Sunday, July 26, 2015

Education policy post 1

(Creative title, I know)

We need to reform how we teach high school. As I was going for a walk today I was thinking about how to learn effectively and how I have found mathematics to be the most important subject in my education in terms of the tools it has given me. All of the most important tools I have learned in political economy are ultimately mathematical. From these tools comes the rest of the work I do and it allows me to understand fields I have never studied intensely because I understand the underlying logic of what they are arguing.

A big issue for me through school was making sure I got enough math to continue to the next step in my education so I can get to where I need to go. This was extremely frustrating for me, and left me without the mathematical tools I needed to continue my science education.

But what about English? As I was thinking about this today on my daily walk the books we were reading in English had large philosophical backdrops to them which were barely covered in school. The process of effectively writing is used in every class, and should be integrated as such. When it comes to literature however, they are based deeply in philosophy. I think while teaching such subjects we should introduce students to the major schools of thought so they can start to put the pieces together and understand what other books these authors were reading so that students can make the connection between the different books and time periods. The other subject literature comes from is history. If one is reading a books based in a time and place, there are probably political overtones to it, and in order to pick those up one needs to understand what was happening in that time and place. Reading books from Latin America is all well and good (we read a few in my IB English class) but doesn't do any good if you are not at the same time learning about the history of that region. I didn't take the history class at the same time, but feel like if I had taken it I would have understood the books a lot more, like the year before when history and English went through the same events at the same time.

To fully understand the books I think it would be useful to read them in chronological order and talk about the schools of thought as they evolve in conjunction with history class since literature is so based on history which helps readers see the trends underlying the books we are reading, since in high school this is all new information to most students.

So, literature is based off of history and philosophy and in order to fully understand the literature one must understand the history. Now, to understand history at a deeper level one must understand the political and economic forces underlying those classes. To fully understand this one would then need to understand some basic political science and economics. The political science would cover basic political theory (which starts with the same philosophers as one would use to understand the underlying themes in literature), American government (which we already do to a point), international relations (so one can understand war and why they occur), along with comparative politics (so one can actually understand what was happening on Britain's side of the American Revolution or how Germany fell into the Third Reich) are the four fundamental bases to political science and would greatly supplement the studying of history and increase understanding of what is happening.

Economics as well is necessary, and would not take a lot of time to cover the basic underlying principles such as supply and demand, elasticity, monopoly, oligopoly, perfect competition, and GDP among others. This of course would be done throughout the year and would help students understand the evolution of economic history and history as a whole because economics is such a fundamental part of society and how we live day to day.

And the really beautiful thing about this is in order to fully understand what economics is and do the problems in a way so that you can apply them to history you need to understand mathematics. This is one of the primary reasons why if a middle schooler asked me for advice about their education I would say to make certain they learn their mathematics at as high a level as possible because practically everything else they will ever study will ultimately be ultimately based on mathematics.

This is why I think of mathematics is the fundamental building block to most of our education. In order to understand literature you need to understand history and philosophy. In order to understand history you need to understand economics. A great deal of philosophy has to do with economics. In order to understand economics you need to understand mathematics. The patterns in music and art can be represented using mathematics which show the patterns which we perceive as beauty. The only fundamental part of a well rounded education that does not revolve around mathematics is learning foreign languages.

Mathematics truly is the language of the universe.

Saturday, July 25, 2015

Vote like your life depended on it

The Guardian published an article today by an African American claiming that he won't be voting in American elections anymore because there is racism in our system.

The problem with this article is that he is taking the worst route. Let's say we have a system for ranking parties on their social values from liberal (+10) to conservative (-10) and you look at your ballot and you have one party which ranks as a -1 and another which ranks as a -5. As long as your personal ideological score is -2.5 or higher you are always better off voting for the liberal party. Sure, you might not get everything you want and there will be more progress to be made, but you need to recognize that you can start to push the election system back to where you want it to be whether it be 2.5 or 10.

In economics we have a concept known as the Production Possibilities Frontier. The concept is that when making decisions there are factors that I cannot change. If I am a firm deciding how much I want to produce in the short run I need to work with the fixed capital (buildings, machines, etc.) that I have. I might want to have 10 factories, but it doesn't matter if I only have 5 in making my immediate decision of my next step. The same applies in political science. I might want to have a party which will smash the legacy of slavery into the dustbin of history overnight and bring equality of opportunity to all Americans next year making us a completely egalitarian land, but in the short run this is irrelevant if I don't have that utopian party. More than that, even if a utopian party existed it would take more than one election cycle at this point in history to eliminate the inequities. This does not mean I should not stop fighting for this honorable goal, and by voting for the better of two options I am doing just that.

We are faced with a situation today where the Republican Party denies global warming, denies that issue of police violence, does not recognize the barriers to people making a life for themselves and is directly in the hands of the Koch Brothers and similar individuals. The Democratic Party also takes money from corporate elites (for similar reasons as to why people need to vote even if neither party is absolutely perfect) but also takes a lot of money from unions and are brought into this system from the start which has so many inequities. They have made progress with social welfare programs which disproportionately benefit minorities along with more direct legislation like affirmative action while Republicans have only moved us backwards.

This article makes a major fallacy in that he is looking at the system as it stands today when judging Democratic politicians and not how the system has changed under such individuals. He brings up Governor Martin O'Malley and claims he has no right to talk about criminal justice reform because Maryland still has major incarceration problems. This is however a major mistake for two reasons: 1. The Governor (pr President) may not, cannot, and has not unilaterally decide to overturn decades of law at the stroke of a pen. Such action requires the legislature. To do so without them would completely undermine the Federal constitution or constitution of any state. 2. Our system by design makes it incredibly difficult to get legislation through. These are both extremely good things. While I agree it would be nice to simply overturn legislation because it is immoral (which is what the courts have done in many instances eg Brown v. Board) it would come at a horrible cost because a Republican President could dismantle Social Security at the whiff of a pen. Our system is designed to be inefficient so that we can't have one politician undo the progress that has been made, which is the flip side of what would definitely happen if O'Malley could simply completely overturn the racism of Maryland's long-standing institutions. (it was a slave state after all before the Civil War) What has frequently happened in State legislatures and Congress is that the President will frequently propose legislation which is then significantly diluted by Congress, on both sides of the aisle. The most striking recent example is the Affordable Care Act which stands as a testament to this balance. On the flip side we also have the Americans With Disabilities Act which was vetoed by President George H.W. Bush but was fortunately overriden by Congress. His simple analysis of this issue gives him the wrong results and makes me wonder how much he really understands of how our government works.

This existence of a system set up for deadlock is not empty promises as he goes on about but instead a protection against us from things like C-51 which passed easily in Canada, and is a complete erosion of Canadian Civil Liberties by Stephen Harper.

He is correct however that grassroots activism is a useful tactic in getting politicians to listen, but it will only work in the end if they use their political leverage to force the politicians to respond. If they then just get more Republicans elected to state legislatures in the Deep South you can bet that they will not respond to such movements. Changing the guard and replacing the legislature like he mentions happened in Reconstruction however is a fundamentally different scenario.

History teaches us that we need to use our voices and need to vote to make a significant difference. If the Quakers had abstained in 1860 in protest for James Buchanan's racism Stephen Douglas would have become President and nothing would have changed. That is however not happened with the Civil War, 13th, 14th, and 15th amendments and Reconstruction which lasted until people stopped voting for liberal Republican candidates and Hayes was elected ending Reconstruction. It was disengagement which ended reconstruction, and postponed the healing of our country. I have no reason to believe another Republican President is going to make our country better relative to a Democratic President, even in the now unlikely chance that person is Hillary Clinton.

So, fine, don't vote if you want to. But when you don't vote you are in effect increasing the margin of victory for the worst party and shooting the civil rights movement in the foot. This makes it so they will move us even further from where we want to go which is what happened in 2000 when people didn't vote for President and we got our worst President in history (judging based on the changes he made from where we started and where we ended up).

I maybe white, but my Quaker ancestors did not get the 13th amendment passed simply through the Underground Railroad (my great-grandfather's hometown of Richmond, Indiana was one of the most important hubs in the network), but we got it done in the end because we had strong people in Congress such as Thaddeus Stevens and President Lincoln who got the job done. I continue to do what I can to make this country a better place every day. That is the only way we have ever made the world better in a way that is very difficult if not impossible to simply revert in 4 or 8 years. This author's choosing not to vote only shoots our movement in the foot and is giving up on centuries of very hard work which I find personally insulting. This is why I find the author's giving up on our country's future so absolutely despicable.

Friday, July 24, 2015

Rational compassion

Often when I am talking with people about my profession, I will have some people who will consistently get upset with me because I usually don't get as visually riled up as other people do. I almost never scream, I almost never use the much too common authority fallacy, and more often than not am able to stay calm when discussing very difficult and important issues be it global warming, corruption, police brutality, you name it.

There is a very deliberate reason for trying to argue for something in this way. I frequently see people both in my personal life and in public life argue only from the heart, which means they are not arguing from understanding the issues at play in a way so that they can effectively make an argument that will not create unintended consequences. This is most common right now in the minimum wage debate, or talking about other worker's rights which people are (rightfully) very invested in, like I last posted about.

Even when talking about such issues I still try to stay away from arguing from emotion because than I am likely to make an argument that will not work as promised. I always get suspicious when people continue to argue for policies which have been demonstrated to not work as advertised even after the evidence becomes completely overwhelming. When I see people continue to argue from ignorance about issues it makes me think less of them and trust them less. When looking at any issue it is important to understand what will really go on.

The best example I can think of right now is when people talk about free trade. The research in political economy is essentially unanimous that free trade for poor countries helps lift people out of poverty. People who work for foreign firms make more than people who work for domestically owned firms, it brings in needed capital to the country, and this pushes real wages up, increasing the quality of living for people in the country. (In economics, Real means that the price, in this case the wage, is adjusted for inflation) Despite the overwhelming evidence of how free trade is better for workers than protectionism people still will tell me that we need to protect our workers, and the best way to do that is to close the borders. By arguing from ignorance and frequently accusing all scientific research on the subject as being part of some sinister plot they are closing their minds to what is really going on and when the evidence is against their case revert to anecdotal case studies to support their idea. The absolute ignorance of the research that has been done and downright unwillingness to do more research to defend their claims makes it the economic equivalent of creationism. Do these people mean well? They claim they do. But when people do not even try to understand arguments from another perspective and continue to support policies that hurt people it becomes very difficult to believe they really want to make the world a better place and I always then suspect some alterior motive.

This is a problem across the world too, I observe it in the media all the time where you have the talking heads, one "liberal' and one conservative who bicker and after blathering on for 5-10 minutes haven't said anything reasonable or realistic.

Because I believe irrational compassion is dangerous to the progressive movement as a whole, I try very hard to make sure I have some evidence behind my claims and that I stay planted to reality so that my proposals can actually work. Then I can have an adult conversation with people which then can open doors and increase understanding overall. Irrational compassion is incapable of this.

So, next time you are talking with someone, keep your values close to your heart but make certain you don't become removed from reality because then it takes more time to get to where we need to go in making the world a better place.

References:
Amiti, Mary, and Donald R. Davis. "Trade, firms, and wages: Theory and evidence." The Review of economic studies 79.1 (2012): 1-36.
 
Irwin, Douglas A. Free trade under fire. Princeton University Press, 2015.
 

Thursday, July 23, 2015

Overtime pay

The Hill
Today the big issue which came to the fore again is the issue of overtime pay. Democrats want to make it so that companies hire people for more reasonable hours while Republicans claim this will indeed cost millions.

Both are wrong.

The reality of the situation is we are dealing with a free market which is more or less in equilibrium which is what the research has found. The reality is that the market will always find a way to equilibrium, and when regulations like this are put in the market then readjusts to the new situation eliminating the benefits we originally saw. Employers will end up cutting wages back to where employees work the same number of hours for the same pay as they did before. I wish it were this simple to bring people's working hours back to a reasonable level, but it just isn't.

The issue here is we need more employers competing for workers. Labor is not a very valuable commodity, which is part of why we have unemployment. Making laws is not going to change the situation.

There are three ways I know that might be able to reduce overtime hours. One way would be to completely ban overtime altogether, but this might end up reducing the salaries of the employees which would be a cost. Research is needed on this question. A quick Google scholar search does not yield many relevant results.

Another method would be to increase the number of firms. This would force them to compete more for the same number of employees driving the wages up. This will encourage more people to the profession which will fix part of the problem of not having enough people with such skills. A basic principle in economics is that if you have a deficit of a good (such as someone's time they work) than the price is probably too low and not enough people are selling the good. Increasing the wage will attract more people to such professions. An added benefit is if there are numerous firms competing for workers than they will have to offer better pay packages, better benefits, and it is a race to attract the most skilled workers. If I was looking for work as an economist and one firm required overtime and another didn't, my decision should be fairly obvious in which one I would take. We need more companies competing for workers which will effectively raise the wage and decrease overtime in an effort to attract the best workers. The advantage to this is as soon as a firm starts to require its employees to put more time in without adequately compensating them that firm will lose its ability to compete and be a place where the least competent employees will land, making it the worst decision for the firm.

Finally, unions could be useful in decreasing overtime while at the same time keeping wages high through their arsenal of tools like strikes. This is found to be a significant effect of unionization across industries.

That is how we will reduce overtime, simply requiring an increase in overtime pay in the past has not made people better off nor increased costs for employers and there is no reason it will do so this time as well.

References
Trejo, Stephen J. "Does the statutory overtime premium discourage long workweeks?." Industrial & Labor Relations Review 56.3 (2003): 530-551.
 
Trejo, Stephen J. "The effects of overtime pay regulation on worker compensation." The American Economic Review (1991): 719-740.
 
Trejo, Stephen J. "Overtime pay, overtime hours, and labor unions." Journal of Labor Economics (1993): 253-278.
 

Tuesday, July 21, 2015

Ceilings, Floors, Taxes, Subsidies and Inequality, Oh my!

In popular economics and the field as a whole inequality is one of the hot button issues everyone has emotions about and thinks about. The question of how to deal with such inequality is one of the big questions in economics, with a lot of questions about how to weigh the costs and the benefits of each, along with understanding what things we view as costs and benefits is at issue as well. There are of course several major ways people deal with inequality, the most popular being the minimum wage and progressive income tax. These do reduce inequality, but have other effects as well.

So, basic economic theory uses the supply and demand diagram to analyze the effects of various policies. The minimum wage is one of the most studied as a way of introducing this concept to people new to the subject so I will start there. The minimum wage is a price floor, meaning that it then is illegal for a firm or individual to pay someone less than that amount. The line in the following diagram demonstrates what this creates:

This diagram clearly demonstrates what we generally find is the effect of a minimum wage. First of all we observe a raise in the wage, which is of course the goal, but this isn't free and comes at the cost of unemployment. At a minimum wage above the equilibrium (where supply meets demand) more people are willing to work (the supply of labor) than people are willing to hire them. This creates unemployment. While it does increase wages it does so at a real cost.

The idea of a maximum wage has the opposite problem, for the same reason. Capping CEO salaries means the number of firms seeking high value added individuals cannot find enough individuals with those skills to match market demand, meaning a reduction in productivity.
This is similar to the idea proposed to Milton Friedman of the Earned Income Tax Credit. We can raise real incomes to the same level as we could do with a minimum wage but we get an increase in labor which means a reduction in unemployment and a bigger overall boost to the economy and reduction in inequality than we would have with a minimum wage (assuming the funds to fund such a plan are done in a reasonable way). Imagine if you can make your pie and eat it to? Welcome to the world of the EITC.
Finally, because this post couldn't be complete without it is the impacts of an income tax. It increases the cost of hiring for firms as well as reducing overall income employees receive. The overall number of workers at this new point is lower than it would have had at equilibrium creating a reduction in the work force. (which is technically different from unemployment) The only other question remaining is what the government does with the revenue in who will ultimately benefit from such policies.

There you are, the four major ways the government can effect the labor market with taxes, subsidies, floors and ceilings.

Tuesday, July 14, 2015

Congress's Choice

I'm really happy about the Iran deal, and looking at the international politics makes it really clear this is the right decision. 1. We are strengthening the President of Iran relative to the Supreme Leader, strengthening Iranian democracy. 2. The government which gave birth to al Qaeda with probably the worst women's rights record in the world which is openly led by the radical perversion of Islam called Wahabbism, this of course being Saudi Arabia, is unhappy. 3. Liberals in Israel are happy and Netanyahu is furious. 4. We are going to have more oil in the market, pushing down prices further hurting the government of the world's largest petrostate, which is Russia. 5. Increasing trade with Iran is going to open economic opportunities for the average Iranian people. (all of the evidence in IPE points in this direction) 6. We are going to have a more open dialogue with Iran, whose President is the only leader in the Muslim world who I have seen consistently uphold values of tolerance and seeking peace over the last decade.

For these reasons, this was definitely the right decision and this will help make the world a safer place where we will have less religious extremism and a more tolerant planet. Sanctions only increase violence and discontent. A basic message of international relations research is that trade and communication are the major bringers of peace in the world, and this decision is going to increase both.

Now it is time for Congress to choose between peace and war, tolerance and intolerance, dialogue and distrust. I hope that enough members of congress will see what is really happening.

The international lobby as well is going to be very stark with Sweden lobbying for increasing trade while the Wahabbi state of Saudi Arabia is going to be lobbying for increasing sanctions. The government of Israel is going to be lobbying against the deal while liberal Israelis are going to be lobbying in favor of the deal. They have a choice between increasing the oil market share of Putin or decreasing the oil market share of Putin. The right answer should be obvious to anyone who looks at the international consequences of this decision. At the bare minimum Iran will open to Europe which will severely hurt the political elite of Russia.

Friday, July 10, 2015

Viva la Europa

We are currently witnessing the biggest play of fools in the history of the world in Europe. These mistakes happened 100 years ago when trade broke down across Europe leading to one of the largest wars the world had seen to that point.

In international politics there are some major theories which talk about how to bring peace to the world. One which has some support is the Democratic peace theory which (as the name implies) is the theory that democracies don't go to war with each other.

However, the theory which has very solid support is the interdependent peace theory. The idea is that if you trade with other countries you will not go to war with them. The strength to this theory is it explains why Europe doesn't go to war with Russia while given tensions democratic peace theory predicts war. European leaders have no incentive to go to war because of the imports and exports they have with Russia.

Now when it comes to the ongoing austerity crisis and depression in Greece, this theory implies a lot for the future. If Greece severed it's connections with the European Union they will very likely find another ally. Given their treatment by the EPP I don't see too many short term incentives for them to stay in the EU.

Putin is currently very interested in expanding his power and we have seen him reach out to Greece in particular as being his next target in his power grab. Given the human rights records of the other countries he has close relations with,  Kazakhstan, Iran, Belarus, Syria, and North Korea being the most impressive examples, I find no reason to believe this change in international relations will bring anything good to Greece or Europe. If this pattern were to continue than than I see no reason Putin would then try in a carrot and stick approach to expand to Italy, Spain, and Portugal. Adding over 50 million people to his alliance is something I can see him do.

Now, this is far more than just a shift in power relations and who the biggest ally of these medium sized nations will be. I expect that as Putin grows his relationship with these countries we will see the same pattern of a reduction in the validity and transparency of elections like we see in Russia today. This will be a massive reduction in the human rights in those countries just like the Franco regime. I see nothing besides EU membership standing in the way.

We also see another trend in the EU today which is already eroding their rights. What is happening today in Hungary is very disturbing and hopefully won't expand to other countries. The current prime minister of Hungary has been accused of undermining human rights by multiple human rights organizations. https://www.hrw.org/europe/central-asia/hungary The EPP is not willing to hold their member accountable to the laws of the European Union, further proof of their true intentions of undermining liberalism and the EU. This was never about Greece's debt from the start. It was about undermining the largest barrier to fascism in Europe.

Before the EPP gained power in the EU we did not see the problems in Greece and Hungary that are happening today. I love Europe and don't want to see an erosion in their liberties or a failure of one of the greatest political experiments in human history. None of this was inevitable and it was all artificially manufactured. It is time for those who love Europe to stand up to the EPP and Putin and save the EU.

The last two breakdowns in trade was in the years prior to the first and second world wars. The current erosion of trade and human rights is a threat to world peace and must be stopped.