Economics before human capital

As part of my last big dissertation push, I’ve spent the last month reading through introductory economics textbooks published 1890-1960. The variety and content of these textbooks has been very interesting*, and in addition to many relevant passages for my own work on the history of economic statistics and macroeconomic thinking, I’ve also come across other tidbits. Today I found one that I thought I’d share because it shows just how radically a field can shift in some of its basic conceptions in a few decades, and because I think it reads like sociology which fits into a little narrative I have that economic sociology now is very resonant with (the old) institutionalist economics from the 1920s-1940s. The quote comes from Lutz and Stanton (1923, p.11) An Introduction to Economics and shows just how radical the human capital revolution was, at least for some:

Human attributes, talents, and qualities are also scarce, but we must be careful not to regard them as wealth. The reason for the distinction is that the person who possesses the unusual gift or talent is first and last a human being, whose personality is to be respected and whose well-being is the goal of all economic activity. If we class the talents of the gifted as wealth, it is a short and easy step to regard the possessors of these gifts as existing mainly for the services which they render, and not as free and independent persons. Under slavery, the talents of the slave might have been regarded, properly enough as part of the wealth of the owner. It is inconsistent with the principles of human freedom, which we now hold sacred, to confuse man as a means for the production of wealth with man as the end of economic action. No person should be degraded to the position of a mere means to the enjoyment of others. We might be in danger of doing this if we regarded human qualities as wealth, scarce though they might be.

The first author, Lutz, was no crazy radical, but rather a respected tax economist who worked on various government committees and taught at Oberlin, Stanford, and Princeton. And yet it’s hard to imagine a more strident rejection of human capital as a metaphor than calling it “inconsistent with the principles of human freedom.” A different economics for a different time.

* If you’re into that sort of thing, at least.

One year ago today, Cersei Lannister sent the greatest memo of all time

Tonight is the beginning of Game of Thrones, Season 5, and thus it also marks the anniversary of when Cersei Lannister circulated what was perhaps the greatest memo ever written in Westeros. Titled, “issues with various Houses,” it noted in passing that basically none of House Lannister’s unification and pacification efforts were working well, and asked Grand Maester Pycelle to solve all the problems:

TO: Grand Maester Pycelle

FROM: Cersei Lannister

SUBJECT: Issues w/Various Houses

We need more coercive diplomacy with respect to Greyjoy and Bolton. If they mess up the North, it will delay bringing our troops home.

We also need to solve the Tyrell problem.

And Dragonstone doesn’t seem to be going well.

Are you coming up with proposals for me to send around?

Thanks.

Needless to say, we are all very excited to see how none of this will get solved this season.

Mentions of Race, Gender, and Inequality in Academic Articles

Philip Cohen published an interesting post using Web of Science data to show how academics talk about inequality in the 1980s to present. Phil looks at variations of the phrase “race, class, gender”, and the rise of “social inequality” over “social stratification”, in the titles of journal articles. 

Here’s another slice at the topic. I used JStor’s Data for Research database (all articles in their collection) and restricted the sample to research articles published between 1980-2012.** Then I looked at the percentage of articles that mention inequality** that also mention: race, sex/gender, or both race and sex/gender.*** Here’s the resulting graph:

Percentage of research articles that mention inequality in JStor that also mention race, sex or gender, or both.

Percentage of research articles that mention social, economic, income, or wealth inequality in JStor that also mention race, sex or gender, or both.

Obviously, mentioning inequality, race, or gender anywhere in the text of an article is a much lower threshold than mentioning things in the title. So, this slice at the corpus of academic research is more like a lower bound on interest in intersectional inequalities, while Phil is looking at something like an upper bound (articles that go so far as to include those terms in their title). Also, here I am looking only at those articles that mention inequality of some sort to see which kinds of inequality are mentioned (“inequality articles” for short). Given that, we can see two clear trends: inequality articles are much more likely to mention both race and sex/gender in recent years (doubling from around 17% in 1980 to around 34% in 2012). In the meantime, discussion of race and gender in general have also increased significantly (from 33% of inequality articles mentioning sex or gender in 1980 to 59% in 2012; and 29% to 45% for race).

With this data, we can also compare the observed co-occurrence of race and sex/gender to the rate we’d expect if mentions were independent. That is, given that 33% of inequality articles mentioned race and 29% mentioned in sex/gender in 1980, we’d expect about 9% to mention both simply by chance. The actual rate is 17%. For 2012, the “expected” rate based on independence is about 27% compared to an observed rate of 34%. So, the overall increase in articles mentioning race and sex/gender is pretty consistent with the increase in mentions of the two terms separately.

What do you all think?

EDIT: Inspired by Philip’s comment, I made another simple chart looking at research articles in JStor. Here I look at the percentage of article that use both the terms “racial inequality” and “gender inequality” as a percentage of articles using either term. Here’s a plot of a 2-year moving average of those results.

JStor research articles mentioning "racial inequality" and "gender inequaliy" as a percentage of articles mentioning either, 1990-2012.

JStor research articles mentioning “racial inequality” and “gender inequaliy” as a percentage of articles mentioning either, 1990-2012.

I restricted the time period here to 1990-2012 (1989-2012 considering the 2 year average) because of sharp uptick in gender as a term in the 1980s and the relatively small N of any mentions of gender inequality from the 1980s (i.e. just 2 articles in 1980). Mostly, not a lot of trend here. Are these the right terms though?

* JStor’s database excludes many publications for a couple years after publication, so the sample size drops considerably for the last two years.
** Specifically, any of the phrases “social inequality”, “economic inequality”, “wealth inequality”, or “income inequality.”
*** In the early part of the 1980s, “gender” was still much less commonly used than sex (cf. nGrams). I use “sex/gender” to refer to articles containing at least one of sex or gender.

Funk and Hirschman (2014) “Derivatives and Deregulation”

I am very pleased to announce that Administrative Science Quarterly has just posted the online version of my forthcoming article with Russ Funk, Derivatives and Deregulation: Financial Innovation and the Demise of Glass–Steagall. Here’s the abstract:

Regulators, much like market actors, rely on categorical distinctions. Innovations that are ambiguous to regulatory categories but not to market actors present a problem for regulators and an opportunity for innovative firms. Using a wide range of primary and secondary, qualitative and quantitative sources, we trace the history of one class of innovative financial derivatives—interest rate and foreign exchange swaps—to show how these instruments undermined the separation of commercial and investment banking established by the Glass–Steagall Act of 1933 even as overt political action failed to do so. Swaps did not fit neatly into existing product categories—futures, securities, loans—and thus evaded regulatory scrutiny for many years. The market success of swaps put commercial and investment banks into direct competition and, in so doing, undermined Glass–Steagall. Drawing on this case, we theorize that ambiguous innovations may disrupt the regulatory status quo and shift the political burden onto parties that want to maintain existing regulations. Our findings also suggest that category-spanning innovations may be more valuable to market participants if regulators find them difficult to interpret.

Many readers of this blog gave us helpful advice over the past four years; thank you all very much! And let us know what you think of the paper.

Coasian Comparison

Josh Barro wrote a somewhat controversial op-ed in the NYT attempting to apply the Coase theorem to the negotiation between passengers on a plane about whether or not to recline their seats. Economist Greg Mankiw and political theorist Jim Johnson each posted a short reaction to the paper. See if you can spot the difference in tone. First, here’s Mankiw:

Screen Shot 2014-08-28 at 10.51.00 AM

And here’s Johnson:

Screen Shot 2014-08-28 at 10.51.55 AM

I wonder what Steve Medema would say.

Statistical Optimism: Mortgage Finance and Depressions, Retro Edition

Let’s coin a new phrase: “statistical optimism.” Statistical optimism refers to the belief that if only we had better statistics about X, and that everyone was made aware of those statistics, then we would make better decisions about X and some set of problems would go away without any major changes in the institutions actually making decisions. It’s a practical, quanty version of the classic Enlightenment-style idea that more knowledge always makes things better. Note that by statistics, here, I mean the production and distribution of quantitative data, the old sense of statistics (vital statistics, censuses, national income statistics, etc.), and not the inferential field we know and love today.

This phrase came to mind today as I was reading through a March, 1932 interview with Senator La Follette* about the need for better economic statistics to improve economic planning in the midst of the depression. The interview is chock full of great quotes that give you a flavor of what it was like to live in a time before the CPS, NIPA, and all the other routine, standardized, official data we take for granted. For example:

It is a sad commentary on our statistical information that in the third winter of the depression we have absolutely no authoritative official figures on unemployment. The only data we have are those collected by the census in 1930 for the country as a whole and for certain cities in January 1931.

The authoritative bit here was to be important, too, as FDR and Hoover fought in the 1932 campaign over whose (partial, non-standardized) unemployment figures were better.

The belief that gets me, though, and that seems to be widely shared across the political spectrum at this point, is that just having good data will fix all kinds of ideological disputes. It was this belief, in part, that motivated the founding of the NBER, and it was this belief that animated Hoover to work to produce all kinds of economic reports in the 1920s and early 1930s in concert with economists and businessmen (e.g. Recent Economic Trends, Recent Social Trends, etc.). La Follette was a Republican also, but later founded the Wisconsin Progressive Party, and clearly believed in less business-led solutions to economic problems than Hoover, but he had the same attitude of statistical optimism. A quote from the end of the interview about the potential for authoritative statistics to prevent future depressions struck me as especially relevant and, from a post-2008 perspective, ironic:

Suppose late in 1928 some authoritative body in Washington had publicly emphasized the fact that there was an excess of private houses on the market. Suppose it had pointed out that construction figures showed an appreciable falling off in the building of new houses. Surely in the light of such warnings people would not have continued investing their hard-earned savings in first and second mortgage real estate bonds thus increasing the supply of new capital for speculative building which continued into 1929.

If only it were so.

FRED New Housing Starts 2006 to 2011

Though, I suppose, in fairness to La Follette, what he called for was not simply the creation of better data but also the creation of an institution – a national economic council, somewhat of a precursor to what ended up being the Council of Economic Advisers – that would have the authority to interpret data, not just collect it. Still, the optimism is palpable, and from our vantage point, tragic.

* La Follette is important in my work because he introduced a resolution in 1932 which called for the creation of the first** official US national income estimates.
** Well, he thought they were the first, and so do most people. The FTC actually produced an estimate in 1926, but almost no one knows about it, and no one did much with it then either.

RSVP for the Junior Theorists Symposium!

JTSlogo2.1

The 2014 Junior Theorists Symposium is just three weeks away! Below, please find an updated schedule. JTS 2014 will be held at the University of California Berkeley in 60 Evans Hall. A complete list of paper abstracts is available here (pdf link). If you have any questions, please contact Jordanna Matlon and myself at juniortheorists@gmail.com.

Junior Theorists Symposium
University of California (Berkeley)
60 Evans Hall
August 15, 2014

8:30 – 9:00 | Coffee and Bagels

9:00 – 10:50 | Culture, Action, and Difference
* Michael Halpin (University of Wisconsin – Madison) – “Science and Sociodicy: Neuroscientific Explanations of Social Problems”
* Ellis Monk (University of Chicago) – “Bodily Capital: Capturing the Role of the Body in Social Inequality”
* Daniel Sherwood (The New School) – “Acting Through the Margin of Freedom: Bourdieu as a Social Movement Theorist”
Discussant: Omar Lizardo (University of Notre Dame)

10:50 – 11:00 | Coffee

11:00 – 12:50 | Measures of Worth
* Alison Gerber (Yale University) – “Tradition, Rationalization and Worth: A Theory of Decommensuration”
* Katherine Kenny (University of California – San Diego) – “The Biopolitics of Global Health: Life and Death and Neoliberal Time”
* Brandon Vaidyanathan (Rice University) – “A Cultural Theory of Differentiation”
Discussant: Marion Fourcade (University of California – Berkeley)

12:50 – 2:00 | Lunch

2:00 – 3:50 | Place and Perspective
* Hillary Angelo (New York University) – “From the City as a Lens to Urbanization as a Way of Seeing: Refocusing Social Categories for an Urban Planet”
* Jennifer Carlson (University of Toronto) – “Citizen-Protectors: Guns, Masculinity and Citizenship in an Age of Decline”
* Victoria Reyes (Princeton University) – “Global Borderlands: A Case Study of the Subic Bay Freeport Zone, Philippines”
Discussant: Saskia Sassen (Columbia University)

4:00 – 5:30 | After-panel: The Boundaries of Theory
* Stefan Bargheer (University of California – Los Angeles)
* Claudio Benzecry (University of Connecticut)
* Margaret Frye (Harvard University)
* Julian Go (Boston University)
* Rhacel Parreñas (University of Southern California)

5:30 – ? | Theory in the Wild: Beer, wine, and good conversation (off-site)

The Junior Theorists Symposium is an open event. In order to facilitate planning, please RSVP by sending an email to juniortheorists@gmail.com with the subject line “JTS RSVP.” We suggest an on-site donation of $20 per faculty member and $10 per graduate student to cover event costs.

If You’re Going to San Francisco…

Dear Readers!

First, a bit of housekeeping. I’ve been officially recruited onto the Scatterplot blogging team. So, for the time being, substantive posts about sociology and related topics will likely be posted over there (e.g. this piece on clarifying the debate over replication in the social sciences). I’ll save this blog for more personal updates and shameless self-promotion.

Speaking of which… I’m very excited for this year’s ASA in SF! If you want to hear what I’m up to or say hi, you can find me at two fantastic events. The first is the Junior Theorists Symposium, which I’m co-organizing with Jordanna Matlon. We’ll be posting the paper abstracts and further details next week, and I’ll make sure to link them here. Please RSVP if you’d like to attend! JTS will be held at the University of California, Berkeley on Friday, August 15 (the day before ASA proper begins in earnest). Old announcement with details here.

The second is a panel on “Credit and Inequality: Interdisciplinary Perspectives.” Greta Krippner and I will be presenting our first paper from a new collaboration on the politics of pricing in insurance and credit. This paper looks at the fascinating legal and legislative contention in the 1980s over the use of gender in risk-based pricing of life and auto insurance.* The panel is Sunday, 2:30-4:10pm.

Hope to see you all there!

* Ok, I admit, few people would normally use “fascinating” to describe any aspect of “insurance pricing.” But believe me, it’s a really rich space to see the workings out of various logics of fairness, discrimination, and the meaning of “individual treatment” in the context of statistical models of risk – questions that rate to be ever more relevant as more and more aspects of our lives are connected to predictive algorithms.

Save ASA’s Archival Records!

As some readers of this blog may know, there’s been a debate over the past few years about what to do with a large collection of archival material held by the American Sociological Association. Specifically at issue are the editorial records of the ASA journals (ASR, Sociological Theory, etc.) from 1991-2009. The ASA council no longer feels that it is worth the expense to warehouse the records in physical form, and is also unwilling to put up the required cash – $120,000 – to digitize the lot. Instead, in an act of uncharacteristic thriftiness, ASA has punted the problem to its members. If we can raise the money by next year, they will happily digitize the records. If not, whatever we can’t pay to digitize will be destroyed.

Led by Alan Sica and Charles Camic, a group of sociologists have organized to try to fundraise to Save Our Archival Records. For more information on the campaign, go to their website. You can donate directly to the effort there, or through ASA’s page. Thanks!

GDP is important, but it’s not that important

Given that I’m writing a dissertation on the history of national income accounting, I hate to say this, but… GDP just isn’t as important as some people want to make it out to be. Some of the worst offenders in this genre of claim seem to be, unsurprisingly, GDP’s biggest critics. Let’s take an example from an op-ed in this week’s New York Times*, Our Mismeasured Economy by Lew Daly at Demos. The editorial follows in a nearly 100-year old tradition of criticizing how national income statistics handle hard to measure, non-market production, in this case government output. Daly argues, sensibly enough, that the way we handle government is ad hoc and arbitrarily rules out the possibility that government could actually add value (we explicitly assume that the value of government output is equal to what we pay for it, no more, no less).

That’s all well and good, but what bothers me is the over-the-top way in which Daly motivates his critique. Here’s the opening line:

Today’s polarized debates about the role of government often boil down to a single issue: the size of government compared with the size of the overall economy, as measured in gross domestic product.

Really? Are we following the same debates? Because although I’ve certainly seen reference to the size of government (and in fact, we see examples of these claims as far back as the early 1930s), they do not seem to me to be a dominant mode of debate at the present juncture. To be fair to Daly, I have not done a systematic content analysis of contemporary ‘debates about the role of government’, but I would be shocked if even a small percentage of these debates (5%?) explicitly or implicitly referenced the size of government as measured in the national accounts. And far fewer “boil down to a single issue” in those terms. Think, for example, of the recent Hobby Lobby case, and other debates around the Affordable Care Act. This debate is about ‘the role of the government’, but it’s not about the ‘size’ of the government but about its intrusiveness: can the government mandate that private companies provide certain kinds of care to their workers? Think also of the NSA wiretapping scandals. Again, the proper role of the government is at the center of the debate, but not the government’s size as a percentage of GDP.

Daly’s op-ed makes a number of sensible points about what we miss if we focus our debate on the productivity of government on the national accounts (though I’m not sure I agree that the fix is to change how we measure GDP as opposed to, say, coming up with alternative measurements of government productivity and restricting our analysis of GDP to where such a number makes the most sense – GDP is built on a bedrock of “market epistemology”**, and I doubt it will ever move far from that principle). But there’s no need to tee those claims up with an overblown one about the centrality of GDP to contemporary political debates about the role of the government.*** GDP is important because of its diffuse implications for how we think about the world, as well as some more narrow technical uses (such as the World Bank’s categorization of “least developed” countries, see, e.g, Jerven’s work) – but it’s not quite so woven into technical systems as, say, inflation statistics, which directly determine wage increases and social security benefits. And so I get that it’s a bit tougher to talk about why getting GDP ‘right’ is so important. But maybe that means we should be having a different debate, about what the right ways to measure and think about the productivity of government are, rather than a narrow technical one about GDP. Somehow I doubt that the Tea Party is going to stop complaining about the Affordable Care Act if the government’s share of GDP goes down a point.

* H/T to Beth Berman for sending this piece along.
** I define market epistemology as the belief that markets provide the best or only definitive information about economic value. Market epistemology shapes debates about the production boundary and in turn the boundary of the economy – that is, it shapes what we decide to count and how we decide to count it, especially for difficult cases like unpaid housework, government output, and owner-occupied housing. See, e.g., chapter 4 of the dissertation I should be writing instead of this blog post!
*** At this point, I’d also like to fully embrace the irony of using a single editorial as a case to motivate a more general argument about the perils of motivating a general argument about discourse from a handful of cases. I can dig up more if you’d really like, I read this stuff for a living.

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