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It seems like the only markets these days are irrational markets. Gold has reached record highs along with many other commodities, and London real estate is
more secure than a Swiss bank account:
London property is the ‘Swiss bank account’ of the 21st century,” Robin Hardy, an analyst at London investment firm Peel Hunt. … It’s seen as a relatively safe place to put your money if your objective is capital preservation,” he said. They think money is “safer invested in an apartment in Sloane Street than in a bank account in Damascus.
The London newspaper The Guardian reported that Ukrainian oligarch Rinat Akhmetov paid a record £136.4m ($222.8 million) for apartment at One Hyde Park. For that much money his view of Hyde Park should be orgasm inducing.
But according to the article quoted above, the rental yields on these properties are historically low, and in some cases negligible — meaning the buildings’ “fundamentals” do not support their high valuations. And you know what happens to a house built on sand.
You might think the world’s elites would have learned from one of their own — no less an authority than G. W. Bush — when he said “fool me once, shame on you; fool me twice … well, the point is you can’t fool me twice.” It’s not even three years since the US housing bubble popped and nearly brought on a global depression so bad it could have been predicted by the Mayan calendar.
Taken from a different perspective, this market furor makes perfect, rational sense. In the first place, England is second only to the United States in its militant support of personal property rights. In the second place (related to the first), London has very restrictive rules on new development: once you buy a property, you can be sure that the look of the neighborhood won’t change around it. (In New York, on the other hand, if you think about buying an historic brownstone in Fort Greene you can guarantee that your quality of life will be changed when the the new sports stadium opens on Atlantic avenue.) In the third place, (as noted above) many of the properties selling for record sums are being bought by global elites from places where the disparity of wealth and power have made their holdings precarious.
The British cultural inclination to protect the individual at the expense of the state is the very reason why middle class Britons are being priced out of the capital:
more and more properties in central London [are] simply unused most of the year. [You] look up at the windows as you walked down the street, and very few [are] lit up.
For the international capitalist class, this is an exploitable advantage that makes good market sense.
Posted 9 months, 3 weeks ago at 09:50. 1 comment
In light of the NSER’s next edition, I will be hosting a regular Friday column searching for answers to the same question: what is economics?
Academic Field Trips: A Comparison
Economics has often been called the “queen of the social sciences“, but what does that mean? Does this express dominance over the other social sciences (8 of which housed here at The New School)?
If Economics were the queen, let’s assume her methods are imposed upon other fields, more than others’ methods are imposed upon economics.
Here’s my idea on how to test this possibility: Google Scholar search other social sciences with “Economic” as a condition (Economic Sociology, Economic Anthropology, etc), compare to the opposite (Sociological Economics, Anthropological Economics, etc), and see which has the most sources.
For the sake of self-interest, I’ll compare only the departments that are within my graduate school: The New School for Social Research. These departments include: Anthropology, Economics, Historical Studies, Liberal Arts, Political Science, Philosophy, Psychology, and Sociology. Here’s what we find (larger numbers in bold):
Anthropological Economics (247) Economic Anthropology (13,000)
Historical Economics (3,230) Economic History (654,000)
Liberal Arts of Economics (0) Economics of Liberal Arts (4)
Political Science of Economics (25) Economics of Political Science (30)
Philosophical Economics (229) Economic Philosophy (15,600)
Psychological Economics (229) Economic Psychology (25,000)
Sociological Economics (457) Economic Sociology (25,900)
Wow. That’s an outstanding result.
Now, I have numerous reservations** (many regarding proper terminology– “Economic History” for starters) in calling this a rigorous examination (and yet, somehow, this is a blog), but to dismiss these numbers would be callous.
If Economics is, in fact, the queen of the social sciences, then she appears to be greatly interested in affairs beyond her domain… and appears to have little tolerance for interest, reciprocated.
[**If anyone wants to know these in detail, I can provide them in the comments section.]
Posted 9 months, 3 weeks ago at 23:24. 1 comment
In the spirit of our project to define Economics, I thought I would look at the concept of “efficiency.” At first glance it seems like a no-brainer. Efficiency is the most return for the least work.
The original meaning, from the Latin ex facio, is to cause or bring about. According to the OED, itwas imported into English through philosophical and theological discourse. For example, Thomas Spencer says in his Art of Logic (1623) “God is sayd to be the Efficient Cause of man: the office of this efficiency, is placed in ioyning the forme vnto the matter.” At this early date efficiency clearly means the proper, proportional ordering of materials and forces, and the optimal outcome (Man) of this divine efficiency is a moral outcome.
Alfred Marshall in his Principals of economics: an introductory volume (7th ed., 1916) at the close of the 19th century is still thinking of efficiency in moral terms: “We have next to consider the conditions on which depend health and strength, physical, mental and moral. They are the basis of industrial efficiency, on which the production of material wealth depends; while conversely the chief importance of material wealth lies in the fact that, when wisely used, it increases the health and strength, physical, mental and moral of the human race” (Book IV, chapter v, parag. 1).
One outcome of the marginal revolution was to limit the definition of “efficiency” to a more technical and less moral valence. Keynes says in the General Theory (1936): “The relation between the prospective yield of a capital-asset and its supply price or replacement cost, i.e. the relation between the prospective yield of one more unit of that type of capital and the cost of producing that unit, furnishes us with the marginal efficiency of capital of that type.” This pronouncement was made during the period of “high modernism” discussed by McCloskey and Nelson, though the older, moral sense appears to creep in again by the 60s when Alan Gilpin is creating his Dictionary of Economic Terms (1966): “Economic efficiency, the efficiency with which scarce resources are used and organised to achieve stipulated economic ends. In competitive conditions, the lower the cost per unit of output, without sacrifice of quality, in relation to the value or price of the finished article, the greater the economic efficiency of the productive organisation.” Implied in “without sacrifice of quality” is the idea that stipulated economic ends are not ends in themselves.
How do we apply our everyday thinking to questions of efficiency? I offer two examples. The first is from the OECD, which released a report yesterday that delineates the number of hours of paid and unpaid work in the OECD countries, as well as China, India, Brazil and a few others. Mexicans work the most overall, and Belgians work the least. (More time for mussels and frites?) More interesting is the breakdown between unpaid and paid work. Again, Mexicans do the most unpaid work, but Koreans do the least. (Husband: “Honey, can you pick the kids up from school?” Wife: “Sure. That will be twenty-two thousand won. You can just credit it to my PayPal account.”)
Americans spend the least amount of time eating and preparing food, but they are the most obese. The common sense explanation is that the food industry, from farming to tables in homes and restaurants, is very efficient at producing calories, but something about those calories has produced a socially inefficient result. A modernist explanation sees this as evidence of an efficient, amoral market (the kind we want) distributing calories, and a population of consumers who will, when they realize they are (un)fit contestants for The Biggest Loser, drive down the price of gym memberships until everyone is fit again. (Would Marshall interpret this data as an erosion of the efficiency of industry, which is based on the health, mental and physical, of the people?)
I want to ask, is there more than one field of efficiency (industrial, technological, national, personal, human, or local), and if there are, can they be mutually exclusive? If there is only one field of human efficiency — one right answer to the question “how much should we produce” — and how many equations would you have to stuff into your model to make it work?
Posted 9 months, 4 weeks ago at 08:50. 3 comments
In light of the NSER’s next edition, I will be hosting a regular Friday column searching for answers to the same question: what is economics?
A Definition
What is economics? What are its boundaries as a discipline and a word? For the sake of approaching this topic, I felt it would be useful to search out a simple definition… easy, right?
Merriam-Webster says:
“a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services.”
It also states that the first use of the word is in 1792. That’s surprising… The Wealth of Nations came out in 1776.
Wikipedia has almost the exact same definition, but it gives a better idea of its origin:
“The term economics comes from the Ancient Greek οἰκονομία (oikonomia, ‘management of a household, administration’) from οἶκος (oikos, ‘house’) + νόμος (nomos, ‘custom’ or ‘law’), hence ‘rules of the house(hold)’”
Oikos, interestingly, is also rooted in words like “ecology” and “ecosystem.” So, the difference between “economics” and “ecology” is the difference between their suffixes: -ology is the “study of” and -nomics is the “laws of.” Also, “nomos” comes from a verb, which means “to distribute.”
The Free Dictionary adds this:
“economic matters, especially relevant financial considerations.”
It also suggests two other similar words: “money, finance.”
Since finance seems relevant, let’s see what an online financial glossary has to say:
“The study of how the forces of supply and demand allocate scarce resources.”
It adds a comment or two on micro- and macroeconomics as well.
Wait a second, just below this definition, there’s another from a website called progressiveliving.org… this should be interesting. They quote two definitions and form a conclusion from the two.
From Lionel Robbins: “the science which describes human behaviour as a relationship between (given) ends and scarce means which have alternative uses”
From Alfred Marshall: “examines that part of individual and social action which is most closely associated with the attainment and with the use of the material requisites of wellbeing”
And their conclusion: “Once we restore the normative dimension of economics, the deficiency of [both definitions] becomes apparent. This is because economics isn’t merely ‘associated’ with the attainment and use of the material requisites of wellbeing — rather, the primary task of economics is to tell us how to go about maximizing these requisites”
That’s a mouthful.
A final offering is from a page called henrygeorge.org. Their definition is not all that different but it does demand the use of the term “political economy” instead of “economics.” Their justification?
“Although the classical political economists recognized the problem of scarcity, they were preoccupied with the economic life of the entire community – with the ‘wealth of nations.’ They sought to identify the principles that underlie the production and distribution of wealth. As it is most often taught today, economics pays little attention to the distribution of wealth.”
So in our journey to “Google away” a definition of economics it seems like we have an idea (or two) of what the definition might be. But there seems to be little consensus as to what that definition means.
All this from the first page of a Google search…
Posted 10 months ago at 17:08. Add a comment
Today on the New York Times “Economix” blog, University of Chicago professor Casey Mulligan proposes to answer the question “why people pay income taxes?” It turns out that they are more afraid of the Feds than they are irked that their money is being stolen by the government. More precisely, people are both afraid of the government and perceive the harm of taxes is not sufficient to warrant civil disobedience:
To the extent that much of the Treasury’s revenue arrives because taxpayers are honest, public policy might not want to take honesty for granted. For example, the Treasury may receive less revenue over time if taxpayers increasingly distrust government because they perceive their tax dollars are wasted.
…
A Ph.D. dissertation being written by Mark Phillips, a University of Chicago student (and an I.R.S. intern) argues that a reasonable fear of penalty explains much of why taxpayers pay their income tax. He agrees that I.R.S. audits are rare, but that the audits are well targeted, so the agency would quickly detect many ways that taxpayers might consider underreporting.
…
For now, it looks as though both honesty and incentives help bring revenue to the Treasury.
The underlying assumption is that government is a coercive authority that is tolerated as long as people think its authority is justified. This frames the debate on taxes in terms of a Hobbesian state read through Lockean individualism: the State’s authority is justified by how its expenditures amplify the individual. Transfer payments are immoral because they disempower some individuals at the expense of others. Military expenditures are justified because they incentivize a martial spirit that enhances the power and prestige of our nation, and consequently raises the status of citizens as individuals.
But what about incentives that are not predicated on the power of a coercive state? A deontological explanation would say that the affect of moral obligation to the State is sufficient to induce people to pay their taxes. Mulligan’s Neoclassical framework can’t recongnize the existence of moral obligation because the only valid (i.e. Economic) obligation is to maximize personal gain. The happy sideeffect of a gain in personal power is enhanced authority for the State. But From a deontological standpoint people pay taxes because it is the right thing to do, not because they have performed a cost-benefit analysis and determined that their utils — and loyalty to their country — are maximized at the current tax rate.
If Economics can’t theorize deontology, should it be making pronouncements on psychological questions like, “why do people pay taxes?”
Posted 10 months, 1 week ago at 12:29. 2 comments
It’s a new year for NSER and we have a new team coming in with many ambitious plans and a desire to not just match expectations but to surpass them and raise the benchmark. Let us start with an introduction of the new team:
We have two Chief Editors, Karthik Raghavan and Brandt Weathers, and three Associate Editors, Jacob Assa, Will Kenton and Noe Wiener.
Karthik studied Civil Engineering and Construction Management in India before joining the economics program at NSSR as a Masters student. His interests lie in understanding the complexities involved in developing sustainability solutions that are themselves sustainable. Having had no prior formal exposure to economics, he finds the philosophy of economics an absolutely fascinating area of study.
Brandt is a Masters student in economics at NSSR with an interest in economic history, political economy and anything that feels like a comparative advantage with heart. He schooled in Arizona but grew up in Texas and will be one of the two primary bloggers for NSER from this team.
Jacob is a Ph.D. student in economics at NSSR as well as a Statistician at the United Nations Department of Economic and Social Affairs. His interests include political economy, labor economics, economic development and the history of economic thought. He recently completed his M.A. in economics at NSSR with a mentored research paper on pension policies in the OECD.
Will is a first year Masters student in economics at NSSR. His areas of interest include the history of economics, the sociology of economics, and urban economics. Before coming to NSSR he earned a Ph D. in English from NYU where he studied Early Modern Politics and political history, the history of rhetoric, and aesthetics. He will be the other primary blogger for NSER from this team.
Noe comes from Switzerland and is a Masters student in economics at NSSR. His interests include the economics of labor and migration, political economy and income distribution, as well as neoliberal policies. He believes that the orthodoxy in economics has all too often been complicit in an extensive project of blame shifting (why do we have unemployment? It’s the unions. Why are the poor so poor? They made bad choices) and thinks it’s high time heterodox economists challenge this paradigm.
Moving on to the good stuff, what is the NSER going to be doing this year? To skip to the punchline, we are going to be spending the whole year asking the question “What is Economics?” Our biggest goal this year will be to create a space composed primarily by and for students coming from a variety of academic disciplines; a space where they feel comfortable enough to share their own perspective on a field that can be quite intimidating. We believe that a dialogue across disciplines is critical for the evolution of economics as a field of inquiry and towards this end, we will be going beyond papers and will invite contributions in the form of blog posts, book reviews, opinion pieces, essays, investigative journalism, cartoons and even fictional work that highlights or talks about interesting issues centered on the question, “What is Economics?” Any contributions that we find interesting will go up on the website, and the most interesting and relevant ones, the ones that have the potential to spur off further discussions and debates, we will publish in the journal by the end of this year. We also hope to get the ball rolling on a long term idea to setup a discussion forum where students from around the world can conglomerate to dissect the worldly philosophy. In addition to the above, we are also trying to work out the details on a survey series as part of the next edition of the journal; keep your eye out for updates on this one.
The theme for the year is quite open to interpretation, and the more interesting your argument, the more we like you. For those who need help getting started, find below some questions that came up during our discussions. For those whose fingers are already twitching, we have really opened up the ways in which you can contribute, so take your pick and start writing (or drawing). Looking forward to your contributions,
Karthik
(For the NSER Editorial Team, 2011-12)
Did flawed economic theory contribute to the recent crisis? Are these problems due to an over-emphasis on math? Can these problems be solved by lowering the intensity of math or do we instead need more math? Perhaps it is neither more nor less, but the kind of math that needs to change? Do we need to be more normative about the economic world? Is economics a science or an art? Does economics show the way for the other social sciences to become more scientific and rigorous, or does economics need to borrow a page from the other social sciences? Is the problem in the theoretical approach in the way the math is constructed? Is it just the neo-classical way of thinking that is a problem? Do the other schools, be it Smithian, Ricardian, Malthusian, Neo-Ricardian, Neo-Malthusian, Keynesian, Post-Keynesian, Marxian, Marxist, Veblenian, Schumpetarian, Schumacherian, Gandhian, Alien offer better alternatives? What is a better alternative? Where does ecological economics fit into the grand scheme of things? Are sustainability measures that are being pushed by the economic world sustainable in the ecological world? Are the individual and the collective different? Does bargaining power matter? How does the equation change if all the power that the capitalist has is transferred to the workers? Is the problem with the people behaving irrationally, or is the problem with economics being too rational? Is rationality in the economic world and the real world the same thing? Is economics in general too complex? Is real life too complex for economics to handle? Does the study of human cognition and perception have anything to contribute to economics? Where do things such as culture fit in the economic world? Do we need institutional reforms or do we need more institutions to be created? Has economics as a science kept up with the latest in the natural sciences? Does economics emulate the natural sciences too much? Can economists learn anything useful from evolutionary biologists? Is there an East vs. West divide in the philosophy of economics? Is Westernization of the East happening too slowly, or do we need to look at the possibility of Easternizing the West? Are agricultural, industrial and knowledge economies the only ways in which an economy can be classified, or is there more to it? Does the common man struggling to put food on the table care about economics as a field of study? Where do moral norms and conventions fit in the economic world? What makes a certain profession ‘right’ and ‘wrong’ in the economic world and where and who draws the line? Is there a difference between economics and applied economics? What is the role of power in economics? WHAT IS ECONOMICS?
Posted 10 months, 1 week ago at 14:03. 1 comment
An epic undertaking by a (budding) sociologist to analyse and identify the triangle of nerd-geek-dorkery… Which is the more prevalent, are there sterotypes by subject, do some stand alone? The full analysis is here, and the method was to dig through a set of google searches for a given time-period, sort and count them for combinations with other words, and map them. I think it’s a great piece of picture and suggests that while the nerd and geek can interchange, and that some nerds are not geeks, the dork stands alone.
Graphics by http://www.futuraprime.net/ - sweet
While I doubt any single work could hope to resolve the epic nerd vs. geek vs. dork debate, I hope that this post has offered some modest evidence. First, I have shown that the dork truly stands alone. Except for Star Wars. Second, I have shown that most nerdy activities are also geeky and vice versa, and when one concept dominates there is no obvious pattern behind it – e.g. not all sciences are nerdy or geeky, and so on. Third, I have offered a small bit of evidence for the hypothesis that phonetics matter, that some phrases just sound better than others.
-Dan Hirschman, a (budding) sociologist
Brilliant stuff me thinks :)
Posted 10 months, 4 weeks ago at 02:33. Add a comment
Download here
An exciting day as the newest issue of the New School Economic Review is now available. The focus of the issue is on Crisis and Distribution, drawing on a conference hosted at the New School in Spring 2010, with conference contributions, talks and submitted papers. It’s a really exciting issue, which has been pushed through by this issue’s chief editor Miriam Rehm. We hope you enjoy it!
Download the whole issue here, or the paper you are interested in below:
Introduction
What does Financial Crisis do?
- Miriam Rehm
Papers
On the heterodox view of the crisis
- Korkut Alp Ertürk
America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Recession
- Thomas Palley
Crisis and Distribution
- Richard Wolff
Power Biased Technical Change, Endogenous Mismatch and Institutional Change
- Peter Skott
Conference Contributions
Crisis and Distribution: A Brief Historical Note
- Jane D’Arista
Crisis and Distribution
- Anwar Shaikh
The Distributional Effects of the Stimulus
- Ajit Zacharias
Developing Countries and the Crisis
- Sanjay Reddy
The IMF and the Global Financial Crisis
- Ilene Grabel
The Distributional Impact of the Crisis
- Jomo Kwame Sundaram
Posted 11 months, 3 weeks ago at 19:34. 1 comment
And the winner, with 7 votes is...
It seems the profession has gotten itself onto the L.A. awards calendar as awards for ‘most influential economists‘ are handed out by the academy of insiders (50 invitees of the Economist) with a lifetime award for acting and a ‘break-out actor of the year’ award. Meanwhile a smaller trade body (the AEA‘s Chicago’ish contingent) has thrown in its lot for best American movie (or paper from the AEA).
So what’s the conclusion. Weeell… Someone with an economic or statistical background might balk at awarding the Academy’s lifetime award on the basis that the winner got seven votes, and second place came in with four… The best new actor won by receiving a massive – and I am sure representative – four votes in total. The best film, as within the standard Academy ‘Oscar’ Awards, can only be granted to a US production (from an AEA journal) and can only be voted for by those selected by the academy. But hey ho, don’t let me spoil the party; we all know the Oscars are political, but we all watch them – so perhaps one should treat these awards the same way: Good entertainment and a chance to hear of a film or actor you hadn’t yet seen. I mean, Hayek even snuck onto the AEA list…
Posted 11 months, 4 weeks ago at 14:52. Add a comment
Frantic work behind the scenes means that we can almost reveal the latest issue of the NSER, officially ready for Winter 2010 it has been held up by some little niggles, but thanks to the heroic efforts of this issue’s chief editor, Miriam Rehm, we are pretty much there.
And it’s a really exciting issue on crisis and distribution, drawing on the conference hosted at the New School in the spring of 2010, with both paper contributions and transcribed talks – with video’s here. More to come, but excited that we’re almost there !
Posted 1 year ago at 18:57. Add a comment