Saturday, September 12, 2015

My _____ Is Better than Yours!

Neil Irwin at The New York Times has a sad little piece on the pissing matches between economics departments.

Why is a newspaper like the Times concerned in the slightest over which economics department is best? What does that mean? It's clear why Stanford or Harvard or MIT would be concerned -- donor dollars. But nobody would suggest that X being best means that every economist at X is better than any economist at Y, or that all the work emerging from X is better than any work from Y.

And why is it the people that make one better? It's the obsession with star names that leads less wealthy schools to spend fortunes building a handful of superstar departments, spending fortunes on a handful of faculty. Do the students benefit? Do junior faculty? Is there better funding for any but the superstars? Harvard, Stanford and a handful of others can buy almost anyone they please. But NYU or Berkeley -- outstanding schools with outstanding economics departments -- can't. Why not create a better overall climate for students and faculty and worry less about the superstars?

Isn't it the quality of work coming out that matters? Certainly, the work is tied to the people, but if research is the real standard, then economists and the reporters who follow them around like little puppies might do well to consider some history. Twenty five or thirty years ago, many would likely have said that Chicago's was the 'best' department. Now, many would say that much of the work done at Chicago was politically driven hokum. (And who would now deny that political ideology drives an enormous part of economics?)

It's telling that in no natural science would this kind of chest beating take place. There are tempests in teapots over the 'best' physics or biology department and there is something sense to saying one is better than they other, but few worry so much about status because the work is the standard. By contrast, economics (and political science) seem to be little more than personality cults.

Saturday, May 2, 2015

Wall Street Bonuses Are Twice the Total Earned by Minimum Wage Workers

According to the Bureau of Labor Statistics, about 1.1 million US workers were paid just the federal minimum wage in 2013. The average Wall Street bonus paid at the end of 2013 was about $164,000 with all the bonuses adding up to about $26.7 billion. That $26.7 billion is twice the combined earnings of the 1.1 million people making minimum wage. 

It's important to remember that, once we the taxpayers bailed out Wall Street in 2008, one of the first things the big banks did was pay bonuses. That was a transfer -- redistribution -- from the average American to the wealthiest. Suggest redistribution of wealth from the 1% (or 0.1%) to the average, and Republicans and Democrats go into hysterics. (Pres. Obama has called for equality of opportunity, but not for more just outcomes or redistribution.) 

For 35 years, both parties have repeatedly endorsed policies that have taken from the little held by the average and poorer and redistributed it upward. This is the point made by Joseph Stiglitz, Anthony Atkinson, Thomas Piketty, and many other progressive economists. And it is a point willfully ignored or dismissed by conservative economists who still dominate economic thinking in the US. The economist John Roemer has made the point that so great an indifference to fact by so large a percentage of economists counts heavily against economics being a science.

Roemer has a nice survey essay: The Ideological and Political Roots of American Inequality

Property Rights in the New Glorious Not-Quite-Revolution

My guess is that many glitterati economists and political scientists at places like Stanford and Harvard are couching the TPP in terms of "property protections" (among which intellectual property is currently the most popular). By the same token that the "Glorious Revolution" supposedly marked a milestone in protecting property from the interference of a national leviathan (making possible the English revolutions in finance and industry), now restrictions on international leviathans (or national ones with international influence) will -- if you drink Obama's Kool-Aid -- promote revolutions in international commerce. With the TPP, international players will have further incentives to innovate and trade because they will be more confident of retaining the gains from their effort.... Or something like that. 

John Roemer wrote a nice survey essay in 2011: "The Ideological and Political Roots of American Inequality". He suggests that micro-economic theory has turned from focusing on the coordinating functions of markets to focusing on markets as devices for harnessing incentives (modeled in the theoretical tool of this time -- game theory). So politicians and executives who want to further line their own pockets now have a theoretical justification for opposing policies that might be deemed to interfere with the incentives of market rewards (especially any redistributive policy).

This serves a convenient dual purpose. First, since the middle class and poor are "takers, not makers," the effect on incentives for them is irrelevant, neatly excluded from the 'scientific' program. Second, redistribution effected by markets is okay (it's 'natural'), but redistribution effected by the leviathan is distortionary and depresses incentives. Regulations, environmental protections, loosening intellectual property protections, and so on, all involve government action that will weaken owners' property claims and effectively redistribute down the economic ladder. This also explains why we are seeing an explosion in conservatives and corporations appealing to rights.