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Sometimes, good people who are doing good work get at least some of the recognition they deserve.

That’s why I was pleased to learn that Dwight Billings recently received the Cratis D. Williams/James S. Brown Service Award, the highest honor for service awarded by the Appalachian Studies Association.

In addition to all the accomplishments cite in the article, Billings has also worked with Kate Black to provide a guided tour of some of the significant materials—including the coal miners’ strike of 1931-32—in the Appalachian Collection at the University of Kentucky.

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Posted: 23 April 2014 in Uncategorized
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What could I possibly add?

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Thanks to Thomas Piketty’s new book, the returns to capital are now back on the intellectual—if not the political—agenda. But, as one of my students (who just completed a wonderful senior thesis on “The Gilt and the Glitter: Thorsten Veblen, The Theory of the Leisure Class, and the Second Gilded Age”) noticed, the composition of incomes of the leisure class changed between the first and second Gilded Ages: in 1916, most of their income came from “capital”; now, a large portion comes from “salaries”—although, as we can see below (in data from 2007), that’s less true of the top 0.1 percent than of the rest of the top 1 percent.

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Robert Solow, in the clearest review of Piketty’s book to date, is the first to notice this change.

You get the picture: modern capitalism is an unequal society, and the rich-get-richer dynamic strongly suggest that it will get more so. But there is one more loose end to tie up, already hinted at, and it has to do with the advent of very high wage incomes. First, here are some facts about the composition of top incomes. About 60 percent of the income of the top 1 percent in the United States today is labor income. Only when you get to the top tenth of 1 percent does income from capital start to predominate. The income of the top hundredth of 1 percent is 70 percent from capital. The story for France is not very different, though the proportion of labor income is a bit higher at every level. Evidently there are some very high wage incomes, as if you didn’t know.

This is a fairly recent development. In the 1960s, the top 1 percent of wage earners collected a little more than 5 percent of all wage incomes. This fraction has risen pretty steadily until nowadays, when the top 1 percent of wage earners receive 10–12 percent of all wages. This time the story is rather different in France. There the share of total wages going to the top percentile was steady at 6 percent until very recently, when it climbed to 7 percent. The recent surge of extreme inequality at the top of the wage distribution may be primarily an American development. Piketty, who with Emmanuel Saez has made a careful study of high-income tax returns in the United States, attributes this to the rise of what he calls “supermanagers.” The very highest income class consists to a substantial extent of top executives of large corporations, with very rich compensation packages. (A disproportionate number of these, but by no means all of them, come from the financial services industry.) With or without stock options, these large pay packages get converted to wealth and future income from wealth. But the fact remains that much of the increased income (and wealth) inequality in the United States is driven by the rise of these supermanagers.

And Solow’s interpretation?

It is of course possible that “supermanagers” really are supermanagers, and their very high pay merely reflects their very large contributions to corporate profits. It is even possible that their increased dominance since the 1960s has an identifiable cause along that line. This explanation would be harder to maintain if the phenomenon turns out to be uniquely American. It does not occur in France or, on casual observation, in Germany or Japan. Can their top executives lack a certain gene? If so, it would be a fruitful field for transplants.

Another possibility, tempting but still rather vague, is that top management compensation, at least some of it, does not really belong in the category of labor income, but represents instead a sort of adjunct to capital, and should be treated in part as a way of sharing in income from capital. There is a puzzle here whose solution would shed some light on the recent increase in inequality at the top of the pyramid in the United States. The puzzle may not be soluble because the variety of circumstances and outcomes is just too large.

Solow seems to be onto something: the source of the salary incomes of the top 1 percent is just as much capital as are the other sources of their income, such as profits, dividends, interest, rent, and capital gains. All of them—including the salaries of “supermanagers”—represent distributions of the surplus initially appropriated by capital.

Therefore, as Solow concludes, “it is pretty clear that the class of supermanagers belongs socially and politically with the rentiers, not with the larger body of salaried and independent professionals and middle managers.”

Protest of the day

Posted: 23 April 2014 in Uncategorized
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Dozens of Sherpa guides packed up and abandoned Mount Everest’s base camp Wednesday in honor of 16 of their colleagues killed in the deadliest avalanche recorded on the mountain, an incident that has exposed a great deal of resentment over their working conditions, pay, and treatment.

Tusli Gurung, a guide who was at the base camp on Wednesday, estimated that nearly half the Sherpas had already left.

The walkout is certain to disrupt a climbing season that was already marked by grief following Friday’s disaster. Sherpa guides were hauling climbing gear between camps when a chunk of ice tore loose and triggered an avalanche. Thirteen bodies were recovered and three Sherpas still missing are presumed dead.

“It is just impossible for many of us to continue climbing while there are three of our friends buried in the snow,” said Dorje Sherpa, an experienced Everest guide from the tiny Himalayan community that has become famous for its high-altitude skills and endurance.

“I can’t imagine stepping over them,” he said of the three Sherpa guides who remain buried in ice and snow. . .

The avalanche was triggered when a massive piece of glacier sheared away from the mountain along a section of constantly shifting ice and crevasses known as the Khumbu Icefall — a treacherous area where overhanging immensities of ice as large as 10-story buildings hang over the main route up the mountain.

Special teams of Sherpas, known as Icefall Doctors, fix ropes through what they hope to be the safest paths, and use aluminum ladders to bridge crevasses. But the Khumbu shifts so much that they need to go out every morning — as they were doing when disaster struck Friday — to repair sections that have broken overnight and move the climbing route if needed. . .

While most climbers have to make multiple passes through the Icefall, moving up and down the mountain as they acclimatize and prepare for their summit attempt, Sherpas make the dangerous journey two dozen times or more, carrying supplies and helping clients negotiate the hazardous maze of ice.

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Back in 2009, in the midst of the Great Crash (and therefore at the start of the Second Great Depression), a colleague and friend asked me whether I expected the teaching of economics to change. His view was that, since mainstream economics had so miserably failed in both predicting the crash and providing a guide as to what to do once the crash occurred, it was obvious the economics being taught to students had to fundamentally change. My answer was that, while the need for a change was obvious, I didn’t see it happening—and it probably wouldn’t happen (thinking back to the emergence of the Union of Radical Political Economics in the late-1960s) unless and until students of economics demanded a different approach.

Well, in various places (starting almost a decade before the current crises, with the eruption of the Post-Autistic Economics movement in June 2000), students have been demanding a fundamental change in the way economics is being taught. The latest effort to move that project along is a report from the University of Manchester Post-Crash Economics Society. Here are some of their key findings, which refer to how economics is taught at Manchester but clearly have much wider relevance, in and beyond the United Kingdom:

  • Economics education at Manchester has elevated one economic paradigm, often called neoclassical economics, to the sole object of study. Other schools of thought such as institutional, evolutionary, Austrian, post-Keynesian, Marxist, feminist and ecological economics are almost completely absent.
  • The consequence of the above is to preclude the development of meaningful critical thinking and evaluation. In the absence of fundamental disagreement over methodology, assumptions, objectives and definitions, the practice of being critical is reduced to technical and predictive disagreements. A discipline with a broader knowledge of alternative perspectives will be more internally self-critical and aware of the limits of its knowledge. Universities cannot justify this monopoly of one economic paradigm.
  • The ethics of being an economist and the ethical consequences of economic policies are almost completely absent from the syllabus.
  • History of economic thought is an optional third year module which students are put off taking due to it requiring essay writing skills that have not been extensively developed elsewhere in the degree. Very little economic history is taught. Students finish an economics degree without any knowledge of momentous economic events from the Great Depression to the break-up of the Bretton Woods Monetary System.
  • When taken together, these points mean that economics students are taught the economic theory of one perspective as if it represented universally established truth or law.

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Special mention

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Map of the day

Posted: 22 April 2014 in Uncategorized
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This is a map indicating the number (by the size of the circles) and percentage (by the color of the circles) of Americans living at or below the official poverty line.