Archive for September, 2011

Yasha Levine and Mark Ames have uncovered a particularly egregious example of right-wing hypocrisy:

Charles Koch, billionaire patron of free-market libertarianism, privately championed the benefits of Social Security to Friedrich Hayek, the leading laissez-faire economist of the twentieth century. Koch even sent Hayek a government pamphlet to help him take advantage of America’s federal retirement insurance and healthcare programs.

But there’s also a second example of right-wing hypocrisy buried in this example: right-wingers have attacked Obama’s Affordable Care Act on the grounds that mandatory health insurance undermines individual rights. However, their own champion, Hayek, in his 1960 opus, The Constitution of Liberty, actually defended the idea of compulsory insurance:

There is little doubt that the growth of health insurance is a desirable development. And perhaps there is also a case for making it compulsory since many who could thus provide for themselves might otherwise become a public charge. (p. 298)

Hayek did, in fact, criticize Social Security and national health schemes, mostly on the grounds that they were based on a single government institution (rather than various private schemes), the government entity charged with the responsibility of funding retirement benefits and healthcare services advertised its benefits through pamphlets and other schemes (of the sort Koch sent to Hayek), and of course they became the means for redistributing income. But Hayek did think a case could be made for the very idea attacked by contemporary conservatives, that health insurance of the sort proposed within “Obamacare” should be compulsory.

When Texas Governor Rick Perry, a front-runner in the Republican primary for president, derides Social Security as a “Ponzi scheme” or a “monstrous lie,” that rhetoric can be traced back to the work of Hayek and Koch. And yet we now know that in private practice, Hayek was perfectly content to pay into Social Security and that Koch encouraged him to draw upon both Social Security and Medicare. Did they really believe what they wrote? Or were these attacks just scare-talk meant for the rubes, for you and us, “the public”?

And do right-wingers today actually read the basic texts they cite and claim to be guided by or do they simply oppose, in the name of something called freedom, any and all forms of government intervention, even those programs their intellectual mentors supported?

Black Swan baseball?

Posted: 30 September 2011 in Uncategorized
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Here’s a question for those of you who have been following the debate concerning Nassim Taleb’s theory of improbable outcomes: is the result of the American League East battle for the final playoff spot (which the Boston Red Sox lost and the Tampa Bay Rays won, with the last pitch in the ninth inning) an example of a Black Swan event?

What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

The result clearly fulfills the first condition (Yankees/anti-Red Sox fans’ wishing for the outcome is not the same as actually expecting it) and the third condition (the amount of nonsense by sports commentators after the fact of why the Red Sox lost simply beggars belief).

But does it carry an extreme impact? It certainly does for the members of the Red Sox Nation (and, presumably, the much-smaller Tampa Bay equivalent), and will no doubt be remembered for years to come.

Perhaps its larger impact, though, will be on reinforcing the importance of uncertainty—the significance of what we don’t know and simply cannot know.


Special mention

For all their complaining about onerous taxes and regulatory uncertainty, capitalists are accumulating capital.

And why not? With lots of free money—the unpaid labor of their employees plus virtually free loans from banks—capitalists are choosing to invest in new equipment and software. Their goal, of course, is to capture even more surplus.

The problem is, while they’re fulfilling the mission set for them by mainstream economics—to serve as “a machine for the conversion of this surplus-value into additional capital”—they’re not doing what society expects of them: to hire enough laborers to lower the unemployment rate.

Their legitimacy in the eyes of mainstream economists is thus satisfied. But their legitimacy in the eyes of workers and their families is increasingly being called into question.

interactive version

Here are some of the relevant facts:

  • Seven in 10 households receiving food stamps had no market income in 2010.
  • Only 21.8 percent of household heads on food stamps had jobs in 2010.
  • More than half of household heads who received food stamps, 51.1 percent, were discouraged workers; they weren’t in the labor force and weren’t searching for work.
  • On average, food stamp households brought home $731 per month in gross income; their food assistance averaged $287 a month.
  • Just 6.7 percent  of households who received food stamps were getting jobless benefits.
  • Nearly half of all food-stamp recipients, 47%, were children under the age of 18.

Cartoon of the day

Posted: 29 September 2011 in Uncategorized
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Theodore R. Marmor and Theodore R. Marmor are, I think, onto something: our language concerning the state has fundamentally changed.

Today the government is the other — not an institution for the achievement of our common goals, but an alien presence that stands between us and the realization of individual ambitions. Programs of social insurance have become “entitlements,” a word apparently meant to signify not a collectively provided and cherished basis for family-income security, but a sinister threat to our national well-being.

The state has become an alien other at least in part because government programs since the fall of 2008 have focused on bailing out banks, both foreign and domestic, and not on helping workers without jobs and homeowners who are underwater.

But the idea that the state stands between us and the realization of our ambitions goes back further, at least to the Reagan years, when a neoliberal discourse of government programs was consistently produced and disseminated. The result is that collective responsibilities, such as social security, are now perceived to be individual entitlements that should be cut in order to maintain fiscal balance and save the economy.

That language was developed in many places, including within the discipline of economics. Neoclassical economics is responsible for the growing emphasis on “individual choice, agency and preferences.” It is that language, perhaps even more than the policies themselves, that may be the true legacy of mainstream economics.

Clearly, we need to challenge the hegemonic language concerning government programs in order to salvage some sense of collective responsibility. But we also need to recognize there are real reasons in recent history for people to perceive the state as an alien other.

Public art of the day

Posted: 28 September 2011 in Uncategorized
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It’s clear why employers wanted health care reform, and backed Obama’s Patient Protection and Affordable Care Act: to contain their contributions to workers’ healthcare costs.

It’s also clear that workers should demand more reform, and to demand single-provider healthcare: to resist the shifting of the healthcare premiums onto them, and to obtain decent healthcare for everyone without lining the pockets of private healthcare providers and insurance companies.

Viktor Vasnetsov, "Grave Digger" (1871)

It was Samuelson who, in 1997, declared with morbid optimism that “Funeral by funeral, economics does make progress.”*

Now, Paul Krugman is worried that progress in economics has come to an end.

when I was younger I firmly believed that economics was a field that progressed over time, that every generation knew more than the generation before. . .

When I look at a lot of what prominent economists have been writing in response to the ongoing economic crisis, I see no sign of intellectual discomfort, no sense that a disaster their models made no allowance for is troubling them; I see only blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide. And no, it’s not symmetric: liberal economists by and large do seem to be genuinely wrestling with what has happened, but conservative economists don’t.

And all this makes me wonder what kind of an enterprise I’ve devoted my life to.

There may be two problems here: One is the right-wing’s “blithe invention of stories to rationalize the disaster in a way that supports their side of the partisan divide.” The other is the modernist story of progress in economics, now as in the past.

What neither Samuelson nor Krugman wants to admit is there have always been different approaches to economics—economics has always been an agonistic field of contending theories and methodologies—and there’s no way of positing or measuring progress, except perhaps within one of those approaches. Thus, a funeral oration for mainstream economics may not signify the death of other economic discourses. Indeed, it may breathe new life into them.

* “Credo of a Lucky Textbook Author,” Journal of Economic Perspectives 11 (Spring): 159.