Category: Economic theory

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Canada Economic theory Minimum wage

Summer writing round-up

I know it’s been a bit quiet on the blog this summer, but that’s in part because I’ve been doing a bunch of writing elsewhere. Here is a quick summary of what I’ve been up to.

In the run-up to the UK election, I wrote a piece for Jacobin on one of the most important parts of the Labour manifesto: the pledge to pursue “alternative models of ownership“, including re-nationalization and co-ops. The entire manifesto was excellent and really shifted the momentum towards Labour, and even if this plank was less discussed, it will be crucial to building a 21st-century left economic policy. This article will be included in an upcoming free Verso e-book on the election and its aftermath; look out for that!

I also wrote a long-ish piece for the CCPA’s Monitor, exploring themes in In the Long Run We Are All Dead, Geoff Mann’s excellent new book on Keynesianism. The book itself is an extended mediation on themes of liberalism and revolution, tracing strands in Keynes back to Robespierre and Hegel (!). I try to situate this history of thought in the present moment and, in doing so, also draw on some examples from Three Worlds of Social Democracy, a collection of essays on the fate of social democracy across the globe, edited by my friend Ingo Schmidt. I highly recommend both books.

In other news, I now have a regular column in the venerable left publication, Canadian Dimension. The first one lays the ground for the themes I want to explore: “Questions of control and decision-making, the kinds of big questions Joan Robinson raised back in 1943, should be front and centre. A belief in democracy that extends to the economy and a readiness to popularize left economics — that’s my starting point for left economics and for this new column.” The second column, hitting newsstands this week, takes on some outdated economic myths of Canada in light of the 150th.

Finally, in more local news, I have helped launch a couple progressive economics initiatives around the big win by Ontario’s Fight for $15 and Fairness, which has successfully pressured the provincial government to introduce legislation raising the minimum wage to $15 and improving labour standards. The main piece was an open letter from economists in support of $15, signed by 52 colleagues across the country, including two past presidents of the Canadian Economics Association. It has been widely cited in the public debate, helping shift it away from business-led fear-mongering. Alongside the letter, Craig Riddell, Lars Osberg, Jim Stanford and I co-authored an op-ed for the Globe and Mail detailing the tectonic shift in the economics profession around the minimum wage.

Most recently, I have written two additional pieces pushing back on a flawed, skewed and irresponsible report on the minimum wage commissioned by the Ontario Chamber of Commerce and its allies. It makes the predictable claims using predictably inflated numbers based on predictably bad assumptions. It also appears to include an openly misleading claim around price increases to stoke additional fears. The first piece, co-written with Zohra Jamasi of the CCPA, is up on the CCPA’s Behind the Numbers blog; the second is a shorter follow-up of my own.

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Economic theory USA

Beltway Bullshit, my interview with JW Mason on Bernie’s economics

My interview with JW Mason on how wonk critics of Sanders’ economic ideas reinforce low expectations was transcribed for Jacobin under the great title, “Beltway Bullshit.”

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Michal Rozworski: There’s been a big debate recently around Bernie Sanders’s economic ideas. It was precipitated by Gerald Friedman’s claim that Sanders’s plans would lead to 5 percent nominal economic growth over a certain period, substantial working- and middle-class income growth, and massive job creation. Pretty quickly, liberal economists like Paul Krugman or former chairs of the Council of Economic Advisors attacked this paper as unrealistic. What is your argument here?

JW Mason: So far, until now I think in the campaign the core questions of macroeconomic policy — whether we can or should want to see a higher level of GDP and employment or faster growth going forward — haven’t really been central on the Democratic side and Jerry’s paper really raised those issues.

Now I don’t think we want to get caught up in the specific strengths or weaknesses of that paper or the plausibility of particular numbers. I think that there are some problems with the paper. If you were to do the same exercise more carefully you would probably come up with lower numbers.

I think it would be foolish to defend the specific estimates that Friedman put out there, but I also don’t think that there is any real need to do so because the fundamental issue, as you say, is not this number or that number. Obviously things evolve under the pressure of events.

Economic forecasting is a very imprecise science in the best case. The question is whether there is good reason to think there is space for a substantially more expansionary policy. Is there good reason to think that a big expansion of public spending could substantially boost GDP and employment?

And I think that there the answers are clearly yes. This paper and the debate that it has sparked has actually been very productive in getting people to engage that question and getting a number of more mainstream Democratic-associated economists to agree that there is actually space for substantial additional expansionary policy.

What does this debate say about the diminished expectations about the economy that we have? Is this what you’re saying that it’s fundamentally about?

That is what it’s about. The position on the other side, the CEA chairs and various other people who’ve been the most vocal critics of these estimates, has been implicitly or explicitly: “This is as good as we can do.”

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Economic theory Housing Political Eh-conomy Radio USA Welfare state

Defending Bernie-nomics and debunking the housing market

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This week, I interview two guests on fairly different topics linked by the fact that they both give very effective debunkings of some mainstream economic thinking. First, I speak with JW Mason, economics professor at John Jay College in New York City, about the debate that has erupted around Bernie Sanders’ economic program. JW argues convincingly that the criticism of Sanders from mainstream liberal economists is about managing and keeping a lid on regular people’s expectations for the economy. The critics are effectively saying “this is the best we can do” even when millions are condemnded to poverty and shitty jobs. Be sure to check out his posts (1, 2 and 3), which are among the best on this debate.

Second, I speak with Nathan Tankus, a writer also based in New York City, on why housing is so unaffordable in large cities even amidst massive condo building booms. Nathan goes through the history of his Chelsea neighbourhood in NYC and its long process of gentrification as a way of drawing some conclusions about why the housing market is so screwed up. It turns out this market doesn’t work like the model described in Economics 101 textbooks. For further reading on the topic, Nathan suggests Bob Fitch (especially The Assassination of New York), Doug Henwood and Michael Hudson.

ready

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Crisis Economic theory Political Eh-conomy Radio

JW Mason on business not investing, still disgorging the cash

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This week’s podcast is a bit more economics-focused than usual but gets at the heart of what’s going on in the global economy where interest rates are near, at, or even below zero, but where investment, growth, wages and employment continue to suffer. My one guest, who joins me for a feature-length interview, is J. W. Mason. J. W. teaches economics at John Jay College, City University of New York, blogs at The Slack Wire and is a fellow at the Roosevelt Institute. It’s for the Roosevelt Institute that he wrote a recent working paper, “Disgorge the Cash: The Disconnect between Corporate Borrowing and Investment”, that is the subject of our conversation. In short, the paper traces how, as a result of the shareholder revolution, firms today invest far less, even when borrowing conditions are better than ever, serving instead largely as ATMs for owners happily pumping out cash. This shift has big implications not only for economic policy, but for our understanding of today’s capitalism.

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Economic theory Workers

Someone is making slightly more than you and this report says it’s time for it to stop!

Here’s a familiar refrain: “Someone’s wages rose faster than someone else’s: report”. This depersonalized version sounds about as cynical as it should especially since the first someone is usually not a CEO whose wages are actually rising faster than everyone else’s – it’s that fat cat across the street, like you know, the garbage collector or maybe the admin assistant at your community centre. Or at least that’s who it is in this case as the headline actually reads, “Municipal employees’ wages rose twice as fast as provincial public sector: report.”

The report in question is one commissioned by the British Columbia government to put pressure on the wages of municipal workers, or even bring centralized bargaining to the still-autonomous municipal sector. The specific claims in the report as well as the shortcomings of its method have been thoroughly debunked by interested parties, both CUPE and the Union of BC Municipalities.

I want to use this as an example of something I seem to come across a lot lately… For beyond the wage comparisons, the economic indicator most prominently referenced in this report is the rate of inflation. More and more, it seems like any wage gain over and above the rate of inflation just isn’t fair. This is not a new argument and it is most easily applied to the public sector that has the stereotype of fat cattery stuck to it. Regardless whether it’s just me noticing it more, it turns out to be an odd one.

The basic problem is that this argument is out of line with the mainstream economic theory to which most of those making it ostensibly subscribe. That not-unfamiliar “go back to Econ 101” argument can be made here against those usually making it. In short, Under a whole array of conditions relating to the competitiveness of markets (perfectly so!) and the structure of production (very particular!), wages should be directly related to labour productivity.

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Canada Class Economic theory Inequality

The lament for Canada’s middle class

I’ve been posting more sparsely lately for a number of external reasons but this should change soon I hope. For now, here is the first major piece I wrote for Ricochet. In some ways, it’s the obligatory piece on Thomas Piketty’s Capital in the Twenty-First Century, but really it’s my way of trying to think through the hand-wringing about Canada’s middle class. Below are the first couple of sections, read the rest here.

The US is in the throes of a debate about inequality: It’s the Waltons versus the Walmart workers on food stamps, the runaway rich in the 1 per cent versus everyone else. Meanwhile, Canada’s inequality discussion has been largely confined to the woes of the middle class. Even the New York Times added grist to the mill by proclaiming Canada’s middle class better off than its US equivalent.

Similarly, while the US has made a veritable rock star out of French economist Thomas Piketty, whose 600-page economics tome Capital in the Twenty-First Century has topped best-seller lists, Canadian reception has been much more muted. This is a bit surprising because Piketty, in drawing out the link between capitalism and inequality, tells the story of a new Gilded Age replacing the post-war Golden Age that saw the middle class establish itself. One reason Piketty’s book may have left less of a mark on Canadian debate is that more of a middle class has endured in Canada. But will today’s middle class survive?

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Economic theory Inequality Political Eh-conomy Radio

Forum on Piketty’s book in Vancouver

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On June 25th, a standing-room only crowd of 150 people attended a public forum and discussion titled “Pikettymania, Inequality and You” on Thomas Piketty’s Capital in the Twenty-First Century. Today, I’m happy to post in full the four talks that made up the first half of the event (the second half was all discussion). The total is about an hour in length with each speaker taking 15 minutes. Enjoy!

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Economic theory Inequality

Slides on Piketty’s Capital

I spoke at an event dedicated to Piketty’s Capital in the Twenty-First Century last night in Vancouver. It was great to have a conversation about inequality, economics and politics with an overflowing, diverse crowd. There is a palatable hunger for an understanding of what is going on today and what kind of political action can generate broad-based mobilization.

I’m posting my slides from that discussion here. They focus on the theory in Piketty’s work and are partly expository as one of the aims of the event was to introduce the arguments of the book. However, I have tried to raise some substantive points about how the book and its myriad empirical observations open the door to future avenues of exploration — especially exploration that takes politics seriously and wants to deepen the tradition of political economy.

One of the fruitful things about the book is door it opens out of the stuffy rooms of neoclassical economics back towards political economy. All the more important, however, to remember the task of carrying out a “Critique of Political Economy” (the subtitle of that other Capital): a serious engagement that is at once a serious critique.

[ Slides in PDF ]

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Economic theory Finance Workers

Whose efficiency? what efficiency?

Efficiency is formidable. It rears its head most everywhere. Witness the tyranny of the target at more and more workplaces: from more greets per hour to more exam points per teacher. At the same time, efficiency also nurtures increasing tyrannies at home: get fit in 12 minutes per day instead of 15…but don’t waste those 3 saved minutes, other efficiencies await!

The ruthless search for efficiencies is everywhere, whether in reality or in slogans, corporate reports or government policies. When, for example, workers are fired or fossil fuel pipelines are planned in the name of efficiency, we want to question the cold calculations behind these decisions. On the other hand, it’s hard to disagree with efficiency. Try it at home. Walk to the kitchen via the bathroom. Use a ladder, a long stick, tongs and some string to get snacks out of the fridge. Efficiency follows us everywhere whether we like it or not: from a diagonal path across a green space to the l8st txting app.

Due to this omnipresence, efficiency is easily conflated with other categories – the drive for profit for instance. (This is no straw man: I’ve had conversations recently where such conflations have come up; overall, I think they are not marginal, albeit often implicit.) This kind of conflation works in two ways. It naturalizes profit-seeking as a simple and inevitable human aim, while making arguments against profit-seeking difficult because increasing efficiency appears to be a no-brainer.

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Economic theory Ideology

Privilege and pseudo-science

When people ask me why I did graduate school in economics, I sometimes half-jokingly tell them that it was a case of going into the lion’s den to see what the lion is up to in there. This is an exaggeration to be sure, but it is in keeping with the dictum that we should understand something in order to critique it effectively. For the similar reasons, I keep reading a variety of mainstream economics books, journals and blogs.

And sometimes I come across things like this. The title, “Feminist framing and general equilibrium theory”, is innocuous enough – especially if one is used to the residual sexism and racism that sometimes accompanies the ahistorical and asocial theory of society that underpins mainstream economics. The author, Nick Rowe, is a frequent contributor to the group blog on which the article appeared; he is a professor of economics and a fellow of a prestigious research institute.

The article is an argument against some recent evidence that shows there may be structural reasons for why fewer women major in economics in university. In particular, there is evidence that women are far more likely to drop economics as a major if they do not receive As.

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