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The Republican Agenda

January 10, 2013 Leave a comment

deficit

[From Center on Budget and Policy Priorities]

Republicans have spent years complaining about the deficit when not in power and increasing it when in power. In power? Start wars. (Iraq, say.) Build the defense budget. Cut taxes. Ignore the deficit. Out of power? Argue for more wars. (Iran, say.) Protect the defense budget. Cut taxes. Decry the deficit. Scream about the need to reduce social programs.

That’s not news. More interesting is the Democratic response. Agree that the deficit is untenable. Cut social programs. Social security is solvent until 2038? Better raise the age for eligibility now. People are living longer and can retire later. What, poor people aren’t living longer? Oh well. Tough luck.

But don’t listen to me. Here are three people who know more than I do, all of whom wrote about the subject today.

1. At his blog, Paul Krugman referred to the deficit-projection graph above, taken from a report by Richard Kogan of the Center on Budget and Policy Priorities:

It still comes as something of a shock to realize that at this point reasonable projections do not, repeat do not, show anything resembling the runaway deficit crisis that is a staple of almost everything you hear, including supposedly objective news reporting.

So you heard it here first: while you weren’t looking, and the deficit scolds were doing their scolding, the deficit problem (such as it was) was being mostly solved.

2. Charles Pierce of Esquire wrote:

The agitation over the “crisis” in the national debt is purely and simply an effort on yet another front to keep rich people as rich as possible, to maintain corporate influence and corporate control over the American economy, and to freeze in place any attempt to ameliorate the effects of those influences on the rest of the country. It would be nice if the president would notice this, too.

3. Finally, and succinctly, Atrios:

It’s good to regularly point out that the deficit scolds don’t care about the deficit. They care about tax cuts for rich people, stealing from Social Security, and kicking the poors and the olds, all while taxing poor and middle class people enough to keep the defense industry rich.

In other words, the Republican agenda.

And by the way, Chuck Hagel can’t be Secretary of Defense. He’s anti-Israel. Anti-semitic. He’ll cut the defense budget.

Lower taxes. Balanced budget. War with Iran. There’s a flaw in this somewhere.

Categories: Economics, Politics

What Mathematics Is

October 25, 2012 Leave a comment

Lloyd Shapley

[AP]

Last week the 2012 Nobel Prize in Economics was awarded to Alvin Roth and Lloyd Shapley for “the theory of stable allocations and the practice of market design.” Catherine Rampell wrote in the NYT:

Two Americans, Alvin E. Roth and Lloyd S. Shapley, were awarded the Nobel Memorial Prize in Economic Science on Monday for their work on market design and matching theory, which relate to how people and companies find and select one another in everything from marriage to school choice to jobs to organ donations.

Their work primarily applies to markets that do not have prices, or at least have strict constraints on prices. The laureates’ breakthroughs involve figuring out how to properly assign people and things to stable matches when prices are not available to help buyers and sellers pair up.

[snip]

Mr. Shapley, 89, a mathematician long associated with game theory, is a professor emeritus at the University of California, Los Angeles. He made some of the earliest theoretical contributions to research on market design and matching, in the 1950s and 1960s.

In a paper with David Gale in 1962, Mr. Shapley explained how individuals could be paired together in a stable match even when they disagreed about what qualities made the right match. The paper focused on designing an ideal, perfectly stable marriage market: having mates find one another in a fair way, so that no one who is already married would want (and be able) to break off and pair up with someone else who is already married.

I wish to say more about the 1962 Shapley-Gale paper. First, more background, from David Henderson’s WSJ article on the award.

Matching theory can be applied to many aspects of life in which matches need to be made—in marriages, for instance, or the job market, or student placement in colleges. In 1962, Mr. Shapley and co-author David Gale published a short but pathbreaking article titled “College Admissions and the Stability of Marriage” in a mathematical journal.

The article presented what is now called the “Gale-Shapley deferred choice algorithm.” The key word is “deferred.” They showed that if each “girl” (yes, people wrote differently then) rejects all but her favorite of the “boys” who propose, but leaves her favorite hanging to allow for someone even better to come along later—and if each boy who is rejected proceeds to his second choice—then letting this process play out yields stability.

What is stability? It means that there is no boy-girl pair who would both rather be married to each other than to the person they did marry.

Of course, letting that algorithm run is unrealistic. Many girls will accept the boy who is good enough rather than wait until a long sorting-out process is over. But other uses for matching theory make more sense. It turns out that doctors had been using the algorithm to allocate residents to hospitals even before the Gale-Shapley article came along.

You can find the article in Volume 69 of the American Mathematical Monthly, the January 1962 issue. (There’s a link here.) It’s quite readable for such an influential paper, in the sense that no specific mathematical background is required. Gale and Shapley begin by describing a general matching problem, the one that arises in college admissions. They then turn to a special case, the marriage problem. After giving a solution to this simpler problem, they return to the general situation and solve it.

You may enjoy looking at their their treatment of the marriage problem. It’s section 3 of the paper. They pose the problem as follows:

A certain community consists of n men and n women. Each person ranks those of the opposite sex in accordance with his or her preferences for a marriage partner. We seek a satisfactory way of marrying off all members of the community. Imitating our earlier definition, we call a a set of marriages unstable … if under it there are a man and a woman who are not married to each other but prefer each other to their actual mates.

Question: For any pattern of preferences is it possible to find a stable set of marriages.

We don’t ask that everyone is married to his or her first choice. That’s not going to happen except in the most contrived of examples. We simply ask that no male-female pair is stuck in marriages they prefer less than a marriage to each other. Gale and Shipley proceed to show, in everyday English, how to set up an algorithm that provides a solution.

In the paper’s “concluding remarks,” they reflect on the fact that their theorem and its proof are, in principle, understandable to any reader, with no need for numbers, geometry, calculus, or what people might typically imagine are the tools of a mathematician:

Finally, we call attention to one additional aspect of the preceding analysis which may be of interest to teachers of mathematics. This is the fact that our result provides a handy counterexample to some of the stereotypes which non-mathematicians believe mathematics to be concerned with.

Most mathematicians at one time or another have probably found themselves in the position of trying to refute the notion that they are people with “a head for figures, “or that they “know a lot of formulas.” At such times it may be convenient to have an illustration at hand to show that mathematics need not be concerned with figures, either numerical or geometrical. For this purpose we recommend the statement and proof of our Theorem 1. The argument is carried out not in mathematical symbols but in ordinary English; there are no obscure or technical terms. Knowledge of calculus is not presupposed. In fact, one hardly needs to know how to count. Yet any mathematician will immediately recognize the argument as mathematical, while people without mathematical training will probably find difficulty in following the argument,though not because of unfamiliarity with the subject matter.

What, then, to raise the old question once more, is mathematics? The answer, it appears, is that any argument which is carried out with sufficient precision is mathematical, and the reason that your friends and ours cannot understand mathematics is not because they have no head for figures,but because they are unable to achieve the degree of concentration required to follow a moderately involved sequence of inferences. This observation will hardly be news to those engaged in the teaching of mathematics, but it may not be so readily accepted by people outside of the profession. For them the foregoing may serve as a useful illustration.

Fifty years later, their message still rings true (though one might prefer to rewrite some of the harsh-sounding bits). If only I had read it years ago. Now I’ll be prepared for the next party, when someone asks what I do.

Categories: Economics, Math

What Money Can’t Buy

August 8, 2012 Leave a comment

I wrote a post last Saturday, Skyboxification, taking off from a review by Jeremy Waldron of Michael Sandel’s recent book, What Money Can’t Buy: The Moral Limits of Markets. On finishing the post, I thought that maybe I should read the book. Sunday I downloaded it and today I finished it. Not hard to do, given how short the book is. It reads more like an extended essay.

As Waldron pointed out, the book is loaded with examples in which money and markets have been introduced (or intrude) into parts of life that might better be kept free of them. This is what motivated me to turn to the book itself. Waldron discussed a handful of examples, all intriguing, and I was curious to see more.

One family of examples has to do with fines becoming fees. A particular case to which Sandel returns from time to time is a daycare in Israel that decided to fine parents who were late to pick up their children. The surprise effect? Tardy pickups increased. Without fines, parents felt properly guilty about keeping the daycare staff at work after hours. With the introduction of fines, tardiness was monetized and parents stopped feeling guilty. They could simply pay for being late — or so one imagines they reasoned, consciously or unconsciously — and they were happy to do so. How the staff felt is another matter.

Or what about gift cards? Giving someone a gift shows thought, interest, a connection. Sandel reviews arguments from economists that giving cash would be better, since the recipient can make better use of the money. But this doesn’t feel right to many. Are gift cards different? Apparently so. The gift card business has been booming. What’s up with that?

Sandel doesn’t so much offer answers to every situation. Rather, he describes the monetization of a traditionally non-economic behavior, discusses what may feel wrong about it, and often analyzes it in the twin contexts of fairness and corruption. For example, in discussing college admissions, he writes:

The idea of selling admission is open to two objections. One is about fairness; the other is about corruption. The fairness objection says that admitting children of wealthy donors in exchange for a handsome donation to the college fund is unfair to applicants who lacked the good judgment to be born to affluent parents. This objection views a college education as a source of opportunity and access, and worries that giving an edge to children of the wealthy perpetuates social and economic inequality.

The corruption argument is about institutional integrity. This objection points out that higher education not only equips students for remunerative jobs; it also embodies certain ideals — the pursuit of truth, the promotion of scholarly and scientific excellence, the advancement of humane teaching and learning, the cultivation of civic virtue. … allowing fund-raising needs to predominate runs the risk of distorting these ends and corrupting the norms that give universities their reason for being.

This is one case where perhaps the appeal to fairness is more compelling than the appeal to corruption. But what about developing a futures market on terrorism: a gambling site where people can place bets on terrorist attacks on certain targets? The logic for suggesting this, as the Defense department’s research organization DARPA did a few years ago, is that such a market would provide useful intelligence. Yet, betting on death makes many people queasy. Sandel devotes an entire chapter to death bets, with numerous examples, including basic life insurance, which was outlawed in many cultures for centuries.

A final chapter addresses naming rights: sports stadiums, schools, police cars, and many more. This happens to connect to the subject of a post I intended to write two falls ago. Perhaps I still will, so let me not try to produce a version of it here. The starting point was to be the line with which Waldron opens his review of Sandel’s book, “Pecunia non olet,” or “Money doesn’t stink.” Let’s turn to wikipedia for a quick review of the meaning:

The phrase is ascribed to the Roman emperor Vespasian (ruled 69-79 CE). Vespasian imposed a Urine Tax (Latin: vectigal urinae) on the distribution of urine from public urinals in Rome’s Cloaca Maxima (great sewer) system. (The Roman lower classes urinated into pots which were emptied into cesspools.) The urine collected from public urinals was sold as an ingredient for several chemical processes. It was used in tanning, and also by launderers as a source of ammonia to clean and whiten woollen togas. The buyers of the urine paid the tax.

The Roman historian Suetonius reports that when Vespasian’s son Titus complained about the disgusting nature of the tax, his father held up a gold coin and asked, whether he felt offended by smell. When Titus said “No,” he replied, “Yet it comes from urine.”

The phrase Pecunia non olet is still used today to say that the value of money is not tainted by its origins.

My never-finished post was inspired in part* by a NYT article on the transformation of MIT’s campus by top architects. Working my way through an accompanying slide show, I came upon the David H. Koch Institute for Integrative Cancer Research. Yes, that David Koch, the libertarian multibillionaire whose political contributions have propped up the Tea Party movement and had a corrosive effect on our politics. (See Jane Mayer’s New Yorker article from two years ago for background on the Koch brothers.) Koch’s name is also on the former New York State Theater in Lincoln Center, home to the New York City Ballet.

*I need to credit my son, Joel, for further inspiration for the still-to-be-written post. He introduced me to the Latin phrase in a different context.

Which gets us back to naming rights. A deal with the devil? Dirty money? Or just good economic sense? I’m not talking specifically about the MIT and Lincoln Center buildings to which Koch has contributed generously. Rather, I’m raising the question in general.

You must have your favorite example of a building you wish had its traditional name, or at least some name that wasn’t changing every few years as companies go out of business, are sold, or fail to keep their end of a naming deal. (Remember Enron Field, the original name of the Houston Astros’ home when it opened in 2000? No doubt millions of people first heard of Enron thanks to this naming deal. The name didn’t last. The field is now Minute Maid Park.) Sandel asks us not to decry this trend, or applaud it, but instead to think through what a suitable basis would be for objecting to monetization. He offers guidance, leaving us to engage in the process ourselves.

In closing, Sandel returns to sports stadiums, which have not only commercial names attached, but also skyboxes and frightful ticket prices. Like him, I remember the days just a few decades ago when all tickets were affordable. He writes about the modest pricing of tickets for Minnesota Twins baseball games. In the early 1970s, when I was a student, I would buy Celtics tickets just before game time at Boston’s North Station. They never sold out. You could just walk up to the counter a few minutes before the game, next to the train ticket windows, and pay $2, $3, $4, $5, or $6. (I sure wish I splurged for those $6 tickets just once.) Now that seems like a dream.

Sandel concludes that we

need to ask a bigger question, about the kind of society in which we wish to live. As naming rights and municipal marketing appropriate the common world, they diminish its public character. … commercialism erodes commonality. The more things money can buy, the fewer the occasions when people from different walks of life encounter one another. We see this when we go to a baseball game and gaze up at the skyboxes, or down from them, as the case may be. The disappearance of the class-mixing experience once found at the ballpark represents a loss not only for those looking up but for those looking down.

Something similar has been happening throughout our society. At a time of rising inequality, the marketization of everything means that people of affluence and people of modest means lead increasingly separate lives. We live and work and shop and play in different places. Our children go to different schools. You might call it the skyboxification of American life. It’s not good for democracy, nor is it a satisfying way to live.

Democracy does not require perfect equality, but it does require that citizens share in a common life. What matters is that people of different backgrounds and social positions encounter one another, and bump up against one another, in the course of everyday life. For this is how we learn to negotiate and abide our differences, and how we come to care for the common good.

And so, in the end, the question of markets is really a question about how we want to live together. Do we want a society where everything is up for sale? Or are there certain moral and civic goods that markets do not honor and money cannot buy?

Polo Grounds, New York, 1922

Whether you agree or not, you will find it a worthwhile exercise to work through Sandel’s examples. We learn in the Acknowledgments that Sandel has himself tested them in joint classes with economists who argue the other side. Those would be rewarding discussions to listen in on.**

**But why must Sandel make it a point to tell us that all these people are his friends? For example, he co-taught a course at Harvard with Larry Summers in 2005, and they were “joined for some sessions by my friend Thomas Friedman,” Summers having already been described in the text as a friend. And on occasion, “my friend Richard Posner … has joined me … for debates about the moral limits of markets.” Should I point out that I was once friends with Summers’ future wife? Really, I was. But so what?

Skyboxification

August 4, 2012 Leave a comment

Toronto skybox

On opening the current New York Review of Books a week ago, I found Jeremy Waldron’s review* of Michael Sandel’s What Money Can’t Buy: The Moral Limits of Markets of particular interest. The book appears to be a provocative treatment of the border between economics and morality, as is Waldron’s review.

(Unfortunately, the review is behind the NYR paywall, so you can’t see it in full. Consolation recommmendation: Joyce Carol Oates’ review of Claire Tomalin’s Charles Dickens: A Life. I wasn’t inspired to read the biography, but I’m eager to read a Dickens novel or two some time soon.)

Waldron poses the core issue at the outset:

Pecunia non olet, we are told. Money doesn’t stink. All it does is open up the way to making exchanges; it’s a liberating medium for connecting one set of preferences to another. But doesn’t money taint the goods it is exchanged for, when those goods have not normally been distributed in the marketplace?

Among the more obvious examples, Waldron suggests, are baby selling and prostitution. But Sandel describes many more.

Michael Sandel’s new book presents, by my count, more than a hundred examples like the ones I have given, of what appear to be intrusions of money and markets into parts of life where they do not belong. Many of these examples I had never heard of before, though they are culled mainly from newspapers. Some of them are quite disturbing and I think they are presented by Sandel for that reason.

There are, for instance, cities in California that offer prison cell upgrades for as much as $127 per night—clean, one-person cells away from the general prison population (most of whom cannot dream of affording that amount). “Our sales pitch at the time was, ‘Bad things happen to good people,’” Janet Givens, a spokeswoman for the Pasadena Police Department, told The New York Times, and other jail officials added that the typical pay-to-stay client is a man in his late thirties who has been convicted of driving while intoxicated.

Another example: an outfit called LineStanding.com offers clients in Washington, D.C., a “premier concierge service where standers wait at a designation of your choosing until they are able to rendezvous with you, the attendee.” Congressional hearings are open to the public, but space is limited on a first-come first-served basis. Many Capitol Hill lobbyists say that they are too busy to wait in line: queuing, it is said, “discriminates in favor of people who have the most free time.” The “standers,” apparently, are mostly retirees or, increasingly, homeless people. They accept $15–$20 an hour to wait in line and then, as the time arrives for the hearing to begin, their suited clients hook up with the them, and many ordinary citizens who have been patiently waiting for a seat are crowded out by the well-funded lobbyists.

Later, Waldron introduces an issue that particularly intrigued me. (Emphasis below is mine)

The other way in which Sandel helps get a debate underway is by identifying a number of distinct lines of thought that often get tangled up in our misgivings about money and markets.

One line of thought focuses on the voluntary nature of transactions. …

A second set of concerns is about unfairness. When scarce or quality goods are allocated, should they always go to the highest bidder? Should poor people be crowded out? …

Sandel makes an excellent point in this regard, when he says that in a society where everything is for sale, life is much harder for the poor:

The more money can buy, the more affluence (or the lack of it) matters. If the only advantage of affluence were the ability to buy yachts, sports cars, and fancy vacations, inequalities of income and wealth would not matter very much. But as money comes to buy more and more … the distribution of income and wealth looms larger and larger.

The effects of economic inequality of wealth or income are mitigated by the fact that some goods are provided on a basis that has nothing to do with money. It need not be egalitarian or collective provision, but just a shared sense that an unequal distribution won’t always reflect inequality in income. That’s the point about the line for the congressional hearings. Some get in and some don’t, but it is not mainly determined by what money you can offer, at least until linestanding.com enters the picture.

This rarely gets discussed by our political candidates. Everyone on both sides of the aisle is so eager to praise the fruits of capitalism that issues of fairness and proper means of redress get shoved under the rug. Shouldn’t this be the central issue underlying the health care debate? Or regulation of Wall Street? Yet Obama, for one, so rarely comes at the issue directly. The crazed right wing is busy calling him a socialist, yet he is so right of what once was the center that he doesn’t speak out on issues that were historically in the Democratic mainstream.

Or, as Waldron concludes:

Sandel is a baseball fan and, in one last example, he cites the “skyboxification” of our society as an incident of money’s baneful influence. People pay money at ballparks to isolate themselves from others in the experience of watching a baseball game. It is a sort of a metaphor for something more pervasive: “At a time of rising inequality, the marketization of everything means that people of affluence and people of modest means lead increasingly separate lives.” If Sandel is right, that phenomenon is bound to make it harder for us to have the public debate that is called for in this important book.

——-
One last note. In examining the Amazon listing of Sandel’s book, I happened to notice a review by the retired University of Massachusetts economist Herbert Gintis. He takes Sandel to task for Sandel’s critique of economics, and what he has to say is well worth reading.

Categories: Books, Economics, Philosophy

The Business of Universities

May 18, 2012 Leave a comment

Thomas Frank has an interesting piece in the May issue of Harper’s on soaring college tuition, the concomitant increase in student debt loads, and the money-making financial model of universities. The article is behind a paywall, so I can’t link to it, though a small excerpt from near the end is freely available.

Unfortunately, Frank doesn’t provide evidence to back up his repeated jabs at universities as profit centers. The article is more sketch than in-depth study. Here’s a representative passage, which follows his observation that universities rely on their status as charitable institutions to defend their behavior:

Charitable institutions do not exploit the labor of their charges, nor do they relentlessly bid down their wages, as universities do with grad students and new Ph.D.’s who take on much of the teaching. They don’t run their endowments as you would a hedge fund (or, as is often the case, invest them directly in such concerns). They don’t take kickbacks to steer kids into the toothy mouths of expensive private lenders. They don’t sell their souls for seats on corporate boards or research grants from tobacco companies or a Division I title. They don’t replace scholarly leaders with armies of professional managers who proceed to fiddle with the curriculum, funnel resources to business schools, and strive for supremacy as (in the winning words of one expert on the subject) “one among many industries that pursue intellectual properties.” These are the deeds of profit-maximizing entities. The fact that universities don’t have shareholders and don’t pay exorbitant bonuses to top officers is merely a matter of organizational detail.

Talk about painting with a broad brush! I’d say he overdoes it there. But universities, public as well as private, do need to be out there full time chasing the money, whether from federal agencies, foundations, or individuals. That’s what gets the buildings built, the research equipment bought, the famous faculty hired or retained, the new programs started.

I read somewhere years ago — I wish I remember where, and this was more in the context of the Harvards of the world than universities in general — that if one imagines universities raise money in order to educate students, than one has the model exactly backwards. No, they educate students in order to raise money. Some of those students, some day, will be the source of major gifts. Educate them and the money will come.

Here’s another passage, from the excerpt available on-line:

Massive indebtedness changes a person, maybe even more than a college education does, and it’s reasonable to suspect that the politicos who have allowed the tuition disaster to take its course know this. To saddle young people with enormous, inescapable debt—total student debt is now more than one trillion dollars—is ultimately to transform them into profit­-maximizing machines. I mean, working as a schoolteacher or an editorial assistant at a publishing house isn’t going to help you chip away at that forty grand you owe. You can’t get out of it by bankruptcy, either. And our political leaders, lost in a fantasy of punitive individualism, certainly won’t propose the bailout measures they could take to rescue the young from the crushing burden.

I like that “punitive individualism” phrase as a description of our Republican Party’s attitude toward the unemployed, those with underwater mortgages, the sick. Blame the victims.

The article ends with a remark by Nicholas Merzoeff, a professor at NYU: “I used to say that in academia one at least did very little harm. Now I feel like a pimp for loan sharks.”

I don’t find myself feeling that way about my job, but maybe I’m naive, or perhaps the difference lies in the significantly lower (though sharply rising) tuition we charge at the University of Washington compared to NYU.

Nor do I share Frank’s level of outrage. But higher education is changing, at the least in the expectations set for it by students, parents, and legislators, and not for the better. What stands out is the growing emphasis on universities as job-training institutions. After paying all that tuition, students expect jobs, and we somehow must magically ensure it, a hopeless task in the current economic climate. That’s where the damage is really done — the combination of large debt and job scarcity.

As long as I’m on this theme, I’ve been intending to read Andrew Delbanco’s book, College: What it Was, Is, and Should Be, which was published two months ago. He’s one of the finest writers on higher education that I know (and also a college classmate). I did read Anthony Grafton’s review of it in The New York Review of Books. Early on, Grafton sets out a fundamental paradox, with which I’ll conclude this post:

The belief that college matters deeply is both implicit and ubiquitous. It dominates upper-middle-class and upper-class family strategies, it wins buyers for magazines that offer pointless and inaccurate university ratings, it generates income for college counselors, and it sustains alumni loyalty (genetics is destiny, a fellow professor told me thirty years ago, as we thought about which colleges our children might attend and realized that we might have sealed their possibilities by our own choices). Most important, it impels tens of thousands of students and their families to spend vast amounts of money every year.

The belief that college matters very little is also ubiquitous: it echoes through the dingy mansions of American public discourse. We hear such a belief when Rick Santorum criticizes President Obama for trying to ensure that as many Americans as possible should attend college, and denounces universities as snobbish institutions, divorced from reality and focused on indoctrinating the young with left-wing dogmas; when the billionaire businessman Peter Thiel offers prizes for top-ranked students willing to drop out of college and try to succeed as entrepreneurs; when writers argue that the college premium in wages is overrated and the American concern with selective admissions rests on erroneous beliefs about the practical value of higher education. These people are all, in their various ways, arguing that higher education has become a strange ghost world, whose practices and beliefs are foreign to those of most ordinary Americans, and whose benefits, intellectual or practical, may be few.

Categories: Economics, Education

Change We Can Believe In, XX

July 24, 2011 Leave a comment

Change We Can Believe In: Moving to the Right

I’ve been struggling all summer with how to write about Obama. I started a post in this series with the subheading “I’m Smarter than You Are.” This was one weekend when Obama slapped down his critics “on the left” in his weekly radio address. Of course, moronic accusations of his socialist tendencies aside, his continuing move rightward expands the ranks of the left daily. Then, a week ago, I tried to pick up the thread, changing the subheading to “Dismantling the New Deal.” I had written a paragraph or two when I tried to pause, save, and switch from laptop to desktop. Along the way, I lost what I wrote, except for some links.

So, here goes again. Just so I get something posted on this subject, I’ll content myself with references to the work of others. Also, let me explain that as fed up as I am with Obama, my disgust with the antics of the Republican leadership is far deeper. But what is there to say about idiots, liars, and charlatans? They are a scary bunch. They have no interest in fiscal prudence, except as a political talking point to promote their interests in the 2012 election. And what are their interests anyway? Some, the genuine crazies, in the name of freedom, mostly want to make sure most people are anything but. The others are just hypocrites.

Anyway, on to Obama, our enigma-in-chief. What is he fighting for? I don’t have a clue. What vision does he have for life in the US? I once thought I knew, but now I know I don’t. He’s ready to reduce Medicare and Social Security to show his own fiscal prudence, but with interest rates and inflation low, unemployment high, states slashing budgets, is this really the time to win the deficit battle? We all know how the deficit got so big, even if the Republicans pretend they don’t. We cut taxes and started two wars. Now Obama has added a few more wars, renewed the national security state, instructed the NSA to have a computer at Fort Meade recording my keystrokes as I produce them (okay, maybe not; but then again, maybe), and wants to take additional steps that will make the lives of ordinary Americans worse. All with a touch of paternalism and arrogance, the underlying sense I get being that he really does think he’s smarter than the rest of us and knows what’s good for us.

Thanks for nothing. Or worse. Next time you run for office, maybe you can explain that the hope and change you’re after are what Nixon gave us.

Perhaps I’m expressing emotions without analysis. Sorry.

As long as I’m taking this route, let me quote from a post four days ago of the blogger digby. With regard to negotiations at the time between Obama and the Congressional “gang of six,” she commented that the proposed compromise

has become the new “middle ground” and it includes devastating cuts to Social Security, the worst of which will fall upon women in their most geriatric years and disabled people who depend upon SSI, more cuts to Medicare and a likely devastating body blow to Medicaid, which also will hit the elderly far worse than anyone realizes. (Learn how to change adult diapers, kids, because that’s what you’re going to spend your 40s and 50s doing.)

Further down in her post, she adds:

Until the last few months I have always argued that a Democratic president was always going to be preferable to a Republican because of the Supreme Court — and the partisan necessity to protect the “entitlements” from the GOP’s ongoing assaults. I would have assumed that any Democrat would issue a veto threat on this Gang of Six monstrosity rather than praise it. I would have also assumed that all Democratic voters and liberal commentators would be aghast that the Democratic Party would even contemplate such a plan when so many people are suffering and there’s no end in sight. Times have certainly changed.

[snip]

It’s true that the GOP is batshit nuts. Nobody is going to argue that the prospect of Michele Bachman[n] and her freakshow followers with more power than they already have is terrifying. But the Democratic party isn’t exactly behaving like solid, serious leaders either, no matter how many times they use the words “balanced approach.” They are fiddling while Rome burns and the Tea Party is just dancing around the fire throwing gas on the flames.

I close with recent cartoons of Ted Rall

and Tom Tomorrow:

Categories: Economics, Politics

The Box

July 2, 2011 Leave a comment

Three nights ago, I finished reading Marc Levinson’s The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. My interest in it stemmed from a short post Paul Krugman wrote at the end of January, a post I quoted before in explaining what led me to William Cronon’s Nature’s Metropolis: Chicago and the Great West. Krugman:

some commenters argue that the really transformative change came in the 19th century. There’s a lot to that.

As it happens, I’m rereading William Cronon’s Nature’s Metropolis: Chicago and the Great West — yes, on my Kindle, which has made a serious improvement in my life. And everyone with any interest in economics should read his account of the rise of the Chicago Board of Trade. Railroads changed everything. It wasn’t just the fact that stuff could be shipped further, faster, cheaper; the railroad also led to the replacement of concrete with abstract forms of ownership (the farmer owned a receipt for a bushel of grain, not a particular sack), standard-setting, futures markets, and on and on. If you’ve read Marc Levinson’s The Box, about containerization (which you should), it’s startling to see how many of the themes were prefigured by the grain trade, as standard-sized rail cars replaced flatboats, as grain elevators essentially began treating grain as a fluid rather than a solid, as conveyor belts replaced stevedores toting sacks.

Cronon found himself unexpectedly in the national news in late March when he wrote about political developments in his home state of Wisconsin and found himself the target of a far-reaching freedom-of-information request by the state’s Republican party. I wrote about this at the time and was inspired to download Cronon’s book to my Kindle. A couple of weeks later, I wrote that “the book was a thrilling experience. It is the most astonishing blend of history, geography, economics, and ecology that I can imagine.”

The Box went on my list of books to read some day. Some day turned out to be Father’s Day, when Joel bought it for me. It doesn’t have the scope or the beauty of Cronon’s book, but it tells a great story nonetheless, of how containerization changed world trade. This is examined at many levels, with Levinson examining the impact on port authorities and local governments, unions, the US military, cities, trains, truckers, manufacturers, national economies, and so on. Typically, each major subject is discussed in its own chapter. Union negotiations. Shipping goods to Vietnam. Developments on the East and Gulf coasts of the US plus the West coast. Developments in Britain, the rest of Europe, and Asia.

Many of the key developments coincided with my youth, as the Manhattan and Brooklyn port collapsed, with most of the action moving to new container terminals in Newark and Elizabeth, and as the longshorement’s unions fought their final big battles against modernization and automation. I was vaguely aware of this from reading the local news growing up, but I didn’t understand just how dramatic and swift the changes were. By the time I moved to Boston, as the book explains, its life as a major port had ended. Because it didn’t invest quickly enough in containerization, shippers could truck containers to New Jersey and have them put on boats there at lower cost. Similarly, the relative roles of west coast ports underwent a dramatic shift, with Oakland taking from San Francisco the dominant position in the Bay Area, but the Bay Area as a whole losing out ultimately to LA and Long Beach.

I learned when I moved here that Seattle was growing as a port because of containers and its location closer to Japan. As the book explains, shipping wasn’t a matter of getting goods to a port to serve the port’s local region. Rather, the key was to make the ocean crossing and get the goods off the ship as quickly as possible, to be put on trains or trucks for distribution nationally. But, as the book mentions in passing, Seattle took a big hit when Tacoma opened a new container port and stole a large part of Seattle’s business. This kind of story was played out all over the world. How London and Liverpool lost out to Felixstowe is an especially interesting tale.

I found a couple of annoyances as I read the book. Basic facts are repeated time and again, as if the reader is assumed to be inattentive. Or maybe the author or editor was. And the Kindleization of the book is not well done, at least for the first half of the book, with frequent breaks in the middle of words and occasional concatenation of the second half of a split word with the subsequent word. There’s no loss of meaning when this happens, but it stops the reader every time, even if just momentarily. Annoyances aside, the book tells a fascinating tale. And as Krugman noted, after reading the Cronon book, I couldn’t help but notice the overlap in themes between the two books.

Alas, re-reading Krugman’s post, I realize I have yet another book to read. Following the passage I quoted above, he goes on to say, “Add in the telegraph — the Victorian Internet, as another must-read book puts it — and it was an incredible change.” That other must-read book is Tom Standage’s The Victorian Internet: The Remarkable Story of the Telegraph and the Nineteenth Century’s On-line Pioneers. I’ll add it to my list.

Categories: Books, Economics, Geography, History

Nature’s Metropolis

April 17, 2011 Leave a comment

I explained three weeks ago how political developments in Wisconsin led me to download and start reading William Cronon‘s 1992 study Nature’s Metropolis: Chicago and the Great West. As I mentioned then, Paul Krugman wrote a post at the end of January in which he spoke of rereading the book, adding that

everyone with any interest in economics should read [Cronon’s] account of the rise of the Chicago Board of Trade. Railroads changed everything. It wasn’t just the fact that stuff could be shipped further, faster, cheaper; the railroad also led to the replacement of concrete with abstract forms of ownership (the farmer owned a receipt for a bushel of grain, not a particular sack), standard-setting, futures markets, and on and on.

I almost bought Cronon’s book at the time. With his appearance in the news last month as a victim of the McCarthy-style tactics of Wisconsin’s Republican party, I delayed no longer. Four days ago, I finished it.

Reading the book was a thrilling experience. It is the most astonishing blend of history, geography, economics, and ecology that I can imagine. You will surely realize that I don’t exactly read a lot of history, geography, economics, or ecology. Perhaps my assessment shouldn’t carry a lot of weight. But let me say this. Find the book, read Part II, and tell me if you disagree.

The book has three parts. The first introduces some of the book’s themes, with a focus on how water, then rails, gave Chicago its central role in the economy of the west over the nineteenth century. Just a few miles up the Chicago River, one reaches a high point whose other side drains into the Illinois River and on into the Mississippi. Thus, Chicago lies virtually at the divide between waterways that take you, in one direction, via the lakes and the Erie Canal, to New York City (or via the lakes to the St. Lawrence, Montreal, and beyond to the Atlantic), and in the other direction, via rivers, to St. Louis, New Orleans, and the Gulf. No sooner did Chicago begin to benefit from this prime location than railways changed everything. But yet again — and Cronon takes pains to point out that this was not inevitable — Chicago found itself in the key location between railways that supplied and brought goods from the great west and railways that sent the west’s produce to the major cities of the east while shipping the east’s manufactured goods back west.

Part II, building on this, is the heart of the book, and a must-read. Titled Nature to Market, it has three chapters: Pricing the Future: Grain, The Wealth of Nature: Lumber, and Annihilating Space: Meat. Each is a gem. I can think of no better microeconomics primer, as we watch capitalism take root and transform the western regions of the country along with the way of life of its population and the land itself. Prairie makes way for farming, the white pine of the north woods makes way to fence the prairie and house its inhabitants, and plains buffalo make way for cattle range land. People’s lives improve, but at a cost, which Cronon always keeps in our field of view.

Part III zooms out a bit, with a broader look at what has been gained and lost. It contains yet another gem, the chapter The Busy Hive, in which we watch Montgomery Ward become a retail force much like Wal-Mart or Costco today. But really, the entire book is a gem.

Categories: Books, Economics, History

Are You Comfortable?

August 23, 2010 Leave a comment

Once again, I’ve sat too long on a topic I meant to write about. Maybe I’ll give it a shot before the issues fade completely from my mind. The starting point was James Surowiecki’s economics column in the August 16 issue of the New Yorker, dated a week ago but now two weeks old. In the context of Congressional discussions on whether to extend the Bush tax cuts that are set to expire at the end of the year, he asks,

who counts as rich? The Obama Administration’s answer is that you’re rich if you make more than two hundred thousand dollars a year as an individual or two hundred and fifty thousand dollars a year as a household, and therefore you should have your taxes raised. Conservatives suggest that this threshold is far too low, and argue that Obama would be taxing mostly small-business owners, or the people a Fox News host has referred to as “the so-called rich,” rather than fat plutocrats. You might think this isn’t really much of a debate. An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You’re rich, and a small tax increase isn’t going to rock your world.

Surowiecki goes on to note that “from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged.” He then reviews why this might be the case, with reasons ranging from the high cost of housing in certain parts of the country to the fact that those earning “a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.”

Surowiecki proceeds to explore this last point in more detail. He observes, for instance, that “People in the ninety-fifth to the ninety-ninth percentiles of income have represented a fairly constant share of the national income for twenty-five years now. But in that period the top one per cent has seen its share of national income double … So at the same time that the rich have been pulling away from the middle class, the very rich have been pulling away from the pretty rich, and the very, very rich have been pulling away from the very rich. … there’s a yawning chasm between the professional and the plutocratic classes.”

Surowiecki concludes that the tax system should reflect this chasm, with the super-rich paying higher rates than the very rich. He concludes that doctors, lawyers, accountants — what one might call (and Matt Miller does call) the “lower upper class” — inhabit a different world from the ultra-rich and should inhabit a different tax bracket as well.

In a commentary at CNN, John Avlon made much the same point two weeks ago, perhaps influenced by Surowiecki’s article, though he doesn’t refer to it. Avlon writes,

There is another issue . . . beyond the increasing gap between rich and poor in the United States.
It is the gap between the “super rich” — who really do have more money than they know what to do with — and what might be called the “working wealthy,” who are taxed as though they’re rich enough to able to give away half their money.

These are individuals whose household income might bring them into the top tax bracket of $250,000 a year but who, with two parents working, might still find themselves struggling to stay in the stability of the upper-middle class in the expensive urban areas where they often work.
Much of the anger about the scheduled sunset of the Bush tax cuts for the increase in top-bracket taxes comes from this productive group of Americans.

The super rich are looking for charitable donations to deduct from their taxes each year, while the working wealthy are still trying to pay all their bills. But they are taxed at the same rate as the private jet set (what a few years ago might been called the Bernie Madoff crowd).

Avlon concludes with mention of “the growing gaps in our society, not just between the rich and poor, but between the super rich, the working wealthy and the forgotten middle class.”

At the Atlantic, Derek Thompson replied to Avlon’s piece, granting that “it can be challenging to put two kids through private school and pay a mortgage on $250,000 a year in an expensive urban area,” but disagreeing “that those families’ experience should guide our tax policy.” He ends up drawing the same conclusion as Surowiecki:

Avalon’s [sic] piece strikes me as an argument for more income brackets. If we acknowledge the country is getting ever more stratified between the wealthy, the super-wealthy and the sweet-lord-they-must-use-their-money-as-napkins wealthy, why not build an attic on top of income tax system to catch extra money at higher rates?

Thompson also takes exception to Avlon’s description of the struggling earners of $250,000 as upper middle class: “I know it’s polite to say we’re all middle class until our yearly income adds a seventh digit, but really. If the 95th percentile is the middle class, does that make the median income earner upper-lower class? Or is America’s middle class more like the stuffing in a three-story Oreo?”

Thompson has a link to a very useful document from Tax Policy Center, from which we can see that about .4% of the population earns over $1 million, whereas another .7% are in the $500,000 to a million range and 3.9% are in the $200,000 to $500,000 range.

Can someone really make $250,000 and be middle class? A week ago, at Andrew Sullivan’s blog site, The Daily Dish, Sullivan’s assistant Patrick Appel quoted from Thompson’s post and then addressed this question. (Sullivan is on vacation and his staff members are running the show.) Appel posits, “families tend to socialize with families who make a little more and a little less than they do. A family earning $250,000 a year likely has a number of friends that make around that amount. They probably also know a number of families making $300,000 to $400,000 a year and number of families making $100,000 to $200,000 a year. Even if an American is in the 95th percentile nationally, they are likely to feel middle-class in relation to peers.” A debate ensued among readers, which you can follow by going over to The Daily Dish.

The notion that we’re all middle class was impressed upon me very early through a joke my father used to tell. It’s a familiar joke, one that could perhaps work in any culture, but one that has come to be identified with American Jewish culture. Indeed, if one does a search on the joke, one finds that it is variously attributed to Henny Youngman, or told with instructions that the punchline should be spoken with a Yiddish accent, or written with Yiddish-accented words (“vell” for “well”) thrown in. Underlying the joke is the notion that one needs a euphemism for being wealthy, it being somehow unseemly for someone to actually admit to being rich. The particular euphemism used in the joke (and so, the euphemism I learned as a child) is that of “being comfortable.”

As for the joke, well, it goes something like this. A man (a Jewish man in some tellings, or more explicitly, a Mr. Cohen) is walking across the street when he is hit by a car. The driver (or perhaps a passing policeman) rushes out to the man, who is lying on the street, puts his sweater under the man’s head, and asks, “Are you comfortable?” The man replies, “Eh. I make a living.”

That’s my understanding of the issues. And yes, I make a living.

Categories: Economics, Humor

Luck, Hard Work, Success

May 3, 2009 Leave a comment

varney

I don’t watch the Fox Business Network, but thanks to a tip from Ezra Klein on his blog, I found myself watching the six-and-a-half-minute clip from last Thursday in which Fox’s Stuart Varney interviews Cornell economist Robert Frank. (Among Frank’s books is a basic economics text written jointly with Ben Bernanke.) I started the clip out of curiosity, not anticipating watching it all. Soon I was transfixed. When you have a few minutes, do yourself a favor and watch. (Click here.) It’s extraordinary.

Who knew one would have to respond to a host who announces that he is insulted to be told that luck is a part of success? Varney turns that general statement into an attack on himself and insists that he succeeded because of his own hard work, talent, and risk taking. He further insists that success will come to anyone who does this. Along the way, he segues into a discussion of high marginal tax rates, asks Frank how much of his money should be taken away (seeming to suggest in passing a total lack of understanding of the notion of a marginal tax rate), and suggests that Frank return to his socialist New York Times and socialist Cornell. I have no idea whether Varney is serious or simply aiming to provoke and entertain. But entertain he certainly does. And Frank gets to observe in passing that Varney is proof that luck is required, since Varney clearly lacks anything else that could have produced such success.

Categories: Culture, Economics, Television