Saturday, October 30, 2010

birches, by robert frost

When I see birches bend to left and right
Across the lines of straighter darker trees,
I like to think some boy's been swinging them.
But Swinging doesn't bend them down to stay
As ice storms do. Often you must have seen them
Loaded with ice a sunny winter morning
After a rain. They click upon themselves
As the breeze rises, and turn many-colored
As the stir cracks and crazes their enamel.
Soon the sun's warmth makes them shed crystal shells
Shattering and avalanching on the snow crust --
Such heaps of broken glass to sweep away
You'd think the inner dome of heaven had fallen.
They are dragged to the withered bracken by the load,
And they seem not to break; though once they are bowed
So low for long, they never right themselves:
You may see their trunks arching in the woods
Years afterwards, trailing their leaves on the ground
Like girls on hands and knees that throw their hair
Before them over their heads to dry in the sun.
But I was going to say when Truth broke in
With all her matter of fact about the ice storm,
I should prefer to have some boy bend them
As he went out and in to fetch the cows --
Some boy too far from town to learn baseball,
Whose only play was what he found himself,
Summer or winter, and could play alone.
One by one he subdued his father's trees
By riding them down over and over again
Until he took the stiffness out of them,
And not one but hung limp, not one was left
For him to conquer. He learned all there was
To learn about not launching out too soon
And so not carrying the tree away
Clear to the ground. He always kept his poise
To the top branches, climbing carefully
With the same pains you use to fill a cup
Up to the brim, and even above the brim.
Then he flung outward, feet first, with a swish,
Kicking his way down through the air to the ground.
So was I once myself a swinger of birches.
And so I dream of going back to be.
It's when I'm weary of considerations,
And life is too much like a pathless wood
Where your face burns and tickles with the cobwebs
Broken across it, and one eye is weeping
From a twig's having lashed across it open.
I'd like to get away from earth awhile
And then come back to it and begin over.
May no fate willfully misunderstand me
And half grant what I wish and snatch me away
Not to return. Earth's the right place for love:
I don't know where it's likely to go better.
I'd like to go by climbing a birch tree,
And climb black branches up a snow-white trunk
Toward heaven, till the tree could bear no more,
But dipped its top and set me down again.
That would be good both going and coming back.
One could do worse than be a swinger of birches.

From The Poetry of Robert Frost Edward Connery Lathem ed., 1969, Henry Holt and Company

Tuesday, October 26, 2010

703 10-27

The "old" labor law history around the turn of the century was conservative in the sense that it focused solely on the operation of the institutions -- law, the state, and so on. Thus these works were generally seen as reformist -- they focused on the "successes of the New Deal" and other ways in which workers were able to advance their economic power over employers. Even somewhat radical scholars in this "old" tradition, such as Edwin Witte's work on labor injuctions, was focused, in the end, on how to reform legislation so that the court decisions were more favorable to workers.

In particular, take the classic example of conspiracy law. At the turn of the century, unliked Britain, conspiracy law (the law of labor unions) still held that unions were illegal. This was maintained up until the New Deal when the NLRB was established. Witte, arguing in the 1920s, observed that over the latter part of the nineteenth century court injunctions were increasingly used against striking workers instead of holding full criminal trials. In fact, (I believe this is something noted in DuBois' Black Reconstruction though I'm not sure) the 14th amendment was more commonly applied to businesses during this time period than to blacks for racial crimes.

At any rate, the focus of this older tradition was on reforming law to give workers and unions a broader space for collective bargaining. Concentration was focused on the internal evolution of unions, law, and other institutions.

Interestingly, and I can't understand why this is the case, but there is another similarity among these early institutionalists (including Commons). They focused mainly on the postbellum period -- and in particular, on the 1870s and 1880s -- as crucial turning points in American capitalism. Forbath for example, while part of the "new" labor law history, also focuses on the postbellum period as central for understanding important debates in American economic history, including American Exceptionalism (he also uses many of the same themes as the old labor historians, including the issue of injunctions). I call attention to this fact because the social historians of the 1960s and 1970s, we will see, are much more interested (and rightly so, I think!) on antebelllum developments in political economy.

This was the older "camp". The "new" labor history was in part influenced by the social historians, but it is also more generally a product of the rise of leftists in academia in the 1960s and 1970s. In terms of the work of the social historians, the "new" labor history was inspired by Christopher Hill, David Montgomery, Herbert Gutman, and others. These social historians were all interested in the economic and cultural causes and effects of capitalism, to varying degrees. (Some of the names associated with social history which I mentioned last time are also important here.) Thus, part of the project of the new labor law historians was to find either a solid framework in which to discuss law and society, or to simply integrate some of the sources of data used by social historians into their analysis. As I mentioned on Monday, some did have explicit theoretical models, and the influence of the Marxian tradition in academia aided this trend.

Of course, the question is not simply to tie the two together. The more general point is the law's social-historical importance both theoretically and with respect to particular time periods and places. People are still debating the social-historical importance of the state. And when constructing our own ideas, we have to be careful, of course, of the extreme opposite of the new institutionalists -- i.e., we cannot simply assert that market or agent behavior is epiphenomenal to the law! the best labor law histories are therefore very clear about the place of the law in history, and try to tell stories which weave economic processes with political ones. But it is definitely much harder than it sounds. Even Christopher Tomlins -- one of the premier labor law historians of the past 20 years -- was criticized in his earlier work for focusing too much on rules and internal mechanisms of the law. Certainly they were Marxist-oriented conclusions and much more politically driven towards radicalism than the "old" labor law historians, but his research was still largely sterilized from underlying socioeconomic forces.

To appreciate the socio-historical relevance of the law, let's deal with an analytical problem which might get at a solution to this issue. Let's say we want to understand the "conditions of existence" of capitalism. The rise of capitalism involved the destruction of some of the aspects of the old system (stage 1: household ownership of the means of production, work primarily from the home, seasonal fluctuations in output, work for use instead of profit), as well as the creation and legitimation of new features: stage 2, capitalist social relations (wherein workers sell their labor in exchange for a profit), ownership of the means of production, a new organization of work. The processes at work in both arenas are, in turn, cultural, economic, nautral, and political in nature.

We have stage 1 and 2, with 4 aspects working between them.

To narrow down our thinking we're going to think of this transition in terms of the limiting factor of politics, and discuss in what ways keeping our foot on politics limits the transition between the two stages. In other words, let's think of some of the economic, natural, and cultural factors contributing to the evolution of stages.

Economically, the development of the power loom allowed employers to make cloth faster and in greater quantities than home production. This is an economic advantage of working in the firm. The power loom was essentially able to out-compete home production, leading to the general decay of home production. So, workers are left with much less to do in the home. Now, as long as workers don't leave their homes (say, for the west), you have a bunch of people at their home with nothing to really do. If the means of production are gone and they don't have any property, those are economic freedoms to leave. Consider the religion. If there are changes in the religious atmosphere, such as a cultural norm resistent to laziness, then there may be cultural freedoms to leave, as well -- religion spurs the productive spirit to leave the household. Or, the family relations are broken down. Natural freedoms are also created, since in the winter time, when there is little to do on the farm, freeing up some laborers to go to the new factory.

At any rate they join a factory and start to work. My point is that they were free economically, naturally, and culturally, to leave home. What could still be holding them back?

There are political freedoms to consider, since a variety of laws and political norms may entrench certain power interests with a vested interest in keeping workers home, such as feudal interests or (as with Steinfeld) indentured servitude's status in the law (if it were still legal, this would create a problem for employers who needed a free labor force).

The question is where do the political freedoms come from? And this is the first half of the story, the first stage, addressed by Steinfeld as well as many others. The question, simply put, is what kind of political justifications or reasons can we make for the freedom of workers to leave their homes for the factories? Part of Steinfeld's contribution to the story is that the political freedom is not all about rights, or political freedom. Rather, it's that such political freedom to leave the home is also contingent on law. And in fact, law actually mattered because law played a role in defining the freedom of the worker.

That's a pretty interesting idea. If the American Revolution wasn't this outburst of world-changing individualism (in the sense that while it may have been about individualism it didn't change everything else about institutions in the process), but rather that individualism instead needed also to be changed and accomodated by law, then we've added another part to the story.

We are also, at this point, confronted with a very important choice. Still in stage 1.

On one hand, we can assume radical individualism of the Revolution and then say the law still had to work out the legal status of political freedom. This is the path taken by Steinfeld.

On the other hand, we can assume some other significances of the Revolution and then ask what role the law played in freeing up the worker in that case. This is the path taken by Tomlins and some others. (Mostly Tomlins. He is a key figure in the new labor law history, having just finished a 600+ page tome on the history of labor and law in the U.S. from colonial times to the Civil War.) We probably won't get to it in this post, but it is a highly intriguing idea, especially with reference to the precise social-historical relevance of law to labor.

As I said, Steinfeld is focused on the first of these two points. In short, he argues that the American Revolution had an "ambiguous" impact on the development of free labor because law still needed to sort out what it meant to be "free" in an employment relationship, from the standpoint of Master-Servant law. The interaction between the two processes of law and work (i.e. the entrypoint for Steinfeld's discussion) is indentured servitude. [Interestingly, the role of indentured servitude has been called into question empirically by some later law and labor scholars. What are the implications?] Citizens increasingly believed that indentured servitude was too close to slavery and thus incompatible with the ideals of "possessive," or republican, individualism. Thus the case of Mary Clark is a turning point in the labor law because this is a woman of color who had the right, according to the courts, to both voluntarily enter into, and voluntarily serve, in a labor contract.

However, Steinfeld believes we have a slight problem, even with this groundbreaking result -- notice that Steinfeld keeps "free" in quotations precisely because the economic power of workers was still reduced in this process. In particular, in individuals' arguments for freedom based on notions of self-government (a political kind of freedom, borrowed from the Revolution's ideals of republican individualism) led to it being much harder for these individuals to argue for freedom based on the ownership of property. I.e., they had a political right to dispose of their persons as they saw fit, but the propertied notion of freedom was reduced to another sphere -- that of the economic sphere. It therefore became increasingly harder for workers to argue for freedom in the economic sphere -- i.e., their freedom vis-a-vis the work process (since they sold their labor power as property).

This particular process supposedly came about because journeymen and other laborers argued on the grounds that they should be treated as juridical equals in the employment contract, not on the grounds that they cannot be directly compelled by their masters (148). Nevertheless, this is something laborers (read: indentured servants...) apparently "achieved", and it is very important to realize this:
What was left to masters was 'persuasion.' Masters would no longer be entitled to rule, to use law directly to compel workers to do their wills. Instead, they would be limited to 'influencing' the decisions that workers were entitled freely to make for themselves, to structuring the 'incentives' workers faced. But it is important to be clear about the significance of this influence. Employers would continue to have power, derived from law, to control workers. Only now this power would take a different form: it would not be based on rights physically to coerce workers but would be based instead on rights masters had under property, contract, and labor law. These legal rights would constitute the basis for the economic pwoer they would continue to wield over wage workers. (148)
Another quote: "it comported with the emerging model of labor that left to the laborer the formal decision whether to stay or to go" (148).

At this point it is useful to step back and realize what has been accomplished. Steinfeld has theoretically fulfilled both criteria for understanding the transition to capitalist relations (i.e., stage 1 and stage 2). First, he explains very well the freeing up of certain forms of labor in the early nineteenth century. Unlike the historians of liberal democratic capitalism (take your pick: Wood, Appleby, Smith) which simply focused on individualism, Steinfeld adds an initial barrier but ends up with the same conclusions: a breaking down of the old model in exchange for the new one. The enemy is us.

In other words, the institutions were still liberal democratic in essence. That point is clearly made by Steinfeld, and we end the discussion of Steinfeld here (pg. 159):
One perhaps unintended consequence of the Revolution wsa that the hierarchical forms of traditional society began to meet with greater and greater resistance. Increasingly, ordinary working men and women refused to accept the formal hierarchical practices that had defined traditional master-servant relations, denouncing these as a slavery unsuited to liberty-loving Americans. Over a number of decades, a consensus emerged that traditional practices in the employment relationship violated the basic equality promised by the American Revolution.
What do you think -- did Steinfeld hit it on the mark or is something else going on here...?

Sunday, October 24, 2010

econ 703 topics, 10-25

The early 1960s saw the birth of the law and economics movement, the tenets of which are most famously represented by Ronald Coase's 1960 article on "The Problem of Social Cost" in the Journal of Law and Economics (that journal began in 1958 and is published by University of Chicago Press). From that article many have extracted the famous “Coase theorem” regarding the efficiency of private bargaining solutions to externality problems, in the absence of transactions costs and regardless of the initial distribution of property rights. Ronald Coase moved to the University of Chicago in 1964 and became editor of the Journal of Law and Economics there. In the 1970s the discipline generated more steam as Richard Posner published his Economic Analysis of the Law in 1973. (Posner moved to University of Chicago in 1969.) Law and economics was heavily influenced by libertarianism and many of its proponents argued for strict private property rights and enforceable contracts, as well as an overall market-oriented view of society.

One can see how this field made a strong impact in economics as well as law departments. The institutional world view encapsulated in law and economics perfectly captures the Walrasian model of microeconomic theory: general equilibrium, arising from enforceable and complete contracts, clear property rights, and perfectly competitive markets. One might say it was a match made in heaven.

Interestingly, just as discontents with the neoclassical model of economics led to certain contradictions in the field in the late 1960s and 1970s (look no further than our own department's radical history for evidence of that), a similar dialectics occurred in law, beginning in the late 1970s with the Critical Legal Studies movement (CLS). And on another point of similarity, CLS also began at Harvard. Influenced by post-structuralism, Frankfurt school critical theory, as well as social problems such as with race, CLS had its reactions against the law and economics school. (In fact, in the late 1980s when Obama was a law student at Harvard, the CLS scholars were constantly in heated debates with the law and economics group, all the while Elena Kagan, Supreme Court Justice, was dean of the school: source.)

In particular, CLS was fueled by some of law and economics' assertions. For example, CLS had an issue with the idea that that law must leave (or, in general, does leave) matters of distribution to the legislative branch. I.e., they contested the claim that property law was not distributional. Also, CLS took law and economics to task for its assertion that that law, in a liberal democracy, fosters Pareto efficiency through enforcing contracts, protecting property rights, thereby promoting private bargaining solutions to problems of externalities. On the first point, CLS (recall their Marxist influences) argued that law shows clear evidence of class bias and is therefore not distributionally neutral. They also showed that a social definition of property completely excludes the possibility of neutrality. On the second point, CLS argued that there are a multitude of real blockades to the efficient bargaining model that are more than simple perturbations from the standard Coasean or Walrasian bargaining model. Economic agents play by a fundamentally different kind of game than the one asserted by the law and economics school.

The CLS critique, like their brother radicals in economics, was both contemporary- and historically-oriented. Horwitz’ book, whether consciously or not (asked years later whether he thought Transformation was Marxist, he replied that he didn't think so), illustrates the relative autonomy thesis of Marxism in historical context. This thesis, advanced by Althusser and later expounded upon by Poulantzas, holds that in a base-superstructure framework, law is relatively autonomous from the economy to the extent that law serves no particular class, though does, in its reproducing of the existing order of social relations, promote the political position of capitalists. In other words, after the American Revolution, the courts began to make reasoned decisions that just so happened to aid the propertied class.

This is supported by the three-stage transition outlined in Transformation. We are familiar with the first two stages: the shift from law as custom to law as an instrument. Beginning in the early nineteenth century, judges consciously changed their views on the nature of the law: when defending their position in the cordwainers’ case of 1806 (denying workers the right to strike) they appealed to the law as “the will of the majority. It is law because it is their will – if it is law, there may be good reasons for it though we cannot find them out” (22). “Judges began to conceive of themselves as legislators,” Horwitz writes, in a thesis that highlights the judges’ reasons behind their decisions to consciously favor one economic group over another.

In other words, law has its own political mechanisms, but courts in this period became more conscious of their role as promoter of economic performance. They saw law as an instrument for economic growth, but they themselves were not instruments of a social class. They were the ones that changed their views and took on a more powerful role in American political economy – it was not a direct propertied influence from a new class of merchants and entrepreneurs in the sense of, say, Ralph Miliband’s view of British politics in modern capitalist society.

If it seems like we have strayed a bit too far from law and economics at this point, that is because we have! The CLS arguments are so radically different from the view of the law as a distributionally neutral institution which promotes efficient bargaining. In the language of political economy, Horwitz is an institutionalist because he refuses to see the law as epiphenomenal to market activity. He believes, to the contrary, that our "present conceptions of the rule of law" rest on a "Hobbesian vision of the state and human nature," so that the law essentially vindicates the "adversarial, competitive, atomistic conception of human relations" (565).

Why should economists care? How can we operationalize, or make use of, Horwitz’ insights concerning the law? Consider this quote, again from 1977: "a recent interpretation of Marx's political theory [by Avineri] ... has demonstrated that Marx himself consistently asserted a regular interaction between 'substructure' and 'superstructure' through which thought, values, and social arrangements actually do affect consciousness and, ultimately, history" (563). In other words, while it is true that economy constitutes law, law also constitutes economy.

This is the central point of Friedman’s view of law and society – society makes property, and the types of property regimes in law serve to promote certain types of accumulation over others. Any regime of intensive property rights is going to have these effects. Under the Walrasian model, enforceable and complete contracts are assumed with absolute property rights to lead to an efficient allocation of goods and services. This is in a market of price takers. But as Friedman points out, absolute property rights are intensive property rights which confer a monopoly to a certain group. Thus, the competitive model needs to assume, in addition to absolute property rights, constant returns to scale. Otherwise, in the face of increasing returns and market power, average costs fall and so prices have a distributional effect in the market. Horwitz too highlights this on pg. 43, in the debate between priority and reasonable use, the latter of which operates under a doctrine of proportionality. Priority implies monopoly, "depriv[ing society] of the 'benefit which always attends competition and rivalry'" (43).

Furthermore, this is not a story of absolute property rights or of promoting the Walrasian model of competition -- in fact, that would be the case if priority were upheld. The point is that by operating under an instrumental criterion the courts simply moved property rights in a new dimension. That is, while priority was not upheld, later reconstructions of sic utere gave substantial intensive property rights to proponents of property development such as mill owners and builders, who would not bear many of the costs of compensation to the people whose property (say, downstream or from a canal product) was damaged.

At this point it also is important to remember the role Coase plays in this story. Coase found that if a railroad, in its operation, was giving off sparks to the surrounding village, a private bargaining solution (in the absence of transactions costs) is feasible. In particular, the initial distribution of property rights did not matter to the ability to find a solution. Consider a related example: the land of a farmer is occupied by himself and a cattle raiser. The cattle raiser's herd comes over and eats the crop of the farmer. The data look like this:

Number in herd (steers) | Annual crop loss (tons) | Marginal crop loss (tons)
1 1 1
2 3 2
3 6 3
4 10 4

Given that the crop price is $1 per ton and the cost to the farmer of fencing the property is $9. The cattle raiser must pay the farmer for the lost crops given that the farmer owns the land, and given the total crop loss of 4 steers, then it is clear that if the cattle raiser wants 4 steers, he will pay the farmer to erect the fence.

But all that is important here is that, for any desired herd less than 4, the cattle raiser must factor into his decision to raise more cattle the marginal costs of $1 per ton of crop lost. Coase brings up a very curious problem, however. Given that the farmer is being paid for any lost crop, shouldn't he simply produce more crops, in fact produce more crops to the point that an inefficient allocation of (crop, herd) will arise? No, Coase says -- "If the crop was previously sold in conditions of perfect competition, marginal cost was equal to price for the amount of planting undertaken and any expansion of output would have reduced the profits of the farmer."

Notice the issue here -- in perfect competition. The marginal cost of the crop is $1, so that the price paid for any lost crop offsets the value of the crop and no difference in production decisions arises. And in particular, the pricing mechanism in the theory of perfect competition does not permit market power from increasing returns, which we noted is quite possible in any intensive property rights regime. In this case, price might be greater than marginal costs, leading to a misallocation in the system: the price of the lost crop paid by the cattle raiser may distort incentives and thereby lead to increased production, hindering the herder's decision to reach a an efficient point for his own decisions.

Translating to U.S. economic history: Horwitz and Friedman both make clear the fact that different property regimes promote different distributions of income, violating the predictions of the Walrasian model in the process. In canals and mills, where substantial damages to property occurred due to the decisions of entrepreneurs, monopoly power was distributed to a particular group, violating the assumptions of the Coasean model in the process.

Is it efficient? At this point, the question may seem absurd. It is, however important and in fact, Horwitz does briefly bring up the point of whether legal subsidization of economic growth was efficient. I personally think we would need to focus on technical efficiency, which is useful for understanding economic growth but not for understanding policy or, more broadly, questions of social welfare. In particular, pushing against the incentives argument by North and others, I would argue that the law does much more than passively create the appropriate incentives. Through the conscious choices law, it actively takes a part in redistribution of income, thereby promoting growth.

In fact, more recent, more explicit, and even somewhat more mainstream examples of this train of thought can be found in the literature on the late developers. Through directly subsidizing and promoting some industries over others, and coercively protect some industries from outside competition and eliminate others the government was able to promote growth.
At any rate, we see that the project of the early nineteenth century courts was to argue, through the rhetoric of classical economic thought (pg. 3), that competition were to be promoted by destroying certain obvious forms of monopoly but really they were just allocating intensive property rights to different actors in society in that process. This is the lesson learned from the Charles River Bridge case, when intensive rights were distributed from the traditional owners of a bridge to the new property developers. This is a direct subsidization of growth.

It is also the case in labor contract disputes, though we will talk more about those on Wednesday. But briefly, because it relates to the point raised here concerning the law favoring the entrepreneur, we find that in building contracts if the entrepreneur had partially fulfilled his contract (maybe by not doing a "sufficiently good" job in constructing the house) he would still be given compensation for the work performed. Horwitz has found that in a similar type of case involving the laborer, he or she was not given partial compensation.

More to come on labor on Wednesday, but for now, wrapping up, I think we can gain a better appreciation of why law should matter to political economy. And in the early nineteenth century, as law changed its views concerning economic development, the entire playing field was shaken up.

What did it all mean for labor?

Saturday, October 23, 2010

coppage v. state of kansas (1915)

From Samuel Bowles, Microeconomics: Behavior, Institutions, and Evolution (Princeton University Press, 2004):
Wherever the right of private property exists, there must and will be inequalities of fortune; ... it is impossible to uphold the freedom of contract and the right of private property without at the same time recognizing as legitimate these inequalities of fortune that are the necessary result of the exercise of those rights.

Monday, October 18, 2010

repeat after me (or, ch. 2 [sketch])

Chapter 1 is meant to be an introduction to the style and logic of the rest of the text. As you can see from my short exercise, I am really interested in demonstrating the irrelevance of bourgeois economics for understanding questions of what I see to be of greater importance to society.

Of course, part of this project is purely a matter of choosing to analyze some variables at the expense of others. For example, focusing on why the poor are poor, or placing another variable into a production function, are choices that purely reflect my political bias. I completely acknowledge that. However, unlike mainstream texts, I am not going to present my proposed weights as principles, absolute and without a history. In other words, an emphasis on bourgeois economics' larger place in social science, as well as a recognition the institutional and historical contingency of its concepts, is a very important part of the project.

The point of the post was to integrate each of Mankiw's 10 principles into a discussion of those same principles' inconsistency, irrelevance, and class bias. Taken as a whole, it addresses problems of logic and methodology which will be expounded upon in later chapters. At times, it is tongue-in-cheek -- I don't really think unemployment benefits are detrimental to unemployment, but that is the view you adopt when you follow the principles.

In other words, it sets the theme for the rest of the project.

In Chapter 2 of Principles of Economics (4e), Mankiw addresses the question of why economists disagree. Three reasons are given: "Differences in Scientific Judgments"; "Differences in Values"; "Perception versus Reality" (pp. 32-33). (The last reason has to do with how economists mostly agree on the benefits of policy-relevant issues such as rent-control and free trade while the majority of voters ignorantly allow such blemishes on society to persist.) Here's what Herbert Gintis had to say about why economists disagree:
Thus the problem of the economist's role in social affairs is resolved. With the
understanding that our ultimate service is to a social movement grounded in everyday work and community life, the radical economist is nonplussed by his or her separation from the dominant sources of power. Radical theory exists today in America only because of the depth of the contradictions of capitalist society, and will wither and disappear if and when the ruling elites succeed in temporarily attenuating and/or suppressing these contradictions. We hold our jobs and disseminate our thought only insofar as we are part of a movement.

Dialectical analysis must also be used to explain why increasing numbers of economists are willing to assume the status of outlaw (a rather mild type of outlaw compared to the George Jacksons, Angela Davis's, and Vietcong fighters, but outlaw just the same). In essence, we are subject to the same dialectical laws which produce black rebellion, wildcat strikes at General Motors, as well as counter-culture and radical student movements. We must be outlaws to preserve our sanity and to seek a decent world for our children. We must be outlaws because, along with other workers, the rationality of our expertise is otherwise divorced from us and perverted toward ends incompatible with our personal self-realization in our work. But we will not be outlaws forever. Join us. ("Consumer Behavior and the Concept of Sovereignty," AER 62: 1/2, 1972, pp. 267-278)
In other words, there are economists out there that see disagreements as essentially political -- not one of disjoint values, but rather of profound importance to our view of human society. Economists can and do often disagree because of fundamentally different political conceptions and goals for society.

Furthermore, and what is perhaps most surprising, is that this is something that Mankiw would totally agree with with -- I never told you the title of chapter 2. It's "Thinking Like an Economist," and like the popular book (and now movie) Freakonomics which drives a similar message, the whole point of Mankiw's principles text is to get you thinking in the world view of markets.

So, what's wrong with a little awareness of the important reasons why economists disagree?

Tuesday, October 12, 2010

10 principles of economics - or anti-mankiw, ch. 1

Thinking about whether a "8. country's standard of living depends on its ability to produce goods and services" I am reminded of the growing gap between worker productivity and compensation in the U.S., and I wonder about the growing levels of inequality in society. If "7. governments can sometimes improve market outcomes," then why can't we use government policy to solve these types of problems? I guess we have to accept that the "two broad reasons for a government to intervene in a market ... [are] to promote efficiency and to promote equity" (pg. 11) are fundamentally at odds with each other: "1. people face tradeoffs," and that includes the government's decision to promote one of these two goals at the expense of the other.

But is it really a tradeoff? Only if we believe that "6. markets are usually a good way to organize economic activity," because then any government efforts to achieve greater equality through promoting a more secure society (better healthcare, government programs to protect the unemployed) are confounded by "leaky buckets" because they are outside of the market. But what if these measures for greater equality led to greater efficiency because we are a stronger, more stable community?

I guess we can't think like that -- "4. people respond to incentives" after all, so unemployment insurance reduces the incentive for "3. rational people [who] think at the margin" to enter the workforce. And since "2. the cost of something is what you give up to get it," unemployment insurance makes your leisure time cheaper than it would have been otherwise, causing you to misallocate your time between work and leisure.

Let's think about this "market" in the broad picture.

When Marx addressed to workers whether they should be for or against free trade, i.e., whether "5. Trade can make everyone better off," he came out neither for nor against it -- it was, he argued, simply not on the table of worker concerns, since in capitalism the fundamental point of reform is the labor process and who controls various aspects of it. That is, economics today -- certainly not an abstract idea which has existed in its same form since the Greek's gave the term "oikonomos, which means 'one who manages a household,'" -- is not "the study of how society manages its scarce resources," (pg. 1) it is about who has control and rights and property in the workplace -- that is, after all, what distinguishes capitalist economics from former economic systems (e.g., hunter-gatherer, feudalism) in the first place.

And so the so-called "principles" that "9. prices rise when government produces too much money" and that "10. society faces a short-run trade-off between inflation and unemployment" are far from god-given facts and concerns of all of economics: they are products of a unique way of thinking about the economy which is rooted in concepts particular to the market-oriented view of society, and not necessarily real concerns of workers fighting for better living standards (because productivity does not give it to them), women searching for equal treatment in the household (because they could care less about incentives for entering the workforce), or even big financiers (who are far from rational people at their margins).

All principles from Mankiw, Principles of Economics (4e, 2007)

Monday, October 11, 2010

columbus day

Arawak men and women, naked, tawny, and full of wonder, emerged from their villages onto the island's beaches and swam out to get a closer look at the strange boat. When Columbus and his sailors came ashore, carrying swords, speaking oddly, the Arawaks ran to greet them, brought them food, water, gifts. He later wrote of this in his log:
They ... brought us parrots and balls of cotton and spears and many other things, which they exchanged for the glass beads and hawks' bells. They willingly traded everything they owned.... They were well-built, with good bodies and handsome features.... They do not bear arms, and do not know them, for I showed them a sword, they took it by the edge and cut themselves out of ignorance. They have no iron. Their spears are made of cane.... They would make fine servants.... With fifty men we could subjugate them all and make them do whatever we want.
These Arawaks of the Bahama Islands were much like Indians on the mainland, who were remarkable (European observers were to say again and again) for their hospitality, their belief in sharing. These traits did not stand out in the Europe of the Renaissance, dominated as it was by the religion of popes, the government of kings, the frenzy for money that marked Western civilization and its first messenger to the Americas, Christopher Columbus.

From chapter 1 of Howard Zinn's A People's History of the United States (pg. 1)

Wednesday, October 6, 2010

isaac asimov on mathematics

I have this book which I am very happy to own, though I admit to having never read the whole thing. The title is A History of Mathematics by Carl Boyer, 2nd edition revised by Uta Merzbach. It is a 600+ page tome that traces mathematical ideas back to considering the origins of the very "concept of number," all the way to the mid-twentieth century's obsession with logic and computing. It does so in a way that is informative to both the mathematician and layperson, because it illustrates the development of mathematical ideas with actual examples and theorems used by the mathematicians grappling with them at the time, all the while eschewing technical complexities for the sake of covering the contributions of every major mathematician in history.

In short, the book is a masterpiece. I bought it as a senior in college for a variety of reasons, one of which was because I, as a math and economics major in college, was writing my honors thesis on art, infinity, and Godel's incompleteness theorem, and I needed the book in order to understand the historical context of formalism and the parallel postulate. I've come back to it time and again, mostly for a before-bed perusal when I don't want to think about anything related to my discipline. And in fact, I've used it on this blog before as well -- when I wrote a post on Keynes' methodological revolution (it's still one of my favorite posts I ever wrote, here it is). I also plan to use it when I write some blog posts on Godel's incompleteness theorem and methodology in economics.

At any rate, I just now noticed that Isaac Asimov wrote the forward for the second edition of Boyer's book. His comments aren't much, but they are strikingly inspiring, so I thought I'd summarize them here with some quotes:

Asimov's premise is that "nearly every field of human endeavor is marked by changes which can be considered as correction and/or extension" (vii). And "only among the sciences is there progress", in the sense that art, for example, has "continuously and chaotically changed." But in science, he refines the progress as "one of both correction and extension" -- for example, "[e]ven Newton, the greatest of all scientists, was wrong in his view of the nature of light, of the achromaticity of lenses, and missed the existence of spectral lines. His masterpiece, the laws of motion and the theory of universal gravitation, had to be modified by Einstein in 1916" (vii).

"Only in mathematics," he writes, "is there no significant correction -- only extension.

...Ptolemy may have developed an erroneous picture of the planetary system, but the system of trigonometry he worked out to help him with his calculations remains correct forever.

"Each great mathematician adds to what came previously, but nothing needs to be uprooted. Consequently, when we read a book like A History of Mathematics, we get the picture of a mounting structure, ever taller and broader and more beautiful and magnificent and with a foundation, moreover, that is as untainted and as functional now as it was when Thales worked out the first geometrical theorems nearly 26 centuries ago.

Nothing pertaining to humanity becomes us so well as mathematics. There, and only there, do we touch the human mind at its peak" (vii-viii).

Who wants to go do some abstract algebra?