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Archive for October, 2009

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?

toponepercent

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?

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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.

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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.

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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:

1255623325

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.

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I recently came across a document published by the Association of Catholic Colleges and Universities in July of 2009 called “Catholic Higher Education and Catholic Social Teaching.” The document offers a vision statement for Catholic Social Teaching (CST) across the curriculum. What struck me was the paragraph on “The Economy” which echoed my concerns and hopes for economics at Notre Dame exactly, copied below with my emphasis added.

Times of economic crisis present an opportunity to rethink the economic models that have dominated the most recent moment of globalization. Yet, in economics and business school curricula, CST is too often relegated to courses on professional ethics. The new economic realities of our time call for a deeper engagement between economics and CST. Catholic universities are envisioned as places where the questions and ideals of CST continue to query the assump­tions of orthodox economic thought and where CST evolves in dialogue with the most rigorous contemporary economic research. Concepts such as the dignity of labor, the common good, the preferential option for the poor, and human soli­darity are essential to forge a more just, merciful, and sustain­able global economy. Students formed in a CST vision and methodology learn that economic responsibility is not reduced to competitiveness and the maximization of profit.

This is exactly my personal concern. The current plan, to dissolve the Economics and Policy Studies Department and spread the professors around the campus or to other universities, will almost certainly sacrifice this vision of Catholic Social Teaching integrated across the economics curriculum. Absolutely, the ECOE professors use econometric tools to teach and research social justice related issues such as poverty and religion. But the classroom and research is lacking in two ways: (1) they lack mention of the assumptions of orthodox economic theory, much less a query rooted in the questions and ideals of CST and (2) they lack discussion of concepts such as dignity of labor, the common good, the option for the poor, and human solidarity.  I become very concerned when these concepts cannot enter the economics classrooms even at Notre Dame.

Although a difficult task, I remain hopeful that a better solution can be forged for economics at Notre Dame. As the document concludes, “By matching determination to conviction, justice can become ever more a reality in our time.” And by the way, Fr. Jenkins sits on the board of the ACCU.

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Nobel Prize in Economics

The Nobel prize committee announced this morning that Elinor Ostrom and Olliver E. Williamson, two Americans, will share this year’s Nobel Memorial Prize in Economics.  (The New York Times and The Washington Post report on it here and here, respectively).  Now, I’m not an economist, so I won’t try to analyze (or explain) the work itself.  But we all know that the Nobel prize is very political, so I’d like to consider what message is being sent by this prize, or more accurately, what message Notre Dame should take form it.

The Times best summarizes the most important aspects of this year’s recipients, writing of Professor Ostrom (Indiana University),

Her background is in political science, not economics.

Wait, a non-economist just won the economics prize?  This should give us (and Notre Dame) pause to think about whether or not economics really is the isolated field the mainstream department likes to think it is.

To be fair, the administration is only seeking a higher ranking by pursuing a department that looks like its ivy counterparts.  To quote Sean Mallin from the recent Scholastic article (which Matt writes about here),

Notre Dame strives to be like its ‘peer institutions’: Harvard, MIT and Yale, all mainstream.  They are caught up in a game of follow the leader.

So how are mainstream economists at top programs reacting to today’s announcement?  Again, the Times helps us out:

“It is part of the merging of the social sciences,” Robert Shiller, an economist at Yale, said of Monday’s awards. “Economics has been too isolated and these awards today are a sign of the greater enlightenment going around. We were too stuck on efficient markets and it was derailing our thinking.”

Yikes!  That’s quite an admission.  The writing might not be on the wall yet, but the signs are becoming clearer and clearer that the economics world may be thawing to some heterodox ideas.  I’ve always been under the impression that Nobel prizes are pretty prestigious- the type of thing you would want your faculty to bring to your institution.  So maybe the economics program at Notre Dame should look to hire more professors like Elinor Ostrom instead of closing their department.  (Ostrom is the Founding Director of the Center for the Study of Institutions, Population, and Environmental Change at Indiana University.  Sounds like ECOP to me.  Read more of here accomplishments at this IU bio-like page).

Notre Dame has a chance right not to lead its ‘peer’ institutions in the study of economics.  Instead, it’s setting itself up for what may soon be a very backward-looking department.

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