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.

10 thoughts on “Union for Radical Political Economics

  1. You can claim to be speaking truth to power, having selected the only ‘power’ in the area that poses no threat to your safety.

    In light of the tragic events in France today, this is no joke.

  2. >Instead of having fancy graphs and lots of data like in the mainstream papers,

    Of course they don’t have lots of data in their papers because the data is all against them. We have the results of a 70 years experiment in the Soviet Union plus ongoing experiments in Cuba and N. Korea to show what Marxist economics gets you. The only kind of income equality you can get is that if you kill off (sometimes literally) the people with the most initiative and drive you can make everyone (well almost everyone except those inside the apparat) equally poor. You have to view Marxist/radical egalitarian “economics” as a religious movement, which not subject to factual refutation, rather than as a science. No one has ever presented any graphs or data proving the existence of God, but this has not hurt religion one bit.

  3. Izzie: I think the standard argument is that the Soviet Union was Marxist-Leninist, that it never achieved true Communism, that they didn’t start from a base of advanced capitalism, and that therefore it was not a fair trial of the Marxist philosophy.

  4. A working definition of insanity is doing the same thing over and over and expecting a different result. The response of true believers is always that whatever extremism was tried was not extreme enough and that’s why it failed. There were a few places where even more strenuous efforts to implement Communism were attempted (e.g. Pol Pot Cambodia, Albania) and the harder they tried the more horrific the results were. It’s like the story of the man who was trying to train his horse not to eat. Just when he had it almost perfectly trained, it died. OTOH, in places inside the Soviet Bloc where Communism was less rigidly applied (Hungary, Yugoslavia), they did relatively better. So the correlation was in exactly the opposite direction – the closer you got to true Communism, the closer you got to true starvation.

  5. Matthaei cited the work that women do within an intact marriage.

    Of course she did. Intact marriages may be the greatest remaining threat to civilization.

    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.

    Right. No doubt, whatever mystery meat replaces capitalism will fix that problem easily. Once the bill is law, the regulators will figure out something over lunch.

    I’m a bit impressed that you can restrain yourself from commenting on some of the insane things these people say. I guess if you assume sane readers, these things don’t really need commentary. I wonder how much of your audience is that sane, though.

  6. Your argument about Krugman is akin to saying “So-and-so is a world expert on automobile design — therefore, he should be the best race car driver in the world.”

    From what I’ve seen, Krugman has been proven right by events; and most of the “neoliberal” economists with their austerity dogmas have been spectacularly wrong. But I know you won’t be convinced by any facts, so let’s not bother with a point-counterpoint discussion. Which isn’t to say that Keynes was completely correct. The government spending in Japan on unneeded infrastructure, and the resulting lack of economic growth, shows that it is important to spend money on the right things; but I suspect that the Japanese “lost decade” would have been a lot worse if the government hadn’t spent that money.

    Anyway, you might want to read Bernstein’s “The Power of Gold”. The chapter on the Great Depression (“End of the Epoch”) has some quotes by prominent politicians and bankers, pushing the same “neoliberal” ideas … if you substitute “Euro” for “gold”, they read frighteningly like present day pronouncements about “confidence” and “deficit reduction”. And we all know how the Great Depression worked out with conventional economics.

  7. PeterL: I think you’re making the same argument for Keynes as has been made for Communism: It hasn’t been given a fair trial. If Japan’s central government had only borrowed and spent 500% of GDP instead of 238% they would be growing super fast today…. Or if only government spending were undertaken by a government run by smart Americans instead of stupid Japanese people it would work way better (IQ data showing that Japanese are smarter than Americans, on average, will not be persuasive; nor will a comparison of Chevrolet’s versus Honda’s cars).

    http://fpif.org/from_keynesianism_to_neoliberalism_shifting_paradigms_in_economics/ gives a good summary of the debate between economists who call themselves “neoliberal” and those who call themselves “neokeynesian”. The radicals reject both, I believe, which is why my posting was not intended to be about the Keynes versus Neoliberal issue. Neo-Keynesians are still “mainstream” compared to the radicals, I think.

    My point about Krugman was intended to answer the question of Why do we want to listen to the radicals? Few interested in science spend time learning about Creationism, for example, because there aren’t too many obvious flaws in mainstream Biology. I do think the “If you could be confident of getting the right answer from mainstream economists, including Krugman, you could make infinite money in the current markets” perspective is evidence of a flaw. Maybe Krugman himself doesn’t want to bother opening an FX account. But if you are sure that he is right, why not open one for yourself get rich using your knowledge that Krugman is right? (a belief not shared by everyone else in the market and therefore one that can be used to make money)

  8. 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?

    It’s possible that he’s satisfied with the level of wealth that he has. In any case, couldn’t such a statement be made about anyone who writes about economics?

    Regarding Keynesianism, it could be said that Keynes developed his ideas as a response to the Great Depression. Since some of those ideas have been adopted by most developed countries, there has never been an event as severe as the Great Depression. So one could say that his ideas have been effective.

    Also, regarding Marxism, I haven’t read much of Karl Marx, but I ‘ve read that he wasn’t very specific about how he would like to see the economy organized. He did write about the “withering away of the state”, which would result in an economy much different from what existed in the Soviet Union.

  9. Vince: “couldn’t such a statement be made about anyone who writes about economics?”. Yes, that’s my point. I just used Krugman as a familiar example of a mainstream macroeconomist. The distinction is not between Krugman and some other mainstream macroeconomist, but between economics and physics, for example. If you’re right about physics there is no cash value because physics does not concern anything that can be traded in public markets. (Actually there is negative cash value to being a physics expert in many cases given the long training requirement and risible cash compensation (any reasonably competent child support plaintiff in Massachusetts would earn more).) My point is that there is more potential value in hearing from a heterodox economist than in hearing from a heterodox physicist.

  10. >He did write about the “withering away of the state”, which would result in an economy much different from what existed in the Soviet Union.

    According to Marx (or actually Engels) the state would wither away only at some later, unspecified time – once a free and equal association of producers was achieved, the state would become an unnecessary relic, just like we no longer keep coal shovels or buggy whips around our house. There would just be no need or demand to keep a government around.

    But before that, everything would be controlled by “the dictatorship of the proletariat” (or “dictatorship” for short). Somehow, no Communist society ever got past the dictatorship phase – external capitalist enemies were always trying to crush them you see, so they had to stick with dictatorship.

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