The Politiconomist

Where Politics and Economics Hang Out

Benjamin Studebaker has published an astonishing piece claiming that feminism has turned on itself.

What is remarkable is that the piece does not so much as namecheck a single real feminist or feminist theory. I suppose this isn’t surprising. After all, this is a piece where Mr. Studebaker argues earnestly that the definitions of words used clearly in major online publications everyday are so muddled that they need to be abandoned. Sure, some of this is basic self-sorting on the internet; I read those publications and it appears he does not. But a Google search wouldn’t have hurt.

On much the same lines, before I get to the merits and demerits of his structuralist/agentic dichotomy, I want to point out that that’s not a real distinction. He made it up—which would be fine if he was applying it to actual feminism he was citing. But he’s not, and so agentic feminism basically turns into a straw argument.

The dichotomy is a more than a little forced, complete with an excluded middle. On the one hand, you have structuralist feminists who believe that forms of oppression are systemic. One of its supposed virtues is that, “no individual men or women are to blame for this—the culprit is a system of thinking.” Sure, this current runs through actual feminist thought, particularly those who come out of the more social justice (as opposed to neo-Liberal) tradition. But when, for example, I was arguing that we ought to have Sympathy for Rapists, you’ll notice I was perfectly content to offer it to them while they they were also in jail for rape. Structural considerations are not obviously dichotomous to individual or “agent” ones. We can put rapists in jail while worrying about the structures that influenced their decision to rape and the structures surrounding incarceration.

But most troublingly is his claim that structural feminism is “fully inclusive, and all people of both genders have much to gain and nothing to lose but their chains.” Mia McKenzie’s whole piece about the problems with Emma Watson’s #HeForShe is well worth reading, but when she says, “Saying that men don’t have the benefit of equality creates a false narrative that we’re all hurt in the same ways and at the same degrees by the evils of gender inequality, and that no one’s really benefiting, and that’s simply not true” is the essence. She gives a variety of ways in which women are plainly worse off here. More,

This is an absurd thing to suggest. Women have been trying to get men to care about oppression of women since…always. Men have never been overwhelmingly interested in fighting that fight, because it requires them giving up power and all evidence suggests that’s not their super-fave thing. Share a link about gender equality? Sure! Count me in! Give up real power in real ways? Nope, not really.

Mr. Studebaker contrasts this with agentic feminism. “For agentic feminism, men and women are treated differently because male agents oppress and exploit female agents.” Who are these agentic feminists? I see these reductive ideas creep in places, but you’d be hard-pressed to find a publication with pull that argues this. In fact, you find a lot of insistence to the contrary. Certainly, uninformed commenters exist, but that’s true on literally every topic. Why is this a particularly fatal flaw?

But nowhere is the problem more apparent than when he says, “On a structural view, Matt Taylor got bullied for expressing a sexual and aesthetic preference that some people are trying to silence.” Not even a little. We live in a society with dominant structures of misogyny and therefore hostile working environments for women. Donning a shirt with scantily clad women on it isn’t appropriate for work under those structures. And yes, the man who did that should be dealt with.

This isn’t even that difficult. Here’s a pornographer on the matter. “There are appropriate places and times to wear clothing with sexual imagery on it—sex parties, erotica readings, erotic art openings, I can probably think of a few others. But the very public announcement of a major event in the history of scientific discovery—landing a robot on a comet!—is not one of those places or times.”

Taylor’s being told that he can’t create a workplace demeaning to women. As far as radical, bullying, McCarthy-esque lynch mobs go…I won’t lose sleep over it.

Feminism’s problem is that it is still perfectly acceptable for someone to make up new feminist divisions without citing any works or theorists and then broadside the movement based on nebulous claims. Mr. Studebaker’s post is emblematic of this, but this sadly remains the standard mode of “critiquing” feminism.

Written by R. A. Stark

November 20, 2014 at 2:37 AM

Posted in Uncategorized

Meme I Hate: Robert Reich

This has popped up a few times:

We’ll follow this around in just a second.

This already has a few of the Politiconomist’s red flags for bad economic discourse. “Corporations” and “create jobs”, no matter the broad claim true or false, rarely get to the heart of the matter. It’s not hard to see why; the matter is very complicated. Sorry, folks, there aren’t often simple answers when talking about three-quarters of production in the United States. And nor should we expect there to be.

Even if Mr. Reich is correct about the underlying idea—namely, a shortage of money among “costumers” is responsible for our economic woes—that isn’t apparent from the reasoning he gives. (Spoiler alert: I don’t think he’s even right.)

Let’s start where he starts. “Corporations don’t create jobs. Costumers do.” This is a variation on an old observation in economics: We all employ each other. The problem is in what it varies. It is evidently untrue that private firms don’t employ people. They are the literal employers who literally pay money. Yes, worth discussing how that money came from consumers. But guess where that money came from? Firms. (And, to a lesser extent, the government.) And guess where that money came from? You see how this goes for awhile.

What may surprise you is that this cycle has an easily defined beginning. The money originates with someone taking out debt. Be that the state, individual, or corporation is not a trivial matter in the scheme of things, but for our purposes we’re going to neglect it. This process also has an easily defined end; the paying off debt basically destroys money.

What this means is that arguments about how the macroeconomy functions have to answer two broad questions. First, what are the circular effects of a policy. It is not sufficient to assume that an increase in consumption will happen and yield an increase in wages. Income must already be up for that to happen. Second, it must grapple with the complex problem of debt.

I am tabling the discussion of income inequality for a moment to get at some of the other problems. Namely, “the vast majority of Americans don’t have the purchasing power to buy the things corporations want to sell”. This is a vacuous statement. Interpreted strongly, it’s a tautology. Americans will never have enough money to buy everything corporations want to sell because corporate managers always want to increase market share and revenue—and thereby profit. For the same reason you want a raise. Interpreted weakly, it’s saying Americans are making the wrong incomes. This is devilishly difficult to quantify and measure.

It does at least make some sense looking at the broad facts. Since about 1971, wages have stagnated while profits have continued to advance apace of production. I don’t think it’s ridiculous to conclude that perhaps corporations are ending up with the money. In a sense it even works out to be true, but the exact reason why is not (simple) corporate greed. Debt is why.

In 1971, federal policy regarding international debts changed; we would no longer balance out our Financial Account with gold payments abroad. Buying debt and exports works about the same way. If England would like to buy either, they first purchase dollars for pounds. Then they purchase the good or debt. The United States then holds those dollars and those pounds. Under the old system, we’d then buy gold from England with the pounds. Under the new system, we buy goods with pounds. (You can’t buy domestic goods with pounds, so they’re worthless to hold onto in especially large quantities.)

Pre-1971, debt creation allowed us to buy gold to even out our debts. Post-1971, we buy goods to even out our debts. Unsurprisingly, the people who benefit most from this are those who hold debt. The people who benefit least are those competing with what works out to be subsidized importing. The effect is not very large any given year—around 3% as an eye-ball average, and quite a bit of variation.

We are then facing a shortage of purchasing because wages are low—Reich is right for the wrong reasons on that front. But what he gets exactly wrong is where that originates. Money starts and ends as debt, and it’s our debts going abroad that are dragging on the low income earners. They are crimped not because an unusual amount of money is going to the top, but because it is being financed on imports.

Written by R. A. Stark

November 18, 2014 at 10:45 AM

Posted in Uncategorized

Don’t Shoot the Message

As the midterm 2014 post-mortem continues, unabated until someone announces their presidential bid, I want to make a small point.

This election came out exactly as anticipated. The democrats were over-positioned from the 2008 election in a slew of conservative states. The House and Senate came out about as expected based on a demographic analysis.

Don’t believe the hype. People largely vote for their demographic interests. The binary nature of the choice leads to some interesting clash—you get Republicans voting against their apparent economic interests to maintain their racial (which is ultimately economic) power, as a famous example. On a meta-level, you can predict that kind of dissatisfaction*.

Political zeitgeist is virtually unheard of. Adding thirty points to support for same-sex marriage in 12 years is basically lightning fast. It took a decade to change a quarter of the electorate’s mind. And much of that was by changing the electorate. My generation, which is famously pro-gay, came of age and started voting. We also came out in record numbers, which explains the balance of the change; it’s harder to hate friends and family.

The point is, two or three months of intense campaigning that cap off quieter, organizing campaigns is nothing.

Voters know which tribe fits their interests, and it is to our system’s credit, not detriment, that that’s how voting turns out**. Upsets usually correct a primary mistake. Here in Indiana we ended up with Senator Donnelly in 2012 because Mourdoch said absolutely vile things on the campaign trail. But also because Donnelly represents the more conservative kinds of Democrats in Indiana. The blue collar, pro-union, supportive-but-not-enthusiastic-of-welfare, anti-choice voter that makes up the loyal opposition in the Statehouse.

If the problem is the message, it’s not what Democrats stand for. Team Blue has a winning coalition on lockdown. In a mandatory voting system, Democrats run the United States. Democrats need a Get Out The Vote (GOTV) strategy for midterms. The elections happen far enough apart that there’s a lot of noise in the comparison, but all things equal, they do better in Senate races when the President is on the ballot.

The question isn’t what should Democrats be talking about. Voters mostly know what Team Blue has to offer. It is how do Democrats get their voters to show up to vote?

*If you’re going to do the low-information voter trope, its the tendency to believe the opposition party is responsible for the clash, irrespective of the facts, that is interesting. Doubly so since it may be because their Representative is against that thing, even if their party isn’t!

**This kind of electoral self-interest is why I believe in a strong minority rights framework.

Written by R. A. Stark

November 14, 2014 at 9:13 AM

Posted in Uncategorized

More Minimum Wage Musings: Denmark

The New York Times has published a piece that is favorable to a large minimum wage hike, using Denmark as an analogy.

Let me begin by tsk-tsking international analogy. Obviously, Denmark is not the United States. There are many reasons this is the case, most glaringly to me that both consumption/non-consumption multipliers are different (about 3 in the US to about 5 in Europe). And, consequently, so are fiscal multipliers (about 1 in the US to about 1.5 in Europe). Any comparison between the United States and European countries must be taken with a grain of salt—Denmark no exception.

In the spirit of hypocrisy, though, let’s take direct analogy between the US and Denmark and try out some facts on the fly. This paragraph is the one that caught my eye:

And the Danish restaurants are less profitable. With fast-food wages in the United States so much lower than in Denmark, and the price of Big Macs in the two countries similar, Mr. Ashenfelter said, “It must be that U.S. McDonald’s are far more profitable.” The higher wages and the higher menu prices help explain why there are 16 McDonald’s per million inhabitants in Denmark, but 45 McDonald’s per million in the United States, Mr. Jurajda said.

There’s an app a formula for that! We can take a stab at the elasticity between employment of minimum wage workers and the minimum wage. Remember, elasticity is the percent change in employment (quantity) over the percent change in price (wage):

$\eta=\frac{\% \Delta Q}{\% \Delta P}.$

[NOTE: I’m using the arc elasticity method, which generates a different number than strict application of this simpler formula. The difference is that the price and quantity used in calculating these percent changes is the average, not explicitly listed here.]

It’s a touch loose and fast to suggest that the difference in quantity can be derived from the difference in open McDonald’s. For one thing, the remaining McDonald’s probably work fewer people harder. But keeping things simple, we get a change of 95%. Likewise, the same calculation for wages comes out to be -94%. This is an elasticity of about -1.

This is a remarkable result. It means that (at least for large increases) you can expect percent losses in employment to be totally cancelled by percent gains in income. In more human terms, it means that the fast-food market is sum-zero. Gains in wages for employees are losses in hours. And, given our observation that we’re probably underestimating how individual McDonald’s are run—that they probably cut even more hours than reflected in the restaurant sums—there is a good chance that there is a net loss to employment.

Still, this is a very loose and fast calculation. It compares two things that ought not be compared this way, and which aren’t good candidates for that fudge to begin with. It uses a proxy set to calculate fast-food employment. In short, it’s very likely that this finding is an artifact of comparing apples-to-oranges—though, it is in line with the Nuemark study I love to cite. Finally, calculating elasticities over these large ranges leaves a lot to be desired, not least of which is because elasticity may not be a single value over a large range.

But if we do go down this road like the New York Times suggests, we get a clear analogy. If we took proposals for a 15 dollar minimum wage, we will see an approximately a 2/3 reduction in minimum wage employment. (In hours terms, not necessarily the employment rate.) This is a massive restructuring of life for those at the bottom of the income distribution, and it would almost certainly be bad for a large number of those folks.

I am surprised to be giving the last thought to Matt Yglesias over at Vox—before he left Slate he was one of the worst offenders of uncritically importing European assumptions onto US cases. But as he astutely points out:

The Danish economy as a whole does a good job of keeping people employed, and it also does a much better job than the American economy of delivering high living standards for the poor…There is something that they are doing in terms of education, training, active labor market policy, and regulation that is allowing them to maintain a low level of unemployment without nearly as much reliance on low-wage, low-productivity fast food jobs as we see in the United States. But that’s the secret sauce, not the high minimum wage for fast food workers.

If anyone has a solid lead on an answer, I’m all ears.

Written by R. A. Stark

October 30, 2014 at 12:35 PM

Posted in Uncategorized

Why Influenza and Ebola aren’t Totally Comparable

But Still, Don’t Freak out about Ebola

Risk assessment is hard. Like really hard. People aren’t good at understanding that a thousand times more likely and ten thousand times more likely are a lot of times more likely apart. These are just ideas human psychology seems to be ill-equipped to handle. More, novel and tail-risk threats are frequently overestimated. The flu kills—very roughly—about 30,000 people and, being pessimistic, let’s guess 10 people on American soil* will die from Ebola by the time this epidemic is over.

Does it make sense to be 3,000 times more worried about the flu?

The obvious answer to most people who consider the problem would seem to be yes. (I’ve conducted a totally unscientific survey of comments I can see on my Facebook feed, so take that how you want.) But I urge you to be skeptical of argumentation that assumes people are irrational, provides statistical margins, and asks you to conclude you should be more afraid of something else. Ebola and Influenza are a different kind of threat, and that’s worth talking about.

One reason to give more weight to Ebola than the simple ratio of deaths is that Ebola is a novel threat. Duncan’s case, and more specifically the nurses he infected, offer a glimpse into what exactly makes new threats dangerous. We know how to keep our Doctors and Nurses safe from the flu and more importantly their patients; it’s basically standard practice for those folks to get vaccines. But the debacle with exposed skin is exactly why we should give more weight to novel threats. It was a basic, preventable mistake. I bet those nurses knew how to make sure Duncan didn’t get the flu from them. I bet it was drilled into them.

And I bet some of the decisions they made were implicitly informed by that training.

We have a well-funded, practiced apparatus for keeping the flu at bay. We have an untested framework for preventing ebola’s spread. Public scrutiny isn’t such a bad thing.

Of course, one must have the conversation on a reasonable level for this to work. What’s interesting is that the comparison is pretty good here. Threat to a foreign power that could cause us some collateral damage and we have a vested interest and power in intervening in.

Bad public scrutiny, unfortunately, has characterized this discussion. We’re owed answers to how typical the Dallas case would have been if the errors weren’t corrected. We’re right to ask if the new protocols will work. We should keep our ears to the ground about changes in the situation, both here and in West Africa. (And this is without getting into the discussion about how ebola is much worse for healthy adults than the flu.)

The tension here is between importance and urgency. The flu is important; we know it’s a consistent public health menace. Ebola is urgent; it carries some risk and requires a response now, but isn’t the same kind of threat. If we talk about it that way, rather as an existential threat while paying the West African outbreak the deference it deserves, we’d all talk about these things better.

So, while keeping in mind that the new risks from ebola deserve extra attention, it’s the flu that deserves more of our domestic resources and attention.

*That a few isolated cases in various large cities and some secondary infections, primarily medical workers. This is the threat the US is facing down at present.

Written by R. A. Stark

October 23, 2014 at 9:54 PM

Posted in Uncategorized

Krugman: How to Get It Wrong, Indeed

I’m several weeks behind on commenting on this, but I still want to comment on Krugman’s piece “How to Get It Wrong“. It reads like self-parody and yet…I doubt he realizes it. It’s well documented that I think Krugman routinely takes plausible positions and then misrepresents the consensus opinion among economists.

As an appetizer, let’s take this:

In what sense did economics go astray? Hardly anyone predicted the 2008 crisis, but that in itself is arguably excusable in a complicated world. More damning was the widespread conviction among economists that such a crisis couldn’t happen. Underlying this complacency was the dominance of an idealized vision of capitalism, in which individuals are always rational and markets always function perfectly.

I’d quibble: It was the mathematical assumption that, in plain English, recessions were caused by extrinsic factors. The models assumed only shocks like droughts, floods, and other disruptions would cause changes to the course of the economy. To be fair, the core framework assumed rational agents and clearing markets, but pinning the problem on this misses the core insight from the great recession: Profitable (and therefore rational) investment can create unforeseen fragilities. This is unpalatable because it implies that market feedback is not very good. But I’m surprised Krugman, a champion of regulating the banks, doesn’t want to go down that road and would rather call responding to these incentives “irrational”.

Whatever. I wouldn’t write a post about that. It’s this stunning display of what-the-fuckery I can’t abide by:

Still, many applied economists retained a more realistic vision of the world, and textbook macroeconomics, while it didn’t predict the crisis, did a pretty good job of predicting how things would play out in the aftermath. Low interest rates in the face of big budget deficits, low inflation in the face of a rapidly growing money supply, and sharp economic contraction in countries imposing fiscal austerity came as surprises to the talking heads on TV, but they were just what the basic models predicted under the conditions that prevailed postcrisis.

Excuse me?

This blog is hardly hostile to the idea that textbook macro deserves a place in the world. I use it here all the time. I use it in my head when commenting on other persons’ posts on Facebook and elsewhere. I will even cop to every now and again literally dreaming about it because, guys, I’m kind of lame. But as a vision of reality? Slow down.

The problem is that the big, reliable insight is only so strong. Namely, that Consumption and GDP are locked in a very tight dance. With over 99% explanatory power, Consumption changes are about two-thirds of GDP changes quarter-by-quarter. Basic arithmetic (see Mathematical Addendum I) will yield a multiplier of 3 on non-Consumption spending.

Textbook macro usually simplifies matters and assumes that the only non-consumption spending that changes during a recession is government spending. As a classroom matter, this is useful, though it should be explored better. As something Krugman is advocating, it leads to confusion. The relationship between Investment, Government spending, and Net Exports—even under liquidity trap conditions—is much more complicated than meets the eye.

Krugman should be aware that the studies he likes often contradict the simple, classroom relationship. Europe has an apparent multiplier of about 5. (It’s one of many ways the US is not Europe.) And yet, he vaunted a study that found the fiscal multiplier to be a paltry 1.5. This is well within the assumptions of textbook macro, which as noted simplifies things. And in the linked piece about Krugman above I cite evidence that the American fiscal multiplier is likely lower—we’ll call it 1 for this piece. That textbook macro is off by about 300% is hardly “a realistic view of the world”.

What makes this especially appalling is that following this contradiction within the framework of textbook economics calls into question at least one of two other theories Krugman has. Firstly, that investment is unaffected by liquidity traps. Secondly, that debts don’t matter. As a matter of opinion, I believe it is the latter.

If we assume that something must be sucking up the excess multiplier, then we quickly arrive at Net Exports. (See Mathematical Addendum II.) The dance between net exports, debt, and government spending is not a simple one to summarize. However, public debt both squeezes domestic debt abroad and goes abroad itself. The currency exchange that facilitates that means we end up with foreign currency and import foreign goods. Every penny we got from that debt is cancelled by the production we send overseas! Since the pressure to send debt abroad is higher the more debt there is domestically, high debt levels mean government debt hinders government spending!

Of course, as noted, Krugman simply asserts that the high end of the consensus range for the fiscal multiplier is “conservative” and is done with the whole thing. In that context, it makes this paragraph a truly stunning monument to his lack of self-awareness:

You might say that this is just human nature, and it’s true that while the most shocking intellectual malfeasance has come from conservative economists, some economists on the left have also seemed more interested in defending their turf and sniping at professional rivals than in getting it right. Still, this bad behavior has come as a shock, especially to those who thought we were having a real conversation.

I see.

Certainly, macro gadgets like the LM-IS model are a good check on bad intuition; they give a solid qualitative framework for using the consensus research of the last century quickly and easily. That’s why I often reference them when writing blog posts. But they don’t perform well on quantitative tests, in no small part because they are hard concepts to measure.

Paul Krugman can’t have it every which way. He can’t believe that textbook macro has performed well and then rely on more traditional analysis for his fiscal multipliers and evidence. At that, he can’t be the bearer of consensus and cherry-pick numbers from the high end of the distribution. He can’t put forward a fiscal multiplier that, by textbook macroeconomics, implies debt matters and then say that concerns about debt are unfounded.

He simply cannot be both the voice of reason and put forward that discredited quantitative models hold predictive power.

By definition, change in GDP (Y) is the sum of the changes in Consumption (C), Investment (I), Government Spending (G), and Net Exports (NX).

$\Delta Y=\Delta C +\Delta I+ \Delta G + \Delta NX.$

As noted above, the empirical relationship between GDP and Consumption is very reliably this:

$\Delta C=\frac{2}{3} \Delta Y.$

By substitution, our GDP identity becomes:

$\Delta Y=\frac{2}{3} \Delta Y +\Delta I+ \Delta G + \Delta NX.$

Solving for the change in GDP shows us the multiplier:

$\Delta Y=3 (\Delta I+ \Delta G + \Delta NX).$

Using the US example and assuming Investment growth is held constant by the liquidity trap:

$\Delta Y=3 (\Delta G + \Delta NX)$

and taking, say, 1 as the fiscal multiplier:

$\Delta Y=1 \Delta G$

you can deduce the relationship between government spending and net exports:

$\Delta G=-\frac{3}{2} \Delta NX.$

In other words, for every dollar spent by the Federal Government, we expect a significant fraction to go abroad. Interestingly enough…that is the case.

Written by R. A. Stark

October 5, 2014 at 3:59 PM

Posted in Uncategorized