Black Woman and self defense

"

For women, part of the tension around this topic is that female gun owners are marginalized in a feminist culture that promotes unarmed resistance and “clean” fighting techniques. These send the message that as long as a woman does not have a lethal means of protecting herself, she is still feminine and worthy of “real” protection—either from a man, or from the police. I grew up with the notion that self-defense achieved via martial arts, pepper spray, and the biggest keys on the key ring are how women combat sexual assault. Movies, media, and college self-defense classes reinforced the emphasis on clean fighting as the feminist way. And as I got older, my reporting on public safety in Texas led me to stories about pink personal Tasers and women involved in restorative justice—but never to women (rape survivors or not) who had decided to use more assertive means to protect themselves. To be a gun-owning feminist, to prepare to protect oneself against two of the most frightening enemies of female-identified people—rape and/or domestic violence—still strikes at the heart of what could be described as a feminist identity crisis, wherein women oppress each other with our inability to make room for alternative models of self-protection."

In the mainstream of our society, Gun issues are generally portrayed as southern white gun totting conservatives (or even white crazy lone wolf maniacs) versus northern white liberals demanding restrictions and regulations on gun ownership. Most commonly, the conversation about gun ownership centers around the "right" to a gun granted by the constitution or the violence generated by guns. The later either comes down from conservative arguments that gun restrictions don't limit gun deaths, just keep people from being able to protect themselves from criminals while liberals argue that they do lessen violent gun crime. For both groups, the overriding desire for guns or gun control is the limitation of crime and especially the vulnerability of "law-abiding citizens". The class tension between those who do well in our current social structure and those who lose is just under the surface.

Violence between law, corporate security forces and workers attempting to unionize was rampant in the late nineteenth and early twentieth centuries. One of the most famous conflicts was dubbed " The Battle of Blair Mountain". where thousands of unionizing workers, cops and corporate private cops clashed. by the end of the conflict about one million round of bullets had been fired. Since the new deal , which was largely won by union (and communist) organizing, and the purging of radicals from the union movement clashes (and the need to arm oneself against your boss) has basically disappeared. In it's place, there is rashes of work place incidents that mainstream society interprets as random acts of crazy people (see Mark Ames's wonderful book "Going Postal"). The right to arm one's self was a very real need for workers in the past (and arguably is one people have neglected since the second half of the twentieth century)

There is yet another alternative history of gun issues. This one revolving around the history of race in america. One of the first post reconstruction laws banned the ownership of guns by minorities. Weapons have historically been used to terrorize black communities and people, but also to fight back. In places where the police may be the racists you need the most protection from, a right to a gun is of profound importance for self defense. For typical white liberals, police are an absolute protection. The idea that one may need to seek protection from someone that isn't the state is anathema. As a result the conflicts between minorities and the police become difficult to understand. The idea that cops may have an unambiguously negative effect on certain groups and unjustly harass them at an institutional level is uncomfortable or difficult to accept. Black woman have especially been left out of the limelight (historically exemplified by Sojourner Truth's speech "Ain't i a woman?") and their need of protection from men, whether white or not, has been ignored.

Works Cited

Ames, Mark. Going Postal: Rage, Murder, and Rebellion : From Reagan's Workplaces to Clinton's Columbine and beyond. Brooklyn, NY: Soft Skull, 2005. Print.

Ayers, H., Rothrock, Z. and King, K. (2006) Archaeological Investigations of the Battle of Blair Mountain: May 13 to November 19, 2006, on file (unpublished)

Sanders, J. Victoria. "Target Market." Bitch Media. Web. 01 May 2012. <http://bitchmagazine.org/article/target-market>.

The horror of HBO's "Girls"

 

"The backlash against the show has been mainly about the all-whiteness of the cast, the way there are no people in color in Lena Dunham’s NYC except bit-part, background workers here and there. Personally I think people of color have dodged a bullet, and should celebrate their own non-representation in this TV-mumblecore hellscape. While this show slimes along, I like to imagine the whole rest of mixed-race NYC having a terrific time everywhere that Lena Dunham and her friends are not, letting Dunhamites move around in a permanent bubble of privileged-white-girl malevolence, shunned by all decent people

In response to the criticism about the show’s blinding whiteness, one of the Girls writers, Lesley Arfin, tweeted sarcastically: “What really bothered me most about [the movie] Precious was that there was no representation of ME.”

HBO's Girls is the latest attempt to create a "realistic" world that upper crust white liberals can identify with. However, like most shows of this nature, it is not recreating what the "world" is like or "life" is like, but simply how these people perceive, or wish to perceive, it. One of the most glaring results of this has been the complete lack of non-white characters in the pilot episode except for, of course, a homeless man. This would be one thing if this was the community in which these characters lived in, but the brooklyn art scene is known for being quite racially mixed. It has been common among (wealthy) liberals in recent years to proclaim that they don't "see" race. Normally this is meant as some brave post-racial society declaration, but as incidents like these accumulate it might be better to view them as an admission of blindness.

People in this world have very little clue how life works for the vast majority of the people around them, and because of that they are only able to frame what they do in terms of their innate talent, rather then their luck or privilege of being born to certain people at a certain place at a certain time. In addition, because they have the financial (read parental) resources to pursue unpaid internships and other such (initially) unprofitable activities (see Ross Perlin's recent excellent book "Intern Nation"), effort and "skill" is still tangentially connected to their success. It's easy to see from that myopic point of view why they are able to presume that those who don't have their success are simply not working hard enough. This point of view also white washes (in a very literal way) the world around them. A combination of their racial and class position allows them to ignore the issue of race and proclaim a strange kind of  "equality" between groups (hence the odd tweet above that equated the movie precious to the "black" experience, therefor justifying her portrayal of the "white woman" experience).

A major part of racial and class inequality (and it's visceral sting) is the ability of those who control our cultural institutions (like news media, television, movies etc) to paper over them and pretend they don't exist. Shows like Girls are especially harmful because they aim to create a "realistic" world, and in attempting to do so end up even further entrenching the ignorance of racial and class issues they don't (or even can't) understand.

Works Cited

Jones, Eileen. "The Horror of HBO's Girls." The EXiled. The EXiled. Web. 07 May 2012. <http://exiledonline.com/the-horror-of-hbos-girls/>.

 

Perlin, Ross. Intern Nation: Earning Nothing and Learning Little in the Brave New Economy. Brooklyn, NY: Verso, 2012. Print.

Vajazzles and other depressing forms of commodified patriarchy

"It's a sexist world. We just live in it. For women in this world, the choice not to convert our bodies into a tool for the beauty industry to exploit is the one that's seen as odd, different, and weird. For us, the simple choice not to invest the time, money, and concern into shaving our armpits is the one that marks us as somehow less of a real woman. But really, the choice not to shave is the one that requires more energy for women, because we stand to be dismissed as dirty, masculine, man-hating hippies if we abstain. When the "woman's choice!" advocates argue that deciding to Vajazzle or not Vajazzle—for that truly is the question—is just a matter of personal taste, they are putting their fingers in their ears and talking really, really loudly in an attempt to deny the culture in which these choices are made."

Sexuality has been an essential battling ground for human society. The definition and conception of gender (and it's relation to sexuality) is a prime way of deriving conflict and inequalities between large groups of people. The cultural and social evolution of gender and gender roles helps determine the balance of power between genders (or even if there is a conflict generating a struggle making the concept of a "balance of power" operative). This battle has taken different forms over different societies and different time periods. Since the origins of capitalism (which is controversial but can be placed to around the late 14th century), this battle hand entered a new battlefield: the area of commodities. Within this context, it is very logical for capitalists to generate products that are derived from and reinforce gender inequality.

From hair products, to salons, to beauty products and the differences between gendered clothing, gender is something that is sold and resold. It is also highly profitable. In addition, the people who make the business decisions surrounding the production of these products have an interest (besides economic) to reproduce these inequalities (or the process of moving through the hierarchy of a corporation has weeded out any desire to confront these issues). Products that directly relate to sex have been very popular since the sexual revolution of the second half of the twentieth century. One could almost view it as a reaction to feminism and the kind of sexual revolution feminists were originally discussing.Things like "waxing" one's genitalia is something that has gone from exotic, to something that is "expected" in many quarters of our society

A new product that threatens to go through this transformation is "vajazzling". a prerequisite of this product is "waxing". Essentially, this is simply adhesive attaching jewels to one's crotch (see the picture above from the vajazzling website). It only lasts a maximum of 5 days and may start causing irritation and such if your hair grows back quickly. As with the beginning of many of these products, it has gotten a huge reaction from woman and has been denounced widely (see the newspaper blog cited above for example). It is also, however popular with some people (and even has a celebrity endorsement). Notice how this product, like many feminine products, involves the performance of femininity rather then being masculine (which usually involves no action eg. growing body hair out). This product, like many products reinforcing gender inequalities threatens to become more ubiquitous, and thus more difficult for feminists and anti-sexists to deal with.

Works cited.

Hess, Amanda. "The Problem With Defending The Sacred Choice to Vajazzle." Washington City Paper. Web. 01 May 2012. <http://www.washingtoncitypaper.com/blogs/sexist/2010/03/15/the-problem-with-defending-the-sacred-choice-to-vajazzle/>.

"Digging for Dirt with Geraldo and Jenny—How talk shows pathologize female sexuality"

"Talk shows are the scariest thing on the planet today. You think I’m exaggerating, don’t you? Think about it: not only are they the lowest common denominator of American pop culture, but they’re also—because they’re in the form of “real” people talking about their “real” lives—taken to be some measure of truth. A talk show pretends to be a window opened by the host; the audience thinks that it’s seeing a clear, undistorted reality. But the view is anything but real—hosts, guest experts, and audience members all inject their own views of the truth into the words of the panelists, making the shows more like funhouse mirrors than windows. Talk shows are powerful propaganda, often masking a conservative, reactionary, restrictive worldview with an earnest desire to help, or a simple voyeurism. The host is always in control of the discourse, and she can run roughshod over what the guests are saying—by not listening, by twisting words to fit a preconceived notion of panelists’ behavior, by putting words into the panelists’ mouths.

When the topic is young women and sex, this kind of moralizing cultural static gets louder and louder. Take, for example, a Geraldo episode called “Teen Sex for Status: These Girls Are Out of Control,” and Jenny Jones, “My Teen Daughter Is Too Promiscuous.” The shows come pre-packaged with titles and the hosts’ viewpoints; the experts come with agendas; audience members come with their own rigid ideas about acceptable behavior. In the parallel universe that is the talk show, like almost everywhere else, female sexual agency hides in plain sight. It can’t be acknowledged—even when it’s being spoken about and demonstrated. When panelists contradict preconceived notions—when they declare that they like the way sex feels, that they fuck just for the hell of it, when they are honest about their erotic lives—their words are willfully misinterpreted and ignored by an audience that must, for its own comfort, erase the reality of female pleasure. And because of the lack of a culturally understood language of female sexual pleasure, it’s even harder for the panelists to express or defend themselves. The problem is not simply that individual girls get insulted and ignored by these particular episodes of these particular shows, but that huge chunks of our entire culture are built on the repression of female sexuality, and these shows are a symptom and a demonstration of that sad fact—and a mode of perpetuating it."

Sexuality is something that have always been regulated by societies. What is unique about today is that people feel atomized and alone. People often don't really know their neighbors, and often people don't connect with their co-workers. As such, the development of their thoughts on gender and sexuality largely happens within their own homes, or in the context of the media presentation of these things. The mass (commodified) culture is the dominant institution in our thinking on these issues. In many ways mass culture is our version of the medieval catholic church. I mean that in the sense that our moral and non-moral beliefs get formed in the context of what this media tells us.

The "talk show" is a perfect example. In a talk show, a personality who is an charge (the show is often eponymously named after them eg "oprah", "ellen" or "maury") guides the audience (in the room and at home) through celebrities, general interest stories but most of all, the socially marginal. Especially shows like "Springer", "Maury" etc feed off of presenting an exaggerated and (explicitly deplorable) form of human behavior. For an audience member at these shows, one really doesn't have the option not to cheer and basically follow the personality's line (I once attended the  Steve Wilkos show). One of the biggest topics these shows thrive on is female sexuality.

Female sexuality is problematic and contradictory in our current society. The sexual revolution had an enormous impact on female sexuality. Talk shows can be seen as a reaction. Often times these shows express purpose is to denounce female sexuality and young female sexuality. These shows tend to be attached (artificially or "organically") to what is looked at in some circles as an "old fashioned" view of sexuality. Many of these shows claim to have a general critique of teenager sexuality, but most of the people they confront are female teenagers. Because these shows are framed around particular personalities, those personalities (and their hand selected "experts) is able to tell their "guest's" story, no matter how their guest tells their story.To repeat Jarvis's critique: "The problem is not simply that individual girls get insulted and ignored by these particular episodes of these particular shows, but that huge chunks of our entire culture are built on the repression of female sexuality, and these shows are a symptom and a demonstration of that sad fact—and a mode of perpetuating it."


Works cited

Jarvis, Lisa. "Talk Shows." Bitch Media. Web. 01 May 2012. <http://bitchmagazine.org/article/talkshows>.

the "volcker shock"

In 1979 President Carter appointed To the federal reserve Paul Volcker. At the time his appointment was seen as part and parcel with Carter's "austerity" program (austerity is generally seen as reducing spending, increasing taxes and being "less accommodating" to private enterprise. Increasing interest rates is what the third point generally means. I will return to this later). In the mainstream economics before the 1970's, a curve called the "Phillips curve" purported to explain that their was a determinate relationship between inflation and unemployment. That is, when the rate of inflation goes up, the rate of unemployment was supposed to go down a certain amount and vice versa. The "stagflation" (ie high levels of unemployment and inflation) of the 1970's completely exploded this view.

In it's place (whether merited or not) Milton Friedman came to prominence with "monetarism". His basic idea was that money is "neutral" in the long run ie it doesn't effect any real variables (like employment, distribution of output etc. see earlier post for a differing view). the basic equation monetarists use to explain this idea is MV=PQ. In this equation M is money (as in cash and bank deposits), V is velocity or how much money circulates in a given period of time, P is the level of prices and Q is the amount of output produced. Milton Friedman argued that velocity was basically constant and in the long run the economy tended towards full employment (the unemployment that did happen was caused by inefficient labor markets ie unemployment insurance and unions). Because of this, it was easy for him to draw the line of causation from money to prices. In other words growth in the "money supply" caused growth in the rate of price increases (look at this earlier post for a more detailed explanation and a reverse the causation argument).

Back to Volcker. He was largely seen as implementing Friedman's agenda. he was to lower, the rate of growth of prices by lowering the rate of growth of money. In practice, this meant a lot of volatility in interest rates (if you target interest rates, you have to accept the level of bank reserves and vice versa).Note also that Friedman declared that labor unions were making labor markets more inefficient and thus restricting output (and creating unemployment). Marxists (and other analysts) such as Doug Henwood argue that the “Volcker shock” was primarily aimed at breaking the power of labor. It's also notable that average people were not involved in this battle ideas. Workers were only a “problem” that needed to be solved.

“Humans are inherently Greedy”

The above statement says very little. It's implications depend on how the author defines “inherently” and the implications they claim come from this assertion. What is more interesting, and more telling, is how this statement is often used. It is commonly asserted in the context of thinking about a different (and possibly better society). For those who respond in this fashion, what they are implicitly saying (and often explicitly say later) is that human “nature” blocks us off from better alternatives then our current society. For those who make this four word statement though, all of that exposition is perfectly obvious.

In contrast, if I were to say “Humans are inherently loving”, it would take lots of exposition to get people to understand the ancillary ideas, let alone understand it as a defense of visions of alternative societies.Why is that? why is this particular propensity (passion in Adam Smith's framework) considered the dividing line between our society and any other better option? No one I know (Adam Smith doesn't count) has ever argued that a division of labor is unsustainable because Humans are inherently intelligent.

Greed doesn't justify or condemn any society. Neither does any other emotion or human propensity. Still, why do people think it does? Marx Gives us an interesting suggestion ( which i find compelling) in The German Ideology: "The ideas of the ruling class are in every epoch the ruling ideas, i.e. the class which is the ruling material force of society, is at the same time its ruling intellectual force". In this view, what the people who control society and regulate it's ability to reproduce itself, are able to shape the ideology of the entire society.

I find Marx's argument compelling, especially in light of the alphabet soup of corporate and wealthy funded "think tanks", corporate funded universities and programs. Not to mention Neoclassical economics itself.

Marx, Karl, and Friedrich Engels. The German Ideology. Moscow: Progress, 1976. Print.

Rationality as a justification of social inequality

Rational choice theory is a branch of thinking ever omnipresent in the social sciences. It is especially dominant in economics and many of the adherents in other disciplines have spilled over from economics (e.g Gary Becker, and Freakonomics co-author Steven Levitt). As could be noted by the use of the term “choice” it a theory of human action. The theorists are not attempting to explain the thoughts, feelings and emotions of People. They purport to explain why they do what they do (at least in the “economic” realm). In addition, their conception of rationality is more specific and different then average person’s definition Duncan Foley explains it like this in his piece Rationality and ideology:

Economists, however, have come to define rationality in a much narrower sense. The economist’s rational decision maker optimizes, that is, pursues not just any action that promotes a goal, but the action that best promotes the goal. The economist’s rational decision maker processes information according to the procedures of Bayesian statistics. Furthermore, the goals the economist’s rational decision maker pursues have to be reducible to the direct consumption of material goods and services. This is a “rationality of the belly” (which some people might reasonably regard as being rather irrational).

This may seem absurd on it's face; on a moment's reflection it is easy to recognize that people don't behave like this. The defense however, is easy (but strangely brilliant) and was made over half a century ago by Milton Friedman:

Let the apparent immediate determinant of business behaviour be anything at all—habitual reaction, random chance, or whatnot. Whenever this determinant happens to lead to behaviour consistent with rational and informed maximization of returns, the business will prosper and acquire resources with which to expand; whenever it does not, the business will tend to lose resources and can be kept in existence only by the addition of resources from outside.

What he is essentially saying is that people have no agency. Actors may have differing motivations but as soon as they start to deal with the problems of “scarcity” and the “economy” they will encounter competition and behave “as if” they are rational “utility maximizing” people. The “natural” processes of economies (Duncan Foley suggests that in Neoclassical economics these processes are determined in a Hobbesian/Lockean/Rawlsian “veil of ignorance”). Even when leaving work and production and entering the world of “leisure”, agents have no agency since their preferences are predetermined. Note that since rational, utility maximizing individuals require perfect information, complete markets and definite measurements of all elements of life that provide “utility”, any move away from Capitalism is rejected as almost perverse. Further, redistribution downwards is considered “inefficient” and “supoptimal” because it may result in less total utility being available (this is called pareto optimality). In this view, it is less efficient for a poor person to have 1 dollar then for Donald Trump to have 3. All that matters is that the better off **could** compensate the worse off, even if they never do. In it's purest form, Rational Choice theory is a full throated defense of capitalism that argues against even the mildest forms of redistribution.

Foley, Duncan. "Rationality and Ideology in Economics." World Political Economy Graduate Class. New School For Social Research, New York City. 27 Mar. 2012. Lecture.

Friedman, Milton. "The Methodology of Positive Economics." Essays in Positive Economics. Chicago, IL: University of Chicago, 1953. Print.

The money induced inequalities in income (more accurately, output) distribution

In our modern capitalist society, a major inequality results from the very nature of production for monetary profit and the hiring of workers. Marx distinguished production for exchange from production for monetary profit using the equations M-C-M' and C-M-C. Workers ( or in proto/non/precapitalist money using societies, peasants) first and foremost are looking to acquire the basic necessities of life. Generally, this means selling the only reproducible asset they have, their labor power. Workers are paid a wage that is denominated in money. Then they use that same money to purchase what they need from firms.

Here, production is fundamentally broken from consumption. Workers only acquire the output they produce by purchasing it at the market and capitalists are producing, not to satisfy consumption but to accumulate money that will partially be used to consume on the market later. Under capitalism, people spend much of their time either producing or consuming, but these activities are never directly connected.

Normally at this point, Marxists go into explanations of how this leads to the exploitation of workers and how all profit comes from surplus value produced by workers. This may or may not be a valid argument, but it is not the focus of this post. Rather, I would like to direct this post towards the analysis of Michal Kalecki, a polish (Marxian trained) economist and widely seen as an independent (conemporary) developer of John Maynard Keynes's analysis. As is noted above, workers are paid a monetary wage. This means they aren't guaranteed any set standard of living (for the moment I will ignore inflation adjusted contracts, since those are no where near the norm). It also means that the pricing and production decisions of firms as a whole determine the output workers receive, no matter how high or low their nominal wages are.

If worker's for example, form a union and push for higher and higher wages (assuming their productivity stays constant), capitalists as a whole could grant them their wage increases but then raise prices to preserve their profit margin. This is quite a dangerous result for many reasons, not least of which it shows that firms have vast control over the living standards and power of workers, but workers (even when they push back) are only able to achieve limited gains for themselves. For Neoclassical economists, this is unacceptable. It is partially why the concept of competition (specifically “perfect” competition) is so central for them. The process of competition between firms helps them strip firms of their agency and social control. It also leads to the easy defense that any undue power corporations have over our lives is a result of a “lack of competition” that is often attributed to state intervention. Even when they spend their time modeling the economy more realistically (using “imperfect” competition) competition is supposed to exert massive control over firms and if it doesn't, the solution suggests itself (deregulate and break up firms). Interestingly Marxists also rely on competition reducing capitalist agency, but for different effects. Rather then equalizing the power dynamic, it is supposed to make it more brutal since any capitalist which didn't try to expand production, invest and squeeze workers would be destroyed.

Mankiw, Nicholas Gregory. Principles of Economics. Mason, OH: Thomson South-Western, 2011. Print.

Marx, Karl. Capital: A Critique of Political Economy. London: Penguin in Association with New Left Review, 1981. Print.

Lopez, G. , Julio., and Michael Assous. Michal Kalecki. Basingstoke, England: Palgrave Macmillan, 2010. Print.

How do banks create money?

This is one of those questions that make me squirm when I have to answer it on the spot, for a lot of reasons. First, money is an intimate topic to people’s lives. They owe people and institutions money, their savings are in money; money is just an integral part of everyday experience. Explaining the nature of money to someone can be a difficult experience, especially when they understand the answer.

Second, there’s the fact that multiple explanations of how banks create money exist. Not only that but neoclassical economics proposes one view that dominates the academic and political discourse (neoclassical economics is broadly the economic point of view that has dominated economics for the last 140 years, with perhaps a brief interlude during the “Keynesian” revolution). In the neoclassical view banks are only able to lend money after depositors have put their cash into a bank. Since governments sometimes require banks to hold a certain amount of money aside (in the U.S it’s 10%), the idea is that the rest of their “excess” reserves are available for lending. This theory plus the US’s 10% reserve requirement has led to one of neoclassical economics’s most appealing teaching example. I think it is valuable to quote N. Gregory Mankiw's principles of economics textbook at length here because he's a very clear writer and his book dominates the textbook market (not to mention it gives me a chance to remind people that his students walked out of his class in protest of it's content last semester here: www.thecrimson.harvard.edu/article/2011/11/2/mankiw-walkout-economics-10 )

"Let's suppose that First National has a reserve ratio of 1/10, or 10 percent. This just means that it keeps 10 percent of its deposits in reserve and loans out the rest... First National still has $100 in liabilities because making the loans did not alter the bank's obligation to it's depositors. But now the bank has two kinds of assets: It has $10 of reserves in its vault, and it has loans of $90. (These loans are liabilities of the people taking out the loans, but they are assets of the bank making the loans because the borrowers will later repay the bank.)

...Once again consider the supply of money in the economy. Before First National makes any loans, the money supply is the $100 of deposits in the bank. Yet when the First National makes these loans, the money supply increases. The depositors still have demand deposits totaling $100, but now the borrowers hold $90 in currency. The money supply (which equals currency plus demand deposits) equals $190. Thus, when banks hold only a fraction of deposits in reserve, banks create money.

The amount of money the banking system generates with each dollar of reserves is called the money multiplier. In this imaginary economy, where the $100 of reserves generates $1000 of money, the money multiplier is 10. What determines the size of the money multiplier? It turns out that the answer is simple: The money multiplier is the reciprocal of the reserve ratio. If R is the reserve ratio for all banks in the economy, then each dollar of reserves generates 1/r dollars of money. In our example, R=1/10 so the money multiplier is 10."

sector	Government		Banks		Debtors (to the bank)		Creditors (to the bank)
Parts of balance sheet	assets	liabilities	assets	liabilities	assets	liabilities	assets	liabilities
Balance sheet	0	$10 (currently held as bank reserves)	$10 reserves. $90 loans	$100 in bank checking account	0	$90 loans	$100 in bank checking account	0

I should add that although this is what Mainstream economics puts in their undergraduate textbooks their is a lot academic literature written and published by Neoclassical economists that qualify or even contradict this story. Indeed the most common defense of neoclassical economics is that the critics either don't understand it or are criticizing a "caricature" (aka what appears in the textbooks). The table above is a much more detailed (with the implicit sectors made explicit) exposition of the model Mankiw is presenting. If you learn accounting, you find out very quickly that any financial asset is someone/something else's liability so that they should all sum to zero (The real world contains physical objects that don't have corresponding liabilities so real world balance sheets should sum to positive values).

Notice that in this conception of money creation by banks, the government directly controls the money creation process. If it lowers reserve requirements, excess reserves will appear in the banking system that, according to these theorists, will be lent out, redeposited and lent out again in the “money multiplier” process Mankiw described. If it raises reserve requirements, banks will have to attract more deposits or reduce the amount of loans they are making.

This is a very orthodox theory but it is used in more unorthodox circles to defend various policies. Many liberal critics of big banks have criticized them on the grounds of “not lending” even after the bailouts (this being based on the idea that their holdings of excess reserves are and should be available for “funding investment”). The “move your money” campaign is largely predicated on the idea that moving your deposit limits the ability of big banks to lend money and increases the ability of small banks to. The NEED act (HR 2990) introduced by Dennis Kucinich is largely based on the American Monetary Institute's ideas.

They subscribe to the Neoclassical view of money creation, with the crucial difference that they don't see the “loanable funds” (the deposit and loan concept described by Mankiw) market as an equilibrating system that balances savings and investment in a way beneficial to all. They see it as a system that allows a privileged few to function as a usurious middle man between government, industry and the public (see: monetary.org). For them returning money creation back to the government simply involves raising reserve requirements to 100% .Recall what Mankiw said above:“If R is the reserve ratio for all banks in the economy, then each dollar of reserves generates 1/r dollars of money.” In this case R=1 so each dollar of reserves is just 1 dollar. To AMI, this means that money is only created when governments spend it into existence.

Another view is presented (usually) by the Post-Keynesian school . They look at the correlation between reserves and broader money creation but think that Neoclassical economics has the causation reversed. Rather then banks needing deposits (and thus reserves) to make loans, they see banks making loans which create deposits and then seeking out reserves later. In Neoclassical economics (as alluded to above) savings and investment is balanced through the loanable funds market. The variable that adjusts to balance these two things is the interest rate. If there are more (less) savings being offered as loans then borrowers willing to borrow them, the interest rate is supposed to fall (rise) until equilibrium is reached. Post-Keynesians in contrast envision a central bank with a target interest rate that will intervene to inject reserves when demand for reserves rises to prevent (unplanned) rises in interest rates and withdraw reserves to prevent (unplanned) falls in interest rates. For them the money supply expands and contracts to accommodate the (profitable) financing needs (and desires) of (credit worthy) economic actors including corporations, other financial institutions and households.

I personally subscribe to the Post-Keynesian view. For some Theoretical and empirical defenses of the Post-Keynesian position see Schumpeter's book, Basil Moore's empirical work and definitive book, and a sampling of federal reserve publications cited below. This is enormously relevant to social inequalities. If one accepts the neoclassical view, banks don't have very much agency. they are simply the (well paid) intermediary between savers and borrowers. It is ultimately their actions and reactions that make major changes in the global economy. Rather then the housing bubble being led by madly inventive, criminal bankers, it is supposedly let by investors in search for higher returns and borrowers desire for more and bigger houses. The neoclassical view also leads to the idea that the level of debt doesn't really matter. It also leads to the idea that less radical forms of activism, like moving your money, will bring banking under control, rather then protest, confrontations or even revolution. Social inequality created by finance is ultimately our own fault. If we just became more active and conscious, these ills would shrink enormously. It's not a class conflict, it's a conflict with ourselves.

Works Cited

Delreal, Jose A. "Students Walk Out of Ec 10 in Solidarity with 'Occupy'" The Harvard Crimson. Harvard University. Web. 23 Mar. 2012.

.

Kydland, Finn E.; Prescott, Edward C., "Business Cycles: Real Facts and a Monetary Myth", Federal Reserve Bank of Minneapolis Quarterly Review 14 (2): 3–18

Holmes, A. R. Operational Constraints on the Stabilization of Money Supply Growth. Controlling Monetary Aggregates. F. E. Morris. Nantucket Island, The Federal Reserve Bank of Boston: (1969) 65-77 .

Mankiw, Nicholas Gregory. Principles of Economics. Mason, OH: Thomson South-Western, 2011. Print.

Moore, Basil J. Horizontalists and Verticalists: The Macroeconomics of Credit Money. Cambridge [England: Cambridge UP, 1988. Print.

Moore, Basil J. "The Endogenous Money Stock." Journal of Post Keynesian Economics 2.1 (1979): 49- 70. Print.

Schumpeter, J. A. The theory of economic development : an inquiry into profits, capital, credit, interest and the business cycle. Cambridge, Massachusetts, Harvard University Press. 1934. Print

Rent and social inequalities

“THE PROBLEM OF RENTS IS EASY FOR A NONECONOMIST, EVEN A sparsely educated low-wage worker, to grasp: it's the market, stupid. When the rich and the poor compete for housing on the open market, the poor don't stand a chance. The rich can always outbid them, buy up their tenements or trailer parks, and replace them with condos, McMansions, golf courses, or whatever they like. Since the rich have become more numerous, thanks largely to rising stock prices and executive salaries, the poor have necessarily been forced into housing that is more expensive, more dilapidated, or more distant from their places of work. ...Insofar as the poor have to work near the dwellings of the rich-as in the case of so many service and retail jobs-they are stuck with lengthy commutes or dauntingly expensive housing.”

In popular discourses, social inequalities are often discussed in income terms. However, as Ehrenreich comments here The lot of the working poor can't be discussed without discussing the major costs they incur. You have to look at both sides of the ledger: the revenue and the costs. One of the most crucial costs, especially in the past three decades, is housing. The increase in rents tend to have marginal effects on the very rich but are the difference between surviving and not surviving for the working poor. In the late 19^th century, a social reformer Named Henry George was intently focused on rent. What he observed was the benefits of nature were accruing to a select few, through the institution of land ownership.

By simply owning land, a person could collect an income that didn't derive from the products of their labor (in seeming violation of Locke's justification of private property). To George, this meant “we must ... substitute for the individual ownership of land a common ownership ... We must make land common property”. This did not require public ownership of the means of production ala Marx : “Let the individuals who now hold it retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent”. How did he propose to “confiscate rent”?

His suggestion was a land value tax. This is a tax on the value of the “unimproved land”. It is different from normal real estate taxes because it does not tax improvement of the land's quality or property on top of the land. This would prevent property owners from profiting off of a market increase in the land price (that wasn't a result of improvements they made) because increase in it's worth (called site value) would accrue to the government rather then the private individual. Consequently, the incentive for land speculation (which can create self-fulfilling price bubbles) would be removed because they don't profit off of market rates rising.

Henry George provides a comprehensive analysis of the other side of the ledger, the cost of living that only rarely enters popular discourse even after the recent hyperinflated housing bubble. Housing (and George's analysis) provides a concrete case of a relatively few extracting unearned income from the large majority of people that fall especially hard on the working poor. In addition, because it costs nothing for an owner to leave a property idle, the lack of land value taxation allows undermines the quality of neighborhoods and undermines the quality of community services.A close examination of his analysis and his proposals would be useful so that the comprehensive qualities of social inequalities could be pushed out . Also, he's one of those rare social analysts who proposes cut and dry solutions which can also be analyzed and criticized in it's ability to relieve social inequality.

Ehrenreich, Barbara. Nickel and Dimed: On (not) Getting by in America. New York: Holt Paperbacks, 2008. Print.

George, Henry. Progress and Poverty. Levin, N.Z.: W.M.F. Williams, 1969. Print.

Unemployment and social inequalities

Above is the unemployment rate since 1948. As one can see, the unemployment rate ticked up around 1970 and only a few brief periods turned back down to 1941-1968 levels. (notably, once during the dot com bubble). The numbers are even more striking when we look at those who have been unemployed longer then 27 weeks. These figures are easy to stare at, but what do they mean for actual people? What does it mean for the unemployment rate to be 3 as opposed to 6 percent (let alone 10 or 12)? What does it mean for the number of people unemployed for over 27 weeks to approach zero in parts of the “golden era” and to secularly increase ever since?

The Center for Disease Control provided a chilling Glimpse last April when they sent out a press release about suicide rates and the “business cycle” (basically the cycles where unemployment and the amount society produces goes up and down). According to their study the suicide rate usually rose during recessions and fell during expansions. “The largest increase in the overall suicide rate occurred in the Great Depression (1929-1933)—it surged from 18.0 in 1928 to 22.1 (all-time high) in 1932 (the last full year in the Great Depression)—a record increase of 22.8% in any four-year period in history. It fell to the lowest point in 2000”.

The ability to pursue a happy and fulfilling life is paramount to a socially harmonious society. As Martin Luther King stated “if a man doesn't have a job or an income, he has neither life nor liberty nor the possibility for the pursuit of happiness. He merely exists”. When inequalities prevent that, and even drive people to suicide, they are inflicting damage of the highest order. Unfortunately, this is only a small sample of the damage caused by Unemployment on social inequality. Unemployment affects crime rates, family cohesion and all other elements of (and inequalities within) social life. How preventable is Unemployment? If it is preventable, why isn't it prevented? To what extent is social inequality responsible for unemployment and to what extent is unemployment responsible for inequality?

King, Martin Luther. "Remaining Awake through a Great Revolution." King Institute Home. Web. 14 Feb. 2012. .

"Press Release:CDC Study Finds Suicide Rates Rise and Fall with Economy." Centers for Disease Control and Prevention. 14 Apr. 2011. Web. 15 Feb. 2012. .

"Unemployment Rate Data." Bureau of Labor Statistics. Web. 19 Feb. 2012. .

Derivatives and social inequalities

What is a Derivative?

The term Derivative is used everywhere. Boring calculus books make you derive derivatives. English teachers tell you that a body of work is “merely Derivative”. If the word couldn't get any more boring, you hear the term in the financial context. Most financial articles can't go a paragraph or two without name dropping a type of Derivative. It might be helpful then to know what a derivative is. Below is a definition of derviatives taken from the “Dictionary of Financial Engineering ” by John F. Marshall . Don't worry if you don't understand the definition on the first reading. I will break it down as best as I can.

“A generic term to describe a wide variety of financial instruments ranging from standardized, exchange-listed products to custom-made, over-the-counter instruments whose values depend on, or are derived from, the price or value of one or more underlying assets, including indexes, exchange rates, interest rates, or commodity prices. “

Wow. That had a lot of words. They seemed to logically follow one another in a sentence, but at this point some of you are taking my word for it that that meant something. Let's take the first part. What is an “exchange-listed product”? This just means that there's some trading floor (or some place online), similar to the New York Stock Exchange, where people will buy and sell financial products that do the same thing. In other words, the products are fungible. Just like one dollar bill does exactly the same thing as another dollar bill, one of these financial products does (or is supposed to do) the same thing.

From this, it's easy to figure out what a “custom-made, over-the-counter instrument” is. It's simply the opposite! Rather then being “listed” on some exchange somewhere and buying it on an exchange, people buy the products on their own. More specifically, there's a person named a “dealer” (also called a “market maker”) who both buys and sells the same product and makes money on the price difference between the price he/she pays for products and the price he/she is paid when selling them (or at least that's the ideal, more on this in later posts). You can think of a market maker as similar to your local corner or grocery store. They buy products from suppliers, sell those same products to you and make money on the difference.

Now how about that second part? “Instruments whose values depend on, or are derived from, the price or value of one or more underlying assets, including indexes, exchange rates, interest rates, or commodity prices”. This is much simpler then it sounds. All that's being said is a derivative doesn't have some inherent value tied to it, it's worth is based on the value of something else. I'll give a simple example. Let's say that I go to my local farmer and tell him “hey, if you sign right here, I'll pay you 2 dollars every week for a year for the right to buy a bushel of apples for 10 dollars at any point during that year”.

That's called an “option” because I'm paying for the option of buying apples at a certain price. When the price of apples goes down (up), the value of this option goes down (up) because the privilege to buy a bushel of apples at 10 bucks is less (more) appealing the lower (higher) the price. If I can go out and buy a a bushel for 5 dollars that option won't be worth very much to me but if the spot (immediate) price is 30 dollars the option becomes more valuable. This principal of basing the value of an asset on another asset can and has been extended to nearly every conceivable thing from those listed above to the weather and movie earnings. In the same way your bet on Jeremy Lin is based on Jeremy Lin's performance, you can design a custom contract to be valued based on the performance of nearly any measurable thing on the planet just as long as you can find someone to take the other side of the bet.

What does this have to do with social inequalities?

Everything. Derivatives exemplify everything about the fact of social inequality and its media discussion. While electoral politicians go back and forth endlessly on tax cuts (the supposed marker of “evil” inequality loving republicans and “equalizing” democrats is their position on marginal tax rates for high income earners), products such as derivatives escaped their traditional place in agricultural markets to infest nearly every part of finance. Large sectors of the American economy and social structure have been able to use products with complex (but longer term) risks and uncertainties to squeeze out millions (if not billions) in the short term while blowing up their companies in the long term and then putting them on the publc's doorstep.

As James Galbraith and his co-author Jing Chen said in a relatively recent paper:“When a part of an organism escapes regulation and turns into a free market, that part of the organism will grow rapidly. This is called cancer. In the end, the unregulated growth, if it is not stopped, will drain all the resources of the organism and destroy the organism. In human society, if an economic sector gains control of large amount of resources and escapes regulation, it will grow rapidly and generate huge profit for the insiders. But the process will drain resources from the whole society. This is what we have witnessed in the current financial crisis”.

In this context, who really cares whether the top marginal tax rate is 35 percent or 39.6 percent? No one tries to deal with cancer simply by putting in place marginal measures to prevent it's growth. People first try everything they can to kill cancer or have it removed. Derivatives are at the center of this process of cancerous growth but because they are complex and (almost deliberately) confusing, they have stayed out of the public eye . More or less the only people who comment on their nuances in legislative fights and public arenas are those who benefit the most from keeping them opaque, unregulated and off-balance sheet. Next time you're at a casino, try a game that you don't know the rules to. That's the game the public is forced into in many areas, but especially in finance.


Chen, Jing and Galbraith, James K., A Biophysical Approach to Production Theory (December 8, 2008). Available at SSRN: http://ssrn.com/abstract=1313366
Marshall, John F. Dictionary of Financial Engineering. New York: Wiley, 2000. Print.