September 24 to October 5

Q1: Now that the major platforms for dissent, such as slavery & agriculture-based economies no longer are as strongly regional, what is the cause of regionalizing of political affiliations?

R: Slavery still echoes down through history. The Democrats used to carry every southern state because, recall, it was the Republican party (Abraham Lincoln) that freed the slaves. Then in 1964, the Voting Rights Act and Civil Rights Act were passed by a Democratic president and congress. The Democrats began losing races in the South then and continue to do so. A book by Thomas Frank entitled What's the Matter with Kansas argues that the reason many agrarian, blue collar states vote Republican -- arguably against their own economic interests -- is because of the three Gs (God, guns and gays). These conservative social issues pull working class folks to the right wing of the Republican party. 

Q2: Would it be possible to keep the market economy running even if people acted more like citizens and less like consumers?

R: The market economy still works in Scandinavian countries. Deciding that some things like what choice of restaurant, flavor of ice cream or model of car are best left to the efficient, allocative mechanism of the market; while other things like education, health care, basic shelter, basic subsistence, sources of energy and use of natural resources are better decided by the collective public seems not to harm the prosperity of a country.

Q3: I feel certain things should be free but shouldn't there have to be a little fee because it costs money to get blood or other things? I just feel the price is too high -- to bring the price down [might create a shortage].

R: I think you're saying that it costs money to hire the staff, buy the equipment and facilities to create a supply of blood and that should be reflected in the prices paid for blood by those who receive it. Perhaps, but then we still have to recognize that it's easier and lest costly to preserve a supply of uninfected blood in Great Britain where no fee is offered to those who give it and to those who receive it. 

Q4: I feel that capitalism is not a perfect economic system. Last year I read Nickel and Dimed (Barbara Ehrenreich) which showed that the poor will remain the same even if they work hard. Capitalism is supposed to help hard workers to gain prosperity.

R: Her book gives a good glimpse into life at the bottom. Conservatives often argue that bread lines, soup kitchens and public assistance are just hand outs to the undeserving who are either too lazy to work or just didn't want to cook that day. Ehrenreich demonstrated (by living on minimum wage jobs) that even a bright, resourceful Ph.D.s couldn't subsist on menial jobs regardless of how frugal they were or how many hours they worked in a week. They still needed to stand in those bread lines, get free clothing at the Salvation Army and were still eligible for welfare.

Q5: We discussed a little in class about businesses, corporations and firms. I understand the roots about these. My question is what exactly is the difference between the three? How do they perform different from each other?

R: The terms are basically interchangeable. Every corporation is a business (firm). The reverse is not true, however. A corporation is a kind of firm that is a legal construction. By incorporating (each state has different laws of incorporation but they are pretty much the same) a firm is protected under limited liability provisions (the shareholders can't be sued, nor can their income be confiscated for the liabilities or criminal penalties incurred by the firm) and a corporation has the right to sell ownership shares to the general public in exchange for annually filing a report (the annual report -- income statement & balance sheet) to the Securities and Exchange Commission and to its shareholders.

Q6: Are the United States people not taxed as much as Europeans because we are so anti-government compared to Europe?

R: In some respects, yes. Our country was founded by those fleeing what they believed was an oppressive government (King George, eh?) and were determined to create a country that was ruled by a government that was held in check by three separate (and supposedly equal) branches. Taxes were a chief complaint of this struggling democracy (remember the Boston Tea Party -- a revolt against taxes placed by the British government on tea sold in the colonies). Europe still has remnants of its feudal past in which a paternalistic government is tolerated to ensure that each citizen is guaranteed certain rights essential to life (food, a job, medical care). Hence, Europeans also tolerate a higher level of taxation that Americans.

Q7: On a different note, I wonder if we humans use too many natural resources. I wonder where we are at with that and when we should start cutting back on what resources. What sacrifices will we have to make and how will the economy be affected?

R: The $64 question. If you had heard David Levy (guest speaker for the Delicate Balance class yesterday 8.4) you might have been sobered by the seriousness of such a question. It is almost as if we are on a knife-edge -- the rate of use of natural resources (principally by the U.S.) is so high that we could seriously be struggling (wars, famine increasing) for resources among ourselves up through the next 40 or 50 years at which time economies might be collapsing world-wide. We still perhaps have time to get off that knife-edge (i.e., fall one way and we're doomed) and some signs show that even major multinational corporations are changing their ways in recognition of the seriousness of our situation. One look at David's graph which charts the change in CO₂ levels with the earth's temperature over the last 250,000 years makes it appear as if we are close to tipping the balance -- melting of the polar ice cap could put many of us under water.

Q8: If water gets privatized, does it offer any potential for more jobs? Also I think class should have a school- funded trip to see the stock market in action.

R: The more scarce a commodity (or natural resource) becomes, the fewer jobs will be created. You can't produce when you don't have the necessary inputs. How about a film clip of Wall Street instead? Believe me, witnessing the floor of the stock exchange will enlightening no one.

Q9: If cigarettes become a controlled drug by FDA, would alcohol become a controlled substance as well?

R: States control the sale of alcohol (age limits, how it's distributed) but you're right -- alcohol is addictive and creates a cost to society in traffic accidents, organ disease, addiction treatment, birth defects and such. But alcohol abuse is less certainly a path to an early grave than tobacco and tobacco has benefited from subsidies to tobacco farmers. It's unlikely it will ever become a drug in the legal sense whereby a prescription would be necessary to obtain it. Of course, never is a long time.

Q10: It's human nature to show one's status and self-worth. That doesn't always mean it promotes respect. Eventually, organic clothing will be the posh thing and those who wear it will become the Louis Vuittan class of today.

R: Let's hope you are right. But if Thorsten Veblin was right there will still be plenty of people who insist upon reveling in excess.

Q11: Industrial sabotage is similar to the monopolies of the early 1900s. Is today's society faced by the same monopoly problems?

R: Veblen's notion that industrial magnates were all about destroying their competitors with ruthless actions like Rockefeller's South Improvement Corporation is descriptive of a singularly vicious period in American corporate history. A few very powerful figures dominated American industry and finance with no government oversight controlling their actions -- in fact, as mentioned in class, dominant economic thinking in the U.S. held that competition itself was destructive, i.e., in a kind of twisted logic they argued that all would be better if only a few companies controlled everything. Moreover, there were social theorists like Herbert Spencer at the turn of the 19th century who argued that John D. Rockefeller, Cornelius Vanderbilt, Jay Gould and the like were wealthy and powerful exactly because they were the best and brightest of human society. It was called Social Darwinism -- the most aptly evolved individuals should rightly take their place at the top of society. Our economy today is characterized by even larger conglomerations but they are more stealthy in how they conduct themselves. With that said; Enron, Microsoft, World Com and Halliburton have openly flaunted corporate rules of conduct.

Q12: What preceded the CEO making the marketing or production system, what else did they control?

R: The transformation that occurred in the style of management from those who were principally concerned with production (engineers, those who possessed practical knowledge) to those who were principally concerned with selling the output (marketing and advertising executives) was a result of the different problems facing the typical corporation. By the 1920s, we were mass producing commodities in numbers that defied the understanding of those who had been around just 30 years previous. The principal problem therefore wasn't how to organize production (Henry Ford, Frederick Winslow Tayler and others had mastered those problems), it was how to entice buyers into the stores and show rooms to purchase the commodities.

Q13: In terms of the movie, Gone in Sixty Seconds, why do you think Ford paid so much for the advertisement of a 35 year old muscle car? The Mustang 500 GT was really only produced for about 5 to 10 years, and then production completely stopped.

R: Often automobile companies promote their raciest models to bring buyers into the show room who then buy the family sedan. Ford and General Motors sink millions of dollars into NASCAR competition just for bragging rights. So, Gone in Sixty Seconds put Ford's name in front of the public in a favorable light regardless of whether the car could be purchased or not. Subsequently, Ford is considering (or has already) producing muscle cars again -- others would know more about that.

Q14: "To acquire property in order to retain one's good name." (Sackrey 65). That's funny. It goes back to the "negative class system" where they divide those of lower income by considering them to have a "bad name".  If the majority of price is based on advertising, wouldn't that be good for society by creating a higher production frontier and raising GDP. Plus it creates employment -- would it increase equilibrium?

R: Right to your first comment -- if you have no possessions then you are of no consequence. Mother Theresa, Bishop Desmond Tutu and Ghandi would have no social standing in such a world. To your second question -- that's the dilemma. In order to salvage the system of capitalism we have to keep growing for the sake of growth itself. Convincing us to buy what we don't need creates jobs, therefore how could advertising be bad? The answer is centered in the kind of society that produces -- a consumerist, wasteful society.

Q15: Would a capitalist society be considered more of a conservative (Republican) approach to economic success -- versus liberals? And for liberals -- would their approach to the economy be more of a communistic approach to equal distribution of the market? Because conservatives have a more individual approach and I would consider liberals to be more communistic, with wanting to "share" (& equalize distribution), even though [can't read it].

R: Surveys of Americans indicate that the majority believe the income distribution is too unequal and therefore favor a progressive income tax. It's a bit much to say that therefore they favor a dictatorship of the proletariat. Sweden and Canada are not communist societies, while Cuba (which is a centrally-planned economy controlled by a powerful and sometimes ruthless leader) has the highest literacy rate and health care system in Latin America. Liberals in America are far from communistic. They compete with conservatives for being anti-communists.

Q: I did not like the game we played on Friday (double oral auction). I did not really get it. If I bought what they were selling then I would lose money because you did not know what you were buying.

R: It was an exercise in which each buyer was given a set of preferences (based upon the reservation prices for each unit -- so you were suppose to accept that the next unit was worth say $5 to you and bid according to that constraint). Sure it wasn't realistic in that regard, but the process and its outcome were a fair representation of what happens in a market place when millions of consumers and sellers make decisions based upon their preferences and costs, respectively. The key was to accept the constraints.