07/03/2015

Steve Pressman on the ethics and economics of the Greek financial crisis

AristotleAt the American Institute Economic Research's Daily Economy blog, visiting fellow (and ASE trustee) Steve Pressman of Monmouth University looks at the Greek financial crisis through the lens of several philosophers, namely Adam Smith, Jeremy Bentham, and Aristotle, injecting a much needed ethical dimension to this economic debate:

Greek Financial Crisis: What Would Aristotle Do?

A common put-down of economists is that they know the price of everything but the value of nothing. This pithy comment encapsulates two very different views of money, and can be helpful in understanding how to resolve the Greek financial crisis.

Adam Smith, regarded as the father of economics, took a moral view of money. For Smith, money was about being able to have a decent standard of living, or being able to “appear in public without shame.” He supported government regulation of lending rates because he feared that lenders would take unfair advantage of the destitute. Following the Smithian view of money, we developed bankruptcy laws that let people (and business firms) escape from crushing debt, and survive without this debt hanging over them.  

The philosopher Jeremy Bentham adopted a more economic perspective. He thought that Smith’s moral view of money was inconsistent with his laissez-faire economics, where people determined what was best for them, and markets determined what was best for the economy overall. Bentham pointed out that usury laws limited individual freedom and had bad economic consequences: Lenders would not lend at low rates, and so we had less investment and spending. The economic view of money states that bankruptcy laws encourage reckless behavior and speculation, since if something goes wrong there is a simple out.

Understanding these two views of money is crucial for understanding the Greek tragedy whose last act will take place this week in Brussels (unless everyone agrees to kick the can down the road for another few weeks).

Continue reading here.

05/22/2015

Op-Ed by Deborah Figart and Ellen Mutari: Summertime and the living isn't easy for area workers

Figart bookDeborah Figart (past president of ASE) and Ellen Mutari (current president of ASE), both of The Richard Stockton College of New Jersey, published an op-ed on the casino industry in Atlantic City, New Jersey, yesterday in the Press of Atlantic City. It highlights the stark contrast between the investment in opulence on the part of casino owners and the dire economic circumstances of the workers and families. An excerpt:

In preparation for the new season, the Tropicana Casino and Resort recently unveiled its $50 million facelift at a ribbon-cutting last week, just in time to lure new customers and welcome back old ones. The casino has erected giant LED panels for a new light show. A new granite pathway and coffered ceilings augment a renovation of 434 hotel rooms. New televisions are sprinkled among the table games. With AtlantiCare as a partner, the Trop opened a state-of-the-art fitness facility at the property. One executive boasted that the leg-press machine alone cost $9,000.

Such investments in Atlantic City's business properties are welcome, and increasingly important in a saturated casino industry. The opulence of these facilities, however, contrasts sharply with the Memorial Day 2015 realties of casino workers and former workers. In Atlantic County, as elsewhere in America, working families are feeling squeezed. Beef prices for those barbequed hamburgers are at an all-time high. The prices of chicken and pork are up too due to drought and a virus in the hog industry, as are the prices white bread, iceberg lettuce, American cheese, potato chips and ice cream, the other key commodities measured by Fortune magazine's BBQ Index.

It is almost like a tale of two cities: the Haves and the Have-Nots. Our local economy is still struggling with the closing of four casinos last year and the loss of 8,000 casino jobs. The ripple effects have been felt by businesses, communities and families throughout the area. Unemployment checks are now running out. Those who still have jobs are often working fewer hours, bringing home less after-tip income, and paying more for their benefits packages. And, at the same time that Tropicana Entertainment was shopping for gym equipment and installing the light show, its key investor, Carl Icahn, was cutting payments for health care and pensions for workers at Trump Taj Mahal. This is still being fought in court.

Read the rest here, and see also Mutari and Figart's recent book (shown above), Just One More Hand: Life in the Casino Economy, on economic conditions in the casino industry in Atlantic City.

04/29/2015

Wilfred Dolfsma: “The market cannot be usefully understood as separate from society."

Elgar bookValues such as care and fairness are not just values that may be found in families, closely-knit communities, or that are discussed among only some philosophically-minded people as their working week ends and they enjoy a glass of wine.

While social economics does not tend to favour any particular set of values over others (values are discussed equally well over a glass of wine as over a pint of beer or a smoothie), social economists are concerned about inclusiveness. Values in support of inclusion of the disfavoured, allowing people to take part in the economy as a practice through which we can provide for ourselves and those we love, are still a broad set of values.

In this respect, the market is no different from any other social practice: all are value-laden, and practices are laden with a plurality of values. Indeed, even when adopting an academic mind, one that is trained to abstract, applying Occam’s Razor, a social economist would emphasize that any single social practice must be understood as part of a larger social setting. Even such a multifaceted practice as the market cannot be usefully understood as separate from society.

The early economists have always understood this to be the case. For a plurality of reasons, one among these being a streak of physics-envy, economists have abstraction to an extreme in the name of academic rigour. Many economists have looked at the market as fully separate, oddly in line with Marxists. While precision has certainly increased, relevance has definitely not. Rather the opposite.

Fortunately, this is realized by many, and not just by economists, and so social economics has come into even more favourable light. Just as the first edition of the Elgar Companion to Social Economics, in 2008, offering cutting edge thought on core themes in social economics, the economic crisis hit much of the globe. To social economists this crisis did not come as a surprise – even though there is not a single social economists who will claim to have predicted the crisis’ occurrence to the day. Social economists are much too well aware of the complexity of the economy, and perhaps because of it too they are too modest too.

Not being afraid to go against the grain of contemporary economics that still separates the positive from the normative in science, and shuns the latter, social economists have developed a comprehensive approach to judging the current state-of-affairs of a setting. Is it duly serving the needs of all, and how can it be improved upon, tentatively? While recommendations will be provided with due care and caution, there is not the active resistance to stepping in to policy debates. Social economists want to change all society for the better, and particularly for those who are in danger of being excluded (and not just change in favour of some, for instance those who can cough up high speakers’ or consultants’ fees).

Social economists thus discuss high theory, connecting from what many will understand as economics-proper, but relate to domains in the social science that some might believe is beyond the scope of economics, even to domains that squarely no longer are economics. If a proper understanding of a problem demands that this be done, social economists should not and do not shy away from it. Social economists also do not shy away from philosophical discussions, continuously determining if its premises are in need of further strengthening. Never, however, is social economics involved in theory-for-theory’s sake, A’-C’ modelling exercises that only very few fellow economists can understand. Depth and rigour in analysis can never be an excuse for arcane academic work. Contributions to the Elgar Companion to Social Economics, 2nd Edition, are indications of this.


WilfredDr Wilfred Dolfsma is a member of the University of Groningen School of Economics and Business. He is Editor-in-Chief, with Robert McMaster, of the Review of Social Economy and Editor, with John Davis, of Elgar Companion to Social Economics, 2nd Edition.

This post was originally published on the Elgar Blog, and is reproduced here with permission of the author.

04/20/2015

Spotlight Article from Forum for Social Economics: Grabner-Kräuter & Bitter, "Trust in Online Social Networks: A Multifaceted Perspective"

ForumThe editors of the Forum for Social Economics are proud to announce their first Spotlight Article for 2015, which Taylor & Francis has made freely available: Sonja Grabner-Kräuter & Sofie Bitter, "Trust in online social networks: A multifaceted perspective" (Forum for Social Economics, 44/1, pp. 48-68). The abstract follows:

In recent years, online social networks (OSNs) have gained great popularity and are now among the most frequently visited sites on the Web. Although security standards and practices are an increasing focus of attention, participants still reveal great amounts of sensitive information in the Web 2.0 environment. Obviously, online social networking takes place in a context of trust. However, trust is a concept with many facets and dimensions. To facilitate trust research in OSNs this article aims at clarifying the role of trust and the relevance of facets of trust, social capital and embeddedness in OSNs. First, the focus is on the individual's decision to trust and on processes through which trust actually emerges. Subsequently, trust is viewed as a structurally embedded asset or a property of relationships and networks that helps to shape interaction patterns within OSNs. A conceptual framework is developed that integrates theoretical concepts from the trust literature, social network and social capital theory, and helps to map different trust-related issues in OSNs.

In addition, Associate Editor Cecilia Winters has written the following introductory comment on Grabner-Kräuter and Bitter's article:

Online Social Networks: Trust or Treachery?

There may be some baby boomers in the modern industrialized world who remember a time without home or office computers and, therefore, no social networking.  Since the mid-90s, however, well after the digital revolution was underway, online social network sites (OSNs) began to appear and proliferate. The fact that OSNs constitute part of a social structure that now exists, in many cases, without a functioning arbitrator, has introduced exciting research opportunities. The editors of Volume 44, Issue 1, of the Forum for Social Economics, which focuses on the theme of well-being, happiness, and trust, are delighted to present, among an array of fascinating articles, the one we have deemed will most stimulate thought, discussion, and future research.

We invite you to read “Trust in online social networks: A multifaceted perspective” by Sonja Grabner-Kräuter & Sofie Bitter. Despite the flourishing number of instances, statistics, and stories of cyber bullying, internet trolling, and public shaming that are now also part of our wired world of social networking, the authors assert that social networking does indeed take place in a context of online trust. Having said that, they assert that trust is a concept with many facets and dimensions in which their research attempts to clarify the role of trust and the relevant facets of trust, social capital, and embeddedness in OSNs. Embeddedness refers to the extent to which economic activity is constrained by social institutions, and the authors view trust as a structurally embedded asset or a property of relationships and networks that help to form behavior in OSNs. The authors note that previous research on OSNs has not extensively considered the relationships among trust, social capital, and social networks in the Web 2.0 environment. The Web 2.0 environment is the second stage of development of the Web characterized by the change from static web pages to dynamic or user-generated content and the growth of social media. 

Two research questions emerge from the above:

  • What are the types and sources of trust in OSNs?
  • How is trust in OSNs related to social capital? 

It is within the context of the above questions that the rest of the paper is framed as the authors provide background to social networks and discuss types of trust in online social networks. They note that trust can be treated in a situational construct but also can be characterized as a cross-situational, cross-personal construct encompassing the unique personality of the trustor. 

The authors move on to the bases of trust in online social structures in which they helpfully point out the similarities between diverse terminologies across the research. Interestingly and perhaps controversially, they regard trust as a powerful substitute for formal governance mechanisms that allow the formation of exchange relationships and attempt to control opportunism. The reader may wonder the following: if trust is a substitute for governance, what is the role played by treachery? Given the dichotomy, does treachery imply anarchy and the potential rule of the mob in an environment where there is little accountability by individuals? The section concludes with the admonition that because micro and macro perspectives influence each other, research should take a multilevel approach, bridging both micro-macro level perspectives. However, the preceding questions are left unexplored.

Finally, a framework summary is provided that links the different bases of trust as a dynamic concept within the structural and relational dimensions of OSNs. The roots of trust and benefits to the user of OSNs are closely related to the structural position held in the OSN, the types of relationships formed, and the mode of social capital enhancement chosen. The authors conclude that research approaches must borrow from multiple disciplines to improve our understanding of the factors that influence the use of social network sites. This contribution to the literature on social networking is a step towards an overall conceptual understanding of the role of trust and the relevance of facets of trust and social capital in OSNs that encourages multi-level and multi-dimensional approaches of research problems. The role of treachery, while mentioned briefly at the onset, does not figure largely in their conceptualization of OSNs, but its absence provides an issue for readers to ponder.

Please feel free to leave comments below and contribute to the integral online aspect of the Forum.

04/06/2015

New book emphasizes the ties between social economics and law

LawSE Over the last half-century, the economic approach to law (or “law and economics”) has become the most successful instance of “economic imperialism,” the extension of the neoclassical economic paradigm to other fields of study. Given the shortcomings of that paradigm, however, law-and-economics misses much of the complexity of human choice and the ethical nature of the law that cannot be captured in terms of utility and efficiency alone. Social economics, on the other hand, emphasizes the importance of ethical values to economic theory, practice, and policy, but to date it has engaged very little with the law. Perhaps this is due to an antipathy to the economic imperialism of mainstream law-and-economics. After all, social economists tend to be methodological pluralists that respect the contributions and insights of other disciplines. But we do not have to “co-opt” the law in order to apply social economics thinking to problems involving the law or to incorporate legal aspects of the economy and society into our work. By its very nature, law is a social enterprise concerned with values such as justice, dignity, and equality, as well as efficiency—which is how social economists conceive of the economy itself. The economy and the law work together within a society to influence economic behavior and outcomes, and social economists need to acknowledge this interrelationship if we hope to understand the broader nature of the social economy we study.

In 1993, Steven Medema published his classic article “Is There Life beyond Efficiency? Elements of a Social Law and Economics” in the Review of Social Economy, in which he laid out various ways in which social economics could contribute to the economic analysis of law. In the 20 years since his article appeared, however, few have picked up his baton, much less run with it. Law and Social Economics: Essays in Ethical Values for Theory, Practice, and Policy is an attempt to rectify this situation and renew social economists’ engagement with the law. Drawn from papers presented at meetings of the Association for Social Economics (at the Allied Social Science Association meetings) and the Law and Society Association, the essays contained in this volume explore several areas in which social economics and law can inform and enrich each other. Divided into theory and applications, the ten chapters in this volume, written by an international assortment of scholars from economics, philosophy, and law, employ a wide variety of approaches and methods to show how a more ethically nuanced approach to economics and the law can illuminate both and open up new avenues for studying social-economic behavior, policy, and outcomes in all their ethical and legal complexity.

On behalf on the contributors, I hope this volume inspires social economists to engage with the law in their work, introduces legal scholars to the unique advantages social economics can provide, and leads to greater cooperation between the two in the future.

This post was adapted from editor Mark D. White's introduction to Law and Social Economics. For more information on this title, see its page at Palgrave Macmillan.

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Me jan 2015Mark D. White is Chair and Professor in the Department of Philosophy at the College of Staten Island/CUNY, where he teaches courses in philosophy, law, and economics. He is the author of four books and over 50 journal articles and book chapters, and edited or co-edited over a dozen volumes. He is the series editor of “Perspectives from Social Economics” for Palgrave Macmillan and “On Ethics and Economics” for Rowman & Littlefield International, and he served as president of the Association for Social Economics in 2014. He can be found on Twitter as @profmdwhite.

04/03/2015

Lascaux, "Crowding Out Trust in the Informal Monetary Relationships: The Curious Case of the Hawala System"

ForumTrust, along with other influential norms of cooperation, has been traditionally viewed as an important coordination mechanism stabilizing expectations of the participants in the informal economic exchanges. Drawing on the example of the informal value transfer system called hawala, this paper, however, shows that the role of safeguard against opportunism in the informal monetary settings is much more reliably performed by the instruments of social control. Norms of control embedded in community beliefs and common social practices among the hawala members entirely replace trusting attitudes, rendering them superfluous for the purpose of protecting financial interests of clients and intermediaries in this informal system of monetary exchanges.

Alexander Lascaux, "Crowding Out Trust in the Informal Monetary Relationships: The Curious Case of the Hawala System." Forum for Social Economics, 44/1 (2015), pp. 87-107.

04/02/2015

Elsner & Schwardt, "From Emergent Cooperation to Contextual Trust, and to General Trust: Overlapping Meso-Sized Interaction Arenas and Cooperation Platforms as a Foundation of Pro-Social Behavior"

ForumWe identify and elaborate some critical factors and mechanisms that foster the emergence of cooperative behavioral patterns. Through institutionalization, which solves social dilemmas through habituation, these factors and mechanisms provide the foundation of contingent cooperation and contextual trust in specific interaction ‘arenas’ and ‘meso’-sized ‘platforms’ (and related carrier groups) in these. This, then, may in turn support the emergence of general trust in the whole population, i.e., across all specific arenas and platforms. The emergence of institutions of cooperation may gain traction more easily in smaller arenas. This, and the transfer, spillover, or generalization to other arenas and platforms, is by no means determined, and the analytical foundation we offer permits to account for the different levels of cooperation, general trust, and socioeconomic performance observable in real-world economies (varieties of capitalisms). Directions of future research, as well as a policy focus, are provided as well.

Wolfram Elsner & Henning Schwardt, "From Emergent Cooperation to Contextual Trust, and to General Trust: Overlapping Meso-Sized Interaction Arenas and Cooperation Platforms as a Foundation of Pro-Social Behavior." Forum for Social Economics, 44/1 (2015), pp. 69-86.

04/01/2015

Piovani & Aydiner-Avsar, "The 2008/09 Economic Crisis: The Impact on Psychological Well-Being in the USA"

ForumThe 2008/09 economic crisis has been the worst crisis of capitalism since the Great Depression. The causes and implications of the so-called “Great Recession” have been widely documented, but the effects of the crisis on psychological well-being have only received limited attention. Using state-level data, this paper aims to assess empirically the impact of the 2008/09 crisis on several indicators of mental health in the USA. The results indicate that unemployment and income levels have a significant and detrimental impact on mental health. This implies that social protection systems—and in particular labor market programs—play a paramount role in reducing the adverse impact of the crisis on mental health.

Chiara Piovani & Nursel Aydiner-Avsar, "The 2008/09 Economic Crisis: The Impact on Psychological Well-Being in the USA." Forum for Social Economics, 44/1 (2015), pp. 18-45.

03/31/2015

Beja, Jr., "Empirics on the Long Run Relationship Between Economic Growth and Happiness"

ForumThe paper finds a statistically significant positive but very small long-run relationship between economic growth and happiness. Reading the evidence as such can mean a rejection of the Easterlin Paradox. The trivial size of the estimated relationship nonetheless indicates little economic significance, if at all. The paper, in turn, argues that using economic significance rather than statistical significance in the evaluation of the evidence can actually lead to a confirmation of the Easterlin Paradox.

Edsel L. Beja Jr., "Empirics on the Long Run Relationship Between Economic Growth and Happiness." Forum for Social Economics, 44/1 (2015), pp. 3-17.

03/18/2015

Economics After the Crisis, by Irene van Staveren

Irene bookA year after the fall of Lehman Brothers, The Economist's headline proclaimed the end of modern economics. What has happened since? Well... almost nothing.

Mainstream and near-mainstream economic textbooks still sell like before. And INET has supported some initiatives that eliminate the rough sides of neoclassical thought and neoliberal policy advice. Very laudable initiatives, with, for example, Wendy Carlin's work on developing a new undergraduate curriculum CORE. But students of economics are not satisfied with these minor changes, so many years after the start of the financial crisis. Their Rethink Economics petition demands more fundamental changes to textbooks.

As a supporter of every single petition, pamphlet, op-ed, and plea for pluralism in economics before and after the crisis, I decided three years ago that I should practice what I preach. The result is Economics after the Crisis, a pluralist introductory textbook published by Routledge in January 2015. It offers a tool to understand the basics of economics from four theoretical perspectives either for use in the classroom or for self-study alongside a standard course book. The theories are presented in every chapter, micro and macro. And from interdisciplinary and close to real-world experiences to mathematically in an idealized world of perfect markets and agents following the single ethical guide of utility maximization. The book presents social economics, institutional economics, post Keynesian economics, and neoclassical economics and thereby shows that almost no economic concept or tool is theory-neutral. If only this message gets across, the book will have accomplished already more than I could hope for.

The window of opportunity to reform economic teaching is almost shut. Banks pass stress tests in Europe and the US while still being too big to fail. Nobel Prizes are awarded to economists who show no effort at all in rethinking economics. And economic policies ignore the danger of continuously increasing private and public debt, while shifting the consequences of such myopia on disadvantaged groups and whole populations.

If it is not now, we may have to wait for the next crisis to change economic thinking and teaching. I truly hope that the combined efforts of critical economists, activist students, and courageous teachers will help to make the change. We cannot afford to standby any longer.

* * * * *

IreneIrene van Staveren is professor of Pluralist Development Economics at the Institute of Social Studies of Erasmus University Rotterdam, the Netherlands. She was awarded the 2014 Lifetime Achievement Thomas Divine award by the Association of Social Economics.