Neoclassical Indoctrination

This story is from a reporter who enrolled in an introductory economics course at the University of Chicago to learn about "left-wing indoctrination" in college courses as practiced in economics:

What We Learn When We Learn About Economics, by Christopher Hayes, These Times, November 2006: There’s a case to be made that the single most intellectually and politically influential neighborhood in the United States is Chicago’s Hyde Park. Integrated, affluent and quiet, the 1.6 square mile enclave on the city’s south side is like a tiny company town, where the company happens to be the august, gothic, eminently serious University of Chicago. Students at the U. of C. sell T-shirts that read “Where Fun Goes To Die,” and the same could be said of the neighborhood, which until very recently had a bookstore-to-bar ratio of 5:2.

But the university is probably best known for the school of economic thought it has produced. When the Chicago School first emerged in the ’50s, its zealous support of free markets and critique of government intervention were considered reactionary and extreme. ...

Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy. In the United States, young members of the middle and upper-middle class first learn its precepts in the academy. Polls routinely show that economists and the general public have widely divergent views on the economy, but among the well-educated that gap is far narrower. A 2001 study ... showed that those with college degrees are more likely to subscribe to the views of neoclassical economists than the general public...

Conservatives have long critiqued academia for the ways professors use their position to indoctrinate students with left-wing ideology, but the left has largely ignored the political impact of the way people learn economics, though its influence is likely far more profound. So in order to find out just what students learn when they learn economics, I headed down to Hyde Park, where the University generously let me enroll in “Principles of Macroeconomics” for a quarter.

Allen Sanderson, 62, has been teaching the intro macro and micro courses at the university for the last 18 years and though he initially appears somewhat grave and understated, it is quickly apparent that he is a master of technique. ... “When you hear, ‘The economics department at U. of C.,’ one’s free association is ‘pro-business, greedy bastards,’ ” says Sanderson (pause, jaw thrust) in the first lecture. “I tend to think that’s not the case. Greedy bastards we may be, but we’re not pro-business. Republicans tend to be very pro-business. It’s a genetic defect of Republicans. Democrats tend to be anti-business, another genetic defect. We are not anti-business; we are not pro-business. We are pro-choice in the ultimate sense of pro-market. Based on empirical work, macro and micro solutions are probably better worked out by private markets than government intervention.”

His second lecture begins with a thought experiment. Noting that there are only 26 spots left in the class for the 52 students who would still like to enroll, he asks, “How should we figure out who gets to go into the class?” The students—eager, studious and serious—shoot their hands up and offer a variety of ideas: Seniority? First-come, first-serve? Ask prospective students to write an essay? It takes about a minute for a confident young man to give the answer Sanderson’s looking for: “auction by price.”

“As a reasonable indication of how much you want something, how much you’re willing to pay is a pretty good means of measuring,” Sanderson says. “A lot of things in economics will turn in one way or another on price. Price has a lot going for it as a generalized expression of commitment. ....”

This makes sense, but I’m uneasy. Wouldn’t giving a place in class to the highest bidder result in the rich students getting in and the financial-aid kids being left out? And since people don’t have equal amounts of money to spend, how good a measure of desire is price in this situation?

“Random and first-come have the benefit of being fair,” Sanderson says, anticipating the objection. “There’s an interesting dichotomy of fair vs. efficient.” But, Sanderson asks, what, really, is fair? If we think some kind of random lottery drawing was a fair way of getting into the class, would that be a fair way of awarding grades? “Obviously not!,” I think. Why? Sanderson lets us mull that over, but the answer floats up immediately: because I work hard for my grades and I deserve them....

“We’re trying to balance these things out,” Sanderson continues. “What’s efficient? What’s fair? Often they are in tension.”

Efficiency is the Chicago School’s defining value. The free market economists who came before— most notably Austrian Friedrich Hayek—offered a philosophical critique of the political consequences of state regulation and control of the economy. But Milton Friedman, his colleague George Stigler and the entire Chicago School focused on the actual economic problems of state control, namely, inefficiency. They rejected Keynes’ contention that markets function best with routine government intervention... Chicago School theories gained popularity when global capitalism hit a major funk in the ’70s—a period of slow growth and high inflation. Friedman argued, plausibly, that it was too much government that had caused the problems.

What may seem a subtle rhetorical shift had major consequences. It transformed what had been conservatism’s moral argument about capitalism bestowing the most benefits on those who worked the hardest—and the inherent injustice of a coercive state forcibly redistributing capital—into a technical argument about the inefficiencies associated with nonfree- market solutions and the perverse incentives that made any social programs destined to fail. ...

Because neoclassical economics always presents itself as a value-neutral description of the world, its ideological commitments can be adopted by those who learn it without any recognition that they are ideological. This is the source of some very spirited debate within the field itself. A growing global movement of “heterodox” economists has criticized the ideological confines and blindspots of the neoclassical approach. As Nobel Laureate Joseph Stiglitz put it, the dominance of the neoclassical model is a “triumph of ideology over science.”

In the popular press, however, such dissent is almost entirely absent. When protesters disrupted the 1999 World Trade Organization meeting in Seattle, WTO officials, mainstream economists and the New York Times’ Thomas Friedman ignored the fact that in much of the world neoclassical reforms had failed to produce the promised growth. Friedman went so far as to dismiss the protesters as “flat-earthers.” For Thomas Friedman (and, indeed, Allen Sanderson), people can’t “disagree” with neoclassical economics. They can only fail to understand it. ...

Students are most likely to have been exposed to macroeconomic issues within the context of political debates about free trade, the size of the budget deficit, tax rates, etc. In order to assure students that they aren’t just learning a set of political talking points, he must go out of his way to hammer home the fact that what he’s offering is unbiased and nonpartisan: positive not normative, facts not opinion. “I don’t have a dog in this fight,” Sanderson tells the students. So every joke about George Bush is followed by a joke about Hillary Clinton, every shot at a Democrat quickly balanced by a shot at Republicans.

The effect, intentional or not, is that Sanderson appears to represent the exact center of the political spectrum, and that can leave students with a strange perception of just where the center lies. During a discussion of flat, progressive and regressive tax structures, a student asked about the argument against the flat tax. “What’s wrong with the flat rate tax?” Sanderson replies. “Well, the bad thing was that Steve Forbes was the spokesman. It’s not obvious that there’s that much wrong with it. There’s sort of a movement out there for a flat rate tax. Because it strikes some people: What could be fairer than that? It also doesn’t distort incentives. It has a lot going for it.”

It’s true that there’s “sort of a movement” for a flat tax, but those in favor of what would be the single most regressive redistribution of wealth in American history are not located in the political center. ... The students sitting around me, I start to fear, are going to walk out of the lecture thinking that the flat tax is a sensible, centrist idea. And as thousands of students pass through classes like Sanderson’s every year, I worry that it will become a sensible, centrist idea.

Sanderson’s politics aren’t one-dimensional, and he certainly isn’t a propagandist. But the fact remains that he has the predispositions of someone who “learned economics from Milton Friedman.” ... [W]hen equity and efficiency tradeoffs ... arise, economists like Sanderson are systematically biased in favor of efficiency because that’s what they are experts on. Efficiency they can measure and analyze. Fairness? That’s the turf of philosophers and politicians. This tendency is most pronounced in discussions of economic growth, and how the benefits of that growth should be distributed. Sanderson paraphrases his Nobel Laureate colleague Bob Lucas, who says that “once you start to think about the benefits of high growth, it’s hard to think about anything else.” In other words, first worry about how best to grow the pie, then how to slice it up. Let efficiency trump equity, create wealth, and then you can use the extra wealth you’ve created to alleviate inequality.

This makes a certain amount of sense. But when this rhetoric comes to dominate our politics, the problem of inequality is never addressed. Now is always the time for growing, later is always the time to address concerns about equity. ...

As taught by Sanderson, economics is a satisfyingly neat machine: complicated enough to warrant curiosity and discovery, but not so complicated as to bewilder ..., and once you’ve got the basics of the model down, everything seems to make sense. As the weeks go by, ... I come to love the class. The more reading I do, the more sense the op-eds in the Wall Street Journal make. The NPR program “Marketplace” becomes interesting. I even know what exactly the Fed rate is. A part of the world that was blurry and obscure begins to come into focus. My classmates seem to feel the same way. “I never thought I’d be interested in economics,” one sophomore told me. “Sanderson convinced me I was.”

The simple models have an explanatory power that is thrilling. Once you’ve grasped the aggregate supply/aggregate demand model, you understand why stimulating demand may lead, in the short run, to growth, but will also produce inflation. But the content of that understanding turns out to be a bit thin. Inflation happens because, well, that’s where the lines intersect. “A little economics can be a dangerous thing,” a friend working on her Ph.D in public policy at the U. of C. told me. “An intro econ course is necessarily going to be superficial. You deal with highly stylized models that are robbed of context, that take place in a world unmediated by norms and institutions. Much of the most interesting work in economics right now calls into question the Econ 101 assumptions of rationality, individualism, maximizing behavior, etc. But, of course, if you don’t go any further than Econ 101, you won’t know that the textbook models are not the way the world really works, and that there are tons of empirical studies out there that demonstrate this.” ...

Of course, some elision and simplification is unavoidable. Sanderson’s not trying to create future economists, but rather give students “some sort of cultural literacy” about how the economy works. He often starts class by leading us through a kind of Socratic deconstruction of a newspaper article that commits some egregious economic sin. ...

Sanderson is so likeable and masterful that the entire semester goes by with the class eating out of his hand: They take careful notes, class attendance is almost perfect every day and each pre-exam study session is packed. But the final unit of the class is devoted to free trade, and suddenly things change.

Sanderson begins the class by telling us that “in trade, there’s an enormous amount of agreement between economists about what constitutes the truth. The disagreements are between economists and everybody else.” His central contention is that allowing any two given countries to trade their goods freely will necessarily make both countries better off. It’s the same logic, he says, that we use everyday. When you decide to have someone do your dry cleaning or fix your car, you’re deciding to specialize in what you do best, and trade for the other things you need. Specialize and trade: That was Adam Smith’s central insight into the nature of the “wealth of nations,” and, Sanderson says, it remains as true today as it was then.

But when lecturing on trade, Sanderson’s tone is noticeably different. His agenda and ideology are more up front, such that the classes felt for the first time almost—almost—like propaganda. And during these lectures, something incredible happens. The class rebels. Whereas for the duration of the quarter Sanderson had made the students feel as if he was their guide in seeing through the Matrix, suddenly Sanderson morphs from being Laurence Fishburne to the FBI agent in a suit. The class prods and pushes back as if they are being fed spin. As Sanderson talks about the importance of nations specializing in whatever they have a comparative advantage in, a student raises his hand: “Isn’t there a problem if you put all your eggs into one basket, and then if there’s a problem with that sector you’re in trouble?”

That ends that day’s class, but it continues in the next. Sanderson argues that liberalized trade creates more jobs than it destroys. “Free trade creates winners and it also creates losers. It turns out that winners are quantitatively larger than the losers.” A student asks, flat out, “Why are we to believe that?” Sanderson restates his point, but the student holds his ground, saying he’s read that there simply doesn’t exist an accurate measure to figure out how many jobs are being created and destroyed. Sanderson concedes that this is true, but insists it “must” be a net positive.

You can hear papers rustling and side conversations breaking out. Hands begin to shoot up and Sanderson began to sweat noticeably as the mutiny spreads. One student asks about attaching labor or environmental protections to trade deals. Sanderson replies that such stipulations (like requiring workers be paid $14 an hour) simply operate like tariffs, raising the price of goods and “saving jobs in the U.S., union jobs that are relatively high paid, and taking people in developing countries who are not well off and making them poorer. I tend to be against laws that make poor people poorer.”

“OK,” responds the student, who with a beard and long hair looks a bit like the student radical who’s been missing all quarter. “Let’s say the standards are not ridiculous. The workers have a right to organize, or we can’t pollute the only source of the village’s water supply.”

“How do we define what’s ridiculous?,” Sanderson shoots back. “Once you start, it’s very difficult to draw the line, in terms of what workers have. Should other countries not trade with the U.S. because we have capital punishment? Should we not trade with countries that don’t allow abortion? My problem with sweatshops is, quite frankly, the only potential definition is people who work long hours for low wages, and that’s what the U.S. was 120 years ago. A lot of what economics is about is how to increase the world’s income, and not for Bill Gates and Oprah, but for the world’s poor. Unions don’t like trade agreements. They’ve never seen one they like, and they want to find a reason in environmental standards or things like that.”

“We do draw the line every day,” the student responds, not bothering to raise his hand this time. There are hands up all over and the class has now devolved into a free-for-all. “We don’t trade with Burma. We didn’t trade with Iraq. We do trade with Saudi Arabia. It’s not impossible to re-imagine how to draw the line.” Sanderson is not winning this argument. “These are tough issues,” he says, and the class ends. ...

For eight weeks, Sanderson had been the model of equanimity, the centrist arbiter of competing factions, and because of this students seemed to accept his word without question. But on the very first day of class he’d tipped his hand that he was an “ardent free-trader,” and his clear desire to have students come away believing, as he does, in the benefits of free trade, was backfiring.

By the next class, Sanderson has regrouped, and calmly and methodically leads the class through a Socratic dialogue. Tobacco farmers have lost their jobs because we smoke less: Does that mean we should have the government do something about it? People lose their jobs all the time because the work they do—whether opening envelopes for magazine subscriptions or wrapping Hershey’s Kisses—becomes automated. Trade works the same way as technological progress: While it might put some people out of work, in the end, it makes everyone better off. The class is nodding, attentive and silent.

Furthermore, free trade is a moral imperative because it makes poorer countries better off. “I don’t want to sound like Miss America,” Sanderson says as he wraps up the final class of the quarter. “I think world poverty is where it’s at in terms of where you try to place resources. My sense is that significant redistribution of wealth is probably not the answer. Part of it is that there is not enough wealth to redistribute. There’s not a lot of rich people and too many poor people. And the gap between rich and poor is too vast. It comes down to economic growth, how fast we can make economies grow. Economic growth does tend to raise all boats.” ...

Comments

[calmo]

Well, it sounds like Sanderson generated some discussion.
I don't know if Dem to Republican covers the entire political gamut of the ideological spectrum, but it does sound like it was an engaging course with an engaging prof and an engaged class.
So, would you, classroom lurker, expect to hear an informed, fair and balanced view or merely indoctrinated view of "The Left-wing Indoctrination as practiced at the Economics dept at U of C"?
I think the clue is in that remark that "fair" is not in the province of economics. Possibly philosophy or political science Sanderson tells his class, but not economics. (Did people object or were they too attached to their indoctrination?) [Was Sanderson genuine or genuinely provocative or, maybe, also attached to his indoctrination of just telling you, tabla rasas, the score?]
O those unsung moms who did inform us what was fair and what was not, --and likely to get your bottom warmed over.
Yes, moms who likely voted more strongly than others for that redirection last Tuesday.
How many moms in Sanderson's class? Not enough.

[Bruce Wilder]

"Based on empirical work, macro and micro solutions are probably better worked out by private markets than government intervention."

Nothing ideological there. No, siree, bob.

"Efficiency they can measure and analyze. Fairness? That’s the turf of philosophers and politicians."

Except when its time to ask us, "Is market exchange morality in action?" (previous post)

[Richard]

Policy is not merely economic policy, and efficiency, while admirable, is but one criterion by which to evaluate policy. Being Pareto optimal is not always enough, and sometimes it is necessary to provide the greatest good to the greatest number of people. There is a case to be made too for a minimum safety net, and measures which do nothing for efficiency but do enhance the government's legitimacy.

[evagrius]

Quite an interesting article. I think the questions of what is "fair" are philosophical and political and, because they are, ultimately economic.

I find fascinating the notion that economics does not have to explore such questions, ( at least in Econ 101).

Again and again, it must be stressed that economics is not about things, but about people.

Why is it so hard for that to be accepted by economists?

[Stormy]

Neoclassical economics will pass—for a number of reasons.

First, the very idea of “free trade” is a myth, with little if any connection to reality. As one student pointed out, we make decisions every day on how and when trade will occur. Consequently, any hope of empirically measuring the advantages of trade with no restrictions is a pipe dream. The central tenet is an act of faith.

Secondly, until we look closely on how and for whose benefit agreements are made, we will never understand the actual mechanisms that are an integral part of globalization and the free trade mantra. The devil is in the details, but the details are given short shrift in almost every economic blog I have read. In what blog has the Doha round been closely examined? Or the NAFTA agreement? Or CAFTA? Lazy and weak minds simply endorse these agreements with the “free trade” mantra.

Thirdly, distribution of wealth is a key issue. It is never addressed.

Finally, laws and institutions are there to protect each one of us from the rapacious and the greedy and the criminal. Should the WTO, for example, turn a blind eye to sweat shops in developing countries? Should not the WTO insist that labor have a right to organize and bargain collectively? Notice how cavalierly Sanderson tried to dismiss labor’s rights with his $14/hour comment. But the student did not bite at that silly reduction; instead, he talked about the rights of labor to bargain freely and without restraint.

And, yes, what about the environment?

I am confident that history will judge neoclassical advocates harshly. Neoclassical economics will be discarded as a child’s plaything, lacking any subtlety or wisdom, a fool’s pursuit. It is a dangerous fiction; the havoc it will wreak on the planet in the next twenty years will take a century to undo.

[dissent]

By the time anything is called 'neo-classical' its time in the sun is over.

[Hugechav]

Free traders are just lazy. Sanderson's definition of "efficiency" seems to be constructed so simply that even his students can follow it.

The difficult part is where policy comes in to decide how to weight the real externalities that are always there: the environment, job training, risk, etc. His real shame is in not mentioning this.

[Ben Litchman]

"The students sitting around me, I start to fear, are going to walk out of the lecture thinking that the flat tax is a sensible, centrist idea."

Heavens, no!

What an absolute joke. But that's to be expected from "In These Times". There are serious critiques of globalization (e.g. Amy Chua's "World on Fire"), but don't look to find any in that magazine.

"Based on empirical work, macro and micro solutions are probably better worked out by private markets than government intervention."

If he's talking about the vast majority of cases (I doubt he means all issues; the Chicago school is much more moderate than the Austrian school), his statement is utterly reasonable, and backed up by mountains of evidence.

We have nearly a century's worth of proof that socialistic policies are bound to fail. In fact, for some of those policies, like price controls, the timeline extends back thousands of years. If anything in history has been a "dangerous fiction," it's the idea that granting more power to the government will solve all our woes.

[Robert]

On free trade, Sanderson was shown decades ago to be wrong on his own terms.

[reason]

Re Scope of Economics: I have heard this sort of view of things before - when I worked in a Central Bank I heard the statement "Economists should present the economic case, leave the environment to environmentalists."

But surely this is dumb. Just because costs are external does not mean they are not costs. "Efficiency" can only be measured in terms of money, if externalities are internalised. (Please define what you mean by efficiency! Classic case, in western Economies it is now "efficient" to throw out a $300 appliance if a 20c part fails). It reminds me of a colleague who returned from Chicago with stories of tests with black and white answers to questions such as "California is economically speaking overpopulated because it has lots of free National Parks".

My question in reply - if economics is so narrowly defined, is it useful, or is it another version of debates about how many angels can dance on a pinhead.

[calmo]

See? we all want in on Sanderson's class --a real testament to his ability as a teacher, a provocateur (where's that Isabel to confirm this sly business? Recall her A-H and just know that probably Sanderson is our's.).
eva's noteI think the questions of what is "fair" are philosophical and political and, because they are, ultimately economic.from our resident and no doubt wildly left-wing, contentious and altogether difficult (not to mention biased) philosopher (huge improvement upon the less efficient Don) strike me as quite marketable.
But first there is this difficulty: how do we get provocateur Sanderson (possibly undeclared philosopher in training)[we can hope people] to unloose (maybe not so far as unleash) his adamant dismissal of this new fangled thing that is such an improvement upon efficient economics: fair economics? It's not fair to just dismiss it out of hand and perhaps worse to contract it out to philosophers or possibly communist political scientists.
It is notoriously difficult to measure fairness Sanderson might say; it is notoriously inefficient to try and that is why we efficiently pass it along to those to whom the opportunity cost of arguing is zero: the philosophers.
Maybe.

[a]

"“A little economics can be a dangerous thing.” Well, that's what economists would like to thing. My guess is that a lot of economics can be just as dangerous...

[a]

"“A little economics can be a dangerous thing.” Well, that's what economists would like to think. My guess is that a lot of economics can be just as dangerous...

[reason]

You would think that the software could be made clever enough to recognise and remove duplicate postings.

[evagrius]

calmo- thanks for the complement, I think. I'm not sure what bias I have, to tell the truth.
As for "left-wing", I'm not sure what that means either.

I did ponder further on Sanderson's class. Someone above has pointed out that "efficiency" is a rather nebulous term..

I'd like to point out that in his book, The Technological Society, Jacques Ellul argued that effiency is the hallmark note of technology. If that's true, then the role of economists is really similar to that of auto mechanics, that is, they're supposed to keep the machines humming nicely and without too much effort.

I rather like that idea; Milton Friedman in blue coveralls with a tool kit. Alan Greenspan, a little smudgy, looking for an Allen wrench to fix that darn inflation that keeps poppingg up.

Yes. I like it. It has a nice touch of humility to it.

[save_the_rustbelt]

Econ professors will have credibility on free trade when they voluntarily give up tenure.

But then Mark and I have had that discussion already. Good morning Mark!

[ken melvin]

Always the line about how this is how it works. How about how should it be? Why not demand that US owned businesses invest in foreign companies that pay very good wages and produce goods for the domestic markets building up that economy instead of exploiting the people. Why not limit the markup for goods produced in Bangladesh to forty percent? Does someone always have to be exploited for an economic system to work?

[spencer]

The problem I have in what we teach in intro econ was passed over without a second thought. My problem is with the idea of efficient.

When economic theory talks about efficiency it is talking about a very narrow balancing of supply and demand under extremely limited conditions that is relevent for talking about certain markets under very limiting assumptions.

But the term efficient in no way implies that free markets are not wasteful. We talk about supply adjusting and claim this is efficient. But what it means is first the market produces a surplus and then has to cut production to reduce supply. But this means we misallocated too many resources to production in the first place and now have to make these resources idle -- unemployment -- to bring supply and demand back into balance. By its' very nature this is a highly inefficient and wasteful process. Essentially markets are almost always wrong -- first producing too little then too much and back to too little. But students walk out of an into class thinking free market are efficient and do not waste resources and that only government is wasteful.

Free markets are great at creating wealth and as Churchill said about democracy, it is a horrible system but it is still better then anything else we have tried.

But the image we have student walk out of intro econ with is a piece of pure propaganda that carries over into our every day life. You go to any right wing blog and this image that markets are efficient dominates the paradigm they use to understand the world. They can not conceive that markets make mistakes and sometimes misallocates resources just as government does.

[adam]

"The effect, intentional or not, is that Sanderson appears to represent the exact center of the political spectrum, and that can leave students with a strange perception of just where the center lies."

oh my goodness! we might have students questioning conventional wisdom!

and at what point did sanderson say "i represent THE EXACT CENTER so adjust your bell curves accordingly"?

and this is called indoctrination?

[evagrius]

spencer- Exactly right. "Efficiency' can really only apply to machines or machine-like actions. That is, one can tinker with a machine to make it go faster, ( car engines), or do more maneuvers etc; That can be measured.
But markets are not machines, they're fictional or abstract creations, ( in the same sense money is), that allow transactions between humans. Because they're fictional or abstract, they can be created any number of ways. There are no "markets-in-themselves" to use a Kantian terminology.
That means that markets can be created to reflect certain social/ philosophical/ religious values that can be "measured" in a sense.
The present-day market reflects the values that society now holds. Those values are, ( as far as I see), the accumulation of material wealth annd the expansion of means to create more wealth. They are not values that hold the needs of future generations in view, nor the environment, nor the spread of economic and social equality to as many as possible.

[Lafayette]

Hayes: "Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy."

Whoever told him this at the U of C? They should both get their heads examined and ask for a bulk discount rate.

Once again, we see the mischievous hand of American journalism that cannot seem to report on a subject without underlining its "inter-galactic" importance to mankind.

Hayes should spend some time outside the stateside cocoon to understand that if free markets are having a field day at the moment; it is far from having become a "foundation for the entire global political economy".

Let's get the history right, boys and girls (of the U of C). Europe exited WW2 with the challenge of a tremendous reconstruction effort that engendered the necessity of a Common Market (that led to the European Union). This inter-nation agreement was, more so, a tariff barrier that protected internal markets against foreign competition, and allowed Europe to redevelop its industrial base.

Half a century later, the GATT round of the mid-nineties last century breached the tariff wall and a tsunami of Chinese products subsequently flooded in. The shock was tremendous, and Europe is still making headway in getting its population to understand what happened. (And, particularly, why no one predicted the tsunami.) American laborers have been equally disconcerted.

Market deregulation is an EU priority, but in no way will Europeans sacrifice the idea of social justice that it has knitted into its national structures. It cannot afford to do so, because it is not like the US. Lose your job in Bordeaux and you don't go looking for another 1330 kilometers away in Berlin. Neither in Barcelona, much closer. In the US, what’s thirteen hundred kilometers (720 miles) when looking for a job? It’s almost next door.

So, free markets be damned should it mean the pauperization of a nation when sacrificed on the altar of dislocation to the "lowest cost".

The expression "free markets" does not mean "free-for-all markets". The concept of social justice is paramount. What is life about? Shareholder portfolio appreciations or the ability of each individual to have a decent job to support his/her family? I suggest the latter is the priority.

As well, if you think that 14-year old Chinese girls working in sweatshops 60 hours a week so you can sport a Nike sweat suit around campus is one of the fruits of a world-wide "free market" system, then, well, think again.

And, if the U of C economists think the world is really flat, then perhaps they'd like to go up against the economics professors from India piped into stateside classrooms to deliver EC101 lectures? The Indian professors are soooo much cheaper and their English soooo much more elegant ...

[Lafayette]

Sanderson: "My sense is that significant redistribution of wealth is probably not the answer. Part of it is that there is not enough wealth to redistribute. "

Condescending academic troglodyte. Malthus would have been proud of this one.

There IS more than enough wealth to redistribute. Humans create wealth - they can redistribute it. That is NOT the problem. The challenge is seeing that it is redistributed fairly. Not equally, but fairly.

Learn the difference between these two words, equally and fairly, Professor Sanderson. Therein lies the economic challenge of this new century.

[adam]

lafayette-

is it "fair" for 200 million chinese to be lifted out of poverty at the expense of the western middle class job security?

since the end of the cold war the number of people living under the u.n. definition of poverty has been cut by roughly half.

but we don't have job security anymore and therfore the noeclassical model it pure imagination and hold no truth.

same old same old.

[Lafayette]

Melvin: "But students walk out of an into class thinking free market are efficient and do not waste resources and that only government is wasteful."

Markets are in dynamic equilibrium. Just because a book or blackboard shows the Demand and Supply lines statically does not mean that they do not budge.

In fact, those crossed lines are an enormous simplification of what the markets are actually doing. To think that the S-D presentation is "efficient" is an attribute that we like to give to elaborate/decorate its concept.

What the curve does not show is what happens politically when the demand retracts stimulating unemployment. Modern government today doesn’t twiddle their thumbs waiting for the curves to reestablish equilibrium at a higher level of unemployment. Because that is socially unacceptable, especially over a long period of time that could very well provoke social unrest.

Which is why Keynes came up with the idea of government stimulated demand intervention? That too is part of the instruction that students should have presented. Not just the tidbits about free-market efficiency.

[Bernard Yomtov]

“How do we define what’s ridiculous?,”

We use our brains. The notion that because there are gray areas there are not also black and white areas is silly.

[piglet]

Concur with spencer. The worst flaw in this article is that it accepts unwuestioning the neoclassical definition if what efficiency is, and here we see more than anywhere else how successful the indoctrination has already been. It simply isn't true that unregulated free-market capitalism is efficient. Only because much of the true cost of economic activity - environmental, social, health cost - is ignored or externalized/socialized, can an economic system based on the destruction of the natural resources on which our survival depends be declared "efficient".

[Ben Litchman]

"Always the line about how this is how it works. How about how should it be? Why not demand that US owned businesses invest in foreign companies that pay very good wages and produce goods for the domestic markets building up that economy instead of exploiting the people. Why not limit the markup for goods produced in Bangladesh to forty percent? Does someone always have to be exploited for an economic system to work?"

How it should be? Who, might I ask, doesn't want to live in a utopia? The proper question to ask is: How can it be? Economics is a science that accepts the unfortunate reality of trade-offs. If this is bothersome to you, study poetry.

If US-owned businesses were legally forced to invest only in companies paying wages comparable to those in the US... what would be the point in going overseas in the first place? Corporations aren't that philanthropic.

And who is "exploited" in this scenario? The US businesses offer more choices to these workers. The wages are atrocious, the conditions are awful -- in relation to ours. Compared to the options they had before, many impoverished people clearly have decided for themselves that this is an improvement. Tim Harford reported that about a million people each month are getting lifted out of poverty in China since they opened their markets.

"Humans create wealth - they can redistribute it. That is NOT the problem. The challenge is seeing that it is redistributed fairly. Not equally, but fairly."

This is starting to get silly. How many more decades of foreign aid, Live Aid concerts, etc. are we going to have to go through before people stop thinking of themselves of saviors fighting against greedy demons and start examining evidence to see what actually works to help pull people out of poverty? A zillion people have documented the problems and suggested better alternatives. Two quick names are William Easterly and Hernando de Soto.

If only those who studied economics, political science, and similar fields had more humility and felt themselves constrained by actual evidence instead of their whims and fancies, there would be fewer harebrained government schemes messing up the lives of poor people around the world.

[James Killus]

There is a famous story about Uri Geller doing his "starting a stopped watch trick" where he says, while holding the watch, "Notice that at no time am I touching the watch!" And the audience let him get away with it. Besides, he was also on a radio broadcast.

All the "neo-classical" talk about efficiency is about the wealth going to those who "created" it. They never, ever, talk about those who merely inherited it. Yet eventually, all great wealth is inherited, and those who inherit that wealth spend more than a bit of that wealth justifying why they should be the ones who have it. Somehow, there seem to be a lot of reasons why such a system is "efficient."

Nor do economists generally have a good way to deal with the problem of how to set the compensation for those whose jobs entail setting compensation. Simple observation suggests that this must be the most important and productive job in all of the economy, judging from the fact that such people are invariably the best compensated. What a coincidence. Or is this just a matter of "fairness" having no connection to "efficiency?" I would have thought otherwise, but I'm sure someone has a model that proves me wrong...

[piglet]

"My sense is that significant redistribution of wealth is probably not the answer. Part of it is that there is not enough wealth to redistribute."

Surely the Roman upper class would have agreed with that. Any upper class in the history of the world, in fact. Given that any one of us is hundreds to thousands of times richer than any member of the enormous global under class, we all act like the Roman aristocracy when it comes to global fairness and, God forbid, redistribution.

"There’s not a lot of rich people and too many poor people. And the gap between rich and poor is too vast." The fact that the gap is "too vast" contradicts his claim that there is not enough to redistribute. But of course, this guy is simply immune against realizing the contradictions in his own arguments.

"It comes down to economic growth, how fast we can make economies grow. Economic growth does tend to raise all boats."

In the literal sense of causing sea levels to rise, he may have a point.

How many of you know the most important mathematical equation in the universe? No, it's not E=mc2. Ask any economist about the growth function. I bet it isn't taught in Econ 101. If a variable grows 5% per year, how long does it take to multiply by 1000? You can calculate this in your head. If p is the growth rate in percent, then 70/p is the time it takes for the variable to double once. 700/p is the time it takes to multiply by 1024 (2 power 10). So the answer is 140 years. This is not the distant future. On a planet that is already on the brink of ecological desaster, further growth of the scale called for by economists is simply materially impossible. With a growth rate of 3.5% (which many economists would call "moderate"), it would take only 60 years to multiply by 8. You can't even envision a world with 8 times the number of cars we have today. There aren't enough resources on this planet for this kind of growth.

And forget what you heard about "sustainable growth". "Driving more S.U.V.’s causes harm, but taking more piano lessons does not." (Robert Frank) Very nice, but did Frank calculate how fast the piano lesson sector will have to grow in order to offset stagnation in the automobile sector? And how will all the kids get to their lesson, maybe by car? Won't they need millions of new pianos? Etc. It's delusion. Economic growth will soon be a phenomenon of an age past, and this is not bad news if we do the right thing and prepare for it. The fact is, there is enough material wealth on this planet for us all to live comfortably, the problem is it is unequally distributed and inefficiently organized.

[evagrius]

I wonder what would have happened in the Late Middle Ages if there had been an international trade in saint's relics?
In a sense, there was an international trade limited to Christendom, but I'm thinking of a truly international trade including Hindu, Buddhist and Moslem saint's relics along with assorted others.
Would the results be similar to what's going on now?

Were there any regions that had a competitive advantage in producing saints?

[Ben Litchman]

James Killus,

Four out of five American millionaires did not inherit the money.

Piglet,

Environmental hysteria is an old pastime. People have been certain that such doom is on the horizon for many years, and thus far they've been wrong. (It doesn't necessarily follow that they're wrong now, but it should give you pause.) If you don't believe me, look up what Paul Ehrlich was saying several decades ago, or what Thomas Malthus was saying a couple hundred years ago, and compare their predictions to what eventually happened. These are but two of many examples.

[Bruce Wilder]

"The fact is, there is enough material wealth on this planet for us all to live comfortably, the problem is it is unequally distributed and inefficiently organized."

While I certainly acknowledge that wealth is unequally distributed, and organized with less than perfect efficiency, it is not clear to me that "everyone" on this planet can live comfortably, unless we severely limit the number of humans, to a number considerably less than current or projected.

Human population appears on track to peak around 2050 at 10 billion. The planet appears capable of supporting, perhaps, on the order of 1 billion people with an OECD standard of living.

[evagrius]

Paul Erlich wasn't yakking about the environment nor was Malthus. They were yakking about shortages of basic goods and food.
The environmental crisis is new only in that scientists now have a much better grasp, having an entire set of data they never had until recently.
Erlich was a strange fellow fixated on population growth. He didn't pay much attention to consumption, pollution etc; nor did he argue that it was necessary for the West to stop its profligate way, ( he just wanted poor people not to have children, a rather different attitude). I think the same could be said for Malthus. I think both believed that rich people were far more responsible than poor people.

[adam]

piglet-

delusion? how about the fact that a large chunck of the wealth in the west is is in home equity and retirement accounts. just how do you propose re-distibuting these assets to the rest of the world?

who is going to grow the food after all the farms are redistributed to the wolrd's poor. what about all of the loans on these assets. when those that get them don't know what to do with them and virtually every bank in the world is forced into default.

this experiment was tried. it failed. food production collapsed and virtually no innovation resulted for many years.

USSR

you are just wrong. redistribution of weath was a massive failure. redistribution of income is another matter as long a profit incentive remains.

[Bruce Wilder]

Ben Lichtman: "Four out of five American millionaires did not inherit the money."

Care to back up that factoid with a citation? I don't see how that could be construed as anything other than seriously misleading. Only some extremely narrow definition of "inherit the money" gets you that result.

Most rich people are the children of rich people, and have become rich as a result, in part, of all the advantages that accrue to the children of rich people, including but certainly not limited to having their parents actually die and bequeath assets.

[adam]

Most rich people are the children of rich people, and have become rich as a result, in part, of all the advantages that accrue to the children of rich people, including but certainly not limited to having their parents actually die and bequeath assets.

care to back that one up Bruce?

[Bruce Wilder]

adam, I've read your comments in this thread, and I am not going to be engaging in colloquies with you on any subject.

There are plenty of sources of statistical and sociological studies of social mobility, which more than back up the contention that a majority of rich people are the children of rich people. This really should not seem like a controversial statement, needing any special documentary support in a blog comment. Given the tenor and direction of your comments, I am not surprised that you see it otherwise; in my opinion, you need a general and thorough reality check, which I do not have the time or inclination to provide, piecemeal; that's why this will be my only and last exchange with you.

[Ben Litchman]

Evagrius,

What would be the point about worrying about population growth if you were content that the levels of consumption could be sustained and could continue to grow?

But if you need an explicit example of what I meant, look into the famous bet between Ehrlich and a much wiser man, economist Julian Simon. Also, Thomas Sowell's dissection of the old Club of Rome jeremiad "Limits to Growth" is great (see the chapter entitled "The Irrelevance of Evidence" in The Vision of the Anointed).

Bruce,

The book I saw the fact in, Sowell's Basic Economics, cites Stanley and Danko's The Millionaire Next Door. It is surprising only because we've bought into the rich vs. poor nonsense for so long. I just read about the richest Jew in the world donating $25 million to Yad Vashem, and in the article it mentioned that the billionaire was born to a "poor immigrant family in Boston[.]" Obviously such an extreme leap to hyper-affluence is very rare, but the general story of rapidly increasing standards of living from one generation to the next is so apparent that we take it for granted. Your rhetoric could use a bit of checking against facts.

[Ben Litchman]

Hey Bruce, there was no reason to be nasty to Adam. Why is that you should be exempt from the burden of cited proof you readily place on others?

[calmo]

Such a naughty boy Lafayette:Hayes: "Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy."

Whoever told him this at the U of C? They should both get their heads examined and ask for a bulk discount rate. The quote is sounding a tad exuberant (the need to market every stupid little thing, people)[This is some, but Lafayette is so much more] but the bulk comment sent me then and sends me now. Spillover exuberance, I've decided is Alright. [Fuggedabout that lame duck efficiency. Sample Spillova Exuberance.] I'm going to ask for the bulk discount rate from now on, you?

[adam]

bruce-

the rich must be dying at a record pace right?

NEW YORK (CNN/Money) - There are 700,000 more millionaire households this year than in 2004, according to a survey released Wednesday.

http://money.cnn.com/2005/09/28/news/economy/millionaire_survey/index.htm?cnn=yes

Return of the millionaires

Report says number of new millionaires jumped 14% in 2003 as the U.S. emerged from recession.

http://money.cnn.com/2004/06/15/pf/millionaires/

Nationwide, households with a net worth of at least $1 million excluding primary residences rose 8 percent to a record high 8.9 million, according to an annual report by TNS Financial Services, a market research and polling firm.

http://money.cnn.com/2006/03/28/news/economy/millionaires/index.htm

Millionaire Households
Year No. in millions Increase
2005 8.9 8%
2004 8.2 33%
2003 6.2 13%
2002 5.5 -9%
2001 6 -4%
http://www.tns-blog.com/?p=25

From 1991 to 2001, the Japanese economy collapsed while the world economy enjoyed the highest growth rates ever recorded--with low inflation and even lower interest rates. In the United States, household wealth tripled--growing from $13 trillion in 1991 to more than $40 trillion in 2001. Over the same ten years, the number of U.S. millionaire households doubled, jumping from 3.6 million in 1991 to 7.2 million in 2001.
http://www.paulzanepilzer.com/tnm.htm

yup those miilioiaires just keep dying in record numbers. they stopped from 1999 to 2002.

bruce you can go with the ad hominem attacks or refute the arguments.

[piglet]

"People have been certain that such doom is on the horizon for many years, and thus far they've been wrong."

Oil-powered economy has been around for 100 years now and you are telling us that because we are still alive, it must be possible to continue forever. I argue that economic growth cannot continue because we don't have the material resources. Would you care to explain where in your opinion the resources for sustained growth will come from? Let's repeat, 3.5% yearly growth = 800% in 60 years and 100'000% in 200 years. Where will it come from?

You think doom is not on the horizon. Ever heard of Global warming? Desertification? Deforestation? Water shortage (soon to be the major problem of a huge part of the US)? Peak oil ()? I am NOT talking of doom and apocalypse now but if you believe that our environmental problems aren't serious and won't get dead serious in the near future then you are only deluding yourself.

[anne]

So we understand:

http://www.nytimes.com/2006/01/29/national/29rich.html?ex=1296190800&en=784822e4b0735ee5&ei=5090&partner=rssuserland&emc=rss

January 29, 2006

Corporate Wealth Share Rises for Top-Income Americans
By DAVID CAY JOHNSTON

New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital.

In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.

In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.

For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991....

[anne]

Class is becoming more accentuated, mobility lessening:

http://www.cbpp.org/7-10-06inc.htm#_ftn4

July 10, 2006

New Data Show Extraordinary Jump in Income Concentration in 2004
By Aviva Aron-Dine and Isaac Shapiro

Economists Thomas Piketty and Emmanuel Saez have recently made available an updated version of their groundbreaking data series on U.S. income inequality.[1] The data are unique because of the detailed information they provide regarding income gains at the top of the income spectrum, and also because they extend back to 1913....

* From 2003 to 2004, the average incomes of the bottom 99 percent of households grew by less than 3 percent, after adjusting for inflation. In contrast, the average incomes of the top one percent of households experienced a jump of almost 17 percent, after adjusting for inflation. (Census data show that real median income fell between 2003 and 2004. Average income is pulled up by gains at the top of the income spectrum; the 3 percent rise among the bottom 99 percent seems to largely reflect gains by households in the top quintile of the income spectrum. In contrast, trends in median income capture the experience of households in the middle of the income spectrum.)

* The top one percent of households garnered 36 percent of the income gains in 2004.

* This disparity produced an exceptional jump in income concentration in 2004. The share of the pre-tax income in the nation that goes to the top one percent of households increased from 17.5 percent in 2003 to 19.5 percent in 2004. Only five times since 1913 (the first year that this data set covers), and only twice since World War II has the top one percent's share risen by as much in a single year (in percentage point terms). Each percentage point of income is equivalent to $68 billion in 2004.

* The share of total U.S. income that the top one percent of households received in 2004 was greater than the share it received in any prior year since 1929, except for 1999 and 2000....

[piglet]

"delusion? how about the fact that a large chunck of the wealth in the west is is in home equity and retirement accounts. just how do you propose re-distibuting these assets to the rest of the world?"

adam, I said that sustainable growth is a delusion. What is your point?

[adam]

piglet i was responding to the following:

"The fact is, there is enough material wealth on this planet for us all to live comfortably, the problem is it is unequally distributed and inefficiently organized."

if you were not implying redistribution, as i inferred, then my apologies.

i do dissagree about sustainable growth being impossible.

[anne]

Who can know where to begin; wealth and income concentration are astonishing and growing, while class mobility is lessening. Simply understand that 1% of households control 57.5% of corporate shares and look to tax structure and we understand. Simply look to the work of Thomas Piketty and Emmanuel Saez and the trends are strikingly evident.

[anne]

http://www.thenation.com/doc.mhtml?i=20040105&s=krugman

January 5, 2004

The Death of Horatio Alger
By PAUL KRUGMAN - Nation

The other day I found myself reading a leftist rag that made outrageous claims about America. It said that we are becoming a society in which the poor tend to stay poor, no matter how hard they work; in which sons are much more likely to inherit the socioeconomic status of their father than they were a generation ago.

The name of the leftist rag? Business Week, which published an article titled "Waking Up From the American Dream." The article summarizes recent research showing that social mobility in the United States (which was never as high as legend had it) has declined considerably over the past few decades. If you put that research together with other research that shows a drastic increase in income and wealth inequality, you reach an uncomfortable conclusion: America looks more and more like a class-ridden society....

[movie guy epigone]

According to the movie "Wall Street" 80% of wealth is inherited. Hard to argue with that.

[anne]

Also, as for the possibilities of sustainable growth look to the optimistic work of Benjamin Friedman, then to the cautionary work of E. O. Wilson:

http://www.foreignaffairs.org/20051101fareviewessay84612/joseph-e-stiglitz/the-ethical-economist.html?mode=print

December, 2005

The Ethical Economist
By Joseph E. Stiglitz - Foreign Affairs

The Moral Consequences of Economic Growth
By Benjamin M. Friedman

...

http://www.nytimes.com/2002/02/17/books/review/17TURNEYT.html?ex=1157947200&en=65b04a9d25a0140a&ei=5070

February 17, 2002

Of Mites and Men
By JON TURNEY

THE FUTURE OF LIFE
By Edward O. Wilson.

[adam]

anne-

"* The share of total U.S. income that the top one percent of households received in 2004 was greater than the share it received in any prior year since 1929, except for 1999 and 2000...."

what i get from the numbers is that stock market performance is a primary driver of millionaire creation.

wealth concentration should also take into account population changes or it can be misleading. if the population is growing, especially through immigration from poor countries, then you have more people coming in on the bottom all of the time.

as far as i know, the expected income from higher education is still quite a bit more than without it so as long as we make that available through grants, loans, tax breaks ect... for those on the bottom then then the mobility is masked by new arrivals.

obviuously, we need to do more to get people to the level that they can attend college or trade schools by providing better education up to that point.

[john c. halasz]

"Economics is a science that accepts the unfortunate reality of trade-offs. If this is bothersome to you, study poetry."- Litchman 10:20 AM

Leaving aside the dubious claim that economics is a science, this shows an unfortunate lack of understanding of poetry. Poetry is not about "trade-offs"? It does not concern itself fundamentally with the "economy" of Being?

[Ben Litchman]

Anne,

However many multiples richer Bill Gates is than me is nothing more than a statistical curiosity, in my eyes. I couldn't care less. There are stumbling blocks in the path of poor people, but I doubt you'd support their removal. A couple quick examples are the lack of parental choice in schooling, and the absurd licensing laws and caps in businesses like hair salons and taxis.

John,

A poet can be as visionary and utopian as he'd like; he's dealing with words. Economists deal with people and scarcity. My sole point was that perfection is possible in a fantasy land (which can be envisioned beautifully by poets and songwriters), but not on the planet earth.

Piglet,

"Oil-powered economy has been around for 100 years now and you are telling us that because we are still alive, it must be possible to continue forever."

Firstly, I'm not saying "because we are still alive, it must be possible to continue forever." I merely said that the doomsayers have been wrong countless times historically. They're quite likely wrong today.

"I argue that economic growth cannot continue because we don't have the material resources. Would you care to explain where in your opinion the resources for sustained growth will come from?"

Sure.

1) We aren't certain of how much oil is in the earth. Excavation costs money, and it's wasteful for the companies to scour the earth at any given moment to find all the reserves. There have been occasions when the known quantity of oil increased from one decade to the next, even with our massive consumption. How did that happen? More was found.

2) When oil becomes extremely scarce, the prices will rise accordingly (as long as meddlers don't institute a cap). It'll become too expensive to use oil to the same extent that we currently do. Behavior will change, but since people enjoy their high standard of living, the incentive will rise for companies to produce alternatives in order to maintain it. There is already plenty of research occurring. It'll move faster as we continue to deplete the supply of oil.

"You think doom is not on the horizon. Ever heard of Global warming? Desertification? Deforestation? Water shortage (soon to be the major problem of a huge part of the US)?"

Yes, I was brainwashed with all that crap in high school (both in my environmental science class and in a local group I shamefully admit to having been a part of, the "Green Action Group"). Deforestation is the quickest to refute: the amount of forestland in North America has increased in recent years. You can thank ravenous consumption for that; the more paper we need, for instance, the more trees are demanded. The rest is equally over-hyped nonsense.

People need a mission, something to fill them with zeal as they trot around "saving" the world. For secular folks, that need is satisfied by environmentalism, among other forms of political activism.

[anne]

There is always class mobility, but as far as we can understand mobility has been declining absolutely and relatively to other developed countries for years. Also, what is interesting is how little the value of stocks matters in households. Now, stock prices matter much for the wealthiest but relatively and possibilty surprisingly little for the bulk of households.

Stock prices, which I use for all sorts of understandings of economic movements, matter to households even less in Europe or Canada and Australia and less again in Japan.

[piglet]

« "The fact is, there is enough material wealth on this planet for us all to live comfortably, the problem is it is unequally distributed and inefficiently organized."

if you were not implying redistribution, as i inferred, then my apologies. »

I do imply redistribution, but you are referring to a different concept of "wealth". "Home equity and retirement accounts" are book values only. House prices in the US have nothing to do with poor people's access to food and water. The inequality I am talking about refers to the grotesquely disproportionate share of natural resources that the rich countries appropriate, especially non-renewable) energy but also land and water (consider that many poor countries can't feed their population but have to export agricultural goods, often used as animal feed by the rich, in order to pay back odious debts). The energy- and resource-intensive lifestyle of the global rich is based on the deprivation of the poor, it's as simple as that. Redistribution in this context means e.g. that the rich have to reduce their energy hunger (in absolute and per capita terms). This is possible without a significant loss in living standard.

[calmo]

O john
justopit
rightnow
Leaving aside the dubious claim that economics is a science, this shows an unfortunate lack of understanding of poetry.
Do tell,
Poetry snot
about trade-

offs?
It duzznt
concern itzelf
fun
da
mentally
with the
Economics
of Being?

We B misdirected then. Possibly even misled.

[piglet]

Ben Litchman, your phraseology doesn't cut it. Of course oil prices will continue to rise, but this is exactly the point: "economic development" as we know it has been based on cheap oil. You can pray and believe in miracles, but you can't get around the fact that there is currently no credible prospect of how to continue the current economic model without, or with less, oil.

"the doomsayers have been wrong countless times historically". Evidence? Care to cite those doomsayers and how they have been proven wrong? (But please leave Malthus alone in his grave. Whatever he was, he was not an environmentalist.) The problem is that you cannot offer a coherent development concept except "let's just go on and see what happens". But what we are doing is irreversible. We are in the process of depleting much of this planet's non-renewable resources, something that hasn't happened before in human history (at least not on a global scale). We do know pretty well what's going on and what's gonna happen if we go on. Too bad that you refused to learn anything from your environmental science class.

[Lafayette]

"We have nearly a century's worth of proof that socialistic policies are bound to fail."

Well, I live in country that practices one that has had an astounding success. When the WHO did a study of health care systems around the world, guess who came out N° 1? France.

Of the top fifteen, most were European countries. Where was America? At 36, just ahead of Cuba at 37th. Holy Moses! How did THAT happen?

The were many criteria that were studied, but the most weight was given to "access to health care". After all, it is sexy to have the best medical technology available, but isn't it more important that the most people possible access basic care services?

The US showed very poorly on that criteria. At any given moment, between 15 and 20% of the American work force has NO medical coverage.

Shame on America. It can put a man on the moon, but its neo-natal death rate would make some African countries blush.

(Not to worry ... the Dems are gonna fix all that. Yeah, right. When pigs sprout wings.)

[john c. halasz]

Ben Lichtman:

O.K. So poetry is sheer volitional fantasy, merely visionary and not of this earth, lacking any rigor of its own, a mere luxury.

But then the topic of this thread is the adequacy of neo-classical concepts/methods/models as accurately grasping the matter of economics, and not merely whether there is indeed a matter for economics to concern itself with. Does a neo-classical, entirely "market" based approach adequately specify all the factors that are needed to account for the way the world actually works, even just economically speaking? Since a realism condition, and not just a claim to be empirical, is a requirement for "science".

And then you go off about increased forrest cover in N.A., inspite of the fact that mono-culture forestry is ecologically problematic and, er, deforestation in Indonesia and Brazil speak much more to the point.

And then you go off to speak about a lamb in the bushes. (You know that there are efforts to develop environmental economics, to factor resource constraints into the accounts, right?)

Some people get off on the fantasy that they alone are truly hard-headed, which they confuse with realism, since others fail to grasp logic or understand its status.

[adam]

well piglet it seems that 200 million chines lifted out of poverty since 1975 and perhaps as many as a million a month currrently are actually dependent on u.s. consumption.

i'm guessing some of the other poor countries to which you refer are also among those that walked out of the doha round over farm subsidies in the developed nations. so they seem to see the path to progress as one that is quite different than your solution unlees of course by "energy- and resource-intensive lifestyle of the global rich" you mean farming.

many poor countries have a plan. they just aren't being allowed to implement it by the farm lobbies of the developed nations.

just how do you explain the number of poor in the world being cut in half since the end of the cold war? is that the rich depriving the poor?

world poverty is decreasing at historical rates. there is not a single economy tracked by the world bank in recession right now.

[piglet]

"200 million chines lifted out of poverty since 1975"

And this proves what? The effectiveness of neoclassical economics???

"just how do you explain the number of poor in the world being cut in half since the end of the cold war?"

Those rosy statistics are based on very dubious calculations. The definition of absolute poverty is less than 1$ per day, and we are told that the number of those absolute poor has fallen. Now this depends on how you apply exchange rates and pricing power parities (PPP), which can be very tricky. The World Bank statistics has been attacked on the grounds that it doesn't measure how much the poor actually can buy for their "dollar", but rather what an average person could buy for a dollar. Example, if electronics and hair-dressing get cheaper but food gets more expensive, then PPP may look good on average but the poor can actually buy less for the same money.

Those are technicalities. In any case, a person whose income rises from 0.98$ per day to $1.01 per day is still very, very poor. The adequate measure of economic progress is how many more people got access to clean water, nutritious food, health care, education, etc. These staistics have improved in some countries but for many, including several that have implemented IMF-dictated free-market-policies, they have actually deteriorated. The ex-socialist countries are an obvious example, as are some Latin American and many African countries.

Last point: Even if the situation of the poor were improving as much as you claim, it would be completely beside the point I have been making. This will be my last response to you.

[adam]

well piglet, most neoclassical economists would likely tell many countries several years befor they call the imf that if they continue their fiscal irresponsiblity the theory of rational expectations dictates that people will catch on, dump their assets and their currency and they will need the imf to renegotiate thier debt.

you see neoclassical economics predicts their failure in many cases and is not the cause.

[Lee A. Arnold]

Ben Litchman, in regard to global warming, deforestation, desertification, water shortage:

"Yes, I was brainwashed with all that crap in high school... Deforestation is the quickest to refute: the amount of forestland in North America has increased in recent years... The rest is equally over-hyped nonsense."

Scientific citations in support of any part of this assertion, please.

On one of the issues, deforestation: The Right is very happy to claim that forests are on the march. This is misleading. To begin with, the figures on forest-cover are a bit soft, because it is difficult to measure. Also, the Bush Administration has put gag orders on scientists throughout Interior and Agriculture, and it could be that nobody really knows what is going on -- but it probably isn't pretty. A recent UN estimate is that U.S. forest cover is increasing by around 600 square miles a year -- i.e., the increase is tiny, perhaps insignificant. As John C. Halasz points out, this almost entirely monocultural tree plantation, which is not biodiverse like natural forest. In fact, the U.S. still continues to lose old-growth forest --unbelievable, since the first warnings about it were sounded decades ago! Theae old wildlands are fragmented by the surrounding human habitat, and so, species-population extinctions have started. Further, global warming is already changing the ranges of plants and animals, so the extinction-debt is accelerating. (The "extinction-debt" is the probability of species-population extinctions, based on the species-area law.)

However, apparently there are members of the public who still believe that, because the markets ignore global warming, it must not be a serious problem.

[James Killus]

Ben Litchman,

First, where did you get the idea that a mere millionaire has "great wealth?" Second, where did you get the idea that millionaires will live forever? Eventually, they die, and their heirs get the wealth.

But yes, men like Howard Hughes and Bill Gates are "self-made" in the sense that they did not allow the fact that they were born into wealth keep them from amassing still greater fortunes.

Now, for extra credit, explain how this is "efficient." And make sure that, at no time, do you touch the watch.

[ken melvin]

Funny thing about forests, all the tree farms Lousy Anna Pacific and others planted and toured us thru; they walked away and left them and now we import our lumber from British Columbia.

[evagrius]

Ben Litchman- The bet between Erlich and Bonds was about commodities. It wasn't about income inequality. It wasn't about pollution. It wasn't about the effect of pollution; global warming.

The source you cite about the man becoming rich is nice. It reminds me of fairy tales.

[evagrius]

So....there seems to be a debate between those who think that things are peachy keen and those who don't.

Those who don't, point out the increasing wealth concentration limited to the top 1% or so of the U.S. population, ( let's leave it there since globally, it's even more extreme), the loss of non-renewable resources such as oil, ( once it's "burned" in your car it only goes into the atmosphere), the loss of natural forest, ( not just trees- monoculture forest just don't "cut it" from an ecological standpoint), the increase in global weather change, (otherwise known as global warming), the difficulty of poor people in the rest of the world able to afford food and so forth.

The other side points to...increasing "wealth", increasing number of millionaires and a rather fierce faith in the ability to muddle through.

Am I getting the debate wrong?

[DRR]

The Problem with this piece is that "The Chicago School", is put up as defacto represenative of what's taught in economics departments, when in fact, "The Chicago School" ,rather than being the norm, is precisely notable for it's near theological rigidity to the types of things critics of neo-classical economics pooh-pooh. This creates a pernicious strawman problem.

As Paul Krugman stated, in his defense of economic formalism that Mark Thoma also cited; The American Economic Association's John Bates Clark Medal is a good indicator of what the discipline values. Of the recipients of the award in recent years, Paul Krugman, David Card, Joseph Stiglitz, Larry Summers, A. Michael Spence, Sanford Grossman, not one of these economists has worked mainly on perfectly competitive markets, or is a free-market ideologue. And all of them, with perhaps the exception of Stiglitz, would classify themselves as Neoclassicists or at the very least, would defend what the reactionaries are attacking when they pooh-pooh "Neoclassical Economics"

Another problem with these critics, as expressed in this thread is that when it comes to Economics, they only deal with their skepticism of the supposed assumptions of economic theory and how ridiculous any of them supposedly are, conveniently ignoring that Economists don't just base their work on theories and assumptions, they do research that constantly tests these assumptions & predictions.

The National Bureau of Economic Research is probably the largest clearinghouse for academic work in the study of economics. Sometimes these studies yield results that contradict prior predictions and assumptions. Sometimes they validate those assumptions, but the consequences of any particular phenomenon are sometimes different that what they thought might happen. A lot of times they study how frameworks and institutions affect what's going to happen in any particular area. But by and large, their research yields results that are more vindicative of "Econ 101" than not.

I trust the David Card's & Mark Thoma's of the world when it comes to economics a lot more than I trust the Pat Buchanan's & Lou Dobbs' of the world.

[Lafayette]

anne: "The inequality I am talking about refers to the grotesquely disproportionate share of natural resources that the rich countries appropriate, especially non-renewable) energy ..."

This is typical of the North/South argument, over decades, that pits the advanced technically economies of the northern hemisphere with the "emerging" economies of the southern hemisphere.

It is a good argument, but bears perspective. The natural resources that you talk about being "appropriated" in fact are paid for at international market prices that are nowhere near "apropriation" values.

The problem has to do with crooked institutions, often starting with national leaders, within these countries that "appropriate" the natural riches that belong to their fellow citizens. So, please, let's apportion the blame fairly.

Want to see where that wealth goes? Go to the south of France and Spain to see the "palaces" that the Russian oligarchy and African lords have built to distract themselves in the sun. (Where do you think the Mobutu family, put into power by the CIA, is wintering nowadays? Try looking for them on the French Riviera.)

The Russian rip-off was one of the largest of its kind under the rotten regime of Yeltsin. Putin has set the record straight somewhat by returning these assets to state control. It remains to be seen what will be done with them in the future. (Some say that Putin's next pit stop is as the head of Gazprom ... his own cute little retirement niche from public life. Nice thinking Vladimir, you and Dubya, Ron and Dickie-boy, enjoy yourselves exchanging "war-stories" in that villa on the Crimea!)

I could go on ... all this is a matter of public knowledge. Known in Europe ... I don't know what they are telling you people in the US (but neither would I be surprised if you haven't been told.)

anne: "... but also land and water (consider that many poor countries can't feed their population but have to export agricultural goods, often used as animal feed by the rich, in order to pay back odious debts)."

This is misinformation.

The problem is not "exporting agricultural goods" but the opposite, meaning the importation of American/European SUBSIDIZED farm products at prices that not even local farmers can compete. So, the natural-wealth rich countries are selling that wealth to pay for food from "poor" American and European farmers.

Let's get rid of those subsidies, which Europe is doing gradually so as to permit a slow transformation of its farm work force (into, largely, unemployment). America's farm policy is one of cronyism as regards the farm lobby. Neither the Democrats and especially not the Republicans have been willing to bite this bullet. Power politics as usual.

[Ben Litchman]

Piglet,

You can pray and believe in miracles, but you can't get around the fact that there is currently no credible prospect of how to continue the current economic model without, or with less, oil.

There is nothing mystical about the laws of economics. Currently, we have plenty of oil, so its use is practical (the only legitimate counter would refer to the problem of its funding regimes like the Saudis, but I'm discussing the economics of the matter). As it becomes more and more scarce, alternatives will arise, if only because of the unimaginable profits to be reaped by whomever develops this new process.

"the doomsayers have been wrong countless times historically". Evidence? Care to cite those doomsayers and how they have been proven wrong?

I have already cited some examples. Here's another: Environmentalists a few decades ago imagined terrible consequences from use of the pesticide DDT. This led to the prevention of its use in third world countries, where it had once been extremely successful in containing malaria. After the meddling, there was a huge upsurge in malaria infections. We're talking about millions and millions of people. This is such a commonly accepted point these days that even Nicholas Kristof, the liberal NY Times columnist, has urged for the return of DDT.

The problem is that you cannot offer a coherent development concept except "let's just go on and see what happens".

I'm not interested in forming a Five Year Plan for Earth Rejuvenation. I'm fairly confident that, as long as information is allowed to move and be conveyed clearly through the price system, we'll be fine.

Lafayette,

If you're under the impression that we have a free market in health care in the US, that's mistaken. Something like half the costs are covered by government. Furthermore, there are restrictions that could be discarded which would make simple health care more affordable for people (for instance, allowing nurses to run their own facilities for routine work).

Having bureaucrats allocate health care would be a terrible mistake. Check this study for a number of reasons. I'm much more amenable to direct subsidies. Charles Murray has offered just such a proposal, in a book entitled In Our Hands.

Also, as I understand it, infant mortality rates have a lot to do with demographics.

On farm subsidies, we're in total agreement that they ought to be immediately thrown out.

John,

Does a neo-classical, entirely "market" based approach adequately specify all the factors that are needed to account for the way the world actually works, even just economically speaking?

The Chicago school has never advocated anarchism. They recognize a role for government. They simply understand that not every problem requires a government solution, and that very often these "solutions" create even more problems than were around initially.

Some are acting as though externalities are ignored. When has this been true? One of the most important contributors to the problem is Ronald Coase, the old Chicago guy.

Lee,

"Yes, I was brainwashed with all that crap in high school... Deforestation is the quickest to refute: the amount of forestland in North America has increased in recent years... The rest is equally over-hyped nonsense."

Scientific citations in support of any part of this assertion, please.

For the specific point I made, you actually conceded, so I don't need to find the source. You just happen to believe the increase is not rapid enough, and the type doesn't suit your taste. Tough to please some people, isn't it!

About the other topics (primarily global warming), I don't know enough about the specifics to offer anything substantive. I could bring up facts about historical climate changes that occurred long before industrialization, and about climate changes currently occurring on other planets. But I'm just not that interested and informed on the issue. The reason is the high cost of knowledge. The complete alarmists have a tendency to exaggerate problems in order to get attention and government action, and the complete naysayers often have an unsettling relationship with Exxon/Mobil and similar companies. I have other things to do with my time than parse out the truth from this morass of bullshit. For me, it's sufficient to know 1) the hilarious (and occasionally tragic) historical follies of environmentalists, 2) the laws of economics, and 3) basic aspects of human nature.

James,

First, where did you get the idea that a mere millionaire has "great wealth?"

So a "mere millionaire" doesn't count as part of "the rich" for you?

All of these questions are subjective and comparative. To someone born in poverty, for example, a million dollars would be great wealth. (In fact, most poor people on the planet would be quite satisfied with the $8/hr anti-Wal-Mart activists lament.)

Second, where did you get the idea that millionaires will live forever? Eventually, they die, and their heirs get the wealth.

And...? What exactly is your point? Should they be prevented from giving their children the money they earned? That's a fundamental motivation normal people have for working hard -- providing the next generation with a higher standard of living than they had.

Now, for extra credit, explain how this is "efficient."

It doesn't. But that's not to say there are no unintended consequences from any policies directed at this fake problem.

If you're going to leap with glee to say, "A-ha! So on this you are concerned with morality!" let me remind you that there is a fundamental difference with taking someone's money and giving it to someone else, and letting someone keep his own money. (Also, I'm always concerned with morality, but I just don't think it's appropriate to impose most of my moral views through the state.)

Evagrius,

The bet between Erlich and Bonds was about commodities. It wasn't about income inequality. It wasn't about pollution. It wasn't about the effect of pollution; global warming.

Perhaps you didn't notice, but we've also been talking about depletion of resources and sustainability here.

The source you cite about the man becoming rich is nice. It reminds me of fairy tales.

To my knowledge, fairy tales aren't true, unlike that story (which I acknowledged to be extremely rare, as far as the degree of the increase).

So....there seems to be a debate between those who think that things are peachy keen and those who don't. [...] Am I getting the debate wrong?

Yes. I've already named a few domestic policy changes I'd like to see implemented, and have alluded to Chua's sane critique of globalization.

DRR,

Pat Buchanan and Lou Dobbs have views on free trade nearly identical to those of the writer of the article Mark Thoma posted on his blog, and those of various commenters here.

[Ben Litchman]

"It doesn't" should be: "It doesn't have to do with efficiency."

[Bruce Webb]

Reason:
"You would think that the software could be made clever enough to recognise and remove duplicate postings."

Yes reasonable software would fail to distinguish between the terms "thing" and "think" and so eliminate the 'duplication'. But I thing a was just trying to correct a misspelling.

Or somethink.

[anne]

This discussion is difficult to get hold of. What are we supposed to write that is definitive? There are careful writers in economic, sociology and political studies who have shown that wealth and income inequality are increasing and class mobility, if we accept the idea that America has classes, declining. The tax structure developed through the last 6 years will assure further inequality and less mobility. Economic insecurity is increasing; after all how could it not be increasing when there are 47 million Americans, most adults and most working, with no health care insurance?

Brad DeLong however shows a nutty National Reviewer who takes the work on economic insecurity of Jacob Hacker and purposely falsifies the finding. Hacker shows that individual variance or swings in security are significant and increasing. Hacker's critic shows that swings in income and wealth for the population average are not increasing.

Of course, we have an equity problem in America when 47 million lack health care insurance. When 1% of households control 58% of corporate shares. Simply start from there. But, how to convince a National Reviewer of anything reasonable is quite a trick.

[anne]

http://delong.typepad.com/sdj/2006/11/i_have_to_disqu.html#comments

November 10, 2006

I Have to Disqualify Donald Luskin from the Stupidest Men Alive Contest
By Brad DeLong

An unarmed man in a contest of wits. A correspondent emails me that National Review's Donald Luskin is puzzled because he cannot reproduce Paul Hacker's findings of rising income instability in America:

The Conspiracy to Keep You Poor and Stupid: Yale economist [sic: he is a political scientist] Jacob Hacker has been getting a lot of play in the mainstream media with his new book The Great Risk Shift -- a kind of Bush-bashing self-help book.... Hacker's thesis, in a nutshell, is that... people don't feel "economic security." His seemingly scientific proof statement is a chart of what he calls "income instability."...

I can't find any other data series that even remotely gives me this result... three that I calculated... [per capita disposable income, median households income, average hourly earnings].... All three are different measures of the volatility of income -- and none of them look the slightest like Hacker's... they lead one to the opposite conclusion -- that incomes have become less unstable through time....

One has to wonder just how Hacker tortured his data to get it to confess that incomes are more unstable today then [sic: than] they've been in the past.

Luskin's confusion can be easily cleared up. Hacker calculates the average variability of individual Americans' incomes. Luskin calculates the variability of the average of individual Americans' incomes. As everybody who has taken even one semester of statistics--or even thought about it for fifteen minutes--knows: in general the variability of the average is not equal to the average of the variabilities. Why on earth should anybody think it should be?

For Luskin to claim that there must be something wrong with Hacker's numbers because Hacker's calculations of the average variability don't line up with Luskin's calculations of the variability of the average, well...

There is a reason I have to disqualify Donald Luskin from this year's Stupidest Men Alive contest: He's a ringer. It just wouldn't be fair to the other contestants.

[adam]

evagrius-

i guess peachy is a bit much but the progress to me is pretty amazing when looked at world-wide. it would be great if more of the wolrd's poor could obtain property rights as desoto points to the lack thereof hurts many.

concentration of wealth @ 1% have 50% often makes it sound as if no one advances. however, if gdp doubles over say 15 yrs (ours has) and population increases then that same 50% among the 1% means many have advanced into that 1%.

my new millioanire stats were just to counter the assertion that most millionaires inherited their money (not true) but a better way to measure progress in my mind would be inflations adjusted income, home ownership, perhaps an increase in percent of college attendance ect...

these numbers don't look bad and are increasing (income is but real wages have lagged because of health care costs).

with that said, there are those that assert that certain levels of wealth concentration can cause political instability (maybe we are there now?).

if your job can or has been eliminated by globalized commerce things aren't peachy but if you are a former chinese peasant they are much better. i have no problem with a tax and/or government spending structure that helps the dislocated just the assertion that wealth concetration is the cause because too often it does not take growth into account.

since increased growth in developing countries could make it harder for us to attract investment here we need to make sure that our tax structure does insure that we continue to attract capital.

[evagrius]

Ben Litchman;

Just some responses as "snarky" as yours.

"Also, as I understand it, infant mortality rates have a lot to do with demographics."

Duh...... It is demographics. It's a typical excuse. Have you considered some other causes involved? There's poverty, poor nutrition, drug and alcohol abuse related to poverty and stress, stress itself from being on the bottom having to constantly struggle for a living,lack of a community to share problems with, lack of basic medical care. All of these can and do contribute to infant mortality rates. All of these are evident in poor communities to a greater or lesser degree.
You need to do some basic reading on this before excusing the very lousy record of the U.S.

"I could bring up facts about historical climate changes that occurred long before industrialization, and about climate changes currently occurring on other planets."

On other planets? Which ones. You mean Mars and Venus are cooling? Or are they warming?

As far as "historical climate changes" before industrialization, do you mean the Little Ice Age? Or do you mean the desertification of Mesopatamia due to over-irrigation and salinization. Or do you mean the deforestation of Greece, Lebanon and Sicily? Those were fairly serious but localized. What's happening now is truly global. Do you know that Australia's in the fifth year of drought- the worst ever? They're limiting showers!

"Perhaps you didn't notice, but we've also been talking about depletion of resources and sustainability here."

Yes. Commodities, you know, oil, minerals, metals. Erlich and Bonds were not discussing pollution or climate chane or drought.

"So a "mere millionaire" doesn't count as part of "the rich" for you?"

Not really. They're a dime a dozen these days. Look at the Forbes lists over the last thirty or so years.

"To my knowledge, fairy tales aren't true, unlike that story (which I acknowledged to be extremely rare, as far as the degree of the increase)."

But it is as far as most people are concerned. Winning the lotto is a fairy tale for most people. It does happen though...just like a fairy tale.

It would be nice if you could, as George Bush has been forced to to some degree, acknowledge that one cannot create reality one wants, no matter how hard you wish.

[Lee A. Arnold]

Ben Litchman, I won't bother you with more facts, since you do not care to pay "the high cost of knowledge," as you wrote. But we can review the argument for which you claim vindication, and provide a cautionary tale to others who might also hope that ignorance is bliss:

On Nov 10 at 1:11 pm Piglet wrote to you, "You think doom is not on the horizon. Ever heard of Global warming? Desertification? Deforestation?..." To which you replied at 2:09 pm "Deforestation is the quickest to refute: the amount of forestland in North America has increased in recent years" --which, even if this were true, does not refute worldwide deforestation, which of course proceeds apace. The redoubtable John C. Halasz at 2:54 pm pointed out that, even for the United States, your answer doesn't meet the main objection: that these new treefarms do not support biodiversity the way the old forests do, and I added at 4:54 pm that the numbers for the U.S. are equivocal. You then claim at 12:48 am that I thereby concede to your argument.

I confess to being confused. You wrote on Nov 9 at 10:20 am that you wished people had "more humility and felt themselves constrained by actual evidence instead of their whims and fancies," but then you contradict yourself the very next day, writing that "I'm just not that interested and informed on the issue. The reason is the high cost of knowledge... For me, it's sufficient to know 1) the hilarious (and occasionally tragic) historical follies of environmentalists, 2) the laws of economics, and 3) basic aspects of human nature."

Have you actually studied anything, other than the memorization of generalities?

[Ben Litchman]

Evagrius,

Have you considered some other causes involved [in infant mortality rates]?

Yes. There are undoubtedly various reasons. I said the problem "had a lot to do with demographics," not that that is the sole cause. The point I made was gleaned from an article I read a while ago. Here is the relevant quote (the citation can be found in the link):

-----

"The primary reason that the U.S has higher infant mortality rates than other industrialized nations is that we experience a higher incidence of low-birth-weight babies due to demographic factors beyond the control of doctors and hospitals[6]:

'Several factors are known to increase the likelihood of low-birth-weight babies, but the most significant is race. African American women deliver very small babies at twice the rate of white American women, This is true even when controlling for the mother's age, income and education. It is even true holding constant the number of prenatal medical visits. Why some ethnic groups have disproportionate numbers of low-birth-rate babies is not fully understood.' "

-----

Back to your points...

"I could bring up facts about historical climate changes that occurred long before industrialization, and about climate changes currently occurring on other planets."

On other planets? Which ones.

One example is Jupiter. I found this story linked on an old blog post on Dan Flynn's site several months ago.

Erlich and Bonds were not discussing pollution or climate chane or drought.

I've already addressed this strange complaint by reminding you of the other topics being argued.

The point ultimately is that if people yelp that the sky is falling time after time, and they're proven wrong time after time, it is perfectly natural and reasonable for observers to take their words with a grain of salt.

"So a "mere millionaire" doesn't count as part of "the rich" for you?"

Not really. They're a dime a dozen these days. Look at the Forbes lists over the last thirty or so years.

Shouldn't that tell you something about our economy? (Your being unsatisfied with levels of wealth our ancestors could only dream of is further evidence that one sector of life in which economists will never have to worry about scarcity is human desire.)

Lee,

I won't bother you with more facts, since you do not care to pay "the high cost of knowledge," as you wrote. [...] Have you actually studied anything, other than the memorization of generalities?

I pay the high cost of knowledge consantly, in areas which interest me. It is literally impossible for any one human being to obtain enough information to speak authoritatively on every issue. This is not reason to concede the reins of government to social tinkerers, who are all too willing to take advantage of rational ignorance.

On Nov 10 at 1:11 pm Piglet wrote to you, "You think doom is not on the horizon. Ever heard of Global warming? Desertification? Deforestation?..." To which you replied at 2:09 pm "Deforestation is the quickest to refute: the amount of forestland in North America has increased in recent years" --which, even if this were true, does not refute worldwide deforestation, which of course proceeds apace.

Firstly, it is true (it's best not to confront pesky facts with silly conspiracy theories). Secondly, one could try to learn why it is so, which would contribute to a flourishing of forests elsewhere. My answer would be property rights, which usually result in the maintenance of the property by the owner, whether it's forestland in North America, elephants in Africa, etc.

The redoubtable John C. Halasz at 2:54 pm pointed out that, even for the United States, your answer doesn't meet the main objection: that these new treefarms do not support biodiversity the way the old forests do

I don't believe the government should be in the business of catering to the pet interests of environmentalists. You, Mr. Halasz, and other likeminded fellows ought to pool your resources and purchase plots of land in which biodiversity will be supported just the way you like it.

[Lee A. Arnold]

On the suggestion that property rights will lead to the flourishing of forests: almost all of the old growth forest in the U.S., as elsewhere, remains in existence because it was put under public ownership to begin with. Otherwise it would be gone, along with the other 99% of it. There is no evidence, historical or contemporary, that private property rights would have resulted in wild forests being left alone.

Indeed, it is only because the government is preventing the cutting of other areas (induced scarcity,) that the timber companies have been forced into replanting instead of selling-off the junk land.

There are private trusts starting up, and some people have hopes to derive profits from hunting and fishing rights, and some rich people in the West are starting to protect wildlands in other places around the world. But this is all small potatoes, and very frequently, contiguous lands are needed for ecological viability. There is no evidence that this effort can succeed, unless in concert with governmental institutions.

There is also no evidence that further development of wildlands is needed for more economic growth. Capitalism can develop in a myriad of ways; that's another thing it is very good at.

At the same time, a number of huge environmental problems are now growing to global proportions -- while only a very short list of specific problems has been solved. It is hard to avoid the conclusion that markets cannot work by themselves here, or won't work quickly enough to avert disaster, and so government has a major role to play in the preservation of various environmental values. The past is no guide to this future. A very good, and well-footnoted, guide is James Gustave Speth's RED SKY AT MORNING (Yale University Press, 2004).

Property rights in environmentalism are useful for some sorts of pollution trading. But even there, the chits are set by government regulation, while the markets themselves are subject to the regular kinds of market failure, such as concentration of polluting industries in poor areas, --which gets us back to the old problem of the distribution of income.

Meanwhile, the contention that biodiversity is only a pet interest of environmentalists is not credible. Biodiversity has scientific functions. Its value to ecosystem services which are a free input to the economy, e.g. water and air purification, amount to trillions of dollars annually worldwide. The state of New York just figured out that they need to get a lot of upstate land off the market, to save billions on water purification for the New York City metropolitan area.
Biodiversity has also been explicitly identified as an important value by every major religion.

Of course, you can believe whatever you wish, but primary reliance upon the example of historical mistakes of environmentalists, the "laws of economics," and "human nature," amounts to its own sort of functional fairytale, --all shifting sand. For secondary argument, okay. For primary argument, learn facts.

P.S. It should be pointed-out that environmentalists have NOT been wrong on many predictions, only on the timing of them. And that Julian Simon wouldn't take Paul Ehrlich's second bet, all the items of which, came TRUE.

[evagrius]

"I don't believe the government should be in the business of catering to the pet interests of environmentalists. You, Mr. Halasz, and other likeminded fellows ought to pool your resources and purchase plots of land in which biodiversity will be supported just the way you like it."

It's not a pet interest. It's the life of the planet.
Biodiversity is needed in order to support all of us. Bees, for instance, need a variety of flowers to visit and gather nectar from. They don't like monoculture fields. When they don't, they disappear,the result, no honey. No honey, a lot of manufactured products, from medicine to foods disappear. When the bees disappear, fruits trees aren't pollinated, no fruit.
When biodiversity disappears, so do friendly bacteria and viruses, so do friendly insects, so do friendly animals.
Instead, one gets viruses resistant to treatments, deadly bacteria and vermin such as rats.
If you like rats, go ahead. Live in a world of asphalt, arificial grass, fake trees, etc;

Of course, you probably would be satisfied with artificial grass and artificial trees.

[evagrius]

Ben Litchman;

You quote from On The Fence ("Dead Meat"?);

"The primary reason that the U.S has higher infant mortality rates than other industrialized nations is that we experience a higher incidence of low-birth-weight babies due to demographic factors beyond the control of doctors and hospitals[6]:

'Several factors are known to increase the likelihood of low-birth-weight babies, but the most significant is race. African American women deliver very small babies at twice the rate of white American women, This is true even when controlling for the mother's age, income and education. It is even true holding constant the number of prenatal medical visits. Why some ethnic groups have disproportionate numbers of low-birth-rate babies is not fully understood.' "

The quote is from a, ahem, "deep" study of health care systems across the world;
Lives At Risk: Single-Payer National Health Insurance Around the World, John C. Goodman, Gerald L. Musgrave, & Devon M. Herrick, Roman & Littlefield Publishers, 2004, page 51

Yes. a deep study that's fairly shallow, tendentious, prevaricating etc; About as biased a study as one could wish.

The quote is deeply racist- to put in very blunt, crude, obscene words; " Why them n#$$!h women just can't give birth to normal babies. Must be their genes or somethin'

Here's a quote from another study that backs up my view;

http://findarticles.com/p/articles/mi_qa3634/is_199907/ai_n8868718

"In communities at all three income levels, black women born in the United States and South America faced a greater risk than did white women of having a low-birth-weight baby. In lowincome areas, in contrast, women born in Africa and in the Caribbean had a slightly lower risk than white women (odds ratios, 0.8 and 0.9, respectively); the risks were comparable in middle- and high-income communities.

The researchers speculate that the differences in birth outcomes among foreignborn women may be the result of their early health experiences or of other factors that might influence who immigrates to the United States. The authors acknowledge that a woman's length of residency in the United States, for which they had no data, may also influence birth outcome. Nevertheless, they conclude that it may be beneficial to target interventions according to community characteristics rather than demographic characteristics alone. "If the lower risk of low birth weight among Caribbean- and Africanborn black mothers could be realized by other black mothers," they observe, "the disparity in low birth weight between blacks and whites essentially would be eliminated."

Did you get the jist of the quote? Did you get it?

Regarding planets;

Jupiter? You want to use Jupiter as an example? Have you read about Jupiter? It's a gas planet with an interior that's very warm,( it may actually be a sun), very cold hydrogen and helium gases etc in the atmosphere; It has no relationship to earth's condition
except in a very general way.
Keep stretching.

Regarding millionaires;

Shouldn't that tell you something about our economy? (Your being unsatisfied with levels of wealth our ancestors could only dream of is further evidence that one sector of life in which economists will never have to worry about scarcity is human desire.)

My desire is for all people to have a decent life, not just some, and not just some having a millionaire's life. And the question is as I've stated; did you look at the Forbes richest list? There's not a single millionaire- they're multimillionaires.
It's a situation our ancestors couldn't dream of- they were sure that once one had enough to eat, a roof over their heads, and decent clothing that any surplus would be shared. That's the ethos of the New Testament and other great religious traditions. Are they wrong?

"I pay the high cost of knowledge consantly, in areas which interest me. It is literally impossible for any one human being to obtain enough information to speak authoritatively on every issue. This is not reason to concede the reins of government to social tinkerers, who are all too willing to take advantage of rational ignorance."

Then you should not say anything regarding these topics since you haven't spent anytime on them.
Exactly what is "rational ignorance"? Is it yours?

Regarding forest biodiversity;
"My answer would be property rights, which usually result in the maintenance of the property by the owner, whether it's forestland in North America, elephants in Africa, etc."

The sacred "property rights". I didn't know property had any rights. Whose propert? For how long?

Mr. Arnold, in his response, has given an excellent response.

You're fixated on an ideology that bears no relationship to the real, actual world. That ideology, of "property rights", of no government etc; is the bane of any attempt to deal with the different crisises now facing us.

[ken melvin]

Bravo!

[James Killus]

When someone changes the subject, one suspects they are up to something. So when I say "great wealth" and Mr. Litchman cites statistics about millionaires, I look for the trout in the milk. Near where I live, a millionaire is someone who bought a tract house 25 years ago and hasn't had to borrow against it to meet some extraordinary expense. Even so, a child of average intelligence and ambition from such a household has a much better chance of gaining admission to a top university than someone of much greater ability who happens to be from parents who came to the area more recently and did not have the advantage of riding the real estate boom. Money allows a parent to provide "the advantages" and advantage means nothing if there are not people who lack those advantages.

Rationalize all you want, but this is, at the very least, an inefficient use of human resources. The hidden model that lies at the heart of neo-classical economics as it exists in practice is Social Darwinism, the belief that biology and science support the existence of a particular social order, the social order which, by happy circumstance and the virtue of our history, happens to be the one in place at this time. Thus, the rich and powerful shouldn't ever feel the pain of impostor syndrome, and that gnawing feeling that they feel must be from that undigested bit of beef, a blot of mustard, a crumb of cheese, or a fragment of underdone potato.

[Peter Schaeffer]

Evagrius,

Would you please stop calling people racists just because they say something you don’t like. Try to look into the facts and available data. The medical community has done reams of studies of LBW (Low Birth Rate) and infant mortality. The 2:1 black/white LBW rate is a reality. Check out the article from the Brookings Institution over at http://www.futureofchildren.org/information2827/information_show.htm?doc_id=256518.

Now is Brookings racist? If you think so, please explain why you regard Brookings as racist.

The web page also mentions something in the medical community so well known it is called the “Hispanic paradox”. Stated simply, the Hispanic paradox is the fact that first generation Mexican women (born in Mexico, not the US) have birth outcomes equal to (or slightly superior to) the white population, in spite of low incomes and low access to health care. Conversely second generation Mexican women (properly stated Mexican-American) have birth outcomes well below the white population, in spite of higher incomes and better access to health care. The medical community is too polite to be blunt about it, but the reasons are typically alluded to. They include (between the first and second generations) higher levels of alcohol, drug, and cigarette consumption, inferior diets, adverse lifestyles, etc.

It’s worth noting that Singapore appears to have the lowest infant mortality rate in the world. Singapore also has a predominantly private medical system mostly based on HSAs (Health Savings Accounts). Singapore’s excellent record is probably not a consequence of HSAs or other financial factors. The absence of a significant underclass and zero tolerance for drugs appear to be larger influences. Singapore's system is also astonishingly cheaper than ours...

It is clear from the literature that lifestyles influence birth outcomes. However, there is evidence of possible genetic factors as well. Check out http://pediatrics.aappublications.org/cgi/content/abstract/111/6/e676 for a study showing adverse birth outcomes among high SES Asian immigrants.

As stated above the medical community has produced a substantial literature on linkages between LBW/infant mortality and race, income, ethnicity, etc. Condemning the medical community as “racist” is unjustified.

[anne]

No; only racism in racism and only racists are racists.

[evagrius]

Peter Schaeffer;

Mr. Schaeffer, you've just stated the obvious. The first excuse concerning adverse birth outcomes for minorities is that it is genetic. When the "hispanic paradox" is brought up, the second excuse is that it must be the new lifestyle they've adopted. So which is it?
You mention Singapore. You point out that it does not have a "significant underclass", has very little drug use, etc;. You don't mention that they probably have high community participation as well.
All these elements are lacking in the U.S. for the "underclass". I'll bet that "white" women who belong to the underclass have birth outcomes similar to minorities.

Read Richard G. Wilkinson , ( and others), on the relationship between health and economic/ social inequality. There's a substantial amount of evidence showing that the higher the income inequality in a population, the worse the health outcomes are for the population as a whole.

The particluar web site referred to in my remarks is typical of those who choose to ignore the basic reality of the type of life most underclass people have to live.

The Brookings Institution, ( it used to be Institute- since when did it become an institution and why?), is typical of many that ignore the reality of those people's lives.

It's not the active racism of the KKK, it's the passive racism of being willfully ignorant.

[ken melvin]

After a hundred years; when something requires so much justifying and rationalizing, man, it's a big lie.

[DRR]

I don't think I would have said this earlier, but Shaeffer and Litchman are starting to sound like the sane ones.

[anne]

Then, I suggest you learn to read and think and come to understand what obvious prejudice amounts to.

[cm]

evagrius: "'Efficiency' can really only apply to machines or machine-like actions."

They are not driving you very hard at work, are they? :-)

It strikes me as a subtle terminology issue -- can you talk about efficiency when you cannot define/measure it objectively?

For example, in "knowledge worker" type work, one can certainly be more or less efficient, but there is generally no objective standard against which to evaluate the output of the work either quantitatively or qualitatively. Neither for work effort, assignments are of differing and nonstandard complexity. If there is, then it's arguably "data processing".

[cm]

adam: "is it "fair" for 200 million chinese to be lifted out of poverty at the expense of the western middle class job security?"

Isn't this a strawman -- are 200 million Chinese really lifted out of poverty, and if so are they lifted by US labor concessions, or is much of that lifting actually happening in the bank accounts of corporations and wealthy elites?

I have been hearing Chinese farmers are not too happy about increased industrial pollution and land/resource grabs for corporate use.

[cm]

adam: The USSR collapsed no because of distribution of wealth, but because of misguided and incompetent elites unable and in fact disinclined to craft a sustainable social model. In fact, arguably lack of (re)distribution of wealth had a role to play -- the elite funneled most surplus value, and indeed most of public resources, to itself and its military apparatus, thinking that feeding propaganda slogans to the population is good enough.

[cm]

Which then found crisp expression in the saying "they pretend to pay us, and we pretend to work".

[evagrius]

cm;

No. I don't work very hard these days. I'm fortunate, ( thanks to union efforts, ( AFSCME)), to have early retirement.

You're correct. In my former work, "efficiency" was defined by how fast one processed applications or re-certfications, so many in one month, with no overdue applications or renewals, ( re-certs). The standards were general and had been agreed to through union negotiations. However, the standards did not take into account the difficulties that could arise in some cases, ( i.e; an elderly person, not very literate, having to come up with massive amounts of verification in order to be asset eligible for Medicaid or an immigrant family not quite understanding timelines and due dates etc; etc;). One could "shine" these people on, keeping your case load "clean" but that certainly did not help the people in need. I worked as an "intake" eligibility worker at a health clinic, taking 75-100 applications a month. It wasn't just processing the paperwork, ( entering the information on a series of data screens), but also interviewing the applicants and connecting them to other services. I often got in trouble for having too many open cases but that was upper management. None of my clients complained.
Now the system has "improved" with CalWIN, an information data system that's supposed to smooth the processing of cases. In reality, it's turned into an even more boondoggled affair. Clients are subjected to 3-4 hour long interviews, request for extraneous information, receipt of letters illegally denying them aid, letters denying them for services not requested, etc; often in incomprehensible legalese English or badly translated foreign languages.
You're right. The "efficiency" has improved but client service has declined.

[cm]

evagrius: Interesting that you would use the term "client". Arguably what you are describing is a business affair (in this type of society anyway), but it smacks of modeling every social interaction as corporate business.

[evagrius]

cm;

"Client" is a better term than "customer" which is the new parlance for those applying for social services.

Client's root meaning is basically someone who leans on another for aid. That's certainly true of those seeking services from lawyers, doctors etc; It certainly holds true for social services.

I hated the term "customer" to be used for applicants for social services. Customer implies the ability to choose, to say yea or nay. Our clients did not have and do not have that ability.

Business ideology has crept into every facet of human activity. In its domain, it's quite adequate, but when it creeps into other domains of human activity, the ideology becomes almost satanic in its effects.

[cm]

evagrius: As a foreigner perhaps I'm imputing particular connotations on terms because of limited cultural exposure. Would there be a better term in this case?

This conversation may look like a distraction from the main topic, but I believe it relates very much to "indoctrination", a large part of which is always definition of suggestive terminology. Language defines what one can think about, and that. My favorite example of old is the (West) German "work-giver" (employer), and "work-taker" (employee). In English it's merely active-passive.

[Ben Litchman]

Evagrius,

The quote is deeply racist- to put in very blunt, crude, obscene words; " Why them n#$$!h women just can't give birth to normal babies. Must be their genes or somethin'

Thanks to this mind-bogglingly ridiculous quote, the rational people in the discussion have come to realize your foolishness.

Out of curiosity, is it racist to say that black people suffer disproportionately from sickle cell anemia? Is it antisemitic to say that Jews suffer disproportionately from Tay-Sachs disease?

Then you should not say anything regarding these topics since you haven't spent anytime on them.
Exactly what is "rational ignorance"?

The fact that you had to ask that question is evidence that you have spent far less time studying. If you have any desire to learn, here's a link.

The sacred "property rights". I didn't know property had any rights. Whose propert? For how long?

This is a classic misunderstanding (and yet more evidence that you've not done much reading on these topics). Sowell discussed the inane rejoinder at some length in Knowledge and Decisions, written nearly three decades ago. To get you started, "property rights" refers to the rights human beings have to own and manage their own property.

The hidden model that lies at the heart of neo-classical economics as it exists in practice is Social Darwinism, the belief that biology and science support the existence of a particular social order, the social order which, by happy circumstance and the virtue of our history, happens to be the one in place at this time. Thus, the rich and powerful shouldn't ever feel the pain of impostor syndrome, and that gnawing feeling that they feel must be from that undigested bit of beef, a blot of mustard, a crumb of cheese, or a fragment of underdone potato.

You're slowly wading off the deep end at the end there. Needless to say, I'm not a Social Darwinist, and I've likely given a greater proportion of my personal income to charity than any of those tossing around slurs here.

[Peter Schaeffer]

Evagrius,

The available data suggests that several factors may be involved in LBW/infant mortality. The likely factors are genetics, lifestyles, and access to health care. I tried to provide examples of each and demonstrate that no single explanation is likely to be correct and complete.

The black/Asian data suggests, but doesn’t prove the existence of significant genetic influences. The “Hispanic paradox” data points more towards lifestyle factors at least within the Hispanic community itself.

The black/Asian data does appear to control for SES, income, and access to health care. The persistence of differences in birth outcomes must be do to something. We don’t have nearly enough data to prove that genes are responsible. However, genes can’t be ruled out either. Gregory Cochran suggests that such outcomes might be a consequence of asymptomatic viruses that Asian are exposed to in the US, but not in Asia. This is far out, but not inconceivable.

The Hispanic data tends to demonstrate that positive lifestyles yield positive birth outcomes, even with low SES and limited access to medical care. In other words, lifestyles are more important than SES and limited access to medical care. Of course, a positive genetic component is also possible which is then offset by adverse lifestyles in the next generation.

The influence of genes on health outcomes is becoming better understood over time. For example, it is reasonably well established that Hispanics have a genetic susceptibility to diabetes. See the following from the NIH.

http://diabetes.niddk.nih.gov/dm/pubs/hispanicamerican/

"Genetic Risk Factors

A family history of diabetes increases the chance that people will develop diabetes. The San Antonio Heart Study showed that the prevalence of diabetes among Mexican Americans who have first-degree relatives (e.g., parents) with diabetes was twice as great as for those with no family history of diabetes.

Having American Indian or African genes (populations with a high prevalence of diabetes) is also thought to be a factor that causes the higher rates of diabetes in Hispanics. Hispanics, like all populations, inherit their susceptibility to diabetes from their ancestors. Hispanics have three groups of ancestors--Spaniards, American Indians, and Africans. Both American Indians and Africans have high rates of diabetes. Figure 2 shows the genetic origins of major Hispanic subgroups.10"

Singapore is well known to be fragmented into racial/ethnic communities including the Chinese (several subgroup), Malaysians, South Asians (several groups), etc. While these groups remain somewhat separate, racial tensions are generally quite low. Racial tension is illegal in Singapore, along with everything else.

If you have any information about community participation in Singapore versus other countries, please post it. Based on Putnam’s thesis (diversity is inversely correlated with community participation) I would guess Singapore ranks low. Of course, Putnam’s thesis is US based and things may be different in Asia.

Of course, underclass membership is associated with adverse birth outcomes. However, the essence of the “Hispanic paradox” is that Mexican immigrant women have positive (non-underclass) outcomes in spite of low SES, etc. By contrast, the next generation does worse in spite of better resources. Of course, underclass membership has adverse consequences for all racial/ethnic groups. However, as the data shows, underclass membership is not strictly a function of SES.

I find it highly believable that inequality is correlated with poorer health outcomes. However, the data I have used is all within the US, save for a reference to Singapore. Singapore and the US have close Ginis (42.5 and 45). Moreover, it is hard to believe that high SES Asians are victims of the US system or that low income first generation immigrants are the beneficiaries. Clearly, other factors are at work

[evagrius]

Ben Litchman;

So you claim that your "rational ignorance" should not be an excuse for others to tinker with policies. A rather strange view.
Besides, as a paper on rational ignorance concludes;

"The biggest problem with the rational ignorance theory is that we do not always know how much a piece of information will be worth until we have acquired it. We have to make judgments based on the experienced costs and benefits of acquiring information, and thoseexpectations are based on experiences that sometimes lead us astray. So even though we may be perfectly rational in our decisions about acquiring information, we can still make what, in retrospect, we will judge to have been bad decisions. Even economists concede that being rational will not necessarily prevent one from making a fool of oneself"

From Economic Brief, Community and Economic Development Program, Clemson University.

Thank you for the reference since it confirms my view, not yours. You haven't spent any time, even a modicum, in acquiring information on the subject, yet still have an opinion. That truly is ignorance.

As for "property rights", I know the difference, ( quoting Sowell is useless- he's a hack). The point is that this notion is a fairly recent one in human history. People owned property, property that was inheritable, but always with a proviso- it had to be of benefit to the community at large, not just the owner.
You may consider this to be a "primitive" notion, but it still is a common understanding among many people, even those in societies that seem to have abandoned this view. It's because of this recognition of community benefit that pollution laws, environmental laws, etc; have been enacted. Besides, it's not really true that you "own" property- it's more that you're a caretaker of it. This holds particularly true for land and water.

As for Social Darwinism- it's nice that you've given to charity but that's no excuse, in fact, it only reinforces the inequities. After all, it makes you feel "good" and "superior", ( the Gospel mention of trumpeting one's charity comes to mind). You do not question how you came to your good fortune, ( you worked hard, right, and have the requisite character, right?). You also do not question the wealth of others and how they obtained it, ( obviously, they work hard and have good character also).

Besides all this, that wasn't my quote though I wish I'd written it.