Alex Berezow is a hack: good old fashioned Red hysteria

As the ballot counting in the Seattle City Council race shows Socialist Alternative candidate Kshama Sawant gaining a narrow lead over incumbent Democrat Richard Conlin, there is now a surge of national media attention on Kshama. This also includes the American media’s love of treating mainstream economics as gospel and creating a strawman of what socialism is.

Alex Berezow’s column “Why Is Seattle Socialist Kshama Sawant Allowed To Teach Economics?” typifies this. There are many things wrong with the column, both in terms of economics and in terms of journalism.

1. He admits that he doesn’t cover economics much. Given that he cites N. Gregory Mankiw, the author of the main survey course economics textbook, I assume he doesn’t have a formal background in it either.

2. He states that “people respond to incentives” and says it is basic and obvious. This is mostly to contrast to his conception of socialism, where there are “little (if any) incentives”. As anyone who reads the books and listens to the lectures of 21st century behavioral economists can tell you, incentives are complex and often depend on variables that aren’t obvious like money, time, or capital.

3. He fails to recognize that socialism has plenty of incentives, they are just different incentives than a normal market capitalist economy. To think that capitalist motives are inherent and self-evident, one would have to explain the many societies throughout the world and history that functioned well without the same view of value and worth.

4. He blithely ignores the respected place socialist theory has in academic disciplines, like philosophy, literature, political science and, yes, economics. He compares socialism in economics to AIDS denial in microbiology. Academic institutions do not keep teaching courses on socialism and its related branches because they just don’t get it. They do it because it’s a valuable part of the process and its critiques help people understand capitalism, consumerism, and the market in proper context.

5. He fails to understand the simple difference between unionizing Amazon and collectivizing Amazon. Here’s the nickel tour on that: what Sawant wishes to do is unionize companies like Amazon that have resorted to underhanded tactics to quash workers wishing to organize. She aims for workers to collectively bargain for pay and conditions, which they currently cannot. To collectivize it would mean to liquidate its private ownership and turn over all the capital, land, and money to the workers. These are radically different things.

6. He follows Mankiw once again on rent control, never once stating that while popular, Mankiw was an economic adviser during the George W. Bush administration, and has a strong conservative bias. In fact, he was in the news this week for a bogus comparison between having children and choosing a car. The large opposition to rent control in orthodox economics is countered in other social sciences and in people who have different values beyond economic efficiency.

This all creates this insidious argument of how dare a college think a socialist should teach economics. Berezow freely admits that she has a doctorate in economics, yet thinks that using that education to critique capitalism and market economics is somehow a wrong that should be righted. It reeks of attempts to silence academic freedom when teachers have unpopular ideas. But if you don’t let anyone with unpopular ideas teach, then there is no dissension, no debate. The social sciences and humanities cease to have any value. Marxist economist Richard D. Wolff often talks of how much pressure there is on colleges to deny tenure to economics professors who don’t think capitalism is a good system- after all, most big donations come from people who made (or inherited) their money through capitalism. Do you think Phil Knight, founder of Nike and a huge source of the University of Oregon’s buildings and programs, wants an economics professor pointing out the horrible system of child labor and dangerous factories that made him all his money?

So this is a piece by a journalist who took the lazy route to bash a socialist. Kshama Sawant has more education in economics, and more background in academia than Berezow. His attempts to make her ideas look stupid come off as childish and smug. The idea that there is a scientifically validated bloc of mainstream economists (of which Mankiw is the leader) pays a disservice to the discipline and all the credible people who offer criticism and alternatives.

And if people do respond to incentives, why did they show up in huge numbers to vote against capitalism as it stands? What is there incentive there?

 

Is the minimum wage harmful? Probably not.

The issue of note in the past few weeks has been the minimum wage, especially as fast food workers are becoming more vocal about how untenable their lives are making just north of seven dollars an hour. Some outlets have pointed out the potential price hikes if a move was made to a $15/hr wage, and there has been a chorus of conservative economists and politicians stating that a higher minimum wage actually increases unemployment, and thus makes certain people worse off as they lose their low wage job for no job at all.

When I took AP Economics my junior year of high school, we used an immensely popular textbook by conservative economist N. Gregory Mankiw. It taught the standard version of introductory economics. It’s rooted in classical economics, and features elegant graphs. It triumphs rational choice theory, or the idea that individuals consistently make the most sensible choice for their overall well-being

Parts of the American left have few good things to say about Mankiw. Beyond that, the issue is that his model doesn’t reflect the real world. Behavioral economists have clearly proven that individuals are not rational, and groups even less so. Looking at in-depth data, it’s clear that the immensely complex world economy does not fit elegant graphs most of the time.

In this debate over a higher minimum wage, there is one flaw of the conservative line. The blog An Economic Sense states simply that there is no empirical research that shows a correlation between a higher minimum wage and higher unemployment. Like many policy changes, it fades into the noise of the economic system. Rory Sutherland, a marketing executive and behavioral economist says that mainstream economics suffers from a case of “physics envy” (video). You can’t isolate individual cogs in the economy and figure out their relations to everything else. Minimum wage policy is not a proton at a particle accelerator- you can’t figure out all of its effects in a controlled environment.

Raising the minimum wage does not create a whole new burden to be shouldered by private industry. The government has to cover these people already through food stamps and Medicaid. Large corporations like McDonalds and Wal-Mart are indirectly subsidized by the government, despite large profits that prove they are not a dollar an hour away from bankruptcy.

John Maynard Keynes had a large set of theories about how the system worked- with data in the decades following his death proving some and disproving others. Famously, he disputed the classical idea that workers only needed to adjust their demands to be employed, and that all unemployment was voluntary.

It’s now clear that some unemployment is involuntary, especially in a near-recession as the United States is now. There are many reasons why people cannot find work, and it is doubtful that the minimum wage is the primary reason. More people could probably provide more labor than their wage if they were hired, but worker value in a large firm is difficult to measure, and the people who run businesses are not always rational. Or rather, they look towards profit rather than output.

The lesson here, which is hammered home every time someone on TV quotes from that economics textbook I had, is that the economy is far more complicated than some would let the public believe. If the minimum wage is an economic problem, it doesn’t show up in current data. It may just be a figment of a theory that just doesn’t make much sense.