Archive for April, 2012|Monthly archive page

Enjoyable Interview Regarding Sex, Lies, and Economics

I have never done an interview over Skype before. Weirdly, I did three this week. Here is the first, which was one of the most enjoyable interviews I have ever done.

Could a Strong Union Movement Save Social Security?

Pear, Robert. 2012. “Social Security’s Financial Health Worsens.” New York Times (24 April): p. A 13.

“The Obama administration reported a significant deterioration in the financial outlook for Social Security on Monday, while stating that the financial condition of Medicare was stable but still unsustainable.”

“The Social Security trust fund will be exhausted in 2033, three years sooner than projected last year, the administration said.”

“In explaining changes in their Social Security projections, the trustees cited slower growth in average earnings of workers and the persistence of unemployment in the slow recovery from the recession. They lowered their projection of average real earnings in the future, primarily because of a surge in energy prices and “slower assumed growth in average hours worked per week after the economy has recovered.”
Let’s see if we can get this straight. For 40 years wages have gotten hammered by the “job creators”. People become increasingly reliant on Social Security, but the system is in trouble because people do not earn enough to get enough taxes taken away to cover social security. The obvious answer is to destroy social security.

Pareto’s Law: Understanding Inequality

Economists are fond of making their work into a science; they like to transform their ideas into a “scientific” law. Accordingly, the Fascist Italian senator, Vilfredo Pareto is credited with discovering Pareto’s Law, which explains why inequality is a natural outcome. Pareto suggested that 20% of causes create 80% of effects. He argued that this law explains why 20% of the Italian population owned 80% of the wealth. Sadly, the U.S. experience calls Pareto’s data into question, but then, those lazy Southern Europeans wallow in socialism.

There is a second Pareto Law, which offers a more accurate explanation inequality. In his Manual of Political Economy, he explained:

“In all periods of the history of our country we find facts similar to the practices we have just pointed out, permitting certain persons to use stratagems to appropriate to themselves the goods of others; hence we can assert, as a uniformity revealed by history, that the efforts of men are utilized in two different ways: they are directed to the production or transformation of economic goods, or else to appropriation of goods produced by others. War, especially in ancient times, has enabled a strong nation to appropriate the goods of a weak one; within a given nation, it is by means of laws and, from time to time, revolutions, that the strong still despoil the weak.” Continue reading

What is Higher Education for?

On Mark Thoma’s blog, Economist’s View, there is an active debate about my post on the Demise of Higher Education.

The comments divided relatively predictable ways, according to whether the commentor were inclined toward Republican or Democratic policies, but relatively little energy was given to the question of the value of higher education. Most people can appreciate the beneficial technologies will that depend upon the scientific training and research that goes on in universities, although not everybody recognizes the debt that society owes to higher education in such developments.

Higher education can mean more than learning about science or classical literature. My own first learning experience in higher education had little to do with a classroom. I found myself in contact with a much wider variety of people that I had ever previously encountered. That in itself broadened my perspective on life. Classes in history, as well as classical music and literature, helped to give me a sense of the life and culture of other parts of the world. My greatest benefit from higher education was a curiosity about the world that I had lacked before.
Let me turn for a moment to an observation about my field, economics. Many of the economists who other economists recognize for making the greatest contributions to their field are people who benefited from exposure to different fields. The winner of the not-really Nobel Prize, Kenneth Arrow, was trained as a meteorologist during the Second World War. Similarly, Nobelist Paul Samuelson worked with mathematicians, engineers, and physicists developing radar during the war. Phil Mirowski’s Machine Dreams is filled with such examples. Of course, scientists have gotten inspiration from similar experiences.

In short, education in general, on is not something that can be easily measured in objective terms. Ideas, which initially seemed kooky, often later turn out to be crucial for future development.

The me finish by saying that my complaints about are not the product of some disgruntled academic, upset over low pay, mistreatment, or any other personal problems. I enjoy what I do. In fact, if I were willing to retire, I could teach half-time for a few years while collecting my pension. If I did, so my income would increase but I can only do so for five years. Consequently, I pay to keep teaching. I have good relationships with my chairman, my dean, and president of the University.

My anger is directed toward the forces that are working to destroy a world, which I love.

The Demise of Higher Education in the United States

The United States has experienced two major growth spurts in higher education. In 1862, the Morrill Act changed the face of higher education will by granting each state 30,000 acres of public land for each senator and representative. Sale of the land was intended to create an endowment fund for the support of colleges in each of the states. Prior to the creation of the land-grant colleges, higher education was predominantly intended for wealthy students and those intending to serve as clergy. The land-grant colleges expanded higher education to different regions and a different class of students. This expansion, however, was still incomplete.

The second episode was the G.I. Bill, which was not so much intended to promote education, but rather to prevent another Bonus March, in which angry soldiers returning from the First World War demanded early payment of their promised bonuses to help cushion the hardships of the Great Depression. Offering education was expected to channel potential discontent.

The G.I. Bill paid a different kind of bonus. The doors of colleges and universities opened to people for whom higher education would have been out of reach. Their skills proved invaluable during the postwar economic boom. A second unintended bonus flowed from the G.I. Bill. To accommodate the massive inflow of students, colleges and universities built infrastructure to expand their capacity to handle so many students. After the wave of veteran enrollments dissipated, colleges and universities had to choose between letting this infrastructure sit idle or enrolling more students. Continue reading

Very Positive Review of The Invention of Capitalism,

Here is the beginning of a very positive review of my book The Invention of Capitalism, which begins:

Our popular economic wisdom says that capitalism equals freedom and free societies, right? Well, if you ever suspected that the logic is full of shit, then I’d recommend checking a book called The Invention of Capitalism, written by an economic historian named Michael Perelman, who’s been exiled to Chico State, a redneck college in rural California, for his lack of freemarket friendliness. And Perelman has been putting his time in exile to damn good use, digging deep into the works and correspondence of Adam Smith and his contemporaries to write a history of the creation of capitalism that goes beyond superficial The Wealth of Nations fairy tale and straight to the source, allowing you to read the early capitalists, economists, philosophers, clergymen and statesmen in their own words. And it ain’t pretty.

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