Tag Archives: economics

Racing & Capitalism

While analogies, like cars, always break down in the end, they can be useful discussion devices. While on a run, I was thinking about my recent injury-induced lack of racing trophies and this topic kept blending in with that of the division of goods in a competitive capitalist society. This lead to an obvious analogy between road races and capitalism.

Both racing and capitalism involve competition and this generates winners and losers. Winners are, of course, supposed to be rewarded for the victories while losers are expected to reflect on their defeat and try harder next time. When planning a road race or managing capitalism, those in charge must address the nature and division of the rewards for the competition. In the case of a road race, this requires the race director to work out the prizes and decide such things as whether there will be age group awards and, if so, how deep the awards will go. In the case of capitalism, those in charge decide how the laws and polices will divide up the rewards.

While there are many ways to approach the division of the rewards, there are two broad approaches. One is to have a top-heavy reward system that yields the rewards to a few winners. In the case of a road race, this will typically involve all the prizes going to the top three runners or even just the first-place finisher. In the case of capitalism, this will typically involve most of the rewards going to the very top winners with the leftovers divided up among the many losers.

Another approach, broadly speaking, is to spread the rewards more broadly among a larger base of winners. For example, many races have age group awards in addition to the overall awards. Most races also have male and female groups as well, which further divides the prizes of victory. In the case of capitalism, this approach would give less to the top winners and divide more among the lesser winners. For example, under such an approach successful small businesses and successful middle and lower class individuals would get more of the rewards. This would, of course, mean less for those at the top of the pyramid, such as the biggest corporations and the individual billionaires.

One argument often advanced in favor of the top-heavy systems of capitalism is to contend that a broader division of the rewards would be some sort of socialism that would destroy competition. But, this is not the case. A broader reward system would still be competitive capitalism, it would just have a broader division of the rewards. Returning to the race analogy, a race that has a broader division of prizes is no less a race than one that offers prizes only to the first-place finishers. Competition remains, the difference is that there will be more winners and fewer losers.

It could, of course, still be argued that having a broader division of rewards would reduce competition and make things worse. In the case of a race, the idea is that runners would think “why should I train or race as hard as before to try to win the whole race when I can now get a prize for being third in my age group?” In the case of capitalism, people would presumably say “why should I work as hard as before to try to be the biggest winner when I can now get decent rewards for just being moderately successful?”

While I will not claim that no one thinks that way, most runners still train hard and race hard regardless of what sort of division of prizes the race offers. The same would seem to hold true of capitalism—people would still work hard and compete even when there was no massive prize for a few and little for everyone else. In fact, people who know they have little or no chance at the biggest prize would presumably compete somewhat harder if they knew that there was a broader division of the rewards and their efforts could pay off with prizes. Also, in the case of capitalism, people already work hard for small prizes when they know they have no chance of ever getting the biggest prize. As such, unless they are delusional or irrational they are not motivated by having a top-heavy reward system. Survival provides an adequate motivation.

At this point, one might want to bring up the example of races that have participation awards—that everyone gets a medal just for showing up. The economic analog would be a form of socialism or communism in which everyone gets the same reward regardless of effort. This, many would argue, would be terrible and unfair.

In the case of races, runners still compete even if everyone gets the same prize (be it the same medal or nothing at all). Because, of course, many people just love to compete for the sake of competition or for reasons that have nothing to do with prizes. It would hardly be a stretch to think that this view also extends into the economic realm—especially since there are people, such as open source developers and community volunteers, who work hard for no prizes. But, there is certainly a reasonable case to be made that people need to win prizes to be really motivated to do anything.

I must admit that while I will still run hard in such a race, I still have a love for competing for prizes. As such, I prefer races that offer competition-based rewards. I am, however, grudgingly tolerant of participation medals—after all, someone who shows up and does the whole race has accomplished something meaningful even if they did not win. Naturally enough, a race can have both participation medals and prizes for winning. In the case of an economy, this would be a competitive system that offered better rewards to the winners, but also provided those who are actively participating in the economy with at least minimal reward. One area in which this analogy breaks down is that the economy has people who cannot participate (the very old, the very young, the ill and so on) and it would be a far more serious matter for these people to get nothing than it is for people who do not finish the race to not get their participation medals.

Automated Trucking

Having grown up in the golden age of the CB radio, I have many fond memories of movies about truck driving heroes played by the likes of Kurt Russell and Clint Eastwood. While such movies seem to have been a passing phase, real truck drivers are heroes of the American economy. In addition to moving stuff across this great nation, they also earn solid wages and thus also contribute as taxpayers and consumers.

While most of the media attention is on self-driving cars, there are also plans underway to develop self-driving trucks. The steps towards automation will initially be a boon to truck drivers as these technological advances manifest as safety features. This progress will most likely lead to a truck with a human riding in the can as a backup (more for the psychological need of the public than any actual safety increase) and eventually to a fully automated truck.

Looked at in terms of the consequences of full automation, there will be many positive impacts. While the automated trucks will probably be more expensive than manned vehicles initially, not need to pay drivers will result in considerable savings for the companies. Some of this might even be passed on to consumers, resulting in a tiny decrease in some prices. There is also the fact that automated trucks, unlike human drivers, would not get tired, bored or distracted. While there will still be accidents involving these trucks, it would be reasonable to expect a very significant decrease. Such trucks would also be able to operate around the clock, stopping only to load/unload cargo, to refuel and for maintenance. This could increase the speed of deliveries. One can even imagine an automated truck with its own drones that fly away from the truck as it cruises the highway, making deliveries for companies like Amazon. While these will be good things, there will also be negative consequences.

The most obvious negative consequence of full automation is the elimination of trucker jobs. Currently, there are about 3.5 million drivers in the United States. There are also about 8.7 million other people employed in the trucking industry who do not drive. One must also remember all the people indirectly associated with trucking, ranging from people cooking meals for truckers to folks manufacturing or selling products for truckers. Finally, there are also the other economic impacts from the loss of these jobs, ranging from the loss of tax revenues to lost business. After all, truckers do not just buy truck related goods and services.

While the loss of jobs will be a negative impact, it should be noted that the transition from manned trucks to robot rigs will not occur overnight. There will be a slow transition as the technology is adopted and it is certain that there will be several years in which human truckers and robotruckers share the roads. This can allow for a planned transition that will mitigate the economic shock. That said, there will presumably come a day when drivers are given their pink slips in large numbers and lose their jobs to the rolling robots. Since economic transitions resulting from technological changes are nothing new, it could be hoped that this transition would be managed in a way that mitigated the harm to those impacted.

It is also worth considering that the switch to automated trucking will, as technological changes almost always do, create new jobs and modify old ones. The trucks will still need to be manufactured, managed and maintained. As such, new economic opportunities will be created. That said, it is easy to imagine these jobs also becoming automated as well: fleets of robotic trucks cruising America, loaded, unloaded, managed and maintained by robots. To close, I will engage in a bit of sci-fi style speculation.

Oversimplifying things, the automation of jobs could lead to a utopian future in which humans are finally freed from the jobs that are fraught with danger and drudgery. The massive automated productivity could mean plenty for all; thus bringing about the bright future of optimistic fiction. That said, this path could also lead into a dystopia: a world in which everything is done for humans and they settle into a vacuous idleness they attempt to fill with empty calories and frivolous amusements.

There are, of course, many dystopian paths leading away from automation. Laying aside the usual machine takeover in which Google kills us all, it is easy to imagine a new “robo-planation” style economy in which a few elite owners control their robot slaves, while the masses have little or no employment. A rather more radical thought is to imagine a world in which humans are almost completely replaced—the automated economy hums along, generating numbers that are duly noted by the money machines and the few remaining money masters. The ultimate end might be a single computer that contains a virtual economy; clicking away to itself in electronic joy over its amassing of digital dollars while around it the ruins of  human civilization decay and the world awaits the evolution of the next intelligent species to start the game anew.

 

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Taxing the 1% II: Coercion

As noted in my previous essay on this topic, those with the highest income in the United States currently pay about 1/3 of their income in taxes. There have been serious proposals on the left to increase this rate to 40% or even as high as 45%. Most conservatives are opposed to any increase to the taxes of the wealthy while many on the left favor such increases. As in the previous essay on this subject, I will focus on arguments against increasing the tax rate.

One way to argue against increasing taxes (or having any taxes at all) is to contend that to increase the taxes of the wealthy against their wishes would be an act of coercion. There are more hyperbolic ways to make this sort of argument, such as asserting that taxes are theft and robbery by the state. However, I will use the somewhat more neutral term of “coercion.” While “coercion” certainly has a negative connotation, the connotations of “theft” and “robbery” are rather more negative.

If coercion is morally wrong, then coercing the wealthy into paying more taxes would be wrong. As such, a key issue here is whether coercion is wrong or not. On the face of it, the morality of an act of coercion would seem to depend on a variety of factors, such as the goal of the coercion, the nature of the coercive act and the parties involved. A rather important factor is whether the coerced consented to the system of coercion. For example, it can be argued that criminals consented to the use of coercive force against them by being citizens of the state—they (in general) cannot claim they are being wronged when they are arrested and punished.

It could be claimed that by remaining citizens of the United States and participating in a democratic political system, the richest do give their consent to the decisions made by the legitimate authorities of the state. So, if Congress creates laws that change the tax rates, then the rich are obligated to go along. They might not like the specific decision that was made, but that is how a democratic system works. The state is to use its coercive power to ensure that the laws are followed—be they laws against murder, laws against infringing the patents of pharmaceutical companies or laws increasing the tax rate.

A reasonable response to this is that although the citizens of the state have agreed to be subject to the coercive power of the state, there are still moral limits on the power. Returning to the example of the police, there are moral limits on what sort of coercion they should use—even when the law and common practice might allow them to use such methods. Returning to the matter of laws, there are clearly unjust laws. As such, agreeing to be part of a coercive system does not entail that all the coercive actions of that system or its laws are morally acceptable. Given this, it could be claimed that the state coercing the rich into paying more taxes might be wrong.

It could be countered that if the taxes on the rich are increased, this would be after the state and the rich have engaged in negotiations regarding the taxes. The rich often have organizations, such as corporations, that enable them to present a unified front to the state. One might even say that these are unions of the wealthy. The rich also have lobbyists that can directly negotiate with the people in the government and, of course, the rich have the usual ability of any citizen to negotiate with the government.

If the rich fare poorly in their negotiations, perhaps because those making the decisions do not place enough value on what the rich have to offer in the negotiations, then the rich must accept this result. After all, that is how the free market of democratic politics works. To restrict the freedom of the state in its negotiations with rules and regulations regarding how much it can tax the rich would be an assault on freedom and a clear violation of the rights of the state. If the rich do not like the results, they should have brought more to the table or been better at negotiating. They can also find another country—and some do just that. Or create or take over their own state.

It could be objected that the negotiations between the state and the rich is unfair. While the rich can have considerable power, the state has far greater power. After all, the United States has trillions of dollars, police, and the military. This imbalance of power makes it impossible for the rich to fairly negotiate with the state—unless there are rules and regulations governing how the rich can be treated by the greater power of the state. There could be, for example, rules about how much the state should be able to tax the rich and these rules should be based on a rational analysis of the facts. This would allow a fair maximum tax to be set that would allow the rich to be treated justly.

The relation between a state intent on maximizing tax income and the rich can be seen as analogous to the relation between employees and businesses intent on maximizing profits. If it is acceptable for the wealthy to organize corporations to negotiate with the more powerful state, then it would also be acceptable for employees to organize unions to negotiate with the more powerful corporations. While the merits of individual corporations and unions can be debated endlessly, the basic principle of organizing to negotiate with others is essentially the same for both and if one is acceptable, so is the other.

Continuing the analogy, if it is accepted that the state’s freedom to impose taxes should be regulated, limited and restricted by law, then it would seem that imposing limits, regulations and restrictions on the economic freedom of employers in regards to how they treat employees. After all, employees are almost always in the weaker position and thus usually negotiate at a marked disadvantage. While workers, like the rich, could try to find another job, create their own business or go to another land, the options of most workers are rather limited.

To use a specific example, if it is morally right to set a rational limit to the maximum tax for the rich, it is also morally right to set a rational limit on the minimum wage that an employee can be paid. Naturally, there can be a wide range of complexities in regards to both the taxes and the wages, but the basic principle is the same in both cases: the more powerful should be limited in their economic impositions on the less powerful. There is also the shared principle of how much a person has a right to, be it the money she keeps or the money she is paid for her work.

Like any argument by analogy, the argument I have made can be challenged by showing the relevant similarities between the analogues are outweighed by the relevant dissimilarities. There are various ways this could be done.

One obvious difference is that when the state imposes taxes on the rich, the state is using political coercion. In the case of the employer imposing on the employee, the coercion is economic (although some employers do have the ability to get the state to use its coercive powers in their favor). It could be argued that this difference is strong enough to break the analogy and show that although the state should be limited in its imposition on the rich, employers should have considerable freedom to employ their economic coercion against employees. The challenge is showing how political coercion is morally different from economic coercion in a way that breaks the analogy.

Another obvious difference is that the state is imposing taxes on the rich while the employer is not taxing her employees. She is merely setting their wages, benefits, vacation time, work conditions and so on.  So, while the state can reduce the money of the rich by taxing them, it could be argued that this is relevantly different from an employer reducing the money of employees by paying low wages. As such, it could be argued that this difference is sufficient to break the analogy.

As a final point, it could be argued that the rich differ from employees in ways that break the analogy. For example, it could be argued that since the rich are of a better economic class than employees, they are entitled to better treatment, even if they happen to be unable to negotiate for that better treatment. The challenge is, of course, to show that the rich being rich entitles them to a better class of treatment.

 

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Kant & Economic Justice

English: , Prussian philosopher. Português: , ...

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One of the basic concerns is ethics is the matter of how people should be treated. This is often formulated in terms of our obligations to other people and the question is “what, if anything, do we owe other people?” While it does seem that some would like to exclude the economic realm from the realm of ethics, the burden of proof would rest on those who would claim that economics deserves a special exemption from ethics. This could, of course, be done. However, since this is a brief essay, I will start with the assumption that economic activity is not exempt from morality.

While I subscribe to virtue theory as my main ethics, I do find Kant’s ethics both appealing and interesting. In regards to how we should treat others, Kant takes as foundational that “rational nature exists as an end in itself.”

It is reasonable to inquire why this should be accepted. Kant’s reasoning certainly seems sensible enough. He notes that “a man necessarily conceives his own existence as such” and this applies to all rational beings. That is, Kant claims that a rational being sees itself as being an end, rather than a thing to be used as a means to an end.  So, for example, I see myself as a person who is an end and not as a mere thing that exists to serve the ends of others.

Of course, the mere fact that I see myself as an end would not seem to require that I extend this to other rational beings (that is, other people). After all, I could apparently regard myself as an end and regard others as means to my ends—to be used for my profit as, for example, underpaid workers or slaves.

However, Kant claims that I must regard other rational beings as ends as well. The reason is fairly straightforward and is a matter of consistency: if I am an end rather than a means because I am a rational being, then consistency requires that I accept that other rational beings are ends as well. After all, if being a rational being makes me an end, it would do the same for others. Naturally, it could be argued that there is a relevant difference between myself and other rational beings that would warrant my treating them as means only and not as ends. People have, obviously enough, endeavored to justify treating other people as things. However, there seems to be no principled way to insist on my own status as an end while denying the same to other rational beings.

From this, Kant derives his practical imperative: “so act as to treat humanity, whether in thine own person or in that of any other, in every case as an end withal, never as means only.” This imperative does not entail that I cannot ever treat a person as a means—that is allowed, provided I do not treat the person as a means only. So, for example, I would be morally forbidden from being a pimp who uses women as mere means of revenue. I would, however, not be forbidden from having someone check me out at the grocery store—provided that I treated the person as a person and not a mere means.

One obvious challenge is sorting out what it is to treat a person as an end as opposed to just a means to an end. That is, the problem is figuring out when a person is being treated as a mere means and thus the action would be immoral.

Interestingly enough, many economic relationships would seem to clearly violate Kant’s imperative in that they treat people as mere means and not at all as ends. To use the obvious example, if an employer treats her employees merely as means to making a profit and does not treat them as ends in themselves, then she is acting immorally by Kant’s standard. After all, being an employee does not rob a person of personhood.

One obvious reply is to question my starting assumption, namely that economics is not exempt from ethics. It could be argued that the relationship between employer and employee is purely economic and only economic considerations matter. That is, the workers are to be regarded as means to profit and treated in accord with this—even if doing so means treating them as things rather than persons. The challenge is, of course, to show that the economic realm grants a special exemption in regards to ethics. Of course, if it does this, then the exemption would presumably be a general one. So, for example, people who decided to take money from the rich at gunpoint would be exempt from ethics as well. After all, if everyone is a means in economics, then the rich are just as much means as employees and if economic coercion against people is acceptable, then so too is coercion via firearms.

Another obvious reply is to contend that might makes right. That is, the employer has the power and owes nothing to the employees beyond what they can force him to provide. This would make economics rather like the state of nature—where, as Hobbes said, “profit is the measure of right.” Of course, this leads to the same problem as the previous reply: if economics is a matter of might making right, then people have the same right to use might against employers and other folks—that is, the state of nature applies to all.

 

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Minimum Wage I: Arguments Against

Minimum Wage In Paraguay, one simple figure

Minimum Wage In Paraguay, one simple figure (Photo credit: WageIndicator – Paulien Osse)

The United States government, like many other government, sets a minimum wage. This is the lowest (with some exceptions) that an employee can be paid per hour. There is considerable debate regarding the minimum wage ranging from disputes over the exact amount of the wage to arguments over whether there should be a minimum wage at all.

Some arguments over the minimum wage are grounded in concerns about economic facts. For example, there is some dispute about the economic impact of the minimum wage. Some contend that increasing it would increase inflation (which would presumably be bad) while some claim that increasing it would boost the economy by increasing spending. In terms of what should be done, these disputes fall nicely within the realm of consequentialism. That is, settling them involves sorting out the facts about the consequences. There would also be some moral aspects to the matter as well, such as sorting out the positive values and negative values based on who they impact and how.

Other arguments about the minimum wage are more ideological in nature and have minimum (or no) connection to matters of economic facts. These arguments tend to be philosophically interesting because of the strong connection to matters of morality.

One argument against the minimum wage is based on the notion that it causes a culture of dependency that interferes with the mobility of labor. The idea, at least as presented in various talking points in the more conservative media, is that a higher (or any) minimum wage would encourage people to simply stick with the minimum wage job rather than moving upwards in the economic hierarchy.

On the one hand, this has a certain appeal. If a person believes that she is earning enough and making a comfortable living, then she might very well be content to remain at that job.

On the other hand, there seem to be some rather obvious problems with this argument. First, unless the minimum wage were increased dramatically, it seems unlikely that anyone would be able to make a comfortable living on such a wage. It also seems unlikely that most people would be content to simply stop at the minimum wage job and refuse opportunities for better employment. People generally stick with minimum wage jobs because they cannot find a better job not because they think they are making quite enough. I would not claim that it is impossible for a person to live what he thinks is a comfortable life on minimum wage nor that a person might be content to just stick with such a job. However, such a person would be an unusual exception rather than one among a vast crowd.

Second, this sort of reasoning seems to be based on the problematic principle that it is necessary to pay people poorly in order to motivate them to move up the economic hierarchy. One problem with this principle is that it would warrant paying people poorly all the way up the economic ladder so as to allegedly motivate them. After all, if people are content to coast at minimum wage, then they would surely be willing to coast if the pay was better. This would thus seem to entail that only the topmost position in a hierarchy should not pay poorly since there would be nothing above that position and hence no need to motivate a person to move beyond it. Interestingly, this does seem to match the nature of CEO salaries—it is common for the CEO to make many times what lesser employees make. Since the number of topmost positions is rather limited, this would seem to be rather unfair. In fact, if this principle is pushed, it would seem to point towards having one position in total that has good pay—thus motivating everyone to attempt to get that one position.

Another problem with this principle is that it seems to be untrue. As a matter of fact, people do attempt to get higher paying jobs when they are available, even if their pay is not poor. People mostly seem to stick with a minimum wage job or a lower paying job because they cannot find one that pays better (there are, of course, other reasons).

As a final point, the idea that paying people to do work creates a culture of dependency seems to indicate the view that the workers are mooching or sponging off the employer. This is, obviously enough, absurd: the worker is getting paid for work done which is the exact opposite of mooching.

A second ideological argument is based on the notion of liberty and rights. The idea is that employers are having their liberty (or rights) violated by being forced by the state to pay a minimum wage.

This line of reasoning does have a certain appeal. After all, people (and corporations are the best sort of people) have rights to liberty and property. If the state tells employers that they must pay a certain wage, the employers are being denied their right to liberty via the coercive power of the state.

There are at least two obvious responses to this line of reasoning. The first is that workers are also people and hence would also have rights, including property rights to their labor. These rights can be used to argue for a minimum wage (or more)—after all, theft of labor would seem to still be theft.  The second is that being part of a society involves, as Locke and Hobbes argued, giving up some rights. While some employers would like the liberty to pay whatever they wanted (which might be nothing—slavery was and is rather popular), it makes sense that such complete freedom would not be consistent with society. Having a civil society, as Hobbes argued, does require the coercive power of the state. As such, the fact that the state is imposing on the liberty of the employer does not automatically entail that this coercion is wrong. The stale also imposes on the liberties of those who would like to steal and kill and these impositions are hardly wrong.

The obvious reply is to contend that while the state has a legitimate right to limit some liberties, this right does not extend to coercing job creators into paying at least a minimum wage. This cannot, of course, be simply assumed—what is needed is an argument that employers should have the liberty to pay as they please. Even if such a liberty is assumed, surely it would have at least some limit. At the very least, it would seem that an employer has to pay more than nothing. Then again, some might like to see slavery put back on the table. There is much more to be said about minimum wage and more essays will follow.

 

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Envy & Class Warfare

I am occupying this space to help sell my book about envy and class warfare. I love the ironies of capitalism.

This concise work is aimed at presenting a philosophical look at economic disparity in the United States. Since this is a truly massive topic, this work is focused on specific aspects of this matter and is divided into sections based on these specifics. As might be imagined, I make no pretense of covering all aspects of economic disparity. Rather, I am focusing on matters that have tended to be at the forefront of the political debate in the United States in recent years. My overall objective is to provide a rational and unbiased (at least as far as that is possible) examination of these matters. My main hope is that this work will be of some use to the reader in sorting out some of these matters and in getting an enhanced understanding of the issues. I also hope to help the reader develop a better defense against some of the rhetoric and fallacies that are used all too often in the place of proper arguments.

Being a rational person (well, at least some of the time) and a philosopher I am open to the possibility that I am wrong in my view and in error in my arguments. As such, I invite people to present critical assessments of my work. My commitment is not to any specific agenda or ideology, but rather to the true and the good.

The work itself is divided into distinct sections. The first section, Economic Disparity, is a very brief look at some areas of economic disparity in the United States. The second section, Taxes, examines taxes from a philosophical perspective. The third section focuses on corporations—which might or might not be people. Fourth, I turn to the matters of class and class warfare. Not to worry, the revolution will be televised. Fifth, the state, democracy and the common good will be discussed. The book ends with envy, avarice and rhetoric.

http://www.amazon.com/dp/B009EFSEFK

You can fight the man by buying more of my books. If by “fight the man” you mean “buy more books.”

WITTGENSTEIN AMONG THE SCIENCES

My new book, WITTGENSTEIN AMONG THE SCIENCES, is out today. I am feeling pretty excited; it looks GREAT. Have a look, here: http://ashgate.com/default.aspx?page=637&calcTitle=1&title_id=11016&edition_id=14506
What is the book about? I would describe it as a broadly post-Schutzian attempt to understand the nature of science, through working through and from the work of Wittgensteinians such as Kuhn and Winch. One of the aspects of it that may be of especial/broader interest is that I seek to inform policy-debates around science through it: e.g. to argue that science-policy ought to be relatively free of government direction, unlike technology-policy which should be subject to tight social constraints. In Part 2 of the book, I seek to employ Wittgensteinian thinking to help in the practical business of understanding the nature of psychopathology. Including the pscyhopathology of unrestrained economism… That is: I argue for instance that, while Friedman’s celebtrated monetary treatise on the U.S. economy and the Great Depression put the latter down in significant part to a failure of monetary policy to make enough money available, one key factor behind the 2007-now economic and financial crisis is a dubious thingifying attitude to money that was _encouraged_ by Friedmanian monetarism and that can be implicitly seen writ large in Friedman’s famous and hugely-influential article, “The methodology of positive economics”.
Enough tasters. See what you think. Let me know here?
(There is an ebook version available, btw.)

Thanks to everyone who helped me with the book, especially my editor Simon Summers. I’d like to mention particularly that the book was also greatly influenced by Wes Sharrock (a Winchian genius) and Bojana Mladenovic (whose work on Kuhn I bow to, which is not the kind of thing I say very often!).

Gender & The Economy

As the economy continues to spiral down, the percentage of workers who are women continues to rise. Unfortunately, this is not due to an increase in the hiring of women. Rather, it is due to the fact that the majority of jobs being lost are held by men. As such, as the number of employed men drops, the percentage of the work force composed of women will increase.

Somewhat ironically, the jobs that are being lost have often tended to be jobs that pay relatively well. Meanwhile, certain lower paying jobs remain. This helps explain the gender shift: men generally have the better paying jobs and women tend to have the lower paying jobs. Further, the jobs that are being lost have tended to be in fields that are male dominated (finance, manufacturing, etc.).

While the majority of people losing their jobs have been men, this has obviously not been a good time for women. Women are not moving into better jobs-they are mainly just keeping the same jobs. Further, in most families the main income provider is still the man. Thus, the reduction in male employment is hurting women indirectly.

Interestingly, I have heard some arguments to the effect that this change can be advantageous to women by shifting the balance of power in the family. After all, power goes with income and if the woman becomes the main provider, then her power will increase. However, this shift in power obviously comes at a cost: while some women might benefit from this shift, the family as a whole will be worse off financially. Also, as noted above, this situation is not a case in which women are making gains in the workplace. They are, rather, not losing as badly. At least for now.

One point of concern is the impact that this shift will have on the family. On one hand, families sometimes grow closer and stronger in times of crisis and stress. On the other hand, families sometimes shatter under such stress. Given that one major factor in marital problems is money, it is not unreasonable to worry that the gender shift could lead to an increase in divorces.

Historically, gender shifts in employment have occurred in times of crisis (mostly wars) and have lead to lasting effects. For example, the entry of women into the workforce during WWII (to replace the males who were off in the war) changed how women and work were viewed. While the 1950s saw a return to more “traditional” roles, the impact of the shift remained. The same will probably be true of the latest gender shift. It will remain to see what sort of impact it will have.

Executive Compensation

As support begins to wane for the stimulus package, the political battle continues. The fact that some of the previous cash handouts went to companies who paid fat bonuses certainly has not helped the general view of such plans. As such, it is hardly surprising that Obama has said that a limit should be placed on executive compensation when a company accepts bailout money.

On the face of it, this seems reasonable. After all, a company has the choice between accepting the money and allowing limitless compensation. If the company accepts the federal money, they certainly need to play by the rules set by the government. Further, the purpose of the bailout money is to (in theory) revitalize the American economy and not to enable executives to increase their already substantial personal wealth.

Interestingly, some people have argued that imposing such limits will be harmful to the recovery. The argument, which has a degree of appeal, is roughly as follows: If a limit is placed on compensation, then troubled companies cannot retain or acquire top talent. If a troubled company lacks such top talent, then it will continue to sink deeper into trouble. In contrast, if a company is able to keep or acquire top talent, then the company’s chances of recovering are better. As such, companies that receive bailout money should be allowed to keep their compensation unlimited by the state.

There are, of course, some obvious concerns with this. The first is an ethical one. Given that the economy is spiraling down and jobs are being lost, it seems rather selfish of executives to desire such extravagant compensation. While $500,000 might not seem like much to a top executive, that seems to be a rather adequate amount to live on and would impose no meaningful hardships. True, they have no doubt grown accustomed to a rather luxurious lifestyle, but this is a time for sacrifices. Suppose, for example, a CEO is now making a modest $5 million a year and this is trimmed down to $500,000. The $4.5 million could then be used to hire workers (or hire back workers who have been laid off). A little math will show just how many average paying jobs ($30,000-60,000) that money could create. And, of course, these workers would be spending money rather than getting unemployment.

Second, there is the concern about the “top talent.” The big companies that got the world into this mess were led byjust such “top talent.” As such, this raises important questions about the quality and desirability of such “top talent.” Perhaps it is time for some new people.

Third, the cost of sustaining such “top talent” certainly puts a strain on struggling companies. If such people do earn the company significantly more than what they are themselves paid, then their compensation would be justified. After all, “Joe Worker” is expected to earn the company more than he is paid and the same should be true of executives. I often wonder whether such executives could possibly generate that much wealth for the company through their efforts alone. Perhaps they do. Perhaps not.

Fourth, while it is reasonable to argue that people who can make more elsewhere will go elsewhere, this does raise some interesting issues. Obviously, people are influenced by money and the argument in favor of unlimited compensation is that a company will need to offer top money to draw “top talent.” This, of course, assumes that people are primarily (or perhaps even solely) by money. It also assumes that the “top talent” expects top compensation and that such people will not sell their talents for anything less (or else).

While the idea that people have to be offered vast sums of wealth to be motivated to take a job has some people, it is obvious that people will work very hard for much less. For example, think of the typical worker-they go to work and generally work hard for far less than what an executive makes. Of course, it can be countered that “Jane Worker” lacks the “talent” to command vast compensation.

However, very talented people do chose jobs and professions that pay far less than they could make elsewhere. For example, many people in education and public service could make considerably more money doing other things. However, they are motivated by other factors such as a desire to help others or to serve the public good. Unless it is the case that executives are simply driven by a desire for selfish gain, then it would seem that “top talent” could be motivated by other factors to aid failing companies. For example, they might be motivated by loyalty to the company or a desire to keep it running and employing people.

In fact, given that the desire for excessive gain helped bring on the economic disaster, it might be better for companies and the world if the folks in charge were not driven by a desire to achieve excessive compensation. Rather, it might be better to have people in charge who are concerned with running a company responsibly and keeping people employed.

As such, the limits on executive compensation seem reasonable.

Utilitarianism & Bailing Out the Big Three

As the world economy continues to stagger about, the American government is considering whether to bail out the big three American automakers (Ford, GM and Chrysler). Like many business, they are running low on cash and are apparently in danger of bankruptcy or outright failure. While this is of great economic and political concern, this discussion also raises philosophic concerns as well.

From a moral standpoint, the question is whether the state should help out the Big Three on moral grounds. As usual, the easiest way to argue for this is to use a utilitarian approach. Making the case is simple enough: estimate the harms done to Americans (or the world if you want to expand the scope of the relevant beings) by not helping out the Big Three and the benefits that will come from helping them out.

The best estimate at this point are that 2 million Americans depend on the Big Three for their health insurance and that 1.4 to 1.7 million jobs would be lost if they failed. While the Big Three make vehicles, they also buy parts, purchase advertising and so on and these tie the companies into the overall American economy. If this figures are accurate, then many people would be harmed if these companies failed. Assuming that the proposed $25 billion (US) bailout would prevent them from failing, then serious harms would presumably be avoided. If the harms prevented are worth at least $25 billion, then a bailout would seem to be the right thing to do.

Of course, there are also other factors to consider. Laying aside the practical concerns about whether the bailout would save the day or not (after all, the Big Three could still fail even with all that extra cash), there is also the obvious concern that the money could be better spent elsewhere. In utilitarian terms, the question is whether there are other ways to use the money that would create greater utility than bailing out the Big Three. In terms of pure numbers, if spending $25 billion elsewhere could help more people, then that is what should probably be done instead. Of course, political spending tends to be decided more by lobbying power than by what would add the most to the general good.

Another concern is to look beyond the more immediate consequences to the long term consequences. After all, the harms generated by bailing out the Big Three must also be considered. One consequence well worth considering is that such a bailout will encourage large companies to engage in more risky behavior. After all, their leadership might reason, if they are “too big or too important to fail”, then Uncle Sam will be there with a bag of cash if they start failing. As such, that anticipated rescue cash will become part of their planning, thus leading them to take more risks. But, even the United States cannot keep dumping taxpayer money into failing companies and this could lead to yet another economic disaster (or a continuation of the existing one).

Moving away from utilitarian concerns, there is also the other moral question: do the Big Three have a moral right to such a bailout? After all, many experts have argued that they are in such dire straits because of leadership failings and poor decision making. If this is true, then it would seem they have no right to expect cash from the state. After all, while the state is supposed to protect the citizens from enemies, the state does not seem to have an obligation to protect citizens from their own bad choices. After all, if I started a business trying to sell books many people did not want to read, then I should hardly expect a check from Uncle Sam when my business fails.