imagining history

where weber and kafka intersect: interesting new research

2012-02-19T11:40:00.001-05:00

A (relatively) new article out of Law, Culture, and the Humanities (February 2011) by Douglas Litowitz titled "Max Weber and Franz Kafka: A Shared Vision of Modern Law" studies the impact of Weberian concepts of law using an interesting historical link between the two great thinkers. Here is a (gated) link to the article -- abstract below:

Recent scholarship suggests a line of influence from the sociologist Max Weber to the writer Franz Kafka, mediated through the lesser-known figure of Alfred Weber, who was Max’s younger brother and a law professor who served as one of Kafka’s law school examiners. This paper finds textual support for this claim of influence. Indeed, there is an uncanny similarity between Weber’s and Kafka’s writings on law, particularly in their diagnosis of a legitimation crisis at the heart of modern law, and in their suspicion that modern law cannot deliver on its promises.Weber and Kafka succeed at capturing the irrationalities, paradoxes, and disaffections of modern law, but in the final analysis their work suffers from a failure to appreciate law’s progressive and emancipatory potential.

economic history link roundup, 2/6/12

2012-02-06T15:54:00.001-05:00

Using Google's Gapminder to analyze the economic history of cities: the case of Golden.

Two heavy-hitter American historians, Seth Rockman and Sven Beckert, analyze the role of slavery in economic growth in this great Bloomberg piece.

Property and race in the South after the Civil War: a new quantitative study from a legal scholar (abstract only!).

The history of a Vermont Labor Hall.

Debates on "New" versus "Old" Keynesianism: here, here, and here.

Economics Anti-Textbook authors get some press on Naked Capitalism recently here.

reconsidering rothenberg's from market places to a market economy, 20 years later: part I of a series

2012-02-04T14:18:00.006-05:00

In this first installment of a series on the transition to capitalism in early America I am going to look back at one of the most influential books on the market revolution, Winifred Rothenberg's From Market-Places to a Market Economy, published 20 years ago. Rothenberg's work has since been read as a kind of "textbook" for understanding the liberal perspective on economic development and has (at least, I am told it has) been studied carefully by high-powered development economists at the World Bank and other organizations to help inform the crafting of development programs in the developing world, such as the Washington Consensus. Thus, given the importance of her work and its longstanding influence, I am going to reconsider her thesis in light of more recent work that has forced us to question some of the crucial premises of her hypothesis that the freeing up of (product and labor) markets laid the bedrock for industrial development in the early-19th century Northeast.

We note briefly that the premise of Rothenberg's thesis clearly depends on the widespread prevalence of local regulatory regimes of both product and labor markets in the 18th century, particularly the early 18th century (given that her observation of increasing market integration begins around 1750). To support that thesis, she draws primarily on quantitative data. Further qualitative support is found in the so-called "Whig" historiography of the American Revolution, of which the quintessential proponent is Gordon Wood's Radicalism of the American Revolution (1992).

For Wood, the American Revolution was radical in its assertion of a popular basis for politics. For Joyce Appleby, a scholar writing along similar lines, its importance for political economy was in its emphasis on liberalism as an economic philosophy -- stressing private property rights, enforceable contract, economic independence, and a laissez-faire theory of government policy. A corollary of this thesis is the rise of a free market mentalitie, as Rothenberg put it -- a rise in the value of free markets and trade for mutual gain among the newly democratic society. Rothenberg finds quantitative evidence of this assertion in the regional convergence of market prices for various agricultural goods as well as the rise of contract labor in the Northeast in the late-18th and early-19th centuries. Her analysis draws from account books, diaries, and prices taken from newspapers. A key aspect of her thesis is the rise of free contract labor and free labor more generally, as distinct from the coercive institutions of the early 18th century. The question to be answered there is, Did the American Revolution give rise to what we would eventually see as the "free labor" necessary to fuel the fire of the Industrialization of the North? Rothenberg answers with a resounding "Yes". Others have their reservations.

Writing from a different perspective, Morton Horwitz's 1977 Transformation in American Law had a chapter on contract law which suggested (but did not prove) a counter-hypothesis. Sifting through court records and treatises he finds that not only was labor subject to a set of legal controls in the early 19th century significantly curtailing its freedom to contract and its mobility, but that the law exhibited a clear class bias against the worker and in favor of entrepreneurship. Taking issue with Horwitz's thesis in her own 25-year-later reconsideration (published on EH.net here) of Transformation she shows how many of the claims of class bias and worker unfreedom in Horwitz have not withstood more recent, closer examinations of the actual application (or more appropriately, lack thereof) of some of the seminal labor cases upon which Horwitz relies. (See Karsten's Head versus Heart for a good summary of right-to-quit law in the Northeast.)

Time to put race at the center of labor
history in the U.S. instead of unfree white labor?

At this point, it seems that Rothenberg has the upper hand. Several other labor law histories centered on the Northeast accepted the basic claim that the American revolution was marked by a fundamental embracing of political equality, throwing off the institutional fetters of an unfree and coercive colonial America (including the legal system!). Indeed, if we are to question at least the labor market-side of her thesis, it behooves us to either find some more empirical evidence to support the Horwitzian argument about labor control in the early 19th century, or to reconsider the labor law history of the colonial era to see in what ways labor ever was unfree or coerced or regulated -- or we could do both.

In the next part of the series, we will see how recent historical research has questioned precisely the points mentioned in the previous paragraph, seriously calling into question whether labor developed along an essentially government-free trajectory in the early Republic.

jeremy adelman on hirschman

2012-01-22T21:03:00.000-05:00

Hirschman's "Rival Views" is a fascinating look at the
origins of moral and political critiques of capitalism

The following excerpt is from a "flavor essay", so to speak, of a forthcoming biography (by Jeremy Adelman) of one of the most interesting and important thinkers in institutional economics and political economy of the last century: Albert O. Hirschman. Hirschman is perhaps most popular for Exit, Voice, and Loyalty, which is a highly original discussion of how individuals behave in political and economic relationships. The following excerpts is from his early years at the Institute for Advanced Study at Princeton, in the 1970s. A very interesting story indeed:

Several weeks later, [Hirschman] walked before the podium in Dodds Auditorium at Princeton University to deliver the Janeway Lectures to large crowds of students and faculty on the theme of “Private and Public Happiness: Pursuits and Disappointments.” For Hirschman there was no basic choice between the two types of happiness; it was not “or” that conjoined public to private. If there was a choice, the point of the lectures was to argue that people were always choosing depending on their moods and inclinations, and it was this activity that Hirschman wanted to draw out. Hirschman’s Janeway Lectures addressed experiences and emotional responses to them—anger at educational institutions, self-incrimination for buying a large house and regretting it (“buyer’s remorse”), and the ever disappointing “driving experience,” which, far from yielding to the lyrical joy ride, more often plunged the BMW-driving pleasure-seeker into traffic jams and car payments. Pursuits of happiness wherever it was being dispensed left trails of disappointment.

In contrast to Olson’s “logic,” Hirschman presented a “dialectic” that unfolds within the self, a self comprised of a complex amalgam of drives. Hirschman’s pendular dialectic was the theme of Shifting Involvements: Private Interest and Public Action (Princeton University Press, 1982), in which he stuck his neck out to formulate an alternative to the gathering political and intellectual orthodoxy. “I have rarely felt so uncertain about a product of mine,” he told his daughter Katia. “Perhaps this is because, as I say in the preface, what I have written is less a work of social science, than the conceptual outline of one or several novels.” Indeed, the preface suggests that there is much more of Hirschman’s personal philosophy and life story stirred into the prose. It threatened to become a bildungsroman “with, as always in novels, a number of autobiographical touches mixed in here and there.”

If there were autobiographical touches, they were not so easy to see. Certainly, no reviewer picked them out, though many did pick on the book as a disappointing one. Compared to earlier books this one was a flop. Nowadays, it is often overshadowed. But one might read Shifting Involvements as a resistance against ideas of triumphalism of any one side and defeatism of any other. To both he insisted there was always more choice, there were always more possibilities, always hope.

More at the Institute for Advanced Study website here.

economic history link roundup, 1/18/12

2012-01-18T18:03:00.000-05:00

If you like the art piece on the right, you might want to check out this blog started by my sister. She's currently an art student in college and she's using the site as a way to catalog her work.

Michelle Alexander talks about the history of mass incarceration and African American history at NPR. Her new book is The New Jim Crow: Mass Incarceration in the Age of Colorblindness. Among many other things, the interview outlines the systematic maltreatment of blacks in an age when issues of civil rights in a "post-racial" state were supposed to have been solved.

David Ruccio reviews Donald Katzner's history of the University of Massachusetts Amherst Economics Department (well, really a history of its "radical turn" in the early 1970s), entitled At the Edge of Camelot: Debating Economics in Turbulent Times, for the Economic History Association at EH.net.

"For God So Loved the 1 Percent," courtesy of the NYT blog. "In the end, Mr. Romney is correct to claim that complaints about economic inequality are inconsistent with the concept of "one nation under God." But that's only because the "1 percent" of an earlier era intended it that way."

economic history link roundup, 1/16/12

2012-01-16T09:21:00.000-05:00

Jean Francois Millet's "Abendgebet"

Work is a four-letter word. It is a striking thesis and I enjoy the author's perspective a lot. David Spencer's work has indeed been featured on this blog before. From the article: "The neglect of the activity of work is seen to have denied space for mainstream economists to engage with the full range of possibilities for progress in human well-being. In particular, it has resulted in a failure to identify the potential for workplace reform as a means to enhance the well-being of workers. The view that work is irredeemably irksome has brought about a resignation to the idea that human happiness lies with the promotion and achievement of a life of ease or leisure and has prevented the consideration of possible ways to enrich and enliven the work that is required to meet societal needs."

The Journal Historical Materialism has a symposium on Marxism and the American Civil War, with a contribution from Eric Foner.

The Great Gatsby Curve, thanks to a link from Krugman's blog. "As [Krueger] shows, America is both especially unequal and has especially low mobility. But he also argues that because we are even more unequal now than we were a generation ago, we should expect even less social mobility going forward."

The Robert F. Wagner Labor Archives at NYU.

network analysis, history, and economics: reconsidering miliband-poulantzas and marxist theories of the state

2012-01-13T08:41:00.000-05:00

What if we made it like a flip book instead? Source:
http://upload.wikimedia.org/wikipedia/commons/thumb
/0/05/Sna_large.png/300px-Sna_large.png

The U.S. Intellectual History blog recently had a post on the utility of network analysis software. You should check it out, it's really thought provoking stuff. Lauren is apparently contemplating using it for a project related to African-American intellectual and radical history. It seems like an interesting tool, but as she points out toward the end of her post -- what would we use this stuff for anyway? To me, it seems like the best thing to use it for is simply data management. If you have multiple core "groups" in the network, sometimes your brain can't process 5, 6, 7 groups down the line in order to see an important relationship. For example, group 1 might be connected to group 4 by quality A, but group 4 is also connected to group 7 by quality B, and group 7 is connected to group 9 by quality C, and qualities A, B, C might share something important to each other which your mind may not be able to sort out very easily, so that you end up missing the connection between groups 1, 4, 7, 9. Network analysis using graphs or other visual methods could help with that.

But there may be other ways to think about the project of network analysis, stretching even further into our understanding of networks and their importance in historical research. To start thinking about that, I offer a few thoughts from my own work.

Part of my dissertation is also concerned with network analysis of legal professionals in the early 19th century U.S. Like Lauren, I am having a tough time figuring out the best way to organize my data, given all the various categories in which I'm putting these people (and trying to figure out social connections and so on). One tool that has been helpful is the use of a spreadsheet -- something like Google Docs is fine -- in which I can place each of these people, and then for each column, have either some quantitative or qualitative statistic about their political views, years in the law, educational background, and so on.

Doing a network analysis on such data is very enlightening -- bringing out some things which, while I may have seen after thinking through the relationships on my own, is made much easier through the use of the spreadsheet which allows me to see everything in one central location and sort through it myself, like sifting through my memories to take out the important parts. Nevertheless, I still feel that doing such analyses is an incomplete use of the idea. Yes, network analysis may make us reach further into our brains to sort for patterns, but it doesn't really impress me that much.

It never really has, though. Why?

I think it would be more useful to do dynamic network analysis. Doing research in history is about uncovering what we don't know (seeking to imagine it through ever greater refinements, both for ourselves and for our audience), which network analysis can help with, but it's also about explaining change. The kind of grand economic histories which I enjoy writing and reading about are concerned with large shifts in history.

In the project I'm working on, it will be interesting to see how social networks which defined the legal profession changed over the course of the rise of capitalism. That is to say, plot networks over time and see how the connections and groups dissolve or get passed on through family and wealth connections. See how groups arise and become a more cohesive whole -- and then see which connections were crucial to that developing cohesion. In doing so, we might shed light on the emergence of a capitalist elite in a way that would really put most existing sociological, political, and ideological histories of law and capitalism to shame.

In fact, Marxist scholars have long recognized the importance of such institutional change in understanding the nature of the capitalist state. In the classic Miliband-Poulantzas debates, this was one of the central critiques that Poulantzas made of Miliband's work. Miliband did a study of capitalist society which revealed the class nature of the capitalist state in Britain. Poulantzas applauded the effort, but essentially made the claim that Miliband was not uncovering anything new -- of course rightist and leftist politicians are the same, the state itself is a reflection of the underlying class struggle in society! Why spend time unearthing the connections? The more important question, for Poulantzas, was to analyze how fundamental changes in the nature of the state are reflective of (but not necessarily completely determined by) fundamental changes in the type of capitalism -- big-time monopoly capitalist vs. financialized, for example -- that have come about.

I'll let Nicos have the last word in this post. But the point is simple: we shouldn't accept the capitalist state as such -- rather, we should see how it arises from certain class conflicts. Network analysis might be an interesting way of doing so.

A significant shift in the predominant branch in the State apparatus, or of the relation between these branches, cannot be directly established by the immediate exterior role of this branch, but is determined by the modification of the whole system of the State apparatus and of its form of internal unity as such: a modification which is itself due to changes in the relations of production and to developments in the class struggle. (Emphasis in the original.)

land of promise: an economic history of the united states, by michael lind

2012-01-11T08:52:00.000-05:00

That's his newest book, due out in April, 2012. Lind asserts that contemporary debates over American economic policy have their roots in early 19th century debates over how internal improvements and manufactures should be promoted by the government. In one camp you had the more conservative view (advanced by people like Hamilton) that states should be heavily involved in the promotion of industry, and on the other, you had the "radical democratic" idea that the state should simply focus on providing a stable framework in which entrepreneurs could seek out private gain.

It might surprise some to find out that the radical libertarian philosophy did not experience a clear win in this debate. Consistently since its founding, the American state has been heavily involved in the promotion -- and even subsidization -- of American growth. Lind's work may be a way to revive these ideas again at a time in which the Keynesian notion of "Aggregate Demand Management" seems to define the limits of state interventionism -- in order to show how strikingly conservative this version of the "Keynesian" view actually is.

Here is the book's description from Amazon:

A sweeping and original work of economic history by Michael Lind, one of America’s leading intellectuals, Land of Promise recounts the epic story of America’s rise to become the world’s dominant economy. As ideological free marketers continue to square off against Keynesians in Congress and the press, economic policy remains at the center of political debate. Land of Promise offers a much-needed historical framework that sheds new light on our past—wisdom that offers lessons essential to our future. Building upon the strength and lucidity of his New York Times Notable Books The Next American Nation and Hamilton’s Republic, Lind delivers a necessary and revelatory examination of the roots of American prosperity—insight that will prove invaluable to anyone interested in exploring how we can move forward.

economic history link roundup, 1/9/12

2012-01-09T09:36:00.000-05:00

A cartoon, yes, but still -- too simplistic?
Source http://www.spartacus.schoolnet.co.uk/USAchild.htm

Remembering Katrina Honeymoon, late historian of women and children's labor in Industrial England. "'It remains an inconvenient truth,' she observed in 2010, 'that most working-class children (and therefore most children) in 18th- and 19th-century Britain did not enjoy the freedom to develop physically and mentally through play and education.'"

Healthcare? Technology? Infrastructure? The Japanese economy has far from stagnated over the last 20 years. "The Myth of Japan's Failure", an NYT opinion piece, fills us in on the details.

The "Lawyers, Guns, and Money" blog continue their excellent "this day in labor history" series with a look at the passing of NAFTA. They also recently won a blogging award for this series.

A great essay on Southern politics during the Cold War (from the "Lenin's Tomb" blog): "racial populism could become a recurring form of Southern politics thanks in part to the defeat and co-optation of turn-of-the-[20th ]century Southern multiracial populism."

Historicizing American Conservatism. "Alan Brinkley raises the question of how to think about the attraction of conservatism to people who are, as he puts it, perched precariously in the middle class. The recent rise of economic inequality, he suggests, may actually have led to the embrace of an antigovernment, antitax politics by middle-class and working-class people, who, facing stagnation of their incomes and living standards, have grown frustrated with a state that seems increasingly incapable of aiding them. The erosion of government...has not led to a call for more government, but rather to a sense of the impotence of the state and a deep pessimism about the possibilities of government activism, and a feeling of resentment about rising tax burdens that yield few tangible benefits (pp. 772-773)".

law, labor, and capitalism syllabus

2012-01-07T09:00:00.000-05:00

American shoemakers in the late-18th century.
Image source: http://griid.org/2011/03/01/march-1-creation
-of-the-first-union-with-a-closed-shop-agreement-in-the-u-s/

Here is a link to the "Law, Labor, and Capitalism in U.S. History" course which I plan to teach this semester.

I steered the course at various points more towards social and political history than what might be seen as standard for a legal studies course. I did this for two reasons.

The course is directed at juniors and I had trouble finding "digestible" material on labor law history for students who do not have a strong background in legal concepts.
A study of social protests and political consciousness of labor can give a valuable perspective into the particular issues workers had with the law as well as how they sought to amend their position. Sometimes, legal history gets wrapped up in the evolution of rules and norms that have little to no impact on how social conflict is instigated or resolved through the law. My course represents an attempt to bring law and labor closer to each other.

Here is a good resource for constructing a legal history syllabus.

economic history link roundup, 1/5/12, and a small request

2012-01-05T09:04:00.000-05:00

Pacific Northwest Labor and Civil Rights Projects,
Art of Richard Correll retrieved from
http://depts.washington.edu/labpics/repository/v/communism/correll/

Check out this excellent labor history resource, "STRIKES! Labor History Encyclopedia for the Pacific Northwest" -- yearbooks, communist party histories, and a great media selection.

Emma Rothschild: 5 books recommended on economic history.

Not something you get to learn about everyday: EH.net has a review (by Thomas Cox) up of James R. Fichter's So Great a Proffit: How the East Indies Trade Transformed Anglo-American Capitalism. Cambridge: Harvard University Press, 2010. Fichter traces trade throughout the colonial and early Republic period of American history -- its influence on elites, specifically merchants. The magnitude of the impact of this trade on the American experience is questioned by Cox, but overall it definitely seems worth checking out.

Matias Vernengo's Economic History syllabus. You can find (introductory, advanced U.S., advanced European) economic history syllabi at UMass here. (You can find my syllabus for an upper-level undergraduate class in U.S. economic history at the "Teaching" link on the upper-right side of this blog.) If you're a heterodox economist with some syllabi in economic history courses, please let me know of them and I will update the list accordingly.

economic history job market candidates, 2011-2012

2012-01-03T09:00:00.000-05:00

Part of a continuing series

Nicolas Ziebarth is getting his PhD from Northwestern and lists economic history as a primary field, which is interesting in and of itself -- usually economic historians try to sell themselves in a more actively-demanded area of specialization (labor economics or development, for example) and list economic history as a secondary field just to keep job prospects as open as possible.

He is interested in the role that resource misallocation plays in economic development. (Anyone out there in development familiar with this idea and can give a quick summary? Leave a comment!) His job market paper looks at its effects during the Great Depression. "Misallocation and Productivity During the Great Depression":

Abstract: Aggregate productivity fell by 18% between 1929 and 1933. Existing explanations for this decline have focused on unobserved shifts in factor inputs such as labor hoarding. I develop a new hypothesis that focuses on the role of resource misallocation between heterogeneous plants. Using a novel plant-level dataset, I study two industries: manufactured ice and cement. I decompose the overall change in industry-level productivity into effcient productivity shifts and misallocation as in Hsieh and Klenow (2009). Increases in misallocation between 1929 and 1931 can explain at a minimum 50% of the decline in productivity for cement, around 20% between 1931 and 1933, and 10 to 15% for 1933 to 1935. I estimate that increases in misallocation can explain 50% of the total decline in industry productivity for manufactured ice between 1929 and 1935. In order to explain these findings, I develop a model of financial frictions that relates misallocation to dispersion in working capital interest rates. If banks are unwilling to take on additional leverage to fund the most productive plants, credit becomes misallocated resulting in factor misallocation and lower aggregate productivity. My model therefore explains the empirically observed increase in misallocation through an increase in the marginal cost of leverage. I argue that these empirical and theoretical results provide another role for the non- monetary effects of the banking crisis during the Depression (Bernanke, 1983a): the collapse of aggregate productivity.

At the website I linked to he also has a paper which seems like more of a "big picture" project; the kind of economic history I find more interesting. He examines traditional models of "backwardness" of developing countries in "Are China and India Backward? Evidence from the 19th Century U.S. Census of Manufactures". The abstract:

Hsieh and Klenow (2009) argue that a large fraction of aggregate TFP differences between the U.S. and the developing countries of China and India can be explained by factor misallocation. Their interpretation is that this misallocation is due to institutions and policies in these developing countries that redirect resources from productive to unproductive firms. Using the U.S. Census of Manufactures from the late 19th century, I find that the level of dispersion in these modern, less developed countries is very similar to that in the 19th century U.S. What these countries share are not similar institutions but rather similar levels of economic development. The institutions of the U.S. at this time were much better than India or China in terms of protecting property rights and allocating resources to the most productive firms. This suggests that the Hsieh-Klenow measure of imperfections is not solely related to institutions but also the level of development. I apply their accounting procedure to the U.S. and find that between 4% and 7% of manufacturing TFP growth in the 20th century can be attributed to a more efficient intra-industry allocation of resources.

The fact that neither in terms of economic development nor institutions are the U.S. and China/India similar, and the fact that the international context is quite different, makes me question the comparison, but it's still an interesting question. And he tries to frame his work in the context of the latest theoretical work by Acemoglu (which goes to the source of how precisely institutions do impact growth, instead of just saying that they matter), though he is really building off of earlier work by Hsieah and Klenow and going in a somewhat different direction -- with implications for the institutional and economic perspective.

economic history link roundup

2012-01-01T13:25:00.000-05:00

A new SSRN paper (by Roger Middleton) on the history of the British Historical Statistics Project, to commemorate its new online edition.

Lawyers, Guns and Money blog runs the latest installment in their "This Day in Labor History" series with a look at an early 20th century example of labor radicalism (they did a short history of the Knights of Labor a few days ago which was really good, too).

Remembering David Montgomery, renowned labor activist and U.S. labor historian.

A new book out of Florida University Press by Mary E. Frederickson entitled Looking South: Race, Gender, and the Transformation of Labor from Reconstruction to Globalization has some essays on the case of the U.S. after the Civil War that are definitely worth a look. Abstracts for all chapters included at the link.

Book forum sums up the latest discussions of American declinism; you can find my thoughts on this latest trend, with a comparison to how British decline was analyzed, here.

Happy New Year!

sovereignty and the american revolution: new research

2011-12-31T09:11:00.000-05:00

I was surprised to see that the Legal History Blog didn't link to this symposium in the William and Mary Quarterly on "patriot royalism" during the American Revolution, since one of the cornerstones of the debate is the question of what it meant to be legally and ideologically separate from Britain. It kicks off with an intriguing paper by Eric Nelson, an up-and-coming political historian from the Harvard Kennedy School (he received his PhD from Cambridge University in 2002). Heavyweights such as Gordon Wood weigh in, with a hard criticism of the work. Unfortunately, ungated copies of the papers are not available.

But here's the abstract to Nelson's paper:

'Patriot Royalism' makes the case that American patriots of the early 1770s became the last Atlantic defenders of the early Stuart monarchs. Their constitutional argument—that America was “outside of the realm” of Great Britain and therefore to be governed not by Parliament but by the royal prerogative—had famously been made by James I and Charles I in their acrimonious disputes with Parliament over colonial affairs in the 1620s. Most patriot writers were fully aware of the provenance of this new position and enthusiastically embraced its ideological implications. In the process they developed a radical, revisionist account of seventeenth-century English history. A proper reckoning with the story of patriot Royalism should allow us to appreciate the true drama of the republican turn in 1776, as well as to understand the persistent allure of prerogative powers in the formative period of American constitutionalism.

In his response to Nelson, Wood downplays the idea of patriot royalism because he has argued, for many decades now, that the Revolution is characterized by a more radical ideological break from Britain. Nelson, in establishing a bit more nuance to the story, is drawing some fundamental interpretations in how we understand the nature of the American Revolution -- specifically trying to show that an undercurrent of conservative British principles of government runs through Revolutionary rhetoric. The study may in fact lead to a more radical questioning of the consensus view that the Revolution itself was so thoroughly libertarian, in place of a more nuanced view of the ideology of the elites who came to power in the years immediately following the Revolution (and leading up to 1789).

Of course, this debate must stay faithful the available historical evidence, which is not exactly on the side of Nelson (at least in terms of quantity of rhetoric in his favor) -- but do read through Nelson's paper if you have the opportunity, as he remains convincing throughout the debate. Another important point in the debate between Wood and Nelson worth considering is how to accurately trace the relative impact of certain speeches or treatises which were being circulated in the early 1770s. Very interesting stuff and highly recommended.

economic historians on the job market, 2011-2012

2011-12-29T09:00:00.000-05:00

The start of a continuing series.

A brief look at a few of the top mainstream departments (Harvard, Berkeley, Chicago...) does not reveal much in the way of budding economic historians (... I guess I shouldn't be surprised. Check back soon for more interesting candidates). However, one of Daron Acemoglu's students is working on some interesting projects related to political economic history: his name is Pablo Querubin. His job market paper is an econometric study of rent-seeking by U.S. politicians in the second half of the 19th century. Abstract and other papers (some of which are also on economic history) here.

The story according to mainstream economists is as follows. Politicians are assumed to be self-interested profit maximizers who seek to gain from the system by acting on their own interests -- interests which do not necessarily line up with the interests of their constituents. The amount of this rent-seeking behavior, furthermore, is strongly related to the accountability of the underlying political system (how fair the electoral system is and so on). In short, a democratic government such as what we have in the U.S. would probably have relatively fewer rent-seeking politicians than a despotic one would.

Now, if we consider the second half of the 19th century-United States, "democratic" usually isn't the first word that comes to mind. Nevertheless, the question is, what would we expect given the postbellum United States? Was there significant rent-seeking? How would you test for it? Querubin uses a methodology which allows him to test whether politicians who were elected by a close margin saw their incomes increase more than the losers of that close electiono over the course of the rest of their careers.

He finds that this was not the case for politicians who were elected in the 1870s, but that it was the case during the Civil War. He interprets this finding as suggesting that in periods when a democracy is in some kind of (political or economic or both) crisis, the space is opened for rent-seeking. Otherwise, a democracy like the U.S. operates pretty well at insulating against such behavior. This is further supported by evidence that a team headed by Acemoglu found recently supporting the idea that "financial firms connected to Timothy Geithner experience an abnormal return of 15% after his nomination as Treasury Secretary," which, since it took place during the financial crisis, qualifies in his story. Although it really doesn't, since Geithner is just one person and I'm not sure that the other contenders for the Treasury Secretary position are necessarily doing any better or worse than him (which would be the true test of the hypothesis).

But should we be surprised that in a capitalist democracy we find such results as Querubin's? Politicians already occupy certain class positions before they gain power, suggesting that if there is some disturbance to democracy, it occurs before anyone approaches the ballot box. If you're looking for a malfunctioning democracy, rent-seeking behavior is not necessarily the first place you would look. I suggest you look instead at the politics of the capitalist state itself: why didn't we see a full democratization of the south after the Civil War (indeed, the period under which Querubin finds no rent-seeking!), for example? The story that we usually find is that different groups of elites are fighting over public policy, often ignorant of the mass of workers, poor people, women and blacks below. It's not rent-seeking, but it is politics from a privileged position in the economic system.

In summary, Querubin's paper seems to present solid evidence against the public choice thesis that politicians are rent-seekers. And he seems to have some good things to say about our political system in the end -- we have a fair amount of checks in our electoral system to counterbalance any self-interested behavior by politicians. But it's only 2 cheers for democracy. Capitalist democracy may not produce rent-seeking politicians but it certainly does produce a situation in which not everyone has equal say in designing the "rules of the economic game".

link roundup

2011-12-27T19:47:00.005-05:00

Over at JacobinMag Seth Ackerman wrote a timely post on the importance of strikes in building up a labor movement. But the field is not as uncultivated as he suggests. A recent book by Gerald Friedman entitled Reigniting the Labor Movement (2008) is a quantitative study of this exact phenomenon. The central thesis of the book is that, since strikes are primarily about workplace governance (aiming to wrest the means of production back from capitalists), that they are necessary to the growth of the labor movement because it focuses workers on democratic practice. Through econometric analysis he finds, for example, that a year with a high amount of strikes increases union membership 5-fold, relative to a year without a lot of strikes. The importance of strike behavior can also be seen as a corollary to Nelson Lichtenstein's State of the Union (2007) which is a historical study of the politics of American labor movement in the 20th century.

Over at EH.net Paul Hohenberg reviews The Birth of Modern Europe: Culture and Economy, 1400-1800: Essays in Honor of Jan de Vries. Laura Cruz and Joel Mokyr, eds., 2010. Hohenberg has some useful things to say about the selection of essays, which cover American and British cases on the topic of culture and demand-driven growth. (Gavin Wright contributes an article on the American case.) Overall Hohenberg finds the essays of mixed quality but still possibly worth a look if your university's library is willing to shell out the money for it.

Readers of this blog may recall a few posts I wrote from a long while back on the so-called "industrious revolution", which is a topic to which de Vries has devoted much time developing -- see this piece I wrote on Sheilagh Ogilvie's research in Germany. So you have a general idea of my views on the topic. The bottom line is this: de Vries' work is very theoretically driven, and it's not clear whether the data support de Vries' conclusions. Increased work hours could be caused by a renewed culture of industriousness, by institutions which significantly restrain the consumption patterns of those in the community, or even by an increase in the cost of living. A recent paper by a grad student here at UMass (Mark Stelzner), which I have had the chance to read through, has found some issues with the data used in one of the more recent papers supporting the idea of an industrious revolution (Allen, Robert and Weisdorf, J.F., “Was there and ‘industrious revolution’ before the industrialrevolution? An empirical exercise for England, c. 1300 – 1830,” Economic History Review, 2010), and I must say that I am convinced by his argument: if you factor in living standards, the causal mechanism from industriousness to increased work hours is hardly clear .

re-imagining history

2011-12-23T10:52:00.001-05:00

Since I started up this blog project in May 2009 it has taken several unexpected turns. First I stopped posting so much about videogames, then I brought in Anti-Mankiw stuff, and lately the blog has become more contemporary and political. I'm leaving that all behind in order to focus more on recent exciting research in law and economy/society and economic history. Turns out there isn't a really good "Economic History Blog", the way that you have a "Legal History Blog" or even Marginal Revolution (which, aside from doing everything else, is also able to keep the interest of an academic core). So, in some ways Imagining History will try to fill a niche with this latest idea.

But no need to fear! My angle will be anything but run-of-the-mill. I anticipate most of the coverage, at least on the economic history side, will be based pretty heavily on hard criticism. So I promise it will be fun to read!

And we'll see where that takes me after a while...

this just in: daron acemoglu down with #ows

2011-12-17T23:03:00.002-05:00

In an interview on his top 5 recommended books on inequality:

"I’m definitely in that camp. I do believe in markets. I passionately believe in the importance of property rights and private property. I think they are absolute sine qua nons for prosperity. But I also believe that these things are very political and the politics shouldn’t be one-sided. Gore Vidal said, “The United States has only one party – the property party. It’s the party of big corporations, the party of money. It has two right wings; one is Democrat and the other is Republican.” If that is true, that’s a real threat to a free market and a fair society. For that reason I think Occupy Wall Street is very important. It’s a grassroots movement that tries to stand up to this tendency of our political system."

Read the full interview here.

quote of the day: legal consciousness in early america

2011-12-11T13:33:00.001-05:00

We don't often get to see how laws developed in and around courts (in legal treatises and reporters) trickle down to affect actual working people in the early 19th century. Much rarer to find such evidence in newspapers. But here is a gem, “From the Witness,” The Sun (Pittsfield, MA), 6 Sept. 1806:

I walked near a snug farm house -- everything around wore the aspect of industry and improvement. I saw the aged inhabitant and his family departing from their dwelling -- I saw them turn and take a farewell view, and march away in silent sorrow. This property had been bequeathed to him by an affectionate wife, now deceased. He had sold his other property and laid out the avails in the improvement of this favorite spot, on which he wished to close his eyes. The common law of a foreign country, the odious remnant of a barbarous feudal system had dispossessed him of this, and turned him and his children, houseless and destitute, upon the world.

Poring over this old piece, its arguments strike the reader of the common “few against the many” polemics that have found their place the historiography of post-Revolutionary society. Still, there is much more to the writer’s discussion than simply an attack on the “privileged”. The idea of the “few against the many,” alive today in popular media with discussions of who exactly constitutes the "99%", was used in post-Revolutionary America to criticize those who owned property, and therefore held status, without the necessary hard work to earn it. In the above, however, there is hard work: there is “industry and improvement,” and yet something still disturbs this social commentator about the nature of the legal system – one that has feudal remnants but continues to affect those in republican America. And are the claims of this farmer baseless or can we find evidence of them in the common law? The following suggests answers

The law of waste as it applied to inheritance changed over the course of the late eighteenth to early nineteenth century. The American legal understanding of waste is that it is any action which causes “permanent harm to real property committed by a tenant” (Black’s Law, 2009), though it could simply mean productive investment in the land by the tenant, as was the 18th century English understanding of the term. The common law view of waste as applied to inheritance developed over time to hold that one could not receive unproductive lands in inheritance, because that land had no inherent value. The economic logic behind the "instrumental conception” of the law was that the market for land knew best, especially in the early nineteenth century, so that a dower in unimproved lands would constrain the future productive value of the land. Indeed, this is the only way to explain the court's (contradictory!) claim that women themselves could not, after inheritance, make the land productive, because that would constitute waste! Horwitz goes so far as to suggest that these irrational decisions suggest that the judges’ goal in this thread of case law was to “undermine the right of dower itself.” For a discussion of the issue, see Horwitz, Transformation of American Law, pp. 56-58.

"no matter what happens, isn't it important to try?"

2011-12-08T17:15:00.001-05:00

Bugenhagen

"Cloud says they are trying to save the planet."
"Honestly, I don't think it can be done."
"For even if they stop every reactor on the planet, it's only
going to postpone the inevitable."
"Even if they stop Sephiroth, everything will perish."

(Bugenhagen stops and looks at Red XIII.)

Bugenhagen

"But, Nanaki [i.e. Red XIII]. I've been thinking lately."

"I've been thinking if there was anything WE could do."
"As a part of the planet, something to help a planet already in
misery..."
"No matter what happens, isn't it important to try?"
"Am I just wishing against fate?"

legal standard of the day -- when could workers recover wages in 1840s pennsylvania

2011-12-07T11:25:00.001-05:00

The ruling here established the fact that "faithful service" is an agreement implicit in the employment contract. That is to say, if a worker "misbehaves" on the job, he is not legally entitled to any back pay (e.g., if he misbehaves on the 29th of the month and the employer fires him promptly and wages for the month are due to him on the 30th, he gets nothing). From Libhart v. Wood (PA, 1841) argued before the Supreme Court of Pennsylvania:

When a servant, who has engaged for a certain time at certain wages, is turned away by his master before the period for which he has engaged to serve has expired, and his dismissal be in consequence of his own misconduct, he will be entitled to no wages; for his faithful service is a condition precedent to his right to wages, and that condition, in the case supposed, he has not performed. But if his dismissal be unjust, the master can not, by his wrongful discharge, prevent the servant from recovering a compensation for his services. Thus the law carefully protects the rights of both master and servant.

quote of the day: law and labor in early america

2011-12-01T14:23:00.001-05:00

Law hung old women in Salem because it was proved, said the courts of law, that they were witches. Law hung the Quakers in Boston, because they wore strait coats and broad brimmed hats. Law whipped the members of the same sect, at the cart tail, from town to town in New Hampshire. Law bared the backs of the Baptists in Boston, and lashed them until the skin was flayed off, because they said 'every man has a right to worship God according to the dictates of his own conscience;' and law in Connecticut compelled every body to cut their hair in a particular manner and prosecuted men for kissing their wives on the first day of the week. Law laid the stamp tax, and the tea tax, and our fathers resisted those unjust laws even unto blood.... Must we be told to submit in silence to law, merely because it is law, without reference to its constituent principles? No law will ever command the respect of any, not even a slave in every sense, unless that law is just.

From An Address delivered before the Mechanics and Working-Men of the City of Brooklyn, on the Celebration of the Sixtieth Anniversary of American Independence (1836) by Seth Luther, quoted in Tomlins, Law, Labor, and Ideology in Early America.

the "occupy harvard crimson"

2011-11-21T20:48:00.001-05:00

With an article by original Anti-Mankiw'er Gilles Raveaud. Download your copy here:

http://occupyharvard.tumblr.com/

A good quote from Raveaud's article. I love the language!

The Harvard economics professor and former adviser to George W. Bush is one of the most
gifted economists of our generation. He is also one of the most effective and talented propa-
gandists of our times. His target: young economics students. His field of operation: the world’s universities. His weapon: the best-selling textbook in the world. It includes 36 chapters and 800 pages of color illustrations, graphs, stories and interesting asides. Don’t worry if you or your kids don’t speak English, Mankiw’s text surely exists in your language.

even rightists don't believe in property rights

2011-11-15T10:41:00.001-05:00

...At least when it comes to someone else's property.

"Mr. Bloomberg said the city had planned to reopen the park on Tuesday morning after the protesters’ tents and tarps had been removed and the stone steps had been cleaned. He said the police had already let about 50 protesters back in when officials received word of a temporary restraining order sought by lawyers for the protesters. He said the police had closed the park again until lawyers for the city could appear at a court hearing later in the morning." (Source: New York Times, "Police Clear Zucotti Park of Protesters".)

A brief note on the title: Greg Mankiw wrote a post a few weeks back entitled "Even Leftists Believe in Property Rights", which was meant to deride the Occupiers' activities. As we see here, the argument goes both ways.

mozart symphony #39 in e flat major, 2nd mvmt.: andante con moto

2011-11-13T14:09:00.001-05:00

anti-mankiw news

2011-11-11T19:59:00.001-05:00

As most of the regular readers of this blog know, Anti-Mankiw the blog started sometime last week, riding on the wave of the Harvard Ec 10 student walkout. The goal of the blog is to reply to N. Gregory Mankiw's blogposts with alternative links and alternative commentary. I strongly encourage you to check it out. Think of it this way: Mankiw doesn't allow comments on his blog, so if you have something to say about one of his posts, head over to Anti-Mankiw, see if we've got something up about it, and post your opinion! It could be a great forum for igniting critical debate on economic problems -- something that, sadly, neither Mankiw's blog nor his textbook seem to really encourage.

Since starting we've had some excellent posts that have garnered some excellent comments. One of the more popular posts has been on the relationship between education and earnings, which you can see (along with some interesting perspectives on the issue) here. But the blog has also given readers a chance to learn more about how Mankiw's book promotes incomplete understanding of inequality and ignores the impact of inefficient institutions (perpetuated by path dependence and power relations) on social well-being.

So please, check out the blog, spread the word, and help raise awareness of these important issues.

video of the ec 10 student walkout last week

2011-11-08T21:03:00.003-05:00

View it here:

http://www.adbusters.org/blogs/adbusters-blog/occupy-econ-101.html

tomlins and uci law - changes in the air

2011-11-07T20:43:00.000-05:00

Christopher Tomlins, who recently left his position at the American Bar Association to join the faculty at the newly created UC Irvine law school, is taking some important steps there toward making the study of law more interdisciplinary:

http://www.uci.edu/features/2011/11/feature_interdisciplinary_111107.php

A good quote from the article:

[Tomlins] plans to have common colloquia, luncheon workshops, social functions and retreats so that students and faculty from different disciplines can swap perspectives.

“It will create a sense of interdisciplinary community and tie the law school into the rest of the campus,” Tomlins says. “Irvine is an especially appropriate place for such a program because there’s already an unusually large concentration of faculty outside the law school doing law-related work.”

The Program in Law & Graduate Studies, he says, is ideal for students interested in professional or academic careers involving law and legal institutions, policy analysis or applied research in law-related fields. These include criminal justice and criminology, urban planning and environmental issues, discrimination, human rights and intellectual property.

Tomlins, who is currently one of the most influential researchers of colonial and early American legal history, recently finished a mammoth book on law, labor and the shaping of civic identity in early America entitled Freedom Bound. It came out in 2010 via Cambridge Press and it is a masterpiece.

Even though Tomlins' work is still essentially legal history, where the evolutionary mechanisms behind rules takes center-stage, some of his latter works have dipped into the intersections of law and the literary mind (including research into the works of Walter Benjamin) and his overall approach to the law is basically Althusserian -- that is, studying the internal mechanisms of law as relatively autonomous from a materialist (feudal/capitalist) base. He is truly an excellent match for taking on such an interesting task at UCI.

brief thoughts on walking out of a class

2011-11-05T21:35:00.001-04:00

As we've mentioned before on the blog, Harvard students are to be commended for their efforts last week at walking out of N. Gregory Mankiw's Ec 10 class. However, the problem, as we stated earlier, was how best to make the argument for walking out of an actual class?

It seems at first to be quite a radical action. Tyler Cowen called the act "garbage". I mean, if anything, isn't now the time when we should be sitting in on these classes and learning as much as we can about the nature and history of the inequality problem? Why are we walking out of classes when we should be seeking to understand our plight?

Well, yes we should be sitting in classes, but that does not require any inherent respect for Mankiw's class. Indeed, it could very well be argued that Mankiw is adding negatively to the debate on inequality, and therefore, doing more harm than good.

But in order to construct such arguments, you need to be very, very careful. You need to be careful because there are many pitfalls along the way that lead you to Democrat-Republican argument traps which do more harm than good. As I see it, there are two routes to go:

First, you need a tight connection between Mankiw's economics, the economics profession as a whole, and finally, the economics profession's connection to real-world economic issues such as finance, unemployment, and public policy. This is easy to do for the case of the economics profession and real-world economic issues, but it is less clear how one textbook can be so responsible for our situations. Perhaps the answer lies in the approach on the individual vs. corporations -- which is something Galbraith mentioned, and it is quoted in The Economics Anti-Textbook by Hill and Myatt. Something like this approach puts you right in the fray of arguing that Mankiw's book is a political project. It's time to do it in a media-consumable manner. Nevertheless, this is going to require more thought

Second, you need to "expand the critique" as my friend Luke put it, which essentially entails getting past the Democrat-Republican framework of talking about politics. As we know, both liberals and democrats often take the market baseline as given, and argue over different possible distributions of the economic pie. If the point can be made, strongly, that this approach is largely the reason for the situation we are in today, i.e. that we need to remove ourselves from market-centeredness and conceive of a "third way" which is more radical, then we can make a successful argument for walking out of Mankiw's class.

What I'm basically arguing is this: If you can follow one of the two (or both) formulas above, and do so in a way that captures the issues in a consumable format (easily understood and disseminated through media), then you can effectively argue that we need to be walking out of classes such as Mankiw's.

it's up it's up it's up

2011-11-05T12:40:00.002-04:00

Link to the full paper here. Critiques of chapters 1, 2, 3, 7.

Alternative chapters and slides will be posted next Friday before ICAPE.

Comments, suggestions welcome.

new project blog, anti-mankiw

2011-11-04T19:42:00.001-04:00

A collective blog in which members rotate posts which are direct responses to N. Gregory Mankiw's blog has just opened up. Head on over and read the introduction.

http://anti-mankiw.blogspot.com/

If you're interested in joining up to help out, feel free to comment on its first post. If you're just interested in keeping up with the posts, make sure to add it to your RSS feed or Google Reader now.

Enjoy!

ch. 3 critique

2011-11-04T08:28:00.007-04:00

Chapter 3 is entitled “Interdependence and the Gains from Trade.” In it, Mankiw intends to show how human interaction in markets according to the basic economic principles of opportunity cost and incentives will lead to a better outcome than each individual could have obtained on his or her own. Essentially, after having developed the organizing themes of the text as well as a discussion of the philosophy of the economist, he decides to delay the explanation of the mechanics of supply and demand an additional chapter in order to present a fundamental theme of the textbook -- namely principle 5, that “trade can make everyone better off” – in a way which encourages students to get in the mindset of thinking like an economist.

Judging from past historical practice of successful economics textbooks, M’s decision to include such a chapter is unique in terms of how he frames his subject. Other textbooks have traditionally given an overview of the workings of the price system, or have given an introduction to the capitalist economy and institutions. These chapters have either been more conscious of drawbacks associated with adopting the economist's methodology, or have tended to focus on the mechanical ideas of the models (such as a technical explanation of the production possibilities frontier) rather than being as one-sided and rhetorical as Mankiw is in chapter 3. Indeed, few if any examples can be found from previous successful textbooks of the kind of elevated and uncritical praise for market exchange that takes place in this chapter.

A long section in chapter 3, titled “A Parable for the Modern Economy”, constitutes the core argument. M shows the reader how trade between a rancher who has an absolute advantage in meat-potato production and a farmer, who also can produce meat and potatoes but neither in the same capacity as the farmer, will lead to a situation which is better for both relative to what they could have obtained on their own. M thus offers a compelling case for the advantages of free trade: even underdeveloped countries, with “backward” technological frontiers, may find it advantageous to engage in trade with a developed country because of the gains from specialization. Ultimately, however, the presentation of the argument is severely flawed. It leaves many important questions unanswered because the entire discussion is steeped in substantial amounts of rhetoric and ideology to the point that the student must try hard to see how any of M’s points relate – or have ever related – to an actual trading relationship. In the following section, I present some of the details of the problem.

Gains from Trade and the Market Mentality: Past and Present

M makes a series of broad generalizations in chapter 3 which require substantial leaps of faith in logic and historical understanding on the part of the reader. I will concentrate on two aspects of his “interdependence and trade” example in order to highlight the main thesis of my argument. First, by inserting the adjective “modern” into the main subheading M implies historical dynamics which are not supported by logic or historical analysis. Second, his discussion abstracts from essential institutional features of a society that are necessary for a market and for interdependence to exist.

The premise of M’s argument is framed according to a standard barter trade problem involving a rancher and a farmer. M begins with the assumption that the rancher has an absolute advantage in the production of both beef and potatoes. He sets out to illustrate that even in this example, both the Rancher and Farmer can be made better off by initiating a series of exchanges based on their marginal rates of technical substitution which lead them to specialize: “Rancher: Farmer, my friend, have I got a deal for you! [Explains the standard argument for making a trade with the Farmer based on their comparative advantages in production]…. Farmer: (sounding skeptical) That seems like a good deal for me. But I don’t understand why you’re offering it.... [more explanation from the Rancher, based on the fact that even though he has an absolute advantage in producing both goods, his self-interest is still in trading because he can focus on producing goods for which the Farmer has a higher opportunity cost] Farmer: I don’t know …. that sounds too good to be true. [Rancher explains the point one last time, and the Farmer finally consents to the exchange]” (50-51). The entire conversation is couched in rhetorical devices and plays on the supposed ignorance of one party to the exchange in order to give a premise for the initiated trade – that the trade seems illogical on its face, but in reality it is beneficial to both agents. It is the economist’s eye, the “rational” perspective, which allows him to see the truth.

By titling this section “A Parable for the Modern Economy” M suggests that trade in the sense of making everyone better off is something that traditional societies could not fully understand or even had the capacities to engage in. It also implies, in a classical liberal tradition, that modern economies are primarily marked by free trade – not industrial labor relations or wage labor. While M attempts to buttress his point by including a news clip that shows how trade may have historically been an integral part of our evolutionary process as human beings, no additional historical evidence for the rise of a market economy is ever presented to the reader. And in fact, this view of comparative advantage is at odds with the significant amounts of protectionism in the form of tariffs and other trade barriers that countries have placed on their infant industries through the course of history. M’s discussion essentially ignores the significant ways in which the Rancher’s proposal has led to harmful effects on economic development.

Furthermore, the distinction between traditional and modern is manufactured in M’s text by a very crude understanding of historical change. While I understand that it is only a principles text, no discussion of how the transition away from self-sufficiency actually occurred. In fact, how self-sufficiency translated into a full-fledged market economy is an interesting and compelling story which requires very little formal introduction to economics – making it an excellent motivational tool for a first year student of economics. As some economic historians have recently pointed out, the rise of market society was not a smooth change. Significant political barriers had to be overcome before market integration could proliferate through society. Unfortunately, all the reader gets out of M’s discussion is a somewhat tongue-in-cheek exchange between the farmer and rancher which characterizes the shift to independence as an economic revelation or “mentality” that must have lead to the market revolution.

There are other weaknesses in M’s “parable”, aside from the ahistorical nature of the Farmer-Rancher exchange. There is no discussion of the infrastructure involved in making this trade possible. The Rancher-Farmer exchange is quite primitive for a supposedly “modern” economy -- there are no publicly provided roads or centralized markets that must first be created before the fruits of interdependence can be realized. Institutions such as these -- often provided by a state or some other centralized authority -- were necessary for infrastructure to develop and allow the type of trade that he describes in the text.

In other words, the whole discussion is stylized to the point that there are only two central ideas that students are able to gain from pages and pages of dialogue: that trade can make both people better off and that specialization is fueled by comparative advantage. Students learn nothing about how the market economy actually grew to allow for this kind of trade, or what other factors (arguably more important) were necessary to support interdependence. As a result, there is no contingency -- there is only the universal of market exchange and optimal trade. This last point is unfortunate, because often there is strong need for public-sector support to aid in the growth process. Without any academic discussion of this political support, M’s text loses some credibility as an effective method for students to learn about the origins and characteristics of the market economy.

Reflecting on the Introductory Chapters

With the end of my critique of chapter 3, we have now moved past the introductory section of M’s text. What have we learned? I began by outlining two main themes of my critique. The first was the logical problems in M’s text which compromise its intellectual integrity. The second was how divorced the text is from what actually occurs in the real world. Over the course of the paper we have gone deeper to see how the logical flaws almost always cover up important political points that are necessary for an honest evaluation of M’s argument. In addition, the second point about disjunctions with reality -- for example the point in chapter 3, about how there are significant institutional investments which fuel interdependence -- are also often political in nature. We therefore come to the general conclusion that M attempts to mask his politics throughout the book, and the process of doing so leads to a text that is weak across a variety of dimensions, perhaps most importantly on an intellectual level.

Chapters 4, 5, and 6 of Mankiw's text introduce the student to supply and demand, applications of demand theory, and some basic tools that governments use to “intervene” in the supply and demand model. I skip these chapters not because I plan to exclude them from my critique, but because in the interests of time I will conclude by critique by shedding light on a particularly grievous example of political bias and subjectivity in M.

harvard students write an open letter to n. gregory mankiw

2011-11-02T15:32:00.003-04:00

Sorry for all the posts, but I'm having a field day with this as I'm sure you can guess.

http://hpronline.org/campus/an-open-letter-to-greg-mankiw/

Here is a reply, "In Defense of Ec 10". Unfortunately it is much more informed and better written, if politically noxious:

http://hpronline.org/campus/in-defense-of-ec-10/

I would have loved to see M's face as the students walked out of the class today!!!

student walkout of greg mankiw's Ec 10... oh happy days

2011-11-02T09:49:00.000-04:00

Students at Harvard plan to walk out of N. Gregory Mankiw's Ec 10 class today in solidarity with #OWS as a protest against his politically biased course.

Coverage at Business Insider, Harvard Crimson, NPR.

Mankiw says the topic of his lecture today is distribution. Too bad his textbook has very little to say about that topic. As I noted in a previous blog post, M's theory of distribution boils down to little more than saying that there is a tradeoff between equity and efficiency -- want more equity through distribution? You'll have to suffer with less efficiency. I 100% guarantee that this will be the message of his lecture today.

It is doubtful whether any reasonable economist still believes such garbage. Inequality -- such as the growing gap between the 1% and the 99% -- is not a sign of increased efficiency. We can become a more stable, successful, and ultimately more efficient society if the wealth is more evenly distributed because we wouldn't have to pay so much to bail out big banks, or keep so many police officers on the streets (guarding banks), or deal with rising private debt which jeopardizes our ability to provide for future generations.

Indeed, if anything, there is a directly positive relationship between equity and efficiency -- there's just no room for such ideas in N. Gregory Mankiw's Market-Biased Model.

thought/quote of the day: english law and trade in late-18th century africa

2011-11-01T15:30:00.003-04:00

From the Wikipedia article on tortious inference:

In a similar case, Tarleton v. McGawley, 170 Eng. Rep. 153 (K.B. 1793), the defendant shot from its ship Othello off the coast of Africa upon natives while “contriving and maliciously intending to hinder and deter the natives from trading with” plaintiff’s rival trading ship Bannister. This action caused the natives (plaintiff’s prospective customers) to flee the scene, depriving the plaintiff of their potential business. The King's Bench court held the conduct actionable. The defendant claimed, by way of justification, that the local native ruler had given [defendant] an exclusive franchise to trade with his subjects, but the court rejected this defense.

ch. 2 critique

2011-11-01T00:38:00.002-04:00

Chapter 2 and that's enough for now... more to be posted soon.

Again, comments greatly appreciated. Many of you who have kept an eye on the blog will see recurring themes...

This one's about analogies in M.

Comments!!!

Chapter 2

The title of chapter 2 of M’s text is “Thinking Like an Economist”. M’s stated goal in this chapter is to introduce the student to the language and overall philosophy of the mainstream economist. He also aims to convey a basic understanding of how, within that philosophy, economists may end up disagreeing. Using examples of basic economic models, as well as popular economics pieces which highlight how economics is used outside the classroom to improve people’s lives, M attempts to show us how “thinking like an economist” can be thought of as a kind of life lesson.

The idea of a methodology chapter -- where before embarking on a study of supply and demand the author first turns to issues of methodology and economics as a science -- is nothing new. Most of the successful economics texts prior to Mankiw use this formula. Samuelson, for example, spent pages discussing different argumentative fallacies in economics and musing on why economists disagree, while McConnell addressed these same issues while also warning of the weaknesses of the deductivist method. As we will see, M borrows some parts of the older formula, but innovates on others. The result, however, leaves much to be desired.

I argue that M’s attempt to convey the language and philosophy of modern economic methodology ultimately fails due to problems in the method of argument used and the basic logic of his claims. In order to support my thesis I will give some examples of the widespread but faulty use of analogies used in the first half of chapter 2 to explain economic methodology. As we will see, analogies can be an effective method of illustrating an idea after it has been defined and presented in a rigorous way; otherwise, analogical reasoning can be superficial and distracting for the student.

Explaining how economists think: analogies and economic examples.
In the first part of chapter 2, M intends to convey two central ideas. The first point is that economics has evolved through time similar to a science. While there are some key differences between most sciences and economics -- for example, in the lack of controlled experiments -- the core of the “observation, theory, observation” interplay, M argues, is preserved in economics. Second, M emphasizes the importance of models in economics as the primary vehicle of inquiry. The ideal economist, therefore, is someone who adjusts his theories according to new observations, updating his data set in order to make new generalizations which are then tested against the new data.

M primarily on analogical reasoning for the main concepts of chapter 2, in spite of the fact that analogies give something far from an air-tight method of argument. They are more suited to colloquial settings or an end-of-chapter comparison, after a thorough discussion of the principle themes of the argument. In this first section I will first briefly discuss the general form of an analogical argument, then take up its use in chapter 2 of M's text.

Suppose we have two concepts, A and B. To make an analogical argument, we start by supposing that x is a concept within A and y is a concept within B. We then argue that x is like y because of a similar connection that they each share to their “parent” concept (A or B respectively). In order for an argument by analogy to be most effective, there must be a very close resemblance of x's and y's “connection” to A and B. But even if there is a close connection, analogies to a concept x are not reliable assessments of x because analogies of x are not definitions of x. Analogies made in order to explain x do not rely on evidence for x, or a logical argument which leads to x, and they are therefore weak as a core tool for understanding. They are most effective as colloquial methods of argument to facilitate understanding once the main evidence or logic for the case has been presented.

Analogies are often not clear cut explanations of an idea because they only work by association with another concept and are therefore not assessed on their own terms. For example, problems with using analogies in an argument, or in pedagogy, begin when students start questioning the likeness of A and B. This either leads to: 1. distraction from understanding the idea or argument in question; or 2. to an unraveling of the analogy, if an important difference between A and B is found which leads to a violation of the legitimacy of the argument in question. As we will see, both 1 and 2 are likely to occur in M’s discussion of the likenesses of economics to physics or biology.

Early in chapter 2 M explains the idea that economics evolves through time similar to a science, using the analogy of Isaac Newton and his apple. As the story goes, Newton got hit on the head with an apple one day while lost in thought, inspiring him to develop his theory of gravity. Similarly, the science of economics has evolved over time as economists have been hit, time after time, on the head with various apples which have forced them to adjust their priors and alter their theories of how the world works accordingly. In other words, Newton's apple is to the progress of physics as significant economic phenomena are to the progress of economics. While M does not go into the specifics of how this occurs in economics, he does supply a fictional example of an economist who walks into a city, observing how when the quantity of money goes up so do prices, and makes the inference that the quantity of money in an economy is related to inflation.

There is no doubt that someone Adam Smith or John Maynard Keynes revolutionized economics similar to how Newton and Einstein changed physics. But the fact that economics is related closely to politics means that there is no clear historical formula for understanding when one theory gets dumped in favor of a newer and “more complete” view. And the fact that economists cannot run controlled experiments also hurts the credibility of the analogy. It suggests that instead of following an “observation, theory, observation” method, economics actually follows a deductivist method in which one’s political beliefs shape his or her understanding of reality.

Not only do the analogies to physics hide important political aspects of economics, but the “looseness” of M’s analogies may also distract the reader from the concept in question. For example, M emphasizes the importance of models using a series of analogies borrowed from the physical and natural sciences. On the importance of assumptions as first approximations, he observes how the physicist, when confronted with the question of how quickly a marble will fall from a 10-floor building, will begin by assuming a vacuum and argue that air is a “negligent force”. In other words, assumptions of zero friction are to physics as assumptions of perfect competition or economic rationality are to economics. On the question of appropriateness of assumptions, he observes how air may not be negligent if we’re talking about the path of a volleyball. Finally, when talking about the importance and use of models overall, he observes how useful they are for simplifying relationships in biology (e.g., a skeleton), physics, and other sciences.

M’s physics and natural sciences analogies are insufficient for a deep understanding of economic methodology. His use of them begs several crucial questions: while marbles have certain “laws of motion” which we’re able to observe in practice, marbles are not able to think. If we were to take M’s physics analogy seriously, then we must assume that the marble's path has no mind of its own – no social priors with which they may choose one path or another. Of course, we know that when economists assume a trajectory of the path of an individual (so to speak), they usually make an extra assumption about how or why that individual is acting in a particular way -- such as, “assume the individual is behaving in a market”, or “assume the individual is acting so as to maximize his or her utility”, etc. Immediately once this has been done, we are no longer in a vacuum because we have had to make a conscious choice about how we believe individuals act in society.

Thus, not only does the analogical mode of reasoning cover up crucial political factors which go into the formation of economic models, but the uncertain character of the analogy leads us off the path of understanding the concept in question. By failing to provide a rigorous account of the use of the deductivist method in orthodox economics M is compromising the intellectual integrity of his text. Analogical reasoning may help to improve on a basic understanding of economic methodology, but one can never actually prove anything using analogy -- nor can one give a deep analysis of a concept by relying on analogy. At best, M's analogical reasoning approach to economic methodology perpetuates an incomplete understanding of the role of methodology in economics. At worst, the (poor and insufficient) analogies lead to pure intellectual brainwashing by failing to provide a rigorous account of the core (crucial, politically contingent) ideas.

In summary, the goal of chapter 2 was to introduce the economist’s worldview to the student, and to convince him or her of the explanatory power, or universality, of that perspective. While on a superficial level that goal might have been achieved by the references to physics, as well as the “in the news section” football coach who used economics research to go for it on fourth down, it is clear that there are substantive weaknesses in how the argument is conveyed. First of all, reasoning by analogy is not an equal substitute for a rigorous treatment informed by philosophy and past economics work on methodolgoy. Second, obfuscating the value-ridden nature of economics leads to an incomplete understanding of why economists disagree and therefore to an incomplete understanding of the economist’s political position in society.

introduction and critique of ch. 1

2011-11-01T00:23:00.002-04:00

Disregard footnotes, for the most part -- still not sure how I will fit them in. 2, 3, and 7 coming soon.

Comments greatly appreciated!

Introduction

At its core, Principles of Economics, the widely popular introductory economics textbook by N. Gregory Mankiw, is severely flawed. While Mankiw (hereafter “M”) presents himself as an informed, centrist economist, his textbook suggests differently. He and his book are most usefully seen as producers of ideology. Two main themes connect to form the argument in this paper. First, I argue that the textbook’s presentation of supposed economic fact does not accord with economic reality, often relying on abstract theoretical arguments that have little relation to how economic decisions inform people’s daily lives. Second, M attempts to be logical and scientific when explaining what are essentially politically subjective theories. He will present an argument as though it were a universal aspect of economic society without exploring the subtleties that are involved in constructing it.

These observations are obvious to anyone who has cast a critical eye on today’s most successfully selling economics textbook. Why are they important to make here? First, this paper is more than simply a collection of chapter-by-chapter critiques of Mankiw’s Principles -- it is also a story of how the presentation of core economic ideas to first-year students has changed over the past 50 years. It thus adds significantly to our understanding of the history of economic ideology and its relationship to education. Secondly, towards the end of the paper, the paper uses some of the themes presented in the critique in order to construct chapter-by-chapter Anti-Mankiw companion pieces to Mankiw’s textbook which are meant to serve as teaching aides.

Finally, a central goal of the Anti-Mankiw project is to demonstrate to the economics student that the modern orthodox economist’s way of looking at things contains enough logical gaps and misrepresentations of the world to severely compromise its intellectual integrity. The point of the paper is therefore partly political: it is to recognize and then subvert one ideology, suggesting another in its place.

In the analysis that follows I use Mankiw’s Principles of Economics (4e, 2007) as the reference point and refer to it simply as “M”. For historical comparison to other texts, I draw on several secondary sources which have allowed me to piece together a history of the most successful economics textbooks since 1948, when Samuelson’s Economics was first published.1 I use the 1985 edition of Samuelson and Nordhaus’ Economics (12th edition), the 1978 version of McConnell’s Economics (7th edition), and the 1975 edition of Lipsey and Steiner’s Economics. Samuelson and McConnell were chosen for their place as either first or second most popular textbook (in terms of sales) up until the mid-1980s (I do not have data for the period after 1985). Lipsey-Steiner was chosen because it was adopted in the place of Samuelson’s textbook in 1978 at Harvard University, marking what I believe to be a significant shift point in economics education.2

In what follows, discussion of each chapter is arranged around M’s presentation in that same chapter. My critique is based on claims of M being disconnected from reality and his logical inconsistency. I argue that the weakpoints of his presentation closely correspond to subtleties of the argument which would require some political explanation in order to tie the argument together – thus suggesting that the “gaps” in his arguments are at least in part driven by political bias. At certain points over the course of the critique, I also discuss how previous textbooks treated the same idea that Mankiw is presenting. The choice to do this does not imply that some earlier text was “right” in how they chose to present a topic. Rather, the goal is to show crucial differences in the emphasis on topics and style of presentation chosen among the various textbooks in order to draw some preliminary conclusions about the history of economics education in the mainstream. After examining the introductory chapters of M (1-3), I jump ahead to chapter 7 (on welfare economics). In the second part of the paper, I present Anti-Mankiw chapter alternatives geared toward a first year student in economics.

Chapter 1

The first chapter of M’s book outlines ten principles which essentially serve as organizing themes for the rest of the text. M asserts that his principles constitute a set of universals in the economist’s view of the world and he makes his case by first separating these broad principles into three categories: “how people make decisions”, “how people interact”, and “how the economy as a whole works”. My criticisms focus on two general themes of M’s text, and these criticisms will constitute the core themes of my critique of the rest of the textbook. First, M’s arguments, while giving the pretense of an exercise in theorizing about economic reality, are in fact at odds with it. Second and most importantly, I argue that M purports to be scientific when in fact his arguments (or as they are called in chapter 1, his principles) are politically subjective.

1: M’s approach is at odds with economic reality.

This point is most apparent in M’s Principle 8 when he asserts that “a society’s standard of living depends on its ability to produce goods and services.”3 U.S. data on productivity and workers’ compensation over the past 30-40 years demonstrates that people can produce more goods and still end up with a lower standard of living, especially when the gains from their productivity are channeled primarily towards the rich. M’s account therefore abstracts from other institutional requirements -- such as a strong voice for labor -- which have historically contributed to the alignment of productivity and workers’ compensation.

In principles 6 and 7, part of the set of principles defining “how people interact” (6: “markets are usually a good way to organize economic activity”; 7: “government can sometimes improve economic outcomes”), Mankiw along with the rest of the economics profession defines the criterion of efficiency as the baseline measure of socially desirable outcomes. According to this view, as we know, prices and market competition are the best way of allocating scarce resources among individuals in society. It is the least wasteful way of assessing the needs and wants of market participants – without prices, how would we know how much of a good is needed, and without competition, how would we know that the prices are as low as possible?

This assertion, of course, requires individuals to be psychologically motivated by economic self-interest or a “market mentality”. It is arguable whether such a psychological state characterizes most of us in our daily lives, however. People do not often act rational or self-interested when in families, or in other types of groups such as communities or with friends. Empirical research has demonstrated how we act out of concerns of care for and cooperation with others, sometimes to the detriment of our own self-interest, a fact which violates the basic tenets of the market-centered model. Such concerns lead us to question whether homo economicus ought to be the starting point for understanding social behavior.

Furthermore, if we believe that individuals do not predominantly act as members of a decentralized market society (i.e. that there are many other more important roles that we fill on a daily basis), then efficiency loses its place as a normative social criterion because the predicted “market equilibrium” is no longer the baseline for our social goals. Furthermore, without efficiency as a benchmark, the popular belief that government faces a tradeoff between equity and efficiency, mentioned in M’s discussion of principle 7, breaks down. (As we will see below, it may also call into question the political use of principle 1: “people face tradeoffs.”) In fact, the tradeoff between equity and efficiency is an idea that very few economists nowadays likely believe in.

Overall, most human behaviors are not fundamentally defined by market parameters such as price, incentives, or profit. Thus, the actual framing of M’s arguments is flawed because we can no longer assume to take everything in the perspective of markets or market efficiency. While this might seem to be a relatively minor point, the fact that most of M’s arguments are constructed on such faulty assumptions means that many of his principles become invalid in light of the counterargument that social values and institutions of cooperation matter greatly in understanding human behavior.

2: M purports to be scientific when in fact his arguments are politically subjective.

M begins chapter 1 with a definition of “economics”, drawing on the word’s roots in Greek, meaning “one who manages a household.” M aims to present the study of economics as something that has more or less stayed fixed across human existence. In other words, the principles mentioned above on “how people make decisions” and “how people interact” represent universals of human behavior. In doing so, M is ignoring the different ways in which economics has been used by policymakers and people in power throughout history. Economics as it is studied in M’s text is not “universal”. It originated not in the Greek or Roman era, but in the late 18th century: the era of Adam Smith, liberalism, free trade, and the beginnings of industrial capitalism.4

For example, feudalism was different from capitalism because the former was largely defined by a political relationship between landowners and serfs, whereas the latter was defined by a political relationship between capitalists and labor. Those who were wealthy and had power used economics to justify their positions. In feudalism, economics was used by landowners to justify the significant rents they received from the serfs. Once a different class of people came into power in capitalism, ideas about personal freedom and freedom of contract were coupled with the necessity to expand the market on efficiency principles. These principles defined classical economics.

Essentially, M defines economics broadly and without any reference to social groups or conflict, even though the birth of classical economics was heavily dependent on political dynamics which lent support to the free trade ideology. As an example, we know that theories dangerous to the spread of capitalism, such as Marx’s critique of political economy in the mid-nineteenth century, lacked support and were attacked by political figures. M’s ahistorical definition of economics thus provides no room for a discussion of how contending classes in society -- such as the poor and rich or producers and non-producers -- have played a significant role in shaping the path of the economy over time.

A corollary to the above point is that, precisely because other groups with alternative political and material interests have played such a key political role over the course of history, their political views, material interests, and cultural norms need to be studied and recognized as important elements of economic behavior and economic change. In other words, many of the core ideas embodied in M’s 10 principles of economics are simply not relevant to a large amount of people in capitalist society, highlighting the political nature of the text still further. For example, the poor and middle class have not seen their living standards rising in tandem with productivity over the past 30 to 40 years (even while principle 8 implies that this should be the case). And furthermore, it is doubtful whether -- in the wake of the 2008-2009 financial crisis -- the major actors in the market’s collapse were “rational people [who] think at the margin” (which is principle number 2).

Over the course of this brief critique of chapter 1, we have encountered most of M’s ten principles and we have seen how they are violated, either by economic reality or according to simple criteria for a sound, logical argument. The weakness in the overall approach of the text, as we will see in later chapters, is immediately present once the details of its arguments are picked apart. Not only is there a political message hidden below the market model, but by focusing on issues of rationality, or how perverse incentives shape behavior, the entire presentation seems to fail to address a significant part of its target audience. This fact leads us to question whether an alternative text, focusing on different principles, might provide a more plausible argument, in the process becoming ultimately more relevant to the real-world concerns of first year economics students.

1Laurence E. Leamer’s “A Guide to Introductory Economics Textbooks”, Journal of Economic Education, vol. 6, No. 1 (Autumn, 1974), pp. 46-56 gives an excellent overview of all economics textbooks on the market between 1971 and 1972, confirming that my data sample trio of Samuelson, McConnell, and Lipsey-Steiner is representative of the average textbook in terms of treatment of core issues such as microeconomics, macroeconomics, and methodology. Kenneth G. Elzinga’s “The Eleven Principles of Economics,” Southern Economic Journal, Vol. 58, No. 4 (Apr., 1992), pp. 861-879 gives sales numbers for McConnell’s and Samuelson’s book between 1960 and 1985, highlighting shifts in market influence and how those two specific texts differed. Finally, I have borrowed heavily from early articles in the Harvard Crimson which has documented when and why Harvard stopped using Samuelson’s textbook in the 1980s. See for example the article “Samuelson Text May be Displaced by Paperback Series in Ec 10”, January 27, 1964 (accessed online on 10/25/11 at http ://www .thecrimson .com /article /1964/1/27/samuelson -text -may -be -displaced -by /).

2See J. Wyatt Emmerich, “Ec 10 Leaders Dump Samuelson’s Bible,” Harvard Crimson September 11, 1978 (accessed online on 10/25/11 at http ://www .thecrimson .com /article /1978/9/11/ec -10-section -leaders -dump -samuelsons /?print =1).

3Mankiw, pg. 12.

4Heilbroner and Milberg, The Making of Modern Society, is an introduction to economic history text which discusses the interplay between the rise of industrial society and classical economics in chapter 3 (see section on “The Invention of Economics”, pp. 46-51).

1Q84 first impressions

2011-10-28T14:32:00.001-04:00

200 pages in; I'm taking my time with this one. Some people are speculating on whether this will be his all-time best work. It is still early to tell: slow-moving plot, mainly because even the main characters are getting a lot of back-story attention. And, there is just so much here, going on, already, in terms of characters and plot complexity. So it's uncertain where and how everything will tie up. In this way we are seeing a shift from most of his earlier approaches, but it is indeed similar to Wind-Up Bird Chronicle and could therefore leave some readers quite upset by the end (though, this did not happen to me).

He's also elevating his themes -- religion, politics, the state -- thereby entering relatively unexplored territory given the ultra-personal approach of most of his other novels/short stories. He could therefore really be trying to do too much if he still wants to maintain the classical Murakami elements. Early evidence suggests he's trying to do both though (Fuka-Eri is a particularly striking example). But if he pulls it off, there is no doubt that this could be a true masterpiece.

Some magical realism but it's really a matured version of even his somewhat more recent examples (e.g., Kafka on the Shore). It makes me feel less guilty about reading it but all the more amazed at how he still pulls it off.

thought of the day: radical economics and intro textbooks

2011-10-27T22:33:00.002-04:00

Reflecting on yesterday's post, which had a quote that was admittedly out of context, I started thinking about how Mankiw treats neoclassical theory vis-a-vis other economic theories.

Of course we know that Mankiw intends to present the consensus view of the mainstream of the economics profession, which is (apparently) why he pretends not to be making any conscious decisions about what to include in his book. Rather, he can say that he doesn't mention radical economics because the mainstream no longer engages with radical economics.

But, my point yesterday is partly that we are taking this intention of presenting the consensus for granted. Samuelson, as it may or may not be evident from reading yesterday's quote, felt as though he needed to address Marx and Marxism on their own terms. He actively engaged with "the old man", pointing out what he thought were both the strengths and weaknesses of his ideas. And as one of my professors at UMass Econ (who is an MIT PhD) would tell us in class, Samuelson was always bringing up Marx in his graduate classes! You would walk in the room, hear this guy talking about Marx, and wonder where the hell you were. One certainly does not find that kind of active engagement with radical economics in graduate courses at the top schools today.

But, there's a flip side of the coin. At times, Samuelson fails to accurately portray Marxist ideas. Just as Mankiw sometimes glosses over core logical steps in neoclassical economics, so Samuelson did similarly with Marxism. And that kind of treatment may be as bad, if not worse, than not talking about him at all (a la Mankiw -- who does not mention Marx a single time in his intro book).

The question is, which is worse? No mention of Marx, or mention some things about him, get some things right, and some things wrong?

What do you think?

I tend to believe that some mention of Marx, even if it's not the best portrayal of his ideas, is the best option for effective pedagogy. And I would say, as a kind of meta-analysis of economics textbooks, that there is something to be said about the evolution of bourgeois ideology that they do not even actively recognized the existence of this countervailing force in their intro textbooks.

The question I leave you with is the following: what does choice of reducing exposure to Marxist ideas imply about the state of bourgeois economics? From the perspective of instruments of bourgeois ideology (an extremely important point to keep in mind), have Marx's ideas become more politically relevant than they were in the 1960s, thus, the need for more forceful repression of them? (This could mean that class struggle has become more acute in society since the 1960s.) Or have the instruments of bourgeois ideology simply found a more effective (efficient, whatever) means of dealing with radical theories? Are both ideas right?

What do you think?

quote of the day

2011-10-26T15:39:00.001-04:00

Marxism may be too valuable to leave to the Marxists. It provides a critical prism through which mainstream economists can -- to their own benefit -- pass their analyses for audit.

Samuelson, Economics [Introductory Textbook], 9th Edition (1973), pg. 866

How the world has changed.

quote of the day: lawyers and justice in colonial vermont

2011-10-23T09:15:00.001-04:00

On attitudes toward the law in colonial Vermont and New Hampshire:

The Yankee pioneers, and especially the judges, who were invariably laymen, viewed trained lawyers with suspicion. One lawyer complained that a chief justice in New Hampshire, 'having no law learning himself, did not like to be pestered with it at his courts.' Another lawyer attempted to file a demurrer, only to have it ridiculed by the judge as 'an invention of the Bar to prevent justice.' (John Page, "The Economic Structure of Society in Revolutionary Bennington", Vermont History 49 [1981], pp. 69-84)

You really have to wonder how much such attitudes have changed over time, or where this view is found in the general population today. Most of us have heard jokes about lawyers and their uselessness to society. But, what other way would we have it? Do we really want to go back to the mid-18th century when a single judge, member of some privileged elite, would argue and then decide on our cases instead of some weasel-of-a-lawyer? Aren't things made just a tiny-bit better by such improvements?

And yet, popular opinion of lawyers is sour. There seems, in the end, to be a kernel of this conservatism in our modern discourse still left over from our distant past.

Although, it is useful to remember at this point that there is a third way, definitely distinct from the two above -- more revolutionary in scope. Abolish the institutions of capitalism which give rise to a professional class of lawyers, and maybe the path to justice, obfuscated by the lawyer (according to the quote above!), might end up being a bit clearer.

frederic chopin, berceuse op. 57

2011-10-20T16:25:00.003-04:00

Berceuse is a lullaby or cradle song.

link roundup

2011-10-17T22:44:00.000-04:00

Been reading too much lately. Here is a menu of select links for your enjoyment:

History of the Rhode Island Supreme Court highlights the interaction between economic growth, distribution, and institutional change. I enjoyed the discussion of how the rise of the textile towns led (or did not lead to) changes in political representation in the state.

Glenn Gould wikipedia entry. One of the new graduate students in our department (hi Luke!) knows too much about non-economics stuff and has recently introduced me to Gould's academic writings on art. Gould has done some amazing interpretations of classical pieces including two very striking renditions of Bach's Goldberg Variations. Start listening to the 1955 version here. 1981 version here. Gould felt that the best strategy for classical player is to come up with completely new and innovative interpretations of existing pieces, not necessarily striving for what the composer may or may not have intended (who could really know that?) but instead trying to make something that is internally consistent and sounds beautiful.

A truly excellent Lapham's Quarterly history of financial speculation. The story they tell is how financial speculation is a tale of how we as humans fall in love with our ideas and creations but in the end how we're fallible. Some really remarkable quotes in a well-written piece. Here's one that comes at the end of the article: Speaking about the technologies that in part drove the financial boom and eventual bust:

Nearly fifty years ago, Marshall McLuhan wrote about our tendency to become fascinated by our inventions, which are, ultimately, extensions of ourselves. As McLuhan tells it, the death of Narcissus had to do not only with his reflection but with his inability to see himself in it. Just as the words “narcosis” and “narcotics” derive from his name, Narcissus was numb; he treated his image as an object of courtship, and he willingly became its slave. McLuhan, ever alert to the perverse urge to lose our uncomfortable selves, described how Narcissus died so that we could live. We court an exquisite ruin whenever we succumb to a pretty face that we fail to recognize as our own.

Somewhat of an "oldie", this article from Daron Acemoglu outlines (in an extremely broad sense of the word "outline") the tasks of institutional economics as economic theorists move forward. As some of you may know, Acemoglu has been a real leader in this field and his works are absolutely recommended (though maybe, you can skip some of the math!). If you want to see where some of his work is headed, check out page 23 of his Political Economy Lecture Notes, "Towards a Framework".

There has been way, way too much aimless debate over Corey Robin's book The Reactionary Mind. To the point of pure frustration of people like me, who understand exactly where Robin is coming from. While engaging in the debates somewhat peripherally over at Rortybomb, I began to realize that people just don't understand the terms in which a classical conservative would make his or her point. Liberals are either too elitist to think that conservatives could be making an intellectual argument (though it's hard to blame them on that front), or their minds are too ingrained into a narrow view of politics that sees the "Republican-Democrat" division as the universal axis of all politics. let's get something straight: classical conservatives understand power and politics and class much better than any progressive Apple-loving Obama-revering hippie. It's not their fault that conservatives live in a different world. No, I take that back -- it is their fault, and that's part of the reason why America is in such a bad shape today. In short, Robin is the only one who really makes sense of modern politics and it's too bad that mainstream liberals can't own up to that fact.

The Chronicle of Higher Education exposes some of the intellectual roots of the beautiful movement that is #OWS.

will write a paper on this, someday...

2011-10-16T11:52:00.002-04:00

...But until I do, you should all send me your comments on the following idea :)

Google ngram for "Think Like an Economist" and "Thinking Like an Economist"

call to arms

2011-10-14T10:58:00.001-04:00

Readers of this blog --

For those of you who expressed interest way back when the Anti-Mankiw movement started, I have an idea for a collectively-written blog project. We would need at least 5 or 6 people for it to run smoothly. If you're interested in helping out, please leave a comment with your email in the comments section of this post.

Thanks!

empirical dimensions of class conflict, part iii (final)

2011-10-12T09:40:00.000-04:00

See the previous two installments of this series here and here. Recall where we ended: we wanted to know how workers respond to a wage increase or decrease depending on the social conditions around them.

The idea that the employment relationship is composed of more than a (wage, effort) contractual agreement between the worker and employer is not new, even in the neoclassical canon. The theoretical notion of an implicit labor contract, which was first developed in the 70s and 80s by theorists interested in the dynamics of asymmetric information (and separately, the economic effects of unions), admits that notions of trust, reciprocity, and authority are key ingredients of the formal employment relationship. Nevertheless, the neoclassical tradition has for the most part taken these factors as exogenous. To wit: theorists have traditionally assumed that trust, reciprocity and so on are ingredients of the labor relationship and then looked at the impact of those factors on wages, productivity, and so forth.

Relatively little has been done on endogenizing (i.e. explaining the actual origins of) trust, reciprocity, and other institutional features of the labor contract. This question is arguably the more important one: rather than examine how informal institutions impact some kind of optimal relationship, shouldn't we look at the actual origins of informal institutions? Shouldn't the question of optimality be relegated to second-place status given how unrealistic it often is? Theory has begun to open up to these questions, but because such work usually involves "fuzzy" notions of informality with connotations of sociology, anthropology and other "soft" sciences, they are rarely accepted by economists, and always with a good deal of reluctance. A recent (accessible!) paper by Daron Acemoglu highlights some of the important work needed to be done in the mainstream if they are to make progress on the important issues.

But for someone steeped in a more radical political economy tradition, the study of the origins of informal institutions such as trust, reciprocity, and conflict is old news. Quantitative studies of the impact of such institutions on economic outcomes, however, is a little less explored. That is where the end contribution of my paper lies (hopefully): giving an account of how political economic conditions shaped the contours of class conflict in early America and tying it to worker behavior on the job to see how such conflict manifested itself.

And this is ultimately where the informal contracts literature needs to go -- it needs to integrate work in other social sciences or else it will never be able to give a good account of the economic effects of institutions. Providing some empirical support is the first step. The particulars of class conflict as an institution arise from political and economic "objective" conditions, including the legal framework in which contracts are drawn up, the distribution of property in society (i.e. who owns the means of production), the availability of labor in reserve, the technology being used, and so on. Those particulars then shape economic outcomes -- wage rates, productivity -- in the firm. It becomes immediately evident that understanding these connections is absolutely crucial for understanding capitalist economic growth.

columbus day

2011-10-10T01:54:00.000-04:00

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)

(Yes, this was posted last year on the blog as well...)

analogical reasoning in mankiw's principles text: an introduction

2011-10-08T22:05:00.002-04:00

In chapter 2, amusingly titled "Thinking Like an Economist", Mankiw sets out to describe the economist's world view. The chapter is similar in scope to some of the most popular economics textbooks of the last 50 years, demonstrating a long tradition of taking time in an intro text to introduce the student to the language and tools of economics before jumping into supply and demand.

But, for whatever reason, Mankiw's treatment of the topic is remarkably different than his predecessors, and in some very important ways. What I want to concentrate on today, briefly, is the role of analogical reasoning in chapter 2 of Mankiw's text.

Now, readers of this blog who have taught before know that analogies can be extremely powerful tools for comprehension. Have a difficult topic you need to cover, and not everyone seems to get it? Try an analogy by drawing a connection between the theory and some experience they have in their daily lives -- like back at their dorm room or at home or something.

But, as some of you may also have realized when trying to deliver these analogies, there are also a lot of problems with them. There are minor issues. It's easy to have your analogy miss some part of the audience, for example. Talk about Buffy the Vampire Slayer when maybe 5% of the room has ever even seen an episode makes your point less effective. Basically, if people aren't familiar with what you're drawing an analogy to, your argument immediately loses credibility.

But there are more serious problems with analogical reasoning. On the most basic level, analogies cannot be used as air-tight proofs of some conjecture because they derive their credibility from the likeness of two separate concepts and the images people have in their minds of those two concepts. Analogies are really best used as helpful mnemonics or for some humorous or otherwise playful purpose. Thus, while they might be good last-resort methods, they are poor substitutes for a sound argument. This point is essentially derived from the fact that the actual effectiveness of an analogy is only as good as the similarity is between the two objects being analogized. Drawing poor analogies will only confuse the student -- because they will start thinking "well, is economic concept A really like analogous concept B? There are some important differences between A and B such as..." -- as soon as they start down that road, you've lost them on your original argument for economic concept A.

Unfortunately, Mankiw commits these mistakes all over the place in chapter 2 of his favorite textbook. The result? Analogical reasoning may help to improve on a basic understanding of economic methodology, but you can never actually prove anything using analogy -- nor can you give a deep analysis of a concept by relying on analogy. At best, Mankiw's analogical reasoning approach to economic methodology perpetuates an incomplete understanding of the role of methodology in economics. At worst, the (poor, insufficient) analogies lead to pure intellectual brainwashing by failing to provide a rigorous account of the core (crucial, politically contingent) ideas.

Example from the text: Mankiw on the use of assumptions in economics

The premise: assumptions are important in economics because they force us to boil down a situation into its essential aspects. We can then use logic and reasoning -- i.e. the deductive method -- to derive economic predictions based on our assumptions.

Analogy: it is similar to the situation of a physicist who wants to know how long it will take for a marble to fall from a building. The physicist abstracts from other forces, such as wind, which might impede the fall of the marble. In other words, the wind force is said to be "negligent". In this manner, the physicist can obtain a good approximation of how long it will take the marble to reach the ground. And obviously, we might adjust this assumption of no wind in the case of a beachball, in order to obtain a better prediction.

How competing textbooks dealt with the same idea: Samuelson (1985) deals with methodology but not assumptions per se. Nevertheless, a large majority of his discussion of methodology relies on logical discussion, illustration of the core ideas (but not until the argument has been explained in words). McConnell (1978) discusses simple critiques of the above premise -- for example, that assumptions tend to be unrealistic, thereby leading fall predictions of behavior. He also spends some pages discussing the shortcomings of the deductivist approach in general (i.e. the proliferation of mathematics, of unrealistic but complex models), in light of the debate over assumptions. Lipsey and Steiner (1975) go a little further. They give a lengthy discussion about how the realism of assumptions does not matter as long as the theory has predictive power. L-S, it should be noted, are much more mathematical and methodlogically conscious than the other texts.

Why does it all matter: students could become caught up in the many ways in which physics is not like economics -- in the relative lack of experimental data, or the fact that molecules can't think, or in the lack of any "universal laws" or constants which define the core theory of the field. This immediately weakens the analogy -- which, as was stated above, should only be used in informal situations to begin with. In the end, it is an ineffective tool and only perpetuates the idea -- already hinted at in chapter 1 -- that this textbook seriously lacks intellectual integrity.

class warfare: a clarification

2011-10-05T21:56:00.001-04:00

Greg Mankiw joins the chorus of right-wing politicians and members of the media claiming that Barack Obama is engaging in class warfare against the rich by enacting redistributive changes in the American tax code.

Now, I wouldn't normally engage in such lowly politicking, particularly when we shouldn't be surprised by who is spewing such nonsense into the blogosphere. But since my reply has a historical component to it, I thought, why not.

THIS IS WHAT CLASS WARFARE LOOKS LIKE

Shays' Rebellion, 1787. Here we have a 9-month revolt by farmers who were very much in debt following the Revolution and did not have sufficient means to pay it back. Members of the Massachusetts supreme court at the time -- consisting of a group of wealthy landowners and other elites with strong connections to them -- enlisted the state militia to crack down on the revolts. Farmers had tried occupying the court rooms and at one point, breaking into the Springfield Armory to arm themselves (they ultimately failed). It was essentially a class war waged by propertied interests against destitute farmers -- and thus it represents one of the first examples of class conflict in the new Republic's history.

Homestead Strike, 1892. This was a particularly violent strike during an era of severe labor unrest. Here we see militiamen -- following on the backs of Pinkerton (a local detective agency) agents -- preparing to retaliate against the steelworkers. Andrew Carnegie, owner of the steel company, fled to Scotland before the strike really got under way. The confrontation left 10 dead and hundreds injured in what is a prime example of class conflict in the era of big business and industrialization.

Over the course of the late-19th century and into the early 20th, court injunctions (orders) against unions, instead of a full trial, became increasingly common across the U.S. as businesses, backed by the judicial system, took more forceful measures against labor. Many of these issues were intended to be solved by the New Deal in the 1930s which, particularly in 1936, provided an institutional space in which capital-labor disputes would be subject to rules, regulations, and a fair trial.

Launching us into the so-called "golden age of American capitalism" where high productivity was matched by rising living standards for workers across the board, these New Deal institutions were symbols of a "capital-labor accord". Except that such stringent victories for labor hardly meant a truly more democratic economy -- while democracy on the workfloor is arguably the whole point of a labor movement, the voices and contracts of the golden age had been reduced to asking for yearly wage increases and increased profit-sharing. And then, even that began to change, as the unions themselves began to die out -- union membership began declining in the 70s and 80s.

Ronald Reagan made sure to maintain that trend in 1981:

In 1981 Reagan fired all the air traffic controllers who did not comply with his order to return to work, after 2 days of protests over their contract. Reagan showed what class power could do and quashed any resistance.

That's what class warfare looks like.

If you want to know what redistribution looks like, see the following:

-8 hour workday

-Job benefits including health care and retirement funds

-Public education at affordable costs

Doesn't look like class warfare to me!!!!

october, by robert frost

2011-10-04T13:39:00.001-04:00

O hushed October morning mild,
Thy leaves have ripened to the fall;
Tomorrow's wind, if it be wild,
Should waste them all.
The crows above the forest call;
Tomorrow they may form and go.
O hushed October morning mild,
Begin the hours of this day slow.
Make the day seem to us less brief.
Hearts not averse to being beguiled,
Beguile us in the way you know.
Release one leaf at break of day;
At noon release another leaf;
One from our trees, one far away.
Retard the sun with gentle mist;
Enchant the land with amethyst.
Slow, slow!
For the grapes' sake, if they were all,
Whose leaves already are burnt with frost,
Whose clustered fruit must else be lost--
For the grapes' sake along the wall.

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

some numbers to ponder

2011-10-02T14:14:00.001-04:00

Take a close look at this table, which tabulates sales data for Samuelson's and McConnell's texts between 1948 and 1984.

From Kenneth Elzinga, "The Eleven Principles of Economics," Southern Economic Journal. Vol. 58, No. 4, 1992, pg. 874.

While you could argue that there were some isolated years in the mid- to late-1960s when McConnell outsold Samuelson, upon closer look at the edition release years you can see that it's not until McConnell's 4th edition -- in press from 1969-1971 -- that it outsold Samuelson's competing new text, the 8th edition -- in press from 1970-1972. The previous editions of the two texts were certainly competitors, but Samuelson won by a hair in the previous edition wars: 389,000 for his 7th edition vs. McConnell's 378,000.

Also, notice the dwindling sales of the 11th edition of Samuelson (and the long revision date! for a while, both texts were on a 3-year cycle). For the 12th edition, released in 1985, McGraw-Hill brought Nordhaus on board as a cowriter of the text in order to try to reorient the ship. One of the big problems with Samuelson's book was its explicit Keynesian focus -- no doubt a product of the seminal intellectual and political influence of its author, but something which in the end would harm a textbook writer, since one needs to be able to adapt in some way to the shifting political winds (particularly if you're writing in the mid-70s, early 80s!).

the whole is bigger than the sum of its parts -- brief reflections on the classic snes game, chrono trigger

2011-10-02T09:38:00.000-04:00

Detroit DJ (or DDJ), whose top 10 ads on videogame history have been featured on this blog before, has started up his own website with some interesting and original writing. For those interested in reading some really high-quality writing on games, I would check him out. He published a piece about a month ago which, while primarily about Final Fantasy 6 (FF6), contained some strong attacks on Chrono Trigger (CT), to which I'd like to add a few comments.

The article is entitled "Why Don't We Remember Final Fantasy 6?" and can be found here. I might agree with DDJ's argument about CT if his points were a little less obvious. He attacks CT's lack of a deep gameplay system, relatively simple story and characters, and a "gimmicky" time travel system as particular sore spots. All of these things are true, and they do indeed detract from what might have been an even better game. And DDJ might be right if the sum of the parts is greater than the whole. But that's certainly not true here. CT has staying power and is an excellent game precisely because of the charm of the overall package that it presents.

It is one of the only games that I can play from start to finish not particularly dreading any scene, boss battle, or dungeon. Everything works so seamlessly -- from rescuing Marle and Robo, to the Ayla scenes, to the magical world of 12,000 BC (the "Magic City", I can still recall the unbelievable music you experience in that era...), and finally, taking on Lavos of course. All of it just fits: while there aren't a lot of sidequests to keep you busy, or extra skills to master, just playing through the adventure itself is what makes the game so great. Each era moves seamlessly into the next -- as you first get caught up in resolving particular character conflicts and then finally uncovering an underlying connection between Magus/Janus/Lavos, leading you to some particularly stark scenes involving these enemies. It's a true adventure with a really great cast of characters and strong underlying themes camaraderie as well as human struggles for power and (on the opposite end) justice.

And that leads me precisely into the most crucial argument for why CT is such an excellent game: the replay value! Players are encouraged, and indeed want to play through the game multiple times and try to find all of the different endings because they are so charmed by the main characters and the story overall. Replay is also a particular strength of this game precisely because it's so short and there aren't a lot of "fringe" things to do. In contrast, playing through a mammoth 40+hour RPG a second time is significantly less appealing in most cases -- in those types of games, you try to do everything in one go-around -- experiment with all of the characters, do all of the sidequests, and in general explore every little area. CT actually takes that formula and flips it on its head: we have a short story with a lot of charm but with a lot of reasons to go through and learn more about the characters and game more than once.

And just a quick disclaimer: I'm not being simple-minded here about CT. I realize that the game is very basic in a lot of glaring ways. But it doesn't help to critique something based on those obvious aspects. If you're going to say something substantive, something new about a game, maybe you can think about how the game fits into comparative context with other SNES RPGs or how it fails to live up to some well-defined model of a quality RPG.

In short, Square-Enix created a wonderfully unique game in CT: it's hard to find a more humane set of characters and such a great (albeit small) adventure story. "The whole is bigger than the sum of its parts" is a theme that applies to few games nowadays, as gamers ask for more and more detail and longer and longer adventures. This is not to say today's games are any worse than previous era -- in fact, in a lot of ways more detail is better and leads to a more real and beautiful world -- but art is not necessarily all about details: it's about message, too, and games like CT or FF7 pull that off superbly.

dynamics of the textbook industry - a quick thought

2011-09-30T21:45:00.000-04:00

Some sentences to ponder regarding the dynamics of the textbook industry, from New Perspectives on Keynes by Cottrell and Lawlor:

Principal features of Samuelson's text remain unchanged over a period of forty-six years. We have argued that Samuelson's 'son' of Keynes was really the product of a virgin birth; it also appears true that, in common with other products of immaculate conception, the analytical apparatus of Samuelson's Economics has remained unsullied by its confrontation with the world. the larger uses of that apparatus have also remained unchanged: Samuelson of the eleventh edition remains the harmonist and neutral scientist of the first edition.

The authors are being less praising of Samuelson than they might seem, given this quote. As they observe in a footnote, Samuelson lost significant market power as early as the mid 60s. His text might have been praised as an excellent model of how to educate undergraduates, but that's not all what sells in the textbook industry. Politics and approach play a significant role -- which is a big reason (though not the whole reason) why big-name centrists (Mankiw), or smaller-name economists who keep a close ear to the ground for ideological shifts in the mainstream (what McConnell was), end up being the most successful.

in which n. gregory mankiw demonstrates the irrelevance of his ten principles

2011-09-30T18:02:00.002-04:00

This post written earlier today is said by Mankiw to have demonstrated the relevance of his Principle 4, "People Respond to Incentives," but it's very possible students will not see his main point. From the (Wall Street Journal) article:

Top officials, in a bid to meet goals to win promotions or thousands of dollars in bonuses, directed many employees to refrain from issuing decisions on cases until next week, according to judges and union officials. This likely would delay benefits paid to thousands of Americans with pending applications, many of whom are financially needy and have waited for a government decision for more than a year.

So Mankiw decided to pick on government officials who responded to a blip in the government calendar by suggesting to their employees that they work less. While this does indeed demonstrate how officials responded to (perverse) incentives (hm... how does "People Respond to Perverse Incentives" sound as a principle?), some students may react by saying, "that's not the duty of government employees! They should be fulfilling their public duty!"

Yes indeed, and guess what: "citizens usually act so as to fulfill their public duty" is not one of Mankiw's ten principles. So I guess Mankiw's 10 principles don't apply to government workers....

...or to families (who purposely do not respond to incentives when deciding whether to provide you with a home or food on the table) either...

I guess the 10 principles aren't really principles, are they? Either that, or whatever world Mankiw is envisioning in his textbook is a cold and barren wasteland.

the problem with orthodox economics

2011-09-28T21:00:00.000-04:00

As though we needed another reason to make the point!

So, I was reading through an article from the journal of economic education entitled, "Textbooks, Taxes, and Objectivity in Economics Instruction" (always gotta love that word "objectivity" when talking about teaching economics). They present the standard textbook argument that taxes lower social welfare by creating some deadweight loss -- the standard argument of course, where the loss in consumer surplus is greater than the gain in profits. The author then laments that this is usually as far as textbooks take the argument in terms of the chain of logical reasoning.

And then, oh boy, I get to this quote:

If the textbook discussion... concludes at this point in the example, the student will be left with the impression that the public sector is necessarily a burden on society. A discussion of the benefits of tax-financed public expenditure will give the student a more balanced view.... Before the city council exercised its power to tax, the private demand for police protection was not strong enough to produce any police protection....If [citizens] reveal their preferences for police protection... the social demand for the services of police... can be identified by vertical addition of the private demands of the citizenry.

Cops! Really? That's what makes the neoclassical model balanced -- if you see that taxes will in turn fund public goods such as the police which has positive externalities. Take the logic of the model one step further and you might even get militarization for self-defense (and for smashing unions and wall st. occupations -- the pesky institutions are too market-distortionary!!!!).

I guess cops don't have diminishing returns to scale either -- they can share donuts or something.

empirical dimensions of class conflict, part ii

2011-09-27T01:00:00.000-04:00

Last time, we ended with a somewhat banal point: that you can't really understand what goes on inside a firm without looking at the social conditions surrounding the firm. The idea becomes interesting and thought-provoking in comparative context -- either cross-sectionally or temporally -- because that way you can say something of value about how the details of different contexts lead to different behavior.

I take up the latter approach and argue that different stages of industrialization produced significantly different patterns of class conflict. Early in the history of the mill, the workforce was primarily composed of farm girls, who took temporary jobs to earn some money before eventually returning home to teach, go off and get married, or go back to work on the farm. Women didn't even necessarily see all of their wages since most of it would be sent home to their father or other guardian. Nevertheless, women were vocal at the mills about wage cuts and would actively protest negative turns in management policy.

Unfortunately, such turns were becoming increasingly common as we move from the beginnings of the mill in the mid 1830s into the early 1840s. Things change at home, too, as agriculture becomes less and less lucrative, thus making families more and more dependent on the womens' earned wages. Of course, protests still occur in this period but the goals become centered around legislative reform (10 hour laws, better working conditions, etc.) now that it had become increasingly apparent that the girls might be working on a more permanent basis. By the late 1840s and early 1850s, when managers at the mill had begun to employ Irish immigrants and had introduced various technological changes leading to increased intensity of work, working families were almost solely dependent on wage work for survival.

Stand back for a second and think about how you might respond, given these different eras, to an increase in your wage rate. In a period where you're relatively free to go and return as you please, a wage increase might be seen favorably as a way of management wanting to share in the profits of the firm -- so you might work a little harder in response, knowing that you'll be rewarded for doing so. But then, think about an era when you're really stressed for time and are already working 70, 80 hour weeks. Is an increase in your wage now necessarily going to mean that you'll put in another 4, 5 hours of work?

Of course not. Even if you're making more in the earlier era relative to the latter era, you might very well be at your "breaking point" in the latter era, with such a "point" significantly affecting your work-leisure preferences. And that is essentially what I am out to prove in the paper -- in short, that working conditions were being increasingly downgraded, causing a shift in response to how workers decided (partly as a group, partly individually) to react when managers dramatically increased or decreased their wages. This isn't a wealth effects model where increased income leads you to shift your time from work to leisure; rather, it is one of changing outside conditions compelling specific performance in the latter period where it was only optional in the previous.

That's it for now! In the final part to the series I'll present the conclusions in a bit more detail and argue a few "big picture" points -- for example, that we can learn a lot about labor contracts in this period from this case study.

fall entertainment at imagining history

2011-09-24T18:56:00.000-04:00

I often enjoy making lists of things I plan on enjoying after getting through difficult bouts of work. Given that I have 2-3 conferences and loads of other stuff to work on up until mid-November, here are some things I'm looking forward to enjoying (note that all of these have been featured at various points on this blog in one form or another) as all of that winds down.

Haruki Murakami, 1Q84 (October 25, 2011)

Murakami's latest is supposed to be a really sensational novel on the order of Wind-Up Bird Chronicle. Released in three separate volumes in Japan, the English translation will released late-October. A selection from it recently appeared in The New Yorker: "Town of Cats".

Assassin's Creed: Revelations (November 15, 2011)

Taking place in early 16th century Constantinople (i.e. Istanbul) promises to be a stunningly beautiful and expansive end to Ezio Auditore's story. (Might have to wait until Christmas break to tackle this one!)

The Rum Diary (October 28, 2011)

This movie adaptation of a classic but rather less well-known book by Hunter S. Thompson starring Johnny Depp is a unique, early look at the young author that is not present in most of his later works that releases, whaddya know, late-October.

Legend of Zelda: Skyward Sword (November 20, 2011)

Probably going to end up being the best example of the Wii's "last stand" before the new console (Wii U) rolls out. Apparently this game is huge. Invoking a less-mature look than Twilight Princess, the visuals on this game look promising. And let's hope that the WiiMotion Plus controls deliver!

Professor Layton and the Last Specter (October 17, 2011)

The latest installment of this fantastic puzzle series is actually a prequel in terms of the timeline of the story. Apparently it includes a lengthy RPG detailing Layton's "London Life"! Coming to stores mid-October.

At various times in my life I have determined that (1 or 1.5 hours) less sleep each night is worth it. I suspect this might be one of those times.

empirical analysis of class conflict -- some current research

2011-09-22T09:00:00.000-04:00

Consider this post to be the first in a series in which I attempt to explain some things I'm currently working on. The problem with stating anything definite about projects is that you risk it coming across the wrong set of eyes. Maybe once I get tenure I'll have a more relaxed tone, but for now (since I haven't even gotten a PhD!), I'll try to write in such a way that doesn't give away techniques, data sources, or references. See my research page here for a list of all current and past projects.

Of course, that stuff tends to be the boring part of any research paper anyway, and when I comment on research I usually avoid technique and references in a New York Times Sunday-esque "pop social science" sort of way, so I guess I'll just try to do that same sort of thing with my own work. Anyway, on to it:

The project I want to write about for the next few posts is both narrow and broad. I started out with a question that hasn't been adequately resolved in the empirical literature, and ended up manifesting about the importance of social context when evaluating model results.

The question: whether under a piece rate (where you get paid based on how much you produce), more productive workers in the firm are prone to work less hard than they should in order to reduce the possibility that the manager cuts their piece rate.

In a firm where all workers are under the same contract, like the one that I looked at, this possibility might arise if individual effort is observable and if workers gain significant experience on the job, or "learning by doing". In such a situation, managers might observe the total output of the firm, decide that productive workers are earning really high rents because the work is too easy for them, and cut rates on everyone in order to stop workers from earning as much and, of course, to keep the profits of the firm from slipping.

The best way to test for the presence such "strategic" individual behavior would be to examine worker effort over time, and see how it responds to changes in his piece rate. Additional information on how long the worker has been at a firm, as well as other factors that might contribute to his or her productivity (how closely is management observing the worker?), would be good "controls" -- i.e., they allow you to tell the fullest story possible by evaluating the contribution of each possible factor to explaining worker effort. And finally, ideally, you would have a lot of workers to look at over a long period, in order to tell a convincing story.

The problem, however, is that if you want to tell a truly convincing story, those are not all the variables you need. Sure, from the inside of the firm, you might be able to explain the relationships among, say, worker effort and how productive he could have been, and then see if he's "lying" on the job. But what if his behavior is also affected by his fellow workers' ideas about why managers are changing their wage rates on them in the first place? A rate cut could mean one thing -- a rate hike, another. Or, what if the worker has to work for a certain amount of time in order to feed his family back home, because it's becoming harder and harder to do so as other options for work deteriorate? These are potentially very significant factors that simply cannot be included in a firm-level research design.

Well, that's it for now. I've outlined the ideal situation for testing the research question as well as a potential problem with that approach. Next time I'll talk a bit more about who these workers were and why running the model in the 1830s might be different from running the model in the 1850s.

old court-new court controversy in kentucky in the 1820s

2011-09-19T22:38:00.000-04:00

One of the more interesting events I've encountered in my research lately is the Old Court-New Court controversy in the early 1820s in Kentucky. Reading through this, you might be struck with some parallels between current debt controversies. And, maybe even ways to get out of them.

It began with debtors unable to meet their obligations (a common theme of social unrest in the early Republic) and deciding to form a party which would stand against the repayment of debts. When this debt relief movement took hold, views on it obviously split into two camps: those representing the creditor interests such as banks who wanted to force payment, and those, in the party, representing debtors who either wanted to delay payment (for, say, a year) or to absolve the debtors of all responsibilities completely.

The situation was made worse from the fact that the cause of the debtors' problems stemmed from a speculative bubble in land in Kentucky that had burst. People had originally taken out loans in order to pay for the land, only to find that when the bubble burst, they owed large sums of money! Thus creditors, who included big insurance companies and banks, were very angry and fought hard against a legislature that had come out in majority support (in both houses of the General Assembly) of the relief party.

The courts, however, declared debt relief to be unconstitutional -- creating a split in the government between the judicial and legislative branch. But unlike most of the early clashes between a society rife with factions on the one hand and "friends of order", the judges, on the other hand, the Debt Relief Party made a radical move by deciding to simply create a completely new court! By the time it was abolished a few years later (once a legislature more strongly against debt relief had come in, and once economic conditions had improved), this "new court" dominated by debt relief interests had heard 77 cases!

Eventually, the cases heard by the New Court were declared null, but Kentucky's brief experience with a dual-court system represents a truly remarkable event in legal history, when people literally took institutions into their own hands to set up an alternative more in line with popular views. While there are many examples of court occupations throughout the history of the Early Republic, nothing quite like this can be found in the history books. It shows what happens when you combine hard times with enormous sums of debt and a government that is insufficiently responsive to majority interests. And, it might just teach us something about current events!

You can read more about the controversy at its Wikipedia site here: http://en.wikipedia.org/wiki/Old_Court_%E2%80%93_New_Court_controversy

beethoven, piano sonata no. 32, op. 111

2011-09-07T20:19:00.001-04:00

This is a side of Beethoven we don't usually get to see in all the renditions of the symphonies and "Moonlight Sonatas"! The final sonata in Beethoven's opus is a delightful surprise, and here is the second (and last) movement of it. Serkin's gentle but I think it's a good interpretation. Enjoy!

First part:

And the second part:

something to reflect on this labor day

2011-09-05T18:01:00.001-04:00

From E.J. Dionne's excellent Opinion piece in today's Washington Post:

So it would take a brave man to point out that unions “grew up from the struggle of the workers — workers in general but especially the industrial workers — to protect their just rights vis-a-vis the entrepreneurs and the owners of the means of production,” or to insist that “the experience of history teaches that organizations of this type are an indispensable element of social life.”

That’s what Pope John Paul II said (the italics are his) in the 1981 encyclical “Laborem Exercens.

Quotes from Abraham Lincoln as well in what is a good summary of the history of how laborers have been overlooked as the drivers of our economy. For a more current example, it is interesting to note that almost three years after the beginning of the U.S. recession (in December 2007), after trillions of dollars to save capital from a total collapse and refusing to raise taxes on the wealthy, President Obama is finally attempting to Get Serious ("Economic Adviser Pick is Known as Labor Expert", NYT 8/29/11) about jobs in the economy.

Makes me sick.

american relative decline in blogs, academics, and policy

2011-09-03T11:20:00.001-04:00

The stagnation of the American economy over the last few years (or as some would argue, even longer) has prompted a growing concern about the possibility of American "relative decline", echoing, in part, the discussions among policy and academic circles in the 1950s regarding British relative decline. And like those debates from the 1950s, people on both sides of the spectrum are weighing in.

From the center-right we have people like David Brooks (see here, "The Vigorous Virtues" NYT Op-Ed) and (from the further-right) Tyler Cowen, who argue that we have dried up a lot of our productive resources, largely from a sluggish public sector and a drift from "republican" virtues. In particular, Cowen's The Great Stagnation published earlier this year looks at median household income and some non-standard (if not thought-provoking) measures of technological growth to argue that American ingenuity is in serious jeopardy of a kind of "plateau".

Liberals, such as the further-left Dean Baker and liberal Dani Rodrik, argue against the view that America is on its way out. Baker in this piece ("Trade Arithmetic for David Brooks") concentrates on continuities, not breaks, in American policy since the 1970s regarding its attitudes towards organized labor as well as where a country's true strength's lie in its political economy. Baker gives a refreshing view of how America has always had an antagonistic view of what Brooks sees as the truly vital source of American productivity and prosperity -- the American worker. In other words, American economic policy is nothing new; it's simply exacerbated by other more important factors, including financialization.

Dani Rodrik looks at the issue on an international scale here (WSJ blog) and here (FT articles are gated, but you can get around the gate by Googling "don't expect china et al to save the world", the article's title, and clicking on the first link), arguing that unless emerging economies adopt a strict industrial policy allowing them to push out of manufacturing into higher-growth areas, relative decline is not likely to be the most important force in the international political economic landscape because developed countries will maintain an edge on the technological frontier.

Relative decline debates always seem to be instigated by conservatives who want to lament the passing of some better time when a country's citizens were more virtuous and hard-working, and "real" economy concerns were more important than finance. Marxists or Marxist-influenced scholars may join the fray by commenting on the labor politics involved, for example by arguing that a lack of a strong labor movement may hinder progress towards socialist revolution and thereby lead to economic/capitalist stagnation (Baker walks a fine line on this front, whereas Bill Lazonick is a solid example of this argument in the British decline debates).

Real progressives, on the other hand, see through the rhetoric most clearly by arguing that relative decline is a fiction manufactured by conservatives in order to skirt the main issues of capitalist development (I would place Rodrik in this camp). I have yet to encounter an explicitly Marxist take on the question and would be interested to hear if anyone has an article to recommend on it.

quote of the day

2011-08-22T14:28:00.002-04:00

I've been involved in some odd research this summer as part of my dissertation, studying Harvard graduates from the 1700s. Lucky for me there is never a shortage of interesting quotes about these guys. Here's a clip from a Boston newspaper, quoted in Sibley's Harvard Graduates (Vol. 15):

Last Commencement Day a Number of the Disputants were led into what some think the good old Way, i.e. the Way of Blasphemy against God. They have a strange Proverb at College, viz. That 'tis no sin to tell Lies in Latin. So it seems to be looked on as no Sin there for God to be Blasphem'd, provided he is Blasphem'd only in Latin.

No words necessary for that one!

it takes a lifetime to learn how to paint like a child

2011-08-21T10:29:00.005-04:00

(Subject line is a modified version of a Picasso quote.)

Economists looking for ways to tell stories in their classrooms -- stories intended to run counter to the oft-trumpted idealisms found in many mainstream textbooks -- might look to children's stories as a treasure-trove of leftist-inspired themes such as equity, fairness, and collective action.

At least, that's the message behind this article which appeared in the NY Times today by Motoko Rich, titled "Fairies, Witches and Supply and Demand" (if you have run out of your 20 articles this month, try typing the article title into a Google search or getting a service such as "NYTClean"). Rich gives many interesting examples, and all it would take is some clever adaptations in order to distill these stories into educational content for first year undergraduates.

Near the end of the article, Rich confronts the obvious question: why is it so much more difficult to find children's textbooks espousing the excitement of competition and market exchange? His answer:

By and large, the economic lessons in children’s books lean left of center. “I think the writers are not particularly sympathetic to or don’t understand how a market works,” said Gary S. Becker, the Nobel laureate who teaches economics at the University of Chicago. “It’s not easy to convey that to a child. It’s not always easy to convey it to grown-ups.”

For the most part, the economic concepts conveyed in the books reflect values like generosity and equity rather than competition. Raymond Fisman, an economist at Columbia University, said his 3-year-old daughter’s favorite books teach the importance of sharing and gift-giving, values that might not lead to the greatest wealth in the real world. But, he added, “I doubt that 3 is the age where you start teaching people the brutal economic truths of grown-up commerce.”

At first I thought -- wait a sec! I could do better than that! Not. So. Simple!

But then, after a bit of reflection on the hours I've spent glued to a Harry Potter book, or to some of my favorite games, or better yet, with my family, I came to the conclusion that No, Rich Has it Just About Right. ;)

supermarket economics

2011-08-17T15:10:00.004-04:00

I was reflecting on the analogies used by economists to illustrate core ideas such as market equilibrium, consumer preference theory, as well as more advanced topics such as the equation of marginal utilities to prices in product market equilibrium, when I began to realize how artificial the supermarket analogy is. (Loosely stated, the supermarket analogy argues that a shining example of how markets work is the supermarket -- a large group of consumers congregating together in order to take part in impersonal exchanges that leave them better off than they would have been if they had to bargain individually with the farmer or manufacturer. Supermarkets therefore increase market efficiency and hence social welfare.)

One example has caught my attention as being a particularly serious example of this fallacy -- Abba Lerner's discussion on product market equilibrium in The Economics of Control. Lerner goes so far as to say that the equation of people's psychological marginal utilities of goods to the prices of those goods, represented in the standard model of market equilibrium, is one of the great achievements of mainstream economics, validating the use of the model in understanding general equilibrium in any market economy. And you can find this story of the triumph of the supermarket analogy anywhere that core economics principles are explained (even Greg Mankiw uses them in his Principles text, e.g. where he asks whether the price of turkey in a supermarket is "just" according to the principles of welfare economics).

Indeed, supermarket analogies constitute a large enough set of ammunition for mainstream economists that I would label that set "supermarket economics", for lack of a better term. (Apparently that term has been used more commonly in other contexts...)

Supermarket economics is deeply flawed because it doesn't address people's most common interactions with economics ideas in their daily lives -- the economics of work and the economics of the home or family. In fact, I would argue that supermarket economics is intentionally used by mainstream economists to mask the more relevant facets of economic life that most people deal with on an ordinary basis.

Think about it like this: even if "supermarket economics" did hold, what percentage of your day is spent in a supermarket? Now what about at work, or at home, or with friends? One of Mankiw's 10 principles states that "markets are usually a good way to coordinate economic activity". But employers don't go around to various islands in a giant market looking for the "right worker" for a particular job, nor do our parents take bids from the highest bidder to see who will be fed on any particular day. Employers plan the coordination of their workforces, and direct their workers not through market incentives but through threats or just because they command authority in the workplace. These are experiences that most of us have everyday -- before we go to the supermarket to pick up tonight's dinner.

My central point is simple but highly relevant to a critique of bourgeois economics. Supermarkets are just an idealized version of an economy: they mask some of the most important aspects of economic life for ordinary people. Standing back and looking at the different economic activities we engage in, we see that direct, impersonal exchange is not the norm.

the art and science of financial markets

2011-08-13T17:07:00.002-04:00

(links to image here and here)

Trying to follow the ups and downs of the stock market is difficult, but it's not a science. While traditional theories of financial markets might like to assume that it is, this cartoon illustrates a different argument for why stock prices move the way they do. Investors must make their decisions based on information about a company that is far from complete, and they also must factor in what all the other investors are thinking about where the stock is headed. If anything, this makes their decisionmaking jobs more complex than science, not less so. And in such situations, frenzies can easily break out where a few small rumors can lead to wide fluctuations in a stock's price. This volatility seems to defy any logical or scientific explanation, as the above picture clearly suggests.

NOTE: This cartoon is part of an ongoing project at Imagining History to cull cartoons and other illustrations around the web as part of the Anti-Mankiw project (making critiques of mainstream economics accessible at the introductory level). See the link below for a list of all cartoons gathered thus far here: http://imagininghistory.blogspot.com/search/label/cartoons.

liszt, consolation no. 3 by vladimir horowitz

2011-08-12T15:50:00.000-04:00

or maybe because they love their land, no matter how polluted it gets

2011-08-11T10:17:00.008-04:00

Robert Vienneau replies to my linking to a strategy videogames wikipedia article with some interesting research on the intersection of games and decision theory. Interesting stuff: I believe that people's performance in games can definitely shed light on understanding individual behavior in complex social phenomena of the "real world". But as I have argued on other occasions, I think that the actual structure of a gaming world, and the method of gamer interaction with that structure, can also be highly productive for teaching about social theory (and, as a corollary, reproducing certain political ideas).

What I'm thinking about is more abstract than saying "well, this is how people react in games to different stimuli... let's extrapolate what that tells us about economic theory!". What I'm going for is more along the lines of, "the worlds that are represented in these games are composed of certain institutions and ideas, which become socially and politically meaningful to the gamer who takes part in those worlds".

Consider the following situation which takes place in the first part of the classic RPG, Final Fantasy VII for the Sony Playstation.

Premise: A giant corporation with strong ties to a large city, Midgar, has endeavored on an environmentally damaging policy of extracting an energy source from the planet which also serves as the people's source of livelihood. To extract the energy, they have built 8 reactors in a circular fashion around the city. The city itself is composed of two tiers: an upper and lower "crust".

On the lower crust you have the slums. Then, you have a pie-like "disc" structure that separates this lower crust from the upper-area, where the corporation runs its day-to day options. (Needless to say, there are strong connections between the corporation and the city government.)

A picture of Midgar:

(click to enlarge. original link. the "slums" are located below the 8 panels you see represented in the image, where the main reactor sits in the center and serves as the corporation's HQ as well.)

Enter Barret and Cloud, who are having a conversation about the layout of the city and the problems with the corporation. Barret is part of a grassroots "terrorist" organization attempting to blow up the reactors in the name of a kind of environmental justice. Cloud has joined the group for the first mission (from which they are coming back after a successful attack on one of the reactors). The following dialogue takes place:

Barret
"The upper world... a city on a plate..."
"It's 'cuz of that &^#$# 'pizza', that people underneath are
sufferin'!"
"And the city below is full of polluted air."
"On topa that, the Reactor keeps drainin' up all the energy."

Cloud
"Then why doesn't everyone move onto the plate?"

Barret
"Dunno. Probably 'cuz they ain't got no money. Or, maybe..."
"'Cuz they love their land, no matter how polluted it gets."

Cloud
"I know... no one lives in the slums because they want to."
"It's like this train. It can't run anywhere except where its
rails take it."

(script thanks to this link.)

(screenshots thanks to this youtube video)

Really remarkable. I remember when I first read those lines, they really hit me like a brick. They still do, in fact. And the game is full of these types of themes and quotes, demonstrating how gaming worlds themselves can introduce the player to social nuances that many people would only consider possible to be fully expressed in a novel or some academic treatise.

Numerous other examples can be found, if you look closely: from the historically (politically, socially, culturally...) engrossing worlds of the Assassin's Creed series to the best Japanese RPGs out there, there is a lot to be learned from taking these games seriously as expressing real social themes on a surprisingly deep level.

links of interest

2011-08-06T16:04:00.005-04:00

Some links that you might find interesting:

You can find podcasts of the annual Tawney Lectures, sponsored by the (British) Economic History Society, here. It includes some pretty interesting talks, including Jane Humphries on child labor and Bruce M.S. Campbell on "Nature as Historical Protagonist".

Gamasutra is a videogame blog, but really so much more. It includes many fact-based and opinion articles addressing the cutting edge-issues in gaming such as social games and the impact of independent developers on the industry.

My Favorite Wikipedia article right now is on strategy video games, which is a real excellent exhaustive list of the different possibilities, including tactical/strategic breakdowns and hybrids. Very cool!

Is Islam compatible with capitalism? A unique discussion of this old question (in general, "is religion compatible with growth?") using the modern Turkish businesspeople from the Anatolian region as an example.

assume a can opener

2011-08-05T14:49:00.003-04:00

N. Gregory Mankiw on why economists might stick to the rational actor assumption even in the face of behavioral economics findings showing that individuals are systematically irrational (pg. 497, Principles 4e):

[E]conomists are themselves are not rational maximizers. Like most people, they are overconfident, and they are reluctant to change their minds. Their choice among alternative theories of human behavior may exhibit excessive inertia. Moreover, economists may be content with a theory that is not perfect but is good enough. The model of rational man may be a the theory of choice for a satisficing social scientist.

And here, to dunk your head in the water, is Jim Crotty on The Realism of Assumptions Does Matter (start at around 4:40 for the relevant discussion):

success (and failure) in the textbook industry

2011-08-04T12:04:00.004-04:00

One of the more fascinating stories in the history of economics textbooks is the persistence of McConnell and Brue's book. McConnell wrote the first edition of his text in 1960 (Brue joined later) and it is still one of the top-selling econ textbooks on the market! It overtook Samuelson in sales figures in 1975 and has maintained a solid presence ever since. How is this possible, and what does it teach us about the future of Mankiw's text?

Such a question cannot be divorced from political, economic, and social context. This may seem obvious, but there are really two sources of change in the textbook market. One is internal: having to do with the dynamics of the market itself, as well as the content and style of the existing texts. If you hear Mankiw or some other orthodox economist talking about why particular texts are successful, they will most likely turn to this flavor of explanation because it tells a story of individualist success and ingenuity in the market -- how textbook writers come up with excellent new ways of presenting economics research in a consumable fashion to first year undergraduate students. People arguing the "internal" view often lack a perspective on why long-term trends and changes in those trends occur.

The second source of change is external: having to do with the social forces alluded to above. (Does a better job of explaining the long swings in a market.) Philosophers and others thinking about the progress of the discipline from the outside are more likely to talk about these sources, but they are just as important (if not more so) than the internal ones. Did the success of Samuelson have anything to do with his commitment to a consumable distillation of the Keynesian mainstream of the time? Most certainly. Did it have something to do with the way he treated the Soviet model and radical economic alternatives? You bet.

So the funny thing is, McConnell always kept in line with social context. For example, in all editions of the text he has included sections at the end of each chapter titled "The Last Word", which included critiques of, say, the mainstream treatment of monopolies by Paul Sweezy. The point was to present economics as having more than one side, to treat that idea carefully, and leave it open to the student to discuss (maybe in class?) the merits of each side.

McConnell and Brue maintained these "Last Words" throughout their textbook, mainly because they were an effective way of presenting an opinionated argument that, in some way, reemphasized the core theme of the chapter. (Samuelson and Mankiw have something like it as well, for a similar reason; it's an effective tool!) But where the earlier editions of "Last Word" had something like a critique of the main theme of each chapter, by the 1980s and certainly by the late 1990s, the editions' "Last Words" were geared more towards an opinionated affirmation of the underlying theme. For example, a chapter on the pure competition model has a "Last Word" on how pure competition maximizes consumer surplus, demonstrating the welfare properties of the pure competition model in a one-page summary of the chapter.

In short, while Samuelson had kept some Keynesian grounding to his text, McConnell and Brue were able to adjust the focus depending on how the majority of economists changed their views.

What does this mean for Mankiw? As I noted earlier, the key invention for Mankiw was the reorganization of welfare economics. This reorganization is a political project in the sense that it "glosses over" key details of the arguments needed for welfare economics to actually make sense. It allows clear applications to the world of public policy. But still, it is, at its core, a right-center book in a world where the mainstream is beginning to shift slowly but surely. As soon as a (mainstream) book comes along that represents economics with more of a political economy focus, more behavioral economics focus, and a better emphasis on the logic (rather than the rhetoric) of core models, Mankiw's position will be in jeopardy.

As a result, I suspect that very soon we will see the downfall of Mankiw's Principles text. But, more on that in another post.

why do economists disagree?

2011-07-31T20:14:00.005-04:00

The New York Times Sunday Review had an article today about social values and science. The article began with a quote from Nobel Prize winning physicist Max Planck:

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

The thesis of the article is simple and powerful: scientists who fully embrace their social values when doing research will come out doing better research for it. Instead of purporting to be more "scientific" than the opposition, researchers should explicitly note their social biases, because by doing so, we will approach a higher quality of science: when the social implications of economists' research are explicitly given ("thrown on the table"), so that they are held to be accountable for their ideas, economics will be the better for it.

It's time we started teaching undergraduates a broader view about why economists disagree. Mainstream texts often choose to present the market-centered view as a place of common ground for any group of economists and policymakers who disagree about how we ought to move forward. The "scientific" or rigorous justification for this choice is the welfare economics vision of the economy: i.e., that perfectly competitive markets maximize social welfare and are therefore socially optimal. Welfare economics has succeeded in an uncountable number of ways: from the clever mathematical articulation of its core ideas in the middle of the 20th century, to more unclear (though equally successful) treatments of the ideas in modern economics textbooks.

An alternative view argues that this baseline is an inappropriate way of addressing the concerns of workers, or the poor. For them, the terms of debate ought not to be defined by markets and market efficiency criteria: even if one admits that we are far from the social optimum, this "third view" believes that we should not discuss policy in terms of getting closer to that criterion of social welfare.

The punchline? Liberals and conservatives are both equally at fault for purporting their underlying economic model to be one of science, or even for trying to argue that views can be boiled down to a nice dichotomous world. A broader perspective on how economics is a pseudo-science would admit of more diverse views, and ultimately, better debates.

Economics -- indeed, the world -- would be much better for it.

employer control and theories of unemployment, illustrated

2011-07-29T15:22:00.001-04:00

Image source: Terry Everton

Ever known someone, such as a parent or friend, who has lost their job, or who has remained unemployed for an extended period of time? Traditional theories of unemployment argue that your friend is unemployed because he or she is too lazy or lacks the skills to make him or herself marketable to employers. In the above picture, we see a different theory illustrated: namely, that employers use the threat of unemployment to increase the productivity of their workforce. As employers lay off workers, labor productivity increases. Similarly, as unemployment falls, workers feel more secure in their jobs causing them to slack off. The fluctuations in unemployment are thus at least partially a cause of employers' desire to control their workforce.

Hat tip to Ian Seda at Los Expatriados for linking to picture, which was originally found at Monthly Review here.

Rachmaninoff, Prelude Op. 32 No. 10, by Sviatoslav Richter

2011-07-27T17:07:00.000-04:00

The great Russian pianist plays a classic!!!

property rights and /capitalist/ growth: some current research

2011-07-25T11:29:00.003-04:00

Regular readers of this blog will know that I've devoted quite a bit of time to the idea of property rights and how theories of property rights align with historical experience, especially in the U.S. In her address to the Economic History Association annual meetings in 2010, Naomi Lamoreaux outlined a compelling thesis for the particular path of development that the theory and practice of property rights has followed in the U.S. since the early 19th century.

To motivate her claim, consider the following observations which form the essential conflict motivating her study. Perhaps the clearest, concise and most overtly-political interpretation of the libertarian notion of property rights can be found in the Washington Consensus, from the 1990s, which argued that we must instill institutions of private property and enforceable contract in developing countries, since these institutions form one important cornerstone of successful economic growth. Critics of this claim may point to the fact that many Western nations (if not all) did not develop in the same way. In fact in a lot of cases, property rights of the disadvantaged, or the minority, were infringed in the name of "economic development". The classic example concerns eminent domain cases, but there are a variety of other situations in which private property rights were not totally respected, but which nevertheless resulted in widespread growth for the areas/economies in question.

Rather than argue that these observations serve as "anomalies", as she likes to call them, in the economist's theory of property rights, Lamoreaux argues instead that such a negative history of property rights protection can still be consistent with an overall view that property rights are to be respected, according to the libertarian conception of the idea. She argues that what has allowed such continual infringement in property over time in the U.S. is a popular democratic tradition which commits itself to widespread property ownership. At the core of the American experience is the presence of a strong middle class, which allows such a seeming "contradiction" between what we Americans say to other countries, vs. what we actually do, to maintain itself over the centuries. Two strings of examples, illustrating the two themes, support her argument.

First, we have historically been weary of large concentrations of property ownership, so we have allowed legalized (i.e. through the legislature) redistribution in such cases. Second, we have a general mistrust and dislike for non-property owners (the poor ... also, they usually do not vote and at some times, could not vote), and so we will generally not get upset when there is a property taking which involves buying up a slum or some other poor area for economic development. Lamoreaux uses many different examples to illustrate both of these points, and overall, I must say that the article is convincing: America has a significant majority of property owners which has been very powerful in determining political outcomes. The political voice of the middle class has supported abrogation of property rights only when the middle class's own property remains untouched.

Many historians -- liberal and Marxist alike -- have identified this trend in American political economy as being one of the key reasons why America has supposedly strayed so far from true-blue, European-style socialism. The argument, presented commonly as the American Exceptionalism thesis, comes in the form of a celebration for the liberal and a lament for the Marxist, but the core underlying conception is the same: democratic ownership of property symbolized by a strong middle class prevents radical change from occurring because society becomes too "spoiled", "individualistic", or "market-loving". In terms of Lamoreaux's thesis, this means that property rights can be infringed upon in a non-democratic way only when it leads to the material benefit of property owners. (Basically, they don't get outraged/mustered unless their property is being taken.)

Lamoreaux refuses to accept (pg. 301) that she is updating the American Exceptionalism argument (which has a lot of holes in it already, thanks to a swelling labor history that documents worker radicalism -- as well as the state's violent reactions to it). Nevertheless, one has to wonder what else her thesis could possibly imply about liberal values in America. Her thesis seems to flirt with the old yarn (though I guess not so old, since some oldies are still talking about it, in various updated forms) that Americans have always been bourgeois-freedom-loving, individualistic modernists.

What would constitute a Marxist critique of Lamoreaux's thesis? (Or, really, any critique that wants to question the relevance of this argument.) First of all, some Marxists might perfectly agree with her claim. They would lament that such is the main characteristic of a value system which has proliferated in American society, an unfortunate staple of the "objective material conditions" in American society, and simply move on. Such lamentations were generally expressed by an older tradition of American Marxist historians, harking back to the the 1920s and 30s, and they don't hold as much weight now (why? well for one, it doesn't seem like a very strong argument). Others, however, might draw from the (updated radical) social theory of the 1970s and discuss the role of ideology in Lamoreaux's story. I think this is one promising way of moving forward.

Alternatively, Marxists might even question the true importance of property rights as a cornerstone of strong economic growth in a developing capitalist society, because the majority of gains in American wealth occurred in the North beginning in the 1830s and 1840s and came from industry, such as textiles. Surely there is a "property rights" element to this historiography as well, since the mills were obstructing waterflow and were protected against downstream users' claims through legislative acts and raw judicial negligence, but obviously that is not the main source of capitalist growth in these areas.

At any rate, Lamoreaux's discussion is important for putting a dent in the accepted notion of Western property rights theory. it's an interesting look at how a country can seemingly be so hypocritical. In the end, however, I sincerely doubt the relevance of her claim to overall capitalist growth, and I question what role ideology might have had in the process as well. By the way, a draft of the paper can be found here. Lamoreaux is an excellent scholar and I recommend any of her works! They are always very smart, deep, and creative institutional analyses.

quick summer reading thoughts

2011-07-23T18:18:00.006-04:00

I haven't been able to do much leisurely reading this summer, and what I have done is hardly voluntary. For example, I was given The Information by my family (albeit a bit indirectly!). Still, what I like about leisurely reading is that it usually stimulates some section of my brain that had gone un-"tickled" for some time.

The Information by James Gleick certainly fits in that category. It tickled the Hofstadter part of my brain that had remained dormant for quite a while. Years ago in college I read and quickly became obsessed with Douglas Hofstadter's Godel, Escher, Bach: An Eternal Golden Braid. I was a math major in college, and I have to say that those first two years of the major were really an exciting time for me because my eye was opened up to so many beautiful ideas, everything from the strange new field of Graph Theory to the centuries-old, strange and abstract field of Real Analysis. To see the ideas of mathematics applied to theories of consciousness in Gödel was truly captivating. (Of course, I later drifted away from math precisely for the lack of applications, but for a while there, math had me sold and, alas, I stuck with the major throughout college.)

But what I liked about Gödel, in particular, was Hofstadter's style of presentation and his ultimate thesis, i.e., that the human mind is something quite different from a computer. The book, in conjunction with the followup, titled I Am a Strange Loop, stressed the ways in which humanity's search for meaning through analogy, and the ways in which we struggle with self-reference when interpreting meaning. It was really fascinating to see Gödel's theorem applied here: Gödel said that formal systems (say, something which might represent a computer) will necessarily contain theorems which, while true, are unprovable using the formal system's tools. He essentially constructed a sentence that talked about itself, using the language of that very formal system. So that was dubbed "incompleteness" and Hofstadter uses the idea of incompleteness and of self-reference to say that it represents human consciousness, more or less. (Try answering the question, "why do you love your favorite piece of music?" you find yourself stuck at some point without being able to come up with a reason other than "I just love it!")

At any rate, the reason I went into that long explanation is to say that Gleick's book comes to the completely opposite conclusion. He starts from the bottom up, from our DNA, and argues that we're just carriers of information. Furthermore, he does it in a very strange way. He spends a lot of time talking about the history of information transferal, essentially tracing the development of modern communication theory, and then talks about genetics toward the end. Don't get me wrong, that part of the text is really well done and I learned a lot about the practical problems faced by a lot of the information theorists. But, the story is all about figuring out how to mechanically transmit information. Little is mentioned about meaning, because Gleick's thesis is that humans are simply agents carrying information, so that the information is the true protagonist of the story, so to speak. Information, measured in the omnipresent "bit", defined the beginning of time and information will remain when we are extinct.

He basically flips Hofstadter's ideas on their head by saying that meaning is not the important point; it's about the ever-growing industry of data storage and how efficiently it can flow. Think Facebook, Google. I'm not enthusiastic about such a position; it doesn't get my juices flowing like Hofstadter's book does. And I would say that Hofstadter provides a much better written and compelling case for his point of view. Gleick's story involves a lot of discussion of the brilliant inventor, and the development of communication technology is obviously related to military, development of the state, and private interests -- so how can there not be any discussion of meaning/symbols of information theory? Information technology is controlled, distorted, and manipulated constantly, so meaning inevitably "creeps in" wherever you talk about information even how it flows and is manufactured. And I'm sure Gleick would even agree with this statement. But the book is completely unconcerned with any of these ideas.

So whereas in Hofstadter I see a real concern with skepticism and philosophical concerns, Gleick's The Information is too dry. I wished there were more discussion of the humanity of it all, but I accept that perhaps that task is too much to tackle in a book which is already 400+ pages. Still, it didn't captivate me the way Hofstadter did and I think that derives from the somewhat flat conclusion and the (at times) slow pacing of the text.

An interesting exercise might be to think about how the incompleteness theorem could be applied to economics. It's already been applied to many different areas of science and philosophy, and I'm sure if someone wrote a pop-econ piece on it it would garner at least some widespread attention. The problem is that it's not exactly a mainstream idea: the thought that individuals are not soulless utility computers might cause most economist's heads to explode. The idea that there exists a human consciousness which, at its core, cannot be modeled formally, might risk a lot of Harvard tenured positions.

an odd shift of perspective

2011-07-21T12:37:00.000-04:00

Who would have thought. A random mentioning here of the DeLong-Harvey scuffle a couple years back led me to a discussion of that event by Econospeak, which led me, in turn, to a perspective on Keynes that I hadn't completely understood, but which is shared fervently by my colleague Josh Mason, and which I now appreciate much more.

My beef with Keynes, from day 1, has been with an overemphasis on the technocratic issues, ignoring the political issues that would, it seems to me, arise when the state tried to take over investment. The idea that we could solve the problem of capital scarcity by going this route is certainly powerful, and I would argue that with the appropriate institutional alterations it could be implemented. (For example, if you found some way of democratizing the workplace through a revolution then maybe it would work. Although even in this scenario, I suspect that if you do not abolish markets you will not be able to prevent market power.)

But it turns out that Keynes had a few other ideas up his sleeve, though they aren't discussed in the General Theory and they don't seem present or even implicit in Keynes' model of the economy. What is, then, the source of these ideas? To echo what JW's been screaming at me for ages, Keynes was inspired by philosopher G. E. Moore's discussions of what goes into the "good life". In fact, in a letter he wrote to T.S. Eliot in 1945 Keynes gets quite specific about it (now, why he was corresponding with old Tommy Stearns in the first place is a question that I would like answered, but I don't have easy access to the Collected Works at the moment to find out):

The full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less.

Read the rest of the letter here, it's quite interesting. The policy is a kind of civil disobedience that has been proclaimed by radicals throughout history: in a situation of all-encompassing power, resist by not resisting. If you truly want to "abolish the rentier class", take away its fuel. As you slowly starve the beast, the concept of capital scarcity will slowly but surely evaporate and you have Keynes' utopian vision. In short, this is a fully developed, step-by-step prescription for bringing about massive change in society in a very radical way. Not in a Marxist way, mind you, but an important contribution to a utopia nonetheless.

Now, I've always known that Keynes didn't simply advocate for public control of investment. I knew that he favored strong unions, too. But I've always believed that Keynes was limited because his underlying model of market processes was very conservative. That is: keep the unions, keep the technocratic investment board, but don't forget to also include the bourgeois in power, too. Defend capitalism; just make it a more stable one where the rentiers don't play such a large role in government policy ("yeah right!" I used to exclaim to myself). But I think the policy ideas elucidated above demonstrate quite clearly that Keynes had a different understanding of humanity's goals in mind.

Well, now, it seems that I agree a bit more with my friend Josh on the issue...

||: a political project, not an intellectual one; a political project, not an intellectual one ... :||

2011-07-19T09:25:00.000-04:00

Those are meant to be repeat signs, by the way.

A commentator writes on this post:

It would be interesting to read your views on what science is.

It's clear what is going on here, with this comment. Consider: Person decides to examine exhibit A. Exhibit A is mainstream economics, purporting to be a scientific theory well-grounded in evidence. Person looks at exhibit A and critiques it. Person can do so on many different grounds, obviously, but one of the most important methods is through the observation that something about exhibit A is logically inconsistent, according to the laws of science (i.e. according to what we actually see in the world, or according to the logic of the theory).

Unfortunately, by doing so, Person is implicitly using a set of his own standards (namely, those of "science") in order to judge the "scientific nature" of exhibit A. But science is not an objective concept in economics or in any field because political ideology also defines what "mainstream economics" is. The question thus arises: maybe Person himself has flawed standards of what "science" is! Perhaps even MORE importantly, perhaps Person's faith in scientific reasoning is representative of a person's faith in a politically charged "idea" of science itself! Fortunately, the main point of my criticism is not to judge exhibit A against what I purport to be "objective" standards of economic science. But I need to explain this a bit more.

Still -- touché. Good point. I should not be simply saying that "Mankiw's text does not hold up to the objectives of science", because that would be saying that if economics were more scientific, everything would be fine. But of course it wouldn't be that easy, because there is a component of ideology to the study of economics!

Fear not reader, I dare not go down the path of holding Mankiw up to standards of science which I myself do not believe in. And actually there are a couple reasons for that. First of all, it's cheap. Mankiw is a textbook! While there are of course some basic standards of logical rigor to which we all must tie ourselves, textbooks are not AER articles and therefore I am not going to pick on Mankiw for small slips in logic.

Second, and more importantly, is that I need to outline my full thesis as a process of steps so people don't jump on me for things I never meant to do in the first place. That is, the extent of my analysis is meant to go much further than simply making a point about logic or rigor. I plan to do the following:

Examine the discussion of welfare economics
Make some observations about how Mankiw tells his story, making note of both major and minor logical slips along the way.
Wrap it up by thinking Seriously about the overall picture of general equilibrium that the student walks away from after reading this section
Consider the political achievements attained at that point

In other words pointing out the non-rigorous nature of Mankiw's style is not the main point of my argument. However, I do think it's important to think about how welfare economics can be taught correctly, that is, in the sense that each proposition follows from prior assumptions and propositions. But that is not because I see any intrinsic value to the logical consistency of the welfare economics model. It's because of what the welfare economics model purports to be. That is, I would like to stress its political significance in the realm of economic thought.

Here's the clincher: That last point is very crucial to me because welfare economics is really a great political achievement. I don't think you would deny that, would you? The welfare theorems are really the epitome of the utopian vision of capitalism, a point expressed in numerous commentaries on them. Thus, by subverting the logic of the welfare theorems, as Mankiw does, he really is making a great political achievement.

He's essentially subverting the political overtones of them, which is essentially political indoctrination in disguise! For another example of the subversion of the political ideas, consider what happened in the 1940s and 50s with the mathematization of the welfare theorems -- that itself was a subversion of the political overtones because the mathematics is meant to bring the whole thing to a class of Higher Truth shared with mathematics and logic.

And this all goes back to my previous post regarding Lerner's verbal run-through of the general equilibrium model (for two people) in the 1930s. In that post I attempted to argue that the reasons why Lerner brought up the discussion of the way a perfectly competitive system would work with money was not necessarily in order to provide any substantive logical critique of Marxian economics; rather, the point was a political jab. All along.

Really an amazing story if you think about it, but you can trace these kinds of stories throughout the history of non-Marxian economic thought.

"social" welfare: introductory dialogues

2011-07-17T13:07:00.002-04:00

The concept of social welfare is hardly "social" at all. Once again the market takes center stage; and we are left wondering whether any social institutions could possibly exist in the bizarre world that Mankiw is painting for his readers. Yes, of course the model he sets up is meant to idealize in order to get to the core issues. But as we will see, Mankiw discusses the model in a way that leaves the student without any methodological framework for actually understanding those tools, except at a superficially wrong level.

We arrive at Chapter 7.

Mankiw motivates the study of welfare in perfectly competitive markets by asking whether the price of turkey at the supermarket is "fair". That is, he wants to know whether, by society's standard, the price of turkey is "just".

Behind this question is the following general idea: suppose we were to find some way of measuring the maximum amount of social welfare derived from an individual's consumption of a particular commodity. In equilibrium, the commodity will be sold at a stable price and with a stable quantity. Now, we know that when you consume more of a particular good, the additional satisfaction you get from consuming it diminishes. Thus, if you buy 5 apples at $1, that first apple was worth a lot to you, the second not so much, and so on. Mankiw wants to find some way of measuring exactly how much that first apple was worth to you, plus how much that second apple was worth to you, ... and so on. We know that the last apple, the 5th, is worth $1 to you because we assumed that to be the equilibrium price: you consume apples up to the point where the benefits of an additional apple equal the cost (or price) of an additional apple. So, what is the sum of all the positive values in between?

That is the concept of consumer surplus, or "CS" as we will call it for the remainder of the post.

...

Question: That seems easy enough to understand. But how does "society" fit in here? We were told by you in a previous post that society has no actual agency in the market, that it's really all about market mechanisms. But now you're telling us that Mankiw wants to judge whether the price of the good is "just" according to society. How does that leap take place?

Answer: The key lies in a concept that is not developed in Mankiw's presentation, thereby leading to the confusion. The key to clearing up your confusion is in coming up with a definition of "social welfare". That is, we need to define social welfare in an economy in order to say that markets maximize "social welfare"! The point is simple, and yet extremely crucial, at the same time.

Question: That seems like a simple problem to solve, though. We can measure the CS of any one individual by figuring out how much that individual values each apple. We just survey him or her (theoretically speaking) and come up with a number in money terms. Why don't we just do that for all consumers in the economy? Since everything is measured in money terms, we have a common unit of measurement. So we just add everything up! What's wrong with that?

Answer: There's nothing wrong with that, by any objective standard of right or wrong. But I do think that you need to realize what implicitly you are doing when you propose that measure of social welfare.

Recall first something that was mentioned at the beginning of this chapter of Mankiw: i.e. that we are now in the normative world of economics: what ought to be. Therefore, in your answer to me, you are implicitly saying that society ought to define social welfare as the equally weighted sum of all individually-summed CS's. That's a very big task you've taken on there!

First of all, you're arguing that your weighting scheme: " 1*(CS of consumer A) + 1*(CS of consumer B) + 1*(CS of consumer ...) + 1*(CS) + ... = SW" is not arrived at democratically or socially in any sane sense of the term. Rather, you're positing that that weighting mechanism is just how you think we should add things up to determine welfare.

Second of all, it's pretty arbitrary, don't you think? We've said that each person is unique in society. For example, some people are poor, and constrained much more by their budgets than other people. So, might there be a social welfare function that captures this fact more accurately? Think of person A and B: person A spends 90% of her income on food and other necessities (like turkey) while person B spends only 40%. How will a change in the price of turkey affect these two people? Most likely, it will affect them wildly differently.

Therefore, when you say "Competitive markets maximize social welfare" You are really saying "competitive markets maximize social welfare according to my definition of social welfare". That's not very "social".

Question: OK, let's step back here. Where does this leave Mankiw's original claim about society? All you're telling me is that society is arbitrary, or biased against people who are income-constrained. But "society" can't please everyone. Doesn't this at least give us a baseline?

Answer: No. In a text that purports to be scientific and based on measurement before theory, Mankiw 100% fails. There is nothing "scientific" about choosing an arbitrary weighting scheme and defining it as social welfare. There is also nothing "social" about it, since we are assigning this weighting scheme insulated from democratic processes which modern market economies are supposed to be all about.

We leave, for a separate post, the treatment of the social planner by Mankiw. To give the brief bottom line: it is a wild ride that involves a lot of intellectual thrashing about in the dark, making little sense and certainly not "enlightening" the student to anything regarding market processes or the significance of public policy in the real world.

turning the history of thought on its head, then reducing it to 3 pages not simply by summarizing but by ripping out the N-3 pages in between

2011-07-15T17:07:00.002-04:00

Comments most welcome in what is to follow: the beginning of a multi-part series on the treatment of welfare economics in Mankiw's Principles of Economics. In his attempt to substantiate the claim that "society" is responsible for the distribution of income in an economy Mankiw fumbles the point, leaving us with a mess of confused statements and lines of thought. Anarchy ensues and the textbook abandons all hope to be perceived as an intellectual achievement (a political achievement, yes).

In a story that is still in the process of being uncovered, we have a startling discovery in the history of economics education in which the ideas and tools of welfare economics take early and center stage in the most popular principles of economics textbook currently around, by N. Gregory Mankiw.

Normally, welfare economics comes toward the end of any serious study of neoclassical economics. This is as it should, since many ideas and intuitions need to be developed before the student can even approach the idea of general equilibrium. The early placement of the subject of welfare economics (chapter 7 in his Principles text) is seen as an innovation by Mankiw: it allows students to see, early on, the applicability of the core ideas of mainstream economics to public policy.

But we think it's just a more convenient method of pushing the bourgeois ideology: the chapter is innaccurate according to any respectable take on the history of economic thought, full of conflicting and confusing statements, and yet confident throughout that it carries the stamp of approval of the "majority consensus" in economics. As such, Mankiw's act represents a significant turn in the history of economics education and of the bourgeois political project more generally: an exchange of scientific or "rigorous" dignity for, well, none at all.

Mankiw defends against the traditional ordering (i.e., the leaving of normative issues of consumer and producer surplus, social efficiency towards the end of the book, or by not including them at all) in classically bourgeois, non-rigorous fashion: early exposure to welfare economics 1. gives a better appreciation of supply and demand; 2. gives an "intuitive" grasp of market efficiency; 3. gives policy relevance (?) to the neoclassical model by using it as the baseline. As it is clear from these points, Mankiw does not place welfare economics early in the book because later concepts depend on it and build on it logically (cost of production does not build on welfare economics, methinks).

Mankiw sez that the former teacher of Ec 10 at Harvard, Martin Feldstein, originally came up with the idea of introducing welfare economics earlier because of his personal interests in public policy. Indeed, there is no reason, other than pure utility to the bourgeois economist, for putting welfare economics so early in the text. Up until chapter 7 (that is where welfare econ is first used), in fact, not much in the way of following the "scientific method" (which he purports to exploit throughout the text with the line 'observation, theory, observation') is invoked at all:

-The first chapters, as we have seen, are just Mankiw talking about how to think like an economist

-And then he spends a chapter talking just about a made up story, complete with dialog, where ranchers and farmers can trade and take a comparative advantage.

-After a drawn out chapter on supply and demand and the concept of elasticity, he brings government in by discussing how it can effect supply and demand through price floors.

-Then comes welfare.

It gets worse. The standard Marshallian method of calculating consumer and producer surplus (CS, PS heretofore) is flawed. While Hicks' reformulation saves the term in the end, it is not without significant qualifiers on Marshall's original formulation of the concept, so that any reference to the (albeit simpler) model of Marshall is incorrect. CS, for example, is not so easily the area under the market demand curve because that would a cardinal measure of utility (each person's utility in consuming a good can be compared with another person's utility in consuming the same good). If person A spends a large majority of his income on bread compared to person B, then an extra dollar might mean more to person A than it does to person B. Mankiw, of course, uses a rare Elvis Presley album as his example of consumer surplus (what various people are willing to pay for it) so he conveniently skirts the issue. But in fact, he never mentions the problem to begin with.

Remark:

The way that some early economists tried to get around this argument is just fascinating. Lerner (writing before Hicks' innovation), speaking more generally about the welfare properties of general equilibrium, tries to argue that we must accept that "the satisfactions experienced by different people are similar in the sense that they are the same thing" because otherwise, we "deny meaning even to the assertion that anyone other than myself is capable of feeling any kind of pain or pleasure" (25). It is by far the most confusing paragraph in the chapter. He attempts to deride "philosophers" who question how we can know that each person experiences utility from the same good equally but he gives no hard facts. All he says is "that the satisfactions experienced by different people are the same kind of thing is incapable of proof". Observation, Theory, Observation, indeed.

Others, including Marshall himself, simply assumed that each person spends similar (small) amounts on each commodity.

End Remark.

How ought welfare economics be taught, then? (We touch on the point briefly here, but it will certainly gain more attention in upcoming posts.) From the ground up. There's a lot of consumer choice and production theory to get through before we can even think about normative properties of our model. As observed earlier, the entire edifice of the welfare model is cracked and beaten and is probably built on a few fault lines too. We should just get rid of the fairy tale stories implicit in this old horse. But for now, it is important to get to the basics: see how the culture of bourgeois economics works in modern education: turning the history of economic thought on its head, stripping it down to a few pages, and ripping out everything else in between.

Some of the ideas of this post were taken from scholarly articles, including one by Miroslav Svoboda found here. The history of CS and PS is well-known but Svoboda has some interesting anecdotes in their account of the story. They will be elaborated upon in subsequent articles.

This post draws on Mankiw's remarks on "Teaching the Principles of Economics," which appeared in the Eastern Economic Journal, Vol. 24 No. 4, Fall 1998.

Closing the first of this multipart series with the observation that teaching the "right" form of welfare economics is both the right and terribly wrong answer to our troubles. "Right" because the lack of a coherent logic to the idea as presented in the text means that many students, who are not taught the importance of assumptions or even their accuracy, will accept the story. "Terribly wrong" because, even as taught correctly, it is still a horribly misguided understanding of how an economy works.

The contradictions, inaccuracies in this great story are still to be revealed...

new look

2011-07-15T15:06:00.003-04:00

For those of you who don't stop by Imagining History daily and read through an RSS feed or Google Reader instead, I thought I would point out that the site has been revamped a bit, with A Cool New Background (yeeeah!), organization, and some additional blog pages on the right side with info about teaching and research. Any comments on these, how they can be cleaned up improved? Tough luck.

(Just kidding. Leave a comment and I'll see what I can fix.)

This was done partly because I was getting bored with the staid orange/white/black combo and also partly because I apparently just hit my 200th post the other day in a little over 2 years of blogging... wooooow!

But don't worry, it's a new look but same feel: you'll still get all the usual writings about videogames, random econ history papers that are actually Cool to Read, and assorted links... although I might be a bit more heavy on Anti-Mankiw for at least a little while...

addendum: stories?

2011-07-13T17:07:00.000-04:00

Of course, the idea that NC econ is built on stories is not a new one; McCloskey made the point nicely in The Rhetoric of Economics over 20 years ago and Steve Cohn, professor at Knox and UMass Econ PhD, has argued in "Telling other Stories" that that's precisely what heterodox economists need to do: tell stories which are anti-Mankiw.

Look, you either stress the rhetoric or the "rigor", and you are either orthodox or heterodox.

-Orthodox rigor people are the "positive economics" people out there, people who just want orthodox economics on some "scientific" footing, whether that be more math, or better statistical analysis, or what have you.

-Heterodox rigor people are similar. They want to fight NC economists by "beating them at their own game" -- becoming better mathematicians or statisticians or historians than the orthodox economists, and answer heterodox/left-leaning questions in the process to jet them out.

-Orthodox rhetoric people are the welfare economists, the economists who quite consciously seek to propagate mainstream theory. Mankiw, for example. At the very very top of the ladder, these people often blur with the orthodox rigor people because they are just so good at everything. (Duflo, Acemoglu come to mind).

-Heterodox rhetoric people are the political activists, Marxists, anarchists out there who realize that there is a political battle to be won here and it won't just be won in the ivory tower. We need to raise awareness of fundamental wrongs in the economy and push for the smashing of capitalism and its institutions. At the very very top of the ladder, again, these people often blur with heterodox rigor people (Bowles... and not an economist but I would of course put some public intellectuals like Harvey or Chomsky or those guys at Wisconsin Soc/PolSci(?) in this group).

So in short, Cohn's view (mine as well) is that we need to come up with some good rhetorical strategies taking the form of anecdotes or stories which frame things from a workers' point of view. (McCloskey, on the other hand, believes we need to move in the 'scientific' direction in order to save NC econ.)

Cohn's list of stories is quite exhaustive, including Robinson Crusoe (apparently he owned a slave who was the other person on the island in the NC version of the story), Diamond/Water paradox, and "supermarket" analogies of an economic process rather than "workplace" analogies (even so-called "liberals" such as Brad DeLong are guilty of this fault, for example when he tries to analyze Polanyi's concept of a disembedded market *facepalm*). Needless to say, there is a lot of room for good ideas here.

We move next to a striking example of NC econ stories in action, one that has profoundly earth-shattering effects on Mankiw's text.

This article drew from Steve S. Cohn's "Telling other Stories: Heterodox Critiques of Neoclassical Micro Principles Texts", GDEI Working Paper 00-06, August 2000. Link here.

the culture of the bourgeois

2011-07-12T10:05:00.000-04:00

Any culture produces stories, myths, and other traditions with the intent of reproducing itself in society. Economics is no different. Economics attempts to reproduce values that serve the interests of certain wealthy individuals in the capitalist economy (capitalists). This is not a new idea: capitalists itself would admit to it. But, like the creation myths of religions, we can question the truth of these stories with cultures and stories which are not so easily heard, precisely because they are against the status quo, with powerful results.

We shouldn't be surprised by all of the stories we find when we open up an introduction to economics textbook. All cultures have their own sets of stories which are meant to reproduce within any one culture the main ideas, customs, values of the society that maintains that culture. For religion, we have the creation stories and other parables. Ancient Greece had oral history and myth.

Therefore, it is very important to realize that when we see the proliferation of stories in economics -- whether it's "Vinny the vegetarian and Mark the meateater" who trade goods so as to equate their marginal utilities with the prices of the goods, or "Sam the farmer and Ralph the rancher" who specialize in their work in order to exploit comparative advantage -- it is very important to realize that there is a culture behind all these stories, attempting to reproduce itself throughout society. Just as religions spread themselves through introducing their texts and practices to new potential members, and just as any culture has its own set of traditions which, once known and practiced by an individual, signifies the individuals membership into a group, understanding in and believing in the central stories told in economics will lead you on the path towards being an economist (or at least, being accepted within their culture).

The problem is, of course, that the stories of economics are incongruent with reality, even when its practioners never cease to argue in favor for them.

Remark: Whenever I read these "stories" I am really amazed at how unbelievably untrue they are -- even while its author is arguing for them until he is blue in the face. For example, in Abba Lerner's The Economics of Control, he explains the classical model of general equilibrium (i.e. the allocation of goods and services in a competitive economy in the case where N=2). He explains, on page 20, that "[the optimal allocation of goods in a competitive economy] seems so obviously what happens in the existing free market economy that all the rigamarole about marginal substitutability and barter exchange would appear quite unnecessary. There are two reasons," he goes on to say, "why all this argument is not unnecessary."

That is, he gives two justifications for why we need the competitive model.

They are far from satisfactory based on any standard of logic or rigor.

The latter argument he provides is that such a model is necessary because it is the foundation upon which later results are built. Fair enough -- surely insane conclusions may derive from any number of laughable premises.

The former argument is more intriguing. "The first reason," Lerner begins, "is the horror that many socialists have of anything that reminds them of the existing capitalist world. This makes it necessary to show that the usefulness of money as a means of bringing about a good distribution of goods is not merely a bourgeois belief carried over uncritically from experience under capitalism but can be shown to bring about desirable ends by a consideration of fundamental principles" (21). But the Marxian critique of money as a basis for exchange is based on the fetishization of commodities and the principle differences between exchange value and use value of those commodities (particularly, labor). But nowhere in Lerner's discussion of a market economy does he address the Marxist critique of capitalist exchange.

My point is that, according to Lerner's discussion, the theory of the optimal allocation of goods in a market economy is not a substantive critique of socialist policy; rather, it is viewed by Lerner as an ideological attack on (or defense against) Marxism.

That changes the game considerably -- and it highlights the important point made above that these are stories which are told over and over in order to reproduce the ideology of traditional, bourgeois economics.

End Remark

For over a hundred years, since at least the time of the response to Marx's Labor Theory of Value, proponents of mainstream economics have actively recognized that their project is a political one. Thus, the bourgeois culture behind economics tells stories which aim to reproduce the system's core beliefs, even though those beliefs are far from universally true. And, in a surprising twist, most economists will not even admit that they are not being rigorous even though it is obviously true that they are not being rigorous.

why there is more to the organization of economic activity than incentives, tradeoffs, and prices: dilbert edition

2011-07-10T17:07:00.001-04:00

Dilbert knows that applying economic incentives in the workplace is not always best, thus calling into question the idea that "markets are usually a good way of organizing activity". Most often -- as is the case with work -- there are probably other, more effective methods for getting Dilbert and his coworkers to perform well.

anti-mankiw: dialogues

2011-07-10T17:07:00.000-04:00

The idea that "society" allocates goods and services in a market economy is incorrect: the true agent responsible for economic outcomes in such an economy is the market and market mechanisms. But market mechanisms are far from universal, far from the "usual way of organizing economic activity." In the home, with friends, or at work, decisions are made based on responsibility, need, trust, and love (in the case of the home and friends), or authority (in the case of work).

Question: Economists often attribute the resulting allocation and distribution of goods and services in an economy to SOCIETY, e.g., "SOCIETY allocates resources across the individuals in an economy." But what precisely do economists mean by the term "society decides..."?

Answer: Economists use the term "society decides..." or "society allocates..." in order to rid markets of any blame for problems with the current distribution of income in a society. When economists attribute the current distribution of income to society, economists really have in their minds a process which is not social, but which does rely heavily on markets and market mechanisms:

1. Individuals interact with each other according to a set of assumptions placed on how they behave (they are rational, they respond to tradeoffs, opportunity costs, and incentives).

2. They interact in a marketplace by trading at various prices until ...

3. everyone is satisfied given their budget constraints.

4. The point of this process is to reach the "social optimum": the amount of goods each person has received after individuals have traded in the market.

In short, it is not really "society" that allocates goods and services; it is individuals who interact through a market mechanism. By placing the "blame" on society, or calling it a "socially" determined income, economists make it seem like the market process is impersonal. According to them, the market does not discriminate against the sick and poor, when the sick and poor need medical services or food and cannot pay for them.

Question: But no one is discriminating against the sick and poor when they need medical services. It's just that, when you place everyone who needs, say, medical services, into a room with everyone who wants to sell medical services, the price naturally gravitates to a point where some are just too poor to afford them at the equilibrium price. So, who is there to blame, if not poor people, for letting themselves fall into bad health or not working hard enough to afford medical services at the current price?

Answer: The answer lies in who is truly to blame for the fact that the most needy cannot find the services necessary to survive. Economists say that "society decides the optimal division of goods and services in an economy." That is, society, which is composed of individuals freely making decisions, gives rise to the unfortunate situation of some people being rationed out of healthcare, or food or what have you.

But what we have found in the previous answer is that it's really about the market mechanism -- that is the agent responsible for some of the social problems you mentioned.

Question: So what you are saying is, we ought to blame the market for social problems? But Principle 6 of Mankiw's Principles textbook says that "markets are usually a good way to organize economic activity." Ought we try to enforce efficiency-enhancing solutions to our problems wherever possible, including organs, health care, and housing?

Answer: But markets are not a "usual" encounter in our society. When you go to work, markets are not how that economic activity is organized. Activity at work is organized by a boss or superintendent, who tells you what to do, and then you do it. Sure, you have the right to quit and look elsewhere for a job if you do not like your boss or think you're qualified for a better position, but that does not diminish the fact that for 8 to 9 hours a day you are working not according to a market mechanism, but rather according to the decisions of a central controller and his or her staff.

And when you go home, your mother or father will make dinner for you, not according to market prices or rationality, but because they love and care for you. They also recognize that you have certain needs in life, and try to provide a good life for you based on those needs.

In short, the majority of your day-to-day life, is decidedly not market-based.

-8 to 9 hours are spent at work or at school, under a boss or listening to a teacher
-7 to 8 hours are spent sleeping at home, under a roof provided for you by your parents
-1 to 2 hours are spent enjoying meals prepared for and provided to you by your family
-That leaves 4 or 5 hours left, which you might spend at a school, with your friends, or some other environment which is certainly not guided purely by market incentives

Furthermore, these traditions -- receiving orders in the workplace, or having your parents provide for you as a child -- have worked for thousands of years. So, is it so obvious that we should use the market to allocate healthcare, if there might be some other ways of doing it based on much more trusted and common ideas of responsibility, or need?

In conclusion, when economists say that society has allocated goods and services, it is really a market mechanism at work. Thus, the market is responsible for many existing social problems of the poor and sick. Since a large part of our time is spent outside of the market, either at home or at work, perhaps there are other ways of allocating the things we need. We should look into these before accepting as fundamental the ideas that "trade can make everyone better off", as Mankiw argues in Principle 5 of his textbook.

gathering potential quotes for the afit conference

2011-02-17T19:01:00.001-05:00

Freedom is neither a legal invention nor a philosophical conquest, the cherished possession of civilizations more valid than others because they alone have been able to create or preserve it. It is the outcome of an objective relationship between the individual and the space he occupies, between the consumer and the resources at his disposal.

Claude Levi-Strauss

very good paragraph

2011-01-23T14:21:00.002-05:00

From A. Allen Schmid's Conflict and Cooperation: Institutional and Behavioral Economics:

When the recipe for production of a good or service is written, it does not contain institutions in addition to land, labor, and capital goods. Physical things are produced by physical things. Institutions and organizations are mental constructs. They influence what things humans put together to produce physical things, but they are not some magical extra ingredient. Some years ago, economists were baffled by the fact that their measures of changes in physical inputs could not explain observed changes in physical outputs. Many tried to add a residual variable and called it technology. But this was a name for our ignorance rather than an identification of an input. The technology can be represented in a sub-function explaining the inputs to produce a specific technology. But it would be double counting to include the new machine and the research expenditures to produce it in the same function.

addendum to previous post

2011-01-19T22:24:00.003-05:00

Note: I realize that there is a significant "aside" when I start talking about work in economic history post-Fogel. I want to reiterate that these are sketches of my argument which will be developed more soon.

And as always, I welcome comments.

EDIT: Out of curiosity I just googled "radical Freakonomics" and apparently that phrase can be found nowhere else on the internet. I wish I could take credit for it, but I can't -- it belongs to a fellow grad student, who may or may not want credit for it.

methodological revolution as political revolution -- reflections on the future of heterodoxy

2011-01-19T21:23:00.003-05:00

At certain times over its 1.5 year history, this blog has been used as a platform for my personal reflections on the state of heterodox economics, either in the very specific case of my own institution or in much more general considerations. Of course, as a leading institution of heterodox thought it is hard to disentangle UMass from larger issues of the past, present and future of radical economics. Today sees another one of these reflections, though I do believe it is one with much more meaning and potentially much more relevance to the future of leftist economics.

You see, while I have thus far focussed on historical issues in searching for a hint of light for the future contained in the past, I am both happy and disheartened to say that this post concerns itself almost explicitly with the future: an "experiment" if you will, in radical economics.

The case has to be made for or against a kind of "radical Freakonomics", an empirical program motivated largely by political frameworks which aim to answer big questions whilst supported by a set of sophisticated statistical techniques. The first main issue is the place of data in economics -- how it has been used and what has its impact been.

The story of data in economics as a social science, and in particular the academic impact of new datasets to enlighten and enrich theories, is of course a very old one. Marx himself found that the story of industrial capitalism needed to be told through the perspective of the disadvantaged classes, searching "underground" and developing his theory of alienation and exploitation based on what he saw to be a serious disconnection between the current "bourgeois economics" of the day and what actually happened in capitalism. Moving to other areas of economics and social science, the examples multiply: what John R. Commons' Documentary History of the U.S. did for institutionalism, or what Richard Morris' Government and Labor in Early America, collecting all those old colonial court records, did for legal history. Revolutionized history and became (and still is!) one of the definitive works on early American legal history -- written in the 1950s!

More recent accounts, however, is where I want to focus my attention:they include Fogel and Engerman's Time on the Cross. Published in the early 70s, the cliometric revolution called for in that book sought to rewrite American history on the back of regressions and other statistical output, starting with the new economic view of slavery.

Like Freakonomics, Time on the Cross had a shock factor to it, and like Freakonomics, it was based on the idea that clever econometricians could overturn a century of historiography on slavery. Coupled with a rising body of theoretical literature by Douglass North and others on the efficiency of institutional change, these libertarian-oriented, empirically-minded economists seriously sought to rewrite American economic history. Unfortunately, while there are still quite a good number of followers in this field, my assessment is that at this point, around 30 years later, economic historians are moving on to other crucial questions, are reaching out to other methodologies, and talking more to people in other disciplines in a more substantive way than simply, "Got any good data?". In short, the field is fragmented right now with no clear direction, especially as North's brand of institutional economics has been formalized and improved upon greatly by scholars such as Daron Acemoglu. It is still possible to take a strongly ideological (and simple) view, but in light of all the theoretical nuances which have been developed as well as a greater respect to cross disciplinary boundaries, the attempts at doing so largely fail.

And so the looming question is whether a radical Freakonomics is really going to make an impact on the trajectory of heterodox thought...

...Or, may I add, on economics at all.

Fogel and North both got a Nobel prize, don't get me wrong. But that's because they ushered in a methodological revolution. By asserting their econometric techniques over the "implicit models" of the historiography, they were radicals in their field. But work which simply strikes at some leftist sympathies is quite different. This type of work has a political "shock power" but without an accompanying methodological revolution (which is, of course, itself a political revolution -- just think for a minute about what Fogel and Engerman were able to accomplish in terms of getting people to think differently about social phenomena) it has a very low discount rate.

This is not the kind of work that changes the trajectory of radical economics -- this is the kind of work that makes it to the front page of the Times, becoming old news in time as the right wing figures out a new way for people to think about incentives.

I will have more to say about this in the very near future, but I just needed to get these thoughts out as I begin to organize my own views about what the future holds for heterodoxy.

methodological individualism ngram

2011-01-13T09:54:00.002-05:00

Thanks to Greg Ransom at Marginal Revolution for the idea.

japanese decroissance

2011-01-07T09:03:00.003-05:00

This piece on modern Japanese economic history really struck me. Especially coming from the Financial Times. Read it here:

http://www.ft.com/cms/s/0/6152b9ca-1904-11e0-9c12-00144feab49a.html#axzz1AMGbHM8M

I don't know whether Japanese culture has really reached this stage of acceptance, but I would certainly not argue that American relative decline will lead to wider cultural decay (this relationship in its various causal forms has been put forward lately by Thomas Friedman for one).

At any rate, I liked this paragraph:

The Japanese themselves frequently refer to non-GDP measures of welfare, such as Japan’s safety, cleanliness, world-class cuisine and lack of social tension. Lest they (and I) be accused of wishy-washy thinking, here are a few hard facts. The Japanese live longer than citizens of any other large country, boasting a life expectancy at birth of 82.17 years, much higher than the US at 78. Unemployment is 5 per cent, high by Japanese standards, but half the level of many western countries. Japan locks up, proportionately, one-twentieth of those incarcerated in the US, yet enjoys among the lowest crime levels in the world.
In a thought-provoking article in The New York Times last year, Norihiro Kato, a professor of literature, suggested that Japan had entered a “post-growth era” in which the illusion of limitless expansion had given way to something more profound. Japan’s non-consuming youth was at the “vanguard of the downsizing movement”, he said. He sounded a little like Walter Berglund, the heroic crank of Jonathan Franzen’sFreedom, who argues that growth in a mature economy, like that in a mature organism, is not healthy but cancerous. “Japan doesn’t need to be No 2 in the world, nor No 5 or 15,” Prof Kato wrote. “It’s time to look to more important things.”

Nevertheless, the article is quite controversial and thought-provoking throughout. It calls to mind a number of related theses. For example, Cowen has claimed at times over at Marginal Revolution that we should be thinking more optimistically about the recent recession as a time of reflection on what matters most in our lives. And (in another thread of the article's argument, distinct from decroissance) Keynes, in "Economic Possibilities", placed enormous emphasis during the Great Depression on the outlook for a post-growth society, where a nation's "economic problem" is solved.

By the way, the title of this post is inspired by the French decroissance, or "degrowth" movement. Read more about it here: http://en.wikipedia.org/wiki/Degrowth

acemoglu on democracy and economic growth

2011-01-01T19:29:00.003-05:00

See this excellent debate on democracy and economic growth between Ed Glaeser and Daron Acemoglu. This is a bit old but it's the first time I'm seeing it:

http://online.wsj.com/public/article/SB117330214622129995-wXADlsfRHp9Z34RAyyVjN_w1yBI_20080311.html

I particularly enjoyed this part (Acemoglu):

The main barrier to democracy is not low education but deep social and economic divides that create intense conflict. Democracy has failed in highly educated countries -- such as Germany before World War II or post-war Argentina. It has also been extremely successful in very low-education countries. Botswana provides a perfect example. It is the most successful democracy and the fastest growing economy in sub-Saharan Africa. When the British granted independence to this colony in 1965, there were only 22 Botswanans who had graduated from university and 100 from secondary school.

But Botswana was fortunate to have avoided the most adverse effects of colonialism and thus did not suffer from deep social divides or distributional conflicts, because the British essentially had no interest in the colony and left it alone. Botswana used the revenues from its diamonds both equitably and wisely. Botswana's democracy has not only endured and flourished, but has not even been challenged by a coup or tarnished by major electoral fraud during the past 40 years.

I would also like to emphasize -- and conclude with -- this point: Sustained economic growth requires secure property rights and a level playing field for generating new technologies and entry by new firms. Democracy is the best guarantor for such sustained economic growth. Economic growth generates various vested interests, ranging from landed elites to businessmen in declining industries to privileged workers. These vested interests will try to block the introduction of new technologies and stop the entry of new firms. Democracy is not perfect, but with its more egalitarian distribution of political power, it will have greater resistance against vested interests than autocracy.

By the way, apparently Acemoglu is writing a Principles of Economics text with Laibson and List, due out in 2012:

http://econ-www.mit.edu/files/6269 (last page). I'm interested in seeing what this looks like (though a coauthor with List somewhat diminishes my excitement).

looking beneath the left-right distinction: the tradition of critiques of economics pedagogy

2010-12-30T11:27:00.005-05:00

Greg Mankiw made a quick reference the other day on his blog to a panel at the AEA meetings on economics education. He linked to a paper by Lopus and Paringer that compares the leading textbooks on the market today. Here is a link to Mankiw's post, which has a link to the paper:

http://gregmankiw.blogspot.com/2010/12/econ-education-at-assa-meeting.html

Here are some bullet point comments:

I certainly agree with Lopus and Paringer's claim that Samuelson's book still sets the framework for economics education, even as other texts have superseded it. In content and approach, Samuelson's successors including McConnell and Mankiw are focused on political balance built on fundamental principles of market mechanisms, limited government intervention, supply and demand, and thinking at the margin, among other key features of a mixed economy.

But Lopus and Paringer simply miss the big issues when they claim that the main problems scholars had with Samuelson's book (and thus the later texts as well) were that it was either "too Keynesian [or] not Marxist enough" (pg. 3), depending on one's place in the political spectrum. This is a very narrow summary of the debates surrounding Samuelson's books. Marc Linder's criticism of Samuelson in particular is much more fundamental. Shunning the left-right distinction, Linder showed how Samuelson's approach to teaching economics was also ahistorical because it pretended to teach "core" economics concepts of scarcity and market efficiency as if they were God-given aspects of economics. Linder argued that these concepts are actually the product of the particular socioeconomic system of capitalism. In short, by ignoring key changes in the history of economic thought, Samuelson's book naturally fits itself into market rhetoric and, if I might add, indoctrination -- precisely because it does not even question principles and ideas which are not wholly absolute or scientific.

It was interesting to learn that McConnell's book overtook Samuelson's in sales by 1975. I thought it was later than that, but it does make sense. It shouldn't surprise anyone because during the mid-1970s a lot of turmoil in the political economy was brewing which led people to question certain basic Keynesian fundamentals. This was also around the time that Harvard started using a different book for its Ec 10 course (i.e., not Samuelson), causing a lot of uproar which has been documented in the Harvard Crimson. The story here goes as follows: after WWII Samuelson had a visiting position at Harvard, but he was denied a full professorship there, purportedly due to the fact that he was Jewish, so Samuelson ended up going to MIT instead. This caused a lot of negative sentiment between the two schools, with one Crimson article arguing that it would take decades for Harvard to recover from their mistake. Thus, when Harvard switched away from Samuelson, this also caused some discontent, seen as another political move against Samuelson and his brand of economics. I talk about some of these controversies more in depth in a post relating to Anti-Mankiw from a while back; you can find it here: http://imagininghistory.blogspot.com/2010/05/in-beginning-there-was.html

Of course, the paper finds little difference among the leading books, aside from small differences in the level of mathematics, policy orientation, and range of topics. While some would qualify an important difference in the top books in terms of their hegemony in the field, to some this is not an important distinction. I for one would certainly not argue that Mankiw's Principles is more hegemonic than any of the others, since economics education itself is partly a political project. But it would have been nice to hear more about different methodologies, in particular when dealing with economics education!
Paper notes that Mankiw's intro does not address the short run as fully as other texts, and there is no discussion of the Keynesian aggregate expenditures model.

Overall, I was not thrilled with the paper, but it is a useful introductory discussion to different economics textbooks. We still have very far to go...

imagining leisure time

2010-12-28T16:23:00.003-05:00

Here are some of the main things I'm working on over break and which will most certainly be subjects of more in-depth posts on this blog in the weeks to come:

Finishing Tomlins' Freedom Bound

This is a fascinating history of law, labor, and society in the U.S. from early colonization up until the Civil War. Not only is there tons of new material in here, but Tomlins does an excellent job of synthesizing demographic research and the existing legal history of the colonial period to make some compelling new arguments. For example, he gives a more refined view of English feudal law's implementation in the colonies, and he argues that there are some striking institutional continuities before and after the Revolution which question the notion of the Revolution as a "sharp break" with the past. Here is an interview with Tomlins about the book.

http://www.youtube.com/watch?v=CcDCLnLpULk. Really an amazing scholar. I recommend anything by him; he has deeply influenced my work.

Watching Cowboy Bebop

An anime with a theme that is very dear to my heart, Cowboy Bebop is about a group of wanderers, a sort of 21st century "Lost Generation" that has a fantastic soundtrack and moving story. It was a bit slow at first, but the story and themes develop quickly after the first 8 episodes or so, as they move into more personal accounts. I very rarely watch anime, so when I do I try to look for the best. This is definitely up there with the others I've watched -- Deathnote and Full Metal Alchemist: Brotherhood.

Staring at Stata output

I'm working on an applied theory project which lies at the intersection of contract theory and labor history. The fact that it is my first serious empirical paper means that I am spending many hours slogging through manuals and websites for the simplest commands. Needless to say it is a very frustrating experience.

Reading Mostly Harmless Econometrics

No fiction for me this holiday! Normally I take the winter weeks off to catch up on favorite authors. Unfortunately that is not the case this year as I move into an important stage of dissertation writing and as other activities crowd out the leisure time normally associated with reading. This is a very readable discussion of the most effective econometric tools used in applied analysis today. It may not solve any problems with your code, but it will give you a good primer on important studies and ideas behind each idea.

Professor Layton and the Unwound Future

The latest installment of the Professor Layton series leaves much to be desired. I firmly believe this is the worst in the series. The puzzles are uninspiring and at times are a real insult to play through. I'm serious, some of the puzzles are just that bad, relying on subtle tricks which require absolutely no logic. The music is bland and unmemorable. The minigames, while much more varied than in previous installments, lack the depth and quality which they had in previous games. Maybe I'm getting sick of these games, but I doubt it -- I was really excited to jump into Unwound Future and now I just can't wait to get back out.

Assassin's Creed: Brotherhood

The latest AC is really just as much an improvement over II as II was over I. This series keeps getting better and I'm extremely excited to see where the developers go in future installments. Focusing on one very big city (Rome), the game adds more challenge, reduces some of the nonsense sidequests, and slims the game in other areas to give the gamer a truly high-quality sandbox experience. I'm only about halfway through so I can't say too much about the story, but I've heard from around the web that it's the only drawback to this installment.

political economy of the arts

2010-12-26T22:42:00.003-05:00

A very interesting comment thread today over at MarginalRevolution on unions in the Arts. I think that it's a great example to use in a labor history or just a (heterodox) labor econ class. It's a fun example that highlights many of the important themes of trades unions such as protection of trade skills, skilled vs. unskilled issues, and how politics and economics intersect for labor on a macro scale. Anyway here is the link:

http://www.marginalrevolution.com/marginalrevolution/2010/12/are-unions-the-enemy-of-the-arts.html#comments

I had something to say about the ways in which political entities have historically restricted access to a trade and why we're not necessarily worse off for it. I then drew the grad school analogy, asking "Are grad schools an enemy of scholarship?" to which one person replied, "I could name some that certainly are :)"

Touche...

considering economic history as narrative

2010-12-25T21:31:00.004-05:00

Apparently Brad DeLong is teaching economic history at the graduate level next semester and will be posting his notes. Here are some things he has to say about why we should study economic history:

http://delong.typepad.com/sdj/2010/12/econ-210a-spring-2011-january-19-12-1-why-we-study-economic-history.html

It is either a " history of thought" type of motivation or maybe Brad just doesn't understand the reasons why economics as a whole (that includes New Keynesians such as himself as well as Chicago guys like Fama) turned away from historical and institutional approaches after WWII. I can really never tell with him -- sometimes he has some thoughtful things to say about methodology, and other times (say, when he is talking about why we shouldn't talk about Marxian economics) he just comes off as stunningly ignorant. See this piece:

http://delong.typepad.com/sdj/2010/10/how-much-does-the-market-organization-of-economic-life-matter.html

I think this is a very insincere discussion of the theory. Or take his views on Polanyi, which I think are superficial (he gives a "supermarket analogy" for understanding the concept of embeddedness, which doesn't seem appropriate when applied to labor markets, thereby missing an important part of the 'embededness' idea):

http://delong.typepad.com/economics_210a_spring_201/2010/01/delong-1997-on-the-embedded-economy-thesis.html

In short, in reading DeLong's notes on why we should study economic history, he seems to appreciate the discipline as a tool for understanding "what really happened". That's fine if you want to point out in an ad hoc way the blind ignorance of most of modern economics to reality, but I contend that economic history is much more meaningful as an actual discipline. We should study economic history because it forces us to understand institutional processes, like how market integration occurred, or how the transition from Feudalism to Capitalism occurred.

Both of these examples are studied in the economic history classes at UMass because these are issues which demand more tools and a broader view of study than economics alone permits. Yes, on the way we at UMass still encounter a greater range of "facts" with which we illustrate theories, but more fundamentally we get to understand the social relations and (political, cultural) institutions that underly economic activity.

What we find is when we add social relations and institutions to the mix, economic activity becomes much more varied and thus much more beautiful as an object of study.

gamer heaven

2010-12-24T12:05:00.000-05:00

Although this deal has been out for a while, I'm only just getting around to blogging it. Check out the Humble Indie Bundle (HIB) 2, which recently added games from the first HIB to it (including the extremely famous World of Goo): so in addition to getting the games from the first HIB, the second one adds solid titles including Mechanarium, Osmos, and my personal favorite Braid. Here is the BoingBoing announcement, which will direct you to the relevant site for downloading:

http://www.boingboing.net/2010/12/23/humble-indie-bundle-3.html

How does it work? You get a bunch of really cool computer games made by independent developers for... however much you want to pay! With the latest additions, you get 11 games for a minimum price of $7.60. Not a bad deal! You can even choose how much goes to the developers and how much goes to select charity organizations.

I would suggest you act fast on this deal -- not sure if it was around for very long the last time they did this. But trust me, it's certainly worth it -- I'm already having tons of fun with Braid and Osmos, and World of Goo was a really excellent experience. All three are innovative action/puzzle games that are really great in short bursts when you want to take a break from work (or other games!).

santa shouldn't wear red

2010-12-23T09:39:00.003-05:00

This article in the FT yesterday caught my eye -- while the theme is nothing new, I think it does a good job of reminding us of the distinction between social relationships and market incentives. In particular, the article's focus on how the "public realm" of being a good citizen is distorted by economics is really good. Take this paragraph and bring it to a mainstream micro theory course:

The public realm continues to rely on thousands of people who offer services voluntarily, and the very nature of health, or education, or policing demands that it be undertaken by people who do not have a purely instrumental view of their vocation. Perhaps it was appropriate to build Blenheim Palace for John Churchill, or to offer his distant descendant Winston a dukedom: but these measures were recognition of great achievement, not performance incentives designed to encourage the individuals concerned to try harder. If Marlborough and Churchill had needed such incentives, they would not have been the right people for the roles they fulfilled.

What may strike the reader about these arguments is the somewhat unnatural dichotomy implicit in the above discussion -- specifically 1. that we must delegate things to either the public or private realms, and 2. that we should not wholly rely on either the public or private realm to advance policy. Like all social concepts this dichotomy is a social construction, and a really interesting history of thought question would be to ask, how did this social construction evolve? To what extent was it influenced by economics?

Pragmatists such as Margaret Radin would argue that the goal of democratic policy is to draw a finely-tuned line between the public and private in a way that preserves our innermost sense of personhood. For example, we may permit prostitution as a way for females to further their economic position in society, but we could reduce the role that contract plays in its operation so as to sidestep issues of commodification (the state could severely regulate contracts, lessening the role of private enforcement).

More extreme solutions might take note of the historically contingent character of the public-private distinction, calling for an embedding of the two within each other. That is, they would recognize that within the history of capitalism these public-private distinctions take place as part of larger ideological forces which attempt conceptualize private relations as different from public ones. The goal was (and is) to delegate a set of relationships based on hierarchy and unequal exchange in the private sphere.

Of course, this is quite a bit of a digression from the FT piece. But it spurs an important point related to the article: the "department store Santa Claus" is not absurd because we need to hide the fact that he's intimately related to the market from the children. He is absurd because he fundamentally accepts capitalist social relations -- that's true whether we look at his relationship to the department store or his own factory in the North Pole.

In this way he is no different from the bastardized western Nanny state -- gift giving with a cruel historical twist re: labor relations.

group intelligence, hierarchy, and the history of society

2010-12-22T08:54:00.003-05:00

Found via 3QD, the Boston Globe reports on new research showing how an individual's intelligence is partly contingent on the group it's in.

A particularly noteworthy paragraph:

More broadly, groups and the complex social structure of human interactions may help account for how people got “smart” in the first place. The dramatic changes in science, culture, art, language, technology, and music over the past thousand years are not due to the development of brand-new mental or physical capacities. Instead, it is a particular kind of group benefit, Goldstone argues, in which human progress bootstraps upon itself through a collective cultural memory. Knowledge ratchets up in successive generations without our having to reinvent technologies, discover laws of nature anew, or risk tasting all the mushrooms in the forest.

Old institutionalists and of course Marxists have known this for a long time. It is a richly historical idea. It may also improve the scientific foundation of some modern-day studies of team production and other ways of decentralizing authority in the workplace.

Interestingly, the article ends with this passage:

“There’s been a tendency to focus on the negative, the mob psychology, the idea that people can bring out the worst in each other,” Goldstone said. “There’s just as much evidence that people can bring out the best in each other.”

Depending on your view of "good" and "bad", this can become a very important statement. The implication of the above paragraph is that successful groups are founded upon the promotion of efficient individual behavior. And so my question to the reader is -- does capitalism bring out the best in people, fostering its own success?

Perhaps one would retaliate to this question by saying that hierarchies are different from groups. Essentially, it may be the case that groups are more efficient but capitalism is built on a different network structure. I would agree with this argument, but I don't see it reflected in these studies. For one, the study finds that group unity is unimportant -- high levels of group technology are behind the efficiency results.

Of course, Gordon, Edwards, and Reich have argued that in America, the development of firm technology was not due to efficiency considerations. But I suppose another, simpler, test of the issue would require examining the efficiency of different types of groups (hierarchical, egalitarian, and so on). I wonder if this has been done before?

where?

2010-12-07T22:06:00.002-05:00

Some of you may be wondering where I currently am, having sparsely updated the blog in the past, oh, 2 months or so.

I promise to update the blog and get back to writing very soon -- the classic dissertation has been getting in the way. Although it never really leaves you, the past two months have been particularly difficult...

For those interested, my project is contract law, social conflict, and labor in early nineteenth century U.S. history. Some interesting results, and while I can't give away too much I will be sharing some interesting ideas soon.

I really miss writing here. More to come soon!

In the meantime: