Thursday, September 26, 2013

Larry Summers, again and again

Here is Larry, again. Before his appointment as Harvard President, when he was chief economist at the World Bank (yes, he never served as a trainee... after all he was the nephew of Paul Samuelson and Kenneth Arrow!) - he wrote the following memo:

“Just between you and me, shouldn’t the World Bank be encouraging more migration of the dirty industries to the less developed countries? I can think of three reasons:
1. The measurement of the costs of health-impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
2. The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost ... Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world-welfare enhancing trade in air pollution and waste.
3. The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity ... Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing.
The problem with the arguments against all of these proposals for more pollution in least developed countries (intrinsic rights to certain goods, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.”

(quoted from "Economic Analysis, Moral Philosophy and Public Policy" by Daniel Hausman and Michael McPherson).

The memo was intended for internal World Bank use only. It caused a public commotion when The Economist leaked it to the public. And, BTW, no professional economists has seriously questioned the "impeccable" economic logic of this argument. When asked about the memo, Summers responded to the reporter: "I think the best that can be said is to quote La Guardia and say, "When I make a mistake, it’s a whopper.’" Yes. Believe or not, that is what he said.
I will not use adjectives to describe Larry Summers (I may succumb to FAE). I will simply ask you to remember what we learned about the stages of the decision-making process. Remember the first step: moral awareness.

Thursday, September 19, 2013

Larry's explanation of gender inequality

The race is over. Last Sunday, Larry Summers sent President Obama a letter withdrawing his name from consideration to be the next chairman of the Federal Reserve. Summers, a former Harvard President who served in the Obama White House as director of the National Economic Council until 2010, was the front-runner to succeed Ben Bernanke at the Federal Reserve Board. Until Sunday.
One of the critical factors that explain his withdrawal was an old speech he made at the 2005 National Bureau of Economic Research conference. Summers provided there an explanation for the underrepresentation of female scientists at top universities, namely, the natural differences between men and women. Here is a small fragment of his controversial comments (clicking here you access the full version)
"(...) It does appear that on many, many different human attributes—height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability—there is relatively clear evidence that whatever the difference in means—which can be debated—there is a difference in the standard deviation, and variability of a male and a female population."
The storm surrounding Summers' hypothesis lead to his resignation from Harvard in 2006. And now that he was running for the Federal Reserve, these words made at least five Democrats on the Senate Banking Committee say they would vote against even bringing Summers's nomination to the floor. A coalition of progressive groups spearheaded by the National Organization for Women and Ultraviolent pushed hard against his nomination, and more than 450 economists signed onto a letter to support his rival, Janet Yellen, currently vice-chair of the Fed.
Other economists do not disagree with Summers's assertion, though. Watch the clip above. Featuring Steve Levitt, Distinguished Professor of Economics at the University of Chicago.

Anyway, we will keep talking about Summers this semester. Here we have a kick-off piece to begin the conversation on inequalities, their explanations, and (possible) moral justifications. Enjoy it!

Wednesday, September 11, 2013

September 11, Business, and Politics

Today is September 11. Chile commemorates the most tragic day of its modern history, culminating a week of remembrances dedicated to the 40th anniversary of the most brutal military coup. Forty years ago, democratically elected President Salvador Allende was toppled by general Augusto Pinochet, earlier chosen by Allende to lead the Chilean army.
The videos and pictures of that September 11 are startling. The whole Chilean army, with the support of the CIA and DIA, against a defenseless old man and 22 followers. Declassified documents related to the military coup (they were declassified during the Clinton administration) have shown the involvement of the CIA and the USA Defense Intelligence Agency. Allegedly, the CIA and DIA secured the missiles used to bombard the La Moneda Palace (the Chilean White House). Yes, the Chilean Air Force bombarded the La Moneda palace with Allende and his 20 supporters inside!
The declassified documents also show that powerful American business leaders like David Rockefeller were active supporters of the military coup. Indeed, according to Edward Korry, former U.S.A. ambassador to Chile in 1973, Rockefeller and other prominent business leaders from the copper industry, played a key role in the military plot with the collaboration of the USA President Richard Nixon and his Secretary of State Henry Kissinger. More than 3,200 people - not only political dissidents and Allende's supporters - were killed or disappeared between 1973 and 1990. 40,000 Chileans survived political imprisonment and torture. At least 262 people have been sentenced for human rights violations in Chile, according to figures from Amnesty International.
Americans have other, strong reasons, to commemorate September 11. But we should not forget the other, the first, September 11. And the role of business in it. The "Chilean economic miracle", announced and praised by the Wall Street Journal at the time, was only possible through brutal political repression and massive human right violations. 
Just prior to the capture of the presidential palace, President Allende made his famous farewell speech to Chileans on live radio (Radio Magallanes). The president spoke of his love for Chile and that he would not take an easy way out or be used as a propaganda tool by the traitors. That he would pay with his life the loyalty of the Chilean people. The radio address was made while gunfire and explosions were clearly audible in the background. Right after, reportedly, he shot himself. But he did not surrender the government elected by the Chilean people.
His last words:

"Workers of my country, I have faith in Chile and its destiny. Other men will overcome this dark and bitter moment when treason seeks to prevail. Keep in mind that, much sooner than later, the great avenues will again be opened through which will pass free men to construct a better society. Long live Chile! Long live the people! Long live the workers!"

Wednesday, September 4, 2013

Lost wallets and character evaluations

This is the story we discussed in class yesterday (from Huffington Post):
KINGSTON, N.Y. -- Hassel Junior Barber lives on the streets of Kingston by choice. He sleeps in doorways and on stoops. And, police say, he's an honest man.
Barber found a wallet plopped down on a sidewalk Sunday in the Hudson Valley city. Inside: $485. Money, Detective Lt. Thierry Croizer said, that Barber certainly could have used for food, shelter, clothes. Instead, the 50-year-old homeless man marched the wallet to the police station and turned it in. No reward needed. "He told us that he did not want anything in return," Croizer said Wednesday. "That he did it because it was the right thing to do, and those are his words, the right thing to do."
In a tough town sometimes scarred by serious crime, Croizer said he wanted to publicize a "feel good" story, and hopes people learn the same lesson he did when he dealt with Barber on a new level.
"It made me reevaluate my perception of people, my first instinct, when I first observe someone," Croizer said.

This coming Friday, we will discuss why Detective Croizer is not entitled to say that.