On "The Rise of the Creative Class Revisited" by Richard Florida ***

I had read Florida’s theories in various Citylab articles and so thought he would be a good writer to end my Econ list with. As a whole, the book I chose had much to offer, but it was also quite familiar to me, full of standard educated thinking of the past twenty years: diversity good, city good, etc. And much of the book seemed to be Florida pushing his theory on everything. It reminded me of how some scholars will create a theory and then write book after book using said theory. It becomes a personal industry. Despite my interest in the subject and Florida’s easy style, I found myself not as enthralled as I would have thought. What follows are my loose notes as I proceeded chapter by chapter.

Businesses move to where the talent, tech, and tolerance are. They don’t move to where there are ample office parks and infrastructure. Where the kind of people you want to employ live or want to live is where your company wants to be. Creative jobs make up a large portion of economy and tend to be best paying. We moved from manufacturing to service but it’s creative where the real growth is happening.

What goes into creativity? There is a contradiction between creativity and organization. The latter stifles the former, but without the latter creativity can’t progress far. It takes more than one person usually to make an idea successful, but often just the one person provides the spark. Creativity flourishes in open and diverse societies. It is often the product of a person’s focus—or ability to do so. Groups can take away from that focus. When organization is too strong, creativity ceases. But the stability of organization also provides the opportunity for creativity to thrive.

The creative class has grown as a percentage of the workforce over the past century. Its wages are higher than the working class or the service class. Its openness, however, is set back by the way it is dominated by Asian and white ethnicities. During economic crisis it experienced fewer job losses than the working class or service class. But what is the creative class? Florida’s definition is a bit hard to figure out. Anyone who has to think or make decisions, it seems, is creative class. Obviously someone who packs boxes all day based on a form denoting where each item should go is service sector; however, if someone has to figure out how best to pack those boxes, is that creative?

Motivating factors in work are less money and more the challenge, stability, and flexibility. So is the claim, based on surveys. That’s why professions like machine operator lacked skilled employees but we have a surplus of hairdressers, which is considered more rewarding. But some of Florida’s statistics seem not to match his claims as much as he makes them out to be. He makes the point that money is less a motivation for type of work than a motivation for dissatisfaction. Highest paid employees tend to enjoy work more. As such, I’m not sure I completely buy his point.

Next is a chapter on flexibility and security and the way creative jobs offer the former but sometimes at the cost of the latter. Companies and employees both seem less inclined to partner for as long as in the past. People move around a lot. Often these are lateral moves rather than hierarchical ones. Bosses no longer know the jobs of their employees. Businesses are flat, with various experts who move from company to company.

Company cultures have changed to allow more flexibility and casualness in aiding creative types. Gone are dress codes. Offices are open, to encourage collaboration. But sometimes such changes are merely for show. Adding ping pong might be a way to make things casual, but if the office isn’t truly flexible and expects long hours, it’s not really conducive to long term creatives.

Time has become the most difficult resource to maintain. Creatives work more hours. And they merge work and home more. In that sense, the old factory worker often ends up with more leisure time than the so-called leisure class. Beyond that people in creative professions often multitask, making time seem even more scarce.

The creative class prefers active leisure to passive. They run, hike, rock climb. They stay in shape. They aren’t big on spectator sports. Passive activity is more the domain of the working class. The creative values experiences. They’re more likely to go to small clubs than huge concerts, which demand too much time and money and don’t mix experiences. (I couldn’t quite figure out Florida’s reasoning for why this is so. Personally I’d venture that many of the creative class jobs are sit-down jobs, whereas working class is more physical labor. Different kind of rest in one’s leisure time.)

The creative class is a strange mix of Protestant work ethic and bohemianism. In the past these two were antithetical. But the two categories have merged in the modern world, such that neither category really exists. The creative antisocial tech person is also the hard worker. Geekiness has gone hip.

Florida turns next to place, noting that while technologically the world has become flatter, places are actually becoming more specialized and less egalitarian. Cities keep growing even though tech allows for rural resourcing. Why? because people of the same creative sort like to be together to bounce ideas off in person. A diverse city offers more ways to get ideas and to work with others in similar fields. (This seems to contradict itself. If all musicians slowly gravitate to Nashville, then in some ways Nashville becomes less diverse—it’s all musicians, whereas writers go to nyc.)

Creative class regions often have higher wages than working or service class, which lends to inequality.

Creative class cities have high levels of technology, talent, and tolerance. But Florida talks mostly about the latter. Where foreigners, homosexuals, and bohemians are tolerated, creativity excels. His comments on foreign born were particularly interesting in our current state. Twenty-five percent of patents are made by foreign born, even though they make up just twelve percent of the population. In other words, hard immigration policies contribute to the brain drain and less economic development. communities that are open to people of all types make for more openness to new ideas as well—to creativity. Want to know where houses will go up in value? Follow where the artists go. They are the first step to gentrification. The one exception to tolerance and diversity? Integration. It seems that that works opposite to these other factors, which is strange, but shows the persistence of racism. My bet would be that a truly tolerant and integrated place would do even better economically through willingness to embrace new ideas, but the continued presence of racism means deep integration doesn’t lend to prosperity.

Florida spends half a chapter defending his theory versus others, most especially the human capital theory, which dovetails closely. But while that one measures raw wealth, creative class theory takes into account where that wealth comes from and thus better measures productivity. If all wealth is inherited it is not really producing anything versus if wealth is coming from wages. The latter is what creative class theory values.

Next, Florida looks at creative class around the world and which countries score high. He also addresses social inequality and notes that the United States is more an outlier than standard because many creative class economies are actually quite egalitarian, much more so than the United States.

Where do people want to live and what sort of relations do they want to have? Florida claims that modern society isn’t about independence and accompanying loneliness. Most people don’t want close communities. They want loose communities—only a few close friends but lots of acquaintances. Loose social ties actually provide more opportunities for work.

He then looks at what makes places attractive and lists these features: a thick job market (many jobs in a profession available, since few expect to stay with the same company), third places to hang out, dating opportunities, diversity, authenticity, and “scenes.” Basic services are important, but people want more than that. They want cultural opportunities and nice scenery.

If a city sets out to attract creative types and to thus grow, what should it do? Attracting a business isn’t enough. It needs to make itself attractive to a diverse set of people, including the less stable young and single. They may not stay, but they are not likely to return with families if there was nothing for them before.

There’s talk of the move back to the city that is common now—or was until COVID. And there’s discussion of the need for density and the advantage of big population. Where density kills is when it starts to kill off variety at the street level. Question: if dense city cores are best for creativity and bold economy, how did suburbs take over for a time and why? I’ve got to think there was an economic advantage for such a system that it would become common for a while.

My question was almost immediately what Florida turned to next—namely by looking at why so many people actually like suburbs and what those suburbs bring to the creative class. His point seems to be that suburbs are an integral part of large metros, and the best suburbs actually find ways to mimic the advantages of that dense core within the suburb.

Next, Florida turns to inequality, which he notes tends to be greater in creative class areas, but then he makes the argument that even so, lower class people are still overall better off in such areas generally. This seems to be variation on the rising tide argument of conservative economics. But the anecdotes at the start of the chapter seem to weigh against it. When a city becomes too expensive for its artists, that creative core becomes the plaything of only the most successful. I mean I guess there are still creative scenes in those places, but I’ve never understood how those scenes hang on. Do they? 

I would think they don’t, or they somehow transform. I think of Deep Ellum in Dallas. It was a hip area when I lived in Fort Worth twenty-five years ago, but I’m told it’s all gone now, full of high cost businesses. It seemed headed that way even when I lived close by, wherein the funkiness was getting priced out and the hipness fading.

Florida seems to believe creative, working, and service class is more important than high, middle, and low class. Yes, those with money are generally happier, but once a base level is reached, creative class are happier than working class. Areas with more creative class are healthier, have lower gun violence, better dental care, and are less likely to drive to work (versus walk, bike, or use public transport).

In his conclusion, Florida makes the case for the creative class to become politically active and notes that we are in a process of revolution not unlike that of the Industrial Revolution. He provides various suggestions, including helping working and service class jobs pay more by making them more creative, making education emphasize creativity more, making cities denser,  encouraging diversity, providing better means to make workers more mobile with health care and retirement not tied to jobs, and recalibrating how we measure growth.

On “Freakonomics” by Steven D. Levitt and Stephen J. Dubner ****

I saw the film probably fifteen years ago. I was expecting, as such, the book to have a lot more than the film did, but I'm not sure that it did. My memory isn't that fresh, obviously, but many of the same stories show up in this book and don't seem told in particularly deeper ways. As such, this book was a little bit of a disappointment. In fact, as becomes obvious after reading the appendixes, the book is built upon a series of scholarly articles written by Levitt that were dumbed down for a popular audience by Dubner. One could say that each chapter is like one of those articles, rewritten for a popular audience (and gladly so, as is obvious from one blog post included in the appendix that is laden with tables and econ speak).

Still, Levitt has an interesting way at looking at the world and applying econ to it, and Dubner has a way with making that all accessible to noneconomists. As such, this book is really interesting, even if the movie seems to have actually been about as thorough as the book. Among the findings: Some teachers cheat for their students on standardized tests. We can tell because the same questions are often answered right and wrong by large swaths of a class that deviate from the general population. Some sumo wrestlers likewise “throw” contests toward the end of the season, since as with British soccer, a sumo wrestler on the edge could, with a loss, drop to a lower level. Suddenly, toward seasons end, some matches that should be givens end up being the other way around in terms of wins. Real estate agents are likely not to work as hard to make their customers an extra ten thousand dollars as we ourselves might be, because in the end, that ten thousand is only one-fifty to the agent. We can tell because agents tend to take a week longer to sell their own houses and make the extra money. Drug dealers, unless they are at the top of the pecking order, make less than minimum wage. Why bother? Because, as with aspiring actors and other hopefuls, the lower drug dealers hope/think they'll make it big one day. Why did crime go down in the 1990s and thereafter? Abortion was leglized in the 1970s, resulting in fewer unwanted children. Unwanted children, apparently, means crime. Such would suggest that parenting makes a great difference in a child's life, but the next chapter discounts that: apparently, parents don't really affect what children become much at all. What's more important is genetics. Educated, well-off, socially involved, older parents end up with more successful kids than those who spank or who live in a better neighborhood or are interested in the arts. Finally, names can help with people getting interviews (we're less likely to call back someone with a supposed “Black” name than a “white” name), but in the long term may not affect one's overall success. Name popularity moves from the high class to the low.

The edition I read ended with three appendixes: one with the article that inspired the book, one with various newspaper articles in response to the book; and one with various blog entries. Some of these were enlightening to the topics covered in the book, while others seemed like tangential material being used as an excuse to produce a new edition. In that sense, the book is not unlike the podcast, which for me seems hit and miss. Sometimes there are some real though-provoking gems, and other times, it just seems like someone is trying to fill radio time.

On “Debt” by David Graeber ***

 

The book is a history of debt that questions a lot of assumptions about fiscal systems generally. It starts off really interestingly and is full of interesting anecdotes throughout, but the deeper I got into the book, the more technical it felt and the less interesting it became. In the end, this really seemed more like a scholarly work than one for general audiences. Because I ended up having a harder and harder time following it as I made my way through it, my notes are likely to seem somewhat slipshod, but they attempt both to summarize some of the main points and some of he most interesting ones.

On a national level debt is both a way of keeping the third world poor and of rich nations gaining tribute from the rest of the world. (In that sense American debt is actually just a sign of its power.) Whether debtors are bad because they have failed to meet obligations or creditors are bad for taking advantage of others varies by the cultural moment and needs of those in power. Impersonalizing debt allows us to justify dreadful actions to others that would be impossible without. We would never demand someone let us prostitute their family, but if we make it such that not paying a debt, the person will face consequences such that they then turn to prostitution to avoid those consequences, we aren’t directly implicated in that turn to prostitution.

The first chapter explains how debt really is the foundation for money. Tendency is to see barter as preceding money, but Graeber denotes that money actually is just an IOU and as such predates any kind of barter. After all, among people who know each other, why would a person take a chicken he didn’t need in exchange for a stereo? We would just give the person the stereo as a gift and then one day when we needed a chicken, the other person would hand us a chicken. We would have credit in other words. Barter only enters in when you have communities who don’t know each other or when monetary systems collapse. If my dollar used to buy stereos but now I need a million dollars that tomorrow I will need 2 million such that dollars are essentially useless, I’m going to be inclined to take the chicken but again only if I need it or if I feel I can do something with that chicken and quick. It’s really not practical for me to wheel chickens around.

Debts can be bought and sold, transferred. But the issue would be that down the line, some folks won’t know the loaner or debt holder. This is where government enters. If the debt holder is the king, everyone knows the king. Now the king becomes the person issuing debt—i.e., money. As such government must have debt to enable money. Thus taxes—we owe government money/debt it then loans out.

Religion is often structured around ideas of debt: we owe our creator or the gods.

But debt is not always a medium of equal exchange. Society is actually centered around different formats and debt can be a way of maintaining social relations such that it is never expected to be paid back. Parents for example will never recoup what they put in to their children; if they demanded such, the relationship would essentially be at an end. Why should such a child continue to respect the parent? In a sense then all communities are communist in a way: we tend to share when we have and take when we need. If we are digging a hole together and one of us needs a tool and the other person has it, we ask and the person gives. The person doesn’t say, what’s in it for me? At a different level, though, communities also organize around exchange. Such communities do so only when people are at near status. If a rich man takes a poor to dinner, the poor man likely isn’t expected to return the favor. Two friends, however, would expect that. A poor man taking a rich man out would generally be seen as receiving a favor from the rich man for his time. So what to do when parties are at different levels? Exchange becomes formalized in some other way where debt is never fully paid, such that relationships continue. The mob boss offers “protection” and takes from me a share of my earnings.

In fact perhaps money is not rooted in debt as a system of exchange at all. Perhaps money is rooted in the concept of debt that can never be repaid: the bride price or, in the religious context, one’s own existence.

Here’s a fact I didn’t know: most Africans went into slavery not as war captives but as debtors. Graeber is interested in how we can come to accept such violence for debt. One can’t truly, for example, pay back someone for a murder. One life does not equal another. Each person is unique. But if we can depersonalize things, rip people from their contexts, then yes, actually we can make a person equal another—or a bag of gold. A slave is like a dead person; and as such, the dead have no rights (indeed, if one is enslaved via war, one would have been dead—and therefore can be owned by the savior).

Graber then turns to questions of honor as they relate to concepts of debt. And then next to women— and how they became possessions (such was not so in the earliest societies). Honor plays a curious role here. The bride price makes sense in a poor or rural society, where a woman is another worker for the family. In rich and urban societies you get the opposite: dowries. Now the family pays the groom to take the woman, the extra mouth to feed, off their hands. Veiling plays a role here as well. Men protect this assett they have acquired with the veil, as a matter of honor. Some early laws required veils for respectable women but also required that prostitutes not wear veils.

Slavery is a basis for society throughout much of history, but it has ceased to be the rule at some periods, like now. But in its place is wage slavery. Why? Perhaps religion but also perhaps having to do somehow with money. Graber doesn’t make clear the connection.

What he does note is that periods of credit are exchanged for periods of coinage: real metal used for money. The latter tends to be periods of warfare, where credit won’t do: you can’t pay transient soldiers with credit and you won’t sell to such soldiers who may never return if only on a promise that they’ll pay you back someday. We’ve entered a credit period with Nixon who took us off the gold standard.

So coinage arrives during a period of great war, when soldiering becomes professionalized rather than something done by regular folk when necessary. It replaces plunder. This period when armies roved and coinage first came to wide use, around 500 bc, is also when great philosophy came on the scene: Buddha, Confucius, and Pythagoras all came in this century and all from civilizations that started using coinage. What’s the connection? Debt enslavement in turn also falls away with soldiering as the spoils of war allow riches to be gained that way rather than from plebians. Now the plebians are soldiers. What emerges with the coin is markets. Markets mean a more materialist way of thinking, which in turn sparks new philosophies and thoughts on ethical practices.

Interesting fact: much of Adam Smith’s theory is drawn from medieval Muslim economics writing, which saw the open market as good and even created by god—however, to help people share rather than to be selfish. Because Muslims banned usury, the market was the only way to make money: take part ownership in someone’s business and reap profits. Christianity condemned usury also, but it saw markets as bad, the tool of nefarious profiteers.

In the Middle Ages coinage was taken in mostly by the church. There was a return to a credit system.

In the early days of capitalism, debt was viewed negatively, but almost everything ran on informal credit. Debt was personal. Rarely did people seek formal law about it; the law in turn was super severe—like the death penalty for not paying a bill was possible and certainly prison. Best not to do that to your neighbor. But as interest was added to debt and credit became depersonalized, buying on credit fell into disrepute, even as penalties became less severe. What’s more government itself took on debt by borrowing from its people to pay for things like wars, instead of people in debt to government because of taxes. That created something of a double standard, where debtors are bad but the government can take on debt at will and at great levels and no one cares.

Graeber then gets into questions about what capitalism even is and how long it’s been around. He gives special attention to slavery and how debt has been used to enslave people such that we aren’t really out of a slave economy: we have wage slaves.

The modern debt age begins with the floating of the dollar, the death of the gold standard. That made poor countries poorer (since they held dollars in lieu of gold) and created inflation. The floating of the dollar was used to pay for the Vietnam War, much as government debt is usually about funding armies. American debt has gone up at roughly the same rate as military spending. Meanwhile the dollar has become the world’s default currency. The dollar is essentially an IOU that goes down in value, or in other words tribute, since that dollar is used to pay for the military that props up its use.

In the end Graeber says that debt plays into the hands of the haves against the have nots, even when the haves owe money. (Think of how banks are bailed out, but people who default are made to pay or reap the consequences of bad credit scores.) His one proposal is to start over; forgive all debt, lest the world’s economy fail, as it surely at some point will.

On “Moneyball” by Michael Lewis *****

 

Economics applied to baseball—that was my thinking in choosing to add this to my economics reading list. It wasn't that heavily into the theory, though, as in the the stories surrounding those who applied new ideas about statistics to sports, and specifically baseball and the early 2000s Oakland A's. In a way, the book adhered much more closely to the movie based on it than I would have imagined. That is, it was much more centered on Billy Beane's life and how his experiences shaped his work as general manager of the team. For a baseball fan, especially for one who grew up in the 1980s, with Bill James's abstracts and Status Pro Baseball, this book is a really fun read; given its heavily narrative nature, I'm not sure how much one gets from it from an economic theory perspective.

For me, much of the book was about how little I know about baseball of the era that Lewis writes about. I followed baseball deeply as a preteen and early teen, from about age twelve to sixteen, and continued to know it fairly well through the miraculous 1988 Dodgers season, when I turned eighteen. But once I started work and especially after I graduated from high school, I found myself with much less time to devote to the sport. Sure, I might check in on how a team is doing from time to time and who are the stat leaders, but I don't listen to virtually every game of my team, scour stats on summer days, or spend those days playing simulation games. As such, players come and go and I know nothing of them. This means, that outside of Jason Giambi, Tim Hudson, Barry Zito, and Nick Swisher, I knew virtually none of the players discussed in this book. And even of the four mentioned, I knew almost nothing of them, other than that they were for a while very good players. I found myself, as such, looking up some of the other players Lewis writes about.

The essence of the book is an attempt to answer how it is that the A's of the early 2000s, one of the cheapest teams in the sport, managed to put up teams that were constant winners. The answer is, of course, to any familiar with what has become standard now in the stport, by paying attention to statistics that others aren't. Things like batting average, for example, really aren't as important as on base percentage. ERA isn't as important as walk-to-strike ratio or homers pet batters. It's these sort of stats that the A's started recruiting with and building a team around. Such was essential, because a poor team like the A's can't afford to keep players like Jason Giambi, who can hit for power and average, so instead one gathers nonnames who actually do significant things.

Beane was apparently an incredible athlete and a potentially great player, but his major league career never panned out. The issue for him was psychological. He couldn't deal with getting out. The game is as much mental as physical. As a result, he floundered, until one day he quit—or sort of did. He walked from the clubhouse into the back office and asked instead to work there, which is odd coming from a relatively young player.

Thereafter, we learn about Bill James and his baseball writing. We learn about why the A's don't run. We learn about various players the A's recruited, such as the catcher Jeremy Brown (an on-base machine who is otherwise not that impressive and thus of no interest to other teams) or the pitcher Chad Bradford (whose low velocity and weird delivery disinterested other teams, despite statistical major- and mostly minor-league success, but whose extremely high groundball rate was of particular interest to the A's). We see how Beane goes about trading with other teams and drafting players, and how his success has meant that he's had to find ways to do so deviously such that teams don't realize who he's really after and thus raise the price.

Lewis's book is a throwback in a way, to a time when the sport was first discovering the more efficient way of operating. Teams like the A's and Rays could still take advantage. I'm not sure that's as much the case anymore, as teams like the Dodgers have both the money and the brains now, and it's sad really. In addition, the focus on stats has taken away for many teams things like the steal and encouraged things like the shift, making for more predictable play. Pro baseball has attempted to adjust the rules, making larger bases, taking away the shift as a legal move, as to bring some things back, but at the same time, it's also encouraged more homers and jettisoned pitchers batting such that to one who enjoys the strategy element of the sport, it seems less interesting than it once did.

On "Why Nations Fail" by Daron Acemoglu and James A. Robinson *****

Countries are poor or rich because of their institutions. That is the basic argument. The authors use the example of the two Koreas and even more the two Nogaleses, one in Mexico and one in Arizona. Each has a better off partner. Why? They have the same geography, culture, people, and knowledge. It is because on one side the institutions exploit the people and on the other the people have more say in those institutions. I think the authors are pretty much correct, though I wouldn’t credit the institutions so much as the character of the leadership. That is, corrupt government leads to poverty.

The authors reference inclusive versus extractive economies and politics. Historical examples proliferate, which makes for great reading. In the examples, only rarely does a political system and economy not match and usually not for long. Extractive situations enrich and empower a small elite, while inclusive ones do so for the vast swath of society. With this also is the need for a strong central authority; without such, there will be no one to enforce laws, and thus society will fail to be extractive but also will not be able to be stable enough to provide the benefits of inclusivity. While inclusive societies are better off, extractive political systems don’t give way to inclusive ones because of creative destruction. That is, inclusivity also means less power and less ability to hold on to resources for the elite, meaning they would lose out even in a richer society.

Two other factors affect growth: critical junctures and institutional drift. Sometimes a plague, disaster, or invention will come along and change all the rules. Small adjustments at these junctures become big differences between nations as the institutions drift along based on that reaction.

Extractive economies can provide economic growth for a time. The problem they inevitably encounter, however, is the lack of creative destruction. When elites are focused only on gaining riches, they fail to spur innovation among others and thus the economy eventually stalls, or others attempt to take the elite position and centralized authority disappears, bringing an end to the structure and stability needed to extract wealth.

It is in the best interest of those in power to prevent creative destruction and thus to continue to extract wealth. A broad coalition of stakeholders, however, can interfere with the ability of the elite to continue to hold power, and once that broad coalition exerts its own power to force creative destruction, society revolutionizes. If that broad coalition holds, you have inclusion and the advantages that come with it. But often new elites emerge in whose interest it is to prevent continuing creative destruction.

The slave trade of course was part of that extractive economy. But so too was colonialism. Once slave trading was banned in the west, the authors bring out, slavery continued into the twentieth century via rules put into place in African countries that kept locals essentially enslaved to corporations and rich folks in the country itself. I hadn’t really thought about this before. The history of South Africa was particularly galling to read, where laws were put in place to create a racial underclass to be low wage workers, where previously there had been a greater degree of equality and advancement. One small Asian nation was completely obliterated, fourteen thousand killed, by the Dutch east Asia company because the people refused essentially to become subservient to the corporation. These were cases as such where nations were made to fail so that others could succeed by extracting land and labor and resources.

Countries that adopted inclusive political dynamics in the nineteenth century as the Industrial Revolution was taking place tend to be the rich ones today.

A virtuous cycle exists for nations with inclusive politics and economies. As elites sense that by not giving in on small issues could lead to revolution, they tend to expand power to less well off people in a gradual process. Likewise, such elites recognize the power monopolies wield over them and not wanting to compete, they break them up. Essentially so many parties have some degree of power that they recognize that not following equality in the law, even when it hurts their own cause, could lead to trouble down the road when they are no longer in charge. An example is given with regard to how fdr tried to pack the courts, which proved unpopular even though his policies were popular and the courts were interfering. Such preserved rule of law. In Argentina the opposite happened. Peron managed to get power to fire judges and install his own and ever since there has not been an independent judiciary and thus rarely a functioning democracy. (I fear that our virtuous cycle is drawing to a close in America, as parties, especially conservatives, play zero sum games. Republicans packed the Supreme Court in a dubious manner. Now the president is wielding powers he doesn’t actually have and congress is letting him and aiding him.)

The vicious cycle is just the opposite of the virtuous. Political power is extractive and limited to a few; this gives economic power, which in turn aids the political power. When the regime changes, it’s not a broad coalition of people but just another group setting themselves up as elites. This is what happened in Africa. Colonial empires extracted resources and set up government to do so; when they left, those who took over used the same techniques to continue extracting resources. Such is also why the us south persisted in poverty for so long. Plantation elites extracted from cheap slave labor; after the civil war, they set up a new system that more or less continued the same practices and kept the rich rich and the poor poor. Very little manufacturing or urbanization or modernization occurred because the system was set up to allow the well off to continue extracting. Eventually if such vicious circles aren’t broken, constant fighting to be top dog leads to a breakdown in the entire system and a lack of any central authority.

The few countries that have broken the mold have done so, the authors claim, with a broad coalition of interests. They give the example of Botswana, which I did not realize was as wealthy as it is. It was not heavily victimized by colonialism. When it became independent it was very poor and had few educated. But what it did have, I would say, were good leaders. I’m not sure they could not have personally benefited from forging an extractive economy. But their focus was on the nation. When diamonds were discovered—likely the source of much of the national wealth—they ensured that the money made was invested not in the tribe who owned the land (which seems would have been easy, especially as it was the tribe of the nation’s leader) but in the nation itself. The wealth is shared. In this sense I can see the virtuous circle taking hold. Everyone knows that if one person or tribe took the wealth for themselves, the nation would lose out. Better to share.

The authors close by noting that their theory is historical. There is no policy prescription that will bring about such changes. Giving money to poor countries usually just enriches the charities and the people in charge, rather than aiding the poor in the country. Increasing trade with an extractive regime, like china, will not make the regime change to an inclusive one. As such, growth in such a country will be temporal, the authors argue. Indeed, in a concrete example given, where a man started a company that was too successful compared with the government companies, he was arrested. The people aren’t actually free to innovate; riches belong to the elite. That is China. But in Brazil, a workers party, a broad coalition, has taken over the government and positive changes seems to be taking hold. Inclusivity. In both examples, however, I see more personal character and lack of corruption as the reason for a given success. You can’t have inclusivity unless the leaders are truly servants more interested in helping their coalition than manipulating it to enrich themselves. In this regard, the American experiment may have benefited by such leaders and may be drawing to a close with the loss of such.

For those wanting a spiritual explanation, Paul and Peter note that God puts the leaders of nations in charge; as such nations rise and fall, succeed and fail, by the leaders who ultimately take those positions. Call it inclusivity versus extraction if you want, but such hardly seems a result of pure happenstance.

On "Capitalism and Freedom" by Milton Friedman ****

This work reads a lot like that of Hayek's. Friedman ties political freedom to capitalism or economic freedom. The reasons make a lot of sense in theory. The more power is concentrated in a few hands the less freedom there is. As such more and localer governments are preferred, giving one opportunity to move if displeased, as opposed to a strong central government. We should not expect government to work for us nor to work for government; rather we should ask what we can achieve through government, through voluntary association. This all sounds good. But then you get down to reality, and this is not always so great. Friedman gives the example of social security. We should have freedom to use that income as we see fit rather than the government taking it and only handing it back to us when old. Yes! Except, wait. How many will actually invest that money and have it on hand when old? And how many can afford to save like so? And what happens when people don’t? Do we just let them suffer, or do we end up paying anyway? (A better example is health care, where such freeloading ends up costing those who actually pay, because we aren’t generally cruel enough to just let the poor or the unwise die on the street.) Too much centralization is awful but a lack of centralized standards can be awful as well. There are reasons equality and well being are of importance; it’s a balancing act with freedom. That’s because free markets don’t dispense with power dynamics; they just move the from government to those with more resources.

Friedman next turns to the role government should play in the economy, which is solely as a rule maker and arbitrator. A key conflict he notes is the need to allow people via the market to make decisions and to combine at will while also keeping that combining from manipulating the market through monopoly. Friedman acknowledges that some industry is better with monopoly because of its nature— utilities such telephone and historically railroads. But what to do with such monopolies? There are three choices: let the government have the monopoly; let the government regulate the monopoly; or let the private monopoly flourish. Friedman actually proposes the latter as the least evil. He says that when the government controls the monopoly, at some point it interferes with innovation. An example is the railroad, which if it had not been regulated, would have eventually split up naturally in the face of new transport opportunities like cars and planes. Instead the government continues to regulate trains and the industry suffers. While deregulating trains might be good, given new technologies, I think letting a monopoly flourish when at its height likely would have kept those new industries from emerging. In the previous chapter Friedman had said all innovation came from private sector, but that is simply not true. Government has often seeded innovation: think of NASA. When it’s too costly and the reward to ethereal, private enterprise is not going to even try a particular innovation. Government can sponsor such.

Friedman tries to blame the Great Depression on government regulation, which seems ludicrous to me. Certainly failed fiscal policy may have helped it along, but the idea that government overreach always makes economic trouble worse seems like poppycock.

Here are some things Friedman would have the government get out of: national parks, farm and housing subsidies, bank regulation, tariffs, social security, business licensing, FCC. I’m dumbfounded. Licensing is a pain and can be abused, but it also protects consumers. FCC regulation helps distribute limited bandwidths so that we have media at all. And every time we deregulate something with the banks, we find ourselves in some economic collapse a decade or two later caused by people gaming the system. Government has a role to play, and that role does stomp on our freedom, but it’s so that others don’t do the same but without a regulator to try to make things somewhat even. I can empathize with the idea of trying to keep power out of the hands of a few, but Friedman puts way too much faith in the supposedly unbiased market. But once monopolistic behavior arises, control is still bound up with just a few people. A democratic government at least lets a wider swath of people at least attempt to keep things even.

On fiscal policy Friedman calls into question Keynesian economics. He notes that government expense to spur the economy do just the opposite, simply making things worse and bloating the government. He points to 1937 when government expenses were cut in the Great Depression and how all Econ troubles resumed. But that seems to me precisely the issue. The government wasn’t aggressive enough to truly put an end to the trouble until ww2. Nevertheless he claims that stimulus is never ending and raises inflation and takes as much from private sector as it gives. This would seem to be true but the idea is that such stimulus is to be temporary; we’re just not good at cutting. In that sense Friedman’s preference for tax cuts instead, if there is stimulus at all, has some point, because it would tend toward shrinking government instead of adding to it. But the problem is the same, since no one wants more tax just as no one wants less government service, so we still end up usually with permanent greater debt. A better means of stimulus might be in the form of grants to private sector: temporary and one time but helping to spur one hopes an economy that has sputtered. (His claim that government stimulus never works seems very dubious to me, having seen it used twice to deal with turmoil and also in reading of troubles in less regulated late 1800s. Yes stimulus leads to inflation, but it does help restore spending in low times more that nothing would. It stops the trouble from getting worse.

On the education front, Friedman espouses vouchers. He notes that ideally only parents would pay for kids, save that society does reap some benefit from an educated populace such that government payment is justified. Still a voucher system with minimum standards about what kids are taught gives parents more choice and drives innovation and excellence through competition. It would also put all people on the same level and better integrate schools. (I have middling feelings about vouchers. If someone who pays in to public school but chooses private schools on top of that now gets money back, that would take money from those who already have less. Minimum standards means government would now wield some authority over private schools. And finally who is to say that vouchers would pay for all of education. A high class institution could charge more and thus cut off poor, leaving them able only to attend poorer schools that can be paid fully by vouchers. Still, I like the idea of giving students more choice.) Friedman argues that only lower level schooling should be paid for and not anything like basket weaving or basketball, which only helps the individual and not the state. For this reason higher education, especially as related to professional programs should not be paid for or operated by the state. You want to be a doctor or plumber, you pay for that yourself because you reap the financial benefit. (Friedman doesn’t address how public education for some such programs can help society fill shortages, but I suppose the free market would do that just as well, since jobs in need would pay more and thus would be more likely to have people willing to pay for education in those fields.) This still leaves a problem for those too poor to pay for such vocational training. Friedman proposes loans based on income one makes after (say the loaner gets 10 percent of your earnings); he acknowledges this is in a way akin to slavery, however. This might be something the government could supply—then it’s more like a tax but only on the beneficiary. And in a sense that’s what has happened with students loans the government sponsors.

On civil rights, Friedman espouses a color-blind society—neither laws enforcing integration nor laws enforcing segregation. In principle I can agree; in practice, it is not realistic. On some level, it seems like we should be able to associate with whom we want, and as Friedman notes, those who choose not to serve part of a community necessarily weaken their economic status compared to others, because they're limiting their audience. Except—and Friedman shares this counterpoint—if a community forges a standard bias such that when one openly breaks that standard, one actually sees economic trouble one would usually not see. He compares race to taste, but in that there is a great problem. Taste may mean blues musicians are in higher demand than classical, but a musician can switch music genres. That’s a whole other world to race, and the like. Despite misgivings, I find it fair that government takes a swing at preventing such biases. Freedom of association is wonderful until one is one of those not free to associate. But it is a tricky proposition, with inherent contradictions, because we clearly allow such freedom in some circumstances while not doing so in others. But not forcing such a situation, one could argue, actually reduces the unity of the society and thus its ability to function.

The most interesting idea in Friedman’s discussion of monopolies is that there should be no corporate income taxes. Rather shareholders should be taxed on company profits. This would encourage larger dividends rather than companies keeping their capital. In turn money would be invested in new enterprises and where it is needed, rather than companies squirreling money away and trying to find new ways to reinvest. It actually would help small businesses more. Interesting argument. After corporations aren’t people but rather the people who make up the corporation. In this sense also corporations should not be involved in welfare and social things; their job is to make money for the investors. Making them worry over other things dilutes their purpose and takes away individual’s freedom. As a stockholder I shouldn’t be forced to give via the company to things I don’t want to give to.

Already noted is how Friedman is against licensing, which he sees as just another form of monopoly, usually perpetrated by those already in a business. He lays out three options for ensuring people belong in a business and says the first two are better options: registration, certification, and licensing. In the first, you put your name on a list, of say gun sellers. Then if we need to figure out where a gun came from we can do so. It also might involve a tax. Certificates involve noting you’ve passed certain criteria like a CPA; others can still enter the business but the certificate gives the educated a leg up and helps customers know a bit about the risk they’re taking if they hire someone else. Licenses keep people from entering a business if they don’t pass a test. Friedman shows how licenses essentially establish a monopoly in fields like medicine; he has a point. But how to keep from malpractice without a license? Let people sue more easily for bad behavior; then again, I’m not sure I’d want money in exchange for poor doctor care.

Next comes redistribution of income, which he says is ineffectively done in taxes and unfair. Luck will always play a role in wealth, along with merit. It’s unfair to penalize someone who manages to do well. He’s a proponent of the flat tax. I have not thought it a great idea insofar as I tend to think there needs to be a way to reset wealth for the sake of balancing societal power. Yet he has a point insofar as he shows how our tax system allows so many loopholes that in fact we end up not with a tax on the wealthy but on those who would otherwise become wealthy. We tax income, not wealth. We don’t tax capital gains at the same rate. And so on. He would tax all money made at the same rate with only a single standard deduction. I’ve always liked the simplicity of such an idea. Not sure of its effectiveness in practice.

Unsurprisingly Friedman comes out against housing assistance, minimum wage, and social security. I see his point about housing assistance and his preference just to hand out money is less paternalistic; I see another solution in South America, where one program hands out half finished houses, giving people a home they own and a place they are invested in. Minimum wages have their problems, I will agree, but I do think establishing a baseline is important and useful. And I am not keen on the poverty of the old that would result if social security went away; there are reasons it was instituted.

That said removing all of the above programs might be fine if his other proposal were instituted: the negative income tax (or in other words the minimum livable income). This seems a bit surprising coming from a neoliberal. But it makes a lot of sense. It is the least paternalistic and offers the greatest freedom, while hopefully keeping folks from becoming indigent. In practice it might work (as some experiments have shown), or it might just lead to inflation in the manner that minimum wages do (or so the argument goes), such that the negative on the income tax does not really provide a livable minimum. (Indeed, I remain mostly skeptical. If we were all paid enough to survive just by living, I would venture that folks would be less inclined to work jobs they didn't like or want unless those jobs paid significantly more than the minimum given out by the government. I mean, why work if you're going to get paid whether you do or not? So some typically disliked job like fastfood would have to pay, I'd think, at least $500 more per month than what your negative tax would be. That would mean that prices would rise accordingly, which would result in that same vicious circle one gets with minimum wage.)

While I don’t buy into Friedman’s anti-Keynesian narrative, I find many of his ideas interesting and possibly better than how we manage the economy now. Much to think on.

On “The World Is Flat” by Thomas Friedman ****

Admittedly, I got Thomas and Milton mixed up. Milton is now next on my list. Thomas is an economic journalist; Milton is the actual economist. Still, I would have ended up reading this book no matter on this same economics list. It was the rage twenty years ago, just shortly after I moved to Georgia. I remember lots of NPR interviews and the like. Interviews with the author made me uncomfortable, because the topic is one to make one uncomfortable—namely, globalization's effect on each and every person on the planet, which can have some rather difficult implications for any single person who is looking to maintain a job. At thirtysomething, this was scary; at fiftysomething, I should be even more scared, insofar as it would be much harder to change focus and grab some new career. The fifties were many of my parents' generation lost jobs; some ended up getting better work, but others struggled along at odd jobs for the next decade until social security kicked in and never really recovered financially. Still, what give me some condolence is that globalization didn't come for me in the intervening twenty years.

It's interesting reading Friedman's book in the context of the new Trump administration. One can look at much of what he's doing as a reaction to just the sort of things Friedman writes about, and at least according to Friedman, they are just about the worst reaction one can have. Cutting one's self off from the world—with trade barriers and anti-immigrant policies—are more likely to slow the economy than protect the jobs one has. That would be Adam Smith's view too: trade barriers are good only to protect industries that are essential to protect for the national interest, like, say, military weaponry and the raw materials that go into that. But one can see why cutting the nation off from the world would seem to be the initial reaction.

Friedman makes clear the globalization is likely to lower the relative wealth of the United States, that is, wealth relative to other nations. However, it is also likely to “grow the pie,” as conservatives have in the past argued about income inequality. That is, it doesn't matter if the rich get richer faster if everyone is getting richer. There isn't a limit on riches one shares.

The first part of Friedman's book focuses on how globalization takes place and what sort of technologies have allowed that to happen, with numerous stories about businesses that have put such technologies into practice, things like offshoring and special software and so on. One of the most interesting developments to me was the case of UPS, which I had been totally unaware of. Apparently, some manufacturers have outsourced the repairs on their products to UPS. What I mean by that is instead of some Asian electronics manufacturer having us ship the defective product all the way back to the factory, it'll arrange for UPS to do not just the delivery but the repair itself. Numerous companies have apparently done this, such that UPS has facilities that are set up to fix stuff. This cuts down on shipping time and cost, for a fee that UPS reaps from the manufacturer, and makes things more convenient for the consumer.

So how are we to cope with things like accounting and taxes and constumer service and, well, just about anything one can think to outsource, and then even things one thinks can't be outsourced, to another nation with a labor force hungry for work and a cheaper cost-of-living? Friedman notes that the easiest tasks have been those that have tended to be farmed out, the standard accounting, for example. That allows those living in the older richer economies to focus on creative and more difficult endeavours. To do that, we need to be on our game in terms of maintaining education. (Something that seems, again, awful in terms of how it is precisely in education that the current administration has seen fit to start many of its budget cuts.)

But even this seems a difficult maneuver to me, when so many of the workers in a place like India actually have great educations. Who's to say an engineer has to be American? One could have the top-notch engineer overseas just as easily do the same work cheaper. In that sense, while Friedman's education argument makes some sense, it also doesn't seem a cure-all. Friedman talks of how some people he know have developed throughout their careers, moving from one thing to another in terms of starting off as, say, illustrators, then moving to medical illustration, then some very narrow portion of the industry—each time, making the change in light of the fact that the previous task became too easy for others (often overseas others) to do using software and training and thus lowering the price of the service. One of the things that made me so anxious when I heard about this book at thirtysomething was the way in which Friedman really pushed education—or really, reeducation. But the thing is, I like learning and study, but I didn't want to be in school constantly, chasing a new certificate or degree every five years because the previous job is no longer necessary. It's tiring enough working forty hours a week; add constant night classes on top of that just to keep a job, it just seems like a drudging way to live.

One interesting proposal in that regard, however, is Friedman's idea of underemployment insurance or transitionary employment insurance. Instead of paying people money when they lose their job or reward them for training, pay people for taking a job in a new-to-them industry, even if it means lower pay. It makes sense. So you're an engineer, but the product you worked on and specialized in goes defunct after twelve years; you were in the higher levels of the company and now you are out of work. You're chasing another job with equal pay, but there aren't many left in that sector of the industry anymore. Instead, employment insurance would pay you not just to go to school for retraining but rather for taking more of an entry-level position in another industry. It would make up the difference, and then, on the job, as you gain more experience and move up and earn more money, the insurance would kick off. This seemed one of the best ideas in the book, which if ever implemented, really would help people in a globalizing and fast-changing economy, one that we really can't recede from and expect to remain relevant or well off. (Indeed, Friedman criticizes the Bush administration for doing to some degree just that in reaction to 9/11, with its focus on closing borders and old gas technologies, rather than being forward thinking, and here we seem to be doing that again—but to a much greater degree.)

On "The Affluent Society" by John Kenneth Galbraith ****

I'm glad someone recommended that I read F. C. Hayek's Road to Serfdom, because this book, as it turns out, is in large part a response to that work, as well as an exploration of what one is to do when a society reaches a state where production outstrips the need for people to be constantly producing--that is, where there is a surplus of necessary goods.

Galbraith notes that he has some skepticism about the worship of free market instead of socialism proffered in books like Hayek's. Those truisms, he says, are not a given. Planned economies can do great things too, like launch Sputnik. Furthermore the challenge of modern society is not poverty as was the case throughout human history for most people. Why do some stay poor amid abundance for most in the moder world? How do we resolve? These are the questions Galbraith sets out to explore. It’s not just about the free market—free market simply offer you a difference in terms of who you serve: the blind free market instead of a government bureaucrat.

Conventional wisdom is what most speak; it is based on what we are comfortable with based on experience, but it is not based in current events. Sometimes situations have changed and conventional wisdom is outdated and wrong. Revolutions in thought occur at some point and become new wisdom. Examples: The liberal policies of the American revolution broke the national planning of colonizers. The welfare state broke the free market. Keynesianism broke the balanced budget. Are we on the cusp of another revolution? (Or at least, were we in the 1950s to the 1970s, when Galbraith was writing this?)

A main problem with the free market is a lack of equality; another is the lack of security in the business cycle. The hard working person is just as likely to fail by luck as succeed.

Galbraith then provides a short history of American economic thought, with special emphasis on a non-American with the strongest influence during the gilded age: Herbert Spencer and social Darwinism, out of which our special faith in the free markets perhaps derives and continues. With Spencer, the rich are the fit, the poor are the weak and are slated to drop off. It's no big deal if the weak drop off; in fact, it is poor form to help them because you’re allowing the less fit to survive.

The counter to Spencer is Marx who is just as much a pessimist and optimist but in other ways. Society will always produce too much, which drives down wages of the poor and kills jobs. When produce runs out and the poor go back to work, wages rise, which brings about higher production costs, which kills jobs and thus kills the continued productivity. And so on. The cycle repeats itself, getting worse and worse until revolution results. Even if disagreeing with Marx, he has had a great influence on economic theory.

There are three basic economic problems: productivity, inequality, and insecurity. These were what economists dwelt on till twentieth century and what Galbraith spends the rest of the book analyzing.

Galbraith notes that there’s been a loss of interest in inequality since about 1950. Why is that so, even though it is still exists? Because of increases in productivity. In rich societies, everyone is getting a bigger amount, even if their shares aren’t equal. In poor societies landowners took all the surplus or growth; in addition, in the 1970s showing off wealth became gauche, so rich became less known. (That certainly doesn't seem the case in the 1980s or 2000s, but maybe it was a bit the case in the 1990s.) Likewise the rich are less powerful than they once were, as they are rarely any longer both entrepreneurs and owners (again, this seems less true now in our tech billionaire age); rather, faceless stockholders own the wealth. (Galbraith provides numbers for the share of wealth owned by the few at the time; they are small compared with today, even though they were egregious even then.)

As for security, that has been resolved for commoners by social programs like unemployment and social security. For the rich, corporations have diversified and grown huge such that they can sustain losses in one area to gain in another and are too big to fail. Poor communities have little heavy desire for security, as they are simply struggling to stay alive, but as society grows affluent, the desire for insurance and the like is a result of what might be lost. The idea that security might make us less productive is a false one, as productivity has increased more with unemployment insurance and social security than without. (Galbraith fails to take into account many economies where people are less inclined to work, if they can't find the job they want, when unemployment is generous.)

Productivity is the obsession of the modern economist. Yet we define it narrowly. We take public service as being unproductive while producing private goods is productive. Actually, though, unemployment and government work helps stabilize the economy by providing production in downturns and thus keeping the private sector busier than it would otherwise be.

Satisfaction is never gained by an increase of goods. So there is no end to production. Yet it is rare goods, not easily obtained goods, that people want. This seems contradictory. Simply producing doesn’t mean you’ll sell the product produced. You have to have demand. That demand for product is based on seeing what others have and on advertising. Compare something you truly need versus something wanted. You know when you are hungry without someone telling you. The fact that someone has to inform you of a product through ads or comparison shows you don’t have to have it—it’s not a true need.

Production has become the system through which the economy grows. This came out of the depression when the solution was to get people back to work through producing stuff via government input. But the government never stopped pushing production and so we have way more stuff now than we used to.

Production is not that important really except insofar as it is necessary for security, that is, to keep people employed. Most people would choose to have low productivity and consistent jobs than high productivity and fewer jobs (this is Schumaker's argument too, in Small Is Beautiful). Contributing to this concern is the amount of debt people take on, which outpaces increased wages. It’s trouble waiting to happen.

How do we bring inflation under control to keep prices stable? When we raise prices, inevitably labor prices must rise. That means prices rise. It’s a loop. The key is more production so that prices need not rise to account for higher labor costs.

We attempt to spur or confine production through available cash—that is, by monetary policy or fiscal policy. Neither is fully effective and both affect sectors of society differently. Adjusting interest rates (monetary policy) has little effect except on smaller businesses, which are less able to invest in the future when rates are high. Big businesses have enough market share to inflate prices and consumers will generally just take out longer loans to deal with higher interest. Fiscal policy (adjusting tax rates) tends to interfere with stable employment, which then contradicts the goal of stabilizing prices. It seems there’s little solution. Galbraith seems to argue for price controls to a small degree here, even though he says that we’re historically averse to them. (Price controls lead to shortages, however, so I am not sure they are a real solution.)

Galbraith next turns to what he calls balance—social and investment. Social balance involves the public versus private economy. Our tendency is to see the public economy as a drain on the private, but the two go hand in hand, with the public usually lagging. If the private economy builds more cars, the public economy will require more roads for example or more traffic cops. We should not see the public economy as a drain on productivity; it enables continued productivity. Also of note in this regard is inflation, which Galbraith says eats into public expenditures as taxes do not rise as quickly (this seems a dubious claim to me) and taxes themselves (or rather the manner in which taxes address inequality, as the public sector tends to provide more for the poor but require more of the rich, which the haves do not like).

Investment balance has to do with how society tends to invest most in that which produces most and makes the most, which in turn becomes self fulfilling. A successful industry will develop faster than a more mundane one, leading to an imbalance in sectors. But what Galbraith really focuses on is education. Education enables industries to advance, as modern innovation rarely derives from uneducated people. But education is typically a public expenditure and thus not seen as directly productive. One could put education fully in the private sphere, but that would actually decrease freedom. This is a major point of contention with Hayek’s claim that the private sector ensures freedom rather than the public. If private industry funded all education, then people would have little choice in profession; industry would determine what can be studied and by whom.

This gets us to the crux of Galbraith’s argument, which is that in an affluent society, production should no longer be the main or only goal. After all, much production is unnecessary other than to encourage consumption: without ads few would know they lack a certain leisure good. Do we really want to force people to move or whatever to enable production of things we don’t actually have to have? But how, without such production, are we to have jobs—that is, the means to make money to live off?

The real concern in the economy is not production but employment and the income that comes with it. To break the dependence on production, Galbraith suggests unemployment compensation be closer to real wages. He claims this will lower production but not affect people's willingness to work. (I would suggest, based on European economies and the old communist regimes, that he is wrong. People tend to become pickier about jobs or not work to advance their positions if forced into jobs they dislike.) Or since some cannot work, a minimum living allowance (as some have recently proposed and experimented with), a likely better solution. To control inflation he suggests price and wage controls but only on corporations and unions, which control larger sections of the economy. This seems dubious also but possibly useful, insofar as indeed a large market share of a given thing does give one more ability to set prices and wages compared with a small employer or laborer.

Inadequate social balance between expenditures on private versus public items is best addressed by taxes, says Galbraith, but not those less flexible with inflation like property tax. Rather income tax is preferred, but most of that at this point is taken up by military expenditures. So to compensate we should have more sales tax. The poor are more affected by it; however, if that tax is used primarily for the public and especially the poor then taking away from consumption in the private sector to allow more consumption in public sector makes sense. We could use that tax for schools and the like, eventually leading to greater production anyway. Such taxes are also key to helping address poverty, because there is not more production but instead a better use of resources. (I’m not sure I buy this argument, as consumption taxes tend to be regressive; so one would essentially be taking money from the poor and handing it back to them in the form of government services—in other words, the government thus would be telling the poor how to spend, as it would do the spending for them.)

Galbraith closes with a discussion of how greater productivity has led to fewer hours and more leisure time, but a better way to address better productivity is also to make work more pleasant. As such there’s a new class, not a leisure class, but a new class: a group of workers who labor not primarily for money but for love of the work they do. Education is key to allowing this and should be the goal to bring most people into this class.

In a world where production is ample and there is no need to spend all our days just scrounging to survive, new ways of measuring economic value are needed that don’t simply count what has been produced, ways that actually somehow take into account our humanity. On this basic point, I guess, I would agree with Galbraith, but many of his policy solutions seem dubious. No matter, he offers much to think about in a mostly lucid way.

On “Theory of the Leisure Class” by Thorstein Veblen ***

I took a step back fifty years or so to add this text to my economics list, given that it shows up on so many lists of classic econ works. Veblen wrote at the height of the Gilded Age—and also at a time when evolutionary theory was making its way into social theory as well. The influence of evolutionary thought is all over this work, and in a way I think it rather harms much of Veblen's theory, which seems very focused on materialism, even though there are aspects of the theory that potentially enlightening.

The gist of the argument is that power and prestige is assigned within communities by the ability one has to live a leisurely life. This leisure is largely shown through one's ability to consume time and money conspicuously—indeed, wastefully. Only the lower classes, the less powerful, have to use their time and money to meet their basic needs. So far so good, but I have difficulty with who Veblen puts into this leisure class category, which is essentially anything having to do with government work or religion. In his view, it seems that unless you're actually making things or growing things, you are conspicuously consuming in terms of the work that you are doing. There is no value to helping to keep society on a moral keel. I guess in Veblen's view, such would take care of itself.

Chapter 1 begins with primitive humanity. Primitive society is more peaceful because people have no time to fight (right here, already, Veblen throws me—people fight over resources all the time; it's not like the poor are immune from such). As one moves toward barbarism, which is a step up from primitive life, one introduces social classes. The higher leisure class is made up of warriors, priests, government, and sport, and it is based around the idea of doing exploits, which give you esteem and power. Intellectual work also places one into this leisure class.

In chapter 2, Veblen notes how the importance of exploits is replaced by an importance in property ownership, as a society advances. Slaves and women are the first property, along with land and eventually goods. The more you own, the more respect you have. Interestingly, Veblen notes, this is why no amount of property is ever enough. I find this latter idea to make some sense. Even contemporary studies show that people tend to be satisfied with less as long as they have more than others around them. Since there is always someone with more somewhere, even the very rich compete to acquire more and stay on top.

The leisure class, that is, the upper class, chiefly engages in nonproductive activity, which can include studies of the occult, dead languages, and grammar, and upholding good manners. As one advances in class, conspicuous consumption is abedded by moving not only one's self into the nonproductivity but also one's spouse and even one's servants (becoming butlers, and so on).

Also as society advances, leisure time is replaced by consumption of goods, especially goods with less use and more expense (think, in modern parlance, brand-name goods). Even lower classes can get in on this action in an attempt to prove a higher status.

In chapter 5, Veblen discusses how hard people will work to remain in a higher class. It is harder, psychologically, to move down classes than up. Because everyone is trying to be like the higher classes, eventually upper-class standards move down into the lower—thus, manners and the like get transferred downward. Veblen especially criticizes scholars, who although usually poor like the lower classes, put on airs to attempt to fit in with the upper class.

Conspicuous consumption goes to the heart of such attempts. One will buy stuff to make one's self seem sophisticated—often stuff that is actually less useful than another option. Thus, handmade stuff is preferred to machine made. We like special editions of books rather than books that are just as good (in terms of info inside and quality of the production) but less expensive.

In chapter 7, Veblen looks at dress in light of this and at the way fashions change just so that we'll seem up to date and sophisticated.

In chapter 8, Veblen returns to evolution, arguing that the leisure class is actually more conservative. Because it does not depend on the society at large, it can be aloof to changes going on and thus doesn't evolve with society. (This seems somewhat counter to the chapters previously, as consumption would suggest actually sticking with trends. I think Veblen is more focused on political and environmental trends here, however. But one has to wonder where the political trends come from? Do they not derive from laborers/producers, who supposedly don't have time to think or to do anything but work?)

This argument sets up chapter 9, where Veblen notes that there are basically two kinds of people: peaceful primitives and barbaric predatory. The leisure class is largely the latter. It is selfish and indvidualistic, while the primitive is community oriented. I'm getting a kind of communist anarchist vibe from this argument, which again I think just misunderstand human nature.

Chapter 10 discusses sports as a leisure activity that shows off exploits while doing nothing of actualy consequence.

Chapter 11 focuses on gambling, which Veblen sees as more conspicuous consumption. The issue I have here, however, is that this is not an activity confined to the upper class. Indeed, the poor often have more reason to gamble, which again goes against his argument. Veblen then notes that those involved in sports and gambling also tend to be more religious, which again I take issue with. He halfway had me through the first seven chapters of the book, but as his argument continues on, the more absurd it seems.

Chapter 12 discusses religion as conspicuous consumption, as it renders no material product. Instead, it uses up resources for valueless items: church buildings, special clothes, and so on. In the mechanical age, the middle classes fall away (especially men), as it is a waste of time. The poor stick to it because they lack resources to change in response to modern circumstances. Meanwhile, the richest take on religion as a means of showing off their wealth—religion becomes bound up in spectacle (as in ancient Rome, I suppose: I sponsor some grand thing and put my name on it). But again, these ideas seem contradictory. If the higher classes are what everyone is aiming for, why would the middle class give up religion while the upper class continues in it? Wouldn't everyone be aspiring to be like the rich, as Veblen earlier argued?

In chapter 13, Veblen discusses the counterforces to the leisure class. As some grow tired of conspicuous consumption, they aim for a more substantive life, one that involves actually producing things. Women especially grow tired of being simply a conduit through which men show off their wealth.

Finally, chapter 14 ends the book with a discussion of how higher education is a form of conspicuous consumption, as it produces nothing but knowledge for knowledge sake. Veblen is especially critical of humanities. Science, based in the practical arts, has invaded this realm, bringing the laborng class into the colleges. Science advances society and moves away from the social order established among the leisure class, while humanities is inherently selfish because it produces nothing of value.

On “The Road to Serfdom” by F. A. Hayek ****

This author was recommended to me by someone who found out I was doing an economics reading list. I was not really looking forward to this work, as it Hayek was someone I'd never heard of and he seemed more of a minor figure such that reading him would take from others I would otherwise read as part of this list. When I read a bit about him, I was even more put out; he sounded like a huge right-wing, free-market capitalism fan, for which I already had a few such books on my list. I figured Smith and Marx to be enough in terms of older classics, Keynes and Galbraith for moderns, and then the rest would be applied and contemporary.

And indeed, as I started out on this book, Hayek's hit me in a lot of wrong ways. He seemed just too big a fan of the free market without any sort of government oversight. But as I read further, he made more and more sense—and he also seemed at times to contradict himself. That is, he seemed very heavy on avoiding government intervention in the economy, but then would backtrack and say that some intervention was okay. In some ways, it reminded me of the way Elizabeth Warren claims to be a friend of capitalism—but only capitalism done the right way.

What Hayek's book is really doing is arguing against socialism—whether on the right or the left. He was writing near the end of World War II, when the troubles that had risen to the fore in Germany with the National Socialists were very apparent. And he was fearful, he notes, that too many other nations, such as the United States and Britain, were drifting toward the same sort of socialist frenzy under the inane idea that socialism solves problems and creates a more equitable society. (He notes that this is actually more a book on politics than on economics, which seems true, save the economics has much to do with his political views.)

Here's where Hayek's big critique of such thinking really gives one much to ponder. He notes that when the government imposes its will on the forces of the market in the name of providing equity, it denies freedom to the people it rules. A planned economy essentially means that certain people will not be able to do as they wish, be it start a particular type of business, sell a particular item, or do a particular job. In that sense, socialism leads inevitably to totalitarianism. In this way of thinking, I would have to agree. The problem, of course, is that simply letting the market dictate things doesn't necessarily lead to a greater amount of freedom; that's because when a private corporation corners a market, now it's just the private corporation that dictates one's ability to start a new business, sell a particular item, or do a particular job. Which are you going to ask to control your fate? Hayek doesn't spend much time on this latter possibility—except he does at some point note the problems with monopolies. In that sense, he seems to imply that ultimate economic freedom for people can only exist when we are talking about small-time capitalists, not multinationals that control the fate of millions. And in that, too, I would agree, save that some industries require such an outlay of capital that they are impossible to run with such a small footprint. The guy down the street cannot decide that he's going to start building commercial airplanes with a small savings or a small loan; there are reasons there are really only a couple of viable commercial airplane manufacturers. In those sort of endeavours, it seems we really do have to fall back on either government involvement or a near monopoly.

And just as one thinks Hayek is espousing total free markets, he pulls back, admitting in places that the government does have a role to play. It is there to keep markets fair (this is where I thought of Warren), so that fraud and monopoly don't twist the market in ways that remove opportunity for everyone. He even at some point notes that the government should be involved in health care, which seems very much more of a socialist kind of argument in many people's views. Once the government starts getting involved in such things, it seems, it warps the market—that's not necessarily a bad thing. It's really a matter of the tradeoff one is willing to make, where one is willing to cede authority and freedom in the hope that a central-planning bureaucrat will be able to do better. I wouldn't want to live completely at the whim of the free market, nor would I want to live totally under the thumb of a government decision maker. Where that balance is is hard to say.

A late chapter in the book discusses a kind of world government. There, he argues against a socialist world government, noting that were we to have such, certain nation-states would insist on cornering the market in certain areas. There would not be the sharing of resources as one would hope. Instead, there would be resentment, the keeping down of certain nations and of the development of their own industries. Instead, he advocates a kind of world government that instead of mandating things would simply prohibit certain things—what sounds to me in some ways what would become the United Nations. One nation, for example, cannot invade another, lest all the other nations then unite to keep such an invasion from happening. Thus, we would have peace. Of course, the issue with this is apparent from the lack of success the UN has had. I mean, it requires other nations to be willing to sacrifice to stop another nation from taking advantage of others. But beyond that, what's the difference between a prohibition and a mandate? On some level, are they not similar things? If we refrain from mandating that a nation provides a living wage to its citizens, but prohibit a nation from starving its people, what's the difference?

Anyway, in the end, I'm glad Hayek was recommended to me. I found it particularly interesting reading in our current times.

On “The Economic Consequences of the Peace” by John Maynard Keynes ***

I was looking for a book by Keynes for my economics reading list and chose this one. It wasn't quite what I was looking for insofar as it didn't really seem focused on what folks call “Keynesian economics.” Then again, I didn't really want some really scholarly text, and that was one main reason I settled on this one: because it was, I read, intended for a popular audience. By that, however, the “popular” audience was very much that of its day. There wasn't much in here that I felt invested in in our day.

That said, the book is an interesting snapshot of one of the concerns of its day, and in it, one can see that Keynes had some foresight. The text largely criticizes the conditions of the peace treaty coming out of World War I, one that was very draconian in the manner in which it treated Germany and that was not in keeping with the assurances Germany had been given when it surrended. He shows how the punishment, the payment forced on Germany by the winners of the war, was unsustainable. It took away chunks of land that Germany had had, some indeed of the most productive land. It asked Germany to repay based on a degree of production that it was incapable of, especially without that land. And it rewarded nations that were not as damaged by the war as certain others and that could have likely sustained the losses—namely Britain and in turn the United States (which Britain was indebted to and thus was repaying), as opposed to nations like France, which suffered much more substantial losses and whose payment was likely more justified.

The result, Keynes hints, is one that is actually not going to resolve issues that it hopes to resolve and instead is likely to lead to the renewal of hostilities, because the German population is not going to be willing to be taxed into poverty for war debt with no end in sight. Such are the arguments, and such, of course, is what came to be.