links of interest

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

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

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?

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

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.

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

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

The great Russian pianist plays a classic!!!

property rights and /capitalist/ growth: some current research

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.