Protest this!

from David Ruccio

Back in 2011, thousands of Chilean students participated in protests against the high cost of higher education. The most famous took place in front of La Moneda, the president’s palace, dancing to Michael Jackson’s “Thriller.”

According to the latest statistics from the OECD report, “Education at a Glance 2017,” the costs of a college education in Chile were still very high in 2015-16.

But they’re still not as high as in the United States, where it costs more to go to college than anywhere else in the world.

Of the 35 member countries in the OECD, the United States has the highest average tuition at both public and private colleges, for Bachelor’s as well as Master’s degrees.

Average public tuition in the United States for a Bachelor’s degree is $8,202 annually, compared to Chile’s $7,654, the country with the second-highest tuition cost. 

Break this!

from David Ruccio

David Brooks should have left well enough alone.

“Profits above morals and humanity”

from David Ruccio

Back in June, Kim Hemphill, in her letter to the editor of the Washington Post, challenged pharmaceutical industry claims that it must charge high prices on lifesaving drugs to recover research and development costs.

The case detailed in the June 11 Business article “Max’s best hope costs $750,000” was yet another example of how the pharmaceutical industry continues to put profits above morals and humanity. . .

Research and development costs are a part of the business pharmaceutical companies are in and should have little, if any, bearing on the ultimate price of a drug. What they charge for these specialty drugs is profit-motivated price gouging, plain and simple.

The fact is, as is clear from the chart above, pharmaceutical prices (at the wholesale level) have risen since 1981 at a much faster rate than for all commodities—more than 7 times compared to just two.

Most people, like Ms. Hemphill, think this is a case of “profit-motivated price gouging” on the part of drug companies. But it’s a difficult charge to prove.

Until now. 

How do you like them facts?

from David Ruccio

Apologists for mainstream economics (such as Noah Smith) like to claim that things are OK because good empirical research is crowding out bad theory. 

Economics and the new history of capitalism

from David Ruccio

As I tell my students, nothing gets a mainstream economist frothing at the mouth quite like mentioning Karl Polanyi.

Or at least it used to, when mainstream economists actually knew who Polanyi was and grasped—however dismissively—what he wrote about the history of capitalism.

To his credit, Eric Hilt (pdf) appears to know something about the author of The Great Transformation and how his work influenced the new history of capitalism. And his review of ten recent books, including Edward Baptist’s The Half Has Never Been Told and Sven Beckert’s Empire of Cotton: A Global History, is not as dismissive as those of other mainstream economists, such as Alan L. Olmstead.

Much of the research of economic historians focuses on questions originating in economic theory, which tend to be quite narrow. In contrast, these book present expansive narratives and explore questions that may not be amenable to the analytical tools of economists. The authors’ critical perspectives also distinguish their work from that of economic historians and make it relevant to the concerns of many popular readers. The historians of capitalism rightly remind us that economic growth and development can have human costs not captured in average incomes; that our economic history includes no small measure of cruelty, coercion, and expropriation, rather than free exchanges occurring in the context of secure property rights; and that the economic system we have today is not a natural condition, but the outcome of policy choices that could have been made differently.

Hilt is, I think, correct: the new history of capitalism does represent a reminder to—and thus an indictment of—contemporary mainstream economics, precisely because it includes an analysis of the “cruelty, coercion, and expropriation” of the emergence and development of capitalism and the idea that contemporary capitalism is “not a natural condition.” 

Who’s working for Facebook?

from David Ruccio

There are plenty of reasons to be interested in—and, even more, concerned about—Facebook. Many of them are raised in the recent review of Facebook-related books by John Lanchester [ht: db]: the fragmentation of the polity (via the targeting of posts), the dissemination of “fake news” (which played an important role in the 2016 U.S. presidential election), the undermining of other livelihoods (such as journalism and music), the level of surveillance of users (much more than any national government), the violation of anti-monopoly rules (via individualized pricing), and so on.

All of them are important—and they get at what the Facebook business model is all about:

For all the talk about connecting people, building community, and believing in people, Facebook is an advertising company.

That’s right. That’s how the owners of Facebook make their money: they track users, collect information, and then sell that to advertisers.*

But it still doesn’t get at the issue of who works for Facebook, who creates that value, what the class structure of Facebook (and Google and other such companies) is.

Lanchester’s answer is that we, the two billion or so of us who use Facebook, actually work for the social-media giant. 

Beyond the trinity formula

from David Ruccio

John Hatgioannides, Marika Karanassou, and Hector Sala are absolutely right: mainstream macroeconomists and policymakers never venture beyond the “holy trinity” of economic growth, inflation, and unemployment.* Everything else, including the distribution of income and wealth, is relegated to the fringes. 

Stocks and wages

from David Ruccio

The new jobs report is out and, once again, little has changed—including wage growth (the blue line in the chart above), which for production and nonsupervisory workers was only 2.3 percent. 

Economics in Wonderland

from David Ruccio

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master—that’s all.”

Alice in Wonderland (pdf) is the key to understanding much of what is happening in the world today—especially the language of economics.

For example, we’re going to hear and read a great deal about tax reform in the days and weeks ahead. But, based on the proposals I’ve seen, nothing in the way of tax reform is being proposed.

The usual meaning of reform is that it involves changes for the better. Most of the so-called reforms that are being proposed by the Trump administration—including the vague speech by Donald Trump yesterday—are just cuts in the tax rates that will directly benefit wealthy individuals and large corporations.

Supposedly, the rest of us will eventually benefit because of increased investment. However, as is clear from the chart above, both corporate profits and private domestic investment are doing just fine without a cut in tax rates. But the benefits to the rest of us simply haven’t appeared. 

Slick maneuvers

from David Ruccio

Corporate duplicity, it seems, knows no bounds.

First, ExxonMobil misled the public about climate change for years, even as its research echoed the growing scientific consensus that global warming is real and caused by human activity. Then, while various states attorneys-general launched investigations of whether Exxon deceived shareholders and the public to protect its profits, the Wall Street Journal published 21 opinion pieces about current or potential Exxon investigations, all of which were critical of government entities investigating Exxon.

We now know, thanks to a study by two Harvard University researchers, Geoffrey Supran and Naomi Oreskes, that Exxon acknowledged that climate change is real and human-caused in 83 percent of peer-reviewed papers and 80 percent of internal documents. Yet, 81 percent of editorial-style advertisements it placed in the New York Times from 1989 to 2004 expressed considerable doubt.

Their conclusion?  

Slick maneuvers

from David Ruccio

Corporate duplicity, it seems, knows no bounds.

First, ExxonMobil misled the public about climate change for years, even as its research echoed the growing scientific consensus that global warming is real and caused by human activity. Then, while various states attorneys-general launched investigations of whether Exxon deceived shareholders and the public to protect its profits, the Wall Street Journal published 21 opinion pieces about current or potential Exxon investigations, all of which were critical of government entities investigating Exxon.

We now know, thanks to a study by two Harvard University researchers, Geoffrey Supran and Naomi Oreskes, that Exxon acknowledged that climate change is real and human-caused in 83 percent of peer-reviewed papers and 80 percent of internal documents. Yet, 81 percent of editorial-style advertisements it placed in the New York Times from 1989 to 2004 expressed considerable doubt.

Their conclusion?  

Time to dethrone economists

from David Ruccio

The election and administration of Donald Trump have focused attention on the many symbols of racism and white supremacy that still exist across the United States. They’re a national disgrace. Fortunately, we’re also witnessing renewed efforts to dethrone Confederate monuments and other such symbols as part of a long-overdue campaign to rethink Americans’ history as a nation.

In economics, the problem is not monuments but the discipline itself. It’s the most disgraceful discipline in the academy. Therefore, we should dethrone ourselves. 

Condition of the workplace in the United States

from David Ruccio

Last fall, just before the presidential election, I posted a report on the perilous condition of the American working-class.

Now, thanks to the Rand Corporation [ht: ja], we have a report on how terrible working conditions are in the United States.

Most Americans between the ages of 25 and 71 spend most of their available time in a given day, week, or year forced to have the freedom to sell their ability to work to a small group of employers. Thus, as the authors of the study note,

The characteristics of jobs and workplaces—including wages, hours worked, and benefits, as well as the physical demands and risk of injury, the pace of work, the degree of autonomy, prospects for advancement, and the social work environment, to name a few—are important determinants of American workers’ well-being. Some of these job characteristics also affect workers’ social and family lives.

Here are some of the major findings, which paint a picture of a work environment that is often stressful, taxing—both physically and mentally—and demeaning: 

From oligarchs to Soviets—and back again

from David Ruccio

Russia is back in the news again in the United States, with the ongoing investigation of Russian interference in the U.S. presidential election as well as a growing set of links between a variety of figures (including Cabinet and family members) associated with Donald Trump and the regime of Vladimir Putin. 

10 years after

from David Ruccio

The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought — Rudi Dornbusch

Last week, a wide variety of U.S. media (including the Wall Street Journal and USA Today) marked what they considered to be the ten-year anniversary of the beginning of the global economic crisis—from which we still haven’t recovered. 

Broken

from David Ruccio

Over the years, I’ve reproduced and created many different charts representing the spectacular rise of inequality in the United States during the past four decades.

Here’s the latest—based on the work of Thomas Piketty, Emmanuel Saez, and Gabriel Zucman—which, according to David Leonhardt, “captures the rise in inequality better than any other chart or simple summary that I’ve seen.”  

“We’ve got the robots”

from David Ruccio

Chico Harlan [ht: ja] describes the arrival of the first robots at Tenere Inc. in Dresser, Wisconsin:

The workers of the first shift had just finished their morning cigarettes and settled into place when one last car pulled into the factory parking lot, driving past an American flag and a “now hiring” sign. Out came two men, who opened up the trunk, and then out came four cardboard boxes labeled “fragile.”

“We’ve got the robots,” one of the men said.

They watched as a forklift hoisted the boxes into the air and followed the forklift into a building where a row of old mechanical presses shook the concrete floor. The forklift honked and carried the boxes past workers in steel-toed boots and earplugs. It rounded a bend and arrived at the other corner of the building, at the end of an assembly line.

The line was intended for 12 workers, but two were no-shows. One had just been jailed for drug possession and violating probation. Three other spots were empty because the company hadn’t found anybody to do the work. That left six people on the line jumping from spot to spot, snapping parts into place and building metal containers by hand, too busy to look up as the forklift now came to a stop beside them.

Tenere is just one of many factories and offices in which employers, in the United States and around the world, are installing robots and other forms of automation in order to boost their profits. 

Beyond market vs. state

from David Ruccio  

At one time, from the late-1970s until the last couple of years, Britain—or at least the British ruling class—was in love with neoliberalism.

Neoliberalism was the common sense of both major political parties—the Tories and Labor (plus, the Conservative coalition partner Liberal Democrats)—as well as most large corporations and wealthy individuals.

As Andy Beckett explains,  

Lost decade?

from David Ruccio

Narayana Kocherlakota, professor of economics at the University of Rochester and past president of the Federal Reserve Bank of Minneapolis, is right: in some ways, the 2007-08 was worse than the Great Depression.  

Dustbin of history?

from David Ruccio

Back in April, Raumplan and Cascina Cuccagna organized an exhibit for Milan Design Week titled “Capitalism is Over.” The basic argument was that, while capitalism may have worked in the first few decades of the postwar period, during the “Golden Age” of capitalism—when “the demand for products and everyday objects rose to never before attained summits”—since the late 1970s, growth has slowed down and “following the neoliberal theories, governments promoted policies that fostered the expansion of financial profits and lower wages.” Their example was Olivetti:

The historical Olivetti attitude to resilience and innovation suffered a fairly marked setback during the crises of the Seventies, which reduced investments in the production sector and initiated the financialized economy that today is reaching its full development. The growth of profits corresponded to a loss of identity and of the centrality of production’s contents, that became increasingly interchangeable. Although since the Eighties Olivetti’s revenues and number of employees has steadily increased, it is also clear that the progressive dematerialisation of its core business doomed the company. Olivetti gradually lost its productive and innovative bent and became essentially a financial investment vehicle.

Martin Kirk makes much the same argument in a recent Guardian column, supplemented by the idea that people—especially young people—have lost faith in capitalism.