Memoirs of an Economics Student

Student Debt Teach-In Notes

2011-12-08T16:55:00.000-05:00

Here are some notes from an Occupy Teach-In on student debt sans links, since this is meant to be face to face...:

Current Situation

Overall U.S.

$960 Billion outstanding student loan debt and counting
Recently surpassed credit card debt
$2853.88 per second

[http://www.finaid.org]

UMass Amherst

Average debt of graduates 2010 $ 25,420
Proportion of graduates w/debt 2010 68%
Nonfederal debt, % of total debt of graduates 2010 27%
Full-time enrollment fall 2009 19,315
2009-10 In-state tuition and fees $ 11,917
2009-10 Total cost of attendance $ 22,593
2009-10 % Pell Grant recipients 22%
[http://projectonstudentdebt.org]

Why? Funding Cuts, Tuition Hikes, and Falling Wages

1. Cuts to Public Higher Education Funding

[PHENOM Key Data on Public Higher Education, December 2011]

· 31% reduction in Massachusetts state support per full-time student from FY2001-2011, despite enrollment increases

· Massachusetts ranks 45^th in the country for public higher education appropriations per capita, at $196, which is 33% below the national average of $291

· For FY2008, 3.8% of state revenues went to public higher education; the national average is 6.6%.

· In FY 2001, the state spent about 25% more on higher education than on prisons (including probation and parole). In FY 2012, it was the reverse – spending on incarceration is about 25% more than on higher education.

2. Tuition Hikes

· Average tuition and fees at public 4-year institutions in Massachusetts was $8,201, 30% above the national average of $6,319 (FY 2010).

3. Falling Wages

· Real wages for workers with college degrees and/or some college have declines since the 1970s while tuition rises

· The tuition/wage gap, along with public funding cuts, is now offset with the massive growth of student debt

Why is this dangerous? Lack of consumer protections and debt crisis

· student loans lack basic consumer protections, like the right to discharge in bankruptcy

· defaulting on loans can lead to ruined credit, wage garnishment, and even having professional licensure revoked

· This gives lending institutions incentive to make pernicious loans, and even incentive for tuition hikes and public funding cuts – a similar dynamic to the mortgage crisis

What can be done?

recent student loan reform only deals with Federal student loans and income based repayment, not with private “alternative” loans
does not address lack of consumer protections, or the root of the problem- tuition hikes and falling wages, with an underfunded public university system

H.R. 2028: Private Student Loan Bankruptcy Fairness Act of 2011-To amend title 11 of the United States Code to modify the dischargeability of debts for certain educational payments and loans

S. 1068: Student Loan Simplification and Opportunity Act of 2011-A bill to amend the Higher Education Act of 1965 to provide for temporary student loan debt conversion authority.

H.Res.365 - Expressing the sense of the House of Representatives that Congress should cut the United States' true debt burden by reducing home mortgage balances, forgiving student loans, and bringing down overall personal debt.

Speak out to state legislature of increase funding to Massachusetts Public Higher Education

Good Resources:

Nancy Folbre, “Saving State U”

Anya Kamenetz, “Generation Debt”

Alan Collinge, “The Student Loan Scam”

Marc Bousquet, “How the University Works”

http://www.occupystudentdebt.org

http://defaultmovie.org

http://www.forgivestudentloandebt.org

http://www.studentloanjustice.org

Anti-Mankiw....it's happening

2011-11-06T12:34:00.000-05:00

A while back one of my comrades lit the fire for the Anti Mankiw Movement. It's now come into fruition, with some great chapter critiques of Mankiw's book here.

And now introducing...The Anti Mankiw Blog, starting with a post concerning the recent Harvard OWS solidarity walkout of Mankiw's EC 10 class:

"Choosing not to discuss such an economically-relevant and important topic demonstrates a severe lack of intellectual and moral integrity on the part of Mankiw and his textbook. In other words, the whole market-centric approach of Mankiw's course is fundamentally at odds with how the world works in reality.

So given that Mankiw’s course, textbook, blog, and ideology are at odds with the actual workings of social and economic life, and even help to perpetuate our societal and economic problems through producing this image of the individual as completely oriented toward market values and ideas, it’s probably time to expand the economic conversation towards more pluralism and away from hegemonic, ideologue set-in-stone “principles”. Indeed, this is why this blog is Anti Mankiw." More here

This blog is a collective effort and open to new recruits interested in joining this constructive conversation.

Income inequality is insane

2011-11-06T12:18:00.001-05:00

Literally.

Or maybe some folks are profiting from the increase in mental illness?

via Equality Trust, hat tip from Occupy Boston <3.

Anticipating the President's Student Loan Reform

2011-10-25T15:42:00.002-04:00

Here's the word so far on the President's plan for student debt to be announced tomorrow in Denver:

President Barack Obama will announce a new plan to allow students holding both private and government student loans to consolidate their debts into a government loan, thereby reducing their interest rates, officials inside and outside the Obama administration said Tuesday.

Mr. Obama is to announce the move in Denver on Wednesday, part of a White House push to emphasize actions the administration can take to boost the economy without congressional approval.

A few things to think about with this....

1. It's quite unprecedented to have Federal consolidation of both private and Federal loans. This effectively removes another layer of risk for the private lending corporations. While this sounds good for debtors who want to consolidate and apply for income based repayment, I worry that the risk-amelioration for private lenders would continue to make the problem worse- making it "okay" for students to take out huge debt, encouraging tuition hikes since students can more easily deal with it, and subsidizing private profits for these lenders. It will help to know more details about how this transaction between private and public balance sheets will play out.

2. Many folks agree that Federal loans are even tougher to deal with than private, for all kinds of reasons including having even less consumer protections and the power to garnish wages/licensure (also, SWAT teams). The biggest problem here though is that it is still completely impossible to discharge these loans in bankruptcy. Even with income based repayment (IBR), this could be a problem. Say someone has their health insurance severely cut and now must pay a large portion out of pocket, meaning they cannot make the IBR schedule or 10 or 15% of income since they need that to cover medical bills. Should this person need to file for bankruptcy due to racking up medical expenses, those loans will still never be discharged.

3. Although the plan sounds "nice" and would probably help a lot of people, part of me thinks money would better be spent investing in free public higher education rather than buying up loans. We need to get to the root of the problem, not dance around half-efforted patches.

4. Final point is to just be cautious with this, but I guess it's a decent start? I can't really say until the fine print is published.

Are there are precedent cases of the government buying up large chunks of personal private debts like this? The bank bailouts inadvertently did, but it wasn't as direct as Federal consolidation of mortgage debt for individuals.

Update: It looks like "private" loans really just means things like Stafford loans that are serviced privately, not all private student debt (such as a Sallie Mae loan). "Second, he will allow borrowers who have loans from both the Family Education Loan Program and a direct loan from the government to consolidate them into one loan. The consolidated loan would be up to a half percentage point less. This could affect 5.8 million more borrowers." Details seem murky, guess we'll wait until tomorrow.

Millenials earning less than previous generations

2011-10-21T15:28:00.000-04:00

And they wonder why so many young people are upset about student debt, rising tuition costs, and the devaluation of a college degree.

Demos put out a nice graphic showing the difference in earnings for young Americans in 1980, 2005, and 2010. The results are upsetting:

"Let’s look at what’s happened to young workers’ paychecks over the last generation, starting with the experience of young men. Three years before the recession, the typical earnings for all young men working full-time were down 4 percent compared to 1980. And behind those overall figures are deep drops in earnings for the majority of young men. By 2005, young men with only a high school diploma were making 82 cents for every dollar their father made back in 1980; young men with some college were making only 92 cents. The only men who made progress over a generation were those with at a least a bachelor’s degree. By 2005, they were making $1.16 for every $1.00 their dad had made at that age in 1980. Of course, that extra 16 cents per dollar gets quickly eaten away by the student loan payments and higher housing costs that also distinguish the life of a 20-something Millennial compared to Baby Boomers. What happened to men since the Great Recession is a continuation of these trends against a backdrop of a labor market that is no longer creating enough jobs to go around."

In so many ways, we are worse off than our parents and even our older siblings. This generation is being squeezed by consumerism and student debt, and along with lower earnings, I'm afraid of where this structural problem is going to end up.

Fact checking total outstanding student debt

2011-10-20T14:07:00.000-04:00

A blog post by Felix Salmon on Reuters yesterday questioned whether the "heading towards $1 trillion" outstanding student loan debt figure is fact or fiction. Salmon uses a recent NY Fed report to argue that the $1 trillion figure is fiction, and is really a mere $690 billion. I don't know what planet he lives on, but either way the outstanding balance, be it $1 trillion or $690 billion, is outrageous and crisis-worthy.

So here's the number disrepncy. The NYFed's most recent "Quarterly Report on Household Debt and Credit" totals student loan debt outstanding at the $690 billion figure. The report however is missing information that defines its data set, collection methods, etc. which would clarify just how this is calculated. I've asked the authors and they are investigating the data problem. On the other hand, the generally accepted figure for current outstanding student loan debt is roughly $950 billion and rising with each semester.

So what did the Fed get wrong? It looks like the figure they and Salmon have latched onto is closer to either the figure for the total of just Federal student loans, roughly $550 billion. The economists may have missed the figures for private student loan balances outstanding since this data isn't as easy to find.

But private student loans, comprising a little less than half of all student debt or roughly $400 billion, are "no minor potatoes" (extra points to whoever can name the professor from which I took the idiom). Doubling the amount of debt by including riskier private loans should certainly change our economic outlook.

So why is this misrepresentation of student debt figure important? Clearly our blogger friend used it as standard right-wing political rhetoric. For jump-to-conclusion-istas, student debtors "whining" about the student loan bubble must have their facts wrong and the massive increase in indebtedness over the past decade is nothing out of the ordinary. Salmon concludes, "It’s a problem, I think. But it’s not a trillion-dollar problem, and it shows no sign of becoming a trillion-dollar problem any time soon." Wrong.

Fact checking is an issue. Sometimes Fed economists get it wrong, but luckily critical readers can catch these errors before the nonsense mudslinging starts.

In Theory and in Practice

2011-10-10T23:47:00.001-04:00

I consider blogging generally to be part of this "theory" realm. Talking about theory or attempting to apply it in some way. I've been away from blogging though to work more on "practice", as well as dealing with grad school and a social life. After last week's student walkout in Amherst, the week's General Assemblies, and today's Student March in Boston, I felt the need to share a few happenings on the "practice" side of things.

On the Student Walkout in Amherst, from our local paper and Amherst Media

http://www.masslive.com/news/index.ssf/2011/10/more_than_150_join_occupy_wall_street_amherst.html

http://www.amherstmedia.org/occupyamherst

Information on Amherst General Assemblies

http://www.occupyamherst.com

Today's Student March in Boston

http://www.necn.com/10/10/11/Students-march-through-downtown-Boston/landing_business.html?blockID=575310&feedID=4209

Stumblings: on higher ed

2011-08-31T16:50:00.000-04:00

The shrinking payoff for graduating college

Relief for student debtors (relief for the economy?)

In case you haven't paid attention all summer, the debt deal screws grad students

Removing bankruptcy protections from a lending system is really, really stupid..... it'd probably be a good research agenda economists to look more into how bankruptcy protections and Federal loan guarantees actually work (or don't), and how they came about.

Co-ops, state ambivalence, crisis, etc etc etc

2011-08-31T16:38:00.000-04:00

Dear blog, I apologize for neglecting you all summer. Basically, it was too nice out and I really like to ride my bicycle. So I am going to post a paper from last semester about some history of the French cooperative movement in the late nineteenth through turn of the century. Hopefully I will someday getting around to fixing this paper, which needs more research and to be more thorough/conclusive.

To summarize, in periods of economic crisis and labor unrest, the French government sort of became ambivalent towards capitalism. That is, they support non-capitalist enterprise in the form of cooperatives, especially worker cooperatives, through direct government grants and contract preference. There is even some evidence that in the U.S. under FDR the state gave some support (or at least curiosity) to non-capitalist enterprises (FDR had an commission set aside for an inquiry into cooperatives). I think when we theorize the role of the state under capitalism and non-capitalism, this ambivalence turns out to be a curious find.

----

Liberté, Fraternité, et Coopération!

French Worker Cooperatives in Historical Perspective, 1870-1910

Introduction

The French cooperative movement is often hailed as one of the great historical examples of workers collectively gaining control of their productive means- a sort of homage to the Marxian linear progression of ownership and democracy over the course of economic history. Bursts of cooperative development were not unusual in European economic history- Rochdales, Owenites, early French socialists, and other attempts at communal distribution, production, living, and/or some combination of all three had been attempted during the nineteenth century.[1] Production and worker cooperatives, where workers own and control their means of production through democratic processes, were particularly less frequent than other organizations, such as the consumer-owned cooperative retail or cooperative credit union.[2]While both Great Britain and France experience similar waves of cooperative movements in the nineteenth through the turn of the century, France became especially conducive to the establishment of cooperative worker societies.

As presented in Joan Wallach Scott’s narrative of the Carmaux glassworkers’ militancy, strikes, and formation of a cooperative glassworks, a feeling of triumph over capital and labor replacing mechanization was realized in these movements.[3] For Scott, the elite artisans used the solidarity of their labor union to establish worker militancy, ultimately leading to a worker strike in 1895. From that strike, the glassworkers left the capitalist factory and established a new cooperative Verrerie. However the triumph of the strike and cooperative factory were short-lived. Shortly after the strike and set up of the production cooperative Verrerie Albi, storybook images of cooperation began to fade. Just one year after the establishment of the cooperative, the Associate Press reported:

“The Directors were workmen, elected by their comrades; but dissension has been rife, and on Wednesday forty workmen left the co-operative works and asked the Rességuier managers to take them back. It is said that several months' wages are due to the workmen, and that the whole capital has been spent, while the works are not yet completed.

The society is heavily in debt, and the misery among its members and their families is appalling. The wives are begging the street. The fort penitent Socialists declare the workmen Directors are responsible for the trouble, and they also assert that the fraternity of workmen does not exist.”[4]

While initially the cooperative seemed like a major success for labor, the reality of producing in a competitive capitalist world set in. Though organizational struggles may have eroded the Carmaux cooperative, other examples of cooperative takeovers showed that such methods were effective in securing “bread and butter” labor rights. In 1900, the New York Times reported that the cooperative mines at Saint-Etienne and Carmaux, established at the same time as the glassworks, enjoyed higher wages and more regulated work days than their capitalist counterparts.[5]Solidarity and cooperation certainly had payoffs, but the ability to form worker cooperatives was constrained by particular economic and political conditions.

Considering Carmaux and other late nineteenth century through turn of the century movements towards worker cooperation, the movement in France was not an idealist attempt at communal living, like that of the early Christian socialists in Great Britain. Instead, cooperation was another means for labor movements to combat capitalist owners, ill work standards, low wages, and labor displacement due to biased mechanization. In historical context however, these events are much more complicated. The formation of worker or production cooperatives in France required particular political conditions, institutions, and economic circumstances which can be analyzed by considering the role of unionization, labor strikes, political support for cooperatives, and national level cooperative organizing.

Prevalence of Worker Cooperatives: France and Britain

It is generally accepted that France established a strikingly higher number of production cooperatives than did Great Britain. In his survey of cooperative enterprises in Europe and the United States, Charles Ryle Faye estimates the approximate number of worker cooperatives in both Britain and France in 1905-6, not yet a decade after the Carmaux strike and well into the French Third Republic and rise of the French Radical Socialists.[6] The French government Statistique defined production cooperatives as a “worker society”. Table 1 outlines examples of sectors and the number of cooperatives found in each in 1905:

Table 1: Number of Worker Societies in France, 1905.[7]

Industry/Sector	Examples	Total Number of Societies
Agricultural and Mines	Woodcutters (2), Slate Quarries (3)	15
Food	Baker (3), Brewers (3)	9
Chemical Products	Photography (2)	7
Books and Paper	Printers (24)	33
Leather and Skins	Shoemakers (12)	25
Textiles and Clothing	Weavers (8)	24
Metals	Locksmiths (6)	36
Wood	Polishers (2)	28
Building	General (12), Carpenters (11), Joiners (11), Masons (8), Painters (9)	113
Stone and Glass Work	Glass Polishers (5)	13
Transport and Furniture Moving	n/a	25
Others	n/a	11
Total		338 (362 in 1906)

Looking at Fay’s data, it is clear that cooperatives were indeed prevalent in artisan craft trades, such as books, glasswork, and leatherworking, which is consistent with the notion of that artisans were particularly subject to the establishment of socialist workplaces, referred to by one historian as ““a cardinal French radical republican article of faith”. [8]It is interesting to note however that other trades such as mining and construction also established several cooperative workplaces. Friedman has shown that circa 1905, these trades were experience both high levels of unionization and strike activity.[9]

Table 2 represent the number of similar worker cooperatives reported to exist in Great Britain in 1905-6:

Table 2: Number of Labor Copartnership Associations in Great Britain, 1905-6.[10]

Industry/Sector	Total Number of Labour Copartnerships
Building, Wood, etc.	32
Textiles	20
Boots, Leather, etc.	17
Agricultural	17
Printers	14
Metal Trades	13
Various	17
Total	130

Great Britain had noticeably less production cooperatives in this time period. In total, Britain had 130 “labour co-partnerships”, which was the nomenclature used to define a production cooperative. These statistics were gathered from the Labour Copartnership Association, covering a wider field than worker cooperatives. The organization was considered to be “propagandist” in reestablishing a cooperative movement in Great Britain after failure of the Christian Socialist movements of the earlier part of the nineteenth century.[11] For this reason, it may be plausible to think that these numbers are slightly overstated and not reflective of the true number of worker cooperatives established in Great Britain in 1905-6.

Considering some bias to these data, it is still obvious that France had a markedly higher frequency of worker cooperatives. In 1900 the populations of France and Great Britain are estimates to be about 41 million and 37 million people respectively.[12] Considering these populations as more or less of a similar level, it is significant that France had 338 established cooperatives versus 130- a roughly 38.4% higher frequency than Great Britain.

Establishing that France had a significantly higher frequency of established worker cooperatives than Great Britain, it begs the question of why this was so. Exploring this question requires looking at how French institutions and political movements facilitated cooperation, the relationship between worker societies and unions, and national efforts to organize a national French cooperative movement.

Solidarity, Strike, and Cooperation

During the French Third Republic, roughly 1870 through World War II Vichy France, the establishment of worker cooperatives and labor struggles between unions and capitalists were complexly, but not exclusively, intertwined. Some historians assume that cooperatives were almost always born out of labor unions or unionized themselves. As apart of President Roosevelt’s investigation in cooperative enterprise, Jacob Baker writes of cooperatives in Europe, “ The attitude of private business men toward cooperatives is sometimes hostile precisely because of the cooperatives’ friendly attitude toward labor….Practically all cooperative workers are organized, and it is quite widely assumed that they should be.”[13] This attitude recognizes that worker cooperatives were on the same side as other labor organizations, both aligned against the degrading tactics of capital, however the relationship between unions, strikes, and cooperatives needs to be more refined in order to understand how changes in the landscape of French labor history effected workers’ ability to form production societies.

The following Table 3 represents one survey question from a French government inquiry into worker cooperatives:

Table 3: Union Membership Survey Question[14]

Question		Response	Total
To be admitted a member of a society…	a.) Is it necessary to be a member of a trade union?	85, yes 87, no	172 workshops with 2835 members
To be admitted a member of a society…	b.) Is it necessary to work in the workshop?	87, yes 85, no	172 workshops with 2835 members

The responses to this survey show that only about half of worker cooperatives were necessarily unionized, however this should not discount the extent to which members of cooperatives interacted with unions or were politically aligned, especially considering the prevalence of the French socialist political movements in the late nineteenth through the turn of the century. It appears as though those who answered “yes” to union membership also answered “yes” to working in the workshop, however the similarity of the two responses should not be taken as meaning the answers are matched or correlated. In any case, cooperatives were clearly not just extensions of unions, but new organizations unto themselves formed both out of strike and possibly as a way to preemptively combat future strike and militant labor activity.

The 1897 French government inquiry on the Associations Ouvrières de Production, which was published by the Office du Travail, heavily implied that labor strikes served as the general impetus to forming production cooperatives.[15] The question of why this is so may have two answers. First, the momentum of solidarity experienced by the workers during and after a strike may have been the final push towards leaving capitalist workplaces and beginning new cooperatives (à la the Carmaux glassworkers. Or, second, the formation of cooperatives may have been a concerted effort by either labor, the French state, or both to prevent striking activity and ease the political tensions cause by unemployment.

In support for the first speculation that labor solidarity during strikes naturally paved the way for the formation of worker cooperatives, Joan Wallach Scott presents evidence of how this occurred at the Verrerie Sainte Clothilde in Carmaux. Her primary claim is that labor displacing mechanization drove down wages, working conditions, and the social status of glassblowing, forcing workers to organize and strike in defense of their livelihood and identities as elite craftsmen. The cooperative was born out of this defensive streak and a fairly homogenous group of Southern French glassblowers, descended from generations of elite craftsmen. Union membership rose dramatically up until the point of the 1895 strike and departure of the workers to the new cooperative Verrerie Albi.[16] This story is consistent with the idea that a natural progression of capitalism would lead craftsmen to unionize (due to technical change), resist, and then form new organizations, however referring back to Table 3, it is not clear that every cooperative came to being in this linear pattern.

Other evidence suggests a different, more nuanced approach to how France fostered such high levels of worker cooperation. In his account of the radical artisan movements in Europe, Iowerth Prothero suggests that cooperative were encourage by the French government and established by workers as a means of creating tolerance between capital and labor, avoiding strikes, militancy, and gruesome tensions between the two. Prothero explains the politics of the situation through the nineteenth century:

“The reason was not wider support for it but the political situation, in many ways similar to that obtaining after June 1848. The strength of co-operative production in France depended on particular circumstances, and when these did not obtain, it was much less important, as in the greater freedom of the early 1848, late 1860s, and later 1870s. Co-operative in the mid-1860s was the result of toleration, with trading ‘issuing from the empiricism of worker class consumption’, and with production promoted by politicians…”.[17] Further, connection between the general world economic crises of the 1870s and 1890s may have also influenced this pattern of toleration for labor struggles.

Evidence for the promotion of cooperative by politicians is clearly presented by Baker, who wrote of earmarked funds allocated by the Minister of Labor in France to credit worker productive societies, though did not provide further evidence of the structure of such funding, how credit was allocated by the state, or obtained by cooperatives.[18] Further investigation into the role of the state in financing worker cooperatives during times of labor unrest is needed to strengthen this argument, however Prothero goes on to suggest that, “In general, then, we can say that in both Britain and France co-operative trading gained steadier and more extensive support (alongside benefit and loan societies), while co-operative production, apart from temporary strategies connected with strikes and unemployment, was only significant when particular political conditions obtained in France….”.[19] Cooperation then was an insurance policy against the threat of strike and unrest due to unemployment.

Evidence for how cooperation emerged as a safety net is seen in an example of French bronze workers in the 1870s. Having struggles with capital, the workers formed a union in 1872, which supported strikes but also includes a cooperative workshop. “While cautiously supporting several limited strikes, the union also created a “union workshop” (production cooperative) and then a fund to provide pensions and aid in case of infirmity to elderly workers. This comprise gradually broke down. In 1876, the cooperators complained, “the spirit that seems to dominant the majority of our colleagues does not permit us to hope for anything other than to amass money for resistance [strikes]””.[20] For these workers, the cooperative workshop came in tension with tendencies to strike against capital, ultimately leading to the break up of the union by 1880. Toleration for capital-struggles, appeased via the formation of cooperatives, was as contentious as it was risky for union workers.

How related then were strikes and the formation of cooperatives? According to Friedman, the years 1900-1910 saw French labor surpassing the United States in the proportion of wage earners participating in strike activity.[21] It was at this time where Fay cites growth in French worker cooperatives, where Table 1 indicates that in 1905 about 338 cooperatives existed, while just one year later there were 362 establishments recorded- a growth of about 7% in just one year’s time, indicating turbulence in labor relations and the search for alternatives to labor militancy by some workers (certainly not all!).

Fay describes how these societies, sometimes born out of strike, were attractive to the “idealism and independence” of French workers, while still providing a safe haven, albeit a very risky one, from labor militancy, strikes, and unemployment. He notes that the typical French work society is small, composed of just 30 or so members who mostly work on the shop floor. “Very few societies have been built out of private businesses,” contrary to assuming that unionization and labor militancy in capitalist firms is a necessary condition for building a cooperative. However Fay reports from the 1897 Inquiry that, “but oftener still and notably on all the occasions in which the original members are numerous, it is from a trade union organization that the productive association, more or less, springs.” Is this always the case? Fay suggest that trade union form worker societies in order to prolong their resistance to employers- creating a sort of long-term strike rather than a momentary, sometimes violent labor struggle. In doing so, workers can remain employed to some extent.[22] There are cases however, such as the Piquers de grès de Paris, who formed cooperatives with no history strike activity or labor militancy.

Though a case-by-case analysis of French cooperatives is needed to tease out the relationship between unions, strikes, and worker societies, it is clear that some correlation does exist. With nearly half of societies related to unions and with waves of cooperation corresponding somewhat to times of intensified capital-labor struggles, there is reason to suspect that worker cooperation is often either born out of labor solidarity and struggle, used as a means of tolerance to avoid strike and unemployment, or some combination of the two paths.

Finances, State Support, and National Organizing

The formation of worker cooperatives, though presented as a conceivable option for labor organizations and independent workers, required facilitation by political action and national organizing. As a less prevalent form of organization, institutional barriers made cooperation less frequent than capitalist development and also required that labor activists make concerted efforts to be involved in influencing local and even national politics. Gaining political and financial support, as well as being able to organize a national federation of cooperatives, proved crucial in French worker cooperative development.

An important tool for bypassing institutional barriers and facilitating cooperative development was the Chambre Consultative, a national federation of worker societies, not unlike the modern-day United States Federation of Worker Cooperatives, which acts to facilitate information sharing, political organizing, and access to financial resources. For such an organization to be effective to fostering a cooperative movement, a regional scale is necessary, whereby regional groups comprise a larger national federation. The organization is described as, “There are three federations in the French movement, but two, those of Lyons and Bordeaux, are subordinate provincial federations. The national federation, which comprises most of the existing societies, is the Chambre Consultative, the Labor Copartnership Association of France.“[23] Looking at the membership levels in Table 4, it is clear that as the nineteenth century drew to a close, participation in the organization grew substantially growing to nearly 200 societies. Further research into whether or not the survival rate of cooperatives involves in the Chambre Consultative differed greatly from those not participating in building a larger cooperative economy would shed more light into the effectiveness of the organization.

Table 4: Membership in the Chambre Consultative by Year[24]

Year	Number of Members of the Chambre Consultative
1894	28
1897**	97 (of 172 societies)
1904	173
1907	198

**see footnote[25]

Though dynamic data on the organization is unavailable, it is clear that Chambre Consultative had a positive effect on encouraging French cooperation, at least comparative to that of Great Britain. As defined by their Congress of 1900, the aim of the federation is “to group in common action all the associations of working-men producers, in order to facilitate for them the obtaining of orders, whether by join enquiry or reciprocal support, and to encourage the development of the principles of co-operation by placing at the disposal of young associations the benefit of the experience acquired by the old ones.”[26] Like the national, regional, and meso-level organizations of today, the federation sought to encourage information sharing, cooperation between cooperatives, political action in favor of cooperation, and other solidarity building initiatives. Why is it then that France developed a dynamic and somewhat effective national federation of worker cooperatives, meanwhile Britain lagged behind?

As mentioned previously, British cooperative development was likely impeded by the lessened tendency to unionize and strike as compared to France. However more significant institutional factors, mainly those of finance and state support, facilitated French development meanwhile being absent in the cooperative efforts of Britain. Fay has outlined three reasons:[27]

1.) Cheap credit provided by the “Banque co-opérative des associations ouvrières de production de France”

2.) State support

3.) State joint contracts

The prevalence of cooperative finance in France enabled worker societies to procure the crucial finance capital needed to establish their production cooperatives. Without such financing, cooperative leaning workers would need to rely on funding outside of the cooperative movement to achieve their goals. The Carmaux glassworkers did exactly this, relying upon a donation from a benevolent capitalist in order to establish the Verrerie Ouvrière d’Albi.[28] This “outside” capital may have very well eroded the cooperative spirit, instead of continuously building upon cooperative principles and inter-cooperation the way that finance capital from within the movement might have done.

Using cooperative finance capital was an important factor in facilitating the development of French worker cooperatives. Finance from the Cooperative Bank of French Societies of Workmen Producers (1894) and other similar outlets had preference for investing in production cooperatives, allowing worker societies to enjoy less expensive capital and access to financiers who understood the nuances of cooperative enterprise. Cooperative finance allowed worker societies to make advances on work for private customers not yet paid for, discount trade bills, open current accounts, make long-term loans for business expansion, and “supply the caution monies demanded for public contracts”[29]. Initially, finance capital set aside for cooperatives was turbulent- some of the first funds, like the Legacy Rampal saw great losses in its first years of existence between 1879-1890. By 1890 the Legacy Rampal, along with other cooperative banks, learned to manage the unique risks associated with cooperatives. As evidence, the Legacy Rampal lost only 30,000 francs in 1901, compared with losses of 200,000 in the previous period.[30]

Financial support from the state also was crucial in facilitating worker cooperative development in France. The Chambre Consultative, Banque Co-opérative, and other organizations received grants from the French government- perhaps as a means of ameliorating capitol-labor tensions via cooperatives and combating economic crises. The state also began giving contract preference to cooperative societies in 1881. This may account for the unusually high number of worker societies in the construction industry, indicated in Table 1. Preference for contracts given to worker societies continued through the turn of the century, and workmen societies even played a substantial role in the building of facilities for the 1900 Paris Exhibition.[31] Many cooperatives eventually saw their biggest customer becoming the State itself, potentially causing issues with dependence on contracts, worker autonomy, and conflicts regarding regulation. Heavy involvement from the state however allowed cooperatives to grow, as shown by the membership levels in Table 3. Great Britain, without involved from the state, then saw its cooperation limited to consumer and retail outlets.

The success of French worker cooperation depended keenly on its ability to organize a national movement, secure financing, and gain support from the French state. It may even be possible that these three aspects are interconnected, as a more cautious and organized federation of worker societies is sure to better gain the trust of both investors and the state, while also drawing attention to the movement and its needs. The data provided by Fay show that through the turn of the century, increasing support from the state and finance correlated with increasing membership in the national federation, the Chambre Consultative, illustrating the complex set of institutions needed to facilitate worker cooperatives.

Conclusion

Tracking narratives and data from the late nineteenth and early twentieth century worker cooperative movements of France, a piece-meal yet sometimes intentional picture of the French movement is portrayed. In Scott’s analysis of the Carmaux workers’ takeover and establishment of a glassmaking cooperative, she ends with an assertion that the cooperative’s established from historical labor struggles over craft identity have no real connection to the cooperatives of today:

““If the glassworkers at Albi today still nourish the tradition of 1895 and associate the strike and the founding of their cooperative with a militant tradition among glassworkers, they nonetheless have translated that tradition into modern terms. They would be surprised to learn that the militancy of their predecessors involved an attempt to defend a highly skilled, exclusive craft against the inroads of mechanization. And they would be even more dismayed to discover that those militant artisans ultimately left the craft and discouraged their children from entering it. There is no direct link between the new glassworkers and the old. The identicalness of occupational title masks two vastly different experiences, that of the modern factory worker and of the nineteenth-century artisan, whose skill and corporate identity are now obsolete.” [32]

While the defense of elite artisan trades may be a passing memory, cooperatives of later decades and of today certainly share a common struggle of defending their dignities as workers and human beings. Considering the legacy left by the Carmaux workers, along with the hundreds of societies and thousands of cooperators involves in the Chambre Consultative, it is evident that the progress in building institutions to facilitate a cooperative development path is significant and unique to French history.

Using data provided by C.R. Fay’s investigation into cooperative enterprises, along with narrative history on the context of French politics and economic development, it is clear that the French movement had unique aspect comparative to Great Britain, the other home of early socialist movements. France fostered a strikingly higher frequency of worker cooperatives, meanwhile Great Britain developed more consumer based cooperative outlets. France was able to develop production cooperatives due to certain political, economic, and social conditions:

1.) A higher rate of unionization, strikes, and labor militancy in general allowed more workers to transition from capitalist industry to cooperative production, either as ways to prevent strikes and unemployment and/or move away from capitalist enterprise

2.) For cooperators not coming from the labor movement, solidarity in their trade or craft was still a possible avenue for facilitating cooperation

3.) France developed certain institutions that allowed for a more successful worker cooperative movement than in years prior to the turn of the century: cooperative finance, state grants, and state contract preference for worker societies

While limited data makes it difficult to “prove” any of these three points, narratives provided by historians and economists give context to these ideas, prompting foundational hypotheses for further research into French cooperative development. If anything, gathering the stories of how worker societies struggled to thrive in the heat of capitalist development in France shows that commune, open societies, labor copartnerships, and other forms of production cooperatives were not just manifestations of naïve idealism. Instead, concerted efforts were made by the state, finance, individual cooperators, and cooperative federations to foster an alternative economic development path. Comparing the experiences of Great Britain and France allows us to see which institutions and policies worked, and which did not. While some cooperatives did fail in the face of capitalist competition, the aforementioned institutions allowed for continual trial, error, and success that no doubt contributed heavily to the formation of modern cooperative groups in Europe and abroad.

Looking Forward

As this research outlines that indeed worker cooperative was better facilitated in France in the late nineteenth and early twentieth century, it also opens up many more questions that require more tedious data collection. As implied by initial research comparing unionization, strike rates, and cooperative development, future research should be done that matches time-series data reflecting unionization by sector, strikes per worker, wages, unemployment levels, number of reported worker cooperatives, number of cooperatives participating in the Chambre Consultative, number of cooperatives made up of unions, amount of cooperative funding procured from cooperative banks/state grants, and the amount of state contracted work awarded to these societies. With some amount of these data available, it would then be possible to build a model of cooperatives and their facilitating institutions that may show the relation between depressed economic conditions (wages/unemployment), tendencies to strike, and the prevalence of supported cooperative development.

More in-depth data, collected from Chambre Consultative records, the cooperative banks, and the government Statistique inquiries, would answer the question of whether or not the French State made a concerted effort to encourage cooperation as a means of relieving capital-labor tensions without sacrificing economic output i.e. tax revenue. Research shedding light on these dynamics could greatly influence how economic policy in modern times deals with cooperatives, and whether or not state support actually creates riskier cooperatives due to conflicts of interest.

References

Ansell, Christopher K. Schism and Solidarity. UK: Cambridge University Press, 2001.

Baker, Jacob. Cooperative Enterprise. New York: The Vanguard Press, 1937.

“Collapse at Carmaux: French Socialist Co-operative Works a Failure- Great Suffering.” Associated Press. London: May 29, 1897.

Gide, Charles. “Productive Co-operation in France.” Quarterly Journal of Economics, Vol XIV, No 1, November 1899.p30-66.

Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908.

[1]Folbre, Nancy. “The Social Family.” Greed, Lust, and Gender. USA: Oxford University Press, 2009.

Friedman, Gerald. State-Making and Labor Movements: France and the United States, 1876-1914. New York: Cornell University Press, 1998.

“Le Congrès des Coopératives en 1900.” Les Scops, Participer 573 – janvier-février 2000. <http://www.les-scop.coop/export/sites/default/fr/_media/documents/congres-1900.pdf>

Marglin, Stephen A. “What Do Bosses Do? Origins and Functions of Hierarchy in Capitalist Production.” Review of Radical Political Economics, Volume 6 Number 2 Summer 1974.

Prothero, Iowerth. Radical artisans in England and France, 1830-1870. UK: Cambridge University Press, 1997.

Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974.

“Wages and Work in France.” New York Times. New York: September 9, 1900.

World Population 1900. World Mapper, SASI Group (Sheffield) and Mark Newman (Michigan). 2006. <http://www.worldmapper.org/posters/worldmapper_map9_ver5.pdf>

[1] Folbre, Nancy. “The Social Family.” Greed, Lust, and Gender. USA: Oxford University Press, 2009.

[2] Prothero, Iowerth. Radical artisans in England and France, 1830-1870. UK: Cambridge University Press, 1997. p 173.

[3] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974.

[4] “Collapse at Carmaux: French Socialist Co-operative Works a Failure- Great Suffering.” Associated Press. London: May 29, 1897.

[5] “Wages and Work in France.” New York Times. New York: September 9, 1900.

[6] Ansell, Christopher K. Schism and Solidarity. UK: Cambridge University Press, 2001.

[7] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 240.

[8] Prothero, Iowerth. Radical artisans in England and France, 1830-1870. UK: Cambridge University Press, 1997. p 164.

[9] Friedman, Gerald. State-Making and Labor Movements: France and the United States, 1876-1914. New York: Cornell University Press, 1998. p 222.

[10] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 226.

[11] Ibid. p 220.

[12] World Population 1900. World Mapper, SASI Group (Sheffield) and Mark Newman (Michigan). 2006. <http://www.worldmapper.org/posters/worldmapper_map9_ver5.pdf>

[13] Baker, Jacob. Cooperative Enterprise. New York: The Vanguard Press, 1937. p 173.

[14] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 241.

[15] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 240.

[16] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. p 166.

[17] Prothero, Iowerth. Radical artisans in England and France, 1830-1870. UK: Cambridge University Press, 1997. p 172.

[18] Baker, Jacob. Cooperative Enterprise. New York: The Vanguard Press, 1937. p 121.

[19] Prothero, Iowerth. Radical artisans in England and France, 1830-1870. UK: Cambridge University Press, 1997. p 173.

[20] Ansell, Christopher K. Schism and Solidarity. UK: Cambridge University Press, 2001. p 61.

[21] Friedman, Gerald. State-Making and Labor Movements: France and the United States, 1876-1914. New York: Cornell University Press, 1998. p 222.

[22] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 241.

[23] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 242.

[24] Ibid. p 242.

[25] An account from a brochure describing the 1897 Chambre Consultative reads:” En 1897, une enquête de l'Office du Travail dénombrait 12 000 associés regroupés au sein de 250 associations coopératives dont 150 adhèrent à la Chambre consultative.” The discrepancy between 150 societies and the 97 listed by Fay is quite large, however using Fay’s more conservative estimate based on the government Inquiry is probably a safer interpretation, as the Chambre has some incentive to overestimate. < http://www.les-scop.coop/export/sites/default/fr/_media/documents/congres-1900.pdf>

[26] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 244.

[27] Ibid. p. 244-8.

[28] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. pp 167.

[29] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 244.

[30] Fay, Charles Ryle. Co-operation at home and abroad. London: P.S. King and Son, 1908. p. 245.

[31] Ibid. p. 247.

[32] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. pp 192.

Default: The Student Loan Documentary Review

2011-08-11T12:20:00.001-04:00

Default: the Student Loan Documentary is a timely film that should be watched by all students, parents, university administrators/faculty, and all voting citizens. Filmmakers Serge Bakalian and Aurora Meneghello show how dire the student debt situation is on both a personal and national level, revealing the brokenness of the university system and its hand in exacerbating inequality, leaving today's young people perpetually stuck.

Watching the stories of individuals, the eerie similarities between student lending and other consumer debt crises become all too clear. The film serves as both a warning and a call to action to students, voters, and policymakers. Reforming our university system, especially debt and lending, so that "education is a right, not a privilege" is crucial in building a productive, fair, and sustainable economy for everyone.

Here are some key points that Default unveils:

The Power and Pernicious Practices of Lending Institutions- a standard capitalist pyramid scheme, marked by misinformation, degraded consumer protections, and institutions that profit from indebted students nearing or in default

Erosion of Affordable, Public Higher Education- leaving students no other choice but to take on Federal and private loans, as grants are slashed and tuition skyrockets

Emotional Toll of Debt Burdens- pushing back or forgoing major life events due to debt, like owning a home, starting a family, or opening a business
Cost to Individuals Lives and Families- as their debt balloons, student debtors end up relying on family, losing jobs, having wages garnished, and facing harassment by debt collectors

[Not to mention the soundtrack (so to speak) is great. The main “theme” song for the movie is by Matt Kresling, who’s album can be downloaded here and other video work can be seen on his YouTube channel.]

The film has an active network of followers for its blog, Facebook page, Twitter account, Change.org petitions, and amongst other groups like Student Loan Justice, Forgive Student Loan Debt, and the list goes on and on. Their social networking pages have grown into a research forum, where supporters and activists share their personal stories, dig up dirt on the lending companies and their lobbyists, debate what should be done, and organize for change.

The filmmakers have done more than just research and produce an eye opening movie- they are actively igniting a movement for the educated class to fight for their rights as consumers, students, and workers. As their newsfeed keeps saying, “The movie is coming, but the MOVEMENT has arrived.” With the Default team working tirelessly to bring together so many activists and students, indeed the movement has arrived and is growing stronger.

Capitalism and le Tour

2011-07-12T12:59:00.000-04:00

Over the past week or so, I’ve been enjoying the Tour de France, filled with many unexpected obstacles and peloton crashes this year. It’s entertaining for anyone who enjoys the sport or the beautiful countryside scenery. But, while watching this machismo race to yellow, green, white, and polka-dot jersey glory, I realized how strangely intertwined and representative of capitalism the race is. Here’s why (and here’s thoughts from another blogger):

Consumerism- As far as I know, the bicycle is one of the first consumer geared products of industrial capitalism and the first to use assembly line manufacturing (Albert Pope produced both bicycles and electric cars this way in the Connecticut Valley), taking us from penny-farthing to S-Works in just a few centuries. This puts cycling into the context of capitalism and gives the analysis some wit. The sponsorships, logos (anyone else notice the Skoda, Skoda, Skoda finish line?), and advertisements for the Tour are overwhelming, as is the diverse range of products and prices being peddled by manufacturers. The consumer products part isn't necessarily a "bad" thing, but the profit motive that drives the over-saturation of advertising, discrimination, and cheating in the sport is somewhat abhorrent.

(White) Boys Only- The history of capitalist development and le Tour also have eerily similar participants. Strong, white men from Western Europe and the United States (and Australia too, Cadel Evans) make up the homogeneous group of entrants. Women are only featured as podium babes, despite often having higher levels of endurance when it comes to road racing (here’s a bit on sexism in cycling). Tough luck finding someone of non-white color from a non-OECD country on the racing roster (here’s some info on racism in the sport). Pro Cycling is not exactly an equal opportunity sport, and the exorbitant monetary barriers to entry into the expensive world of pro cycling enforce the white-boy culture of the peloton.

Winner Take All- As in a capitalist economy, there are only a few winners of the coveted jerseys (sort of inter capitalist rivalry for super profits). But winning the jerseys relies on a uniquely strategic mix of competition and cooperation between teams and individual racers.

Cooperation- This is the feature that I think makes the Tour a good parable for how capitalist competition works, since other sports rarely require as much cooperation within and between teams. Like different firms, the teams compete for total points, yet the individuals (like managers or investors) also compete over points and the jerseys for individual overall stage winner, sprinter, king of the mountain, and young rider awards. The peloton breakaway often cooperates between rival teams and individuals, to make sure the top riders make it to the finish line, not unlike how capitalist clusters work to “draft” off of each others’ means of production, technological innovations, etc. Sort of a weird dynamic.

Crashes- One wrong move, chain slip, or flat can potentially bring the whole peloton to a halt. Looking back on previous Tours, it does seem like crashes are a central tendency in cycling, just as they are in capitalism.

Cheating- The really obvious one, even if it may be less rampant these days. Blood transfusions, doping, and who knows what else. Cheating is usually how capitalists win, while adopting a code of silence about how they are ripping off workers and consumers. For many years, this is how many cyclists in the Tour won stages, broke records, and kept silent about the lack of integrity in the sport.

The final parallel is that like today’s economy, the tour is also not completely capitalist and other modes of production, like cooperatives, coexist. One of my favorite teams, Euskaltel Euskadi from the Basque Country, rides cooperatively produced Orbea bicycles. The team has sponsors from Basque public companies and Mondragon coops (I believe some of the coops make/sell parts for Skoda), while supporting some very competitive riders like Gorka Izagirre and others. [Note: this blog accepts donations in the form of Orbea Dama Onix road bikes.]

So what would a post-capitalist Tour de France look like? Less sponsors, more sports(wo)manship? Less economic barriers to entry, allowing women and people from all countries around the world to race? Maybe it’s time to start an alternative Tour, where anyone can enter and the goal is to make sure everyone cooperates, has fun, and finishes the route.

Mind the Tuition-Wage Gap

2011-06-29T15:57:00.001-04:00

Graph of the day, complete with a falling real wage and rising tuition. Where can I find average student loan debt by year?

Watch "The Yes Men Fix The World"

2011-06-24T22:11:00.000-04:00

Stumblings

2011-06-22T11:25:00.000-04:00

Ideology is a tough egg to crack- snarky remarks from MR about this opinion piece critiquing rational choice philosophy

The Spartan Student blog, fun writing in a sort of ex-post-James-McCandleless kind of way

My Debt Story

Bicycling's Gender Gap: It's the Economy, Stupid! ..... anything that combines cycling and economics is my cup o'tea

Marxists in the news, Lady Gaga befriends Slavoj Žižek

2011-06-20T14:25:00.000-04:00

Story can be found here, from the really reliable and never trashy New York Post. But, apparently she just supported him in the March strike in London of the ICU lecturers' union.

In an earlier blog post by Žižek though, he had some interesting commentary on Gaga:

"But what of my good friend Lady Gaga’s theoretical contributions? Certainly, there is a certain performance of theory in her costumes, videos and even (some of) her music. Nina Power has already noted that the infamous “meat” costumecould be seen in reference, indeed, a performance of, Carol J. Adams’s The Sexual Politics of Meat: A Feminist-Vegetarian Critical Theory, a book that notes the consistent linking in the oppressive imaginary of the patriarchy of the female body and meat, of animality and the feminine. "

I think I'm going to pick up a "political economy of pop culture" field.

Generation unemployed and unemployable

2011-06-19T11:42:00.001-04:00

RealityBase.org (via RWER blog) shows how frightening the youth employment population ratio is these days, despite being "digitally skilled" in a time when many economists cry structural unemployment:

"The employment-population ratio for 16-24 year-olds started declining in 2000—just as we were all getting computerized and networked. Meanwhile the employment-population ratio for those 55 and older has been increasing since 1993. In the Great Recession, youth employment has been devastated and mature worker employment has hardly been affected at all. If these trends are being driven by skills, conventional wisdom must be wrong about what skills are needed and the importance of education. "

And here comes the punchline-

"We've been emphasizing education and skills development in America for decades, and there is nothing apparent in the current emphasis that seems likely to change our output of skilled workers. Nor does the historical record indicate it would contribute much to domestic job creation if we did have more skilled workers. Skilled Chindians [workers in China and India] will still be cheaper, and young Americans will still be living with their parents as long as that's true."

So, despite the great number of young educated workers in need of jobs, the relative price of youth labor just isn't cheap enough for American capitalists. But if it's a price argument, then why are higher wage, older workers being disproportionately unaffected? Obviously, there's much more to the story than just relative prices of labor, although I'm wary of making any narrowly generational arguments since it's in both older and younger workers' interest that graduates have jobs.

EPI recently published a briefing paper on "The Class of 2011", showing high school graduates as by far entering the worst job market since the Great Recession began, swiftly followed by recent college graduates that often end up in low-wage jobs that don't require a degree in the first place. Importantly, the paper debunks the myth that college grads are "sheltering in school", by extending their graduation date or enrolling in graduate programs.

But what makes the situation even worse for the young unemployed and unemployable? No safety nets, and for college grads, high debt.

"Unsurprisingly, graduates typically find themselves strapped with debt: In 2009, 56% of public school students graduated with debt averaging $20,467, and 65% of private school students graduated with debt averaging $26,728.

High debt underscores why young workers need a safety net. Without significant prior work experience, there is little chance new entrants to the labor market have accrued savings, and young graduates in particular are likely to have substantial debt. In other words, it is very unlikely for young workers to have an individual safety net."

It looks like the youth reserve army of unemployed, unemployable debtors will never catch a break.

When Freddie Met Sallie: Parallels Between the Mortgage Meltdown and Student Debt

2011-06-17T13:49:00.004-04:00

After the the Savings and Loan Crisis, it was widely recognized that the financial bust was the result of control fraud between private industry and government regulators. A few decades later, a similar scenario occurred in the mortgage market giving us the current financial crisis. Now, while we may now all be on alert of another inside job in the mortgage market, another debt crisis is still looms: student loans.

[Richard Mock linocut via old UMass Econ t-shirt]

With the mortgage crisis, plenty of critical economists saw the mortgage bust coming yet went unheard or at least un-listened-to. Likewise with student loans, many in informed, dedicated writers and activists like Alan Collinge, Anya Kamenetz, the filmmakers of Default: The Student Loan Documentary, an others have spent years explicating the extent of student indebtedness, the perverse structure of student lending, the brute force used by debt collectors, and the immense consequences the student lending system has on the livelihoods of graduates.

Similar to the mortgage crisis, which resulted from a disastrous mix of price inflation and unethical lending incentives, the student loan crunch stems from a similarly toxic combination of incentives and institutions breeding a Gresham dynamic marked by deliberate and calculated fraud: exorbitant tuition hikes, usurious lending practices by both the Federal government and private loan companies, financial misinformation from student aid institutions, and an astoundingly blatant lack of basic consumer protections for students and cosigners.

It is no news that over the past few decades, college tuition has risen dramatically higher than inflation and the real wage has declined. Concurrently, student indebtedness has reached an all-time peak, recently having surpassed credit card debt, for a staggering total of over $919 billion dollars and growing. Like any debt-asset bubble, the uphill price inflation is swiftly followed by its rupture, marked by a steady increase in default.

For years, the student loan default rate has been understated by the Department of Education, leading us to just now see the vast scale of vulnerable student debt being held by recent graduates (note: the students, not the debt, are really the vulnerable ones). Attempting to connect these trends is difficult, with a diverse number of explanations being offered by economists and educators- explanations which often end up blaming students for being irresponsible with their debt and choice of school. But, the most compelling has been professed by Allan Collinge, founder of the student debtor advocacy group StudentLoanJustice.org.

Collinge’s analysis is strikingly similar to UMKC economics and law Professor William K. Black’s concept of control fraud in financial crisis, in which white-collar criminals control the means and institutions of fraud, giving incentive for pernicious and risky lending and asset price inflation. Collinge explains how the removal of consumer protections, primarily that ability to discharge student loans in bankruptcy, has given lenders and institutions incentive to bloat college tuition and lobby for further degradation of these fairness standards, even supporting feudal-like methods of debt collection, including wage garnishment and harassment. Loans in forbearance or default, just allow lenders to collect more and more.

The mortgage crisis grew from a malicious mafioso-eque partnership of bankers, mortgage brokers, derivative insurers, and political lobbying that worked to liberalize financial markets, inflate housing prices to fuel toxic mortgages, and guarantee payouts from complex derivatives. The student loan pyramid scheme relies on colleges and universities willing to hike tuition, government cuts to public higher education, Federal direct and guaranteed student loans, and a political apparatus responsible for removing consumer protections for student borrowers.Meanwhile, the system (mis)educates borrowers through complex, obfuscated names, rules, and regulations. (See this excellent graphic explaining the relationship here.)

As with the mortgage meltdown, the Federal government has served as the base crutch perpetuating the crisis in higher education, by guaranteeing many loans, effectively removing risk, yet still using harsh collection tactics and lacking consumer protections. In fact, some estimates show that for every dollar of recovering defaulted student loans from the Federal Family Education Loan Program, they receive about $1.22 back, a recovery rate much higher than any credit card. With this kind of recovery success, students are the Department of Education‘s (and bailed out private lenders’) new gold mines. (Where does that money go anyway? I'm guessing to more loans, feeding the beast.)

Seemingly friendly, unbiased, benevolent financial literacy services like FinAid.org offer less than clear warnings about the lack of consumer protection for private and Federal loans, while corporations like Sallie Mae and the Massachusetts Educational Financing Authority tout deceptively government-sounding names. These quasi-governmental publically chartered now private entities outright deceive customers, just as Fannie and Freddie did in the mortgage deluge, giving students and cosigners a superficial sense of fairness when weighing the costs of college and taking on Federal or private loans. Maybe, like cigarettes, these toxic (and parasitic) consumer lending products also need a warning label on their websites.

Luckily, the movement for increasing consumer protection for student loans is making some headway. Representative Steve Cohen, along with Senator Dick Durbin and others, has reintroduced a bill that would give bankruptcy protection for some student loans, but for many students bankruptcy would be a last resort.

“When Freddie met Sallie” sounds less like a romantic comedy starring Meg Ryan, and more like a disaster flick where students and families stand victim to financial kleptocracy.

Current reading

2011-06-09T15:54:00.000-04:00

Pedagogy of the Oppressed.... why didn't I read this years ago?

Academic Capitalism and the New Economy: Market, State, and Higher Education

Schooling in Capitalist America, and this revisited piece

How The University Works: Higher Education and the Low Wage Nation

Also, I just finished Katzner's "At The Edge of Camelot", which..........I recommend, for scope.

Licensed and indebted professionals of the world...unite?

2011-06-09T14:36:00.004-04:00

Between high debt, stagnant wages, weak employment prospects, and innavigable laws, it looks like the squeeze is on for many of the highest skilled licensed professionals.

A few months back, 42 nurses in Tennessee were suspended from their practice for defaulting on their student loans (hat tip to the Default blog, of course), removing their right to work in their profession. There are several other similar reports out there, including lawyers who have been disbarred for debt defaults.

This sort of action is fraught with conflicting interests between workers, employers, professional organizations, and lenders. Clearly, taking away the right to work in your vocation and earn income makes little sense. One attorney noted, ““It is helpful in the sense that it motivates people to repay their student loans.” But, if the idea is to “incentivize” timely repayment of the student loans, which enabled professional licensure in the first place, revoking licenses just doesn’t make much sense since it removes the capability to earn income to pay back those debts. Low wages, high tuition, and usurious loan practices make for a dangerous squeeze on credentialed workers.

Digging deeper, it turns out that several states, alongside Tennessee have statutes that allow for professional licenses to be revoked in the event of student loan default. The statutes are argued on similar grounds as rules for past due child support, which allows professional licenses to be revoked in the case of defaulting on payments. But how does child support parallel student loans?

I guess the argument for revoking licenses based on past due child support payments assumes that one’s legal dependents should be of priority- they are kids after all (although, as I understand, in many cases responsibility for child support and its back payment is quite muddled, drawn-out, and lacking fair standards…to some extent). But, mirroring the statute for license revocation in the case of student loan default on that of child support default seems a bit strange- are Sallie and Nellie Mae now being considered in the same “dependent” category as children? Is this a glimmer into legal structure of the corporate, in this case financial, “nanny” state, where obligations to financial institutions get the same priority, maybe even more, as obligations to children (...maybe that doesn't make sense?). I can’t quite seem to work this reasoning out, but I’m also not a lawyer. It doesn't make sense in either case to remove a credential that allows for someone to work, unless that debt somehow interfere's with their capacity to work within that profession.

According to a UVM Research report, the constitutionality of both the child support and student loan default statutes is quite questionable. The law treats licenses to practice as a kind of collateral for educational or child support debts, “In other words, a licensee’s license has much the same type of protection as the licensee’s house or bank account”. But does your house or bank account enable to work to the same degree that a license does?

Putting a debtor out of work adds yet another layer of conflict to the student loan crisis, as well as to general labor struggles for licensed professionals. Here, it’s not student loan companies asking for licenses to be revoked, it’s the licensing institutions themselves, i.e. Department of Health, Bar Association, etc. It’s not so clear however that this statute even benefits student lenders, or really anyone except those professional associations or employers of licensed professionals that may fear having underpaid, debt-burdened, disgruntled workers. Licensed professionals of the world, unite?

Should the Department of Education ever be using SWAT Teams??!

2011-06-08T15:00:00.002-04:00

[Update: Definitely not student loan default related but still.... that certainly got people thinking!]

I think the answer is no, but apparently today in California the prison-financial-industrial complex reared its ugly bat/gun/whatever SWAT teams use.

The original story was posted as follows:

"SWAT Team Busts Into House Over Student Loan Default-Acting on orders from the U.S. Department of Education, a S.W.A.T. team broke into a California home Tuesday at 6 a.m. and roughed up a man — reportedly because of his estranged wife’s defaulted student loans. She wasn’t there."

Later on, ABC News made a few corrections to the story, asserting that student loan defaults were not the reason for the search warrant. But, the revised story makes a really peculiar note:

"A U.S. government official confirmed for News10 Wednesday morning federal agents with the Office of the Inspector General (OIG), not local S.W.A.T., served the search warrant. The official would not say specifically why the raid took place. He did say the search was not related to student loans in default. He went on to say OIG is a semi-independent branch of the U.S. Department of Education that executes warrants for criminal offenses such as student aid fraud and embezzlement of federal aid."

Call me a softee, but while I understand embezzling student financial aid (whatever that means, it probably is OIG slang for default but who knows) may be quite serious, does it really justify using a SWAT team to enforce a search warrant? What exactly is student aid fraud and how can an individual execute such a serious offense that it requires SWAT team force? Hopefully more details will break soon so this story begins to make much more sense. Regardless of what the reason for the search warrant was, the whole thing raises many thoughts and questions.

This reminds me of the awful accounts of people forcefully being served eviction notices during the ongoing foreclosure fiasco, except this time, what physical property can be seized for a student loan default? Your brain? Future labor power? This is a slippery slope towards something... awful. Recently there was a good piece from DailyKos mentioning debt warrants and the archaic idea of debtor's prisons, brought to you by Koch Industries no doubt.

More to come on student debt, academic capitalism, and other stuff over the summer. This story caught me off guard and compelled me to repost.

Lost generation....

2011-06-01T10:15:00.000-04:00

The end of the semester and various events put me on blog hiatus for the past while, but I've been digging through quite a bit of hot information on the student debt front- everything from anti-feminism to debtors prisons. More to come on that. Meanwhile here's something on "human capital contracts" that to me sound like a bizarre remix on feudal relations. Maybe that's somehow more humane than financial capitalism? Maybe not.

Word of the day: economisting

2011-04-22T10:19:00.000-04:00

Economisting: (e kon’ o mist’ ing)

1. The act or process of converting limited evidence into grand claims by means of rhetorical ploys, especially punning.

2. The belief or practice that empirical evidence can only confirm and never disconfirm a favored theory.

3. Conclusions that are theory-driven, not evidence based.

See also confirmation bias, painting with a broad brush, Iraqi weapons of mass destruction, post-modern critical theory, marketing.

I think I want to be an economystic when I grow up.

Why undercut wages can you can just use unpaid labor? 100% rate of surplus!

2011-03-28T13:36:00.001-04:00

The article on the rise of unpaid jobs is here. And the following is my favorite quote:

"People who work for free are far hungrier than anybody who has a salary, so they're going to outperform, they're going to try to please, they're going to be creative," says Kelly Fallis, chief executive of Remote Stylist, a Toronto and New York-based startup that provides Web-based interior design services. "From a cost savings perspective, to get something off the ground, it's huge. Especially if you're a small business."

Unfortunately, I think she literarily means hungrier... for food and water. A new (maybe not-so-new) low.

90% of New Hires Are Men....

2011-03-22T14:05:00.000-04:00

According to this piece from ABC News:

"Of the 1.3 million jobs created in the last 12 months, some 90 percent have gone to men, according to a report from the Bureau of Labor Statistics. Women have gained just 149,000 jobs."

That's pretty awful and seems like grounds for an unprecedented discrimination lawsuit, if it were possible to press charges against the whole US economy.

The figure is astounding, even considering that women may have relatively lower labor participation rates and were initially less affected by the mancession. Apparently it's not just particular personality traits that will increase your probability of getting a job, but also your gender. I am now wondering whether or not more discrimination lawsuits have been filed due to the great recession? Womancession indeed.

Intriguing words on universities, students, and academic capitalism

2011-03-14T11:18:00.001-04:00

Having attended a private business school for two years, and even in my experience as an undergrad at a large state school, I can attest to these words:

The logical conclusion is that students ought only to be taught by Richard Branson by shadowing him on a work day, to ensure he himself re- mains relevant by remaining on the job. And if this contradiction were not obvious enough, the style of pedagogy, the first contradiction, reminds the student that what is really relevant, what is really skilful, is to prove to the real world what university education always proves (at least): that the student can follow arbitrary authority, endure boredom, and compete against others.

That is from Stefano Harney's article "In the business school". This can be found in the Edu-Factory Collective's Web Journal, issue number zero, entitled "The Double Crisis". You can find a copy of the journal here, and purchase their book Towards a Global Autonomous University here.

Video stumbling: 23 Things They Don't Tell You About Capitalism

2011-03-08T21:34:00.002-05:00

If you haven't yet read the book, here is the RSA Presentation:

I don't agree with him precisely... and I wish he were an even harsher critic. But it's still a nice, tractable book and presentation. However, I think he forgot number 24: there are viable alternatives to capitalism i.e. cooperation. They definitely don't tell you that!

"For profit or for students?" guest post

2011-03-01T17:25:00.001-05:00

A new post about for-profit colleges, co-written with Mark Paul, is over on the Baseline Scenario blog:

For-profit colleges are expanding enrollments at a rapid pace, but it is questionable whether these revenue-seeking universities give adequate consideration to students’ welfare, retention/graduation rates, and overall economic well-being alongside their bottom line profits. Read more here...

Thanks James and Simon!

20 Best Economics Papers

2011-03-01T14:02:00.002-05:00

And just one woman author was named. Not cool.

http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.101.1.1

Can we come up with a list of the 20 Best Heterodox Economics papers in the past hundred years?

(I think my list will start off with maybe Marglin... Sabel and Zeitlin?.... what else? I guess some of the best econ papers don't even necessarily need to be written by economists)

Merits of for-profit colleges? Another lame argument about efficiency....

2011-02-26T11:26:00.002-05:00

First, here's some breaking news. I officially accepted admission to UMass's PhD program, which is unbelievable and a statistical anomaly. Unfortunately, I am now really broke because I spent so much on graduate school applications. But... I couldn't be more grateful and happy.

In other news, new Economix contributor Judith Scott-Clayton had a post yesterday about the "Merits of For-Profit Colleges". I was initially appalled after reading this, but I do get her point. Yes, for-profit college, for all of their evil practices, certainly are comparatively more efficient at obtaining Federal funds for their students and boosting their enrollments. But, efficiency in what context? And, do traditional schools really have a thing or two to learn from their for-profit counterparts?

Being able to procure Federal funding for students needs to be taken with a grain of salt, considering that for-profits are seeking well.... profits (duh!), not opportunities for their students. Traditional private and public universities arose from a tradition of either religious scholarship (like Ivys) or scientific research (like the land-grants). For-profits are rooted in capitalist opportunism, popping up when skyrocketing tuition has crowded out financially strapped students form more traditional schools, and when desperate job seekers see no better alternatives than enrolling in for-profit programs when facing a moribund job market. A for-profit incentive for securing funding is a lot different than seeking out what is best for your students.

Efficiently securing the most Federal funding per student then results from a natural incentive for profit-seeking schools, since Pell Grants and other funds give a pretty direct hand-out to their shareholders. This is not to be praised- it's downright wasteful of Federal funds and harmful to students who more often than not leave these schools without any degree in hand.

As for whether or not these schools are actually any more "efficient", I am not convinced that the higher Federal-funds-per-student at for-profits is necessarily correlated to more better or more navigable financial aid services either. A 2008 study by the National Center for Education Statistics shows that lower-income students have a higher percentage of students who enroll in for-profit schools. It is likely the case that students more likely to qualify for aid also happen to be more likely to enroll in a for-profit college, as many socio-economic and institutional barriers may impede their ability to be admitted to public or private university (think about the barriers to entry: costs of SATs, application fees, the time spent researching schools, etc.). Being more likely to qualify for funding then translates to these schools having more students receive Pell Grants and other forms of Federal student aid.

Are these schools efficient at ripping off Federal educational funding? Yes. Are they efficient at providing what is best for students, in terms of risky debt and solid graduation rates? Not so much. Instead of jumping to conclusions about how well these schools operate, let's hold our praise for the merits of for-profits (unless of course you happen to be a shareholder in one of these institutions).

Efficiency is such a gross term... I wish people would put it in context before branding it onto every analysis.

Curbing my grad school anxieties...

2011-02-14T16:51:00.002-05:00

Today I found out I was accepted to American's Econ PhD program, though no word yet on funding. This is very good. Last week I noticed that I am prematurely aging with the finding of a single white hair, and I attribute this solely to the graduate school admissions process. I'll probably have a ~~Kitty Bartholomew-esque~~ ~~skunk stripe by the time I finish a dissertation though. Merr.~~

jk.... rumor has it I'm staying in Amherst!

Anyway, here's what I'm reading and other stuff:

The Youth Unemployment Bomb

Generation Un....I prefer Generation Screwed

Humanizing the Economy

The Violence of Financial Capitalism

"Collapse at Carmaux, May 29 1897"

2011-02-12T14:38:00.001-05:00

Here is the launching point for my history paper, revisiting the Carmaux co-op and figuring out what happened afterward:

French Socialist Co-operative Glassworks a Failure- Great Suffering.

Associated Press, 1897.

"London, May 29.- The co-operative glass works at Carmaux, France, which intended to compete with the capitalist Rességuier's works at Carmaux, seem doomed to failure. The co-operative, or Socialist works, were started with a capital of $100,000, as a result of the agitation of M. Jaurès and other Socialist Deputies in that district, after a strike at the capitalist works.

The Directors were workmen, elected by their comrades; but dissension has been rife, and on Wednesday forty workmen left the co-operative works and asked the Rességuier managers to take them back. It is said that several months' wages are due to the workmen, and that the whole capital has been spent, while the works are not yet completed.

The society is heavily in debt, and the misery among its members and their families is appalling. The wives are begging the street. The fort penitent Socialists declare the workmen Directors are responsible for the trouble, and they also assert that the fraternity of workmen does not exist."

Commodifying education: a linguistic analysis

2011-02-09T16:41:00.000-05:00

Okay, it's not really an analysis- it's just a dinky little blog post.

It occurred to me that the word "tuition" has a history reflecting that of the commodification of education. That is to say, higher education developing not "for use" in order to develop and expand human capabilities, but instead developing "for exchange" in order to limit credential access, provide a barrier for entry to certain job markets, and derive profit.

People have paid for education for some time in some way or another, however it wasn't until 1828, around the time that higher education began establishment in the United States, that the word "tutition" gravitated towards referring to the payment for education, rather than the act of teaching itself:

tuition mid-15c., "protection, care, custody," from Anglo-Fr. tuycioun (late 13c.), from O.Fr. tuicion "guardianship," from L. tuitionem (nom.tuitio) "a looking after, defense, guardianship," from tuitus, pp. of tueri "to look after" (see tutor). Meaning "action or business of teaching pupils" is recorded from 1580s. The meaning "money paid for instruction" (1828) is probably short for tuition fees, in whichtuition refers to the act of teaching and instruction. (http://etymonline.com)

In many parts of the world, "tuition" retains its original meaning, where pupils receive tuition from their tutors, however in the United States, the usage is almost exclusively in reference to fees. It also seems that the U.S. especially has a proliferation for private, for-profit higher education institutions, while many other places, like the UK where the word originates, maintains (for the most part) a strong system of public higher education.

What other words have come to reflect these sorts of economic changes? Where can I go study linguistic economic anthropology and history?

Not so strange jobs report

2011-02-07T07:20:00.001-05:00

Apparently, for some economists the January jobs report looked perplexing. The economy saw a historic drop in the rate of unemployment from 9.4% to 9.0%, yet only added a meager 36,000 new jobs. David Leonhardt expressed his concern for these "strange" numbers:

As I said before, the job market is neither healthy nor seems to be improving very rapidly. But the unemployment rate is dropping at a historically rapid rate. It’s very odd.

It's pretty clear though, even with this drop, a 9% unemployment rate is anything but healthy. With some simple reading into the report, it's easy to see how this number may have been sort of a fluke. Dean Baker concludes:

The drop in unemployment in the household survey was the result of a reported increase in employment of 589,000, after adjusting for changes in population controls. This difference is actually not very confusing to people familiar with the data.

The household survey is always erratic. It effectively is measuring level of total employment in the economy. Even if it is off by just 0.2 percent, this implies an error of almost 300,000. If it errors by this much on the high side one month and then by an equal amount on the low side the following month, it would imply a drop in employment of 600,000 in a context where there was no actual change in employment. Looking back over the last two decades it is easy to find months with large changes in employment that did not coincide with any obvious upturns or downturns in the economy.

I guess it's not so strange after all. Also, maybe all of the snow (which is now a four-letter-word) meant less folks heading to the unemployment office and picking up the phone? Aren't these methods sort of antiquated, maybe not accurate? Why aren't any of the other U6 and whatnot included in these reports?

Education for progress or for-profit?

2011-02-02T13:42:00.005-05:00

[Read the original version of this post, with less blatant opinion, over at NextGenJournal]

In addressing solutions to America’s economic problems in his State of the Union speech last week, President Obama outlined reforms target towards higher education. By setting goals for increasing college graduation rates and supporting technological research and development, the President appeared to agree with those economists who would rather blame the workers for lack of skills than take a more critical look at management and boards of directors.

Touting ideas for new investments to bring graduation rates up to speed and move the economy forward, it was clear that much of this talk was inconsistent with the President's new found focus on balancing the budget and appeasing the right. Many student advocacy groups, like the United States Students Association (USSA), saw Obama’s well-intended promises as blurring into empty rhetoric. Many critics are questioning how investment in education can be achieved, while simultaneously focusing on fiscal austerity and deficit cutting.

Lindsay McCluskey, president of the USSA, wrote recently of how many of the same fiscal austerity measures outlined by Obama in the State of Union will also fetter educational investments. In fact, the recently proposed measure to reign in federal spending to 2008 levels also means decreasing funds available for Pell Grants, one of the most crucial funding sourcing for underprivileged students. It should be clear by know, that austerity measures will only exacerbate our inequality problems.

Was the President making more of a sales pitch than a call for government investment? Since few direct investment policies have even been brought forth, it is difficult to tell. It is clear however, as the job outlook remains bleak, that staying in or returning to college remains one of the few viable options for remaining competitive in the labor market, even if the costs are often astronomical.

Many colleges are seeing record breaking application cycles for the Class of 2015, due to the lack of work alternatives for young people and the need for students to earn "competitive" degrees and skills in order to stay afloat. Unless firms begin using their cash hoards to hire, I am unsure of how much of an edge any degree offers.

Naturally (for the capitalist system at least), the renewed interest in higher education has brought about profiteering by private companies. For-profit colleges, especially those specializing in online training programs, have seen ever-increasing enrollments during the Great Recession–though many are now contentiously facing regulations and scrutiny from the Education Department. Some colleges have even taken to originating their own high-risk educational loans in search of added profit and enrollment.

Last month, Sallie Mae, one of the largest private educational lenders in the United States, boasted a record increase in profit of 45% over last year. Though much of this profit is due to debt restructuring, the lender has also substantially increased the amount of student loans from last year’s $381 billion figure to $413 billion even though default rates on student loans continue to increase, creating new worries about a student-debt bust similar to that of the housing crash.

Considering the job numbers, which are expected to remain stagnant for January, and the supposed "need for re-skilling" and education in the economy, it appears as though student debt and for-profit colleges could very well turn into the next bubble to burst on our economic horizon.

Current reading

2011-01-29T14:08:00.000-05:00

On Marx's money theory

Another introduction to Marxian money theory

Industrialization, Family Life, and Class Relations, Saint Chamond 1815-1914

Agricultural Revolution in England

A CEO as an economic advisor? Conflict of interest?

2011-01-23T17:23:00.003-05:00

I have inadvertently been on blog hiatus lately. Graduate school applications, school work, and some travel have all gotten in the way of what was meant to be a relaxing winter break of reading and blogging. Oh well. This semester should bring some fun content since I'm taking an economic history course on European capitalist development, econometrics, and a course on cooperatives. Back to blogging...

Last week, President Obama appointed General Electric chief executive Jeffrey R. Immelt to run his outside panel of economic advisors. Immelt will be taking Paul Volcker's place as Chairman. The main focus now of the panel is said to be on job creation, also an area expected to be addressed in the upcoming State of the Union Address. Something just seems like some kind of ironic conflict of interest, no?

It turns out, that while Immelt plans to focus on getting the nation on the path towards job creation, his company, General Electric, is actually one of the worst offenders when it comes to job destruction (job killing in Republican nomenclature). GE is a leader in sending manufacturing jobs overseas (as nearly 53% of all GE jobs are), causing many labor leaders like the director of the Alliance for American Manufacturing to label Immelt as "an outsourcing CEO".

Since Immelt has been at the top of the company, about 29 factories in the U.S. have closed and thousands of jobs have been exported overseas. The issue was briefly covered by ABC News in their evening broadcast here. The newscast discloses that from 2007-2009, General Electric has had more than 20,000 layoffs of American workers. Not to mention the company has also committed countless environmental misdeed, outlined here on a site advocating for cleaning up GE's damage.

In fact, GE has a history of devastating local economies. Some decades ago, Pittsfield Massachusetts was home to the vast GE Plastics Division. The campus sprawled many acres in the city, until thousands of layoffs occurred in the late 1980s and early 90s (some old news articles are chronicled here). The city was then burdened with an industrial wasteland on the North side of town, and an environmental catastrophe in the Housatonic river, which has only recently been settled. Ironically, TreeHugger seems pretty happy that such "an advocate for clean energy" [profits] will be joining the team, but they may want to do their homework. Pittsfield is just one example, and judging by the number of factory closings, there are likely dozens of other similar stories.

While Immelt claims to have jobs for Americans as his number one priority, his position as such a prominent business leader suggests he may have more interest in navigating policy aimed at padding the pockets of big business executives, rather than creating stable and sustainable working-class jobs.

As economists debate a code of ethics for disclosing conflicts of interest, such as ties to business while being an economic advisor, it looks like to Obama economic advisory panel has avoided that problem all together- forget the economists, just directly hire big business! Ivory towers may have moved to Wall Street, but Wall Street has apparently relocated to the White House.

Sighhh.

Video stumbling

2011-01-09T16:31:00.000-05:00

How did I miss this one over the summer?

First grad school acceptance

2011-01-07T09:06:00.000-05:00

Wooo! This morning I heard back from Maastricht University and was accepted to their Masters in International Economic Studies. I have also finished all but two of my other applications...and am officially broke (application fees add up).

Comic relief

2010-12-30T15:01:00.000-05:00

Glassworkers of Carmaux Review

2010-12-29T15:04:00.001-05:00

Joan Wallach Scott’s account of the social, economic, and cultural changes leading to the workplace militancy described in The Glassworkers of Carmaux allows for nuanced interpretation of what drives labor movements, namely bottom up social change. The analysis of the workers at Verrerie Sainte Clothilde closely examines how changes in the structure of work caused great unrest in a once elite trade, particularly due to mechanization. While Scott focuses mainly on the changes in workplace organization, societal status, and labor mobility as causes of French glassworker union growth, there are other elements of labor movements that Scott may have benefited from discussing further: the particular capitalist social relation of mechanization and how Carmaux’s labor movements related to the larger momentum of labor movements in France.

Scott sets the scene for the glassworkers rebellion by giving a personalized analysis of the decades leading up to the 1895 strike, not only through generalized historical record but also via the birth, marriage, and death certificates in the town. This approach not only allowed for a more introspective analysis of the changes leading up to the strike, but also evoked a sort of empathy for the glassworkers. Glassmaking particularly yields itself well to this narrative, as generations of families were employed in the craft and the changes in economics, culture, and politics resulted in significant changes in the lives of families[1]. The effectiveness of Scott’s analysis relies upon the personal nature of the account- in order to understand what led to union organizing in Carmaux, it is imperative to have an understanding of how in just a few decades the life of a glassworker and his family changed dramatically.

Mechanization is isolated as a major cause of the workplace re-organization, which gave rise to the growth of labor militancy in Carmaux. Through increased mechanization, both labor saving and output increasing, the value of the skills held by glassworkers were severely marginalized. This idea is first explored in Scott’s analysis of the Societé de Mines, in how this low-skilled trade with earlier mechanization was more susceptible to union activities than glassworking in the 1850-70s. However, in the wake of new technologies like the fours à gaz, adopted around the 1880s, glassworkers could no longer hold their expertise in the craft hostage when bargaining with factory owners, as these technologies no longer warranted the precise skill once needed for glassmaking[2]. Glassworking, like mining, was now a low-skill and low-wage job. Similarly, factory owners like Rességuier were not longer solely dependent on the skill of the workers, but now the workers were dependent on the capitalist for wages.

Scott appears to be blaming mechanization and technology for the skill devaluation faced by the workers at Verrerie Sainte Clothilde, which is problematic since her analysis is a social one. Borrowing from Marglin’s analysis of “What Do Bosses Do?”, it would have been helpful to analyze the changes in work structure in the glass factories, noting that the new structural was particular to capitalist production and managerial hierarchies[3][4]. It is reasonable to imagine that other forms of technology could have been adopted that would have been more conducive to the original organization and decision-control by the glassworker équipes. The concentration on mechanization then obfuscates what the real problem was: the changing social relation of production.

Glassmaking was no longer a patriarchal elite guild, but rather unskilled grunt work with the wages to match. In the new structure of work, power was held in the hands of owners and managers instead of with the guild of craftsmen. The social results of mechanization are what Scott focuses on, however explicit attention to how these changes were particularly capitalist in nature would have made her analysis even stronger. Had technologies been developed that upheld the original souffleur, grand-garçon, gamin, and porteur team-based structure of work while increasing output, then perhaps worker self-management would have been retained in the factories, and no labor movement would have emerged from the glassworkers[5]. Mechanization is an important part of the story, which placed glassworkers in a similar situation to the miners by the 1880s, however the subject of technology has to be carefully analyzed with special respect to the particular social relations that result from capitalist-orientated technological advances.

While focusing narrowly on the local emergence of the glassworker union and solidarity with the miners, Scott pays too little attention to the importance of the larger socialist momentum occurring at the time in France and the rest of Europe. While the changes in factory work in Carmaux certainly warranted a bottom-up grassroots labor movement, with miners and glassworkers alike seizing city politics, these movements were likely only possible by “drafting” off of the larger socialist/labor momentum in France, as well as the failures of the French institutions (particularly in health care and education). Cracks in the institutions are, of course, necessary for successful labor movement and for union growth.

The details on local elections in the city and canton are important, but relating the election of labor leaders in Carmaux to the larger movements throughout the country would have been able to link how grassroots movements caused by larger social changes (like the transition to capitalism) can create mass social reactions. The workers of Carmaux eventually adopted a revolutionary spirit, acknowledging their fellow reds from across the entire French working class, so outlining the larger political and social conditions across France would have better linked why it is that such a small town can serve as a poignant vignette of working-class struggles that similarly occurred throughout Europe (this probably wouldn’t fit in just one book though.) Analyzing Carmaux specifically though, allowed Scott to compare and contrast miners and glassworkers at different stages of proletarianization.

Scott argues that a history of social, culture, and economic changes contributed to labor militancy, not just the adoption of socialism (since many workers weren’t really even aware of what that meant at first). However, considering the solidarity evoked by labor groups, it appears as though the emerging momentum of socialist movements in France must have played some crucial role in those at Carmaux by the time of the May 1892 elections. Scott writes on how, in preparation for the May elections, Carmaux’s socialists adopted the fourteen point agenda that the Parti Ouvrier Français had created at its Congress of Lyons in 1891.[6] If the local movements, which eventually seized the election, were following a nationally developed platform, then the larger momentum of socialist movements in France must have been imperative for the success of labor leaders in Carmaux. Focusing more on this fact could have outlined a more holistic analysis of labor movements: a two-pronged bottom-up and nationally organized approach.

After the success of the socialist vote in the May 1892 election, it appeared as though the unions were able to seize power in both workplace decisions (like regulating souffleurs, child labor, and wages) as well as in local governmental matters. Within just a few years though, the weaknesses of the workers in Carmaux were shown during the glassworkers’ 1895 strike. Though leading up to the strike, the unions of miners, glassworkers, and other small craftsmen were able to grasp power in some workplace decisions and in the local municipal government, they were unable to garner the massive support of people outside of the workers. While 60% or so of the population voted socialist in 1892, support from the other 40% (less the capitalists and aristocrats) was necessary in order for the unions to successfully maintain their control[7]. Friedman writes, “Success in the overwhelming task of advancing the Labor Movement depends on gaining the support of greater powers and authorities outside the working class, employers, state officials, and middle-class observers.” [8]

When describing the failure of the 1895 Verrerie Sainte Clothilde strike, Scott cites the ability of Rességuier to rehire cheaper labor as replacements for the striking union workers[9]. This is an important fact, but does not recognize the failure of the labor movement to also garner support from non-working class groups, such as police and educators, and maybe even capitalists as well. The control over wages was ultimately a symptom of the loss of control over the craft by the workers. Perhaps with more support from non-working class groups, like lawmakers or even those who purchased bottles, actions could have been taken to regain control over the craft and therefore wages, making Rességuier’s tactic of rehiring ineffective. Up until the glasswork strike, Rességuier had tolerated the union since their policies actually made the factory more efficient, giving the union some bargaining power. By the 1895 strike though, the union was no longer useful to the factory owner, particularly due to their political activities, giving the capitalist no more incentive to bargain with the union. Without non-working class support, the strike then marked the demise of glassworker militancy in Carmaux, as Rességuier fired and disbanded the union from his factory. By the time workers were able to set up their own cooperative glassworkers outside of Carmaux, the changes in political and social relations contributed to the further demise of the union and mixed feelings towards the cooperative.[10]

The Glassworkers of Carmaux was one of the most striking (pun intended) works for its detailed and personalized account of workers’ movements. The analysis, based on the particular history of glassworking, its organizational structure, and the politics and culture of Carmaux, were able to depict how glassworker militancy developed and ultimately declined due to the specific conditions at the time. By mapping each crucial detail, Scott is able to truly pinpoint the most pivotal changes in work and politics, and their effects on the everyday lives of workers and their families. In doing so, she is able to avoid the mistake of gross generalization and provide a snapshot in time of how labor movements occur. This kind of analysis is robust (and also quite emotionally moving), however it is so intriguing that is also raises questions regarding the nature of mechanization and the broader worker movements in France. Other than a few points of expansion on the social relation of capitalist mechanization and on French politics, The Glassworkers of Carmaux provides a detailed framework for analyzing labor movements and their social and political histories. Maybe reigniting the cooperative movement will in the present day will give back craft identity, an important element of unions for Scott, to modern workers and labor movements.

[1] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. pp 3.

[2] Ibid. pp 74.

[3] Marglin, Stephen A. “What Do Bosses Do? Origins and Functions of Hierarchy in Capitalist Production.” Review of Radical Political Economics, Volume 6 Number 2 Summer 1974. pp 61.

[4] These two works were both published in 1974, so Scott’s ability to borrow from Marglin would have been sort of impossible.

[5] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. pp 33.

[6] Ibid. pp 130.

[7] Ibid. pp 131.

[8] Friedman, Gerald. Reigniting the Labor Movement. USA: Routledge, 2008. pp 57.

[9] Scott, Joan Wallach. The Glassworkers of Carmaux: French Craftsmen and Political Action in a Nineteenth-Century City. USA: Harvard University Press, 1974. pp 159.

[10] Ibid.

Current reading

2010-12-19T12:30:00.000-05:00

The Glassworkers of Carmaux... somehow this monograph has struck me more than anything I have read in a very long time- I think this has something to do with Scott's almost narrative-like approach to analyzing the worker militancy in the glass factories of the last 19th century. I felt like I got to know these workers on a very personal level. Her approach makes me want to embark on my own historical scavenger hunt to figure out why my ancestors, who for many generations worked as bookbinders in Manchester UK, up and left for Ireland after the turn of the century.

Adam's Fallacy: A Guide to Economic Theology

The Use and Abuse of Mathematical Economics

Video stumbling: Foley on math and economics

2010-12-12T16:34:00.002-05:00

Here's a good lecture from INET:

The Heat of Desire: How Self-Interest Became Science and Why It’s a Problem

2010-12-09T21:42:00.001-05:00

I have victoriously finished a final paper for a history of economic thought course, with an hour and a half left until the deadline. I chose a broad and complex topic, so I am not sure how I feel about my own arguments, but here it is:

The dismal and peculiar science

Economics suffers from a case of academic Napoleon syndrome, constantly trying to assert its dominance as a hard science while coping with its reputation as a social softie, and often unable to reconcile this split personality. The inherit tensions in the discipline stem from economics’ yearning for scientifically robust means of disseminating the often obfuscated and down-right confusing matters of human behavior. Wanting to achieve a parsimonious way of formulating the social world often leaves the dismal science with a case of theory-envy.

While classical economists comfortably discussed matters of social change, collective action, and class struggle, the desire to qualify economics as hard-science with concrete laws and answers, like its sisters in physics and engineering, led to development in the mathematized neoclassical theory that blatantly borrowed its theoretical foundations from the natural sciences[1]. The complex relationship between the economic social science and the physical natural sciences influenced thinkers Francis Ysidro Edgeworth, Stanley Jevons, Léon Walras, and other economists to develop a highly mathematical, sterile, and static theory of economic life[2].

While the development of quantitative mathematical methods in economics made great progress in empirical work (and gained the discipline some prestige), some of the essential assumptions borrowed from physics and adapted to economics become problematic, particularly as theory becomes ideology in action, guiding real decisions and outcomes. A potentially perilous and flawed assumption is equating the natural energy of economics to utility and self-interest. When holding self-interest in such high regard as an efficient resource allocation mechanism, history has shown the subsequent ideology can often cause economic life to go awry.

Wherefore thermodynamics?

The most obvious case of theory plagiarism occurs between neoclassical theory and the physical science of thermodynamics- the study of heat. In thermodynamics, the isolated energy of heat is able to equilibrate in a closed system-like the way a scorching furnace disperses heat to pleasantly warm a home. Many 19th century economists saw parallels between the Smithian invisible hand that orders self-interest and heat science’s ability to measure and calculate how a system may stabilize temperature and energy[3]. In the physical system, energy equalizes throughout a mass to achieve maximum entropy- a stable and non-chaotic state[4].

The assumptions developed by neoclassical economists too depict a static system that ultimately reaches a state of balance or equilibrium. Unlike physical systems however, social systems, especially the economy, are never closed from outside events and influences. Similarly, particles and heat units rarely organize revolutions or form suicide pacts.[5] Recent works by heterodox economists Duncan Foley and Eric Smith give mathematical proofs of such plagiarism, while also debunking the legitimacy of the axioms in general equilibrium economics.[6]

The first economist of the Victorian era to begin formulating mathematical equations for production, wages, and decision-making was Francis Ysidro Edgeworth, who borrowed much of his methodology from the physical sciences[7]. Some have conjectured that Edgeworth, a neurotically shy trained mathematician, suffered from person case of theory-envy, needing to assert the robustness mathematics as dominant over petty social theory in order to show his own intellectual talents.[8] Edgeworth’s fetish of quantitative methods led to the development of sterile models that essentially removed the politics (and people) from political economy.

The models, commonly taught in introductory microeconomics courses, simplify life down to a set of interworking equations, which despite short run shifts, ultimately converge to a happy equilibrium. On paper, these equations beautifully illustrate how individual utility-maximizers efficiently allocate the scarce resources of the system, guided rational self-interest and perfect information, in much of the same manner as particles are always guided by the physical laws of nature.

Heilbroner notes that despite dehumanizing economics, mathematical models immediately caught on. The new “science” was “so neat, so beguiling, so bereft of troublesome human intransigences, and so happily unbesmirched with considerations of human striving and social conflict, that its success was immediate.”[9] Maybe the adoption of neoclassical economics was the result of wishful thinking by an emerging capitalist society, as social tensions and complexity grew during the 19th century’s rapid industrialization. It was probably easier for many social scientists to just turn a blind eye to the complexities of social change, and focus on well-behaved math equations.

Along with their cognitive dissonance towards the social realm, neoclassical economics also evoked the ethos of the natural sciences, creating an aura of believability. Ultimately, the static, dry theory became accepted as unquestionable natural laws.[10] Foley concludes:

At the mathematical physics end of the spectrum [of political economy in the 19th century]…William Stanley Jevons…Vilfredo Pareto…and Leon Walras, among others, labored to create an axiomatized, mathematical political economy that could endow the social relations of capitalism with the aura of “natural laws” that guaranteed the stability and rationality of economic life.[11]

While developments in economics borrowing from the methods of heat science gave the ability to derive mathematical formulas, aiding in empirical research, the narrow models present static situations that rely on a mysterious endogenous energy that is essentially unobservable and immeasurable. Foley and Smith address this flaw in the adoption of thermodynamic models to economics:

As a result economics has developed a general theory (Walrasian general equilibrium theory), but on methodologically flawed foundations which foreclose the tight and scientifically fertile connection between theory and measurement enjoyed by thermodynamics.[12]

For thermodynamics this energy is heat- an observable, calculable, and manipulable physical phenomenon. Human self-interest however, is not so easily dealt with. It is illogical to assume that market representations like prices and quantities can accurately depict levels of utility and self-interest, as such manifestations often depend on individual means and circumstances outside of one’s control. So how is it that the mainstream branch of the dismal science evolved to operate on such assumptions about the nature of utility maximization and self-interest? Following the history of economic thought leading up to the works of Edgeworth, as well as Stanley Jevons, Léon Walras, and other neoclassicals, the motivating energy of economics can be traced back and identified as self-interest.

Heat of desire, entropy of self-interest

The efficiency of self-interest and greed as a motivating energy is commonly attributed to Adam Smith. While neoclassical thinkers focused on Jeremy Bentham’s ambiguous concept of utility, it is easy to logically connect how utility quickly becomes analogous to self-interest in the theory. Smith explains how pursuing self-interest via the market can align desires and needs so that people efficiently allocate resources to produce what is needed and desired[13]. For utilitarians, people make these allocation decisions based on some received happiness or benefit, commonly interpreted as monetary or material.

Neoclassical theory, borrowing its assumptions from Jeremy Bentham’s concept of utility, derives an axiom of utility maximization- people always pursue the choices that give them the most utility, satisfaction, or happiness. Utility maximization then is a self-interested action, since the individual makes herself better off --always. Utility then collapses into being an expression or result of pursued self-interest, or in neoclassical language, outcomes reveal preferences determined by desire and self-interest. To thoroughly adapt the methodology of thermodynamics then, neoclassical economists equates heat energy with the energy of self-interest:

In representing the behavior of individuals (or households) as the maximization of well-behaved utility functions (which represent transitive, convex preference orderings) under constraints, marginalist and neoclassical economics effectively regards individuals as equilibrated thermodynamic systems in which a well- defined equation of state links extensive variables (commodity bundles) to intensive variables (marginal rates of substitution). [14]

The utility functions and marginal rates of substitution cited by Foley and Smith assume that the agents pursue self-interest in this maximization process. Self-interested, profit-maximizing actors are one of the necessary conditions in neoclassical economic theory.

Assuming self-interest as the endogenous energy of the economic system is problematic. People are not always self-interested. People are not self-interested in regular, calculable ways. People are easily persuaded by their own theories. The rhetoric of self-interest, based on the efficiency justifications of neoclassical theory, can quickly become ideology and perceived divine wisdom. By creating an aura of science, neoclassical economics endorses the efficiency and moral goodness of self-interest, ignoring the perverse incentives such assumptions may create.

Self-interest boils over and loses steam

The assumptions of neoclassical economics regard self-interest as the only energy in the economic system- a view that ignores other human motivators like love, pure altruism, or even bitter hatred. There are two very important implications of this ignorance: self-interest becomes a self-fulfilling prophecy and other dimensions of human existence, such as the environment, become marginalized (pun intended).

In time, the marginalist and neoclassical endorsement of self-interest became mainstream material for textbooks and courses, as well as a guiding light for business decisions. Self-interest made its way into American and world culture, celebrated as the efficiency and fair allocator of scarce resources. Whether or not self-interest was an enlightened as the models claimed may be contestable, but the rhetoric of neoclassical economics evolved into market ideology- what can be called “utopian economics.” [15] Some experimental research in the 1990s and 2000s even suggested that students majoring in standard mainstream economics end up developing a tendency toward being uncooperative and selfish.[16]

In a self-interested world of free markets and competition, expecting the worst of others often results in bring out the worst in everyone.[17] Many economists cited perverse incentives as a cause of the 2008 Financial Crisis.[18] In the market, brutish self-interest guides individuals to take advantage of such perverse incentives, creating systemic risk for the entire economy. As the financial collapse and moribund labor market show, the invisible hand does not always guide self-interest in the right direction.

William Stanley Jevons, who is credited with neoclassical marginal utility theory, was even aware of the potential dangers of market ideology. The famed Jevons Paradox describes how the market-based allocation of a scarce resource, such as a fossil fuel, can lead to the development of increasingly efficient technology for its use. More efficient technology however, actually ends up leading to an increase in the use of the fossil fuel, defeating the purpose of efficiency altogether. In this situation, self-interested businesses in the market end up putting themselves in a pickle, depleting very necessary natural resources and making everyone worse off.[19] The consequences of relying on self-interest for market-based climate change solutions will continue to be contentious as green industry growth becomes imperative for global economic survival. Unless the invisible hand gets a green thumb, it may be time to reconsider many of the dominant economic models based on self-interest, devoid of human interaction, politics, and feelings.

Conclusion

Following the intellectual exchange during the 19th century between the physical sciences and economics shows how the static neoclassical models were developed. Economics asserted its place as a “science” by adopting many of the mathematical methods of thermodynamics, and thus creates an ideology that self-interest and markets were undeniable natural laws of economics. The narrowness of this ideology has some disastrous implications for both individuals and society, as seen in the current financial meltdown and avoidance of implementing effective climate change strategies.

While an analysis of the peculiar relationship between self-interest, heat science, and mathematical axioms sounds like an out-of-touch lofty intellectual debate, it is evident that without reconsideration of economic thought, many people’s livelihoods and dignities are at stake. Hopefully the field of economics will continue to battle itself, as it has in the past, and open debate about more socially-regarding theories and policies before the scorching heat of self-interest leaves the discipline (and the economy) up in smoke.

------------------
[1] Smith, Eric and Duncan K. Foley. “Classical thermodynamics and economic general equilibrium theory.” Journal of Economic Dynamics and Control, 32 (2008) 7-65.

[2] Foley, Duncan K. Adam’s Fallacy: A Guide to Economic Theology. USA: President and Fellows of Harvard College, 2006. pp 173.

[3] Folbre, Nancy. Greed Lust and Gender. New York: Oxford University Press, 2009. pp 58.

[4] Nadeau, Robert. “Neoclassical economic theory.” Encyclopedia of Earth, 2008. <http://www.eoearth.org/article/Neoclassical_economic_theory> Visited November 16, 2010.

[5] Foley, Duncan K. Adam’s Fallacy: A Guide to Economic Theology. USA: President and Fellows of Harvard College, 2006. pp 159.

[6] Smith, Eric and Duncan K. Foley. “Classical thermodynamics and economic general equilibrium theory.” Journal of Economic Dynamics and Control, 32 (2008) 7-65.

[7] Heilbroner, Robert L. The Worldly Philosophers. New York: Touchstone, 1995. pp 173.

[8] Ibid.

[9] Heilbroner, Robert L. The Worldly Philosophers. New York: Touchstone, 1995. pp 175.

[10] Foley, Duncan K. Adam’s Fallacy: A Guide to Economic Theology. USA: President and Fellows of Harvard College, 2006. pp 157.

[11] Ibid.

[12] Smith, Eric and Duncan K. Foley. “Classical thermodynamics and economic general equilibrium theory.” Journal of Economic Dynamics and Control, 32 (2008) 7-65. pp 64.

[13] Folbre, Nancy. Greed Lust and Gender. New York: Oxford University Press, 2009. pp 58.

[14] Smith, Eric and Duncan K. Foley. “Classical thermodynamics and economic general equilibrium theory.” Journal of Economic Dynamics and Control, 32 (2008) 7-65. pp 64.

[15] Cassidy, John. How Markets Fail. New York: Farrar Strauss and Giroux, 2009. pp 23.

[16] Frank, Robert H. “The Theory that Self-Interest Is The Sole Motivator Is Self-Fulfilling.” New York Times- Economic Scene, February 17, 2005.

[17] Ibid.

[18] Crotty, James and Gerald Epstein. “Avoiding Another Meltdown.” Challenge, Vol 52 Number 1, January/February 2009. pp. 5-26.

[19] Foster, John Bellamy, Brett Clark, and Richard York. “Capitalism and the Curse of Efficiency.” Monthly Review, November 2010. < http://www.monthlyreview.org/101101foster-clark-york.php>

The list...

2010-12-05T11:40:00.001-05:00

I think the list is complete, but I will probably change it completely last minute...sighh. Here are the graduate schools I am applying for, in no particular order:

Colorado State University, PhD Economics
University of California Riverside, PhD Economics
New School University, MA Economics
University of Utah, PhD Economics
University of Missouri Kansas City, iPhD Economics
University of Massachusetts Amherst, PhD Economics
Maastricht University, MA International Economic Studies
[Update] American University, PhD Economics (even though I would like to be at a state school)

Should there be any others? Applications are already beginning to be due.

Student loans: a very preliminary attempted Marxian analysis

2010-12-04T13:25:00.004-05:00

Attempted and preliminary are the key words here, it's a rough first draft. For now, I will not include any resource links because I need to do a lot more research, but the idea came to me after reading this analysis of student loans as a form of indentured servitude. There are a few other blogs and articles suggesting something similar too. Anyway, I wrote this quick analysis down earlier today. I apologize for the length and the unedited language. Feel free to tear it apart- constructive criticism is always very helpful.

The peculiar institution of student lending

Student lending is a curious institution. Someone out there puts up capital to a student loan-making agency. These agencies then make and service loans to students to pay for college education, since most Federal loan and grant programs do not nearly cover the costs of attending even the most inexpensive of state schools. For this service, agencies receive a merchant fee (servicing fee) plus accruing interest paid to both the agency and initial financial capital investor.

So far, student loans are not too distinguishable from any other personal loan (like an auto loan) or even from a commercial loan for a business. But for student loans, there is one very odd catch: your future potential value of labor power is the collateral.

Say what?

For a personal loan, the lender typically asks for some kind of collateral asset like a house or some property to back up the loan in the case of default. Since human capital development through education is difficult to collateralize, this is not done (unless your parents have used home equity to pay for college). The only real asset to hold to cover the loan is the future earnings of the student, which can be garnished in order to repay the loan and interest.

It gets more peculiar. Student loans as distinguishable from other loans in the inability to discharge the debt. Unlike a mortgage, car loan, or credit card, student debts cannot be written off in bankruptcy court- the last resort for many struggling debtors. Regardless of financial struggle (for most bankruptcies, this is health related), a student loan agency still holds the right to collect payment from any future earnings. One blogger has suggested this as being a form of indentured servitude.

Private student lending

Although recent reform by the Obama administration has changed the nature of finance capital in student lending, attention still must be given to the many private student loans still on the books. The terms of these loans will make this a pertinent issue for at least 10-20 years to come, which is the lifespan of many educational loans. The rest of this analysis will be assuming private student loans, which make up a large portion of total lending, since federal loans typically do not cover the full cost of college attendance. More and more private student loans will be entering repayment in the next decade, even as direct private lending is phased out. The rest of this analysis will just consider the private lender case.

The effects of education in capitalist production

Using what I have learned from Knowledge and Class and Theory of Capitalist Development, I am going to attempt to analyze this system of payments (hopefully) within that kind of framework, or at least what I understand of it so far (I am not claiming to even know what I'm talking about, it's just an attempt). Where does financial capital for student loans come from? From people who have financial capital, also known as financial capitalists. Are these people distinguishable from industrial capitalists? I don't think so these days, especially in the United States, where some of the larger industrial capitalists also tend to be financiers. For this reason, let's just lump together all of the capitalists (they are all cronies together, right?).

So, capitalists supply financial capital for student lending. Why would they do this and further, how?

Capitalists have a definite interest in supplying funding for students. These future workers will be developing their human capital to become more productive and innovative workers at the firms. A more productive workforce can then increase surplus/profit in the following ways:

1. Create a more valuable product due to the higher technical skills needed to create the product, making it of better quality and worth (↑ W --> ↑ W/lh = value created per labor hour). Given a small wage differential between skilled and unskilled labor, this could then ↑ SV since ∆ W_{good produced} - ∆ V_{labor power} = ↑ ∆ SV, given the same capital or a change in capital still less than the difference between the increased value of products and the increased value of labor power i.e. the increase relative surplus value derived from labor. In other words, educated labor is worth substantially more than unskilled labor, but the capitalist does not pay the new educated labor an increased wage equal to the amount of the increase in the value of skilled products. The rate of exploitation is then increased, ↑S/C+V, meaning an increase relative surplus value.

2. Increased education can increase the technical productivity of labor, and then be helped by increasing mechanization (which required skilled labor) to increase productivity. Increased productivity will lead to more output, ↑UV and ↑UV/lh, output per labor hour. Assuming a constant rate of exploitation (or even slight decrease), this would still result in an increase in surplus value ↑SV due to the increased output, for which each unit has some amount of surplus value. The increased technical productivity of labor means increased absolute surplus value. (Assuming constant or even decreasing W)

In short, increasing education and skills for workers can bring more surplus to the capitalist. Education then, is in the interest of the capitalist.

How the capitalist can finance education

Capitalists could leave educational expenditures up to the workers, however this could be detrimental to the capitalist mode of production. Workers, instead of spending their incomes on capitalist commodities, would then be diverting their spending towards the subsumed class process of education, which is not quite in the circuit of capitalism. This diversion could then create crisis, as workers propensity to consume capitalist products decreases, and capitalists face a realization crisis, also known as lagging aggregate demand. How then can the capitalist system effectively provide education without directly creating aggregate demand problems?

Using the ideas from Resnick and Wolff, it is consistent here that the capitalist find a way to fund education while still securing his own “conditions of existence”. To do so, the capitalist makes a subsumed class payment, from the surplus, in the form of financial capital investment in the student lending industry. Student financier companies then engage in servicing and distributing loans to the future workers to purchase education. The financiers here play a similar role to the merchant capitalist, by profiting via a merchant fee for distributing the loans. The interest and principal payment however, is paid back primarily to the initial investor- the capitalist.

Surplus Value_capitalism = ∑SSCP_{other stuff} + SSCP_{student-loan-capital}

This subsumed class payment to educational lending institutions becomes the loanable funds to students. Students are then required to pay back the amount of the loan to the capitalist, an upfront service and origination fee to the agency, and an additional interest payment to the capitalist. These payments are made once the student has entered the labor force, and come from the wages paid by their capitalist employer (typically).

p= loan principal payment i=interest payment

V_{labor power} = (EV/UV x #UV) + p_{student loan} + i_{student loan}

_{consumption by worker payments on student loans}

The educated labor class then returns wages back to the capitalist not just in the purchase of commodities through consumption, but also in the repayment of educational loan principal and interest [an expropriation via financial capital].

Implications for the worker

The worker is now burdened with a new kind of debt that essentially siphons wages back to the capitalist class. The unique laws regarding student debt make it impossible to discharge, and even in the case of death, may pass on the debt burden to a cosigner or relative. In default, a cosigner’s assets, such as a house, may even be fair game for private student lenders to claim in repayment of the loan. More typically though, the laborer’s wages are garnished by the private lending institutions, reminiscent to the days of indentured servitude. The accrued interest may even begin to equal the increase in wages earned due to increased educational attainment, which in essence lowers the real wage [via expropriation].

Although arguments can be made suggesting most of the educated workforce enters subsumed class managerial positions, the impact is very similar. The managerial worker’s job is to maintain or increase the profits of the firm, either by relative or absolute surplus value extraction. The managerial worker still will be making a circular repayment back to the capitalist class in return for the educational lending. Interest payment profit and increased productivity are still returned back to the capitalist class.

Implications for the capitalist

In student lending, the capitalist class profits in two ways: increased educational attainment by workers or managers can increase profits and the repayment of loans by workers or managers brings returns the original subsumed class payment to educational capital and an interest payment to the capitalist class. The capitalist, not the worker or manager, then receives the benefits of increased education. In many ways, this can be shown through the decrease in real wages in the United States since the 1970s and the general increase in educational attainment over the same period of time (although current trends are in question). As usual, a hidden win-win situation for the capitalist class.

On the other hand, the capitalist class may face a problem with siphoning both surplus and interest payments from workers and managers. The interest payment will crowd out the ability of workers to consume capitalist goods, possibly creating a realization crisis. The loss of profits in crisis may not be able to be made up for by the interest payments to capitalists, or the tensions between financial and industrial capital may rise. Innovations due to increased educational attainment by workers may also exacerbate the profit realization crises that occur under competition. Indirectly, student lending becomes a source of lagging aggregate demand, although interest payments circulate back to the capitalist class.

Workers unable to pay student loan debts altogether may also cause a problem for the capitalist class. This may work to create a systemic student loan crisis, resulting in mass defaults, or mass under-consumption of student loans as educational financing becomes too expensive. Workers then will become less educated, less productive, and less profit producing. Capitalists may then be unable to make up this loss in profits through interest payments received, resulting in further crisis.

Conclusion

In short, private educational lending is a circular flow back to the capitalist class through a wage expropriation, though guised as a means of increasing wages for the labor class. The capitalist class receives back profits through innovations in production, as well as through the payment of interest on student loans by educated workers. The peculiar structure of student lending, which collateralize future labor power potential, allow this process to occur. This process though, is fraught with ways in which the system could destabilize capitalist production.

Private educational lending will remain a problem in the structure of the capitalist circuit of production for the next few decades, despite recent reform. The reform, which shifts lending to the federal government, may also contain many of the same problems as private lending.

This is a very preliminary attempt at analyzing the process of educational financing, which needs much more development and research.

Talkin 'bout my generation: blog response part one

2010-11-25T09:27:00.002-05:00

(These is a dose of irony titling this post after a song by the Who- a band most popular with the baby-boom generation.)

Judging by the comments on the Baseline Scenario, Huffington Post, and others, it appears as though our guest blog post went well, or at least elicited response. Reading through these comments, some were constructive, a few sweet, many outlandish, and a select few just bizarre. Regardless of comment quality, the topics of student debt, unemployment, the broken educational system, and the future structure of the U.S. economy are getting attention. For the moment, I'd like to focus on the issues of age and government investment in green technology.

Many commenters evoked tones of intergenerational warfare, accusing the younger folk of being too lazy and unwilling to work hard. The "I got mine" attitude (or FUIGM as abbreviated by one commenter) is counter productive here- the whole point of our argument for reinvestment in education and green collar industries was to acknowledge that such policies could have both long-term and short-run positive effects for everyone. A few points to consider regarding intergenerational war:

There are a whole lot more baby-boomers than Millenials
The Millenials will soon be having to care for the baby-boomers, through not just Social Security, but also the private retirement investments that rely on consistent returns from current business operations, i.e. those productive jobs held by younger workers
As baby-boomers age and enter retirement, new costs and burdens will emerge, particularly in housing and health care. As retirement savings and Social Security run out, who will foot these bills?
When our parents' generation was in college and fresh on the job market, they experienced a massive growth in publicly subsidized state universities, government research (think NASA and Cold War), and new growth sectors in computer technology that didn't just emerge out of the blue, it was promoted by government expenditures.

The argument of our article was not for the government to bail out all 18-30 year olds, but rather to take the opportunity to set us all on a more productive path, since the private sector certainly doesn't appear to be taking charge.

Public investment in green-collar industries could go a long way, in the same way aerospace and computer investment did in the 1960s and 1970s. Would such investment have to be a capitalist handout? Not necessarily, enterprises can organize however they choose, and an increase in public R&D grants may be a good way funnel investment through research institutions and universities into productive firms. This would, in a way, target the younger group of upcoming workers and researchers. Increased productivity among 18-30 year olds will be necessary for supporting older generations, and those to come.

A few comments suggested Americans are over-educated, as high school diplomas and bachelors degrees have become more and more useless in the job market. I don't think encouraging less people to pursue higher education is the answer; global economies mean more competition, and more mechanized technology-heavy industry warrants more highly-skilled workers. We should want to be adjusting our economy to these high-skilled jobs, meaning increased educational opportunities for younger folks.

The reason B.A.'s seem so worthless now is because the stagnant market is dictating a loss in value. Just because profit-hoarding corporations are unwilling to hire educated workers does not mean that the human capabilities and skills of that worker lost any value- they are just valueless to the reluctant corporate investor who would rather sit on cash than invest in anything new. Deteriorating human capital, not over-education, should be the concern here. For those on the cusp of enrolling in college, some human capabilities may never have a chance to be developed due to high tuition costs and family financial burdens.

Educational loan reform and investment in public universities was another piece of the puzzle for our argument, but I will get to that in another post that addresses student debt, tuition, and decline of public higher education. Long story short, without reform in education and the promotion of new (green) industry, I have no idea where we may be headed, but it doesn't look like a very nice place.

Stumblings

2010-11-21T13:48:00.000-05:00

Indentured servitude, here I come!

Jevon's paradox

The Economy: Why They Failed... I really admire John Cassidy's crisp writing

Quantitative easing explained

"How are the kids?" guest post

2010-11-21T09:19:00.001-05:00

Exciting blogosphere news- the Baseline Scenario blog was very kind in publishing a guest post written by myself and friend Mark Paul. The post is entitled "How are the kids? Unemployed, underwater, and sinking" and we examine how the younger generation is faring in our sluggish economy:

In some cultures asking how the kids are doing is a colloquial way of asking how the individual is faring, acknowledging that the vitality of the younger generation is a good metric for the well-being of society as a whole. In the United States, the state of the kids should be an important indicator. Young workers bear the significant burden of funding intergenerational transfer programs and maintaining the structure of payments that flow in the economy. Today, the kids’ outlook is almost as bleak as the housing market; they are unemployed, underwater on student debt, and out of luck from a reluctant political system. Read the rest of the entry here....

Thanks James and Simon!

Update: Yves Smith adds to this argument in "Is Student Debt the Next Front in the Consumer Debt Crisis?"over on Naked Capitalism. I'm afraid she may be onto something, but the question is what happens when student debt, which can be neither discharged nor is collateralized, goes under? Is it the cost of university that is revalued in the market, or the potential of labor earnings?

Reworking undergraduate economics

2010-11-17T19:50:00.000-05:00

Having formerly attended a very mainstream business school, I am incredibly appreciative to be studying at a heterodox economics department as an undergraduate. Here, I can take courses that are simply just not offered anywhere else (economics and the literary imagination, anyone?), and also be exposed to some great research and faculty. However, I feel that the undergraduate experience does not really capitalize on its own resources. I think there really should be a specific heterodox economics track for undergraduates that would go something like this:

First-year requirements: Intro Micro, Intro Macro, Intro Political Economy

Second-year: Intermediate Keynes, Intermediate Neoclassical (changing the names of these courses could really help)

Third and Fourth years: Marxian Economics, Socialist Economies, Economics and the Literary Imagination, History of Economic Thought, American Economic History, European Economic History, plus electives in gender, race, development, etc.

I also think Marxian should really be two classes- one on epistemology that goes much more in depth with the philosophy of Marx, and the second on the more technical economic theory. I would keep the math requirements (Calc I, II, Stats) and maybe even make them more robust adding in Linear Algebra, Calc III, and Econometrics courses as requirements. Math is kind of fun...in retrospect.

Even though I know very little about anything, part of me worries about heterodox departments inadvertently self-dissolving by not encouraging enough critical economic thought within the undergraduates. I would hope departments would want to illicit more undergraduates to look at heterodox economic theories and pursue them in graduate school, but I am really doubtful that this is on the agenda. (Do most econ graduates actually study math as undergrads?) Sure, this sounds naive, and there is also a whole other issue about whether or not undergrads even care about the economics major in the first place. (sigh)

In any case, I am unclear as to how these departments plan on maintaining research and teaching in the decades to come. It appears as though heterodox departments still attract a good number of very talented graduate students, so maybe this doesn't look like a problem. But I would hope, for reasons of wanting to bring alternative economic ideas into more prominence, the approach would be "the more the merrier" and undergraduate studies would be encouraged as well.

I guess our Radical Student Review group is a start, and there are much bigger problems out there to worry about.

Inside Job Review

2010-11-13T12:35:00.003-05:00

The movie Inside Job was recently released and more or less lays out the pattern of corruption that led to the 2008 Financial Crisis and subsequent government inaction as far as new financial regulation goes.

In short, the bankers were in bed with the government, government was in bed with the bankers, neoliberalism will kill us all, and bankers made out fine while the rest of us are unemployed. The first 4/5 of the film were not surprising for anyone that has kept up with blogs, books, and articles about the crisis. The last 1/5 though really drove home the idea of corruption in academia. (The movie is broken up into parts, I'm guessing 5, but I can't quite remember how many there were.)

A number of academic economists, most prominently Larry Summers and Martin Feldstein, were examined for their conflicts of interest. Nancy Folbre summarized a lot of this, plus other new research on ulterior motives in economics, in this recent blog post "Ethics for Economists". Academic economists, unlike other professions, do not have a standard code of ethics that requires them to disclose conflicts of interests or other pertinent information when publishing their work. According to Inside Job and recent research from UMass economists, the ivory towers seem all to have moved to Wall Street.

Inside Job only talks about these conflicts in the context of the financial crisis though, and I suspect these kinds of ties go much deeper. For example, the New Yorker recently had a great piece tracking the influence of the infamous Koch brothers on not only the Tea Party, but academic institutions as well. Conservative colleges like George Mason University and right-leaning think-tanks like the Cato Institute receive a portion of their funding from the Koch brothers, who's interest surely are not confined to pure academics. I imagine there's a lot more dirt to be dug up if we were to examine the university donations, grant funding, and business ties within many economics departments, and probably other disciplines as well.

The movie really showcased the corruption of industry, politics, and academia. Understandably not in depth, the film asked the right questions and did a particularly good job of exposing some of the nuanced conflicts of interests. I wish the filmmakers had address the hegemonic nature of neoliberalism and the complacency of common folk. I also wish they had interviewed at least one heterodox economist to talk about the ethics problem, but maybe they will save that for part two.

Paul Samuelson's Memories

2010-11-07T10:15:00.001-05:00

Here is an excerpt from Samuelson's "Memories" in Newsweek, June 2 1969, covering the great Sweezy-Schumpeter debate at Harvard, moderated by Wassily Leontief. A summary of the debate is as follows:

"The patient is capitalism. What is to be his fate? Our speakers are in fact agreed that the patient is inevitably dying. But the bases of their diagnoses could not be more different.

On the one hand there is Sweezy, who utilizes the analysis of Marx and of Lenin to deduce that the patient is dying of a malignant cancer. Absolutely no operation can help. The end is foreordained.

On the other hand, there is Schumpeter. He, too, and rather cheerfully, admits that the patient is dying. (His sweetheart already died in 1914 and his bank of tears has long since run dry.) But to Schumpeter, the patient is dying of a psychosomatic ailment. Not cancer but neurosis is his complaint. Filled with self-hate, he has lost the will to live."

Notable quotable

2010-10-31T11:22:00.000-04:00

"Most people take capitalism for granted, just as they take the solar system for granted. The eventual passing of capitalism, which is often conceded nowadays, is thought of in much the same way as the eventual cooling of the sun, that is to say, its relevance to contemporary events is denied. From this point of view one can understand and criticize what happens within the framework of the system; one can neither understand nor evaluation what happens to the system itself. Great historical events, however, generally concern whole social systems. The result is that to the typical modern mind they assume a catastrophic character, with all that this implies in the way of emotional shock and intellectual confusion."

Sweezy, Paul M. The Theory of Capitalist Development, 1942. pp.21-22.

Weekend Reading

2010-10-30T11:44:00.000-04:00

Theory of Capitalist Development

Class Analysis of Households Extended: Children, Fathers, and Family Budgets

Classical Thermodynamics and Economic General Equilibrium Theory.... I have a developing idea here about heat physics, economic ideology, and industrial development... I think I will end up using this for a paper for my history of economic thought class somehow.. and luckily I'm already well-versed in all matters regarding heat and steam

Also, later this weekend, I am going to submit my first application to a graduate school...frightening.

Breakthrough

2010-10-25T17:47:00.001-04:00

It occurred to me today that my frustrations in the past few blog posts lately have to do in part with one irreconcilable nuance between overdeterminism/post-structuralism and institutionalist frameworks, specifically in relation to Fogel and Engerman.

Question: Is it consistent with the overdeterminist framework that institutions are always efficient? Can conditions of existence be created and secured for something that is inefficient? If so, how and why?

I hate efficiency! And I hate that economists are so rubbish in defining what they mean by the term in the first place.

Stumblings and thoughts

2010-10-25T10:13:00.003-04:00

Thoughts:

Who cares about efficiency? And why?

Why does mainstream micro theory ignore time? For example, I would suspect that marginal utility not only diminishes per unit but also for one particular unit over time as well.

Why do we focus so much on work/non-work tradeoffs? Are there other economic systems and theories from outside of the Euro-centric world that consider things differently?

Stumblings:

Some info on GLS Shackle

Foucault-Chomsky Debate

Rich Mom, Poor Mom (this post mentions Melissa Hodges, who is a fellow CRF awardee, and is doing some incredible research on families and self-employment)

Neoclassical v. heterodox economics: the case for plurality

2010-10-22T16:37:00.001-04:00

That title actually sounds like it should be for a multi-volume book, not a silly undergrad's blog post. Anyway, as an undergraduate at a distinctly heterodox economics department, I often observe arguments that go something like the following mad-lib:

"This (insert neoclassical theory) is wrong because it relies on (choose either factor endowments, preferences, or technology) and ignores (name some kind of social or political institution from which the previous paradigm is contrived). (Follow up with a historical analysis of some random European country, throw in some anecdotal evidence of a few other countries, and apply this to whatever the major theme of the paper is)."

That is fun, and a good brain exercise, but I really wish there were some more appreciation for neoclassical theory, and all theories in general. Really just an end of "I'm right, you're wrong" economics. One of my favorite blogs, the Real World Economics Review, bugs me at times with this, and there are countless other mainstream blogs that fall into this trap. I do see that this kind of banter is definitely constructive- a critical approach is great for revising and defending whatever your idea is, but at the same time this kind of "academic culture" can also be more conducive to ignorance too.

I really think using multiple frameworks, while totally inconsistent, can be really useful. For example, the most basic neoclassical model relies on some pretty hefty assumptions. With those in mind, this model makes it fairly easy to point out when those assumptions are violated, like in the case of asymmetric information or something like that. Heterodox theory, like maybe an institutionalist approach, can then take that problem and point out how this asymmetry came to be based on social or government institutions and their history. Yes? Maybe I just don't get economics and should throw away those graduate school applications.

Just a few nonsensical thoughts... so here are some interesting links: Uncertainty is the central fact motivating economic activity (yes!), what makes stuff interesting, and the war on moms.

The culture of poverty, let's blame the poor

2010-10-19T09:04:00.000-04:00

If the leading paragraph's Harry Potter reference wasn't offputting enough, the content of this recent New York Times article is somewhat disturbing, especially to anyone who knows a thing or two about economics. The article discusses a return by scholars in anthropology and sociology to considering culture as a significant determinant of poverty. In other words, the poor are and remain poor because of their culture. Reading between the lines, it's apparently now okay to be politically incorrect and blame the poor for their own woes in academia.

“We’ve finally reached the stage where people aren’t afraid of being politically incorrect.” Really? As if social scientists were sitting around waiting for a chance to be politically incorrect?

Anyway, culture is an important dynamic to study, however culture itself cannot be blamed for persistent poverty. Persistent poverty likely means there are persistent underlying structural problems, like inadequate education or job discrimination, not just cultural trends or "being a victim of the market."

Culture does shape the way people act, behave, work, consume, abide by laws, respect public goods, raise their families, and so on, but the scholars mentioned in the article are missing the major link between culture and poverty: it's not culture that directly determines poverty, it's the poverty and underlying social and economic institutions (let's say capitalism and societal acceptances of vast inequality) that too determines the culture and social norms of a group. They are missing the broader elements, and the ways in which institutions are actually determining the smaller group cultures.

For example, would the growing social acceptance of single parent households have occurred had their not been other social, economic, and political strains that had first determined the deterioration of the family unit? There are plenty of arguments contributing the changes in modern family structures to the underlying spheres of alienation and exploitation (both class and gender) present in capitalism.

Had the scholars interviewed in the article acknowledged the overdetermination of culture present in their analyses of the "culture of poverty", I think I would have been okay with the general idea of examining culture's influence on poverty traps. But it is imperative that these scholars also examine the broader structures that are simultaneously determining that culture. Blaming the "culture of poverty" will likely not help to solve the greater problems of inequality.

Mind the gap: information asymmetry in care

2010-10-17T14:33:00.001-04:00

Recently, the Archives of Internal Medicine published a study demonstrating the persistence of communications discrepancies between physicians and hospitalized patients. For anyone who has ever been hospitalized, or known someone who has, this evidence is not really that surprising.

One good example- only 17% of inpatients can correctly name their main physician. That actually does not surprise me. Being hospitalized is usually a high-anxiety kind of situation. Remembering your doctor's name is probably not a priority, as much as remembering to take in all of your fluids might be. With that in mind, it is interesting to note that only 57% of patients were actually aware of their diagnosis, while 73% of the respective doctors studies believed their patients were in the know of their medical condition. The same kind of aforementioned anxiety and fear may have played a role in this discrepency, so maybe this accounts for the fact that 98% of doctors claim to have discussed anxiety and fear with patients while only 54% of patients actually report that happening. Having not yet read through the entire study, I am unsure of the statistical significance of these numbers, and of the merit of sampling methodology, yet the numbers do seem to point to something work taking a look at.

So why is this important? For one, patients and doctors should be on the same page about information, especially since so many medical situations require outpatient attention and lifestyle changes (to some degree) by a patient. But these finding are likely just the tip of the iceberg when it comes to information assymetries in care, including other areas like nursing home, child care, outpatient services, etc. Without proper information, can patients and families really judge the quality of care? Do patients, families, and even insurance companies (...sadly) share these same miscommunications, resulting in real economic symptoms like adverse selection? How many extra costs do these discrepancies present?

This gap likely presents many costs, on all participants in medical care creating an imperfect market. In childcare, economist David Blau presented a robust model of the child care market, described as generally well-functions with a few valuation gaps. He does acknowledge the information asymmetries present in the market, especially in the gap between perceived and actual quality of care for children. Something similar likely occurs with adult care, like hospitalization, where the communication gap between doctors alters what the hospital believes to be quality care and what the patient feels they are actually receiving. Someone, like an insurance company, can likely find creative ways to capitalize on this discrepancy. As more similar studies to the one done by Olson and Windish emerge, the question is how these communication gaps can be ameliorated, at what cost, and at what savings.

The London Tube is famous for its "Mind the gap" caution signs. Those involved in care markets, especially patients and family members, should follow a similar motto to avoid stumbling into an information and quality gaps. Hospital and care center administrators, as well as policy makers and regulators too, may want to watch their feet. I am not knowledgable to make any suggestions on how to do this, but to me it seems like communication discrepancies may be somewhat solvable through technology, like accessible and transparent medical documentation that can be reviewed by doctors, patients, families, and insurers. This small study is a part of a much broader problem in care, with complex transactions and costs (both monetary and health), so solutions will likely never be that simple.

Music stumbling

2010-10-17T10:40:00.001-04:00

"Talking NPR Blues"

Current reading

2010-10-11T11:07:00.001-04:00

The Making of the English Working Class

Woman and Socialism

Economic Backwardness in Historical Perspective

Do the Right Thing: Effects of Moral Suasion on Cooperation

A forthcoming paper on wealth inequality

Want to read if I ever have free time again:

Philosophy and the Mirror of Nature

At Home: A Short History of Private Life

Video stumbling

2010-10-03T21:45:00.001-04:00

Here's a talk on "Morality and the free market". This channel on Hulu also has a few other good economics related lectures. With commercials of course!

Random observation on bank atm's

2010-10-01T08:12:00.000-04:00

Why do bank atm's on college campuses allow you to choose withdrawal amounts in $10's, while regular one's only allow for $20's?

I've noticed that $10's are available not only on this campus, but also others that I frequent. Then I get disappointed when I can't withdraw $30 back in town. Are banks expecting poor college students to only be able to withdraw $10? Or is there some higher marginal availability of $10 bills in circulation on campuses with many central retail outlets making it easier to stock those Hamiltons?

Questions on dialectics, Marx, history, self-interst, etc

2010-09-21T20:57:00.000-04:00

This post is just some questions that have come up over the past few weeks of classes:

If the dialectic epistemology supposes that pretty much everything is complexly determined by everything else and the other way around too, then how is it that Marx was able to use such a framework, yet still concentrate on a specified and internal cause, in the form of class, as a source of exploitation and contradiction? In the dialectical approach, would it not be that both endogenous and exogenous circumstances would affect class and vice-versa, but also that class would affect and be affected by other spheres of alienation and exploitation such as gender or even the environment?

This question is something I struggling with in reading the debates on the transition from feudalism to capitalism from Sweezy, Dobb, and Brenner. In trying to analyze the arguments as either Marxian or not or whatever, and keeping in mind the dialectic, it is difficult understand the determinants of the existence of class conflict in and of itself. I really hope the answer isn't "scarcity", because I could have found that in a Greg Mankiw textbook, since I think looking at things like population or famine or lack of technology tend to boil down to "scarcity". But I am guessing the "answer" is more likely to be presented as some kind of power struggle, for the sake of a power struggle, because that's what people do, even when there is enough food to go around. ("Answer" is a word that should be loosely applied.)

Also, the role of subsistence in the economic history and the history of economic thought is really interesting and I think I may write a bit more on that over the weekend. Do we draw that line within vehement desire between self-interest and greed at some point around subsistence? Is the provision of subsistence used as a mechanism to keep exploitation in place? What about today where without wage-work, it is nearly impossible to find your own subsistence without state aid? More to come if I find the time.

Corporate cash hoarding...

2010-09-18T10:34:00.002-04:00

Here is the post from the Economix blog showing corporate cash hoarding.

Call me naive, but can people really go around claiming "structural unemployment" (look here or here) when it is those who are holding back from investment who are actually choosing to change that very structure of who they want to hire?

That is to say firms may be choosing to only hiring those workers that they can squeeze the most profit and productivity from, hence the jobless claims versus openings numbers, and so on. So while profits may be high, signaling some kind of recovery, the source of those profits is just layoffs and unfilled openings. (A fitting headline: FedEx's profit doubles, 1700 layoffs.)

Nevertheless, even though some argue that the unemployed are kicking back enjoying those extended benefits instead of looking for a job, maybe it would be useful to consider the people making hiring decisions up top. I'm sure there's some corporate scapegoat like "international competition" or whatever contributing to the lack of productivity and hiring, but it would seem reasonable that now would be a good time to invest in workers and technology before the hole is dug much deeper.

Is this a recession from lack of jobs or a recession from lack of long-term sustainable thinking?

Anyway, just a thought. Back to Robert Brenner and some child-care research.

P.S. We are thinking of starting an undergraduate/graduate reading group based on some Marxian and Institutionalist things and whatever else we want to explore. Reading suggestions welcomed.

Benefits trap: child care and unemployment

2010-09-13T10:44:00.000-04:00

I have a feeling over the semester, this little blog will take a turn towards being more of a reading journal. Over the weekend I immersed myself in all sorts of books and articles on the subject of child care, in regards to quality, consumers, and those who work in the industry.

In really just paging through David M. Blau's book "The Child Care Problem", I started to think about some of the inadvertent effects of tax brackets, welfare cutoff points, and the frequent dependency of child care on government subsidies.

This is nothing new, economists have long been aware of so-called "welfare traps". Increases in income can often result in larger decreases in tax benefits, welfare, and other aid programs. Often those benefit losses include some kind of child care subsidy. As Blau discusses, the loss of the child care subsidy, along with the high costs of market day care centers, creates a sort of "parent trap" (not to be confused with the Disney film), keeping parents on welfare in order to keep the child care subsidy.

In this situation, given the prospect of a higher paying job for current welfare recipients, the cost of now having to place children in day care comes at odds with the benefit of higher paid work, or with the cost of forgoing a job altogether to provide home based care (like in a two parent household). Sometimes this head-butting leads to forgoing better employment options and remaining on a government subsidized program, as it turns out to be a better deal than any job benefits minus new child care costs.

Around the blogosphere, there has been a lot of talk about the jobless recovery, Beveridge curve anomalies, and the employment-population ratio. In some ways, these numbers may reflect the occurrence of the "welfare trap". Some folks even go so far as to just assume the unemployed are taking a free-ride, with no incentive to work due to such lavish unemployment benefits.

Along those lines, I am curious as to whether or not there is a larger "benefits trap" that occurs, not with "lazy" workers (because I think that's rubbish), but rather those workers who have to support a family and children. That is to say that, regardless of any government assistance (and maybe even especially without it) and outside of the realm of welfare, the costs of child care, keeping a home, and other normally unpaid work may work against those looking for prospective employment.

If an unemployed parent is seeking work, would there be much benefit in a taking a relatively low wage job that would now require spending on day-care, after school programs, and extra transportation to all of those things? If a parent is concerned with the quality of child care, this makes troubles even worse. High quality care, for those parents wanting the best for their children, is typically more expensive and requires extra time and involvement from parents- another added cost. (Don't forget, high quality early childhood care usually means higher quality future students, and later more productive workers.)

Responsibilities for children problems can't explain all of the gaps in employment/openings, but I think there is a line of thought here that could help to analyze the "jobless recovery". More importantly, the profound effects of "welfare traps" or "social safety net traps" that are felt during a recession should be a good sign that these programs need some work, especially when it comes to economically punishing those who choose to have the children who eventually become the next labor force and supporters of those social safety nets.

Current reading

2010-09-09T09:09:00.000-04:00

Most of this is for class, some of it is for fun:

Greed, Lust, and Gender

Governing the firm: workers' control in theory and practice

Clio and the Economics of QWERTY

The content on the Abolish Human Rentals website

Spark: How old-fashioned values drive a twenty-first century corporation.... I finally got around to reading this

Stumblings

2010-09-01T11:02:00.000-04:00

The nonsense of the invisible hand

Color photographs from Russia 100 years ago.... these are absolutely incredible and breath-taking

A bit on high-tech self providing and work centers

They're with stupid: anti-intellectualism rears its head

GREeeeeee

2010-08-27T14:19:00.001-04:00

GRE is done, although my scores give the impression that English may not be my first language (by the way, English is pretty much my only language except for French from school). I think I may retake that wretched exam to improve my verbal score, but overall I am pretty happy with how it turned out.

For any of you that may read my blog and are also about to take the GRE, I highly suggested doing as many timed practice exams as you can. I nearly ran out of time on both the quantitative and verbal sections, and had to rush the last 7-8 questions of each.

As far as study guides go, I recommend any of the Princeton Review books. Cracking the GRE is a good overall book, but the 1014 GRE Practice Questions give you a much better idea of what specific types of questions are on the exam. Taking a prep course is probably better though, but I didn't have that kind of money to spend. Also, special triangles are your friends.

That's all for now. I need to catch up on the last week or so of economics blogs.

Fall semester

2010-08-23T10:50:00.000-04:00

I'm due to take the GRE Friday and so I'm spending most of my time preparing for that, as well as organizing things for the upcoming semester (including digging myself into an even deeper hole of student debt, yay.) Upon finalizing my schedule, I realized how lovely it does look:

Marxian Economics
History of Economic Thought
Writing for Economics
Graduate Intro to Economic History (maybe, I'll finalize this after the first week of classes)
Linear Algebra (boo, although a nice break from econoland)
Random French Independent Study

I will also be doing some undergraduate research assisting for a professor, dealing with running the economics club, doing some tutoring every week, and hopefully finding some time in there to apply to grad school.

With such a busy semester, I have yet to decide whether or not this will make me appreciate my 30-45 minute commute more (guaranteed time by myself) or less (being late for class, no time to finish anything). We'll see.

Stumblings

2010-08-19T10:50:00.000-04:00

Economics and time... the paper they refer to about photons and whatnot, can really mess with your head

Why girly jobs don't pay well and the response to readers' comments.... I think part of the reason for reader confusion is the difficulty for economists (or anyone) to translate how something goes from social or cultural norm to an economic preference. I also wish that Prof. Folbre had talked a bit on how this effects minority women.

An economist muses about race

I think the "Why do we yawn?" question is really one of the most impossible in human history, apparently we'll never have a real answer

A good blog post on deficit hawks, social security, and whatnot

2010-08-17T10:16:00.001-04:00

Here is a good read from the UMKC New Economic Perspectives Blog (one of my favorites) and was written as a response to Laurence Koltikoff's piece from Bloomberg claiming that the U.S. is bankrupt. I think this blog post does a good job of explaining basic things about debt and deficits. Here is my favorite, albeit sardonic, paragraph regarding social safety nets:

The alarming situation we are in, according to the deficit hysteria crowd, is the result of the government running a Ponzi scheme for 6 decades as it has been taking resources from the young and giving them to the old. If their point is that we are taking real resources from the young and giving them to the old, then yes, that's what we are doing. And that's what every society is doing, has always done, and will always be doing unless you want to let the elderly population die of hunger. Ditto for infants—the lazy do-nothings expect us, the working age population, to take care of them! Why can't those lazy infants and elderly people pull their own weight?

If I recall correctly, a few years back the UMass Economics department had made up some department t-shirts that featured a "reptilian" drawing meant to represent how capitalism, like reptiles, does not care for its young and is cold-blooded in nature, or something like that. Deficit hawks too seem to take the reptilian route, cawing about the inefficiencies of social security and the like.

With all of these deficit hawks and capitalist reptiles, things are really starting to look like a zoo.

Stumblings

2010-08-12T16:11:00.000-04:00

List of unusual deaths from antiquity to present... this is really disturbing

Triple Crisis Blog

On corporate America's investment strike

Borat economics in Washington

College schmollege

2010-08-12T09:52:00.000-04:00

There are quite a few interesting news bits in higher-education-land lately:

1.) The U.S. isn't so great when it comes to graduating students from college
2.) Those same students who couldn't graduate also have loans, and now student loan debt has surpassed credit cards. The real thing to consider when comparing student loans to credit cards, is that way more people have credit cards than college loans, so the debt-per-person is significantly higher for the student loan portion of debt.
3.) The President laid out some lofty goals for increasing educational attainment in the U.S.

As great as it is to have a game plan on how to increase those graduation rates, I worry that many of these plans don't address both parts of the issue. In general, I would boil down the two major issues as being of cost and quality. That is to say that there are two main barriers for students entering college, the cost of attending a university and the quality of their prior education, which are exclusionary for those lacking college-level preparation in high school and financial assistance.

Part of the President's goal to increase college graduation rates to roughly 60% over the next ten years (from the current 40%, number 12 world-wide), is to focus on providing more college preparation in high school. Students often lack the basic writing, reading, and mathematics necessary for universities, and then end up wasting time (and money) taking remedial coursework. This lag may contribute to increasing costs, time, and discouragement for students that causes them to not complete their degrees. But I wonder, is high school the whole issue? As we learned a few months ago, reading levels in just the 3rd grade can be a critical benchmark for predicting academic achievements later down the road.

Of course, this is an economics blog, so recognizing the budget struggles of schools at every level (K-doctoral) helps to explain the general lack of resources and quality found throughout the educational system in the U.S. (except for those fancy private schools). Considering those struggles, just in the context of increasing college preparation in K-12, seems already like an edu-pacolypse, where thousands of teachers and administrators have already faced massive layoffs and budget setbacks (just think about what happens to quality when classes increase from 20 to say 30 or 40 students, although the federal government recently offered some assistance here.)

Now for the other side of the story, college is ridiculously expensive and nobody can pay for it. Student debt is only increasing along with tuition, even at public schools. In fact, I am often taken back by the charges on my student account, even though I am paying in-state tuition, with a few scholarships to offset things, and without any room and board, yet the numbers remain nearly equivalent to the cost of a new mid-size car. Despite a few reforms in lending, the fact is students are paying for something few can really afford. This is an obvious deterrent for students considering college, and even for those currently enrolled, the opportunity cost along with tuition can often make dropping out very viable option.

The higher education issue seems to have turned into one big and very messy linear programming problem. How to balance costs, quality, graduation rates, and achievement while dealing with a budget being increasing wrung out and constrained. I'm only an amateur, but it seems as though priorities need to be realigned to putting a value (politically) on bettering the educational system. If economists are seriously worried about some of those Beveridge curve worries, it is also probably time to put a better "price" on the opportunity cost of not improving K-college in the U.S, which eventually translates to social and intellectual capital building.

It takes awareness and political will for these types of change, but there doesn't seem to be much of that other than surface-level goal setting. In fact, it took me far longer than it should have to track down news articles related to student loans and the education gap. Sigh. Maybe it's time for a second round of Morrill land grand colleges? On a more positive note, I've noticed many colleges offering more and more online courses (including my own). I've taken one of these before and hated it, but I can see how these are becoming a good option for revenue generation, making courses available to more students, and cutting costs, though I am unsure of how it effects quality. I don't hope that this is the future of education, but it does seem to be a good strategy for staying afloat.

Stumblings

2010-08-10T10:10:00.000-04:00

Dead-weight loss from Jersey Shore's Snooki

5 suggested common themes for economics that takes the subject matters seriously

Juliet Schor on work sharing

Elevated buses in China

Applying to graduate school for economics

2010-08-06T12:53:00.000-04:00

I'm spending my summer dealing with applications, GRE's, essays etc, so that I don't have to worry about it so much come autumn. This process is mostly discouraging and frustrating. The question of "how many schools to apply to" is difficult, and getting costly. The application fees charged by universities are really exclusionary. Here's a link to some advice on the "how many" question.

Meso-level economics and cooperatives

2010-08-05T11:56:00.001-04:00

As I have mentioned in previous posts, I am spending a portion of my summer interning with the Valley Alliance of Worker Cooperatives, a local organization of worker owned enterprises and a few consumer cooperatives too. My task is to help outline an internship program and being involved with this organization has been, so far, a very eye-opening foray into the cooperative world.

The first observation about cooperative business is that this is a movement, not just a business structure like LLC or Inc. As I read more about the movement in the U.S., as well as the much larger cooperative economies in Italy and Spain, the idea of "meso-level economics" or "mesoeconomics" comes up quite often. Mind you, this word is nowhere present in the common economics introductory and intermediate level textbooks or curricula, although if you read in depth into Schumpeter it comes up. Here is the less than information wiki entry on mesoeconomics. Here's a paper on the origins of mesoeconomics.

The idea of mesoeconomics is that there is another level of organizing or transaction or dynamic that takes place somewhere between microeconomics (consumer and the firm) and the macroeconomy (GDP, fiscal and monetary policies). An example of a "meso-level" economic entity, in the cooperative setting, would be that of the Valley Alliance, in that it is a regional grouping of microeconomic actors (coops). Mesoeconomics could also be talking about different sectors, geographies, incentive effects, supply chains, etc. It's complicated, undefined, and I certainly haven't read enough yet to really explain anything.

In regards to building a cooperative economy, meso-level thinking is important when trying to encourage cooperation between cooperatives. An group like the Valley Alliance serves to connect coops together, encourage coops (especially those in different product/service sectors) to inter-cooperate, and also to collectively work towards financing options, health-care plans, retirements, and cooperative investment activities, preferably through other coops or coop-related organizations.

Since coops are a movement, the mesoeconomic activity serves as a means for influencing the culture, education, and laws that can help to build the great cooperative economy. In the Valley Alliance example, the organization can help to lobby for more coop friendly laws (like allowing a consortia to purchase pooled health insurance), team up with educators to teach about co-opreneurship (like UMass), and to socially connect coops and the community.

There are of course many obstacles and constraints acting on this kind of organizing. Funding and man-power are scarce resources, and minuscule in comparison to the rest of the capitalist based economy, however even the smallest seed can become a tree someday, so I'd like to think that when a small organization of coops begins "seeding" intercooperative investment and support, it can grow to someday be a full-scale mesoeconomic actor in building the larger cooperative economy (...macroeconomics!).

I'd like to know more about mesoeconomic theory, in both the mainstream and cooperative sense, so I'll be snooping around for more books and papers. I know that the idea isn't well-received, but mainstream economists should reconsider rebuilding "the model" to include this level of organizing. A few weeks back, Nancy Folbre talked about "new economics" in her blog post, and last week there was another post that talked about another take on "new economics" using models from seismology (which eerily reminds me of the marginalists and thermodynamics).

The need to rethink is apparent and obvious. Physical, biological, and social systems work on several levels, so maybe it's time to reconsider how we look at the levels of economics.And while we're at it, cooperation sounds a lot more fun than competition.

That's enough of my humble student ramblings for now.

Marxian poetry

2010-08-03T14:05:00.003-04:00

Apparently this poem, ~~entitled~~ which had been signed "-One of the Know-Nothings", is from The Poor Man's Guardian (London, 1831):

Wages should form the price of goods;
   Yes, wages should be all,
Then we who work to make the goods,
   Should justly have them all;
But if their price be made of rent,
   Tithes, taxes, profits all,
Then we who work to make the goods,
   Shall have--just none at all.