Union for Radical Political Economics

I attended a session run by the Union for Radical Political Economics (URPE), a 50-year group that can be lumped roughly into the larger “heterodox” camp of economics that had a small but continuous presence at the American Economics Association 2015 conference.

Why is there any reason to doubt that the mainstream “neoliberal” economists are correct? If they were, why would they waste their time working as economists? Paul Krugman, for example, writes New York Times articles that are based on the assumption that he knows the optimum way to run an economy. But if he actually did possess this knowledge he could survey the world’s countries with tradeable currencies and then, using the crazy leverage that is available for currency trading, bet on the sure winners and against the sure losers. He could thus accumulate infinite wealth within a few years. Why scribble away for the New York Times when he can join the Forbes 400 at the #1 spot?

A founder of the URPE group, Howard Wachtel, was the first speaker. He is an example of a friend’s rule that the most capable people in any field tend to be the pioneers (see Vermeer, for example, in the early years of modern oil painting). Wachtel said that what motivated his early research was the observation that labor markets were not functioning as predicted by classical economics. People with similar levels of education, and therefore presumably marginal productivity, were being paid different amounts. He looked especially at those with just a high-school degree or a maximum of two years of college. If they found employment in the Detroit automobile industry, for example, they could earn much higher wages than in a different occupation or in a similar occupation elsewhere in the U.S. [Note: I’m not sure that this falsifies classical economics; the auto makers were at the time an oligopoly extracting above-normal profits from American consumers and a powerful labor union was able to intercept some of those profits before they reached the shareholders; the free competitive market with perfect information postulated for much of Econ 101 is very far from the reality of the Detroit automakers circa 1970.]

Wachtel said that the structure of the labor market has a greater effect on wages than human capital and that proof of this is the “vast investments in education and student loans” that have been made for the preceding decades without much effect on wages (see previous posting). Wachtel gave a compelling example of why we need of why we need a massive wealth tax to address complaints about income inequality: “What if I am playing monopoly with my grandchildren and I win the first game then say ‘Let’s play again but each person will start with however much money he or she had at the end of the last game.’ Very quickly they figure out that this isn’t a fair way to play.” (It is a great story but Gregory Clark spoils the ending with his 800 years of data; it turns out that when an English family had 15 children those kids did not turn out dramatically poorer than when a prominent English family had just a handful of children. See The Son Also Rises.)

The next speaker was Julie Matthaei, a professor at Wellesley College. Her talk was titled “Workers, Women, and Revolution: A Marxist-Feminist Perspective on URPE.” She talked about how Marxist-Feminists like herself are committed to ending both patriarchy (male domination) and capitalism (class domination), pointing out that the answer to “Can women be liberated in capitalism?” is “No because they would still be dominated by class.” Her group was forced to adapt in the 1980s when they came under criticism from black and lesbian academics. They also decided to broaden their horizons internationally by adding a program to object to the Jewish occupation of Palestine (Matthaei did not mention looking into criticizing any of the other 195 countries in the world; I’m wondering if this is an illustration of this recent Atlantic magazine story where the journalist says that supporting the Palestinian cause is popular among journalists in Israel because “You can claim to be speaking truth to power, having selected the only ‘power’ in the area that poses no threat to your safety.”) Matthaei criticized Sheryl Sandberg’s book Lean In (my review) as “an example of liberating only white privileged women”: “Sandberg talks about breaking the glass ceiling but for poor women the basement is flooding.” (After the talk I asked her about her abstract that cited the problem of “women’s unpaid reproductive work”. Didn’t the child support guidelines that we have had in place for 20+ years now put a price on reproductive work? If a woman can get paid for having a baby or selling her abortion, what kind of unpaid reproductive work is left? Matthaei cited the work that women do within an intact marriage.)

Michael Zweig talked about how the labor market must be viewed as employers and workers meeting as classes, rather than as individuals, and that the market is segregated by race and gender (note that this was seemingly contradicted by the fake resume study presented at the conference by a group of Harvard researchers). Zweig said that Gary Becker predicted that the market would eliminate racism, e.g., if black workers of the same quality were available at a lower price than white workers, a company such as Target would hire all black workers and put Walmart out of business. Zweig asserted that the fact that blacks and women still are paid less than white men shows that “capitalism embodies racism and patriarchy. It is not enough that we have a black president. We now know that. Class matters.”

Marlene Kim of U. Mass Boston was the “discussant.” She suggested that everyone needed to incorporate more feminism in their papers and also bring in “cutting edge theories on race” from Psychology. In her view the answer to income inequality was unionization. (I didn’t mention that I had been a member of a union that negotiated a 30:1 hourly wage ratio between senior and junior workers; see “Unions and Airlines”) For an example of why capitalism needs to be torn down she cited USDA inspectors coming out every week to farms to make sure that fruit being packed was up to standards but ignoring obvious child labor law violations. (I’m wondering if the issue is simply that there are separate government offices for performing these inspections, as noted in my posting about FAA oversight of my single-pilot helicopter operation.) But if capitalism is to be torn down, what other enterprise is big enough to take it on other than the U.S. government?

Barbara Bergmann, an influential feminist economist who is too old to travel to a conference like this one, recently published What to Do About Single Parenthood” (Huffington Post). She proposes more government support of children, regardless of the parents’ marital and living status and income, so that children would become essentially cost-free or perhaps even profitable even for married couples. I called her up (she’s a family friend) and asked whether she meant this to be a supplement to the existing litigated system of child support or a replacement for it. For example, could one still collect $4 million after a night of passion with a dermatologist (oxymoron?) and then pocket 100% of the money because the Feds were now paying all direct child expenses? Professor Bergmann said that this system would be a supplement and “I wouldn’t favor weakening any of the existing systems.”

[Note that cost-free (for married couples) or pure-profit (for child support plaintiffs) children might help address the “sustainability of the welfare state” problem identified by some of the demographically-minded economists at the conference. With the exception of the Netherlands and Singapore, most modern rich countries run Social Security-style pensions as a Ponzi scheme in which yet-to-be-born workers will pay for the pensions of current adults. Alicia Adsera and Ana Ferrer brought a paper titled “Do Migrants Adapt to Fertility Patterns in Destination Countries? Evidence from OECD Countries” and noted that college-educated Canadians have a lower-than-average and lower-than-replacement rate of fertility. In other words, they are doing A Farewell to Alms in reverse (in Farewell we learn that economic growth was driven by highly educated people having larger families than the illiterate)). Even without that, apparently almost every developed country is in trouble because so many systems were built under the assumption of an infinitely expanding population. (Assumptions made with the advice of mainstream economists, I might add!)]

An issue with this group is that they don’t seem to have any criteria for disbanding. If total compensation for all working Americans fell within a 3:1 range, would that be sufficient to call the economy “fair”? Would it require a 2:1 range? Would the group disband with a “mission accomplished” if all nations worldwide had only the income disparity of Sweden? URPE doesn’t seem seem to have a concrete numerical goal. Another issue is that data are used selectively. In the 1980s it wasn’t generally possible for an American to earn more from child support than from going to college and working. Then a sociologist published Divorce Revolution asserting that women were becoming 73 percent poorer (out of a maximum impoverishment level of 100 percent) after filing divorce lawsuits. Aside from some simple data coding errors identified 11 years later in an academic paper, the main reason for this counterintuitive result (why were women hiring lawyers and going down to the courthouse asking judges to make them poor? Then, as now, the majority of people suing are women) was that the author didn’t consider earned household income. A women who sued her VHS video cassette rental store clerk to marry a plastic surgeon was counted as impoverished because the author looked only at what the woman was collecting from the clerk and the total number of people in the household. So the marriage to the plastic surgeon made her poorer, not richer (since the surgeon’s income was not counted, only his postulated consumption of food and living space). The modern folks who earn a living by saying that women are getting a raw deal from the U.S. system flip this technique around. They look only at what women earn from wages. If the women is married, the woman’s ability to spend a share of the husband’s paycheck is ignored. If the woman is divorced, the child support, alimony, and tax-free property she may have received is ignored. One of the plaintiffs that we use as an example in our book is Jessica Kosow of Kosow v. Shuman (see previous posting). After a four-year marriage she obtained a spending power 3.2:1 larger than her University of Pennsylvania classmates. But her case would be evidence that the U.S. system is rigged against women because she has no W-2 job (based on an interview with the defendant in the case, two years after the trial before Judge Maureen Monks in Middlesex County).

It it tough to remain unbiased in this heterodox versus mainstream economics debate because all of us are bombarded on a regular basis with pronouncements from the mainstreamers. However, based on the presentations that I saw at the conference, the heterodox folks are begging the question (in the logical fallacy sense). Instead of having fancy graphs and lots of data like in the mainstream papers, which are designed to persuade and defend against criticism, the heterodox folks simply assume that everyone in the room already agrees with them. Thus the discussion in a heterodox session is how to achieve what are characterized as “reforms” rather than about, for example, whether data support the proposition that Americans employers are more interested in indulging their racism and sexism than in profits (the kind of project that Professor Wachtel was doing circa 1970). Thus it is a group primarily engaged in preaching to the converted. And it is more politics than economics.