Tag: political economy (page 1 of 2)

The Value Alignment Problem’s Problem

Having recently attended a workshop and conference on beneficial artificial intelligence (AI), one of the overriding concerns is how to design beneficial AI.  To do this, the AI needs to be aligned with human values, and as such is known, pace Stuart Russell, as the “Value Alignment Problem.”  It is a “problem” in the sense that however one creates an AI, the AI may try to maximize a value to the detriment of other socially useful or even noninstrumental values given the way one has to specify a value function to a machine.

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Discussion: Structural Power and the Study of Business

This is a guest post by Randall Germain, Professor of Political Science at Carleton University, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. Links to other posts in the symposium can be found here.

A scholar knows he has been around for a while when the problem of structural power re-emerges as a legitimate and worthy subject of research. My graduate education in IR and IPE was pre-occupied with debates over hegemonic stability theory and neo-realism, which were, in their own ways, very particular demands to take structure and the power of structures seriously in our research. But along the way this interest in structure became transmuted into a quest to make whatever data we had about existing institutions reveal how they functioned in a world of exogenous developments. Research shifted from a focus on what Benjamin Cohen has called ‘big picture’ thinking about the global economic and political order, to a much narrower set of concerns connected to how specific institutions operate and the parameters within which they move. In many ways the concerns that dominated scholarly debates in my academic ‘youth’ have gone south, replaced by concerns which, while not of course unimportant in a scholarly sense, are perhaps somewhat less driven by the ‘big picture’ problems of change and transformation that animated research in that earlier period.

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The Structural Power of Business: Taking Structure, Agency and Ideas Seriously

This is a guest post by David Marsh (Institute of Governance and Policy Analysis, University of Canberra, Australia), Sadiya Akram (Queen Mary College, University of London, UK) and Holly Birkett (Birmingham Business School, UK), as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in their article found here. Links to other posts in the symposium can be found here.

There has been a revived interest in the last few years in the power of business. This is hardly surprising given the way in which Governments made significant concessions to the banks in the context of the Global Financial Crisis (GFC). Indeed, most, but not all, empirical studies of the power of business have concentrated on the relationships between Governments and the financial sector particularly in the UK and the US. Is it true, as some have claimed that the power of business has increased substantially, thus undermining the operation of contemporary democracy? Of course, this is, in large part, an empirical problem. However, assessing the power of any group within society is not easy and we need a more sophisticated conceptual framework to address this empirical problem.

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The Multinational Firm and Geopolitics: Europe, Russian Energy, and Power

This is a guest post by Rawi Abdelal, Joseph C. Wilson Professor of Business Administration at Harvard Business School, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Abdelal’s article found here. Links to other posts in the symposium can be found here.

Multinational firms produce many of the geopolitical outcomes in which political scientists are interested. It is such a pity, then, that political scientists know so little about multinational firms. In this paper I put forward a theoretical framework for understanding the role of multinational firms in both markets and the international system.

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Why Is the U.S. Still So Important in the Post-Crisis Global Financial System?

This is a post by William Kindred Winecoff, Assistant Professor of Political Science at Indiana University Bloomington, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Winecoff’s article found here. Links to other posts in the symposium can be found here.

A curious thing has happened since the global financial crisis: all of the rising powers that were ostensibly going to challenge the postwar American hegemonic project have taken significant steps backwards, while the U.S. has recovered much more smoothly than many predicted. Indeed, the political economy problems within unified Europe and the formerly-booming BRICs (Brazil, Russia, India, and China) appear to be deepening further, while others who had resisted the U.S. project, or been ambivalent towards it, are facing new problems of their own: this is especially true of “Pink Tide” left-populists in Latin America – who are suffering from the unraveling of the same commodities supercycle from which they previously had benefited – while the “Fragile Five” middle income economies (Turkey, Brazil, India, South Africa, and Indonesia) face slower economic growth, pressures on their external economic accounts, and serious domestic political challenges.

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Behind Structural Power Lies Structuring Power

This is a guest post by Henry Farrell, Associate Professor of Political Science and International Affairs at George Washington University, and Abraham Newman, Associate Professor in the Edmund A. Walsh School of Foreign Service and the Government Department at Georgetown University, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Farrell and Newman’s article found here. Links to other posts in the symposium can be found here.

Political scientists haven’t paid nearly enough attention to structural power over the last two decades. As Charles Lindblom argued, it is clear that firms have political power and influence that goes beyond their direct ability e.g. to put money behind ideas and politicians that they like. In a capitalist system, by definition, businesses make the final decisions about how capital is allocated. This means that politicians have to pay attention to their decisions, allowing businesses collectively and sometimes individually to shape the political agenda. Pepper Culpepper and his colleagues, both by drawing renewed attention to structural power, and by showing that it can vary across state, industry and context, are doing a lot to explain political outcomes that would otherwise remain mystifying.

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Structural Power in Latin America

This is a guest post by Tasha Fairfield, Assistant Professor in the Department of International Development at the London School of Economics and Political Science, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Fairfield’s article found here. Links to other posts in the symposium can be found here.

Taxation is a policy area rife with examples from around the world of the substantial influence that business can wield. Consider Latin America, a region known for phenomenal inequality and light taxation of income and wealth (much like the United States in recent years). Business has been particularly successful at securing favorable tax legislation in Chile­­––business owners who comprise the top 1% receive upwards of 22% of national income but paid average effective tax rates of roughly 15% (compare to 24% in the US in 2004).

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The Structural Power of Business as a Causal Hypothesis

This is a guest post by Kevin Young, Assistant Professor of Political Science at the University of Massachusetts Amherst, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Young’s article found here. Links to other posts in the symposium can be found here.

We live in a civilization populated by an organizational form that has replicated itself throughout the world with incredible speed, voracity and flexibility. It might be the organizational form of our age. This organizational form organizes the wealth that society produces; its decisions determine whether people eat or starve; its machinations influence what kind of society is possible. Every large-scale policy must confront and engage with it. Indeed, most public policy is squarely focused on shaping its behavior. The greatest human talent of our age is subsumed within it and directed for its purposes.

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No Escape from Uncle Sam

This is a guest post by Patrick Emmenegger, Professor of Comparative Political Economy and Public Policy at the University of St. Gallen, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Emmenegger’s article found here. Links to other posts in the symposium can be found here.

The United States of America is the most powerful country in the world but when it comes to interactions with international banks, it looks surprisingly feeble – at least according to conventional wisdom. Two types of international banks seem beyond the reach of U.S. law enforcement authorities. On the one hand, some banks are primarily located in other countries and thus protected by these countries’ legal sovereignty. Absent international cooperation, these banks – although influencing international capital flows in important ways – seem beyond the reach of national law enforcement. On the other hand, the largest international banks are typically located on U.S. soil but considered to be “too big to fail.” Since their collapse could endanger the viability of the global financial system, these banks are off-limits for criminal prosecution, because history shows that criminal prosecution of such banks leads to their collapse.

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Structural Power and Contemporary Politics

This is a guest post by Pepper D. Culpepper, Professor of Political Science at the European University Institute, as part of the Duck of Minerva’s Symposium on Structural Power and the Study of Business. This post draws on ideas developed at greater length in Culpepper’s article found here. Links to other posts in the symposium can be found here.

Crises shake up the real world. Sometimes, they even shake up the world of political science. The recent global financial crisis and the ongoing bank and sovereign debt crisis associated with it in the Eurozone have led many scholars to reach back into the toolbox of structural power to help understand some puzzling developments. The symposium that is appearing this week brings together contributions from several scholars who have found this toolbox useful.

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Programming Note: Symposium on Structural Power and the Study of Business

This week the Duck will host a symposium on a recent special issue of Business and Politics on Structural Power and the Study of Business, which was guest-edited by Pepper Culpepper and published in October. De Gruyter has generously agreed to temporarily ungate the issue to correspond with this symposium; the articles may be found here.

Each day of the week will contain a post in the morning and the afternoon, written by the authors of the articles in the issue, with a concluding post discussing the project by Randall German. We hope you will join us in the comments as we go along. This note will be updated with links to each post as they appear, so as to serve as an archive of sorts. The full schedule is below the jump.


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Three Ways to Think about the IMF’s Insistence on Debt Relief for Greece

According to the NY Times, the IMF has refused to participate in any new bailout program for Greece unless Hellas is receiving debt relief. Specifically, says the IMF, this relief must come in one of three ways to be determined by Greece and the Troika: reducing the amount of principal debt to be repaid (“writedowns”), extending the term of the loans (the IMF suggest no payments for 30 years), or interest rate subsidies that would allow Greece to repay its loans at rates substantially below their market value. In practice part of the debt (around€100bn) was already discharged in 2012 via debt swaps that amounted to writedowns. And some of the third and a bit of the second were already being done under the old bailout regime, and both would have been part of the new agreement reached last weekend as well.

But those are less than half-measures in the face of an onrushing avalanche.  Continue reading

Why Piketty Is Wrong about Debt Forgiveness

[UPDATE: This provides more detail and context than I do. Read it instead of, or at least in addition to, my post.]

Thomas Piketty has decided that because Germany was the beneficiary of debt relief in 1953 that they should extend the same privilege to Greece today:

When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: What a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.

Before explaining why this is both normatively and positively misguided I would like to clear some brush by mentioning two things. First, everyone (including me!) agrees that Greece’s debt must be written down. In fact, a gradual disposal of Greece’s debt has been a part of bailout program since 2010 and more of it will be discharged in the future. Greece has not paid back a single cent on net. In the meantime the debt is being financed through rollovers whose interest is mostly being paid by the rest of Europe while Greece has received fiscal transfers equivalent to more than 100% of GDP. So it is not an accurate characterization of the situation to say that the Greek economy is being squeezed in order to pay back debt; it is being squeezed because its level of spending was not matched by its level of productivity. And in some ways it still is not, although it is now quite close.

Second, while it would be very nice to have an international bankruptcy mechanism that would allow us to discharge debt and reorganize national economies in an orderly fashion, governments are unlikely to cede sovereignty over this issue for understandable reasons. So ad hoc bargaining is what we’re stuck with for the foreseeable future.

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You Never Give Me Your Money/ You Only Give Me Your Funny Paper

I would like to cut through a lot of the rhetoric and discuss where we are with the Greece crisis and where we are likely to be quite soon. I will conclude with some thoughts as to why this has been an enormous failure on the part of Syriza and the intellectual left that has supported it, and it will come with a very high cost. TL;DR: Wishful thinking is no substitute for real analysis. The European North made its position on indefinite financing of the South (and East) clear before the euro came into being. In fact, that was a condition for the euro to come into being. It has not changed. The deal was fundamentally the same in 1997 as it is today and will be tomorrow.

Here’s where we are:

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Does it Pay to Divide and Conquer?

duckThe intuition behind the maxim divide et impera is clear.  If they’re busy fighting each other, they not fighting you.  And that’s obviously in your interest (assuming, that is, you are some sort of occupier or metropole seeking to extract rents from a local population.)  Devious and underhanded?  Sure.  Morally repugnant?  If you’re inclined to view politics through such a lens.  But effective?  Self-evidently.

Or so you might think.

Brenton Kenkel, a University of Rochester doctoral student currently on fellowship at Princeton, argues otherwise in this fascinating working paper.

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Rodrik’s Paradox is No Paradox

Last month, Dani Rodrik wrote a piece for Project Syndicate that went all kinds of viral.  In it, he explains why he no longer views himself as a political economist.  The upshot: because if he believed the stuff he used to believe, he’d have to accept that there’s not much room for improving the world through op-eds, and that’s not something he’s prepared to accept.

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Yes, Matt Yglesias, Panem is an extractive, totalitarian empire

[UPDATED] Yglesias asks if “any real country could have an economy like Panem’s?” His answer comes via a synopsis of Daron Acemoglu and James Robinson’s Why Nations Fail:

The places that are rich today were poor then, while those that are poor today were generally rich in the past. This, they argue, is no coincidence. When Spanish conquistadors showed up in the prosperous areas of Latin America, they stole all the gold they could get their hands on and then set about putting the native populations to work. They set up “extractive institutions” whose purpose was to wring as many natural resources (silver, gold, food) from the land as possible while keeping power in the hands of a narrow elite. These institutions discourage savings and investment, since everyone knows any wealth can and will be arbitrarily expropriated. And while the injustice of it all led to periodic revolutions, the typical pattern was for the new boss to simply seize control of the extractive institutions and run them for his own benefit.

In short, Yglesias thinks that Panem makes sense when it comes to raw-materials extraction and agriculture, but less well when it comes to the production of complicated manufactured goods.

Collins wisely avoids going into detail about what life is supposed to be like in Districts specializing in luxury goods or electronics. It’s difficult to have a thriving economy in electronics production without a competitive market featuring multiple buyers and multiple sellers. 

Absent market competition, personal computers never would have disrupted the mainframe market and the iPhone and Android never would have revolutionized telecommunications. Entrenched monopolists have no interest in developing new technologies that shake things up. It’s difficult to get real innovation-oriented competitive markets without secure property rights, and exceedingly difficult to have secure property rights without some diffusion of political power. That needn’t mean real democratic equality—a standard the United States and Europe didn’t meet until relatively recently—but it does mean fairly broad power-sharing, as the U.S. has had from the beginning.

Yglesias’ line of analysis is pretty unobjectionable, but it does run into a few issues.

First, in relative terms, Panem’s core and inner-periphery appear to have developed consumer markets.  Capitol itself is given to conspicuous consumption and its elite enjoy a particularly high standard of living, even by contemporary US standards. The low-numbered Districts, particularly Districts 1 and 2, are far more prosperous than District 12. Just because a polity engages in significant economic extraction does not mean that its metropole and more prosperous peripheries cannot produce market forces that drive at least some innovation, as was the case with European colonial empires and any number of city-state empires.

Second, the more interesting interaction is, as Yglesias touches on but doesn’t give adequate attention to, whether Panem’s totalitarian impulses discourage innovation. This is a much broader topic, but my sense is that we shouldn’t confuse the “innovation gap” between, say, the United States and the USSR with a claim about lack of innovation in the Soviet Union. The Soviet Union was, for much of its life-cycle, reasonably innovative on a number of scientific fronts. Given Panem’s apparent lack of full-fledged international competitors–and hence fears about a technology gap with other states or empires–I don’t see a major problem for Collins on this front.

Indeed, as one of Yglesias’ commentators points out, Panem exists at least a few centuries in our future in a post-collapse environment.

My reading of the technology of Panem is that it is largely stagnant itself, much of it the remnants of a more enlightened time before what seems to have been an somewhat apocalyptic event. What advancement their is is indulgent and trivial. It is implied, for instance, that life in District 12 has not changed much for a long time – no new ways of mining, neither more nor less oppressive than it had been, no indication of technological progression. You can imagine an electronics district that is like Foxconn etc; capable of competently creating electronics with all the necessary precision, but not particularly invested or interested in *what* they are making.

Third, Yglesias misses one of the more important consideration regarding Panem’s plausibility: the size of its population. District 12’s population is around eight thousand. One impressively obsessive estimate places Panem’s entire population at no more than four million–a number that strike me as extremely high from the scattering of information found in the novels. This high estimate would make Panem’s population roughly that of late medieval/early modern England, less than half that of New York City. This is an exceedingly small population, and one dispersed over a territory the stretches from at least modern-day Colorado to to eastern Kentucky. I am not convinced that Panem’s population, which may very well number in the low hundreds of thousands, could sustain its economy.

All of these speculations run into a fundamental problem. We are discussing a society with extraordinarily advanced genetic engineering, let alone other futuristic technologies. Moreover, Panem resides in a world with a much diminished carrying capacity. We should not assume that the economic logic of the present, let alone the premodern past, provides us with clear guidance for assessing Panem’s plausibility.

[UPDATE]: I hope that PM has more to say about this later, but one implication of Panem’s low population should be very expensive labor–which raises questions about the Capitol’s choice of labor-intensive production techniques, most notably in the Districts devoted to raw-material production and basic manufacturing. But this isn’t really much of a mystery once we recognize that Panem’s economic system is subservient to its political structure. The Capitol’s segmentation of the Districts by position in the chain of production, its creation of artificial energy scarcity, and its monopolization of the flow of resources among the Districts… these are classic, if rather extreme, forms of divide and rule. So if we want to assess Panem economics, we need to do so through the lens of political economy. Or as Aristotle might say, politics really is the master science.

My Payroll Tax Rant of the Day

The payroll tax fight in a nutshell.

Republicans: Unlike every other tax cut we’ve dealt with in this congressional session, the payroll tax holiday must be offset. We demand spending cuts.

Democrats: Fine, we’ll offset it with a temporary increase in taxes for the .01% of the population that makes more than a million dollars a year.

Republicans: No. We demand spending cuts.

Democrats: Wait. Are you saying that given the choice between two policies that lead to the same exact levels of aggregate taxation, you’d choose one that raises taxes on 99.99% of taxpaying Americans?

Republicans: Yes. We demand spending cuts. 

Democrats: But why not offset a temporary stimulus measure with one less likely to reduce aggregate demand? 

Republicans: …. 

Democrats: Oh. ….That’s not what you mean by “offset,” is it? 

Republicans: Took you long enough. We demand any economic benefit of the payroll tax holiday be offset.

I can’t believe that we’re even having this debate.

The Politics of Ressentiment, Round XXIV (Updated)

According to Politico:

Senate Republicans are coalescing around a plan that would continue the current salary freeze for all federal workers and lawmakers to pay for an extension of the payroll tax cut favored by President Barack Obama and other Democrats…

The GOP apparently calculates that they can shift the discussion from their defense of tax cuts for the most prosperous Americans by attacking Federal workers.

Sadly, they’re probably right. But this trial balloon also demonstrates just how little the Republicans care about deficits or stimulating growth. After all, their offset plan involves reducing demand-side stimulus in one sector to increase it elsewhere. It’s also a revenue loser, insofar as those salaries would be subject to state and federal taxes. A simple surtax on millionaires would be much better policy.

Don’t get me wrong: cutting payroll taxes is probably somewhat more stimulative than increasing the salaries of Federal employees, insofar as the additional money goes to people who make more than the payroll-tax cap, and therefore are that much more likely to save than to spend. The freeze is kind of a sham anyway, insofar as the big salary boosts for Feds come from promotions to higher pay grades. But this looks to be yet another depressing chapter in the GOP’s war on the 99%.

Update: the proposal is even worse than what was leaked. Means-testing Medicare has some pros and cons, but slashing the Federal workforce is a terrible idea.

Partisanship vs. Policy: the Housing Bubble Debate

Morgensen’s and Rosner’s new book appears to have breathed new life into claims that responsibility for the housing bubble can be laid at the feet of Democrats, ACORN, and Fannie and Freddie. Given that buyers of the book at Amazon are also snatching up works by Ann Coulter, Glenn Beck, and Andrew Breitbart, I’m pretty sure that it is on its way to becoming the housing-bubble bible for all those who also are learning how Constantine’s conversion to Christianity and the Battle of Poitiers were key “tipping points” in the history of human freedom.

It strikes me as unlikely that a closer chronicle of the shady political dealings surrounding housing policy in the 1990s tells us very much new about the causes of the bubble. But I find it interesting that conservatives are so gleeful about their account because it implicates a lot of Democrats. As a partisan matter, that’s obviously of interest. But as a policy matter? It seems odd that conservatives would be so eager to swallow a story ultimately more consonant with progressive goals than their own.

The underlying problems here center around deregulation (including the loosening of lending standards), a federal reserve that refused to exercise oversight or take steps to deal with a growing bubble, and the influence of moneyed interests on policy. The drive to extend homeownership to poor minorities who had, because of discriminatory practices, been excluded from access to housing equity, certainly played a role here, e.g., it led to some well-intentioned policies that soon became co-opted by housing lenders.

But without those other mechanisms we can’t really get from the “progressive” policy (more homeownership for poor minorities) to the current economic crisis, and those mechanisms are overwhelmingly ones that progressives, rather than conservatives, want to address. Indeed, can overwhelming proportion of the failures attributed to the Clinton administration stem from its tack rightward on financial and regulatory policy. The bad behavior of Democrats largely centers around their pursuit of corporate cash.

However desperately folks like Mead may try to link this to a general criticism of third way politics, the core “problems” have little to do with the progressive elements of that fusion.* Conservative policies aren’t designed to rectify these failures, but to entrench them in American politics and policy.

*The giveaway? One of Mead’s examples of a “third way scheme” discredited by Morgensen’s and Rosner’s account of the housing bubble is the “cap-and-trade” approach to reducing carbon emissions. But the cap-and-trade approach was embraced by progressives in an attempt to find common ground with conservatives, who generally supported the approach until Obama proposed it.**

**While I’m on the subject of Mead, I remember how every “economic collapse” scenario from when I debated in high school (c. 1991) culminated with a quotation from him about how a major economic slump would lead to outbreaks of interstate conflict around the globe. As it obviously did. Just look at all those interstate wars in, er, well, uh….

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