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Archive for June, 2009

From the NYTimes:

“What is co-housing?”The Cohousing Association of the United States has been answering that question quite frequently as more people sign up for its tours: The communities consist of individual houses whose residents share some common space, a few communal dinners a week and a commitment to green living.

The movement has been gaining momentum here since it first arrived from Denmark two decades ago. But passengers on the bus tours describe the general climate of uncertainty as setting off more urgent waves of reappraisal: Is this how I want to raise my family? Spend my remaining years? Is there a better option — a more stable community?

[…]

In some cases, the closeness of these communities offers bulwarks against a lousy economy. Residents speak of lending money to one another when necessary or, say, pitching in to build a wheelchair ramp when insurance might not cover it. Then there is the savings associated with a more efficiently designed home, and shared upkeep costs. But strictly speaking, a home in a co-housing community doesn’t necessarily cost less than a traditional home. As advocates describe it, the benefits are of the added-value variety.

“You just get more bang for your buck,” said Laura Fitch, a 15-year co-houser who led a recent tour in Massachusetts. “You can have entertainment next door rather than going to the movies, and if you’re a parent, you don’t have to drive to all those play dates, or even buy as many toys because your kids are more entertained.”

She added that the price of co-housing often included a common house with guest rooms, a party space, a children’s play area and the security of people watching out for one another.

[…]

“My grandparents’ community got through the Depression by being very close-knit,” Mr. Reichert said, “with one family knowing how to farm, for example, and another knowing how to raise poultry. We’ve lost that. But co-housing is accomplishing something similar.”

Craig Ragland, the executive director of the Cohousing Association, said: “Some people are looking at these communities as a lifeboat. The thinking is, if I’m surrounded by people who care about me, I’m less likely to crash and burn.”

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From the 2009 Reith Lectures:

We live in a time of financial crisis and economic hardship – everybody knows that – but we also live in a time of great hope for moral and civic renewal…Whatever reforms may emerge, one thing is clear: the better kind of politics we need is a politics oriented less to the pursuit of individual self-interest and more to the pursuit of the common good. That at least is the case I shall try to make in these lectures.  A new politics of the common good isn’t only about finding more scrupulous politicians. It also requires a more demanding idea of what it means to be a citizen, and it requires a more robust public discourse – one that engages more directly with moral and even spiritual questions.

[…]

We’re living with the economic fallout of the financial crisis and we’re struggling to make sense of it. One way of understanding what’s happened is to see that we’re at the end of an era, an era of market triumphalism. The last three decades were a heady, reckless time of market mania and deregulation. We had the free market fundamentalism of the Reagan-Thatcher years and then we had the market friendly Neo-Liberalism of the Clinton and Blair years, which moderated but also consolidated the faith that markets are the primary mechanism for achieving the public good. Today that faith is in doubt. Market triumphalism has given way to a new market scepticism. Almost everybody agrees that we need to improve regulation, but this moment is about more than devising new regulations. It’s also a time, or so it seems to me, to rethink the role of markets in achieving the public good.

Full text here

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Robert Skidlesky has an opinion piece in the Financial Times (h/t Mark Thoma) in which he injects the insight of Keynes and the notion of intellectual battles into current debates. Skidelsky is an important scholar of Keynes, and wrote an award-winning three-volume biography about his life and work.

Skidlesky begins by distinguishing economics from the natural sciences:

In the social sciences, the situation is different. There have been famous battles galore, but no decisive victories. Indeed, it is characteristic of the social sciences that their battles are interminable, temporary defeats being followed by the regrouping of the defeated forces for a renewed assault.That economics is not a natural science is clear from the inconclusive engagements that have punctuated its own history.

A hundred years ago the classical theory reigned supreme…

Then along came the Great Depression of 1929-32 and John Maynard Keynes. Keynes “proved” that markets had no automatic tendency to full employment…

For 30 years or so Keynesianism ruled the roost of economics – and economic policy. Harvard was queen, Chicago was nowhere. But Chicago was merely licking its wounds. In the 1960s it counter-attacked. The new assault was led by Milton Friedman and followed up by a galaxy of clever young disciples…

No policymaker understood the maths, but they got the message: markets were good, governments bad.

He then contextualizes a current debate, between Niall Ferguson and Paul Krugman, in these intellectual battles. While ultimately siding with Krugman, I think he makes an extremely important point:

In this particular debate, I am on Prof Krugman’s side, but I do not agree that Prof Ferguson’s position represents a retreat to a phlogiston state of economics. This is to take economics to be like a natural science, which Keynes never believed it was, because he thought its subject matter was much too variable over time.Keynes’s view was that we need different economic models at different times. The beauty of his General Theory of Employment, Interest and Money was that it was general enough to accommodate a variety of models applicable to different conditions. Markets could behave in ways described by the classical and New Classical theories, but they need not. So it was important to take precautions against bad behaviour. Ultimately, the Keynesian revolution was a triumph not of good science over bad science, but of good judgment over bad judgment.

Judgment is something often overlooked as extremely important in economics and in finance. This morning, I listened to the This American Life podcast from last week, which looked at the regulatory failures leading up to the current crisis from both the government and rating agency points of view. When talking with people from the ratings agencies in particular, it was clear that there was an utter refusal to exercise judgment. The equations were the equations. So what if the data might seem logically unapplicable? The future will reflect the past, etc.

So, the question of the day is, given all we now know about the causes of this economic crisis, what sort of judgment will be applied, both in academia and in the policy world? What factors will people in power choose to ignore? Sadly, I think the wage-stagnation/class-based argument, which has been well-outlined by Richard Wolff, will probably be ignored.

Is there a new Keynes for this generation, who will restore “good judgment” to the dominant economic paradigm? Perhaps Keynes will be the new Keynes. I think these are important open questions as the discipline’s introspection continues.

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The idea of human rights has been on my mind lately, and it’s good to know that I’m not alone. Bill Easterly, fresh off his battle in HuffPo with Jeff Sachs, has had a few posts this past week about the topic of poverty as a human rights violation. I think he makes some salient points. (more…)

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I was on Mankiw’s blog today. He had a brag about the Quarterly Journal of Economics (published at Harvard, where he works) earning the number one ranking in a new journal ranking paper.

Harvard’s QJE is number one, natch.

For the unacquainted, “natch” is slang for naturally. Ugh. Anyways, that’s not the point of this post.

The article he linked (pdf download) attempted to construct and “ambition-based” ranking of journals. That’s not really the point of the post either. I perused the list of 69 journals they had selected, and realized that none of the eleven heterodox economic journals (which I will talk about in a post next week) were on it. I was a little miffed, so I decided to pick one of these journals (Journal of Economic Issues) and go through their methodology on the Web of Science and see what was going on. Well, as it turned out, at no point from 2001-2007 was an article in JEI written in those seven years cited in one of the seven “general-interest” journals. That would earn JEI a whopping zero on any rating with this methodology.

The authors of this new ranking acknowledge the subjectivity of their (and any) methodology, and patted themselves on the back for being so explicit about the reasons for each methodological choice. That’s well and good. However, it still leaves heterodox economics in the cold and with no necessary disclaimer. The methodology naturally excludes it.

Of course, this whole ranking business is a vicious cycle. Rankings like this one remove any credibility within the mainstream from journals like JEI. As a result, any self-respecting (or ambitious) author in the seven general-interest journals will think long and hard before citing one of these articles. So they get no citiations in the mainstream, etc.

Rankings-obsessed people like Mankiw have a very rigid definition of knowledge. I would obviously admit that knowledge is a social process; this does not mean it has to be a hegemonic one. Crowding out research with seemingly foreign methodologies is convenient, because as a mainstream economist, it allows you to not have to worry about the implications of this research.

The effects are not limited to journal rankings or citations, however. I’ll post next week about an article that details the marginalization of the heterodox journals and the implications for heterodox economics departments. Spolier alert: this vicious cycle has ramifications far beyond the world of journals; it affects economics as a discipline, both in terms of future research and future pedagogy.

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joblossesmay

From the NYTimes

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In MRZine:

The point is that nothing in the Obama-GM tragedy was necessary or unavoidable.  The political struggles not undertaken and the laws not passed created the circumstances that drove UAW capitulation to the Obama bankruptcy as their least awful option.  Knee-jerk apologists for the status quo are wrong to dismiss talk of what might have been. […]

GM played by the capitalist system’s rules.  First, it always aimed to profit by driving its employees as hard as possible and paying them as little as it could.  Second, GM secured the US market for its cars and trucks by blocking the development of high-quality mass transportation here. […]

Under capitalism’s rules, the decent wages and working conditions won by the UAW provoked GM to strike back by moving production where wages and benefits were lower. […]

Workers who struggle successfully for decent wages and working conditions always find that the system strikes back.  That’s how capitalism works, how capitalists profit.  Republicans and Democrats alike proudly serve that system.  And the lesson for GM and other workers is. . . . . ?

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