Via Wicked Anomie. Imagine Sifl and Olly with less slacking and more social theory.
From the category archives:
Political Economy
Via Robert Farley“Scott Lemieux”:http://lefarkins.blogspot.com/2008/02/economics-writers-should-understand.html, I see that “noted economist”:http://marcambinder.theatlantic.com/archives/2007/08/dont_panic_megan_mcardle_is_he.php Megan McArdle “is arguing”:http://meganmcardle.theatlantic.com/archives/2008/02/tax_me_more_fund_raises_little.php that the fact that Virginians haven’t voluntarily contributed to a fund increasing government revenues implies that people don’t want higher taxes. [click to continue…]
This “piece”:http://www.ft.com/cms/s/0/3f03314e-bd3e-11dc-b7e6-0000779fd2ac.html by Stefan Theil in the _FT_ today on the biases of French and German high school economics textbooks is pretty bad, but it turns out to consist of edited extracts from an “even worse essay”:http://www.foreignpolicy.com/story/cms.php?story_id=4095 that he’s published in _Foreign Policy._ [click to continue…]
My (longish) review of Roberto Saviano’s _Gomorrah: A Personal Journey into the Violent International Empire of Naples’ Organized Crime System_ is “now out”:http://www.thenation.com/doc/20071210/farrell in _The Nation_. I liked the book quite a lot – as I say in the review it’s a little like Ryszard Kapuscinkski’s melanges of fiction and journalism, but it’s far starker, more direct, and angrier in its conclusions. One of the things I found most interesting about the book (although I don’t think his argument ultimately works), is Saviano’s efforts to connect together the Camorra and global capitalism. This is something that the “NYT reviewer”:http://www.nytimes.com/2007/11/14/books/14grim.html didn’t get – he complains that the first chapter of the book (on Chinese smugglers) doesn’t say anything about the Camorra at all. As I read the book, that was rather the point that Saviano was trying to make – that the fundamental problem lies not so much in the florid stories about the Camorra clans as in the underbelly of globalization; the myriads of clandestine and informal markets and of relationships between the legal and illegal economies that help sustain global capitalism. The book is at least as much about markets as about crime – two extended quotes after the jump give some of the flavor. [click to continue…]
“Tyler Cowen”:http://www.marginalrevolution.com/marginalrevolution/2007/10/leonid-hurwic-1.html on the Nobel prize going to the mechanism design crowd.
In other words, no incentive scheme, no matter how clever, can get people to tell the truth. Grove, Clarke, Tideman, and Tullock lurk in the hallways. Note that a second price auction (let everyone bid and the winner pays the price of the next highest bid) fails in terms of Paretian optimality. The government takes the second price bid from the winner, but what should it do with the money? Either the government wastes resources by destroying wealth, or it redistributes that wealth in some way but then the resulting redistribution in turn feeds back into bids and we can no longer derive truth-telling as optimal (but is this really a practical problem?; my fear is that the entire incentive-compatibility literature has never gotten at the real reason why we don’t run the entire economy as a second-price auction.)
One of my favourite papers of all time, Gary Miller and Thomas Hammond’s “Why Politics is More Fundamental Than Economics: Incentive Compatible Mechanisms are Not Credible,” “makes exactly this argument”:http://jtp.sagepub.com/cgi/content/abstract/6/1/5 (link to abstract: full paper is behind paywall for non-academics, unfortunately) using clear language and simple mathematics. It also makes clear (a) that the problem doesn’t vanish if the surplus goes to a private actor rather than government, hence suggesting that many private sector schemes to elicit information etc are similarly problematic, (b) that one plausible historical solution has been to elicit the creation of bureaucratic norms of professionalism that encourage administrators not to behave as selfish rational actors and (c ) that the surplus problem is, properly considered, where politics enters into the argument, and a way of getting at the real reasons why we don’t run the economy using these mechanisms.
Also notable is another paper that “Tyler links to”:http://www.marginalrevolution.com/marginalrevolution/2007/10/was-the-indian-.html on whether the Indian caste system was efficient or not. As Tyler notes politely, and Chris Hayes “more pungently”:http://www.chrishayes.org/blog/2007/oct/14/mainstream-economics/, this is a weirdly functionalist paper in the way that many economic analyses of institutions are weirdly functionalist. The professional deformity of the institutional economist is to seek explanations of institutional origins and change grounded in efficiency. In fairness, I should acknowledge that the professional deformation of the political scientist (and of many economic sociologists) is to seek explanations of institutions grounded in power and distributional questions, but it seems to me that this professional deformity gets things right _a lot more often_ (institutions that are genuinely grounded in the desire to promote collective efficiency are relatively rare, and the Indian caste system is rather obviously not one of these rare exceptions).
Update: see further “Jim Johnson”:http://politicstheoryphotography.blogspot.com/2007/10/2007-nobel-prize-economics-mechanism.html for a more detailed account of how mechanism design “unintentionally …establishes the fundamental importance of _politics_”. On distribution v. efficiency, see also this very interesting “new _AJS_ article”:http://www.indiana.edu/~tbsoc/AJS%20article.pdf (via “OrgTheory”:http://orgtheory.wordpress.com/2007/10/14/interests-and-the-creation-of-new-institutions/ ) which seeks to assess the merits of distributional and efficiency theories in explaining the origins of transnational private regulation. Finally, those looking for some (mathematically pretty hairy) intro materials on mechanism design theory should go to “Michael Greinecker”:http://yetanothersheep.blogspot.com/2007/10/readings-on-mechanism-design.html.
Alex Tabarrok and Dani Rodrik have moved from arguing about industrial policy into arguing about the blinkers (or otherwise) of libertarianism.
“Dani”:http://rodrik.typepad.com/dani_rodriks_weblog/2007/08/irreconcilable-.html
It is in that spirit that I have been mulling about the derision and incredulity with which my recent post on industrial policy was met among some libertarian bloggers. … The real revolutionaries here are the libertarians. They envisage a real good world out there that looks like nothing we have now (or have ever had), and they want us to get there. Second, there are really deep philosophical differences here that have nothing to do with economics per se. Most importantly, I believe government can be a force for good; they do not. But third, libertarians hold on to their priors so strongly that they seem impervious to evidence. They shrug off the fact that there is more freedom and more wealth in those parts of the world where the government is stronger, not weaker. With respect to industrial policy proper, they refuse to engage with the fact that every nation that has grown rapidly has made use of it. I look at the world and see some government programs that work and others that fail. I want to understand what determines these outcomes, and to know how we can improve the ratio of the first to the second. When libertarians look at the same programs, they see one wreck after another.
“Alex”:http://www.marginalrevolution.com/marginalrevolution/2007/08/dani-rodrik-has.html
Dani Rodrik responds here to my pointed remarks on his argument for industrial policy. Rodrik’s response, however, is along the same lines of his earlier – “I’m sophisticated, your simplistic” – post on why economists disagree. In this case, it’s ‘libertarians are ideologues who are immune to evidence.’ Rodrik, however, has painted himself into a corner because he cannot at the same time say that the “systematic empirical evidence” for market imperfections in education, health, social insurance and Keynesian stabilization policy is “sketchy, to say the least” (also “difficult to pin down” and ‘unsystematic’) and also claim that libertarians are ideologues who are immune to evidence. Say rather that libertarian economists are immune to sketchy, unsystematic, difficult to pin down evidence. Rodrik is thus right that he is “not as unconventional as I sometimes think I am. The real revolutionaries here are the libertarians.” The libertarian economists are revolutionaries, however, not because they are immune to evidence but because they respect evidence so much that they are unwilling to accept “conventional wisdom” simply because it is conventional.
“Bruce Bartlett”:http://andrewsullivan.theatlantic.com/the_daily_dish/2007/08/yet-more-cont-b.html is advocating the introduction of Value Added Tax to America. This is a perennial proposal on the right, but it doesn’t appear to ever gain much political traction. The obvious reason why is that VAT is unpopular because it’s a regressive tax (the more people earn, the less they pay). However, this doesn’t explain why European countries which one would expect to be more attracted to progressive taxation systems have VAT, often at quite high levels.
Former CT guest blogger (and current GWU colleague and friend of mine) Kimberly Morgan has written a nice historical paper (Word file “here”:http://www.henryfarrell.net/morgan_prasad.doc )with Monica Prasad looking at how the US came “to have a tax code that is on many levels more hostile to capital accumulation than its peers” while France “which in some opinions has “never really been won over to capitalism” ” found itself relying on taxes that hit workers and consumers unusually hard. Simplifying drastically, she and Prasad argue that it can be explained by timing. Industrial capitalism arrived in the US before a real national state came into being, while the state preceded capitalism in France. The weak state in the US, and the willingness of business to ride roughshod over consumers, “led to an intense public interest in disciplining capital, which underpinned a movement toward income taxation that would punish capital and the wealthy.” In France, in contrast, well-founded fears of state intrusion led French citizens to fear direct taxation, and tax advocates to work against “fiscal inquisition” and the further expansion of the state into private life. This left French left-wingers ambivalent about the virtues of income taxes, so that a state crippled by war expenses had to turn to a sales tax to raise money. If this is right (and they provide a lot of historical evidence), some of the verities of left and right about France and the US should be turned on their head (this is one of the reasons why it’s a fun paper, for values of fun that include ‘detailed historical institutionalist arguments about causation.’)
“Tyler Cowen”:http://www.marginalrevolution.com/marginalrevolution/2007/07/is-economic-ine.html points to a very interesting new paper by Daron Acemoglu and his colleagues (PDF – it was “here”:http://econ-www.mit.edu/faculty/download_pdf.php?id=1510 this morning, but this link isn’t working for me any more; see “here”:http://www.isop.ucla.edu/cms/files/acemoglu_bautista_querubin_robinson.pdf for a slightly earlier version) on the relationship between political and economic inequality. Tyler’s gloss is that this provides general insights into the “meme” of whether economic inequality is bad for growth, and concludes that “at least from that data set, the real problem seems to be rent-seeking behavior through the political process.” Thus, unless I misunderstand him (which is possible; he may just be blogging in shorthand), he is saying that this paper provides significant evidence suggesting that economic inequality isn’t the cause of slower economic growth; instead, political inequality and rent-seeking are at fault. [click to continue…]
to _Methodenstreit: The Extended Blogospheric Remix_. First, as a few commenters here and there have noted, Herb Gintis’s review of a Post-Autistic Economics reader has disappeared from Amazon. I’ve been in contact with Gintis, who not only didn’t take it down himself, but is rather annoyed at its disappearance. I’ve taken the liberty of reproducing it below the fold for the sake of posterity. Second, I see that an “Econ prof” claims in correspondence with “Ezra Klein”:http://ezraklein.typepad.com/blog/2007/05/more_on_heterod.html that “Aklerlof, Stiglitz, etc. all got published very easily.” For Akerlof at least, this “isn’t true”:http://nobelprize.org/nobel_prizes/economics/articles/akerlof/.
I received my first rejection letter from _The American Economic Review_. The editor explained that the Review did not publish papers on subjects of such triviality. In a case, perhaps, of life reproducing art, no referee reports were included. … again rejected on the grounds that the _The Review_ [i.e. _The Review of Economic Studies_ – hf] did not publish papers on topics of such triviality. … The next rejection was more interesting. I sent “Lemons” to the _Journal of Political Economy,_ which sent me two referee reports, carefully argued as to why I was incorrect. After all, eggs of different grades were sorted and sold (I do not believe that this is just my memory confusing it with my original perception of the egg-grader model), as were other agricultural commodities. If this paper was correct, then no goods could be traded (an exaggeration of the claims of the paper). Besides — and this was the killer — if this paper was correct, economics would be different. I may have despaired, but I did not give up. I sent the paper off to the _Quarterly Journal of Economics,_ where it was accepted. I had had such a hard time getting this article published, that I was quite surprised, on a trip to England in the fall of 1973, to discover that, not only had it been read, but even with considerable enthusiasm.
In the near future, CT will be hosting another book event. I thought it would be helpful to alert our readers ahead of time so people can read the book and thereby participate in the discussions more actively and in a more informed manner.
The book is “Higher Ground: New Hope for the Working Poor and Their Children” by Greg J. Duncan, Aletha C. Huston, and Thomas S. Weisner.
During the 1990s, growing demands to end chronic welfare dependency culminated in the 1996 federal “welfare-to-work” reforms. But regardless of welfare reform, the United States has always been home to a large population of working poor— people who remain poor even when they work and do not receive welfare. In a concentrated effort to address the problems of the working poor, a coalition of community activists and business leaders in Milwaukee, Wisconsin, launched New Hope, an experimental program that boosted employment among the city’s poor while reducing poverty and improving children’s lives. [The authors] provide a compelling look at how New Hope can serve as a model for national anti-poverty policies. [source]
You can either buy the book directly from its publisher, the Russell Sage Foundation, or get it at Amazon
In addition to Timberite contributions, we’ll have comments by Nancy Folbre and Kimberly Morgan plus a response by Greg Duncan.
Chris Hayes’ “article”:http://www.thenation.com/docprint.mhtml?i=20070611&s=hayes on heterodox economics has gotten a lot of attention; for my money, the two best takes on it are “Ezra Klein’s”:http://ezraklein.typepad.com/blog/2007/05/forgetting_the_.html and “Matt Yglesias’s”:http://matthewyglesias.theatlantic.com/. As Matt says:
What heterodox economists are really challenging isn’t neoclassical economics but the political behavior of neoclassical economists. The recent Alan Blinder fracas is a case in point. He didn’t call any of the standard neoliberal case for free trade into question, and, indeed, didn’t argue against free trade at all. He just said something that he thought would be helpful in spurring the creation of the sort of social democratic society with an open market that he favors, while many economists saw his statements as giving aide and comfort to people who have a political agenda (blocking new trade agreements) that they don’t like.
This post has perhaps the single most unriveting title that a Crooked Timber post has _ever_ had (although there are arguably some other “close contenders”:http://maxspeak.org/mt/archives/002361.html). But it’s motivated by some real annoyance. I’ve been dealing with a major project which has moved from one publishing venue to another, and am now checking to make sure that all the authors have switched over to the new bibliographical format, with brackets in the right places, journal volume number but not issue number, and all of the rest of that nonsense Which made me think about the considerable transaction costs that this involves for authors of academic articles and books. Most publications and presses in the social sciences have their unique house style, which one has to conform to in order to get something published.
You can maybe tell a functionalist story about why there are some differences in bibliographical styles _between_ disciplines – lawyers likely do have good reason to have those long confusing footnotes bristling with references. Within disciplines however, the continuing differences between journals are perhaps in part the result of path dependence (which in this case is little more than a fancy term for laziness on the part of the publishers; they’ve always done it this way and see no reason to change), in part the result of prestigious journals trying to reduce the flow of submissions by making prospective authors pre-commit some effort to sprucing up the bibliography before they submit a piece, so that they are less likely to submit a bad article on the off-chance. But surely this can’t explain why less prestigious journals too have their own house styles – one would think that those journals towards the lower end of the prestige rankings have an incentive to make it as easy as possible for authors to submit pieces. So I suspect that there is something else going on which isn’t strictly rational – a perception on the part of editors/publishers that to be a ‘real’ journal, one has to have one’s own particular hoops to make authors jump through. But then I’m writing as someone who has never edited an academic journal, nor seen any of the internal politics around these decisions – if anyone out there has more facts, or indeed more fact-free speculations along the lines presented here, comment away.
Tyler Cowen has a “pretty interesting essay”:http://www.cato-unbound.org/2007/03/11/tyler-cowen/the-paradox-of-libertarianism/.
The more wealth we have, the more government we can afford. Furthermore, the better government operates, the more government people will demand. That is the fundamental paradox of libertarianism. Many initial victories bring later defeats. I am not so worried about this paradox of libertarianism. Overall libertarians should embrace these developments. We should embrace a world with growing wealth, growing positive liberty, and yes, growing government. We don’t have to favor the growth in government per se, but we do need to recognize that sometimes it is a package deal. … We need to recognize that some of the current threats to liberty are outside of the old categories. I worry about pandemics and natural disasters, as well as global warming and climate change more generally (it doesn’t have to be carbon-induced to be a problem). These developments are big threats to the liberty of many people in the world, although not necessarily Americans. The best answers to these problems don’t always lie on the old liberty/power spectrum in a simple way. … Intellectual property … Another major problem – the major problem in my view – is nuclear proliferation … In short, I would like to restructure classical liberalism, or libertarianism — whatever we call it — around these new and very serious threats to liberty. Let’s not fight the last battle or the last war. Let’s not obsess over all the interventions represented by the New Deal, even though I would agree that most of those policies were bad ideas.
The essay seems to me to glom together two, quite different theses – that the demand for government increases along with wealth, and that new, complex global problems require more government intervention than most libertarians would care for. Even so, his call for a pragmatic libertarianism seems on target to me (I’d vastly prefer a political debate in which smart libertarians acknowledged that global warming was a major problem in need of a political solution, and contributed insights from their own perspective, to a debate in which many libertarians either minimize the problem or suggest that no real political solution is possible).
From the acknowledgements page of Christopher Howard’s _The Hidden Welfare State: Tax Expenditures and Social Policy in the United States_ (“Powells”:http://www.powells.com/s?kw=christopher%20howard%20hidden%20welfare%20state&PID=29956 has cheap hardbacks).
No one in his right mind would choose to study and write about tax expenditures (better known as tax loopholes) knowing in advance that it entailed a ten year commitment. Investigating the ins and outs of the byzantine U.S. tax code is simply not its own reward, which is why many people pay lawyers and accountants good money to do it for them. If someone were going to study tax expenditures for longer than a day or two, he or she would need to come upon the topic by accident. Over time, that someone might develop a curious affection for tax expenditures, much as one does for a stray dog or cat that keeps hanging around the house. Even then, one would have to remind oneself constantly that studying tax expenditures was not the ultimate goal, but a means of saying something interesting about a larger issue, like U.S. social policy. At least that has been my experience.
Many thanks to everyone who chipped in with comments on my reading list; I enclose the final (assuming that I can track down a scannable copy of the DiMaggio JITE reading for Week 1) version beneath the fold. Also, the syllabus that I linked to for Jonathan Zeitlin’s course on institutions at UW Madison last week was apparently incomplete; the full version is “here”:http://wage.wisc.edu/uploads/Courses-Fall06/soc%20915%20syllabus%20(5).pdf.