Archive for October, 2010

We have often expressed dissatisfaction with the lack of pluralism in economics, a discipline which is now dominated by neoclassical theory. But what should also be clear is that this is more than a trivial academic debate about economic theory. The dominance of neoclassical theory is more of a “cultural hegemony,” to use the term described by Antonio Gramsci, in that neoclassical theory exerts control through a widespread consensus. And this consensus is what reaches far beyond the corridors of university economics departments.

First, and most obviously, neoclassical theory and methodology are changing other social sciences. Economics Ph.D’s are becoming chairs of other departments, such as political science departments, and economists are claiming to do the other social sciences better than other social scientists. The “freakonomics” style of economic research claims a method of scientific inquiry that can answer any question, given an appropriate data set. And this puts pressure on anyone who is not using rational choice theory to start doing so, so that the research can be considered “more rigorous.” All the top programs in Public Policy, Environmental Policy, and Development, for example, have significant requirements in neoclassical theory.

In addition, the field of “law and economics,” à la University of Chicago, is becoming part of the standard curriculum of law programs throughout the country. Law and Economics is essentially an approach to legal theory that applies the methods of neoclassical theory to law; indoctrinating law students with such an approach, without any mention or presentation of alternative economic methodologies, shapes the law and how our legal scholars think about society in a very particular way.

The hegemony of neoclassical theory extends far beyond economics, and has significant consequences for our world. I believe that understanding how we got to where we are today in economic theory will prove important to guiding the way forward, so I wanted to close with a quotation from an article by Esther Mirjam Sent explaining how she became interested in the history of economics:

As I mentioned, the reason I started studying economics is because I had this idea to improve the world, and then I realized that economics was not going to help me much in improving the world, so maybe instead of improving the world, what I should do is improve economics. And that is how I became interested in the history and also philosophy of economics.

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Labor Unions and Happiness

There’s a fair amount of literature as to whether there is a causal relationship between labor union membership and higher wages, and the evidence is mixed. However, in a recent study (h/t In These Times), two political scientists from Notre Dame, Patrick Flavin and Benjamin Radcliff, and Alexander Pacek from Texas A&M, examine the relationship between labor union membership and subjective well-being, or happiness. They use individual and aggregate data from 14 countries.

Our findings strongly suggest that unions increase the life satisfaction of citizens, and that that this effect holds for non-union members as well. Moreover, we also find that labor organization has the strongest impact on the subjective well-being of citizens with lower incomes…We show these relationships to have an independent and separable impact from other economic, political, and cultural determinants. 

Their methodology seems sound, as they have a robust set of controls at both the aggregate and individual level- in aggregate, they control for social expenditure, GDP, and unemployment, and for individuals, they control for education, self-reported health, self-reported trust levels, and others. They use OLS, and in some specifications, interact union membership with income to see how the relationship varies with income. OLS certainly leaves the study prone to omitted variable bias, but they do their best with the controls mentioned above.

I find striking the result that union density has an equally strong effect on reported well-being of non-members. However, though American society may not value worker solidarity so high, that could be because we don’t have much of it. I think that this study is a great example of political scientists asking the right questions, both in their outcome variable and they key variable of interest. Subjective well-being is receiving more attention in economics, it seems, and perhaps this will lead policymakers to make decisions are metrics other than economic efficiency.

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Blogging Tomorrow

It’s not uncommon for me to promise a future post on this blog that either never comes or comes later than expected. There are also tons of posts in my mental queue that I simply haven’t gotten around to writing. Procrastination is not a novel phenomenon, though, so I know I’m in no way unique. I did enjoy reading James Surowiecki’s article on the topic, so I’m posting about it mere seconds after finishing reading it. I’m particularly intrigued by this notion of the “extended will,” although I’m having trouble applying it to blogging, since there is literally no penalty for delaying or not posting.

Instead, we should rely on what Joseph Heath and Joel Anderson, in their essay in “The Thief of Time,” call “the extended will”—external tools and techniques to help the parts of our selves that want to work. A classic illustration of the extended will at work is Ulysses’ decision to have his men bind him to the mast of his ship. Ulysses knows that when he hears the Sirens he will be too weak to resist steering the ship onto the rocks in pursuit of them, so he has his men bind him, thereby forcing him to adhere to his long-term aims.

Or maybe I just need to strengthen my will:

Mark D. White advances an idealist argument rooted in Kantian ethics: recognizing procrastination as a failure of will, we should seek to strengthen the will rather than relying on external controls that will allow it to atrophy further. This isn’t a completely fruitless task: much recent research suggests that will power is, in some ways, like a muscle and can be made stronger.

In any case, I think there’s real merit to the dichotomy Surowiecki sets up at the end:

In that sense, it might be useful to think about two kinds of procrastination: the kind that is genuinely akratic and the kind that’s telling you that what you’re supposed to be doing has, deep down, no real point. The procrastinator’s challenge, and perhaps the philosopher’s, too, is to figure out which is which.

On that note, I owe this blog a review of David Harvey’s excellent book, The Enigma of Capital. Don’t hold your breath, though; I’m a blogger-at-will.

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Max U at the Firm Level

Julie Nelson, a foremost feminist economist, has a new paper in the GDAE Working Paper series. The title is, “Does Profit-Seeking Rule Out Love? Evidence (or Not) from Economics and Law”. As anyone who has taken introductory microeconomics knows, our dear friend “Max U” for individuals has it’s firm-level counterpart, profit maximization. Remember that these are not tested observations, but assumptions underlying neoclassical theory. Nelson problematizes “Max P” by arguing that it need not preclude altruistic actions from firms toward society. She points out that the distinction between money and love is an unhelpful abstraction at best, and at worst,

 Rather, this essay will demonstrate, the idea was invented and has maintained its power to shape our thinking through mutually‐reinforcing historical, social, and political processes. The rhetoric of profit maximization serves to distort, rather than illuminate, our social reality

The essay is fascinating- Nelson traces the roots of Max P, as well as challenging ideas that it completely dominates empirically or is legally mandated. She concludes by serving some alternative approaches to economics, particularly emphasizing a view of the economy as relational. Most importantly, she problematizes the idea of commoditatization, arguing that we should not assume that something has become commoditized once it has entered a market. Instead,

Commercial relations, in fact, are often themselves saturated with social meaning and relationality. Rather, it is the entry of narrow, profit-maximization values and related specific structures that, by reducing the value of everything to its contribution to a “bottom line,” threaten to drain human meaning.

Nelson’s paper is a helpful reminder of some ways in which our economic models of the world shape the world.

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