Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

Friday, August 5, 2011

I was in the process of working on an absolutely brilliant post about the debt ceiling debate and the lack of progressive voice in the discussion but someone beat me to it. It's really a shame too, I had found wonderful graphics to illustrate my points and there is a great chance that it may have become an over-night sensation and changed the entire tone of discourse in the United States.

Shame on you, Dan Froomkin,
for depriving the world of this genius.
I may wind up writing more about the subject but Dan hit many of the important points I intended to address, mainly that the discussion was between a conservative group of politicians who wanted to cut federal spending in an attempt to lower the deficit and a group of more conservative politicians who wanted to cut federal spending more in an attempt to lower the deficit. Missing entirely from the discussion was the voice asking why we're trying to cut spending during a recovery that is looking more and more like a recession every day.

Look at this creepy socialist.
He's such a tax and spend liberal.
In a discussion with someone about this topic I mentioned that domestic federal spending, with the recent budget deal, has returned to the level as a percentage of the GDP that it was at in the 1950s when Eisenhower was president. I was then asked why I wanted the government to take more money from the economy than it did when Ike was president. I'll put aside the fact that the top tax rate when Ike was elected was 92% and 91% when he left office while the highest burden of federal tax today is 35%. I will rather make an appeal to reason.

All I want is economic policy that is based upon facts rather than fear-mongering, flawed ideology and feelings. I want it to be based upon things we know, facts. For example:

1. We know that markets hate uncertainty. Uncertainty is almost always a major indicator of a flailing economy, I haven't made a stringent effort to look for one but I've never known of an economist who would argue against this.

2. We know that battles over raising/lowering taxes, cutting/growing government and deficits create uncertainty within markets.

3. We know that raising taxes certainly has an effect on business owners, corporations, ie. everyone who hires anyone. We can argue over how much of an effect but to deny that taxation affects business is ludicrous.

4. We also know that cutting government spending has an economic effect, namely raising unemployment and removing from the economy the money that those government employees, now unemployed, would have made as pay. Again, we can argue about how much effect this has on an economy but it is impossible to argue that it doesn't have an effect.

It only makes sense, then, that we avoid these things that we know will hurt the economy and do something instead that we know will improve it, to create jobs. The government only has two means of creating jobs, cutting taxes or creating government jobs. The first has already been tried with little to no positive effect on the economy in the Bush tax cuts. It only makes sense then to get unemployed people working again, and imagine that, there's plenty for them to do. Our roads, parks and electrical infrastructure are in a catastrophic state of disrepair, public transportation in the form of high-speed rail is looking to be an efficient and relatively inexpensive way to get people where they want to be fast and that is only a small part of what work there is needing to be done.

It's a good thing we're not trying to find
work for plastic surgeons, no more
work needs to be done on this.
A temporary public works program would get money in people's pockets, lessen the unemployment problem and pump much-needed cash back into the economy. It helped the last time it was tried, we've little reason to think that it won't work again some 75 years later.

I suppose it'll also be necessary to explain why the budget deficit and national debt are unimportant distractions in our current situation but that is for another time.

Sunday, July 11, 2010

Creating a New View of Reality

History is truly a discipline unlike any other. History is simultaneously limited by it's exclusive attention to the past and unlimited in its use of, and application to, every other discipline. Though it is unique in this way, history is a discipline that shares much in common with others in purpose and methodology, making ample use of the similarities and differences alike, allowing historians to create a comprehensive picture of the past. John Lewis Gaddis said, “We know the future only by the past we project into it. History, in this sense, is all we know.”1 Only through history can society gain the perspective needed in order to make informed decisions about the future.

History shares much in purpose with other disciplines, its defining purpose being it's exclusive dealing with the past. One of the main purposes of history is shared with the field of geography in its representative qualities. “History, like cartography, is necessarily a representation of reality. It's not reality itself.”2 While geographers represent places in space through the use of maps and other geographical tools, historians represent events in time using generalizations and narratives. Anthropology shares this purpose with history as well in that, “They act as mediators between different worlds, seeking to do justice to the other world while speaking to their own, much as historians do.”3 Like historians do not recreate the past, the anthropologist's job is not to recreate the societies and peoples that they study, but instead to give a thorough representation of them.

History also shares a purpose with many other disciplines in creating accounts of existence, giving the field a direct tie to that of philosophy. “Since philosophy explicates thought processes, it has a great deal to say about how historians fashion arguments, the sorts of explanations they offer, their assumptions about how the past can be known, their models of causality, and so on... Like sociology and anthropology, philosophy offers general accounts of human existence.”4 While philosophy is an attempt at explaining a range of subjects, history attempts to create an explanation of the past. Social Science shares in this explanatory purpose in its attempts to explain the structures and behavior of societies, “Marx continues to be of interest, less so because of his failed predictions than for his analysis of the structure of power in capitalist societies and his comprehensive view of the close interrelationship of economic class dominance, political power, and ideology.”5 Anthropology also finds common purpose in its attempts to explain human activity. Clifford Geertz created his own account of human existence in his attempt to explain Balinese society through the lens of the cock-fight, saying, “As much of America surfaces in a ball park, on a golf links, at a race track, or around a poker table, much of Bali surfaces in a cock ring. For it is only apparently cocks that are fighting there. Actually it is men.”6

In addition to these roles, “Part of the historian's task is... to demonstrate that what is was not always so in the past and therefore need not be so in the future. The historian must be, in this sense, a social critic.”7 W.E.B. DuBois is a perfect display of this purpose in the field of Social Science, “In keeping with the reformist ethos of the time, DuBois believed in the utility of scientific research in the solution of outstanding social problems.”8 This purpose is also apparent in economics as shown by Joseph E. Stiglitz in Making Globalization Work as he asked, “How can we take the economic forces of globalization – which have so far been injurious to the environment – and make them work to preserve it?”9 Geography too may play the role of social critic at times as shown by David Harvey, who worried that, “The geographical ignorance that arises out of the fetishism of commodities is in itself cause for concern. The spacial range of our own individual experience of procuring commodities in the market place bears no relationship to the spatial range over which the commodities themselves are produced.”10

In addition to purpose, history also shares many of its methods with other disciplines. One of the key historical methods is the use of theories from many other fields in explaining a historical event. “History is eclectic, hence the range of its debts and the complexity of its relations with other disciplines. Sometimes these are to be understood in terms of the use of theories; indeed 'theory' can be a useful concept for clarifying relations between disciplines.”11 No field shares this trait with history as much as geography does, as it is also, “Rather eclectic, and to the extent it has theories, these are shared with other fields, such as climatology, economics and other social sciences.”12 History also shares with geography the ability to distort space and time to suit the purposes of understanding. Just as geographers can compare different landscapes of their choice, “Historians have the capacity for selectivity, simultaneity, and the shifting of scale: they can select from the cacophony of events what they think is really important; they can be in several times and places at once; and they can zoom in and out between macroscopic and microscopic levels of analysis.”13

When there is no way to reproduce a scientific experiment in a lab setting the only tool left is one that historians have always had to make use of, deductive reasoning. “It's here that the methods of historians and scientists – at least those scientists for whom reproducibility cannot take place in the laboratory – rough coincide. For historians too start with surviving structures, whether they be archives, artifacts, or even memories. They then deduce the processes that produced them.”14 History also benefits from other tools that many disciplines commonly make use of, the most obvious of these being the creation of theory and generalizations. In the process of writing narratives historians cannot but help making generalizations, while theory can be extremely useful in providing an explanation for the causes of historical events. Many sociological theories, such as Marx's theory about the mode of production,15 Weber's iron cage,16 or DuBois' Veil,17 are directly applicable to historical events largely because the authors of these theories were using a historical approach, bringing together varying interdependent variables from the past to explain the social structures of their times.

With all of the tools that history shares with other disciplines there is one that is completely unavailable to historians, that being hands-on research. The historian's subject lies in the past, ensuring that they may never experience it first-hand as W.E.B. DuBois could with his. “Without research assistants, DuBois conducted a door-to-door survey to get at the facts about the economic , social, religious, and familial life of the inhabitants of the Seventh Ward, in the hope of dispelling the myths and fantasies that circulated in the white community.”18 Historians cannot walk among the people they study as Geertz and his wife had, “On the established anthropological principle, When in Rome, my wife and I decided, only slightly less instantaneously than everyone else, that the thing to do was run too.”19 Historians are instead forced to piece together an account of the past with the remnants that are left behind.

There remains one difference in methodology that becomes clear when comparing the methods of social scientists and historians. “It is, most fundamentally, the distinction between a reductionist and an ecological view of reality.”20 Social scientists, for the purpose of forecasting, attempt to reduce a complex event to simplicity, as dealing with an uncountable number of interdependent variables makes such forecasting impossible. “In sociology such a theory would be applied to a number of cases, but a sociologist would be less likely to start with the case study and then apply a mixture of theoretical devices to it, which is precisely what many historians do... They are more likely to look for the rigorous application of a theory, and to find eclecticism sloppy and intellectually unacceptable.”21 The fact that historians avoid forecasting what might happen in the future frees them from the burden of reductionism. They can instead take an ecological approach and apply as many theories with as many interdependent variables to a single event as is necessary to explain it.

Because history is such an eclectic discipline, historians are able to borrow the theories of any other discipline that fit with the event being studied. From the social scientist a historian might borrow, “A Marxian approach to society (which) contained a number of ideas, theories and concepts that could be applied to a wide range of historical cases, as indeed Marx himself applied them. In particular, the analysis of modes of production and their implications, class oppression, revolution, ideology and imperialism were taken up by historians.”22 From political science historians may borrow the case study by Bejarno and Segura, which makes clear the continuing problem of race in the United States through the example of the 2003 race for Louisiana governor.23 One of the most useful fields from which historians have borrowed recently is Anthropology. “Anthropologists developed a number of ideas and concepts that can be used by historians. Ritual, fetish, kinship, magic, possession, symbol, shaman and the gift relationship would all be obvious examples where, even if the concept were not exclusive to anthropology, that field endowed them with a rich significance upon which historians could draw.”24 Our diversity of methods to draw upon is an infinitely useful tool that makes the gathering of historical data that was previously unobtainable possible.

History is a versatile discipline that is at once both unique and applicable to all other fields. Through the study of the past historians reach for many of the same goals as other disciplines while also borrowing many of their tools for its own ends. History combines with the other disciplines in the endless pursuit to explain where the future might take us by providing the answer of where we came from. As different as they all may think of themselves, the practitioners of each discipline all share one basic desire regardless of their field of study. “This is what paleontologists, tailors, and cartographers as well as historians hope for – the product may move those who encounter it to revise their own views so that a new basis for critical judgment emerges, perhaps even a new view of reality itself.”25

The Straw Man

I received an e-mail a couple of days ago with the following story asking me my opinion of it. I thought it may be useful for the purpose of discourse to talk about it here instead of confining my answer to the eyes of a single person.

An economics professor at a local college made a statement that he had never failed a single student before, but had once failed an entire class. That class had insisted that Obama's socialism worked and that no one would be poor and no one would be rich, a great equalizer..
The professor then said, "OK, we will have an experiment in this class on Obama's plan". All grades would be averaged and everyone would receive the same grade so no one would fail and no one would receive an A...
After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy.
As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D!
No one was happy.
When the 3rd test rolled around, the average was an F. The scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.
All failed, to their great surprise, and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great but when government takes all the reward away, no one will try or want to succeed.

Could not be any simpler than that.

I'll be very up front and blunt about my feelings on this story. It is plainly the most ridiculous piece of mindless propaganda that I've seen. Really. It is that bad.

I'll start at the easiest place here, which is the obvious fact that the story is fiction. I doubt anyone seriously considered that the story could have really taken place just as I doubt that the author really expected anyone to think that. It's pretty clear that the author was trying to make a political point of which the means of delivery was secondary.
The problem with this is that his point is completely nullified by the far-fetched scenario in which the point is clothed. There are socialist students on college campuses. Yep, it's a fact. But to suggest that somehow this professor got an entire room full of socialist students in an economics class is laughable. Please give me a somewhat plausible premise.
The idea of the college campus as breeding ground for socialist indoctrination is one of those myths that conservative talk radio just can't let go of. I've got quite a bit to say as far as debunking this myth but that may distract from the point so I'll leave it for another time.

Now for the important part, the point the author is trying to make. The argument is threefold:
Obama's presidential policies are socialist

The grading policy used by the "economics professor" is an example of socialist policy

The socialist principles that Obama's policies are based upon (and displayed in the professor's exercise) don't work

The big problem with this tale is that two of the three premises of the author's argument are blatantly false and the other is irrelevant because of the falsehood of the other two.

I'll start off with the second part of the author's argument because it's the easiest to debunk. The idea that a socialist government just passes out equal rewards regardless of input of effort just doesn't hold up to reality. That kind of policy has existed but it is generally known better as communism, and even then it is an incredibly flawed and simplified example of it. The confusion of communism with socialism is an easy error to make given their history of working with one another but that hardly means that they are the same thing.
The basic idea behind the modern socialist ideology is that food, shelter & medical care are human rights that should not be dependent upon a person's income and that these basic necessities of life are to be provided to the public by the government. Under such a system the economy still functions much as it does in any other capitalist nation with the exception that these necessities are to be exempt and provided without cost. In such a system there is still a great deal of variance in the levels of income among the public, the distance between the richest and poorest citizens just isn't so great and the poorest aren't homeless/dying of curable disease/starving to death.
It isn't my intention to argue that this system of government works or does not work, there are a multitude of valid arguments for and against it and that isn't my point. My point is that the exercise used by this "economics professor" isn't an example of socialism at all, any economics professor (or student for that matter) could tell you that. This alone makes the point of the story worthless but it doesn't contradict the idea that Obama's policies have been "socialist".

This part of the argument is a little harder to combat because of the wide range of things that people can consider socialistic and also because it relies heavily upon the idea of intent, and the only person who could tell us that with any amount of authority is Obama himself. Even without getting in his head though, I am extremely comfortable in saying that Obama is anything but a socialist.
The big scare of socialism is most prominently used in the fight against Obama's health care proposal but as much as one looks at the actual proposal this idea of a socialist takeover of the medical system just doesn't match reality. The largest part that even remotely resembled socialism, and is used as an example of socialism, is the now abandoned proposal for a government insurance program.
The problem with the view that this is a somehow socialistic program is that it is restricted to a very small percentage of the public and that the overall system of non-governmental insurance programs would continue to not only exist, but continue to rake in consumer money hand over fist.
The most extreme among proposals was to create a government insurance program that would compete with other private insurance companies on the open market to establish a very basic coverage for those who were unable to afford healthcare elsewhere. I would like to see an explanation for how a government competing with private business on the market is socialism. It's not a socialism I've ever seen before.

The other area in which Obama has had the accusation of socialism hurled in his direction is in regards to his stimulus program. It really doesn't take a history major to see that such a program has been used before and has proved to work relatively well in helping to restore a functioning economy through the creation of jobs.
The theory behind it was based upon the economic theories of John Maynard Keynes, among other economists of his time, and was first put to the test in the United States during the Great Depression. According to Keynes the best way to counteract a recession within the economy was to increase government spending for the purpose of job creation.
I won't go any deeper into his theories but he had written several books on the subject and has had incredible influence on the way in which modern economists view the world and economic developments, so much so that, "Milton Friedman, the nation's leading conservative economist, who was Presidential Candidate Barry Goldwater's adviser on economics," said, "'We are all Keynesians now.'" (Click Here to read the article from which this is quoted, it is an interesting read for anyone interested in American economic history.) For those of you who don't know who Milton Friedman is, he is best known as the man behind Ronald Reagan's "trickle-down economics."
My point here is that the policy of stimulus programs is based upon economic theory that has garnered the support of some of the most conservative (and non-socialistic) economists in our country and is anything but socialistic. The entire purpose of such a project is to return the capitalistic economic system back to a healthy recovery.
Even if such theory was considered socialistic, it hardly applies to the exercise undertaken in the story above. Nowhere in such a policy is it ever suggested that everyone obtains equal rewards for unequal work.

I don't especially feel the need to even address the third part of the author's argument as I've already shown why the assumptions it is based upon are false. It's extremely clear that the type of example given by the author of this tale has very little to do with anything Obama has proposed.

TLDR (Too Long Didn't Read) version:
The story isn't an accurate description of socialism

Even if it was, Obama's policies are not socialistic

Even if Obama's policies were socialist, the story relates to them in no way whatsoever

The story uses a commonly used logical fallacy known as a "straw man." In such an argument one describes their opponent's philosophy in a simplistic and inaccurate manner for the purpose of knocking it over with ease as a display of the power of their own argument. Of course it was easy to show that Obama's policies in the story won't work, they have no basis in reality whatsoever.

As always, don't take this as approval for Obama. He's done plenty to make me unhappy with his presidency thus far as well, I just choose to use some form of reality for the basis of my criticism rather than arguing against some fictional existence.
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