Friday, November 17, 2017

Is There Economic And Political Meaning In "The Wizard of Oz?"

We covered international trade in my micro class recently and the text book has something about this in that chapter.

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor. Also, for my students, there is an article in chapter 15 of the micro book by Tucker and in chapter 18 in the macro book.Below is an excerpt from the Taylor paper:


"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"
Now an excerpt from Tucker:
"Gold is always a fascinating story: The Wonderful Wizard of Oz was first published in 1900 and this children's tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gold standard, Oz in the title is an abbreviation for ounce, Dorothy is the naive public, Emerald City symbolizes Washington, D.C., the Tin Woodman represents the industrial worker, the Scarecrow is the farmer, and the Cyclone is a metaphor for a political revolution. In the end, Dorothy discovers magical powers in her silver shoes (changed to ruby in the 1939 film) to find her way home and not the fallacy of the Yellow Brick Road. Although the author of the story, L. Frank Baum, never stated it was his intention, it can be argued that the issue of the story concerns the election of 1896. Democratic presidential nominee William Jennings Bryan (the Cowardly Lion) supported fixing the value of the dollar to both gold and silver (bimetallism), but Republican William McKinley (the Wicked Witch) advocated using only the gold standard. Since McKinley won, the United States remained on the Yellow Brick Road."
But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:
"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."
I found a review of the book in the NY Times from 1900 and it does not mention anything about OZ having political or economic meaning. The book was also made into a musical a few years later and none of the reviews of the musical mention any political or economic meaning.

Thursday, November 09, 2017

The Deficit Trials 2017 A. D.

This was a commercial back in 1986. It paints a bleak picture of America in the future, presumably caused by the growing national debt ($2 trillion then, about $20.5 trillion now-adjusted for inflation the 1986 figure would be about $4.4-4.5 trillion now, so we have still risen quite a bit). I think this thing is way over the top but there may be some real dangers from the debt that I mention below. You might have to watch a brief commercial for some product first. We have been covering the deficit and debt this week in my macro classes. If the embedded video does not appear, use the link below it.

Ridley Scott - W. R. Grace Deficit Trials

Real problems the national debt might cause
 

1. About 31% of the debt is owed to foreign citizens. When they get paid back, they come and buy American goods. That leaves fewer goods for Americans (who can't afford to buy as much due to higher taxes that were needed to pay back the debt). BUT THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE.

People borrow money all the time to buy houses and cars. Then they pay it back to a person outside of their family or household. We don’t consider this a burden since the money was put to good use. Right after World War II, the national debt was 120% of the GDP. This was much higher than it is now and we survived. No one complains that we borrowed to win the war. The national debt is about 105% of the GDP now. In 1986, the year the video was made, it was about 50% of GDP.

2. Raising taxes might hurt economic incentives. At higher tax rates, people might want to work and invest less. Fewer businesses might expand and fewer news ones created since you will get to keep less profit. But again, THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE. Also, if taxes only go up a little, and the debt is slowly paid off each year (like after WW II), it may not hurt too much.

3. We may have fewer government services in the future if we pay back the debt by lowering government spending. But this means that we are trading more government services today for fewer in the future. THIS IS NOT NECESSARILY A BAD THING IF THE MONEY IS SPENT WISELY (which everyone not might not agree on).

If taxes and interest rates are higher in the future due to the debt, that will lower our future economic growth rate. We will still probably grow, but not as much.

Friday, November 03, 2017

Today Is Day Of The Deadweight Loss

On this day, economists mourn all the social welfare that has been lost in the last year. That social welfare is lost and we will never get it back. 

Deadweight loss is the loss of social welfare caused by that dreaded demon, inefficiency. Examples are monopoly and externalities. To learn more, go the following link:

Deadweight_loss

One good way to commemorate this day would be to cut out the deadweight loss triangle from a monopoly graph (like the one shown below) and burn it, to symbolize all of the lost social welfare. Doing so is both a life-changing and life-affirming ritual.

Thursday, October 26, 2017

Female homicide rate dropped after Craigslist launched its erotic services platform

Sex workers have long argued that online erotic services platforms make their jobs safer. A new study proves it.

In my micro sections, we have been reading a chapter titled "Sex, Booze and Drugs" in the book The Economics of Public Issues. That chapter mentions that prostitutes are safer when they can advertise online.

By Noah Berlatsky of ThinkProgress. Excerpts:

"The September 2017 study, authored by West Virginia University and Baylor University economics and information systems experts, analyzes rates of female homicides in various cities before and after Craigslist opened an erotic services section on its website. The authors found a shocking 17 percent decrease in homicides with female victims after Craigslist erotic services were introduced.

The data does not provide a single clear explanation as to why female homicide rates drop so steeply, Scott Cunningham, one of the paper’s authors, told ThinkProgress. It’s possible, for example, that when Craigslist opens erotic services ads, some women in abusive domestic situations decide to become sex workers, move out, and so escape violent homicide at the hands of their spouses or boyfriends.

The most likely explanation, though, Cunningham says, is that sex workers simply make up a huge percentage of female homicide victims. When sex workers are safer, female homicide rates drop significantly.

Cunningham and the paper’s other authors, Gregory DeAngelo and John Tripp, analyzed online escort review sites in order to try document the movement of sex workers to indoor locations. They found that after Craigslist introduced erotic services pages, client reviewers mentioned lower prices and lower satisfaction — a sign that lower-priced street workers were moving indoors and receiving reviews for the first time.

Once sex workers move indoors, they are much safer for a number of reasons, Cunningham said. When you’re indoors, “you can screen your clients more efficiently. When you’re soliciting a client on the street, there is no real screening opportunity. The sex worker just has to make the split second decision. She relies on very limited and complete information about the client’s identity and purposes. Whereas when a sex worker solicits indoors through digital means, she has Google, she has a lot of correspondence, she can ask a lot of questions. It’s not perfect screening, but it’s better.” 

There’s some evidence that other crimes are decreased by online advertising as well. Kristen DiAngelo, executive director of the peer sex worker advocacy organization Sex Worker Outreach Project (SWOP) Sacramento, pointed to a study conducted by the organization in 2015. Researchers interviewed 44 sex workers on the street and, of those workers, 18 percent said they had moved outdoors following the closing of SFRedbook. 

“Of that 18 percent, almost every one of them had been raped since they’d been out there,” DiAngelo told ThinkProgress. “We had been asking them ‘have you been raped?’ but there was a point where I wanted to say, ‘Have you been raped yet?’ because it was just that prevalent.”

DiAngelo also believes that easy access to online ads makes trafficking less likely, rather than more likely. On the street, women are visible; it’s easy for pimps and traffickers to find them. Online, DiAngelo says, “women can run their own business and predators don’t have immediate access to them.” 

Maxine Doogan, founder of the California-based Erotic Service Providers Union, added that online ad providers like Craigslist and Backpage also improve safety because they provide access to steadier work and more affluent clients. Shutting down the sites “makes people desperate for money,” she told ThinkProgress."

In theory, closing down advertising is supposed to reduce exploitation of women. In practice, when resources are taken away from people living on the edge of poverty, they have fewer options and are less able to protect themselves.

For all these reasons access to the Internet can transform the experience of sex work. Young women who have been able to screen clients using sites like Craigslist, “almost feel like this is a safe job because they have these tools,” DiAngelo said.

Sex workers report that free online advertising makes them safer. There is now data showing that erotic services ads significantly decrease female homicide rates. So, will law enforcement back down and allow these sites to operate again?"

Feedspot named this blog number 97 on its list of the top 100 economics blogs and websites (so that is my third top 100 ranking)

Thursday, October 19, 2017

The Amount of Your Compensation Going Toward Benefits Keeps Rising

By Josh Zumbrun of the WSJ.

In my micro class, when I cover poverty, incomes and the income distribution, this is something that I mention when talking about incomes over time. Maybe they have not gone up as much as they used to because more of employee compensation has been going to benefits. The trend that Zumbrun discusses has been there before even 2006.

Excerpts:

"In 2006, just over 70% of employer costs went to wages and salaries. That’s now down to 68.3%, the lowest point in the data."

"In the first quarter of 2017, employers spent $24.10 an hour in wages and $11.18 in benefits for every hour of work.

The breakdown on those benefits: $2.91 for health insurance, $2.49 on various types of paid leave (including vacation time, sick pay, holiday pay and personal leave), $1.95 for Social Security and Medicare, and $1.88 on other benefits (including unemployment and disability, life insurance, workers’ compensation payments, and various types of supplemental pay.)

Taking inflation into account, the gap in growth rates between wages and benefits becomes starker. Real wages have grown just 4% in total since 2006, according to this report’s measure. Real benefits have grown 12.4% over that period."

Thursday, October 12, 2017

How Odysseus Started The Industrial Revolution

Factory work may have been a commitment device to get everyone to work hard. Odysseus tying himself to the mast was also a commitment device. Dean Karlan, Yale economics professor explains how commitment devices work:


"This idea of forcing one’s own future behavior dates back in our culture at least to Odysseus, who had his crew tie him to the ship’s mast so he wouldn’t be tempted by the sirens; and Cortes, who burned his ships to show his army that there would be no going back.

Economists call this method of pushing your future self into some behavior a “commitment device.” [Related: a Freakonomics podcast on the topic is called "Save Me From Myself."] From my WSJ op-ed:
Most of us don’t have crews and soldiers at our disposal, but many people still find ways to influence their future selves. Some compulsive shoppers will freeze their credit cards in blocks of ice to make sure they can’t get at them too readily when tempted. Some who are particularly prone to the siren song of their pillows in the morning place their alarm clock far from their bed, on the other side of the room, forcing their future self out of bed to shut it off. When MIT graduate student Guri Nanda developed an alarm clock, Clocky, that rolls off a night stand and hides when it goes off, the market beat a path to her door."
 See What Can We Learn From Congress and African Farmers About Losing Weight?

Something like this came up recently in the New York Times, in reference to factory work and the Industrial Revolution. See Looking at Productivity as a State of Mind. From the NY Times, 9-27. By SENDHIL MULLAINATHAN, a professor of economics at Harvard. Excerpts:
"Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories — an important innovation of the Industrial Revolution — blossomed because they allowed workers to specialize and be more productive.

Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.

Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.

As Professor Clark provocatively puts it: “Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own.”

The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: “It would be good if there were rules against being absent because it would help me come to work more often.”"
The workers, like Odyssues, tied themselves to the mast to resist the temptation of slacking. This made it possible for factories to generate the large output of the Industrial Revolution.

Thursday, October 05, 2017

Price-gouging laws can backfire

This was by me and was printed in The San Antonio Express-News on Oct. 3. Click here to go to it.

Re: “More and more, qualms about price gouging in short supply,” Daniel Fridman, Opinion, Sept. 24:

Daniel Fridman argues we should not ignore the immorality of price gouging.

It seems immoral to sell a thirsty disaster victim bottled water for $5. Maybe that would happen even more without anti-gouging laws. But we should not ignore the immoral results the laws cause, which can be serious.

One is wasted resources. I drove around for two days a few weeks ago, looking for gas and unable to buy any. Either the lines were too long or the stations had no gas. My time and gas were wasted.

All I wanted was 2 gallons to keep me going for about a week (I drive only about 12 miles a day and own a Honda Civic). I would have gladly paid $5 a gallon, but the law prevented that.

If the price had been that high, most of us would have purchased just enough to last until the crisis ended. An extra-high price might have prevented the long lines.

What about all those cars idling in line at the gas stations (maybe many of the people just wanted to keep the AC going)? How much waste and pollution did that cause?

The Express-News had pictures of cars backed up a block or more onto busy streets. More congestion and pollution.

One of my students said she waited in line 30 minutes but the station ran out before she could buy any gas. Fights and fender benders also occurred.

Then there were the people filling 50-gallon drums. With the law preventing price increases, there was nothing to stop that behavior.

There is also the misallocation of resources. Who gets items when there are price controls?

After disasters, hardware store owners have sold gas-powered generators to friends since they are not allowed to raise the price. How is it moral that you need to know someone to get a vital good or service?

Grocery stores that might have been willing to pay a premium for the generators were out of luck. They couldn’t power their refrigerators and coolers. Food spoiled when people were in great need.

Fridman offered no examples of victims who did not get food, water or gas. He also did not mention that major companies don’t price gouge because they have their long-term reputation to consider, not because of any laws.

One example of this was Best Western cutting its affiliation with a hotel that gouged. It did not have to be told by the government to do that.

But what should be done when a hotel has too few rooms? If it raises the price, some friends or family members might go in on a single room and some can sleep on floors in sleeping bags, freeing up a room for others.

Otherwise, we are left with first come, first served. Only those who get there first get a hotel room.

Enforcing these laws causes problems, too. After Katrina, John Chefferson drove 600 miles to sell generators at twice the price he paid. But he was arrested and no one got them because the police confiscated them. How is that moral?

Texas gouging laws are vague. Attorney General Ken Paxton said not to raise prices by more than 10 percent above the previous three-month average. But neither that nor any other specific number is codified, showing how hard it is to make moral judgments in these cases.

Cyril Morong, Ph.D., is an associate professor of economics at San Antonio College.