Wednesday, April 13, 2011

"Everyone has an ideology" - Krugman

I liked Paul Krugman's blog post today, "Everyone has an ideology". (We say the same thing about what an 'ideology' is in the Anti-Textbook, p.42, actually.) The word is routinely misused as a term of abuse for whoever has an ideology the speaker or writer doesn't like.

Workin' on the chain gang, Georgia 1941

   In his hypothetical example about selling contracts for prisoners to work for corporations as slaves ("indentured workers"), that would actually be legal under the US Constitution. The 13th Amendment, added after the Civil War, reads, in part:
Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.
 So slavery has not actually been abolished.


Thursday, April 7, 2011

A case study in externalities, corporate power, and citizen resistance

As yet another term of lectures draws to a close, I have the familiar feeling that there's not been enough time to 'cover all the material'. This is a common objection to using something like the Anti-Textbook in a course: 'there's no time to do what's even in the text!'.
   There's some truth to that, of course, if you really want to try to lecture about everything in a 300-450 page text in one term. Such an objective almost guarantees that it would be hard to do that and to comment on it critically and to get students to read beyond the text.
   One way to economize on class time is to get students to do something outside of it. They could listen to (or watch) a case study that draws themes together and would provide a basis for some discussion in class or a short written assignment. While driving home from an evening class tonight I listened to CBC Radio's Ideas, that featured a superb 50-minute episode called 'Saving Salmon'. (It can be heard here.)
   The broadcast consisted of a wide-ranging interview with Alexandra Morton, a biologist who lives on the north end of Vancouver Island on the west coast of Canada and who has made a career of studying killer whales (or orcas). Because the whales eat salmon, she learned about the wild salmon, and then when the corporate-owned ocean feedlots of farmed salmon appeared, she learned about them and the many external costs that come along with them, including the damage they do to wild salmon. Then she learned about the political power of the (mostly Norwegian) corporations that own the salmon feedlots, and more broadly about the power of big business lobbies that would be happy to see the wild salmon gone so that rivers can be used for other things like dams and pollutants. Then she had to think about how to organize resistance to the politicians whose inclinations are to serve the destructive corporate animal...

Alexandra Morton and some orcas, Vancouver Island
(from her website)

The account was told with such clarity and eloquence that, for me, it brought the scene alive and drew together in a powerful and memorable way a set of themes (such as pervasive externalities, corporate political influence, informational problems and citizen ignorance and disorganization, and the possibilities of resistance) that all economics students should be thinking about. It's a great case study. I'll write about another one soon.


Wednesday, April 6, 2011

Where has The Economics Anti-Textbook been selling?

Tony and I recently got a report from Zed about sales of The Economics Anti-Textbook up to the end of September 2010. There were a few surprises, I thought.

Location                                         Hardcover                  Softcover

Europe                                                    9                           197
UK                                                          9                           502
USA                                                       23                          316
Rest-of-World (incl. Canada)                    0                           832

I would not have expected UK sales to exceed those in the US, although the book was released some months later there by Palgrave Macmillan, so perhaps that accounts for it.

Hardcover sales (intended for libraries) are less than I would have expected, but a quick check through our library catalog system shows the book is currently in 157 libraries so far, mostly libraries in universities and colleges, but also public and national libraries. So perhaps those were added after September, or libraries are buying the cheaper paperback.


Sunday, April 3, 2011

Corporate crime pays

If you had any doubts about that, read Ed Vulliamy's report in today's Observer: "How a big US bank laundered billions from Mexico's murderous drug gangs". Here's a few paragraphs from this long report:
More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.
"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.
The conclusion to the case was only the tip of an iceberg, demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.
Naturally, no Wachovia executives went to prison for these trifles.

With financial services provided by guess who

   Economics students will be relieved to know that authors of the mainstream money and banking texts, embarrassed at having neglected to discuss the grim facts of rampant money laundering, corporate crime and sleazy off-short 'tax havens' in their texts to date, are planning whole chapters on the subject in new editions. 

   Just kidding.


Saturday, April 2, 2011

Elizabeth Warren on avoiding regulatory capture

One of the things we griped about in The Economics Anti-Textbook was the lopsided nature of economic power which spills over into the pollution of the political system, all dutifully ignored by the standard textbooks, except in one place. There's typically some brief discussion of how regulatory agencies trying to deal with monopoly power have a tough time because they can be 'captured' by those they are trying to regulate.
   This now-you-see-it-now-you-don't treatment doesn't damage the overall impression students take away of the absence of business power and how one might possibly think of the economy as if it consisted of a lot of perfectly competitive markets. But it fits nicely into a subtext of 'governments often screw up and make things worse' that starts with the examples of government 'interference' in competitive markets.
    An interesting case study to watch will be the evolution of  The Consumer Financial Protection Bureau, located within the Federal Reserve System. Quoting from the NY Times summary of it, the Bureau
was created in response to complaints about deceptive or abusive practices by banks, credit card companies and mortgage brokers. The issue rose in prominence after the credit crisis of 2008, when thousands of Americans lost homes they had bought under mortgages they had either not understood or been misled into signing.In its official language, the bureau was created to "implement and, where applicable, enforce federal consumer financial law consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent and competitive.

   Elizabeth Warren, a law professor at Harvard, is the interim head of the Bureau. Recently I read Paul Krugman's comment "Elizabeth Warren is not Jesus", and read his link to Yves Smith's Naked Capitalism blog entry "The Elizabeth Warren Rorschach Test". Smith writes that 
The Administration was keen to get her inside the tent to neutralize her. The fact that the Wall Street Journal and some quick-trigger Republicans are doing their thuggish best to intimidate her should not be mistaken an indicator that she has become effective despite the odds. It has far more to do with their pettiness and paranoia than with her ability to escape the shackles this Administration has put on her.
    For various reasons, I've never heard Warren speak (aside from her illuminating appearance in Michael Moore's Capitalism: A Love Story). So this snowy April morning, I settled down in front of the computer to listen to something longer, in this case, her Mario Savio Memorial Lecture given at UC Berkeley last November.

   Warren's lecture (which starts at minute 26 followed by a question and answer) was deeply impressive. Her ideas about how to design a regulatory agency from the beginning to make it hard to capture were really interesting and must frighten those who make large profits by ripping people off. No wonder their hirelings are yapping at her heels.
   Warren also strikes me as someone that it'd be mighty tough to "neutralize". Paul Krugman's right though. She's not Jesus; she's better than Jesus, who after all made all kinds of fake claims about the product he was selling. She doesn't put up with that kind of thing.


Friday, April 1, 2011

A glimpse of how nuclear industry bosses think

As the mess at Fukushima gets slowly worse and worse and more leaks out about Tepco's lying, cost-cutting and ignoring of safety requirements, we've seen the debate about the future of nuclear energy heat up too. I was reminded of investigative reporter Mark Hertsgaard's book, Earth Odyssey: Around the world in search of our environmental future (1998), in which he has a memorable account of a conversation with a "top executive" in a nuclear company.

   Hertsgaard brought up with him the thorny issue of safely isolating the enormous and growing quantity of radioactive materials "from ecosystems and human contact for a period of time equal to the known length of human civilization" (p.144). He'd been assured by others that there were all kinds of great solutions to this ten-thousand-year problem. Then he writes (p.145):
And if the industry's certainty about nuclear waste storage turned out to be wrong, so what? "To me, it's the craziest thing," another top executive told me, referring to the many governors, legislators, and average citizens who had declared their states off limits to nuclear dumping in the late 1970s. "Neither they nor their descendants are going to be there at the time when anything could conceivably go wrong. If you do a halfway decent job of disposing of [nuclear waste], it's at least a few hundred years before anything could go wrong, and they won't even be there then."
  And the nuclear industry wonders why people don't trust it.