Neocolonialist Quote of the Day

From the NYTimes:

America’s war in Iraq has been good for business in Iraq — but not necessarily for American business. American companies are not seeing much lasting benefit from their country’s investment in Iraq.  (emphasis mine)

Investment?  Or invasion?

Are they saying the war wasn’t a good business strategy?

More Thoughts on Disillusionment/Marx and CST

I had a post planned for today that would follow up on two distinct points in my post from yesterday. Sadly, Ruccio managed to beat me to both of them.

The first point is regarding a growing dissatisfaction with capitalism:

Twenty years after the fall of the Berlin Wall, a new BBC poll has found widespread dissatisfaction with free-market capitalism. In the global poll for the BBC World Service, only 11 percent of those questioned across 27 countries said that it was working well.

More than 29,000 people in 27 countries were questioned. In only two countries, the United States and Pakistan, did more than one in five people feel that capitalism works well as it stands.

Almost a quarter – 23% of those who responded – feel it is fatally flawed. That is the view of 43% in France, 38% in Mexico and 35% in Brazil.

And there is very strong support around the world for governments to distribute wealth more evenly. That is backed by majorities in 22 of the 27 countries.

The second point is to address the canard that teaching Marxism is somehow out of line with Catholic Social Teaching. There is certainly a case to be made that practicing Marxism goes directly against the teachings of the Pope. However, some recent writing in the Vatican’s newspaper should at least shore up any doubts about pedagogy. The Times of London has the goods:

Karl Marx, who famously described religion as “the opium of the people”, has joined Galileo, Charles Darwin and Oscar Wilde on a growing list of historical figures to have undergone an unlikely reappraisal by the Roman Catholic Church.

L’Osservatore Romano, the Vatican newspaper, said yesterday that Marx’s early critiques of capitalism had highlighted the “social alienation” felt by the “large part of humanity” that remained excluded, even now, from economic and political decision-making.

Georg Sans, a German-born professor of the history of contemporary philosophy at the pontifical Gregorian University…said that Marx’s theories may help to explain the enduring issue of income inequality within capitalist societies…

Professor Sans argues that Marx’s intellectual legacy was marred by the misappropriation of his work by the communist regimes of the 20th century. “It is no exaggeration to say that nothing has damaged the interests of Marx the philosopher more than Marxism,” he said.

This overturns a century of Catholic hostility to his creed. Two years ago Benedict XVI singled out Marxism as one of the great scourges of the modern age. “The Marxist system, where it found its way into government, not only left a sad heritage of economic and ecological destruction, but also a painful destruction of the human spirit,” he told an audience in Brazil.

Then again the Pope has been busy reappraising modern capitalism. Benedict’s latest encyclical, Charity in Truth, offers a direct response to the recession, arguing that global capitalism has lost its way and that Church teachings can help to restore economic health by focusing on justice for the weak and closer regulation of the market…

Professor Sans’s article was first published in La Civiltà Cattolica, a Jesuit paper, which is vetted in advance by the Vatican Secretariat of State. The decision to republish it in the Vatican newspaper gives it added papal endorsement.

Of course, this flies in the face of those who argue that Marx’s teaching is so out of sync with CST that it should not be taught at a Catholic institution. It warms the heart to know that the Vatican’s newspaper is more open-minded than many reactionary defenders of neoclassical economics’ hegemony.

 

Berlin Retrospectives and Rethinking Marxism

I know next to nothing about the history that led up to the fall of the Berlin Wall, and that seems to be on everyone’s minds these last couple days with the 20th anniversary. Many on the more radical left seem to be approaching the event with a great deal of caution. I don’t know if I’m a member of the radical left, but I’d at least like to advance the case that today’s retrospectives bear an intellectual and pedagogical relevance.

Before we get into that, I think it can be established that counterarguments of the left generally seem to fall along the lines of, “socially and politically, people are more free, but economically, they are poorer than before.” Sean has some nice postings at Cultural Perspectives. He quotes an NYT op-ed by Slavoj Zizek:

When people protested Communist regimes in Eastern Europe, the large majority of them did not ask for capitalism. They wanted the freedom to live their lives outside state control, to come together and talk as they pleased; they wanted a life of simplicity and sincerity, liberated from the primitive ideological indoctrination and the prevailing cynical hypocrisy…people aspired to something that can most appropriately be designated as “Socialism with a human face.” Perhaps this attitude deserves a second chance.

Here’s another perspective from someone who was the teenage daughter of left intellectuals during the Fall:

To this day, my parents are convinced that the Reagan-Thatcher variety of free-market capitalism, which they believe led to growing income inequality and today’s financial crisis, flourished because of the absence of an alternative. The term reunification grated with them. They felt that West simply swallowed East and in the process discarded 40 years of mostly bad but some good policies.

Mainstream thought tends to see the fall of the Wall as the final condemnation of an economic and political system that curtailed freedom and ensured destitution. This view motivated Fukuyama’s “End of History” narrative. The repeated crises of capitalism, however, have caused even him to rethink this determinist stance.

I believe it is intellectually shaky to hold on to the Fukuyama view of the Berlin Wall twenty years later. The fall was a great triumph for democracy, but its economic consequences are as dubious as ever. An honest approach must admit that capitalism’s merits should at least be questioned, both for the former USSR, and for contemporary economies.

And speaking of questioning, a marginalized (at least in the U.S.) group of scholars met in Amherst, MA this week at New Marxian Times, a conference hosted by the journal Rethinking Marxism. Some might argue that such a conference could only lead to a ham-handed, groupthink/nostalgia-induced delusion about what the Soviet regime could have been. However, as Ruccio notes, these conferences are attracting a new generation of radical thinkers. Hopefully, Marxism can continue to attract enough people who at least attempt to think about it clearly so that it is no longer seen as anti-Catholic, anti-freedom, anti-human nature, and malevolent ideology.

I hope I’m not building up a straw man here, but most who criticize Marxism on its face have not spent much time thinking about it, much less rethinking it. However, just as during a time of crisis we are called to rethink Wealth of Nations, The General Theory, and Capitalism and Freedom, we would be remiss not to rethink Capital. Anyone who deems this exercise unnecessary for economics students is being willfully ignorant. Demarginalizing the denizens, present and future, of conferences like RM, is necessary to ensure honest discourse about the future shape of the global economy.

____

A postscript for those who find anything other than neoclassical/Keynesian economics useless: I learned the mainstream stuff even better by learning the critiques. And I haven’t been brainwashed by either. Defensiveness does not stimulate learning. [end rant]

Paradigm Shifts? Sudden Realizations?

There’s a great post on Washington’s Blog about Tuesday’s WSJ article about paradigm shifts in economics.

But the Journal makes it sound like the policy-makers and economists who deployed faulty models were innocently ignorant of any larger truths:

The models “were not able to draw up the red flags,” says Tim Besley, a professor at the London School of Economics who served on the Bank of England’s policy-making committee until recently.

Barry Ritholtz has an excellent criticism of the article, pointing out:

There are many areas I would have liked to see the [journal's] article explore: The lack of Scientific Method, the mostly awful performance of economists, its misunderstanding of the value of modeling, the bias inherent in Wall Street variant of economics, and lastly, the corruption of economics by politics...

Economics has a somewhat, shall we call it, less rigorous approach. Indeed, the arrogance of economics is that it is the polar opposite of Science. It begins with a few basic assumptions, many of which are obviously untrue; some are demonstrably false.

No, Mankind is not a rational, profit maximizing actor. No, markets are not perfectly, or even nearly, efficient…

Economics … creates an illusion of precision where none exists. The belief in their models led to all manner of mischief, from subprime to derivatives to risk management…

It is not like economists weren’t warning about booms and busts. Nobel prize winner Hayek and others were, but were ignored because it was “inconvenient” to discuss this “impolite” issue…

And – even now – mainstream economists are STILL willfully ignoring things like massive leverage, hoping that the economy can be pumped back up to super-leveraged house-of-cards levels…

The powers-that-be do not like economists who say “Boys, if you don’t slow down, that bubble is going to get too big and pop right in your face”…

Indeed, the Journal and the economists it quotes seem to be in no hurry whatsoever to change things:

The quest is bringing financial economists — long viewed by some as a curiosity mostly relevant to Wall Street — together with macroeconomists. Some believe a viable solution will emerge within a couple of years; others say it could take decades.

Paradigm shifts need to happen organically, but when there are powerful forces in the way, it is difficult for that to happen. One would hope academia could bridge this gap, but the recent events at Notre Dame demonstrate that even demands from below (like 200 students going to hear a Marxist speak on a Thursday evening) will not shake the reliance on citation rankings and other “institutional pressures.” What will it take for the discipline to crack? Right now, only the gadflies are calling it like it is, and the blogosphere doesn’t have enough influence to cause meaningful change (yet).

The Conscience of a University

The October issue of Common Sense, one of the campus newspapers at Notre Dame, included an article by Professor Emeritus Peter Walshe entitled “The Conscience of a University: a matter of economics and perhaps much more.” The article originally appeared in the newspaper in 1996, but it is being republished because, according to the Editor’s note, “especially in light of the uncertain future of the Economics Department at Notre Dame, the concerns that Professor Walshe discusses remain as pertinent as ever.” (While the issues are not currently posted online, the original 1996 publication of this article can be found here.)

Because of the lucidity and clairvoyance with which Professor Walshe writes, I can only quote him and encourage a reading of the entire article.

As the campus struggles to discern the essential attributes of a Catholic university, blame for the crisis – the advance of secularization – has focused on the relationship between faith and science, liberalism, individualism, license, the scourge of the Enlightenment, the collapse of an inherited moral consensus, etc. etc.. What is missed – because it would be far too uncomfortable to confront – is the nature of the capitalist enterprise that has been embraced by Notre Dame. Capitalist values and the financial clout of corporate leaders prevail. Instead of witnessing against the cultural hegemony of capitalism, Notre Dame reflects it. Notice our market generated income differentials (the huge discrepancies that exist between faculty colleagues), the composition of our Board of Trustees, our monuments to capitalist heroes, the corporate salaries paid to our top administrators and our unwillingness to take up certain justice issues: for example, the longstanding opposition to trade union activity on campus, whether among groundskeepers, dining hall staff, secretaries or faculty.

…

A major casualty of this approach was the Department of Economics. In an earlier decade it had begun to establish a national reputation as a place where unfashionable value issues were taken seriously. Hesitating to continue down this road, the strategy (under pressure from the Provost’s office) changed to one of employing au courant, (largely mathematical) model- building faculty, which has made the Department much less interesting.. In an interview in Common Sense last month, Douglas Kinsey drew our attention to a comparably disquieting situation, pointing out that market determined salaries are heavily skewed against the Art Department where a distinguished senior professor will earn a salary below that of incoming junior faculty in the Business School. (Next time the Business School hosts a conference on business ethics it might care to use this situation as a case-study.) Another example of the malaise comes from the Department of Government which earlier this year set out to lure a successful British academic. Toying with the Department, he visited the campus on several occasions, negotiating for the top dollar, only to decline the offer – for which the Department had gone out on a limb to make in a context where there was an urgent need to appoint women and minorities. (I suspect he had second thoughts about being stranded in an Indiana cornfield, or possibly a better deal was made elsewhere.) Such cases, and the maneuvers of already appointed and well compensated faculty to pressure Notre Dame into yet further pay hikes, are not unusual. The sad fact is that we have naive administrators who lack confidence and are easily dazzled by high profile academics – particularly those from Latin America and Europe – ready to take advantage of the University’s insecurity to squeeze out inflated contracts. The result is a chaotic pattern of salaries which is an affront to sorority and fraternity.

…

Forming Notre Dame as a truly Catholic university means answering Bob Rodes’ most telling questions: “Do our teaching and research priorities reflect a preferential option for the poor, a concern for the margins of society?” Or do we set out “to impress the biggest employers,” court the wealthiest foundations, publish in the most prestigious journals, become dependent on outside funding and its research agendas – “to the point of exercising a preferential option for the rich?

Bruce Bartlett Ignores Inequality

Bruce Bartlett makes a lofty claim (h/t Mark Thoma):

Fortunately for conservatives, the greatest free market economist of all time, Milton Friedman, found an explanation for the Great Depression that let capitalism off the hook. The fundamental problem, he said, was that the Federal Reserve foolishly allowed the money supply to shrink by a third between 1929 and 1933…

By fingering the Fed’s mistakes as the root cause of the Great Depression, Friedman rescued capitalism from blame. Today, I think most economists accept this explanation, although they differ on the appropriate response to the decline in the money supply…

Bringing it back to the Great Recession,

The main differences between today’s crisis and the Great Depression is that the deflationary pressure is less than a third of what it was in the 1930s and policymakers today reacted much more swiftly and more appropriately than they did after 1929.

Okay…but first, policymakers needed a crisis to respond to. Now, what do the Great Depression and Great Recession have in common?

Ah yes, inequality. Correlation does not imply causation; however, there are a number of mechanisms whereby inequality can engender instability in capitalism. So, remind me- how does Friedman’s money-driven explanation remove capitalism from blame?

Soros’ Big Push

Newsweek (h/t Ezra Klein) reports that George Soros is going to pour $50 million into an economic think tank that will combat free market fundamentalism. The “Institute of New Economic Thinking” will use grants, symposia, and a journal to encourage a wider range of economic thought.

On its face, this idea seems like a good one. There’s been a lot of talk about the broken sociology of the profession, and a lot of those problems are rooted in the chain of money that tends to fund free market economics. Obviously, it would be better if the change could happen from within the academy, more organically, but things like that take time. A “big push” like Soros’ thus seems warranted to encourage more Stiglitz’s, Krugman’s, et al.

Based on Soros’ predilections (he is a capitalist after all), I’m doubting that Polanyi and Marx are going to play heavily in this effort. Hyman Minksy certainly will, according to the article. Soros is a very finance-oriented guy- that’s where he’s made his money, after all. Nevertheless, it would be good if more people were open to concepts of capitalist instability, not just financial instability.

(Ig)Nobel Reactions

Geoff Hodgson has compiled some reactions (pdf) to the recent Nobel Prize in Economics for RWER. These reactions are from the web forum/message board Economics Job Market Rumors, which is read by grad students, post-docs, et al. in the PhD econ world. Comments on any web forum, especially anonymous, should be taken with a large grain of salt. I wonder, though, to what extent these comments are representative.

Some of them are just misogynistic:

This girl seems to be a political scientist. I dont think she has published original research in any major economics journal…

The fact that most of us have not heard about her says enough about her contributions…

Some are dismissive of her work:

Multidisciplinary?? Other disciplines are all rubblish [sic]. Why let them conteminate [sic] our purity? [...]

Economics is superior. Don’t let political science conteminate [sic] us!

And, thankfully, others are corrective:

Seriously, this is a sensible and insightful award to an original and careful researcher whose work is widely cited precisely because it is original. To those of you who have never heard of her: you might start by asking why your lazy micro teachers inflict a narrow range of material on you that typically consists of selected papers from their own back catalog,
the work of their buddies and one or two classics they themselves were forced to swallow in grad school. To those of who complaining that’s she’s never published in your favorite ‘top journal’: yes, despite that shameful handicap she is one of the most cited social scientists around, by economists and non-economists alike. [...]

These postings really do show the narrow training of many economists. In fact, economics departments in most universities are highly isolated places in the larger world of social science. To trash a scholar as serious and insightful as Ostrom is a shame.

And, FTW…

What if the commons is actually an important field of study and the fact that most of us never read anything about it during graduate school is something that economic theory lecturers should take into account when formulating their syllabi?

Most of the reactions I’ve read in the blogosphere have been overwhelmingly positive. I know I read that some of U of C were chaffed by the whole thing (Fama was the fav, after all). So, what are others’ experiences; are people in and around economics depts excited about this award? Mad? Reflective?

My hope is that this Nobel leads to the sort of introspection in that last comment. My fear is that the discipline, through various self-selection mechanisms, has been populated with more narrow-minded people (most of whom are probably not sexist), who believe that neoclassical economic theory should always carry the day.

Midway: Message from the Gyre

Earlier this year Matt had a post about photographer Chris Jordan’s work examining the waste produced by consumerism (check it out here).  Well Chris Jordan is back with a new work titled, “Midway: Message from the Gyre.”  The photo blog world has been buzzing about this work for the past week (as well they should, it’s brilliant), but I think it’s time we consider the economic side.  The series consists of pictures of albatross babies on Midway Atoll that have died from a high plastic intake.  These small bits of plastic are thrown into the ocean and apparently make their way to the middle of the pacific ocean where the birds,

are fed bellies-full of plastic by their parents, who soar out over the vast polluted ocean collecting what looks to them like food to bring back to their young.

Look around the room and consider just how much plastic we consume.  Some of it we’ll recycle.  But if it doesn’t have the right number in that little triangle, or we forget, or it’s just inconvenient, it’ll end up in the garbage with the rest of our waste.  And then we forget about it.  But with the exception of some recently designed plastics, none of the plastics that end up in the garbage are going to biodegrade.  Many will end up the ocean where they may do this:

Regarding truth in these photos, artist Chris Jordan writes,

not a single piece of plastic in any of these photographs was moved, placed, manipulated, arranged, or altered in any way. These images depict the actual stomach contents of baby birds in one of the world’s most remote marine sanctuaries, more than 2000 miles from the nearest continent.

I know they’re not exactly happy images, but check out the rest of the series at Chris’s website.

What I’ve Been Reading

Creative mental forces are lacking lately. Intellectual ones, not so much. In the last two weeks I’ve read one very good book and started another.

The first, The Moral Measure of the Economy, is an excellent crash course in applied Catholic Social Teaching, written by Chuck Collins and Mary Wright. For those who are pressed for time and well-versed in CST and how it shapes the way one thinks about the economy, poverty, et al., and I would recommend skimming through up until Chapter 7. It is at this point that the authors talk about alternatives. Their disucssion is both wide-ranging and coherent, covering ideas from community organizing to worker-owned cooperatives.

The second, Economics: Neoclassical versus Marxian, was writtenby Richard Wolff and Stephen Resnick at UMass Amherst. These authors are Marxian economists, btu the first third of the book essentially reads like a self-aware intermediate micro textbook. All the basics, from individual utility curves to production functions to AS and AD, are covered. In discussing neoclassical economics, they pull all their punches and choose to merely point out the assumptions one must make to paint a neoclassical world. At times, their portrayal of the resulting worldview even sounds favorable. For instance:

According to neoclassical theory, profit income is due partly to an individual’s personal actions in regard to saving and partly to the productivity of a thing called capital…to criticize and individual for receiving a relatively high profit income is virtually absurd. Are we to cast blame on the inherent productivity of a nonliving thing, capital…? (82).

Of course, I know the book is going to proceed to shred neoclassical theory when it presents the basis of Marxian theory. They’ve already beat the drum of neoclassical economics’ key assumptions (and the exclusion of class as an entry point). They call these assumptions “the governing essences,” which can be boiled down to preferences, production function, and endowments. Indeed, if all of these essences are taken as given as the basis for discussion, who wouldn’t subsequently derive neoclassical theory (assuming, of course, some mathematical ingenuity).

More on this book when I’ve finished, but I like its approach. Don’t just write a polemic that criticizes the consequences of a theory; instead, criticize the assumptions, the “essences”, and the entry points.