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The Perks of the Critical Position

In many socially or politically relevant philosophical disputes, one position can safely be described as the 'entrenched' position, and the other the 'critical' one. One position is fairly widely shared, and often the mores and institutions of society function under the assumption of its correctness. The other position, less dominant in wider society (though sometimes influential in a particular quarter of it, such as the academy) takes as its primary immediate task the dismantling of the entrenched position. Those who subscribe to the critical position typically see their position as a principally negative position, and usually so do their opponents. They see themselves - and are seen - as attacking a tradition, a school of thought, a superstition; tearing down a model or framework - that of the entrenched position. Those who subscribe to the entrenched position habitually see this as destabilizing and sacrilegious, an iconoclastic assault on a sacred institution, tra…
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Firms and Incentives under Socialism

In my last post, I made the case against the heuristic 'market socialist' pricing mechanism that Fred Taylor and other market socialists have argued could salvage socialism from the inherent impossibility of the rational allocation of resources. One aspect of market socialist theory, however, I left mostly unaddressed, and that's the socialist theory of firms. I referred, at the end of my post, to the problems of incentives under a socialist arrangement, and a future post on the matter; this is that post. I associate most of the 'incentives questions' relating to socialism with the definition of the firm, its ownership, and the relative status of its participants. In particular, I think the Coasean theory of the firm is the best model for firms, is the most consistent with  observed reality, and ultimately vindicates the free market approach to firms rather than the socialist approach, as the former best aligns incentives to maximize well-being, while the latter cl…

The Social Cost of Forgoing Self-Interest: A Quick Thought on Kibbutzim

I just listened to the latest episode of EconTalk, with Ran Abramitzky. It was an enjoyable episode, but I had a couple thoughts I wanted to articulate. Throughout the talk, Drs. Roberts and Abramitzky were basically exclusively concerned with the success or failure of the kibbutzim themselves as institutions. However, what went unconsidered was the cost incurred by the success of the kibbutz on society in general and on many o the individuals within the kibbutz (note that this is not a criticism per se; obviously time constraints limit what can be discussed, and I thought it was a very good discussion).

The cost of the prevalence of kibbutzim to society is fairly straightforward; it is essentially an opportunity cost (neglecting more direct public costs like government subsidies). Abramitzky marvels that kibbutzes managed to solve the problem of 'brain-drain' by imposing high costs on exit; those apologetic to the kibbutz as a social model or even hope to extend some of its c…

Capitalism and Imperialism

One of the most peculiar arguments levied against capitalism and the market economy is the claim that, as an economic system, it inherently tends to induce imperialism in the states it inhabits. I say it is peculiar because it is not so much argument against capitalism per se, as an economic system, as an argument against what is asserted to be an unavoidable side effect of capitalism. Of course, there is a variation of this argument that holds imperialism to be necessary - even on a theoretical level - for capitalism to 'prosper,' which we find in 'dependency theory.' For this post, though, I'm sticking with the more 'basic' argument: that regardless of whether market economies could exist peacefully in theory without capitalist economies exploiting the resources and labor of other countries, capitalism inevitably leads to the avarice for accumulation that induces such exploitation. This sentiment - perhaps best epitomized by the likes of Noam Chomsky - is…

Thoughts on Noah Smith's Econtalk Interview: Wage Stagnation, Co-determination, and Short-termism

Recently, Noah Smith was interviewed by Russ Roberts on Econtalk. In the interview, Smith primarily discussed several issues: 1) long term trends in wages/compensations (specifically, the decline in wages or compensation in the past few decades); 2) shorter termism among executives; 3) monopolies; and 4) co-determination in corporate management. Some of the contentions he made I took issue with, and therefore, on the suggestion of a friend with whom I was discussing the episode, decided to write a post on it for my mostly imaginary readers.

I would probably summarize Smith's overall thesis as follows: an increase in the presence of monopolies and oligopolies in the American economy (or put differently a decline in competition), along with 'short-termism' in the behavior of executives, has led to (or at least significantly contributed to) a decline in worker compensation, the disproportionate accretion of wealth by investors, and perhaps a general pattern of underinvestment…