Our profession’s lack of understanding of gender and diversity is not innocuous. Presumably, it is one reason the climate in our profession is so poor. But it also affects what gets published (or not) and our influence on policy (or lack thereof). While economics is always concerned about causal identification, the bar is higher for papers about gender because, in the words of one of my recent journal reviewers at the American Economic Review (the flagship publication of the American Economic Association): “Unfortunately, papers like this face the uphill battle of having to rule out all unobservables that could possible [sic] be correlated with gender…” [emphasis added].
Nutrition is a conundrum in developing countries. The couple argue that things that make life less boring are a priority for the poor – a TV set, something special to eat, for example. In one location in the northern Indian state of Rajasthan, where almost no one had a TV, they found the extremely poor spent 14% of their budget on festivals. By contrast, in Nicaragua, where 56% of the poor households in villages had a radio and 21% owned a TV, very few households reported spending anything on festivals.
Their work also suggested governments and international institutions need to completely rethink food policy. Providing more food grains- which most food security programmes do – would often not work and help little for the poor to eat better because the main problem was not calories, but other nutrients.
In a special edition of the Financial Times, with a dramatic cover wrap which was virtually blank but for the giant words “Capitalism: Time for a Reset,” its economics doyen Martin Wolf went out of his way to define it for readers, guessing they too had to be enlightened. In an essay which bemoaned stagnant wages and productivity, inadequate competition, and rampant inequality, he explained that rentier capitalism “means an economy in which market and political power allows privileged individuals and businesses to extract a great deal of such rent from everybody else.” The half-forgotten term is as old as Adam Smith, who first defined rentiers as capitalists who were able “to reap where they never sowed.”
How are consumption and acknowledgement related to each other?
Part of consumption may be explained as need. But we can never really know where need begins and where desire takes over. The two are inextricably intertwined. I prefer to approach consumption from another angle: the desire for distinction, explored in particular by Bourdieu.3 Unlike utilitarian visions of social action, the Mauss movement4 sees the principal motive for human action as being the desire for acknowledgement. More precisely, it sees the desire for acknowledgement in terms of gifts, the desire to be acknowledged as a generous donor; and, beyond that, to be seen in terms of generativity. We wish to be seen as being involved in life-enhancing, creative action.
Take the case of a farmer who is trying to decide on an investment strategy for the future of his farm: should he be planting new fruit trees, purchasing new equipment, increasing (or decreasing) his livestock, or investing in new buildings? Recall, now, that our hypothetical farmer gets his grain from wholesalers who themselves bought it at prices set on financial markets, and it becomes all too clear that excessive uncertainty surrounding the price of grain will leave him unable or unwilling to experiment with new strategies. The industrialist on whom Hayek based his own reasoning is likely to suffer from a similar paralysis.
Inflation targeting by the Central Bank might have some unintended consequences.
But reducing uncertainty about prices by keeping the inflation target at 2% or more might actually increase a sense of uncertainty about real things like home values or investments. While it is right to worry about massive deflation, the historical relationship between deflation and recession is not all that strong. In a 2004 paper, the economists Andrew Atkeson and Patrick Kehoe concluded that most of the evidence of a relationship comes from just one case: the Great Depression of the 1930s.
To begin with, there is the problem of exactly whom the basic income will apply to; in other words, what is the subject for claims to social justice in the world of basic income. In most formulations, from Thomas Paine forward, a basic income is conceived of as having a condition of citizenship attached to it. Though this would be a relatively straightforward in a world of limited interstate migration, the reality is that individuals and families currently exist in a wide variety of positionalities vis-à-vis the state in which they physically inhabit. In addition to citizens, there are permanent residents, refugees, students on visas, temporary foreign workers and more. The danger with a citizenship-conditional basic income, as it is unlikely that every country would implement such a policy at the same time, and certainly not at the same monetary level, is that it would further deepen the divide between citizen and non-citizen inhabitants of particular countries.
A great narrative of what happened to the U.S. economy since the end of World War II.
If you fell asleep in 1945 and woke up in 2018 you would not recognize the world around you. The amount of growth that took place during that period is virtually unprecedented. If you learned that there have been no nuclear attacks since 1945, you’d be shocked. If you saw the level of wealth in New York and San Francisco, you’d be shocked. If you compared it to the poverty of Detroit, you’d be shocked. If you saw the price of homes, college tuition, and health care, you’d be shocked. Our politics would blow your mind. And if you tried to think of a reasonable narrative of how it all happened, my guess is you’d be totally wrong. Because it isn’t intuitive, and it wasn’t foreseeable 73 years ago.
The first lie is that if finance is entirely free, globalised and unregulated, it will develop instruments to insure against risks (derivative products), rendering impossible the spread and intensification of the blaze. After two decades of stable inflation and financial liberalisation, the financial community, the media, and the political establishment loved to proclaim that systemic crisis had now become impossible (‘this time it’s different’). But the impossible did happen. This owed not to some external mega-event but rather to the fact that speculation had eroded from within any sense of reason and any barrier to the appeal of greed. This first lie is also the basis for the other two.
Piketty presents himself as politically engagé, so it would be natural to cut to the chase and announce my view of whether he is a good guy or a bad guy, a comrade or an enemy. That impulse is all the stronger because his title is a deliberate allusion to Marx’s great work, Das Kapital. The title, after all, is CAPITAL in the Twenty-First Century, not Capital in the Twenty-First Century. But I shall resist the temptation, because it would be a mistake. There is a great deal to learn from this book whether or not one situates oneself where Piketty does on the ideological spectrum [as I do not], and that must be the focus of my attention in the first part of this discussion.