Political Economy

“Nathan Newman”:http://www.nathannewman.org/laborblog/archive/002986.shtml writes about union-busting cartels.

bq. For folks who remember the southern California grocery chain strike last year, a key to the grocers breaking the strike was a revenue sharing deal between the big chains– thereby preventing the unions from easily reaching settlement with any of the firms individually.

The L.A. Times “story”:http://www.latimes.com/business/la-fi-supers26may26,0,6124770.story?coll=la-home-business that he links to has more.

bq. The chains initially refused to disclose the pact’s details and sought to have them sealed after Lockyer sued. But King unsealed the documents in February. They showed that the companies used a formula based on their sales, before and during the dispute, and their regional market shares to figure out what Kroger should pay the others. Kroger later revealed in securities filings that it paid a combined $148 million to Safeway and Albertsons, and Albertsons said it received $63 million of that. That would have left $85 million for Safeway.

Those who have read Adam Smith will remember “his observations”:http://geolib.com/smith.adam/won1-08.html on the tendency of business owners to gang up together against workers.

bq. We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people.

(Funnily enough, Smith’s self-appointed intellectual heirs at the Adam Smith Institute don’t seem all that interested in his ideas on combinations of masters, despite their eagerness to “smash trade unions”:http://www.adamsmith.org/80ideas/idea/26.htm. An oversight that I’m sure they’ll be rushing to rectify.)

Interesting times for the European Union’s constitutional project. The French are looking “decidedly wobbly”:http://www.danieldrezner.com/archives/002081.html on the new European constitution, which they vote on next Sunday. The Dutch, who will be voting soon after, appear to be strongly opposed. This all sounds dreadful for pro-Europeans. However, I’m going to make two predictions. First, the unexceptionable one – I don’t think that the constitution has much chance at all of being ratified. If it somehow gets over the French hurdle, it’s going to come a cropper at the British one. Then the risky one – I reckon that the European Union may be on the verge of acquiring real political legitimacy for the first time, exactly and precisely because of the vociferous debates which are starting to get going.
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Matt Yglesias writes about “philosophical zombies”:http://yglesias.typepad.com/matthew/2005/05/zombie_attack.html which reminds me to mention that this particularly refined class of undead gets a nod in Charles Stross’s Singularity Sky. It’s a nice example of a genre trope getting picked up by the academy, spun around, then yanked back into the popular culture with its references skewed. The few moments in the last couple of days which I haven’t spent grading, I’ve been reading Stross’s The Family Trade, a novel contribution to the somewhat exiguous genre of economic fantasy. Sort of like Roger Zelazny’s _Amber_ but with real feudalism – illiterate peasants, aristocrats who are obsessed with their fishing and mining rights (even if they don’t know much about what fishing and mining actually involve in practice), and a spunky heroine determined to reform the gung-ho mercantilism of her family business. It’s all enormous fun. I don’t usually buy books in hardback, but I couldn’t wait for a year to order a copy of the sequel, which is coming out in June. Good stuff.

John Sutherland “splutters indignantly”:http://www.guardian.co.uk/g2/story/0,3604,1484604,00.html in _The Guardian_ that Steve Levitt’s Freakonomics, hides “hard-core Reagonism [sic] and Thatcherism” under a mask of playfulness. His evidence for this? First, that Levitt is an economist:

bq. Fun as it is to read, Levitt’s vision of the human condition is cold. The solution to every problem, whether political, moral, social or spiritual, is economics. The human animal is a rational-choice machine, driven by incentives and self-interest.

Second, that Reagan’s tax-cuts were “highly freakonomical” because they were counter-intuitive.

bq. Cut the taxes for the rich, and the poor will benefit. How? Because of trickle-down. And the government will pull in more revenue. Why? Compliance: people don’t mind paying taxes, they mind paying excessive taxes. History has proved Freaky Ron wrong on the first count and perhaps right on the second.

Now fulminating opinion-pieces should perhaps be held to a lower standard of truth than serious journalism. But even so, this is still an exceptionally silly article. First, even if Levitt’s view of the human condition is cold and based on economics, this is by no means evidence that he’s a right-wing jihadist. If Sutherland really wants to see the argument that “the solution to every problem, whether political, moral, social or spiritual, is economics” developed at length, he only needs to go back and read Marx’s _Capital_. Second, Reaganite economics didn’t have much of anything to do with the kinds of arguments that Levitt is putting forward. Indeed, in an important way, they’re antithetical to the kind of social science that Levitt is trying to do. _Contra_ Sutherland, the intellectual justification for Reagan’s tax cuts was, insofar as it was anything, the Laffer curve. To state it politely, the idea behind this curve was not driven by data. Levitt’s work, in contrast, isn’t scrawled down “on the back of a restaurant napkin”:http://www.wanniski.com/showarticle.asp?articleid=2965 ; it’s driven by what the data show. This, I suspect, is why Levitt has some harsh words for John Lott in the book – cooking your numbers is a mortal sin.

I’ve read _Freakonomics_ pretty carefully (you’ll be seeing more on this topic before the end of the week). My guess is that Levitt is somewhere to the right of the political center, but it’s only a guess. His broad political orientation is impossible to discern from his writing on economics. Sutherland’s article is completely off the mark, and is, in a certain way, anti-intellectual. He identifies a particular style of thought that he doesn’t like, and then damns it on the basis of its purported link to a right wing political agenda. And in so doing, he seems to argue that the examination of incentives and what they tell us about how to make policy is fundamentally morally problematic. That’s a far reaching claim, and, I believe, one that is deeply misconceived. Sutherland is usually a good book reviewer, but he’s gotten this one very badly wrong indeed.

(Thanks to Chris for the link).

Stephen Bainbridge ruminates on Patrick O’Brian’s Aubrey-Maturin novels and the reasons for the success of the British Navy in its wars against Napoleonic France and the US. He gives a brief discussion of a “paper”:http://www.sfu.ca/~allen/navy2.pdf by Douglas W. Allen, which analyzes the institutions of the British Navy as a solution to a set of principal-agent problems. Now, the paper is interesting, but it seems to me to be flawed, in a manner that’s unfortunately rather typical of many economists who analyze social institutions. Allen treats the rules of the Navy as an efficient solution to a set of monitoring problems, where the British state wanted to make sure that its captains, officers and seamen fought well on its behalf. In other words, he’s making a functionalist argument.

Now the functionalist part of the story is an important one; the British Navy clearly existed for a reason. But if the Aubrey-Maturin novels provide any sort of an accurate picture of the institutions of the British Navy, there’s strong countervailing evidence to suggest that many of the institutions of the Navy were less intended to maximize the overall efficiency of the Navy as a fighting machine, than to provide powerful actors in the Navy with the opportunities for individual gain. Viz., the institutionalized prerogatives of pursers to engage in certain forms of peculation. The right of admirals to a third-share of any prize money won by captains under their command. The need to pay sweeteners to those in charge of the docks to provide timely repairs. The arbitrary system of promotion, which depended at least as much (and probably rather more) on patronage and political connections as on merit. Not to mention Aubrey’s (and Hornblower’s) continual source of complaint – the miserable official allotment of gunpowder, which meant that captains had to lay in their own supplies to have any chance of fighting successfully at sea. Now I imagine that one could construct “just-so” stories which explained why most (or all) of these institutionalized features of Navy life contributed to the overall goal of maximizing the Navy’s efficiency as a fighting machine. But they would be just-so stories – not especially convincing on their merits. To the extent that O’Brian is right (and he clearly did a hell of a lot of research), the institutions of the British Navy during the Napoleonic wars weren’t even a second-best solution. They were an ungainly compromise between a wide variety of different actors, each of whom had a strong streak of self-interest, and the ability and desire to bargain in order to achieve that interest, whatever this meant for the British Navy as a fighting force.

Update: title changed following comment from Kieran

A week late and a dollar short, I am now ready to unveil my election forecasting model. Gosh what fun it was to make; there really is no substitute for wading in and making a model if you want to learn about a dataset. I am not uploading it here, because the bloody thing is a 1MB Excel file and I suspect that the bandwidth consequences of this for CT would cost me my stripes. However, if you email me at daniel dot davies at gmail dot com, I’ll send it across to you if you like. Or alternatively, you can download the data yourself from Martin Baxter‘s site and produce your own version which may be safer from my trademark incomprehensible spreadsheet design and boneheaded calculation errors. Below the fold, the recipe for my model, the forecasts themselves, and a bit of psephological analysis which suggests why I think that the Liberal Democrats are really, really badly screwed.

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Three links relating to unions and the academy:

A very nice article in Dissent, which I’ve been meaning to link to for a while, setting out the reasons why non-tenure track faculty should unionize.

Teaching assistants at Columbia and Yale plan strike action; the university administration responds with the usual chestnut: “The university’s relationship with graduate students is educational and collaborative. It is not an employer-employee relationship.”

Nathan Newman writes about a new book by Charles Morris, a labour law scholar, arguing that unions have a right to “engage in collective bargaining through a minority union on a members-only basis.” By Newman’s account, Morris “documents that the clear legislative intent of the National Labor Relations Act was to require collective bargaining by companies with minority “members only” unions.” If this original intent can be made to stick (which would be a hard-fought battle, given the current ideological slant of the NLRB), it could transform the US labour relations system.

There was a bit of an argument that was provoked by my recent post about Republican intentions and labour reform; Sebastian Holsclaw, among other commenters, suggested that not only could Republicans be trusted to undertake reform and increase accountability in the labour movement, they were the only political party that could be so trusted. Democrats were too close to the unions to want to change them. By sheer coincidence, I was reading Rick Perlstein’s Before the Storm: Barry Goldwater and the Unmaking of the American Consensus over the last couple of days, and came across the following bit (p.37), in which Goldwater compares idealistic and incorruptible union leader Walter Reuther to James Hoffa senior (who was incidentally a Goldwater fan):

“Do you mean to tell me,” asked an amazed committee accountant after wading through the ascetic leader’s expense accounts,”that Walter Reuther pays for his own dry cleaning when he stays in a hotel?” Goldwater was not deterred. “I would rather have Hoffa stealing my money, ” he declared, “than Reuther stealing my freedom.”

Now on the one hand, Goldwater was one individual, and he’s dead. But on the other, he was perhaps the single most important influence on modern Republicanism. As Perlstein documents, Goldwater’s particular brand of don’t-touch-me conservatism came to dominate the Republican movement. His ordering of preferences is, I’d submit, very strong evidence that one strain (arguably the dominant strain) of modern Republicanism shouldn’t be trusted anywhere near the question of trade union reform. It’s not interested in reforms to improve transparency so much as gutting the labour movement. Charismatic, personally honest leaders are a much bigger threat to these people than corrupt union bosses like Hoffa.

(I should also say that “Before the Storm” is a cracking read; anyone who’s interested in the forces driving current American politics should read it).