assorted short thoughts

1)this being the last few weeks of school, I’m swamped with work and taking a blogging-break until mid-May

2)I was linked by a real-life journalist! yay! plus, the blogpost she wrote was very interesting, so go read

3)visual WTF of the day

4)verbal WTF of the day:

If the demand for land were only D4, land rent would be zero. Land would be a free good — a good for which demand is so weak relative to supply that an excess supply of it occurs even if the market price is zero. […] This essentially was the situation in the free-land era of U.S. History

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medium-length thoughts about economics

1)my textbook is trying to kill me. I nearly fell of my chair when I read the following paragraph:

Our discussion of resource pricing is the cornerstone of the controversial view that fairness and economic justice are one of the outcomes of a competitive capitalist economy. Table 12.7 demonstrates, in effect, that workers receive income payments (wages) equal to the marginal contributions they make to their employers’ outputs and revenues. In other words, workers are paid according to the value of the labor services that they contribute to production

It does no such thing.

That Table 12.7 is only showing that given two resources, their price, their productivity, and the resulting profit, you can calculate the least expensive and most profitable combination of the two resources, which indeed tends to fall in the area where marginal revenue of adding a unit of a resource = marginal cost or adding a unit of a resource. Which has fuck all to do with real markets. Because in real markets, a hell of a lot of the necessary information is impossible to come by (for example, accurately calculating marginal revenue from a unit of labor is near impossible. seriously, how does one calculate the marginal revenue of CEO A over the marginal revenue of CEO B? one doesn’t, and can’t considering their pay is established a priori, before they’ve had a chance to create any marginal revenue at all); plus, they disappeared the ever-necessary ceteris paribus that accompanies such mathematical games with very limited variables. What may be true for a mathematical game with only a few variables will not be true in a real-world situation with fuckloads of variables, including human error and human biology.

2)And not only is the content of the textbook trying to kill me, so is their language-abuse:

It is no coincidence that the service occupations dominate the list [of 10-fastest growing US occupations for 2006-2016]. In general, the demand for service workers in the US is rapidly outpacing the demand for manufacturing, construction, and mining workers.

well, no, it’s certainly not a coincidence. That’s because you can’t have a coincidence with only one variable. You need at least two, so that they can, you know, coincide. Of course, it could be that the paragraph meant to say “it’s no coincidence that service occupations dominate the list while the demand for service workers is rapidly outpacing…”, but that would be so blatantly obvious, it would not be worth the paper it’s printed on. I’m thinking the word they were looking for here was “surprise”, as in “It’s no surprise that the service occupations dominate the list.”

3)Unrelated to my text-book, I’ve found the term for a phenomenon I’ve been observing in people who talk and write about economic issues: goal displacement.
Goal displacement is when the means to achieve a goal either become the goal, or become more important than the goal. So, when I read articles about the Chinese economy were the writer says that China needs to get its population to save much much less of its income to increase consumer-spending to improve the economy, I know that the writer is suffering from goal displacement: a healthy economy is a means by which the well-being of people is to be accomplished. to diminish the well-being of people to make an “improve” the economy is turning the means of achieving something into a goal unto itself.

Homework-blogging, episode one

since my brainpower is completely taken up with working on these class-papers, I figure I should repurpose at least a few of them for blogging; at least the ones from my Social Inequality class, since they’re relevant to my blogging in general. So, here’s the first one.

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Planned Parenthood in the Media: Dividing Gender and Class issues

The Media have become one of the biggest influences on how we perceive and interpret the world. In terms of the Dimensions of Oppression discussed by Patricia Hill Collins (2011, pp. 763-768), it has become an important social institution, as well as a producer and distributor of the symbols that create the Symbolic Dimension of Oppression. This is true both in its fiction as in its non-fiction: in his essay “Media Magic: Making Class Invisible”, Gregory Mantsios describes the ways in which the Poor and the causes of their poverty are disappeared and distorted in the Media in their news programs. These are narratives that create strong symbols and dichotomies between “them”, the poor and “us” the wealthy.

Most of the time, the poor don’t show up in the news-media at all, even if the issue under discussion affects them or relates to them in some way., because the story is written from an “us” perspective, and the “us” are middle-class and wealthy people. And if the poor are mentioned in the media at all, they’re usually either blamed for their condition, considered undeserving of help, or considered a problem to “us”.

Currently, the importance of the news media as a symbol-making institution is best represented by the way the issues surrounding a bill that would defund Planned Parenthood are being presented in the news, and how that presentation shapes any discussion and defense of Planned Parenthood is being held in society. Planned Parenthood is a non-profit organization that provides various services to women, and it discounts them or even provides them for free for low-income women. It also provides some services to men (cancer screening and STD treatment and diagnosis, for example), which are similarly discounted for poor men. On February 11th, the US House of Representatives voted in favor of banning all federal funding for the organization. The media and politicians have been discussing this event in one of two ways, either focusing on abortion and women’s sexuality, or on fiscal responsibility that requires cutting the budget. An excellent example of that framing is evident in Judson Berger’s article from February 5th, in which he writes “Republicans are trying to juggle the abortion issue as they wage a separate, and more high-profile, battle in Congress over spending.” Another article on CNN.com mentions that proponents of the ban are saying that current restrictions on abortion funding aren’t enough because “applying the government’s money to other procedures leaves more of the group’s own cash on hand to allocate to abortion-related services”. The same article says that the cuts are “part of a continuing resolution that included dramatic spending cuts across a range of programs” (Political Ticker, 2011). In other words, the media uses the symbols of an innocent, righteous, and victimized “us” (the middle class, the men, the “morally responsible” women) who are being asked to shoulder an ethical and financial burden on behalf of a “them” (the non-taxpaying poor, sexually irresponsible women) that is demanding an unethical service to be provided from “our” taxpayer money, even though they brought the problem on themselves (see Mantsios’ “The Poor Have Only Themselves To Blame” narrative, p. 95) and who are undeserving of help because of their immoral behavior both in terms of what led to their situation and the service they demand (Mantsios’ “The Poor Are Undeserving”, p. 94). The best example of this particular line of argument could in fact be seen when Rep. Steve King (R-Iowa) debated the defunding of Planned Parenthood, as broadcast on C-SPAN and distributed on the internet via YouTube and MediaMatters: his argument for defunding Planned Parenthood was that “they” were “invested in promiscuity” and that “we” needed to “stand on principle” and not fund them. The narratives are those Mantsios describes as being used against the poor, but in this case they are strengthened, in terms of the othering they do, because they’re used for not one but two of the opressive categories identified by Collins: class and gender. The othered aren’t just undeserving and guilty poor, they are undeserving and guilty poor women, making the “them” an even smaller, even more marginalized, and even more easily ignorable group less likely to be in any way connected to “us” and “our” problems and needs.

The fact that Planned Parenthood is a health-care provider for the poor for such things as cancer screening, UTI treatments, and even diabetes testing is not mentioned in either article. Neither is the fact that the tax-burden is minimal, and that tax-payers themselves often either use their services themselves, or have within their communities people who do. The effects on the health of those people from various backgrounds who might now lose access are ignored entirely by the Media coverage of the discussion. No mentions are made of what will happen to people from a wide section of the population, including plenty of people belonging to the “us” category (middle-class students, married women with children, men who go for cancer testing) if clinics have to close, or if they won’t be able to provide their services at reduced cost or for free any longer. These realities have been excised from Media discussion in favor of the negative, dichotomous symbolism.

Understanding the narratives Mantsios describes can help see past the narratives trying to frame people who use Planned Parenthood as “the other”. But that alone is not enough, because Mantsios essay focuses only one one dimension of oppression, i.e. class, while the issues surrounding a defunding of Planned Parenthood involves both class and gender oppression.

Patricia Hill Collins’ essay “Toward a New Vision: Race, Class, and Gender as Categories of Analysis” can help broaden the perspective and make it possible to understand the issues surrounding Planned Parenthood not in terms of divisive “othering” and entrenched interests, but rather as an issue that spans the different dimensions of oppression. This may enable people to look at the services Planned Parenthood provides as being beneficial to people in all sorts of different groups, groups that maybe wouldn’t otherwise be able to see each others as allies in the provision and maintenance of health-care access. Her suggestion of how to find new ways to conceptualize race, class, and gender away from dichotomous either/or categories that classify someone as either oppressed or oppressor(2011, p. 762) can help feminists fighting for women’s reproductive rights see poor men and conservative charities for the poor not as oppressors withing the Patriarchy, and conversely can help organizations trying to help the poor see middle-class feminists not as oppressors within the class-structure. Similarly, her description of how to transcend the barriers that were erected in identity-politics by splitting people into distinct categories by race, gender, and class and form alliances on common causes(2011, pp. 770-771) provides useful advice on how to overcome social and cultural differences of opinion on issues that divide people, in order to make it possible for all of them to work together on issues that they share in common. Her example of a inner-city school in which people from all sorts of different spheres came together with the common goal of educating Black children can very well be transferred to the discussion about Planned Parenthood. The same goes for her suggestions for how to build empathy between people who are affected differently by the different oppressive structures of society. Instead of focusing on Planned Parenthood as a place where “the other” (“immoral women”, “non-taxpaying poor”) receive services, such discussions would be able to focus on the very broad range of services provided, as well as the very broad range of people using them: affordable cancer screenings for men and women, birth-control for poor families who can’t afford any more children, regular health-checkups for students and poor women and men, etc.

Being able to visualize such common-ground issues affecting a broad intersection of people could make it possible for more people to feel invested in the organization and look past the divisive Media narrative. It could enable them to cooperate with others in the fight against the ban. Building empathy between women who feel their reproductive choices attacked, and the poor who have their access to basic health-services limited, can also foster discussion about the real dimensions of whom Planned Parenthood is helping, and in what ways. And it can diminish the effect of the two-pronged attack on Planned Parenthood, on the one hand from the moralistic stance on women (targeted at conservative groups and men), and on the other from the fiscal stance against poor people (targeted at middle class and wealthy people). Only if we learn to empathize with the experiences of people in group to which we do not belong ourselves, understand that many people fall within both categories, and understand that while everyone is affected by issues of gender and class (as well as race) differently, with different aspect being visible and salient to them to different degrees (Hill Collins, 2011, p.763), no one is unaffected entirely, can we begin to look pas the single-focus divisive Media narratives and instead look on the actual range of effects of defunding Planned Parenthood. Effects that aren’t shown in the narratives provided by the Media, which prefers to ignore the poor altogether and prefers to show those who use Planned Parenthood’s services specifically and solely as women seeking abortion, usually portraying it as a moral failing.

References

Berger, J. (2011, Feb 5th). Abortion Debate Returns to Capitol Hill as Lawmakers Weigh New Restrictions. FoxNews.com. Retrieved from http://www.foxnews.com/politics/2011/02/05/abortion-debate-returns-capitol-hill-proposed-restrictions-advance/

Hill Collins, P. (2011) Towards a New Vision: Race, Class, and Gender as Categories of Analysis and Connection. In T. Ore (ed.), The Social Construction of Difference & Inequality(5th ed.) (pp. 760-774). New York, NY: McGraw-Hill

King, Steve (2011). MediaMattersAction YouTube-Channel. Retrieved from http://www.youtube.com/watch?v=Vex77n65nJ0

Mantsios, G. (2011) Media Magic: Making Class Invisible. In T. Ore (ed.), The Social Construction of Difference & Inequality(5th ed.) (pp. 93-101). New York, NY: McGraw-Hill

Political Ticker (2011, Feb. 28th). Boehner in ‘war’ against Planned Parenthood. CNN Politics. Retrieved from http://politicalticker.blogs.cnn.com/2011/02/28/boehner-in-war-against-planned-parenthood/

Homework-induced epiphany…

…possibly laced with a good dose of Dunning-Kruger, so I’d appreciate it if people more edumacated in economics would point out if I’m missing something or drawing ignorant conclusions.

Anyway, I just finished slogging through the math-heavy section of my economics textbook that dealt with different forms of economies, most notably “pure competition”, “monopolistic competition”, “oligarchy”, and “pure monopoly”. This being the textbook I previously described, it did not contain any human beings and stressed economic efficiency a lot. And of course there’s only one system that produces both allocative and productive efficiency (meaning that resources in the system are allocated in the most “desirable” way, and that everything is produced in the cheapest possible way): the pure competition.

Anyway, so here’s how that’s supposed to look in graph form:

on the left is what an individual company’s curve would look like, on the right is the graph for the entire industry. Now, I’m mostly interested in the right left chart. that dot saying P=MC=minimum ATC is the point at which production supposedly occurs in a company in a purely competitive economy. p=price of each unit of product, MC=marginal cost (i.e. the cost of producing and selling one more unit), ATC = average total (i.e. variable and fixed) cost cost, (i.e. average cost of each unit sold). so the point at which each of these companies produces is the point at which the price for each unit sold is exactly the same as the cost of producing it.

Think about this.

This means this company is making zero economic profit. It’s not supposed to make any, in the long term. If it did, that would mean it is producing at a point on the demand-curve above ATC, the difference being the profit. And you achieve efficiency only if you don’t produce above minimum ATC.

According to that model, profit is inefficient.

Now, the graph on the right claims that some profit is being made even with efficient production. That’s the orange part called “producer surplus”. How this producer surplus comes about out of a market made up by companies which all function like the one in the right chart, I don’t know, and that’s the part where I’d really love a real economist to step in an explain.

Anyway, back to the single company. The one that isn’t supposed to make any economic profit in the long-term. What human thought-process would make a person enter such a market, where businesses operate at zero economic profit? What person adds to their workload for no profit? Now, I can see that there’s a group-profit here. After all, things are being produced. And if you’re a laborer, then you’re getting paid, because your wage is part of the variable cost included in the ATC. But what’s in it for the individual entrepreneur? Wouldn’t it be more profitable to such a person to not go into business, and instead use that otherwise unprofitably invested time to, I don’t know, plant a vegetable garden to reduce food-costs instead?
The answer my textbook provides is about short-term fluctuations: sometimes demand for a product rises, which causes price to rise creating a short-term window of profitability. This is where more businesses enter the market, supply rises, and profit goes back down to non-profitable levels (for balance, sometimes demand shifts in the other direction and short-term losses result). But then what? The model seems to say that the companies then just go on blithely producing things at no profit (because shutting down is more expensive), but is that realistically really what would happen? A whole industry full of businesspeople not earning much of anything on their business, and being ok with that? I find that hard to believe. What seems to happen in the real world is that businesses attempt to prolong that small window of profitability for as long as possible. I can think of two common ways of doing this.

1)The window of profitability is created by an upward (or rightward on the graph) shift in demand. Creating a continuously shifting demand-curve would create a continuously open profitability window, even when more and more businesses enter the market or expand production capabilities to satisfy the demand. Thus, growth-economics and the never-ending race upwards until we run out of resources.

2)The window of profitability is profitable because the number of companies was sufficient for a lower demand, thus introducing a temporary shortage in producing businesses, and thus a price-spike. Businesses could attempt to keep that level by driving new businesses out of business, buying them, merging, etc. And once you’ve started that process, you have very little, AFAICT, that prevents that process from continuing past the original point and turning this “purely competitive” market into an oligopoly. Oligopolies, btw, are inefficient but very profitable.

So here’s two things. One, shouldn’t libertarians hate large profits, since they’re a blatant sign of economic inefficiency and a sign that the market isn’t working? And two, how exactly does a perfectly competitive market remain so, when there’s no rational motivation to create and maintain a business that makes no profit in the long-term?

I’m thinking an explanation of how the left chart leads to the right chart could probably answer those questions. But without that answer, it just doesn’t make any fucking sense.

My Economics Textbook (part two)

Let’s start today’s post with the following quote(emphasis mine):

Some economists say that ghe distribution of annual consumption is more meaningful for examining inequality of well-being than is the distribution of annual income. In a given year, people’s consumption of goods and services may be above or below their income because they can save, draw down past savings, use credit cards, take out home mortgages, spend from inheritances, give money to charities, and so on. A recent study of the distribution of consumption finds that annual consumption inequality is less than income inequality. Moreover, consumption inequality has remained relatively constant over several decades, even though income inequality has increased.

after reading that, I had to go check when this book was originally published. I mean, we’ve just been through a massive economic crisis caused in part precisely by consumption being greater than income. And we’ll be spending a LOT of time recovering from it! At the end of that article is an even more stupid quote from The Economist:

More than 70 percent of Americans under the official poverty line own at least one car. And the distance between driving a used Hyundai Elantra and a new Jaguar XJ is well nigh undetectable compared to the difference between motoring and hiking through the muck. … A wide screen plasma television is lovely, but you do not need one to laugh at “Shrek”.
Those intrepid souls who make vast fortunes turning out ever higher-quality goods at ever lower prices widen the income gap while reducing the differences that really matter.

First, that must have been written by someone who has never driven a used anything; because my experience with old cars is that they have a very bad habit of breaking down when I need them to get to work most. And of course 70% of poor people have a car; there’s virtually no public transportation system, and living near jobs is unaffordable. In fact, virtually every application I’ve ever had to fill out asked whether I had “reliable transport”, which translates to “do you have a car that won’t break down” in most circumstances. And yet, 30% DON’T have a car, and when oil-prices spiked a few years back people had to quit their jobs because they couldn’t afford putting in enough gas to get to their jobs. To praise America’s car-dependence is some sort of perverse (and the same goes for the “even homeless people have cellphones” argument: of course they do, how else are they supposed to stop being homeless? cellphones have become a necessity for many of them), and so is the “reducing the differences that really matter” comment. The ability to watch TV is “what really matters”? The ability to drive a car is “what really matters”? Really!? And here I thought that would be affordable housing, nutrition, healthcare, and education. You know, the things more and more Americans are simply not able to afford. And I could write a rant about “higher-quality goods at lower prices”, too, since for the ACTUAL things that matter this is often not true. My ancient cast iron pans are worlds better than any newfangled teflon-coated piece of shit I could buy from Walmart and which will fall apart in a year or two. Electronics might be the only exception here.

Anyway, the entire chapter on inequality is like the quote, a longwinded attempt at pretending it’s not so bad. For example, they explain that the rising inequality since the 70’s was primarily caused by a sudden increase in the need for highly skilled workers in biotech, IT, etc instead of blue-collar workers. And then smoothly transitioning into explaining how this increased demand for skill explains the astronomic rise of CEO pay. Which, as far as I can tell, are actually two entirely separate things, but whatever. Also, I was under the impression that the demand for blue-collar work was replaced by a demand for service-industry jobs, which are mostly even less skilled and more importantly not unionized. That, combined with their claim that “incomes have risen in all quintiles, income growth has been fastest in the top quintile” (is that so? I was under the impression that the lowest quintiles were barely, if at all, keeping up with inflation, nevermind an actual rise in incomes) seems to indicate that they want to claim that rising inequality means that no one got poorer, but that plenty of people got richer. Which is pure and unadulterated bullshit.

And then they top this off with a beautiful tu quoque: “Second, increased income inequality is not solely a U.S. phenomenon. The recent rise of inequality has also occurred in several other industrially advanced nations”. Indeed it has. And? It’s still a bad thing. And “in several” implies that it didn’t increase in ALL of them. Did these other nations not have an increased need for IT, biotech etc. professionals? Do they have no need for highly skilled CEO’s and highly paid athletes and entertainers? Or is it maybe that these things alone don’t explain the rising inequality?

Then there’s a chapter on healthcare. In the beginning paragraph is this sentence: “Those with insurance or other financial means receive the world’s highest-quality medical treatment, but many people, because of their inability to pay, fail to seek out the most basic treatment.” While the second half of that sentence is correct, the first is only true for a subset of the insured. Plenty of people with insurance get shitty care, get denied treatments or payment for treatments, have their treatments delayed while the hospitals and the insurance fight over what is or isn’t covered, etc. And then there’s the fact that many insurance plans still don’t cover preventive care (The insurance plan for NDSU students for example only covers visits to the doctor when you’re sick).

Then they do some “international comparison”: they admit that “for whatever reason”, the U.S. has the highest spending, but at least, “there’s general agreement that medical care (although not health and not “preventive care treatment”) in the United States is probably the best in the world.” and what the bloody fuck does it mean to have the best medical care in the world if your preventive care and your health sucks? Anyway, then they list all these awesome things brought to you by the U.S. medical system. And they’re the very same things that the not-best-in-the-world systems in Europe have achieved as well, at much lower costs: rising life expectancy, “most advanced” equipment and technology, virtual elimination of polio, angioplasty, bypass surgeries, transplants, prosthetics, joint replacements, etc. The only point I’m willing to give them is that most of the medical research funding comes from the U.S.

And then comes the section that talks about the Moral Hazard Problem of health insurance. Now, I know that this is hypothetically relevant, but come on… “if their insurance covers rehabilitation programs, some people may be more inclined to experiment with alcohol or drugs”? Really? I’m thinking that belongs into the “hypotheticals I pulled out of my ass” category. Plus, they list people going to the doctor more often and requesting more test as a negative effect of health insurance.

In the chapter on Supply and Demand, we get the following essay:

Ticket prices for athletic events and musical concerts are usually set far in advance of the events. Sometimes the original price is too low to be the equilibrium price. Lines form at the ticket window and a severe shortage of tickets occurs at the printed price. What happens next? Buyers who are willing to may more than the original ticket price bid up the ticket price in resale ticket markets.
Tickets sometimes get resold for much greater amounts than the original price – market transactions known as “scalping”. For example, an original buer may resel a $75 ticket to a concert for $200, $250, or more. Reporters sometimes denounce scalpers for “ripping off” buyers by charging “exorbitant” prices.
But is scalping really a rip-off? We must first recognize that such ticket resales are voluntary transaction. If both buyer and seller did not expect to gain from the exchange, it would not occur! The seller must value the $200 more than seeing the event, and the buyer must value seeing the event at $200 or more. So there are no losers or victims here: Both buyer and seller benefit from the transaction. The scalping market simply redistributes assets (game or concert tickets) from those who would rather have the money (and the other things that the money can buy) to those who would rather have the tickets.
Does scalping impose losses or injury on the sponsors of the event? If the sponsors are injured, it is because they initially priced tickets below the equilibrium level. Perhaps they did this to create a long waiting line and the attendant news media publicity. Alternatively, they may have had a genuine desire to keep tickets affordable to lower-income, ardent fans. In either case, the event sponsors suffer an opportunity cost in the form of less ticket revenue than they might have otherwise received. But such losses are self-inflicted and separate and distinct from the fact that some tickets are later resold at a higher price.
So is ticket scalping undesirable? Not on economic grounds! It is an entirely voluntary activity that benefits both sellers and buyers.

Yes, this is a defense of scalpers. As an explanation of supply and demand, using scalping would have worked; but actually defending it? It doesn’t even work “on economic grounds”, since the scalpers don’t provide a service that wouldn’t be available to the buyers otherwise: the tickets they sell are not tickets that magically add capacity. Rather, scalpers remove tickets from the original supply-pool, and distribute them back to the pool of people wanting the tickets, to whom these tickets are now not available at the original price. They get something for nothing. (and what’s with the implication that scalpers sell “their” ticket? If it’s an event the scalper actually wants to attend, they will. Scalpers sell additional tickets, i.e. ones that have no value to them beyond the price they themselves paid for them).

And lastly, this is another instance of “assume robots”. Imagine for example that the sponsors of the Soccer World Cup decided to price their tickets at “equilibrium price”, which would mean the tickets would go for hundreds of thousands of dollars. The result would be worldwide riots, not a calm “oh well, I can’t afford it, I guess I’ll watch it on TV instead”. NO ONE wants that kind of publicity, especially since it would be likely to result in dead people.

And even in less drastic situations, you REALLY don’t want to price yourself out of theoretical range of too many of your fans. After all, very few sports teams and musical entertainers primarily earn money from their shows. Most of it comes from sales of merchandise and advertisement, with the live performances being more like the “free gift with purchase” enticement that mostly is just supposed to cover the costs of maintaining/renting the venue. With musical events, there’s of course some balance necessary between the need of the venue owners to make a profit and the performers to maintain mass appeal, but only venues that actually strive for a certain level of “elite” appeal would use high pricing to limit the number of people who will show up, in my experience. The entertainment business simply cannot be reduced to its economic components only.

In the same chapter you get another essay, this time proposing a legal market for human organs. Their main arguments for it are that people should be free to make any transaction they want, that this would increase the number of people who sell their bodies at death(!), and that not making it legal just means the trade goes on illegally.

Goddamn robots again. After all, the same argument could be used for selling oneself (or one’s children) into slavery. After all, that also happens on the black market already, it’s economically viable-ish, and will increase the availability of cheap human labor. It’s also still a really shitty idea once we remember that we’re talking about human beings, not robots and their spare parts. Besides, the claim that it would increase the number of people who give their bodies away after death is disingenuous, since it blatantly ignores that there’s already better ways to do that (opt-out instead of opt-in policies), and that no one gives a flying fuck about what people do with their dead bodies; it’s the sale of organs out of still perfectly alive bodies, which actually might still need those organs, that’s the problem.

Lastly, a possibly minor point is also the selectiveness on some of their graphs. For example, when showing examples of countries on the Index of Economic Freedom, they use Hong Kong, Ireland, and the US as examples of “free” countries, but not Denmark; similarly, they use Venezuela, Cuba, and North Korea as examples of “repressed” countries, but not Zimbabwe or Syria. This isn’t much, but it still makes it look like you need to be a neo-con country to be free, while all (and only) socialist countries are repressed. Also, that graph is sourced to The Heritage Foundation; not exactly the world’s most unbiased source.

There’s still about 1/3 of the book I haven’t looked through. I expect the same problems to crop up there. If they piss me off enough, and are interesting enough to write about, I might make a third post about them in the future. But I think this is quite a lot of clusterfuckery already, and certainly pretty good evidence that these sorts of textbooks are what produces so many libertarians in this country :-/

My Economics Textbook (part one)…

…or “now I know why this country is infested with libertarians”.

My textbook for my Microeconomics class arrived the other day, and I’ve been leafing through it, reading bits and pieces of it. I have no opinion about the various models presented in there, not being an economist (d’uh), but some of the phrases in it, some of the opinions, and some of the “real-life examples” for economic principles etc. are disturbingly bad. If this is what most college-educated Americans know of economics (and it’s very possible, since the textbook claims to be the most commonly used one), I’m no longer surprised so many of them are libertarians.

Some of it may well be a problem with it being a beginner’s class, and thus full of stuff that’s so simplified, it’s almost wrong. It happens. However, when half the explanations seem to include an invisible “assume a spherical cow population of cheap, expendable, emotionless robots”, the simplifications actually end up being potentially dangerously wrong.

Can’t get even past the preface explaining the changes since the last edition, before we get to this awesome paragraph (emphasis mine):

This chapter addresses the question of whether the world is becoming overpopulated and rapidly running out of resources. It covers topics such as declining fertility rates, the optimal rate of resource extraction, resource substitution, resource resource sustainability, oil prices, and alternative energy sources. An understanding of the basic economic principles of natural resource economics will be critical to future voters and leaders. This micro treatment of natural resource and energy topics is particularly timely since many students are regularly exposed to alarmist views on these subjects

ooooh, “alarmists”, what a wonderful start. Ok then, let’s go to Chapter 15: Natural Resource and Energy Economics. First, we get a fairly decent (as far as I can tell) assessment of demographic development, with the minor smearing-by-omission of Malthus, whose assessment of the dangers of populations was quite right for a world in which two things didn’t exist: female emancipation and reliable birth control. The book only says that he was wrong. Also, a strange paragraph about how women had to have many children just so at least two could survive to adulthood, and that “parents – initially unaware that such a revolutionary change in death rates has taken place – for a while kept having six or more children”. Something tells me that wasn’t nearly as planned and premeditated as it sounds. Like I said, “assume robots”…

Then we go to resource usage: all these doomsayers were wrong because in fact the supply of resources has been increasing. True enough, so far, since we haven’t run out of anything significant yet. And what will happen when we do run out? Well, population growth will stop and reverse, and resource use has also leveled off (Forgetting to mention that many have leveled off waaaaay above sustainable levels while some don’t HAVE sustainable levels at all, and that some have leveled off ONLY on a per-capita basis was a pure accident, right?), and therefore we can conclude that future technology will prevent demand for resources exhausting their overall supply (wut? that would require the ability to increase efficiency to the point where you can create something out of nothing, or replacing it with an equivalent. just what is equivalent to iron? oil (for fuel AND plastics AND medicine)? potable water?!). Oh, and “even if we were to run out of oil, alternatives would quickly become available”. IF we run out of oil? Also, I’d like to know their definition of “quickly”. New stuff only comes quickly to those with money, and these new resources wouldn’t be cheap, merely relatively cheaper than the now extremely expensive oil. Oh, and we’re not going to run out of energy because of “clean coal” and fuel made from turkey guts. Really. And lastly, overexploitation is caused by “incomplete property rights” (because no one ever over-extracts their own resources and companies ALWAYS carefully plan years and even decades ahead instead of worrying primarily about increasing next quarter profits. Just ask the Enron Guys). This is exemplified by the tiresome example of successful vs. unsuccessful wildlife preservation: State-run programs always have massive problems with poachers. Programs that have the local population as “owners” of the wildlife, i.e. in control of the tourism (they run it, they profit from it, etc.) give the population more incentive to protect the animals and not kill them. This is phrased as a “public property vs private property” thing, when in all the programs I’m familiar with the “property” is communal, at the village-level. If it were in fact private, I suspect it would just cause the same situation as with Medieval European”private hunting reserves”: the owner has incentive to protect the forest and the wildlife, but everyone else doesn’t.

At the end of the chapter, there’s a little essay called “Is Economic Growth Bad for the Environment?”. They argue that it isn’t, because rich countries have higher EPI scores. They even have a nice chart that indeed shows a very strong correlation between EPI scores and GDP per person. Which of course tells us fuck-all about economic growth, and conveniently ignores the fact that most extraction and manufacturing, the source of most resource use and pollution, has been outsourced out of these rich countries into the poor countries. And a certain economist whom I won’t name even suggested exporting waste. Plus, even scoring the highest on EPI doesn’t mean it’s enough, if “highest” still means using too many resources, spewing too much CO2 into the atmosphere, degrading arable land, unsustainable use of water, etc.

To round off the “economics and environment” issue, in another chapter, they have this to say about Climate Change:

Economists also stress that the market mechanism, through its system of prices and profits and losses, will make appropriate adjustments based on new climatic realities. Air-conditioner sales may rise; snow shovel sales may fall. Some agricultural lands probably will be deserted; others farther north will be cultivated. The maple syrup industry in New England may shift to Canada. Nevertheless, the transition costs – the costs associated with making economic adjustments – of global warming will undoubtedly be very high unless some actions are taken to reduce greenouse gases. But industrial economies are built on carbon-based energy sources, so the costs of reducing such gases are also quite high. The relevant question from the economic perspective becomes: Will it be less costly for society to reduce greenhouse-gas emissions or simply to try to mitigate their effects?

First off, what lands further north? The soil-less Canadian Shield? The permafrost currently sinking into the ocean? And this would of course happen at the cost of the forests that are currently covering these areas, but without new forests sprouting up in the abandoned deserts (see Iraq and Egypt for what happens when agricultural lands stop being agricultural).

And secondly, “cheap, expendable, emotionless robots” again. I know this is an economics textbook, not an ethics textbook, but you can’t tell me that there’s even a question about which solution would be better: entire countries are scheduled to become uninhabitable, and I’m having a hard time believing such massive disruptions to settlement patterns(nevermind massive death for a moment; apparently human life, especially brown human life, is cheap) could be cheaper than CO2 emission reduction.

This concludes the environmental part of the rant. Since the post is already pretty long, I’ll stop here, and write the rest tomorrow (I really really will, promise. It’s already partially written anyway).

Those who forget history…

Excerpt from Chile’s Free-Market Miracle: A Second Look, by Joseph Collins and John Lear:

Starting in November 1981, a series of banks and businesses began to fail, including several if the principal conglomerates that had benefited most from privatizations of government-owned companies and sweeping financial and business deregulation. The result was a drastic contraction of the economy that rivaled the worst years of the Great Depression. the gross domestic product (GDP) dropped by 14 percent in 1982, and official unemployment rose to over a third of the labor force (and in reality even higher). Suddenly the Chilean “miracle” had little to show for itself except a heavily indebted and failing private sector and an economic base incapable of supporting such high level of debt.

The military government responded by distancing itself from free-market policies, at least long enough to bail out the private sector. Over the next two years, the government absorbed the debts of many large businesses, restoring them to soundness before selling them off to private interests. Other companies were sustained through preferential exchange rates with which they could pay their dollar debts. The government would up taking on as public debt some $16 billion in foreign loans, most of which had been originally incurred and often recklessly spent by private Chilean conglomerates.

By contrast, middle-class families watched with disbelief and anger as the balances on their home mortgages, indexed to the dollar value of the peso, soared; but the government offered them no relief.

This was written in 1995.