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Posts Tagged ‘Alternatives’

Andrew Revkin‘s post reminds me of my time at Notre Dame. He quotes Michael Sandmel, who is graduating this year from NYU:

We had around 140 attendees from universities around the country.  Many of us study in mainstream neoclassical economics departments where interdisciplinary ecological-economics, and the questioning of G.D.P. growth as a primary (or, depending on who you ask, desirable) objective, is still very much fringe thinking.  I don’t attempt to speak for all of my peers, but I know that many of us share an enormous frustration with the way in which our supposedly leading institutions teach us about the economy in a way that is myopic, ahistorical, and devoid of nearly any critical conversation about sustainability or human well being.

This is particularly troubling as we regularly see our schools accredit future leaders in business, finance, and government, sending them into a world of 21st century problems with a 20th century toolkit.

Well said!

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Rob Johnson at the Institute for New Economic Thinking asks a deep and important question: does the economist serve powerful interests or society?

The answer seems clear-cut. Economists today primarily serve the needs of powerful interests at the expense of society in general.

But why?

To answer this, Johnson peals back the surface of overt corruption to explain how the problem goes far beyond that. It was not that economists were all on the take leading up to the global financial crisis, Johnson says, but that those whose visions aligned with powerful financial interests “were used as marketing vehicles, and they were not adequately skeptical as scientists of what the flaws in their vision might be.”

“The world is always uncertain,” Johnson continues, “so when people become anxious, they want the expert to tell them what is going to happen.” The problem is that these experts don’t shoulder much of the risk of being wrong – or of selling confidence when humility is called for – and it is society that ultimately pays the full price of their deception.

Yet many economists don’t even see the problem. They don’t know – or don’t want to know – that they are selling snake oil and that the abstract precision of their finely tuned mathematical models doesn’t hold up to the many contingencies of the real world.

The solution Johnson proposes resonates with me: change the way economics is taught. Rather than use principles of economics to indoctrinate, use it so study the philosophy of economic science. Help students realize that an interesting and useful economics deals with politics and institutions and power and the good society. Ethics cannot be completely absent from the toolkit of the economist. Otherwise, they end up serving the interests of the powerful at the expense of society.

Then we can get to the real issue that the profession must confront:

Economists. What – and who – are they good for?

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Revisions and all, we are 300,000 jobs richer than we were a month ago. There are plenty of blog reactions you can read to this report, all of which tease out the different cyclical and structural aspects, short and long-term implications, much better than I could. Check out Mark Thoma’s links for a smattering.

My own reaction, yesterday morning, was cynical as ever- “great news for Barack Obama!” As I read my Twitter feed over breakfast, I particularly enjoyed Neil Irwin’s tweet: “that sound you hear is champagne corks in the West Wing.” Indeed, Obama’s Intrade odds jumped 1.5% to 57%, the highest level since August, when the Europe news was getting worse. OK, let’s leave that cynical reaction aside.

I had a reality check this morning, courtesy of the inner city of Baltimore, while driving to a church men’s breakfast in the DC area. I was riding with two fellow congregants from Luther Place Memorial Church- one an old-timer who is something of a social justice junkie, the second a community activist in Baltimore, who works to transform vacant lots to community spaces. The old-timer began to ask for our reactions to the jobs report. Before I could say my piece about it helping Obama but not being good enough for a real recovery, the activist jumped in and said, “I don’t pay attention to that stuff. Where I work, the unemployment rate is 50 to 70 percent. These reports just aren’t relevant to them.”

We immediately moved to discussing Mitt Romney’s remarks, and agreed about how out of touch he seems by saying he’s not concerned about the very poor. Ed the activist knows that way more than 5% of Americans are very poor, and no, the safety net is not catching them.

We didn’t get into the politics of it much deeper than that. But it’s clear to me that there’s a simple fact people like Mitt Romney will never comprehend, and that most of us progressives too easily forget (especially when we get “good” economic news). Our economy has been leaving many behind for some time now. The great recession has made things worse, and there is no such thing as an economic recovery in places like inner city Baltimore.

This whole conversation was underscored well by a reflection from Richard Rohr, read toward the end of this breakfast (and it was quite serendipitous- our reader opened to the book to a random page). It was titled “Who are the poor?” and it read,

“The Gospel sounds very different to a man with a full stomach than it does to a man with an empty stomach…that’s why Jesus said the Gospel had to first be preached to the poor.”

When we hear the jobs report, with our full stomachs, we have all manner of reactions that will inherently be divorced from the reality that the poor experience. Yes, the January jobs report matters. Cynically, it helps Obama on the margins, which is good, because he is way better than the other guy. But, jobs reports like these are not good enough. 

This is true in the limited sense that we are far from full employment, which we rightly hear from Mark Thoma, Dean Baker, et al. However, this jobs report is more importantly not good enough when read by those with empty stomachs. Unfortunately, with our current economic structure, no jobs report will be Gospel or good news to them.

The first Friday of every month this year, we will hear a (hopefully) six-digit number. Pundits and economists will weigh in, good and bad. Let’s just all keep in mind that a jobs report sounds very different to a man with a full stomach than it does to a man with an empty stomach. We should all work for an economy in which jobs reports can be truly good news for the swelling ranks of the poor.

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It’s been a little while since I last posted…theoretically, a good New Year’s resolution would be to start posting more, but I’ll have to see if time allows. I was immediately drawn, though, to this story from the latest issue of the Economist: “Heterodox Economics: Marginal Revolutionaries.” The author focuses in particular on two schools of thought- market monetarism and neo-chartalism, and on two of their champions- Scott Sumner and Warren Mosler, respectively, who inparticular have gained mainstream currency.

The article goes somewhat in-depth into the ideas of each school, but I think what is most relevant is the process by which these bloggers have risen to prominence, and what it means:

On February 25th, [Sumner] earned a link from Tyler Cowen, a professor at George Mason University whose “Marginal Revolution” blog is widely respected. And one month after he started Mr Krugman devoted a short post to rebuffing him.

To be noticed by Mr Krugman is a big thing for a blogger; all the current heterodoxies court such attention, with neo-chartalists churning up his comment threads and Austrians challenging him to set-piece debates. The more Mr Krugman wrestles with them, the more attention they garner—a correlation that has made him wary. “I’ll link to any work I find illuminating, whoever it’s from,” he writes. “I’ll link to work I think is deeply wrong only if it comes from someone who already has a following.” Otherwise, “why give him a platform?”

Mr Sumner’s blog not only revealed his market monetarism to the world at large (“I cannot go anywhere in the world of economics…without hearing his name,” says Mr Cowen). It also drew together like-minded economists, many of them at small schools some distance from the centre of the economic universe, who did not realise there were other people thinking the same way they did. They had no institutional home, no critical mass. The blogs provided one. Lars Christensen, an economist at a Danish bank who came up with the name “market monetarism”, says it is the first economic school of thought to be born in the blogosphere, with post, counter-post and comment threads replacing the intramural exchanges of more established venues.

Indeed, much of the sociology of the discipline has been driven by a gatekeeper model, in which the only way to be heard is to fit into the mainstream enough to get published. Blogging creates a different set of incentives, because people who read blogs seem to value heterodox more in and of itself, and little value is placed on conformity. It is not a perfect meritocracy- the best and brightest ideas might still be ignored if they are too radical. However, one hopes that the existence of economics blogs is chipping away at the intellectual narrowness of the discipline.

Over time, ideas from yet more radical schools of thought, like neo-Marxism or post-Keynesianism, may be deemed worthy of heavy consideration and rebuttal from the likes of Krugman or Mankiw. However, for that to happen, everyone needs to be speaking the same language. I imagine that Mosler and Sumner have had a somewhat easier time because their ideas more easily fit onto the map of economic discourse, particularly because their ideas fit well into a financial discourse. Start talking about alienation or surplus value, though, and it may be a different story.

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Many criticize the Occupy Movement as having muddled goals and nebulous ideas, and that it therefore will be unable to change anything. But this viewpoint misses the entire point.

The Occupy Movement recognizes a fundamental problem: that it is generous to call our political system a democracy, when so few have so much more influence in Washington than the rest of us. This leads to policies and systems coming out of Washington that do not work for everyone, but rather for those who helped craft them. Remedying this situation is an enormous task, and it is not a goal of the Occupy Movement to come up with a single silver-bullet solution. Rather, the Occupiers realize that the first step to ameliorating the situation is to talk about it. The entire political discourse is already too small. The Occupy Movement is simply creating a space in which these issues can become part of the public discourse. It is a space which can accomodate, for the first time in decades, perspectives that are larger than the Republican/Democrat polarization. Those who are unimpressed, unsettled, or unsympathetic to such an approach lack either thoughtfulness or creativity.

The cable news channels, for one, seem unwilling to comprehend this approach to action. Unable to reduce the Occupy Movement to a bumpersticker-size slogan, cable news networks prefer to dismiss the Occupiers as confused and restless. It really is a shame when dwelling in thoughtfulness, complexity, and creativity receives so little credit.

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Conspicuous consumption plays an important role, even in our flailing economy. See the NYTimes, “Even Marked Up, Luxury Goods Fly Off Shelves”:

Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin “Bianca” platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.

Even with the economy in a funk and many Americans pulling back on spending, the rich are again buying designer clothing, luxury cars and about anything that catches their fancy. Luxury goods stores, which fared much worse than other retailers in the recession, are more than recovering — they are zooming. Many high-end businesses are even able to mark up, rather than discount, items to attract customers who equate quality with price.

In the Theory of the Leisure Class, Veblen wrote that a major force driving economic activity was competition in the pursuit of higher status: to drive the nicest car, wear the most expensive clothing, go on the most exotic vacations, so that others would see your status. Veblen wrote that this conspicuous consumption led to irrationality in purchases and wasteful spending. This article is a great reminder of how economists could progress by looking backwards once in a while.

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