Economics/Finance

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…]

We were having birthday cake with my youngest son who turned 14 today, when CBS aired an item on the Sunday Morning Show for which I was interviewed. The item was on the question whether one can be too rich. As regular readers of this blog know, I’ve written a couple of papers (this one being open access) and more journalistic pieces (e.g. this) that we should answer this affirmatively. So now CBS decided the idea deserved an item, and I think they did a great job in putting several different relevant concerns together in a mere 8 minutes. It can be watched online here. (I believe they could have found more vocal opponents of limitarianism, but I guess these voices get plenty of airtime elsewhere?)

Abigail Disney has a line of critique from which I’ve so far tried to steer away – namely that becoming superwealthy changes a person and their character for the worse. That resonates with some of the findings in the intriguing book by Lauren Greenfield, Generation Wealth. Although I wrote very briefly (in Dutch, alas) on the scientific studies that we have that suggests that extreme wealth concentration might lead to unhappier people than being moderately well-off, I am hesitant to write more about this, for two reasons. One is that arguing that they are less happy and that therefore they should not be so rich is quit paternalistic (and most approaches in political philosophy and social ethics reject paternalistic arguments). Still, it also affects their children, so the paternalism objection might be less strong than at first sight. Arguing that they become less virtuous (read: bad people) is something that I cannot say since I haven’t tried to find the relevant studies (if they exist); moreover, it also seems a non-starter if we want to engage in a political debate that should include those that are superrich, or that defend the superrich. The other reason why I haven’t gone down this road so far is that I think the other arguments for limitarianism are strong enough in themselves to carry the claim – why then introduce a more contentious one, except if the evidence were to be overwhelming?

I don’t think I’ve announced on this blog the other news I have on limitarianism, which is that I’m writing a trade book on the topic, which is under contract with Allen Lane/Penguin (for the UK), Astra (for North America), and translations secured in Dutch, German, Korean, Italian, Japanese, Russian, and Spanish (the magic that working with an agent does!). The manuscript is due after the (Northern Hemisphere) Summer, so I’ll be having more posts on this matter over the next months.

Readers of a certain age will remember Scrooge McDuck, the mega-rich uncle of Donald, who enjoys diving into his gigantic money bin filled with gold coins. Replace gold with paper currency[1] and you have the archetypal version of a theory of the rich [2] popular in some versions of Modern Monetary Theory.

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As announced a few weeks ago, here is the first of a series of book chats – starting with Mariana Mazzucato’s Mission Economy. The idea is that this post opens up a space for anyone to talk about any aspect of the book they want to discuss (under the general rules that apply to discussion on this blog), as well as raise questions of clarification that we could put to eachother.

Mission Economy is about rethinking capitalism and rethinking government. Perhaps it is even more about rethinking government than about rethinking capitalism. Both need to be rethought in order to redirect the economy into what Mazzucato calls ‘a mission economy’, which will allow us to tackle problems facing humans and the planet that are currently not properly addressed: climate change, insufficient high-risk long-term investments in the real economy, real wage growth that is much lower than productivity growth, and so forth.

Mazzucato argues that right now we (that is, our governments) ask “how much money is there and what can we do with it?” but instead we should be asking “what needs doing and how can we restructure budgets and design innovation and collaborations between the government, industry, academia and other groups so as to meet those goals?” [click to continue…]

I spoke to some US-based scholars today about a study they are planning to do on the question whether American citizens think one can say that at some point, one is having too much money. Long-time readers of our blog might recall that in January 2018 I asked you for input on a study I was setting up in the Netherlands to find out whether the Dutch think there is the symmetrical thing of a poverty line – a riches line. And yes, they do. The study has in the meantime been conducted and published in the journal Social Indicators Reserach, and is open access – available to all. I am very grateful to my collaborators and (economic) sociologists Tanja van der Lippe, Vincent Buskens, Arnout van de Rijt and Nina Vergeldt, since I would never have been able to do this on my own: the last time I did empirical work was in 2002 (and in the good tradition of economics graduate training, I never collected my own data when I was trained as an economist, hence it was a great adventure to set up this survey).

Based on our data, we find that 96,5% of the respondents made a distinction between a family that is rich and one that is extremely rich, whereby the standard of living of the latter is described as: “This family has much more than they need to lead an affluent life. They never have to consider whether they can afford certain luxury spending, and even then, they still have plenty of money left to do extraordinary things that almost no one can afford. No one needs that much luxury.” [click to continue…]