Dodgy economics is flying around left and right as the new GOP health bill is being piñata-ed from all sides this week. One particular strand is the charge of economism in the political rhetoric around healthcare. I want to talk a little about that since it relates to the teaching of introductory economics. In sum I want to claim that there is no great crisis in econ 101 being reflected here, but that there are reasonable grounds to suspect that marginal changes could have a big impact in how the median econ 101 student absorbs our material.
According to the Department of Homeland Security, there are more than 13 million legal permanent residents in the United States. I’m one of them. U.S. politics matters a lot to me, since this is where I live my life, but my fellow green card holders and I have no vote with which to express our opinions on the future of our home country. Perhaps you can imagine how frustrating that is.
Fake news is in the news, part of the nauseating task of dressing the ugly wound of the presidential election. The OED has named “post-truth” its word of the year, and the Republican candidate for president aligned himself with the kind of wilful confusion that is known to be a deliberate tool of autocratic regimes.
In the aftermath of the election, we are seeing the usual, healthy debate within both the winning and losing parties over what to make of the results and what comes next. I do fundamentally believe in the importance of vigorous debate inside political parties followed by unified support of the ultimate platform. It is crucial to avoid fractures that may make it impossible to build a majority coalition.
I think it’s fair to say that the GOP presidential nominee has said, oh, a few things that would have sunk the candidacy of a politician.
It’s amazing to me how much this presidential election reflects ideas and conversations that have been percolating around college campuses for the past several years. I often tell students that their movements have an uncanny way of being on the right side of history (OK, I see that I’m begging the question, sue me) and I think that this is being borne out in all caps this year.
The National Labor Relations Board today issued a long-awaited ruling that graduate students working as teaching and research assistants at private universities are allowed to unionize. The issue at hand has long been one of semantics: are graduates on paid assistantships more like students, or more like employees? Are the assistantships more like a fundamental training component of a program of study, or more like jobs done by the students to support themselves financially?
Olympic fever. My TV has been pretty much stuck on NBC this week (fine, NBC, I guess I see why you paid $1.23 billion for the broadcast rights!), their questionable programming choices aside. (And I certainly did NOT find… other means to watch the women’s gymnastics all-around final live today. Nope, nothing to see here.)
As I sit at my desk and look around me, I see a lot more than I could hope to do alone. The computer I’m typing on, the appliances in my kitchen, the coffee in my cup, the books on my shelf, the stores outside my window, the garbage cans outside my back door, the street at the end of the path… there is not a single thing that I would be able to replicate alone.
I don’t know about you, but once I start thinking about the immense web of trade, combination, and connections that make up the world we live in, I know awe. I don’t have the words to describe how the stuff I see around me came to be. It’s alchemy. (This, by the way and for the economists, is why general equilibrium theory blew my mind when I first saw it.)
Trade is an issue ever at the heart of political discourse. This year, Brexit and Trumpism have elevated its urgency in the public discourse. I won’t talk here about any specific trade deal, whose details are seldom clear-cut (see, for example, a short note on TPP from Beat the Press today). I want to instead think about the concept of trade itself. Fundamental to the issue is a deep question: what should be the scale of our society?
If I was alone in the world, I would be done for. If I was very lucky and busted my tail I might be able to Robinson Crusoe myself an existence for a little while. I am fragile: a twisted ankle could mean the difference between life and death.So let’s start by accepting the obvious truth that going it alone is not going to get us anywhere.
What about a few people? I’ll try to build shelter, you see about getting us some food. If you get sick, I have your back. We may rediscover the power of specialization to make us more than proportionately powerful together than apart.
At the level of a person, specialization and trade are simple things. Sure, there is systemic coercion in our lives, but trade, entered into willingly, is nothing more than a little win-win. A little of what I have and a little of what you have and we are both better off than before.
But we are not yet remotely close to building a toaster.
What about a small town? You know, Main Street U.S.A., with a hardware store, a bakery, a soda fountain, an elementary school, a factory. We’re specializing a little more, increasing the scale of our little society. But the scale is not just what we see in our zip code. Already our idyllic picture is cheating a little bit. The goods in the hardware store, the textbooks in the school, the lumber in the houses all took more to produce than our little town can accomplish alone.
When it comes to the stuff you consume, the borders of your society are not the same thing as the scale of your society.
We may also start to see a type of fragility creep in to our world. That factory is maybe not just working to make a thing for our town, but for many towns. Our town is specializing in that thing. We are trading that thing for the other stuff we are using but don’t make. So tell me: what is the scale of this society? And tell me: what happens if the thing our factory makes becomes obsolete?
What about a state? A country? Whole regions may be devoted to banking, or product assembly, or the auto industry, or agriculture, or mining. The scale of society through trade must become huge: a region certainly wants to eat more than just banking services. And, inexorably, now the local risk may not be so local after all. What do we do here? And what do we do when the day comes that we can’t do it anymore?
People’s lives must change with scale too. Adam Smith’s pin factory, where each person has a tiny, repetitive task, is not likely any worker’s idea of a good time. He knew this, and we know this. For most people, though, living alone off of the land in the woods is also likely to get old pretty quickly.
And, in our hypothetical hyper-specialized region, if I want to make my way in life in some other way, I have to cast myself out, to move to a place that does something different. That costs me, physically and psychologically.
Where is the sweet spot?
Would you prefer it if your town, state, or country were closed, forced to be entirely self-sufficient? What would you be willing to sacrifice to make that happen? There is nothing wrong with saying: yes, I would accept fewer things, more expensive things, in exchange for shutting us off from the rest of the world. But in my heart I don’t think this is what anyone wants. I’m not sure that people want to be isolated from the world or from the variety it brings. I think we just want a nice place to live and something to do.
I want a small town, with a Main Street rather than a Wal-Mart, and what unleashes Wal-Mart more than logistics and trade? I love being able to afford more stuff, but I hate that all I have left are strip malls. (I’m only half kidding when I say that better real estate and some interior design would be the cheapest way for Wal-Mart to buy our goodwill.)
From this angle, specialization means drudgery and local risk. From that angle, trade means variety and the freedom to pursue my own path.
Can we square the circle? I’m sure there is a connection between the increasing scale in society and Bowling Alone, but they are not exactly the same. I think that we can find some daylight between them. Maybe we could even find that, down there somewhere, trade and community share more than they seem.
Earlier I said that when I look at the stuff around me I am in awe. I see so much stuff that if you tried to explain it to someone from a few generations ago they would burn you as a witch. But I also see cooperation, community, and interdependence among humanity on a scale I can’t comprehend. Trade is a conception of community too.
If a desire for community is imprinting on politics is as part of the lament against trade, maybe we are not so far from a consensus after all. Maybe I’m overstating the case. But at a minimum, pro-social and pro-trade policies do not need to be seen as mutually exclusive opposites. Delivering both in one package would be a fine trick.
Following up on my post from yesterday about higher education funding, I’d like to discuss this article from William G. Bowen and Michael S. McPherson from last week at Vox. I think it is quite representative of the wonky, centrist view—dare I say consensus—that casts the student pays model as a self-evidently “right” approach.
There are many illuminating points in the article. In particular I am quite receptive to their “proposals for reform”: briefly, work to improve graduation rates, reform PhD programs to reduce the oversupply of PhDs relative to academic jobs, professionalize teaching faculty to address the outrageous reliance on mistreated adjunct faculty, and consolidate some small colleges to avoid costly duplication of administrative spending. I think these are excellent starting points for a healthy debate.
But nevertheless I would like to strongly object to the characterization of the funding debate that runs through the first half of the article. I’ll pull a few excerpts that I believe get it wrong on the student pays versus society pays debate.