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    February 2011

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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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    Thanks Maxine, I enjoyed this post. My wife and I have had lengthy discussions of this problem, specifically the interpretation of economics and economic structures outside of economics. In her MA in Art History, for example, they studied some Marx (and commentary on Marx) and Marxian interpretations of Art History. But, they didn't read the stuff that Marx was initially critiquing in Capital, nor did they read the more recent manifestations of Marx and Labour Theory of Value - Braverman's Labor and Monopoly Capital for example. I subsequently suggested that she (and others, if they were so inclined) at least read a bit of Adam Smith - maybe some relevant passages in TMS and WoN. Then, as you suggest, others like Sen, Rawls, maybe even Nozick. Or throw in some (former?) analytical Marxists like the late Gerry Cohen, Jon Elster, or Philippe van Parijs. Any of these people might give a different approach to Art Theory (and, in English, literary theory) than one based only on Marxist theories of the economy and class. (I am overstating the problem a bit, I think, but the point remains).

    I'm not an English PhD student, and I don't know that I can explain *the* labor theory of value, but I think I can take a stab at coherently explaining *a* labor theory of value:

    Oh, and I've read Marx *and* Smith (Yves and Adam) *and* Rawls. :)

    (I apologize for not combining my comments) I changed my intended major from economics to political science precisely because I realized that economics PhD students don't actually read a lot of books.

    As I understand the labor theory of value it is based in the idea that people pay people for commodities, so that, ultimately, what "creates" value is human time, effort, and attention, which Marx summarized under the term "labor."

    Marx's own introduction to his theory of value may be read at:
    It seems straightforward enough, though without the more recent visualizations that economists use for explanations it takes some effort at understanding. I've wondered if Marx perhaps used but did not publish sketch graphs. But the answer to that question would probably required a trip to the GOPB in Moscow and, not being an academic economist or historian with a research budget, I will not be answering that question any time soon.


    Umm ... I realize you're an econ Ph.D. and so not expected to know the history of economics, but do you really not realize that Adam Smith originated the labor theory of value? That David Ricardo employed essentially the same value theory as Smith? Say what you will about Marx, and the enthusiasm non-economists have for Marx, but you end up looking a bit of a fool for criticizing people for not reading Smith when you yourself have not read Smith closely enough to recognize that he employs a labor theory of value!

    It seems petulant to be annoyed that English PhD students are surprised that economists in top programs don't even read one of the most influential classical economists, and then you criticize them for...not being economists?

    Of course they can't fully explain all of Marx's theories and probably haven't read all of the economic literature, that's not their specialty. It's completely reasonable to criticize economists for not having any sense of the history of economic thought, that's supposed to be part of their specialty.

    Rich C,
    I was thinking that since we're no longer a nation of deer hunters and beaver trappers, the answer(s) to my question might be a bit more complex than in Smith's time. It seemed to stump Ricardo who was facing an increasingly complex economy where capital (both physical and financial) and international trade were playing greater roles in exchange and in production processes, but maybe I got that wrong, too. As to looking a bit of a fool, I fear I'd have to give up blogging and resign my job if that were something that bothered me. I'll count on you to let me know though. :-)
    Thanks for your comment.

    Steve K,
    NEVER annoyed with English PhDs. After all, they know how to write and speak well and will one day save us all. Simply wondering how well they really understand Marxist theory, since that was the assertion on the blog I was responding to. It may well be that English PhD's spend more time reading Marx than I give them credit for. My main point remains that none of us (any of us) read enough outside of our own fields. Thanks for your comment. :-)

    Scott M and everyone else, thanks so much for your comments and the links. Always appreciated.

    The comments to this entry are closed.

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