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Posts Tagged ‘informal economies’

From Wired:

Bill Gates once derided open source advocates with the worst epithet a capitalist can muster. These folks, he said, were a “new modern-day sort of communists,” a malevolent force bent on destroying the monopolistic incentive that helps support the American dream. Gates was wrong: Open source zealots are more likely to be libertarians than commie pinkos. Yet there is some truth to his allegation. The frantic global rush to connect everyone to everyone, all the time, is quietly giving rise to a revised version of socialism. [...]

The more we benefit from such collaboration, the more open we become to socialist institutions in government. The coercive, soul-smashing system of North Korea is dead; the future is a hybrid that takes cues from both Wikipedia and the moderate socialism of Sweden. How close to a noncapitalistic, open source, peer-production society can this movement take us? Every time that question has been asked, the answer has been: closer than we thought.

[...]

A similar thing happened with free markets over the past century. Every day, someone asked: What can’t markets do? We took a long list of problems that seemed to require rational planning or paternal government and instead applied marketplace logic. In most cases, the market solution worked significantly better. Much of the prosperity in recent decades was gained by unleashing market forces on social problems.

Now we’re trying the same trick with collaborative social technology, applying digital socialism to a growing list of wishes—and occasionally to problems that the free market couldn’t solve—to see if it works. So far, the results have been startling. At nearly every turn, the power of sharing, cooperation, collaboration, openness, free pricing, and transparency has proven to be more practical than we capitalists thought possible. Each time we try it, we find that the power of the new socialism is bigger than we imagined.

Read the whole thing.

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Nancy Folbre, an economist at UMass Amherst who specializes in feminist economics, has a post at Economix that discusses the lack of home productio in GDP statistics in light of the economic crisis.

Home construction is way down in the United States, but home production — work to produce goods and services for own consumption — is way up. As people forgo expensive restaurant meals, they spend more time cooking at home. A Time Magazine poll reports that individuals are doing more housework and home repairs. Many Americans, famously including Michelle Obama, are planting vegetable gardens. Even some urbanites are raising chickens in their backyards.

The issue becomes most poignant when doing cross-country comparisons:

Average time devoted to home production in the United States is lower than in many other countries partly because female participation in paid employment is particularly high here. As a result, estimates of gross domestic product, based on market transactions, overstate our relative well-being. Research by economists Rick Freeman and Ronald Schettkatt, for instance, shows that the value of mothers’ unpaid work in Germany is even greater than it is here. Adding an estimate of the market value of this work to G.D.P. in both countries would increase measures of German living standards more than ours.

Household dynamics may change as a result of the recession, but GDP could miss it entirely:

Men in the United States have increased the average amount of time they devote to housework and child care since 1975. Unemployed husbands who depend on their wives’ paychecks have incentives to develop their skills in this department. They seem rather reluctant to do so.

But that may change as bouts of unemployment grow longer, as they have during the current recession. When data from the 2008 and 2009 American Time Use Surveys become available, it should be possible to estimate the amount and value of increased unpaid work by both women and men. In hard times, even a few dollars a day can make a difference.

Sometimes I debate whether GDP is a good enough measure to be worth fixing. However, so long as it remains the primary indicator of economic well-being, I would obviously prefer that it be as holistic as possible. Of course, we then get into the throny issues of how to value household production. In any case, it could be that the recession provides incentives to reevaluate our economic statistics.

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Can’t believe I beat Sean to the punch on this one (h/t Mark Thoma). Forbes has an article about how the recession is affecting underground economies, talking with sociologist Sudhir Venkatesh. The whole article is interesting, but I only have time for a couple excerpts:

“The recession is engendering more violence,” says Venkatesh, a professor at Columbia University. “There’s far greater competition for whatever meager resources there are. The folks down on Wall Street peddling drugs, they’re fighting. The sex workers are trying as hard as they can to retain their clients”….

Today Venkatesh is watching black market workers slip into despair along with the rest of the population affected by the economy. Lest legal workers consider this a distant problem, one conclusion of Venkatesh’s work is that the underground and mainstream economies are intimately entwined. “The boundaries are fluid, particularly in the global city where the black market has become instrumental–one might even say vital–to the overall economy,” he says. In New York City illegal workers serve sex, drugs and takeout to the wealthiest members of society–or at least they did until financial sector layoffs began in 2008…

Venkatesh is struck by how much the black market resembles the wider society in which it is enmeshed. In the same Parisian banlieues that erupted in riots in 2005, he observed an “almost aristocratic,” highly centralized criminal operation. In the ghettos of Chicago, by contrast, he observed underground workers convene an ad hoc court to solve a dispute. His dismisses the “culture of poverty” theory, which suggests that poor blacks in America don’t work because they don’t value employment. “People in America want to work,” he says. They do so ever so industriously, even when they’re breaking the law.

Venkatesh should be a familiar name if you’ve read Freakonomics- he was the guy who found out that drug dealers make the minimum wage too. The full article details his research methodology, which is rigorous and on-the-ground.

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