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March 30, 2015

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Economic Journal 125th Anniversary Special Issue

Posted: 30 Mar 2015 04:13 AM PDT

The Economic Journal was among the first journals to come into existence. This is the first article of the 125th anniversary issue. The remaining articles are from notable economists (e.g. Stiglitz, Heckman, and many more) discussing seminal work that appeared in the Journal (the articles are relatively short):

Economic Journal 125th Anniversary Special Issue [under Creative Commons]: First published: 29 March 2015 Full publication history, DOI: 10.1111/ecoj.12230 View/save citation.
It is with great pleasure that we mark the 125th anniversary of the founding of the Economic Journal with this special issue. The EJ has published many seminal articles on a variety of topics over the years; in this issue we have selected some of what we think are the most important and asked leading economic thinkers of today to share their thoughts on the impact that these articles have had. The authors have explored the historic contribution of the articles and possible future ways to advance the subject. It has been an honour for us to work with these economists, whose own research is seminal to the future development of the profession. We thank them sincerely for their contributions to this project.
The Economic Journal was founded at a meeting convened by Professor Alfred Marshall at University College London, at the behest of Herbert Somerton Foxwell and Robert Harry Inglis Palgrave among others, and chaired by George Viscount Goschen, Chancellor of the Exchequer.1
The meeting was called to discuss setting up a journal of economics in England, and brought together around 200 people from surprisingly disparate backgrounds. Leading academics included Francis Ysidro Edgeworth, chair at King's College London and first editor of the Economic Journal; Mary Paley Marshall, one of the first female students at Cambridge and co-founder of economics at Bristol University with her husband; Henry Sidgwick, philosopher, economist, founder of Newnham College Cambridge and a supporter of women's education; and John Neville Keynes, renowned economist at Cambridge University. The hall at UCL was also packed with social philanthropists, journalists and businessmen. Notable names from the audience were Charles Booth, philanthropist and social researcher, who influenced the government in the establishment of the old age pension; Millicent Fawcett, radicalist and suffragette, who campaigned for women's rights and the better protection of children; Octavia Hill, social reformer and co-founder of the National Trust; Clara Collet, economist and reformist who sought to improve working conditions for women; Robert Giffen, economist and journalist at The Economist, the Daily News and The Times; and George Bernard Shaw, socialist, playwright and co-founder of the London School of Economics. There were also significant names who pledged their support to the cause in writing, including George Baden-Powell, the conservative politician; Sir Thomas Farrer, 1st Baron Farrer, civil servant and lawyer; Joseph Shield Nicholson, professor of political economy at Edinburgh; and George William Bramwell, judge.
There was unanimous agreement for the proposed journal of economics. Marshall had laid out the need for a journal to support the development of young economists. The aim of the journal was to encourage debate at the highest academic level and the audience unanimously carried the motion to establish the journal, cheering in support of the idea that the journal should incorporate diverse viewpoints for the benefit of the country at large.
George Bernard Shaw was the only person to introduce some controversy, by questioning the selection of a politician, Viscount Goschen, to lead the society in its publication aims. Marshall rather honestly confided that he was not a political supporter of Goschen but that they would be hard pressed to find a candidate for presidency who had no political views whatsoever.
The support for the EJ at its inauguration in 1890 only hinted at the impact the journal would achieve on a national scale. Numerous national newspapers reported on the meeting at UCL and pledged their support to the project. The Times, for example, stated that 'the propriety of the proposal was unquestionable. Not a dissentient voice was raised'.2 Interest did not stop with the initiation of the Journal but continued with the subjects discussed in each issue.
In the first edition of the Journal, Editor Francis Ysidro Edgeworth proudly declared that:
The most opposite doctrines may meet here as on a fair field. Thus the difficulties of Socialism will be considered in the first number; the difficulties of Individualism in the second. Opposing theories of currency will be represented with equal impartiality. Nor will it be attempted to prescribe the method, any more than the result, of scientific investigation.3
EJ6
The Standard heralded these aims, saying:
We want such a publication in this country, where questions of public well-being can be discussed without reference to the party cries of the hour.4
It went on to discuss the diverse topics published in the issue ranging from 'The Eight Hour Day in Victoria' by John Rae, to 'The Fall of Silver' by Henry Hucks Gibbs and 'The Difficulties of Socialism' by Leonard Courtney, which the newspaper declared 'is [an article] which no person should miss reading.' The second issue of the Journal was met with the same interest as the first. The Cape Town Argus said 'its second number well maintains the high expectations with which it was started'. It picked out Sir Thomas Farrer's article entitled 'Some English Railway Robberies of the Next Decade' for particular mention, saying it was 'admirably clear and succinct'. The Manchester Courier included in-depth description of all articles included in the issue, adding that the Journal was an 'excellent and instructive publication'.5
While the subject matter and impact of the Journal has evolved considerably since its first issue, the editors are pleased to uphold the original simple values: to publish the best articles in economics in any field and to disseminate its research as widely as possible.
A note on 125 years of the Economic Journal would not be complete without mention of the bee motif, which marked its centenary in 2014. The bee was chosen as the seal of the Royal Economic Society when it received its Royal Charter and first appeared on the cover of the EJ in March 1904. There has been some debate as to the meaning and motivation for selection of this motif. It was proposed by Professor Mark Perlman that the bee was a symbol of the investigational method appropriate to the study of economics.6 He suggested that this notion was taken from Francis Bacon's Novum Organon, which was widely read in England in the nineteenth century:
Those who have handled the sciences have been either Empiricists or Rationalists. Empiricists, like ants, merely collect things and use them. The Rationalists, like spiders, spin webs out of themselves. The middle way is that of the bee, which gathers its material from the flowers of the garden and the field, but then transforms and digests it by a power of its own. And the true business of philosophy is much the same, for it does not rely only or chiefly on the powers of the mind, nor does it store the material supplied by natural history and practical experiments untouched in its memory, but lays it up in the understanding changed and refined. Thus from a closer and purer alliance of the two faculties- the experimental and the rational, such as has never yet been made- we have good reason for hope.7
Bacon's words seem to work not only as a metaphor for economic science but for the Economic Journal itself, which sought to combine approaches to economics and enable the study of the discipline through embracing different perspectives. However, a more prevalent theory is for the meaning of the bee is that it derived from The Fable of the Bees (1714) by Bernard Mandeville. This paradoxical thesis argued that social welfare, social progress, riches and benefits are all based on the human vices. The idea is said to underlie the theory of 'the invisible hand' of economic markets, developed by Adam Smith (1723–90). However, there is no documentary evidence to show categorically that either of these allegories was behind the selection of the bee motif.
Not all editors of the EJ have been fond of the busy bee. The stamp was removed from the Journal during the editorship of Brian Reddaway in a bid to modernise the cover. The symbol was reintroduced in 1990 by John Hey, as a mark of the centenary of the RES and the EJ. Austin Robinson, one of the longest serving editors of the Journal, applauded this move, admitting that he had 'a certain affection for it [the bee]'.8 The reintroduction of the bee motif however also marked a re-design, and added further complexity to its possible significance. The quote 'amor urget habendi' (acquisitiveness impels) was added to the modernised image, a line taken from Virgil's Georgics:
'ac ueluti lentis Cyclopes fulmina massis
cum properant, alii taurinis follibus auras
accipiunt redduntque, alii stridentia tingunt
aera lacu; gemit impositis incudibus Aetna;
illi inter sese magna ui bracchia tollunt
in numerum, uersantque tenaci forcipe ferrum
non aliter, si parua licet componere magnis
Cecropias innatus apes amor urget habendi
munere quamque suo.'9
'As when the Cyclopses forge thunderbolts
Deftly of ductile metal, some of them
Pump air from bullhide bellows, others plunge
The hissing bronze in troughs, while Etna groans
Under the weight of anvils. Mightily
They raise their arms in alternating rhythm
And turn the metal with their gripping tongs.
Just so (if small may be compared with great)
Innate acquisitiveness impels the bees
To ply their several tasks.'10
Here the bee is related to hard work, industry and the division of labour. As such, the motif may relate to the industry of the Journal and the Royal Economic Society, or to a broader view of economics as a study of the human drive to obtain. There is no record of why this quote was selected for the refashioning of the bee image and it only serves to open up the possibilities of the bee's meaning.
To celebrate 125 years of the Journal and 100 years of the busy bee, we have, for one issue, reinstated the original bee of which Austin Robinson was so fond and included all of the bees on the back cover. We will leave it to the reader to ponder why it was selected to represent the Journal and the society all those years ago.
EJ7
We are pleased as editors to be able to carry on the tradition of the Economic Journal, which has such a vibrant history and has made such an important contribution to the development of the field.
Joint Managing Editors
Martin Cripps University College London
Andrea Galeotti University of Essex
Rachel Griffith University of Manchester
Morten Ravn University College London
Kjell Salvanes Norwegian School of Economics
Stepahnie Seavers Institute for Fiscal Studies
Frederic Vermeulen University of Leuven
Production Editor
David Mayes University of Auckland
Publishing Editor
Stephanie Seavers Institute for Fiscal Studies
Notes
  1. For further details of the meeting see 'The British Economic Association', Economic Journal, vol. 1 (Mar 1891), pp. 1–14.
  2. The Times, 21 November 1890. RES Archive, London School of Economics RES_1/3/2 p. 3.
  3. 'The British Economic Association', Economic Journal, vol. 1 (Mar 1891), p. 1.
  4. The Standard, 9 April 1891. RES Archive, London School of Economics RES_1/3/2 p. 5.
  5. The Cape Town Argus, 12 August 1891. RES Archive, London School of Economics RES_1/3/2 p. 8.
  6. Letter to Economic Journal Editor Professor John Hey on 3rd April, 1990. RES archive.
  7. Francis Bacon, Novum Organum, Peter Urbach and John Gibson (trans. and ed.), Open Court Publishing: Peru, Illinois, 1994, reprinted 1996, paragraph 95, bk.1, p. 105.
  8. Letter to Professor Perlman, University of Pittsburgh, on 20 September 1990. RES archive.
  9. Virgil, Georgics, Richard F. Thomas (ed.), Cambridge Greek and Latin Classics, University of Cambridge Press: 1988, reprinted 2001, vol. 2, Bks 111-1V, bk IV, p. 24, lines 170 to 179.
  10. Virgil, The Georgics, L. P. Wilkinson (trans.), Penguin Classics: London, 1982, pp. 129–30.

Paul Krugman: Imaginary Health Care Horrors

Posted: 30 Mar 2015 01:38 AM PDT

Why doesn't the public know how successful Obamacare has been?:

Imaginary Health Care Horrors, by Paul Krugman, Commentary, NY Times: ...Representative Pete Sessions of Texas, the chairman of the House Rules Committee, recently ... declared the cost of Obamacare "unconscionable." If you do "simple multiplication," he insisted, you find that the coverage expansion is costing $5 million per recipient. But ... the actual cost per newly insured American is about $4,000.
Now, everyone makes mistakes. But this wasn't a forgivable error..., one indisputable fact is that it's costing taxpayers much less than expected — about 20 percent less...
But that is, of course, how it's been all along with Obamacare. Before the law went into effect, opponents predicted disaster on all levels. What has happened instead is that the law is working pretty well. So how have the prophets of disaster responded? By pretending that the bad things they said would happen have, in fact, happened. ...
Remember, Obamacare was also supposed to be a huge job-killer. ... Well, Obamacare went into effect fully at the beginning of 2014 — and private-sector job growth actually accelerated, to a pace we haven't seen since the Clinton years. ...
Finally, there's the never-ending hunt for ... for ordinary, hard-working Americans who have suffered hardship thanks to health reform. ... Remarkably, however, they haven't been able to find those stories. ...
In reality, the only people hurt by health reform are Americans with very high incomes, who have seen their taxes go up, and a relatively small number of people who have seen their premiums rise because they're young and healthy...
In short, when it comes to the facts, the attack ... has come up empty-handed. But the public doesn't know that. ...
And the favorable experiences of the roughly 16 million Americans who have gained insurance ... have had little effect on public perceptions. Partly that's because the Affordable Care Act, by design, has had almost no effect on those who already had good health insurance..., they have seen no change in their status.
At a deeper level, however, what we're looking at here is the impact of post-truth politics. We live in an era in which politicians and the supposed experts who serve them never feel obliged to acknowledge uncomfortable facts, in which no argument is ever dropped, no matter how overwhelming the evidence that it's wrong.
And the result is that imaginary disasters can overshadow real successes. Obamacare isn't perfect, but it has dramatically improved the lives of millions. Someone should tell the voters.

Have Blog, Will Travel

Posted: 30 Mar 2015 01:38 AM PDT

I am here today:

Royal Economic Society Conference 2015
University of Manchester, United Kingdom
 
March 30, 2015

March 31, 2015

April 1, 2015

Links for 03-30-15

Posted: 30 Mar 2015 12:06 AM PDT

'A Separating Equilibrium in Indiana'

Posted: 29 Mar 2015 04:31 PM PDT

Rajiv Sethi:

A Separating Equilibrium in Indiana: In the wake of Indiana's passage of the Religious Freedom and Restoration Act, the following stickers have started appearing on storefronts across the state:

These signs allow business owners to signal their disapproval of the law, and if they spread sufficiently far and wide, will force those not displaying them to implicitly signal approval of the law. It's worth reflecting on the consequences of this for customer choices, the profitability of firms, and the beliefs of individuals about the preferences of those with whom they occasionally interact.
At any given location, the meaning of the symbol will come to depend on the number and characteristics of the nearby firms displaying it. If all businesses were to paste the sticker alongside their Visa and Mastercard logos, it would be devoid of informational content and would not influence customer choices; this is what game theorists quaintly call a babbling equilibrium
But it's highly unlikely that such a situation would arise. Some owners will display the sign as a matter of principle, regardless of it's effect on their bottom line, while others will adamantly refuse to do to even if profitability suffers as a result. 
Between these extremes lies a large segment of firms for whom the choice involves a trade-off between profit and principle. They may disapprove of the law and yet abstain from taking a public position, or they may approve and cynically pretend to disapprove. What they choose will depend on the distribution of characteristics in their customer base, as well as the choices made by other firms.
In more liberal areas, such as college towns, those who display the stickers will likely profit from doing so, and owners concerned primarily with their profitability will be induced to join them. The meaning of the symbol will accordingly be diluted: some of those displaying it will be indifferent to the law or even mildly supportive. By the same token, the meaning of not displaying the symbol will be sharpened. Customers will sort themselves across businesses accordingly, with those opposed to the law actively avoiding businesses without stickers, thus reinforcing the effects on profitability and firm behavior.
In more conservative areas, those who display the stickers will likely experience a net loss of customers, and the meaning of the symbol will accordingly be quite different. Only those strongly opposed to the law will publicly exhibit their disapproval, and among those who abstain from displaying the stickers will be some who are privately opposed to the law. In this case customers opposed to the law will be less vigorous in seeking out businesses with stickers, again reinforcing the effects on profitability and firm behavior.
Just as customers will come to know more about the private preferences of business owners, the owners will come to know more about the customers they attract and retain. Furthermore, customers in a given store will come to know more about each other. Bars and bakeries will become a bit more like niche bookstores, and casual interactions will become a bit more segregated along ideological lines. None of these are intended consequences of the law, but they are some of its predictable effects, and it's worth giving some thought to whether or not they are desirable.
I've heard it said that businesses in Indiana had the authority to deny service to some customers even prior to the passage of the new law, and that it therefore doesn't involve any substantive change in rights. Even so, it's a symbolic gesture that pins upon a group of people a badge of inferiority. Responding to this with a different set of symbols thus seems entirely appropriate.

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