economics

We all know that, on some basic level, money is purely symbolic.  It only works because everyone collectively agrees to participate in the fantasy that a dollar bill is worth a dollar, whatever that is.  Moreover, most of our money these days is purely electronic, represented by ones and zeros and real only in the most abstract sense possible.

Christopher Ingraham at the Washington Post offered another way of thinking about money as a social construction: how much it costs to make it.  None of our coins are actually worth what they cost, and pennies and nickels are worth quite a bit less.

The excess cost of producing pennies and nickels means a budget deficit for the Treasury. In 2013, producing the coins cost the government $105 million dollars above and beyond the coins’ value.

Interestingly, moves to eliminate pennies have been successfully opposed by the zinc industry for years, illustrating another sociological phenomenon: the power of corporations to shape government decisions.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

This chart comes from Chuck Marr at the Center on Budget and Policy Priorities.  As Marr explains:

The United States is a relatively low-tax country, as the chart shows.  When measured as a share of the economy, total government receipts (a broad measure of revenue) are lower in the United States than in any other member of the Organization for Economic Co-operation and Development (OECD), even after accounting for the modest revenue increases in the 2012 “fiscal cliff” deal and the taxes that fund health reform.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Each  year the National Priorities Project releases a visual illustrating how our tax dollars are spent.  This is the one for 2013, sans medicare and social security taxes.

At the end of Sociology 101, I like to ask my students: “What is the state for?”  This often takes them aback, as most of them have never considered the question before.  Is it for defense?  It is to maximize happiness or reduce misery?  Is it for maximizing GDP?  Protecting private property?  Do we want to use it to influence other countries?  How?

There are many questions to ask and they are not purely theoretical.  I like how the spending of our tax dollars helps make the conversation more concrete.

Cross-posted at Business Insider.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

On average, U.S. workers with jobs put in more hours per year  than workers in most OECD countries. In 2012, only Greece, Hungary, Israel, Korea, and Turkey recorded a longer work year per employed person.

A long work year is nothing to celebrate. The following chart, from the same Economist article, shows there is a strong negative correlation between yearly hours worked and hourly productivity.

More importantly, the greater the number of hours worked per year, the greater the likelihood of premature death and poor quality of life.  This reality is highlighted in the following two charts taken from an article by Angus Chen titled “8 Charts to Show Your Boss to Prove That You Can Do More By Working Less.”

In sum, we need to pay far more attention to the organization and distribution of work, not to mention its remuneration and purpose, than we currently do.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Countries with a lot of ethnic diversity generally show weaker economic growth than homogeneous countries.  A new study, however, discovered a variable that strongly reverses the trend: women leaders.

Management professor Susan Perkins and her colleagues compared the economic growth rate of 139 countries over 55 years.  They found that diverse countries did significantly better when a woman was at the helm.  The more diverse the country, the stronger the effect.

Perkins and her co-authors cautiously attempt to explain their data (here), but think that it may have something to do with leadership style.  Female leaders have been shown to be more collaborative and non-authoritarian than men. Co-author Nicholas Pearce speculates:

In countries with a lot of internal conflict, oftentimes people are looking for signals that the person in charge is going to be collaborative and not dictatorial or self-interested. Women’s gender role is symbolic of collaboration, that they’re going to empower marginalized voices.

Because of gender stereotypes, then, women may seem more trustworthy. Meanwhile, real differences in leadership style may affirm those expectations and be more effective in practice.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

By now most readers are likely familiar with the idea that the American middle class is shrinking.  Most income and wealth gains over the past 40 or so years have gone to the richest Americans, while poverty is spreading and getting deeper.  As a result, the percent of Americans who can reasonably claim to be middle class is shrinking.

I found a fantastic animation illustrating this process in the neighborhoods of the city of Chicago.  Borrowing data from education scholar Sean Reardon and sociologist Kendra Bischoff, Daniel Hertz calculated where the  median family income of each Census tract fell relative to the entire metropolitan area.  Orange tracts are ones where the median family income is 0-45% of the median for Chicago as a whole (struggling families), dark green tracts are ones where the median is 200% or more (resource rich families).  Grey is, literally, middle class.

For simplicity’s sake, here is 1970 and 2012 right next to one another.  Notice that the 1970 map involves a lot more grey (middle class) and the 2012 map involves a lot more green (rich) and especially orange (poor).

Here’s the animation:

For another interesting measure of the shrinking middle class, see our post showing increases in high paying and low paying jobs, but decreases in jobs that pay middle income wages.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Economic policies often rest on assumptions about human motivation.  Here’s Rep. Ryan (Republican of Wisconsin):

The left is making a big mistake here. What they’re offering people is a full stomach and an empty soul. People don’t just want a life of comfort. They want a life of dignity — of self-determination.

Fox News has been hitting the theme of “Entitlement Nation” lately. This Conservative case against things like Food Stamps, Medicare, welfare, unemployment benefits, etc rests on some easily understood principles of motivation and economics.

1.    Giving money or things to a person creates dependency and saps the desire to work. That’s bad for the person and bad for the country.
2.    A person working for money is good for the person and the country.
3.    We want to encourage work.
4.    We do not want to encourage dependency.
5.    Taxing something discourages it.

Now that you’ve mastered these, here’s the test question:

1. According to Conservatives, which should be taxed more heavily:

a.    money a person earns by working.
b.    money a person receives without working, for example because someone else died and left it in their will.

If you said “b,” you’d better go back to Conservative class. A good Conservative believes that the money a person gets without working for it should not be taxed at all.

Not all such money, of course.  Lottery tickets are bought disproportionately by lower-income people.  If a person gets income by winning the PowerBall or some other lottery, the Federal government taxes the money as income. Conservatives do not object.  But if a person gets income by winning the rich-parent lottery, Conservatives think he or she should not pay any taxes.

What Conservatives are saying to you is this: working for your money is not as good as instead of inheriting it. This message seems to contradict the principles listed above. But, as Jon Stewart recently pointed out, Conservatives apply those principles of economics and motivational psychology only to the poor, not to wealthy individuals or corporations.

Cross-posted at Montclair SocioBlog and the Huffington Post.

Jay Livingston is the chair of the Sociology Department at Montclair State University. You can follow him at Montclair SocioBlog or on Twitter.

Thomas Piketty has just published a massive new book tackling the explosive growth in income inequality.  Here’s what it looked like in Europe and the United States in 2010 (source):

A New York Times review of the book, Capital in the Twenty-First Century, begins as follows:

What if inequality were to continue growing years or decades into the future? Say the richest 1 percent of the population amassed a quarter of the nation’s income, up from about a fifth today. What about half?

To believe Thomas Piketty of the Paris School of Economics, this future is not just possible. It is likely…

His most startling news is that the belief that inequality will eventually stabilize and subside on its own, a long-held tenet of free market capitalism, is wrong. Rather, the economic forces concentrating more and more wealth into the hands of the fortunate few are almost sure to prevail for a very long time.

Piketty’s pessimistic view is based on his argument that income generated from capital normally grows faster than the economy or income from wages.  This means that the private owners of capital benefit disproportionately from growth, which makes it easier for them to increase their asset holdings and by extension future income.  And, since wealth and income translate into political power, we face a self-reinforcing dynamic leading to ever growing inequality.

This suggests that embracing a system based on maximizing the returns to private owners of capital is a mistake for the great majority of working people. A recent study by the investment bank Credit Suisse provides more evidence for this conclusion.  As Michael Burke explains,

The study… shows that long-term growth rates of GDP in selected industrialized economies are negatively correlated with financial returns to shareholders.

That is, the best returns for shareholders are from countries where GDP growth has been slowest, and vice versa. Where growth has been strongest, shareholder returns are weakest…

The negative correlation [seen in the chart below] does not prove negative causality. But it does support the theory which suggests that the interests of shareholders are contrary to the interests of economic growth and the well-being of the population.

All this information is worth keeping in mind the next time business and political leaders tell us that the key to our well-being is boosting business confidence, the market, or private returns on investment.

Cross-posted at Reports from the Economic Front.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.