Archive for the ‘Economics’ Category

How Thinking Like an Economist Undermines Community

Thursday, March 20th, 2008

An excerpt from
Stephen A. Marglin, The Dismal Science: How Thinking Like an Economist Undermines Community (Harvard, 2008).

http://www.hup.harvard.edu/catalog/MARDIS.html

Economics celebrates the self-interested, calculating individual and the market as a means of realizing individual satisfactions, and this celebration is important in overcoming opposition to extending the sway of the market and, by the same token, undermining community. Economics is not only descriptive; it is not only evaluative; it is at the same time constructive—economists seek to fashion a world in the image of economic theory.

The problem with the idea that economics is purely, or even primarily, a descriptive undertaking is that the apparatus of economics has been shaped by an agenda focused on showing that markets are good for people rather than on discovering how markets actually work. And from this normative perspective has come the constructive agenda. If you believe that economics is or should be about describing the world, then it is a case of the tail wagging the dog. If you believe, as I do, that the normative agenda has been central to economics from well before Adam Smith’s time, then it is more understandable why the apparatus of economics is built on foundations that undermine community. Undermining community is the logical and practical consequence of promoting the market system.

This much is certain: if all we economists cared about was describing the world, we could easily forgo much of the framework that I find problematic. Take one of the most basic tools of economic analysis, demand. If we did not care about drawing conclusions about how well markets work, as distinct from how markets actually work, we could start directly from the demand curve rather than basing demand on choices made by rational, calculating, self-interested individuals. We do not take demand as the starting point because it would then be impossible to argue that—subject to some fine and not so fine print—a system of markets maximizes welfare.

In making this argument, economics relies on value judgments implicit in foundational assumptions about the self-interested individual, about rational calculation, about unlimited wants, and about the nation-state, and it is these assumptions that make community invisible. In arguing for the market, economics legitimizes the destruction of community and thus helps to construct a world in which community struggles for survival.

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Retail space per person

Friday, August 31st, 2007

This is messed up:

Retail Space Per Person

(Ganked from Clusterfuck Nation by Jim Kunstler : Peak Suburbia)

Posted in Business, Culture, Economics, Globalization | No Comments »

Tall = Smart and Wealthy

Tuesday, August 28th, 2007

Interesting:

Freakonomics – Opinion – New York Times Blog

It is well documented that tall people tend to hold high-status jobs and earn high wages. There are many possible explanations for this: height is a useful job attribute for some reason; other people mistakenly think tall people are more intelligent than they really are; being tall in high school gives you the confidence to succeed in the work force; etc.Case and Paxson suggest a completely new explanation for the link between height and high wages: taller people earn more because they are smarter on average. They document that, as early as age three (before schooling has had a chance to play a role), taller children perform significantly better on cognitive tests. These higher scores persist through childhood. I find their evidence pretty convincing — though this is not good news for my four year old son, who is currently in the 5th percentile for height, just like I was at his age.

Posted in Economics, Science | 3 Comments »

The zero-sum globalization game nightmare

Wednesday, April 5th, 2006

How the World Works, salon.com’s globalization blog, has a post that brings up the zero sum idea:

In How the World Work’s darker moments, we recall an epiphany experienced by Frank Holliwell, the protagonist in Robert Stone’s great novel about the U.S. and Central America, “A Flag for Sunrise.” Contemplating the mess made by the U.S. in Latin America, he fears that the affluence of the rich countries of the North requires the poverty of the poor nations of the South. In Holliwell’s nightmare, globalization is a zero-sum game: Luxury in New York mandates starvation in Zambia.

I sent a letter (or whatever a web based response should be called) responding to the post:

The zero sum nightmare alluded to might not be too far from the truth. I recommend taking a look at L.S. Stavrianos, Global Rift: The Third World Comes of Age (New York: Morrow, 1981). Global Rift is a history tome that, starting from 1400, traces the emergence of the third world. While Global Rift does not paint a zero sum nightmare per se, it does present the case that first world wealth is born on the backs of the third world. A sort of pyramid scheme, if you will. It seems unlikely to me that the entire world could live at first world standards. The first world lifestyle is premised on (dare I say defined by) access to cheap resources: energy, labor, and other natural resources. Where can the third world turn to for access to cheap resources that the first world isn’t already using?

The last page of the text (814) quotes an Army report that is interesting in light of recent events (and note the second author): “Major Danial W. Christman and Major Wesley K. Clark concluded in a study . . . that ‘U.S. military forces will be ineffective in coercing petroleum-producing states to respond to America’s wishes.’” (emphasis mine).

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What is rich anyway?

Tuesday, October 25th, 2005

The fuzziness underscored in my last post around the meaning of “rich” set me to thinking. I peg rich at a net-worth of at least $10 million (decamillionaire). I reasoned to that conclusion by looking at what sort of income an amount of capital can generate assuming minimal returns (e.g., some sort of income focused mutual fund returning only a few percent per year). At a paltry 3% our $10 million dollars will generate $300,000 of income. Chop that in half (really not even that much) to account for income tax and your left with $150,000 of income, which is the low end income that people associate with wealth. “Rich” is when capital, not work, generates the income. If you have enough capital to maintain an income, sans work, at the “rich income level” ($150,000-$300,000+) than your rich. Of course decamillionaires can continue to work if they desire. The point is that they don’t have to work to maintain a “rich” income, their capital does the work for them.

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Tax Cuts For the Rich

Monday, October 24th, 2005

The Washington Post is running a special report on teens. One question from the national survey provides yet another bit of evidence for my favorite theory of why low and middle income people vote (at least indirectly) for tax cuts for the rich: they think they will be rich someday (63 percent of teens report it is likely or fairly likely they will be rich).

A recent Tax Foundation survey supports the conclusion that American’s generally have an optimistic view that they will be rich someday:

As with most surveys, the majority of respondents viewed themselves as middle class. Only 2 percent of U.S. adults consider themselves upper class, and fully 79 percent say they are lower-middle, middle, or upper-middle class.

When asked what income it would take for them to consider themselves “rich,” the median response was $200,000 per year with 27 percent saying they’d have to earn more than $500,000 to be rich. However, responses show the definition of rich is different in urban vs. rural areas. The median response for those in rural, suburban, and mid-size counties was $150,000 per year; only respondents in large urban counties defined rich as earning $200,000 per year or more.

Consistent with previous surveys, young, single and educated Americans remain optimistic about their future. Fully 46 percent of 18-34 year-olds, 44 percent of singles, and 46 percent of those with a bachelor’s degree or higher say it is likely they’ll be rich someday. [FYI, The Center on Budget and Policy Priorities has questioned the Tax Foundation's methodology as it relates to tax calculations.]

Though, this commondreams.org article argues that the “super-rich” are sufficiently off the radar (i.e., not properly counted in surveys, studies, and the census) that we don’t even know what rich is: “But by designating the (decapitated) top 20 percent of the entire nation as the “richest” quintile, the Census Bureau is including millions of people who make as little as $70,000. If you make over $100,000, you are in the top 4 percent. Now $100,000 is a tidy sum indeed, but it’s not super rich–as in Mellon, Morgan, or Murdock. The difference between Michael Eisner, Disney CEO who pocketed $565 million in 1996, and the individuals who average $9,250 is not 13 to 1–the reported spread between highest and lowest quintiles–but over 61,000 to 1.” And this New York Times special report on class in America cites a Federal Reserve Bank study indicating that income mobility has slowed in each decade since the 1970s.
Moving up the income ladder grows more difficult, yet people remain optimistic that they will be rich. It seems that the American Dream is going strong.

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Post-Autistic Economics and Neuroeconomics

Friday, May 20th, 2005

A few years back a gaggle of French economics doctoral students became disgusted with the orthodoxy of economics and launched a revolution. The movement they started became known as post-autistic economics because in their petition (manifesto) they described classical economics as dwelling in “unreality to the point of being autistic.” That quotation is from an article in The Chronicle of Higher Education. I have archived it here. I first read about post-autistic economics in an Economist article. I would cite it but since I am practically swimming in Economist issues (the downside of weekly news magazines) I will never be able to locate the article again. The Chronicle article does a more thoroughgoing job anyway:

The students dubbed their movement “Post-Autistic Economics” and quickly provoked a national debate of the French variety. Some leading publications and high-profile economists hailed the protesters, who, in petitions-cum-manifestoes, denounced economics as a morass of “imaginary worlds” that was mired in “pathological,” pseudoscientific mathematics; that was aggressively excluding pluralism; and that was, even so, barely able to explain “l’économie de Robinson Crusoé.”

The reformers include prominent scholars who made their names as top-notch neoclassical economists. One is the iconoclastic and polymathic Deirdre N. McCloskey, a distinguished professor of the liberal arts and sciences at the University of Illinois at Chicago who also has appointments there and at Erasmus University of Rotterdam in art, cultural studies, economics, English, history, and philosophy.

In 1983, she (then he, but that’s another story) sparked an uproar with “The Rhet-oric of Economics,” an article in the prestigious Journal of Economic Literature. In it, she convinced many heterodox economists that the discipline’s claims to truth, while couched in terms of scientific proof, were shored up by many forms of reasoning and persuasion.

Much of economics, she has reiterated with rhetorical flair, is “a con game of a very odd sort,” one marked by three primary “vices.”

What I find particularly exciting is the possibility of double teaming classical economics, for we have the efforts of the Post-Autistic Economics Network combined with work in neuroeconomics. Over at Neuroethics & Law, Professor Kolber reports on a BusinessWeek article that details some recent advances in neuroeconomics. With the new mindset that Post-Autistic Economics provides combined with the tie to physical reality (i.e., the brain) that neuroeconomics hopes to provide, we may finally begin to see useful economics models.

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