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Archive for July, 2009

I just read Michael Pollan’s cover story for NYT magazine, expecting a light and enjoyable read (and it is), given that it started with a discussion of Julia Child. However, he snuck a fair amount of the political economy of food in there:

Those corporations have been trying to persuade Americans to let them do the cooking since long before large numbers of women entered the work force…The same process of peacetime conversion that industrialized our farming, giving us synthetic fertilizers made from munitions and new pesticides developed from nerve gas, also industrialized our eating.

Shapiro shows that the shift toward industrial cookery began not in response to a demand from women entering the work force but as a supply-driven phenomenon. In fact, for many years American women, whether they worked or not, resisted processed foods, regarding them as a dereliction of their “moral obligation to cook,” something they believed to be a parental responsibility on par with child care. It took years of clever, dedicated marketing to break down this resistance and persuade Americans that opening a can or cooking from a mix really was cooking. Honest. In the 1950s, just-add-water cake mixes languished in the supermarket until the marketers figured out that if you left at least something for the “baker” to do — specifically, crack open an egg — she could take ownership of the cake. Over the years, the food scientists have gotten better and better at simulating real food, keeping it looking attractive and seemingly fresh, and the rapid acceptance of microwave ovens — which went from being in only 8 percent of American households in 1978 to 90 percent today — opened up vast new horizons of home-meal replacement.

Harry Balzer’s research suggests that the corporate project of redefining what it means to cook and serve a meal has succeeded beyond the industry’s wildest expectations. People think nothing of buying frozen peanut butter-and-jelly sandwiches for their children’s lunchboxes. (Now how much of a timesaver can that be?) “We’ve had a hundred years of packaged foods,” Balzer told me, “and now we’re going to have a hundred years of packaged meals.” Already today, 80 percent of the cost of food eaten in the home goes to someone other than a farmer, which is to say to industrial cooking and packaging and marketing. Balzer is unsentimental about this development: “Do you miss sewing or darning socks? I don’t think so.”

So, what are the important implications of this shift?

For [anthropologist Claude] Lévi-Strauss, cooking is a metaphor for the human transformation of nature into culture, but in the years since “The Raw and the Cooked,” other anthropologists have begun to take quite literally the idea that cooking is the key to our humanity…

If cooking is as central to human identity and culture as [Harvard anthropologist] Wrangham believes, it stands to reason that the decline of cooking in our time would have a profound effect on modern life…

And indeed, cooking has become more of a spectator sport, as the rest of the article goes to lengths to show. However, there is a more insidious side effect:

A 2003 study by a group of Harvard economists led by David Cutler found that the rise of food preparation outside the home could explain most of the increase in obesity in America. Mass production has driven down the cost of many foods, not only in terms of price but also in the amount of time required to obtain them…

Cutler and his colleagues demonstrate that as the “time cost” of food preparation has fallen, calorie consumption has gone up, particularly consumption of the sort of snack and convenience foods that are typically cooked outside the home. They found that when we don’t have to cook meals, we eat more of them…

When we let corporations do the cooking, they’re bound to go heavy on sugar, fat and salt; these are three tastes we’re hard-wired to like, which happen to be dirt cheap to add and do a good job masking the shortcomings of processed food. And if you make special-occasion foods cheap and easy enough to eat every day, we will eat them every day.

Can we go back? Harry Balzer, a food industry marketer quoted earlier, has a negative view:

“Not going to happen,” he told me. “Why? Because we’re basically cheap and lazy. And besides, the skills are already lost. Who is going to teach the next generation to cook? I don’t see it.

Sort of depressing.

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Via Econospeak (which is quickly becoming one of my favorite blogs), Thomas Palley has written a response to the Queen of England’s request for an explanation on why no one predicted the crisis. He was actually responding to a different response letter written by Tim Besley and Peter Hennessy, in which they argued that the failure was one of “collective imagination.” Palley writes,

The failure was due to the sociology of the economics profession. This failure was a long time in the making and was the product of the profession becoming increasingly arrogant, narrow, and closed minded. One was compelled to adhere to the dominant ideological construction of economics or face exclusion. That was the mindset of the IMF and the World Bank with their “Washington Consensus”, and it was the mindset of central bankers (including your own Bank of England) with their thinking about the sufficiency of inflation targeting and hostility to regulation…

Professors Besley and Hennessy’s letter is another example of the economics profession’s complete inability to come to grips with its sociological failure which produced massive intellectual failure with huge costs for society. This is a very serious social problem and we will all continue to pay the costs as long as it is unaddressed.

I inadequately blogged about Palley’s succinct and thorough examination of the crisis a few months back. He continues to be nearly spot-on.

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Al Jazeera English news channel has a great segment I really enjoy called People and Power. A recent series they did follows lawsuits against multinational corporations around the world.

In a special five-part series People & Power charts the rapidly growing number of lawsuits being brought against multi-national corporations.

War crimes, conspiracy, corruption and payments to terrorists are just some of the serious charges that have forced some of the world’s largest companies to hire high-profile defence lawyers to defend their name in cases often brought by plaintiffs who are barely literate.

Corporations on Trial reveals a growing anxiety about the power and influence of big business.

Today many multinational corporations have annual revenues greater than some countries’ national budgets; governments are increasingly held to ransom by their economic power.

Around the world, ordinary people are asking how many more times their interests should be sacrificed for corporate greed and shareholder profit.

Asking how, in other words, can the world’s multinationals be kept in check.

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Chris Anderson talks to Stephen Colbert about the rise of “freeconomics,” the reputation economy, and the gift economy.

More on youtube:

And an article:

Enabled by the miracle of abundance, digital economics has turned traditional economics upside down. Read your college textbook and it’s likely to define economics as “the social science of choice under scarcity.” The entire field is built on studying trade-offs and how they’re made. Milton Friedman himself reminded us time and time again that “there’s no such thing as a free lunch.

“But Friedman was wrong in two ways. First, a free lunch doesn’t necessarily mean the food is being given away or that you’ll pay for it later — it could just mean someone else is picking up the tab. Second, in the digital realm, as we’ve seen, the main feedstocks of the information economy — storage, processing power, and bandwidth — are getting cheaper by the day. Two of the main scarcity functions of traditional economics — the marginal costs of manufacturing and distribution — are rushing headlong to zip. It’s as if the restaurant suddenly didn’t have to pay any food or labor costs for that lunch.

Surely economics has something to say about that?

It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we’ve always known about but have only recently been able to measure properly. The “attention economy” and “reputation economy” are too fuzzy to merit an academic department, but there’s something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

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Patents may not bolster innovation, as commonly thought:

A new study challenges the traditional view that patents foster innovation, suggesting instead that they may hinder technological progress, economic activity and societal wealth. These results could have important policy implications, because many countries count on patent systems to spur new technology and promote economic growth.

[...]

PatentSim features an abstract model of the innovation process, a database of potential innovations and a network through which users can interact with one another to license, assign, buy, infringe and enforce patents. The software allows players to simulate the innovation process under a traditional patent system; a “commons” system, in which no patent protection is available; or a system with both patents and open-source protection.

“In PatentSim, we found that the patent system did not work to spur innovation,” said Tomlinson, associate professor of informatics. “In fact, participants were more likely to innovate when there was no intellectual property protection at all, or when they could open-source their innovations and share them with other people.”

Read the article here.

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Michael Perelman, who blogs at EconoSpeak, has posted an essay (pdf) called “An Idiosyncratic Road to Crisis Theory” (actually, he posted it last sunday, and I’ve been too lazy to blog about it). He manages to cover a lot of ground in ten pages, particularl with regards to capital theory. His introduction may be the most provoking part, however:

As an undergraduate, introductory microeconomics didn’t make any sense. After a few weeks, I realized that it was easy to get a good grade until by working backwards. Since the goal was to show that everything worked out perfectly, all you have to do on an exam is to start with the answer that the market creates the best outcome, then work backward to figure out what would make it occur. Economics soon became my easiest class. Although I do not follow that procedure anymore, I am convinced that much of the economics profession still does. Eventually, some seemingly obvious questions began to trouble me.

Economics, which purports to explain the nature of a capitalist system motivated by profit maximization, lacks a theory of capital as well as any coherent explanation of the determination profits. One of reasons is simple: economics generally deals with a static conception of the world, yet fixed capital, which becomes increasingly important with the maturation of capitalism, calls out for a dynamic analysis, even with a static conception of the world.

(more…)

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Hint: it might not be the “poverty trap”…

Jeffrey Sachs has a new article about…the same thing he always talks about:

The G-8’s $20bn initiative on smallholder agriculture, launched at the group’s recent summit in L’Aquila, Italy, is a potentially historic breakthrough in the fight against hunger and extreme poverty. With serious management of the new funds, food production in Africa will soar.

Indeed, the new initiative, combined with others in health, education, and infrastructure, could be the greatest step so far toward achieving the Millennium Development Goals, the internationally agreed effort to reduce extreme poverty, disease, and hunger by half by 2015…

…One cornerstone of the project was “smallholder farmers”,  meaning peasant farm families in Africa, Latin America, and Asia – working farms of around one hectare (2.5 acres) or less. These are some of the poorest households in the world, and, ironically, some of the hungriest as well, despite being food producers.

They are hungry because they lack the ability to buy high-yield seeds, fertiliser, irrigation equipment, and other tools needed to increase productivity.

As a result, their output is meagre and insufficient for their subsistence. Their poverty causes low farm productivity, and low farm productivity reinforces their poverty. It’s a vicious circle, technically known as a poverty trap.

Is that really the reason why these farmers are  “some of the poorest households in the world, and, ironically, some of the hungriest”?  Sachs likes to talk about “history’s lessons,” but hasn’t history also taught us that hunger doesn’t happen in isolation?  Surely, these farmers aren’t just hungry because they lack industrial farming technology.  What’s the bigger picture look like?  (here’s one look, and another)

And has anybody else noticed that everything aid-related seems to be an “historic breakthrough” for Sachs, even while poverty is still rampant, abroad and at home?  Maybe Sachs is missing something…

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Given all the recent debate, I felt that we required something more on health care systems.  Paul Krugman gives an account of “why markets can’t cure healthcare” in the New York Times, where he slams those Americans who believe that the only answer is free markets:

There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.

This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies either — they’re not in business for their health, or yours.

The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping. (”I hear they’ve got a real deal on stents over at St. Mary’s!”) That’s why doctors are supposed to follow an ethical code, why we expect more from them than from bakers or grocery store owners.

So what are some alternatives? Krugman points out that a single payer system is not the only alternative. There are many existing systems (all better that ours) that are quite dissimilar; while not free market healthcare systems, the ones often considered are alternative markets or alternative capitalist systems. But some people have even imagine noncapitalist healthcare insurance systems. One example is the communal system organized by the Simple Way and Christian Health Ministries.

Imagine a group of folks committing to pool their money together every month in order to cover each other’s medical needs? Sounds pretty sweet eh? Well, it’s happening.

…And while we are grateful for the tireless labor of folks working toward health care for all, we are not willing to wait for the government to do what the Church is meant to BE. Christian Healthcare Ministries is one of a growing number of innovative communities bearing each other’s burdens when it comes to medical expenses. Each month folks contribute money to a common fund of which over 90% goes directly to meet needs. Members receive newsletters that tell who is in the hospital and how to be praying for one another. CHM now has over 20,000 members who have collectively paid over 400 million dollars in medical bills over the past 20 years. Check them out: www.chministries.org

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Stephen Dubner (of Freakanomics fame) has a post on the recent corruption scandal, mostly in New Jersey, but stretching across the globe.  He makes sure to point out that some of those involved dealed in black market body parts:

Note that the case even involved some trafficking in human organs:

“Another man in Brooklyn, Levy-Izhak Rosenbaum, was accused of enticing vulnerable people to give up a kidney for $10,000 and then selling the organ for $160,000. Mr. Dwek pretended to be soliciting a kidney on behalf of someone and Mr. Rosenbaum said that he had been in business of buying organs for years, according to the complaint.”

Remember this story the next time someone brings up the need for a legitimate, regulated market for human organs, as we’ve discussed here many times in the past. Many people’s objection to such a market is that poor people would suffer because a) they won’t be able to afford to buy organs; and b) they may be coerced into selling them. But with the current black market, poor people are already being excluded from getting organs (because there’s a scarcity of donated organs) and being lured into selling them — although in this case, it appears that a middleman got to pocket $150,000 while the “donors” got only $10,000.

To summarize Dubner’s logic: if it exists, make a market of it.  Since criminals are already dealing in body parts, we could do better by allowing (regulated) trade, on an open market, so normal, hard-working individuals can buy and sell as if body parts were like candy bars.  I wonder if he would make the same argument for the already-existing black markets in sex slavery, narcotics, or industrial waste? (though Larry Summers beat him to the punch on the last one)

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Daniel Little has a nice summary and analysis of a book written in the 50s (which I had never heard of) called The Power Elite, by C. Wright Mills.

The central idea is that the United States democracy — in spite of the reality of political parties, separation of powers, contested elections, and elected representation — actually embodied a hidden system of power and influence that negated many of these democratic ideals.

However, Little notes the lack of empiricism in Wright’s contribution, both in terms of description and mechanism. Regarding the latter, Little writes, that there is “relatively little analysis of the social mechanisms that reproduce this social order.”

Perhaps economics can both contribute to and benefit from an analysis of these mechanisms. Regarding the contribution part, Little writes,

But even more compelling would be a study that doesn’t exist yet — a social network map that represents something like the whole population of a community, linking individuals to the institutions in which they occupy a position of power. The vast majority of the population would exist in single points at the bottom of the map; most people don’t have a position of power at all. But, if Mills is right, there will be a small subset of people who are interconnected through many relationships to institutional sources of power…

I’ve heard a lot in the wake of the financial crisis about the concept of network mapping, and I’m also momentarily inspired by the work of Saez and Piketty, which uses a wealth of statistical analysis tools to show, in a fine-toothed manner, distributions of income. The only problem, and this is something that Little observes, is that power, and not money, is ultimately what we are interested in. Community organizing 101, as I learned it from the IAF handbook, is about organized money and organized people. I’m not sure you go about quantifying the behind-the-scenes relationships that define power, or if you would even want economists to bring their inevitably utility-dominated tools to bear.

More important, in my opinion, is what economics can gain from such an analysis (and by no means do I fancy this thought to be original). A recognition of power structures will change not only how one thinks about democracy, but also how one thinks about the economy. Market power, regulatory capture, and other issues abound from a veritable Pandora’s Box once we think in these terms. Social policy, especially with regards to our views on income taxes, estate taxes, public education, social safety nets, et al. would certainly change if we came to the conclusion that Wright’s hypothesis about reproduction is correct, and so as Little writes,

at a given time there is a small subset of the population who occupy most of the positions of power; and the probability is great that the sons and daughters of this group will occupy similar positions of power in the next generation. And in fact, it is perfectly visible in our society that the likelihood of occupying a position of power in one generation is highly influenced by the power status of the antecedent generation.

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