In the interview with Deirdre McCloskey, she first apologizes for her long book; I appreciate this. She then talks about economics.
She talks about several different parts of her book. First, she states how the economy is a world of made up stories and as long as the stories are "stories of cooperation, we celebrate it and the working lives it is made up of." She then goes on to talk about how economics can be either in math or in words but it is still rhetorical. McCloskey says she is a humanist who is not making ridiculous claims one way or the other about economics but is simply pointing out the ironies and metaphors. McCloskey talks about socialism and capitalism and how she wishes there was a set way to show which one is better, but there simply isn't and all we have is a "tangle of human interest and passion." However, she does show that capitalism is better for the poor and while at first it doesn't seem good, a "flourishing human spirit" comes from it. Socialism on the other hand starts with the flourishing artwork, music, and books but leads to a worse state after, seen in Russia. McCloskey then goes against the liberals who think they have a monopoly over political language proving that capitalism is good. McCloskey ends the interview talking about how people need to suck it up when reading about her references to God.
I found McCloskey's view on knee-jerk disbelief very interesting and intuitive. She shows how knee-jerk disbelief is when people jump at the chance to voice their opinions when they have nothing to back it up with. In class with Rizzo we talked about how one of the three reasons to study economics is so that we know the facts so we aren't just doing these knee-jerk disbeliefs where we oppose whatever argument is made with know supporting evidence. McCloskey shows these disbeliefs in talking about McDonalds and Wal-Mart and how people hate these companies although they are good for the poor and the economy. I hear this everyday when people say don't buy from the big businesses and I see bumper stickers that say buy locally. People need to get their facts straight because there is nothing more annoying than people who have empty arguments that then try and go into a economic-political debate.
I also liked McCloskey's view on living life and how it is much more than material goods. Although she seemed a little morbid in this section showing how Hitler had more of a point to his life than most people, I still approved her cat metaphor in how we simply live in the moment with our material goods. She did start to get preachy here saying how humans need faith, love and hope in their lives.
McCloskey says that we need to reform the way in which we talk about the market but doesn't give a way of doing this. How should we reform the way we talk about economics and the market? McCloskey writes as a Christian, conservative, big-business writer. Why should her opinions of economics be respected anymore than her counterparts? Why did Rizzo give us one persons view on the world of economics without a Hindu, liberal, socialist's opinions? In her talk about how Capitalism is better than Socialism, McCloskey shoots down Socialism as it reverses human flourishing while capitalism leads to flourishing. She has one example: Russia and America. Her books were written in 2006 and 2010 and I'm assuming the interview was somewhere in the middle. But either way she has not looked at or given an opinion in Obama-care. Since all we can use is her interview, what would her opinions of Obama-care and a trend towards socialism be based on her arguments in this interview?
We read this piece perhaps just to see how knee-jerk disbelief is truly alive in the world and that's why we should study economics. But I think we also read this piece to learn more about the socialism and capitalism debate and about how economics is rhetorical.
Saturday, September 17, 2011
Wal-mart Gains From Me Missing Buses
Last Tuesday, I decided to take an adventure to Wal-Mart to pick up some much needed groceries. Ok fine, I was bored and this campus shuts down when all the pre-med people have chem labs on Tuesdays and Wednesdays. Either way, I went to Wal-Mart.
After buying something for my Engineering class, I found a $5 DVD. I decided to buy it so next time when I'm bored and no one is around I could watch a movie rather than explore Rochester. (I could also go the gym but thats another story.) Distracted by a Dunkin' Donuts - remember I am from Boston and can't live off just the Starbucks on campus - I missed my bus. I decided to continue shopping and found nothing useful to buy, except for another $5 DVD. Let's pretend this happened one more time after that. After being in Wal-Mart for 3 hours, I had collected 3 new DVD's for my collection and spent almost $15.
This confused me. I would never buy 3 DVD's at once for $15. I could hear my Mom in the back of my head at a candy or toy store saying: "Matt just pick ONE!" So how did this happen? What economic principle allowed to me to ignore my principles and my Mother and buy three DVD's just because I bought them at different times? I began to think that if I designed a store, you would have to go throw multiple check outs to leave. What if you paid at the first one and then had to simply walk through another. We the goods of cheap magazines, gum, and DVD's between the checkouts be enough to entice someone into continually buying things? This is a strong possibility, but I don't know the economic principle that allowed me to buy 3 DVD's. Or maybe I'm just a sucker who likes to watch DVD's. Either way I am building this store.
Boarding the bus with my DVD's I began to think of economics. I felt like King Louis, having "servants" drive me to Wal-Mart where goods were waiting for me. My DVD's were like Rizzo's coffee. I told no one I was going to Wal-Mart, how did these DVD's appear? How did they know I was going to miss my bus (twice) and buy these specific DVD's? Those movies would still be there if I didn't buy them; they were made for ME! I then began to feel bad for the Africans and poor countries that I just exploited. While I, a "rich" American, bought DVD's and increased my material wealth with trifling goods (the value of time watching the movies with my friends would come later) and increased Wal-Mart's wealth, I exploited the poor. The rich got richer at the poor's expense. I'm truly sorry and invite all those I exploited to a movie night this weekend in Tiernan Hall.
After buying something for my Engineering class, I found a $5 DVD. I decided to buy it so next time when I'm bored and no one is around I could watch a movie rather than explore Rochester. (I could also go the gym but thats another story.) Distracted by a Dunkin' Donuts - remember I am from Boston and can't live off just the Starbucks on campus - I missed my bus. I decided to continue shopping and found nothing useful to buy, except for another $5 DVD. Let's pretend this happened one more time after that. After being in Wal-Mart for 3 hours, I had collected 3 new DVD's for my collection and spent almost $15.
This confused me. I would never buy 3 DVD's at once for $15. I could hear my Mom in the back of my head at a candy or toy store saying: "Matt just pick ONE!" So how did this happen? What economic principle allowed to me to ignore my principles and my Mother and buy three DVD's just because I bought them at different times? I began to think that if I designed a store, you would have to go throw multiple check outs to leave. What if you paid at the first one and then had to simply walk through another. We the goods of cheap magazines, gum, and DVD's between the checkouts be enough to entice someone into continually buying things? This is a strong possibility, but I don't know the economic principle that allowed me to buy 3 DVD's. Or maybe I'm just a sucker who likes to watch DVD's. Either way I am building this store.
Boarding the bus with my DVD's I began to think of economics. I felt like King Louis, having "servants" drive me to Wal-Mart where goods were waiting for me. My DVD's were like Rizzo's coffee. I told no one I was going to Wal-Mart, how did these DVD's appear? How did they know I was going to miss my bus (twice) and buy these specific DVD's? Those movies would still be there if I didn't buy them; they were made for ME! I then began to feel bad for the Africans and poor countries that I just exploited. While I, a "rich" American, bought DVD's and increased my material wealth with trifling goods (the value of time watching the movies with my friends would come later) and increased Wal-Mart's wealth, I exploited the poor. The rich got richer at the poor's expense. I'm truly sorry and invite all those I exploited to a movie night this weekend in Tiernan Hall.
Class 7 - It's Good to Be the King...(it's just better to live in the 21st century)
In class 7, we discussed how in 15 years we will be twice as rich, according to Rizzo's calculations. Things will either cost less or we will have more money. We then talked about how material goods are trifling as it is the stream of values (sentimental, time spent with others, etc...) that is more important.
Enough with discussion! Time for power point!!!
We discussed how the difference in wealth increases between the richest and the poorest countries. 200 years ago the difference was so small it went unnoticeable. However, today the difference has grown to reveal very noticeable living conditions in the richest and poorest countries. The rich get richer at the poor's expense.
However, we have seen that the world is improving. In 1970, 27% of the world lived a dollar a day. Today it is less than 1 %. The extremely poor has been reduced by 80%. This is mainly due to increased health. So the rich are getting richer, but the poor are doing pretty well. We saw how the income inequality has shifted dramatically to the right over the last 50 years and there are fewer poor people in the world today.
We then discussed ancient times and feudal societies. We saw very few differences between ancient Egyptians and monarchies of the 16th century. They both did and built great things, but in a feudal society, the servants get paid for the work.
We discussed the problems with poop and how cars are a lot better than horses because there is no poop problem. There is also more land to farm because the horses don't have to graze. And finally we don't die from living in a society full of poop.
We then realized we are as rich as King Louis XIV. We have more servants than he does (they just work for the rest of the world too). We have technologies and medicines that are amazing. We can impress King Louis just as much as Bill Gates can. We are richer than the King because we are not in peril. So many great monarchs and thinkers of the olden days died of some trivial disease. We are richer in health (Wow I sound like my mother).
Enough with discussion! Time for power point!!!
We discussed how the difference in wealth increases between the richest and the poorest countries. 200 years ago the difference was so small it went unnoticeable. However, today the difference has grown to reveal very noticeable living conditions in the richest and poorest countries. The rich get richer at the poor's expense.
However, we have seen that the world is improving. In 1970, 27% of the world lived a dollar a day. Today it is less than 1 %. The extremely poor has been reduced by 80%. This is mainly due to increased health. So the rich are getting richer, but the poor are doing pretty well. We saw how the income inequality has shifted dramatically to the right over the last 50 years and there are fewer poor people in the world today.
We then discussed ancient times and feudal societies. We saw very few differences between ancient Egyptians and monarchies of the 16th century. They both did and built great things, but in a feudal society, the servants get paid for the work.
We discussed the problems with poop and how cars are a lot better than horses because there is no poop problem. There is also more land to farm because the horses don't have to graze. And finally we don't die from living in a society full of poop.
We then realized we are as rich as King Louis XIV. We have more servants than he does (they just work for the rest of the world too). We have technologies and medicines that are amazing. We can impress King Louis just as much as Bill Gates can. We are richer than the King because we are not in peril. So many great monarchs and thinkers of the olden days died of some trivial disease. We are richer in health (Wow I sound like my mother).
Class 6 - GDP: A Graph of the Rich Getting Richer
In our sixth class, we explored the wondrous world of power point!
First we discussed what GDP (gross domestic product) was: the dollar value of goods and services in our economy and the ability to consume things we buy. The world average GDP per capita is around $10,500. We saw how the world didn't get rich until about 200 years ago during the industrial revolution. The spread between the richest and poorest countries was only different by a factor of nine. Today that factor is 75. A small percentage change in GDP is a huge change in living standards. This led to the Rule of 72 which describes how long it will take for an investment to double given a fixed growth. 72 divided by the growth gives you the time.
We then discussed how people get rich. We produce more, we trade more, and we have people take care of us.
We talked about world population and how the world can actually hold 1 trillion people. The world today can actually fit in Texas.
Extensive growth is when something new is invented, it is shared among people. This causes the producers to spend more and people then spend their money on getting the new things.
We ended the class showing how African GDP is behind everyone else by almost a factor of 20. This just shows how America and Europe took advantage of the poor countries. The rich get richer at the expense of the poor. However the Economist in 2011 discovered the six of the ten fastest growing countries are in the sub-saharan region so Africa may finally be catching up.
First we discussed what GDP (gross domestic product) was: the dollar value of goods and services in our economy and the ability to consume things we buy. The world average GDP per capita is around $10,500. We saw how the world didn't get rich until about 200 years ago during the industrial revolution. The spread between the richest and poorest countries was only different by a factor of nine. Today that factor is 75. A small percentage change in GDP is a huge change in living standards. This led to the Rule of 72 which describes how long it will take for an investment to double given a fixed growth. 72 divided by the growth gives you the time.
We then discussed how people get rich. We produce more, we trade more, and we have people take care of us.
We talked about world population and how the world can actually hold 1 trillion people. The world today can actually fit in Texas.
Extensive growth is when something new is invented, it is shared among people. This causes the producers to spend more and people then spend their money on getting the new things.
We ended the class showing how African GDP is behind everyone else by almost a factor of 20. This just shows how America and Europe took advantage of the poor countries. The rich get richer at the expense of the poor. However the Economist in 2011 discovered the six of the ten fastest growing countries are in the sub-saharan region so Africa may finally be catching up.
Class 5 - How Rizzo Gets His Coffee
In our fifth class we discovered why it is important to study economics. We want to understand wondrous things, learn important concepts, and get the facts right. In our society, too many people have opinions about how economics work or how the government should be spending their money. If I asked a random person if America is spending too much on foreign aid, they will probably respond with a resounding yes. If I then asked them how much we are currently spending on foreign aid, they will probably stand there dumbfounded. Everyone has an opinion, they just don't know the facts.
We then discussed the Type C and Type M parts of our brains and how they respond to economic problems. For example, if oil prices rise our Type C (analytical) brain will ask why did this happen? However, our Type M brain (empathy) will wonder who rose the oil prices and the go off blaming the oil companies or some random country. We use our Type M too much.
We then went on to discuss how Rizzo gets his coffee every morning. The process is impersonal, as we don't know anyone involved in the millions of tangents that made the coffee. It is also based off of self-interest as no one does this so Rizzo gets his coffee, the people just want to exchange their goods. They could care less about Rizzo getting a headache. The process is also based on cognitive issues as no one knows how to do all the steps, shown in ipencil, and if they did, they could not sell the coffee for only $2. Finally the process is undirected, as no one called to make sure Rizzo gets his coffee; it's just there. The people don't really interact with each other, they just work together and get along because they are in a commercial sphere.
There is order. Everything works in a process and we don't realize until it doesn't work.
This is the invisible hand at work. By everyone's individual incentives or exchanging goods, something good happens: Rizzo doesn't get a headache. We do our own things and amazing things get done in the process. The thread that guides the invisible hand is the price system.
The last thing we talked about was tacit and dispersed knowledge, how people can't explain or are unaware of their knowledge in the marketplace and don't realize how it affects others. When people do understand their knowledge, there is uncertainty.
We then discussed the Type C and Type M parts of our brains and how they respond to economic problems. For example, if oil prices rise our Type C (analytical) brain will ask why did this happen? However, our Type M brain (empathy) will wonder who rose the oil prices and the go off blaming the oil companies or some random country. We use our Type M too much.
We then went on to discuss how Rizzo gets his coffee every morning. The process is impersonal, as we don't know anyone involved in the millions of tangents that made the coffee. It is also based off of self-interest as no one does this so Rizzo gets his coffee, the people just want to exchange their goods. They could care less about Rizzo getting a headache. The process is also based on cognitive issues as no one knows how to do all the steps, shown in ipencil, and if they did, they could not sell the coffee for only $2. Finally the process is undirected, as no one called to make sure Rizzo gets his coffee; it's just there. The people don't really interact with each other, they just work together and get along because they are in a commercial sphere.
There is order. Everything works in a process and we don't realize until it doesn't work.
This is the invisible hand at work. By everyone's individual incentives or exchanging goods, something good happens: Rizzo doesn't get a headache. We do our own things and amazing things get done in the process. The thread that guides the invisible hand is the price system.
The last thing we talked about was tacit and dispersed knowledge, how people can't explain or are unaware of their knowledge in the marketplace and don't realize how it affects others. When people do understand their knowledge, there is uncertainty.
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