Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Econamici: Where did The Wealth of Nations come from?Adam Smith (1723-1790) published The Wealth of Nations in 1776, also the year of the American Revolution. Both The Wealth of Nations and the Declaration of Independence sprang from a context, the so-called "Enlightenment." The Enlightenment in turn has a history, traced in the lectures of Alan Charles Kors, on "The Birth of the Modern Mind: The Intellectual History of the 17th and 18th Centuries," available from The Teaching Company (www.teach12.com). The story begins in the early 17th century with politician and philosopher Sir Francis Bacon, (1561-1626). Born to a noble family, Bacon rose in the court of Queen Elizabeth and then James I, eventually becoming Lord Chancellor--before being dismissed for taking bribes. Bacon was educated in the mode of thinking that dominated European schools and universities: "Aristotelian scholasticism," a blend of Greek philosophy and Christian theology. Under scholasticism, knowledge derived first from the writings of prior authorities, second by logical arguments from these authorities, and finally--simply as a means of illustration--experience. Bacon rebelled against scholasticism. Instead of deduction from authority, he argued in his most famous book, The New Organon, we should derive knowledge by induction from observation of the real world. Knowledge should be cumulative, testable and useful in improving the well-being of mankind. Francis Bacon wasn't the first to propose something like the "scientific method." So did his unrelated forbear Roger Bacon (c. 1214-1294), who lectured on Aristotle at Oxford. But times had changed. The printing press, invented in 1440 by Gutenberg in Germany, fostered much broader literacy. The Reformation had swept northern Europe including England, where it was imposed by Elizabeth's daddy, Henry the Eighth. So while Roger Bacon died in obscurity, Francis Bacon inspired an enthusiastic following. In 1660, his disciples founded the British Royal Society, whose Annals became the most prestigious place to publish not only scientific research but improvements in technology. Meanwhile, the Roman Catholic Church had unwittingly painted itself into a corner by endorsing Ptolemaic astronomy, in which the sun and planets revolved around the earth. Not because the earth was the most important, but because it was the most imperfect, and therefore furthest from the realm of God in the perfect heavens. Understandably, scholars like Kepler (1571-1630) and Galileo (1564-1642) trained their eyes and their improving instruments on the heavens, observing and measuring the motions. They reached a startling conclusion: not only did the earth and planets revolve around the sun, but they moved according to precise laws that could be represented mathematically! The dam broke in 1687 when Newton (1643-1727) published (in Latin) his Mathematical Principles of Natural Philosophy, unifying the laws of physics on the earth with the laws of motion of the planets. A tidal wave of scientific discovery and new technology burst over the ever more literate public of western Europe, challenging the established church and engendering the Deistic faith of Thomas Jefferson and others-the idea that God's work is manifest in nature. Now imagine Adam Smith growing up in Scotland in the mind-blowing excitement of that era, teaching at the University of Glasgow and writing his first bestseller, The Theory of Moral Sentiments. He spent 1763-66 in France visiting with the leaders of the French Enlightenment, men such as Voltaire, Rousseau, Turgot, Helvetius and D'Alembert, and discussing laissez-faire with the Physiocrats Quesnay and Dupont de Nemours. Back in Scotland, his close friend was the radical moral philosopher, David Hume. Small wonder The Wealth of Nations reflects the Enlightenment outlook: keen and fresh observation, followed by analysis without overemphasis on consistency; compassion for humanity; and always, skepticism and wit. Smith can write, on the one hand, The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. and on the other hand, (GM and HP are you listening?) The directors of [joint-stock] companies, however, being the managers rather of other people's money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master's honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. Today, alas, much of mainstream economics seems to have retreated to scholasticism, abandoning observation, deriving ever more elaborate and obscure formulations from received wisdom. ### I send Econamici--occasional emails with interesting attachments or links--to friends who are economists or care about economic issues. If you can't follow a link, I can send you the actual article. Back Econamici are also posted to www.georgiststudies.org. My email is Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Economists' Statement Regarding the Need to Raise the Minimum WageThe folks at the Economic Policy Institute are gathering signatures from economists in support of an increase in the minimum wage. The federal minimum wage has not been increased in nine years, meaning that, when adjusted for inflation, workers at the bottom have had their pay slashed. There will be ballot initiatives in 6 states this fall to boost the minimum wage. Use this info to quiz your candidates and write letters to the editors.ECONOMISTS’ STATEMENT SUPPORTING AN INCREASE IN THE MINIMUM WAGE The minimum wage has been an important part of our nation’s economy for 68 years. It is based on the principle of valuing work by establishing an hourly wage floor beneath which employers cannot pay their workers. In so doing, the minimum wage helps to equalize the imbalance in bargaining power that low-wage workers face in the labor market. The minimum wage is also an important tool in fighting poverty. The value of the 1997 increase in the federal minimum wage has been fully eroded. The real value of today’s federal minimum wage is less than it has been since 1951. Moreover, the ratio of the minimum wage to the average hourly wage of non-supervisory workers is 31%, its lowest level since World War II. This decline is causing hardship for low-wage workers and their families. We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed. In particular, we share the view the Council of Economic Advisors expressed in the 1999 Economic Report of the President that "the weight of the evidence suggests that modest increases in the minimum wage have had very little or no effect on employment." While controversy about the precise employment effects of the minimum wage continues, research has shown that most of the beneficiaries are adults, most are female, and the vast majority are members of low-income working families. As economists who are concerned about the problems facing low-wage workers, we believe the Fair Minimum Wage Act of 2005’s proposed phased-in increase in the federal minimum wage to $7.25 falls well within the range of options where the benefits to the labor market, workers, and the overall economy would be positive. Twenty-two states and the District of Columbia have set their minimum wages above the federal level. Arizona, Colorado, Missouri, Montana, Nevada and Ohio, are considering similar measures. As with a federal increase, modest increases in state minimum wages in the range of $1.00 to $2.50 and indexing to protect against inflation can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). AMI Monetary Reform Conference, Chicago, Sept. 21–24, 2006The upcoming issue of Dollars & Sense includes an article on (lack of) transparency at the Federal Reserve by Steven Zarlenga, Director of the American Monetary Institute, "dedicated to the independent study of monetary history, theory, and reform."The AMI will hold its second annual Monetary Reform Conference at Roosevelt University in Chicago, September 21-24, 2006. The conferences will focus on three broad areas: The Monetary Reforms: The main focus of the conferences - Researchers will describe and make the case for the kind of monetary reforms advocated, presenting both the logical and historical basis for them, and the mechanics of implementing them. Extensive question and answer periods and panel discussions can air doubts or concerns regarding the desirability of the reforms and suggest refinements. Included will be discussions of research and thinking methodology. A monetary reform bill – The American Monetary Act, ready for introduction into congress will be analyzed including strategies for getting it supported. Achieving the Reforms: Selected Political, Social and Monetary Activists will give the benefit of their experience in educating, raising public awareness, organizing and motivating people and governmental bodies to influence public policy decisions Using the Reforms: Presentations on how a properly reconstituted money power within government will be effectively used to “promote the general welfare”. These will focus on several areas: --Infrastructure programs, including education and health and upgrading America’s crumbling infrastructure, focusing on futuristic designs well within the reach of today’s technology and economy, to create hospitable, clean, sustainable cities of the future. --Farming parity proposals for maintaining the existence of family controlled environmentally sound farming. --Education proposals to provide crucial funding from sources other than middle-class property taxes. --Medical Care proposals which more effectively and fairly distribute the benefits of our medical technologies. Each area identifies another constituency which will support monetary reform. For more information, visit the conference website. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Dean Baker responds to David BrooksIf the latest goofball article by David Brooks on the NYT op-ed page (to add insult to inanity you have to pay to see it) "The Populist Myths on Income Inequality" is driving you nuts, check out Dean Baker's great response. Jared Bernstein also had a similar reaction in his post David Brooks Ruined My Subway Ride.Dollars & Sense and United for a Fair Economy recently put a book out about the topic, The Wealth Inequality Reader. D & S regular Chris Tilly wrote a great piece a while back about why inequality is bad in Geese, Golden Eggs, and Traps. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Read the latest from Dean Baker and Jared BernsteinEnjoy the excerpts of Jared Bernstein and Dean Baker's new books in the Jul/Aug Dollars & Sense? Now you can buy (or in the case of Baker's book, download) the books through our site. Visit our resources page for more information.Miss the issue? Here's a bit from each. The Conservative Nanny State, by Dean Baker. From the excerpt: It is accurate to say that conservatives don't like big government social programs, but not because they don't like big government. The problem with big government social programs is that they tend to distribute money downward, or provide benefits to large numbers of people. That is not the conservative agenda—the agenda is getting the money to flow upward, and for this, big government is just fine. All Together Now: Common Sense for a Fair Economy, by Jared Benstein. From the excerpt: I once heard an allegory about mealtime in heaven and hell. It turns out that in both places, meals are served at a huge round table with lots of delicious food in the center. The food is out of reach, but everyone's got really long forks. In hell, everyone starves because, while people can reach the food with their forks, the forks are much longer than their arms, so nobody can turn a fork around and eat what's on the end of it. In heaven, faced with the same problem, people eat well. How? By feeding each other. On the resources page, you'll also find links to books by Dollars & Sense collective members, resources for economic research, other sources of left economic comment, and occasional event announcements. The featured event right now is the U.S. Federation of Worker Cooperatives' Second Conference for Worker Ownership and Workplace Democracy, October 13-15 in New York. Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). School Choice: A Lesson from New ZealandI have long supported school choice--confined to public schools. My son attended primary and middle school in District Three on the Upper West Side of Manhattan. District schools are subdivided into small units, each with its own program and principal, competing to attract students from all of Manhattan. At IS 44 on west 77th Street, my son's Science School was one of eight middle schools in the same building. Other schools included a theater school, a bilingual school and a school for children with disabilities. The schools shared sports and extracurricular activities--notably an award-winning choir, in which my son sang. Every morning city school buses brought children from both ends of Manhattan; some traveling over an hour. Although the neighborhood is mainly white, at least two thirds of the students were Black or Hispanic. Despite large class sizes, teaching was excellent. Parents were enthusiastic and involved. I myself accompanied the choir on tour; my husband helped with the annual Science Fair, other parents helped with painting and repairs, and managed the Sunday flea market on the playground. Despite the success of District 3, and of similar experiments in Manhattan Districts 2 and 4, the experiment never spread to the whole of the New York School System. I attributed this failure to entrenched bureaucracies in other districts, and hoped the City would eventually impose choice on them. I was wrong. Advocates for choice claim benefits not only for those children who actually transfer to new schools, public or private, but for those who don't. Competition, they say, will force sclerotic public schools to improve their performance. The same logic supports the movement for charter schools, which allow greater flexibility of curriculum within public school systems. However, studies of pilot choice and charter schools have begun to trickle in. While long-time advocates (like Caroline Hoxby) claim success, most studies show that, all else being equal, choice and charter schools on average contribute little to student performance. Meanwhile, in 1992, in a fit of free-market enthusiasm, New Zealand implemented a top to bottom choice system within the public schools. Schools are ranked into 10 levels, based on socio-economic and ethnic composition of the students. Lower ranked schools, with proportionally more disadvantaged students, notably native Maoris, qualify for additional aid. The high-ranked schools are oversubscribed, and as a result need not compete for students. The lower-ranked schools do compete. With what consequences? Education researchers Helen Ladd and Edward Fiske, who studied New Zealand schools in 2000, found that the most able students benefited, including upwardly-mobile students from poor backgrounds. However the competition for students seriously hurt teacher morale in lower ranked schools. Essentially, the top schools drain the rest of the system of the best students, the best teachers, the most energetic principals, and the most motivated parents. Moreover, the very fact that students can easily switch schools (except for getting into the top schools), makes the parents less committed to any particular school. Ladd and Fiske conclude that the New Zealand school system is polarizing and undemocratic. I still, hesitantly, support choice within public schools. How can I say that my son's poor but ambitious classmates shouldn't have had the opportunity to attend a good school? Or that parents shouldn't have some choice of schools to fit their children's needs and interests? But it's a "fallacy of composition" to claim that because choice can improve a few schools it can save a whole system. Choice doesn't create a free lunch, removing the need for more resources and higher pay for teachers. Absent strong countervailing policies, choice simply makes public schools better reflect an unequal society. If we want the undeniable benefits of choice, we must fight all that much harder against the tax and other polices that rig the economy to benefit a wealthy elite. The Ladd_Fiske article on New Zealand is available at http://www.pubpol.duke.edu/people/faculty/ladd/SAN01-16.pdf &&&&&&&&&&&&&&&&& I send Econamici--occasional emails with interesting attachments or links--to friends who are economists or care about economic issues. If you can't follow a link, I can send you the actual article. Please let me know if you want to be removed. Past Econamici are posted to www.georgiststudies.org Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
