Happy new year!

[ht: cnc]

Got a little ethics?

We already know that academic economists don’t have any ethics. The question is, will they try to find some anytime soon?

Momentum is building, to judge by an article in today’s New York Times, for economists to discuss ethical guidelines or codes of conduct at the upcoming Allied Social Science Association meetings in Denver. My guess is they’ll succumb to the pressure and adopt something very limited—disclosure of conflicts of interest, say—and leave untouched all the other ways economics, as it is currently conducted, falls afoul of ethical norms and values.

So, they’ll go to the meeting with no ethics and leave it with a little bit of ethics. But academic economics will remain mostly without the kind of ethics George DeMartino and others are calling for.

Corruption and the hypocrisy of neoclassical economists

The hypocrisy of neoclassical economists never ceases to amaze.

On one hand, everything is supposed to be universal and transhistorical. Individual preferences, markets, prices, and so on all fall under that category. Then, when it suits them, they turn to cultural relativism.

The latest example is Jagdish Bhagwati, for whom free international trade is always and everywhere the right policy. Cultural differences don’t matter. He is critical of any and all attempts to intervene in or regulate international trade, whether it be a government tariff or an antisweatshop campaign. He opposes all such attempts to disrupt free trade. Then, there’s corruption, which he goes to great lengths to describe as a culturally specific phenomenon: what is regarded as corruption in one cultural context is not in another.

The cost of corruption has been particularly high in India and Indonesia, where policies created monopolies that earned scarcity rents, which were then allocated to officials’ family members.Such “rent-creating” corruption is quite expensive and corrosive of growth. By contrast, in China, the corruption has largely been of the “profit-sharing” variety, whereby family members are given a stake in the enterprise so that their earnings increase as profits increase – a type of corruption that promotes growth.

So, in contrast to his position on free trade, Bhagwati opposes corruption in the Indian and Indonesian contexts but not in China. Which is it then, universalism or cultural relativism?

Now, as readers can probably guess, I tend to favor culturally relative approaches to all economic phenomena. As far as I’m concerned, the specific meaning and effects of scarcity, prices, markets, trade, exploitation, and so on—including corruption—depend on their cultural context. But, as against Bhagwati, I don’t turn to cultural relativism for some things and then turn it off for others.

What then explains Bhagwati’s hypocrisy? Is it that in some cases corruption hinders the development of capitalism, while in others it promotes capitalism development? Is that the universal standard, successful capitalist development, which allows him to see corruption through the lens of cultural relativism?

Billy Taylor RIP

Obituaries can be found here, here, and here.

Suicides and luxury cars

Only under capitalism are suicides closely related to the purchase of luxury cars.

You have to look to India to see the relationship. There, according to P. Sainath, 17,368 farmers killed themselves over the course of 2009—while, in October, businessmen from Aurangabad in the Marathwada region of the state of Maharashtra bought 150 Mercedes Benz luxury cars. The connection?

The value of the Mercedes deal equals the annual income of tens of thousands of rural Marathwada households. And countless farmers in Maharashtra struggle to get any loans from formal sources of credit. It took roughly a decade and tens of thousands of suicides before Indian farmers got loans at 7 per cent interest — many, in theory only. Prior to 2005, those who got any bank loans at all shelled out between 9 and 12 per cent. Several were forced to take non-agricultural loans at even higher rates of interest. Buy a Mercedes, pay 7 per cent interest. Buy a tractor, pay 12 per cent. The hallowed micro-finance institutions (MFIs) do worse. There, it’s smaller sums at interest rates of between 24 and 36 per cent or higher.

Farming households, starved of credit to purchase agricultural inputs, have had to turn to moneylenders, loan sharks, and other “non-official” sources of credit. And, with crashing commodity prices, and increasing levels of debt they have no hope of repaying, farmers have been committing suicide in record numbers. The total farm suicides since 1997 have now reached over 2 million.

Meanwhile, in November, a new group of 101 businessmen from Aurangabad made the decision to buy BMW cars.

Because they can

We’re known for a long time that one of the secrets behind Wal-Mart’s low prices is the fact that it pays low wages to its workers. Now, it’s decided to pay its workers even less.

David Macray reports that, beginning in the new year, Wal-Mart will discontinue its $1 dollar an hour bonus pay for Sunday work. Why is it making this move to lower the price of labor power on Sundays?

Surely, it’s not a question of being unable to afford it, because Wal-Mart is rolling in dough. Actually, the answer is fairly obvious: They did it because they could.With no labor union or government agency to stop them, with the country too distracted by its own economic worries and woes to empathize with retail clerks, and with the job market in the sorry shape it’s in, what are these Wal-Mart folks supposed to do—quit their jobs and look for work elsewhere? Taking all of this into account, Wal-Mart saw the move as eminently doable…and did it.

That’s the world in which we now live: those on top do whatever they can to boost profits and to keep a larger share of those profits—by lowering workers’ wages and demanding an extension of tax cuts. Why? Because they can.

Capitalism’s creative destruction

There’s probably no better example of capitalism’s creative destruction than the changes to the South Works area of Chicago over the course of the past century and a half.

The picture above is a rendering of the redevelopment scheme that is now underway.

The about 470-acre South Works site juts into Lake Michigan and has dazzling views of downtown nine miles to the north. The master plan, by the architecture firm Skidmore, Owings & Merrill, calls for 13,575 market rate and affordable homes to serve 50,000 new residents, 17.5 million square feet of retail and commercial space, a high school and a marina with 1,500 slips, to be built in phases over the next 30 years. The estimated cost is $4 billion.

Here’s a link to a brief history.

Here’s what it looked like in the past:

date: 2009

date: c. 1970

date: unknown

date: unknown

The plan is to preserve some of the masonry walls along an old boat slip. I wonder if they’ll pay homage to the struggles of the tens of thousands of steelworkers who lived and worked on the site from the mid-nineteenth century (as the North Chicago Rolling Mill) until the U.S. Steel plant officially closed in 1992.

Crazy 2010

 

Public art of the day

“Thug Life”

Karma

 

‘Tis the season of inequality

Inequality, it seems, is everywhere this holiday season.

It’s a central issue in William Easterly’s review of Matt Ridley’s new book, The Rational Optimist.

Ridley also fails to really address inequality and uncertainty. The free market may produce cornucopia, doubters concede. But it also gave Richard Fuld of Lehman Brothers $60,000 a day (in 2007, the year before the company went bankrupt) while one billion other people survived on a dollar a day.

Frank Rich discusses it in the course of writing about the the “Disneyland Dream.”

In last week’s exultant preholiday press conference, Obama called for a “thriving, booming middle class, where everybody’s got a shot at the American dream.” But it will take much more than rhetorical Scotch tape to bring that back. The Barstows of 1956 could not have fathomed the outrageous gap between this country’s upper class and the rest of us. America can’t move forward until we once again believe, as they did, that everyone can enter Frontierland if they try hard enough, and that no one will be denied a dream because a private party has rented out Tomorrowland.

Francis Fukuyama focuses on it in posing the question “Is America a plutocracy?”

Why has a significant increase in income inequality in recent decades failed to generate political pressure from the left for redistributional redress, as similar trends did in earlier times? Instead, insofar as there is any populism bubbling from below in America today it comes from the Right, and its target is not just the “undeserving rich”—Wall Street “flip-it” shysters and their ilk—but, even more so, government policies intended to protect Americans from their predations. How do we explain this?

And Jeffrey Sachs expresses his worry that both major U.S. political parties are making it worse.

The US budget deficit is enormous and unsustainable. The poor are squeezed by cuts in social programs and a weak job market. One in eight Americans depends on Food Stamps to eat. Yet, despite these circumstances, one political party wants to gut tax revenues altogether, and the other is easily dragged along, against its better instincts, out of concern for keeping its rich contributors happy.

Maybe that’s what Dr. Seuss was writing about, too: how inequality stole Christmas.