Archive for April, 2014

top 1 percent

Lisa Keister [ht: st] has looked at who the top 1 percent are and published her results in an article that is now available on-line (although, alas, behind a paywall) in the Annual Review of Sociology.

The key result, from where I sit, is there are few demographic differences between the top 1 percent and the rest of the top 9 percent, thus challenging the common argument that human capital and skill-biased technological change explain rising inequality in the United States.


Note: according to Matthew Yglesias, the anomalous results for the other 90 percent (e.g., they’re 71.2 percent male) may be an artifact of the Survey of Consumer Finances methodology, which appears to code mixed-gender married couples as male.

hey mr economics

Thomas Palley reminded me of a post I had planned to write on how mainstream economists are attempting to raise the drawbridge. And not just those on the conservative wing.

Liberal mainstream economists, such as Paul Krugman and Simon Wren-Lewis, also want to pull up the drawbridge over the moat and protect the castle of mainstream economics.

According to Krugman, heterodox economists are working with the wrong storyline:

Here’s the story they tell themselves: the failure of economists to predict the global economic crisis (and the poor policy response thereto), plus the surge in inequality, show the failure of conventional economic analysis. So it’s time to dethrone the whole thing — basically, the whole edifice dating back to Samuelson’s 1948 textbook — and give other schools of thought equal time.

Unfortunately for the heterodox (and arguably for the world), this gets the story of what actually happened almost completely wrong.

It is true that economists failed to predict the 2008 crisis (and so did almost everyone). But this wasn’t because economics lacked the tools to understand such things — we’ve long had a pretty good understanding of the logic of banking crises. What happened instead was a failure of real-world observation — failure to notice the rising importance of shadow banking. Economists looked at conventional banks, saw that they were protected by deposit insurance, and failed to realize that more than half the de facto banking system didn’t look like that anymore. This was a case of myopia — but it wasn’t a deep conceptual failure. And as soon as people did recognize the importance of shadow banking, the whole thing instantly fell into place: we were looking at a classic financial crisis.

Wren-Lewis offers much the same interpretation:

Let me get personal. Over the last few years, I have been in charge of a macroeconomics course at Oxford. For better or worse, if past evidence is anything to go by, one or two of those taking this course will end up helping run the economy. There is so much important mainstream theory that needs to be covered in that course, because it is theory that is essential to trying to understand what is currently going on in the world. At its core is Keynesian theory, which has proved its worth since the recession. (Interest rates didn’t rise because of all that government debt, inflation didn’t take off because of all the money that has been created, and austerity did delay the recovery.) It would be a great step backwards if I had to stop teaching part of that, and instead teach Austrian or Marxian views about the macroeconomy, or still worse spend time worrying about what Keynes really meant. I would much rather a future Chancellor, Prime Minister, or advisor to either, remembered from their undergraduate degree that mainstream theory said austerity was contractionary, rather than ‘well it all depends on whether you are a Keynesian or an Austrian’.

In both cases, the argument is that everything we need to analyze and come up with effective policies to get out of the Second Great Depression is contained within mainstream economics. And we don’t really need to do anything fundamental to change the way we teach and do economics. Instead of attempting to learn something about heterodox economic theory and making an alliance with heterodox economists—perhaps even creating new drawbridges into the mainstream castle or blowing up the walls of the castle itself—liberal mainstream economists like Krugman and Wren-Lewis have decided to stick with the hydraulic Keynesian models that can be found in the corners of the castle of mainstream economics.

Don’t get me wrong: I’m not against teaching mainstream economics. I do it all the time, precisely because it’s the hegemonic economic discourse and students need to know how it works (even, and perhaps especially, when it doesn’t work). But that doesn’t mean it’s the only sort of economics students or policymakers should be exposed to. There are a lot of other ideas, which heterodox economists have been developing and using for a long time, that can make sense of and get us out of the current mess we’re in.

But students won’t even know such ideas exist if their professors keep them trapped within the walls of the existing castle.

April 28, 2014

Special mention

racistidiotPR720 scotus-evolution-mccutcheon-cartoon


Special mention

147689_600 DonSterlingAndGF

Poem of the day

Posted: 28 April 2014 in Uncategorized
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I chanced upon the following poem by Bertolt Brecht, from 1936, while searching for the appropriate words to commemorate the retirement of a colleague and longstanding friend.

Questions from a Worker Who Reads

Who built Thebes of the seven gates?
In the books you will find the names of kings.
Did the kings haul up the lumps of rock?
And Babylon, many times demolished
Who raised it up so many times? In what houses
Of gold-glittering Lima did the builders live?
Where, the evening that the Wall of China was finished
Did the masons go? Great Rome
Is full of triumphal arches. Who erected them? Over whom
Did the Caesars triumph? Had Byzantium, much praised in song
Only palaces for its inhabitants? Even in fabled Atlantis
The night the ocean engulfed it
The drowning still bawled for their slaves

The young Alexander conquered India.
Was he alone?
Caesar beat the Gauls.
Did he not even have a cook with him?
Philip of Spain wept when his armada
Went down. Was he the only one to weep?
Frederick the Second won the Seven Years’ War. Who
Else won it?

Every page a victory.
Who cooked the feast for the victors?
Every ten years a great man.
Who paid the bill?

So many reports.
So many questions.


from Bertolt Brecht, Poems, 1913-1956, ed. John Willett and Ralph Manheim (London: Methuen, 1987).

Map of the day

Posted: 28 April 2014 in Uncategorized
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The National Low Income Housing Coalition has calculated how much a worker would have to earn per hour to cover modest, one-bedroom housing (assuming a 40-hour work week and a 52-week year). They call this rate a “housing wage,” and it is much higher than the minimum wage in much of the country.

Emily Badger and Christopher Ingraham [ht: lw & ja] have mapped his information. Their two main conclusions are:

  • No single county in America has a one-bedroom housing wage below the federal minimum wage of $7.25 (several counties in Arkansas come in at $7.98).
  • Coastal and urban counties are among the most expensive.

As we can see below, the one-bedroom housing wage for Cook County is $15.88, more than twice the federal minimum wage and more than 50 percent higher even than the increased minimum proposed by Obama.



I don’t mean to spoil the Thomas Piketty “rock-star economist” party but where are all the women?

Sure, there’s Heidi Moore but has anyone else noticed that all the public debates in the United States seem to include only male economists?

According to the latest report from the Committee on the Status of Women in the Economics Profession, about 30 percent of both first-year graduate students and new Ph.D.s in economics are women and, while the numbers decline as the rank goes up, it is still the case that in doctoral programs 28.3 percent of Assistant Professors, 21.6 percent of tenured Associate Professors, and 11.6 percent of Full Professors are women.

But none of them seems to have been invited to the party.