Blogger Party in Vegas!

Dear Readers!

My June travels are nearly over, and I have a pipeline of posts that should be coming in the next few days on such exciting topics as Milton Friedman vs. Gary Becker and the perennial favorite of markets & politics. Until then, I want to note the announcement of the annual ASA ScatterPlot Blogger Party! Details here. Short story: Sunday, August 21, 4:30pm at the Seahorse Lounge at Caesar’s Palace. I hope to see many of you there!



Sorry for the lack of posts. I’m halfway through a week-long trip to DC for a combination of pleasure and business. Tomorrow, I’m making my first trip to the National Archives (the College Park, MD branch). Wish me luck!

Also, on the off chance I have any DC-based readers – if you have any “can’t miss” suggestions for restaurants or sights to see, or you want to grab a coffee in the next few days, leave a comment!

Polanyi and the First Derivative of Social & Economic Change

I am not a conservative. Quite the opposite – I think of myself as very progressive, liberal, all the things you associate with a typical Sociology graduate student. I cheered the recent Prop 8 decision declaring marriage a fundamental right for which there is no rational basis to restrict to only opposite gender couples.* And yet, when it comes to economic changes, I find myself thinking more and more conservatively of late. I do *not* mean to imply conservative in the sense of Republican, with policies supporting the rich getting much, much richer (see this recent Hacker and Pierson article for an excellent analysis of the political origins of the recent tremendous rise in inequality focused on the richest getting richer). What I mean is more along the lines of Schumpeter’s creative destruction.

Schumpeter argued in Capitalism, Socialism and Democracy that capitalist economies are awesome not because they allocate resources efficiently on a moment to moment basis (as in a hypothetical perfect market equilibrium), but rather because they generate a “perennial gale of creative destruction” – innovation that upends old ways of doing things and replaces them with totally better ways. Capitalism, in other words, produces and diffuses innovation better than socialism. There are some inefficiencies along the way – friction in the system, temporary monopolies based on having innovated before your competitors – but that’s a price worth paying.

At least, that’s what Schumpeter thinks. Schumpeter is joined in this theorizing by the fictional President Josiah Bartlet on The West Wing, my favorite TV show of late. Bartlet is a Nobel-prize winning development economist turned politician and eloquent defender of free trade in an episode (“Talking Points“) that tries to examine both sides of the debate (as if there were two sides). The episode hinges around a conflict with the communication workers who learn that 17,000 programming jobs are going to be moved to India as a result of stronger intellectual property agreements. Bartler is practicing his talking points (hence the name of the episode), and after introducing Schumpeter’s phrase (“Hey, listen: Any economic advancement involves what Schumpeter called ‘creative destruction.'”) and being told to avoid using the word destruction, Bartlet goes on to say:

Global economic forces are unstoppable, just like technology itself. Should we have banned ATMs, to protect bank tellers? Or digital watches, to prop up the guys who fix grandfather clocks?

This quote interests me for a couple reasons. First, the quote pairs two strong and objectionable forms of determinism – economic and technological. Technological determinism has been the subject of much debate in the science, technology and society literature (e.g. Winner’s Do Artifacts Have Politics?, Wyatt’s Technological Determinism is Dead, Long Live Technological Determinism, see Nye for an overview). After the fact, we tend to think that technological progress had to move in a single direction – such as the development of the modern electricity system based on large generating stations and a grid to distribute it. Historical research often points out other paths-not-taken, not taken for political/social/accidental reasons rather than “purely” technological ones (in this case, micro-generation, much as we do for hot water via individual furnaces in buildings and houses).

Economic determinism is similar, with debates about it going back to at least Marx (e.g. “historical materialism”, “fetters”, all that jazz). And as in the quote from Bartlet, the two are often paired – economies must move forward in particular directions because technologies push forward in a single direction. It’s a neat setup, and one that historians of science, technology – and, I would argue, economics – ought to fight.

What’s all this got to do with Karl Polanyi? Polanyi was a mid-20th century economic historian/anthropologist/whatnot. Polanyi is most famously (at least in Soc circles) associated with the concept of embeddedness – the idea that the economy is never actually separate from other social institutions (language, custom, the rule of law, politics, etc.), but rather that it is always already embedded within them and could not function without them. Polanyi’s great work, The Great Transformation is treasure-trove of other useful ideas and concepts (see a forthcoming book by Fred Block and Peggy Somers for excellent examples).

One concept that I have not seen much discussed however is Polanyi’s emphasis on the rate of change of the society/economy. Polanyi often sounds like a technological or economic determinist – for example, in his analysis of the poor laws of England, he agrees with the commentators of the time that the system was inevitably doomed and needed to be reformed. Other times, Polanyi seems less determinist – I believe there is something of a small debate about this point which I hope to look into when I have some time. But even when Polanyi sounds maximally determinist about the forces of economic and social change, he argues that an emphasis on that determinism obscures the role of government in those changes: modulating the rate of change.

A belief in spontaneous progress must make us blind to the role of government in economic life. This role often consists in altering the rate of change, speeding it up or slowing it down as the case may be; if we believe that rate to be unalterable – or even worse, if we deem it sacrilege to interfere with it – then, of course, no room is left for intervention. Enclosures offer an example. … Yet, but for the consistently maintained policy of the Tudor and early Stewart statemen, the rate of that progress might have been ruinous, and have turned the process itself into a degenerative instead of a constructive event. For upon this rate, mainly, depended whether the dispossessed could adjust themselves to the changed conditions without fatally damaging their substance, human and economic, physical and moral… (Polanyi 1944 [2001]: 39)

In the example from the West Wing episode, the communications workers argue that many of their members have changed careers three or four times to try and keep pace with economic changes. Their lives are structured around long-term commitments with certain costs and obligations (“I’ve got three kids in college”) – they can’t simply retrain, move to a new place, and start over. The pace of these changes has picked up in many ways since Polanyi’s day, and certainly since the 17th-19th centuries which Polanyi discusses for most of his book. Entire industries might be eliminated in a matter of years or months. And there’s particular sign of things slowing down. So what now?

Years ago, I was relatively unsympathetic to these concerns. As another character argues in the show, people in India need jobs too, in fact more desperately than Americans (judged by global norms for wealth and prosperity). On the other hand… I think there is something to be said for the idea of government trying to modulate the rate of economic change to somehow match with our lifespans. There are plenty of bits of institutional inertia – the fetters on progress, as a Marxist might say – but instead of seeing these bits as problems to be overcome, I think we should see them as warning signs. Our metrics for well-being should take into account the costs, both easily measurable in terms of unemployment and harder to measure in terms of well-being, of economic upheavals. Sometimes – as in the case of same-sex marriage – I am completely unsympathetic to those who feel that the world is changing too quickly. In other cases – as for the unemployed former auto workers that are such a prominent part of the Michigan mindscape – I am much more so. I’m not actually that sure what distinguishes the two cases however, nor what we should be doing about either. But I think we should be taking the question more seriously. Just as economics often fails by examining “comparative statics” and “generalized equilibria” when the questions we want to know about happen in between the stable moments (which may or may not ever exist), I think political and social analysis should take seriously Polanyi’s notion that government should act on the rate of economic change, and that slower change might be a good in itself.

Erg. I hope I don’t sound like too much of a hypocritical luddite, writing on my shiny MacBook Pro laptop, with my wireless mouse, at my WiFi-enabled coffee shop, in my chummy university town funded largely to create precisely that perennial gale. So it goes.

* Though, did anyone read much of the decision? In general, I thought it was fantastic, but there were some interesting bits about why the state has an interest in marriage at all. Specifically, page 111 notes “The state regulates marriage because marriage creates stable households, which in turn form the basis of a stable, governable populace.” Foucault much? Reading that sentence, in contrast to all the surrounding bits about how marriage is about love and choice and etc. creeps me out a bit. Perhaps the state really shouldn’t be in the marriage business at all?

The Smith-Nietzsche-Schelling Model of Rationality

Sociologists tend to have a lot of problems with rational choice models of behavior that emphasize the decisions of discrete, rational individuals. In a sense, the discipline itself can be seen as a reaction to liberalism* and its overemphasis of individuals, individuality and choice. The easiest place to see this is in Durkheim or Marx, both of whom explicitly argue that individuals are formed by society and not the other way around. In a way, the whole structure-agency debate (can we call it a debacle at this point?) stems from social theorists trying to grapple with the basic problem of reconciling a liberal belief in the self with a sociological belief in society.

Mandeville QOTD on Sociobiology

Bernard Mandeville was an early 18th century physician and author. Famously, he wrote The Fable of the Bees, collection of a poem and some essays on the theme of how private vices (properly channeled by societal institutions) turn into public benefits. Mandeville was quite insightful – for example, in his essay “A Search into the Nature of Society”, Mandeville notes that “Intrinsick Worth” is a tricky concept, given that what seems valuable or good in one culture may be seen as worthless or evil in another. Mandeville punctuates this discussion with a passage that I very much enjoyed on socialization (not his term) and the dangers of connecting natural law and social law:

“What Men have learn’d from their Infancy Enslaves them, and the Force of Custom warps Nature, and at the same time, imitates her in such a manner that it is often difficult to know which of the two we are influenc’d by.” (334)

A nice summary of the problems facing research in sociobiology? You be the judge.

Why isn’t sociology funny?

Economists have it easy. Jobs in B-Schools and the private sector, not to mention the Federal Reserve, keep employment and wages high, and the CEA means that economics is the only profession with its own voice in the White House. But beyond that, economists seem to have it easy in one other key way: economics is just funny. I don’t know why it is – the overpowered jargon, the absurd simplifications, whatever it is, economics has a lot of jokes.

For example, the internet is full of funny economists. Yoram Bauman is the stand-up economist, who just released a cartoon introduction to microeconomics. Jodi Beggs runs the blog Economists Do It With Models, and was recently featured at the AEA’s humor session. Oh yeah, they had a humor session at their annual meetings! Economists are featured in jokes, such as the famous can-opener joke (featured on the cover of MacKenzie et al’s Do Economists Make Markets?). Paul Krugman even wrote a humor paper on the theory of interstellar trade. And so on.

What about sociology? There was a blog thread a few years ago on Sociology light-bulb jokes, but one blog post does not a funny discipline make. I made a bit of my own for last year’s Cabaret (an annual event in the Michigan Soc department where first-years are required to entertain the department with an evening of skits).

But still, I’m left puzzled. Why is sociology so lacking in humor? Or if it’s not, where is it? Is it just an issue of disciplinary size – economics is a bigger profession, and as Smith taught us, the division of labor is limited by the extent of the market. Are we simply Too Small To Laugh?

A disturbing thought indeed. Let’s hope this year’s Cabaret proves me wrong with some enduring sociological humor that we can contribute back. Perhaps the real problem is institutional – if we had some sort of sociological humor archive, we could improve the distribution and reproduction of sociological humor. Somehow, I doubt it’ll happen. Until then, I’m left spending my mornings in econ envy. For the laughs, of course, not the money.

The Embeddedness of Economic Action: Piracy Edition!

I don’t listen to NPR as often as I would like, in part because my commute is a 10 minute walk, but a friend today sent me an excellent bit from Planet Money. Yesterday’s podcast revisits piracy, and consists largely of a very funny story about how a pirate negotiator and a businessman hit it off after completing a negotiation for the release of some kidnapped employees. Here’s the story. I recommend it as an excellent example of the embeddedness of pirate action in social structure! (Of course, you’ll mostly get the economics angle involving information and bargaining, but that’s Planet Money for you.)

Econ 101: Hopelessly Outdated And All The Macro You Need To Know?

Gregory Clark, UC Davis economic historian and Atlantic blogger, wrote awhile back a very interesting post about the failures of the profession to predict the current downturn, and the irrelevance of most contemporary economic research to understanding the recession. In a sense, he’s arguing that economists have stopped studying the economy because they thought the problem was solved – the business cycle moderated, fiscal and monetary policy levers sufficiently understood to make another Great Depression* impossible. Here’s Clark’s assessment of the current debate:

The debate about the bank bailout, and the stimulus package, has all revolved around issues that are entirely at the level of Econ 1. What is the multiplier from government spending? Does government spending crowd out private spending? How quickly can you increase government spending? If you got a A in college in Econ 1 you are an expert in this debate: fully an equal of Summers and Geithner.

The bailout debate has also been conducted in terms that would be quite familiar to economists in the 1920s and 1930s. There has essentially been no advance in our knowledge in 80 years.

While I like the thrust of the comment (and given my own recent reading of 1930s economic writings I largely concur) I disagree slightly with the timeline. 80 years ago, in 1929, John Maynard Keynes had not yet published A Treatise on Money (1930), let alone The General Theory of Employment, Interest and Money (1936). Hicks’ famous interpretation of the General Theory, which set the stage for Samuelson’s text and the Econ 101 courses Clark refers to, was published in 1937. So, I think to be a bit more precise and a bit more charitable, we can say there has been very little advance in the terms of the debate in the last 70 years. Which is to say that we still think of the economy roughly how we did just after Keynes (but not much before him), and we still focus on the same metrics for success and the same big policy proposals. But is that the same thing as saying there has been no advance in our knowledge? Or just to say that the paradigm of economics (to abuse Kuhn for a moment, as so often happens) has not shifted as much as all the debates about monetarism, New Keynesianism or Real Business Cycle theory would suggest.

But back to the central claim Clark makes: has all of the macroeconomic research done in the last 70 years really provided us with nothing (or less than nothing in Eugene Fama’s case) helpful for a big crisis? Does Econ 101 give you all the macro you need to know for the current crisis, even though it’s all considered hopelessly outdated by graduate curricula standards? If so, why?

Clark connects the uselessness of contemporary macro to the Great Depression II: Electric Boogaloo to economics turn towards studying the apparently trivial, e.g. online dating. But that can’t be enough – PhD economists are still required to take a rigorous year of macroeconomics, at least, in basically every program. And every top department has plenty of people who are still studying the dynamics of economies, rather than specific markets.


* I was sorely tempted to write “Great Bagel” there in honor of the West Wing but, of course, bagel stands in for the R-word not the D-word.

Jon Stewart on Competing Presidential Approval Indicators

Here’s a snippet from the Daily Show’s excellent coverage of the financial crisis last week. You can find just the relevant clip here (it’s the third clip down, though the whole episode is fantastic). Jon is talking about the all-knowing Dow as a presidential approval indicator, as seen on any major financial news network:

Yes, the Dow knows all and it doesn’t like what it sees. But you people just don’t get it, giving Obama 60% approval ratings. F*ing morons. I know you people, you six-pack sippin’, iceberg lettuce-eating, America-loving non-elitists. Sitting down in your ivory basements thinking, “Isn’t the Dow Jones Industrial Average just a short twitch numerical representation of a bunch of guesses about other people’s assumptions about the financial well-being of an arbitrarily chosen group of 30 out of tens of thousands of possible companies?” No! You’re wrong! It is a real time, cause and effect precision barometer of how the president is doing. It’s been that way for years!

In Defense of Callon’s Performativity of Economics

This past Thursday I was faced with the delightful task of trying to defend the “performativity of economics” literature from two of the best informed skeptics I have ever encountered. I can’t quite remember how the conversation shifted to the topic, but I soon found myself trying to re-justify the entire program from the ground up in order to defend my take on it, as well as the work I would like to do using the concept. So, here is a brief gesture in that direction. (more…)