Keynes says you don’t know what’s about to hit you

2012-02-04 (Saturday) § Leave a comment

The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or be could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate without passport or other formality, could despatch his servant to the neighboring office of a bank for such supply of the precious metals as might seem convenient, and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing coined wealth upon his person, and would consider himself greatly aggrieved and much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise, were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.

from the introduction of The Economic Consequences of the Peace by John Maynard Keynes, describing the privileged lives of middle- and upper-class Londoners in the early 20th century.

Bold added.  Most of this excerpt at a glance strikes me as true of my own people today, Americans of the early 21st century.  I think, or I hope, that the bold part is untrue of at least a significant minority of us.  We have a considerable awareness of the influence of politics, military conflict and trade policy on our daily lives.  I’m not sure how much comfort that should be if it’s true, though.  It depends on what the dangers are.

This book is Keynes’ warning that the Treaty of Versailles would bring disaster on Europe, and WWII proved him right.  Maybe as I continue through the book I’ll find out that his reasons for thinking so don’t have parallels in my own country and time.  I’m pretty sure that even if the unwise actions of those Europeans do have parallels today, the dangers today will be different.  A global or even a continental war between great powers is hard to imagine today.  There are too many interests threatened by such a prospect and too few served.  Whatever dangers we face, they’re likely to be international in origin and not driven by a few specific governments.


Poll: Wealth in US governance and politics

2012-02-04 (Saturday) § Leave a comment

Without making any commitments about the means, would you endorse the goal of bringing the correlation between personal wealth of a US citizen and that citizen’s influence on election outcomes and public policy down to a level ascribable to chance?  Or to put it less mathematically, would you endorse the goal of making it so that a US citizen’s personal wealth doesn’t give her any more influence on election outcomes and public policy?

I would.  I think if having a lot of material wealth gives you more influence on legislation and more say about who gets elected to public office, that’s a bad thing.

What are some non-self-serving reasons to think otherwise?

Here it is as an actual poll:

Will globalization make us meet in the middle?

2012-01-31 (Tuesday) § 2 Comments

When goods and information can move quickly, cheaply and easily from any part of the world to any other, is it possible for the labor classes of different countries to indefinitely enjoy very different standards of living?

Right now we do.  Nominal currency amounts aside, working people of average means in the US, Canada or western Europe can afford goods and services of both higher quantity and quality than working people of average means in sub-Saharan Africa, Central Asia, or South America.

Famously, this contributes to a lower cost of labor in the latter places, and when that labor is sufficiently qualified compared to its more expensive alternatives in the developed world, employers fire the Americans or Canadians and move shop to China or the Philippines.  This is an old phenomenon by now.

Is there a way this kind of movement can go on indefinitely without standard of living rising for the cheap workers and falling for the expensive workers?  It seems anecdotally like this is already happening.  I read that Chinese factory labor is getting more expensive (or to talk about people as if they were people, Chinese people who work in factories are getting better wages and ancillary benefits).  I also hear constant talk in the United States about how job security and limited work hours are luxuries that will slowly bankrupt us nationally if we try to maintain them.

If the gradual convergence of standards of living between the working classes of different countries is an inevitable consequence of easy global trade flows, is there a way we can see that as a good thing for the richer working classes?  If it’s not, should we get mad and vote for protectionist trade policies?  Or should we just sigh and take it?

If economists are already arguing over these specific questions, I’d love to be directed to where I can follow the arguments.

What’s the point of an economy?

2012-01-31 (Tuesday) § Leave a comment

In media and in ordinary conversation I sometimes hear people talk about whether something is good for the economy.  Everybody seems to already know what “good for the economy” means, and further, what the economy is good for.

As with my attempts at analytic philosophy on this blog, I’m approaching economics as an amateur.  I’m hoping to understand it better by putting my current views forward and then responding to problems and alternative angles that people point out to me.

I’ve been reading The Worldly Philosophers, a survey of the views and lives of a sequence of European and American men who made important contributions to economics.  It may be because I’m getting their views at secondhand and in summary, but it seems to me that none of them looked directly at the question of what an economy is for.  (Maybe that’s because they already had it figured out.  But I don’t.)  They looked at more specific and less fundamental questions:  Why are there poor people and rich people?  Is everybody better off if everybody owns everything (communism), or if most things are owned by somebody in particular (private property)?  In a market economy, is it inevitable that the amount of goods and services being produced and sold will occasionally fall and leave a lot of people with a lot less access to goods and services (recession)?  Important questions, but they assume we already know what we want the economy to do.  So what is that?

One possible answer is that we want the economy to make supply match demand as closely as possible.  In other words, given that people want certain things, the point of an economy is to get as many of those things as possible produced and distributed to those people, while getting as few things as possible produced that nobody wants, and getting as few things as possible distributed to people who don’t want them.  Money, prices, and liberty of exchange are just ways of trying to make that happen in a market economy.

Right now in the United States the thing that the broader public wants most from the economy, and what elites claim to want most, is jobs.  Does that mean the point of an economy for us is to give people useful things to do with their time?  Clearly not, or at least not exclusively.  What people mean is jobs that pay a living wage.  Otherwise they (we) would be happy doing volunteer work all the time and consider that a successful economic outcome.  But a sufficient income + work aren’t enough simply added together.  Most people want a sufficient income that feels like a reward for their labor contribution.  Otherwise they would be happy living on reliable charity and doing volunteer work.  Anecdotally my sense is that most Americans wouldn’t be happy with that indefinitely.

So the point of our economy in the United States isn’t just to match supply with demand.  It’s to make supply match demand AND make the demanders feel like they earned the supply.

Tell me what I’m missing.

Get it right or pay the price

2012-01-15 (Sunday) § Leave a comment

I’m reading The Worldly Philosophers by Robert L. Heilbroner, a summary of the lives and ideas of a sequence of European and American men who had a big influence on economics.  Right now I’m on the part about Karl Marx.  I’ve never attempted his epic tome, Capital, but the excerpts and summary that Heilbroner gives make the dude sound like kind of a bad thinker in some ways.  Not in his attention to detail or his efforts at a thorough examination of consequences, but in his lack of zeal in correcting his own blind spots and looking for where he might have been wrong.  I’m almost ready to say that those intellectual virtues are more important than the detail and thoroughness.  As long as we can take correction from each other, we can cover each other’s areas of ignorance.  A brilliant thinker can still be wrong and can even be wrong where a less brilliant thinker is right.  It’s less likely than the reverse, but we’re all fallible enough that anybody who’s unenthusiastic about being shown to be wrong is asking to make serious mistakes.  I don’t know if the USSR, the PRC, Hoxha’s regime in Albania, etc. would have arisen even if Marx had never written any of what he wrote, but if his intellectual career really was a necessary cause of those regimes, and if the leaders of those regimes were acting out of a sincere conviction of Marx’s ideas, then his intellectual mistakes can be credited with the terrible suffering of millions of people.  And he was no lord or statesman with political power to push his ideas – he was a random German dude who published some indie rags.  Ideas matter.

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