Saturday, January 3, 2009

Universities Cause Reversion to Emphasis on Ascribed Status

American society has become increasingly stratified and the reason is increasing regulation, universities' domination of the labor market and the Federal Reserve Bank. Max von Weber argued that the Protestant ethic engendered capitalism. Talcott Parsons argued that social norms that are fundamental to economic development include universalistic versus particularistic; specificity versus diffuseness of role relations; achieved versus ascribed status; and collectivity versus self orientation.

The idea of universalistic versus particularistic social norms is that in order for a society to develop, laws must apply universally. Resources must be allocated on the basis of universal criteria that reflect objective achievement such as competence rather than by social class, race or other ascribed characteristics. Relations should not be based on general considerations such as family connections, but rather on specific achievements.

America has increasingly become a society where status counts more than achievement. We can see this in the recent proposal to appoint Caroline Kennedy to the US Senate. To see how far we have fallen from America's past achievement orientation, let us compare a Senator from the early 1820s, Andrew Jackson, with the proposed appointee from New York, Caroline Kennedy.

Andrew Jackson, assisted by Davy Crockett who was under Jackson's command, defeated the Red Stick Creek Indians at the Battle of Horseshoe Bend in 1814. In the Battle of New Orleans in the War of 1812, according to Wikipedia:

"on January 8, 1815, Jackson's 5,000 soldiers won a victory over 7,500 British. The British had more than 2,000 casualties to Jackson's 13 killed and 58 wounded or missing."

In 1817 Jackson led a campaign against the Seminole and Creek Indians. Having been ordered to prevent runaway slaves from going to Florida, Jackson invaded Florida, resulting in calls for his censure. Using the invasion as a pretext, Secretary of State John Quincy Adams negotiated the Adams-Onis treaty with Spain, whereby Spain ceded Florida to the US. Jackson served as the first US governor of Florida in 1821.

In 1822 the State of Tennessee elected Jackson to the US Senate. He ran for president in 1824, and although he won the most votes he did not win a majority, and John Quincy Adams was selected by special vote of Congress. Of course, Jackson was elected to the presidency in 1828, and in his second term abolished the then-central bank, the Second Bank of the United States.

Now, let's compare Caroline Kennedy's resume to Jackson's. Caroline Kennedy's grandfather was a wealthy bootlegger who managed to get himself appointed to several government sinecures, to include the first chairman of the Securities and Exchange Commission and Ambassador to Britain. Her father was president. Kennedy attended Harvard and Columbia. She is a mother and wife. She has coauthored and edited several books. She has no other important achievements.

Americans are increasingly insensitive to the lack of emphasis on achievement in their culture. The reason is that universities have intruded into the allocation of labor. Universities masquerade as a form of selection-by-achievement, but they are nothing of the sort. The reason people get into a selective college is a test score that is independent of achievement and/or family connections or other status criteria. Few if any college students can boast of important achievements, and the few who do achieve important things in college like Bill Gates or Michael Dell, do so in spite of the college curriculum, not because of it.

The emphasis on attending a selective college would not in itself render American society ascription as opposed to achievement-based without a second factor: the increasing dominance of Wall Street over American business life. In the nineteenth century Wall Street was a neutral actor that served to finance American business in light of small-scale banks and scarce credit (scarce because of the gold standard). However, that changed in 1913 when the Federal Reserve bank was established and given the power to expand and contract the money supply. In 1933 the gold standard was abolished, and in 1971 its final remnant was cleared away. Since 1971 Wall Street has expanded dramatically because of the massive support it has received from the Fed.

The beneficiaries of the massive expansion of credit have of course been Wall Street executives. They have benefited at the expense of the public and of other businesses, which have not had equal access to credit and to resources that they would have in the absence of the Fed's credit monopoly. This is because of the income tax, the inheritance tax and the inflation tax.

Given the allocation of the public's wealth into Wall Street's hands, the question needs to be asked: who gets to be the recipient of the Fed's beneficence? The answer, of course, is that selection is made on the basis of family background and academic credentials.

Thus, universities serve as the selection device by which a privileged aristocracy, handed wealth by the Fed, gains entry. Universities are the post-World War II form of primogeniture.

Achievement no longer matters for much in American culture. Rather, you get into a good school and then hope you get a job on Wall Street. You try your hand at the markets, and if you're lucky you become a billionaire. This trend of allocation of wealth on the basis of status rather than achievement has brought us Caroline Kennedy. What is new about Kennedy is the arrogance of our politicians. They are willing to put forward a candidate who lacks any competence whatsoever, and whose only claim to the post is aristocratic family background.

America is reverting to the 17th century before our eyes.

Letter to Governor Paterson: Kennedy Appointment Turns My Stomach

PO Box 130
West Shokan, NY 12494
January 3, 2009

The Honorable David A. Paterson
State Capitol
Albany, NY 12224

Dear Governor Paterson:

I oppose the appointment of Caroline Kennedy to the Senate. Ms. Kennedy lacks meaningful political or business experience. Indeed, she lacks meaningful work experience of any kind. While experiences gained in motherhood can be transferable to work, a series of responsible but more limited posts leading to the Senate would be an appropriate career path.

Rather than basing your interest in Ms. Kennedy on her experiences, achievements or characteristics, you are basing it on her family name and background. Sociologists would call your fixation on her background ascription- as opposed to achievement-based. Ascription of status is characteristic of feudalism and aristocratic societies, not of growing or successful ones.

Retrogression to medieval aristocratic privilege has increasingly become characteristic of our society in general, and of New York State in particular. That is, the nation and the state have become increasingly fixated on privilege and status at the expense of achievement. This, in turn, is related to excessive power of Wall Street and big business reinforced by government whereby business success is no longer based on innovation but on political power and access to government, particularly to Federal Reserve Bank credit. Your appointment of Ms. Kennedy is symptomatic of New York's culture of privilege. It turns my stomach.


Mitchell Langbert, Ph.D.

Friday, January 2, 2009

Car of the Future

There comes a time when the gears of the universe click into place and the automotive future revs into high gear. A few days ago the Foundation for Economic Education offered to donate a book I am using for my senior seminar to my students, Economics in One Lesson by Henry Hazlett. Around the same time, the Republican Liberty Caucus of New York chair, Carl Svensson, set up a meeting in New Paltz with Robin Yess. It is no small coincidence that Yess ran for Assembly in the 101st district in New York, which is where I happen to live. Today, Ms. Yess forwarded the following video link from the website of (can you believe it?) the Foundation for Economic Education! On top of which I was just thinking of doing a blog about the automotive bailout. Plus, I just bought a car.

Thursday, January 1, 2009

Progressivism, Morality and Power

What is called "liberalism" in American popular parlance is better termed "social democracy", although even that term fails to fairly characterize it. I nevertheless use the term "liberalism". Liberalism is in part a moral system. Liberals believe that state action can improve moral outcomes. For example, liberals believe that it is more moral to have less income inequality than more, and therefore that it is moral for the state to force wealthier people to give their wealth to less wealthy people.

There are a number of interesting corollaries to liberal morality. For example, there is a shamanistic belief in the power of the state to bestow morality. If an individual with less wealth were to simply take the wealthier person's assets, then that would be termed theft. But the liberal believes that morality is conferred upon the theft if the state takes it.

Part of the liberal's claim is that democracy bestows morality. A group of people decides that a given income distribution is fair, and then morality is bestowed on the theft by the fact that the group made the decision. Hence, liberalism is a system of fetishization of some construct, be it the state, democracy or power itself, by which the liberal believes that morality or right is conferred.

In the eighteenth century Hume showed that there is no intellectual basis for ethics, but rather right and wrong are emotions hence cannot be proven. However, the intellectual content of the emotion, right and wrong, can be conferred by a wide range of constructs. Aristotle believed that virtue derived from a socially inculcated set of habits and that a virtuous individual has integrated virtue into their decision making capacity, their right reason or ortho logos. Descartes, an Enlightment rationalist writing in the Christian tradition, believed that God verifies the authenticity of perception and that as a result logical (and moral) choice is possible. Locke argued that labor confers ownership and therefore it is morally right for a free individual to lay claim to property and estate. None of these beliefs suggests the need to curtail or control human nature. Control is not normally considered part of ethics.

In contrast, John Dewey, the proto-typical liberal, father of progressive education and arguably founder of modern liberalism says this in the introduction of his book "Human Nature and Conduct":

"Morality is largely concerned with controlling human nature. When we are attempting to control anything we are acutely aware of what resists us. So moralists were led, perhaps, to think of human nature as evil because of its reluctance to yield to control, its rebelliousness under the yoke."

It is true that the inculcation of habits involves a degree of control, but none of the great philosophers, particularly Aristotle, saw good habits as in themselves representative of morality. Rather, morality involves freedom and choice between good and evil.

Dewey, however, claims that the Sunday School teacher's mission represents all morality, that all morality involves control. More likely, Dewey fetishizes control and power, and therefore defines morality as control. How far Dewey would go with that definition was and is uncertain. In the real world, Dewey never did protest Stalin's crimes.

Thus, Dewey defines morality as control. This is characteristic of liberalism, which idealizes control or power used in conjunction with democratic processes or for social democratic ends. Is liberalism's goal democracy, equality or power for the liberal? In fact, the liberal regime has yielded less equality and less democracy than existed in the nineteenth century. What has changed is the allocation of power.

Tuesday, December 30, 2008

19th Century Land Policy and the Fed

The Land Act of 1796 allowed purchasers of public land a minimum of 640 acres, one square mile at $2 per acre with one half of the purchase price being able to be deferred for a year. The large size of the plots prohibited most Americans from purchasing public land. These minimums were reduced over the ensuing 66 years, resulting in an increase in agricultural output.

Under federal land policy, the minimum was reduced to 320 acres payable over four years in 1800. In 1820 80 acres could be purchased at $1.25 per acre, and in 1832 parcels of 40 acres could be sold. Especially after 1830 squatters were granted rights and in 1841 the "Log Cabin Bill" allowed squatters preemption rights of up to 160 acres. The Graduation Act put up land unsold for 30 years for sale at 12.5 cents an acre. During the Civil War, in 1862, the Homestead Act granted 160 acres and 320 per married couple as long as they lived on the land or cultivated it for five years. Thus, the population of the western states grew from about one million in 1810to about 14.8 million in 1869, or from 15% of the US population to 47.1%.*

From 1870 to 1890, corn output increased from 1.125 billion bushels to 1.650 billion bushels, an increase of 46.7%. Land used for corn increased from 38.4 million acres to 74.8 million acres, an increase of 94.8%. Because the newly granted land was less fertile than the land that settlers purchased first (since settlers chose the best land first) productivity fell from 29.3 bushels per acre to 22.1 bushels per acre. A slightly different pattern applied to wheat, whose output increased 76.8% between 1870 and 1890 and whose land increased by 75.5%. Because of expanding output, real farm income per capita rose by only .8% from 1869 to 1879 and .7% from 1879 to 1889.**

According to Walton and Rockoff***, "it is alleged that the rapid distribution of the public domain laid the groundwork for modern agricultural problems by inducing too much capital and labor into agriculture, thereby impeding the process of industrialization."

"...Partially as a result of this rapid addition of resources, the new West produced crops at such a rate that consumers of foodstuffs and raw materials enjoyed 30 years of falling prices. Furthermore, according to Robert Fogel and Jack Rutner, average rates of return on investments in land improvements, livestock, farm buildings and machinery equaled or exceeded returns on other contemporary investments, and real incomes in the new agricultural areas outside the South grew at rates comparable with those in manufacturing."

Nevertheless, despite the Fogel and Rutner findings, it would seem that Populism was related to falling agricultural prices. Moreover, the culture of farming was likely one that included an element of speculation. As Richard Hofstadter points out in Age of Reform****

"Frequent and sensational rises in land values bred a boom psychology in the American farmer and caused him to rely for his margin of profit more on the process of appreciation than on the sale of crops. It took a strong man to resist the temptation to ride skyward on lands that might easily triple or quadruple their value in one decade and then double again in the next...The penchant for speculation and the lure of new and different lands bred in the American farmer a tremendous passion for moving--and not merely, as one common view would have it, on the part of those who had failed, but also on the part of those who had succeeded...Mobility among farmers had serious effects upon an agricultural tradition never noted for careful cultivation: in a nation whose soil is notoriously heterogeneous, farmers too often had little chance to get to know the quality of their land; they failed to plan and manure and replenish; they neglected diversification for the one-crop system and ready cash...In a very real and profound sense, then, the United States failed to develop (except in some localities, chiefly in the east) a distinctively rural culture...What differentiated the agricultural life of these regions...was that it was so speculative, so mobile, so mechanized, so 'progressive', so thoroughly imbued with the commercial spirit."

Moreover, increasing agricultural productivity put additional pressure on commodity prices. Walton and Rockoff point out that+

"Thanks to the research of Olmstead and Rhode we have a greater appreciation of changes in plant varieties, irrigation systems, fertilizers and other biological inventions that greatly impacted the use of land for planting. These changes worked along two lines: (1) the discovery of new wheat varieties (and hybrids) that allowed the North American wheat belt to push hundreds of miles northward and westward and (2) researchers and farmers who found new methods of combating insects and diseases, some of which came from experimentation with new varieties (seeds) from Europe and elsewhere..labor productivity grew dramatically in wheat and corn over these decades. According to Robert Gallman, labor productivity in these two crops grew at a rate of 2.6 percent annually between 1850 and 1900."

As well, point out Walton and Rockoff, mechanization due to McCormick's reaper as well as thresher, mowers, horse rakes, seed planters, grain cleaners, portable grist mills, corn-shellers and similar devices enhanced labor productivity on farm.

The result was of course increasing competition and economic stress on farmers, who had to adapt, "to run faster just to hold ground". Such rapid change creates anxiety, which in turn leads to the demand for political fixes. For farmers, this was Populism. Of course the alternative, retaining primitive agricultural methods, would have prohibited industrialization. "In 1870 Americans spent one third of their current per capita income on farm products. By 1890, they were spending a much smaller fraction, just over one-fifth...Thus, although the real incomes of the American population rose during the period, and although Americans did not spend less on food absolutely, the proportion of those incomes earned by farmers declined." On the other hand "the value of agricultural exports rose from $297 million in 1870 to more than $840 million in 1900.++

Added to this mix was the "rapid increase in the supply of agricultural products. All over the world, new areas were entering the competitive fray. In Canada, Australia, New Zealand and Argentina as well as in the United states, fertile new lands were becoming agriculturally productive."+++

The Fed was not established purely because of Populism, but Populism was certainly a contributing factor. Fed apologists like William Greider in his Secrets of the Temple emphasize agitation among farmers because of falling commodity prices. Greider neglects to mention that falling commodity prices were great for workers. But they were bad for farmers, including moderate-to-poor income ones, who were landholders or speculators. In his book, Greider does not mention the relationship of federal land policy to falling agricultural prices. He merely paints falling agricultural prices as a monetary issue--in other words he takes the Populists' economic reasoning at face value. Nor does he raise the question as to whether farmers-as-speculators or farmers-as-workers dominated the Populist movement.

As Walton and Rockoff point out:

"Farmers were not inclined to see their difficulties as the result of impersonal market forces. Instead, they traced their problems to monopolies and conspiracies: bankers (some thought that Jewish bankers were particularly to blame) who raised interest rates, manipulated the currency, and then foreclosed on farm mortgages; grain elevator operators who charged rates farmers could not afford; industrialists who charged high prices for farm machinery and consumer goods; railroads that charged monopoly rates on freight; and so on."++++

Greider's book provides an excellent example of the inability of the public to debate questions concerning money dispassionately. A good example is his discussion of the Populist movement.

*Gary M. Walton and Hugh Rockoff, History of the American Economy Tenth Edition. South-Western-Cengage Learning, 2005, pp. 145-148
**Ibid, p. 288
****Richard Hofstadter, Age of Reform: From Bryan to FDR. New York: Vintage Books, 1955
+Op. cit., pp. 290-1
++Op. cit., p. 294
+++Op. cit., p. 293
++++Op. cit., p. 294

Monday, December 29, 2008

An Examination of the Employment Patterns of CNN Announcers

I was just at the gym and CNN was on. I was wondering how America's news announcers get their jobs. I did some research on the Internet and this video comes closest to explaining how people like Jack Cafferty, Wolf Blitzer and Lou Dobbs found work. Note: Dobbs= Moe, Cafferty = Larry, Blitzer = Curly. Only they're not as smart as the three in the video.

Sunday, December 28, 2008

The '49rs Didn't Need Gun Control

Among my favorite westerns are the ones about the gold miners in California, the '49ers. There was no law in California in 1848-50 and the small number of US army there found a large percentage deserting to pan for gold. The strike came at a propitious time. The Irish potato famine, the Taiping Rebellion and the European Revolutions in Sicily, France and the rest of Europe all occurred then. Moreover, the Mexican War had just ended and more than a few rowdy young veteran types headed for California. "from a population of about 107,000 near the end of 1849, California grew to more than 260,000 within three years."

There are a number of interesting issues about the emergence of property rights in this lawless bonanza land of ambition, greed and dreams. The absence of property rights and law would seem to have been likely to have encouraged conflict, as would the nature of the miners. Moreover, the number of men was far greater than the number of women, likely adding to the potential for explosive violence.

In their History of the American Economy Gary M. Walton and Hugh Rockoff quote John Umbeck's California Gold Rush: A Study of Emerging Property Rights :

"During 1848,...nearly 10,000 people rushed to mine gold on property to which no one had exclusive rights. Furthermore, although every miner carried a gun, little violence was reported. In July, when Governor Mason visited the mines, he reported that the miners were respecting Sutter's property rights and that 'crime of any kind was very infrequent, and that no thefts or robberies had been committed in the gold district...and it was a matter of surprise, that so peaceful and quiet a state of things should continue to exist."

I guess they didn't need gun control!

Andrew Jackson on the Second Bank of the United States

"Money is power."

-President Andrew Jackson
Quoted in Richard McCormick, "The Discovery that Business Corrupts Politics".