Archive for February, 2010

Rick Wolff argues that the rise in income inequality, and the false scapegoating around its causes, have prevented systemic change:

There is no mystery about why income inequality got so much worse.  The real wages of average workers stopped rising during the 1970s (after having risen for a century or more).  Meanwhile those workers’ productivity kept rising…

Most American workers have not understood, nor were they informed, why they were falling ever further behind…They did not grasp that their decline flowed fromchanged social conditions that ended the tradition of rising wages for rising productivity. First among those conditions were thecomputers that replaced so many jobs…Second, there were the millions of US housewives and immigrants newly looking for paid work in the US after the 1970s — out of necessity and desires for better lives.  The US labor market thus experienced a combination of shrinking demand for workers just as more workers looked for jobs.  Employers from Main Street to Wall Street took advantage of the changed conditions…

Few among the lower 90 per cent understood how the changed social conditions combined with the economic system to cause their falling income shares.  Instead, many blamed themselves or friends and family or found still other scapegoats…but, more importantly, missed a chance to see and solve the problems of the economic system…

What malfunctioned over the last 30 years was the economic system; it generated a divisive, depressing, and dangerous pattern of economic development.  It was the system of production — where employers and employees endlessly seek advantages at each other’s expense — that stopped raising workers wages. It was the financial part of the system that pushed unsustainable loans…It was the political part of the system that looked the other way…

After all, the leading ideologues in the US — politicians, media personalities, and academics — had mostly bought into the system with enthusiasm…

To remove this or that scapegoat while leaving the system in place is no solution…Regulations constraining what private enterprises can do for profit only provoke them further to manipulate and/or corrupt politicians to evade, alter, or remove the regulations.  The system works that way and normally compels its parts to do likewise.  That is what “system” means.  But a systemic crisis like today’s is “abnormal,” a window onto possible system-change that would be terrible to waste.

I think Wolff is right on with focusing on the issue of scapegoating. In fact, this process, broadly defined, is the main reason why the economic crisis has not swung the regulatory/labor-capital pendulum back in favor of labor and regulation. Ignorance about the roots of the crisis (mainly abetted by scapegoating) have muddled the calls for changes. Modern populism has taken a very odd form, in which much ire is directed against regulation and labor unions.

Thus, while I once strongly believed in the backlash predicted by social structure of accumulation theory, the last 12 months have constrained my optimism. The failure of passing an adequate stimulus, real health care reform, EFCA, financial regulatory reform, and even cap and trade, have left me somewhat hopeless. How do we go about de-scapegoating? A lot of the bloggers are doing yeoman’s work on this stuff, but one questions whether these posts reach policy makers, much less lower and middle class Americans. Maybe things like the Zinn Education Project can bring about a broader conception of how our economic and political system actually produces unequal results. Maybe not. However we get there, de-scapegoating seems necessary for real change.

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Via Mark Thoma, Maxine Udall argues that, “If economists were physicians, we would be sued for malpractice.”

Economics, mathematized and divorced from moral philosophy, was effectively neutered after WW II, at the point when its relevance to “serious economic argument” might have been established and developed. The outcome was perfectly aligned with market forces that would continue to shift the national narrative in ways that would finally succeed in convincing people that “government is the problem”…

Now add to this the promotion and tenure policies at even second rate economics departments that require and only reward publication in journals that favor morally vacant, mathematically rigorous, theoretically obtuse existence proofs that more often than not bear no relation to reality as we know it. One is then left with an economics literature that few people, including some who have majored in economics as undergrads, can truly understand, either in its content or in its relevance to the important moral and economic issues that confront us today…

Economics provided the theory and language that supported the drive to the ditch we find ourselves in. We did it by allowing economics to become divorced from moral philosophy. Now the economy is on life support and most people in this democracy can’t tell the “difference between cynical posturing and serious economic argument,” but they can and will vote. (emphasis mine)

And Notre Dame is demoting a handful of economists who have attempted to stand against this process. Reading Udall’s post also makes me wish more people who cite Adam Smith would read Gavin Kennedy’s blog first; at least then, they would have to confront their sin of falsely positivising (excuse the neologism) their discipline.

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Students at Notre Dame managed to put the dissolution of ECOP high on the agenda at the Board of Trustees meeting yesterday. Student government representatives placed this issue second on their agenda, after the GLBT issues I’ve blogged about before. Here’s The Observer’s report:

 Students are concerned by College of Arts and Letters Dean John McGreevy’s lack of transparency as he moves to dissolve the Department of Economics and Policy Studies, student government chief of staff Ryan Brellenthin said.

“The decisions were made without student input and the process was not revealed to the student body,” Brellenthin said.

“It was almost as if they were hoping students weren’t paying attention,” he said.

Students are concerned that closing the department will narrow the economics education at Notre Dame, Brellenthin said. They are also concerned that this decision sets a precedent that students will be excluded from future academic decisions

“Very little attention has been focused on the 400 students who are economics majors,” Brellenthin said. “No efforts have been made to engage student opinion on the topic.”

Schmidt said he is an economics major, but he first heard about the plans to dissolve the department from The Observer.

“We weren’t told about it,” Schmidt said.

The dissolution of Economics and Policy Studies will be voted on at the next meeting of the Academic Council, Brellenthin, who is one of the four students who serve on the academic council, said. “We can make statements against the dissolution, and we certainly will, but it has been on the agenda to dissolve before we could put it on the agenda to discuss,” he said.

Brellenthin said faculty members are also concerned about the dissolution of the department.

“They are asking what will happen if professors who teach something that isn’t the mainstream theory are pushed out,” he said.

“The fear is that the academic council is just going to be a rubber stamp” on McGreevy’s decision to dissolve the department, Schmidt said.

One trustee expressed her surprise after Weber ranked the dissolution of the department as the second most critical issue for students, but the issue is about students’ wanting to be respected, according to Brellenthin.

Brellenthin cited reports that McGreevy described the dissolution of the department as “too sensitive an issue for debate.”

“We respect the administration and the professors as top-tier educators, but we want to be respected as top-tier students,” Brellenthin said.

It may be too late, as the Academic Council meets in three weeks. However, as I indicated in my open letter, it is imperative that these issues not be swept under the rug, whatever the outcome. Clearly, the students involved should be praised for their willingness to speak truth to power on an issue that sometimes seems less relevant or pressing than other concerns.

The Faculty Senate also took up the issue on Tuesday, passing two resolutions. The first, which passed with only a couple objections, held that faculty should not be separated from their department except under extreme circumstances. The second, which passed with a slightly narrower margin, said that the reconstituted Department of Economics should allow any former members of that dept (i.e. pre-split) to rejoin if they so choose.

The writing has been on the wall for a while, but we can hope that the tension and protest being raised results in an outcome that is better for students and for pluralism.

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As two feet of snow barrel towards the DC metro area, I leave you with some weekend reading in advance of my early dismissal from work. Enjoy the weekend!

Serious Links:

Mel Watkins reviews John Cassidy’s New Yorker piece “How Markets Fail” (MRZine)

Questions and Answers about Chartalism (Rogue Economist Rants)

David Ruccio points to a distinctly non-capitalist food co-op. (Anticap)

Glenn Greenwald questions state assassination powers (Salon)

Amy Goodman remembers Howard Zinn (Truthdig)

Juan Pablo Pardo-Guerra asks “whither mainstream economics?” (RWER)

A long and persistent middle class squeeze (EPI)

How GDP betrays the economy (CrisisMaven)

Ta-Nehesi Coates probes the deeper meanings of fast food and systemic racism

Demand question time in Congress

Diversions (Saints/Lil’ Wayne edition)

“I Will Forever Remain Faithful: How Lil Wayne helped me survive my first year teaching in New Orleans” by David Ramsey

The New Yorker profiles Lil Wayne

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The term guard labor, for me, calls to mind situations in developing countries in which the wealthy feel the need for multiple armed guards around their estate to keep out possible intruders. The mansions sit on the hill, likely looking out over a valley of slums, paintintg a portrait of a highly unequal society. However, this situation need not be limited to the third world- US inequalities are great enough such that the US employs guard labor strikingly. Mark Thoma to a piece discussing the economist Samuel Bowles, who has done work on inequality and its relationship with guard labor.

“Prior to about 20 years ago, most economists thought that inequality just greased the wheels of progress. Overwhelmingly now, people who study it empirically think that it’s sand in the wheels.” … Bowles offers a key reason why this is so. “Inequality breeds conflict, and conflict breeds wasted resources,” he says…

Inequality leads to an excess of what Bowles calls “guard labor.” […] Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.

There is also a clear relationship across states between the state’s gini coefficient and it’s proportion of guard labor. There is thus a clear mechanism by which inequality is not just unfair but inefficient:

The problem, Bowles argues, is that too much guard labor sustains “illegitimate inequalities,” creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time—perhaps starting their own businesses.

Thoma writes,

With progressive taxes the lucky do pay a little extra, and that allows society to provide social insurance to the unlucky…if the guard labor hypothesis is correct, it provides yet another rationale for a progressive tax code.

My question is: is a progressive tax code enough to address this societal ill? Redistribution programs are great when they work, but the political space for them is limited. Perhaps our economic structure has endemic fissures like these; in that case, studies like this one call for a deeper look at our society’s basic mechanisms of distributing wealth, rather than retooling around the margins.

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The New York Times’ Opinionator blog features a piece (ht: AD) by Allison Arieff on the efforts by some to shift empty space from disuse.

There’s a staggering glut of empty space around the country right now, unused space that’s not doing anyone much good. That in itself isn’t new; what is unprecedented is our ability to visualize that data in an entirely new ways…

More broadly, G.I.S. allows us to literally view our place both globally and in a hyperlocal context.

That level of specificity, both at the micro and macro level, is helping revolutionize the way we think about, plan for and design the space we inhabit (or abandon). A visual map can show us patterns of overbuilding, abandonment, mis- (or lack of) use; it can teach us something about our current tendency to overbuild.

A professor at Berkeley has started a project called Local Code, which takes advantage of these new capabilities to propose specific projects such as “re-greening” swaths of pavement. The idea is that

Though most of us barely notice or give any thought to this seemingly useless space, finding pragmatic ways to use it can have a beneficial impact on the social, economic and environmental health of a region…

Neglected at the local level because they neither provide nor generate revenue, these sites are markers of larger patterns of neglect (much as we’re seeing with homes abandoned to foreclosure). In San Francisco, they often outline the shape of entire, mostly lower income neighborhoods…in need of ecological and social attention.

The plans are hyperlocal and hyperspecific.

Looking through this lens also enables us to think about infrastructure in a new way. The era of massive, expensive, centralized projects like the Big Dig in Boston has passed. “Now, with the ability to model dynamic systems, we can show a much more decentralized collection of resources could provide greater benefit…The best way to provide infrastructure is to not go in with a meat ax but to practice urban acupuncture, finding thousands of different spots to go into.”

Of course, a note of limitations is necessary:

Data-visualization capabilities can’t solve all the problems, but it’s hard to overestimate the extent to which this information can help us to think about larger systems and their interrelationships, so that we see a building as not just a building but an ecological infrastructure…

These challenges are massive; the attitudes responsible for them, deep-seated. Inquiries like de Monchaux’s illustrate that there is intelligent inquiry and actionable theorizing happening about how patterns might be broken, planning might be more flexible and dynamic, and our visions of space and its functions could expand — and, perhaps, contract.

Our society is not well-suited for dealing with the commons in a systematic way. The problem of space disuse is a classic example of a positive externality, which in some ways makes it more difficult to tackle than something like pollution. Unexploited opportunities like empty pavement require not only a will to act, but also imagination and the necessary tools. GIS and data visualization certainly help with the latter issues, but where does the will to act come?

The green movement has entrenched itself and yet green spaces aren’t seen as goods in and of themselves. I was struck yesterday reading Greater Greater Washington, a DC blog that covers area transit and livability issues. They were proposing that an unlidded urban underpass be capped with a streetscape to better serve pedestrians, shoppers, et al. Another (cheaper) plan for a median greenery was seen as suboptimal because its benefits were less direct- after all, people might not use the park. When the benefits of green space are so abstract, it makes collective action to implement them that much harder. I think we are far from a new urbanism in the Local Code mold.

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The Real World Economics Review Blog has opened voting for their ignoble prizes in economics, which goes to economists who, “contributed most to enabling the Global Financial Collapse.” Apparently turnout has been heavy. Here are the dossiers for the candidates.

Go vote.

My ballot: Fama, Greenspan, and Lucas.

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Keynes v. Hayek, Full Video

A while back, I posted a Newshour clip about the making of a Keynes/Hayek rap video. The full video has been released, and it is awesome- high production value and high comedy. Keynes’ biographer Lord Skidelsky says of it, “Absolutely fair and brilliantly rhymed…It’s not a complete account of Keynes but it seems to be completely right.”

Update: New readers, check out some of the recent posts on the right (on Guard Labor and Inequality; Empty Spaces; and the Ignoble Prize in Economics). For more info on the Economics dept. situation at Notre Dame, click the “Economics at ND” tab at the top or the “Notre Dame” tag to the right. Also, feel free to subscribe on RSS or follow on Twitter.

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