Heterodox Economist

It's not...

It's not that I've given up posting but that my mother's health has declined greatly over the past week and, so, I've been otherwise occupied.

Bad Science for the Day

Finally I understand my daughter:

I want you to know that I love evolutionary psychologists, because the ideas, like “girls prefer pink because they need to be better at hunting berries” are so much fun.

From Bad Science.

Good Post from Up North

A good post on current trends in orthodoxy from Relentlessly Progressive Economics.

Introduction to John Milton

Our understanding of the work of Karl Marx is enhanced by a consideration of John Milton's Paradise Lost.

John Milton (1608-1674) lived--and participated--in interesting times.

Milton participated in the English Civil Wars (1642-1651) and the political conflicts during the Cromwell years. Milton's weapon, of course, was the pen rather than the sword. But what a mighty pen it was. He acted as advocate, provocateur, and apologist for the Protestant/Parliamentary side weaving together theological and political arguments to justify the taking of state power, the subsequent execution of the King, and the actions of Cromwell's government.

His arguments impressed many. (Milton's writings reappeared translated into French in the years leading up to and following the French Revolution.)

Unfortunately for Milton, his method of addressing political and social questions was soon rejected in favor of that developed by his contemporary Thomas Hobbes. Few students today read Milton's polemics in favor of divorce (1643-5), his defense of free speech (Areopagitica, 1644), or his argument in favor of popular government (Tenure of Kings and Magistrates, 1649). Instead, students today read Hobbes' argument (Leviathan, 1651) in favor of an all-powerful King.

Although Milton's political/social agenda is much more acceptable to modern folks than Hobbes', Milton's method often relied on using Christian scripture and/or invoking classical Greek and Roman writers. Hobbes rejected all of that: he famously deduced his arguments from materialist assumptions and on a social contract between individuals. Modern social science starts with Hobbes; Milton was the last of the great pre-Hobbesian social thinkers.

Something was gained and something was lost in the move from Milton to Hobbes.

After his service to the English Revolution, Milton was arrested and imprisoned after the Restoration in 1660. He was soon given his freedom.

Between 1658 and 1664 Milton wrote Paradise Lost. The poem sought to "justifie the wayes of God to men." In particular, Milton gave his version of the Fall of Man (snake, apple, etc) and presented his argument that the ejection of Adam and Eve from the Garden was, in fact, a glorious moment and a gift of God.

More broadly, Paradise Lost develops Milton's Christian theory of history. Standing at the center of Milton's history is a collision between free will and determinism. Milton struggled to reconcile the two, but I don't think that even Milton thought he was completely successful.

Two centuries later, Karl Marx--in his theory of history--also attempted to reconcile free will and determinism. It is unclear whether Marx was more, or less, successful than Milton in this effort. In some ways, Milton and Marx confronted similar problems in their respective theories of history.

But to understand the nature of Milton's effort, and Marx's later effort, we have to take a side trip into the world of Christian theology as it was played out in Europe during the Reformation.

(Both Milton and Marx also addressed "the problem of evil" in their respective work, but I'll ignore that for now.)

To be continued...

Wacky Way to Start the Week

I just finished rereading Karl Marx’s Wage Labor and Capital. Of course, Marx's essay falls short of John Milton’s Paradise Lost as an imaginative work. That much is obvious. But Marx's essay has more in common with Paradise Lost than readers might think. 

Isn't it a bit wacky to mention Marx's essay in the same sentence as Milton’s epic? Paradise Lost is, after all, The Greatest Poem Ever Written In The English Language.

Not wacky at all.

Most important of all...By writing the above I’m forced to write a series of posts about Milton's Paradise Lost and Marx’s economics. What could be more fun!

Econophysics: a Brilliantly Colored Sock for the Same Old iEcon?

Barkley sees econophysics as an important development in economies. As far as I can tell, econophysics uses sophisticated mathematical tools developed by physicists to study the economy. Or, more accurately, it uses these tools to study the exact same objects, problems, and data studied by orthodox economists.

The famous economist Paul Samuelson is said to have simply borrowed the math models developed by physicists in the first part of the 20th century to do his economics; the econophysicists seem interested in simply borrowing the math models developed by physicists in the latter part of the 20th century to do economics. I guess that's progress.

My first college major was physics. But I switched to English Literature because the issues addressed in the humanities seemed more important than those addressed in physics. My lack of enthusiasm for econophysics might be related to that. Econophysics seems more like a new sock for an iPod than something really new.

But I'm just one--perhaps misguided--particle.

Brilliant Economists

Tom Toles:

RosaSpeak, You Listen!

Dean Baker says,

There is no general public interest in having the government assist the Wall Street crew in their efforts to dump their debt on less informed investors. They profited on the upside, they absolutely deserve the losses that stem from their failure to exercise good judgment in their investment decisions.

Mark Thoma responds:

... a rate cut or other interventions, if they were to occur, are to address general macroeconomic conditions and protect people who had nothing to do with bringing about the mortgage mess, not to bail out the mortgage industry in particular.

Both are right: Wall Street should take a hit but good macroeconomics reasons can be found for the State to intervene in ways that bails out Wall Street.

I'm not saying what I think should be done. I'm merely articulating the "structural dependence of the state on capital" theory.

Rose Luxemburg's Reform or Revolution proposed that capital has power over which no formal institution (state or otherwise) can prevail. Regardless of what institutions exist--or who fills the positions within these institutions--the danger of a "capital strike" gives capital veto power over what these people and institutions do.

If capitalists are not happy with things, they make it clear that it is their ball and unless you follow their rules they are taking their ball home and then no one can play.

Capitalists have near-complete power over production, location, and investment decisions. So the fate of everyone in the economy depends on these decisions. The threat of a capital strike (to stop production, to move somewhere else, or to withhold investment) is, therefore, powerful.

Of course, what is good for Wall Street might be different from what is good for other fractions of capital. And this might be different from what is good for "capital as a whole." And, the set of policies acceptable for capital might be quite large and so the state might have a wide variety of choices it can make (and it might matter for real people who is it that makes the decisions and what they decisions they make).

So, the issue the state faces might not be what is fair, what is just, or should people be responsibility for their own (bad) decisions. The issue the state faces might be "what must be done to keep capitalists (and Wall Street) happy?"

RosaSpeak, You Listen!

Hyman Minsky's 15 Minutes of Fame

Hyman Minsky has recently been invoked in various blog postings and news reports. According to Minsky, the normal functioning of capitalist financial markets creates instability and fragility. As an economy expands, firms take on more and more risky--if not outright speculative--debt, and this can create the conditions for financial spontaneous combustion and recession. The recession "cleans up" the financial system as the much of the debt disappears in bankruptcy.

It's all endogenous: it's not caused by external factors but by factors inherent to capitalism itself.

The proliferation of increasingly risky loans in the USA in recent years seems consistent with the Minsky vision of a growing instability in the financial structure as the economy expands. The recent rumblings in US/World financial markets seems exactly what Minsky would have envisioned as some of this debt seems (after the fact) a bad idea.

Yet once the current financial rumblings fade into the past, so too will public references to Minsky fade. Until the next incidence of unexpected spontaneous combustion.

At other times Minsky's economics will live a furtive existence. Such is the fate of the heterodox.

The Eighteenth Brumaire of Alan Greenspan

"Hegel remarks somewhere that all great world-historic facts and personages appear, so to speak, twice. He forgot to add: the first time as a Volcker, the second time as a Greenspan." Apologies to Karl Marx

"American consumers might benefit if lenders provided greater mortgage-product alternatives to the traditional fixed-rate mortgage. ...the traditional fixed-rate mortgage may be an expensive method of financing a home." Alan Greenspan

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Barry Ritholtz, normally a reasonable guy, falls victim to simplistic ethics when he approvingly quotes the following:

In the free market, those that made bad credit decisions must be allowed to pay the price, and only by paying dearly can lessons truly be learned. Borrowers who were unwitting and took on too much debt must learn that there are consequences for their actions.

Many borrowers took well-informed gambles and lost. I have no problem if such folks "pay a price" during a housing shakeout.

But some holders of today's risky mortgages fell victim to a hard-and misleading-sell by lenders who were able to take advantage of the borrower's belief that only by taking a risky mortgage could they ever live "the American Dream." Yes, such borrowers voluntarily took out risky mortgages, but we can conclude little about what they deserve from that fact alone or what is good for the US economy in the future.

Yes, they made a voluntary decision...but not in conditions of their own making.* For instance, Alan Greenspan shilling risk was not of their own making.

Further, I doubt that folks today would have been less likely to have taken out risky mortgages because, say, 15 years ago people unknown to them took out risky loans and fully paid the price in an earlier housing crunch. The claim that today people must "learn their lesson" so that the same thing doesn't happen to other people in the future isn't compelling.

Many people are desperate for jobs and, so, take risky jobs at dangerous work sites because that is the only way these people see to get ahead in life. When an accident happens and one of these workers loses an arm, no reasonable person would merely point to the fact that the worker voluntarily took the job as support for the claim that the worker deserved to lose an arm or worse.

I don't know what percent of holders of risky mortgages today should be given a break if the housing market collapses. But I do know that lumping all holders of risky mortgages together on the basis of some simplistic ethical perspective isn't right.

Added: Paul Krugman (via Mark Thoma) agrees: help for (some) borrowers but no bailouts for the lenders.

-------

* More precisely, "Men make their own history, but they do not make it as they please; they do not make it under self-selected circumstances, but under circumstances existing already, given and transmitted from the past."

In Which I Lead California to a Golden Age. That was the Plan Anyways.

In 1999 the California State Assembly paid me to write a report, "Incentives to Encourage More Worker Friendly Corporations in California." Not one of the spiffy proposals I offered in my report made its way into law. Imagine that.

The report starts off:

This report describes and analyzes policies that California can implement that will lead to more “worker friendly” businesses in the state. Worker friendly businesses provide to their employees the following: fair compensation, employment security, healthy and safe working conditions, and employee relations that provide basic workers’ rights.

Dream on, you might say. But then comes the hard pard:

As requested, the policies proposed in this report are—for the most part—based on incentives such as tax credits and monetary grants....

Holy Banana! Tax credits and grants to promote "worker friendly" businesses!? That really narrows the policy spectrum; we're marching into new policy ground in this effort.

Just as bad, they wanted everything framed in terms of cost-benefit analysis.

But being a good citizen--and needing the money--I complied.

This led to odd proposals such as:

Union workplaces are worker friendly workplaces. Unions gain for their members higher wages, better healthcare insurance and pension plans, greater employment stability, healthier and safer workplaces, and a higher likelihood of fair treatment from their employer. Unions can be promoted in two ways. First, the state can provide a tax credit to employers who voluntarily accept their workers’ petition for union representation. Second, state tax credits can be made available only to businesses that do not violate existing state and federal labor laws.

Sometimes the world is just not ready for new ideas. ;>   

AWOL

An unplanned out-of-town trip Tuesday night means no posting for the day. So it's a fine time to give Terrance a visit at The Republic of T.

Heterodox Economics Newsletter

Fred Lee's latest issue. A link can also be found in my Reciprocity Row.

From Progressive Assembly to Fordism

A 1913 photo of Ford Motor Company's first assembly line shows the car body being attached to the frame:

Myth has it that Henry Ford invented the assembly line. But he did not. Ransom Eli Olds built cars using "progressive assembly"as early as 1901, twelve years before Ford introduced his assembly line. Olds put cars on stands that were wheeled by workers from work station to work station. This innovation increased the rate of production tremendously.

Many years later Ford visited Olds' factory, liked what he saw, and "borrowed" Olds' ideas for progressive assembly. Most importantly, Ford replaced wheeled stands by a powered conveyor belt.

By replacing worker-moved stands by a management-controlled conveyor belt, Ford took control of the pace of work. Ford factories soon became known for a rapid pace of work and, so, high rates of production. But the rapid pace of work led many workers to quit after just a few weeks on the job. Ford responded by doubling the rate of pay. His workers now put up with the unpleasant pace of work because the pay was so good.

In fact if an auto worker saved diligently, he could eventually buy one of the cars he produced. The "masses" were now able to enjoy levels of consumption once only available to the relatively well-to-do.

Out of this came "Fordism": mass production (based on routinized and intensified work) coupled with domestic mass consumption. The US economy, based on Fordism, boomed in the 1920s, the 1940s, the 1950s, and the 1960s. But the spread of mass production technology to lower-wage countries in the 1960s, and the subsequent rise of imports in the 1970s, undercut the classic Fordist system in the USA.

Profits vs. Cures

Possible solutions to antibiotic-resistant bacteria exist, but Western profit-seeking drug firms have little incentive to develop them: they might not generate adequate profits. The BBC reports:

Dr Nick Housby of Novolytics Limited ... says this is because of the intellectual property rights surrounding the therapy, which has so long been used elsewhere. Phages are notoriously hard to patent, the process by which drug companies secure their future profits.

Income Growth vs. Quality of Life

The evidence is clear that the US does not have the healthiest people in the world:

A combination of expensive health insurance and an ever-increasing rate of obesity appear to be behind a startling fall by the US in the world rankings of life expectancy. Despite being one of the richest countries in the world, America has dropped from 11th to 42nd place in 20 years, according to official US figures.

A single number--such as life expectancy--can't tell you all you need to know about the quality of life. But this number must be considered alongside the traditional measures of the quality of life (such as income per person).

The graph below (based on data from this research outfit) makes an important point:

Some countries with levels of per capita income falling far short of that found in the USA have populations with longer life expectancies.

Policies and institutions that generate the most rapid income growth might fail to generate the best quality of life. If a country wants to generate a good quality of life, certain programs (such as healthcare) should receive special treatment even if such special treatment hinders income growth.

(The graph above is for the top 100 countries in life expectancy.)

Stock Market 24/7 vs. a Canary in a Coal Mine

The amount of time the mass media spends on the stock market in a typical week is far beyond what the actual importance of the stock market warrants. Three reasons, among others, the mass media covers the stock market so extensively:

• Demographics. Like those who watch golf, those who follow the stock market have relatively high incomes. This makes televising and writing about the stock market a good venture for a profit-seeking mass media. Ad revenues can be pretty good although relatively few people follow golf or the stock market.
• Constant material. Five days a week the markets do something. So five or more days a week you can report on the stock market. This predictable and continual material is nice to have because mass media outlets don't have to go looking for real news.
• Easy material. Sports articles write themselves: a set of things happened, someone won, and it is easy to find people to interview in the locker room. Almost anyone can write a sports article. Stock market articles also write themselves: the market moved up and down, some stocks gain and other lose, and it is easy to find people to interview. ("We gave 110%" and "Investors were taking profits" are among the trite quotes that you can be guaranteed to get from those you interview.) Almost anyone can write an article about the daily movement of the stock market.

At times stock market happenings are truly important, but this happens only occasionally. Further, when the stock market acts in ways that demand attention, this is often merely a symptom of problems elsewhere. It's a canary in the coal mine sort of thing.

Another Great Moment in Bad Writing

"In terms of microeconomic studies, the importance attached to displaced workers is the fact that these workers supposedly change jobs for reasons that are orthogonal to their unobserved ability."

Andrew K. G. Hildreth, Till M. von Wachter, and Elizabeth Weber Handwerker, "Estimating the ‘True’ Cost of Job Loss: Evidence using Matched Data from California 1991-2000"(pdf).

Sen: Orthodox Economist Gone Bad

Amartya Sen's "capacity approach (pdf)" pushes economics in the right direction. His proposed standard for judging an economy--what it permits people to do and to be--is superior to approaches that use maximum happiness/choice as the measuring rod for economic success.

Unfortunately, Sen's approach is still heavily and profoundly weighed down by orthodox economics.

For instance, his theory of "the economy" is starts with mutually beneficial exchange and then moves outward from there. Markets = freedom. Freedom = good. Markets = good. (Sen argues that markets need to be supplemented by widespread democratic oversight but that's another story.)

As far as I can tell, unequal bargaining power between employers is simply overlooked. Wage workers appear only rarely in his economic theory. His standard economic policy is based on letting those excluded from market participation (for instance many women in "traditional" households) participate equally in markets as buyers and sellers. That some folks might go from being oppressed in the household to being oppressed in a factory seems ruled out by assumption in Sen's theory.

An ounce of Sen's work is worth 1,000 pounds of standard orthodox economics. But Sen still fails to break completely with the orthodox research program. His work is interesting and important, but Sen is best seen as an orthodox economist gone bad.

Which is a very good thing. But not enough.

Unemployment Benefits and Property Rights

Suppose it's a Great Depression--and no unemployment insurance exists--and a bunch of workers lose their jobs. They might say, "You can't fire us. We'll starve.... So we'll stay right here in the factory and demand our jobs back by taking control of the means of production. Ha, it will be like a sit-down strike!"

Suppose now that unemployment insurance (UI) is created...poof!...and laid off workers have access to unemployment benefits. They'd now be more willing to just walk away from the factory and wait in line at the unemployment office to sign up for their UI benefits.

Hypothesis: one function of unemployment insurance is to give workers an incentive to just walk away when they lose their jobs. UI helps protect the property rights of business owners when many of their workers might be angry.

Mid-1980s Structural Change in UI Program?

Let me define "Regular UI Cushioned Proportion (RUICP)" as equal to: (weeks of regular unemployment insurance benefits provided) / (weeks of unemployment experienced). A RUICP of 0.75 means that workers receive regular UI benefits for 75% of the weeks they are unemployed. A higher RUICP means more UI benefits and, so, a greater cushion against unemployment.

The scatter plot below indicates that when unemployment increases, RUICP falls. Among other things, greater unemployment leads more workers to run out of regular UI benefits and UI provides less of a cushion against unemployment in economic bad times. (I'm ignoring the issue of "extended UI benefits" for now).

Historical interlude: the high unemployment in the mid-1970s and early-1980s bled many state UI programs dry. The federal government stepped in--bless their hearts!--to provide funding to these needy state UI programs. But the feds insisted that states tighten up their UI programs. Many states did so by the mid-1980s: UI benefits became harder to get than before.

The scatter plot below breaks the same data above into two groups: that from 1967 to 1983 and that from 1984 to 2006. I've added the OLS line to both groups of data.

The green data points are for the earlier period while the red data points are for the 1984-2006 period. The data suggest a structural change in the UI program in the mid-1980s. For a given rate of unemployment, the cushion provided by the UI program was less in the second period than in the first period.

This mid-1980s change is a policy-induced increase in the cost of job loss via the reduction in the cushion the UI program provided against unemployment.

Unemployment Insurance Benefits Less Available

Among the justifications of unemployment benefits are:

• It's fair to help those who have lost jobs because of forces out of their control,
• It reduces the chance that large numbers of hungry unemployed workers gather together, riot, steal, and generally show a lack of respect for capitalist property rights, and
• It boosts the economy during recessions by giving unemployed workers income to spend.

Unemployment benefits also reduce the cost of job loss. But not as much as they used to.

The following graph shows the proportion of unemployment (experienced by laid-off workers) cushioned by unemployment insurance (UI) benefits. If 10 weeks of UI benefits are provided to workers who are unemployed for 15 weeks this would appear as 10/15 = 0.67 in the graph.

From 1969 to 1983 the proportion of unemployment cushioned by UI benefits fell from 0.89 to 0.47. After 1983 the proportion bounced up and down but remained at levels below that of the late 1960s and early 1970s.

Of late, the proportion has been a smidgen above 0.63: more than a 1/3 of unemployment today is not cushioned by UI benefits. Today, job loss is more costly than it once was.

The cause for the decline includes fewer workers being eligible for UI benefits, fewer eligible workers applying for benefits, more stringent requirements for keeping UI benefits, and more spells of unemployment lasting longer than regular UI benefits are paid.

(Details: the workers considered were those who have been laid-off from their jobs and only "regular" UI benefits were considered. I've ignored here the many issues involved in generating the above numbers.)

Center for Popular Economics Blog

I didn't know the Center for Popular Economics has a blog, Econ-Atrocity. But then, there's lots I don't know.

225 versus 385,000,000

Presented without comment:

"...my calculations...tell me that the world's richest 225 people...earn more than the combined annual incomes of the people of the world's twelve poorest countries, or about 7 per cent of the world's population (385 million)."

Partha Dasgupta, Human Well-Being and the Natural Environment, 2001, page 4.

Mere Mortals: Listen and Believe

Speaking from Mount Olympus, dangerous outsider (proof: Harvard Ph.D., UC Berkeley professor, Research Associate of NBER, past federal government official, Visiting Scholar at SF Fed, highly published in mainstream journals) Delong writes:

... opposition to protectionism is a good thing...

A statement so clear, so sure, and so unable to be justified by his own economic theory.

But this is typical of these folks.

I'm not for or against protection or free trade in general but I am in favor of taking theory seriously...unlike the standard orthodox economist.

Technical Control

Technical control developed in response to the failure of simple control and simple-hierarchical control to work effectively in the large firms developing in the US after 1880.

Technical control involves using machinery and the flow of work to force a certain pace of work on workers. Frequently workers were often tied to a workstation while work flowed past them. The assembly line is a classic case. But technical control need not involve assembly lines. It can also take place in an office where paper moves from workers to work in a planned fashion so that workers are forced to process a certain amount of paper in a certain time.

Technical control permits the firm to reduce, or eliminate, close supervision by supervisors. By reducing the importance of supervisors, technical control helped reduce the conflicts between employers and supervisors. Because machines or the flow of work now enforced the pace of work, firms were able to get a high level of work effort even in production sites run by less capable (and lower paid) supervisors.

But technical control creates problems for management. For instance, workers see work extraction as being directly related to an impersonal firm and "the bosses" rather from personal interactions with immediate supervisors. Workers also tended to be "homogenized": they were all subjected to same plant-wide system of labor control. Such workers were more likely to come to see that they all had common interests. Before, different groups of workers were subjected to different conditions based on the oversight of different supervisors and, in this earlier situation, workers believed that they had an individualized relationship with their supervisor and little in common with the majority of workers within the workplace.

But now, with the implementation of technical control, workers increasingly saw themselves as having a common interest opposed to management. Personal relationships between employees and supervisors were not able to smooth over the feeling that workers had that machines or the work flow were driving them relentlessly.

The spread of technical control after 1900 created the conditions of the rise of unionization in the US in the 1930s.

Health Care Insurance and Wage Dependence

The US system of employer-based health care is inefficient. Yet the fact that workers in the US often depend on their employer for health care insurance enhances employer power. If you lose your job you lose (low-cost) access to health care insurance. Many people stick with lousy jobs simply because that's the only way they can afford health care insurance. Otherwise they'd quit in a minute.

The US is unique in having employer-based health care insurance as the dominant means of providing health care to citizens. Folks in the US think employer-provided health care insurance is the natural way to do things; folks in other countries think the US system is bizarre.   

I'll throw out a hypothesis: the existence of employer-provided health care in the US (partly) explains the decline of unions. Employer-provided health care increases wage dependence and the cost of job loss. This enhances employers' power. Employers use this power to aggressively implement anti-union activities and workers, being dependent on their employers, must often go along with the employer's agenda. The threat of shutting down a business (rather than accept a union) is more powerful if workers depend on the employer for health care insurance.

Good Life Outside of Work --> Greater Worker Power within Workplace

Eleanor insightfully comments on wage dependence:

This suggests that employers need to destroy social goods such as affordable health care and education, social security, public parks, free entertainment and so on, in order to increase workers dependence on employment. This strikes me as an interesting idea. I have wondered for some time why the upper classes were so intent on making life hell for working people.

The concepts of "wage dependence" and the "cost of job loss" explicitly link social programs to the relative power of employers and workers. In particular, the better are public education, social security, and unemployment insurance, the smaller is wage dependence and/or the cost of job loss and the greater is worker power.

The better life is away from workplace, the more power workers have within the workplace.

Conservatives often claim that unemployment insurance is relevant only to the unemployed. In this narrative, the unemployed are slackers and have no right to sit around all day drinking, watching TV, and playing video games when real people are out working for a living. So employed workers should oppose a good unemployment insurance system. Unemployment insurance is just not fair to employed workers.

In fact, a good unemployment insurance system enhances worker power within the workplace.

Extreme example: suppose you could get unemployment insurance benefits equal to what you now earn. Your boss tells you to do something you don't want to do. You might just pause and think about whether you will actually do it as ... hey ... if you refuse and get fired your material standard of living would be unaffected. A good unemployment system reduces the cost of job loss and, so, increases your ability to say "no" to the boss.

Conservatives, however, have convinced many that it is in workers' interest to attack unemployment insurance. Conservative narrative victory? False consciousness? Gramscian hegemony? Your pick!

A more minor case: if public lands can be enjoyed by all for free, anyone can go hike, play, swim, and picnic. It's free for all. But if a "user fee" is imposed then you need income to use public land. Many unemployed people might find a $10 user fee is just too much to spend for recreation. Lose your job; lose your access to public land.

William Butler Yeats on the New Social Contract

I favor the establishment of a new "social contract" within the US that would bring more of the material benefits of capitalism to ordinary people. I'm not sure, however, that any such contract would be long-lasting.

I'll introduce a new term:

Capitalist Entropy n. A process through which any well-meaning ethical order established within a capitalist country quickly disintegrates in the face of the actions of capitalists to boost their profits.

Or, as Yeats wrote, things fall apart.

Consider US labor law. The 1935 Wagner Act was intended to promote unionization in the US. But soon this body of law was weakened significantly (by Taft-Hartley in 1947). Later amendments further weakened federal labor law. By the 1970s US labor law was a mush more tasty to businesses than to unions.

Independently of the erosion of labor law, creative businesses found ways to violate the letter and intent of these laws and yet face few repercussions beyond scowls and harsh words ("shame on you!").

A well-meaning body of law (federal labor law) that benefited the public was quickly neutralized by greater forces. Capitalist entropy in action.

So...I'm in favor of a new social contract for the US. But we have no reason to suppose that even if such a thing was established in the US that it would be long-lasting. It might help people for a couple of years (which might be enough to justify aiming for it), but beyond that things will fall apart.

Markets and Niagara Falls

One of my favorite descriptions of market behavior, circa 1855:

[Miss Bird] was determined to view of [Niagara] Falls from Goat Island, and now, on this second visit in 1855, she found she could travel by hack across Roebling’s newly opened bridge to the American side without hazarding the rocky ferry crossing. That, however, meant another infernal squabble with a crowd of some twenty ragged hack drivers, all clamoring for a fare. She and two other guests … were scarcely out the door when the drivers all began shouting various prices.

The first offered to do the rounds for five dollars. A second dropped to four dollars and a half and was immediately attacked as a thief and a blackguard, whereupon “a man in rags” offered to take them to Goat Island for three. When she accepted, the first hackman offered to meet the three-dollar price, insisting that his rival was drunk and his carriage wasn’t fit for a lady.

A fist fight followed, with much shouting and squabbling, until the ragged man succeed in driving up to the door. Only then did Miss Bird realize, with a sinking heart, that the hack really wasn’t fit for ladies—the stuffing was quite bare of upholstery, the splashboards were held together by pieces of rope, and the driver was at least half drunk.

Off they went, bumping along the Niagara gorge, 250 feet above the green flood, with no protective parapet to offer security.

From Pierre Berton, Niagara: A History of the Falls, New York: Penguin, 1992, page 73.

Added: I've been a busy bee the last few days hence the above minimum-effort posting.