Arnold Kling

Math and Economics

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Brad DeLong points to an interesting post by Daniel Davies on the use of math in economics. Davies writes,


If the history of economic thought teaches us anything, it teaches us that people who don't use the mathematics always, sooner or later, end up saying something badly wrong about economics. Paul Krugman has an essay on the subject with which I profoundly disagree on a number of points, but which contains one highly important truth; there are important ideas in economics which are crystal clear if you understand the mathematics and bloody hard to get your head round if you don't.

Davies has many interesting links in his post. The Krugman essay says in part,

International trade in particular happens to be a subject in which a page or two of algebra and diagrams is worth 10 volumes of mere words. That is why it is the particular subfield of economics in which the views of those who understand the subject and those who do not diverge most sharply.

I may be putting words into Krugman's mouth, but what he is saying is that you can divide the world into people who will say things like, "We're losing all our good jobs to India!" on the one hand and people who believe in a simple general equilibrium model (the famous 2x2x2 model) of trade on the other. International trade always looks like a better deal from a general equilibrium perspective than it does to those who do not have that perspective.

I would like to break out two issues raised by Davies and Krugman. First, can economic education take place without math? I hope that the answer is "yes," because I am trying to outline a book that attempts to do that. Unfortunately, I find it plausible that the case for free trade cannot sink in when it is presented in nonmathematical form.

I also think that when we use math to teach we should use numerical examples and computation rather than calculus. In my business experience, I never encountered a situation in which I used calculus. I had a data point or two and extrapolated the rest. I think that we mislead students who may be headed into business when we describe the world in terms of differentiable functions.

The second issue is, "Should economists use math to communicate with one another?" My personal opinion is that we have carried the use of math well past the point of diminishing returns.

In economics, it is easy to deceive yourself and others. You can deceive using words. But you can also deceive using math. You can say that assumption X drives a result when it really is assumption Y. To this day, I do not think that the "rational expectations" model of macroeconomics was driven by the assumption of rational expectations. I think it was driven by an implicit assumption of perfectly flexible wages and prices. But hundreds of Ph.D dissertations and a Nobel Prize or two were awarded to what I always thought was a mathematical swindle.

For Discussion. Is trying to teach economics without math a misguided project?


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CATEGORIES: Economic Methods



TRACKBACKS (3 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/38
The author at Truck and Barter in a related article titled On Teaching Economic Models writes:
    I look at the question more broadly: To what extent could I teach anything using math? I could re-read Arnold's question to read, Is trying to teach economics without formal logic a misguided project? My answer: Hell no! [Tracked on December 18, 2003 4:05 PM]
The author at PrestoPundit.com in a related article titled http://www.hayekcenter.org/prestopunditarchive/002175.html writes:
    Truck and Barter: Arnold Kling asks: Is trying to teach economics without math a misguided project? As a math/stat major... [Tracked on December 23, 2003 1:45 AM]
The author at Le blog de Polyscopique in a related article titled Réponses sur l'OMC writes:
    Je reproduis ici les réponses que j'ai reçues sur mon message sur l'OMC. Jubal Harshaw de TANSTAAFL commente: Staiger a étudié de façon fine le rôle et le fonctionnement de l'OMC (voir sa page http://www.ssc.wis... [Tracked on January 15, 2004 9:35 PM]
COMMENTS (79 to date)
Joe Kristan writes:

"For Discussion. Is trying to teach economics without math a misguided project?"

No. Unfortunately, many of us (I raise my own hand here) failed to appreciate the beauty of mathematics when we were in school. A lot can be taught by example and analogy; unless you want to consign the vast majority to economic ignorance, you have to continue to try to teach around innumeracy.

Steve writes:

You cannot describe economics without what your president calls "fuzzy" math.

Give all our jobs to India, we get lower prices in the states, but nobody has a job, but the prices are low, so we're all better off. Also, we are all better off today than in the late 90s because prices are lower today, even though 8 million people can't find meaningful work. It's better to let other countries (even ones that disagree with us) make steel while we sit around and think up marketing ideas for a living, because, gosh, we don't need steel for anything important like the military, so we can rely on china to provide it for us.

Fuzzy math.

Peter Gallagher writes:

Hi Arnold,

I doubt that many people actually want to LEARN economics.

I think most people find economic concepts (opportunity cost, economic rationality, comparative advantage etc) surprising when first introduced to them, useful in many different contexts and even liberating and fun. But not many people who have learned to apply economic concepts want to be economists. For these people, the habits of thought and the conceptual frameworks of economics that serve them well in their career or in their lives (as consumers, as taxpayers) do not require a mathematical understanding in my experience.

I have managed to take business people and even senior trade administrators through quite sophisticated analyses of trade policies using just pictures (simple static equilibrium analyses); the economic equivalents of 'tangrams'.

It's true that it's impossible to have a sophisticated grasp of the theory without a good grasp of the mathematics. It unlikely that anyone whose understanding of the theory is exclusively non-mathematical will make a contribution to the development of the theory, for example.

But I find it amusing that Davies should warn that people who don't do the math will sooner or later make a mistake. Precisely the same observation can be made about the many professional economists whose working assumption is that economics is an application of mathematical analytics.

Best wishes,

Peter

JJ writes:

I do believe math is very important to economics education since it's a subject that basically deals with relationships between numerical data. I think the basic ideas behind economics can be explained non-mathematically the way a pop-sci book can explain the general ideas of relativity without equations, but if you want to get beyond a very cursory knowledge of econ you need math.

Cap'n Arbyte writes:

I don't think the math is necessary -- just look at the Austrian school. Using math also doesn't make you more likely to be correct. The equations and models are simplified, they make unrealistic assumptions and miss things in the real world. If your assumptions are bad, so are your results.

Math can also be abused. See William Barnett II's "Dimensions and Economics: Some Problems":
http://www.mises.org/qjaeDisplay.asp?letter=b&action=alphaAuthor

Bob Hawkins writes:

Hey, we teach physics without math. I've done it.

Perhaps it would be more precise to say, we teach physics *concepts* without using math. Obviously, the students in "Physics for Poets 101" aren't being prepared to do research or to apply physics. Presumably, knowing concepts like conservation of energy is some use to them in their chosen field, even if they can't calculate how many joules.

Certainly, knowing concepts like supply and demand, even without being able to numerically determine the equilibrium price, would be useful to any citizen.

Guan Yang writes:

Here's an idea:

(I just started undergraduate economics at the University of Copenhagen.) The micro book we use in our first-year course is Hal Varian's Intermediate Microeconomics. There are a lot of interesting concepts. One basic micro concept is that if you tax one good (e.g. cigarettes) and use all the proceeds to subsidize another good (food), then consumers will be worse off. Varian shows this very elegantly using algebra and revealed preference.

This concept could easily be explained to a layperson without using math. However if that layperson began to *question* the idea, saying that he does not believe in it, I would have a very hard time proving it without resorting to math, or at least indifference curves and budget lines.

Steve writes:

When I look at an Economist, I see a mathematician without any human compassion, empathy, or common sense.

To say that forcing cigs to be more expensive and in exchange getting cheaper food is a "bad" thing, it just reinforces that stereotype.

Mcwop writes:

Steve,
Take a look at the Marketplace section (front page) of the Wall Street Journal. Two columns that will be of interets to you.

Steve writes:

I don't have the WSJ, but let me guess. IBM's offshoring of 4,700 hard working american's jobs might be one of them?

Jim Glass writes:

"First, can economic education take place without math? "

Well, Coase got a Nobel using no math at all -- in fact, while largely deriding the mathematical modeling in "blackboard economics" for the way it "assumes away" little real-world details that muck up the models, like transaction costs.

What did he say? "Utility is to today's mathematical economics what the aether was to 19th century physics." Or something close to it.

So it is possible to do some valuable economics with no math, just by looking at facts and data and applying logic and insight. Of course, economics is a wide and spreading field, so other areas of it might be at the same time highly math dependent.

But economics, to the extent it has any real value, must be applied through policy in the real world. That means it *must* be possible to explain it to the average voter and the average politician, neither one of whom will know calculus and will probably have long-forgetten high school algebra (if he/she ever knew that).
That gets to Marshall's famous advice on doing economics:

(1)Use mathematics.
(2)Keep to them till you have done.
(3)Translate into English.
(4)Illustrate by examples that are important in real life.
(5)If you can't succeed in (4), burn (3).

That still looks like pretty good advice to me. And if one can't even succeed in (3) it likely means that in terms of the outside real world one probably has gone far into diminishing returns to score some inside points in academia or some such.

"Unfortunately, I find it plausible that the case for free trade cannot sink in when it is presented in nonmathematical form."

Oh, sure it can. I understand it and I haven't used calculus in 20 years -- and I've always been able to explain it convincingly without any math references at all to people who are *open* to explanation.

The problem with getting the free trade explanation across is the same as getting the "why rent control is bad" explanation across to people here in NYC. It's a combination of the fact that the truth is counter-intuitive and a bit paradoxical on first thought to most people (protectionism *should* protect jobs, and rent control *should* controls rents, right?) compounded by the fact that many people either are self-interestedly motivated on the issue or have already been long-indoctrinated into not believing it.

But the apparent paradox is not hard to explain in plain Englsih with simple logic to people who are open to explanation. I mean, this isn't quantum mechanics!

Which gets to the main issue, IMHO. All the sciences taught in high school and which society deems some knowledge of necessary for scientific literacy (physics, chemistry, astronomy, etc.) are *at least* as math dependent as econ. But nobody coming out of high school has trouble with counter-intuitive paradoxes like the Earth is not the center of the solar system. Although to *prove* even that it you'd need some really sophisticated observations and math!

The problem is we don't teach basic economic literacy in high schools and spread it through "popular economics" magazines, books and columns the way we do science. We don't even do it through business schools and publications. The result is there is no shortage at all of top PhD scientists, and top business people too, (Perot, Soros, Buffett) going around publicly spouting *howlingly* wrongheaded economics -- and doing it self-righteously, with no idea that they should be embarrassed. I mean, I saw some Scientific American articles a while back with scientists lecturing on economics that were like a pack of economists who had never heard of Darwin lecturing to PhD biologists.

The odd thing is that in the real world basic economics is much more important for the average person to know than basic science. The electorate does not vote on whether it is wise to vote for laws and politicians that defy the laws of physics and chemistry. They don't vote for the politician who promises to use alchemy to turn lead into gold and distribute it to everyone -- but *do* vote for politicians who promise to regulate rents to give more low-cost good housing to everyone!

I mean, kids come out of high school knowing where fossils come from and what goes into making them -- but with no idea of where a dollar in the pocket comes from, in literal terms, or how their first job will be created.

This seems to me a very basic deficiency in our educational system and cultural standards.

Lawrance George Lux writes:

I must admit to being a biased Observor here, as I do relatively poorly with the math elements of Economics, and I have attempted a writing career of expressing Economics in nonmathematical terms.

I have found Math clouds as much as it edifies. A statement that you cannot explain an Economic concept without Math, simply states you understand a mathematical concept, without understanding the real Economics of the situation.

I have long opposed overextension into the Export markets, as overcapitalization is rampant, for the numbers of Product Sales to be expected over the long run. I also support a uniform, low rate (2%) tariff across the board on Imports. Math Economists will state this is wrong, but they say so in a universally common environment of increasing disparities of Income, and with falling Labor rolls.

Math Economists always fail to observe what is taking place on the ground. The Math provides an Ivory Tower, where they do not have to look out the window, and see there are increasing numbers of Bums living on the sidewalk. lgl

Steve writes:

I don't know a single successful, rich businessman who espouses free trade from the rooftops, do you? They're all a bunch of Ivory tower Economists and children of Scottish Gypsies that beg for it.

Why is this?

Jim Glass writes:

"I don't know a single successful, rich businessman who espouses free trade from the rooftops, do you? They're all a bunch of Ivory tower Economists and children of Scottish Gypsies that beg for it.

"Why is this?"
~~~

Because business people are interested in putting money in their own pockets and are happy to lobby to get the ability to do so at other people's expense.

Ivory Tower economists OTOH, not being in the position to so profit, are more open to the idea of considering the greater good of all.

Business people also are much more sympathetic to monopolies than are Ivory Tower economists -- well, at least when *they* have the monopoly. It's pretty much the same thing. Maybe exactly the same thing.

Bernard Yomtov writes:

I have to say I'm dubious. I think you can give some rough explanations of things, but it's just too easy to get sidetracked if you don't have a good logical base. This is the point I think Jim Glass was making about the difficulty of dealing with objections.

Consider chapter one - supply and demand. These are, after all, mathematical concepts, and many common errors arise from failure to understand this.

May I suggest that one way to address Arnold's question is to deal with a specific topic, like supply and demand. How would you explain these without graphs or equations, in a way that makes the concepts useful tools for thinking about economic issues?

Mcwop writes:

Steve writes: "I don't have the WSJ, but let me guess. IBM's offshoring of 4,700 hard working american's jobs might be one of them?"

No. It is about India recruiting Americans for IT jobs there, and the second is about Indians moving back to India for jobs.

On another note, Jim and Steve, you talk about businessmen that do not espouse free trade. I know a few succesful importers that do espouse free trade.

Steve writes:

McWop--

I'd sooner die than move to that 3rd world hovel and work for one of them, thanks for telling me though.

Secondly, of course Importers are going to be for free trade. That's a silly statement. Do you know the proportion of American would-be-workers to the number of owners of importing businesses? I'd say that's a math problem Economists need to look into.

Daniel Lam writes:


The problem with self-interested motivations is not so much self interest per se as the fact that people value their own self-esteem and dignity far too much, and truth and logic far too little.

If you are living in a rent-controlled apartment paying one-tenth the market rent, knowing the truth about rent control would mean acknowledging that you are benefiting massively from a policy that is harmful in general. Many people would consider such an acknolwedgement to be an affront to their moral self-worth, so they refuse to believe the truth. Personally, I would be very happy to know that I am gaining from a dumb policy at the expense of less lucky fellow citizens.

The first thing one should do before starting to think about economics is to list all the bad policies that one supports because they benefit one personally, and all the good policies that one opposes because they harm one personally. If you can't come up with a long list, you're not being honest with yourself.

Ronnie Horesh writes:

"Unfortunately, I find it plausible that the case for free trade cannot sink in when it is presented in nonmathematical form."

There is a strong case for free trade that does not take mathematical form, and that is the moral argument. Governments who stop their citizens buying things from willing sellers [at home or overseas] should have to explain why. That non-mathematical statement would, I suspect, be readily understood by anyone who buys anything in any market place.

Gautam writes:

Hello,

I'm writing from the 3rd world hovel that steve does not want to come to. Unfortunately for him he does not understand that the economy whether america's or India's or of the whole world for that matter does not exist in stasis, things change, there is a such a thing as technological development.

In the 1980s and early 1990s auto workers lost jobs in America to Japan, raising similar anti-trade cries, but American ingenuity turned around the economy with the IT boom. Not only are American's losing jobs as a result of the IT revolution to lowly paid snivelling(sic.) Indians such as myself, but also to fellow Americans who are making more for less, because they now have high speed computers and internet connections on their desks.

Mathematics is very important in understanding economics and clarifying the finer points, but personally i wish there was a less mathematical way of doind things, because it alienates many people such as steve who can't comprehend economic insights without indulgin in pointless banter, that circumvents the issues.

Monte writes:

Math may add dimension to our understanding of economics, but it’s not a fundamentally important aspect of teaching it. Economics is a behavioral science more closely related to psychology than a hard science like physics or chemistry, both of which are heavily dependent on math for interpretation.

At the same time, many economists are convinced math and economics are intrinsically linked and represent a whole that is greater than the sum of its parts. Indeed, as Simon & Blume observed in the preface of their book, "Mathematics for Economists" (1994), mathematics, for better or worse, has become the language of modern analytical economics.

Steve writes:

Gautam--

No disrespect intended. I just didn't sign up for being forced to move to the 3rd world when free trade was shoved down my throat in the 1990s. You guys get all the benefits such as new jobs, we get all the benefits such as cheap socks at WalMart and unemployment. Thanks for everything.

Steve writes:

To reiterate:

In the 90s, we saw millions of jobs go offshore with the promise that we would get better, higher paying jobs in return. WHERE ARE THESE JOBS, ECONOMISTS? Tell the American people where these jobs are.

We are sick of the lies about free trade.

Steve writes:

Please prove (using math or any other way you choose) that free trade benefits everyone in the job losing country. Please take into account unemployment insurance payouts, psycological damage, alcoholism, and foreclosures in your analysis, not just that "50,000 save a $1 on socks, so this is better than someone having a $50k/year job".

Convince me of this and I'll stop posting on this board. Good luck.

Boonton writes:

How about the reverse? Demonstrate that protectionist policies protect enough jobs to counter loss consumer welfare effects. You can even incorporate a model that gives one $50K job more weight than 50,000 who save $1.

Shouldn't an advocate of a policy demonstrate that there is good reason to think it will work?

Steve writes:

Good point, boonton. Here goes:

Ok, so let's say I loose a $50,000 job. Now that my job is done in China, 50,000 more people can buy socks for $1 less per pair. Sounds great for those 50,000 people, doesn't it? Consider what might happen in this situation, though:

My house gets foreclosed upon, so I'm out on the streets. The bank gets the house and is forced to sell it at a loss. Probably about $5000 there. I'm getting unemployment of $1,000/month (that's coming out of YOUR pocket), and my children are beating up your kids to steal lunch money because I couldn't afford to feed them. My wife has to turn to "the oldest profession" because there are no jobs for her anymore, either, and gets arrested (costing YOU money for police, etc). She gets a public defender (costing YOU more money) and neither of us pays any taxes anymore since we have no income. Although we pay no taxes (which causes the deficit to rise, causing interest rates to rise, COSTING YOU MORE MONEY), we are still using the roads, getting our kids educated (for what, I don't know), and collecting unemployment.

All of this cost, so people can get socks for $1 less at WalMart. None of these things are EVER factored in when talking about the "benefits" of NAFTA, GAAT, etc.

Bob Dobalina writes:

Steve, Steve, Steve...

My house gets foreclosed upon, so I'm out on the streets. The bank gets the house and is forced to sell it at a loss. Probably about $5000 there.

Great news for: the guy who buys your house, the guy who shorted the stock of your bank because they make crappy loans, the carpenter who redoes the kitchen, the bar the carpenter goes to after you pay him, the mechanic who works on the bartender's car, the church the mechanic attends, the poor children whose educations are supported by the donations the church takes in, the neighbors the child who don't have to worry about that child stealing their cars, et cetera.

Also great news because it teaches people about the values of thrift! It encourages them not to mortgage themselves to the gills in order to afford a house that they really can't.

I'm getting unemployment of $1,000/month (that's coming out of YOUR pocket),

But we free marketeers don't believe in involuntary unemployment compensation.

and my children are beating up your kids to steal lunch money because I couldn't afford to feed them.

If your kids beat up my kids, we have a serious problem. Crime is a problem under any economic model. If we can't solve the problem together, Steve, I'll see to it that your bullying children become your problem.

My wife has to turn to "the oldest profession" because there are no jobs for her anymore, either, and gets arrested (costing YOU money for police, etc). She gets a public defender (costing YOU more money)

Nope! Prostitution is legal in a free market.

and neither of us pays any taxes anymore since we have no income.

In a free market, there wouldn't be income taxes.

Although we pay no taxes (which causes the deficit to rise, causing interest rates to rise, COSTING YOU MORE MONEY), we are still using the roads, getting our kids educated (for what, I don't know), and collecting unemployment.

Nope. No deficit, no government spending.

And if we favor a very minimalist government, and you're driving on the roads, you're paying taxes on gas.

In a free market, the roads are toll. So we wouldn't let you free-ride there, either...

Steve writes:

Crime isn't a problem in Scandanavia, is it? And they're not capitalist pigs like us.

Social Darwinism is barbaric. Try to survive in this country without a job and without hope of replacing your prior job, you'll come to agree with me.

Daniel Lam writes:

'Ok, so let's say I loose a $50,000 job. Now that my job is done in China, 50,000 more people can buy socks for $1 less per pair.'

And what are those people going to do with the $1 each they have saved? Say they spend it on shoeshines to go with their new socks, something they could not afford before when socks were more expensive. Will that not create a new $50,000 job for a shoeshiner? The shoeshiner may be the former sock maker after a painful transition, or it may be a different worker altogether. You may be justifiably angry at being forced out of the noble profession of sock making and into the humiliation of shoeshining, or at being thrown out of work while that brute the shoeshiner who lives across the street makes a fortune. But in either case no jobs have been lost in aggregate.

I'm kind of new here, so I'll be optimistic and assume that it is not a waste of time to try to explain in more general terms how the loss of jobs to cheaper foreign imports is offset by the creation of jobs in the following sectors:

- In the export sector, if the foreigners use the dollars they earn to buy American stuff.

- In the capital goods and construction sector, if the foreigners invest their dollars in US assets, and the money is used by US companies to increase capital spending.

- In the government sector, if the foreigners invest their dollars in US assets, and the the money is used by the government to increase public spending.

- In the domestic nontraded services sector, if consumers use the savings from cheaper imports to increase their consumption of such services, as in the shoeshine example.

This is not so complicated. And see, no math at all.

Steve writes:

Mathematical economists also believe that lower unemployment raises inflation. The late 90s should have dispelled that myth, yet you folks still believe that.

As we continue with our deflationary tailspin, more indebttedness will lead to falling consumption/wages, etc while still at "full" employment, you math whizzes will realize that full employment is around 3%, not 5.5% and that positive inflation and lower unemployment are not directly correlated while negative inflation and higher unemployment ARE directly correlated.

Steve writes:

Yes, none of it is complicated. I understand.

I'm just angry that people in the tech industry are going to have falling real wages for the next 30 or so years if they're lucky enough to stay employed at all, and nobody in our government seems to care.

Boonton writes:

"Ok, so let's say I loose a $50,000 job. Now that my job is done in China, 50,000 more people can buy socks for $1 less per pair. Sounds great for those 50,000 people, doesn't it? Consider what might happen in this situation, though:"

Steve, this is a textbook example of why math is a good thing. I didn't ask you to spin some story about how the universe blows up because free trade cost you a $50K sock manufacturing job per year (BTW, what does the typical worker in a sock factory make? Assuming some still exist in America I will bet it is not now nor ever was anywhere near $50K per year).

I specifically asked for you to demonstrate that protectionist policies generate more benefits than they cost...even if you want to weigh $50K to one person higher than $1 to 50K people. For example, there's little evidence that the steel tariffs saved more jobs than were cost in steel consuming industries (plus the costs to consumers).

Boonton writes:

"I'm just angry that people in the tech industry are going to have falling real wages for the next 30 or so years if they're lucky enough to stay employed at all, and nobody in our government seems to care."

So what? I understand your emotion but why should this be different from any other industry? I heard a report on NPR that nurses, because they are in demand, are making $50K a year to start in California. Doctors in the Philapeans are coming to America to be nurses because of the money. Not too long ago tech workers were making obscene pay....so why shouldn't their real wages fall? They were overpaid to begin with.

Gautam writes:

Steve,

I think you are being a tad emotional about this (and for good reason I am sure), but unfortunately despite getting all those jobs that you claim we are taking away from you, India is still a desperately poor country. Here there are people who have been unemployed for 20 years at a stretch (since the closure of Textile Mills in the 1970s because the labour Unions did not like the idea of upgrading facilities with technologies then being developed in the west to improve productivity which would have made many but not all jobs redundant, instead they just shut down the whole plant and any benefits that might have accrued as a result of being officialy fired have not been realised either), and there are thousands if not millions of people who do not have regular jobs at all. Even a regular job in India does not pay enough in a year to pay for an American lifestyle for more than a week or two.

I personally don't like the idea that many Indians(especially socialist minded ones) harbour about the Rich countries systematically keeping people here poor, by denying us technology and trade and forcing us into penury as a nation. I think that India has been poor largely because Indians are not allowed the chances to proove their mettle as entrpreneurs or as professionals, unless they have some back alley connection to the power mongers that be within the country.

A distinct advantage that exists in America and in many western countries by contrast.

Steve you are a lucky man to have been born in a free country and you don't need me to tell you that, but does ensuring your freedom involve taking away the miniscule wealth(and the accompanying freedoms) that is coming our way?

The argument for free trade between countries is the same that exists for free trade between states within the same country. For instance I think Mercedes has opened its factory in Alabama where costs of labour are lower and labour is less unionised, which could be interpreted as a loss of jobs for the not exactly fully employed Detroit area.

Steve writes:

Gautam--

We have covered on this board many times that trade between the states and trade between countries are two different things because of immigration and forex. I can move to Alabama if need be, but moving to India is far more difficult. The fact that Alabama is taking Michigan's jobs does not put pressure on the dollar, either.

I harbor the same idea that your friends do. USA is trying to keep India poor so they have a ready supply of CHEAP labor available at any time. Think about that for a while.

Yes, I am lucky to be in this country. Why should I be happy that people in another country are taking away my chance at becoming wealthy, though?

Boonton--

So you're again saying that anyone making over $50k a year is overpaid? How would you feel if every time you turned on the news someone was telling you that you are overpaid and should be put out on the streets? Try walking in a programmer's shoes for a month. Watch the nightly news coverage of offshoring. Watch Lou Dobbs every night about offshoring of IT work. Read slashdot every so often talking about it.

Steve writes:

Aren't some industries WORTH protecting for national interests, regardless of the stupid math behind it?

Steel?
Defense?
Ag?

Yes, you're right that free trade should benefit the society as a whole. It's just hard to see that when you're one of the very few who will pay dearly for the benefit of many others. I understand the math behind it, you folks need to understand the emotion behind the counter-argument (which none of you seem to care about at this point).

One MAIN tenent behind Free Trade is that newer high pay, high value jobs are created, and this is a total lie. WHERE ARE THEY?

Boonton writes:

"Aren't some industries WORTH protecting for national interests, regardless of the stupid math behind it?
Steel?
Defense?
Ag?"

Possibly, in that case policies should be crafted towards national defense...not bailing out pension plans of a few old mills. This may mean keeping some mills mothballed near navel yards. It doesn't mean protection or aid for mills that will probably never produce anything defense related.

I never said everyone making $50K was overpaid. I said that there were a lot of overpaid people in the tech sector. This means that pay will be falling in that sector causing it to balance out with the rest of the economy. This is unavoidable and using protectionism will be just a band aid on the real underlying trend.

Steve writes:

Just like all the other free traders... You guys never answer the all-important question that holds GW's presidency in the balance:

Where are the new high paying jobs we were promised would replace our old back breaking IT jobs?

Boonton writes:

I gave you one, nurses. Not as sexy as building a dot com to deliever bubble gum to your house that loses around $150M a month but it pays a lot of bills. I'm sure if you dig around the labor dept. site you can find other 'hot' careers whose pay is rising....

Steve writes:

Bankruptcy attorney and nurse. that's all there is, friend...

Cap'n Arbyte writes:

Steve,

I'm a high-tech worker whose job is at risk due to globalization. I still resolutely support it. I explain my reasoning here, and wrote it with an audience of people with concerns like yours in mind:
http://arbyte.us/essays/Glory_of_Globalization.html

I would be happy to discuss this topic via e-mail if you'd like.

Steve writes:

Cap'n--

I've actually already been to your website. I stumbled upon it as I was searching for salvation at my lowest point (when I was less than a month from unemployment, yet writing software using the "latest and most in-demand and cutting edge tools".)

Like I've said, I understand the theories. I just don't see why it's okay to stab your fellow man in the back instead of cooperating with him. Nor do I understand why people who make decisions on trade are people who are the least negatively affected by their decisions.

America CANNOT compete on anything that involves labor now that the 3rd world has equal access to jobs. That's great if you're a machine, but I'm a human, all I have to offer is labor. Take that one to bed tonight.

Eric Krieg writes:

Everything I know about economics I learned by reading the editorial page of the Wall Street Journal. I can't recall any equations being published there.

BUT...

Come on, what kind of math do you really need to know to do undergrad economics? Algebra? REALLY SIMPLE ALGEBRA at that. And some really simple graphs.

The math is helpful because it teaches kids HOW TO THINK. Perhaps that is a bigger goal of college than mere instruction in any one subject?

Deleting math from ANY subject is misguided. Math is like lifting weights for your brain. It makes you smarter.

And whoever made the comment that they learned physics without math must be smoking crack. You didn't learn anything. Physics can be done without calculus if you are willing to memorize equations without understanding how they were derived, but it cannot be done without math.

Steve writes:

Eric--

Most of these folks consider Calc I to be upper division math. Algebra and knowledge of a TI bond calculator should be all that is needed for Econ.

Eric Krieg writes:

>>Algebra and knowledge of a TI bond calculator should be all that is needed for Econ.

And I got a minor in economics with a 4.0 GPA with nothing more than elementary algebra. I think calculus was MENTIONED once.

Like most engineers, I'm an HP man. I'm Reverse Polish.

Steve writes:

At the risk of sounding like an AOL user, Me too!

They'll have to rip my Hp48 from my cold, dead hands.

Boonton writes:

I was an econ major as well and I think not using calculus made the subject more difficult. Calculus is beautiful to express economics concepts like a rate of change, elasticity of supply or demand curves and so on. Trying to learn these concepts using only simple algebra is actually more difficult in my opinion. A touch of calculus would have sliced through those concepts like a hot knife thru butter.

Steve writes:

Booton--

Wouldn't a stats course be more beneficial for solving those types of problems?

I suppse a discussion of limits would help, and that would be covered in Calc I, but how often does an Economist need to find the area under a curve? The volume of a 3d object? The surface area of a field?

Boonton writes:

Not really, the basic parts of Calc hit really good economic concepts. The slope of a point on a curve, the rate of change of a curve and all that. These hit basic economics very well. Statistics doesn't hit basic economics as well, IMO, since econ I & II is heavy on the theory while stats would come into play for a course on producing actual models of the real economy.

Eric Krieg writes:

Calc I and Differential Equations are all that is needed. Limits, derivatives, integrals, and diff equs. I never saw any value in the rest of it (when is last time anyone used a power series?).

A better idea than dropping math from economics is using economics to teach math. I have always felt that, if a teacher could find a real world example of a concept being used, I was more interested in learning that concept.

I think most kids are similarly practical.

dsquared writes:

Aside from the general issue covered in my own post, here's my (short) list of things that you absolutely, positively, need university level mathematics to understand in economics.

Any maximisation problem complex enough to be of interest -- Linear programming.
Optimal portfolio construction and the Capital Asset Pricing Model -- Quadratic progamming (although to be fair, most economists cheat on this one and take the result on faith, you can't understand it without the math)
Theory of auction design -- mainly real analysis and Bayesian learning
Option pricing and general valuation of contingent claims -- partial differential equations and martingales (I would argue that you really don't understand a risk-neutral pricing argument unless you can approach it from both angles).


Of these, the first three are pretty specific applications of economic "engineering-type" math, adapted for specific problems not of interest to the layman. The last, however, is an incredibly important concept of amazingly general application and I bet it doesn't appear in Arnold's book (or any other undergraduate level textbook) because you *just can't* understand it without the probability theory.

Gautam writes:

I'm doing my masters in Economics, the kind of maths tools used in the course are calculus (including integrals), Linear and Non-Linear Programming and Stats tools like Time Series, Regression, Probability etc.

Though engineers may find these things elementary, everyone is not an engineer (which is a good thing for engineers), and the objective of writing economics non-mathematically would be to extend the logical reasoning of the subject to those who are uncomfortable with mathematics or have never had a chance to learn too much of it.

The reason why i don't support the ideas that you seem to agree with, is that they have led to 50 years of isolationism, where a large portion of the population was not able to break through the bureaucracy, large numbers of people starved to death because the government which monopolised everything from farm acquisition to trnasport to distribution, was not able to deliver food fast enough or to the right places. It still can't, but the proponents of the ideas of neo-colonialism would rather starve to death with protectionism than they would have everyone fed and wealthy in a free trade economy, because they think that if we engage in trade our resources will be taken away from us. But that is just looking at one side of the equation, the other side shows that with the money we get by selling our resources we are able to buy other resources that we lack, which help us improve our standard of living.

Inter State commerce is quite similar to international commerce, in theory as well in practice though such imprecisions as "more difficult to move to India than to Alabama" do help cloud out that idea. For instance take my own job, I work as a RA for a PhD student from Cambridge, Mass. He can't afford to hire someone in America because he can't pay minimum wage, but he pays me about approx. 1/3rd of American minimum wage and he can afford to pay that.

Similarly it is not neccessary that your job has been taken away from by someone in India, take a scenario where one of your co-employee's a particularly brilliant chap with a lot of drive leaves your firm, and wants to start up a firm which competes with your existing firm, but your firm provides the services it does at the lowest possible cost that is possible in America. This guy brilliant as he is hits upon this idea, why not enter a joint venture with an Indian firm that can guarantee a high quality of manpower, that we he can undercut your firm and enter the market. He is able to do this successfully. Now your firm has only two options, either it induces the existing employees to be more productive (and maybe fire some of them as a result) or they have to start moving some of their work to los cost locations. If they don't do this all the people employed with the firm will lose their jobs, including the management, and the shareholders of the company will also have to bear a loss.

Also what happens when you replace your co-worker with an Indian or a Chinese entrepreneur, would you advocate that America shold ban the use of Indian and Chinese software so that American engineer's can continue to have their jobs.

As Ricardo said a long time ago, its about comparative cost advantage, the guy who can make something for less, will provide the service/good to all those who can't make it at an even lesser cost. At the moment some Indian's have a comparative cost advantage over some american's in one area, but American's are particularly ingenious in the creation of new arenas of advantage for themselves.

I am not asking you to be happy about losing your job, which ofcourse is inconceivable, I am asking you why your job should be protected when it could just as well have been lost to a Canadian in North America, or an American who has travelled to India or an Indian who has never stepped out of his country.

Eric Krieg writes:

When the Indians start quoting Ricardo, you have to be optimistic about the future.

Gautam, guys like Steve are very sensitive to Indian protectionism, as they should be. They resent having US companies being locked out of Indian markets by tarrifs and local content regulations. I think resentment is very understandable when a country like India does not make its markets as open as our are.

Perhaps the Indians need to read Adam Smith as well as Ricardo?

Steve writes:

Eric--

That's the crux of my frustration, and I couldn't have said it better myself (I've tried).

It's not JUST tariffs, though. They have NTBs against our goods (such as the oft-sited claim that Coke had pesticides in it so it would get removed from the Indian market). They want all our jobs and money, but refuse to buy any of our stuff.

They like to buy our companies, though. So we're really trading cheap socks/TVs/IT work in exchange for control over our companies. Not a good trade from our side.

Eric Krieg writes:

Yeah, you really can't be protectionist and quote Ricardo.

I'm just hopeful that the Indians are less protectionist than they have been in the past. As they grow and a middle class forms, they will become less protectionist. Their infrastructure needs almost dictate that they cannot get everything they need to grow effectively internally.

In my mind, the best excuse the Indians have is that aren't doing anything that we didn't do when we were at their stage of development. The US of the 19th Century was the poster boy for protectionism.

And the Republican Party was the protectionist party! How times have changed.

Gautam writes:

I'd like to register a small protest about the clubbing together of people as "Indians". Many of the policies that you are complaining about, are chiefly associated with the Government of India. Despite being a democracy, the high levels of illiteracy and hangovers of colonial paranoia(among other social issues), allow protectionists in India to get away with murder in broad day light, perpetrated through policies that are not only hurting trade partners but Indians domestically. For instance there are tremendous differentials in Sales Tax accross states, also agricultural incomes are not taxed across the board irrespectve of their size (there are some very rich farmers), there are heavy subsidies on electricity for rural areas, while urban electricity is subject to scarcity surcharges. All this comes from the fact that in British India the primary taxation mechanism was yield independent agricultural taxation, which our benevolent(sic.) leaders have tried to correct in Affirmative Action style.

About Indians not buying American products. I can't think of anything that is farther away from the truth. The scare about pesticides is part of some convoluted International Demonstration Effect where Indian elitists want us to follow the same standards as the West at a fraction of the standard of living. Pepsi and Coke are the mainstay of the cold drinks market. If i walk into a shop intending to buy a bottle of cola, I can buy only Pepsi, Coke or ThumsUp(A Coke Brand). And i have no problems doing this, though other "Indians" do.

I just heard a story from a friend who visited Kashmir and in a village where many of the people are survivors of Terrorist attacks(close to the border/LoC with Pakistan), after a meeting everyone was served Coke. So the penetration of such products is far deeper than one can imagine.

Another example, is the fact that there are atleast 5 McDonalds within 10kms of my house, 2 within 2 kms (in suburban Mumbai). American culture and companies are here, and they are making there presence felt.

But you can't really expect to sell cars, computers and hamburgers to a country that is still largely at or near subsistence level. Today I went into Downtown Mumbai to buy some books and on the way *atleast* 10 people asked me for money. This included a family of three standing outside a five star hotel with no money for dinner. A 10 or 12 year old child wiping the floor of the suburban train. A man wearing just a very soiled pair of shorts and holding a tumbler in his hand standing outside the High Court (built by the British). A man who had a broken piece of bread in his hand and wanted money to buy tea, as I was walking out of Coffee Shop (a la Starbuck's).

The victim's of the policies of the government of India are inside India. As more jobs come into the economy (I am truly sorry that it is emerging in the short run as a zero-sum game) my personal hope is that this wealth will flow through the economy and possibly undo much of these damages.

Steve writes:

Gautam--

1) How is it possible that a country which offers free college tuition to all comers can have illiteracy?
2) How many burgers does McDonald's have to sell in order to make up for one programmer job lost?
2a) How many burgers does a primarily vegan/vegitarian country eat?
3) How many 8 oz coke cans does KO have to sell in order to make up for one programmer job lost?

Eric Krieg writes:

>>The victim's of the policies of the government of India are inside India.

And you are not alone. There are corrupt elites in many countries, including many, many of our biggest trading partners (especially Mexico). (And of course, I have to get a dig at the corrupt Democrat elite in this country. We are not immune ourselves).

This is the dilema that the US has: how do we change other countries, get them to do the right thing, in a peaceful, negotiated way? I mean, if we can't even get Mexico to change for the better 10 years after NAFTA, is there any hope in a country as far away as India?

Steve writes:

--->This is the dilema that the US has: how do we change other countries, get them to do the right thing, in a peaceful, negotiated way? I mean, if we can't even get Mexico to
change for the better 10 years after NAFTA, is there any hope in a country as far away as India?

Gautam writes:

Steve,

A country that provides free education does not neccessarily provide a quality education in every single college, in fact all it does is over crowds the colleges, underpays the teachers, and churns out unemployable in-DUH-viduals. Also the maintainence of free (or near free) education for Undergraduate and Graduate Courses, has become a political gimmick, rather than something that has any real value addition capability in Human Capital terms. There are some excellent instiutions like the IITs, IIMs and certain exceptional colleges. But the vast, vast majority of the universities are mired in bad teaching, and worse disinterested students. In my class there are about 140 students (yes this is a post-graduate class), of whom about 20 would be interested in pursuing a career in Economics, the rest are there because their parent's don't want them to sit at home.

India is not a primarily vegetarian country, there are Muslims here, Christians (like myself), Sikhs, Parsis, Tribals and many Hindus who eat meat. Hindus in Kerala even eat Beef. It is a vocal minority within the Hindu community that is vegetarian. There are very few vegans (the Jains) because the idea behind preserving cows is that they can provide you with milk. All indian sweet dishes and there are many of them, are milk based.

Also i don't think you can accuse McDonald's of bad business sense, they do not sell beef in India, they have a special range of Chicken and Vegetarian offerings, and have thriving franchises in predominantly Vegetarian neighbourhoods. I think the Indian franchise is run by an orthodox vegetarian family, though i am not sure of that.

I don't know how many burgers they have to sell, or how many coke cans(there are mostly bottles here), but i doubt however many they do they are not going to be able too reinstate your job. I am not arguing for benefits to accrue to India at the expense of america, but that benefits that we are getting from American's are also flowing back to America, in the form of dividends and cheaper products.

Also if you have been following the news carefully, you will notice that Dell and Lehman Brothers have recently decided to withdraw their BPO contracts from India because of low quality. This attests to the vacous benefits of free education. Indian's are cheaper but they are also low quality. I am personally quite happy about this, because it sends the right signals. Americans are not just looking for cheap labour they are looking for good labour. I hope the people in the Ministry of Education are listening :-).

~ Eric..

Though it is important in political terms for America to be a leader, in reform. I think the cultivation of imitative development schemes, has been taken far too far by many commentators. India and other countries should try to be vangaurd reformers, rather than be perpetual followers. Unfortunately, the bureaucratic attitude has so deeply sunk in to our economic and political framework, that unless something has been shown to work elsewhere, no one is willing to take a risk and make it work here.

Eric Krieg writes:

How do we know NAFTA isn't the CAUSE of their lack of change for the better? How do we know >>NAFTA hasn't been the reason they are poorer than they were 10 years ago? Why do you folks not see the causal connection there, but you see a causal connection betwixt tax cuts for the rich and economic growth?

Well, the cause of Mexico's problem is their corrupt elite. I think that you can make the argument that that elite thought that NAFTA would take care of their problems for them. Because they had NAFTA, Mexican elites did not restructure their country as they needed to.

>>Nice dig at the "corrupt" dems. Not all of us are corrupt.

Democrat elites are corrupt: Bill and Hillary Clinton, Terry McAllaf, the AFSCME and SEIU, university professors, media people, municipal bond traders, the trial lawyers, those kinds of people.

Steve writes:

Gautam--

The truth is that Republican America is all about cheap labor. They outlaw abortion to increase the cheap labor pool, they want open borders with Mexico to increase the cheap labor pool, and they want a "guest worker" program to do the same.

The fact that Dell and Lehman are moving these $10/hour jobs (weak in American's eyes, I can make $10/hour at McDonald's) back to the states does not make my spine tingle in the way that it does when I hear about a huge system failure in a project that was outsourced and that they had to hire a consulting firm to come in and fix it at $500/hour/consultant.

I'm sure McD's is making a huge profit in India with or without beef products, because that's what McD's does best! ;-)

Eric Krieg writes:

Gautum, here is my feeling about reform:

The United States was no different from the Euros and other countries in the 1970s. We were overtaxed, over-regulated, with lots of bloated, politically connected businesses that were not globally competitive. Our economy was weak, growth was nonexistant, inflation and unemployment were out of control. There were a lot of entrenched, Democrat interestes that were resistant to change and kept out economy down throughout that decade.

Then Ronald Reagan was elected, and things started to change very rapidly. Taxes were cut dramatically (the top income tax rate went from 70% to 28% during his tenure). Industry after industry was deregulated. Corporations were forced to restructure to become globally competitive. Unions were busted. Inflation and unemployment were overcome.

All these reforms required a lot of pain on the part of the American people. It was not easy to do. There was a lot of risk, and a lot of people lost their livelihoods, their homes, and their families.

It would have been less painful to just muddle along as we did in the 1970s. But we took the pain, and it led to the boom years of the 1990s.

I just get frustrated that other countries, especially the Euros and the Japanese (and, yes, the Indians), are not willing to reform and restructure as we did. It is a failing on their part, a mass psychosis. I just wish that there were something that Americans could do about it (we like to fix problems, you know!).

Eric Krieg writes:

>>The truth is that Republican America is all about cheap labor. They outlaw abortion to increase the cheap labor pool, they want open borders with Mexico to increase the cheap labor pool, and they want a "guest worker" program to do the same.

Dude, get some Prozac, okay. That's the dumbest thing I ever read.

The only constituency there is to close the borders is in the Republican Party, although it isn't in control of the party at this point in time (Dubya is, and he ain't closin the border).

The politicians giving illegals drivers licenses are Democrats. Ditto the push for "guest workers". That's a Democrat proposal.

Now, it is true that businesses are making a lot of money exploiting cheap Mexican labor. But at this point in time I don't see how anyone can connect big business to the Republican Party. There are just as many Democrats in positions of power in corporations as there are Republicans.

As for abortion, could it be that Pro-lifers believe what they do as a matter of principle, and not for economic reasons?

Steve writes:

Eric--Name one proposal that the GOP has given with an aim of raising wages for the average joe. Just one.

The GOP is all for CHEAP labor, the cheaper the better. It's a proven fact, and I can't believe you don't agree with me.

Eric Krieg writes:

>>Eric--Name one proposal that the GOP has given with an aim of raising wages for the average joe. Just one.

Doing my tax return, I find a 10% bracket that was 15% in the past. And I find a $1000 tax credit for each child.

That's two things Dubya did for the "average joe".

I think 8.2% growth in the third quarter was due to Dubya's tax and spending policies (low taxes and LOTS of spending). That definately helped the average joe.

Boonton writes:

Gautam's post was very enlightening. You don't 'win' in a market by being cheap. Quality is rewarded for its value and it doesn't need a protected market.

Republicans do tend to favor cheap labor but this is a really complicated subject. Pro-life Republicans tend to be culturally conservative. They are likely to be more sympathetic to anti-immigration arguments on the grounds of cultural conservatisim (see Pat Buchannan). They are in a coalition with business minded Republicans who don't feel as passionate about abortion but do on taxes, spending etc.

But just think about what you're saying. Imagine you are Steve Forbes or some other rich owner/manager of a large corporation. Does it make sense for you to lobby against abortion to get cheap labor? Even if abortion was outlawed tomorrow and the population responded by having the kids (as opposed to being more careful about unplannned preganancy) you will have to wait 20 years to get your hands on the first crop of 'post Roe.v.Wade non-aborted labor'. If you're 40 yrs old today you'll be on the verge of retirement then! Even then they, at best, would just drive down wages on entry level positions....positions that aren't that expensive now!

Steve writes:

Boonton--

His post was certanly enlightening. Doesn't change the fact that lots of educated people in the states are afraid to even go to work in the mornings because of the billions of unwashed masses who want their jobs.

The Steve forbes situation makes perfect sense. 20 years from now, Steve Forbes will be in his 80s. What kind of labor does an 80 year old man need?
1) Gardener -- Perfect for immigrants and unwanted children
2) unlicensed in-home nurse -- See #1
3) Driver -- See #1
He will not need anyone with an education or any kind of inner-strength.
...eh, it's just a theory, that's all.


"Unwanted" children probably make less salary over the long haul than "wanted" ones. I'm sure there is a survey out there sponsored by planned parenthood ;). Before you guys jump on me, I'm 100% pro-life.

The GOP is pro-cheap-labor, that's a fact.

Boonton writes:

This all may be true but it's pretty far fetched to think Steve Forbes is anti-abortion because he's hoping to score a $5/hr gardner in 2020 rather than a $10/hr one.

Steve writes:

Ah, but Mr. Flat tax is also against the death tax. His KIDS get to fully enjoy the fruits of his cheap labor campaigns.

Eric Krieg writes:

>>This all may be true but it's pretty far fetched to think Steve Forbes is anti-abortion because he's hoping to score a $5/hr gardner in 2020 rather than a $10/hr one.

My point exactly. If you believe that one, you probably believe Dubya has already caught Osama and is just waiting closer to the election to announce the fact.

And if you believe that, Steve (and Madeline Albright!), you need MEDICATION. Conspiracy theories of that sort are signs of delusion, psychiatrically speaking.

Eric Krieg writes:

>>The GOP is pro-cheap-labor, that's a fact.

There are many policies that lead to "cheap labor". Make an itemized list. I'll bet you any amount of money that the Democrats are for as many "cheap labor talking points" as Republicans are. I'll bet they are for more points.

Even the trade unions are pro-immigration, now. Mexicans are more pro-union than Americans are.

The Democrats are the party of illegal Mexican immigrants. Now that's a fact.

In fact, if it weren't for non-citizens being represented in Congress (they count towards reapportion, for some nefarious reason), Democrat states like California and New York would have a couple of seats less in Congress, and Republican states like Montana would have a couple more.

Gautam writes:

- Minimum Wages.

I think Steve you are a little confused about Minimum Wage. In many cases it seem to be one of the things that are driving jobs out of america. Whether it is one high paying job or 5 low paying jobs, the fact that jobs are being driven out of the country by proposals that exclude the lowest skill set, is as much of a problem as Indians providing cheaper labour. Thank god for India we don't have enforced minimum wage legislation, its something that we can't afford as a society.

- Progressive Taxation
Progressive taxation hurts the salary paying people the most. The rich have ways to get around the taxes by moving their money abroad or hiring people to do the job. But the middle classes have their Taxes deducted at source (atleast in India) then they have to ask for the money back from the government, by showinf expenditure etc.

- Economic Reforms
The steps that have been taken in India in the last 10 years are fantastically revolutionary for our society. I am not apologising for it, i think the reforms have been grossly underdone, if it was a beef steak it would be very very rare. But when you look beyond the veil of the Call Centres and the McDonald's the social divisions become stark, there are Muslim Ghettoes, and Dalit (lower Caste) slums, there are Brahmin colonies and so on, people are very divided in mind and in reality. Then looking at the national stage there is the Language problem, there are 14 national languages, and more than 200 hundred other important languages excluding dialects. So just running this place is a tremendous feat, keeping it together is a wonder of the alchemy of Nationalism. Reforming it is part of the internal upheavels that are going on, liberals(In India a liberal is in the British not the American sense) across the country are trying to change the mindsets of people. Thankfully we have both the negative aspects of government and the general catastrophe of the economy to push our ideas with. I wish we were reforming faster too, and on our own steam rather than as a matter of compulsion.

Steve writes:

Nope.. No confusion. Must have been lost in the translation.

Minimum wage might be enforced here, but the artificial minimum wage is close enough to the natural one (where people just decide not to work at all, regardless of the law) that it should deserve the blogspace we just allocated for it. :)

"Mr. Flat Tax" is my psudonym for Steve Forbes (who preaches about a 17% flat tax). Re-read the message and it will make more sense now. :)

Eric Krieg writes:

>>"Mr. Flat Tax" is my psudonym for Steve Forbes (who preaches about a 17% flat tax).

Forbes misuses the term. His tax proposal is just less progressive than today's tax. There is one rate, but it doesn't start on the first dollar of income, and there are deductions. It is not a true flat tax.

The Medicare payroll tax is a true flat tax. The Social Security payroll tax would be a flat tax if it wasn't phased out at 80 something grand of income.

Boonton writes:

"Ah, but Mr. Flat tax is also against the death tax. His KIDS get to fully enjoy the fruits of his cheap labor campaigns."

Perhaps but how to account for the fact that Steve Forbes is a Johnny come lately to anti-abortion? Before he was viewed as more of a libertarian who adopted more right wing cultural positions in order to curry favor with the religious right. The religious right would probably view Pat Buchanan as their ideal candidate and he is hardly a supporter of cheap labor.

Boonton writes:

Besides, as someone who is pro-choice I find it rather disturbing & distasteful to think my position is supposedly motivated by some favor to labor unions to make labor more expensive.

Steve writes:

Ok...Forget the abortion issue. The GOP is purely and simply the party that wants CHEAP labor, and expensive upper-upper-crust management. Agreed?

L.A.Ward writes:

I teach freshman and sophmore economics and minimize the math. I also minimize the graphical analysis to the graphs the illustrate specific issues. I have had good success with my students who went on to further their economic studies and feel that at the level I am teaching I would have driven many of them away focusing on math. I also feel the too often we "hunt" for a quantative solution instead of "seeking" a theoritical possibility.

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