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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    08/06/2010

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    Very good article. It points out the inadequacy of the GDP as a measure of wealth, and certainly of well-being, in general very clearly, and how it undervalues everything that's not being directly paid for especially.


    Dear Maxine,

    Very good post. I enjoyed it. I am going to put it on my reading list for introductory economics this semester. It will go well with the discussion in our text by Frank and Bernanke of what is left out of GDP.

    Bernanke recently gave a commencement speech that is surprisingly intelligible on a related issue. It can be read at: http://www.federalreserve.gov/newsevents/speech/bernanke20100508a.htm

    Economists have long noted the inadequacy of GDP. What has always stymied any further discussion within the profession is the question of whether, or not, there is any better alternative? Do you think there is and, if so, what is it?

    Maxine-
    I happened upon your blog some time ago and want to thank you for your insightful articles, especially as a 'girl economist'
    While not an economics by degree (I am an urban planner, specializing in demographics and mapping), I appreciate you ability to analyze and discuss economics beyond the GDP and 'growth.' I'll continue to read your work and hope to incorporate some of the concepts in my own analysis of demographics (which I see as economics with people first).
    Keep up the great work!

    Societies enrich themselves fabulously when they eliminate the expenses and tediousness of child-raising altogether, and they get a few decades of good living out of it. All available time becomes carefully channeled into monetized endeavors, and the only immediate consequence is that millions of people are spared the burdens of existence.

    This is a feature, not a bug.

    However, some women don't go along with this program so wholeheartedly, and the whole class is punished as a result.

    So far so good, but now what? Your article gets all weird at the end when you inveigh against those that fear the effects of unlimited deficit-spending and savings-dilution that have been so popular the past few years.

    Are you saying that the country and the economy will be okay with debt over 100% of GDP so long as there's finally some wage equality and a comprehensive safety net? That one problem will cancel out the other?

    also re leonhardt: Does the Labor Market Punish M(O)thers?

    http://www.huffingtonpost.com/nanette-fondas/does-the-labor-market-pun_b_673819.html

    Mike, I'm glad the blog will be useful for a class. I think there is or soon will be a better alternative, particularly now that we seem to be more actively seeking one. I hope that the work by Stiglitz, Sen, Fittousi and the commission that I cite above will move us closer to it. BTW, I noticed that the link I provided above to their report was faulty and have corrected it. I'm providing it here as well: http://www.stiglitz-sen-fitoussi.fr/documents/rapport_anglais.pdf. That you are teaching your class to think about limitations of and alternatives to GDP as a measure of wealth and well-being is a giant step in the right direction.

    Maxine

    Very nicely put. I came across the same critique of using the "market" as a measure of well-being in Joan Robinson's book Economic Philosophy (1962).

    The OECD and national statistics bodies usually put the non-market share of national production at around 30-40% of the total, and the Australian economist Butlin noted that shares in total production in Australia were pretty much constant thirds between market, government and non-market over a long period. I suspect that, if you took "non-market" to cover most government, almost all household, most not-for-profit and a dood deal of internal corporate activity, markets would struggle to cover a even a third in any economy.

    Surely this raises a question for economics - if markets are the optimal way to organise production and exchange, how come they are never used to organise more than they do?

    The source article was rock solid. Your analysis and observations are quite sensible.

    Which is usally not the case in these arguments.

    If breeding didn't have a cost, population growth would be far higher than it is.

    Which is usually considered a bad thing.

    "To which I reply, "Well....that's one way of looking at it and you'll do very well in your graduate studies in economics.""

    Aha... so THAT'S (partially) why I did not do weel in my graduate studies in economics!

    (Seriously. Sit in a graduate classroom and try questioning the miraculously perfect effciency of markets.)

    - Jeff V

    You're making two arguments that are completely unrelated, in my view. First, that GDP doesn't capture the value provided by unpaid work like raising children.

    Then you seem to be arguing that we should increase the "safety net" because... well, it isn't clear to me at all why. Because women with children make less money, on average, it would seem. Maybe you are advocating transfer payments to women for performing child care, which would make up for their lost wages. Maybe much larger child tax credits. Either would be a boon to me.

    But keep in mind that my wife and I form an economic unit from any reasonable perspective. To say that she is punished because her wage is lower than it might be if she didn't take primary responsibility for the kids misses the fact that I make more for the same reason. So we as a whole bear the cost of rearing our children, and they are certainly expensive. But it isn't clear to me that compensation is due to us.

    Don't forget to count the value of sex in a family. How much higher GDP would have been if men/women were satisfying their sexual needs through the legal market.

    And the value of driving to work, and....

    Anyway, the issue of optimal amount of support/penalty for childbearing by women with different income is not straightforward, and requires taking a stand on many controversial issues like the degree of inheretability of intelligence, and relationship of intelligence and wages.

    Excellent post again.

    And it's not just mother's work that is undervalued, it's grandmother's.

    We just had our first child 8 months ago, and we are fortunate to live nearby my wife's mother. She only works part-time, so she is able to spend about 35 hours a week at our home helping out with childcare. Obviously this makes an enormous difference.

    So much moving and so far in the United States in this generation has some enormous costs, one of which is breaking apart extended families and old friends. Perhaps the advancement of telecom will lead to a lot more being able to work remotely. In most cases it's best for people to work mostly outside of the home, for social interaction, but advanced telecom could allow for remote offices all over, so people don't have to leave the city they grew up in.

    yes, a lot of these arguments are nice but no one points out that what you value may not be monetary but still "real," spending money on a date is real! saving money for your family is real!
    You fail to look at it from an individual perspective that neither the government nor society can be expected to place a value on things, it comes down to you and your values in life, basically you work for it and you vote with your wallet!!
    You spend your hard earned $$ on what you find is important!! that may be a date, a college education or saving $$ to raise a family. no one can be responsible on everyones behave in the long run, if you want something you work for it and you pay for it!!!
    its more to do with government making promises to everyone that confuses people and distorts the picture, that you have to work hard to get ahead and earn what you want or what you need.
    personally if i was a woman, though i'm not, you'd wan't to be financially secure or have someone to provide for you if you have kids(husband, boyfriend, lesbian lover) there no limit to the amount of money someone can spend on a child or on an adults, people will always want more but there aren't limitless resources to go around.
    you can't place a value on everything in life thats why empowering the individual is more important, for you to invest in what you see as a virtue.

    The comments to this entry are closed.

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