Archive for the ‘Critical Economics’ Category

Proposal Accepted

September 10, 2007

Today, Becca and I had our first meeting with my thesis committee:  Humphrey, Greenlaw, and Hansen.  I admit feeling a bit worried about how it would turn out because I have never had a class with Hansen before, and I had a feeling he would be the person that needed the most convincing.

In a strange twist, Hansen effectively talked us into doing precisely what we proposed to do:  develop a methodology.  Not to say he and the other professors did not help us narrow down the topic a bit more, rendering it more manageable; rather, the qualitative difference between what was proposed and what was decided would be a worthy thesis topic was not very significant. 

The thesis proposal, in its nearly final form, did not spend a great deal of time developing a model because that was never the intended focus of my thesis on political corruption.  The intention was to develop a schematism for translating the heavily descriptive work of anthropologists into the language of, at the very least, political economy, for the purposes of working out the ways in which social networks come into conflict with the state.  Humphrey, my main advisor for the thesis, seemed to think that the basis for desiring to develop this methodology needed more clarity, and so suggested that I spend more time formally developing and critiquing the model that characterizes the mainstream literature. 

It would appear, however, that this distracted unnecesarily from the main point: an alternative model is useless if it can not be tested, and since alternative models of corrution based on social networks appeared to lack an associated methodology, to even talk about testing  is premature.  We were proposing to develop that methodology, but with half the pages of the proposal devoted to developing models, the focus of the thesis was rendered unclear.  It struck Becca and I both as funny that in the end, Greenlaw, and Hansen especially, cared a lot less about models and a lot more about methods, and effectively talked us into focusing on the latter (our original plan), rather than the former.    

I have been warned, as mentioned before, that developing methodology does not provide the fame and fortune that an ambitious economist might seek.  Certainly my economics education these past four years has not explored alternative approaches (not so much a complaint – methods are rightly secondary to concepts in undergraduate work, methinks, and traditional methods are more than adequate for most of the problems that undergrads will take up).  Still, there is something to spending a class period or two to demonstrate that great strides are not always made in the synthesis of new concepts, but also in new approaches to familiar problems.  Stagnation of or dogmatic commitment to either concepts OR methods will doom any quest for knowledge.     


Musings on Anthropology/Economics Crossbreeding

September 2, 2007

I have taken the (I believe risky) step of going ahead with my decision to attempt an interdisciplinary thesis project with a friend of mine in the anthropology department.  She is a highly intelligent woman for whom I have an enormous amount of respect.  Yet having spent but a single week in an anthropology class with her, I am becoming painfully aware of just how different our two fields are.

Economics, for reasons I will speculate on in just a moment, is a social science whose practitioners are able to actively seek to implement their discoveries in the form of policy.  The field itself retains a highly priveleged position amongst the rich and powerful.  Some economists would argue that this is due to its explanatory power, but I would argue that, in addition and by no means inconsequentially, the undergirding assumptions of mainstream economics tend to paint the powerful in a most beautifying light.  Surely, regardless of their wisdom, the king’s advisors would think twice about commenting on the transparency of the emperor’s new clothes?  More coarsely, economics gets as much sway with the politicians for kissing ass as it does for making sense of social phenomena. 

Cultural anthropologists on the other hand, lepers of the social sciences, seem to have long accepted (or at least long convinced themselves of) the fact that politicians will never listen to them.  Contrary to the economist, the anthropologists I know are, it seems, fierce defenders of the irreducibilty of social actions and/or cultures to a set of general principles.  This is, of course, highly impractical stuff if you are a politician facing a deadline:  you need straight answers, predictions, forecasts, a means of translating the ideas to your constituents.  The muck of anthropology, a field that seems unable to pick and settle even on a method of analysis, is characterized by a paralyzing fear of ethnocentricity.

Clearly, economists and cultural anthropologists judge success in their fields by very different standards.  By no means do economists celebrate Milton Friedman for his searing insight into homo economicus.  He didn’t care whether or not humans ACTUALLY made decisions in a certain way, so long as they acted “as if” they made decisions in a certain way.  Contrarily, the pure cultural anthropologist, it seems, could not be more opposed to reducing their subjects’ activities to a set of certain principles; that would require an imposition of ethnocentric values of the mos egregious sort.

My thesis advisor, Shawn Humphrey, suggested that I take what I find in the anthropological literature and fit it into a mold that will work with my economics tool kit.  I would rather not do that.  I would like this to be a meeting of the minds.  I would like her to say “Ok I’m wiling to give here if you’re willing to give there.” 

I worry that this will not, perhaps even can not, happen. 

Research as a Knowledge Creating activity

August 1, 2007

Some time ago I read a post at Pedablogy concerning the creation of knowledge and the way it is communicated to students.  This notion of knowledge creation fascinates me on a philosophical level, but it also has important practical implications, especially for my senior research thesis. 

As scientists, we subscribe to the relevant version of the scientific method, and I may be granted that the scientific method provides a general framework of how we match a priori theorizing with a posteriori empirical observation.  When the theory is shown to predict the observation, and that within some degree of tolerance (which can be fairly variable), and when those experiments are repeatable and the results verified, then at some point it becomes knowledge.  I have found it to be extremely tempting to develop theory a priori with the intention of testing it through simulations.  It is tempting because data collection is not only costly, but also because data is often difficult to acquire and full of holes or open to charges of imperfections.  Thus in economics it has become common in my experience to develop a clever model, then bask tautologically in one’s cleverness by running a simulation within the confines of the model without any accountability to the real world. 

I for one would prefer not to fall into this temptation, because I think ultimately it leads to obscurity.  However, I am also keenly aware of the fact that the difficulty of providing empirical evidence is that, simply put, data often does not exist.  In these instances, data sets must be somehow painstakingly created and models adapted for use with that data.  These data sets are often imperfect, but I think they are an important development in the social sciences.  A good example may be Transparency International’s Corruptions Perceptions Index (CPI).  While I think there are many reasons to worry about the underlying assumptions upon which the CPI is founded, I really admire the attempt to create such an index and a similar one at the World Bank.  Corruption and its effects are terribly difficult to measure because they are illicit in nature; no one will simply own up to their crime.  Indeed, this is a major obstacel in any study of illegal or taboo behaviors.  So if you want to measure and analyze any black market with any sort of accuracy, you have to be very original in your approach; that is, you need to have a new methodology.

And this is precisely the point:  Methodology.  Your methodology is where you decide what data to collect, how to collect it, and how to apply it to your a priori theory.  It is in your methodology that all your assumptions come to the fore.   It is (or at least it can be) the place where the most creativity and imagination is required because it is precisely here that pure method (mathematics and survey methodology), abstractions about the world (a priori assumptions and theory), and data all must be fit together into a cogent theory. 

 I really believe it is in the methodology that the most reform must take place.  In the absence of data in the form of dollars and cents, economists need to think about alternative methods for collecting, synthesizing, and evaluating data and models.  I think this is where I would most like to focus my attentions in my honor’s thesis.  I have been warned by a person who shall remain nameless that few economists have ever achieved fame and fortune for their work in methodology.  This may be true now, but I wonder if that trend will continue.  In any event, my overwhelming desire is to increase my own level of knowledge; being recognized for that is just the cherry on top. 

The Cancer of Corruption

June 28, 2007

Last weekend, my research partner and I agreed that we would work collaboratively on a thesis that deals with corruption, especially in the third world.  Political corruption, which gets defined in numerous ways, receives a great deal of blame (not necessarily unwarranted) for the failure of many aid programs, as elites and authorities siphon funding and resources into their own coffers for personal use. 

So we make a rather radical suggestion:  Suppose that corruption, as we call it, is integral and functional within the system; that is, were a “corrupt” official or institution to be suddenly removed from the equation, this would create a gap that would actually act to interrupt otherwise positive-growth activities.  Furthermore, corrupt practices are manifestations of the universal phenomenon of a person or organization that uses its vested power to prevent access to resources unless payment is made to them.  Under this perspective, whether you are paying a bribe or an income tax, you are participating in the same generalized system where access is restricted to those who pay the bribe/tax/fee/etc.

Taxes as glorified bribes?  In a sense, yes.  If you don’t pay your taxes, do you still get access to the system?  No.  In extreme cases you go to jail.  Analogously, if you don’t pay the armed officer on the road in Kenya a bribe to get through his roadblock, will you still get your goods to market?  No — or yes but only with a great deal of effort (travelling off road, which will take longer, be more dangerous, and make market activities less profitable). 

We grant there are differences, but the analogy is too valid to be ignored. 

The possibilites for research are three:

1) Fit corrupt practices into a more general theory of state formation, such as the roving/stationary bandit model developed by Mancur Olson and other institutional economists.

2) Identify particular practices that are labeled as corrupt and demonstrate that they are not.

3) Develop a methodology for testing the theory utilized in 1).

 More on these later.

Geography: Meaningful for Modern Economic Growth?

May 9, 2007

Chances are you’ve at least heard of Jared Diamond and his book Guns, Germs, and Steel (originally published in 1997).  It won the Pulitzer Prize and does a stand up job of refuting most implicitly or explicitly racist or ethnocentric explanations for the disparate levels of development and stability across nations and continents.  Diamond’s theory is founded on the idea that different ancient societies began making technological leaps and bounds at different times depending on the contemporary geography that attended.  In general, the orientation of the continent (east-west vs. north-south), the availability of domesticable animals and plants and the relative nutritive content of the latter, the climate, the macro- and microfauna – all these factors, which lie outside the scope of the human equation – vary from region to region.  That one modern group of humans is richer or has more power than another, says Diamond, is ultimately determined by the prehistoric, unfair distribution of natural resources and favorable accidents of birth and settlement. 

And the theory is pretty sound, or at least appears so upon a cursory examination of the data.  Leave it to a modern economist, however, to take a good theory and stretch well beyond reason.  I speak of a paper by Douglas Hibbs and Ola Olsson, in which they develop a methodology to explain modern GDP/capita via a series of measurements of a nation’s “prehistoric biogeographical endowment.”  They find strong correlations between modern GDP/capita and things like prehistoric climate, axis, available domesticable plants and animals, etc.  Perhaps most provocative is their assertion that the quality of a nations institutions is explicable in large part by the attending prehistoric biogeography.

It is at this point in reading the paper that I became quite perturbed.  It is very misleading to use modern nation-states, none of which existed in any way shape or form until just a  few hundred years ago (and that at best – most modern African and near East nations did not exist until the middle of this century!), as an analytical unit when measuring the effect of a series of events that occurred as much as 10000 years ago.  Modern political boundaries were not determined by geography.  In fact, most borders on the impoverished continents of South America and Africa were imposed haphazardly and arbitrarily by the colonial powers, regardless of the ethnic makeup of the regions that were split up.  As a consequence, you have many ethnic groups that are split up into two different states, others which were forced to live together under the same flag who would not otherwise choose to do so.  Dense populations are suddenly created in areas unconducive to dense population, leading to proliferation of disease, poverty, and conflict. 

My point is simply this:  Prehistoric Geography has about as much causative effect on present day GDP/capita as the Big Bang does.  It is very hard to make the case that the system that produced modern day circumstances was entirely predetermined.  That is, the power of cultural interaction to determine present circumstances has long outstripped the effects geography would have.  It would be one thing to expalin Mesopotamia’s cropping-up with reference to geography.  It’s entirely misleading to say that Sudan (for example) is poor because of its prehistoric biogeographical predispositions.  Geography vested power, perhaps, but it is the use of that power towards destructive ends that gives us our current situations. 

The Self and Othering

April 12, 2007

In my first post about critical economics, the first paragraph related to the workability or testability of new theories.  Economics as a social science is concerned with reducing observed phenomena to a general, testable theory.  The advantage economists feel they have over other social sciences is that what the propose can be empirically measured, usually in money terms, but over the years other objectively applicable units have been devised.  Case in point are the development of indexes of institutional quality or corruption, which while rife with difficulties, are nonetheless big steps in the right direction. 

In general, however, economic measurements – expressed or implied – are proxies for utility – the amount of happiness that an action or commodity or service supplies to someone.  And in general, we say that choices are made at the margin, where the actor determines the extra (marginal) benefit or cost that attend an action.  If the benefits outweigh the costs, the action is taken.  To complicate matters, new institutionalist economists have brought in the idea of transaction costs, which are the costs that attend actually creating an environment in which a desired choice can be made.

One of the major problems with this type of analysis is not that it uses utility (based on a rather outdated moral system, chosen for its theoretical quantifiability, rather than for its reflection of reality), or even that it assumes people identify and weigh costs and benefits.  At some point, as I said in my post, whether we are the actor or the economist studying the actor, we must stop gathering data and make reasonable hypotheses about the best course of action.  Infinite time spent gathering data is infinitely costly.  No, this is not the problem; rather, it is the source of the explanatory power of economics.

Instead, I believe that the problem is that the actor of economic theory is always the individual.  I think that the individual should taken out of the center of the universe and replaced by the more generalized concept of the self.  The self, as I understand anthropological theory, is defined by a process of “othering.”  We do not define out selves, but rather our selves exist as logical consequence of who we say we are not.  For example, I am not a member of any family but the Knowles family.  I am not Chinese or Bolivian, I am American (recognizing that even that statement is not rife with difficulties).  I am not you, or you over there, I am me.  All these different definitions of who I am – American, Knowles, the “I”, even white, middle class, etc. – enter into my decision calculus.

Allowing that we do weigh costs and benefits, does it not seem that we find ourselves weighing the costs and benefits not only to ourselves as individuals, but also as members of a particular family, or nation, or race or class?  Statistically, we will act in similar ways as the group(s) to which we belong.  So what if the choice one aspect of the self would make runs in contradiction with the choice the other aspect of self would make?  How do we decide which way to go?

In the past 30 years or so, neoclassical microeconomists have devised a number of ways to account for how we act, by developing models of altruism, social capital and opprobrium, and coordination problems.  These solutions can get very complex.  What if, instead of developing a series of post scripts to apologize for using the individual as the unit of analysis, economists were to understand choice calculi as multiple cost/benefit analyses with respect to each definition of self, weighted by the level to which one identifies with the various aspects of selfhood?  This is a first approximation of what I called a Copernican Revolution in economic thought.

But how would you measure this?  More on that as I develop my thoughts.   

Critical Economics

April 10, 2007

The idea of a critical economics is one that – once complete – avoids the accusation of unworkability.  However, practical applicability (i.e. policy prescription) must come at the expense of full description (i.e. as is the case in the simplified economic model).  In this way critical economics is differentiated from many of the other social sciences, such as cultural anthropology (with deepest respect and apologies to a few of my very best friends that happen to be anthropologists – and inspirational ones, at that).  At some point, the description must end if any changes are to be implemented.  Leaps of faith – leaving behind infinite attention to detail –  are, unfortunately, implicit in all activity. 

Critical economics recognizes that the favor its mainstream brethren enjoys with Western governments and corporations arises as much from its willingness to promote the interests of the powerful as from its explanatory power; indeed, the causation runs both ways, and critical economics is both humbled by, and fascinated with untangling, this interplay between politics and economics. 

Critical economics is not rooted in some petty dispute with neoclassical ideas of rationality; though there be something to bounded rationality, it is not yet a cohesive theory – more of an assemblage of unsynthesized factoids about the deviations of mostly western human behavior from a set of assumptions.  To achieve the label “theory”, it must be a suitable replacement for the behavioral assumptions of neoclassical, unbounded rationality.  Bounded rationality, however, is not simply psychological, but related instead to biocognition and context. The field of behavioral economics, insofar as it exists as a combination of mainstream economics and theoretical (i.e. nonphysiologically based) psychology, may very well be following a big red herring altogether. 

Critical economics avoids the Marxist aversion to capitalism, but it also avoids the common economist’s disavowal of socialism/communism.  Neither has ever existed independently; let’s accept that fact and move on.  Whatever the economic system that prevails, it is always buttressed by the attending political situation.  Economic systems are created and supported by the politcal, the social, the contextual.  Only once established does the causation run both ways – does the economic start to affect the political.  It is high time all economists are humbled by the fact that purebred Homo economicus is not only extinct:  he never really existed.  Nothing that we associate with any economic system is innate. 

Critical economics is interested in replacing the self as individual with a more generalized model of the decision-making self.  The individual is an outdated, outmoded conception of the human being.  For economists so loved the individual as an analytical unit, they have developed theories to explain instances of self-sacrifice, marriage, altruism, and more just to account for all the difficulties such a conception creates.  In the process – by, say, incorporating the individual into the family and using the family as the analytical unit (see Becker) – they have come close to an important fact, yet still they seem to miss the point.  Critical economics wants another Copernican revolution – it wants to propose that the individual is orbitting the self, along with many other planets (selflets?) – predicates of self, like the family, the clan, the state, the human race.  Such a reworking of the self lends itself nicely to theories of choice while avoiding the baggage of corrolaries and axioms and apologias that the current economic conception of the self – the individual – requires. 

Critical economics is just that – critical.  It makes mistakes, examines itself and subjects itself to examination, is refined, and is applied again.

Critical economics is subject to empirical analysis and inquiry.  A difficulty of many social sciences is that it is very hard to verify results, and for every proponent of one explanation there are at least two detractors.  This the nature of academic debate, and is healthy, but when it stalls progress, it can doom a field to irrelevance.  Mainstream economics has tended to avoid this problem, but at the expense of universality.  Critical economics faces a doubly difficult task:  It must use existing methodologies while simultaneously working to perfect new ones.  It must use current analytical units (utility, income, wealth), but it must recognize the limitations, and it must work more appropriate means and units of measurement.  Utility, income, and wealth are very poor methods of measuring human behavior outside of the modern, industrial nation-state.  The critical economist uses such units gingerly when outside of that context, and recognizes the implicitly normative, untestable nature of those units.  “There’s telos in them thar hills!”

Corrollary:  Nonetheless, critical economics is willing to grant that human weigh benefits and costs, and that this is a prejudice induced by the undeniability of the explanatory power of 20th century economics.  It is doubtless an approximation, but it is not necessarily an unfounded assumption.  Insofar as humans respond in predictable ways, insofar as pattern recognition and patterned behavior ares observable in all human societies, insofar as humans make decisions: humans appear to weigh benefits and costs.  It is, however, vital to understand the structure of that pattern, the structure of the society and its language and thought, in order to flesh out just what constitutes the quality and magnitude of benefits and costs.  In this critical economics draws from new institutional economics and structuralist thought in general. 

Introduction – Hopes for the Future

April 2, 2007

Notwithstanding the research blog that was required for my economic analysis class last semester, my experience with blogs begins with my livejournal.  However, this past weekend I had the opportunity to attend the Student Academy and I think my experience confirmed what I’ve been thinking I should do for a while now:  Start committing my more constructive mental and academic events and activities to a publicly accessible blog. 

 That said, there are essentially four broad topics which I will broach in this blog, but if it becomes necessary I will go ahead and run separate blogs in order to maintain some coherence.  These topics are:

1) My ongoing research concerning virtual economies, especially as regards world of warcraft.

This summer I hope to be able to gather the data necessary to test my hypotheses concerning the interactionss between real and virtual economies, especially in MMOs.  I’m not as interested in situations where the interaction is intentionally designed into the game, such as is the case with Project Entropia or Second Life.  My interest is more in the destructive interactions between games like WoW, EQ, EQII, and others with the real life economy.  More on this as it develops, but you can read about the early stages of my research in the blog linked above.

2. Also starting this summer, I hope to begin work on my honor’s thesis in economics with my good friend Becca under the supervision of a few of my professors, primarily Prof. Shawn Humphrey.  Becca is actually an anthropology major, among other things, and we hope to be able to do some interdisciplinary work in combining two fields of social science that often find themselves at odds with one another.  The exact topic is yet to be identified, so again there isn’t much to say about this right now.  More as it develops.

3.  Critique of Economics

As much as I love what I do, and as good as I’d like to think I am at doing it, I am often unsatisfied with certain aspects of traditional economics.  Neither, however, do I necessarily consider myself a member of one particular school of economic thought rather than another.  For lack of a better label, I’ll just call myself a critical economist. 

I think that economists wield a great deal of political power, and we often assume that this is the case because we’re just so damned good at predicting and analyzing human behavior.  While I think that is true, I also think that the assumptions we tend to make about humans in order to analyze them is both advantageous to those who wield political power and, in some cases, unsubstantiated.  You will not find me arguing  here that people are not rational; rather, I am interested in the assumptions we like to make about such socially constructed concepts as the self, conflict, government, economic systems, etc. that act to structure incentives and which are often assumed away or completely unacknowledged.

I’m interested in practicing an economics that analyzes human behavior – not one that forces undue assumptions about behavior onto humans.  This is the critical economics I will be writing about here.

4.  Philosophical meanderings

Along with being an economics major, I take at least one philosophy course every semester, and I’ve been doing this in such a way as to follow the chronological order of western philosophical thought.  I started with Thales and now I’m on Nietzsche.  Next semester is existentialism.  I enjoy the places philosophy takes me, and where I think what I have to say is intersting, I’ll be putting it up here. 

 So this is the big plan; if this blog can live up to just one of these purposes, that’d be great.