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November 2014 posts

Links to College Ethics Scandals

By Jonathan B. Wight

Two interesting stories appeared this morning about ethics on college campuses. Both are highly critical of college administrators—one for doing too much, the other for doing too little.

Doing too much: According to this article in the Times, Harvard and other elite schools are actively discriminating against Asian American applicants because their admissions scores are too high. 

Doing too little:  According to Jim Bacon’s provocative piece on Bacon’s Rebellion, millennial students across America are running sexually wild while Baby Boomer administrators twiddle their thumbs, as exemplified by the horror story of alleged gang rape at UVA.

The following photo appeared in Bacon's article. Is this harmless fun or a sign of depravity--of people failing to honor themselves, their bodies, and their relationships in proper ways? I have blurred the faces to protect the innocent. [Full disclosure: I would not want to be judged by some photos taken during my college days... :) ]



Endocrine Disruptors and the Brain

By Jonathan B. Wight

This is not a pretty story!  Chemical pollution costs have the potential to have long gestation times and cataclysmic effects that cannot be adequately accounted for in product pricing.

To read about this important issue, see Andrea Gore and Sarah Dickerson, Endocrine Disruptors and The Developing Brain (2012).

This matters greatly for economics. There are more than 85,000 chemicals used in industrial production, and most of these have not been studied for safety. Body

There is a ideal version of the Coase Theorem in which private property rights and low transaction costs allow the market to solve externality problems on its own. 

If any chemical harms me, I can costlessly sue and be made whole; knowing this, the expeller of the pollutant will gain my cooperation voluntarily.  The price system will work to properly allocate resources, and there is no need to have government regulations when the private market solution is cheaper and better!

But what if the externality is insidious, making its way into our fetal brains and wrecking its havoc only later in life?  How could anyone prove causation when a pregnant mother exposed to Chemical X in her third month of pregnancy bears a child who 18 years later develops certain severe health issues? 

Ronald Coase himself denounced the view that transaction costs would be low enough in many cases to allow for self-regulation.  The endocrine disruptor story is an example of why that might be so.

I happened to sit next to Andrea Gore on my way up to a conference at St. John Fisher College, in Rochester.  Andrea is a biologist at UT-Austin who studies the ways that pollutants interact with human hormones.

Hormones drive our human systems. And pollutants interfere with those chemical messengers.  The rise in autism and other diseases may be related to this issue.  Are we all like the frog in the slowly heating pot of water?  

Jonathan Wight's 2014 Presidential Address to the Association for Social Economics

Mark D. White

WightBecause he's too bashful to tell you, I'll tell you that Jonathan Wight's 2014 Presidential Address for the Association for Social Economics, delivered at January's ASSA meetings, has just been published in the Review of Social Economy, and the link has been posted to the ASE blog.

The title is "Economics within a Pluralist Ethical Tradition":

Ethical pluralism is the recognition that multiple ethical frameworks operate in social settings to solve problems of moral hazard. In particular, non-consequentialist considerations of duty and virtue operate to restrain self-interest and lower transaction costs in exchange, such as when asymmetric information exists. Positive economics has tended to rely exclusively on a behavioral model that assumes utility maximization, but this approach fails to give credit to the neglected foundations of duty and virtue. Consequences, duties, and virtues all play a role in sustaining businesses, for example, and in promoting the search for truth within the economic research community. Normative welfare economics can also benefit from understanding vertical and horizontal pluralism.

Should All Immigrants Speak English?

By Jonathan B. Wight

At a recent party, an acquaintance said she supported the President’s new immigration policy, provided that immigrants would be required to speak English. 

The signs at Walmart were galling to her—blatantly announcing products in Spanish!

The English-only movement has a long history going back centuries, but took on new life in the 1980s and afterwards. On the surface, it is a sensible policy to reduce transaction costs and increase the cultural coherence needed to maintain national unity.  Think of the cost to public administration and schooling to maintain more than one official language, not to mention the loss of economies of scale in advertising in the private sphere.

Wikipedia quotes Teddy Roosevelt, the great progressive, as saying “We have room for but one language in this country, and that is the English language, for we intend to see that the crucible turns our people out as Americans, of American nationality, and not as dwellers in a polyglot boarding house.”

There’s more than a few things troubling about the anti-Spanish movement, however.  The main two are that it seems unnecessary and counterproductive.

My great great grandparents on my mother’s side came over from Germany, likely in the 1870s.  They settled where lots of other Germans did, in Milwaukee, Wisconsin. They proceeded to build up a strong German community and my great grandparents contributed to this by starting a German-language printing company!  This effort survived until World War I when it became clear that using the enemy language would not do anymore.

My point is that America’s history is filled with other immigrant groups coming in and maintaining their own diverse cultures for many decades.  This happened to the Italians in “Little Italy” in North Boston and the Chinese in “Chinatown” in San Francisco. Even earlier, Spanish was spoken in Florida, French was spoken in Louisiana, and Spanish was spoken throughout Texas, California, and places in-between.  Navajo was used in the Navajo Nation, and of course this diversity became quite useful for making codes during World War II. There is no magic time in American history when English only was spoken. Navajo

Eventually there was language immersion by the other groups. Kids typically want to learn English to fit-in.  So, the bottom line is the English-first movement raises some important points, but ultimately is unnecessary as kids will tend to learn English. Forcing the parents to learn seems draconian.

I do support the teaching of “business English” in schools, so that every kid learns the language skills needed for success in college and business.  Many kids growing up in the ghetto speak dialects of English that can be as incomprehensible to outsiders as Dutch or Russian.  Requiring everyone to learn “business English” does not mean abandoning one’s cultural roots, accents, or so on.  It means learning a “second language” that at times can be vital for economic opportunity. 

But requiring English-only suffers from a second problem—it is counterproductive in a global age. Americans as young kids should be learning multiple languages. It creates a tone of jingoism and cultural arrogance to insist on English-only.

2nd International Congress of Social Responsibility

By Jonathan B. Wight

I have no idea what the Congress of Social Responsibility is or who is promoting it.

But someone of power and might must be backing it, Buenos airesto attract
Paul Krugman, Amartya Sen, Nouriel Roubini
, and others to Buenos Aires to be the plenary speakers last week.

Krugman has blogged about the Argentine government’s ill-disguised attempt to manipulate inflation figures. It goes without saying that if government cannot collect basic information without attempts to manipulate it, that is a grave breach of fiduciary responsibility.

My own experience in Brazil bears this out. The government at one time installed price controls on black beans in Rio (causing shortages), which nevertheless allowed the government to report a lower price of food.  It didn’t fool anybody but themselves.

It’s a good thing to promote social responsibility, especially as it relates to transparency and accountability.    

Tom Magliozzi - R.I.P.

By Jonathan B. Wight

This is a few days late, but one of the great, authentic comics has died.

Tom Magliozzi (1937-2014) is the older brother to Ray, of the CarTalk duo fame. Cartalk

I first heard “Click and Clack” up in Boston in the early 1980s when the show was airing locally. Later, it was a joy to find it broadcast nationally on NPR.  It was by far my favorite show: I would arrange my housekeeping duties on Saturday morning to coincide with the show, carrying around my radio while I worked at chores.

Tom and Ray cared about ethics, and they helped steer people to generally do the right thing.

For example, if someone had a car that they knew had a serious fault, Tom and Ray would usually convince the person to let the next buyer know about it.  They had a common-sense decency about the right and wrong way to treat people and it did not require highfalutin’ philosophy to keep straight.

The exception would be when someone was trading-in a car at a dealer.  Then, it was “all’s fair in love and war” mentality. I guess they figured the cards were already stacked in favor of dealerships. The dealership had the ability and the incentive to eliminate problems of asymmetric information, so there was little danger of the dealership getting rooked. But the same was certainly not true of buyers.

Few of us are saints, and Tom Magliozzi is certainly not one. But he sure made us laugh and encouraged us all to become slightly better people.

Trickle-down Inflation

By Jonathan B. Wight

From Matt O’Brien at WaPo we learn that billionaire Paul Singer thinks the Commerce Department is underestimating inflation—because the things that billionaires buy are rapidly rising in price!

Yes, by Singer’s account, billionaire spending is a leading indicator of general economic trends.  Singer is quoted as saying:

“Inflation is also distorted by the increasing gap between the spending basket of the well-off and that of the middle class (check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like).”

If prices of rare art, exotic mansions in the Hamptons, and gorgeous homes in London are booming, how far behind can the rest of the market be? 

After all, Beluga caviar (at $3,100 per pound) is a close substitute—isn’t it?—for Walmart hummus Caviar (at $2.99 per pound)?  Inflation will trickle-down!  If Beluga caviar is getting pricier, surely the Fed should look at this indicator with great concern!

But markets are actually quite segmented. One reason is because of vastly different income elasticities of demand. 

Also, while billionaires earn a huge fraction of income, they do not spend a huge fraction of income on the kinds of things that average people do. So whereas GDP calculations give a disproportionate weight to the income gains at the top (the larger the share of income, the larger the weight given), this is not true for calculating inflation.

As O’Brien says to Singer: “Tough luck.”