Bob Cropf

This Week’s Reading

In class stuff on February 16, 2009 at 4:38 PM

This Week’s Reading is the Arthur Okun Book (The first two Chapters).

Arthur Okun sheds light on how conventional economic theory mainly focuses on efficiency and productivity, while the distributional effects (equality) of a capitalist society are avoided. It is to the extent that the two concepts of ‘efficiency’ and ‘equality’ are almost deemed as mutually exclusive or essentially antagonistic.
He brings up the issue of social and political rights, and categorizes social goods into those should and should not rely on the market mechanism for provision. He identifies access to nutrition, health care, and housing (among others), as such goods, and disapproves the market mechanism’s violation of these “fundamental rights of survival”. What is your perspective on this view? Are goods such as health care a right or a privilege?

As we read Okun, let’s think of the concepts of “market justice” and “social justice”. In keeping with the tradition of the course, let’s continue to think of these perspectives in the context of the major paradigms of the course.

  1. I forgot how much I liked Okun! I am glad to read him again particularly in light of current events.

    I agree with Okun whole heartedly that there is a fundamental right of survival and I would most certainly include goods such as health care and housing. The first two reasons are very practical: ensuring a decent minimum (1) preserves the peace (a decent minimum makes preserving the peace both possible and morally justifiable); (2) better educated, fed, housed workforce is more productive.

    The second reason is more philosophical: I don’t see a compelling reason to justify NOT spending the money to do those things. Yes, some efficiency may be lost, but as long as the efficiency is just making a few cut back from keeping a house in St. Lucia and Vail to just one or the other, I don’t see how it is morally justifiable to refuse to care for the least among us. It is a harder choice to make when a society is incapable of providing a decent minimum for most because there is simply not enough to go around (Afghanistan, Haiti, Somalia), but when there is more than enough to go around to provide a decent level of nutrition, education, housing, and health care, there really isn’t any reason good enough not to do so, IMHO. All that is left when resources are ample to justify not doing so, is a moral assumption harkening back to Calvin, Smith, Malthus (an Anglican minister, by the way!), and Ricardo, that those who are wealthy are somehow deserving of their wealth by some combination of divine blessing and hard work. Do we honestly think that assumption holds when we look at the wealthy of our own time (i.e., Bernie Madoff) let alone the wealth of Malthus’ time (landed aristocracy)?

    There were a couple of things in Okun that caught my eye on this reading:
    (1) “American workers thus far have displayed a preference for consolidating their positions as consumers rather than establishing a beachhead as capitalists,” (p. 64). I thought this was interesting because, while I think it is mostly true, the move to 401(k)s and putting money in mutual funds over saving accounts has made capitalists out of many… and burned many in the process. Are we all cut out to be capitalists?

    The other reason is that I read this shortly after hearing that the UAW has been offered ownership in GM, the alternative is losing all benefits (including pensions) in bankruptcy. Okun appears to argue that this should a no brainer in good times, let alone when face with losing so much as the alternative… UAW, apparently, didn’t just jump at this. Is it because they really don’t want ownership in a huge stinking corpse that is GM – just wait it out and hope for salvation from the government? Or is this just too fundamental of a change for UAW to take on lightly? In contract to Germany, where labor and capital have a very collaborative arrangement, where labor and capital here have a very combative one. What happens when labor becomes capital in a market system?

    (2)”Production comes out of a complex, interdependent system and may not be attributable to individual contributors. (footnote: In viewing the whole social and political system as an “input,” I am using an unconventional – but nonetheless relevant – concept of joint inputs.),” (o. 46). I think this goes to the heart of why a decent minimum is necessary. We can see what happens when we totally neglect the social and political systems when we look at Zimbabwe – economic activity is impossible there because basic needs are not being met and social systems are nonexistent. It also argues against the justification of “I earned it by working hard” against taxation to provide such a minimum. If the value of the output, and in our highly specialized economy, the very existence of your output depends on input and subsequent valuation of others, there is no way one individual “earned” 100% of the value of their output. The only way to get around this is to be a hermit and devote all of your energy to the basic task of staying alive (self-made shelters, clothing, utensils, and implements, growing all own food, etc.). Since we don’t “earn” 100% of the value of our output, can we lay exclusive claim to it? What if some of our output is a result of healthy workers, workers who got a decent public education, the fact that I don’t have to ensure safety by stringing razor wire around the top of a wall that completely encloses my house (like by brother-in-law had to when he lived in the Dominican Republic)?

  2. Right on point! I cant agree with you more.

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