'Tis the Season...

I started blogging a little over a year ago. Last night over dinner, a friend asked me why I do it. The answers I gave him were: I love to write and I want to be part of the really exciting conversation about economics and economic thought that has been a byproduct of the financial sector's mismanagement of risk.

I didn't say it last night, but I think I also started blogging because I grew up in a family business and have become increasingly appalled over the last 10 years or so by what seems to me to be a very limited view of the duties, obligations, and responsibilities of business.

I remember the sense of incompleteness and confusion I felt when first exposed to the theory of the firm. You see, in our business we were not profit maximizers. We were business men and women, embedded in a community, our fate intertwined with that of the community. We had to make enough money to stay in business for the long-haul. That meant that our customers had to keep coming back, we had to provide value, and we had to work, to sell. No one who walked into our business was greeted with "Let me know if I can help you." The customer was like a sacred guest. Our job was to find out what she needed, to tell him as much as we could about the merits of our merchandise, to help them identify and purchase the best match for their preferences and their pocketbook, or to send them to a competitor, with directions on how to get there, if we didn't have and couldn't get what they were looking for.

Our long-term survival depended on some amount of profits, but equally important were reputation and civic responsibility. These three are what we optimized over, not profits alone. We viewed all of these as interdependent. That meant that sometimes reputation and civic obligation were a constraint on profits.

We were also a small firm. The kind of firm economists like to imagine populates the ideal of a competitive market. And so they do. And our market was local, better suited to enhancing our moral sentiments about and our ethical commitments to our customers. our employees, and our community than global markets are, perhaps.

Now, after a year of blogging, I'm discouraged and puzzled.

I can understand that someone who has managed to capture a privileged economic and political position, one where they are backed by US taxpayers as they gamble for personal gain in financial casinos, will do whatever they must to maintain it. And I expect that over time, if unchecked and unchastized, they will take on increasing amounts of risk, underwritten by the rest of us. What I didn't expect was the magnitude of the moral failure: that financiers would help to create securities designed to fail, sell them to clients, and then bet against them. 

What I can't understand is the willingness of the citizenry to protect and reward someone who has harmed or is continung to harm them. I do not understand voting for politicians who support tax cuts for and neutered regulation of these same destructive speculators. Nor do I understand voters' apparent willingness to eviscerate all of the social programs and safety nets that are all that stand between them and what can only be regarded as neo-feudalism. I conjecture that the reason for this counterintuitive behavior is that the moral narrative that accompanies a technocratic tax cut for the wealthy is more compelling that the moral narrative that accompanies a technocratic stimulus of aggregate demand or support for families harmed by the financial sector's market and moral failures.

If you had told me 10 years ago that I would become a critic of investment bankers and an advocate for labor, I would have said that you were crazy. I was weaned on horror stories about the New Deal, the WPA and CCC, wage and price controls, and the horror of unions. (And, if we ever return to a point where unions become so powerful that they impede business, I will blog against them.)

I grew up in relatively egalitarian (at the time) Appalachia. My family had more money than most. I had two best friends. One friend's father was a (union member) coal miner who died of black lung disease when he was in his sixties. The other's father pumped gas at the local gas station, while his wife baked the most delicious bread and sold it to her neighbors. There was a compression that occurred in coal-mining and steel-producing towns. I think it's something about the landscape and the drear tar-paper brick houses and the fact that we all lived so close to each other. It causes those at the top of the income distribution to want not to seem too far above. But it may also be that money just isn't that important when most people don't have much of it. It also helps that the most you can spend on a dinner out is $20 per person (with wine) because that is the most the best restaurant in town charges for the top-of-the-menu T-bone steak with two vegetables (where mac and cheese and jello are both considered vegetables) and a glass of the "house wine."

I remember thinking until I was about 8 years old, that my only job options would be five and dime store clerk or bookkeeper, because those were the jobs women seemed to hold in my town. Mercifully, I didn't have to become a store clerk (although I've worked as one and was darn good at it, too) or a bookkeeper, but I remember feeling despair at the prospect even as an 8 year old. Maybe that is why I care so much about educational opportunity for anyone, anyone, who wants it.

And I remember that nearly every strikingly beautiful mountain vista was marred by a gas well or a coal tipple or a boney pile. It was the price, I told myself, of progress and the American dream. They kept my friends' fathers employed and my family in business.

Now I find myself wondering if the price is becoming too high, paid by those who can least afford it, and collected disproportionately by those who no longer generate the jobs or the universal opulence that used to be justification for that disproportionate allocation. I'm also increasingly concerned about how that price is set and the one-sided and self-serving (for those at the top) discourse that surrounds it.

I got into this conversation because I felt I might be able to contribute clarity for those not trained in economics and a different perspective. It has been an exciting and stimulating conversation. I've thought and read more about macroeconomics than I ever did in grad school. I have developed a real fondness and respect for my readers and their very thoughtful comments and for my fellow economics, anthropology, sociology, and biology bloggers, especially Mark Thoma, without whom only five people would ever have read this blog.

Now I find myself in need a a break, partly because I feel so discouraged by recent political events and the apparent triumph of zombie economics; partly because I have a paper and a grant proposal that need my attention. Barring some major new development, I'm going to take some time between now and New Years to reflect on what I've learned this past year and on the conversation we have had. I'll be back online around the New Year. In the meantime, if you're in the mood for a more seasonal essay, you might want to read my winter solstice post on my other blog. It contains the words "GDP" and "incentives," but is more in the spirit of the holiday season than this blog has been.

Happy Holidays and Best Wishes for a prosperous, opulent, full-employment, non-volatile, no negative externalities New Year for us all!

Comments

[300baud]

Don't despair!

By all means take a break. But as an entrepreneur similarly horrified by recent goings on, I really appreciate you writing about this. It's very heartening to know that I'm not crazy in my thinking that business can have (and perhaps must have) a moral foundation. Doubly so given your formal education in economics and your practical experience with small business.

They say that for sailing students, the smaller the boat, the faster they learn. I think it's the same for businesses; running a small business in a small town let your ancestors see the true essence of commerce in a way that Blankfein, et al, never can. I hope you'll keep reminding people of the lessons they learned, as I think more of their spirit is the only way to return to sustainability and economic sanity.

Happy holidays!

[Francois Gauthier]

Happy Holidays and come back soon. More than any other economics blogger you are able to go to the heart of issues and make us see the big picture.

I've told my daughter who's a senior and about to go into economics to read you. Hope she does.

[The Barefoot Bum]

Well, you've inspired at least one future economist. 4.0 after my first semester, and if my economics teacher could have given me a 5.0, he would have.

[rl]

Maxine, be sure and take that break. Nobody can deal directly with the dirt constantly, and your full life deserves your attention, and some peaceful time for sure.

What you do in writing this weblog is I think very valuable. I know I've both learned from your take on matters, and in finding the level of caring.

I have the sense that we will invent our way out of the current pickle, and not by any direct things that happen because corps or choruses define them.

This is throw-back to the lessons of communities, and certain history as well. I'm not sure yet exactly how much difference it makes, but we actually do have a lot of tools in the shed this time.

Best to you and yours,
Clive

[rl]

p.s. you've gotten one of your big rewards in the post just above mine ;)

[Jim Luke]

Maxine, I understand your need to take a break and you are entitled. However you will be missed. Your blog has been refreshing. It raised my hope that perhaps this lost-it's-way economics profession that we have chosen might find it's way back to what matters again.

Good luck on the grant.

[Donald Broder]

I hope that after a well earned rest and a pause for other work you will return. Your ability to enable us to see the moral dimensions of economic issues is remarkable and valuable.

[Mike]

Take a break but come back. You have a unique voice and gift in explaining technical concepts within a framework that sees economics as tool to advance the welfare of society...welfare that must be inclusive.

[Kalpa]

Beautiful and well-said, Maxine! Tis a strange world after all. I have linked it in my own writing today. Good luck to you in the new year.

[ecrive]

Thank you for your moral clarity and practical focus.

When I first read the Meditations of Marcus Aurelius, I was stunned by the similarities to people, actions and circumstances in the 1969 USA.

What I have carried with me is the certainty that all material changes will require structures and processes (?incentives) that do not require people to undergo fundamental change. The passions that drove the Romans ~ 150 still drive us today. Discouraging but also encouraging if we view the long term trends. Optimism may require us to step outside our slice of history, do the yeoman's work for later generations' benefit and have faith that narrow self-seeking over a truncated horizon will be held somewhat in check.

I have difficulty believing this, but I am willing to accept it on faith.

[Scott M.]

Maxine, love the blog, and wish you and yours the best for the holidays.

While you're spending the time off thinking, I'd like to seriously suggest you consider either reading Marx and/or looking at becoming a full fledged socialist/communist.

[steve]

Take a break and come back. Yes, a lot of this seems as though it does not make a difference, but it all adds up. Few write as well as you about the intersection between economics and moral behavior.

Steve

[Freelections.blogspot.com]

Maxine,

Thank you for your compassionate, clear, and non-technical explication of the state of our political economy.

Michael

[Maxine Udall (girl economist)]

I want to thank all of you for the very kind comments and encouragement. rl is right. Barefoot Bum's news was the best holiday gift an educator can ever receive. Thank you, BB. M. Gauthier, I hope your daughter learns and benefits from anything I write. Thank you for the recommendation. Jim, nice to hear from a kindred spirit. And thanks to the rest of you (and those readers who don't comment) for reading and for taking the time to provide thoughtful comments. I don't always have time to respond, but I assure you that I think about everything that is said. It often shapes future blogs or gives me new perspectives. Many, many thanks and Happy New Year to you all.

[DarenBowel]

Nice to post this article & sharing.