Smith on Human Capital
2 hours ago
- Female bargaining power vis-a-vis men in the householdEach of these has been dramatically influenced by feminism. It seems obvious to me that that has played a role as well, and indeed that activating this enormous segment of the workforce has had important implications for economic growth.
- Female preferences
- Employer preferences
"...the notion that a social system moved by independent actions in pursuit of different values is consistent with a final coherent state of balance, and one in which the outcomes may be quite different from those intended by the agents, is surely the most important intellectual contribution that economic thought has made to the general understanding of social processes. [Adam] Smith also perceived the most important implication of general equilibrium theory, the ability of a competitive system to achieve an allocation of resources that is efficient in some sense. Nothing resembling a rigorous argument for, or even a careful statement of the efficiency propositions can be found in Smith, however."
- Arrow and Hahn, 1971Arrow of course proceeds to provide some efficiency propositions that most economists would find relevant to think about, and he rigorously demonstrates the point that individuals pursuing their own interests can generate beneficial results for society in a system of market exchange. Adam Smith took an enormous step forward and provided arguments that had been fairly convincing. Walras, Arrow, Hahn, Debreu, etc. picked up where Smith left off. I'm sure they found Smith's arguments plenty convincing, but they were nevertheless able to provide new arguments - and they did.
"I don't necessarily agree that heterodox models are either "more realistic" or better equipped to incorporate gender than mainstream models. I think the case for heterodox models along these lines is overwrought. The advantage of heterodox models (post-Keynesian, Kaleckian, Kaldorian) is that since the eclipse of the use of the Keynesian cross in formal macro work, they are some of the only models that give prominence to issues of effective demand, paradoxes of thrift, the futility of wage cuts, and those sorts of things. That's a major advantage, and one of the reasons why I like these models - but I don't think it makes them more realistic than mainstream models. Mainstream models generally do a better job of incorporating expectations, price setting behavior, intertemporal choice, and microfoundations. These are all areas the mainstream has pushed forward while heterodox economists have been working on other problems. You really need a rich set of perspectives to draw on, I think.
This is a little tangential to the point about gender, though. The special advantage that heterodox models have for gender is their tendency to divide economic actors into classes (sort of a classical/Marxian carry-over), which lends itself naturally to gendered classes like "men" and "women". If we think the response of investment and savings are sensitive to the relative participation of men and women in the labor force (as Erturk and Cagatay (1995) propose), a heterodox approach is a natural one.
Mainstream models have advantages in working with gender too, though. Bargaining models are mainstream, and one of the big reasons why we think gender disparities exist is because of power relations between men and women that can be easily modeled by assigning men higher bargaining power in a model. Standard labor supply models have done a fine job incorporating unpaid work - I don't know of an equivalent heterodox approach to labor supply (which is not to say there isn't one).
The more tools you've got in your toolbox the more likely you are to be able to answer a question that pops up."
"What is Smithian about me is that I start with what Dan Klein calls a "presumption of liberty." I also have little faith in precise models of human behavior. I believe that good social science is narrative in nature using facts and observations about the world. I am suspicious of politicians who try to engineer economic systems from the top down. I think people are a mix of self-interested and altruistic but the self-interested part dominates. What induces altruistic behavior is a desire for respect. I believe people (even economists) are prone to self-deception. I think the division of labor is limited by the extent of the market and is likely more important for creating prosperity than Ricardian comparative advantage.The presumption of liberty (where he starts) is a good place for me to start too. From my perspective we presume liberty - we are not awarded liberty by the state. That's not to say I believe in natural rights. When the state acts it acts because free people empowered it to to achieve our ends, under the strictures of constitutional restraints (ideally).
What's on your list?"
"My team didn't get our way in the crisis. Neither did yours. But your side got a lot closer. Don't you think that the $820 Billion dollar "stimulus" package had more in common with Keynes than Hayek?I had responded: "Right but everything that has happened since the stimulus has been holding federal spending steady and they've all been arguing about how to reduce it - in the middle of a depression. That sounds closer to your response (cut) than mine (grow)."
Alan Blinder is a pretty Keynesian guy. He thought it was about the right size: http://www.npr.org/templates/story/story.php?storyId=100018973 I know--some people wanted a bigger stimulus. But it's a Keynesian stimulus not a Hayekian one. What is Smithian about me is that
I start with what Dan Klein calls a "presumption of liberty." I also have little faith in precise models of human behavior. I believe that good social science is narrative in nature using facts and observations about the world. I am suspicious of politicians who try to engineer economic systems from the top down. I think people are a mix of self-interested and altruistic but the self-interested part dominates. What induces altruistic behavior is a desire for respect. I believe people (even economists) are prone to self-deception. I think the division of labor is limited by the extent of the market and is likely more important for creating prosperity than Ricardian comparative advantage.
What's on your list?"
|Getting ready to put up pantry shelves yesterday|
Q2. Are you saying that the entire recession was caused by redistributive public policy? A2. No: expanded redistribution made the recession at least twice, and probably four times, as deep as it would have been with a constant set of rules for disbursing subsidies to the poor and unemployed. Nor do I say that redistribution was the root cause of the recession – Chapters 9 and 10 of the book explain how the mortgage mess and financial crisis made it politically feasible, if not necessary, to expand the amount of redistribution. [emphasis is added]So it seems to me to make that bolded claim you really do need take labor supply and demand effects of the safety net into account (I've only seen his take on labor supply effects so far - I need to see the book to understand the rest), but also everything else that's going on. If the recession would have been three times as worse (just throwing numbers out there) without the interventions of Bernanke, Bush, and Obama in late 2008/early 2009, your "at least twice, and probably four times" assessments are obviously going to change!
"Each one of us benefits from the protection assured by the threat of guns; each one of us could be the next life they claim as recompense, without regard for personal rectitude. This perspective would require us – all of us, though in different ways and to different degrees – to see ourselves as both complicit with this power and the victims of it."Yep!
"Economists do not look at quantities only but at prices. That is the very point of being an economist: to not simply be some operations-research material-balance accountant of product flows but to look deeper and take market prices as indicators of Lagrangian multipliers associated with the appropriate social-welfare maximization problem."
1. A big negative demand shock in response to the financial crisis.So in the section above I talk about how Mulligan covers #3 and ignores #4 (or apparently leaves it in his book but doesn't think it's important enough to present). The other problem is that he completely ignores #1 and #2, and tries to assert that he's explaining the Great Recession!
2. A big positive monetary/fiscal/TARP response. You can say it wasn't enough so it wasn't "positive". I'm just saying that it was a big positive relative to doing nothing. My baseline is no policy change, rather than "the policy change that would have fixed everything", which makes it a positive.
3. A small negative effect from the labor supply effects of the safety net.
4. A medium positive effect from the labor demand effects of the safety net.
"If I were a “Progressive” I would not deny the facts that Mark and I report in our essay. I would, instead, trumpet and celebrate these facts, insisting that they are the happy and as-promised results of government programs and institutions such as Social Security, Medicare, the National Science Foundation, the U.S. Department of Education, Fannie Mae and Freddie Mac, rarely broken streams of deficit financing since the late 1960s, the ITC’s diligence in protecting Americans from dangerously low-priced (“dumped”) imports, and on and on."I do not make this stuff up about Don. This is how he actually thinks. He actually thinks that liberals think the market and entrepreneurs are chopped liver.
"The long dominance of Ricardo over Smith of comparative advantage over increasing returns was largely due to the belief that the alternative was necessarily a mess. In effect, the theory of international trade followed the perceived line of least mathematical resistance. Once it was clear that papers on noncomparative- advantage trade could be just as tight and clean as papers in the traditional mold, the field was ripe for rapid transformation." - Rethinking International Trade, 1990Contrary to assertions that I am sure I will get in the comment section about worshiping Krugman, this is not the case at all. This is a widely recognized point.
"The thermodynamicist Wilson taught a seminar on mathematical economics that autumn of 1935, an outgrowth of his attempt to reform the field. Only four students enrolled - Abram Bergson, Sidney Alexander, Joseph Schumpeter, and Samuelson. Samuelson immediately began translating into math the economics he had brought with him from Chicago. "A student who studied only one science would be less likely to recognize what belonged to logic rather than to the nature of things," he recalled later. "One of the most joyful moments of my life was when I was led by E.B. Wilson's exposition of Gibbsonian thermodynamics to infer an eternal truth that was independent of its physics or economics exemplification."
- David Warsh, Knowledge and the Wealth of Nations, p. 116
Daniel Kuehn is a doctoral candidate and adjunct professor in the Economics Department at American University. He has a master's degree in public policy from George Washington University.