Tuesday, September 28, 2010

replication of the existing social order

From Howard Zinn, "The Conspiracy of Law," in The Rule of Law (Robert Paul Wolff, ed.)
The main decisions have been made outside the courtroom, by the society and the culture that brought this combination of persons to this place at this time. But this is made explicit by the deliberate attempt of courts to limit the scope of argument and decision, thus ensuring that court decisions will have minimum effect on the direction of society. On the appeals level, including the Supreme Court, this means deciding cases on technical or narrow grounds wherever possible, postponing fundamental questions as long as possible. It has been most difficult, for instance, in cases of draft resistance, to get the Supreme Court to rule on a question far more important to society than the disposition of one resister: Is the war in Vietnam illegal?

This attitude is expressed by one of the judges in Lon Fuller's mythical case of 'The Speluncean Explorers,' when he refuses to deal with the moral complexities of a community decision to sacrifice one person so that others might live: 'The sole question before us for decision is whether these defendants did, within the meaning of NCSA Sec. 12A, willfully take the life of Roger Whetmore.'

Not so mythical are the actual cases of political protesters hauled into court on ordinary criminal charges and prevented by the judge from airing the political grounds of their actions.

Tuesday, September 21, 2010

leon walras understands the power of hegemony...

so why can't Greg Mankiw?

From my AEA Economist's Calendar, September 2010:
As for those economists who do not know any mathematics, who do not even know what is meant by mathematics and yet have taken the stand that mathematics cannot possibly serve to elucidate economic principles, let them go their way repeating that 'human liberty will never allow itself to be cast into equations' or that 'mathematics ignores frictions which are everything in social science' and other equally forceful and flowery phrases. They can never prevent the theory of the determination of prices under free competition from becoming a mathematical theory. Hence, they will always have to face the alternative either of steering clear of this discipline and consequently elaborating a theory of applied economics without recourse to a theory of pure economics or of tackling the problems of pure economics without the necessary equipment, thus producing not only very bad pure economics but also very bad mathematics.
Leon Walras, Elements of Pure Economics, 4th ed., 1900

Sunday, September 19, 2010

intriguing and thought-provoking paragraphs

A more detailed post on efficiency wage models, as well as why I considered using one in my work, to come soon. For now, check out this excellent quote from a paper by Raff and Summers from 1986 titled, "Did Henry Ford Pay Efficiency Wages?" Raff went on, in 1988, to publish a paper in the Journal of Economic History where he argues that models of wage determination simply cannot explain the causal forces behind Ford's choice to introduce the $5 dollar day. It was, instead, a reaction to the potentialities associated with massive labor unrest.
The question of cooperation raised in the preceding paragraphs brings us finally to what might be called "morale-based" efficiency wage theories such as the one proposed by Akerlof (1982). Morale explanations in general, and Akerlof's gift exchanges in particular, have received relatively little attention compared to other efficiency wage theories. But it is quite plausible that the higher wages might have raised morale and contributed to the Ford plant's productivity.

The Ford shops were certainly no workers' paradise in 1914. The company proudly claimed that it crowded workers and machines together extraordinarily tightly to take advantage of every available inch of space on the shop floor. It even filled the air with work in progress. There was no particular dignity in work at the plant. Thus there was ample scope for Ford to raise morale. The changing technology also increased the importance to Ford of "buying the peace" and avoiding systematic soldiering and output restriction or other collective action by his work force.
I know I've done the "coming soon" thing a lot recently. A flurry of blog posts is definitely on its way. Three main topics in the works:

-Godel and economics
-Why not efficiency wages?
-Law and the labor process in economic development

Monday, September 13, 2010

market size, market integration, and the demand-side view of capitalist development: time to move on

What role does the market play in economic growth? Both classical and neoclassical models of growth place central emphasis on the market as the agent of trade, profits, and accumulation, allowing for rapid expansion of the economy. Markets were, of course, Adam Smith's solution to understanding the wealth of nations. And in more recent work in the neoclassical tradition, the answer is essentially the same: Winifred Rothenberg finds that the spread of market society (represented by geographical price convergence across markets) between 1750 and 1850 in the U.S. was a key factor to American economic success. Markets are celebrated for their efficiency in bringing buyers and sellers together in order to trade, increase their wealth, and ultimately prosper.

Of course, other traditions of economic thought have emphasized the role of the market in fostering economic growth as well. In the Marxian circuit of capital, markets are central to the accumulation process, providing the means for businesses to reinvest the surplus value gained from selling their goods back into the labor process, in turn creating the conditions to extract even more surplus from workers. In this framework, markets are also important but in a slightly different way: markets are only necessary insofar as they allow the initial accumulation process (the really important part of the Marxian theory of growth) to expand on ever-larger scales. In other words, they are an intermediate agent in capitalist expansion -- where the primary role comes from the labor process itself.

Which answer, or model, is right? It depends, in part, on your view and understanding of the rise of capitalism -- an issue which involves theoretical debates which are extremely important to political economy. But aside from the theory, it's true that each answer or model definitely possesses a set of testable hypotheses. For example, to show that markets were the primary source of economic growth, one may want to look at statistical connections between market integration and economic growth. Of course, causality would have to be tested for and established -- usually a very difficult phenomenon to pin down.

Indeed, this is the approach taken by the neoclassical study mentioned above, by Winifred Rothenberg, and she ultimately fails in giving good scientific reasons for thinking that markets were primary to understanding the growth of the economy. Markets can still be an important part, but the question of whether markets caused growth or the other way around -- a scenario in which wealthy producers may set out to develop and expand the market in society -- is not addressed. In other words, while Rothenberg certainly shows the presence of market integration between 1750 and 1850, in the end it is simply a correlative relationship. To really get at the effects of markets on growth, we have to think about employing alternative methodologies.

One possibility is the skillful use of the counterfactual. What would have happened, say, if British economic growth ultimately came to a halt by the middle of the eighteenth century? What would the neoclassical model predict about this phenomonon? Well, given the central role that markets supposedly play in fostering growth, then neoclassical economists would argue that markets most likely were not as integrated, or as large, or as important in society. If there was someway to test this hypothesis, then it would be one way of getting at a causal relationship: if markets were indeed dead in Britain (in the case of British failure), while they were quite alive in America (the case of success), then it would be more persuasive to argue that market integration is a primary variable.

Of course, the problem with the counterfactual is that it's very difficult to find! In "Domestic Trade and Market Size in Late-Eighteenth-Century France" (Journal of Economic History, September 2010), Guillaume Daudin utilizes the methodology of the counterfactual by considering the role markets played in the relatively-slower developing late-eighteenth and early-nineteenth France.

But as you can see from the title, Daudin focuses on market size, not market integration. Nevertheless, Daudin brilliantly uses market data to measure market size, and finds that markets were relatively larger than their British counterparts. Market size is determined by a two-stage process: first, Daudin measures the probability that any particular town would have been consuming a particular good (textiles, hardware, and so on). The probability is based on the amazing dataset used in the study -- a per-district, as well as national, report on transport costs, populations, and other relevant market-size and market-access variables. These probabilities are used as weights on the town population sizes to establish market size.

As Daudin notes at the end, "our claim is that size-innovation relationships do not explain the course of the Industrial Revolution.... Adam Smith could certainly not predict the emergence and future form of the Industrial Revolution by describing the division of labor in a French pin factory. But he still uncovered an important path to higher productivity" (739). While not a complete refutation of Smith, for reasons mentioned above and emphasized a bit more below, the use of the counterfactual here is an intriguing method for understanding the real causal mechanisms behind economic growth.

I want to return briefly to the comparison between Rothenberg's discussion of market integration, and Daudin's analysis. Rothenberg seems to have it on the mark that the question is about market integration. Some discussion of this by Daudin may give a more convincing account -- for example, were prices also converging across markets in France during the period in question? If so, then the fact that French growth is slower means that we should search for other variables to explain the relative success of Britain.

Nevertheless, just as Ogilvie's article (commented on a while back on this blog) criticized the Industrious Revolution model by showing how demand is constrained by local institutions, so does this model ultimately come to the conclusion that demand simply cannot explain economic growth.

When will the profession convincingly move toward supply-side phenomena which focuses on the labor process in the context of a transforming social system? More to come on that in the upcoming weeks!

Friday, September 10, 2010

engaged with the mainstream but not engaged to it: notes on heterodoxy

I'm going to write briefly about what I see to be a clear division in the state of radical economics, heterodox economics, and the history of these traditions at UMass. The division boils down to something I've observed in the teaching and particular attitude of economists here: either a clear disengagement or engagement with the mainstream approach, depending on your age (roughly greater than or less than 40).

Here's the story: I've noticed that younger economists at radical left departments are overwhelmingly obsessed with the frontiers of research in their field -- whether it's international or labor or whatever. The goal of these economists is to familiarize themselves with the latest research trends ("fashions" is what it boils down to) and produce research according to these trends, asking leftist types of questions along the way.

While it is easy to admit that being successful in academia nowadays requires one to be well-informed of the latest trends and to conform to them whenever possible (essentially, speaking the language of mainstream methodology), a quick look at the tradition of radical economics in academia -- notably the establishment of a radical economics program at UMass in 1973-1974 -- shows how very different the behavior of these young economists is. This, in turn, leads to a more nuanced view of professionalism and careerism for leftist academic economists today. In short, the radical tradition in the 1960s and 1970s was built on really smart people posing really strong oppositional frameworks to the standard view in the mainstream.

Examples include some of the classic papers of the first group of radical economists at Umass: Steve Resnick's 1975 paper on development, or Herb Gintis' 1972 AER paper on the nature of the Outlaw. Whether integrating dialectics into a study of academics and social movements (as with Gintis) or posing a new understanding of development as a relationship between capitalist and non-capitalist economies (one of Resnick's themes), it is clear that these economists were disengaging with the mainstream in order to offer a completely different view of concepts and phenomena which neoclassical economists also try (to this day) to explain. In other words, as I've written in other areas on this blog, mainstream and radical econ can be looking at the same time period, indeed the same issue, and come to two completely different explanations of it.

The result of this strategy, for better or worse, was a set of academics who sought to change the profession's understanding of certain concepts and phenomena fundamentally by posing a new view of them. The younger crowd, being obsessed with research frontiers, is asking very interesting questions, but they are obsessed with the mainstream's recognition and incorporation of these younger economists' ideas into the broad framework. The emphasis is less on imagining a drastically different world view, and more on altering the existing world view to take new questions and variables into account.

Are there young economists out there working in the older tradition? Of course, but the trend is certainly in the opposite direction. What does it all mean? Well, I will leave this short comment with a provocative question: Who got the jobs with automatic tenure at a solid research institution?

Comments and blog responses are very much appreciated!

Tuesday, September 7, 2010


From my AEA Economists Calendar 2010-2011:

Karl Marx was a philosopher and political economist who adapted classical economic theory to critique capitalism. He argued that markets alienate individuals from their true selves, and that capitalists extract surplus value from human labor. His ideas have inspired many to advocate for revolutionary political change aimed at upsetting capitalism and reducing the gap in wealth dividing the rich from the poor. His writings include Das Capital (1867), Economic and Philosophical Manuscripts of 1844 (1932), and Manifesto of the Communist Party (with Friedrich Engels) (1848).

Quotes included are two from Capital (one from vol. 3, not that good and one from vol. 1, OK), one from the Manifesto and another from the Contribution (which of course I like :).