Today our class reviewed Smith, Marx, and Keynes by choosing movies, songs, countries, and games that fit each of the economists. For Keynes, one group chose the Hannah Montana song, "best of both worlds".....
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Friday, February 21, 2014
Econ humor
Friday, February 14, 2014
Conscious Capitalism Cop-out
In my intro to econ courses we've been discussing Smith, Marx, and Keynes. In each class, I try to ask them why each economist is currently relevant and also give them a few of my ideas. Today we discussed how Marx would see Valentine's Day as a commodification of human relationships and Keynes's idea of the socialization of investment.
My interpretation of this is perhaps a bit different than what Keynes meant but (as I say in my classes) it is not like we can snap chat him and ask if we are on the right track. Socialization of investment is about dealing with the problem of uncertainty and incentives. If businesses are concerned with only maximizing profits for their shareholders, they may not make the right choices for the long-term health of the business or for the economy. We need businesses to have a range of accountability- to shareholders, workers, the community, and the nation.
Julie Nelson's Economics for Humans discusses how the pro-market view of business is quite similar to anti-market views of businesses: both agree that businesses' main objective should be to maximize profit. Free marketers see corporations maximizing their profit as a tide lifting all boats while anti-capitalist think corporate social responsibility as an oxymoron. However, she argues this false dichotomy does not have to be so.
Conscious capitalism is a new movement (full of old ideas) that seeks to synthesize profit making with ethics and morals, giving back to the community while still making a buck. Here are some excerpts from the book Conscious Capitalism:
"Corporations are widely perceived as greedy, selfish, exploitative, uncaring- and interested in only maximizing profits."
"All of the other professions put an emphasis on the public good and have purposes beyond self-interest. Why doesn't business?"
Conscious Capitalism Cycle
Team member Happiness
Motivated Team Members
Good Value Products
Satisfied Customers
Sales Growth
Profit Growth
Motivated Investors
Giving Back
Increased Job Satisfaction
Well gee, that sounds kind of great. Better working wages and conditions, more resources for the community. If Kohls offered me a scholarship as a part of "giving back" it would be difficult to say no. I'm not arguing these benefits aren't REAL benefits for someone or that they don't make a different to communities.
What is interesting to me is that there appears to exist a degree of exploitation that is acceptable.
I wonder if the degree of exploitation is what bothers people more than the fact that they are being exploited in the first place. What's the difference between Walmart paying minimum wage and Costco paying 15 dollars an hour? Surplus value is still being extracted. Is there some magic number that makes us say, "Well, that degree of exploitation seems reasonable. Lets label this a "good" company". What is this rate? It is tied to the poverty line? Our imagined cost of living expenses?
I'm so curious how companies actually set wages. Of course, I know the wage = marginal product of labor theory, but that's just a theory. What are these HR people doing? Do they calculate the rate of exploitation? Do they try to minimize it? Maximize it?
To me, conscious capitalism is throwing workers a bigger, tastier bone. Is this bone bigger and tastier meaning better wages and better conditions for real humans? Yes. Shouldn't we be happy for those gains? Sure. Point being, it is still a bone and someone who has enough fat on them to invest money is reaping the delicious meat.
UPDATE: Besides the fact I must have been hungry during this post, I've thought of two examples of how the profit motive can still conflict with social well-being:
1. During my short intern stint with the Institute for Wisconsin's Future, I worked on one project in particular- collect superlatives of a certain company. Best place for working mothers, most environmentally friendly, most... etc. I thought it was a little odd so when I asked why I was doing this, the research director told me he wanted to show that even the best, most praised companies can still be tax dodgers.
2. One of my students was telling me about how a certain well known corporation has a community day and sponsors many of her organization's events. Although I don't deny the impact of their sponsorship, I think perhaps if they didn't use weird tax loopholes like paying another company (aka themselves) ridiculous amounts to use a logo so it looks like their profits weren't actually that high might also have real impacts on the community.
My interpretation of this is perhaps a bit different than what Keynes meant but (as I say in my classes) it is not like we can snap chat him and ask if we are on the right track. Socialization of investment is about dealing with the problem of uncertainty and incentives. If businesses are concerned with only maximizing profits for their shareholders, they may not make the right choices for the long-term health of the business or for the economy. We need businesses to have a range of accountability- to shareholders, workers, the community, and the nation.
Julie Nelson's Economics for Humans discusses how the pro-market view of business is quite similar to anti-market views of businesses: both agree that businesses' main objective should be to maximize profit. Free marketers see corporations maximizing their profit as a tide lifting all boats while anti-capitalist think corporate social responsibility as an oxymoron. However, she argues this false dichotomy does not have to be so.
Conscious capitalism is a new movement (full of old ideas) that seeks to synthesize profit making with ethics and morals, giving back to the community while still making a buck. Here are some excerpts from the book Conscious Capitalism:
"Corporations are widely perceived as greedy, selfish, exploitative, uncaring- and interested in only maximizing profits."
"All of the other professions put an emphasis on the public good and have purposes beyond self-interest. Why doesn't business?"
Conscious Capitalism Cycle
Team member Happiness
Motivated Team Members
Good Value Products
Satisfied Customers
Sales Growth
Profit Growth
Motivated Investors
Giving Back
Increased Job Satisfaction
Well gee, that sounds kind of great. Better working wages and conditions, more resources for the community. If Kohls offered me a scholarship as a part of "giving back" it would be difficult to say no. I'm not arguing these benefits aren't REAL benefits for someone or that they don't make a different to communities.
What is interesting to me is that there appears to exist a degree of exploitation that is acceptable.
I wonder if the degree of exploitation is what bothers people more than the fact that they are being exploited in the first place. What's the difference between Walmart paying minimum wage and Costco paying 15 dollars an hour? Surplus value is still being extracted. Is there some magic number that makes us say, "Well, that degree of exploitation seems reasonable. Lets label this a "good" company". What is this rate? It is tied to the poverty line? Our imagined cost of living expenses?
I'm so curious how companies actually set wages. Of course, I know the wage = marginal product of labor theory, but that's just a theory. What are these HR people doing? Do they calculate the rate of exploitation? Do they try to minimize it? Maximize it?
To me, conscious capitalism is throwing workers a bigger, tastier bone. Is this bone bigger and tastier meaning better wages and better conditions for real humans? Yes. Shouldn't we be happy for those gains? Sure. Point being, it is still a bone and someone who has enough fat on them to invest money is reaping the delicious meat.
UPDATE: Besides the fact I must have been hungry during this post, I've thought of two examples of how the profit motive can still conflict with social well-being:
1. During my short intern stint with the Institute for Wisconsin's Future, I worked on one project in particular- collect superlatives of a certain company. Best place for working mothers, most environmentally friendly, most... etc. I thought it was a little odd so when I asked why I was doing this, the research director told me he wanted to show that even the best, most praised companies can still be tax dodgers.
2. One of my students was telling me about how a certain well known corporation has a community day and sponsors many of her organization's events. Although I don't deny the impact of their sponsorship, I think perhaps if they didn't use weird tax loopholes like paying another company (aka themselves) ridiculous amounts to use a logo so it looks like their profits weren't actually that high might also have real impacts on the community.
Wednesday, February 12, 2014
To Math or Not to Math is not the question
Peter Radford's message (stated previously by Paul Krugman, Lars P Syll, and countless others) about the economics profession is something I read again and again on blogs and in articles: economics/economists have become entranced with mathematical rigor and have forgotten models and equations are supposed to say something about reality and actual human beings.
I hear this message so much sometimes I think "but nobody really thinks like that". Math is a tool you can use to simplify your theory or organize your thoughts. (My old professor used to say Joan Robinson's verbal reasoning is like take a train while Blanchard's mathematical reasoning is like taking a plane- both get you where you need to go). No one would intentionally throw in more complex math just to make their model more rigorous. No one would add microfoundations they didn't believe in just because it was "the way to do it" or "the way to get published". No one would pile shaky assumptions into their model just because that would mean using some profound theorem or doing some crazy programming. Would they?
I've been watching some financial theory lectures by John Geanakoplos on Yale's Open Courses and so far they've been less about finance and more about the place of math and methodology in economics.
I've only watched about four of the videos and I haven't been biased by discovering his economic pedigree so my judgment may be a little premature but John really makes me not want to blame math for all of econ's woes.
I don't quite buy the "economics as an objective science" line. (Feminist economists have long argued economists want to make economics more like physics because you can't argue with scientific laws.)
But I do buy the notion math is one of many ways of looking at something and if we are serious about developing theories about the economy that are rooted in real phenomena, math should be a part of the way forward.
Just as Robert Solow argued capitalism OR socialism was a false dichotomy, I think perhaps we can think about math in this way too.
How can we utilize math as a means to explain, predict, and simplify the way the economy actually works?
How can we use math to compare our theories to what we observe in the world?
Can math help incorporate the idea of a society, the implications of history, the idea of uncertainty into our theories about the economy?
I hear this message so much sometimes I think "but nobody really thinks like that". Math is a tool you can use to simplify your theory or organize your thoughts. (My old professor used to say Joan Robinson's verbal reasoning is like take a train while Blanchard's mathematical reasoning is like taking a plane- both get you where you need to go). No one would intentionally throw in more complex math just to make their model more rigorous. No one would add microfoundations they didn't believe in just because it was "the way to do it" or "the way to get published". No one would pile shaky assumptions into their model just because that would mean using some profound theorem or doing some crazy programming. Would they?
I've been watching some financial theory lectures by John Geanakoplos on Yale's Open Courses and so far they've been less about finance and more about the place of math and methodology in economics.
I've only watched about four of the videos and I haven't been biased by discovering his economic pedigree so my judgment may be a little premature but John really makes me not want to blame math for all of econ's woes.
I don't quite buy the "economics as an objective science" line. (Feminist economists have long argued economists want to make economics more like physics because you can't argue with scientific laws.)
But I do buy the notion math is one of many ways of looking at something and if we are serious about developing theories about the economy that are rooted in real phenomena, math should be a part of the way forward.
Just as Robert Solow argued capitalism OR socialism was a false dichotomy, I think perhaps we can think about math in this way too.
How can we utilize math as a means to explain, predict, and simplify the way the economy actually works?
How can we use math to compare our theories to what we observe in the world?
Can math help incorporate the idea of a society, the implications of history, the idea of uncertainty into our theories about the economy?
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