Tag Archives: economics

What happened to economics?

7 May
Eric Posner and Glen Weyl, “How Economists Became So Timid”, The Chronicle of Higher Education.
Self-styled American and European radicals, for example, helped end monarchy and expand the franchise. The free-labor ideology of European radicals and American Radical Republicans helped abolish serfdom and slavery and establish a new basis for industrial labor relations. The late 18th and 19th centuries also witnessed the liberal reformism of Jeremy Bentham, Smith, James and John Stuart Mill, and the Marquis de Condorcet; the socialist revolutionary ideologies of Pierre-Joseph Proudhon and Marx; the labor unionism of Beatrice and Sydney Webb; and, influential at the time but now mostly forgotten, the competitive common ownership ideology of Henry George and Léon Walras. This ideology shaped the Progressive movement in the United States, the “New Liberalism” of David Lloyd George in Britain, the radicalism of Georges Clemenceau in France, even the agenda of the Nationalist Chinese revolutionary leader Sun Yat-Sen. The Keynesian and welfare-state reforms of the early 20th century set the stage for the longest and most broadly shared period of growth in human history.
The upshot is that economics has played virtually no role in all the major political movements of the past half-century, including civil rights, feminism, anticolonialism, the rights of sexual minorities, gun rights, antiabortion politics, and “family values” debates. It has been completely unprepared for Trumpism and other varieties of populism, having failed to predict those developments just as it failed to predict the financial crisis of 2008. And, until very recently, it has shrugged at one of the most politically charged and morally troubling issues of our time — the rise in inequality.
Even the recent attempts of the field to live up to its heritage have fallen flat. Thomas Piketty’s Capital in the Twenty-First Century, while widely perceived as a successor to Marx’s Capital, ends by half-heartedly proposing a modest global tax on capital. Where is the modern Smith, Marx, George, or Keynes? Other fields have not stepped up to fill the void left by political economy’s collapse. Sociologists and political scientists largely eschew specific policy proposals. And political philosophers, while offering bold visions of ideal societies, usually avoid dirtying their hands with the details of feasible policy design.

Why is there so little opposition to the hegemony of the super-rich?

21 Mar

What we have here is a failure of political memory and imagination.

In 2014, when Oxfam arrived in Davos, it came bearing the (then) shocking news that just 85 individuals controlled as much wealth as half of the world’s population combined. This January, that number went down to 80 individuals.

Fraser terms out current era the second Gilded Age. The first ran from the end of the Civil War through to the stock market crash of 1929. In that first Gilded Age:

American elites were threatened with more than embarrassing statistics. Rather, a “broad and multifaceted resistance” fought for and won substantially higher wages, better workplace conditions, progressive taxation and, ultimately, the modern welfare state (even as they dreamed of much more).

So far there is little popular resistance in the current Gilded Age. What’s missing?

Fraser offers several explanations for the boldness of the post-Civil War wave of labor resistance, including, interestingly, the intellectual legacy of the abolition movement. The fight against slavery had loosened the tongues of capitalism’s critics, forging a radical critique of the market’s capacity for barbarism. With bonded labor now illegal, the target pivoted to factory “wage slavery.” This comparison sounds strange to contemporary ears, but as Fraser reminds us, for European peasants and artisans, as well as American homesteaders, the idea of selling one’s labor for money was profoundly alien.

This is key to Fraser’s thesis. What ­fueled the resistance to the first Gilded Age, he argues, was the fact that many Americans had a recent memory of a different kind of economic system, whether in America or back in Europe. Many at the forefront of the resistance were actively fighting to protect a way of life, whether it was the family farm that was being lost to predatory creditors or small-scale artisanal businesses being wiped out by industrial capitalism. Having known something different from their grim present, they were capable of imagining — and fighting for — a radically better future.

It is this imaginative capacity that is missing from our second Gilded Age, a theme to which Fraser returns again and again in the latter half of the book. The latest inequality chasm has opened up at a time when there is no popular memory — in the United States, at least — of another kind of economic system. Whereas the activists and agitators of the first Gilded Age straddled two worlds, we find ourselves fully within capitalism’s matrix. So while we can demand slight improvements to our current conditions, we have a great deal of trouble believing in something else entirely.

The East India Company: Capitalism and Colonialism Hand-in-Hand

6 Mar
For the corporation – a revolutionary European invention contemporaneous with the beginnings of European colonialism, and which helped give Europe its competitive edge – has continued to thrive long after the collapse of European imperialism. When historians discuss the legacy of British colonialism in India, they usually mention democracy, the rule of law, railways, tea and cricket. Yet the idea of the joint-stock company is arguably one of Britain’s most important exports to India, and the one that has for better or worse changed South Asia as much any other European idea. Its influence certainly outweighs that of communism and Protestant Christianity, and possibly even that of democracy.
Companies and corporations now occupy the time and energy of more Indians than any institution other than the family. This should come as no surprise: as Ira Jackson, the former director of Harvard’s Centre for Business and Government, recently noted, corporations and their leaders have today “displaced politics and politicians as … the new high priests and oligarchs of our system”. Covertly, companies still govern the lives of a significant proportion of the human race.
The 300-year-old question of how to cope with the power and perils of large multinational corporations remains today without a clear answer: it is not clear how a nation state can adequately protect itself and its citizens from corporate excess. As the international subprime bubble and bank collapses of 2007-2009 have so recently demonstrated, just as corporations can shape the destiny of nations, they can also drag down their economies. In all, US and European banks lost more than $1tn on toxic assets from January 2007 to September 2009. What Burke feared the East India Company would do to England in 1772 actually happened to Iceland in 2008-11, when the systemic collapse of all three of the country’s major privately owned commercial banks brought the country to the brink of complete bankruptcy. A powerful corporation can still overwhelm or subvert a state every bit as effectively as the East India Company did in Bengal in 1765.

H/t 3QD.

Symposium on Universal Basic Income (UBI)

13 Sep

Appearing in the Boston Review, discussion took place back in 2000. Philippe Van Parijs makes the opening statement and then replies to comments on it. Here’s the first few paragraphs of that statement:

Entering the new millennium, I submit for discussion a proposal for the improvement of the human condition: namely, that everyone should be paid a universal basic income (UBI), at a level sufficient for subsistence.

In a world in which a child under five dies of malnutrition every two seconds, and close to a third of the planet’s population lives in a state of “extreme poverty” that often proves fatal, the global enactment of such a basic income proposal may seem wildly utopian. Readers may suspect it to be impossible even in the wealthiest of OECD nations.

Yet, in those nations, productivity, wealth, and national incomes have advanced sufficiently far to support an adequate UBI. And if enacted, a basic income would serve as a powerful instrument of social justice: it would promote real freedom for all by providing the material resources that people need to pursue their aims. At the same time, it would help to solve the policy dilemmas of poverty and unemployment, and serve ideals associated with both the feminist and green movements. So I will argue.

I am convinced, along with many others in Europe, that–far from being utopian–a UBI makes common sense in the current context of the European Union.

Responses by: Herbert A. Simon, Emma Rothschild, Brian Barry, Anne L. Alstott, Fred Block, Katherine McFate, Gar Alperovitz, William A. Galston, Wade Rathke, Edmund S. Phelps, Elizabeth Anderson, Ronald Dore, Robert E. Goodin, Peter Edelman, Claus Offe.

MacArthur Fellowships: Let the Geniuses Free

9 Oct

I’ve been following the MacArthur Fellowship program from the beginning. Like many, I’ve thought it too conservative in its pick of fellows. I long ago decided that the foundation could improve matters by adopting a simple rule: don’t award fellowships to anyone who has stable employment at an elite institution.

My reasoning was simple: if they’ve got an elite job, they can eat and they can work. Depending on the job, they may not have as much time for creative work as they’d like to have. But they’ve got more time than they’d have if they had to wait tables, do temp word-processing, or teach five adjunct courses a term spread across three different schools. They can function creatively.

That puts them ahead those who are so busy scratching for a living that they cannot function creatively at all.

When I set out to write this post, that’s all I had in mind. I’d reiterate the standard complaint about MacArthur’s programmatic constipation, with appropriate links here and there, and then offer up my one simple suggestion. I figured it for a thousand or maybe fifteen hundred words.

But then things started getting interesting, and more complex. So I’ve had to write a much longer post. I’ve not given up on that simple idea, nor have I augmented it. But I have a richer and more interesting rationale for it. That’s what this post is about.

The Genius Grants

I don’t know when I first heard that the newly formed Catherine D. MacArthur Foundation would “be looking for gifted but impecunious poets, promising young composers, research scientists in midcareer and other ‘exceptionally talented people’”, as The New York Times put it in 1980, but, like many creative people, I thought to myself: At last, a foundation that’s looking for (people like) me. The article went on to say:

Many foundation programs have sought to assist scholars and artists…but most have required that the would-be fellows already have achieved some public recognition. Unlike most others, the new fellowships will permit the recipients to choose entirely new fields of interest, with no requirement that the fellowship lead to the completion of a project, publication, or even a progress report.

Just what I need, thought I to myself, just what I need. It would allow me to blow this pop stand and get some real work done.

As Roderick MacArthur, son of the foundation’s benefactor, John D. MacArthur, would put it in 1981:

“This program,” Mr. MacArthur said, “is probably the best reflection of the rugged individualism exemplified by my father – the risky betting on individual explorers while everybody else is playing it safe on another track.”

“If only a handful produce something of importance – whether it be a work of art or a major breakthrough in the sciences – it will have been worth the risk.”

My name wasn’t on that list or on any subsequent list.

Nor, I tentatively decided in that first year, was the foundation deeply interested in people like me, people whose work did not fit into conventional categories and thus would be ineligible for conventional foundation largesse. Rather, given the foundation’s actual practice, it is clear that the MacArthur Fellows Program has been funding pretty much the same people funded by every other foundation and government agency. Continue reading

United States of inequality – Inequality – Salon.com

5 Jun

As we wait for the results of the Wisconsin recall election, a refresher course on what the struggle over the future direction of the United States is really about might be in order. Fortunately (or depressingly) the Stanford Center on Poverty and Inequality has put together a new package of easy-to-digest “educational materials on trends in inequality” that pound the message home. The gist: the United States is becoming more unequal every which way you can imagine.

Between 2009 and 2011, the press release for the project notes, “media mentions of the phrase ‘income inequality’ increased by over 250 percent.” But changing trends in income distribution are only one part of the vast distortions rippling through American society. The slides now available for perusal at http://www.inequality.com are divided into 14 categories: debt, education, employment, family, gender, health, immigration, income, mobility, politics, poverty, race, violent crime, and wealth.

The most obvious insight gleanable from the charts is that class background matters. If you are poor, you are more likely to be in debt and have health problems, and less likely to get a quality education or have your priorities reflected in politics. Of course, that’s always been true, not just in the U.S., but everywhere.

via United States of inequality – Inequality – Salon.com.

Plutocracy, Paralysis, Perplexity – NYTimes.com

4 May

For the past century, political polarization has closely tracked income inequality, and there’s every reason to believe that the relationship is causal. Specifically, money buys power, and the increasing wealth of a tiny minority has effectively bought the allegiance of one of our two major political parties, in the process destroying any prospect for cooperation.

And the takeover of half our political spectrum by the 0.01 percent is, I’d argue, also responsible for the degradation of our economic discourse, which has made any sensible discussion of what we should be doing impossible.

Disputes in economics used to be bounded by a shared understanding of the evidence, creating a broad range of agreement about economic policy. To take the most prominent example, Milton Friedman may have opposed fiscal activism, but he very much supported monetary activism to fight deep economic slumps, to an extent that would have put him well to the left of center in many current debates.

via Plutocracy, Paralysis, Perplexity – NYTimes.com.

JPMorgan Passes Stress Test, Raises Dividend – NYTimes.com

13 Mar

Looks like the Obamicans are pulling out all stops for the election.

JPMorgan Chase became the first bank on Tuesday to say regulators have completed stress tests of its balance sheet, and it said it would raise its quarterly dividend by a nickel to 30 cents and buy back as much as $12 billion of stock this year.

The Atlantic ran a recent article about how these “stress tests” are a scam intended to make  bank for the 1%, not to protect the financial system for the 99%.

via JPMorgan Passes Stress Test, Raises Dividend – NYTimes.com.

Occupy Economics, and the Sustainable Finance Lab — Crooked Timber

17 Oct

in the Netherlands a very interesting initiative started a few weeks ago (independent of Occupy Wall Street, but obviously not independent of the same global problems in the financial sector): the Sustainable Finance Lab. It’s an initiative by an eclectic group of academics, mostly economists (some more mainstream, some more heterodox), and one small ‘green’ bank (Triodos), to bring together people interests in debating what the real problems are with the financial sector and what needs to be changed. … it’s been very, very interesting – in fact, on issues of economics I haven’t seen anything as interesting so close to home for a long time, and that’s probably because people who normally don’t speak to each other are sitting in the same room and sharing their views. Bankers, academics, students, ex-investment bankers, journalists—they all share their views in a respectful atmosphere, but it’s clear they do not quite have the same perception of how urgent change is needed, and indeed what type of change is needed, or what the causes of the problems are.

via Occupy Philosophy, Occupy Economics, and the Sustainable Finance Lab — Crooked Timber.

Division of Labour: September 2011 Archives

21 Sep

The new Economic Freedom of the World report, coauthored with Josh Hall and Jim Gwartney, is released today. The big news is the continuing decline of the United States. Since 2000, the overall rating (out of 10) has fallen from 8.45 to 7.58 in 2009. This decline is among the largest in the world during the period putting us in the company of countries like Venezuela and Argentina. The overall decline is accounted for by changes in three areas: Spending, Property Rights, and Regulations.

via Division of Labour: September 2011 Archives.

H/t Tyler Cowan.