I started working on this project maybe a year and a half ago. It turns out, recording an album on your own is a lot of work. Why do many of us take on challenging creative projects with dubious rewards? It’s something I continue asking myself, and I think I’ve explored it far enough to know that the answer is not, simply, “for fun”.

On the micro-scale, this is true in many ways. The individual decisions of millions of businesses, communicating through prices, add up to a system that satisfies most people’s wants with a dizzying array of constantly-improving products. We don’t need a giant bureaucracy to set the price of raisin bagels or determine how many electric lawnmowers should be built.

However, what I’m now discovering is that there is no “invisible hand” analogy on the macro-scale. The “natural” macroeconomic outcome of an entirely free market is abhorrent. Devastating cycles of boom, bubble, and recession; ever-more concentrated wealth; terrible working conditions for the poor; and, perhaps, resource depletion and collapse. It’s entirely up to the government (and, in some cases, labor unions), to guide the market with fiscal policy (government spending), monetary policy (mainly the interest rate), and human rights protections, and to clean up after the market with social welfare programs.

The hands are quite visible. So how much do you trust your government? They’ve been doing a bang-up job lately. Poor monetary policy (years of super-low interest rates, among other problems), contributed greatly to the housing bubble and our current Great Recession.

I just think it’s important to remember when certain pundits and Wall Street executives plead for small government and financial deregulation, that there is no reason to believe that would help in macroeconomic terms.

On the micro-level — when you are talking about things like price tariffs, subsidies, restrictions on trade, product standards — there is a justification, at least in theory, to call for “smaller government” or deregulation. Because here the market allocates resources more efficiently than the government would (again, at least in theory). But we already know what happens to the macroeconomy, left to its own devices, and that is everyone but the fabulously rich and very lucky gets smacked around by the invisible hand.

First, the economy supports repetitive, continuous flows of expenditures and income through which dollars spent by Smith are received as income by Chin, then spent by Chin and received as income by Gonzales, and so on.

Notice how this apparent attempt at multiculturalism implies an income hierarchy reinforcing ethnic stereotypes and supports a paternalistic, trickle-down theory of wealth creation at the same time?

Over recent years, women have greatly increased their productivity in the workplace, mostly by becoming better-educated and professionally trained. As a result they can earn higher wages. Because those higher wages have increased the opportunity costs — the forgone wage earnings — of staying at home, women have substituted employment in the labor market for more “expensive” traditional home activities. This substitution has been particularly pronounced among married women.¹

This passage implies that the reason women were not working before is that they weren’t valuable workers (being untrained and uneducated) and without the prospect of high wages, they preferred to stay home. The section goes on to give a number of additional explanations, none of which give any reference to social factors, e.g. the women’s movement (just as a random example).

Certainly economic explanations are important to understanding broad social and demographic changes. But only an economist would not put social or cultural factors among the reasons for women’s rise in the workplace. And this goes to a fundamental problem with neoclassical economists: they believe economics can explain far more about the world than it does. And then they make policy recommendations based on that conceit, and we keep listening to them.

1. McConnel, Campbell R. and Brue, Stanley L. Macroeconomics: Principles, Problems, and Policies (15th ed). McGraw-Hill. New York, 2002.

Of course you can find many people, even people in prominent or powerful positions, who believe carbon dioxide is not a pollutant (e.g. Senator James Inhofe), or who don’t characterize current economic conditions as a recession. But that does not justify presenting a widely-held and generally-accepted fact as a fringe belief. Waterboarding is widely and generally accepted to be torture, not “likened” to torture and not only by “critics”, just as carbon dioxide is not merely “likened” to pollution and not only by “critics”.

I wrote a letter to the editor of the Post about this; I’ll let you know what happens.

Well, prices changes behavior. That’s the point. There is some psychological value to giving people options, even ones they can’t afford, as opposed to mandating something (“You can only drive on odd-numbered days”), but it’s still about changing behavior. We know that raising the price of driving causes people to do it less (cf. recent increases in gas prices and subsequent fall off in car travel), but it’s not a terribly strong effect. If we want big reductions, like cutting miles driven in half, it’s hard to imagine that just pricing people out of their cars ($15 gas?) will be acceptable. I’m convinced the much more powerful (and palatable) tools will be land-use planning, making urban cores more attractive places to live (e.g. by improving urban schools), and cultural shifts toward valuing neighborhoods and urban features.

One of the interesting questions that came up was, “will policies to reduce miles driven also suppress economic growth?” This is something the right and center panelists were very concerned about. And actually, it’s hard to see how a pricing-based policy wouldn’t. There could be some rebound effects, like a more vibrant commercial economy if congestion-pricing makes the city more pleasant to shop and do business in. Or perhaps everyone would save fuel on balance because congestion-pricing eliminates gridlock. However, the main effect of charging more for driving is that people have less money to spend on other things. But let’s think about the other types of policies — the ones that get people replacing cars with transit and living closer to things. Offhand, I would say the economy becomes more service-oriented. People go out to eat more, spend more on cultural attractions, meet each other in bars and so on — the classic urban lifestyle model. They have smaller houses which they spend less to fill with things and, or course, less on cars. Bad for the economy? It’s not obvious, but I’d guess it’s better for communities to have more-local economies in the long run. Another direction it might go is that car travel gets expensive/unpleasant but the alternatives aren’t great either, so people just stay home. Probably yes, this would slow economic growth. Although that shouldn’t be the question. Are people less happy? Spending more time with the family and less time commuting to far-flung jobs is not bad. Staying home to watch tv and get isolated and depressed, on the other hand, probably is bad. So there is a right way and a wrong way to reduce driving. I expect that the strategies based on building vibrant communities support both economic growth and movement to a service-based economy that is better for the environment and connects people with each other.

In the wake of the this, um, misunderstanding, my mentor, a wizened and diplomatic long-time employee, explained to me that people in the federal government are not used to people saying what they mean. They work on an adjusted scale of diplomatic language. For example:

Since “concerns” is as bad as it gets, indicating serious political conflict, I can see that on a scale like this my statement must have either just been confusing or sounded like the nuclear option. The question now is whether to change my communication style or idealistically soldier on, because I believe people in the government ought to say what they mean. So far my solution has been to write what I want and trust my coworkers to temper the language. But this is probably not a long-term solution.

The author makes an interesting framing of personal privacy as an implicit contract. It’s not illegal for someone to follow you around from store to store and record your purchases, but we would consider it an invasion of privacy. We implicitly regard such information as belonging to you. The information has value to every company that can sell you more things if they know your purchasing habits, but this information has (largely) not been monetized. Apparently, the main way that buyout artists made money on hostile takeovers in the ’80’s was by breaking implicit contracts, like the implicit contract to pay senior workers more.

From my own experience from my father’s work in wholesaling, this seems to be a major way that large companies push out small businesses. Some of it is due to higher efficiency from economies of scale, but a lot of the lower prices come from breaking implicit contracts. A small sales business relies on personal relationships. “Good service” is based largely on the understanding that if something goes wrong, it will be fixed at no charge. The small businessman builds loyalty with the customers, often investing a lot up front in samples, demos, and time. The implicit contract is that the customer will stay on board for a while if she finds value in the product. A big company, on the other hand, can offer lower prices, but demos and personal time are short. Likewise, service is more an “our way or the highway” approach. Big companies can freeload on the value that smaller companies invested to get a new product adopted by coming in afterward, perhaps with a cheaper knockoff, and undercutting. At the same time, they keep costs low by redefining the implicit rules of good service and doing less for the customer.

If a small company who you’ve been doing business with for years says, “okay, I’m going to renege on all our agreements, but my prices will drop a little next year”, you’d probably be mad and find another supplier. But a new entrant has an easier time changing the rules, like the way the buyout artists could hire new managers who hadn’t made any promises about future salary. Similarly, online entrepreneurs have this incredible opportunity to break implicit contracts because the social rules of the Internet are still fuzzy. Corporate behavior is checked to some extent by consumer opinion, and behavior that really breaks the social code is sometimes met with a profit-shrinking backlash. But when the social code is fuzzy, this mechanism is less of a protection. Facebook bungled its attempt to spy on users’ purchases by going too far too fast. But I suspect if they made a more staged, strategic invasion of privacy, they would have gotten away with it. How did Google get away with reading private email? If a corporation started scanning our paper mail for keywords and tacking ad fliers on the envelopes, people would not stand for it. But now no one seems to mind the Google approach.

The capitalist compulsion is to monetize everything that can be legally (or sometimes illegally) monetized. It looks to me like the social lawlessness of the Internet and ill-formed social views about digital information are openings allowing personal identities to be rapidly monetized. Perhaps a partial solution is for online communities to coalesce around certain principles and defend them, as seemed to work in the Facebook case. If a major online community really drafted the “Internet Rules of Privacy” and got some prominent other communities to sign on, perhaps pledging to boycott companies that don’t follow the rules, that might really change the game.

As much as I’d like to see a landmark piece of legislation that defines ownership of personal information and restricts the collection of personal data, I wonder if the bottom-up approach, a sort of citizen-union, could work faster in the case of the Internet.

There are the acronyms, of course. Their use is understandable. You have a lot of multi-word office and program names you use all the time, you start abbreviating. But then you start communicating with a string of capital letters and I have to wonder, is anything really being said? I mean, even if I knew what all the acronyms meant, it seems like you would need some verbs and adjectives. In any case, I thought academics had a hard time accounting for the audience and defining acronyms where appropriate. It turns out we do pretty well compared to some government types who seem to forget they are using lingo at all.

There is also, it seems to me, rampant use of vague language to describe day-to-day activities, like “facilitate”, “connect”, “interface”, “vision”, and “leverage resources”, as in “Our vision is to liaise with many other offices and interface particularly closely with XYZ in order to facilitate collaboration and better leverage our resources.” I’m not sure which of my two theories about this is more disturbing: (1) that most of the time it’s expedient for agency officials to talk about their work in vague, buzzwordy language because, for instance, the lawyers and politicos they usually talk to eat it up, or (2) the majority of time is really spent on phone calls and meetings and other things that are most accurately described as “facilitating” and “liaising”.

I can credit everyone I’ve talked with so far for not resorting to the most cliche business lingo, like extraneously appending “moving forward” (meaning “in the future”) when the verb tense already implies that. No one has even mentioned synergy. But there is a lot of hogwash about strategic plans and long-term visions. If a year from now I start going on about how I’m leveraging resources to facilitate the goals in Administrator So and So’s YYZY plan for XZZ, I hope someone will kick me.