Economics/Finance

(Hi all, wonderful to become part of this great blog! But now, directly on to some content!)

Imagine that you have a toothache, and a visit at the dentist reveals that a major operation is needed. You phone your health insurance. You listen to the voice of the chatbot, press the buttons to go through the menu. And then you hear: “We have evaluated your profile based on the data you have agreed to share with us. Your dental health behavior scores 6 out of 10. The suggested treatment plan therefore requires a co-payment of [insert some large sum of money here].”

This may sound like science fiction. But many other insurances, e.g. car insurances, already build on automated data being shared with them. If they were allowed, health insurers would certainly like to access our data as well – not only those from smart toothbrushes, but also credit card data, behavioral data (e.g. from step counting apps), or genetic data. If they were allowed to use them, they could move towards segmented insurance plans for specific target groups. As two commentators, on whose research I come back below, recently wrote about health insurance: “Today, public plans and nondiscrimination clauses, not lack of information, are what stands between integration and segmentation.”

If, like me, you’re interested in the relation between knowledge and institutional design, insurance is a fascinating topic. The basic idea of insurance is centuries old – here is a brief summary (skip a few paragraphs if you know this stuff). Because we cannot know what might happen to us in the future, but we can know that on an aggregate level, things will happen to people, it can make sense to enter an insurance contract, creating a pool that a group jointly contributes to. Those for whom the risks in question materialize get support from the pool. Those for whom it does not materialize may go through life without receiving any money, but they still know that they could get support if something happened to them. As such, insurance combines solidarity within a group with individual pre-caution.

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At some indeterminate point in the fairly recent past, citizens and leaders of most liberal democracies probably looked forward to a condition to be realized in the imaginable future that we can, for the sake of a convenient label, call Universal Scandinavia. The basic features ought to be obvious: employment and decent housing for all, lots of leisure time and paid holidays, universal healthcare generous maternity provision, inclusion for people with disabilities, free education and universal childcare, freedom to form a relationship and maybe a family with the person of your choice (straight or gay), a woman’s right to choose, tolerance of everyone regardless of faith or race, political freedom and democratic elections under fair conditions, concern for the natural environment and so on. A vision of prosperity for all, even if some degree of inequality might be tolerated to provide incentives and so forth. This wasn’t particularly an ideal limited to the left (in fact parts of the left would have rejected it for something more robustly socialist) but could have been embraced, in its rough outlines, by everyone from the centre-left to people on the centre right such as, for example, Simone Veil.

Some parts of this radiant future even got built, to varying degrees, across parts of Europe other than Scandinavia, in places like Canada, Australia, New Zealand. A realistic utopia, in fact.

But

Today, alas, that happy crowded floor
Looks very different: many are in tears:
Some have retired to bed and locked the door;
And some swing madly from the chandeliers;
Some have passed out entirely in the rears;
Some have been sick in corners; the sobering few
Are trying hard to think of something new.¹

Nobody currently thinks our future looks like Universal Scandinavia – and even in places where social democratic parties are in power, such as the UK – nobody thinks that they will advance even the tiniest step towards it. Rather, the likelihood is that even they will retreat. "Nice idea, but unaffordable."

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Cabo Verde is not a rich country. To have an idea, the minimum wage is €130 a month and a meal in a restaurant costs around €10. The IMF classifies Cabo Verde as a developing country.

Development has long ceased to be defined in exclusively economic terms. In 1990, a “human development index” was introduced, and other indicators have followed. Yet, there is one dimension still missing from all international comparisons: the moral development of a society. On this dimension, Cabo Verde seems to be among the most advanced. Here’s why. [click to continue…]

by Rutger Claassen and Ingrid Robeyns

Let’s establish an upper limit on the personal wealth any individual can possess. This is the core principle behind ‘limitarianism’. Limitarianism represents one of the more radical proposals in the debate on wealth inequality. Over the past few years, one of us has developed the philosophy of limitarianism (first in the academic realm, and then more recently also in the public sphere, as regular readers of this blog know). The proposal has since been endorsed, and in some cases further developed, by other scholars and writers, including Thomas Piketty and the Dutch journalist Sander Heijne.

Of course, not everyone likes the idea. One of the most important critiques on limitarianism is that it is unclear whether company owners can continue to hold on to their flourishing businesses in a limitarian world. Or no longer being able to receive exceptionally high pay for running these companies. Think, for example of the $46 billion compensation package Elon Musk received for serving as Tesla’s CEO.

Annemarie van Gaal, described as one of the most well-known businesswomen in the Netherlands and columnist for the influential Dutch newspaper De Telegraaf, claims that with a wealth cap, there will no longer be any business activity:

“But anyone who is willing to take significant risks, endure immense stress, and sacrifice sleepless nights to apply their talent and perseverance in order to reach the top, should be given free reign. These people are the ones who create jobs and ensure that our country remains among the wealthiest in the world. (…). Would top entrepreneurs still be willing to sacrifice years of their lives, take countless risks, and endure hardship if they knew in advance that there’s a limit to their success? No. We will never become a happy society if we allow this.”

But is this correct? Can business owners remain owners of their business under limitarianism? And can their businesses thrive? This is an important question. Because even if there are strong moral arguments for limitarianism, they are not worth much if limitarianism destroys the economy. [click to continue…]

So in the last three years or so — since COVID, basically — Romania and Taiwan have both joined a very special club of countries.

There are not a lot of countries in this club. If you’re very generous, you could include perhaps a dozen or so. But to my way of thinking, there are only about eight. They include:

Ireland (pretty much the type specimen)
South Korea
Singapore
All three Baltic states — Lithuania, Latvia, and Estonia
Taiwan
Romania

There are some definitional issues. Romania, in particular, s a borderline case.  It only qualifies as… half a member, let’s say. Microstates are excluded; to join this club, you must have at least half a million people. In theory, you could argue for the list to include Australia, Israel, Slovenia, and even the United States, but I except them because reasons.  

Okay, so:  What is this club?

The answer is below the cut.  But first: take a moment, look at that list, think about it.  (Here’s a hint: remember what I do for a living.)  Try to come up with an answer, and then put it in the comments. I’ll be curious to see what people think.

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(Originally drafted for a conference at Frankfurt in 2018 to mark the 40^th anniversary of Karl Marx’s Theory of History: A Defence. I’ve done a bit of editing of my conference script and added a few footnotes etc, but it isn’t necessarily produced to the scholarly standards one might require of a journal article.)

In Karl Marx’s Theory of History, G.A. Cohen attributed many of the ills of capitalism to the market mechanism. Later in his career he came to see the market as practically ineliminable. Insofar as he was right about the market in his earlier work, it may turn out that the alternatives to capitalism he championed at the end of his life will also generate the pathology he deplored: the systematic bias in favour of output over leisure and free time. The following explores some of these tensions.

Introduction

In the second half of his career, G.A. Cohen concentrated his discussion of capitalism on its wrongs and injustices. According to his diagnosis, the primary injustice in capitalism arose from the combination of private property and self-ownership, which enables capitalists – who own the means of production – to contract with workers – who own only themselves and their labour power, on terms massively to the capitalists’ advantage. The workers, who produce nearly all of the commodities that possess value in a capitalist society, see the things that they have produced appropriated and turned against them as tools of exploitation and domination by the capitalists. But the wrongness and injustice of capitalism, the theft of what rightfully belongs to workers, is only one part of what is to be deplored about capitalism. In chapter 11 of Karl Marx’s Theory of History, a chapter where he went beyond the expository and reconstructive work he undertook earlier in the book, Cohen articulated a different critique, this time focused not on injustice but on the ills to which capitalism gives rise. In that chapter he attacks capitalism for stunting human potential through a bias towards the maximization of output, a bias which condemns human beings to lives dominated by drudgery and toil. Relatedly, he attacks capitalism both for stimulating demand for consumption that adds little of real value to people’s lives and because for damaging of the natural environment through pollution. In developing this critique, Cohen also notes that the bias towards output he identifies is celebrated by Max Weber as exemplifying rationality itself, a celebration which Cohen thought ideological and mistaken.¹

Though both the wrongness and the badness of capitalism arise from the conjunction of private property and the market, it seems natural to emphasize the role of private property more in the production of injustice and to stress market relations more in the genesis of its badness. It is the fact of what the capitalists own that gives them decisive leverage over workers in the labour market, making exploitation within the workplace consequently possible; it is the market that compels everyone, capitalists and workers both on pain of extinction, to act in ways that end up being so destructive for human and planetary well-being.

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If you haven’t yet listened to Emily Hanford’s Sold a Story, you probably should, now. It’s brilliant, if profoundly depressing. Very brief synopsis: the methods routinely used to teach children to read in the US don’t work well for large numbers of children, and the science of reading has been clear about this for decades. Three academics in particular — Lucy Calkins of Teachers College, and Irene Fountas and Gay Su Pinnell of the Ohio State University — are responsible for promoting these bad practices (which are pervasive), and persisted in doing so long after the research was clear, and have gotten very rich (by the standards of academics) from the curriculum sales/speaking circuit.[1] Hanford’s documentary has single-handedly changed the environment, and in the past couple of years State departments of education and even school districts throughout the country have been scrabbling to reform, often under the eye of state legislators who have been alerted to the situation by the amount of chatter that Sold a Story has generated.

Go and listen to it.

Although a great admirer of Hanford’s work, which I have known and followed for many years, it took me a while to listen to Sold a Story. By the time I did I was familiar with the basic narrative which, I think, freed my mind to wonder about something that Hanford doesn’t discuss. The role of academic bystanders. People like me.
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Quinn Slobodian’s new book, Crack-Up Capitalism is an original and striking analysis of a weird apparent disjuncture. Libertarians and classical liberals famously claim to be opposed to state power. So why do some of them resort to it so readily?

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This post is a memo that I just presented at a workshop organized at the EUI by Kate McNamara, Frederic Merand and Catherine Hoeffler. Some of its key ideas were articulated in an informal discussion with Bill Janeway, Margaret Levi, Suresh Naidu, Dani Rodrik and Gabriel Zucman a couple of weeks back. None of them are at all to blame (I’ve benefited greatly from their various comments, suggestions and disagreements but probably not nearly so much as I should have).

Memo
In this brief and very informal memo, I argue that the “knowledge problem” critique of industrial policy has itself become a problem for knowledge. For decades, economists have argued that state policy makers lack the requisite knowledge to intervene appropriately in the economy. Accordingly, decisions over investments and innovation ought be taken by market actors. Now, the “market knows best” paradigm is in disrepair. It isn’t just that “hyperglobalization” has devoured its own preconditions, so that it is increasingly unsustainable. It is also that some goals of modern industrial policy are in principle impossible to solve through purely market mechanisms. To the extent, for example, that economics and national security have become interwoven, investment and innovation decisions involve tradeoffs that market actors are poorly equipped to resolve. There are good reasons why Adam Smith did not want to see defense policy handled through the market’s division of labor. [click to continue…]

Here, as promised, is a podcast we made at the Center for Ethics and Education based on interviews we did with Sandy Baum and Michael McPherson, authors of the excellent book Can College Level The Playing Field, which is an indispensable read if you want to understand the relationship between inequality and higher education, and inequality within higher education, in the US. (For CT discussion of a very poor quality review of the book, see here). Also I unabashedly recommend the whole podcast series!

Sandy Baum and Michael McPherson recently published a book, Can College Level The Playing Field?: Higher Education in an Unequal Society, which I’d recommend to anyone who wants to understand the structural position of higher education in the US. Spoiler alert here: Their answer is “No”. Most of the book is taken up with explaining why, by showing the multiple ways in which background inequalities and inequalities in the pre-college education system constrain any efforts higher education might make to level the playing field, and showing how unequal the higher education system is anyway, including – and this seems not to be well understood by politicians or a lot of commentators – how unequal the public sector itself is.

Full disclosure: I’m close friends with both of the authors, and read at least 3 versions of the manuscript before it was published and, I just realized by looking at its Princeton University Press page, wrote a blurb for it. The producer of the CEE podcast series is putting the finishing touches on an interview that we’ve done with them, and as soon as it is published, I’ll post about it encouraging you to listen and, again, encouraging you to read the book.

This (extremely long) post, though, is only secondarily about the book. My main interest is in a genuinely awful review of it, and of another book by Gary Orfield (which, I will emphasize several times, I have not read yet), in Boston Review by Christopher Newfield. I’m writing about it partly because it so irritated me that I want to get my irritation out of my system, but also partly because it illustrates some of the failings that are common to many of the books and commentaries I read about higher education.

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Earlier today,  after I tweeted out that “Proposals to mint $1tn platinum coin are designed to circumvent the US constitution’s “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts,” I got lectured by Nathan Tankus for “not grasping the most elementary legal issues in the topic you’re pontificating on.” This turns on the interpretation on the authority granted by Section 31 U.S. Code § 5112. Advocates of the platinum coin naturally like to quote the plain meaning of the text: “(k) The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” The plain meaning interpretation of (k) has been supported by Philip N. Diehl, former director of the United States Mint, who helped write the bill. But Diehl was not in Congress (and in virtue of his former office has obvious incentives to exaggerate its power and his former achievements).

However, the official author of the original bill, Representative Michael Castle, denied this interpretation, and suggested (quite plausibly in my opinion) that the provision was intended to cover collectibles (and not to provide the Treasure with the power to do an end run around any debt limits). I would be amazed if the original legislative record suggested otherwise. The law as we have it was inserted as a provisions into H.R. 3610, the Omnibus Consolidated Appropriations Act for 1997. It would be interesting if the congressional leadership recorded any views on the matter at the time (and that would change my view!) But the revisionary (‘plain meaning interpretation’) wasn’t voiced until May 2010. Even Diehl has admitted at one point that (the ‘plain meaning interpretation’) would constitute an “unintended consequence” of the bill. [Quoted in Grey (2020) op. cit, p. 261.] So, I don’t think this is really in doubt.

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One of the challenges critics of our contemporary form of capitalism face, is how to make the analysis of that beast clear to a broad audience. Let’s face it, most academic books on the topic are hard to understand. Moreover, many people hardly ever read a non-fiction book about politics, let alone the economy. Film is in this respect a great medium, since it is easier to digest than reading a book. And often a picture says more than a thousand words.

Some years ago, I was teaching ‘ethics of capitalism’ to an interdisciplinary group of undergraduate students. Many of them had never had any economics, and since any third-year student could take this course, I had students in that class from all over the university – history, philosophy, economics, geography, anthropology, sociology – even a student from theoretical physics. In the last week of the course, we zoomed in on the financial crisis, and I was worried how to teach such complex material. So, in addition to giving a lecture, I also organised a screening and discussion of Inside Job, and that worked very well. The film was pretty effective to further process the dry material from the lecture, and put all of it into a broader perspective. [click to continue…]

One of the things I really like about my job, is that I have been appointed on a chair with the explicit expectation to advance interdisciplinary collaborations between ethics and political philosophy on the one hand, and the social sciences (broadly defined) on the other. I’ve been co-teaching with historians, taught some courses that were open to students from the entire university, have been giving guest lectures to students in many other programs including economics, pharmacology, education, and geosciences; and I co-supervised a PhD-student in social work. I’ve written an interdisciplinary book on the capability approach, and have co-authored papers with scholars from various disciplines. So interdisciplinarity is deeply engrained in much of what I do professionally.

But while I love it enormously, interdisciplinary teaching and research is also often quite hard. One of the challanges I’ve encountered in practice, is that students as well as professors/researchers are not always able to recognise the many different kind of questions that we can ask about society, its rules, policies, social norms and structures, and other forms of institutions (broadly defined). This then leads to misunderstandings, frustrations, and much time that is lost trying to solve these. I think it would help us if we would better understand the many different types of research that scholars working on all those aspects of society are engaged in. [click to continue…]