MBA Student Humor

Via NPR’s Planet Money, an amazing parody of “Total Eclipse of the Heart”, the Karaoke song to end all Karaoke songs:
Total Collapse of the Street

It’s no Cakeroll, but I am loving the Remix culture today. I wonder if we can come up with anything nearly so clever (and well-sung!) for our own grad student evening of scenes-thing. I don’t think any of us are particularly good at video editing, however, and they are only 19 of us.

Alright, back to Understanding National Accounts.

Migrants – The Hardest Hit by the Crisis?

In my first term at UCSD, I wrote a literature review about migrant remittances (money sent home by emigrants to their families). It was the paper I’d worked the hardest on in my life up to that point, and I remain proud of it. The research I did on remittances led me to start reading papers about immigration written by economists, which in turn led me to try and figure out how economics worked because what they were doing was somehow not what I was doing*. Since then, my interests have turned very sharply towards economic sociology and the sociology of economics (and science more broadly), but occasionally those two worlds re-collide. The current financial crisis has hit hard several sectors of economic activity, one of which is construction, one of the largest employers of immigrants. So this NYTimes article on the downtown in remittances isn’t really surprising, though it is kind of tragic. Here’s a few snippets:

TOSH-TEPPA, Tajikistan — In poverty-stricken Tajikistan, the global financial crisis is measured in bags of flour.

At least that is how Bibisoro Sayidova sees it, as she looks for ways to feed her five children, since her husband, a migrant worker in Russia, stopped receiving his wages this fall. Now he is loading large sacks of dried fruit in Moscow on faith.

“Sometimes I cry when the kids don’t have socks or coats,” she said, mixing a stew of water, bread, onion and oil. “We’re still hoping he’ll get paid.”
…
The decline will be less severe than for other flows, like foreign investment, Mr. Ratha said, but its effects will be amplified in countries like Tajikistan that have come to depend on rapidly growing remittances. The country will rank first in the world in 2008 for remittances as a portion of its economy — 54 percent — according to an estimate by the International Monetary Fund.
…
Economists do not expect effects to be felt broadly in labor markets until well into next year, but the trend of booming remittances has clearly ended. In Tajikistan, remittances rose just 1 percent in November, compared with the same month last year, according to the I.M.F., down sharply from a record growth of about 90 percent early this year.

That has brought a quiet desperation into households like Ms. Sayidova’s. The area is missing so many men that it feels like wartime, and its daily allowance of four to six hours of electricity is the same as in Baghdad. Malnutrition is widespread. Unicef estimates that more than one-third of children are stunted. Ms. Sayidova’s 13-year-old son has the body of a 6-year-old.”

How we count the labor of immigrants is contentious, but it’s clear that we don’t judge our policies (much) on how they will affect people in other countries, especially not unauthorized migrants and their families. But they will.

We still think in terms of the “U.S. Economy” or the “Russian Economy”, but that’s a dangerous load of crap [I guess I am taking off my scholar hat here... -D]. Governments do not have the power to regulate (much) beyond their borders, and our concept of the economy was defined to make possible government intervention (Susuki 2003 for an excellent essay on the British case that I just came across). But the effects of action on the U.S. economy don’t stop at our borders, or any border really. One world, ready or not. One economic system, regulatory power or not.

* In particular, this paper remains an exemplar for me:
Benhabib and Jovanovic. 2007.“Optimal Migration: A World Perspective”.
Here’s the abstract:
“We ask what level of migration would maximize world welfare. We find that skill-neutral policies are never optimal. An egalitarian welfare function induces a policy that entails moving mainly unskilled immigrants into the rich countries, whereas a welfare function skewed highly towards the rich countries induces an optimal policy that entails a brain-drain from the poor countries. For intermediate welfare functions that moderately favor the rich however, it is optimal to have no migration at all.”
It’s the first line that got me: “We ask what level of migration would maximize world welfare.” What a crazy question. The conditions of possibility of that question are still what I am trying to understand.

A Bright Side to the Financial Crisis?

So, I just watched the 30 minute version of “I.O.U.S.A.”, a documentary about the Federal debt. It was mixed – I enjoyed parts of it, they have some excellent high profile interviews, etc. I’m not super impressed with how they treat Medicare (minimal discussion, even though it supposedly makes up over half of the US Gov’ts liabilities right now), and I think they didn’t do a good enough job pointing out Republican (e.g. Reagan, Bush II) hypocrisy on budget deficits and the connection to increased debt.

In any event, I was thinking about the impending retirement of my parents’ generation and what that will mean for me and for the Federal debt. Personally, I will likely be entering the academic labor market in 5 years or so, and so if the baby boomer professors would start retiring en masse, that would be much appreciated*. On the other hand, the demographic shift in the U.S. towards more retirees and fewer employees is why Medicare and social security have such large forecasted shortfalls. Ok, so far nothing new here. But what impact will the financial crisis have? The Dow is sitting around 8600 right now, off from a high of over 14,000 in October 2007. For my parents, and many others near their age, the sudden reduction in savings invested in the market could delay their retirement for several years. So, I wonder, will the financial crisis end up ameliorating (albeit only a small amount) the fiscal crunch created by the baby boom retirement?

* Although, worryingly, professors seem much less inclined to retire at 65, 70, 75 or even 80 than almost anyone else I can think of. Well, except Senators**.
** And Supreme Court Justices, of course.

Making My Day, One Borges Story At A Time

Ran across this video on YouTube today which consists of some (ir)relevant images timed to the reading of one of my favorite Borges’ stories by Borges himself*. Here’s the video and an English translation of the story below:

From A Universal History of Infamy:

“Of Exactitude in Science

…In that Empire, the craft of Cartography attained such Perfection that the Map of a Single province covered the space of an entire City, and the Map of the Empire itself an entire Province. In the course of Time, these Extensive maps were found somehow wanting, and so the College of Cartographers evolved a Map of the Empire that was of the same Scale as the Empire and that coincided with it point for point. Less attentive to the Study of Cartography, succeeding Generations came to judge a map of such Magnitude cumbersome, and, not without Irreverence, they abandoned it to the Rigours of sun and Rain. In the western Deserts, tattered Fragments of the Map are still to be found, Sheltering an occasional Beast or beggar; in the whole Nation, no other relic is left of the Discipline of Geography.

From Travels of Praiseworthy Men (1658) by J. A. Suarez Miranda”

* It occurs to me that it is likely the the reading is by another, some random fan. I do not know Borges’ voice well (although, in another sense, I know his voice all too well). And yet, I do not think it matters. “O Destino de Borges, tal vez no más extraño que el tuyo…”

Democracy in America: The Great Depression Edition

From The Economist, November 23, 1929, a quote from a “high authority” on the causes of the stock market crash:

“The market fought its way upward against Reserve banks and member banks, and there was truth in the boast that it defeated them . . . bankers are not the owners of the funds in their custody, and the market defeated them by going round them and inducing depositors to place their funds at the disposal of ‘the street.’ Democracy triumphed over authority and leadership in the advance, and the orgy at the finish was all its own.”

The Normal and the Pathological: Normal Economies Edition

Brief thought as I begin to read through books that purport to explain how national income accounts work: Everyone’s favorite conservative economic blogger, Harvard’s N. Gregory Mankiw, is worried that the government may use the crisis as an excuse to permanently increase government expenditures as a percentage of GDP. He notes that during the Great Depression and WWII, government expenditures logically increased dramatically. But then they failed to drop off:

The graph and proposal are interesting. For example, if the Democrats manage to get some sort of National Health Care system in place, we rate to see a dramatic increase in governemtn expenditures as percent of GDP, and this crisis could be a great excuse to get it passed (lots of involuntarily unemployed people, need the government to spend lots of money anyway, the insurance industry is fubared, etc.). Of course, Mankiw and I disagree about whether or not this would be a good thing, but that’s slightly beside the point. It’s worth noting that in most European countries, government is a much higher portion of GDP (some not great data here).

What interests me most in Mankiw’s analysis is this line:

Here is one question reporters should focus on when evaluating the proposed plan: Five or ten years from now, when the economy is presumably at some normal level of employment and growth, what will the federal budget look like, as evaluated by the budget deficit and tax revenue as a share of GDP?

I don’t know why I hadn’t made this connection before (or maybe I just don’t remember making it), but what makes an economy “normal”? There is an extensive and interesting literature around the idea of “normal” and “pathological” (e.g. Durkheim, Canguilhem, Foucault) and how constructed and recent those concepts are. How do we make a “normal” economy? What does that mean? What are the politics of normality when it comes to economies? How does this relate to questions such as “are we in a recession?” etc.?

EDIT: The Economist’s Free Exchange blog has some insightful as usual commentary on Mankiw here.

What the Economy Does: Kristof on the Auto Bailout

Quick update, as I am ensconced in discourse analysis a la Foucault until Tuesday. Nicholas Kristof of the NYTImes has a straightforward op-ed today on the auto bailout and why its needed. Here’s the opening:

For the first time in human history, I agree with Dick Cheney. According to The Los Angeles Times, he warned Republican senators that if they refused to bail out the auto companies, “we will be known as the party of Herbert Hoover forever.”

The senators from the Herbert Hoover Party promptly fumbled, but President Bush seems poised to rescue the car companies anyway. Thank heaven!

Look, there are plenty of sound arguments against a bailout. But there’s a practical argument that trumps everything: when conditions are so fragile, we can’t risk a staggering blow to the national economy. When you see a hole in the dike, don’t discuss the virtues of laissez-faire policies — plug it!

I wonder (and hopefully will soon find out) how this case was or wasn’t made in 1929. But I’ll tell you this – it wasn’t made with reference to “the national economy” because it didn’t exist yet (as an object of knowledge, a discursive thing). I wonder, purely speculatively of course, if the economy defined as a measurable, integrated totality of production and distribution in a given region had gained prominence by 1929, would an early fiscal stimulus by the government (and bailout of various industries, etc.) been easier?

The economy opposes the market here – markets are efficient mechanisms for distribution, with coherent rules that productively punish incompetence. while economies are messy totalities with interaction effects that make possible Kristof’s argument. The market for automobiles might be functioning perfectly (although I would wager it is not and has never, think about the externalities alone), and with respect to that market perhaps the Big 3 should fail. Thankfully, we don’t live in a system governed by markets anymore, but rather by economies. And this economy is too dependent on this industry to let it fail today. (Also, there’s a strong case that Kristof does not make that because of the crisis loans are not forthcoming from the private sector and the government is merely taking an opportunity to make a profit based on its status as one of the only liquid lenders right now. If the state were not defined out of the market, this solution might be more obvious.)

New Blog: Life as a Sociologist

Happy end of term everybody! I’m one 15-20 page paper on Foucault away from completing my second first-term of graduate school. Exciting, isn’t it?
Even more exciting, I’ve started contributing to a new group blog entitled Life as a Sociologist. There’s a motley crew of about 9 graduate students and new faculty that are contributing so far, but the whole endeavor is brand new and I imagine it will settle down to a stable core in the next few months. So, in case you happen to be short on high-quality sociology group blogs, check this one out! Who knows, someday we might be as tall and mighty as Scatterplot.

Auto Bailout Counterfactual Q

Ok, so the big news in Detroit (and much of the rest of the country) is… ok, it’s Blagojevich. It’s just too amazing a story to pass up – a governor, who knows he is under investigation for corruption, demanding money for a Senate appointment (not to mention aid to a children’s hospital). But more seriously, the big news round these parts is the proposed auto industry bailout. Here’s the Detroit Free Press’s take, for example.

What’s interesting, and confusing, to me is the counterfactual often left out of these stories, or radically underspecified: what exactly happens if the auto companies get nothing? Ford claims they can last awhile, possibly til the end of the crisis, without any funds. GM and Chrysler don’t, although Chrysler is owned by a private firm at this point, so who knows. But in any event, these companies aren’t simply going to shut all their plants and send everyone home, right? So what happens? How plausible, for example, is the argument that consumers won’t purchase cars from a company in bankruptcy for fear their warranties won’t be valid, etc.?

Robert Reich believes that the auto industry needs a mixture of a bailout and bankruptcy. Reich makes the important connection to the costs to the government of the Big 3 going down:

The only reason for taxpayers to put up even one dollar for every two that the automakers put up is the significant social cost that would occur if any one of the Big Three were to rapidly shrink — including unemployment insurance, increased liabilities for the Pension Benefit Guarantee Corporation, lost tax revenues, and costs associated with large numbers of people suffering losses of wages and employment.

Following Reich, pension and retiree health care issues seem the most central to me. If one of the main reasons the Big 3 are uncompetitive right now is legacy costs, and if the government already guarantees those costs in the event of a bankruptcy, why not just have the government pretend (for these) purposes that the Big 3 went bust, take over the pensions and thus dramatically reduce their overhead without getting involved in the messy business of running auto companies?

The best part of this plan is that might serve as a window to move closer to universal health care. As the Economist recently argued, employer provided health care is stupid. Employees are afraid to change jobs – or take risks on starting their own business, say – because they lose their health care when they leave their job. The Economist Blog’s favorite solution involves making health care plans portable. Another solution to this particular problem (“job lock”) would be to take insurance out of the private sector. Then people would have an even greater capability to innovate, start businesses, etc. knowing that their health care was not on the line. Wouldn’t that be nice?

Another interesting bit to this story is the differential treatment of the auto industry and the financials (Reich mentions this, as have a number of other commentators). What’s with that? $700 Billion to rescue banks that failed dramatically, but not $14bn for auto companies in a slow decline but working towards reform? Is banking simply too important to fail (as a sector)? If so, should it be left to the private sector?

And yes, I am in favor of nationalizing health care, and no I am not in favor nationalizing the entire financial industry.. I’m just saying, the prevailing logics have been wacky lately.

P(Recession)=1? Or, Why a Binary Concept of Recession is Ridiculous

Beloved readers, apologies for the delay in posting and the brevity of this post. Like every other academic every December, I underestimated the amount of work I need to do in the next 11 days or so and thus have been rushing off between lectures, class and the coffee shoppe where my nose has been buried in old timey Foucault. But the recent story on the US Recession is just too good to pass up. So here’s the brief version:
On December 1st, the National Bureau of Economic Research’s Business Cycle Dating Committee announced that the economy had peaked in December of 2007, and thus that economy had been in a recession for almost a full year*. But what does it mean to be in a recession? A tidbit from a news story:

According to official government data, the US economy contracted at a 0.2 percent pace in the fourth quarter of 2007 but grew 0.8 percent in the first quarter and 2.8 percent in the second quarter of 2008. It then contracted 0.5 percent in the third quarter, based on a provisional estimate.

But the gross domestic product (GDP) data may have been skewed by tax rebates that stimulated consumer spending, according to analysts.

The NBER said “we do not identify economic activity solely with real GDP, but use a range of indicators” in determining the onset of recession. It said over the past year there have been unusually wide discrepancies between income and output.

Key things to note here, from my perspective: The story claims that “official government data” show the U.S. economy contracting. That data, mentioned in the next line as the GDP, is linked 1 to 1 with the economy. That linkage is the outcome of a process that, I argue, began in 1934 with the first official national income statistics in the U.S. (if not earlier) and was resisted at every step of the way by at least one of the architects of the statistics (Simon Kuznets). The Business Cycle Dating Committee (which Kuznets’ mentor Wesley Mitchell created, along with NBER, and on which I believe Kuznets sat) still knows that the GDP is not supposed to be, and has never been intended as, a measure of “the economy” and thus they feel comfortable relying on a combination of indicators and expert judgment. Mechanical objectivity vs. expert judgment much? (Porter 1995)

But that’s not where I want to go with this post (although it is one place I might want to go with my dissertation research). In this post I want to argue that a binary idea of recession and expansion is fundamentally absurd. For example, we can all remember the “jobless recovery” of the early 2000s. What the heck is a jobless recovery? Recovery for whom? Etc. Economists, however, have gone entirely the other route with the binary economy, moving from a strict dualism to a probabilistic framework. That is, they have started calculating the probability we are in a recession. Here’s a graph, based on data found here (and ignore the black dot, it’s an artifact of the silly way I extracted this image):

One interesting thing here is that the recession probability index is only around 17% in December 2007. So, according to one group of economists, we likely were not in a recession then. But what does that mean?

Here’s the wrong question: Were we ‘actually’ in a recession starting at the end of 2007? This question is silly. Officially**, we were (although not at the time. But now, officially, we were. We have always been at war with Eurasia.). On the ground, the situation has always been more complicated. Naming and dating recessions and expansions is a shorthand, convenient for some purposes, disastrous for others, and always political (in the sense of being connected to relationships of power and knowledge, although also in the more commonly-used sense).

Were I to have more time to spend on this, I’d probably make some argument about the business cycle committee performing (cf. Callon 1998) the recession, then some bad joke about how if we could just get rid of the committee we could get rid of recessions forever! Instead I will, Borges-style, merely reference those unwritten comments and end this post. Back to Foucault!

* For a more technical description, check out this post at Economist’s View.
** Well, semi-officially. NBER is technically not governmental, but for whatever reason their business cycle dating committee is seen as the official recession-naming body.