Thursday Tutorial Times

Lets hire kids cause it's cheap

Overall I must say that I enjoyed the reading and found it worthwhile in so far as it presented not only the theories of these economists but also their lives –Had it not been for this book I certainly would have never known about Smith’s likeness to Mudders.

Heilbroner paints a persuasive portrait of the market system. Indeed, it’s hard not to see the market system as wholly benevolent and even liberating when compared to the custom-ruled and authoritarian based predecessors. Who would dare argue against the sovereignty to choose what you will produce and how you’ll produce it; what you will buy and from whom; and what occupation you will pursue. I’ve personally always felt that economic theory is more easily talked about than realized or observed. It’s not as if every person, even those within the most free of states is as free an agent as described. Even within free states we see indirect barriers (nepotism, sexism, racism, unions, etc) that prevent easy entry into any industry or profession. Obviously I understand that no system is perfect and that this one is not entirely intangible (the current ease of transnational exchange attests to its worth) but when does a model or system become too one-dimensional.

Philosophically, it’s disconcerting to think that the system keeping our society from collapsing belittles human interaction into nothing more than self-interest and competition. To be sure, I recognized the merits of the market system in promoting economic freedom, but as Heilbroner notes, economic freedom is not the same as absolute freedom. And in my opinion, if independent of moral contemplation, this kind of freedom not always something to be desired. As he states, markets are “the strictest taskmaster of all… if one pleases to do what the market disapproves, the process of individual freedom is economic ruination”(58). Economic success is nice, but its pursuit can be used to justify unjust acts. Lets not forget about the boys and girls at the Lowdham factory who were “whipped day and night… to stimulate their flagging industry”(105). Sure, I find relief in Robert Owen and his crusade for humane working conditions, but I am nevertheless perturbed that, within this model, nothing more than the prospect of increased profits would drive factory owners to improve conditions. Is man truly only preoccupied with gain?

An Explanation for Economics as a New Science

For me the most interesting part of The Worldly Philosophers was the opening section that attempted to explain why economics basically did not exist before the 1700s. I never really thought about this question before myself. I just kind of accepted, that, yes, economics was a fairly new social science. However, as soon as Heilbroner brought the topic up I found myself intrigued. I think I also found this part the most interesting because this is one of the only parts of the book that exhibits Heilbroner's own ideas, as opposed to just summarizing the ideas and life stories of various economists.
Heilbroner's basic thesis--that prior to the 1700s economics was controlled by command and tradition, and thus there was no need for economic theory to explain things--seems simultaneously acceptable but lacking. As I said, I had never really thought about this issue before, and when Heilbroner presented this explanation, I found it plausible enough, but in more careful consideration I felt that it had a few holes. Sure, economies was controlled by command and tradition prior to the 1700s, but that does not mean that there was a lack of need for economic theory. I recall in learning about the history of Rome that there were massive problems with inflation and economic policy in general... how is it possible that the Romans never had the need to explore economic theory in explaining these phenomenon? For example, Soviet Russia had a command economy, but that does not mean they lacked economic study. They developed 5-year plans to expand their economic production to the greatest extent. These plans were not just political theory, but economic theory; even though they took place in a command economy.
Simply having economic decisions primarily decided by command and tradition does not mean that there is no need for economic theory. If anything, it seems to me it is the opposite. In a market system, "the invisible hand" guides things, and no one needs much knowledge of how the system works to make it work. It just works. Sure, it is cool to figure out why, but it is not necessary to understand why it works for it to function. However, in a command economy, exactly the opposite is true. If someone is specifying how economic decisions should be made, there is absolutely no guarantee that those decisions will turn out well. It seems as if there is a far greater need for the study of economics in that case.
In conclusion, Heilbroner's observation that prior to the 1700s, most economic decisions were made by command and tradition does appear to be true. However, his conclusion that this shift away from these modes of economic decision-making created the need for the discipline of economics seems dubious at best.

Superman that Worldly Philosopher

The last page of the book is sad. "That we will again have a worldly philosophy seems unlikely." Aren't we in PPE to become the next worldly philosophers? I personally enjoy extending the simplistic to obscene dimensions, and I hope there is space left in our zeigeist, or at least the future's for Okham's razor to step in. But that is all a joke, we're all here to work for Bain next year.

I, like Akta, enjoy thinking about economics and science. Is economics a science? Taking econ at cmc (and I would guess the experience would be the same anywhere else) has imbued me with the sense that it is the best of all sciences! Personally, I think it its time for a worldly philosopher to come in and reconcile the worlds of ethics and economics. Perhaps Sen? He is a little to end-state, but at least people are on that path.

On a third note, I think Heilbroner has it wrong (or at least not all right) when he says that trends are in the direction of the economy being controlled more from without than within. Housing crisis, that dude in France who lost a lot of money, and the obscene amount and types of advertising (I hate advertising) all seem to suggest to me that the market shapes our freedom, rather than our freedoms shaping the market (too cliche). Capitalism is experiencing a resurgance not seen since the days of the robber-barons! Is this a cycle blessed to repeat, throwing us into a modern day FDR? Lets hope so. When will this cycle end? I'm down for more socialism, and I'm not too big of a fan of wealth disparities, even if they swing back and forth. Is there enough power in play to stop the pendulum from making it back to the sacred left? Palin supporters thinks so. Her policies of tribalism don't quite match, though. It must be "Gods will," just like that oil pipeline and our current occupation.

Moving to a major fourth (key of C), I obviously don't fully believe the more extreme points I bring up are forces without oposition, but that is a huge cop out, so I'll stand by them.

Best Way to Control Unpredictability?

I think one of the most interesting principles in the reading is that, “Every day the community faces the possibility of breakdown—not from the forces of nature, but from sheer human unpredictability” (19). Due to the unpredictability of humans, humans who have the most to lose have tried to create systems that control people enough to make society predictable. If leaders push for everyone to follow the traditions and religions of their ancestors the people in power can peacefully keep the majority on a road of predictability. The book mentions that in the past societies would either push tradition and religion to control the masses or they would use force and power to make the people obey the demands of the leaders. While the book keeps those two methods as different, I believe they should be lumped into the same category. Both of those systems keep everyone under control by making everyone live in fear, whether it is physical pain or a miserable afterlife, the people are driven to doing what the authority wants, because they are afraid of the alternative. Where Heilbroner’s argument becomes really intriguing is when he begins to delve into, “the invention of a third solution to the problem of survival”(20). As he explains the market system and how everyone would look out for their own best interest and everyone would benefit, as every exchange would help all parties. While this seems to work out, I believe that the first two fear based systems are much more efficient at keeping society stable than a free market society. One question that comes to mind is: what is the difference between the forces of nature and the sheer human unpredictability and a free market society? While one is chaos, is the other simply organized chaos?

While I am personally a fan of the capitalist system in the United States, true Laissez Faire is just as scary to me as communism. If the United States let any given business do whatever it was that they saw fit, I believe Sam Walton (Former owner of Walmart) or his successors would be running the country. If there were no anti-trust laws and laws protecting consumers and businesses from the big and powerful companies, then all the small innovative businesses would slowly be gobbled up by all of their competitors until there was a monopoly in every industry. That is why I believe that the United State’s current economic system is as close to perfect as it could ever be. In fact I believe that Robert Owen would be satisfied with the United State’s current economic system. While some people are living in poverty, no one really starves and there is a lot of economic opportunity for both the rich and the poor. While the rich have an advantage over the poor in society, I believe the United States has done the best a country could realistically do in creating a fair system. While there will be people and businesses who take advantage of the government support, or find loop holes like Walmart, by having most of their workers work under forty hours so they don’t have to pay their workers healthcare, the United States is always taking strides towards evening the playing field. Of course according to Helibroner, “The human animal, it is repeatedly said, is distinguished above all by his self consciousness. This seems to mean that, having set up his society, he is not content to let things be; he must tell himself that the particular society in which he lives is the best of all possible societies”(38). With that being said, perhaps I would think that whatever economic system I grew up with would be the best. However, in the case of the United States economic system I think anyone would have a hard time finding major flaws as there are countless checks and balances to almost any possible action of human unpredictability.

Human = Magnetized Particles

In the discussion of Adam Smith, Heilbroner makes the argument that the rules of the market, or the market mechanism are worth dissecting. However “dry” they may be (and I am not entirely convinced that he thinks they are) an understanding of the “worldly philosophers” goes hand in hand with these laws. The laws are based around competition—it keeps everyone in check and allows everyone in a society to attain what they need without much proscription.

Heilbroner later asks the question of “what is it that drives society to this wonderful multiplication of wealth and riches?” If it is the market mechanism—which he leaves as an open possibility, then doesn’t that reflect poorly on capitalism if one believes that material pursuits beyond that which is absolutely necessary are frivolous or wrong? Heilbroner states the “market harnesses man’s creative powers in a milieu that encourages him, even forces him, to intent, innovate, expand, take risks.” However, these risks are all a means to an end that is not necessarily happiness: wealth. A great metaphor shows up on page 71, where he states that humans are full of magnetized particles attracted to profit and repelled by loss. This system in which the magnetic people lie is of course Capitalism, and it works because the dear elements of man (self-interest and competition) fit in with this system well to make it flourish. But is that true? Perhaps people have become conditioned over time to act a certain way, but really our nature could be molded by any tradition, our rationale affected by any outside source of historical guidance or attractive morale. Could Owen be right?—is “mankind no better than its environment and if that environment was changes” could real paradise be achieved? In his experimental practice perhaps not, but different sorts or cultures of small societies or social cohesion do work in various places.

"A World Full of Lobsters"

Though all of us have read quite extensively on Adam Smith, Karl Marx, JM Keynes and our favorite, Malthus, I must say that Heilbroner does an excellent job at entertaining his audience as he takes them through “the lives, times, and ideas of the great economic thinkers.” For instance, who knew that that Adam Smith was kidnapped by a band of passing gypsies as a child?

I agree with Sarah that Heilbroner does embrace a rather comprehensive definition of “economist,” but I think his choice to discuss “economic thinkers,” yet to entitle his book, The Worldly Philosophers, is indicative of his acute awareness of the ties he is drawing between the two fields. In fact, Heilbroner mentions in his preface that his publishers suggested retitling the book, The Great Economists. As he says, “Fortunately nothing came of this.” [Though he does say that a student once went to his/her bookstore and asked for “A World Full of Lobsters”… I guess I could see how that rhymes.] In fact, Heilbroner emphasizes the fact that this edition of his book includes an “important thread” that was missing from his prior editions, mainly a certain social vision that underlies all social analysis and runs parallel to the evolution of economic thought.

This brings me to Heilbroner’s discussion of the intersection of science and economics. Even though he largely discusses this in the last chapter, my attention was drawn to it after Hillary brought up the concern that we do not have economics down to a science. I definitely see where she is coming from; three years of CMC economics has certainly made me immediately question the practical applications of a theory upon initial introduction. However, I believe that Heilbroner has an interesting response to this issue.

In fact, he questions on p. 317, “Why, then, should we not applaud the increasing tendency to envision economics as a science?” He bring up the logical reply that the ambivalent nature of human behavior makes it nearly unfeasible to compare economics with the physical sciences. Volition must always be factored into the study of social science. “If economics were in fact a science, we humans would be mere robots, no more capable of choosing what was to be our response to a price rise than is a particle of iron to the presence of a magnet” (317). On almost the other end of the spectrum, Heilbroner also brings up the fact that economics cannot be reduced to a physical science because it is too political in nature. It is unclear how to “objectively” address distribution issues such as hereditary poverty or wealth. Perhaps one could try to enter Rawls’s Veil of Ignorance. Essentially, I think that Heilbroner does a great job at delineating the importance of an interdisciplinary approach to economics while tying in the stories and minds of “Worldly Philosophers” such as Smith, Ricardo, Marx, Hegel and Malthus.

To revert briefly to Malthus: It is not clear to me how Heilbroner suggests that Malthus’s position towards the poor can be viewed as anything but “hard-hearted.” Though Heilbroner asserts that Malthus endorsed the abolition of poverty relief “with the sincerest interest of the poorer classes at heart” (p 84), and attempts to contrast Malthus’s position to social theorists that suggest allowing the poor to simply “die peacefully in the streets,” I am not convinced. What Heilbroner and Malthus seem to be missing is the entire issue of the distribution, not only of wealth, but also of luck. Malthus warns against increasing “the sum of mankind’s misery,” but clearly does not address distributive justice. As Heilbroner states, “It is not surprising that Malthus was regarded as beyond the pale of decent-thinking people.” (85)

They Each Got Something "Right"

After having read Hillary and Sarah's comments about economics and science, I thought to myself how nowadays, there are no books about the many scientists who attempted to solve the question of gravity, light and momentum, but rather, there is a biography or recognition of the ONE scientist who succeeded in figuring out each scientific mystery. Although the process of figuring out economics (and philosophy!!) is similar to the scientific processes of testing and retesting, it is clear that the world as a whole is not hell-bent on any particular economic argument, but rather, depending on the era and the society, bits and pieces of all of these economic philosophers are taken to address economic challenges and policies of our time. (Hence the peanut gallery comments "that was very Marxist of you" or "that was a Smith-like self-interest and competitive idea".) Unfortunately, things aren't black and white, but I guess that's what we are used to in PPE...constantly questioning the world and striving for answers.

This being said, I think it is going to be interesting to watch us pull aspects of these economists' arguments throughout this class into our own arguments. I think each philosopher had portions of their arguments that were absolutely absurd but other parts that made me think "Yeah, they all seem to have something that seems 'right'" (Some more than others I might add.) But then again, who is the judge of what is right and wrong here? There are some economic truths (supply and demand etc), but the right and wrong answers of which economic policies work are not necessarily black and white when they are first enacted.

Although I do not agree with all of the Utopian Socialist Robert Owen's, beliefs, I do agree that a solution to the poverty problem is helping to make the poor productive (111). Even in today's world, we have found that giving large amounts of money to poverty-stricken countries and corrupt governments does not yield the ideal results the donating governments/organizations would like to see. Rather, money spent on methods such as micro-financing and education have proven to be more effective in addressing the poverty problem than tossing over the big buck and hoping they know what to do with it.

Despite many of Owen's ideas being ignored (i.e. The Villages of Cooperation and distrust of money), some still have a presence today and can be influential in the way economic policies are devised. This just goes to show that we can take parts of these economists' arguments and adapt them to how we approach today's complex economy. Although the economy will never be black and white like some scientific laws, it will continue to be tested through various policies that will help address the economic problems of our time and ensure economic happiness for the greatest number (that is, if you have some utilitarian preferences).

I am especially excited to have a better understanding of each philosopher's view. I've had exposure them in past classes but in very different contexts. Overall, (and I know Max would agree) this book was extremely interesting and a good read. It will be a great foundation for what is to come and it is (I will agree with sarah) "truly a PPE Book."

The Worldly "Economists"

The Worldly Philosophers is truly a PPE book. Although its subtitle may suggest that the focus of the reading is the “lives, times, and ideas of the great economic thinkers,” what makes each of the so-called economists noteworthy is their ventures outside the economic sphere. Heilbroner connects the thinkers through the vague concept of social vision, a (perhaps) rather superficial link but “A” for effort. Each definitely tried to present history in a social context, make order and find meaning in the social patterns of the past, present, and future.

The philosophical basis of Smith’s argument was particularly compelling, paradoxically so. Self-interest is both a motivation and a regulation. Defining the “market system” as “an astonishing arrangement in which society assured its own continuance by allowing each individual to do exactly as he saw fit – provided he followed a central guiding rule”, the market system is distinct from, and indeed in Smith’s conception preferable to, plain old markets (20). After all, it is a “mechanism for sustaining and maintaining an entire society” (27). This is an intriguing distinction that disregards the hundreds of sustainable societies that exist (and have for much time) existed without the “market system” as defined by Smith. His laissez-faire economic schema is appealing but has it really ever been tested? Is it one of those theories, say like communism, which sounds amazing in theory but functions terribly in reality?

With Malthus and Ricardo it’s back to population dynamics. Most interesting in this section was the distinction between Malthus and Ricardo. Heilbroner duly notes that the two were arguing about different things: Malthus was considering the size of the pie, Ricardo the distribution of it.

Thank goodness the Utopian Socialists come along to save us from the dismal Malthus/Ricardo outlook. Through voluntary reform, humanity will progress toward perfection. *Side note: I’m already perfect but humanity as a whole could certainly use some help.* Heilbroner’s definition of “economist” is loose as he describes the thinkers in the chapter entitled “The Dreams of the Utopian Socialists.” For example, the normative suggestions of Fourier, who describes not only how the produce of society tended to be distributed but how it should be distributed, strike me as deeply philosophical in nature. The brilliance of John Stuart Mill was his ability to apply the laws of economics to both the production and the distribution of wealth. He observed that distribution depended on society’s customs and laws and, in true Nina fashion, asserted that they was no right way to distribute wealth. However, he claimed that society could distribute its wealth on the basic of ethics and morality instead of cold, impersonal laws. YEAH YEAH YEAH!

Marx…yawn…how many times in one college career can I espouse his genius. Compelling as his argument is, we all know how communism works (or doesn’t, rather) in the real world. And on to see-saws and elevators…Heilbroner wasn’t particularly full of praise of the history of “managed capitalism.” The term itself certainly has a nice ring to it but I wonder what Keynes would say about the current credit market. Thoughts, oh brilliant ones?

Who Opposes Markets?

The button-maker's guild. The Privy Council. The Old Guard.

What did these groups have in common during the Middle Ages?

They all opposed the market. But why?

Quite frankly, the answer is simple: the means for their power relied on products/ideas that were being replaced by newer and better ones.

Let us look more deeply into the situation of the button makers.

The button-makers guild opposed the invention of the cloth button. The cloth button did the same job a regular button did, except that the cloth button was cheaper. As a result, people started demanding cloth buttons. The people's reasoning was simple: the money they didn't spend on real buttons could now be used to purchase other, more important products. Everyone in that society then had more money to spend, thereby raising the overall wealth in that society.

But of course, the button-makers didn't see it that way. They were losing business and the only way for them to maintain their income was to demand the abolition of cloth buttons. They then used the government as a tool against the people and forced the cloth button industry to pay heavy fines. The button-maker guild knew their product was inferior and so they did all they could to close the market.

In the end the button-maker's guild failed - cloth buttons won the day - but it is not their failure that is important as much as their reasoning behind wanting to close the market for buttons.

The fact is that inferior products cannot compete in the free market. Cloth buttons are better than regular buttons, light-bulbs are better than torches and automobiles are better than horse-drawn carriages. The makers of the inferior products will always argue for more government intervention (after all, the only hope of salvaging their industry is to force people to buy their products) and oppose the opening of a market.

If we are truly interested in raising everyone's well-being, we should argue for open markets.

Dean Hess will speak to us tomorrow. PLEASE be there at 9AM sharp.

Cheers

Malthus is everywhere

In this very first attempt at posting I thought it proper to touch on the familiar for a bit because PPE is all about the interconnectedness and big picture stuff right? My favorite part or at least the part that stuck with me throughout the rest of the reading, if only because of the catchy language, was the section on Malthus and the nice explanation of why Malthusian misery never came to fruition. The quote that stil makes me giggle everytime I read it is, "birth control seems to have been practiced by the upper classes all through history, which is one reason why the rich got richer and the poor got children (p93)." Hurray for birth control and the means to escape the Malthusian trap! I like that there are opportunities for all to control their procreation like the rich have been smartly doing forever, and I think that Elliott would thoroughly agree and might even give us a double fist pump and a "Yeah! Yeah! Yeah!" for that one.

In all seriousness though I find it kind of troubling and also kind of alluring that even though we have all these great thinkers and theories for our economy but we still don't really have it down to a science. Sure certain parts of our world fit into the models that we can discuss, but there's no way to encapsulate our economy and watch it perform exactly as predicted. Keynes had it all figured out, but even his theories weren't exactly right or couldn't give us the prescription for our economy in good times and bad. The balance between the views of the macro that agrees with Keynes and the micro that labels us all as robots functioning in perfect trade don't mesh as well as we could possibly hope.This hope for a continuous and all encompassing economic theory seems to be similarly doomed like search to that of the scientists that are looking to derive a theorem that will connect all of physics and make sense of our universe. Sad but far from possible unless you are looking long run, whereas Keynes scolds us and says that in the long run we'll all be dead. Gotta love the uncertainty that the real world promises.