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coverVOICES ON THE ECONOMY How Open-Minded Exploration of Rival Perspectives

Can Spark Solutions to Our Urgent Economic Problems

Amy S. Cramer, PhD Laura Markowitz

THE VOTE TEXTBOOK Volume I

VOICES ON THE ECONOMY How Open-Minded Exploration of Rival Perspectives

Can Spark Solutions to Our Urgent Economic Problems

THE VOTE TEXTBOOK Volume I

Amy S. Cramer, PhD Laura Markowitz

Tucson, Arizona

ISBN: 978-1-7339103-0-9

Cover design by David Scott Allen

Book design by Michael Leclair

Cover Photo © rclassenlayouts

Voices On The Economy (VOTE) Program

1 West Broadway Blvd., Suite 505

Tucson, AZ 85701

www.VoicesOnTheEconomy.org

This book is for the great economic thinkers of tomorrow.

We’re waiting for you.

Acknowledgments W hatever inspiration you take from these pages is the direct result of the efforts of many pas-sionate and committed people who believe in the mission and vision of the Voices On The Economy (VOTE) Program. This book would not exist if not for the generous support of our funders.

Foremost among them is the Thomas R. Brown Foundations. Special thanks to Barbara Gray, Sarah

Smallhouse, Mary Brown Bernal, Gerry Swanson, and the entire Board of Trustees for believing in the

VOTE Program and to Norma Roberts for her administrative support over the years. The VOTE Program

was incubated at Pima Community College in Tucson, Arizona. We are deeply grateful for its ongo-

ing institutional support. And thanks also to the Political Economy Research Institute at the University

of Massachusetts Amherst, and to other individual donors, who generously supported Volume I of

this textbook.

Years ago, a book called Economic Issues Today by Robert Carson, Wade Thomas, and Jason Hecht demonstrated how to present multiple perspectives on economic issues in a thoughtful, unbiased way.

The VOTE Program stands on their shoulders, and we are grateful to them for inspiring our work.

There are too many people on the VOTE team to thank by name, but the program has benefited from

the participation of hundreds of teachers, interns, research assistants, administrative support staff, and

students, all of whom gifted us with their ideas and enthusiasm. The VOTE Program curriculum was

shaped over the past decade by talented research assistants: Zachary Forman, Ryan Day, Sheri Pingry,

Irving Talavera, Angela Lucero, and Zachary Stout. We also relied on the careful reading and important

feedback of our beta readers: Maggie Chrisman, Veronika Gillis, Ali Godoy, Gene Gotwalt, Ilene Grabel,

Keoka Grayson, Travis Klein, Alan Lee, Ishrat Mahzabeen, Fiona Markowitz, Patrick Peatrowsky, Robert

Rubinovitz, Barbara Silverstein, and Dhun Silverstein. Our board members graciously contributed their

thoughtful critiques to this book: George DeMartino, Glenn Maller, and Amelia Craig Cramer. Finally,

this book would not exist in the form that you see here without the graphic design talents of Michael

Leclair and David Scott Allen and the keen eye of copyeditor Amanda Krause.

Writing a book takes a lot of time and focus. We are both deeply grateful to our close family mem-

bers. Laura thanks MK LeFevour for her love and support. Amy thanks Amelia and Margo Cramer for

being her anchors and guides in this long process of writing the VOTE textbook. She especially wants

to thank the many family members, friends, and colleagues who understand and support her drive to

realize the greater purpose of this project, which is to help repair the world.

Our hope is that the VOTE Program will empower people of all ages and backgrounds to find their

unique voices and join the conversations that shape our lives and our future. What that really means is that

all the effort that’s gone into creating the VOTE Program—and all the ideas in this book—are for you. We

are most grateful to you, our readers, for embarking on this adventure with an open mind and hopefully

sparking new solutions that the world desperately needs. We look forward to hearing your voice. Amy S. Cramer, PhD

Laura Markowitz

Tucson, Arizona, 2019

Contents

Acknowledgments

Part I—Background

Chapter 1 The World Needs Your Voice

Chapter 2 Thinking About Thinking

Chapter 3 The Great Economic Thinkers

Chapter 4 Conservatives and Liberals: Conventional Theory

Chapter 5 Radical Theory

Part II—First Issues

Chapter 6 Tools to Get Started

Chapter 7 Issue: Agriculture

Chapter 8 Issue: Product Safety

Chapter 9 Tools to Move Ahead

Chapter 10 Issue: Livelihood

Chapter 11 Issue: Housing

About Voices On The Economy (VOTE)

ch1

There’s a famous story about nineteenth-cen-tury English painter Dante Gabriel Rossetti. It may or may not be true, but it explains why the VOTE Program exists. Our version of the

story goes like this:

One day, an elderly man approached the well-

known artist and asked Rossetti if he would be so

kind as to take a look at a few recent sketches.

After glancing at the drawings, Rossetti said, “I

don’t want to hurt your feelings, but my honest

opinion is that these don’t show much talent or

artistic skill.”

The old man looked sad but

not surprised. He held out

another portfolio. “Please,

kind sir, would you take

one more minute and look

at these sketches by a young

art student?”

Rossetti started to give them

a cursory glance, but then his

eyes widened in surprise. He

studied them closely. “These are

astonishing!” he exclaimed. “I have

never seen anything like this. With

the right encouragement, education,

and support, this artist could go far.

This kind of talent could change the whole art

world. Tell me—who made these drawings?”

Tears rolled down the old man’s wrinkled cheeks.

“I did,” he confessed, “forty years ago. But I didn’t

have any encouragement, so I never believed in

myself. I became discouraged and gave up. Now I

see that I have lost whatever talent I might have had

because I didn’t develop it.”

The world needs your talents. It desperately

needs your unique skills and your unique voice to

bring us the brilliant new solutions that will solve

our urgent economic problems—poverty, lack of

health care, homelessness, the growing national

debt, and more. But there are people like the old

man in this story who were never

encouraged, or supported, or

educated to find their voices.

They check out of the con-

versations and tell them-

selves, “My ideas don’t mat-

ter.” They end up leaving it

to others to argue and debate

and have passionate opinions.

They squander their opportuni-

ties to speak up about issues that

have everything to do with their

own happiness and well-being.

1The WorldNeeds Your Voice

2 | Voices On The Economy

Finding Your Voice

The VOTE Program exists to prevent this tragedy

from happening to you or anyone else. VOTE stands

for Voices On The Economy. We are a nonprofit

organization whose mission is to inspire solutions

to our nation’s urgent economic problems by

building a culture of respectful listening, passionate

advocacy, and intelligent debate. We do this by

teaching you the liberal, radical, and conservative perspectives on economic issues—side by side, in

a completely unbiased way. Then we invite you to

try on those competing voices so you can become

fluent in each one. When all of us become fluent in

multiple perspectives, the result is transformative.

We realize that those who think differently from

us are not the enemy. We step outside our echo

chambers and our minds open to new ideas and

new possibilities for solutions. Our vision for the

VOTE Program is that people from all walks of life

will find their voices on the issues and become

educated voters; combative debate will become

solution-focused conversation; and our nation

will move forward in the best possible way. In a

democracy, diversity of ideas is a gift. We need one

another’s voices to change the conversation.

We believe the world will be a better place

because of your voice. We believe you have the capacity to make unique contributions that the

rest of us need. Your perspective could change

the whole world! You might see something that

no one else sees, which could lead to solutions

to our most challenging problems. This is no time

to tune out, fade out, or stay on the sidelines. It’s

time to get in the game. The VOTE Program will

educate, support, and encourage you, so that no

matter what you end up doing in life as a career,

you will know how to use your voice to contribute

in a meaningful and productive way to the conver-

sations about economic issues.

Why Economics?

Right now you might be thinking, “Economics?

That’s not relevant to me!” You wouldn’t be the

first to think that, but as an economics educator,

I (Amy) have to confess that I find that response

astounding and alarming. It’s like hearing a fish say

that water isn’t important. Please understand that

economics is not just about how to invest in the

stock market or how to balance your checkbook.

Did you eat today? Did you travel on a road to

get somewhere today? Are you wearing clothes?

Do you have a cell phone in your pocket? All

these things are influenced by economics. It has

everything to do with the quality of the drinking

water that comes out of your tap, whether your

seat belt works properly, what shoes you’re

wearing right now, the age at which you can

retire, your decision about whether or not to have

kids, if you can go to college, how safe you are

walking home at night, where you’re sitting right

now, where you live, your career opportunities,

and everything else you can think of. Everything

in the newspaper—from the sports section to

the TV listings—is about economics, as are the

feeds on your social media, the debates about

financial aid you hear in the hallways at school,

Chapter 1: The World Needs Your Voice | 3

and arguments at work about the minimum wage

and benefits. And those conversations you and

your family and friends have at the dinner table

about organic food versus nonorganic food, and

what new car to buy? Yes—economics. All the

choices available to you have been, are now, and

will be shaped by economics.

Economics is relevant to your life in every way.

If you’re not yet convinced, then please take a

look at the issues we’re going to explore in the

VOTE Program (the list on the right). There’s

nothing on this list that doesn’t affect you and your

future in every way possible.

But here’s the problem that usually comes up

when people want to learn about economics:

nearly all high school and college courses are

loaded with technical model building, which can

be intimidating. It’s like you have to climb a steep

trail up a mountain of information and try not to

twist an ankle on all the jargon before you reach

the top, where you will finally feel ready to have

a voice in the policy discussions. A lot of people

give up on understanding economics before they

even try. If you are like the majority of people who

don’t want to make the climb, the VOTE Program

offers a much more accessible path. And if you’re a

person who has fallen in love with economics and

relishes the challenge of mastering mountains of

economic models, then the focus on multiple per-

spectives offered in the VOTE Program will make

your journey into this field even richer and more

exciting. No matter which path you choose, you’ll

become conversant with diverse ways of under-

standing the world.

Although I did climb the mountain, and it was

rewarding to reach the top and earn my PhD, I

was aware all along the way that many people

are left out of the conversations altogether, and

it was clear to me that this holds us back as a

society. We need everyone’s educated input to

spark brilliant new ideas about how to solve our

urgent problems. We need to become a nation

of informed voters. Yet because economics seems

so complicated, too often people leave those

debates to the “experts.” They don’t understand

the jargon, or they’re scared off by the statistics,

charts, and graphs. So I started the VOTE Program

to make economics accessible to all—and to help

you to fall in love with the questions economists

ask about how to create well-being.

4 | Voices On The Economy

Multiple Perspectives on Economic Issues

I went off to college in the 1970s in the midst of

the gas shortage, the coal-worker strikes, children

getting brain damage from eating lead paint chips,

prices rising as people were losing their jobs,

soaring mortgage rates, warnings about the health

effects of worsening smog, and more. The popular

media referred to the different sides of the debates

on economic issues as “conservative,” “liberal,” and

“radical.” But as a young person, I had no idea

how to evaluate them. Which one was right? What

made the most sense to me? How could I be sure I

was voting for what I really believed in? “I’ll study

economics!” I thought to myself. “That’s where

I’ll learn what I need to know to understand the

debates going on in our nation so that I can join

the conversations.”

Unfortunately, my economics classes were a

disappointment. My professors taught as if there

were only one way to think about economics.

They didn’t even mention that other perspectives

existed, and they assigned readings and textbooks

that just echoed their personal favorites. So I looked

for answers outside the classroom. I went to rallies

and protests. I listened to the speakers, but I was

disappointed that people seemed to be talking to—

and listening to—only those who agreed with their

positions. So I turned to the media for answers, but

I found newspapers and television reporting to be

more of the same echo chamber (and it’s gotten

even worse over the decades).

In the midst of my deep frustration trying to

make sense of all the noise, I was thrilled to come

across a groundbreaking academic book by Rob-

ert B. Carson, Wade L. Thomas, and Jason Hecht

called Economic Issues Today. The authors line up

different perspectives side by side and compare

them in a fair, unbiased way. It was astonishing

when I could understand the differences between

how radicals, conservatives, and liberals see the

issues. It transformed my vision of the world from

black-and-white to glorious Technicolor. All the

arguments in Congress that I read about in the

morning paper—from international trade deals

to seat-belt laws—suddenly made sense. I recog-

nized the different economic perspectives when

they were lampooned on Saturday Night Live,

satirized in political cartoons, and argued over

during my family reunions.

Using Economic Issues Today as my inspira-

tion, I created a version of this way of teaching

multiple economic perspectives that is accessible

to people of all ages, walks of life, and academic

backgrounds. VOTE uses multimedia, group exer-

cises, and role playing to trace the roots of our

current economic debates back to the ideas of the

Chapter 1: The World Needs Your Voice | 5

great economic thinkers from the last three hun-

dred years. I launched the VOTE Program to help

you transform your world from black-and-white to

Technicolor. I created it for you—and, selfishly, for

me—because I want to share the world with peo-

ple who are respectful listeners, passionate advo-

cates, and intelligent debaters. You have opportu-

nities to vote all the time—not just at

the ballot box but also in conversa-

tions at work, at school, with family,

with friends, and with strangers. Your

voice influences the ways other peo-

ple see the world, so don’t you want

to make sure that what you’re saying

is what you actually believe? Imagine

you have a headache and need pain

medicine. You would want to know

the possible side effects of the dif-

ferent available choices. You would

read the labels first and then make

an informed decision about which

one is right for you. The VOTE Pro-

gram helps you “read the label” on

each economic approach.

Economics is a fascinating story

of the evolution of ideas. There have

been countless economic thinkers—

men and women from cultures and

nations around the world—but the

debates that largely shape our con-

versations today are credited to three

great economic thinkers who were

European men: Adam Smith, Karl

Marx, and John Maynard Keynes. In

chapter 3 you’ll learn more about

them and the ways in which their ideas still inform

the conservative, radical, and liberal views on the

most pressing problems we face as a nation. The

VOTE Program focuses on the thirteen most rele-

vant economic issues of our time, giving you the

information and tools to make up your own mind

about what you believe.

Maybe you’re thinking, “I don’t need the VOTE

Program, because I already know what I think. My

mind is made up, and I know I’m right. I know

how we should move our nation forward.” But

how well informed is your opinion? Do you truly

know what the other perspectives are saying? How

did you develop your opinion? We’re all influenced

by our families, our communities,

perhaps our religions, and more.

Consider that if you had grown up

in a different family, or a different

neighborhood, or a different reli-

gion, you might have a completely

different perspective right now. All

of our ideas about the world are

profoundly shaped by these and

other influences.

For instance, let’s say your family

members are all die-hard Cardinals

fans. On game days all the cousins

gather to watch the Cardinals play

on television and everyone wears

the team colors. When the Cardi-

nals score, everyone chants, “We

bleed Cardinal red!” When the Car-

dinals lose, everyone shouts at the

TV and accuses the other team of

cheating. (“Those umpires were

probably paid off to look the other

way, because the catcher definitely

tagged the runner at home!”) Every

holiday dinner conversation turns

into a heated debate about who

was the greatest Cardinals player of

all time. In this context, how likely

are you to become a Yankees fan?

How likely are you to decide you prefer soccer

over baseball? If your family has always been

staunchly Republican or Democrat or Democratic

Socialist, how likely are you to understand the

views of other perspectives, or to speak up for

a policy or candidate from another party? How

Adam Smith

Karl Marx

John Maynard Keynes

6 | Voices On The Economy

likely are you to be open

to alternate points of view?

I despair when people

argue for one economic

perspective without truly

understanding the other

perspectives. It’s danger-

ous to believe that you’re

right and everyone else

is wrong when you don’t

really understand the other

points of view because you

haven’t been exposed to

what others are saying in a

fair-minded way.

Many things can happen when you’re open-

minded and have access to this information. One

possibility is that you’ll learn the other perspectives

and change your point of view. Or your original

view will grow stronger. You’ll say to yourself, “I

understand what they’re saying, and I’m even more

sure I’m right!” You may hear the strengths and

weaknesses of each argument and become open

to finding middle ground. You’ll think to yourself,

“If we compromise, we could solve this!” Another

possibility is that by hearing how the people from

other perspectives think about the issues, you will

come up with a whole new way of thinking about

solutions to our urgent economic problems.

You might be wondering why I’m making a

big deal about the importance of learning multi-

ple economic perspectives in an unbiased way. It

turns out that my experience in college wasn’t the

exception; it’s the norm. Most economics courses

and books present only a single economic view-

point—and they present it as the “truth.” The few

that do include diverse viewpoints nearly always

conclude that one or another is the “right” or “best”

economic approach. I believe introductory eco-

nomics education should empower you to make

up your own mind, not convert you to a teach-

er’s (or textbook writer’s) way of thinking. You

need to judge for yourself

and find your own voice

on the issues—not mimic

mine or anyone else’s. It

doesn’t matter to me what

you decide; I only care

that you make an informed

decision. If you study the

statistics for all the base-

ball teams and end up

more convinced than ever

that the Cardinals really

are the best baseball team

in history, that’s great. Or

if you change your mind

about the Cardinals and become a die-hard Yan-

kees fan, that’s great. Or if you decide hockey is

a much better sport than baseball, that’s great. As

you read this book, please repeat this to yourself:

“The VOTE Program is not advocating for any of

the perspectives; it’s helping me make my own

educated and informed decisions about what

I believe.”

How We Identify the Perspectives

The VOTE Program uses the terms conservative,

radical, and liberal because these are the terms

most used by the popular media to describe the

dominant ways of understanding economic issues

in our society. However, we know these are not

perfect descriptors. We’re using them as catch-all

terms to describe the general ideas of each of the

perspectives. These three umbrella terms give you

a way in to the conversations about economic

issues by drawing bright lines between them so

you can compare and contrast their approaches

in the broadest way. Over time and with practice

you’ll become more fluent in their ideas and

develop a more nuanced understanding of each

one. You’ll come to realize that there is a lot more

complexity and diversity of thought within the

radical, liberal, and conservative camps. In fact,

By hearing how people

from the other

perspectives think about

the issues, you may come

up with a whole new

way of thinking about

solutions to our urgent

economic problems.

Chapter 1: The World Needs Your Voice | 7

they debate and argue among themselves as much

as they do with people from other perspectives.

Your Voice Is Your Vote

It’s no accident that the acronym for Voices

On The Economy spells out the word VOTE. In

a democracy we, the people, must decide what

our national priorities should be. That’s what all

the fights in politics are about. When we cast our

vote for the candidates who will represent our

views in the White House, in Congress, in the

statehouse, on the local city council, or on the

school board, for example, we’re really voting for

the economic perspective we believe will best

advance our personal interests and the interests

of our community and country. Voting is your

opportunity to say, “Here are what I believe to be

the highest priorities for our nation. Here is what

I want my future to look like. Here is the kind of

world I want to live in. This is the path forward that

I believe we should take to solve our problems.”

Even if you can’t vote at the ballot box, you can

speak up at the kitchen table, talk to your class-

mates and coworkers about issues, and use your

voice to influence the people around you. And

when you don’t vote, you let other people decide

for you what your future will look like. They—and

not you—will decide if the minimum wage should

go up, stay flat, or be eliminated. They—and not

you—will determine how much federal debt we

will have. They—and not you—will decide what

your retirement security will look like. If nothing

else, I hope reading this book convinces you to

exercise your privilege to vote whenever you get

the chance. Please remember the old man in the

story about the artist Dante Gabriel Rossetti. He

didn’t use his voice, and he missed out on his

chance to transform the world.

The VOTE Ballot

You may or may not already have opinions about

the issues we’re going to cover in this book. Either

way, let’s find out if and how your attitudes change

as you go through the VOTE Program. Below,

you’ll find the VOTE Ballot. It doesn’t matter if you

don’t know much or anything about the issues

listed there. Make your “1st Vote” by taking your

best guess. You will see that there are circles with L for liberal, R for radical, and C for conservative. If you’re a conservative on an issue, put a dot on the

outside edge of the circle that’s under the C. Same goes for if you’re a liberal (under the L) or a radical (under the R). But wait! If you’re between two of the positions—let’s say liberal and radical—then

put a dot in between the L and the R. If you lean a little more toward one perspective or the other,

move the dot in that direction.

Please don’t leave any issues blank. We’re going to vote again (“2nd Vote”) at the end of each of the

issues chapters. You’ll be able to track why you

took that position (the “Why?” column) after you

become more educated and informed about the

issues and the perspectives. Please vote right now

on issues 1 through 13 before you continue read-

ing. If you printed a copy, please save it in a con-

venient place. You’ll need it thirteen more times.

8 | Voices On The Economy

ISSUE 1st VOTE 2nd VOTE WHY?

C R

Agriculture

Product Safety

Livelihood

Housing

Income Distribution

Market Power

The Environment

Health Care

International Trade

Retirement Security

Economic Stability

The Federal Budget

Immigration

$ $

Name

VOTE Ballot

VOTING INSTRUCTIONS: • Decide which perspective you agree with on each issue. • Place a dot on the outside circle corresponding to that perspective (C, L, R). • If you lean toward another perspective as well, place the dot in that direction.

Chapter 1: The World Needs Your Voice | 9

The Three Questions of Economics

You’re ready to start your exciting voyage into

economics, but please don’t worry when I tell you

that we’re going to begin with a shipwreck. Imagine

you are stranded with others on a deserted island.

What’s the first thing you’re going to ask? “How

can I survive?” Humans throughout the ages have

been asking questions about how to survive. This

is what makes economics such an interesting social

science. Economists break down the question of

survival into three components. First, given the

resources we have, what should we make? This is

the consumption question. Should we use the

driftwood on this island to make a fire to keep

warm or to build a raft? Let’s say we decide to

build a raft. The second question, then, is how do

we make it? This is the production question. We

decide that you’ll collect the driftwood, vines, and

tree sap, and I’ll fashion a hammer from a stone and

a stick. We’ll then use these items and our labor to

build the raft. The third question is for whom do we make it? This is the distribution question. Who should have a place on the raft? Those other people

who also washed up on the beach—should they

build their own raft or use ours? The definition of

economics that we’ll use in this book is the study of the consumption, production, and distribution of goods and services—questions you would ask if you were stranded on a deserted island.

Because you were not the only one left stranded

after the shipwreck, you also would have had to

ask questions about how to manage social interac-

tions among the survivors. How would decisions

be made? How would conflicts be resolved? What

should the group’s priorities be (e.g., laws, gov-

erning structures, and policies)? That is the sphere

of politics. Politics is the study of governance— the systems that manage social interactions. Just

Three Questions of Economics

What to Produce? (The Consumption question)

How to Produce? (The Production question)

For Whom to Produce? (The Distribution question)

Economics The study of the Consumption,

Production, and Distribution of

good and services

10 | Voices On The Economy

like on the island, economics and politics are

always bound together, which is why the people

who started studying this phenomenon years ago

called it political economy. Later, to dive deeper into these topics, the fields of political science

and economics were divided into two separate

realms of inquiry. In the VOTE Program we bring

them back together because we not only explore

the economic ideas of each perspective, but we

also examine their policy ideas. Our nation has

a representative democracy or republic. We elect others to vote on our behalf to enact laws

and policies. Our laws are passed not by a major-

ity of people in the nation but by a majority of

elected representatives, whether it’s on the school

board, or in the statehouse, or in Congress. Our

representatives can’t just enact any law they want.

All our laws and policies must align with our Con-

stitution (we call this a constitutional democ- racy). While radicals, conservatives, and liberals all agree that peace and prosperity can best be

delivered in a political system of constitutional

democracy, they disagree on which economic

system can best bring us the material well-being

to thrive and which policies will move us forward

as a nation. Those disagreements are the subject

of the VOTE Program and this book.

The three questions we ask in economics are

subcategories of the bigger subject of prosperity,

also known as wealth creation. When we talk

about wealth or prosperity, we don’t just mean

big bank accounts. We mean having everything

we need to flourish and live full lives

so that we can achieve our

potential. This includes the ability to go to the

dentist and get your cavity filled, to sleep on a

mattress, to wear shoes, and so forth. In other

words, we’re not just talking about the ability to

afford designer shoes and sports cars. We’re not

talking about materialism—the belief that your possessions are the most important things in life.

We’re talking about the goods and services we

need to survive and thrive.

One of the things I’m most grateful for are my

glasses. When I put them on every morning, I’m

reminded of my favorite episode of The Twilight Zone, a TV show I watched in the 1960s. The epi- sode is about a man who just wants to be left alone

so he can read, but his demanding wife and his

demanding job as a bank teller keep interrupting

his reading time. So one day he slips into the bank

vault to steal a little peace and quiet with a good

book. That’s where he’s hiding when a nuclear

blast happens. He emerges from the vault and

discovers that he’s the sole survivor. At first he’s

devastated, but he quickly sees the bright side of

his situation: now he has all the time in the world

to read! As he reaches down to pick up a book,

he accidentally drops his glasses and—crunch!— he steps on them. The last man on Earth can’t

read without glasses, and there’s no one left to

make him new ones. This is an economics story.

We determine what to make—glasses.

Chapter 1: The World Needs Your Voice | 11

We determine how to make them—with specially

trained opticians working with glass or plastics.

And then we determine who will get them. There

are billions of people on the planet, and some

estimate that a billion or more of us need glasses

but don’t have them. Think of all the car acci-

dents that happen because of bad vision. Think

about the students who fail in school every year

because they can’t see the board. Think of the

people who fall and break bones because they

don’t have good depth perception. All this harm

and suffering could be prevented with glasses.

Who gets glasses and who doesn’t? Who gets to

live in a mansion, and who has to live on the

sidewalk? Who gets a car, and who takes the bus?

Who gets a refrigerator full of food, and who goes

hungry? These are the kinds of relevant questions

we grapple with in economics.

Important Economic Terms

There are a few terms you’ll need to know as

we get started. Inputs are what go into making a product. Inputs are also called factors of production or, more simply, resources. For example, on your deserted island, you have a

coconut tree. You collect the coconut fronds and

use them to build a shelter, so in this context

coconut fronds are inputs.

Resources include three types: land, labor, and capital. Land generally refers to anything that nat- urally comes from the Earth, like coconut fronds,

clams, ore, diamonds, and animals (except for

humans). Soil, minerals, animal and fish stocks, and

fresh-water lakes are all considered land resources.

Labor is human exertion—physical and mental

activity. When you climb the coconut tree to pick a

coconut, that’s labor. Capital, also sometimes called

the means of production, is any equipment you use to produce the final product, such as a sharp

rock you use to slice the coconut open. By the way,

you might have heard of a fourth resource called

the entrepreneur—the person who brings a spe-

cial talent to create new industries, new firms, and

new markets. Since not all the perspectives agree

that this is a special fourth resource, we don’t

include it on our list of resources. Some believe it’s

just another form of labor.

Inputs are what we use for production, which

simply means taking resources and turning them

into something useful or desirable. An input

might start out as one thing and become another,

as happened in the movie Cast Away. The char-

acter played by actor Tom Hanks is stranded on a

deserted island. He tries unsuccessfully to open a

coconut by banging it with a rock. Desperate and

frustrated, he flings the rock away and a piece

chips off. That chipped piece has a sharp edge,

and he’s able to use it to open the coconut. In

this example, he turned a rock into a tool. In eco-

nomic terms, we say that land (the rock) became

capital (a tool).

Everything we make is called an output, or

product. There are two kinds of products: goods

and services. Goods are tangible, meaning they

can be touched. They are physical things such as

coconut oil and computers. Services are intangible,

meaning they can’t be touched. You can’t touch a

concert, although you can touch the guitars that

the musicians play. The musicians themselves are

labor. In this context, the guitars used during the

12 | Voices On The Economy

concert are capital because they are equipment

used to make the final product (the concert).

There are just a few more terms to know. Micro- economics and macroeconomics are different ways economists analyze and understand the econ-

omy. Micro means small-scale (think microscope), and macro means large-scale. Imagine you’re play- ing the game Pictionary. You have to draw a picture

that allows your teammate to guess the word. Let’s

say your word is farm. If you’re looking through the lens of microeconomics, you start small and go

big, so first you draw a carrot. You add a leafy top,

squiggly lines for the roots, and a bunny nibbling on

it. From there you draw the garden growing around

the carrot, and then the barn in the distance, with a

herd of cows on the hillside. That’s how you get to

farm. If you’re looking through the lens of macro- economics, you start big and go small, so first you

draw the whole spread—barn, farmhouse, plowed

fields, cows on the hill. Then you sketch in the gar-

den, drawing the neat rows of vegetables. Last, you

draw the carrot in its row next to the lettuces and

cabbages, and the bunny nibbling on it. It doesn’t

matter whether you go from big picture to small

picture (macroeconomics), or from small picture to

big picture (microeconomics). They are simply two

approaches to economics.

Microeconomics is the study of markets. You go to super markets and malls, and you shop

online, so you know how it works. You want

coconut cupcakes (demand); the convenience

store has them (sup ply). Markets are places

where demanders and suppliers come together to

buy and sell. Macroeconomics looks at the whole

economy including Gross Domestic Product (GDP), which is the measurement of all goods and services produced by a nation; unemploy- ment, which is the measurement of the number of people who want jobs and don’t have them;

and inflation, which is the measurement of over- all price increases over time.

Another term that you’ve probably used before

is theory. For our purposes, a theory is an expla- nation of any question you want to think about.

Theories always start with a question: for exam-

ple, when you drop a piece of toast, why does

Exercise 1: Inputs and Outputs Let’s do a quick exercise to review inputs and outputs. We’ll use the example of dentistry. Let’s say

you go to the dentist. Write down whether each item in the list that follows is an input or output. If

it’s an input, indicate whether it’s land, labor, or capital; if it’s an output, indicate whether it’s a good

or a service. The Answer Key is at the end of the chapter.

1. Teeth cleaning ______________

2. Gold for fillings ______________

3. Dental technician ______________

4. Mouth guard ______________

5. Drill ______________

Chapter 1: The World Needs Your Voice | 13

it always land buttered side down? Why does a

dog wag her tail? What were television executives

thinking when they canceled your favorite show?

We come up with theories to answer questions we

have about the world around us. Economic the- ories are explanations related to questions about consumption, production, and distribution—what

to produce, how to produce, and for whom to

produce. A theory is an idea, while a system is a set of things that work together in the real world

to form a complex whole. An economic system is the actual consumption, production, and dis- tribution that takes place in the real world. One

chief difference among economic systems is who

owns and/or controls the resources (land, labor,

and capital).

Over the centuries, societies have operated

under a variety of economic systems. For exam-

ple, medieval Europe operated under the eco-

nomic system of feudalism, where only the noble classes owned the land and capital. They

controlled the labor by forcing the serfs (peas-

ants) to work for them to earn their food and

shelter. In colonial and antebellum America, we

had an economic system of slavery, in which the masters owned the labor of the slaves. In twenti-

eth-century Europe, the Soviet Union’s economic

system was called Soviet-style communism (state-owned capitalism), where the state con- trolled the labor and owned the land and capital.

As a nation, we have already rejected all three of

these economic systems, so in the VOTE Program

we’re not going to be talking about things that

we already generally agree are wrong or untrue.

We won’t be suggesting, for instance, that the

Soviet Union had a successful economic system,

or insisting feudalism is best, or advocating for

us to go back to slavery. We’ll be considering the

predominant economic perspectives that people

currently debate.

Choose Your Economic System

Let’s do a little experiment. Imagine there are

two countries, and you have to choose where you

want to live. In both Country A and Country B

there is private ownership of land and capital, and

individuals control their own labor, so owners hire

other people to work for them. Let’s say each country

has an identical firm that runs an entertainment

service, “Balance It!” The employees of “Balance

It!” stand up and balance their notebooks on their

heads while they do a classic dance you might

have heard of called the hokey pokey. (Trust me,

this is actually very entertaining.) When someone’s

notebook falls, that person sits down. Eventually,

there’s only one person left standing—the “Balance

It!” winner. The reward for the winner is candy,

which represents things people want and need,

from private helicopters and exotic vacations to

dental care and college tuition. Each of the winners

in both Country A and Country B receive a huge

pile of candy, and the runners-up receive a big

pile of candy. No one else who competed receives

any candy.

Here’s where you have to make a choice: In

Country A the winners of the candy keep it all.

They start businesses that create wealth for them-

selves and jobs for others, thereby stimulating the

economy. Some voluntarily redistribute a portion

of it through philanthropy to help others meet

their basic needs. In Country B the winners keep

a substantial portion of the candy. The govern-

ment redistributes the rest of the candy to fund

programs that create more opportunities for more

people to succeed, which grows the middle class.

With money in their pockets, they buy more so

firms expand and create more jobs. Which coun-

try would you want to live in—A or B?

Have you voted? Good. Now let’s say there’s a

third country—Country C—where, instead of pri-

vate ownership, workers cooperatively (together)

own the businesses where they work, and every-

one has a vote on how the company is run. The

14 | Voices On The Economy

worker-owners of “Balance It!” get up and do

the hokey pokey with notebooks on their heads,

and eventually one person is left standing. It is

assumed that the winner in this competition was

only the winner because everyone contributed to

“Balance It!,” so each person in Country C gets a

modest pile of candy, and a majority votes to give

the winner an extra bonus piece. Each worker

then gives a portion of their candy to a communal

fund that ensures that everyone’s basic needs are

met—housing, transportation, health care, higher

education, and so forth. This creates an incen-

tive for more cooperatively owned businesses to

form, thereby stimulating the economy.

Now that you have a third choice, please vote

again. Which country would you choose to live

in—Country A, Country B, or Country C?

Country A and Country B both represent the

economic system of capitalism, which happens to be the dominant economic system in the United

States. In capitalism, individuals privately own land

and capital, and people have the legal right to con-

trol their labor. Country A represents the conserva-

tive view of capitalism, and Country B represents

the liberal view of capitalism, but please note that

proponents of both the conservative and liberal

perspectives believe that capitalism is the best

possible economic system. Country C is the eco-

nomic system of democratic socialism, which represents the radical view. Proponents believe the

best economic system has a combination of public

ownership and worker ownership. We call propo-

nents of this system radicals.

Conservatives celebrate free-market capital- ism. By “free” they mean free from government interference. Conservatives believe free markets

create economic and social harmony, while gov-

ernment regulations and bureaucracies make

capitalism inefficient and coercive. Conservatives

believe we need to embrace a free-market system

to ensure liberty for all.

Liberals believe that businesses should be

guided by government through fair-market capi- talism. The partnership between private enterprise and the public sector creates equity, transparency,

accountability, and stability because, when it’s

left alone, capitalism can lead to unfair competi-

tion, market failures, and numerous other unequal

opportunities. Liberals believe we ought to guide

fair-market capitalism to ensure fairness for all.

Radicals believe capitalism is a system driven

by private profit and not by social need. They

view capitalism as a destructive system that steals

from workers and that needs to be replaced by

one that values people over profits. In the VOTE

Program we call that system democratic socialism

(but please be aware that not all radicals identify as

democratic socialists). Radicals believe that when

some resources are owned cooperatively by work-

ers and some resources are owned by the whole

society then we can build a just economic system

for all.

Chapter 1: The World Needs Your Voice | 15

Every time I do this activ-

ity in my classes, the stu-

dents are all over the map

when it comes to choosing

which country they want

to live in—which is really

a choice between ideas

about the best way to orga-

nize the economy. This is

not at all surprising; human

beings have been fighting

about this since the begin-

ning of civilization. Just

think about our nation’s

history. The Revolutionary

War was about stopping

taxation without represen-

tation. The Civil War was in

large part to end the system

of slavery and give all peo-

ple the right to control their

own labor. World War I and

World War II challenged imperialism (one coun-

try taking control of another country’s resources).

The Korean War, Vietnam War, and Cold War were

fought to stop the spread of communism (state

ownership of resources and

state control of labor). We

fought the Gulf War, some

say, to again stand against

imperialism. The War on

Terror is seen by some to

be a fight about the own-

ership of resources. Terror-

ist Osama bin Laden, who

masterminded the attacks

on the World Trade Center

on September 11, 2001, told

his followers, “[Y]ou should

liberate yourselves from

the deception, shackles

and attrition of the capital-

ist system. . . . The capital-

ist system seeks to turn the

entire world into a fiefdom

of the major corporations.”

The history of the world is

a history of conflict over

the ownership and control of resources, and this

is likely to continue to be the case as long as there

are human beings.

The problem isn’t that we

disagree. Looking at issues

from different points of

view can and should make

us stronger. This is a gift of

democracy. The problems

occur when we disagree

without respectfully

listening to the other sides,

and when we dismiss out

of hand the validity of their

points of view.

16 | Voices On The Economy

Change the Conversation

Up until now, we’ve been talking about liberal,

conservative, and radical economic ideas. You should

know that these ideas are often represented by

political parties in the United States. The Democratic

Party tends to follow the liberal economic idea of

government partnering with private enterprise. The

Republican Party tends to follow the conservative

economic idea that government should allow

capitalism to operate unfettered. The Democratic

Socialists of America tends to want

cooperative ownership of resources and

a participatory government. By the way,

you should know that the Democratic

Socialists are represented by a

handshake and a rose, the Republicans

are represented by an elephant, and the

Democrats are represented by a donkey.

Just as wars are fought over who

owns the resources, so too are bat-

tles waged within our nation to deter-

mine which economic perspective will

shape our nation’s policies, taxation,

trade deals, environmental standards,

and more. We have conflicts and pas-

sionate disagreements, and inevitably

some part of the population ends up

feeling disappointed with the direction

we take as a country. This is normal

in a democratic system. Sometimes

the liberal view has the majority vote;

other times the conservative approach

has the majority vote. And sometimes

(although far less often but with a definite voice

in the debate) the radical view influences national

policy. The problem isn’t that we disagree. Look-

ing at issues from different points of view can and

should make us stronger. This is a gift of democ-

racy. The problems occur when we disagree with-

out respectfully listening to the other sides, and

when we dismiss out of hand the validity of their

points of view. These are ideas that could poten-

tially move us forward as a nation. Studies have

shown that we tend to surround ourselves with

people who echo our own perspectives, which

means we don’t get enough practice listening to

other perspectives in a respectful way. Recent vot-

ing statistics show that Republicans and Democrats

are more polarized than ever, with increasing lev-

els of hostility. In decades past they regarded one

another as political opponents, but lately the rheto-

ric has become vicious—nasty memes and political

rants dominate the news and social

media. They now treat one another

as the enemy.

And where are the Democratic

Socialists in this fight? Since the Great

Recession of 2007, followed by the

Occupy Wall Street movement and

a surprisingly successful run for the

Democratic Party’s presidential nom-

ination by Senator Bernie Sanders

(an Independent from Vermont who

identified as a democratic socialist),

there has been growing interest in

the radical perspective. Socialism

was the most frequently searched

word on Merriam-Webster’s web-

site during Sanders’s 2016 presiden-

tial primary campaign. That year, a

survey by the Institute of Politics at

Harvard University revealed that half

of people ages eighteen to twen-

ty-nine didn’t support capitalism,

and a third of this group supported

socialism. The implications of this are quite signif-

icant. As Massachusetts Senator Ed Markey once

said, “Although children are only 24 percent of

the population, they’re 100 percent of our future.”

Because of the rising interest in democratic

socialism, more Democrats and Republicans have

become vigorous, vocal opponents of it.

We need to get better at understanding one anoth-

er’s points of view. Respectful listening and compro-

Republican

Democrat

Democratic Socialist

Chapter 1: The World Needs Your Voice | 17

mise are absolutely vital in a democracy and crucial

for sparking new solutions. This is the heart of what

we’re doing here in the VOTE Program. But why

haven’t people been doing it all along? Because it’s

not easy. Bitter feuds and different ways of thinking

about our nation have existed since before the Rev-

olutionary War. Leaders debated whether the fed-

eral government or local jurisdictions should have

more power. Who should own the resources? Who

should be allowed to vote? It has always been hard

to hear ideas that contradict our own, so please

don’t be surprised if you find the VOTE Program

challenging at times. For each issue in this book,

you will be asked to argue the position of each of

the economic perspectives—even the ones you

vehemently disagree with. Why would we ask you

to do this? Because we believe that you can’t really

learn how to swim if you’ve never been in water.

You might learn the motions of the crawl, but you

can’t know what it feels like to float, or to breathe

out bubbles through your nose, or to propel your-

self across the pool by kicking your legs. Speak-

ing aloud the words and phrases of each economic

perspective is like diving into the pool. It gets you

inside the ideas so you can really understand the

complexities and nuances. Once you do that, you’ll

be able to make up your own mind about what

you believe. You’ll come to that opinion with an

educated understanding of your choices. The VOTE

Program inoculates you against believing oversim-

plified sound bites meant to be provocative and

divisive—things like “Conservatives don’t care about

the environment!” or “Radicals are un-American!” or

“Liberals are antibusiness!”

The VOTE Program is all about helping you

become engaged with the larger issues in the world

around you. Only half of eligible voters actually

cast their ballots in recent years. This is alarming

if you care about the future of our country, which

has everything to do with your future well-being.

Even if you weren’t sure how to vote on the VOTE

Ballot, you will definitely start to form your own

opinions about the issues as we cover them in this

book. The first step to becoming civically engaged

is very simply this: you have to care.

18 | Voices On The Economy

The Next Great Economic Thinkers

The VOTE Program is going to teach you about

Adam Smith, Karl Marx, and John Maynard Keynes,

the great economic thinkers who laid out their

ideas regarding how we can best create wealth

and prosperity. We’ll trace their voices through

to today’s radical, liberal, and conservative

perspectives. My favorite daydream, which I hope

becomes reality very soon, is that not only you but

also your friends and family members will read

this book and participate in the VOTE Program.

I imagine you all seated around the dinner table.

The conversation turns to issues in the news.

Your friend says, “Okay, I get what you’re say-

ing about cracking down on companies that pol-

lute. This is what I think we should do about it,

and here’s why.”

Your sister reaches for the potatoes and says,

“Yeah, I see your point, but what if we compro-

mise and find a solution this way?”

Your neighbor passes her the salt and says, “What

you’re both saying only convinces me more that

what I believe is the best way to deal the problem

of pollution, and here’s why I think so.”

Then you leap up, so excited that you nearly

spill your soup. “I see the strengths of what you

all are saying, and I also see weaknesses in your

arguments. But listening to you just gave me an

amazing idea for a new way to think about the

environment—and about economics in general!”

We’re waiting for the next great economic

thinkers. We haven’t had a new way of thinking

about economics in nearly a century, and we’re

due for one. My dream is that you will be the

next great economic thinker. Our world desper-

ately needs you to help navigate us through the

uncertain waters ahead. We’re looking at chal-

lenges on every front: unsustainable debt, unaf-

fordable health care, food insecurity, the possi-

bility of drones and robots replacing the majority

of human workers in the years to come—not to

mention challenges we can’t yet even imagine.

We will always have disagreements. The goal

of the VOTE Program is not to unite us in agree-

ment. The point is that, through your civic engage-

ment and civil discourse, we can move forward

together and advance as a civilization. I have a

sense of urgency about this because I won’t be

here forever, and neither will you. None of us

will. I lost close family members at a young age,

so perhaps that’s why I’m so aware of mortality.

If you’re extremely lucky, you may get a hundred

years, but you don’t know when that second date

on your gravestone will arrive. No one does. So

instead let’s focus on the dash—that little line that

connects your birth date and your death date that

stands for all the days in between your arrival and

your departure. We’re all living in our dashes, as

people like to say, and it’s up to us to make the

most of this lifetime, however long it will be. It’s

up to us to use our voices to vote—to say what

we mean and add our unique, informed perspec-

tive to the conversation. Don’t let that dash go by

and then years later say with regret, “You know,

I did have an idea way back when, but I lost

it because I never really knew how to use my

voice.” My great hope for you is that on the day

you die you will look back on your life and know

that your voice made the world a better place.

Chapter 1: The World Needs Your Voice | 19

Chapter 1: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. As new artificial intelligence inventions are used to take orders in fast food restaurants, more workers are losing their jobs. Which of the three questions of economics relate to this situation?

A. For whom to produce? B. What to produce? C. Why to produce? D. How to produce?

2. Juan is a 25-year-old quarterback for a professional football team. In terms of resources, Juan is _____, the goal posts are _____, and the grassy playing field is _____.

A. land; labor; capital B. labor; capital; land C. capital; land; labor D. labor; land; capital

3. While driving on a freeway, a rock from the truck in front of you hits your car window and cracks it. The next day, you hire a company to replace the front windshield. In this scenario, which of the following is true?

A. The window repair is an output, specifically a service. B. The window repair is an output, specifically capital. C. The window repair is an output, specifically a good. D. The window repair is an output, specifically land.

4. What is studied in microeconomics? Choose all that apply. A. The nursing shortage B. The number of layoffs in the construction industry during the previous decade C. The decrease in average prices in Japan during the 1990s D. The advertising campaigns used to sell sneakers to teens ages 13 to 16

5. Which of the following news article headlines would be of interest to a macroeconomist? A. The Unemployment Rate Fell By 0.4% in January B. Wage Growth Outpaced Inflation for the First Time in a Decade C. Mexico’s Gross Domestic Product Higher Than Expected D. Mergers and Acquisitions Leave Only a Few Players in the Gaming Industry

20 | Voices On The Economy

6. In the market for pens, writers and pen manufacturers meet. In this context, the writers are the __________ and pen makers are the __________.

A. producers; consumers B. demanders; suppliers C. sellers; buyers D. suppliers; demanders

7. What is the difference between an economic theory and an economic system? A. Theories are explanations about the economy, and systems are actual economies in the

real world.

B. There is no difference—a theory and a system are synonyms. C. Theories are studies of markets in general, while systems are studies of markets during

particular time periods.

D. Theories are actual economies in the real world, and systems are explanations about the economy.

8. Which of the following is an economic system? A. Feudalism B. Slavery C. Soviet-style communism D. All the given choices are correct

9. In capitalism, who owns the capital (the equipment used for production)? A. Government B. Groups of workers C. Private individuals D. Consumers

10. Match the economic theory (left column) to its preferred economic system (right column). A. Conservative i. Fair-Market Capitalism B. Liberal ii. Free-Market Capitalism C. Radical iii. State-Owned Capitalism D. None of the above iv. Democratic Socialism

Answers

1. D 2. B 3. A 4. A, B, & D 5. A, B, & C 6. B 7. A 8. D 9. C 10. A – ii, B – i, C – iv, D – iii

Chapter 1: The World Needs Your Voice | 21

Chapter 1: Key Terms

Capital Capitalism Constitutional democracy Consumption Democratic socialism Distribution Economic system Economic theory Economics Entrepreneur Factors of production Fair-market capitalism Feudalism

Free-market capitalism Goods Governance Gross Domestic Product (GDP) Inflation Input Labor Land Macroeconomics Market Materialism Means of production Microeconomics

Output Production Representative democracy Republic Resources Services Slavery Soviet-style communism State-owned capitalism System Theory Unemployment

Answer Key to Exercise 1

1. Teeth cleaning Output: Service

2. Gold for fillings Input: Land

3. Dental technician Input: Labor

4. Mouth guard Output: Good

5. Drill Input: Capital

ch2

T here’s a joke about the famous fictional detective Sherlock Holmes. It goes like this: Holmes and his crime-solving sidekick, Dr. Watson, are on a camping trip. It’s the middle

of the night, and Holmes suddenly shakes Wat-

son awake.

“Watson! Open your eyes!”

“Huh?” Watson says groggily.

“Wake up and tell me what you see!” Holmes

says urgently.

“Uh—I see thousands of stars in the sky?”

“Yes!” says Holmes, nodding encouragingly.

“And what does that tell you?” Watson yawns. “I suppose it tells me that the

universe is bigger and more complex than I can

comprehend, so my irritation that you woke me

up and my worry that I won’t be able to get back

to sleep are insignificant in the grand scheme

of things.”

“Yes, but what does it tell you?” Holmes asks again.

Watson considers the night sky. “From the posi-

tion of the constellations, it tells me it’s approx-

imately half past four. And the sky is clear, so

it tells me it’s unlikely we’ll need our umbrel-

las tomorrow.”

“Yes, Watson, but what does it tell you?”

“Oh for goodness’ sake, Holmes! Just tell me

what you think it should tell me, and let me get back to sleep!”

“It’s elementary, my dear Watson—it should tell

you that someone has stolen our tent!”

What does this story tell us? It tells us that we

each experience and interpret the world in our

own unique ways. It also tells us that more than

one thing can be true at the same time.

Here’s a little test. What do you see in figure

2.1? Do you see a vase? Do you see two faces in

silhouette? You may actually see both, depending

on how you look at it.

Figure 2.1

2Thinking About Thinking

24 | Voices On The Economy

Does the picture below (figure 2.2) look like

it’s moving to you? It isn’t, but your eyes may see

it that way. So what this should tell you is that

just because we’re positively certain we’re see-

ing something the right way while other people

are seeing it the wrong way, we may, in actuality,

all be right—or we may all be wrong, or maybe

we’re the only ones who have it wrong.

Figure 2.2

In some aspects of our lives we’re perfectly

comfortable with the fact that there’s more than

one way to understand something. For example, if

you were asked what the right kind of food is, you

would think the question was crazy because the

right food is the food you feel like eating. That’s

correct. It might be tacos; it might be salad. Right depends on the context. Likewise, if you were

asked what the right kind of music is, you would

roll your eyes and say, “That’s another trick ques-

tion. There’s no ‘right’ kind of music.” Of course

there isn’t! It’s a matter of opinion. But one type of

music might be more “right” in a certain context.

For instance, Beyoncé is more right than Beetho-

ven if you want to create a dance-club atmosphere

at your party. And Beethoven is more right than

Beyoncé when you perform at your classical piano

recital. So there are some issues that we agree can

have more than one correct answer. Many things

could be right.

On the other hand, there are some issues

about which we feel uncomfortable saying that

many answers could be right. Those become dif-

ficult conversations. For instance, what’s causing

global climate change? Was Christopher Colum-

bus a brave explorer or a ruthless invader? Was

life on Earth created by God in six days, or did it

evolve over millions and millions of years? There

are many issues about which we vehemently dis-

agree. You probably have strong views on these

and other controversial questions, and so does

the person sitting next to you. There are issues

about which each of us feels certain that we’re

right, and it can be very frustrating—and even

infuriating—when others are just as certain about

an opposite opinion. The beliefs that seem so

obviously certain and true have deep roots in our

families, cultures, religions, educations, national

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Chapter 2: Thinking About Thinking | 25

our heads out of thin air; they are the products

of our experiences and the influences around us,

including our teachers and textbooks.

It takes profound courage to question—let alone

to go against—the beliefs of everyone around you.

That’s why sixteenth-century scientist and philos-

opher Galileo Galilei is one of my heroes. Talk

about courage! During Galileo’s lifetime, Europeans

believed the Earth was the center of the universe.

The Catholic Church considered this official doc-

trine based on the Holy Scriptures, which described

how God created the Earth and all things on it in six

days. But Galileo gathered scientific evidence that

led him to believe the Earth revolves around the

Sun. He stood up for what he believed even though

people thought he was crazy. The Church was very

powerful at that time and had little tolerance for

diverse viewpoints; it condemned ideas that con-

tradicted its doctrine. Imagine the guts it must have

taken for Galileo to tell the Pope and the inquisitors

that they were wrong. He paid a heavy price. The

Church sentenced him to life in prison for spread-

ing an idea they considered dangerous heresy. It

forced him to recant everything he ever said about

the Earth revolving around the Sun. It destroyed his

book and banned him from ever publishing any-

thing else for the rest of his life.

Eventually everyone realized Galileo was right.

The Church even apologized to him … 359 years

later. Today it would be hard to find a person

who doesn’t believe the Earth revolves around

the Sun. But do we all believe this in the same

way? Imagine you’re in class and I ask, “Who

believes the Earth revolves around the Sun?” Your

hand shoots up, and so does everyone else’s. It’s

a no-brainer. We all saw that model of the solar

system in first grade, with the Sun in the middle

and the Earth, Mercury, Venus, and the rest of

the planets revolving around it. Now I ask, “Does

anyone here think that while the Earth probably

26 | Voices On The Economy

does revolve around the Sun, there’s a possibil-

ity that one day—maybe a hundred years from

now—we’ll have new instruments for measuring

and a totally different way of understanding the

universe, which could lead us to say that the Earth

does not revolve around the Sun?” Only some

people will raise their hands, and that’s because

we have different ways to think about truth, facts,

and new information.

Buckle up, because we’re going to get deep now.

There’s a branch of philosophy that specializes in

how we think about thinking. It’s called epistemol- ogy. Epistemology is a complicated area of study, but for our purposes we’re going to talk about ways

of thinking that open up conversations by consider-

ing new possibilities and ways of thinking that frus-

trate constructive conversations.

Essentialism, Non-essentialism, Relativism, and Absolutism

Let’s consider four ways people think about

thinking. Essentialists believe there is an essence to everything—an intrinsic and unchanging truth

that we can come to know through careful study.

They say that as we explore and learn, we can

know the truth. Therefore, our ideas about the

solar system, human life, and everything else can

be true. They say we can know a thing is true by

experiencing it through our senses (empirically) and by applying reason and knowledge

(rationally). For example, to an essentialist, it’s true that the Earth revolves around the Sun, and

it’s highly unlikely that new information, or new

instrumentation, or new perspectives will change

that understanding. Truths are more than just

opinion: they reflect reality. However, essentialists

change their beliefs when new knowledge is

discovered that convinces them there is a more

accurate way to understand reality. Staying open-

minded to new ideas makes sense to an essentialist

because those ideas could help bring them closer

to grasping the true essence of the thing.

Non-essentialists believe that there is no fixed “true” essence to reality. They say that as we study

and explore and our own minds open to new

ideas, and as time passes and the contexts of his-

tory, law, human development, and other things

change, so too do our understandings of what is

true. To a non-essentialist, the things we believe

to be true are only reflections of the knowledge

we have in this moment. For example, a non-es-

sentialist says we believe right now that the Earth

revolves around the Sun, but it’s possible that new

information, or new instrumentation, or new per-

spectives will one day change that understand-

ing. Non-essentialists point out that our thoughts

and perceptions are shaped by what we think we

know, what we expect to see, and what we haven’t

even thought to look at yet. They say that it matters

a lot what we think because it’s through ideas that

we make sense of the world. So while non-essen-

tialists reject the notion that there is a fixed essence

to all things, they embrace the view that ideas have

consequences. They say that’s why it’s important

to advocate for one idea over another while at

the same time staying open-minded to new ideas,

because they could lead to consequences that

we prefer.

Chapter 2: Thinking About Thinking | 27

We can leave it to the great philosophers to

debate whether or not there’s an essence to all

things—whether essentialists or non-essentialists

are correct. Both agree that knowledge keeps

evolving, which opens up conversations because

this mindset allows for new possibilities. Once

upon a time, people believed the Earth was flat;

even geniuses such as Leonardo da Vinci and

Isaac Newton couldn’t explain how babies were

conceived; and until fairly recently, people ridi-

culed the suggestion that doctors could prevent

infections by washing their hands. We are con-

stantly building on our knowledge from previous

discoveries. As Newton said, “If I have seen fur-

ther, it is by standing on the shoulders of giants.”

And sometimes building new knowledge requires

that we replace even deeply held beliefs, such as

the idea that the world is flat.

Let’s look at two ways of thinking that frustrate

constructive conversations. Relativists are some-

times confused with non-essentialists. Relativist

thinkers have sophisticated ways of understanding

the world as not having one fixed truth. But the

popularized version of relativism says, “Since we

can’t know what the truth actually is, you go ahead

and think what you think; I’ll go ahead and think

what I think; and in the end it doesn’t matter either

way.” No! It definitely matters because we are con-

stantly making choices and decisions based on what

we believe to be true. There are consequences to

ideas. For instance, because we believe the Sun and

not the Earth is at the center of our planetary sys-

tem, we’ve been able to launch satellites into space,

and we use a solar calendar to measure the pas-

sage of time. If you believe one idea is as good as

another, you won’t advocate for any particular one,

and there is therefore no opportunity for meaning-

ful dialogue. You might even end up not bother-

ing to vote because you think the policies we have

don’t make a difference one way or another. It’s as

if you shrug and say, “Yeah, whatever.”

Another way of thinking that frustrates con-

structive conversations is sometimes confused

with essentialism. Absolutists say, “My way is the

only right way because it is the absolute truth.”

No! This is close-minded thinking that rejects all

new ideas and leaves us stuck in the dark ages.

For instance, if we had rejected Galileo’s new way

28 | Voices On The Economy

of looking at the planetary system, we would not

have satellites, cell phones, or countless other

inventions today. Being open-minded and curi-

ous to explore new ideas is what moves humanity

forward. Absolutists reject any idea that doesn’t fit

with their preconceived notions about the world,

which blocks opportunities for meaningful dia-

logue that could expand understanding.

When it comes to the right music or food, rela-

tivism makes sense. And when it comes to oppos-

ing human trafficking, absolutism makes sense. But

when we debate economic perspectives, rejecting

relativism and absolutism in favor of intelligent

open-mindedness makes the most sense. It’s the

only way to have the kinds of constructive conver-

sations that can lead to real solutions that move our

nation forward and make everyone’s lives better.

Economics and Pluralism

Most of us were raised to believe that what we

learned in school was true. For instance, you weren’t

given a textbook called Chemistry: One Way to Look at It. You were taught from Chemistry: The Way It Is. But today the vast majority of economics classes are

taught from a single perspective (liberal, radical, or

conservative). The problem is that many students

don’t even realize they are learning a perspective.

It’s just taught to them as Economics: The Way It Is. In the meantime, economics educators are famous

for fervently disagreeing with one another about

which perspective is the “right” one. They can

be very certain that the others are dead wrong.

This absolutist way of thinking limits our potential

to see solutions. For instance, they might only

present research data that supports their views,

and if they even acknowledge that there are other

perspectives, they might quickly dismiss them as

Exercise 2: Different Ways of Thinking Let’s practice identifying the differences between essentialist, non-essentialist, relativist, and

absolutist statements. Which is which? The Answer Key is at the end of chapter 2.

1. “As a child I was taught that the atom was the smallest particle. When scientists discovered even

smaller ones, I changed my belief. New information brings us closer to the essential truth.”

2. “If I drop a shoe from a second-story window, I am completely certain it falls to the ground because

of gravity. This is an immutable fact that will never change, so it’s a waste of time to consider other

theories or explanations.”

3. “Juan thinks the forest should be cut down so the city can build a new shopping mall. Ashley

is passionate about saving the forest. I say neither one is right or wrong; it’s just a matter

of preference.”

4. “My doctor told me to lift weights to prevent high blood pressure. Then a study came out showing

that running was more effective for my age group. New knowledge and changing contexts continually

add to what we know so that we keep improving and making decisions that are better for us.”

Chapter 2: Thinking About Thinking | 29

illegitimate or irrelevant. And relativism—the flip

side of absolutism—is just as harmful. Believing

that it doesn’t matter what you believe also limits

our potential for finding inspiring new ideas, and it

brings us classrooms full of teachers and students

who don’t recognize that our ability to prosper and

flourish is at stake.

The VOTE Program promotes pluralism in

economics education. Pluralism means being

open to a diversity of viewpoints. It’s a commit-

ment to open-minded conversations, whether you

approach economics education as an essentialist

or a non-essentialist. It’s an opportunity to build on

existing knowledge and advance our understand-

ing by considering alternative ways to look at eco-

nomic relationships.

The Case for Pluralism in Economics

For the last fifty years or so, there’s been

a growing movement of educators calling for

economics to be taught from more than one

perspective. But while those teachers want to

include more pluralism in their classrooms, in

some cases the decision about what to teach

is out of their hands. For example, in 2010 the

Texas State Board of Education voted to change

the state’s social studies curriculum so that it only

represented the conservative economic point of

view. Social studies teachers were required by law to teach students that unregulated capitalism is

superior to all other economic systems and to

present Republican Party policies more favorably

than any other policies. Society loses out when

multiple perspectives are not allowed to be taught

to students. That’s why students around the world

are demanding to be taught economics from

multiple perspectives. The International Student

Initiative for Pluralism in Economics, for example,

hosts conferences and organizes students in

dozens of countries worldwide to advocate for

more pluralism in economics curricula. Economics

students and educators from all the perspectives—

radicals, conservatives, and liberals—are part of

this call for change.

30 | Voices On The Economy

When we embrace plu-

ralism, we’re respecting

other people’s right to

think differently from our-

selves. In our democracy,

the majority rules, but the

minority deserves respect

and appreciation because it

provides the majority with

a chance to learn and test

its ideas against thoughtful

critics. Democracy is a sys-

tem of compromise, which

means we won’t always

have things our way, but

neither will anyone else.

Using your voice is espe-

cially important when you consider other ideas to

be dangerous or offensive or completely wrong.

But—and this is the important part—please make

sure you’ve listened respectfully and understood

those other points of view before you offer your

critique and alternative ideas. The process of lis-

tening to others respectfully and then engaging in

civil discourse (not leaping up to interrupt with

rude comments, snorts of disbelief, or apoplectic

rage) is not always pleasant or comfortable, but

it guarantees that we will have a healthy democ-

racy and find the best solutions to move forward

together as a nation.

Pluralism doesn’t mean just mentioning another

perspective to metaphorically pat it on the head in

a patronizing way, or to use it as a contrast to make

the favored perspective look good. It means hav-

ing an unbiased discussion of multiple perspectives.

Some books and courses appear to present diverse

economic perspectives, yet they are rife with subtle

and overt biases. Others invite students to compare

different economic systems. But the problem is the

economic systems they compare to their favored

perspective are outdated and irrelevant, so there

really isn’t any true pluralism presented. The way

the systems are presented

skews the debate. In one

often-used high school text-

book, the authors basically

ask, “Readers, do you want

to go back to an economic

system that’s based on the

kind of trade we had back

in the premodern days,

when we were all hunters,

gatherers, and farmers? No?

Well, then you don’t want a

traditional economic system.

And how would you like to

live in a communist country

like the Soviet Union, where

the government owns every-

thing and tells you what to do? No? Then you don’t

want a command economic system. That leaves

only one solution: the market economy! So, you

see, capitalism clearly is the best economic system.”

The problem with this sort of comparison is that no

one is advocating for the United States to have a tra-

ditional economy, and no one wants us to become

the next Soviet Union. This sets up some thing that

isn’t a real option just to give the impression of plu-

rality. Yes, traditional and command economic sys-

tems are important things to study, but they should

be studied in history classes, not in modern-day

economics classes. In the VOTE Program we com-

pare the relevant, contemporary choices we face

regarding our economic system: radical (democratic

socialism), conservative (free-market capitalism),

and liberal (fair-market capitalism). These three eco-

nomic systems are debated in the mainstream in our

country today, and you need to know about them

in order to have an educated and informed voice in

the world.

The VOTE Program won’t pretend to compare

different perspectives while really trying to sell you

on a personal favorite. It’s about helping you dis-

cover what you believe by presenting each of the

The VOTE Program won’t

pretend to compare

different perspectives while

really trying to sell you on a

personal favorite. It’s about

helping you discover what

you believe by presenting

each of the economic

theories in a balanced way.

Chapter 2: Thinking About Thinking | 31

economic theories in a balanced way. Textbooks

and teachers have tremendous power. Students

implicitly trust their teachers; likewise, they trust

their textbooks to give them accurate and balanced

information—but that’s often not the case. This

textbook has been written very carefully so as not

to influence you in any direction when it comes

to the three perspectives. We respect you, and we

wholeheartedly support your right to make your

own decisions about what you believe.

Ethics and Economics

Let’s step back for a moment and consider

what economists are really arguing about. In

other words, what are these “perspectives” all

about? Each one is a different idea for how to

structure and run our economy so that we can

promote well-being by generating prosperity.

Proponents of the three perspectives we’re going

to be examining are all guided by their own sets

of ethics, which are the moral principles that govern behavior. Ethics underlie every economic

theory, practice, and policy. They guide our

decisions about what are the right things to do.

Sometimes the bitter fights among economists

include accusations and insinuations that the

opposing sides are unethical—that they lack

integrity, honor, or decency. That, of course, may

be true of individuals from every perspective,

but it’s not true that liberals, conservatives,

or radicals are, as a group, unethical. This is

important to remember. They all care about

integrity and morality.

If you believe that people who think differently

from you can’t also be honorable and decent

human beings, then you can’t listen to them with

respect. And if they hold that prejudice about you,

then there’s no way they will hear you respectfully.

When we believe strongly in an idea, we might

be tempted to become self-righteous and want

to claim the moral high ground. It’s just another

way to close down conversations. Imagine how

disrespected you would feel if someone made

negative assumptions about you just because you

disagreed with them on how to solve the health-

care problem or how to address the national debt.

Please remember that each one of us is passion-

ate when it comes to our opinions about how the

world ought to be. That’s normal and appropriate.

It’s good to care about the world around you. We

applaud you for being engaged with ideas in a

passionate way. But please don’t dehumanize or

demonize those who think differently from you

about economics. A politician once said about her

opponent during a close-fought election: “I can’t

agree with a thing he says, but I don’t let myself

32 | Voices On The Economy

think the worst of him as a human being.” A

reporter asked how she managed not to hate him

when he was attacking her ideas. She replied, “I

just remind myself that he’s a human being, his

mother probably loves him, and we both want the

world to be a better place, even if we don’t agree

on what that looks like or how to get there.”

It might go against the grain of everything that

you’ve ever learned in your life, but please be

open to the value of pluralism as you study eco-

nomics. Cultivating an open mind will help you

get the most out of the VOTE Program. Using

a pluralistic approach, we can concentrate our

energies on finding our best answers instead of

tearing down opposing positions.

How to Build “Theory-Plus”

You and I and everyone else have theories

about how the world works. A theory is a system

of ideas intended to explain something. Theories

always start with a question: Why is my brother so

annoying? Or why do we only see rainbows in the

afternoon? Or does the Earth revolve around the

Sun? Theories are shaped by our assumptions— the things we believe are “givens” and that are

most relevant to the question. To build our

theory, we create a model, which represents our assumptions, and then we draw conclusions from our model to answer our initial questions.

These three components make up a theory. In

the VOTE Program we use “theory-plus.” The plus

refers to a fourth component: policy. Policies are proposals for action that flow directly from our

conclusions. It’s policy that we fight about every

day in our nation—policies about what’s included

in your economics textbooks, policies about

wages, policies about hiring and firing at your

workplace. It’s because of policies that economic

theories are relevant to your life. They aren’t just

random or purely academic ideas; they have real

consequences in the world. Some people say that

academics (and economists) just sit around in their

ivory towers all day long, theorizing and gazing

at their navels, which implies that theorizing is

unimportant and maybe even a little bit useless.

No! The eminent economist Paul Samuelson, who

wrote the most widely used economics textbook

of the twentieth century, once said, “I don’t care

who writes a nation’s laws—or crafts its advanced

treaties—if I can write its economics textbooks.”

He understood that when you change people’s

minds, you change the world. When we can get

other people to believe our theory is correct and

to base policies on our theory, it changes the

entire landscape of everyone’s lives. This is true

whether the theory is about economics or houses

or astronomy or milk or anything else.

So just to review, the four components of theo-

ry-plus are assumptions, model, conclusions, and

policy. We use the term a milk chocolate piece to

remember them. Economic theories answer the

three questions economists always consider: what

to produce, how to produce, and for whom to pro-

duce. We’re going to talk about economic theories

in a minute (and spend the rest of the book talking

about them), but right now let’s use an example

that isn’t about economics to practice building a

theory. We’ll pretend we’re architects, and we’ll

start with the question, What type of house design

offers the best protection from wind and rain?

Step 1 is to establish our assumptions. Let’s say

our assumptions about houses are the following:

! A steep roof keeps rain from getting into

the house.

! Shingles are the optimal roofing material

because they lie flat on the roof, so a high wind

isn’t likely to tear them off.

! Stone is the sturdiest material for walls because

it can withstand high winds and driving rain.

Chapter 2: Thinking About Thinking | 33

Right away, you might be thinking, “But wait!

I don’t agree with those assumptions.” Please set

aside your disagreement for the moment. Later you

can decide if you still think this theory’s assump-

tions were flawed. But before you form an opin-

ion, you need to learn the theory—especially if it’s

a dominant theory that takes up a lot of air in our

public conversations. You don’t want to find your-

self having to say, “I disagree with you but I can’t

say why, because I didn’t like your assumptions so

I didn’t bother to learn your theory.”

Now that we’ve laid out the assumptions, step 2

is to build a model that represents those assump-

tions. The model could be physical, or narrative

(words), or mathematical, or graphical. Since our

theory is about houses and we’re pretending to

be architects, we’ll build a physical model. Let’s

say we construct a scale model of a stone house

with a forty-five-degree-angle shingle roof. This is

a representation of our assumptions.

Now we’re ready to test it against wind and rain

to draw our conclusions, which is step 3. We aim

a fan at our scale model house to simulate high

winds, and then we blast it with a power sprayer

to simulate hurricane conditions. How much water

got inside? How many roof shingles flew off? We

collect that data. Then we do comparisons on scale

models of houses that have different designs—for

example, an adobe house with a flat roof and a

wood-framed house with a tile roof. We pelt them

with the same simulated wind and rain conditions.

After we’ve tested our models, we use the data we

collected to draw our conclusions. That informa-

tion answers our initial question: what is the best

way to build a house to withstand wind and rain?

34 | Voices On The Economy

We conclude: “A stone house with a forty-five-de-

gree-angle shingle roof.” A conclusion is simply an

answer to the initial question we asked.

Policy is the practical result of a theory. Just

think about this house example. You might not

have any interest in building a stone house with

a 45-degree-angle shingle roof. But let’s say we

convince insurance companies that this is the best

house design in all circumstances. “This informa-

tion can save us a lot of money,” those companies

say. “We are going to have a new policy that we’ll

only insure stone houses with forty-five-degree-an-

gle shingle roofs because we’re convinced it will

reduce the number of claims people make.” You

really like your brick house and you don’t want to

move, but you will have to because you don’t want

to live in a house that has no insurance. So you can

start to see here how important policies are. Now

let’s say the government is also convinced by our

conclusions and creates a new policy that it will

only award contracts for stone-and-shingle-roof

houses. You’re a builder who specializes in wood-

frame homes. You will have to change your whole

business—switch suppliers, fire your carpenters,

and hire stone masons—so your firm will survive.

All the other builders will have to do it too. Soon

stone-and-shingle-roof houses are the only houses

being produced.

You may not have agreed with the assumptions

of the theory, but it won’t matter. Once policies

are created, you’re stuck—you have no choice. Do

you see the domino effect a theory can have from

assumptions, to models, to conclusions, to poli-

cies, to your life? Economic policies—tax reform,

health care, international trade agreements, immi-

gration legislation, and many, many more—have

power over every aspect of your life. Economic

policies in our country come from conservative,

radical (less frequently), and liberal theories. That’s

why we’re studying these perspectives. Don’t you

want to have a say in what’s being decided, which

will affect every aspect of your existence? We’ll be

building radical, liberal, and conservative theories

in each of the upcoming issues chapters. We’ll

describe them in a balanced way, side by side, so

you can compare their assumptions, models, and

conclusions, and form or confirm your own opin-

ions about their proposed policies.

Positive Economics and Normative Economics

Earlier in this chapter we described how

non-essentialists and essentialists both keep

their minds open to new information that could

change their ideas about issues. Where they

differ is that essentialists believe there is an

essential truth that we can aspire to understand.

Non-essentialists believe there isn’t an essential,

unchanging truth to be discovered because

everything is shaped by context; however,

what we believe about issues matters because

beliefs have consequences. Both essentialists

and non-essentialists are open to the study of

alternative perspectives.

As you can already guess, an essentialist econ-

omist believes that theory building is a science,

meaning theories can describe things that are true

(“what is”). They say these objective truths are

facts and therefore aren’t based on value judg-

ments. They call this fact-based approach positive economics. On the other hand, they say, policy analysis is not a science, which means policies are

up for debate. For example, what action is best to

solve hunger? The policy decisions that are made

are based on people’s opinions and value judg-

ments (their ideas about “what should be”). Essen-

tialist economists call this normative economics. It shouldn’t surprise you to learn that non-essen-

tialists reject the idea that economics is an objec-

tive science, as they believe that what we know is

shaped by context. They argue that assumptions,

models, and conclusions can’t describe “what is”

because facts change depending on who looks at

them, how they are looked at, and when they are

Chapter 2: Thinking About Thinking | 35

No matter how differently essentialists and non-essentialists think about facts and truth, they share the same agreement that policy is normative. This opens the door

to pluralism, making open-minded debates on economic issues possible.

Assumptions, Models, and Conclusions

Policies “Normative Economics“

looked at, among other factors. Take as an exam-

ple the extensive research that has gone into the

causes of obesity. Nutrition researchers concluded

that eating too many high-carb and high-calorie

foods causes obesity. Genetic researchers con-

cluded that obesity is caused by family history.

Psychologists concluded that people overeat and

become obese because of emotional traumas.

Non-essentialists say there’s no “right” answer, but

there are significant repercussions for policies that

are drawn from each of these conclusions. They

reject the idea of positive economics. They say all

the components of theory are normative.

As you can hear, these two very different ways

of looking at theory can be a source of a lot of

conflict. It may help you later to remember this

difference in ways of thinking when you won-

der why conversations about economic issues can

become frustrating. This whole chapter on epis-

temology has brought us to this point: no matter

how differently essentialists and non-essentialists

think about facts and truth, they share the same

agreement that policy is normative. That opens

the door to pluralism, making it possible for us

to engage in policy debates with an open mind

and embrace new ideas about how to move our

country forward.

But What Is True?!

Every time I teach the VOTE Program, students

come up to me after class and say, “Can’t you just

tell me which perspective is the right one? You

know more than I do; you’ve been thinking about

this for a long time. I’m just getting started. Please

help me out and tell me what to think!”

I know it would be a thousand times easier for

you if I just told you what to believe rather than

inviting you to figure it out for yourself. I’m grateful

to the instructors who changed my life with their

charisma and the eloquent persuasion that brought

me around to their points of view. I’ll admit I some-

times feel a twinge of guilt about not being that kind

of teacher. But I hope to be a teacher and textbook

writer who provides an even more valuable service

by not pushing you in the direction that I think is

best and true. You will be better off—and the world

will be the richer for it—if you develop your own

opinions and learn how to convey them to others

who may not agree with you. It’s time to find your

voice, and I can’t wait to hear you!

Essentialist Non-essentialist

“Normative Economics”

• Facts are objective science • Facts reflect “What Is”

• Fact are subjective • Facts reflect “What Should Be”

“Positive Economics”

36 | Voices On The Economy

Chapter 2: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. A biologist studies life; an economist studies the production, consumption, and distribution of goods and services; a psychologist studies human experience. What does an epistemologist study?

A. Morality B. The origin of the universe C. The relationship between natural and social sciences D. Knowledge

2. Which of the following statements would make sense to an essentialist? A. “I know it is true because I saw it with my own eyes!” B. “Just because I can think through a problem logically doesn’t mean it is provable.” C. “I can collect data and see connections, but honestly I can report the results in a

multitude of ways.”

D. “I can win any argument because I have learned the art of shifting the focus so that the other person sees things my way.”

3. Which of the following statements would make sense to a non-essentialist? A. “Facts don’t change, even in different political, economic, cultural, and biological

contexts.”

B. “There is only one true way to interpret the economy.” C. “Alternative theories on the economy are equally valid and therefore people should not

support one theory over another.”

D. “Important consequences result from alternative perspectives on the economy and those consequences should be the basis of supporting one theory over another.”

4. Match the type of thinking about truth (left column) to its description (right column): A. Empiricist i. Theories can be proven through one’s senses B. Rationalist ii. Theories can be proven through logic and proofs C. Absolutist iii. Theories are alternative explanations, all equally valid D. Relativist iv. Theories are either right or wrong

5. Pluralism in economics education means an open-minded embrace of alternative theories in the classroom and in textbooks. Which of the following use open-minded inquiry that could be consistent with pluralism? Please choose all that apply.

A. Essentialism B. Non-essentialism C. Absolutism D. Relativism

Chapter 2: Thinking About Thinking | 37

6. Who of the following are committed to ethics (moral principles that govern behavior)? Please choose all that apply.

A. All individuals from every perspective B. Radicals as a group C. Conservatives as a group D. Liberals as a group

7. Every theory starts with certain givens (“assumptions”). A model is then developed to represent those assumptions. Which forms may a model take?

A. Essentialist, non-essentialist, absolutist, or relativist B. Production, consumption, or distribution C. Descriptive, physical, graphical, or mathematical D. All the above

8. All the following statements about conclusions are true EXCEPT: A. Conclusions are answers to the initial questions asked. B. Conclusions can be reached by collecting relevant data. C. Conclusions can be reached through deductive reasoning. D. Conclusions are actions taken to ensure a particular outcome.

9. Which one of the following is an example of a policy? A. Minimum wage legislation is abolished. B. Minimum wage legislation causes unemployment. C. Minimum wage legislation results in living wages. D. Minimum wage legislation doesn’t fix poverty.

10. Essentialists and non-essentialists differ on the subject of Positive Economics, but they agree that __________ are the purview of Normative Economics.

A. assumptions B. models C. conclusions D. policies

Answers

1. D 2. A 3. D 4. A – i, B – ii, C – iv, D – iii 5. A & B 6. B, C, & D 7. C 8. D 9. A 10. D

38 | Voices On The Economy

Chapter 2: Key Terms

Absolutist Assumptions Conclusions Empirically Epistemology

Essentialist Ethics Model Non-essentialist Normative Economics

Pluralism Policy Positive Economics Rationally Relativist

Answer Key to Exercise 2 1. Essentialist 2. Absolutist 3. Relativist 4. Non-essentialist

ch3

When I was still a PhD student in eco-nomics, I had to take a comprehensive exam that covered much of what I’d learned in the first year and a half of the program.

If I failed the first time, I’d have one more chance to

pass. If I failed a second time, I would be kicked out

of the program. As the exam drew closer, I stopped

sleeping so I could use those hours to study. Natu-

rally I was tired, so I started drinking caffeine, which

I never do. I drank as much Mountain Dew as

humanly possible to keep myself going. (This was

before energy drinks were invented.) If you’ve ever

tried to study for an exam when you haven’t slept

and you’re over-caffeinated, then you know where

this story is going. The night before the exam, shak-

ing from exhaustion, stress, and caffeine, all the

words on the page became jumbled and incoherent.

My brain felt scrambled, and all the ideas I thought

I’d learned during the past three semesters made

absolutely no sense. It was as if each idea was a

random jigsaw puzzle piece that didn’t fit with any

of the other random jigsaw puzzle pieces. My stress

and frustration blossomed into a full-blown panic

by one in the morning. I threw my notes in the air

and resigned myself to failing. Then I fell into bed

and slept for four hours.

Have you ever tried to put a jigsaw puzzle

together without looking at the picture on the

box? You have to scrutinize each little piece and

try to guess what the big picture looks like from

that little dash of blue next to a spot of red. Is

that an eye? Could it be a tennis racket? Unless

you’re a jigsaw puzzle expert, it’s very challeng-

ing. But doesn’t education often operate this way?

3The Great Economic Thinkers

42 | Voices On The Economy

The teacher gives you a lot of small bits of infor-

mation, and you have to figure out what the big

picture looks like—whether it’s dates of battles

and names of treaties or the periodic table of ele-

ments. You can get so busy memorizing those lit-

tle details that you never actually grasp the big

picture of what you’re supposed to be learning,

even while you’re getting good grades. To me,

this is a lost opportunity. The big picture is the

whole point of education!

The morning of my exam, something incred-

ible happened to me. I woke up and all those

jigsaw puzzle pieces suddenly made sense. They

fit together seamlessly, and I could see the big

picture. I went into the exam feeling confident.

I passed the test and went on to earn my PhD.

I became an economics educator, but I never

forgot how it felt to be lost in the details without

knowing the big picture. I vowed to myself that

if ever I had the honor and privilege of teaching

others, I would start my courses by making sure

my students could see the big picture.

History of Economic Thought

This chapter will give you the big picture of

the history of economic thought, and it’s from

this history that today’s liberal, radical, and

conservative perspectives took root. We’re going

to tell you about three great economic thinkers

and the theories they developed. Their names

are Adam Smith, Karl Marx, and John Maynard

Keynes. Once you finish reading this chapter,

you’ll see how their different ideas still play

into our economic policy debates like familiar

melodies. You’ll recognize their refrains when

you read a newspaper article, when you watch

stand-up comedy, and when you debate politics

over coffee with your friends and family.

Adam Smith The story of modern economics begins

in Scotland in the eighteenth century

with Adam Smith (1723–1790). He

never actually studied economics

because there was no formal study

of economics at the time. He was a

moral philosopher who pondered the

complicated question of why humans—

who had been living in societies for millennia— were still mostly miserably poor. After much

thought, he concluded that the problem traced

back to the economic systems that kept the masses

from accumulating wealth. In Smith’s time the

predominant economic system in Europe was

mercantilism, which was based on the idea that nations should trade goods with other nations in

order to get as much of the other country’s gold

and silver that they possibly could. Countries

Chapter 3: The Great Economic Thinkers | 43

competed to stockpile

the most of these

precious metals, leading

governments to impose

high taxes on imports to

prevent their own nation’s

gold and silver supply from

leaving the country. Under

mercantilism, governments

granted special rights and

privileges to certain people

to participate in trade,

concentrating wealth in

the hands of only the well

connected. In other words,

it made a few people very

rich, but mercantilism

never made society as a

whole wealthy. Smith also

noted that neither had the

economic system before

mercantilism (feudalism) nor had the agrarian (farming) economies that came before that.

Smith was excited about a newly emerging eco-

nomic system that seemed to have amazing poten-

tial. People who privately owned their land, labor,

and capital met in marketplaces, and prices were

determined for goods and services. Demanders

acquired the things they wanted, bringing them

levels of material comfort they’d never before expe-

rienced. Suppliers earned more profits than ever

before. And all of this happened without govern-

ment involvement. I’m sure you recognize this eco-

nomic system as capitalism. Smith described it in his

world-changing book, An Inquiry into the Nature and Causes of the Wealth of Nations. Commonly referred to as The Wealth of Nations, it was pub- lished in 1776—coincidentally, the same year that

the American Declaration of Independence was

signed. It popularized capitalism around the world.

Smith intrigued readers with his opening descrip-

tion about the potential to create wealth. He wrote

about a pin factory where

individual workers were

only able to produce a small

number of pins in a day.

But when owners—moti-

vated by profit—had work-

ers each complete one task

of production (specialize),

the number of pins work-

ers were able to produce

dramatically increased. This

was one of many exam-

ples he gave to show how

the motivation for profit in

the context of private own-

ership works. The Wealth of Nations became a clas- sic during Smith’s lifetime,

which is quite unusual

because an author is usu-

ally long dead before his or

her work is considered a classic. To this day, when

we talk about classical theory in economics, we start with Adam Smith and The Wealth of Nations.

Adam Smith is considered the father of modern

economics, as well as the person who popularized

the economic system of capitalism. He was a pro-

lific writer, and scholars who study his work like to

remind us that his thinking was actually much more

layered and nuanced than the legacy for which he’s

famous. We won’t be covering that level of detail

about him in this book, but you should know that

there are schools of economists who do nothing but

study and debate the complexity of his ideas. Please

keep in mind that we’re crediting to Smith the ideas

that are generally attributed to him and that have

influenced generations of economists that came after.

Smith wasn’t a scientist or a mathematician, so

The Wealth of Nations doesn’t include any graphs or mathematical equations to explain his the-

ory. This was not a problem until the mid-1880s,

when the scientific method became very popu-

Smith was excited about a

newly emerging economic

system that seemed to have

amazing potential. People

who privately owned their

land, labor, and capital

met in marketplaces, and

prices were determined for

goods and services. And all

of this happened without

government involvement.

44 | Voices On The Economy

lar. Some people wanted factual proof that what

Smith wrote about was scientifically true, so a

group of economists added math and graphs to

Smith’s work so that it would stand up to sci-

entific inquiry. This enhanced version of classical

theory is called neoclassical theory (neo means “new”). Today, it is the mainstream (conventional)

theory of capitalism.

You’ve known about capitalism your whole

life, so the idea is hardly going to be revolution-

ary or shocking to you. Yet think about the his-

tory of the world and try to imagine how many

times a minute humans have wanted something,

whether a necessity or a luxury, but couldn’t get

it—food, dental care, education, a wedding dress,

a home, transportation, warm clothes. Maybe they

prayed to God, or begged the king, or applied to

the government bureaucrats, or took out a loan.

Maybe the things they wanted existed, but peo-

ple couldn’t afford them; or maybe the things they

wanted weren’t available; or maybe there weren’t

enough of them to go around. Adam Smith’s prom-

ise in The Wealth of Nations is that the economic

system of capitalism can bring us all untold wealth

when there is private ownership of land, labor, and

capital. Firms will make us what we want; they

will make the maximum amount using the fewest

resources; and those who choose it can have it.

Many conservatives believe popularizing capital-

ism was a game changer for humanity. Suddenly

there was a way to get the things people wanted

and needed, in a system that was open not just to

the well connected but to every free person.

The economic system of capitalism has three

types of players: demanders, suppliers, and the

government. I’ll talk about Player 3, the govern-

ment, in a minute. Player 1, the demanders, own

their own labor. They trade it to acquire money

(in other words, they get paid for their work).

Player 2, the suppliers (we also say firms or busi-

nesses), own or hire land, labor, and capital,

which could take the form of a chocolate bar fac-

tory or a sheep farm or a computer repair shop.

Demanders and suppliers meet in markets, where

prices for goods and services are determined. The

prices signal to buyers what and how much to

buy and signal to firms what and how much to

make. Price signals give firms and individuals a reason to act. Just think of the multitude of deci-

sions being made all the time by countless people

about how to use resources. This invisible force

that directs every market at every moment is what

Smith termed the invisible hand. No one is in charge or pulling the strings. It all happens nat-

urally.

Let’s say there are advances in robotics and

now more people want to buy personal robot

assistants because the new models clean bath-

rooms, make dinner, and play basketball with

you. When more people demand them, the price

of personal robot assistants will go up. That sig-

nals firms to make more of them. Making more

of a popular item means firms can sell more and

make more profit, and profit is why firms are in

business. Price signals play a really important role

in capitalism, functioning as incentives, meaning they motivate people and firms to take action.

Smith further said that firms will not only make

us the kind of stuff we want and need, they’ll do

it without wasting resources. The robotics firm is

not going to hire more workers than it needs or

buy more copper wire than it needs because it

wants to make the most money possible. Firms

will produce the amount that generates the most

profit at the lowest possible cost. No law or gov-

ernment regulation directs them to do this; it sim-

ply makes sense to them because it serves their

profit interest to do it.

Let me ask you this: would you enlist to go to

war and put your life on the line to protect your

country if it produced tons of great stuff—none

of which you could afford to buy? Most likely you

wouldn’t. Those who believe capitalism is the best

economic system say that everyone who chooses

Chapter 3: The Great Economic Thinkers | 45

to do so can get the great stuff. How does it work?

Price signals ensure that personal robot assistants

will go to those who most want them. Let’s say

there’s an investment banker and me, a teacher,

and we both really want one. Who is going to get

one? The person who followed price signals and

became a well-paid investment banker, or the per-

son who makes a more modest living as a teacher?

In capitalism, when we follow price signals we can

make career choices that lead us to be able to pur-

chase the goods and services we want. For exam-

ple, I chose to be an educator because I wanted

to teach economics more than I wanted to have a

personal robot assistant or a yacht or a ski chalet

in the Alps. At the end of the day, the robot will go

to the investment banker because the investment

banker wanted it more than the teacher and chose

accordingly. And this is how it should be, accord-

ing to Smith. If I really wanted that personal robot

assistant, and if I wanted to be able to acquire it

more than I cared about other things, I would have

made a different career choice and could have

been able to afford one. In capitalism, firms make

products for those who most want them. Smith

said we don’t have to rely on divine intervention,

the noblesse of a king, or good luck to get what

we most want and need because capitalism will

make it available to us through the free market.

Remember in chapter 1 we described the three

questions of economics: what to produce, how to

produce, and for whom to produce? According

to this theory, firms will make the stuff we want

(called allocative efficiency). Firms will make the maximum amount of stuff we want at the

minimum cost (called productive efficiency). And the stuff will go to the people who want it

most (called distributive efficiency). These are the three outcomes of capitalism, as promised to

us by Adam Smith.

Did you notice what didn’t happen in this sce- nario about who gets a personal robot assistant?

Player 3 didn’t get involved at all. The government

didn’t tell people to buy personal robot assistants,

and it didn’t tell firms to produce them. Smith said

that in capitalism government shouldn’t interfere

with suppliers and demanders. It should leave the

system alone to be guided by the invisible hand

that arises from price signals. (Conservatives later

popularized the French term for “leave it alone”—

laissez-faire, literally “allowed to do.”) A market free from government involvement is called the

free market. But that doesn’t mean we don’t need

46 | Voices On The Economy

government in capitalism. You wouldn’t labor day

and night to make money to afford that personal

robot assistant if your neighbor could just grab it

from you without any consequences. Smith said

the government should maintain a criminal jus- tice system to protect private property rights. And it’s not reasonable to expect that every firm will

have to construct its own power plant, manage

its own sewage, pave its own roads, and such. So

the second role of government Smith identified is

to create infrastructure. And firms aren’t going to invest in building businesses if people from other

countries could simply march in and take over our

country, so the third role of government should

be to ensure our national security. Government should have no other roles, he said. “Little else is

requisite to carry a state to the highest degree of

opulence from the lowest barbarism, but peace,

easy taxes, and a tolerable administration of jus-

tice: all the rest being brought about by the natural

course of things.”

The “natural course of things” he’s referring to is

the invisible hand. Today, conservatives, who are

free market capitalists, follow this idea. They believe

that all our other needs can and should be met

through private solutions including corporate and

individual philanthropy. For instance, disaster relief

is provided by nonprofit organizations and religious

organizations. They believe education, health care,

retirement security, and more are best provided

through a private system that brings people the

products they want at the lowest possible prices.

Capitalism operates on the assumption that peo-

ple and firms act out of their own self-interest— whatever brings the most benefit to the person or

the business. Smith says that is precisely why it

works. He believed self-interest is a far more sus-

tainable motivation for caring about the common

good than a sense of altruism or social responsibil-

ity. Would drug companies risk billions investing

in research and development of new medications

if they weren’t going to make money on them? Not

likely, say proponents of capitalism. As Smith wrote

in The Wealth of Nations: “He intends only his own gain, and he is in this, as in many other cases,

led by an invisible hand to promote an end which

was no part of his intention. By pursuing his own

interest, he frequently promotes that of the society

more effectually than when he really intends to

promote it.” In other words, Smith believed that

we will demand things that lead to our own hap-

piness—such as personal robot assistants, sky-

Chapter 3: The Great Economic Thinkers | 47

scrapers, ballet lessons, medication, vacations, and

soup—out of self-interest. And out of their own

self-interest, firms will supply these things—not

because they’re trying to make our lives better but

because they’re trying to make money. Self-interest

is the engine that drives capitalism. Smith some-

times used the term enlightened self-interest to describe the phenomenon that the pursuit of

self-interest is automatically the pursuit of the best

possible outcome for all of society.

Capitalism sounded amazing to the people who

read Adam Smith’s book in the late 1700s, which

is why it so quickly became a classic. The Wealth of Nations explained that when the economy hits a bump in the road—maybe there’s news of an

impending attack by aliens from another planet,

so spending goes down because everyone is hid-

ing under their beds—it’s not a problem. Smith

reassured readers that the economy will inevita-

bly fix itself. Here’s how it works: When people

stop buying, prices will go down. When prices go

down, wages—the price of labor—will go down.

When wages go down, it’s cheaper for firms to

produce, so firms will start hiring workers. Now

that they have money in their pockets, work-

ers start buying again—not just personal robot

assistants but skateboards, tropical fish tanks,

houses, concert tickets, computers, and all sorts

of things—and the economy picks up again. The

government doesn’t have to do a thing to fix it

because capitalism is a self-correcting system and,

according to Smith, the best system for creating

economic growth and a better standard of living

for everyone. To free-market capitalists, the key

is for government to leave it alone—laissez-faire. Neoclassical theorists apply marginal anal-

ysis—marginal means additional—to show how firms and individuals make profitable decisions to

do something by comparing the additional ben-

efit of doing it to the additional cost of doing it.

You might know this as cost-benefit analysis. For example, if it costs a firm $10 to make a pizza,

and it can sell that pizza for $11, the firm would

decide to make it because the additional benefit

exceeds the additional cost. The firm would con-

tinue to make pizza until the marginal cost exceeds

the marginal benefit, and then it would stop. Deci-

sions are made on the margin, which means that

firms don’t decide they’re going to make one hun-

dred pizzas; they do a marginal analysis as they go

along to determine if they should make the one

hundredth pizza. Neoclassical theorists say optimal

decisions are made by comparing marginal cost

and marginal benefit. Should you work another

hour? If you do, you’ll earn $15, but you’ll miss

your bus and have to pay for a ride home, which

will cost you $12, and you’ll miss dinner, so you’ll

have to grab a bite to eat, which will cost you $5.

Working an extra hour will give you $15 and cost

you $17, so you will decide not to do it because

the marginal cost is greater than the marginal ben-

efit. Cost-benefit analysis is used for every kind of

decision, including whether to clean an additional

10 percent of pollutants out of the river, whether

a city should build a new line for its light-rail sys-

tem, or whether a town should open a new high

school, and so forth.

Smith’s ideas were further developed by two

influential thinkers in the twentieth century. F. A.

Hayek (1899–1992) was part of the Austrian

school of economics. Hayek ended up teaching

at the University of Chicago. Also at the Univer-

sity of Chicago was economist Milton Friedman

(1912–2006), who was part of what is known as

the Chicago school of economics. Friedman in

turn influenced President Ronald Reagan (1911–

2004), who championed supply-side econom- ics—lower taxes and fewer government regula-

tions. Friedman’s and Hayek’s ideas inform the

conservative conversation today in the Republican

Party (also called the Grand Old Party, or GOP for short), as well as in the Libertarian Party. Proponents are often called the Right (or right- wing), supply-side, and classical/neoclassical.

48 | Voices On The Economy

To sum up the conservative economic position

presented in the VOTE Program: In capitalism, when the economy is free from government inter- ference, the invisible hand of price signals leads markets to self-correct and adjust on their own so that all can prosper. This is why we embrace free-market capitalism through a laissez-faire approach. Conservatives believe we need liberty (from government interference) to flourish with

unfettered opportunities.

No one would disagree that Adam Smith’s ideas

changed the world. He founded a whole field of

study and transformed people’s lives across the

planet. By promoting capitalism, he created the

global economy that shapes every aspect of our

lives today. Yet, on the day he died—July 17,

1790—this great economic thinker said that he

wished he had accomplished more.

CONSERVATIVE WHO

Adam Smith The Wealth of Nations

WHEN

18th century

WHAT

Firms are privately owned and guided by price signals

(the invisible hand).

WHY

Because when the economy is free from interference, we have the right incentives to create prosperity.

HOW

Embrace Free-Market Capitalism

WHERE

In a nation with liberty so all can flourish with unfettered opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Conservatives • Republicans Classical/Neoclassical Theorists

Republican Party • GOP • Tea Party Libertarians • Right • Far Right

Supply-Side • Austrian • Chicago School Right to Work Advocates • Deregulators

Chapter 3: The Great Economic Thinkers | 49

The Power of the Market

“Look at this lead pencil. There’s not a single person in the world who could make this pencil.

Remarkable statement? Not at all! The wood from which it’s made, for all I know, comes from a tree

that was cut down in the state of Washington. To cut down that tree, it took a saw. To make the saw,

it took steel. To make the steel, it took iron ore. This black center, we call it lead but it’s really . . .

compressed graphite. I think it comes from some mines in South America. . . . This red top up here,

the eraser a bit of rubber, probably comes from Malaya, where the rubber tree

isn’t even native. It was imported to South America

by some businessmen with the help of the British

government. This brass ferrule, I haven’t the slightest

idea where it came from, or the yellow paint, or the

paint that made the black lines, or the glue that holds it

together. Literally thousands of people cooperated to make

this pencil. People who don’t speak the same language,

who practice different religions, who might hate one another

if they ever met. When you go down to the store and buy this

pencil, you are in effect trading a few minutes of your time for a

few seconds of the time of all those thousands of people. What

brought them together and induced them to cooperate to make

this pencil? There was no commissar sending out orders from some

central office. It was the magic of the price system. The impersonal

operation of prices that brought them together and got them to

cooperate to make this pencil so that you can have it for a trifling sum.

That is why the operation of the free market is so essential not only to

promote productive efficiency, but even more to foster harmony and

peace among the peoples of the world.”

—Conservative economist Milton Friedman, from the PBS Series Free

to Choose, Part I, The Power of the Market

50 | Voices On The Economy

Karl Marx The next great economic thinker came

along in the nineteenth century. German-

born Karl Marx (1818–1883) was profoundly

influenced by The Wealth of Nations and

developed a critique of capitalism that became

the foundation of radical theory. Marx looked

around, and instead of seeing the prosperity

Adam Smith described, he witnessed masses

of people living in poverty. While agreeing with

Smith that previous economic systems such as

feudalism and mercantilism hadn’t worked to

create prosperity for the masses, he said capitalism

wasn’t working either. He published his most

influential critique in the first volume of his book

Capital (Das Kapital in German) in 1867. He wrote that the capitalist society “that has sprouted

from the ruins of feudal society has not done away

with class antagonisms. It has but established new

classes, new conditions of oppression, new forms

of struggle in place of the old ones.”

Marx must have wondered if there was some-

thing wrong with his eyesight because he wasn’t

seeing what Adam Smith promised in The Wealth of Nations. Instead he saw young children working twelve-hour days in factories and miserable living

conditions in slums coated in grit from the smoke

belching out of factory chimneys. Marx theorized

that there was a direct connection between cap-

italism and the suffering of the masses. He saw

capitalism as a system in which owners steal from

wage laborers, and everyone accepts this as a

normal fact of life, rather than regarding it as a

crime. He pointed to the heart of the problem:

capitalism’s relentless drive for profit. It creates

incentives for cap- italists (owners of capital) to engage

in inhumane prac-

tices such as dangerous

working conditions, low

pay, polluting the environ-

ment, and more. Yes, it deliv-

ers untold wealth, said Marx, but

capitalism also brings untold mis-

ery because it’s a system that values profits over

people. He said it enriches a small minority while

making the vast majority suffer.

Consider your first job. Do you think you were

paid what you actually contributed? When I ask

my students, friends, and family this question, I

hear again and again, “Of course not!” Marx argued

that people know they’re getting paid less than they’re contributing. My first job was selling hot

dogs on the streets of Hartford, Connecticut, and I

sold about $300 worth of hot dogs per hour. I was

paid $5.15 per hour. That was the minimum wage

back then. After the owner paid himself his wages

and then paid for all of his overhead—the hot

dogs, buns, mustard, cart, permit to sell food on

the street, and all the other costs—he kept every-

Chapter 3: The Great Economic Thinkers | 51

thing except the $5.15 he had to pay me for each

hour I sold his hot dogs. Marx would say that the

rest of the value I created through my labor—the

surplus—was stolen from me. The owner takes the surplus that the wage laborer produces. Marx said that capitalism has this built-in mechanism of

theft, which he called workplace exploitation. He said the only choices for wage laborers are to

stay and be exploited or quit and be unemployed.

According to Marx, most of us don’t see anything

wrong with workplace exploitation because we’re

taught to believe that this is normal, inevitable,

and the way it’s supposed to be. The first volume

of Capital gave people a radical new way to see the worker’s situation.

Like Smith, Marx was simply describing what he

saw going on in the world around him. He wrote

that capitalism is a story of bloody and violent

struggle, not a harmonious meeting of suppliers

and demanders. His biggest contribution was to

shine a light on what he saw as exploitation and the

capitalist system of theft, a system rigged in favor

of the owners of the machinery, who, because of

that ownership, control wages, benefits, working

conditions, profit distribution, and more.

In addition to workplace exploitation, Marx

identified something else he saw as a big problem.

He called it capitalist competition. While owners are not necessarily bad or greedy people, they are

stuck in a bad system, which leads them to make

harmful decisions. Here’s how it works: Let’s say an

owner of a coffee shop hires workers to sell lattes.

Her competitor—the big chain coffee shop across

the street—replaces wage laborers with machines

to cut costs. Now, if she doesn’t cut costs in the

same way, her competitor will be able to undercut

her prices and put her out of business. She may

not want to lay off workers, but to stay in business,

she will have to. Other competitors may also cut

costs by eliminating worker safety equipment, or

reducing everyone’s wages, or speeding up pro-

duction, or polluting the environment, or produc-

ing a lower-quality product, or moving their facto-

ries to countries where wages are lower. To stay

competitive and make sure her company doesn’t

go under, she will also do those things, even

though she may not want to. Radicals say we’re

all racing to the bottom, creating worse and worse

conditions for wage laborers, more and more diffi-

cult choices for owners, and less safe products for

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consumers. They say this is

business as usual in capi-

talism, where firms have to

compete to survive. Fueled

by the drive for profit, firms

will be forced to take steps

to increase their profits

even though it means mak-

ing society worse off.

Nowhere in Capital does Marx offer solutions to the

problems of capitalism.

He only set out to write

the critique. However, in

a small pamphlet called

The Communist Manifesto, published in 1848, co-authors Marx and Friedrich

Engels lay out a few ideas for what an alternative

economic system could look like. Their main idea

was to abolish private property and let workers

own the equipment, factories, farms, and other

capital they used to produce things. “[This new

system] … may be summed up in the single sen-

tence: Abolition of private property,” they wrote.

“… [I]t deprives no man of the ability to appro-

priate the fruits of his labour. The only thing it

deprives him of is the ability to enslave others by

means of such appropriations.” Marx and Engels

called this new economic system communism.

Their pamphlet, which offered some broad

notions, was no blueprint for a new economic

system, but it nevertheless became an inspira-

tion for the Russian Revolution of 1917. Russia’s

working class rose up and overthrew the czarist

(autocratic) system of government and the revo-

lutionaries seized all private property. But instead

of turning it over to the workers, the new govern-

ment became the new owner of the resources.

What the Russian Revolution ended up creating

was a system of state capitalism, where the state—not the workers—owned the means of pro-

duction. It was not the communism described in

The Communist Manifesto, but the word communism unfortunately became con-

flated with the state capi-

talism of the Soviet Union.

When the Berlin Wall

fell in 1989, and Soviet

communism came to an

end, some critics said that

meant Marx’s ideas had

failed and were therefore

irrelevant. But radicals say

Marx’s critique of capital-

ism is as relevant today as

it ever was because capi-

talism continues to be the

world’s dominant economic system, and radi-

cals believe the abuses of capitalism continue to

destroy the lives of individuals, the integrity of

communities, and the ecosystems of the planet.

Karl Marx believed capitalism creates problems

that can’t be fixed—not by the government inter-

vening and not by the government leaving the

system alone. The problem is the capitalist sys-

tem itself.

Marx influenced socialist economist and activ-

ist Rosa Luxemburg (1871–1919), who influenced

Eugene V. Debs (1885–1926), who ran for U.S.

president five times as a Socialist Party candidate.

Debs influenced U.S. economist Richard D. Wolff,

who founded the radical organization Democracy

at Work. Wolff influenced many modern-day dem-

ocratic socialists, whose ideas influenced Vermont

Senator Bernie Sanders. Supporters of Marx’s idea

to reject capitalism are referred to as radicals, the Far Left (or leftists), Marxists, democratic socialists, and socialists/communists.

If we didn’t have capitalism, what kind of eco-

nomic system would bring us the things we want

and need without exploiting workers and creat-

ing suffering—the poverty, slums, sickness, misery,

and alienation—that Marx describes? The radical

Karl Marx believed

capitalism creates problems

that can’t be fixed—not by

the government intervening

and not by the government

leaving the system alone.

The problem is the

capitalist system itself.

Chapter 3: The Great Economic Thinkers | 53

idea to replace capitalism that we talk about in

the VOTE Program is democratic socialism—an economic system of cooperative ownership. This

includes public ownership, community owner-

ship, nonprofit ownership, and worker ownership.

With public ownership, the democratically elected

government is in charge of certain resources so it

can ensure that everyone’s basic human needs are

met—health care, utilities, higher education, trans-

portation, and more. Community ownership could

be a local park or a stadium that the municipality

owns and operates. Nonprofit ownership could be

a land conservation group owning and operating

a bird sanctuary. Worker ownership means all the

workers in the firm own it together and decide

together how the business will be run.

Imagine you work in a coffee shop, but now

you and your fellow baristas are all co-owners.

You use a democratic process to decide how much

you each should be paid. You also decide collec-

tively how to produce and price the coffee drinks

you sell, and how to distribute the profit. Radicals

call this workplace justice. Radicals point out that while firms compete in markets, the worker-own-

ers live in the communities where they work and

therefore there is coordination among compet- itors to make decisions that benefit not just their bottom lines, but their own lives, the lives of their

neighbors, and the whole community.

In democratic socialism, a portion of the profit

from all cooperatively owned firms pay for things

that ensure the well-being of everyone in society,

such as health care, higher education, and trans-

portation. According to radicals, cooperatively

owned firms produce things that make people’s

lives better. The decaf coffee your firm sells will

be made without dangerous chemicals because

your family and friends are drinking it. Your

firm and other local worker-owned coffee shops

will switch from plastic lids to compostable lids

because it’s better for the landfill on the edge of

your town. And when you all go in together to

54 | Voices On The Economy

order the new lids in bulk, everyone saves money.

When a problem arises—say the new drive-thru

window is creating traffic jams on the roads—

your neighbors, your democratically elected gov-

ernment representatives, and the worker-own-

ers at your coffee shop come together to solve

the problem. Finally, in democratic socialism the

impact of production and consumption on other

communities around the world is factored in to

your decision-making. That’s why your coffee

shop sources its beans from a collective of local

indigenous growers in Costa Rica that uses nat-

ural pesticides. Radicals say this is business as

usual in democratic socialism, where competition

goes hand in hand with coordination. Fueled by

the drive for well-being, firms will put people and

the planet before profit.

To sum up the radical economic position pre-

sented in the VOTE Program: In capitalism, the drive for profit leads firms to exploit workers, which creates suffering, inequality, bloody and violent conflicts, and global crises. This is why we instead adopt democratic socialism. All can prosper when private ownership is replaced with cooperative ownership, and the well-being of all is valued over profits. Markets and competition will still exist, say radicals, but exploitation will be

eliminated. They believe we need freedom so all

can flourish with meaningful opportunities.

Karl Marx died in exile in London on March 14,

1883. Only eleven people attended his funeral.

Years later, a large memorial was erected on his

grave. It reads, “Workers of all lands, unite!” —the

final sentence in The Communist Manifesto.

RADICAL WHO

Karl Marx Capital, Volume 1

WHEN

19th century

WHAT

Firms are worker-owned and guided by the pressure for good

(the invisible synergy).

WHY

Because when the economy values people over profits, we act in everyone’s best

interest to create prosperity.

HOW

Embrace Democratic Socialism

WHERE

In a nation with freedom so all can flourish with meaningful opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Radicals • Democratic Socialists Marxist Theorists

Green Party • Communist Party Socialists • Left • Far Left

Dependency/World-Systems Theorists Labor Rights Activists • Occupy Movement

Chapter 3: The Great Economic Thinkers | 55

The Community-Owned

Green Bay Packers

“The Green Bay Packers are a fan-owned

team. I’m asked sometimes who’s the

best owner in sports. I always say it’s the

112,000 owners of the Green Bay Packers.

This is a very unique arrangement. This

started in 1923, when fans, to keep the

team from folding in Green Bay, each

plunked down a couple of bucks to keep

the team afloat. This is a time when no

one had a sense that the NFL was going

to become the gargantuan business that

it is today. And then in 1960 when it really

did look like the league could take off, [the

NFL] wrote it into their constitution—into

their rules of incorporation—that said no

other team could be run by a nonprofit

entity. That was now not allowed. And

what’s so interesting about it is you go to

a Green Bay game, you go there knowing

that 60 percent of the concessions are

going to local charities. Even the beer

costs half as much as it does at a typical stadium. And you also know you’re not going to have an

owner who threatens to move the team to Los Angeles unless they’re given a billion-dollar enormo-

dome across town. It’s a very special relationship, and it’s one that I’ve argued a lot that should be

replicated, and then sports can be something that keeps our cities afloat instead of weighing them

down.”

– Dave Zirin, author of A People’s History of Sports in the United States,

appearing on The Laura Flanders Show

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56 | Voices On The Economy

telephones and radios, in people’s homes. More

people drove cars and went to the movies. All this

was great for the economy. The nation’s overall

wealth doubled between 1920 and 1929. But the

stock market crash in 1929 set off a financial

panic. People lost their fortunes overnight,

banks went under, and firms went out of

business. This widespread financial ruin plunged

the nation into the Great Depression. It was a scene

of mass unemployment and abject poverty that had

never been seen before in the United States. In cities

across the country, one-time bankers and socialites

stood in line with unemployed factory workers and

farmers, all hoping to get a free bowl of soup and

bread from overburdened charity organizations.

Policymakers were tearing their hair out trying

to figure out what to do. They looked to the econ-

omists of the day for advice, and what they heard

from classical theorists was, “Don’t do anything.

Just leave the economy alone and let the invisible

hand and price signals guide the markets. If you do

nothing, the economy will get back on its feet all

by itself.” But people were angry, scared, and frus-

trated; they wanted something to be done to move

the country out of the Depression. Laissez-faire

didn’t sound like much of a solution. The Russian

Revolution had taken

place only twelve

years before, and

some people started to

wonder if maybe com-

munism would be a better

economic sys tem. But poli-

cymakers weren’t interested

in rejecting capitalism—that

seemed un-American to them. Just when our

nation’s leaders were desperate for an answer, the

next great economic thinker emerged.

John Maynard Keynes (1883–1946) was a Brit-

ish economist trained in the classical school. Like

his peers, he was taught to believe that laissez-faire

capitalism worked because firms respond to price

signals. But Keynes looked around at all the people

who were starving, homeless, and desperate for a

job, and he realized that even though wages had

never been lower, firms still weren’t hiring. He wrote

in his 1936 book The General Theory of Employ-

ment, Interest and Money (also known as The Gen-

eral Theory): “Our criticism of the accepted Classical

theory of economics has consisted not so much in

finding logical flaws in its analysis as in point ing

out that its tacit assumptions are seldom or never

John Maynard Keynes In the 1920s capitalism in the United States

seemed to be delivering on its promise of

prosperity. World War I was over, and people were

ready to enjoy life again. The Roaring Twenties

were famous for jazz music and for women finally

winning the right to vote. With more people

living in cities than ever before, there

were more electrical appliances, such as

Chapter 3: The Great Economic Thinkers | 57

satisfied, with the result that it cannot solve the eco-

nomic problems of the actual world.” The economy

was stuck. Without jobs, people had no money to

spend, and until they started demanding products,

firms had no reason to produce and therefore no

reason to create jobs. That meant people would

continue to have no money. It was a vicious cycle.

Shouldn’t low wages have signaled firms to start

hiring, as the classical theorists argued? To Keynes it

was clear that firms were ignoring the price signal

of lower wages. Even though owners knew, logi-

cally, that if they hired workers, then those work-

ers would have money in their pockets to buy

the firm’s products, they still didn’t create jobs.

Keynes said this happened because the owners

had negative expectations—what he called ani- mal spirits. While classical theorists were say- ing that leaving it alone would fix the problem,

Keynes was saying yes, it would—in the long

run—but “this long run is a misleading guide to

current affairs. In the long run we are all dead.

Economists set themselves too easy, too useless a

task, if in tempestuous seasons they can only tell

us that when the storm is long passed the ocean

is flat again.” He recommended that government

take an active role to get money into people’s

pockets to immediately grow the economy and

bring prosperity back.

This is how Keynes’s idea works: Imagine it’s

1931, and you own a factory that makes roller

skates. The country is in the Great Depression, and

prices and wages have plummeted. That’s your

signal to hire more workers. So do you start hir-

ing workers to make roller skates right now? You

don’t—because no matter how inexpensive it is

to make them, you don’t believe anyone will buy

roller skates when they have no money for food,

clothes, or anything else. (This is animal spirits—

your negative expectation.) Keynes said the way

to stimulate the economy is to get people to start

spending. He saw a new role for government in

capitalism: it could help put money back in peo-

ple’s pockets by creating job programs, social secu-

rity programs, unemployment benefits, and more.

When people once again had money to spend, they

would start demanding products, which would sig-

58 | Voices On The Economy

nal firms to start producing.

Growing demand would

lead to more production,

which would lead firms to

hire more workers. With

the return of jobs, the econ-

omy would be back on its

feet, and capitalism would

be up and running again,

bringing us untold wealth.

This new way of thinking

about the helpful hand of government to stimulate the economy is referred to

as the Keynesian revolu- tion. It is also referred to

as Keynesian economics

and liberal economics. The General Theory remains the most influential lib-

eral critique of free-market

capitalism. Remember that

Keynes didn’t disagree that

the economy, if left alone, will self-adjust in the

long run. He just said that it was wrong, economi-

cally and morally, to wait around for that to happen

while people suffer—not when the helpful hand

of government can guide capitalism to ensure eco-

nomic stability. Pro-market policies married to gov-

ernment involvement will bring us the widespread

economic well-being we want, according to Keynes.

He rejected Karl Marx’s idea that capitalism should

be replaced. Unlike radicals, liberals believe whole-

heartedly in the wealth-building potential of capital-

ism. Liberals, like conservatives, believe it’s the best

economic system ever invented.

Liberals today continue to see an important

role for the helpful hand of government in capi-

talism, not just to stimulate the economy and max-

imize the wealth-building potential of capitalism,

but also to regulate industry so that none has an

unfair advantage over another. Fair-market capi-

talism is guided by govern-

ment to ensure stability and equity. Stability in this context means an economy

that doesn’t seesaw wildly

up and down but that has

constant, steady growth.

Equity means we all are

treated fairly and have what

we need to succeed. This is

subtly different from equal- ity, which means treating everyone the same. Let’s

say I want to watch my

local Little League team’s

final game in the playoffs.

I arrive late, only to dis-

cover that the bleachers are

already full. I find a place

to watch from behind the

fence at third base. Unfor-

tunately, my sister is too

short to see over the fence.

My best friend can see just fine, but I forgot my

glasses, so even though I can see over the fence,

the game is a blur. Equity means that we’ll each

get what we need to see the game. That might

be a stool for my sister to stand on and glasses

for me. In contrast, equality means we would each

get exactly the same thing—a stool and a pair of

glasses—whether we needed those things or not.

Equity is important to liberals because they

believe that it’s not fair that some people have a

place at the starting line while others have to start

a few yards behind and even more start miles

away. The odds are obviously stacked against

everyone in the back. Relatively few of them can

overcome the unfair disadvantage and succeed.

The starting line is a metaphor for all the things

we need in order to have to compete in capital-

ism—for example, education, health care, trans-

portation, and job opportunities. Liberals look

Keynes didn’t disagree that

the economy, if left alone,

will self-adjust in the long

run. He just said that it

was wrong, economically

and morally, to wait

around for that to happen

while people suffer—not

when the helpful hand

of government could

guide capitalism to ensure

economic stability.

Chapter 3: The Great Economic Thinkers | 59

to government to help level the playing field so

more people can become wealthy under capital-

ism. Liberals are not, however, saying government

should ensure that everyone finishes the race or

finishes at the same time. The job of government

is to make sure we all have the same opportuni-

ties and advantages to compete. It’s up to individ-

uals to work hard, study hard, and apply them-

selves with the determination to succeed. Liberals

believe that when people take individual respon-

sibility and have the same opportunities, then cap-

italism will deliver on the promise of prosperity.

Liberals say the helpful hand of government

brings us things that we could never accomplish

on our own as individuals: Social Security, the min-

imum wage, public libraries, public transportation,

Medicare, public education, and so forth. Liberals

point out that we can thank the government for

bringing us the internet. They also say you can

thank government for protecting you from fraud-

ulent practices by firms and for protecting firms

from illegal practices by other firms. This happens

through mechanisms such as consumer protec-

tion laws, antitrust legislation, worker protections,

environmental laws, and trade protections because

government regulations ensure accountability and

transparency in capitalism. Accountability means

firms have a responsibility to society and are

answerable for their actions. Transparency means firms must disclose information so there can be

oversight to hold them accountable.

Keynes believed that when capitalism is guided

by government, it promotes peace between coun-

tries. His ideas influenced the creation of the

International Monetary Fund, the World Bank,

and the World Trade Organization. Some credit

Keynes’s ideas with influencing President Frank-

lin D. Roosevelt, who created the New Deal

during the Great Depression. Liberal economists

also credit Keynesian thinking with pulling the

United States out of the Great Recession that

started in 2007. They say in both cases, the gov-

ernment helped people to have money to spend,

so firms were perfectly willing to start up produc-

tion again and hire more workers, which put the

economy on the road to recovery. Famous pro-

ponents of Keynesian economics include Harvard

professor John Kenneth Galbraith (1908–2006),

who advised President John F. Kennedy, and con-

temporary liberal economist Paul Krugman. Their

ideas inform the liberal conversation today in the

Democratic Party. People who follow liberal the-

ory are called Keynesians, progressives, liberals, interventionists, and center left.

60 | Voices On The Economy

In the media, and in the popular minds of people

in the United States, liberal refers to the fair-market or Keynesian perspective. That’s why we use it this

way in the VOTE Program. But please be aware

that the word liberal outside the United States refers to the free-market perspective, which in this

country is the conservative perspective. And just to

be even more confusing, the term classical liberal is another name for conservatives.

To sum up the liberal economic position rep-

resented in the VOTE Program: Under capitalism, when the government intervenes in the economy, all can prosper because the private-public part- nership stabilizes markets and creates account- ability, transparency, and equal opportunities. This is why we guide fair-market capitalism with the helpful hand of government. Liberals believe we need fairness so all can flourish with

equal opportunities.

Keynes died from a heart attack at his home in

Sussex, England, on April 21, 1946, at the age of

sixty-three. He was survived by his wife and par-

ents. His obituary in the New York Times reported that he was “[e]xhausted by the strain of the Inter-

national Monetary Conference in Savannah, Ga.”

There is no grave for Keynes. His ashes were scat-

tered on the Downs. (Too bad, because he had

the perfect quote for his gravestone: “In the long

run, we’re all dead.”)

LIBERAL WHO

John Maynard Keynes The General Theory

WHEN

20th century

WHAT

Firms are privately owned and guided by price signals and government

(the helpful hand).

WHY

Because when the economy is stable and equitable, we have the ingenuity and

accountability to create prosperity.

HOW

Embrace Fair-Market Capitalism

WHERE

In a nation with fairness so all can flourish with equal opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Liberals • Democrats Keynesian Theorists

Democratic Party Progressives • Center • Center Left

Institutionalist Theorists • Social Economists Labor Union Organizers and Members

Chapter 3: The Great Economic Thinkers | 61

Excerpt from the Second Inaugural

Address of President Barak Obama

“Together we discovered that a free market only thrives

when there are rules to ensure competition and fair play.

Together we resolve that a great nation must care for

the vulnerable and protect its people from life’s worst

hazards and misfortune. Through it all, we have never

relinquished our skepticism of central authority, nor have we

succumbed to the fiction that all societies’ ills can be cured

through government alone. Our celebration of initiative

and enterprise, our insistence on hard work and personal

responsibility—these are constants in our character.… For

we, the people, understand that our country cannot succeed

when a shrinking few do very well and a growing many

barely make it. We believe that America’s prosperity must

rest upon the broad shoulders of a rising middle class.…

We understand that outworn programs are inadequate

to the needs of our time. So we must harness new ideas

and technology to remake our government, revamp our

tax code, reform our schools, and empower our citizens

with the skills they need to work hard or learn more,

reach higher…. We, the people, still believe that every citizen deserves a basic measure of security

and dignity. We must make the hard choices to reduce the cost of health care and the size of our

deficit. But we reject the belief that America must choose between caring for the generation that

built this country and investing in the generation that will build its future…. The commitments we

make to each other through Medicare and Medicaid and Social Security—these things do not sap our

initiative. They strengthen us. They do not make us a nation of takers. They free us to take the risks

that make this country great.”

62 | Voices On The Economy

Exercise 3: “What’s My Perspective?” You can tune your ear to start to hear the perspective someone is coming from even if that person

doesn’t say it directly. Here’s an exercise that will help. Match the following quotes from well-known

individuals to one of the three perspectives. The Answer Key is at the end of the chapter.

Quote 1: “Capitalism does not permit an even flow of economic resources. With this system, a small

privileged few are rich beyond conscience, and almost all others are doomed to be poor at some

level. That’s the way the system works. And since we know that the system will not change the rules,

we are going to have to change the system.” –Martin Luther King Jr., Civil Rights Leader

Quote 2: “We have been ruled by men who live by illusions…the illusion that there is some other way

of creating wealth than hard work and satisfying your customers.” –Margaret Thatcher, Former British

Prime Minister

Quote 3: “You cannot separate the political structure from the economic structure. One has to be

an idiot to believe that the average working person who’s making $10,000 or $12,000 a year is equal

in political power to somebody who is the head of a large bank or corporation. So if you believe in

political democracy, if you believe in equality, you have to believe in economic democracy as well.”

–Bernie Sanders, U.S. Senator

Quote 4: “It was the labor movement that helped secure so much of what we take for granted

today. The forty-hour work week, the minimum wage, family leave, health insurance, Social Security,

Medicare, retirement plans. The cornerstones of middle-class security all bear the union label.”

–Barack Obama, Former U.S. President

Quote 5: “Capitalism demands the best of every man—his rationality—and rewards him accordingly.

It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the

products of others, and to go as far on the road of achievement as his ability and ambition will carry

him.” –Ayn Rand, Philosopher

Quote 6: “Governments will always play a huge part in solving big problems. They set public policy

and are uniquely able to provide the resources to make sure solutions reach everyone who needs

them. They also fund basic research, which is a crucial component of the innovation that improves life

for everyone.” –Bill Gates, Entrepreneur

Chapter 3: The Great Economic Thinkers | 63

Three Perspectives on the Role of Government

As we discussed in chapter 1, our nation has

a representative democracy. The scope of the

government’s involvement in our lives differs

according to the visions of conservatives, liberals,

and radicals. For conservatives, government’s role

is limited to three areas: ensuring our national

security, protecting property through a criminal

justice system, and building the infrastructure

the nation needs, such as roads, bridges, and

utilities. Liberals agree with these three roles

of government and add three more: regulating

firms to ensure transparency and accountability,

stabilizing the economy, and ensuring equity to

create opportunities. Radicals agree with all six

of these roles of government and add three more:

facilitating community councils so that people can

participate fully in their own governance, some

collective ownership of resources and production,

and providing universal benefits such as health

care, higher education, and transportation.

Conservatives, Liberals, and Radicals National Security

Property Protection Infrastructure

Liberals and Radicals Transparency and Accountability

Stability Equity

Radicals Community Council Facilitators

Some Public Ownership Universal Benefits

Figure 3.1 The Role of Government from Three Perspectives

64 | Voices On The Economy

Figure 3.2 The Big Picture

Classical Theory Adam Smith:

Wealth of Nations 1776

Neoclassical Theory 1880s

Radical Theory Karl Marx:

Capital, Vol. 1 1867

Liberal Theory John M. Keynes: General Theory

1936

Present-day Conservatives

Present-day Liberals

Present-day Radicals

The debates among conventional economists

have been going on since the 1930s. But even

though they were diametrically opposed to one

another’s points of view, some of the leading

economists of the past were much more cordial

and polite about voicing their disagreements. It

was a far cry from the kind of negative rhetoric

we hear in our debates today. For instance, in 1951

liberal economist John Kenneth Galbraith wrote to

conservative Milton Friedman: “You know, in many

ways, how much we enjoyed your visit here last

week. This is just my way of adding a personal

word of thanks. I hope it won’t be too long before

we see you here again. So far as I can tell, also, the

students seemed to have suffered no permanent

damage. I hope your colleagues perceive no

disconcerting change in you. On second thought, I

hope they do.” Please note the playful and friendly

tone. They could disagree but still think well of

each other. We’ve lost this ability these days. The

VOTE Program will help get us back to a place

where we can acknowledge our differences and

use the ideas of our critics and opponents to

become better thinkers and better people because

of these debates. By the way, while we talk about

the big divide in our nation as being between the

The Big Picture

Remember at the very beginning of this chapter when I promised to give you the big picture of

economics so you wouldn’t have to try to put the jigsaw puzzle together without knowing what it looks

like? Here it is:

Chapter 3: The Great Economic Thinkers | 65

conservatives and the liberals, that’s not actually the

big divide in economics. The big divide is between

the people who reject capitalism (radicals) and

those who think America is, and ought to remain,

capitalist. Liberals and conservatives land on the

same side of that debate.

Now that you have the big picture of modern

economics, you’ll be able to understand the ori-

gins of the debates going on around you about

why we should get rid of the Environmental Pro-

tection Agency (Laissez-faire!); or why health- care workers should own the hospitals where

they work (Worker ownership!); or why govern- ment should require firms to install safety features

in cars (Transparency and accountability!). Every day, people are debating economics, and I hope

you’re already starting to tune in to these conver-

sations that are taking place around you. As we

start learning about the different issues and what

the different perspectives have to say about them,

this big picture will help you understand the

core differences and figure out where you stand and what you want to say. The VOTE Program is asking you to decide what country you want to

live in. What do you think is the best path for-

ward? Adam Smith, Karl Marx, and John Maynard

Keynes are not just three historical figures from

some dusty past. Their ideas still influence our

conversations today. The name Voices On The

Economy (VOTE) has a double meaning. You can

hear the voices of the great economic thinkers

who have come before you, and you can use their

voices to help you find your own. We look back

through history so we can find a path forward.

66 | Voices On The Economy

VOTE Perspectives

CONSERVATIVE

WHO

Adam Smith The Wealth of Nations

WHEN

18th century

WHAT

Firms are privately owned and guided by price signals

(the invisible hand).

WHY

Because when the economy is free from interference, we have the right

incentives to create prosperity.

HOW

Embrace Free-Market Capitalism

WHERE

In a nation with liberty so all can flourish with unfettered opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Conservatives • Republicans Classical/Neoclassical Theorists

Republican Party • GOP • Tea Party Libertarians • Right • Far Right

Supply-Side • Austrian • Chicago School Right to Work Advocates • Deregulators

RADICAL

WHO

Karl Marx Capital, Volume 1

WHEN

19th century

WHAT

Firms are worker-owned and guided by the pressure for good

(the invisible synergy).

WHY

Because when the economy values people over profits, we act in everyone’s

best interest to create prosperity.

HOW

Embrace Democratic Socialism

WHERE

In a nation with freedom so all can flourish with meaningful opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Radicals • Democratic Socialists Marxist Theorists

Green Party • Communist Party Socialists • Left • Far Left

Dependency/World-Systems Theorists Labor Rights Activists • Occupy Movement

LIBERAL

WHO

John Maynard Keynes The General Theory

WHEN

20th century

WHAT

Firms are privately owned and guided by price signals and government

(the helpful hand).

WHY

Because when the economy is stable and equitable, we have the ingenuity

and accountability to create prosperity.

HOW

Embrace Fair-Market Capitalism

WHERE

In a nation with fairness so all can flourish with equal opportunities.

THESE IDEAS ARE BROADLY SHARED BY

Liberals • Democrats Keynesian Theorists

Democratic Party Progressives • Center • Center Left

Institutionalist Theorists • Social Economists Labor Union Organizers and Members

Chapter 3: The Great Economic Thinkers | 67

Chapter 3: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Who is considered to be the “Father of Modern Economics,” and which of the following describes his area of inquiry?

A. John Maynard Keynes—How government intervention can turn a recession into an expansion.

B. Karl Marx—How private ownership of resources leads to exploitation of working people. C. Adam Smith—How nations become wealthy through private ownership of land, labor,

and capital.

D. Milton Friedman—How a decrease in taxes leads to an increase in economic growth.

2. A conservative would say that price signals are incentives for buyers and sellers to act. For example, when people demand more video games, the price goes up and firms start to produce more of them. The result is that in capitalism, firms make what people want. This is technically referred to as:

A. Productive Efficiency B. Allocative Efficiency C. Distributive Efficiency D. Economic Efficiency

3. The mathematical method used by neoclassical theory involves a type of marginal decision- making referred to as cost-benefit analysis. Please use this type of analysis to identify a correct decision below.

A. Eliana owns a food truck. She decides to close the truck from 2:00 p.m. – 3:00 p.m. every day because she makes $1,200 when she stays open during that hour, while it costs her $900 to stay open for that hour.

B. Jo Hsin pays $12 per hour for a daily swim class. Her employer gives her a wellness incentive of $10 that she can use for any exercise class. She decides to keep swimming because it’s more cost-effective than the only alternative available, which is an aerobics class for $8 an hour.

C. Dominic decides not to work the night shift as a waiter and instead studies for his economics exam. He would have made $150 in wages and tips, but if he gets an A on the final, he will qualify for a textbook scholarship for $200 next semester.

D. Grant is a DJ at a local club. He decides to hire an assistant for the night at $400, which means he can work two rooms instead of one and get paid an extra $350.

4. Match the significant date for radicals (left column) to its corresponding event (right column). A. 1867 i. Capital, Volume I published B. 1917 ii. Growing interest in democratic socialism C. Today iii. The Russian Revolution D. 1989 iv. Berlin Wall falls and Soviet communism ends

68 | Voices On The Economy

5. At a privately owned hair salon that employs three workers, the owner’s weekly costs are $1,500 in wages and $1,200 in capital and raw material (rent, shampoo, electricity, etc.). Every week, the hair salon makes $4,000. According to radical theorists, the surplus value of __________ is produced by and taken from the ________.

A. $1,200; capitalist B. $2,500; workers C. $6,700; owner D. $1,300; laborers

6. All of the following statements are true from a radical perspective. Which one expresses the idea of worker ownership?

A. Workers have rights to decent pay, safe working conditions, family leave, and overtime pay. B. Workers cooperatively own the businesses in which they work rather than laboring for

others in exchange for a wage.

C. Workers value people over profits and they can band together to ensure that firms where they work share this value.

D. Workers plan for community resources to be allocated fairly according to basic human rights and responsibilities.

7. Liberal theory as described by John Maynard Keynes can be identified by which of the following statements? Please choose all that apply.

A. Capitalism, along with the helpful hand of government, gives us the ideal mix of material comfort, opportunity, innovation, and growth.

B. The only important things to defend in our economy are profits, private property, and business interests.

C. The best way to meet the needs of the majority of people is to reject the private ownership of capitalism and replace it with the cooperative ownership of democratic socialism.

D. Allowing firms and consumers to respond to price signals no matter what the situation is the best way to bring about our collective economic well-being.

8. Match the liberal government roles (left column) to their definitions (right column): A. Transparency i. Firms are responsible for their actions B. Accountability ii. Firms disclose information so that oversight is possible C. Stability iii. Constant, steady growth in the economy D. Equity iv. Everyone has what they need to succeed

9. Please choose all options below that represent the liberal perspective: A. John Maynard Keynes, John Kenneth Galbraith, Franklin Delano Roosevelt B. Karl Marx, Milton Friedman, Ronald Reagan C. Progressives, Interventionists, Center Leftists, Democrats D. Libertarians, Socialists, Austrians, Republicans

Chapter 3: The Great Economic Thinkers | 69

Chapter 3: Key Terms

Accountability Agrarian Allocative efficiency Animal spirits Capitalist Capitalist competition Center Left Classical theory Communist Coordination among

competitors Cost-benefit analysis Democratic socialist Distributive efficiency Enlightened self-interest

Equality Equity Far left GOP Helpful hand of government Incentives Interventionists Invisible hand Keynesian Laissez-faire Leftists Libertarian Party Marginal analysis Marxist

Mercantilism Neoclassical theory Price signals Productive efficiency Progressives Right Right-wing Self-interest Stability Supply-side Surplus Transparency Wage laborer Workplace exploitation Workplace Justice

Answer Key to Exercise 3

Quote 1: Radical perspective • Quote 2: Conservative perspective • Quote 3: Radical perspective

Quote 4: Liberal perspective • Quote 5: Conservative perspective • Quote 6: Liberal perspective

10. Which of the following are functions of government shared by radicals, liberals, and conservatives?

A. National security, accountability, and equity B. Infrastructure, property protection, and national security C. Universal benefits, stability, and property protection D. Some public ownership, infrastructure, and equity

Answers

1. C 2. B 3. C 4. A – i, B – iii, C – ii, D – iv 5. D 6. B 7. A 8. A – ii, B – i, C – iii, D – iv 9. A & C 10. B

ch4

REUTERS / Mike Segar - stock.adobe.com

REUTERS / Mike Segar - stock.adobe.com

4Conservatives and Liberals: Conventional Theory Tatyana McFadden was born in the Soviet Union in 1989. She came into the world with a congenital condition called spina bifida, which left her without the use of her legs. “My

mother, like many people in Russia at that time,

couldn’t afford to care for me properly,” McFad-

den writes in her autobiography Ya Sama! The newborn was placed in a government hospi-

tal, where doctors expected her to die within a

few weeks. When it looked like she would sur-

vive, she was transferred to a state-run orphan-

age. There, McFadden lay in

a crib all day, in a room with

a dozen other children. She

described how she eventually

learned to climb out of her

crib and scoot around on her

hands, dragging her twisted

legs behind her. There were

no wheelchairs in the orphan-

age. She writes that living con-

ditions were harsh. Showers

were hose-downs with cold

water. Her clothes were ill-fit-

ting castoffs. Meals consisted

of porridge for breakfast and

thin soups with bits of boiled

vegetables for lunch and din-

ner. She never left the orphanage for field trips

or outings or to play in a park. “There were no

books to read,” writes McFadden, “no television

to watch, no Internet to explore. There was no

one to teach me, no one to read to me. My days

had no names; my hours had no numbers.”

At the age of six, McFadden was adopted by

an American family and brought to the United

States. For the first time in her life she had proper

nutrition, education, and medical care—including

surgeries to straighten her legs. She also got her

first wheelchair, and her parents

enrolled her in sports programs,

which is where McFadden dis-

covered her love of racing. With

all these new experiences and

resources, and with hard work

and determination, she became

the fastest female wheelchair

racer in the world. A Paralym-

pian champion since age fifteen,

she dominated in sprints and

middle-distance and marathon

racing, setting world records.

For many consecutive years she

won the Boston, London, New

York, and Chicago marathons,

which no one before her had

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72 | Voices On The Economy

ever done even once. Her picture was featured on

millions of cans of Coca-Cola, on McDonald’s cups,

and on banners lining the streets of London and

Rio de Janeiro. She’s shared the red carpet with

princes, rock stars, sports icons, and politicians.

After she graduated from college, she went on to

earn a graduate degree in education. Her life and

her story inspire people of all ages and abilities.

Liberals and conservatives say we could fill vol-

umes with stories of people like McFadden, who

found opportunities in the United States. They say

through hard work and determination anyone can

realize the American Dream of a good job, nice

things, a home, and opportunities for upward

mobility. Both conservatives and liberals believe

America is the promised land of opportunity

because of capitalism. They say that it’s capitalism

that creates the levels of prosperity that make it

possible for all of us to realize our potential.

Some people mistakenly think that since they

don’t believe owning sports cars or Rolex watches

or designer clothes is what gives meaning to their

lives, the conversation about capitalism isn’t rele-

vant to them. Please understand that materialism

isn’t capitalism. The promise of maximum eco- nomic well-being Adam Smith wrote about in The Wealth of Nations isn’t about amassing private helicopters and yachts, say liberals and conserva-

tives. It’s about having the prosperity to thrive and

live meaningful lives so we can achieve our full

potential. They say capitalism makes it possible

for us to have coats to keep us warm in winter,

a decent place to live, good-quality health care,

food on the table, education, wedding celebra-

tions, and vacations—and yes, for some, private

helicopters and yachts, as well.

Chapter 4: Conservatives and Liberals—Conventional Theory | 73

Building Conventional Theory Conservatives and liberals share the same theoretical framework (way of analyzing economics), which is called conventional theory. By the way, it’s called conventional theory, or sometimes mainstream theory, because it’s the most popular way of thinking about capitalism.

In chapter 2 we demonstrated how to build the-

ory-plus (a milk chocolate piece). In this chapter we’ll build conventional theory to discover how

conservatives and liberals answer the what, how,

and for-whom questions of economics. Just to

review, a theory is built with three components:

assumptions, models, and conclusions, and then,

from the conclusions, policy recommendations

emerge. Liberals and conservatives agree on the assumptions, models, and conclusions. However,

they disagree when it comes to policy. After we build conventional theory, we’ll discuss their dif-

ferent policy ideas. Then we’ll build radical theory

in chapter 5. It needs its own chapter because rad-

icals do not agree with the assumptions, models, or conclusions of conventional theory. We’re going

to learn how to build the theories of these three

major economic perspectives because, in order to

think critically about the liberal, radical, and con-

servative views on the issues covered in the VOTE

Program, you’ll need to know the basis of their

policy recommendations.

74 | Voices On The Economy

Assumptions

Assumptions are statements that the builders

of a theory believe don’t have to be proven

because they see them as self-evident “givens.”

Conventional theory starts with the assumption

of scarcity, which is to say that resources are not limitless. For example, our country only has

a certain amount of fresh water and a certain

number of electricians and tractors. There are limits

to our land (anything that comes naturally from

the Earth), labor (human exertion), and capital

(equipment). Because all input resources are

limited, outputs (goods and services) are limited.

Conventional theorists say this assumption makes

logical sense because if all the land downtown is

already in use for other purposes, we can’t make

more land to put up another apartment building.

We can’t make unlimited oil changes, chocolate

bars, mattresses, rock concerts, pharmaceuticals,

or anything else, because eventually we’ll run out

of resources to produce those things.

The second assumption is that individuals

maximize their happiness by seeking to acquire

more goods and services and that we each have

the ability to make the best decisions about what

will bring us the most happiness because we are

rational (logical) beings. For example, if some-

one asks you if you would like one chocolate bar

or two chocolate bars, conventional theorists say

you’ll choose two because you are self-interested

and you know that more chocolate is better than

less. A rational person will choose to get more of

the things that create happiness. This is going to

be true whether we’re talking about more candy

bars or vacations, if those are things that make

you happy. It’s also true about giving more dona-

tions to the local food bank, if that’s what makes

you happy.

The third assumption is that firms maximize

profit by transforming resources into products

that people want, using technology to do so. Technology refers to know-how—the best way to

put capital, land, and labor together to produce

something in a way that uses the fewest resources

to make the most stuff. In popular usage technol-

ogy has come to mean machines such as com-

puters and other electronics, and that’s because

machines generally help us use fewer resources

when we make products. Conventional theo-

rists say firms use technology because they are

made up of people acting rationally to maximize

their profit.

By the way, if you’ve ever taken another eco-

nomics course, you may have learned that the

definition of economics is “the study of scarcity

in a world of unlimited wants.” We don’t use that

definition of economics in the VOTE Program

because these assumptions of scarcity and unlim-

ited wants are not shared by radical theorists.

Model

It’s time to build a model. Remember, a model

is simply a representation of the assumptions.

We’ll use words to start describing the model, and

later we’ll switch over to graphs.

The first assumption—scarcity—is about the

natural world. We’ll actually save that discussion

for later in the book. For now, let’s model the sec-

ond assumption (individuals act in their self-in-

terest to maximize their happiness) and the third

assumption (firms act in their self-interest to max-

imize their profit). Notice that the driving force

behind these latter two assumptions is self-inter-

est. According to conventional theory, it is human

nature to be self-interested no matter what the

economic system.

Remember markets? Well, in an output market,

individuals are the demanders, and firms are the

suppliers. Markets are the building blocks of the

economy. There are two actors: demanders and

suppliers. Demanders are those who want to buy. You’ve been a demander all your life. Sometimes

you’re called a consumer, household, individual,

or buyer. Suppliers offer something for sale.

Chapter 4: Conservatives and Liberals—Conventional Theory | 75

They are also called producers, vendors, firms, or

sellers. Please note that when we talk about the

video game market, or the chocolate bar market,

or the pedicure market, we’re not looking at a

single company that supplies those goods and

services; we’re looking at all the firms that supply video games or chocolate bars or pedicures—and

all the demanders of those goods and services.

When suppliers and demanders meet in a mar-

ket, demanders will try to buy at a low price since

the lower the price, the more they can afford to

buy, which maximizes their happiness. Suppliers

will try to sell at a high price since the higher the

price, the more money they will make, thereby

maximizing their profit.

The Law of Demand

What is the most important determinant

for whether someone buys something or sells

something? Price! That’s what conventional

theorist say. When the price is right, we’re willing

to act, and that price also influences the quantity

(amount) we’ll buy or sell. How much would you

pay for a chocolate bar? Forty cents? Fifty cents?

A dollar? Quantity demanded is the number of units of chocolate bars people will demand

at any given price. When price changes, the

quantity demanded changes. To state the obvious,

when the price of chocolate bars is high, people

buy fewer. When the price is low, people buy

more. This reflects the assumption of individuals

maximizing their happiness, and conventional

theorists call it the law of demand. Here’s how you would write it in symbols: P��QD� (when

price goes up, quantity demanded goes down).

The opposite is also true: P��QD� (when price

goes down, quantity demanded goes up).

Ceteris Paribus

Hold on a minute. It isn’t only price that

determines if we’ll buy more or less, according

to conventional theory. There are all sorts of

other things going on in the economy that affect

markets. There might be a new cure for diabetes,

so people who previously avoided chocolate bars

are now rushing to the store to stock up on them.

Or there might be a new report that says eating

chocolate bars increases intelligence, and now

parents everywhere are forcing their children to

eat chocolate bars day and night. In other words,

many things influence a demander’s decision to

buy or not to buy chocolate bars. Conventional

theorists know that it’s simply not possible to factor

in everything that’s happening in the market. So

for the purposes of describing the law of demand,

they assume nothing else is changing besides the

price and quantity demanded. They use the term

ceteris paribus, which is a Latin term that means “with all other factors or conditions remaining

the same.” The law of demand says, “When price

goes up, quantity demanded goes down, ceteris paribus.” When we read ceteris paribus, it tells us that the law of demand isn’t factoring in a

cure for diabetes or studies about chocolate bars

and intelligence.

76 | Voices On The Economy

The Law of Supply

Now imagine that you’re a supplier. That

might be harder to imagine because we’re mostly

demanders. But pretend you own a chocolate

bar factory. At what price would you sell your

chocolate bars? A dollar? Fifty cents? Forty cents?

Quantity supplied is the number of units of chocolate bars you would supply at any given

price. Typically, when the price of chocolate bars

is high, you would supply more; when the price is

low, you would supply fewer. The law of supply says, “When price goes up, quantity supplied goes

up; when price goes down, quantity supplied

goes down, ceteris paribus.” In symbols it looks like this: P��QS� or P��QS�.

Joining Demand and Supply

So here’s how it works: on their own, suppliers

and demanders are stuck. How will demanders get

what they need? How will suppliers sell their goods

and services? It’s when we bring them together—

when demand meets supply—that markets emerge

and prices are determined. For conservatives and

liberals, this is where the magic happens. When

demand and supply come together and prices are

determined, they signal demanders and suppliers

to spring into action. Demanders buy more or less

depending on price, and suppliers sell more or less

depending on price. Because of price signals, say

conventional theorists, markets work to bring us

what we want and need, and suppliers produce

them in the right quantities. And this is thought to

happen without anyone planning it or managing

it—as if guided by an invisible hand.

Let’s take a closer look at how prices are deter-

mined. In table 4.1 you can see some made-up

numbers about chocolate bars that reflect the law

of supply and the law of demand. When chocolate

bars cost $1.00, quantity supplied (QS) is six hun-

dred units. When the price goes down to $0.60,

QS goes down to four hundred units. That reflects

the law of supply—the quantity supplied will fall

when price goes down. In other words, suppli-

ers will supply less when the price goes down.

And what happens to quantity demanded (QD)?

At the price of $1.00, QD is two hundred units.

When the price goes down to $0.60, quantity

demanded increases to four hundred units, which

reflects the law of demand. Quantity demanded

increases when prices go down. In other words,

people will demand more chocolate bars when

the price is lower. Can you see what’s happening?

Conventional theorists say, “When price does this,

quantity does that.” In other words, price hap- pens first and drives the quantity change. They call price the independent variable and quan- tity the dependent variable. Quantity changes when price changes. Price goes first. Just keep

that in mind.

Price Quantity Supplied

Quantity Demanded

Surplus or Shortage

$1.00 600 200 Surplus: QS > QD and P �

$0.80 500 300 Surplus: QS > QD and P �

$0.60 400 400 Equilibrium: QS = QD, No P !

$0.40 300 500 Shortage: QD > QS and P �

$0.20 200 600 Shortage: QD > QS and P �

Table 4.1 Demand and Supply Schedule

Chapter 4: Conservatives and Liberals—Conventional Theory | 77

Equilibrium

There’s something else really important to

notice in table 4.1. Do you see what happens when

chocolate bars are at $0.60? Quantity supplied

is equal to quantity demanded. Conventional theorists call this golden moment equilibrium. Remember how Adam Smith assured us that the

invisible hand guarantees that firms will supply

the things we want and will supply the right

amount of them so that everyone who chooses

can get them? Equilibrium is the reason why.

Assuming ceteris paribus, there is no reason for price to change when it’s at equilibrium, because

everyone who wants the chocolate bars at that

price can have the chocolate bars, and firms will

supply exactly the right number of chocolate bars.

At equilibrium, price is stable because there is no

unmet demand or unsold supply.

Surplus and Shortage

There are two more things to notice in table

4.1 (still assuming ceteris paribus). When the price of chocolate bars is $1.00, firms will supply

six hundred chocolate bars, and individuals will

demand two hundred chocolate bars. That means

firms will have four hundred extra chocolate bars.

This is called a surplus. (But please note that this word is used differently from the way we used it in

chapter 3 when we were discussing radical theory.

Here we mean surplus to be when there is more

supply than there is demand for a product.) At any

price above equilibrium there will be a surplus,

but conventional theorists say that the surplus will

be temporary because of price signals. Think of

the day after Valentine’s Day, when candy makers

are stuck with heart-shaped boxes of candy that

nobody wants because the holiday is over, and

everyone has a chocolate hangover from eating

too many truffles. Candy makers will drop their

prices, and bargain hunters will be willing to buy

78 | Voices On The Economy

that candy at the lower price, and the market for

Valentine’s Day candy will return to equilibrium.

The opposite is called a shortage. At $0.20, for example, firms will supply two hundred

chocolate bars, and individuals will demand six

hundred chocolate bars. That means there aren’t

enough chocolate bars for all the people who

want them. Quantity supplied is less than quan-

tity demanded, so price goes up. Think of the

day before Valentine’s Day, when you and all the other procrastinators rush into the store to

buy last-minute roses because you don’t want to

disappoint your beloved. But you discover there

are only a few scraggly ones left—not enough to

go around. Now there is a shortage. Florists will

raise their prices because procrastinators will be

willing to pay more. The market will once again

find equilibrium. Conventional theory says that

whether there’s a surplus or a shortage, equilib-

rium is like a magnet, pulling the market back to

the point where quantity supplied equals quantity

demanded. They say that in the market there’s

never a problem of having too many or too few

things, because prices will automatically adjust

people’s incentives to supply and demand, which

will always bring the market back to equilibrium.

In a well-functioning economy, no one wants

a surplus or a shortage, and the great news is we

don’t have to have either, say conservatives and

liberals. You don’t have to wake up in the middle

of the night and worry if the convenience store

will have coffee tomorrow. If there’s a surplus or

a shortage, price signals will automatically bring

the market back to equilibrium, ceteris paribus.

The Joy of Graphing

Okay, “joy” may be an overstatement, but we

hope you’ll come to appreciate the elegance of graphs. Think of them as tools that allow you to create fast summaries of large tables of information.

Graphs are the language of conventional theory.

In case this is intimidating, just think of it as a

picture of something—like when a friend texts

you emojis to communicate without words that

she needs caffeine and misses her cat. You

already may be comfortable with graphing, but

if you aren’t yet, please don’t worry; it won’t take

you long to catch on. With a little practice, you’ll

be able to read a graph and understand the gist

of what it represents with almost as much ease

as you can interpret your friend’s text messages.

Once we get into the issues chapters, you’ll

need your graph-reading skills to understand

how conservative and liberal economists view

economic issues.

Conventional theorists understand that the

world is a very complex system, with countless

factors at play that impact the economy—human

psychology, history, biology, weather, family

dynamics, demographics, technology, and much

more. A model only depicts a tiny slice of this

complexity. Imagine you want to drive to the

beach. You punch the address into your Maps

app and wait for it to find the fastest route. Imag-

ine what the trip would be like if your app also

referenced every tree, shrub, and flower along the

way. That information would be accurate but not

Chapter 4: Conservatives and Liberals—Conventional Theory | 79

relevant to you. In fact, you would be so tangled

up in all the botanical details that by the time

you made it to the beach—if you ever actually

arrived—you would have missed the best waves

for surfing. Conventional theorists say mod-

els don’t need to show every possible piece of

information about the economy; they just need

to focus on the relevant aspects of the problems

we want to solve. Graphs are versatile tools for

conventional theorists. They can be simple, or

they can show multiple variables, and they even

can be multidimensional (although in this book

we’re only using two-dimensional graphs). The

bottom line? Graphs allow conventional theorists

to cut through all the noise and help economists

understand how markets—and the economy as

a whole—change so that they can find solutions.

You can draw graphs to model the electric car

market, the flower market, the coconut market,

the acupuncture market, and any other market.

We’re going to draw a graph of the chocolate bar

market using the numbers from table 4.1. Our

graph will simply compress all the information

into one picture that’s easy to see. Please note

that we’re using made-up numbers. This is simply

an exercise to reflect the law of supply and law

of demand in our model of the second and third

assumptions of conventional theory.

Liberals and conservatives use graphical mod-

els to deliver a quick snapshot of the relationship

between two variables—price and quantity—in

our chocolate bar market. When price changes,

quantity also changes. Changes in price come first.

By the way, if you’re a mathematician, then please

be warned that the way economists draw graphs

might give you a headache. That’s because they

place the independent variable (price, or P) on the vertical line (y axis) and the dependent variable (quantity, or Q) on the horizontal line (x axis). We know what you’re going to say: “That’s wrong!” In

standard mathematics it’s the opposite—the inde-

pendent variable is always on the x axis and the

dependent variable is always on the y axis. We have no idea why economists started doing it this

way, but we advise you to just roll with it.

Let’s draw the chocolate bar market graph.

Begin by making a horizontal line for the bot-

tom of your graph. Label it Q for quantity, mean- ing how many chocolate bars. You can jot in the

numbers from left to right, beginning with zero

(also called the origin) and going up to six hun- dred in increments of one hundred. The numbers

get bigger as you move toward the right. The ver-

tical line goes on the left side. Label it P for price. Jot in the prices, beginning with zero (the origin

point) on the bottom, up to $1.00, in increments

of $0.20. The numbers get bigger as you move

up. Don’t forget to give your graph a name. This

would be “Chocolate Bar Market.”

Now you’re going to plot the points on your

graph. Think of them as players on two soccer

teams: supply, represented by an S, and demand, repre sented by a D. There are two actors in the

market—the supplier and the demander. To fig-

ure out where Team S and Team D players need

to take their positions on your graph, check out

table 4.1. (If you already know how to do this,

you can skim this paragraph.) Let’s begin with

80 | Voices On The Economy

supply. When the price (P) of chocolate bars is

$1.00, quantity supplied (QS) is six hundred. Put

one of your players (represented by a dot) in that

position on your graph. When the price is $0.80,

quantity supplied is five hundred. Put a dot in

that spot, and so on. When you fill in all the dots,

connect them to make a line, and label it S. Team S is all set up on the field now, and you have just

succeeded in creating the supply curve. (Even if it looks like a straight line, economists refer to it

as a curve.) While you’re admiring your supply curve, notice how when price goes up, quantity

supplied goes up. Liberals and conservatives call

this a positive relationship and also say that this curve has a positive slope. These are terms

you need to know because conventional theorists

use them as shorthand to describe their graphs.

Now plot the points for demand, and label the

line connecting all the dots D. This is the demand curve. If you did it correctly, when the price (P) is $0.20, quantity demanded (QD) is six hundred,

and when price is $0.40, quantity demanded is five

hundred. Now, while you admire your fabulous

demand curve, notice that when price goes down,

quantity demanded goes up. Conservatives and

liberals call this an inverse relationship and also say that this curve has a negative slope.

$1.00

.60

.80

.40

.20

200 300 400 500 600

D Q

Chocolate Bar Supply

$1.00 P

.60

.80

.40

.20

200 300 400 500 600 D

Chocolate Bar Demand

0 0 Q

Figure 4.1 Supply Curve and Demand Curve

Chapter 4: Conservatives and Liberals—Conventional Theory | 81

$1.00

.60

.80

.40

.20

200 300 400 500 600

Q Q1

Chocolate Bar Market

Figure 4.2 Market Graph: Equilibrium

Here’s where it gets interesting: check out what

happens at $0.60 when we bring together sup-

ply and demand (as exhibited in figure 4.2). Do

you see that this is where Team Supply and Team

Demand intersect? This point is equilibrium. You can see the dot in the center. This is literally and

figuratively the goal for liberals and conservatives.

Equilibrium is represented by the price at which

the quantity of chocolate bars supplied equals the

quantity of chocolate bars demanded. As we dis-

cussed above, this is the golden moment. There is

neither a shortage nor a surplus of chocolate bars.

In our example, the chocolate bar market is in

equilibrium at $0.60, when four hundred choco-

late bars are supplied and four hundred chocolate

bars are demanded. Congratulations! You have

just created a model of a market using conven-

tional theory.

How to Read Shortages and Surpluses

You can see in figure 4.2 that at points below

equilibrium (prices below $0.60), the quantity

supplied is much less than the quantity demanded,

which tells you there’s a shortage. And you can

see that at points above equilibrium (prices above

$0.60), the quantity supplied is greater than the

quantity demanded, which tells you there’s a surplus.

People often become confused about how to read

a surplus and a shortage on the graph. Check out

figure 4.3. Look at a price above equilibrium—let’s

say $0.80—and follow it horizontally across the

graph. You’ll first cross the demand curve, and that

point is the quantity demanded (QD = 300) at $0.80.

If you keep traveling to the right, you’ll next cross

the supply curve, and that point is the quantity

supplied (QS = 500) at $0.80. When quantity

supplied is greater than quantity demanded, as it is

at all prices above equilibrium, there is a surplus.

When there’s a surplus, prices tend to come down.

And when prices start coming down, firms become

less willing to supply and consumers become

more willing to buy. Eventually, they will meet at

equilibrium (four hundred bars at $0.60).

$1.00

.60

.80

.40

.20

200 300 400 500 600

Q Q1

Chocolate Bar Market

Figure 4.3 Market Graph: Self-Adjusting

82 | Voices On The Economy

The opposite happens if you’re at prices below

equilibrium. When quantity supplied is less than

quantity demanded (QS < QD), there is a shortage.

When there’s a shortage, prices tend to go up.

When prices start to go up, firms are more willing

to supply and consumers are less willing to buy,

until we end up back at equilibrium. And that’s

why—separate from any outside influence—there

can never be a permanent shortage or surplus,

say conventional economists. Prices and quanti-

ties will always return to equilibrium. Just med-

itate on this for a moment: in the conventional

theory model of markets, in equilibrium there will

never be overproduction or underproduction of

anything, in the long run.

Why Do Prices Ever Change?

We’ve just finished saying that prices will always

tend toward equilibrium and be stable there, but

that doesn’t make sense. In the real world, prices

are changing all the time. When we originally drew

the chocolate bar market graph, we assumed ceteris

paribus—that the only thing affecting quantity

was a change in price. But actually, according to

conventional theory, there are a number of external

factors that can influence price. We’re going to

identify and use twelve factors to see how they

influence markets at any given time. By the way,

right now we’ll talk about external factors as if they

only occur one at a time. In reality, a lot of things

can change at once.

So how do we model price changes? Up until

now, we’ve been talking about points on the curve

and calling them quantity supplied and quantity

demanded. When the price goes up, we move along (up and down) the curve to a new point of quantity supplied or quantity demanded. But if

something else changes—one of the twelve exter-

nal factors we’re about to discuss—it won’t just

change a point on the curve; it will change the

entire curve so that the level of demand or supply

increases or decreases at every price level. There is

a change in demand or a change in supply, which

means you must shift (the whole curve moves) to the left or to the right. You draw a brand-new

Chocolate Bar Market

SS 2

Left is Less

Right is MoRe

$1.00

P1 .60

.80

.40

.20

200 300 400 500 600 Q Q1

$1.00

P1 .60

.80

.40

.20

200 300 400 500 600 Q1

Left is Less

Right is MoRe

Q0 0

Figure 4.4 Shifting Demand and Supply Curves

Chapter 4: Conservatives and Liberals—Conventional Theory | 83

curve on the graph and label it D2 or S2 to rep- resent the new change. When the demand curve

shifts to the left, the quantity decreases at every

price level; when it shifts to the right, the quantity

increases at every price level. Just remember Left is Less, Right is moRe. The graphs are getting busy in figure 4.4. But here’s the good news: you’ll be

able to find the new equilibrium very easily, and

since you already know the relationships between

price and quantity for both supply and demand,

you can leave off the numbers on the axes.

Six Factors That Shift the Demand Curve

Imagine you’re walking down the aisle at the

grocery store, hunting for a snack. Chocolate bars

are on sale. A lower price is definitely an incentive

to buy. You jingle the change in your pocket and

wonder, “What other things besides price might

influence my decision about what snack to buy?” If

you’re a conventional theorist, you would ask it this

way: “What are the factors that shift demand?” Let’s

look at six external factors that shift the demand

curve to the right or to the left, changing people’s

decisions about what snack to buy at every price. For

each example given, please note that the opposite

would shift the demand curve the other way.

1. Income: When people have more or less money to spend. For example, average

wages go up. People have more money, so

they demand more chocolate bars. Demand

shifts right.

2. Preference: When desire for something changes. For instance, a recent study shows

that chocolate increases intelligence. Every-

one wants to be the smartest person in the

room, so people demand more chocolate

bars. Demand shifts right.

3. Prices of Complements and Substitutes: A complement is something that goes with

a product. A substitute is something that can be used instead of the product. For example,

ice cream is on sale, and it’s a decent sub-

stitute for chocolate bars when people crave

a sweet treat, so people buy the ice cream

and demand fewer chocolate bars. Demand

shifts left. They also like milk to comple-

ment their chocolate bars—the two just taste

perfect together, so when the price of milk

goes down, people buy more chocolate bars.

Demand shifts right.

4. Availability: When it’s more or less conve- nient for people to get the product (we also

call it the “laziness factor”). For instance,

zoning laws change, and convenience stores

selling candy pop up on nearly every corner

of every neighborhood, so people buy more

chocolate bars. Demand shifts right.

5. Future Expectations of Price, Income, and Preference: When people anticipate changes and act accordingly. For example,

people expect the price of chocolate bars

to go up as Halloween approaches, so they

stock up on chocolate bars before mid-Octo-

ber. Demand shifts right. Or they expect their

salaries to go up, so they buy more choco-

late bars today. Demands shifts right. Or they

expect that they will want fewer chocolate

bars on January 1, when they make their

annual New Year’s resolutions to eat health-

ier, so they buy fewer in December. Demand

shifts left.

6. Number of Buyers: When there are overall more or fewer people who are potential buy-

ers. For instance, a new law requires choco-

late bar buyers to be eighteen years old. No

one seventeen or younger can buy chocolate

bars, so fewer people buy chocolate bars.

Demand shifts left.

84 | Voices On The Economy

When you subtract ceteris paribus from the

demand equation and allow factors to change,

such as the six listed above, you need a new way

to represent the relationship between supply and

demand on your graph. You do this by shifting

your entire demand curve to the left or to the

right, as shown in figure 4.4.

Six Factors That Shift the Supply Curve

Imagine you own a chocolate bar factory.

You’re perusing your monthly financial report

and wondering about whether to increase or

decrease your supply of chocolate bars at every

level. Let’s look at six external factors that shift the

supply curve to the right or to the left, changing

how much firms supply. For each example given,

please note that the opposite would shift the

supply curve the other way.

1. Cost of Inputs: When firms must spend more or less for the resources to make their prod-

ucts. For instance, a hurricane in the Carib-

bean drives sugar prices up, so firms supply

fewer chocolate bars. Supply shifts left.

2. Number of Firms: When there are more or fewer total number of suppliers of a partic-

ular product. For instance, accounting fraud

and mismanagement drive some chocolate

bar firms out of business, so fewer chocolate

bars are supplied. Supply shifts left.

3. Taxes, Subsidies, and Regulations: When government legislation leads firms to pay

more or less. For example, an increase in

corporate taxes, a decrease in subsidies for

chocolate bars, or an increase in government

regulations for safety equipment in chocolate

bar factories means fewer chocolate bars are

supplied. Supply shifts left.

4. Prices of Related Goods: When it’s possible for firms to make a different product using

the same resources, firms will make the high-

er-priced product. For instance, chocolate bar

factories can use the same labor and equip-

ment to make chocolate-covered pretzels, so

when the price of chocolate-covered pretzels

is higher than the price of chocolate bars,

firms switch production and fewer chocolate

bars are supplied. Supply shifts left.

5. Changes in Technology: When firms can make more or less output with the same

resources because procedures for production

become more or less efficient. For example,

firms develop a new packaging system that

doubles production without costing more,

so more chocolate bars are supplied. Supply

shifts right.

6. Future Expectations: When firms antici- pate a change in the price of the product.

For instance, firms expect the price of choco-

late bars to go up around Halloween, so they

supply fewer in the months leading up to

October. Supply shifts left.

So remember, when you subtract ceteris pari-

bus from the supply equation, you need to show

it on your graph. You do this by shifting the entire

supply curve to the left or to the right.

Chapter 4: Conservatives and Liberals—Conventional Theory | 85

Exercise 4.1: Market Change Guide Let’s use the Market Change Guide to analyze how this could affect the market for soda.

US taking steps to ban junk food from school

WASHINGTON—The Obama administration will begin a drive this week to expel Pepsi, french fries and Snickers bars from the nation’s schools in hopes of reducing the number of children who get fat during their school years.

In legislation soon to be intro- duced, candy and sugary beverages

would be banned, and many schools would be required to offer more nu- tritious fare.

To that end, Agriculture Secretary Tom Vilsack will deliver a speech today at the National Press Club in which he will insist, according to excerpts provided to the New York Times, that any vending machines

that remain in schools be “filled with nutritious offerings to make the healthy choice the easy choice for our nation’s children.”

First lady Michelle Obama said last month that she would lead an initiative to reduce childhood obesity, and her involvement “shows the importance all of us place on this issue,” Vilsack said.

THE NEW YORK TIMES

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1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

P S

QQ 1

Now that you understand market changes from the conservative and liberal perspectives, you can

start to analyze stories you read in the newspaper and make graphical models of the market changes.

For example, here is a story about the controversy around selling junk food in schools.

86 | Voices On The Economy

First, identify the market. That’s easy. It’s the soda market. Write that on the line below the graph on

the right side of the page.

Second, determine the market change. This happens in four parts:

! For part A, search for the relevant factor. Soda will not be sold in schools, and even though students

are still allowed to bring it in their lunchboxes, soda will be less available at school and less conve-

nient for students to buy. Check the twelve relevant factors and find “Availability/Convenience.”

Check the box next to that factor.

! For part B, shift the demand or supply curve. Remember, you don’t need actual data points (num-

bers) to plot a new curve. We’re just showing relationships between price and quantity. Since the

relevant factor affects demand, you shift the demand curve, and since it’s going to drop when soda

becomes less available, demand shifts to the left. Draw the shift on your graph.

! For part C, slide (move along) with the price change. At the original price, quantity supplied (QS) is

greater than quantity demanded (QD), which means the soda market has a surplus. When there’s a

surplus, price tends to come down. As price comes down, firms are less willing to supply, so there’s

movement along the supply curve down and to the left. Consumers become more willing to demand,

and there’s movement along the demand curve down and to the right. You write it this way on your

Market Change Guide: QS > QD, Surplus, P tends�.

! For part D, settle at the new equilibrium. Do you see it on your graph? It’s the new price where quan-

tity supplied meets quantity demanded. This is what conventional economists call the new market

clearing price. The new equilibrium price is lower, and the new equilibrium quantity is lower. This

shows that the market for soda is shrinking. This is a lot of information that you’re getting from your

graph, and the easy way to write it on the Market Change Guide looks like this:

New Eq. P�

New Eq. Q�

Search, Shift, Slide, Settle. This is how you analyze changes in markets from the conventional

perspective. You can do your own analysis whenever you come across a news story. For instance, when

you hear that the government is getting rid of regulations on air bags in cars, or when there’s a frost

in Florida that kills the orange crop, or when a health report comes out that says kale can extend your

life. How will those markets be affected, and what difference will it make in your life?

There’s one more thing left to do on your Market Change Guide: Decide. Liberals and conservatives

say that understanding market changes can help you make the wisest investments, the best purchasing

decisions, and the best career choices so that you can get the things you want in life. Look at your graph

and ask yourself if the best time to buy soda is now—before the sale of junk food is banned in

Chapter 4: Conservatives and Liberals—Conventional Theory | 87

schools—or after that new policy takes effect. You can see that you wouldn’t decide to buy soda now,

because the price is going to go down. Is this the best time to choose a career working for a soda

company? No, because when markets shrink, so do job opportunities in those firms. Is this the right

time to invest in a soda firm? No, because the stock price will likely fall as a result of this change.

You can fill in those decisions at the bottom right side of the Market Change Guide. (Yes-Y; No-N,

Maybe-M; Not Applicable-NA.)

ANSWER KEY: Exercise 4.1

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

P S

QQ 1

The Soda Market Q2

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

Demand Shifts Left

QS > QD, Surplus, P tends � N

New Eq. P� | New Eq. Q�

The Soda Market

88 | Voices On The Economy

Union OKs new contract, ending Tucson bus strike

The 42-day Tucson bus strike ended Wednesday when drivers, mechanics and other members of Teamsters Local 104 voted to accept a new contract.

The vote was 351-41, an 89 percent approval, said Teamsters Local 104 President Andy Marshall.

Everyone gets a raise under the new contract, he said, but he wouldn’t release contract details, saying he didn’t want to inflame opinions of people who are angry about the strike.

Professional Transit Man- agement, the contracted oper- ator of the city’s Sun Tran bus system, also would not give

details about the contract. There were no addition-

al city tax dollars in the deal, which stays within the ap- proved city budget for Sun

Tran, Marshall said. Additional details were not immediately available.

Sun Tran buses will be back to a normal schedule starting

Thursday, Sept. 17. During the strike, the number of buses and bus routes was limited, making for long waits in the heat.

Since the strike began, the Tucson Unified School Dis- trict has been providing bus service to high school students who rely on Sun Tran to get to class. Though full Sun Tran service is resuming, TUSD will continue to transport those students through the end of the week, said spokeswom- an Stefanie Boe.

See STRIKE, A4

By Becky Pallack ARIZONA DAILY STAR

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Union members try to listen from outside, with standing room only inside, during the voting.

Exercise 4.2: Market Change Guide

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

P S

QQ 1

Please use the Market Change Guide to analyze how the end of the bus strike could potentially

affect the market for public transportation. The Answer Key is below, but please don’t look until

you fill yours in completely.

Chapter 4: Conservatives and Liberals—Conventional Theory | 89

ANSWER KEY: Exercise 4.2

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

P S

QQ 1

The Public Transportation Market Q2

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

Supply Shifts Left

QD > QS, Surplus, P tends � Y

NANew Eq. P� | New Eq. Q�

The Public Transportation Market

90 | Voices On The Economy

Western US sees triple-digit temps in early heat wave

LAS VEGAS—Parts of the Western U.S. are getting an early taste of scorching summer heat, forcing officials in California, Oregon and the desert Southwest states to heed the warnings of danger- ous, triple-digit temperatures in the first week of June.

Organizers rescheduled California’s state track and

field championship events to start in the evening hours Fri- day and Saturday. The com- petition is being held in Clo- vis in the San Joaquin Valley, where daily highs are expect- ed to top 100 degrees through the weekend, according to the National Weather Service.

Precautions are also in place ahead of Portland’s

Rose Festival on Saturday in Oregon, when the mercury is expected to rise to 99 degrees in the city and 103 degrees downstate in Medford.

Marching bands have asked event officials if they can ditch some of the pomp and circumstances by taking off their hats and changing their uniforms during judged

performances to cope with the stifling heat, according to spokesman Rich Jarvis. The popular festival is also renting mist machines and handing out sunscreen around a carnival area on the Willa- mette River waterfront.

“We’re telling people, ‘Beware,’ ” Jarvis said. “It’s going to be tough.”

By Sally Ho THE ASSOCIATED PRESS

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Exercise 4.3: Market Change Guide

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

P S

QQ 1

Please use the Market Change Guide to analyze how higher temperatures could potentially affect the ice cream market. The Answer Key can be found at the end of the chapter.

Chapter 4: Conservatives and Liberals—Conventional Theory | 91

Price Signals and the Invisible Hand

Markets represent what happens when

demand and supply are joined together: they

create price signals, which are incentives for firms

and individuals to act. From the conventional

perspective, the invisible hand is a metaphor for

the process by which this happens—with no one

person or government entity masterminding it.

Like a maestro conducting the great symphony

of capitalism, the invisible hand guides suppliers

to produce what demanders want. And it ensures

that suppliers will make the most output at the

minimum cost; and that the products will go

to the demanders who want them the most.

Conventional theorists say it’s when we’re guided

by the invisible hand that our economic well-

being is ensured. They say we just have to look

around us to know that capitalism is the best

possible economic system.

Imagine you’re an alien from outer space,

hovering above Earth in your spaceship. When

you peer down at the planet through your giant

unblinking alien eye, you see shining cities and

productive farmland. You see industries improv-

ing every day, creating better products and better

technologies. Your eye swivels one way, and you

see that some of the earthlings are coming up with

innovative ideas and working day and night on

their start-ups, which end up changing the whole

world for the better. Your eye swivels the other

way, and you see that humans have pantries and

refrigerators full of all kinds of delicious foods

from different places around the world. Amazed,

you zoom your ship closer to the atmosphere to

take a better look. You see a bustling city with all

kinds of transportation and housing, and people

from diverse backgrounds and cultures engag-

ing with one another in the trade of goods and

services. All around them are a wide variety of

shops, housing, parks, entertainments, and jobs.

You wonder how all this came to be, and you

want to take a closer look. So you zip on your

human suit, and, disguised as one of them, you

walk the streets. You discover that earthlings have

marvelously advanced medical technology and

gleaming hospitals with state-of-the-art instru-

ments and people whose sole job is to come up

with new medicines and treatments. Earthlings

92 | Voices On The Economy

are motivated by self-interest to get their wants

and needs met, and firms are motivated by self-in-

terest to gain profit, yet their self-interests create

the greater good. Deeply impressed, you return

to your ship. You can’t see the invisible hand, but

you can see the effects of this marvelous mech-

anism on this lovely blue-green planet. Where

there is capitalism, profit brings prosperity to

societies and gives humans what they want and

need. As you turn your ship away from Earth, you

think to yourself, “What a grand idea!”

Conclusions

We just created the market change model of

conventional theory. Now let’s take a look at the

conclusions liberal and conservative economists

draw from it. Remember, conclusions are simply

the answers to the original questions.

What to Produce?

The model shows that in a market economy,

firms make us what we want (allocative

efficiency). When demanders want something,

demand for it shifts and a higher price results.

The higher price signals firms to act in their own

self-interest to maximize profit by supplying it

in the right quantity. Price signals tell suppliers

what to produce because the market economy is

guided as if by an invisible hand.

How to Produce?

The model shows that firms make us the

maximum amount of goods and services possible

using the fewest possible resources (productive

efficiency). To maximize profit, firms won’t hire

more workers than they need, or buy more delivery

trucks than they need, or rent more factory space

than they need, because those actions would cut

into their profit. Firms won’t waste resources,

because their self-interest motivates them to

maximize their profit. Price signals tell suppliers

how to produce because the market economy is

guided as if by an invisible hand.

For Whom to Produce?

The model shows that in capitalism, firms’

products go to those who most want those

products and therefore make choices to be able to

get them (distributive efficiency). Although people

have limited budgets that keep them from getting

absolutely everything they want, in capitalism, when

people are unhappy with their budget constraints,

they can invest in themselves—by getting more

training, for instance—so that they can qualify for

jobs that pay a higher wage, enabling them to be

able to satisfy their wants and needs. People follow

price signals in the labor market to know which jobs

Chapter 4: Conservatives and Liberals—Conventional Theory | 93

will bring them the income that will afford them

the things they want and need. Price signals tell

suppliers for whom to produce because the market

economy is guided as if by an invisible hand.

Enlightened Self-Interest

Conventional theory says that we flourish as

a society because when individuals and firms

act out of their own self-interest, those actions

enhance the well-being of all. Adam Smith wrote,

“It is not from the benevolence of the butcher, the

brewer, or the baker that we expect our dinner,

but from their regard to their own self-interest.

We address ourselves not to their humanity but

to their self-love, and never talk to them of our

own necessities, but of their advantages.” What

he meant by “advantages” was profits. Profit

is the way we make one another better off. As

individuals, on our own we can’t possibly make

all the things or provide all the services that we

want and need. We’re continually depending on

others, just as others are constantly relying on us

to provide what they want and need. One person

creates value (writes a book, invents an app, bakes

a cake, walks dogs, cuts hair) and then engages

in voluntary exchange with other people. So if

you make ovens and other people want and need

an oven, they exchange their work as teacher or

bricklayer, for example, to earn a wage, which

they then trade for the ovens you produce.

You already know this, of course. But conser-

vatives and liberals would urge you to really con-

sider what it means for your life. Consider that

there are people all over the world who have no

ovens. People in those countries often have to

spend their whole day gathering firewood just so

they can cook their stew over the flames and bake

their bread in the hot coals. Since you didn’t have

to go out and gather wood to make your dinner,

you had time to read this book, to start a busi-

ness, to do volunteer work. Adam Smith said that

by acting in our own individual self-interest, we

end up serving the interests of the whole commu-

nity—without any intention to do so. That’s what

he meant by enlightened self-interest.

The Benefits of the Invisible Hand

! Products We Desire

! High Standard of Living

! Abundance

! Incentives and Rewards

! Entreprenuerial Innovation

! Social Mobility

! State-of-the-Art Advancements

! Investment

! Profit

! Business Opportunities

! Jobs

! Maximum Social Welfare

! Choice

! Autonomy

! Cooperation

! Thriving Communities

! International Trade

! Prosperity

! Peace and Social Harmony

Policy Liberals and conservatives both believe that

capitalism is the greatest economic system; they

have that in common. But, like two siblings who

grow up in the same house and both love and

respect their parents, they still have bitter rivalries

about everything else. In fact, there are three

siblings in this book: radicals are the third, and

we’ll learn about radical theory in chapter 5. All

94 | Voices On The Economy

three economic perspectives share the same desire

for everyone to flourish in our society, but they

have very different visions for how to get there.

When it comes to policy—the course of action an

individual, group, or government takes based on

the conclusions of a theory—conservatives and

liberals only agree that it should be pro-capitalism.

Beyond that point of agreement, they have very

different ideas about which policies will solve our

urgent economic problems.

Liberals believe capitalism works best when

there is a partnership between firms and govern-

ment because this stabilizes and stimulates the

economy and makes competition in the market-

place more equitable. Liberals believe it’s not a

good idea to rely on the invisible hand alone to

bring markets back into balance. Because busi-

ness owners have an incentive to seek their own

self-interest, the government is needed to step in

and guide capitalism to ensure accountability and

transparency, stability, and equity. Acting in the

public’s interest, politicians and bureaucrats are in

the best position to design solutions to problems

because our government can take all interests

into consideration without being influenced by a

profit motive. And for those in society who fall

through the cracks, the government creates safety

nets to ensure the well-being of all.

For liberals, the story of Tatyana McFadden

shows how powerful the public-private part-

nership can be. Without a partnership between

government and business, there would have

been no accessibility ramps for her wheelchair

at the schools she attended, the stores where she

shopped, or the airports where she traveled. With-

out the helpful hand of government, there would

have been no wheelchair-accessible bus to pick

her up and drop her off at school every day. It

was because of the public-private partnership that

McFadden had access to the education, transpor-

tation, and health care she needed, say liberals.

And it was because of government that McFad-

den was assured she could attend the university

of her choice without being discriminated against

Chapter 4: Conservatives and Liberals—Conventional Theory | 95

based on her disability,

so she could have equal

opportunities to realize her

dreams. They say McFad-

den was able to realize

her potential because of

fair-market capitalism.

Conservatives believe

that government should

have only three roles: to

protect private property

(criminal justice system), to

build infrastructure (roads

and public works), and

to provide national secu-

rity. But when it comes

to markets, conservatives

believe in the laissez-faire approach to capitalism,

meaning the government should leave markets

alone and allow them to self-adjust through price

signals and the invisible hand. They say politi-

cians have the same incentive as anyone else to

act in their own self-interest, which means that

instead of making impartial decisions that serve

the public interest, government ends up serving

the interests of the groups that finance political

campaigns. Conservatives say the better approach

to solving problems in capitalism is to leave it up

to business owners, who know their own indus-

tries and therefore understand better than biased

politicians how to solve problems. They say

the profit motive will ensure that the owners of

firms make the most efficient decisions. And for

those in society who fall

through the cracks, fami-

lies, religious institutions,

nonprofit organizations,

and private and corporate

philanthropy create the

safety nets that ensure the

well-being of all.

For conservatives, the

story of Tatyana McFadden

shows the power of the free

market. Without needing to

be told by the government,

firms produced the gym

equipment she needed to

train and become a cham-

pion. Without being told by

government, the producers

of her racing wheelchairs

created state-of-the-art designs that improved the

sport for her and many other athletes. Without

the government meddling, McFadden was able to

secure sponsorships from corporations that pro-

vided her with what she needed to realize her

dreams. Conservatives say that Tatyana McFadden

was helped to realize her potential by free-mar-

ket capitalism.

This difference in approach to solving prob-

lems is the heart of the debate between Repub-

licans and Democrats when it comes to eco-

nomic issues. We’ll be examining that debate and

those issues, including the radical (Democratic

Socialist) perspective, in each of the upcoming

issues chapters.

When it comes to

policy, conservatives

and liberals only agree

that it should be pro-

capitalism. Beyond that

point of agreement,

they have very different

ideas on which policies

will solve our urgent

economic problems.

96 | Voices On The Economy

Conventional Theory: Capitalism

ASSUMPTIONS 2.MODEL i. Scarcity

ii. Individuals Maximize Happiness

iii. Firms Maximize Profits

i. Production Possibilities Curve

ii. Law of Demand

iii. Law of Supply

Self-Interest

Determinants of Demand

1. Income

2. Preference

3. Number of Buyers

4. Availability/Convenience

5. Prices of Substitutes and Complements

6. Future Expectations

Determinants of Supply

1. Cost of Inputs

2. Number of Firms

3. Taxes/Subsidies/Regulations

4. Prices of Related Goods

5. Changes in Technology

6. Future Expectations3.CONCLUSIONS

Market: Price Signals lead to the Invisible Hand

Enlightened Self-Interest

Conservative Policy a. Embrace Free-Market

Capitalism

b. Reject Government Interference • Self-Correction and

Opportunity

Liberal Policy a. Embrace Fair-Market

Capitalism

b. Support Government Partnership • Stability and Equity

I. What to Produce? Firms make what people want.

II. How to Produce? Firms make as much as possible using the fewest resources.

III. For Whom to Produce? Firms’ products go to those who want them most.

Chapter 4: Conservatives and Liberals—Conventional Theory | 97

Conventional Critique of Socialism

In politics today, conservatives (Republicans) and liberals (Democrats) are bitter opponents who constantly shout down each other’s

economic ideas. Their arguments center on how

much government involvement there should be

within capitalism, but as you just read, they are

in perfect agreement that capitalism is the best

economic system for creating prosperity. For this

reason, they both strongly oppose the radical idea

that capitalism should be replaced by democratic

socialism. In chapter 5 we’ll be taking a closer

look at the radical critique of capitalism. Right

now let’s take a closer look at the conventional

critique of socialism.

No Private Ownership

Socialism, be it democratic socialism, market

socialism, communalism, or any other form, has

at its foundation the communal ownership of

property. Sometimes this is also called government

ownership, or public ownership, or cooperative

ownership. Whatever it’s called, say liberals and

conservatives, abolishing private ownership and

trading it for communal ownership will always result

in less productivity and a lower standard of living

for everyone. You probably learned in elementary

school that in 1620 a group of colonists sailed to

the New World on the Mayflower and established

a settlement in Plymouth, Massachusetts. Many

settlers before them had tried to make a go of it

in the “New World,” but they all failed because of

famine and disease. You may have learned that

the Pilgrims only survived thanks to the help they

received from local Native Americans, who taught

the newcomers how to grow corn. You also may

have learned that the first Thanksgiving was a

celebration of the Pilgrims’ first bountiful harvest,

which signaled a turn in history—European settlers

were finally able to survive and go on to build this

nation. But this version of the story is not quite

right, according to some conventional economists.

They say the Pilgrim settlement almost failed

U n

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S tate

s p u

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98 | Voices On The Economy

because of the lack of private property rights. This

is how they tell the story:

When their settlement was first established, the

colonists drafted a document called the Mayflower

Compact, which established the rules for the new

colony. They agreed that instead of privately

owning their own land and growing food on it,

they would have a communal farm where every-

one worked the fields together. When this was

put into practice, however, there were problems.

Everyone received the same share of rations from

their communal store of supplies, and according

to the written accounts by the first governor, this

bred resentment because lazy workers received

the same amount of resources as hard workers.

So what was the point of working hard? There

wasn’t any—which is why people stopped work-

ing in the communally owned fields. The gover-

nor of the colony described in his diary how food

was left to rot in the fields because no one was

willing to go out and harvest it. Even those who

had previously shown themselves to be industri-

ous and diligent were unmotivated because of

communal ownership. The settlers ate through

their store of food and then started to go hungry.

Out of desperation the governor allocated sepa-

rate parcels of land to the colonists to farm. He

told them they could keep what they grew to feed

themselves and their families. Now highly moti-

vated to work hard because they would reap the

rewards, the colonists became industrious. They

planted more corn, had healthier harvests, and

ultimately flourished. According to this telling of

the Pilgrim story, private property was the game

changer. From the conventional perspective, this

is a cautionary tale. Socialism’s ban on private

property inevitably leads to poverty for all.

No Profit

The reward system of profit motivates people

to be productive, work hard, and innovate,

according to conservatives and liberals, and

socialism is doomed to fail—and indeed has

failed wherever it has been tried—because when

there is no profit motive, there is no incentive to

work hard. Here is how they see it: in capitalism

people are willing to toil, struggle, take risks, and

overcome hardships when they know they will

benefit directly from the rewards. In socialism

there is no direct reward for going the extra mile,

improving one’s skills, or coming up with brilliant

new ideas because profit is taken by the group

and distributed communally. Socialism’s rejection

of the profit motive kills off the entrepreneurial

spirit. Great achievements don’t come from

government bureaucracies but from individuals

pursuing their own self-interest. In fact, socialism

actually creates a disincentive for people to come

up with new inventions and technologies. Workers

in socialism have more incentive to protect their

job security than to come up with efficiencies that

could improve production if the result were to

make them less necessary. If they aren’t going to

directly benefit from the profits those innovations

bring, then why should they bother? In every case,

say conventional critics, socialism lowers the bar

for productivity and leaves us in the dark ages.

No Price Signals

Socialism creates the worst scenario for an

economy, say liberals and conservatives. Here’s

their argument: It strangles the very things that

leads to the rational distribution of resources, which

are price signals. They are incredibly complex

and elegant mechanisms to distribute resources

to their best possible uses, but in socialism the

whole system crashes. Suppose government is the

only provider of health care (socialized medicine

is a common scenario in socialism). It will be the

only demander of ambulances, X-ray machines,

and bandages. The costs for those resources

should reflect how desirable and abundant they

are, but when there is only one demander—

government—the cost doesn’t reflect that at all.

Chapter 4: Conservatives and Liberals—Conventional Theory | 99

For producers, this means there’s no way to

determine the ideal quantity to produce. Price

guides those kinds of decisions. The end result is

that resources are used inefficiently.

There’s another problem with not having price

signals, say conventional critics. In socialized

medicine there is no price for health care since it’s

provided for free. It’s not in a market; therefore,

people end up overusing it. Without a price signal

for health-care services, the provider—the social-

ist government—can’t know if it’s a good idea to

continue offering preventive yoga classes or if it

should use that budget for vaccination programs.

Prices are vital in a world of scarcity because they

direct how society allocates resources so that

people can actually get what they need and want.

Prices are the beacons that guide decisions about

how to move forward.

There are no substitutes for price signals, say

conventional theorists, and socialism fails at its

attempts to achieve the same outcomes through

central planning. Picture a group of people in a

conference room somewhere deciding for us what

will be produced, how it will be produced, and

for whom it will be produced. Failure is inevita-

ble when any socialist government tries to replace

price signals with a planned economy because

economic systems are too complex and unpre-

dictable, and all the moving parts are constantly

in motion. Socialists may have the best intentions

to create prosperity but micromanagement won’t

work. There is no rational way any individual,

group, or government can make all those count-

less decisions that are guided organically through

price signals and the invisible hand of capitalism.

Whatever tortured calculation the planning com-

mittee in a central office somewhere comes up

with will inevitably lead to the wrong allocation

of resources, which will give people the wrong

combination of products and the wrong quantities

of products. For instance, they’ll decide to make

stretch polyester shirts instead of the cotton shirts

that people actually want. It will lead to shortages

and surpluses—warehouses stuffed with boxes of

stretch polyester shirts that no one wants, and long

lines of people desperate to buy one of the few

cotton shirts that were produced.

One reason central planning fails, say conven-

tional theorists, is the local knowledge prob-

lem—the fact that government planners lack the

very specific industry knowledge that private own-

ers have cultivated through training and experi-

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100 | Voices On The Economy

ence about production. This is not something that

a government committee can know. It includes

things like the quirks of the particular technology

in that industry, the regional transportation delays

that can happen, where to find the best tools and

materials, the challenges of finding workers with

the right skills, the distribution opportunities that

are possible during certain seasons of the year, and

so forth. A central planning committee can’t repli-

cate this local knowledge, say conventional crit-

ics, and trying to use it to circumvent price signals

threatens our prosperity.

No Hierarchy Socialist workplaces are often cooperatively

owned and run on a democratic basis, with each

worker-owner having a vote on decisions about

what to produce, how to produce, and for whom

to produce. From the conventional perspective,

there is good reason to be cautious about using

democratic decision-making in firms. If, for exam-

ple, a firm owned by the workers democratically

decides to offer a base wage of $30 per hour,

the business might quickly become unprofitable

and uncompetitive if that decision was made in

the absence of price-signal feedback. Democratic

socialism can actually jeopardize long-term sus-

tainably of firms, they argue. It can become mob

rule, and then firms won’t make the hard decisions

that benefit the company (and society). Further,

they say that in cooperatively owned firms there’s

a high transaction cost—the time it takes to lis- ten to everyone’s ideas and feelings about every

matter pertaining to the running of the firm. The

bottom line for conservatives and liberals is that

both mob rule and high transaction costs lead to

stagnating businesses and a stagnating economy.

No Competition

When we trade capitalist markets for socialist

government control, we end up with mediocre

products, no choice, and bureaucratic red tape,

say liberals and conservatives. Here’s the crux of

their argument: Suppose there is only one shoe

company in your socialist country—communally

owned, of course. It makes only one kind

of pinchy shoe in a frumpy style with cheap

materials. Government-controlled industries can

be inefficient and wasteful, can fail to produce

what people want, and can overcharge because

they have no competition. You need to have

shoes to wear, so you’ll have to buy the pinchy

ones because there are no other options. No

competition means there’s no incentive to invent

more comfortable and stylish shoes. This is true not

just about shoes but about everything in society

because in socialism the government controls

whole sectors of the economy—including health

care, housing, transportation, higher education,

and so forth. Without competition, we won’t get

state-of-the-art health care, or high-speed trains,

or the most energy-efficient housing, but we will

get high-priced and low-quality products, say

conservatives and liberals. They believe socialism

leads to a low standard of living in which everyone

is stuck together in the misery of mediocrity and

unmet needs.

No Democracy

Liberals and conservatives often warn that

socialism inevitably erodes democracy and leads

to totalitarianism. They offer several reasons why

this outcome occurs. The first is that socialism’s

central planning takes away individual choice.

Even though people can still go to the polls on

election day and cast a vote, it’s never on the

ballot to change the ownership of the sectors that

the government controls—the health care system,

public utilities, transportation, and so forth.

Liberty, choice, and self-determination are traded

for more government control, and the end result

is less democratic control by the people.

The second reason conservatives and liberals

are concerned about socialism eroding democracy

Chapter 4: Conservatives and Liberals—Conventional Theory | 101

is their belief that abuse of power is more likely

to occur when control of the economy is in the

hands of a few people—even the most well-inten-

tioned people—because there are fewer checks

and balances to keep bureaucrats honest. Instead

of the government staying out of business (free

market) or partnering with business (fair market),

socialism empowers the government to run busi-

nesses, and so inevitably the government must

take on the role of tyrant and enforcer because

socialism is a system that demotivates workers.

When workers aren’t productive, the whole soci-

ety is on the brink of starvation and deprivation,

so the only choice left to the government is to

step in and force people to work. They may not

want to be tyrants, but socialist governments must

make sure wealth is generated to keep the whole

system going—even if that means terrorizing peo-

ple to keep them fed.

A third argument raised by conventional theo-

rists is that in a socialist economy there is bound

to be less productivity, which means more hunger

and deprivation, so it’s natural that people will take

desperate measures to feed their families. Illegal

private markets will form to compete with social-

ist-controlled markets. The government will have

to ban black markets because they are a form of

private ownership and those who participate are

therefore stealing from the socialist system. The

government will have to take on a policing role,

interrupting black-market trading and prosecuting

people for economic crimes. Critics say that the

The Dangers of Socialism According to Conventional Theory

CAUSE EFFECT

No private property Poverty for all

No profit No innovations

No price signals Misallocation and inefficient use of resources

No hierarchy Mob rule and high transaction costs

No competition High prices and low-quality products

No democracy Totalitarianism

102 | Voices On The Economy

outcome of socialism is government coercing peo-

ple to comply with an economic system they don’t

actually want.

The fourth argument for why socialism leads

to totalitarianism arises from the conventional

assumption of the scarcity of resources. Conserva-

tives and liberals say that with private ownership,

price emerges from voluntary trade in markets,

and price moves people’s desires and behaviors

to distribute scarce resources in the best ways to

meet wants and needs. But socialism forces society

to allocate resources toward certain things (hous-

ing, health care, transportation, education, and so

forth), which means those resources aren’t avail-

able for other things that people might want or

need more. Liberals and conservatives say social-

ism leads to loss of democracy, freedom, and lib-

erty; coercion and violence; and abuse of power.

Economic Well-Being from Diverse Perspectives

T he VOTE Program doesn’t advocate for one economic theory over another. Our method is to line up the liberal, radical, and conservative

perspectives sides by side in a balanced and accurate

way so that you can understand their analyses,

evaluate their ideas for yourself, and make up your

own mind about what you believe. Then you can

use your voice to join the conversation. As we delve

into the thirteen issues of the VOTE Program, we’ll

be putting on a mask (metaphorically, of course)

and channeling the voices of the conservative,

radical, and liberal perspectives for each of the

issues and articulating their different ideas for

creating economic well-being. The best way to hear

these “voices” is to imagine that you’re listening to

someone who is a passionate advocate for that

perspective. This person really wants you to picture

what their ideal world would look like if our country

followed their policies for economic well-being. Try

to imagine what their utopian vision would be like.

Do you agree with their views? Is that the world you

want to live in? Does their analysis of the problem

make sense to you? Does their solution make sense

to you?

In the VOTE Program we believe that through

a process of respectful listening, passionate advo-

cacy, and intelligent debate, we’ll find ways to solve

our nation’s most entrenched problems. As you go

through this process you might come to believe in

your own views even more strongly or see ways

for the proponents of the different perspectives to

cooperate, compromise, or collaborate on solu-

tions. You might be convinced to change your per-

spective, or maybe you’ll be sparked to come up

with brilliant new solutions.

Let’s practice listening to the voices of the liber-

als and conservatives as they describe their visions

for economic well-being in the section below. At the

end of chapter 5, we’ll hear the voice of the radi-

cal perspective.

Chapter 4: Conservatives and Liberals—Conventional Theory | 103

The Conservative Voice: Free-Market Capitalism

Life, liberty, and the pursuit of happiness are

inalienable rights we all cherish. When we create

prosperity, we can realize the American Dream

because economic well-being is the foundation

of a good life. It allows us to flourish and thrive.

What is the best way to create wealth in our

nation? The best way is through unfettered capi-

talism as our economic system, with government

as our political foundation. The economic sys-

tem of free markets, resting on strong constitu-

tional protections of private property, gives us

all the liberty to realize our highest potential. It

unleashes our ability to accumulate the greatest

wealth and enjoy the highest standard of living,

and it allows us to take care of our most vulnera-

ble populations.

For thousands of years human beings wal-

lowed in abject poverty. A select few experienced

comfort and material wealth, but the vast major-

ity of people led miserable lives of deprivation.

Then we were given the gift of capitalism. People

could own their own land, their own labor, and

their own capital. Acting from self-interest, indi-

viduals and firms came together in free markets,

and that’s when the transformation happened:

humanity went from the gutter to the skyscraper.

How did we get to the skyscraper? Humans

achieved new heights of prosperity through free

markets, price signals, and the invisible hand. Act-

ing from self-interest, individuals demanded sky-

scrapers—and cars, and health care, and entertain-

104 | Voices On The Economy

ment, and everything else we wanted for a good life.

Acting in their self-interest, firms responded when

the prices for those products went up—by pro-

ducing more skyscrapers, more cars, more health

care, more entertainment, and more of everything

else we wanted. When we leave capitalism to its

own devices, firms make us what we want, and

they do so on their own initiative—not because

they are told to do so or out of a sense of altruism.

They make us what we want because they follow

their own motivation to maximize profit. They not

only make us what we want, but they achieve lev-

els of production along the way that our ancestors

could never have imagined. Through enlightened

self-interest, the free market gives us untold wealth

because individual self-interest is beneficial to the

greater good. The invisible hand is the force that

guides the endless ebb and flow of supply and

demand to ensure that we get our needs met. We

never have to worry about having enough food

or enough housing or enough transportation if we

make good decisions in our lives, because the free

market delivers everything we want in abundance.

When we leave capitalism to its own devices on a

foundation of constitutional democracy, the result

is perfect equilibrium in every market, to our col-

lective well-being. We can thank capitalism for

every meal, every pair of jeans, and every time the

lights turn on.

When capitalism is unfettered, all of us are

afforded ample opportunities to get exactly what

we want, regardless of class, race, age, gender,

national origin, sexual orientation, religion, or abil-

ity. Through hard work and personal initiative, we

are all able to realize our potential, contribute our

genius, support society through our philanthropy,

and flourish. Free from government interference in

the free market, firms don’t discriminate or engage

in favoritism or bias, because those behaviors are

contrary to the drive to maximize their profit. That

means the playing field is level. Everyone has the

chance to succeed and prosper. We’re fortunate to

live in a democracy where we are guaranteed the

right to the pursuit of happiness. Only when we

leave capitalism alone will it deliver on that prom-

ise of freedom because it is inherently efficient,

equitable, and responsive. It creates the best possi-

ble conditions for us to thrive. When we leave cap-

italism to its own devices, we realize the American

Dream with peace and social harmony.

The Liberal Voice: Fair-Market Capitalism

Life, liberty, and the pursuit of happiness are

inalienable rights we all cherish. When we create

prosperity, we can realize the American Dream

because economic well-being is the foundation

of a good life. It allows us to flourish and thrive.

What is the best way to create wealth in our

nation? The best way is through capitalism in part-

nership with a democratically elected government.

The economic system of capitalism, resting on the

strong constitutional protections of a free and open

society, ensures fairness and opportunities for all

of us to realize our highest potential. It unleashes

our ability to accumulate the greatest wealth and

enjoy the highest standard of living, and it allows

us to take care of our most vulnerable populations.

Throughout the ages, human beings have strug-

gled to rise out of poverty. For millennia we scraped

by in conditions of squalor. Only a select few were

able to achieve lives of comfort and material secu-

rity. Then capitalism came along, and private own-

ership of land, labor, and capital enabled some

people to prosper, though many never moved up

Chapter 4: Conservatives and Liberals—Conventional Theory | 105

the economic ladder. Uniting capitalism with our

representative government, we created opportuni-

ties for those left behind and left out. Government

programs and public-private partnerships leveled

the playing field so more of us could prosper, and

that’s when we all realized the promises of capital-

ism: humanity went from silver spoons for a few to

a feast of opportunities for the masses.

How did we create this feast? Government and

private industry came together to act in the best

interests of us all, taking into account our needs now

and the needs of future generations. Government

invests in social infrastructure that serves our collec-

tive self-interest—things like highways, education,

public safety, clean water, health care, transporta-

tion, and more. Because of the dynamic partnership

between private-sector capitalism and public-sector

government, firms are able to innovate and create

jobs and products that improve our lives immeasur-

ably, so more people can partake of the feast of cap-

italism. Capitalism is driven by the profit motive, and

it joins with government, which is driven to benefit

the public at large. Together they bring us what we

could never create on our own as individuals. We

act in both our own self-interest and our collective

self-interest to create the best possible conditions to

thrive. We never have to worry about having access

to a health-care system, and we get the best-trained

doctors, cutting-edge treatments, and innovative

technologies. We never have to worry about facing

natural disasters or other emergencies on our own,

and we get the most effective equipment and best-

trained personnel. We all win because we all have

access to the things we need, including jobs, safe

products, and a clean environment.

Through hard work, personal initiative, and

assurance of fair competition, we are each able to

realize our genius, contribute to society, and flour-

ish. These opportunities are available to people

of every class, race, gender, age, national origin,

sexual orientation, religion, and ability because

the government has ensured that the playing field

106 | Voices On The Economy

is level. Through the harmonious partnership of

capitalism and democracy, firms don’t discrim-

inate or engage in favoritism or bias. Everyone

has an equal chance to succeed and prosper. And

in hard times the public-private partnership gets

the economy back on track through stimulus pro-

grams and regulations. We’re extremely fortunate

to have a government that is of the people, by

the people, and for the people. It protects prop-

erty rights and human rights, the environment,

and vulnerable groups that would otherwise be

excluded from sharing in the rewards of capital-

ism. It ensures that capitalist competition is fair and

equitable. It ensures that people who work hard

will prosper. Capitalism’s private ownership and

profit incentive, coupled with government’s com-

mitment to our collective well-being, deliver the

American Dream with peace and social harmony.

More Sides to the Story

Now you understand how conservatives and

liberals analyze economic issues. You know why

they differ on their ideas about policy and the

role of government in markets and why they are

united in their view that socialism is a dangerous,

wrongheaded economic system. But there’s

more to the story. In the next chapter you’ll

read the radical critique of capitalism and learn

how democratic socialists derive their economic

policies. Then you’ll have everything you need

to decode the conversations taking place around

you. You’ll be ready to apply what you’ve learned

to analyzing the thirteen economic issues of the

VOTE Program and help guide the future of our

nation by using your voice. In the words of the

Spider-Man comic book: “With great power there

must also come great responsibility!”

Chapter 4: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. All the following are assumptions (givens) of conventional theory EXCEPT: A. Scarcity of resources is an unchanging condition of the natural world. B. Human nature dictates that people will be cooperative and altruistic. C. The self-interest of firms is to maximize their profits. D. The self-interest of individuals is to maximize their happiness by acquiring more goods

and services.

2. The Law of Supply and the Law of Demand identify relationships between price and quantity. The law of demand states that when price goes up, quantity demanded __________, while the law of supply states that when price goes up, quantity supplied __________.

A. decreases; decreases B. decreases; increases C. increases; increases D. increases; decreases

Chapter 4: Conservatives and Liberals—Conventional Theory | 107

3. Consider the bicycle market graph below. Please identify the quantity of bicycles supplied and demanded at $400 and the way in which equilibrium will ultimately be restored.

A. Quantity Demanded (QD) is less than Quantity Supplied (QS). Given this surplus, price will tend to go up and the market will settle at equilibrium (P = $600; Q = 400).

B. Quantity Demanded (QD) is greater than Quantity Supplied (QS). Given this shortage, price will tend to go down and the market will settle at equilibrium (P = $600; Q = 400).

C. Quantity Supplied (QS) is greater than Quantity Demanded (QD). Given this surplus, price will tend to go down and the market will settle at equilibrium (P = $600; Q = 400).

D. Quantity Supplied (QS) is less than Quantity Demanded (QD). Given this shortage, price will tend to go up and the market will settle at equilibrium (P = $600; Q = 400).

4. In the coffee market, which of the following will shift the demand curve to the right? Choose all that apply.

A. It is expected that the price for coffee will go up because of weather-related problems in Central America.

B. A new tax is imposed on coffee producers. C. Average incomes increase. D. The price of tea goes down.

Please use the Market Change Guide to answer the next two questions.

5. Advances in artificial intelligence are being used to more effectively fill containers of shampoo, hand lotion, liquid soap, and similar kinds of products. Please use this information to determine the order of the market change in the sunscreen market.

A. Search i. QS > QD, Surplus, Price tends � B. Shift ii. Supply shifts right C. Slide iii. Equilibrium price �; Equilibrium quantity � D. Settle iv. Increase in technology

$1,000

$600

$800

$400

$200

200 300 400 500 600

Q The Bicycle Market

108 | Voices On The Economy

6. Please pick the graph that matches the market change described in question #5 and then identify what decisions make the most sense (refer to part 3 of the Market Change Guide).

A. Graph iv; Purchase after change? Y; Career in industry? Y; Invest now? Y B. Graph i; Purchase after change? Y; Career in industry? N; Invest now? N C. Graph ii; Purchase after change? N; Career in industry? M; Invest now? M D. Graph iii; Purchase after change? N; Career in industry? N; Invest now? N

7. Conclusions answer the original questions: how to produce, what to produce, and for whom to produce. Conventional theory’s conclusions show that in capitalism firms won’t hire more workers than they need or engage in wasting resources at any level of production. As a result, we end up with __________.

A. Distributive Efficiency B. Productive Efficiency C. Allocative Efficiency D. All the above

P S

QQ 1

The Sunscreen Market Q2

P S

QQ 1

The Sunscreen Market Q2

P S

QQ 1

The Sunscreen Market Q2

S2 iii

P S

QQ 1

The Sunscreen Market Q2

Chapter 4: Conservatives and Liberals—Conventional Theory | 109

8. Liberals and conservatives agree on the assumptions, model, and conclusions of conventional theory, but they disagree when it comes to policy. Which of the following represents their policy positions?

A. Conservatives want democracy in the workplace; liberals want more government oversight.

B. Liberals want government to leave markets alone; conservatives want more government oversight.

C. Conservatives want the invisible hand to guide the market; liberals want a partnership between government and business to guide the market.

D. Liberals want the invisible hand and community councils to create prosperity; conservatives want self-interest and regulations to create prosperity.

9. Conventional theorists believe that socialism is dangerous to the prosperity of a society. Please pick the statement(s) below that is/are consistent with this conventional argument.

A. Central planning leads to too many price signals. B. Without private property, no one works hard. C. Without the government’s help, firms won’t know what to produce. D. No profit motive means there’s no incentive to innovate.

10. Conservatives and liberals say that in socialism the lack of hierarchy leads to which of the following outcomes?

A. Increased prosperity B. Mob rule C. High transaction costs D. B and C only

Answers

1. B 2. B 3. D 4. A & C 5. A – iv, B – ii, C – i, D – iii 6. A 7. B 8. C 9. B & D 10. D

110 | Voices On The Economy

Chapter 4: Key Terms

Central planning Ceteris paribus Complement Conventional theory Curve Demand curve Demanders Dependent variable Determinants of Demand

Income Preference Price of complements/

substitutes Availability Future Expectations Number of buyers

Determinants of Supply Cost of inputs Number of firms Taxes, subsidies, regulations Prices of related goods Changes in technology Future expectations

Equilibrium Graph Independent variable Inverse relationship Law of demand Law of supply Local knowledge problem Move along Negative slope

Origin Positive relationship Positive slope Quantity demanded Quantity supplied Scarcity Shift Shortage Substitute Suppliers Supply curve Surplus Technology Transaction cost

Answer Key to Exercise 4.3

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Market:___________________________________

3. Decisions (Yes, No, Maybe, Not Applicable)

3a. Purchase before this change? ______

3b. Choose a career in this industry? ______

3c. Invest now? ______

P S

QQ 1

The Ice Cream Market Q2

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

Demand Shifts Right

QD > QS, Shortage, P tends � Y

YNew Eq. P� | New Eq. Q�

The Ice Cream Market

ch5

You might have heard of the Occupy move-ment, which began four years after the start of the Great Recession in 2007. It started as Occupy Wall Street—a protest move-

ment against what activists saw as the corporate

greed that led to the biggest economic disaster

in our country since the Great Depression. The

Occupy movement organizers accused the gov-

ernment of not holding banks accountable for the

economic mess they had made. They said govern-

ment spent taxpayers’ dollars to bail out the very

banks that had sent the nation into the economic

tailspin in the first place. The Occupy movement

spread to cities across

the country. It was

2011, and millions of

people had lost their

homes to foreclosures,

millions of companies

were out of business,

and unemployment

rates across the nation

soared. Protesters were

also fueled by out-

rage that 1 percent of

the world’s wealthiest

people owned more

than the other 99 per-

cent of the population. They occupied parks and

other public spaces in their cities and towns and

demanded economic justice, which they defined

as an end to the grotesquely enormous divide

between the richest and the poorest, and an end

to corporate influence in politics. Their motto was

“We are the 99 percent!”

The Occupy movement started out peacefully,

but some demonstrations turned violent when

protesters and police confronted each other.

Police were sent to break up protesters’ encamp-

ments, and some activists were forcibly removed

from public spaces. Others were hit with pep-

per spray. Emotions

ran high when police

hauled people away

in handcuffs. The

Occupy movement

eventually disbanded,

but its message con-

tinues to echo in the

words of political

leaders. In 2016 U.S.

Senator Bernie Sand-

ers, an Independent

from Vermont, sought

the Democratic Party

nomination for presi-

5Radical Theory R

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R S

/ M ike

S e

g ar - sto

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.co m

114 | Voices On The Economy

dent. Sanders spoke passionately about disman-

tling big banks and closing the gap between the

1 percent and the 99 percent. More than 13.2

million people voted for him, and some analysts

believe that number doesn’t come close to cap-

turing the broader level of support he had among

youth and others who couldn’t vote. For instance,

surveys after the primary election revealed that

many who supported Sanders cast their votes for

the other candidates because they didn’t believe

he could win. The unexpected groundswell of

support for Sanders crossed all demographics

and took both Democrats and Republicans by

surprise, particularly because Sanders identified

as a democratic socialist. Before his primary run,

few Americans had heard of democratic social-

ism. The most basic definition is that democratic

socialism is an economic system that prioritizes

people over profits.

“Democratic socialism means that we must

create an economy that works for all, not just

the very wealthy,” Sanders explained in a 2015

Time magazine article. He also said, “My vision— it’s not just making modest changes around the

edge.” He was referring to his call for free tuition

at public universities, campaign finance reform,

and single-payer health care. He advocated for

many democratic socialist ideals, including paid

family leave for workers, Wall Street reform, and

universal health care. Although he didn’t win the

nomination, his ideas and the ideals of democratic

socialism changed the public conversation about

economic solutions. In the 2018 midterm election,

dozens of candidates ran as democratic socialists

on the national, state, and local levels, and many

won seats against longtime incumbents.

There was another Occupy movement that

had a very different outcome than the one in the

United States. Argentina struggled with an eco-

nomic depression from 1998 until 2002, with the

economy fully collapsing in 2001. With millions

of people out of work and thousands of facto-

P h

o to

b y G

ag e

S kid

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Chapter 5: Radical Theory | 115

ries shut down, the wage laborers who had once

been employed in the factories that churned out

auto parts, bread, ceramics, and other products

suddenly found themselves living in ghost towns

of boarded-up factories. The way Occupy activists

tell this story, the government was overwhelmed

by the crisis and offered the unemployed pop-

ulation little relief and no real solutions to the

economic mess. So workers came up with their

own solution. They took over the factories where

they had once been employed. They knew how

to run the machines, so they got them up and

running again and went into business together

as worker-owners. They used a democratic pro-

cess to manage the businesses. Each worker had

a voice and a vote, and they decided collectively

what, how, and for whom to produce. The idea

of cooperative ownership caught on all over the

country, with thousands of workers taking over

the factories where they had once been employ-

ees. The empresas recuperadas (recovered busi-

nesses) movement, as it was called, made the fac-

tories productive again, brought back jobs, gave

communities a chance to recover, and helped the

economy start to improve. Worker-owners across

Argentina banded together under the motto that

translates as “Occupy. Resist. Produce.”

Karl Marx would certainly have been heartened

by this story. He was the one who famously said,

“Workers of the world, unite; you have nothing to

lose but your chains.” But replacing private own-

ership with cooperative ownership in Argentina

was not a harmonious process, as Marx could have

predicted. He said capitalists would not willingly

give up their power, and warned that capitalism

leads to bloody, violent confrontations between

workers and law enforcement, whose duty it is to

protect the private property rights of the capitalist

owners. In Argentina, eventually the worker-own-

ers and the private owners took their battles to

court. The workers argued that they had a legit-

imate right to the capital (machinery and factory

space) because their tax dollars had funded those

factories for years through government grants,

loans, tax breaks, and subsidies. A documentary

was made about a ceramics factory called Zanon.

When the workers won their battle in court, they

changed the name of the business to FaSinPat,

short for Fábrica Sin Patrones (Factory Without

Bosses). Other worker-owners also won their

court cases. As of 2017, there were more than

three hundred cooperatively owned companies in

Argentina, including factories, hotels, media com-

panies, transportation firms, schools, restaurants,

health-care providers, and more.

U .S

. P u

b lic

D o

m ai

116 | Voices On The Economy

Cooperative Ownership in Democratic Socialism

Democratic socialism can have many different

forms of ownership, including public ownership

of certain institutions, community ownership,

nonprofit ownership, and cooperative ownership.

In the VOTE Program we describe the form of

democratic socialism that uses a combination of all

these, while emphasizing cooperative ownership.

Seven in ten people in the United States work

for someone else. That means three in ten are

either self-employed or have an ownership

stake in their workplaces. Imagine you and your

co-workers are each partial owners of the place

where you work. This is called a cooperative. Cooperatives (co-ops, for short) are jointly owned

and democratically run enterprises. They can be

firms, public utilities, universities, or any other

kind of business. With cooperative ownership,

people voluntarily work together to meet their

shared social, economic, cultural, and political

needs. There are a variety of forms this can take.

Worker-owned cooperatives are literally owned by the workers and governed democrat-

ically, meaning everyone has a voice and a vote

and is part of the decision-making process. But

it won’t look the same in every firm, because

worker-owned cooperatives each decide how to

structure the business. For example, every mem-

ber might vote on all or most management deci-

sions. Or worker-owners might vote periodically,

while leaving the day-to-day decision-making to

designated managers who have expertise in those

areas. Some firms have rotating decision-making

positions so that everyone in the company has an

opportunity to take leadership in those roles. You

may be interested to learn that worker-owners gen-

erally each have a say in the company’s pay scale

and benefits, in the hours they work, and in what

K e

n n

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W e

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Chapter 5: Radical Theory | 117

and how and for whom their firm produces. This

is considered a major plus of worker ownership,

say radicals. Cooperatives may be small locally run

businesses. They can also be large multinational

corporations or any size in between.

In Cleveland, Ohio, for example, the Ever-

green Cooperatives are a network of three linked

worker cooperatives that started out in 2008 with

a laundry service and then added a solar installa-

tion and energy retrofit business. Now they also

have one of the larger urban greenhouses in the

United States that produces hydroponic lettuce

and other vegetables and herbs. Evergreen uses

a mixed model of cooperative and community

ownership with a community-controlled corpora-

tion that oversees the cooperatives.

In the Basque Country of Spain, a worker-owned

corporation called Mondragon started out in 1956

producing paraffin heaters. By 2017 the multi-

national corporation comprised more than 250

worker-owned companies with more than 80,000

workers across the globe—most of whom are

worker-owners. With tens of billions of dollars in

total assets, it was listed as one of Spain’s largest

multinational corporations. It has businesses in

finance, industry, retail, and knowledge (including

a cooperatively owned university).

Consumer cooperatives, which are owned by the customers, who each get a share of the profit.

Sometimes it’s in the form of a discount. You may

already be a member of one. Examples include the

Green Bay Packers, REI, Nationwide Mutual Insur-

ance Company, credit unions, food co-ops, and a

wide variety of housing cooperatives. Consumer

co-ops are structured so that member-owners may

vote on certain aspects of the business.

Producer/marketing cooperatives are made up of independently owned businesses (some

privately owned and some cooperatively owned).

The owners collectively market and sell their

goods under one brand or label. You might have

been buying products for years from co-ops

without even knowing it. For example, Organic

Valley, Sunkist, Ocean Spray, Welch’s, and Land

O’Lakes are all cooperatives. Many producer/mar-

keting cooperatives are in the business of agricul-

tural products. This is simply because it’s often

more profitable for independent farmers to band

together and market their products under one

label they own together rather than to sell their

products to a big corporation that will take more

of the profits and not give the farmers a say.

118 | Voices On The Economy

Purchasing/retail cooperatives are also made up of independently owned businesses

(some privately owned and some cooperatively

owned). They come together under one brand or

label to purchase inputs, which saves them money.

You’ve probably done business with at least one

of these co-ops. Examples include Ace Hardware,

Best Western, Carpet One Floor & Home, NAPA

Auto Parts, and ShopRite Supermarkets.

Just to be clear, cooperatives all have a demo-

cratic structure, but they are not “one size fits all.”

The way they are set up and run reflects the val-

ues, personalities, and desires of those involved.

They create their own organizational structures

and rules to establish work cultures, missions,

and diversity, and these reflect their collective val-

ues and priorities.

Radicals point out that cooperatives aren’t just

an interesting theoretical idea; they are already a

significant—and growing—part of the U.S. econ-

omy, with tens of thousands in operation. Radicals

say that in countries around the world, coopera-

tives have been part of the economy and people’s

lives for decades. A United Nations study reports

that there are millions of cooperatives around the

globe, which employ hundreds of millions of peo-

ple. It says that a billion people are either mem-

bers or clients of cooperatives. Radicals believe

that through cooperatives, workers lift themselves

out of poverty, creating a society where everyone

can thrive. Here’s how Mondragon describes its

philosophy: “A conscious commitment to coop-

erate and to progress together. People who col-

laborate and join efforts and dedication. People

united to do great things. To be more competi-

tive. To get further. That is Mondragon. Joint work

to overcome extraordinary challenges. Humanity

at work.”

Co-op Statistics Worldwide Number of Cooperatives:

3.0 million (U.S. 40 thousand)

Worldwide Number of Members: 1 billion (U.S. 350 million)

Worldwide Employment: 280 million

Worldwide Turnover in U.S. Dollars: 2.1 trillion

Chapter 5: Radical Theory | 119

Building Radical Theory in Two Parts

Remember, Karl Marx was a philosopher who spent most of his life working on a critique of capitalism while writing very little about what

kind of economic system should replace it. That’s

where it gets interesting. For more than a century,

radicals—who generally agree on the assumptions,

model, and conclusions of the critique of

capitalism—have bitterly argued and passionately

disagreed about what Marx really thought was

the best alternative to capitalism (policy). In the

VOTE Program the radical perspective we present

is democratic socialism simply because that is the

economic system that is currently discussed in

the mainstream debate in the United States. We’re

going to build radical theory in two parts: since

Marx’s work is a critique of capitalism, part 1 is

capitalism; part 2 is democratic socialism.

Radical theory starts with a set of questions

concerning wealth creation that should sound

very familiar to you by now. What should we

produce, how should we produce and for whom

should we produce it? We build theory with three

components: assumptions, model, and conclu-

sions. After we build the theory of capitalism from

the radical perspective, we’ll discuss the policy

that emerges from the conclusions. Then we’ll do

the same for democratic socialism.

Assumptions

As you will recall, assumptions are statements

that don’t have to be proven; they are self-

evident “givens” about human nature and the

natural world. These can be applied to capitalism,

democratic socialism, or any economic system.

The first radical assumption is that there is a

surplus. To break it down for you, just imagine that in every generation there are people who

can’t produce anything—infants, disabled people,

the elderly, and so forth. So how do they manage

to survive? Every society has members who pro-

duce more goods and services than they need for

their own personal survival. That’s the surplus. If

you produce wheat, or shoes, or medicine, you

don’t just produce enough for you; you produce

more than you can consume as an individual.

Radicals assume that surplus is produced no mat-

ter what the economic system (feudalism, mer-

cantilism, capitalism, democratic socialism, and so

forth), and that this has been true since humans

first came into existence. It’s self-evident, they

say, since it’s the only way human society could

possibly have survived and reproduced itself over

time. At different times in your life your survival

has and will depend on the surplus produced by

others.

The second assumption of radical theory is

class process. This simply says that, when it comes to surplus, there are differences between

who makes the surplus (production), who takes

the surplus (appropriation), and who ultimately

gets portions of the surplus (distribution). Class

process wouldn’t be an issue if you were the only

one on your deserted island. In that case, you

would be all three—the maker, the taker, and the

getter of the surplus. But in human society it’s

more complicated than that. For example, in feu-

dalism a surplus of food is produced. The serfs

make it, the lords take it, and they distribute some

of it to the knights, who keep the serfs in line and

maintain the feudal system. In a slave economy

the slaves make it, and the slave owners take it

and distribute some of it to the overseers, politi-

cians, and law enforcement—those who maintain

the slave system. In Soviet-style communism the

workers make it, and the state takes it and distrib-

utes some of it to the military, bureaucrats, and

politicians—those who maintain the communist

system. In our current economic system—capital-

120 | Voices On The Economy

ism—the wage laborers make it, and the owners

take it and distribute some of it to the manag-

ers, lawyers, and politicians—those who maintain

the capitalist system. In democratic socialism the

worker-owners make it and take it, and then they

distribute some of it to themselves, to commu-

nity institutions, and to government—all of which

maintain democratic socialism.

The third assumption of radical theory is that

there are dynamic interactions over surplus. People struggle over the production, control,

and distribution of the surplus because every-

one wants to get their hands on it. Regardless of

the economic system, there’s always going to be

conflict over the surplus, say radicals. To picture

this, imagine the Super Bowl. You know what

happens at kickoff: every player on both teams

scrambles at top speed to claim the most advanta-

geous position to take control of the football (the

surplus). The desire to catch that ball and control

it is the force that compels the players to race

around the field. Everyone is driven to interact in

whatever ways will help them get the ball. A foot-

ball game is an easy way to picture dynamic inter-

actions over surplus. Players block and tackle one

another to the ground as they each try to be the

one to control the ball. But let’s also consider the

host of other dynamic and contradictory forces

at work in the background of the game—factors

that influence who succeeds. There’s the weather,

the players’ training and equipment, interpersonal

relationships among teammates, rivalries between

teams, old injuries, the screams of the fans, the

quality of sleep the players had the night before,

the time of day, the position of the sun, the coach’s

mood, the referee’s allergies, and more. Many

people really love to watch football because they

are fascinated by the complex interweave of all

these dynamic forces—competition, cooperation,

harmony, discord, and skill, among others. When

it comes to surplus, however, it’s not a game, say

radicals. The stakes are life-and-death. Who gets

food and shelter, healthcare, and everything else,

and who doesn’t get those things, will determine

who survives and who perishes.

Although many radicals might not term it this

way, class process and the dynamic interactions

over surplus are driven by people’s desire to take

Chapter 5: Radical Theory | 121

care of the needs of themselves, their families, and

their friends. In other words, it assumes that we

each have a self-interested stake in who makes it,

who takes it, and who gets it. Radicals say self-in-

terest in capitalism grows into a destructive force,

while in democratic socialism it grows into a ben-

eficial force that recognizes that our well-being is

intrinsically connected to the well-being of others.

In other words, self-interest is mutual interest.

Model

Economics studies human society and social

relationships. Of course, economists from all the

perspectives understand that the world is a very

complex place, with countless factors constantly

at play—human psychology, history, biology,

the weather, family dynamics, demographics,

technology, and much more. They all consider

economic relationships as being one part of a vast

and complex social totality, which comprises all the dynamic social relationships that coexist

and impact one another constantly. How radicals

depart from conventional theory is by holding

this holistic view of economics at the forefront of their model. They look at economic issues in

the context of the complex interactions among

everything in the social totality because every

individual part of the social totality, including the

economy, is influenced by and has an influence

on every other part.

If this is hard to picture, think about health

care. Radicals say you might assume the system

we have now is just normal and the way it’s sup-

posed to be. But when your grandmother was a

girl, the pediatrician made house calls. Fifty years

ago, no one thought it made any sense to bring

a child with a high fever to an urgent care cen-

ter. In fact, those didn’t even exist. Sick children

stayed at home in bed with soup, and then the

doctor showed up with a bag of instruments and

did the exam right there. There was no WebMD

where parents could look up symptoms online

and double-check that the doctor diagnosed their

child correctly, because there was no internet.

Radicals say our health-care system is the result

of a complex intersection of economic, sociologi-

cal, psychological, scientific, biological, and other

factors. They say in twenty years health care will

look quite different from the way it looks today,

as will education, transportation, and everything

else. Everything is constantly changing and con-

tinually in flux, and everything influences every

other thing to the point that it wouldn’t exist in

this particular way without those influences.

If your head is spinning right now, you’re not

alone. Social totality is a huge idea, and radicals

know that it can seem chaotic and unmanageable.

Here’s something that will help.

Have you ever seen a Rubik’s Cube? It’s a six-

sided puzzle that was invented in 1974 and quickly

became wildly popular. (This was before video

games and phone apps.) The standard size has

nine colored squares on each side of the cube.

The goal is to twist and turn the rows so that you

land all the same-colored squares together—one

side all yellow, another side all green, and so on.

But here’s the frustrating catch: every time you

turn a row, every facet of the cube changes con-

figuration. You can’t move just one square without

122 | Voices On The Economy

changing the whole cube every time. Just imagine

the Rubik’s Cube as a way to represent the radi-

cal perspective’s holistic view of economics—that

changing one thing impacts everything.

Figure 5.1 The Social Totality

Represented on a Rubik’s Cube

On a standard three-by-three Rubik’s Cube,

there are more than forty-three quintillion pos-

sible combinations of colored squares. This

would make it the most frustrating puzzle ever

invented if not for one small detail: the middle

squares of each of the six sides of the cube are

fixed points. In other words, those six core points

never move, but all the other colored squares

twist and shift around them. Once you know that

everything else moves around these fixed cen-

ter points, you can solve the puzzle quite easily.

A seventeen-year-old from the Netherlands set

a new world record in 2014, solving the Rubik’s

Cube in 5.55 seconds. (That same year, someone

else set the record for solving the Rubik’s Cube

using only his feet. It took him 25.14 seconds.) If

you smashed the Rubik’s Cube, all the moveable

squares would fall away, and you’d be left hold-

ing the six core points.

The VOTE Program uses the Six-Core Cube to

represent the radical model (just as conventional

theory uses the market graph). Because the radi-

cal model has two parts—describe capitalism and

describe democratic socialism—there is a Six-

Core Cube of capitalism and a Six-Core Cube of

democratic socialism. The social totality is exactly

the same in both economic systems, but their six

core points differ.

Radical Theory Model: Capitalism

Earlier you read that radicals believe that in

every economic system a surplus is produced.

Let’s first model the assumption of surplus to see

how it occurs in capitalism.

Labor Theory of Value

Imagine a world where someone owns a

chocolate bar factory. They buy the mixing

machines and the wrapping machines. They buy

the sugar, milk, and cocoa. Now they have to hire

wage laborers to run the machines that mix the

ingredients to make the chocolate bars.

A worker applies for a job at that factory. The

owner will try to get the worker to labor for the

lowest possible wage, while the worker will try

to get the owner to pay them the highest possi-

ble wage. Their conversation might seem cordial,

but radicals say the owner and worker are actually

locked in a struggle over who will gain the most

benefit. They struggle over what the wage should

be, what vacation time the worker will get, how

many hours of labor the worker will provide, and

how much sick leave they will earn over time. Rad-

icals say that in capitalism the owner will always

give the worker the lowest possible wages and

benefits in order to maximize the firm’s profit, and

the worker will always want the highest possible

wages and benefits in order to live a good life.

There are two categories of workers, according

to Karl Marx. He said a productive worker is

Chapter 5: Radical Theory | 123

one who works with machines and raw materi-

als to make something that can be sold. Unpro- ductive workers are those whose labor doesn’t directly produce a good or service that can be

sold, but who are crucial to the business, none-

theless. Unproductive workers include janitors,

managers, administrative assistants, bookkeepers,

and other support workers, as well as the factory

owners, who bring together the resources and

enable the process of production. So now, let’s

say the chocolate bar factory owner and worker

agree that the worker will make chocolate bars

for $20 per hour, working for ten hours a day.

The owner pays the worker $200 a day to pro-

duce chocolate bars on their machines using the

ingredients they bought. The costs for materials,

machines, and nonproductive workers, includ-

ing the owner’s salary, total $3,000 per day. In a

ten-hour shift the productive worker makes four

hundred bags of chocolate bars, which the owner

sells for $10 a bag. In those ten hours the total

revenue earned is $4,000, and after the owner’s

costs of $3,000, the productive worker’s labor

added $1,000 of value. A quick summary of this

is in figure 5.2.

Those machines and ingredients didn’t get

together and mix themselves. The productive

worker’s labor brought them together and turned

them into chocolate bars that are worth more

than the components parts are worth individually.

The owner paid the worker $200, which radicals

call necessary labor. It was determined through that silent struggle to be the necessary amount

the owner had to pay to get the worker to come

to work, and the necessary amount the owner

will have to pay to get the worker to come back

to work again tomorrow. The leftover $800 is

called surplus labor. Since in capitalism it takes the form of money (in other words, it’s not bags

of chocolate bars), Marx called it surplus value and wanted us to recognize that it is the labor of

productive workers that creates the surplus. Rad-

Figure 5.2 The Labor Theory of Value

Example: Chocolate (bags per day)

Owner (capitalist) hires a factory worker $20/hour

Worker works 10 hours $200

Costs (raw materials, capital, support workers)

$3,000

Final product $10/bag

400 bags per day $4,000

Surplus Value (source of surplus value is unpaid labor)

$800

$200 (Necessary Labor)

$800 (Surplus Labor)

$1,000

124 | Voices On The Economy

icals model surplus using this labor theory of

value, which shows that productive labor creates

the surplus.

Workplace Exploitation

Now let’s model the radical assumption of class

process—who makes the surplus, who takes the

surplus, and who gets shares of the surplus. In

capitalism it’s the productive worker who makes

the surplus. The worker is also known as the

proletariat or laborer. In capitalism it’s the owner

who takes the surplus. Owners are also called

capitalist and bourgeoisie. So back to figure 5.2,

check out the bottom line that represents that

$1,000 of value created by the productive worker.

The owners pays $200 in agreed-upon wages to

the worker. But what about that other $800? The

owner pockets it. The act of the owner taking

the surplus from the productive worker is called

workplace exploitation. Radicals say workplace

exploitation is perfectly legal and occurs all day

long, every day, worldwide. The value of people’s

labor above what they are paid is stolen every

single day, yet no one protests this theft. Not the

people whose labor is stolen, and not the people

doing the stealing. This class conflict, (or class struggle) is so normalized that everyone accepts it as a fact of life, and no one even thinks to change

the system. Radicals say people living in capitalism

assume that exploitation is as inevitable and

unchangeable as gravity. We don’t even question

it. In fact, we only see two choices: to be exploited

or to be the one doing the exploiting. According

to radicals, the vast majority will choose to be the

owner—the boss, the exploiter—and this is how

capitalism perpetuates itself.

When radicals use the word exploitation, they mean only that the surplus value of labor is stolen

from the laborers by the owners of capital. But this

word has become a catch-all phrase to refer to a

whole variety of abuses, and radicals say this has

exacerbated the problem because it makes work-

place exploitation even more invisible. For instance,

owners may create unsafe working conditions, give

wage laborers slop to eat at lunchtime, and keep

the bathrooms locked except during breaks. Rad-

icals say that while these behaviors are appalling

and probably illegal, we should use the terms abu- sive, immoral, or wrong, but we shouldn’t call them

Chapter 5: Radical Theory | 125

exploitation. This is not just a random vocabulary lesson. Radicals believe there needs to be one spe-

cific word for the act of stealing from wage laborers

so that workers can finally recognize what’s hap-

pening and rise up together to change the system.

Finally, who gets the surplus in capitalism? The

owner of the chocolate bar factory takes the sur-

plus but doesn’t keep it all for themselves, say

radical theorists. They give a portion of it to the

factory managers, since the owners may not live

in the towns where their factories are located, and

even if they do, they can’t be everywhere at once

in the workplace. Managers make sure the wage

laborers are not stealing cocoa or slacking off.

And owners need to be certain the wage laborers

can’t sue them, so they give some of the surplus

to lawyers to write employment contracts in the

owners’ favor. They give a portion of the surplus

to the accountants to show the profit as a return

on their investments and not as theft. They also

need to ensure that there aren’t too many expen-

sive regulations and taxes imposed on the choco-

late bar industry by government, so some of that

surplus goes to support whichever political parties

are in power and to lobbyists who promote their

industry’s interests. Radicals say those managers,

lawyers, accountants, and lobbyists—in addition to

owners—get portions of the surplus, which moti-

vates them to maintain the capitalist system.

Capitalist Competition

To model the third assumption, the dynamic

interactions over surplus in capitalism, we

need to describe capitalist competition. While

workplace exploitation describes the struggle that

takes place between owners and wage laborers,

capitalist competition describes the struggle that

takes place among capitalist owners. People often

use nature metaphors to talk about this kind of

competition—“It’s a jungle out there,” or “It’s a

dog-eat-dog world,” or “You’re either the shark

or you’re shark food.” Capitalist competition is a

matter of survival. For example, if one chocolate

bar factory owner decides to dump compostable

waste in the landfill to save money, all the other

chocolate bar factory owners will be pressured

to dump their waste in the landfills as well so

they can stay competitive. If they can’t stay

competitive, they will be driven out of business.

Radicals are often accused of painting owners as

greedy people who are only interested in lining

their own pockets with profits and flying around

in private helicopters. But radicals say that’s not

true. They believe owners can be perfectly nice

people—and probably are—but owners are

caught in a system (capitalism) that forces them

to make harmful decisions in order to maximize

their profit because they are competing with all

the other owners in their industry. The stakes are

high. Everyone wants their firm to stay in business.

Joining Workplace Exploitation with Capitalist Competition

When we join workplace exploitation and

capitalist competition, we get the pressure for bad: owners are motivated to do the wrong thing. They make decisions that value profit over the

well-being of people and the planet, and as a

result the social totality is impacted in negative

ways, say radicals. Let’s look at six scenarios that

describe how the pressure for bad works.

Scenario 1: The Rich Get Richer. A chocolate bar factory owner is golfing with the owner of a

rival firm and says, “I just bought those new pack-

aging machines, and now we’ve boosted our pro-

duction.” His competitor considers the implications

of buying even more machines for her factory—

what Marx called the accumulation of capital. “I’m all for improving our efficiency,” she says,

“but think about the serious consequences if we

126 | Voices On The Economy

all buy those machines and we all boost our pro-

duction. My employees will produce twice the

chocolate bars on those new machines at their

same hourly wage, so I’ll be increasing the level

of workplace exploitation and creating higher

and higher levels of income inequality. And with

those new machines increasing production, we

would lay off unnecessary workers and save even

more money. But should we penalize workers

who have been doing an exemplary job? With so

many out of work, it will drive down the wages

of the workers who remain because unemployed

workers will be lining up for their jobs.” Marx

called them the reserve army of the unem- ployed. “That feels wrong,” she says.

“So don’t do it,” says her competitor.

But if she doesn’t do it, and he does, and so do

all the other chocolate bar factory owners, then

her firm won’t survive. So she will do it. That is

the pressure for bad. Radicals say that because

of private ownership of the means of produc-

tion, capitalism causes increased levels of worker

exploitation, greater and greater income inequal-

ity between owners and wage laborers, and

higher rates of unemployment.

Scenario 2: Gaming the System. Two choco- late bar factory owners are old friends from business

school. They meet for coffee and one tells the other,

“I’m getting ready to launch a new line of sugar-free

chocolate bars. We’re using a new, less-expensive

sweetener that’s still controversial, but as soon as

we convince the FDA to approve it, we’re going to

make a bundle. Our lobbyist down in Washington

says we’ll get the green light next month with a few

campaign contributions in the right pockets. We’ll

be able to increase our profits exponentially!”

Her colleague has read the preliminary stud-

ies on that sweetener, which show that it can be

dangerous for people with diabetes. “If it could

harm consumers, then it shouldn’t be approved,”

he thinks to himself. “I certainly don’t want my

chocolate bars to harm anyone.” He tells her, “I

don’t want to pressure a government agency to

approve a potentially unsafe product.”

“Then don’t do it,” she says.

But he will do it—because of the pressure for

bad. If his firm doesn’t switch to the cheaper

sweetener when it gets approved, then his costs

will be higher than his competitors’ costs. They

will undersell him, and his company won’t sur-

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vive. Radicals say that in capitalism decisions are

in the hands of a few—top-down governance—

so we’ll get unsafe products.

Scenario 3: Kicked to the Curb. At a confec- tioners’ trade show, the owner of a chocolate bar

factory meets a competitor from another state. He

tells her, “Even though sales are down, our num-

bers look good because we cut our company’s

pension plan.”

She is appalled by this revelation. “My work-

ers have been with my company for generations,”

she says. “I don’t want to take away their retire-

ment security.”

“So don’t do it,” he says.

But she will—because of the pressure for bad.

If she doesn’t do it but all her competitors do,

then she won’t be able to compete, and she’ll

go out of business. Radicals say that in capital-

ism individuals are at risk, and workers are not

assured of having a safe and secure retirement.

Scenario 4: Go Big or Go Home. A chocolate bar factory owner and a competitor meet for lunch.

She says, “Our firm is struggling, so I’m going to run

ads that convince people that chocolate bars make

them sexier, sportier, happier, healthier, and smarter.

I’ve lined up a marketing firm to spread this idea,

and we’re funding research to ‘prove’ that people

can raise their IQs by eating our chocolate bars.”

Her competitor thinks to himself, “That’s just

wrong!” Aloud, he says, “You know, I think of

myself as a person who is bringing a little sweet-

ness into the world and giving people a quality

product. But if I knowingly lie about the bene-

fits of chocolate bars, I won’t be able to sleep at

night. I don’t want to do it.”

“So don’t do it,” she says. “We’ll make sure the

ads say those benefits are specific to our brand,

and when our ad campaign succeeds, we’ll buy

your company out from under you.”

So he will do it—because of the pressure for

bad, he can’t afford not to. Radicals say that pro-

duction for profit brings us products that are nei-

ther beneficial nor useful. We end up with public

health crises and unfair competition.

Scenario 5: Planet in Peril. Two chocolate bar factory owners meet at a sales conference.

One says, “Our new conveyor belt system is so

efficient that we doubled production this quarter.

If you want to stay in the game, you should get

on board with this new machinery.”

Her competitor says, “Wait a minute: if we dou-

ble production, we’ll all need a lot more resources.

Dairy farmers will have to raze the forests to make

room for more cows to get us the milk we’ll need.

And we’ll need to double the size of our fleet of

trucks to distribute all that chocolate, which means

we’ll be creating more carbon pollution.” He tells

her, “I’m just not comfortable participating in

something that has so many detrimental outcomes

for our society. I don’t want to do it.”

128 | Voices On The Economy

She says, “So don’t do it.”

But he will do it because of the pressure for

bad. If he doesn’t, and she and all the other fac-

tory owners do, then his firm won’t be able to

survive. Radicals say that in capitalism unsustain-

able production depletes resources, harms the

environment, and is shortsighted because capi-

talists are more concerned with making a profit

right now than with planning for a healthy future.

Scenario 6: Race to the Bottom. A chocolate bar factory owner hears that competitors are plan-

ning to move to countries with cheaper labor. His

company has been an anchor in the community

for fifty years, employing nearly half the adult pop-

ulation—not to mention all the business it gives to

local office supply firms, electricians, and plumb-

ers. The taxes his firm pays go to fund the local

schools, parks, and roads. If he moves the factory

overseas, the community will become a ghost

town. He calls a competitor to share his concerns.

“So don’t do it,” she says.

But he will—because of the pressure for bad.

If he stays and all the other firms move, he won’t

be able to compete, and his firm will go out of

business. Either way, the owner will hurt the com-

munity. So, reluctantly, he moves his factory to a

developing nation, and so do the other chocolate

bar factory owners. Now they only have to pay $5

per hour for labor instead of the $20 they were

paying. A few years later, if they find a country

where they can pay $1.50 per hour, it will make

financial sense to abandon the new community

and move there next. Radicals say that in capital-

ism destructive globalization leads to unhealthy

communities around the world.

Representing the Pressure for Bad

The Rubik’s Cube we showed earlier in the

chapter describes the radical perspective’s holistic

view of the economy—when one part of the

social totality shifts around one of the six core

points, every other part is affected. Capitalism’s

six core points are problematic, say radicals,

because no matter how you try to twist and turn,

they create the pressure for bad, so we’ll never

solve our economic problems.

Radical Theory’s Six Core Points of Capitalism

1. Private Ownership: Owners (capitalists) buy the machinery and then hire wage laborers to

produce on those machines while they pay the

wage laborers less than the value they create.

2. Top-Down Governance: Government is structured in such a way that decision-mak-

ing is in the hands of a few, and people are

not empowered to make decisions beyond

their occasional vote in an election.

3. Individuals at Risk: Basic human needs are not guaranteed, so people live in fear and

worry about their material well-being—health

care, food, education, housing, and so forth.

4. Production for Profit: Firms make things that bring them the most profit, regardless of

whether or not those products are necessary,

useful, or safe.

5. Unsustainable Production: Firms produce without considering the long-term effects of

their products and production processes on

the environment and humanity, which puts

the well-being of future generations at risk.

6. Unhealthy Communities: Firms fail to take into account the impact of the production,

consumption, and distribution of their prod-

ucts here and around the world, resulting in

a host of harmful outcomes to individuals,

communities, and the environment.

Chapter 5: Radical Theory | 129

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Figure 5.3 Radical Model of Capitalism

The Drive for Profit and the Visible Suffering

The six core points of capitalism guide

countless decisions in the social totality. They

exert a pressure for bad that motivates owners,

government officials, and others to value profit at

the expense of the well-being of people and the

planet. Radicals say we just have to look around

us to see that the pressure for bad leads to the

visible suffering: poverty, hunger, sickness, wars, climate crises, inequality, debt, and more. They say

capitalism is a destructive economic system that’s

killing our planet.

Imagine you’re an alien from outer space, hover-

ing above Earth in your spaceship. When you peer

down at the planet through your giant unblinking

alien eye, you see masses of humans living in des-

perate poverty. Your eye swivels one way, and you

see that some of those earthlings are working at

the planet’s worst jobs—sometimes two or three

jobs—yet they don’t earn enough to feed their chil-

dren. Your eye swivels the other way, and you see

that some humans have pantries and refrigerators

full of food that’s spoiling because they can’t eat it

all. Baffled, you zoom your ship closer to the atmo-

sphere to take a better look. You see a prosperous

city, yet there are people living under plastic tarps

in parks, under bridges, and in cardboard boxes in

filthy alleyways. All around them, you see houses

and apartments lying empty. This confuses you,

and you wonder if perhaps you’re not understand-

ing human society because you’re still too far away.

So you zip on your human suit, and, disguised as

one of them, you walk the streets. You discover

that earthlings have marvelously advanced medi-

cal technology and gleaming hospitals with state-

of-the-art instruments. Yet masses of people still

suffer because they can’t afford health care. They

die slowly and painfully from conditions that could

be easily treated. Some are children. Deeply con-

fused and distraught, you return to your ship. You

can’t imagine why the visible suffering exists when

clearly the lovely blue-green planet has everything

130 | Voices On The Economy

necessary to take care of everyone’s basic human

needs. As you turn your ship away from Earth, you

think to yourself, “What a waste!”

Radical Theory Conclusions: Capitalism

Now that we’ve created the model for radical

theory’s critique of capitalism, let’s take a look

at the conclusions that radical theorists draw

from it. Remember, the model answers the

original questions:

What to Produce? The model shows that in capitalism firms pro-

duce what serves their profit interests, regardless

of whether or not it is something beneficial or

what people actually want. By distorting people’s

preferences through advertising and questionable

research, for example, firms manipulate consumers

into thinking they need what the firm makes and

convince people they are getting what they want.

Firms must always look for ways to hook consum-

ers to want more. This happens because capitalism

is a system that values profits over people.

How to Produce? The model shows that in capitalism firms gen-

erate output at an unacceptable cost to society.

The problem is not that capitalism is a system that

creates wealth, say radicals—it does create the

untold wealth that was promised by Adam Smith.

But the pursuit of that wealth in the context of the

drive for profit leads to unacceptable costs.

For Whom to Produce? The model shows that in capitalism wages don’t

reflect what workers contribute. Workers create the

surplus through their labor, but the fruits of their

labor (the surplus value) is stolen from them. The

surplus value goes to those who maintain and per-

petuate the capitalist system. These are the groups

that prosper under capitalism. They get to buy

more than they need—two homes, six cars, clos-

ets full of things—while most workers can barely

afford the necessities of life.

Alienation

Living in a capitalist society, we can understand

why we often feel so bleak, disconnected,

isolated, and estranged from one another, say

radicals. It’s because success is measured by the

Chapter 5: Radical Theory | 131

bottom line. Radicals believe profit is important

because it creates opportunities for people to

flourish and innovate. But when we’re pressured

into chasing the almighty dollar and grabbing

short-term gains while ignoring the long-term

ramifications of our choices, everyone suffers.

That includes the people who are exploited and

the people who make their profit off the sweat

of others. Radicals say that capitalism’s drive for

profit—valuing financial gain over the well-being

of people and the planet—creates an unhealthy,

destructive, singular focus that undermines

peace and harmony, a clean environment, safe

communities where everyone can flourish, and

meaningful connections to our fellow humans.

In capitalism, the absence of connection to

one’s work, to one’s workplace, to what is made,

and to one another is called alienation. Radicals

say that this experience arises in four ways:

! Workers have no control over or rights to the

products they make. Their labor is treated like

a commodity, no different from any other input

that’s bought and sold, as if there’s no differ-

ence between a worker and a machine.

! Since capitalism sets people up to compete

with one another for the job, for the raise, for

the extra shift, for the manager’s approval, for

the owner’s largesse, for the market share, and

so forth, people become isolated and estranged

from one another.

! Workers are alienated from the decisions their

firms make about production and the ways in

which those decisions (and products) impact

the community and the wider world.

! Workers are alienated from what Marx believed

was intrinsic to human nature: to want to con-

tribute meaning, beauty, and usefulness to

shape the world according to our vision and

values. Radicals say that capitalism frustrates

this inherent need each person has, and in the

process drains us of our humanity.

Radical theorists conclude that when self-inter-

est is planted in the soil of capitalism, self-interest

becomes destructive and leads to alienation. They

say capitalism is based on a set of perverse incen-

tives that actually undermine the connection that

people truly want and need.

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Radical Theory Policy: Capitalism

Based on their conclusions, radicals say

we should reject capitalism as an economic

system. Historically, humans have had a variety

of economic systems, and when Adam Smith

first popularized capitalism, it was embraced as

an improvement over feudalism, mercantilism,

slavery, and other flawed systems. While Marx

agreed that capitalism created unprecedented

levels of wealth, he also said it created

unacceptable levels of destruction and suffering.

Therefore, capitalism is not the answer for human

well-being. He wrote, “The modern bourgeois

society that has sprouted from the ruins of feudal

society has not done away with class antagonisms.

It has but established new classes, new conditions

of oppression, new forms of struggle in place of

the old ones.” Radicals today agree that there are

better options—other economic systems that will

bring us maximum well-being and end the visible

suffering of capitalism.

Radical Theory Model: Democratic Socialism

Some modern radicals believe democratic

socialism is the best system to solve the problems

that we experience in capitalism and bring us the

levels of wealth and well-being that we all want.

Let’s now build the model of democratic socialism.

Collective Creation of Value

To model the assumption of surplus in

democratic socialism, let’s describe how radicals

understand the way surplus is created. In a

democratic socialist system the worker-owners

come together to produce goods and services.

Regardless of the different roles workers have

within the firm—machinist, accountant, designer,

rock star, forklift operator, choreographer, and

so forth—surplus is created when productive

labor is applied to raw materials and machines.

Think of yourself making lattes in your worker-

owned coffee shop, using your labor to operate

the espresso machine to turn the coffee beans

and milk (raw materials) into delicious coffee

beverages. Or think of a rock band creating

surplus by playing guitars, drums, and keyboards

in a theater to entertain people who purchased

tickets. You get the picture. This is called the

collective creation of value.

Workplace Justice

After the costs—salaries, raw materials,

machines, utilities, concert T-shirts, and all the

other expenses—are paid, there is a surplus.

The assumption of class process in democratic

socialism (who makes the surplus, who takes the

surplus, and who gets the surplus) is that when

workers have an ownership stake in the firm, they

decide these things cooperatively. In democratic

socialism, worker-owners not only make the

surplus, but they also take the surplus. Radicals

say that when there is no distinction between the

makers and the takers, there is no theft (workplace

exploitation). Instead, there is workplace justice. And the worker-owners decide together, using

a democratic process, who gets the surplus. For

example, they might vote to use it to expand

and reinvest in the firm (purchase some sweet

new amplifiers, in the case of the rock band), to

create an emergency fund, or for philanthropy.

Just as capitalists give some of the surplus to

politicians and others who perpetuate capitalism,

democratic socialists also make sure surplus goes

to perpetuate democratic socialism, which means

cooperatively owned enterprises hire lawyers,

industry advocates, and accountants. Some of the

surplus goes to the community through taxes to

provide universal access to the things necessary to

survive and thrive, including health care, education,

transportation, housing, childcare, and retirement

security. Radicals say this distribution of the surplus

raises the standard of living for everyone.

Chapter 5: Radical Theory | 133

Because the worker-owners use a democratic

process to decide how to divide the surplus

among themselves as salaries, there is usually a

limit to how much the highest-paid worker can

earn compared to the company’s lowest-paid

worker. The worker-owners establish a pay scale

based on factors such as whether the position is

full time or part time and the worker’s seniority,

skill, education, and experience. They decide

whether or not to have a base pay for every

worker, and whether they want to use some of

the surplus to give themselves bonuses.

Coordination among Competitors

To model the assumption of the dynamic

interactions over surplus in democratic socialism,

we need to describe coordination among competitors. While workplace justice describes the relationships among worker-owners,

coordination among competitors describes the

way firms compete and cooperate for the greater

well-being of society. People often use metaphors

for teamwork to describe coordination—“Many

hands make light work,” or “In unity there is

strength,” or “No person is an island.” Coordination

is a matter of survival because we all depend on

one another for our continued existence and

for our success. For example, worker-owned

chocolate bar firms might coordinate to create a

composting program so their landfills don’t get

overloaded and produce methane gas, which is a

hazard to everyone’s health and the planet.

Radicals are often accused of not caring about

profit, but they say that’s definitely not the case.

They understand that profit is very important for

keeping businesses afloat. However, while it’s

vital to the success of any enterprise, profit is not

the most important driver of well-being. Firms

need profit to succeed financially, but ultimately,

“success” means being a positive force in the world.

Radicals are also accused of painting worker-

owners as saintly people who have no interest in

profit and are driven purely by altruism, but radicals

say that’s not true. They believe worker-owners

can be selfish and even unpleasant people—and

some probably are—but they are part of a system

(democratic socialism) that pressures them to make

decisions that benefit society because they live in

the communities where they work and they are

accountable to one another.

134 | Voices On The Economy

Joining Workplace Justice with Coordination among Competitors

When we join workplace justice and

coordination among competitors, we get the

pressure for good: worker-owners are motivated to do the right thing. They make decisions that

value people and the planet over profit, and as

a result the social totality is impacted in positive

ways. Let’s look at six radical scenarios that

describe how the pressure for good works.

Scenario 1: More than a Paycheck. A choc- olate bar factory worker-owner is golfing with a

worker-owner from a competing firm and says,

“Our firm just bought those new packaging

machines, and they’re so efficient that our pro-

duction has shot up. We just voted to give every-

one in the company raises next quarter. And with

some of the profit we’re going to invest in expan-

sion and create more positions in our firm.”

His competitor says, “That sounds amazing. At

our next cooperative meeting I’m going to sug-

gest we vote on buying those machines too.”

“You should do it,” he says. “It’s good for our

whole community if all our firms do well.”

Radicals say that because of cooperative own-

ership of the means of production, democratic

socialism ensures just compensation, more equi-

table income distribution, and stable jobs.

Scenario 2: Of the People, by the People,

for the People. A worker-owner of a choco-

late bar firm meets an old friend from business

school who is also a worker-owner in a chocolate

bar firm. She says, “Did you read the latest news

report about some of our competitors? The new

sweetener they’re using in their sugar-free prod-

uct lines are making people sick. The government

convened a Product Safety Council with scientists,

public health experts, and representatives from

firms and consumer groups. They decided that all

candy producers will need to test new sweeteners

more extensively before we can send our prod-

ucts to market.”

Her friends says, “I’m glad to hear it. We all want

to be safe. Let’s get our firms to work together to

develop a testing process. It will be more effi-

cient, and we can share our ideas with the council

delegate from the chocolate bar industry. I think

we’ll have valuable expertise to offer.”

Chapter 5: Radical Theory | 135

Radicals say that in democratic socialism partic-

ipatory governance—decision-making that occurs

through collaborations among community, firms,

government, and other stakeholders—brings us

safe products.

Scenario 3: We Have Each Other’s Backs. At a confectioners’ trade show, a worker-owner

in a chocolate bar factory meets a competitor.

He says, “Our company offers generous benefits,

including a supplemental pension plan and early

retirement options. Of course, our firm also pays

into the universal retirement fund that takes care

of everyone. We all do. Now we’re negotiating

with a cooperatively owned elder-care firm to see

if we can get a day program started for our most

vulnerable retirees.”

“That sounds like a great benefit,” she says.

“What if our firm goes in on that with you? We

could probably get a better deal if there are more

of us and we would bring the care company

more business.”

Radicals say that in democratic socialism there

are social safeguards that guarantee that people

will have a secure and dignified retirement.

Scenario 4: The Right Stuff. Two choco- late bar factory worker-owners meet for coffee.

“My firm is struggling,” says one. “We’re hoping

business turns around with our new marketing

campaign for chocolate protein bars. There’ve

been all those new studies on the importance of

protein, and we’re playing up the health benefits

of chocolate when it’s eaten in moderation. We

think this could be a game-changer for the candy

industry.”

Her colleague says, “I’ll talk to my fellow work-

er-owners and see what they think, but I like the

idea of adding a healthier product to our line

as well.”

Radicals say that in democratic socialism firms

produce for use, making things that are beneficial

and helpful.

Scenario 5: Save the Earth. Two acquain- tances meet at a sales conference. Both are work-

er-owners of chocolate bar firms. One says, “Our

firm invested in a new conveyor belt system, and

we could easily double our production. But some

of us are worried about the long-term effects of

higher production. For one thing, the dairy farm-

ers will have to cut back the forest to create more

grazing land for the cows, and this will hurt the

environment. We figured out that our firm can

easily meet our revenue goals for this fiscal year

136 | Voices On The Economy

if we only work four days a week with the new

machines. At our next worker-owner meeting, I’m

going to propose that instead of producing more,

we each take off one day a week.”

“That sounds awesome!” his competitor says.

“We bought a new packaging machine, and it’s

speeding up our production. I’m worried about

adding more trucks to our fleet and increasing

our firm’s carbon footprint. I’ll bring your idea

back to my firm. An extra day off would give us

more time to be with our families and do volun-

teer work in the community.”

Radicals say that in democratic socialism coop-

eratively owned firms produce sustainably, pro-

tecting the environment for generations to come.

Scenario 6: Think Globally, Act Locally. A

worker-owned chocolate bar factory is visited by a

trade representative from Central America who tells

the worker-owners about a cooperative of indig-

enous cacao bean growers who keep the profits

from their own businesses. “I think we should sup-

port them by buying their product,” says one work-

er-owner. “If a majority agree, let’s bring this up at

our national association meeting and see if we can

get other firms to start sourcing their beans from

growers that are cooperatives.”

Another worker-owner says, “It will be more

expensive than what we’ve been paying, but

there are troubling reports that some producers

we’ve been buying from are using child labor. I

don’t think our firm should support that.”

“I agree,” says another worker-owner, “and I

think we should let those other growers know

why we’re not going to be giving them our busi-

ness anymore. Let’s use our buying power to

pressure them into ending that practice and tak-

ing care of their communities.”

Radicals say that in democratic socialism a

commitment by firms to healthy communities—

their own and those where they do business—

promotes safe and thriving communities around

the world.

Representing the Pressure for Good

The Six-Core Cube of democratic socialism

(figure 5.4) represents the radical model’s view

of the vastly complex relationships among the

systems of human society. It models the way

every part is impacted when one aspect shifts—

as farming whirls past immigration, it crosses

anthropology, slides past markets, and dips under

the federal budget, and so forth. Remember, all

these components of the social totality swivel

around the middle squares of the cube, which are

the six core points of the cube. The six core points

below describe the pressure for good in democratic

socialism and how the social totality is impacted.

Radical Theory’s Six Core Points of Democratic Socialism

1. Cooperative Ownership: People come together collaboratively as joint owners of

their firms, housing, public utilities, and so

forth, making decisions about policies and

structures through a democratic process of

one person, one vote.

2. Participatory Governance: Decisions are made by councils convened by public officials,

with members including experts, representatives

from cooperatively owned firms, special inter-

est groups, the community, and others. Com-

munity councils serve the interests of society in

ways that are transparent and accountable.

3. Social Safeguards: Basic human needs are both a right and a responsibility. Things

like water, electricity, higher education,

health care, housing, and transportation are

supported by the whole society to bene-

fit everyone.

4. Production for Use: The driving force for firms is to produce things that people need

Chapter 5: Radical Theory | 137

and that improve their lives, rather than

producing for the sole purpose of making

a profit.

5. Sustainable Production: Firms use best practices to produce in such a way that

resources will continue to be viable for gen-

erations to come.

6. Healthy Communities: Firms take into account the impact of production, consump-

tion, and distribution of their products around

the world, resulting in a host of beneficial

outcomes to individuals, communities, and

the environment.

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

Figure 5.3 Radical Model of Democratic Socialism

The Invisible Synergy

The six core points guide countless decisions

in democratic socialism. They are a pressure for

good that leads democratic socialist societies

to prioritize the well-being of people and

the planet even when it cuts into their profits.

The pressure for good leads to the invisible

synergy. Synergy is a word from Greek that means “working together.” In quantum physics,

synergy describes the phenomenon of two

things coming together to create something

greater than the sum of its parts. Synergy defies

the mathematics we’ve all been taught that says

one plus one can only equal two. It arises from

people coming together as individuals, firms, and

government within the values and opportunities

of democratic socialism. Without central planning

or any person or government orchestrating it, the

invisible synergy brings us more useful products

and more sustainability, say radicals. More job satisfaction and more of our human needs met, more accountability and transparency and more thriving communities. The drive for well-being in

democratic socialism puts our entire planet—and

the future of humanity and every other species—

in the best possible position, according to radicals.

They say we just have to look around us to know

that democratic socialism brings us the quality of

life we all want and need.

Imagine you’re an alien from outer space, hover-

ing above Earth in your spaceship. When you peer

down at the planet through your giant unblink-

ing alien eye, you see masses of humans living in

harmony. Your eye swivels one way, and you see

that earthlings are working hard and contributing

to their own well-being and that of their families,

while at the same time benefiting the whole soci-

ety. Your eye swivels the other way, and you see

that everyone has pantries and refrigerators full of

healthy foods and none go hungry. Intrigued, you

zoom your ship closer to the atmosphere to take

a better look. You see a prosperous city where

everyone has a home because it is a basic human

right. You see humans living in a variety of hous-

ing—some of it for individuals and families, some

cooperative, and some with care for elders and

people with disabilities. You are even more curious

about human culture, so you zip on your human

suit, and disguised as one of them, you walk the

138 | Voices On The Economy

streets. You discover that earthlings have marvel-

ously advanced medical technology and gleam-

ing hospitals with state-of-the-art instruments, and

everyone has equal access to this wonderful med-

icine because it’s a basic human right. Impressed

and inspired, you return to your ship. You realize

that there is an invisible synergy that makes human

society thrive because everyone sharing resources

and working together creates opportunities and

well-being that is more than just the sum of all the

parts. The lovely blue-green planet has everything

necessary to take care of everyone’s wants and

needs, and humans have found a way to share in

the bounty, to the benefit of all. As you turn your

ship away from Earth, you think to yourself, “What

an inspired idea!”

Chapter 5: Radical Theory | 139

US taking steps to ban junk food from school

In legislation soon to be intro- duced, candy and sugary beverages

would be banned, and many schools would be required to offer more nu- tritious fare.

that remain in schools be “filled with nutritious offerings to make the healthy choice the easy choice for our nation’s children.”

First lady Michelle Obama said last month that she would lead an initiative to reduce childhood obesity, and her involvement “shows the importance all of us place on this issue,” Vilsack said.

THE NEW YORK TIMES

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Capitalism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Good The pressure for good is a motivation to…

4. Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Exercise 5.1: Six-Core Cube Guide Let’s use the Six-Core Cube Guide to analyze this story from the radical perspective.

Now that you understand the six core points of capitalism and the six core points of democratic

socialism, you are ready to analyze stories you read in the newspaper and hear on the news. For exam-

ple, here is a story about the controversy around selling junk food in schools.

140 | Voices On The Economy

! Start on the left side (capitalism). First, identify the problem. In this article, the problem is child-

hood obesity.

! Second, choose a relevant core point from the list. While you could make a case for all six, the

most relevant one is Production for Profit. Remember, that means firms make things that bring

them the most profit regardless of whether or not those products are necessary, useful, or safe.

! Third, describe the pressure for bad. This is what motivates firms, governments, communities,

and individuals. Here is where you write what happens as a result of the core point you selected.

In this case, firms produce and market unhealthy and addictive foods to young people because of

the drive for profit.

! Fourth, expose the visible suffering, which is the outcome in capitalism. In this case, when firms

produce for profit, we get public health crises.

Now let’s fill in the right side (democratic socialism).

! First, identify the problem. It will be the same as it is in capitalism, so you can write “child-

hood obesity.”

! Second, choose a relevant core point from the list. While you could make a case for all six, the

most relevant one is Production for Use. Remember, that means the driving force for firms is to

produce things that people need and that improve their lives, rather than producing for the sole

purpose of making a profit.

! Third, describe the pressure for good. This is what motivates firms, governments, communities,

and individuals. Here is where you write what happens as a result of the core point you selected. In

this case, firms produce and market delicious, healthy snacks and sodas, in moderation, to young

people because of the drive for well-being.

! Fourth, reveal the invisible synergy, which is the outcome in democratic socialism. When firms

produce for use, we get healthy communities.

Chapter 5: Radical Theory | 141

Capitalism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Good The pressure for good is a motivation to…

4. Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Childhood obesity Childhood obesity

x x

produce and market unhealthy, addictive foods to young people because of the drive for profit.

produce and market delicious, healthy snacks and soda , in moderation, to young people because of the drive for well-being.

When firms produce for profit, we get public health crises.

When firms produce for use, we get healthy communities.

ANSWER KEY: Exercise 5.1

142 | Voices On The Economy

Union OKs new contract, Ending Tucson bus strike

The 42-day Tucson bus strike ended Wednesday when drivers, mechanics and other members of Teamsters Local 104 voted to accept a new contract.

The vote was 351-41, an 89 percent approval, said Teamsters Local 104 President Andy Marshall.

Everyone gets a raise under the new contract, he said, but he wouldn’t release contract details, saying he didn’t want to inflame opinions of people who are angry about the strike.

Professional Transit Man- agement, the contracted oper- ator of the city’s Sun Tran bus system, also would not give

details about the contract. There were no addition-

al city tax dollars in the deal, which stays within the ap- proved city budget for Sun

Tran, Marshall said. Additional details were not immediately available.

Sun Tran buses will be back to a normal schedule starting

Thursday, Sept. 17. During the strike, the number of buses and bus routes was limited, making for long waits in the heat.

See STRIKE, A4

By Becky Pallack ARIZONA DAILY STAR

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Union members try to listen from outside, with standing room only inside, during the voting.

Capitalism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Good The pressure for good is a motivation to…

4. Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Exercise 5.2: Six-Core Cube Guide Please use the Six-Core Cube Guide to analyze this story from the radical perspective. The Answer Key is

below, but please don’t look until you fill yours out completely.

Chapter 5: Radical Theory | 143

ANSWER KEY: Exercise 5.2

Capitalism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Good The pressure for good is a motivation to…

4. Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Workers need more pay, buses aren’t running, and transportation system is underfunded.

x x

underpay workers, cut bus routes, and cut corners because of the drive for profit.

increase pay, expand service, and improve overall quality because of the drive for well-being.

When individuals are at risk, we get a broken public transportation system that leaves people stranded.

When we have social safeguards, we get a reliable public transportation system that serves the community’s needs.

144 | Voices On The Economy

Capitalism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core point to explain the problem

3 Describe the Pressure for Good The pressure for good is a motivation to…

4.Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Western US sees triple-digit temps in early heat wave

Organizers rescheduled California’s state track and

Precautions are also in place ahead of Portland’s

Rose Festival on Saturday in Oregon, when the mercury is expected to rise to 99 degrees in the city and 103 degrees downstate in Medford.

Marching bands have asked event officials if they can ditch some of the pomp and circumstances by taking off their hats and changing their uniforms during judged

“We’re telling people, ‘Beware,’ ” Jarvis said. “It’s going to be tough.”

By Sally Ho THE ASSOCIATED PRESS

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Exercise 5.3: Six-Core Cube Guide Please use the Six-Core Cube Guide to analyze this story from the radical perspective. The Answer Key

can be found at the end of this chapter.

Chapter 5: Radical Theory | 145

Radical Theory Conclusions: Democratic Socialism

The radical theory of democratic socialism

has three conclusions that answer the original

questions of economics:

What to Produce? The model shows that cooperatively owned firms

produce things people need and want and that are

beneficial to society. This includes providing social

safeguards—health care, transportation, higher edu-

cation, and other basic human needs. This outcome

occurs because democratic socialism is a system

that values people and the planet over profits.

How to Produce? The model shows that in democratic socialism

firms produce sustainably. Through a commit-

ment to participatory governance and democratic

decision-making, they are guided by the invisible

synergy to make decisions that promote healthy

communities here and around the globe.

For Whom to Produce? The model shows that in democratic socialism

worker-owners enjoy the fruits of their own labor,

and their wages reflect what they contribute. A

portion of the surplus also goes to expanding

their enterprises, meeting the larger community’s

needs, and all the other services—legal, account-

ing, security, government—that ensure the future

success of democratic socialism.

Connection

All human beings long for peace, prosperity,

and the freedom to live their highest and best

selves, say radicals. To achieve those things, we

need a strong economy, and profit is only one—

albeit important—part. Profit enables firms to stay

in business and create the things that are good

and useful for people. It funds a decent standard

of living for worker-owners, circulates back into

the community to support local institutions, and

ensures the social safeguards that are everyone’s

rights and responsibilities. But focusing on profit

alone can’t give us what we want and need to

thrive, say radicals. They believe that in democratic

socialism the drive for well-being brings us peace

and prosperity, a clean environment and renewable

resources for generations to come, dignity and

respect in the workplace, fair compensation, and

release from worry about survival so we can

each achieve our potential. When workers in

cooperatively owned businesses forego higher

profits for themselves, it’s so there can be a higher

standard of living for everyone. Radicals point out

that this doesn’t occur because worker-owners are

more saintly or evolved than anyone else. They say

it’s because there’s an intrinsic understanding that

we are all interdependent—self-interest is mutual

interest—and when we act with that understanding,

the economy flourishes.

In radical theory, a positive feeling of cama-

raderie, mutual support, shared purpose, and

belonging is called connection. This experience arises in democratic socialism in four ways:

! With cooperative ownership, workers have

control over, and rights to, the products they

make. Their labor is valued and respected.

! When workers are connected as co-own-

ers, one person’s success is a success for the

whole firm, so worker-owners are connected

by mutual interest to cooperate and bring out

the best in one another.

! Because every worker is an owner, each per-

son contributes not just hours of labor but also

a voice and a vote to shape and represent the

firm’s mission in the world. This creates a sense

of belonging and mutual respect.

! Cooperative ownership enables people to

contribute something of meaning, beauty, and

146 | Voices On The Economy

usefulness through their labor. In democratic

socialism, people are able to shape the world

according to their own visions and values. In

the process, they can deeply connect with their

own humanity.

Radicals conclude that when planted in the

soil of democratic socialism, we recognize that

our self-interest is our mutual interest, and an

ever-upward spiral of well-being is ensured. They

say that democratic socialism is based on a set of

positive incentives that bring us the connection

we truly want and need.

The Benefits of the Invisible Synergy

! Worker Ownership

! Prosperity

! Income Equality

! Sustainable Production

! Jobs and Stable Prices

! Safe Working Conditions

! Universal Health Care

! Housing for All

! Abundance

! Safe and Thriving Communities

! Clean Environment

! Fair Competition

! Sustainable Balanced Budgets

! Secure and Dignified Retirement

! Social Harmony

! Peace and Cooperation

! Safe and Useful Products

! Innovations and Advancements

! Fair Trade Relationships

Chapter 5: Radical Theory | 147

Policy

Based on the conclusions, the course of action

radicals propose is to replace our current economic

system of capitalism with democratic socialism.

They say it would create unprecedented levels of

well-being because it has justice and commitment

to the common good at its core. In democratic

socialism, workers are paid what they contribute,

the government upholds the interests of the people,

society provides each person with what they need to

get their basic needs met, firms’ products are useful

and beneficial, production processes guarantee that

future generations will also flourish, and people

make decisions that improve communities here and

throughout the world. This economic system brings

us peace and prosperity.

Radicals say that the Occupy movement in the

United States and the growing support for demo-

cratic socialist ideals reflect a growing disillusion-

ment with capitalism in our nation and a desire

for radical change. From spontaneous encamp-

ments in public parks to protest the excesses of

capitalism, to electing socialist representatives,

radical ideas are taking hold, they say—an evolu-

tion, not a revolution, to bring us a brighter future

of economic justice. Radicals say that even though

the number of people who identify as democratic

socialists is still relatively small, these ideas are

shaping the mainstream conversations about pol-

icy. To quote an Ethiopian proverb: “When spider

webs unite, they can tie up a lion.”

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148 | Voices On The Economy

Radical Theory: Capitalism vs. Democratic Socialism

Radical Policy a. Reject Capitalism

b. Embrace Democratic Socialism • Justice and the

Common Good

Six-Core Cube: Capitalism

1. Private Ownership

2. Top-Down Governance

3. Individuals at Risk

4. Production for Profit

5. Unsustainable Production

6. Unhealthy Communities

1.ASSUMPTIONS i. Surplus

ii. The Class Process

iii. Dynamic Interactions over Surplus

Self-Interest

2.MODEL i. Labor Theory of Value

ii. Workplace Exploitation

iii. Capitalist Competition

Pressure for Bad leads to The Visible Suffering

3.CONCLUSIONS

Destructive Self-Interest and Alienation

I. What to Produce? Firms make what serves

their profit interests.

II. How to Produce? Firms maximize output,

but at an unacceptable cost to society.

III. For Whom to Produce? Firms’ products go to

those who directly/ indirectly exploit others.

1.ASSUMPTIONS i. Surplus

ii. The Class Process

iii. Dynamic Interactions over Surplus

Self-Interest

Capitalism Democratic Socialism

2.MODEL i. Collective Creation of Value

ii. Workplace Justice

iii. Coordination among Competitors

Pressure for Good leads to The Invisible Synergy

3.CONCLUSIONS

Mutual Interest and Connection

I. What to Produce? Firms make what people want and need.

II. How to Produce? Firms anchor communities

and produce sustainability.

III. For Whom to Produce? Firms’ products go to

worker-owners, firms, and community.

Six-Core Cube: Democratic Socialism

1. Cooperative Ownership

2. Participatory Governance

3. Social Safeguards

4. Production for Use

5. Sustainable Production

6. Healthy Communities

Chapter 5: Radical Theory | 149

The VOTE Program doesn’t advocate for one

economic theory over another. Our method is

to line up the radical, conservative, and liberal

perspectives side by side in a balanced and

unbiased way so you can understand them,

evaluate their ideas for yourself, and make up

your own mind about what you believe. Then you

can use your voice to join the conversation. The

best way to hear these “voices” is to imagine that

you’re listening to someone who is a passionate

advocate for that perspective. This person really

wants you to envision what their ideal world would

look like if our country followed their policies for

economic well-being. You can practice respectful

listening and try to imagine what their utopian

ideal sounds like. Do you agree with their views?

Does their analysis of the problem make sense

to you? Does their solution make sense to you?

This process of respectful listening, passionate

advocacy, and intelligent debate is how we’ll find

our way forward. Maybe you’ll be convinced to

change your mind, or you’ll be even more certain

that your view is the best one. Maybe you’ll hear

places where compromise and trade-offs make

sense. Maybe you’ll be sparked to come up with

brilliant new solutions.

In chapter 4 we practiced listening to the voices

of conservatives and liberals. Now let’s hear the

radical vision for economic well-being.

The Radical Voice: Democratic Socialism

Life, liberty, and the pursuit of happiness are

inalienable rights we all cherish. When we create

prosperity, we can realize the American Dream

because economic well-being is the foundation

of a good life. It allows us to flourish and thrive.

What is the best way to create wealth in our

nation? The best way is through democratic

socialism. When democracy is seamlessly inter-

woven with the economic system of socialism and

rests on strong constitutional values of justice, it

gives us freedom to live balanced and meaningful

lives. It unleashes our potential to accumulate the

greatest wealth and enjoy the highest standard of

living, and it allows us to take care of our most

vulnerable populations.

Brutal poverty has been the common condition

of humans for much of our history because most

economic systems are built on one group of peo-

ple exploiting (stealing from) another group of

people: slave masters and slaves, lords and serfs,

the state and workers, and private owners and

wage laborers. At the same time, political sys-

tems enforced this theft—and continue to do so

today. Democratic socialism corrects the glaring

injustice of workplace exploitation. It operates

from a holistic view of individual and collective

well-being and recognizes that when we cooper-

Economic Well-Being from Diverse Perspectives

150 | Voices On The Economy

ate and collaborate, we generate abundant wealth

and everyone’s needs can be met. It is this under-

standing of our interconnectedness that gives

democratic socialism the power to transform our

lives. Humanity goes from chains to freedom.

We are set free to achieve our highest potential

because the driving force in democratic socialism

is to create a good quality of life for all, along with

desirable and useful products. Profits are import-

ant, but they are not the first priority. We are guided

by the pressure for good that arises when we value

people over profits, which leads to an invisible

synergy that gives us more than just the sum of the

individual parts. When we act in ways that serve

our mutual interest, we come together in connec-

tion, and as a result we are able to live healthy,

balanced lives. Democratic socialism is guided by

six core points. Through cooperative ownership,

we prosper because we benefit directly from the

fruits of our own labor. Through a commitment

to social safeguards, people are freed from crush-

ing debt and worry about paying for college tui-

tion, medical care, transportation, and other basic

human needs because each person has a right and

a responsibility to make sure these are available

to everyone. Firms are committed to producing

things that are useful and helpful to people. While

profit is of course important to the survival of any

firm, those profits are made without manipulating

society’s needs and desires. Through a commit-

ment to sustainable production, firms make deci-

sions that are good for communities and ensure

that resources will be available for generations to

come. A commitment to participatory governance

brings together public officials, worker-owners,

and representatives from other stakeholder groups

to engage in open-minded dialogue and find the

best ways forward. These collaborations result

in transparency, accountability, and innovation.

Through a commitment to healthy communities,

we recognize that we share one Earth and that

our global interests are inextricably tied to our

local decisions. Democratic socialism gives us the

Chapter 5: Radical Theory | 151

Chapter 5: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Match the type of cooperative (left column) with its definition (right column). A. Worker-owned i. Customers join and have an ownership stake in the business B. Producer/Marketing ii. Businesses come together under one label to advertise C. Purchasing/Retail iii. Businesses come together under one label to buy inputs D. Consumer iv. People who work in the organization own it

2. Please choose the correct meaning of the radical assumption of surplus. A. The natural world provides more resources than people need and want. B. At all points of production, quantity supplied is greater than quantity demanded. C. When people make products, they naturally make more than they need for themselves. D. The benefits that individuals get when they pay less money than they would have been

willing to pay, and that firms get when they make more money than they would have been willing to accept.

3. In a privately owned window company, each week the owner pays $1,250 in labor costs and $3,000 in capital, raw material, and support workers (including the owner’s own salary). The company earns $5,000 per week. According to radical theorists, the surplus value is ________. It is produced by the ________ and is taken by the ________.

A. $750; laborers; capitalists B. $2,000; workers; owners C. $3,750; bourgeoisie; proletariat D. $750; workers; workers

freedom, security, and opportunity to do what is

best for ourselves, for our communities, and for

our planet.

Democratic socialism joins two of the most

inspired and practical political and economic sys-

tems humans have ever known: democracy and

socialism. It creates opportunities for each one of

us to realize our genius, leadership potential, and

capacity to contribute to society and flourish. These

opportunities are freely available to people of

every class, race, gender, age, national origin, sex-

ual orientation, religion, and ability. We can have it all—material comfort; affordable, healthy, and safe

products; housing; medical care; security in our old

age; beneficial trade relationships; jobs; and stable

prices—as well as a clean environment and ethical

relationships with one another. Democratic social-

ism delivers the American Dream with peace and

social harmony.

152 | Voices On The Economy

4. Which of the following statements are true about capitalist competition in capitalism according to radicals? Choose all that apply:

A. The bourgeoisie are not necessarily bad people. B. Profit maximization is the primary measure of success. C. It’s a dog-eat-dog world where only the winners survive. D. Owners are stuck in a bad system that pushes them to do the wrong thing.

5. In a worker-owned window company, each week the co-owners pay $1,250 in productive labor costs and $3,000 in capital, raw material, and unproductive labor costs per week. The company earns $5,000 per week. According to radical theorists, the surplus value is ________. It is produced by the _______ and is taken by the ________.

A. $750; laborers; capitalists B. $2,000; workers; owners C. $3,750; bourgeoisie; proletariat D. $750; workers; workers

6. Which of the following statements are true about coordination among competitors in democratic socialism? Choose all that apply

A. Co-workers are not necessarily good people. B. Profit is important, but not more important than the well-being of people and the planet. C. In unity there is strength, so when cooperatively owned firms do well it benefits everyone

in the community, including competitors.

D. Co-owners are stuck in a good system that pushes them to do the right thing.

Please use the Market Change Guide to answer the next two questions.

7. Advances in artificial intelligence are being used to more efficiently fill containers of personal-care products such as shampoo, hand lotion, toothpaste, and liquid soap. Choose the relevant core point of capitalism and identify the pressure for bad and the visible suffering. (Hint: an answer is only correct if it’s relevant to this scenario.)

A. Top-Down Governance. Firms pay off government officials. Visible suffering: unsafe products.

B. Individuals at Risk. Firms price their personal-care products so high that only the wealthiest 1 percent of the population can afford them. Visible suffering: public health crises.

C. Healthy Communities. Firms move production out of the country to take advantage of the new technology and lower environmental standards. Visible suffering: unemployment and pollution.

D. Private Ownership. Firms lay off workers and increase the rate of exploitation for those who are left. Visible suffering: growing income disparity.

Chapter 5: Radical Theory | 153

8. Advances in artificial intelligence are being used to more efficiently fill containers of personal-care products such as shampoo, hand lotion, toothpaste, and liquid soap. Choose the relevant core point of democratic socialism and identify the pressure for good and the invisible synergy. (Hint: an answer is only correct if it’s relevant to this scenario.)

A. Participatory Governance. Groups of stakeholders decide that product testing is necessary. Invisible synergy: safe products.

B. Social Safeguards. Individuals and firms pay into the system so that everyone is guaranteed health care, including personal-care products. Invisible synergy: preventive care increases.

C. Healthy Communities. Firms produce locally so they are committed to a zero carbon footprint. Invisible synergy: firms create more worker-owner positions in their communities and reduce pollution.

D. Cooperative ownership: Firms adopt the new technology, and with increased efficiency co-owners will get bonuses and time off and the firm will invest in plant-based containers. Invisible synergy: higher standard of living and more leisure time.

9. According to radicals, all the following are examples of connection that occur in democratic socialism EXCEPT:

A. Workers have a voice and a vote in the firm’s mission. B. Workers contribute something of meaning, beauty, and usefulness to the world. C. Workers are either winners or losers in their firms, so when one is promoted, another

is demoted.

D. Workers have control over and rights to the products they make.

10. Which of the following are radical policies? A. Reject capitalism B. Embrace democratic socialism C. Prioritize justice and the common good D. All the above

Answers

1. A – iv, B – ii, C – iii, D – i 2. C 3. A 4. A, B, C, & D 5. D 6. A, B, C, & D 7. D 8. D 9. C 10. D

154 | Voices On The Economy

Capitalism

1. Identify the problem

2. Choose a relevant core

point to explain the problem

3. Describe the Pressure for Bad The pressure for bad is a motivation to…

4. Expose the Visible Suffering (outcome)

Democratic Socialism

1. Identify the problem

2. Choose a relevant core

point to explain the problem

3. Describe the Pressure for Good The pressure for good is a motivation to…

4. Reveal the Invisible Synergy (outcome)

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Democratic Socialism * Worker Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

Higher than usual temperatures

x x

continue using fossil fuel because of the drive for profit.

switch to renewable energy because of the drive for well-being.

when we have unsustainable production, we have climate change and more disruptive, weather-related disasters.

when we have sustainable production, we get a planet in balance and fewer weather-related natural disasters.

Answer Key to Exercise 5.3

Chapter 5: Key Terms Accumulation of capital Alienation Bourgeoisie Class process Class struggle Collective creation of value Connection Consumer cooperative Cooperative Dynamic interactions over surplus Exploitation Holistic Invisible synergy Labor theory of value Mutual interest Necessary labor Participatory governance

Pressure for bad Pressure for good Producer/marketing cooperative Productive worker Proletariat Purchasing/retail cooperative Reserve army of the

unemployed Six Core Points of Capitalism

Private ownership Top-down governance Individuals at risk Production for profit Unsustainable production Unhealthy communities

Six Core Points of Democratic Socialism

Cooperative ownership Participatory governance Social safeguards Production for use Sustainable production Healthy communities

Social totality Surplus Surplus labor Surplus value Unproductive worker Visible suffering Worker-owned cooperatives Workplace justice

ch6

6Tools to Get Started There’s an old economics joke about a trav-eler who visits an island inhabited by can-nibals. He passes by a butcher shop that specializes in human brains. The sign in the win-

dow reads: “Artists’ Brains, $9/lb—Philosophers’

Brains, $12/lb—Scientists’ Brains, $15/lb—Econo-

mists’ Brains, $19/lb.”

“Wow!” the traveler exclaims. “Those econo-

mists’ brains must be popular.”

The butcher overhears and says, “Are you kid-

ding? Do you have any idea how many econo-

mists you have to kill to get a pound of brains?!”

When you’re done groaning, let me tell you the

VOTE Program’s twist on this scenario. It will help

you think about our three different perspectives.

“Wow!” the traveler exclaims. “Those econ-

omists’ brains are expensive. They must be in

demand.”

“All brains are in demand,” a liberal shop-

per says, “but econo-

mists’ brains are by far

the tastiest. Everyone

loves them, but this

butcher has cornered

the market. Now he

takes advantage of us

consumers by pur-

posely offering fewer

economists’ brains for sale, and then he jacks up

his prices. It’s outrageous! We need government

to protect consumers and the other butchers from

this kind of unfair advantage by regulating the

market.”

The conservative butcher says, “I’m not doing

anything wrong. You’re the one who’s got it all

wrong. This is just a matter of supply and demand.

It’s true that economists’ brains are more popular,

but do you have any idea how many economists I

have to kill to get a pound of brains?! That’s what

drives up the prices. I’m not taking advantage

of consumers, and nothing is stopping the other

butchers from selling economists’ brains at lower

prices. It’s a free market.”

The butcher’s radical apprentice grumbles,

“Hah! You’ve both got it wrong. I’m the one

doing all the work of

killing the economists,

yet I’m getting paid a

pittance. I can’t even

afford to buy the econ-

omists’ brains that I pro-

duce! The price of those

brains is high because

of the drive for profit.

What we ought to do is

switch from capitalism

to democratic socialism.

158 | Voices On The Economy

If this butcher shop were owned by the workers,

and all the firms on our island were cooperatively

owned, we would all get paid what we actually

contribute. Then we could all afford these tasty

economists’ brains.”

We don’t live on an island of cannibals, so

we can’t have an informed opinion about this

debate—but we can have informed opinions about the economic debates that shape every

aspect of life where we live. You’re about to

get into the nitty gritty details of those debates.

You’ve been through basic training—learned the

philosophy and history of economic thought as

well as conventional and radical theory. There are

just two more things to cover so you’ll be per-

fectly prepared to dive into the issues. First, you’ll

need to make sure you’re not bringing along a

load of stereotypes about the different perspec-

tives. They’ll weigh you down, and this mission

will never get off the ground. Second, you’ll need

to learn a few new radical and conventional tools.

We’ll be using them to analyze the first two eco-

nomic issues in the VOTE Program, which are

Agriculture and Product Safety.

Challenging the Stereotypes

Radicals, conservatives, and liberals don’t agree

on the causes of economic problems, and so it’s no

surprise that they don’t agree on the best possible

solutions to those problems. In fact, while it may

seem like the three perspectives disagree on just

about everything except that puppies and kittens

are cute, they actually all want the same general

outcome for each issue. Are you skeptical? You’re

not alone. The idea that all three perspectives

want the same outcome is the most controversial

assumption of the VOTE Program. Many people

disagree. They protest that conservatives, radicals,

and liberals don’t all want a clean environment,

affordable housing for all, and an end to poverty.

“No!” we often hear from students and other

economists. “Some perspectives don’t want those

things for everyone!” They point to policies

proposed by each perspective that potentially

could, or do (in their respective opinions), lead

to harmful outcomes for some people. Here are

examples of the kinds of things we hear again

and again when we teach the three perspectives

side by side in the VOTE Program:

“They want to take away our health care and let people die!”

“They want to drive businesses under with end- less regulations!”

“They want to give freeloaders the same rewards we give hard-working people.”

We believe that when you understand the visions

from which liberals, radicals, and conservatives

operate—the visions for economic well-being we

described in chapters 4 and 5—then you will under-

stand the world each perspective hopes to create. Their respective policy proposals come from a uto-

pian idea of what would work in an ideal world—a

world in which their perspective reigns supreme. In

every case, all three perspectives really do want the

exact same outcomes. It’s only when you’re stand- ing outside their world views and looking in that it

might seem as if they don’t. We’ll be stating these

shared outcomes explicitly in each issues chapter.

Below (table 6.1) is a summary of the shared prob-

lem statements that all the perspectives can agree

on, along with their shared goals.

All the perspectives are searching for solutions

that will create the best possible world for all of

us. Thinking the best of each perspective is a vir-

tue for VOTE Program participants. When you

entertain the ideas of other perspectives in a fair

and open-minded way, and when you graciously

give others the benefit of the doubt that they, too,

want outcomes that are beneficial for everyone,

then your mind opens to considering their ideas.

With that mental attitude, you are in a position

to be inspired by diverse ideas, and that inspira-

tion can spark brilliant new solutions for the best

pathways forward.

Chapter 6: Tools to Get Started | 159

Issue Name Shared Problem Shared Goal

Agriculture Instability in farming threatens food security A secure food system

Product Safety Products can cause harm The protection that people want

Livelihood Poverty causes suffering End poverty

Housing Unaffordable housing leads to homelessness Affordable housing for all

Income Distribution Income inequality can cause social conflict Income that rewards contributions

Market Power Large firms can abuse their power in markets The best products at reasonable prices

The Environment Polluted air, water, and land Breathable air, drinkable water, habitable land

Health Care Lack of access to high-quality health care Health and well-being for all

International Trade Foreign trade can cause conflicts Improved standard of living through trade

Retirement Security Seniors are economically vulnerable Care and peace of mind for the elderly

Economic Stability Inflation and unemployment undermine prosperity

Stable prices and full employment

$ $ The Federal Budget Long-term, escalating debt holds us back as a nation

Financial freedom to invest in our future

Immigration Integrating newcomers into society is challenging

Newcomers make positive contributions to society

Table 6.1 Shared Problems and Shared Goals

160 | Voices On The Economy

What Is a Stereotype?

Have you ever felt as if

you weren’t being seen

for who you really are—

as a unique and complex

individual? Have you ever

felt that you never even

had a chance to be seen as

an individual because the

other person already made

up their mind about you

based on how you look, or

act, or where you’re from?

It’s a terribly frustrating

feeling. A stereotype is an oversimplified—and

often unflattering and

unfair—idea about a group

of people, and if you

happen to belong to that

group, or are in some way

associated with that group,

the stereotype gets slapped

on you without you being

able to do anything about it. The other person

may not even be conscious of making automatic

assumptions about you. Whether conscious

or unconscious, stereotypes make it nearly

impossible for others to form a fair impression

of who you really are. It doesn’t matter that you

happen to be a complex and unique person with

a great sense of humor and a terrible singing

voice, or that you are obsessed with video games

and someday want to travel to every country on

the equator. When people judge you through

the lenses of their stereotypes, they sum you up

in the most narrow and ungenerous way. You

might find yourself seething with resentment,

shame, rage, and frustration. You might find

yourself stereotyping them in return. Do you see

the situation unfolding here? No one is being

considered as a complex individual, no one is

being given the benefit

of the doubt, and no one

is open to being curious.

How likely are you to start

a respectful dialogue with

someone you stereotype,

or with someone who

stereotypes you?

Let’s be real about the

fact that not only are we

sometimes stereotyped,

but we also stereotype

others. It’s an unfortunate

part of being human that

we all carry around certain

preconceived ideas about

other groups of people.

They are most often asso-

ciated with gender, race,

religion, sexual orienta-

tion, national origin, class,

age, ability, political and

economic perspectives,

culture, and legal status, as

well as a host of other categories. Why do stereo-

types even exist? Sociologists and psychologists

who have studied this phenomenon say stereo-

types serve, in part, to make us feel better about

our own group identity. It may be the least noble

characteristic of humans that in order to feel bet-

ter about ourselves, we often put down others.

Stereotyping is a lazy habit. For example, con-

sider this one: “All women love shoes.” Some

people argue that there’s a grain of truth in ste-

reotypes, but the problem with that defense is

that even if a woman coincidentally happens to

love shoes, it’s never fair or accurate to assume all women love shoes. When we stereotype, we’re

too lazy to be curious about the other person.

We don’t bother to find out what the individual

actually likes or thinks or wants or knows, so we

pull out the old stereotype and feel smugly supe-

A stereotype is an

oversimplified—and

often unflattering and

unfair—idea about a

group of people, and if

you happen to belong to

that group, or are in some

way associated with that

group, the stereotype

gets slapped on you

without you being able to

do anything about it.

Chapter 6: Tools to Get Started | 161

rior or comfortably complacent. And of course we

take for granted that our own group is made up

of unique individuals who have diverse character-

istics—shoe lovers, shoe haters, shoe-“meh” peo-

ple. Can’t we just realize the same is true for peo-

ple who are not in our group? It seems like the

simplest thing to do, yet we all fail to reject the

stereotypes we unconsciously and consciously

hold about people who are not in our political

parties, religions, social classes, genders, races,

and so forth.

You might be thinking all this talk about ste-

reotyping is unnecessary because they are mostly

harmless and sometimes even funny. After all,

some of the best stand-up comedy plays off ste-

reotypes, right? Maybe. But in the context of the

VOTE Program, stereotypes are a buzzkill. They

make it impossible for you to hear all the per-

spectives with an open mind. Imagine if before

you even hear their ideas, you’re thinking, “Those

radicals are all dangerous extremists,” or “Those

liberals are idiots,” or “Those conservatives are all

liars.” I guarantee that without an open mind you

will not only struggle with the Issues chapters in

this book, but you will also have a hard time in

life when you interact with people who are dif-

ferent from you and who think differently from

you. Every religion and culture has some version

of the idea “Do unto others as you would have

others do unto you.” Please keep that in mind

when you run up against stereotypes about con-

servatives, liberals, and radicals—and especially

keep this in mind if you’re tempted to fall back on

them when you disagree with other perspectives.

Rejecting stereotypes will help you to be a better

person, and it will open you up to a rich diversity

of thoughts and opinions.

One more thing to keep in mind about stereo-

types: there’s a difference between people who

are socially liberal, conservative, or radical and

those who are economically radical, conservative,

or liberal. Views on gun laws, abortion, legaliz-

162 | Voices On The Economy

ing marijuana, the separation of church and state,

and other social questions don’t necessarily link

to economic views. Because all these social issues

are hotly debated in contemporary society, it’s

easy to get confused. Just remember that an eco-

nomic conservative can be anti-gun, an economic

radical can be against legalizing marijuana, and

an economic liberal can be against the separation

of church and state. Social views and economic

perspectives don’t always match up. In the VOTE

Program we’re only exploring economic views.

It’s going to be useful to recognize some of the

most common stereotypes about each perspective

so you can challenge them in your own mind and

when they come up in debates and conversation.

These are by no means all the ones you’ll hear in

the world, but this sampling will give you prac-

tice recognizing and responding to biases about

diverse points of view.

Four Common Stereotypes about Liberals

Stereotype 1: Liberals Believe the Solution to All Problems Is a Government Handout. The stereotype of the bleeding-heart liberal

who wants to open the government’s wallet and

pass out tax dollars to anyone who whines has

long been used against liberals when they want

to institute social programs to help struggling

businesses, families, and individuals. It’s the

helpful hand of government that lifts people out

of poverty, say liberals, through programs that

create equal opportunities that give everyone a

fair shot to compete in capitalism. Government

programs are not handouts; they are hand- ups, according to liberals. And govern ment

intervention doesn’t weaken us—it strength ens

us as a nation. Whether government support is in

the form of Head Start programs for pre schoolers,

food assistance for the hungry, drug rehabilitation

programs that divert people from prisons, or job

training programs that give people marketable skills, liberals say fair-market capital ism opens the

doors to prosperity for all.

Liberals say a civil society is one in which we all

take care of those who need help so that everyone

can realize their potential and become contributing

members of society. Government programs correct

inequalities and power differences that make

the playing field uneven. Liberals say capitalism

flourishes when everyone has equal access to

opportunities, so it’s smart to feed people who

are hungry, educate people who are illiterate, and

give job training to the unemployed. From the

liberal perspective, this kind of investment is the

only way more Americans will be able to realize

their potential and use their talents and skills to

make our nation as prosperous as it can be.

Stereotype 2: Democrats Are the Party of the Elite and the Wishy-Washy. The stereotype of the Democrats—the political party of the lib-

erals—as constantly waffling and flip-flopping

on policy is untrue and unfair, say liberals. They

point out that decisiveness may look like strength,

but it’s like the old saying, “When all you have

is a hammer, every problem looks like a nail.”

Liberals say that instead of hammering away at

every problem and saying, “See how strong and

decisive I am!” it makes more sense to study the

problem from many angles to find the best solu-

tions. By understanding the context and circum-

stances of problems and entertaining different

ideas, we can find the best solutions that will lead

to an economy that works for the greater good.

It’s not wishy washy to come up with complex

solutions to problems, say liberals, and it’s not

elite to be intelligent. The idea that liberals are

elitists with PhDs and law degrees who talk over

everyone else’s head while nothing gets done in

Washington couldn’t be further from the truth.

Liberals come from every social class and educa-

tional background. But they say if “elitism” means

not sticking your fingers in your ears and block-

Chapter 6: Tools to Get Started | 163

ing out information that doesn’t agree with your

preconceived notions, then they proudly claim

the title.

Liberals believe it’s just good sense to make

informed decisions by incorporating new infor-

mation and doing research to help chart the best

course and then change direction when new

information comes to light. Could that look like

flip-flopping? Yes. But liberals call it wisdom

when leaders’ and policymakers’ ideas become

more nuanced with new information. They say

we should embrace complexity and use our intel-

ligence to develop the best solutions. Liberals like

to quote John Maynard Keynes, who said, “When

the facts change, I change my mind—what do

you do, sir?”

Stereotype 3: Liberals Are “Politically Correct.” A common stereotype of liberals is that they always want to give some people special

treatment—LGBTQ people, women, people of

color, people with disabilities, and so on. Liber-

als say the term politically correct is a put-down because it suggests they are insincere in their com-

mitment to equality and only interested in their

personal gain (such as votes on election day). Not

true, say liberals. Equality is the very heart of their

economic values. They say that their commitment

to fair play opens the door wider for more people

to participate in capitalism and thereby improve

the economy. They would like you to please note

that they are not calling for “special treatment”

but for equal opportunities for all, which is a core

American ideal. They say they are often misun-

derstood as wanting equal outcomes for all, but

that’s not true. They believe it’s up to the individ-

ual to work hard and persevere in order to suc-

ceed. They offer people a fair start on the ladder

to success, but we all have to do our own climb-

ing. Liberals are proud of their successes securing

the rights of people with disabilities to have equal

access to jobs, passing the Fair Pay Act, and more.

The foundation of the liberal economic perspec-

tive is that when more people are able to contrib-

ute to society, the whole nation prospers. They

believe we achieve the highest participation by

using government programs to remove barriers of

discrimination and lack of opportunity.

Liberals say that lack of opportunity can also

come about because of personal bad luck—maybe

you were born into a family that struggled in pov-

erty for generations, or your home was carried

away in a flood, or medical bills led you to bank-

ruptcy. They say that is why we need government

programs to help people get back on their feet.

Fair-market capitalism gives all people a chance

to compete equally and achieve the wealth and

well-being we all desire. Liberals see themselves

as humanistic and inclusive—as people who act

from conscience. They see themselves as standing

up for the rules and making sure everyone plays

fair so that capitalism can work for individuals

and for the nation as a whole.

Stereotype 4: Liberals Are Antibusiness. Often during budget debates, liberals are stereo-

typed as being “antibusiness” when they advocate

for taxes on the rich and regulations on firms. This

couldn’t be farther from the truth, say liberals,

who see themselves as champions of capitalism.

They believe business makes us all better off by

creating jobs and making the things people want

and need, and liberals say that’s precisely why we

need a partnership between business and govern-

ment. It’s through regulations that create account-

ability and transparency that firms can thrive in

a fair marketplace, they say, and it also protects

firms from a few bad apples crashing the whole

system and spoiling it for everyone. For instance,

liberals say that if we didn’t have environmental

regulations, a few firms could end up destroying

the resources that other firms need to produce

and prosper in capitalism, such as clean water,

clean air, and healthy forests. Without oversight,

say liberals, we will kill the goose that lays the

golden egg. They believe government helps busi-

164 | Voices On The Economy

ness by protecting fair competition and ensuring

that a few firms don’t end up with the power to

manipulate prices.

Liberals believe regulations on businesses and

taxes on the wealthy protect capitalism because

these measures prevent extreme levels of inequal-

ity. They worry that if the income divide grows

too wide, people will take to the streets out of

frustration and reject capitalism altogether, which

would threaten our whole way of life. And by

the way, they add, taxes on the wealthy actually

grow the economy because they fund the gov-

ernment programs that put money in people’s

pockets, and then people go out and spend it,

which is very good for business. As demand goes

up, firms expand and create more jobs, and the

whole economic system prospers. So liberals are

proud to be what they believe is the party of the

responsible taxers and smart spenders who prime

the pump of the economy when necessary, pay

it back as the economy grows, and, throughout it

all, support businesses to thrive.

Four Common Stereotypes about Radicals

Stereotype 1: Radicals Are a Bunch of Idealistic Hippies. Radicals are often lampooned as 1960s hippie throwbacks who

believe that one day we’ll all unite in solidarity,

hold hands, and sing “Kum ba yah” while we work

together in perfect cooperation. Radicals laugh at

this stereotype. They say of course cooperatively

owned enterprises don’t rely on everyone getting

along or sacrificing their individual needs for

the greater good. In fact, they say, democratic

socialism is actually the most self-interested

economic system because when workers have skin

in the game as owners of their firms, and when

everyone has a voice in participatory government,

then people have the best chances of getting their

individual needs met. To radicals, the most self-

interested way to survive in a competitive world

is to join forces with others who share your goals

and interests. They say the wolf who runs with a

pack eats better than the wolf who hunts alone.

If “idealistic” means believing that there’s a bet-

ter economic system than capitalism, then radicals

proudly claim the title. They say there will always

be a pressure for bad in capitalism, which will

always lead to the visible suffering of humankind.

In contrast, they say democratic socialism creates

a pressure for good, so even if you’re a nasty, self-

ish, greedy individual, it doesn’t matter—you’ll

work collaboratively with others because it’s the

best way to get your needs met. They believe

it’s self-interested—not idealistic—to collaborate,

coordinate, and cooperate.

Stereotype 2: Democratic Socialists Are Anti-wealth. No human is anti-wealth, if by “wealth” we mean getting our needs and wants

met, say radicals. They say this stereotype is com-

pletely unfounded because of course everyone

wants the material things that help us to survive,

thrive, and flourish—kitchen gadgets, Broadway

plays, energy drinks, headphones, colored pens,

sneakers with gel soles, and everything else we

value. Rejecting capitalism doesn’t mean there

won’t be wealth, they say. Under democratic

socialism, firms still need to make a profit to stay

in business. There are still markets and prices,

and businesses still produce the things people

want. Radicals say if the cooperatively owned

firms make rickety bicycles or moldy bread, or

if the packages don’t get delivered on time, or if

companies squander their resources, then those

businesses won’t survive. The big difference

between democratic socialism and capitalism is

that it’s up to the worker-owners to decide how

wealth will be produced, consumed, and distrib-

uted, and radicals say this is how we end up with

the invisible synergy that makes society wealthy

and healthy.

Radicals say it’s actually capitalism that’s anti-

Chapter 6: Tools to Get Started | 165

wealth—for the 99 percent. The way they see

it, when you work for a low wage, and you not

only have to pay your rent and food and phone

bills from that paycheck, but you also have to

pay for your own health care, your own college

tuition, your own bus pass to get to work, and

more, you’re left with less than nothing. Under

capitalism, the majority of people are struggling

to dig out from under a mountain of debt, and

not because they’re buying private helicopters

and expensive jewelry, say radicals, but because

they’re just trying to get their basic needs met.

In democratic socialism, social safeguards such

as health care, education, housing, transporta-

tion, and retirement security are funded through

everyone’s contributions. Radicals say that even

though taxes are higher, people don’t have to

pay for everything on their own. Society provides

those big-ticket items such as a college education

at much lower costs than each person would have

to pay to provide them individually. Radicals say

that under democratic socialism we get levels of

wealth, security, and well-being that only the 1

percent enjoy now under capitalism.

Stereotype 3: Radicals Want to Pay an Uneducated Janitor the Same as an Inven- tor with a PhD. This stereotype is completely untrue. There is no rule in democratic socialism

that says everyone in a cooperatively owned enter-

prise has to be paid the same amount. According

to radicals, wages can be based on skill, experi-

ence, education, seniority, and many other fac-

tors. The worker-owners decide for themselves

the salaries, base pay, hours, bonuses, vacation

time, paid leave, and more. But radicals say what

is ensured is that in democratic socialism there

is dramatically less discrepancy between what

the lowest-paid and highest-paid workers earn.

Instead of the highest-paid workers making four

hundred times the average wage laborer’s salary,

it might be more like six or seven times more. So

the janitor probably won’t get paid the same as

the inventor of the company’s best-selling new

widget, but the disparity in pay between the two

will be a lot less than it would be in capitalism,

say radicals, and that means more money is avail-

able to fund everyone’s well-being.

Radicals don’t agree with the capitalist idea that

entrepreneurs are a fourth resource—as import-

ant as land, labor, and capital. The way they look

at it, while the chef in your favorite restaurant

is important, you wouldn’t dine there if the ser-

vice was bad, or if the dishes were dirty, or if

the floor was sticky. They say you can have a

great idea about creating a car company and take

great financial risks and work day and night—but

without the engineers, the mechanics, the weld-

ers, the painters, and the administrative assistants,

you won’t have any cars. Sure, entrepreneurs are

important, say radicals, but cooperatively owned

enterprises operate with respect for the contri-

butions of everyone’s work, understanding that

each person plays a role in the overall success of

the business.

Stereotype 4: Radicals Want a Revolution. This stereotype is often used to scare people

away from listening to the ideas that radicals have

to offer. In fact, say radicals, the peaceful change

from capitalism to democratic socialism is already

underway. They point to the tens of thousands of

cooperatively owned businesses that are already

thriving in the United States, turning over trillions

of dollars annually. They point to the diverse can-

didates running in local, state, and national elec-

tions as democratic socialists. Radicals say Amer-

icans are already rejecting capitalism, and more

are jumping on the democratic socialism train

every day, sickened by the gross income inequal-

ity between the 1 percent and the 99 percent.

Radicals believe we don’t have to kill off capi-

talism in a bloody revolution to realize the vision

of a world in which it’s replaced by a democratic

socialist economic system. But they acknowl-

edge that part of the power of capitalism is that

166 | Voices On The Economy

it makes us believe it’s so monolithic that it can

never be changed. Radicals like the quote by

anthropologist Margaret Mead: “Never doubt that

a small group of thoughtful, committed citizens

can change the world; indeed, it’s the only thing

that ever has.” Radicals say change can evolve in

small increments, like tiny grains of sand shifting

a little at a time until suddenly they hit a tipping

point and turn into a landslide.

Four Common Stereotypes about Conservatives

Stereotype 1: Conservatives Are Greedy and Heartless. This stereotype is often meant as a put-down, implying that conservatives will

trample on everyone else at the dessert buffet so

they can grab the biggest piece of the pie for

themselves. Conservatives have a very different

way of looking at it. They say that if by “greedy”

you mean motivated to make the most profit, then

yes. In that case, greed is the best possible fuel for

the economy. They believe that when they work

hard to maximize their profit, and when they earn

that big piece of pie, they will naturally grow their

business, which means they will create jobs for

everyone and grow the entire economy. In that

way, all those other people at the dessert buffet

will get their pie too—because the profit motive

leads to a bigger pie for everyone. Conservative

economists like the old saying, “A rising tide will

lift all boats.” They say everyone benefits when

we pursue our own self-interest; however, if we

have to split the pie equally, we’re all going to

end up with a lousy crumb of crust.

Conservatives are also stereotyped as heart-

less and unsympathetic when it comes to helping

those less fortunate. But conservatives say they

are as concerned as anyone else about living in

a society where all people thrive and have what

they need to contribute and prosper. Charitable

giving is a long-standing practice among conser-

vatives, and not just out of a sense of altruism.

Taking care of those less fortunate is in their own

self-interest because it makes the streets safer, the

schools better, and communities more pleasant

places to live. And they say philanthropy is good

business because it gives firms a good reputation.

This stereotype is usually used as a put-down

when conservatives object to social welfare pro-

grams. But from their point of view, government

handouts don’t do anyone any favors, because

they actually enable people to be unproductive.

As former conservative House of Representatives

leader Paul Ryan (a Republican from Wisconsin)

once said, those welfare programs turn the “safety

net into a hammock that lulls able-bodied peo-

ple into complacency and dependence.” Conser-

vatives believe free-market capitalism creates the

incentives for people to make the choices that

will bring them the happiness they want. They are

strong advocates for individuals taking personal

responsibility for themselves and their families by

staying in school, working hard, seizing oppor-

tunities, staying out of trouble with the law, and

otherwise being productive members of society.

Stereotype 2: Republicans Are the Party of the Rich. It’s simply not true that conservatives are all rich. According to an oft-cited 2016 study by Flor-

ida State University political scientist Douglas Ahler

and data researcher Gaurav Sood, only 2 percent of

Republicans made more than $250,000 a year. The

researchers also found that the majorities of both

the Republican Party and the Democratic Party were

middle class (the research did not include dem-

ocratic socialists). So why does this stereotype of

the rich Republican persist? The researchers say the

mass media popularizes certain images of Republi-

cans so that people end up forming a stereotypical

idea from what they see, read, and hear in the news.

This leaves everyone with a skewed impression of

all the political parties. We end up believing there

is a deeper income divide among Republicans and

Democrats than actually exists.

Chapter 6: Tools to Get Started | 167

When critics say conservatives just want to

make the rich richer, conservatives respond with

a hearty, “Yes, and that’s a good thing. When was

the last time a poor person gave you a job?” They

say it’s the rich who prime the pump of the econ-

omy by expanding industry and creating employ-

ment opportunities. And they say the rich create

the kinds of jobs that help the country produce

the things we want and need, as opposed to cre-

ating more jobs for government bureaucrats, who

only slow down innovation with red tape and

regulations. Conservatives view entrepreneurs as

a fourth resource (in addition to land, labor, and

capital), and they see capitalism as a reward sys-

tem for those hardworking and creative geniuses.

“We want them to get rich,” conservatives say.

“Wealth motivates entrepreneurs to create the

things that make our lives better.” They believe

that, without the profit motive, those treasured

members of society would not have put in the

sweat and hard work and taken on the risks that

brought us lasers, wrinkle-free shirts, cell phones,

computers, airlines, and amusement parks. With-

out the profit motive, there would be no jobs or

innovations, and communities would fail to thrive.

Conservatives support the rich to keep creating

wealth because they believe that is what moves

us all steadily upward toward more prosperity.

Stereotype 3: Conservatives Want to Pre- tend Everyone Has an Equal Chance to Suc- ceed. Please remember that conservatives include people of all genders, races, religions, sexual ori-

entations, physical abilities, and every other kind

of diversity. They know as well as anyone else that

racism, sexism, and other forms of discrimination

exist. But economic conservatives believe social

justice and equality come about through free-mar-

ket capitalism because it gives all people the incen-

tives and the opportunities to compete equally to

achieve the wealth and well-being they desire.

Conservatives see themselves as moral, responsi-

ble adults who take charge of their own lives, and

they expect others to do the same. They believe

people can rise on their own merits because the

system of capitalism is color-blind, gender-blind,

and blind to other differences. If a person pro-

duces something that others demand, prosperity

will be created. They say it’s that simple.

From the early days of classical theory,

free-market capitalists spoke out against slavery,

and the neoclassical economists continued this

tradition. They believe humans should deter-

mine for themselves the best use of their privately

owned resources, including to whom and under

what conditions to sell their labor. They believe

slavery—an economic system where someone

owns the labor of another person—is incompat-

ible with capitalism because it leads to a misal-

location of resources. For example, a slave may

have been best employed as a lawyer, while a

plantation owner might have been best used to

dig ditches. A nineteenth-century Scottish philos-

opher named Thomas Carlyle criticized classical

theory, calling it a “dismal science” for its anti-

slavery position. Other economists slammed him

for it, although Carlyle’s label persists to this day.

(Unfortunately, most people who use this phrase

don’t know the background and mistakenly think

it means that economics is boring or constantly

delivering bad news.)

Stereotype 4: Conservatives Are Stubborn and Pigheaded. A common stereotype of con- servatives is that they won’t compromise, and even

actively stonewall, when they don’t get their way.

If their critics mean they won’t compromise their

principles, then “guilty as charged,” say conserva-

tives, who believe it’s an excellent thing for people

to stand up for what they believe. Conservatives

say it’s not stubborn or pigheaded to hold to one’s

strong beliefs in the face of opposition. In fact,

they say this is something to cherish and preserve

because it’s only when they bring their convictions

to the table that they can make their best contribu-

tions to the conversation and be an integral part of

168 | Voices On The Economy

the process that moves our nation forward.

A related stereotype is that conservatives stub-

bornly resist change. Please don’t think conser-

vatives are just a bunch of stodgy old-timers who

grump about how things used to be better when

they were young and about how the world is

going to ruin. People who align with the conser-

vative economic perspective are all ages and from

all walks of life. What they share is the belief that

free-market capitalism is the champion of eco-

nomic innovation, progress, and advancements.

They defend conservative principles because they

believe these are the only way to achieve a thriv-

ing society. Conservatives say their uncompromis-

ing position is a good thing because we shouldn’t

compromise what we know will bring us the

greatest prosperity. Furthermore, they say that this

is what we’re supposed to do in a democracy.

We’re supposed to be passionate advocates for

our positions and try to persuade others. They say

that in a democracy we should not water down

our ideals just so we can unite in agreement. Con-

servatives believe compromise should not mean

selling out.

Exercise 6: Think Again Choose one of the stereotypes below and say if it’s true or false. If false, explain to a friend or

classmate your rationale. The Answer Key is at the end of the chapter.

1. Conservatives are greedy.

2. Radicals are anti-wealth.

3. Liberals are politically correct.

4. Republicans are stubborn.

5. Democrats are wishy-washy.

6. Democratic socialists want a bloody revolution.

Chapter 6: Tools to Get Started | 169

Conventional Theory Tools

Conservatives and liberals say the secret to

capitalism’s unprecedented success as an economic

system that brings us untold wealth is the invisible

hand that guides it—the unseen force created by

countless price signals, which direct us to create

maximum economic well-being without any one

person, entity, or government directing the activities

of the economy. In chapter 4 you learned that

conventional theorists see equilibrium as the point

on the graph that represents the optimal amount

of goods and services at the optimal prices. This

maximizes our social welfare, which is when society uses its resources in the best possible way

for the greatest good—no waste, no inefficiency.

Marginal Cost and Marginal Benefit

But how can conventional theorists actually

know we are maximizing our social welfare?

They look at it in two different ways. Let’s use

the asparagus market as an example. Remember

marginal analysis, where decisions are made

by comparing the additional benefit (marginal benefit) and the additional cost (marginal cost) of doing something? The supply curve in figure

6.1 represents farmers’ willingness to supply

asparagus at different prices. What makes them

willing or unwilling? As firms supply units, their

marginal costs go up. There’s a complicated

explanation for this, which we will look at in a

later chapter, but for now just imagine that when

the asparagus farmer first grows a crop, the

land is rich with nutrients. Putting more units of

asparagus into production means the farmer must

improve the soil with costly fertilizers, resulting in

higher costs. Therefore, the farmer will be willing

to supply more units only at a higher price.

Conventional theorists say the supply curve is the

marginal cost (MC) curve.

The demand curve in figure 6.1 represents

consumers’ willingness to demand asparagus at

different prices. But what makes them willing or

Expanding the Models for Agriculture and Product Safety

In the next two chapters, we’ll be exploring the first two VOTE issues: Agriculture and Product Safety. Before we delve into these and the other issues, we’ll start by either learning new tools or learning new applications of existing tools to help us analyze the issues from the conventional and radical

perspectives. To get started, let’s review the models you’ve already learned in chapters 4 and 5 and add

a few new twists.

170 | Voices On The Economy

unwilling? As people consume more of a product,

their marginal benefit (happiness) goes down.

The first pound of grilled asparagus will give

them more pleasure than the pounds they will

continue to eat. Consuming more units results in

lower additional benefits. Therefore, consumers

will be willing to demand more units at a lower

price. Conventional theorists say the demand

curve is the marginal benefit (MB) curve.

At equilibrium—the golden moment—the mar-

ginal cost is equal to the marginal benefit. This point

is the maximization of our social welfare. We can

see it in figure 6.1. Everyone who chooses aspara-

gus can get it, and the asparagus farmers are sup-

plying the right amount, which means resources

are being used in the best possible way. You can

see why other points on the graph aren’t maximiz-

ing our social welfare. Looking vertically, at every

point to the left of equilibrium quantity (Q1) the

marginal benefit is greater than the marginal cost,

which means more resources should be dedicated

to asparagus production. And looking vertically,

at every point to the right of equilibrium quantity

(Q1) the marginal cost is greater than the marginal

benefit, which means that fewer resources should

be dedicated to asparagus production. It’s only at

equilibrium that we’re using our resources in the

optimal way as a society.

P S = MC

D = MB QQ1

The Asparagus Market

Figure 6.1 Marginal Cost and Marginal Benefit

Chapter 6: Tools to Get Started | 171

Total Surplus

The second way conventional theorists show

that equilibrium represents the optimal use of

our resources as a society is by looking at the

consumer and producer surplus. In the asparagus

market, some consumers would actually have

been willing to pay more for asparagus (at

prices above equilibrium). And some producers

would actually have been willing to accept less

for asparagus (at prices below equilibrium). Let’s

graphically describe this willingness:

Consumer Surplus

Producer Surplus P1

P S

QQ1 The Asparagus Market

Figure 6.2 Consumer Surplus and Producer Surplus

In figure 6.2 the top triangle (between the

equilibrium price and the demand curve) is called

the consumer surplus—the amount consumers were willing to pay above the equilibrium price.

When the market price was $3.00, for example,

and you were willing to pay up to $4.50 for it

because you love grilled asparagus, that $1.50 dif-

ference is the consumer surplus. In this graph the

bottom triangle (between the equilibrium price

and the supply curve) is called the producer surplus—the amount for which producers were willing to sell their asparagus below the equilib-

rium price. When the market price was $3.00, for

example, and your firm was willing to sell aspar-

agus for $1.50, that $1.50 difference is the pro-

ducer surplus. Please note that the word surplus in this context is different from how we’ve used

it in previous chapters. It refers to the difference

between the amount a consumer is willing to pay

or a producer is willing to sell and the equilibrium

price—not the point at which quantity supplied is

greater than quantity demanded, or the amount

that is left over after all other expenses are paid.

As you already know, this isn’t just about a sin-

gle asparagus firm. The asparagus market model

describes all producers and all consumers in that market. The important thing to recognize about

consumer surplus and producer surplus, say con-

ventional theorists, is that all the resources firms

and individuals were willing to spend are now

freed up for other uses, and this is good for them

individually as well as for the whole economy.

Total Surplus

Social Welfare =

P S

QThe Asparagus Market

Figure 6.3 Total Surplus and Social Welfare

Together, those two triangles of consumer sur-

plus and producer surplus create the total sur- plus. The entire purple area in figure 6.3 rep- resents the maximization of social welfare, which

172 | Voices On The Economy

conventional theorists think of as the sum total of

the value gained in society by engaging in trade

to improve quality of life. In case it’s not per-

fectly clear to you from the graph, think about it

this way: liberals and conservatives say this is a

picture of the optimal satisfaction of our needs

and wants regarding asparagus (and every other

market, of course—asparagus is just our exam-

ple). We’re neither overproducing and wasting

resources nor are we underproducing and lacking

the products we want and need.

Triangle Trade-Off So how can we apply this tool of social welfare

to answer the question of what happens when the

market changes because of government involve-

ment? Let’s say you read in the newspaper that

new rules for asparagus farmers require them to

disclose the names of the pesticides they will be

using on fields near schools in the coming year,

and farmers must have the soil on the borders of

those fields tested by an independent laboratory

every month to make sure the toxic chemicals

are not affecting school grounds. How will this

new government regulation impact the asparagus

market? Conventional theorists use the Market

Change Guide to find out (figure 6.4).

The first step is to Search. Looking through the twelve factors, you see that there has been a

regulation imposed on farmers. They will have to

pay more money for soil testing and other admin-

istrative costs. That’s one of the factors that Shifts supply to the left. So, Shift to the left—Left is Less—which means supply goes down at every price level. Step three is Slide. Since supply shifts to the left, asparagus is no longer at equilibrium

at the original price. Draw a horizontal line from

the original price. It hits the new supply curve

first, and the demand curve second. Quantity

demanded is greater than quantity supplied. That

is a shortage, which means prices start to rise. As

prices start to rise, move up and along the supply

curve and the demand curve to the new equilib-

rium price. Step four is Settle. The demand and supply curves cross. What do you see? The equi-

librium price has increased, and the equilibrium

quantity has decreased.

Here’s what’s interesting to notice in figure

6.5: because of the regulation, a bite has been

taken out of the total surplus—a triangle-shaped

bite that represents the lesser amount of aspar-

agus that is being traded in the market. We call

this the triangle trade-off. In this case, it shows lower production.

Chapter 6: Tools to Get Started | 173

Liberals and conservatives agree that the trian-

gle trade-off shows us a technically accurate pic-

ture of the change in total surplus when govern-

ment gets involved in a market. But they disagree

about whether the triangle trade-off is good, bad,

or neutral. Conservatives read figure 6.5 in the

following way: because government got involved,

society is now at a lower level of asparagus trade.

That gray triangle, which they call the efficiency loss or deadweight loss, represents the poten- tial trade that could have happened in the market,

but didn’t because of government interference.

Conservatives say government interference results

in a loss of efficiency for the economy as a whole,

which brings us lower social welfare. And they

say the problem would have fixed itself because

if producers were actually doing something that

was causing harm to children, then they either

would have voluntarily changed to a safer pes-

ticide or consumers would have refused to buy

the products until the firm changed pesticides. In

Market Change Guide: Asparagus Regulation

1. Identify the market and write the name below the graph.

2. Determine the market change

2a. Search for the relevant factor

(on the graph to the right, draw the market change and also describe it in words under each step below)

2b. Shift demand or supply

2c. Slide with the price change

2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market

Total Surplus

Triangle Trade-Off P1

P S

QQ 1

The Asparagus Market Q2

Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations

Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations

Supply Shifts Left

QD > QS, Shortage, P Tends �

New Eq. P � | New Eq. Q �

Total Surplus

Triangle Trade-OffP1

P S

QQ 1

The Asparagus Market Q2

Figure 6.5 Lower Production Triangle Trade-Off

Figure 6.4 Market Change Guide: Asparagus Regulation

174 | Voices On The Economy

either case, the market would self-correct.

Liberals interpret the triangle trade-off differ-

ently. They say there was potential harm that

asparagus firms needed to preempt, and the gov-

ernment, through regulation, partnered with the

asparagus industry to make sure their production

process caused no harm to people. Liberals view

that gray triangle as equity gain. It represents the market adjustment that government wisely

facilitated. Liberals say government intervention

results in a market correction, which brings us

more social welfare.

When the government gets involved by increas-

ing supply rather than decreasing it, the debate

between conservatives and liberals will be exactly

the same, although the triangle trade-off will be on

the right side of the equilibrium point, representing

higher production, as seen in figure 6.6. Again, lib-

erals would call this equity gain while conservatives

would call it efficiency loss or deadweight loss.

When it comes to securing our food system

and addressing product safety, these are the kinds

of disagreements that liberals and conservatives

have about government involvement and social welfare. The policies we will be debating in chap-

ters 7 and 8 are agricultural subsidies and product

safety regulations.

Agricultural (Farm) Subsidies. This is financial support given by the government to pro-

ducers of agricultural products. There are a vari-

ety of farm subsidies, including cash payments,

crop insurance, disaster assistance, agricultural

research, and more. Subsidies are a liberal pro-

gram generally intended to ensure an uninter-

rupted food supply. As you can see in figure 6.7,

they shift the supply curve to the right, making

firms more willing to supply at every price level,

resulting in lower prices and higher quantities.

In chapter 7 you’ll be seeing alternative per-

spectives on subsidies using the wheat market

graph when conservatives and liberals argue for

their points of view. They have different ways of

thinking about whether farm subsidies are helpful

or harmful in ensuring a secure food system.

Product Safety Regulations. These are stan- dards that lawmakers believe firms must follow

to prevent risks to consumers at all levels of pro-

duction and distribution. This includes the design,

Triangle Trade-OffP1

P S

QQ 1

The Asparagus Market Q2

S2S2

Figure 6.6 Higher Production Triangle Trade-Off

Total Surplus

P S

QQ 1

The Wheat Market Q2

S2S2

Figure 6.7 Subsidies in the Wheat Market

Chapter 6: Tools to Get Started | 175

manufacture, distribution, and sale of products.

Product safety regulations are liberal programs

intended to protect consumers from harm. There

are a wide range of government agencies that

oversee consumer safety, including the Food

and Drug Administration, the Consumer Product

Safety Commission, the National Highway Traffic

Safety Administration, and others. You can see in

figure 6.8, that product safety regulations shift the

supply curve to the left because firms’ expenses

go up when they comply with regulations. Reg-

ulations make firms less willing to supply at

every price level, resulting in higher prices and

lower quantities.

In chapter 8 you’ll be seeing alternative per-

spectives on product safety regulations using

the automobile market graph when liberals and

conservatives argue for their points of view. They

have different ways of thinking about whether

product safety regulations are helpful or harmful

in bringing people the protection they want.

P S

QQ 1

The Automobile Market Q2

Figure 6.8 Regulations in the Automobile Market

Radical Theory Tools

Now let’s take a look at the radical tools you

need to understand their point of view on the

issues of Agriculture and Product Safety. Radicals

say that to analyze an issue, we ideally would

see all the ways the core points move together

simultaneously in the constantly shifting social

totality. But that is just too vast and complex an

exercise and probably impossible to do without

a highly advanced supercomputer, which hasn’t

been invented yet. So here’s the radical method for

dealing with this seemingly impossible task: focus

on one core point at a time as a portal into the

issue. As we drill down into that single core point,

not only will we be able to analyze the issue,

but radicals say we also will be able to glimpse

how all the core points simultaneously interact to

impact the whole economy. Please keep in mind

that assignment of these “portal” core points in

each of the VOTE issues is somewhat arbitrary

because each is relevant for every issue. Since

radicals take a holistic view of the economy, the

core points can’t be separated or thought of as

separate from the whole. This may be giving

you a brain freeze, but just keep in mind that

this makes the radical tools very versatile. Later,

you might come back and analyze the same issue

using a different core point as your portal, which

will offer different insights into the issues. The

core points that we’ll be using as tools in chapters

7 and 8 revolve around governance. Please recall

that government under democratic socialism

looks much like what we have in capitalism in

certain respects: a representative democracy with

elected officials, three branches of government,

and taxation. A big difference between

government under capitalism and government

under democratic socialism is how decisions are

made: top-down versus participatory.

With the radical perspective there are always

two parts: describe capitalism and describe demo-

cratic socialism. The description of capitalism will

176 | Voices On The Economy

focus on the core point of top-down governance.

Top-down governance occurs when decision-mak-

ing is left in the hands of a few elected officials

and bureaucrats, and people are not empowered

to have a say beyond their occasional vote in an

election. The description of democratic socialism

will focus on the core point of participatory gov-

ernance. Participatory governance occurs when

diverse stakeholders—representatives from coop-

eratively owned firms, consumers, community

interest groups, experts in the field, public officials,

and so forth—work together to generate enforce-

able action plans and policies that improve life

for people.

Capitalism: Top-Down Governance

Radicals say there are two problems with our

current system of democracy under capitalism.

The first is that while a person may go through

the yearly ritual of casting a vote in an election,

that’s usually the extent of their participation in

the political process. Just think of all the things

that impact our lives about which we don’t have a

vote, say radicals: our workplaces, our industries,

new development in our neighborhoods, the air

quality in our cities, what goes into our water

supply, and more. They say that because of

capitalism, we lose the chance for full participatory

democracy and end up with a diluted form of

representative government. This occurs in part

because to get elected, politicians must accept

hefty corporate campaign contributions. In turn,

they are expected to prioritize the profit-making

interests of private owners. In capitalism, say

radical theorists, decisions that affect us all are left

in the hands of those who aren’t really working

for us but who are working for the wealthiest.

According to radicals, even if we had a gov-

ernment that wasn’t being unduly influenced by

special interest groups, democracy under capital-

ism brings us top-down governance, with deci-

sions being made by those who lack local exper-

tise about the issues. Politicians and bureaucrats

in a far-off city can’t possibly understand the full

impact of their decisions on local communities,

say radicals. They lack the relevant knowledge,

history, and context. Even the best-intentioned

public officials will miss the mark. The stake-

holders and experts with vital input have no real

power. In the end, say radicals, top-down gover-

nance makes problems worse even if the inten-

tion of politicians and bureaucrats is to help. This

is how top-down governance looks in capitalism:

Scenario 1. You’re an asparagus farm owner,

and you meet an old friend from college who

owns a competing asparagus firm. She says, “Did

you hear? Those citrus growers hired a lobbyist

to go down to Washington and get them govern-

ment subsidies. Now orange growers are making

a bundle. We ought to hire a lobbyist and get

ourselves some of those subsidies too.”

You think this is a terrible idea. “I don’t want a

government handout,” you say. “It’s not necessary,

and it will cost taxpayers more money. I don’t

want any part of that.”

“So don’t do it!” she says.

Chapter 6: Tools to Get Started | 177

But you will do it—because if you don’t and the

other asparagus growers do, you’ll be driven out

of business. Radicals say top-down governance

in capitalism means the drive for profit corrupts

producers, politicians, and lobbyists, leaving the

government and not the community influencing

what gets produced.

Scenario 2. You’re golfing with another aspar- agus farm owner. He tells you, “We’re spraying our

fields with that new pesticide, and it’s saving us a

bundle. But now the government is threatening to

regulate. They’re starting with fields near schools,

but soon they’re going to require all asparagus

farms to disclose the chemicals we use. It’s going

to open us up to lawsuits every time a kid gets a

cold! We have to figure out a way to get around

this. Let’s all kick in and contribute to political

campaigns of candidates who will oppose regula-

tions. If that doesn’t work, let’s hire lawyers to get

us exemptions.”

You say, “I don’t want to do that! It’s so wrong!

We know there are possible links between the

new pesticide and liver cancer. Maybe it should be regulated.”

He says, “So don’t do it!”

But you will—because if you don’t, you could

lose the farm. Radicals say top-down governance

leads to corporations covering up wrongdoings

and cheating the system.

Scenario 3. You’re at a fertilizer trade show, and you meet a farm owner from another state,

who says, “Have you heard that the government is

giving tax breaks to farmers who switch to grow-

ing crops that can be used as biofuels? Washing-

ton is worried about our national security and our

dependence on fossil fuels. I’m going to plow up

my asparagus fields and plant corn, which can be

processed and made into ethanol.”

You say, “Those lawmakers might mean well,

but the last time the government came up with

policies about biofuel, there were all kinds of

unintended consequences. They didn’t solve our

dependence on fossil fuels, and some of those

178 | Voices On The Economy

policies ended up creating hardships for people

because the price of corn skyrocketed.”

She says, “So don’t do it!”

But you will do it—because if you don’t and

all the other firms do, you won’t stay in business.

Radicals say that, in capitalism, top-down gover-

nance leads to unintended consequences because

while the decision-makers might put together an

advisory committee with owners, consumers,

national security experts, scientists, and others, in

the end a few bureaucrats make the decisions—

either because it’s most expedient or because the

politicians are influenced by special interests. The

result is either a narrow attempt to solve big, com-

plex problems or an insincere attempt to come up

with inclusive solutions.

Democratic Socialism: Participatory Governance

Radicals believe that when we have an economic

system of democratic socialism, in the context of

our constitutional democracy, we experience true

representation because our elected officials on

every level of government are guided by the will

of their constituents through a mechanism called

community councils. These are groups of stake- holders with the power to decide on the policies,

budgets, programs, and priorities that they want for

their regions and for the nation—and on changes

they want made to existing ones. It is the job of

those who hold elected offices—from Congress to

local school boards—to convene community coun-

cils of their constituents and to facilitate their con-

structive discussions. They bring the groups’ ideas

to the voting bodies—Congress, the state house,

the school board—and work to get them passed.

The people who serve on community councils are

primarily the stakeholders who have the most to

gain and lose from the decisions that are made.

These include delegates chosen by their industries,

neighborhoods, and firms to represent their inter-

ests. There are also experts from relevant fields,

advocacy groups, public officials, consumers, and

more. For example, if the issue is the use of pesti-

cides on asparagus fields, then community coun-

cil members would include consumer advocates,

delegates from the pesticide industry and farming

firms, environmentalists, nutritionists, public health

experts, and neighborhood representatives.

Elected representatives not only convene com-

munity councils, but they and their staff also pro-

vide expert facilitation so that meetings are effec-

tive and constructive. Community councils rely on

interest-based negotiation, which is a strategy of identifying the diverse and sometimes contra-

dictory needs and concerns of everyone at the

table. For example, some may want ways to ensure

accountability and transparency from firms, while

others may want more support for research and

development. Once it becomes clear what the

interests are for each stakeholder, the community

council members work together to create win-

win proposals that address everyone’s needs and

concerns, and then they vote on those proposals.

After the community council comes to a majority

decision, the elected representative works to get

Chapter 6: Tools to Get Started | 179

their proposals passed into law. Because this is a

democracy, there are back-and-forth discussions

and debates with other lawmakers to find sup-

port for their various ideas. Elected officials take

new information back to their community coun-

cils, where the group discusses the feasibility,

merits, and drawbacks of potential compromises

and trade-offs. There may be times when elected

officials must make decisions without the input of

the community council. For instance, if there’s an

issue of national security, it may not be feasible

to share sensitive information with a larger group

of people. If a decision must be made quickly

to respond to a crisis or disaster, there may not

be time to convene a community council. Or if a

decision needs to be made for the greater good

of the nation, the elected official might vote for it

even if it’s not the top priority of the local region.

These overrides of the community’s desires are

rare occurrences in participatory governance.

Radicals say representative democracy without

the corrupting influence of campaign contribu-

tions by special interest groups has a built-in fail-

safe against corruption and abuse of power. If

elected officials don’t represent the interests of

their constituents, then they won’t be reelected.

It’s the nature of a democracy that no one gets

everything they want every time, but this par-

ticipatory process gives us laws, policies, and

budgets that reflect what the majority want and

need, say radicals. And it ensures that the needs

and concerns of those in the minority also have

a voice because they have a seat at the table.

Community councils address every issue—Food

Security Councils, Product Safety Councils, Acces-

sible Health Care Councils, Affordable Housing

Councils, and so forth. Some say it is just too

cumbersome to involve so many people as deci-

sion-makers. Radicals counter that participatory

governance is the most effective for the long

term because policies that we adopt truly repre-

sent the will of the broadest spectrum of society

and the wisdom of the many stakeholders.

When it comes to ensuring a secure food sys-

tem and bringing people the level of safety they

want in their products, radicals offer alternative

ideas to top-down agricultural subsidies and

product safety regulations:

180 | Voices On The Economy

Food Security Council’s Emergency and Innovation Funds. The government makes money available to help farmers prepare for,

respond to, and adapt to instability in agriculture.

The policies for how distribute the funds come

from stakeholders, including farmers, community

leaders, consumers, conservationists, scientists,

and public officials. For example, funds enable

farmers and scientists to collaborate on developing

new strains of drought-resistant crops. They pay

for farmers to get trained in best practices of rain-

water harvesting, the latest methods for protecting

crops from diseases and pests, and techniques to

restore soil after erosion from storms. On top of

that, farmers receive financial assistance to help

them recover after disasters.

Product Safety Council’s Hazard Assess- ment Protocols. Government gives firms support and resources to reduce the risks of

dangerous flaws in their products’ designs, man-

ufacture, and use by consumers. The policies for

how to do this come from representatives from

firms, industry, consumer groups, safety experts,

engineers, and others. The Product Safety Coun-

cil develops protocols for firms to follow, and

the government provides oversight and enforce-

ment of these policies. For example, teams of

outside experts review the product designs for

flaws or potential unintended consequences.

Other experts test prototypes for problems that

could cause the product to be dangerous, such

as defective component parts or malfunctions.

Outside inspectors monitor the production

process, checking for possible contamination,

human error, wrong calibrations of machinery,

and other issues that might cause a product to

become unsafe for its intended use. They also

monitor the safety of workers. Experts in market-

ing and communications review users’ manuals,

product warnings, and age gradings on pack-

aging, and make sure product descriptions are

accurate. The protocols help firms to produce

safer products. And in the event of an unsafe

product reaching the market, the government

will facilitate a recall.

From start to finish, participatory governance sup-

ports businesses and consumers. This is how partic-

ipatory governance looks in democratic socialism:

Scenario 1. You’re a worker-owner of an aspar- agus farm, and you meet an old friend from col-

lege who is a worker-owner of a competing aspar-

agus farm. She says, “The Food Security Council is

convening, and I hear they’re proposing an Emer-

gency and Innovation Fund so that we farmers can

invest in drought-resistant seeds and better irriga-

tion systems to weather the next dry spell.”

You say, “That’s a great idea! Everyone counts

on us to produce their food. Our firm will defi-

nitely send a letter of support to our region’s del-

egate. We want an Emergency and Innovation

Fund. Let’s spread the word to the community

and other worker-owned farms so they can voice

their support for it as well.”

She says, “Let’s do it!”

You’ll do it because participatory governance

delivers long-term plans and decisions that are

beneficial for firms and communities.

Scenario 2. You’re playing golf with another worker-owner of an asparagus farm. He says, “We

just got the alert from the Product Safety Council

that the cheaper pesticide we’ve been using is

going through the Hazard Assessment Protocols

again because it’s just come to light that it may

be linked to liver cancer. We had an emergency

vote last night, and all the worker-owners of my

farm unanimously decided to stop using it on our

fields immediately, even though it will cost us

more to use the safer alternative.”

You say, “I’ll have to talk to my co-owners, but

I’m sure everyone will want our firm to switch over

to the safer pesticide too—even if it hasn’t been

banned yet. And we’ll want to talk with our Prod-

uct Safety Council delegate to find out which pes-

ticides it recommends as the safest for asparagus.”

Chapter 6: Tools to Get Started | 181

He says, “Let’s do it!”

You’ll do it because with participatory gover-

nance, all the relevant stakeholders have a seat

at the table and therefore everyone has buy-in

because they trust the process.

Scenario 3. You’re at a fertilizer trade show, and you meet a worker-owner from another state

who says, “Worker-owned farms in my state were

just offered money by our Food Security Council

to convert five acres of our fields over to renew-

able energy. It’s one part of a bigger plan in our

state to make all the farms more self-sustaining.”

You say, “That’s a great idea. It will save our

farm money on energy bills and protect us long

into the future.”

He says, “You should do it!”

You’ll do it because participatory governance

solves big, complex problems by harnessing the

ideas, passion, and creative thinking of multi-

ple stakeholders.

Six-Core Cube Guide

Now that you know the core point of top-down

governance in capitalism and the core point of

participatory governance in democratic socialism,

you can use the Six-Core Cube Guide (figure 6.9)

to analyze the same scenario we addressed in

the conventional tools section. You read in the

newspaper that asparagus farmers are required to

disclose the names of the pesticides they will be

using on fields near schools in the coming year,

and they must have the soil on the borders of those

fields tested monthly by independent laboratories

to make sure the toxic chemicals are not affecting

school grounds. How will this new government

regulation impact the asparagus market?

Figure 6.9 Six-Core Cube Guide: Asparagus Regulation

Capitalism

1. Identify the problem. Pesticides may cause harm to people and the environment.

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Bad The pressure for bad is a motivation to…

influence regulations to approve use of cheaper, harmful pesticides because of the drive for profits.

4. Expose the Visible Suffering (outcome) With top-down governance, we get an insecure food system with unsafe products.

Democratic Socialism

1. Identify the problem. Pesticides may cause harm to people and the environment.

2. Choose a relevant core point to explain the problem

3. Describe the Pressure for Good The pressure for good is a motivation to…

collaborate on hazard assessment protocols because of the drive for well-being.

4. Reveal the Invisible Synergy (outcome) With participatory governance, we get food security and safe products.

ProductionFor Profit Privat e

Ownership

Top-DownGovernance

The Six-C ore Cube

of Capita lism

Six Core Points of Capitalism * Private Ownership * Top-Down Governance * Individuals at Risk * Production for Profit * Unsustainable Production * Unhealthy Communities

Six-Core Cube Guide

Six Core Points of Democratic Socialism * Cooperative Ownership * Participatory Governance * Social Safeguards * Production for Use * Sustainable Production * Healthy Communities

ProductionFor Use CooperativeOwnership

Participator y

Governance

The Six-C ore Cube

of Demo cratic So

cialism

182 | Voices On The Economy

You’re Ready for the Issues

You will be hearing more about top-down gov-

ernance and participatory governance in chapters

7 and 8, when radicals argue for their point of

view about whether agricultural subsidies can

solve the problem of insecurity in agriculture and

whether product safety regulations can bring peo-

ple the level of safety they want. Although we are

using these particular points to discuss the next

two issues, please remember that in every case all

the core points are relevant to every issue. Feel

free to use them all when you’re debating and

discussing the issues in the real world.

We’re about to start the first issues chapters.

Just to give you a sense of what that will be like,

here is how the chapters are organized: First, I’ll

tell you a story that brings the issue into focus

so we can narrow down and define the problem

shared by all the perspectives (and recognize

the shared outcome they hope to create). Then

we’re going to identify the policy debate—that’s

the course of action everyone is arguing about.

After that comes the really fun part. We’ll put on

masks (metaphorically) and speak to you in the

voices of the conservative, radical, and liberal

perspectives. Regarding which one goes first,

we’re treating it like that inevitable argument you

had if there were siblings in your family and you

had to ride in a car together and everyone wanted

to sit in the front seat: the perspectives will be

taking turns. At the very end of each issue, it will

be your turn to put on the masks and speak from

each of the voices, but I’ll tell you more about

that later. Let’s get started!

Chapter 6: Tools to Get Started | 183

Chapter 6: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. All perspectives share the same economic problems and goals, even though they differ on the best ways to solve those problems. Please match the issue with the shared goal.

A. Agriculture i. Affordable housing for all B. Product Safety ii. End poverty C. Livelihood iii. The protection that people want D. Housing iv. A secure food system

2. Which of the following statements are true about stereotypes? Please choose all that apply. A. Stereotypes are always oversimplified, often unflattering, and definitely unfair ideas

about groups of people.

B. Stereotypes keep people from seeing others as unique individuals and lead to narrow and ungenerous ideas about people who are different from us in some way.

C. Breaking down stereotypes for just one identity (e.g., economic) is correlated to, and necessarily breaks down, stereotypes for other identities (e.g., social).

D. Stereotypes make it difficult to have respectful dialogues.

3. Consider the market for winter jackets. According to conventional theorists, equilibrium represents the maximization of our collective social welfare. Please choose the two arguments they use to make this point.

A. At points to the left of equilibrium, MB < MC and to the right of equilibrium, MB > MC. Equilibrium is the perfect spot where MB = MC and resources are used in their best possible way.

B. At points to the left of equilibrium, MB > MC and to the right of equilibrium, MB < MC. Equilibrium is the perfect spot where MB = MC and resources are used in their best possible way.

C. To the left of equilibrium, consumers would be willing to pay less (“Consumer Surplus”) and firms would be willing to receive more money (“Producer Surplus”). Equilibrium is the perfect spot where Total Surplus is maximized.

D. To the left of equilibrium, consumers would be willing to pay more (“Consumer Surplus”) and firms would be willing to receive less money (“Producer Surplus”). Equilibrium is the perfect spot where Total Surplus is maximized.

Q The Winter Jacket Market

184 | Voices On The Economy

4. Which of the following statements are true from both the liberal and conservative perspectives? Choose all that apply.

A. The grey triangle trade-off represents an efficiency loss and a loss in social welfare.

B. The grey triangle trade-off represents an equity gain and a gain in social welfare.

C. The grey triangle trade-off represents a change in production and resource use as a result of government action.

D. The grey triangle trade-off represents standard market change steps, specifically search, shift, slide, and settle.

5. Agricultural (farm) subsidies are a liberal policy to address instability in agriculture. Subsidies may take a variety of forms (crop insurance, direct payments, and more). One function of subsidies is to give farmers incentives to produce more of a subsidized product. While liberals and conservatives disagree about whether this is a positive or negative policy, they agree that the resulting equilibrium price will __________ while the equilibrium quantity will __________.

A. decrease; increase B. decrease; decrease C. increase; increase D. increase; decrease

Triangle Trade-OffP1

P S

QQ 1

The Winter Jacket Market Q2

S2S2

Chapter 6: Tools to Get Started | 185

6. Please pick the graph that shows the effect on the sunscreen market of a new product safety regulation that requires firms to do additional testing.

A. i B. ii C. iii D. iv

7. From the radical perspective, all the following are problems with top-down governance EXCEPT: A. Elected officials have sole decision-making authority once they are in office. B. Special interest groups influence politicians through campaign contributions. C. Representative democracy means that elected officials represent constituents instead of

each person representing themselves.

D. Affected parties are often asked to take on an advisory role, rather than a decision- making role.

P S

QQ 1

The Sunscreen Market Q2

P S

QQ 1

The Sunscreen Market Q2

P S

QQ 1

The Sunscreen Market Q2

S2 iii

P S

QQ 1

The Sunscreen Market Q2

186 | Voices On The Economy

8. According to radical theory, participatory government has many functions, including: A. To convene and facilitate community councils B. To work to get community council decisions passed into law C. To override community council decisions in rare cases of national and domestic security

issues

D. All the above

9. In what way would a Food Security Council’s Emergency and Innovation Fund work? A. The federal government works on its own and requires farmers to find self-sustaining

ways to rotate crops and set aside conservation land.

B. Government officials listen respectfully to the advice of the councils, but ultimately representatives vote their conscience. This includes the use of direct payment subsidies when needed.

C. Elected officials convene Food Security Councils, which determine the type and amount of funding needed to ensure a stable food supply.

D. During years of famine, the fund builds up and the council goes on hiatus. It becomes active only during times of catastrophe.

10. A Product Safety Council’s Hazard Assessment Protocol is a set of steps firms follow to bring new products to market. Which one of these choices best describes the ways the protocols are determined and who or what enforces them?

A. Groups of stakeholders are convened by elected officials to determine the safety of new products.

B. Groups of stakeholders are like jury selection in our current society---no particular skills are needed.

C. Groups of stakeholders advise their assigned government officials on sets of protocols to pursue and hope that the government chooses to convene a Product Safety Council.

D. Groups of stakeholders are often motivated by profits over people. To avoid this, government officials have the ultimate decision-making authority.

Answers

1. A – iv, B – iii, C – ii, D – i 2. A, B, & D 3. B & D 4. C 5. A 6. C 7. C 8. D 9. C 10. A

Chapter 6: Tools to Get Started | 187

Chapter 6: Key Terms Community councils Consumer surplus Deadweight loss Efficiency loss Equity gain

Interest-based negotiation Producer surplus Marginal benefit Marginal cost Social welfare

Stereotype Total surplus Triangle trade-off

Answer Key to Exercise 6

1. False. Conservatives believe that when people act in their self-interest to make a profit, they’re

doing everyone a favor because they turn around and create jobs so that more people can

prosper.

2. False. Radicals believe that wealth is important to the well-being of society. They just want to make

sure the 99 percent have access to it, and not just the 1 percent.

3. False. Liberals believe that in the race to succeed, some people are unfairly held back by prejudice

and lack of opportunity. They want to level the playing field so everyone has a chance to

prosper.

4. False. Republicans believe compromise should not mean selling out our principles. It’s only when

they bring their convictions to the table that they can make their best contributions to the

conversation.

5. False. Democrats don’t see every problem as a nail that needs a hammer. They understand that

problems are complex and nuanced thinking leads them to find the best solutions.

6. False. Democratic socialists say the change from capitalism to democratic socialism is already

evolving in a peaceful way, with more people choosing cooperative ownership and voting for

democratic socialist candidates across the nation.

ch7

7Issue: AGRICULTURE Everything you eat is brought to you by nature. Our food is grown and harvested in myriad ways. But there’s a problem that humans have aways faced when it comes to our

food security: nature is unpredictable.

Picture a dust storm that’s a thousand miles

wide. You first see it as a black smudge on the

horizon, but then it’s rolling toward you—a wall

of dust that grows bigger with each passing min-

ute. You’re standing outside your house, and

you’re watching hundreds of thousands of tons of

topsoil carried on raging winds, speeding toward

you at a hundred miles per hour! When it hits,

you remember to close your mouth. You cover

your face and shut your eyes, but the grit gets in

anyway, and you’re coughing up dust. When the

monster storm finally moves off to engulf the next

town over, you see

that your whole

world is half bur-

ied under sand.

Your home, your

family’s farm, your

town—it’s all laid

to waste. I know

it sounds like a

Hollywood disas-

ter movie, but this

really happened on April 14, 1935. It’s known as

Black Sunday. And this storm wasn’t an isolated

event. Black Sunday was 1 of 263 dust storms that

blew through the southern Great Plains of the

United States during a ten-year period. In 1934

alone, there were 38 dust storms. That’s more

than 3 per month.

I was in elementary school when I first learned

about the Dust Bowl. The decade-long disaster

merited just one page in our social studies text-

book. I remember the grainy black-and-white

photograph of a dilapidated farmhouse mostly

covered in sand. My teacher explained that the

Dust Bowl was caused by a period of severe

drought in the 1930s. The way we discussed it, I

thought it was a horrific one-time natural disas-

ter that could never happen again. It wasn’t until

decades later that I

learned it was one

of the worst nat-

ural and human- made ecological

disasters to affect

the United States.

The Dust Bowl

killed nearly seven

thousand people

and left more than

190 | Voices On The Economy

two million people homeless. It killed animals

and ruined ecosystems, and it turned much of the

southern Great Plains into a desolate landscape.

The origin of the Dust Bowl traces back to the

1860s. The U.S. government wanted to settle the

West and create more prosperity in our nation.

Congress passed the Homestead Act, which

allowed pioneers to claim 160 acres of land in the

Great Plains for free if they farmed it. Later bills

expanded the acreage to 320 and then to 640.

People rushed to load up their wagons and stake

their claims in Kansas, Nebraska, and the Dako-

tas, and later in Texas, Oklahoma, New Mexico,

and Colorado. Picture grasslands where the buf-

falo once roamed. Now picture industrious pio-

neers plowing it up to plant their wheat and corn.

The Plains Indians had sustained themselves

on the grasslands of the Great Plains for millen-

nia—but not by farming. They hunted buffalo

and traded with other Native people for crops

because land in the Great Plains wasn’t easy to

farm. The ground was covered with tough grasses

that had long roots, which made it hard to plow.

And the weather was unpredictable, with peri-

odic droughts, high winds, and extreme tempera-

tures. Even the earliest European explorers rec-

ognized that the area lacked the right conditions

for farming.

But in the early 1900s the weather happened to

be unusually cooperative, with steady rains that

brought bountiful harvests. So more people opti-

mistically headed west to homestead, while others

(called “suitcase farmers”) staked their claims and

then hired workers to farm the land while they

went back home. Between 1900 and 1930 there

were one million pioneers in the Great Plains.

In 1930—which, by the way, was the start

of the Great Depression—the first of four long

droughts hit the southern Great Plains. The dry

period lasted ten years. The land dried up, and

extreme temperatures and high winds made con-

ditions harsh. Those climate conditions in the past

were balanced by the grasses that had evolved

there over time to anchor the soil with their deep

roots. But this time, with more than one hundred

million acres of those grasses plowed up to make

way for wheat, corn, and other crops with shallow

roots, the soil dried out and turned to dust. That

U .S

. P u

b lic D

o m

ain

Chapter 7: Agriculture | 191

dust was at the mercy of the high winds. That’s

how Black Sunday and the other dust storms

came to be. And the black blizzards didn’t just

affect the prairie states; the storms made their way

east too, as described on the History Channel: “[A]

massive dust storm two miles high traveled two

thousand miles before hitting the East Coast on

May 11, 1934. For five hours, a fog of prairie dirt

enshrouded landmarks such as the Statue of Lib-

erty and the U.S. Capitol, inside which lawmakers

were debating a soil conservation bill.”

After the drought ended, the people who

remained in the Great Plains returned to farming.

Today there are family farmers and large corpo-

rate enterprises growing crops on that land. They

use better soil conservation methods and farming

practices, and agriculture is once again a thriving

industry in that region. Droughts are managed

by irrigating with water from the Ogallala Aqui-

fer, an underground reservoir. That water supply

is not limitless, however, and some experts are

concerned that it’s being overused. They warn

that there may be another Dust Bowl in our

near future.

The Dust Bowl is a shocking story. It illustrates

not only a historical event that happened nearly

one hundred years ago but also something that

could happen again. Even under the best con-

ditions, with best practices, there will always be

instability in farming because no one has yet

learned how to control the weather or how to

predict threats to crops—insects, diseases, toxic

spills, and more. Radicals, conservatives, and lib-

erals all agree that instability in farming threat-

ens our food security. But as you might imagine,

they don’t agree on how to ensure a secure food

system. The policy we’re going to debate in this

chapter is agricultural subsidies.

Understanding the Issue of Agriculture

“My grandfather used to say that once in your

life you need a doctor, a lawyer, a policeman, and

a preacher,” said inspirational speaker Brenda

Schoepp. “But every day, three times a day, you

need a farmer!”

Our ability to feed ourselves is a fundamental

issue of survival. We’ve known since the begin-

192 | Voices On The Economy

ning of human history that agriculture is a very

risky and unstable enterprise. In fact, of all the

issues we’re going to be exploring in the VOTE

Program, this is the one people have been grap-

pling with the longest. For most of human history

we’ve had to spend all our days producing food

for our next meals. In America today, the vast

majority of us aren’t farmers. We rely on the local

grocery store—that is, the market—to supply us

with what we need.

What Is Agriculture?

Let me ask you this: When you bite into a

cheese sandwich, do you wonder who grew the

wheat for the bread? Do you know who raised

the chickens that laid the eggs that went into the

mayo? Do you ever wonder about the farmers

who milked the cows and made the cheese? How

did that food get to your plate? Let’s do a little

experiment. Make a grocery list right now. Jot

down five items you want to pick up at the store

later. We’ll come back to this.

First, let’s define our terms for this chapter.

Agriculture is the science and practice of farm-

ing for the purposes of growing crops and raising

animals to sustain us with food and clothing. The

term agribusiness describes modern commercial

farms that use advanced technology. The terms

big ag, corporate ag, and large-scale agricul-

ture all refer to the largest agriculture firms. Just

to give you an idea of the scope of farming in our

nation, the United States has long been the largest

exporter of food in the world. There were more

than two million farms in 2017. Half of those were

small farms of forty-five acres or fewer, accord-

ing to the U.S. Department of Agriculture (USDA).

More than nine hundred million acres are used

for farming, and close to 70 percent of the farm-

land in the nation is controlled by the top 10 per-

cent of farming enterprises.

Another term you might have heard in conver-

sations about agriculture is commodity. It means

a product is interchangeable no matter who pro-

duces it. So a bushel of wheat grown in Minne-

sota is no different from a bushel of wheat grown

in Nebraska. Soft commodities are agricultural

products such as wheat and corn, and hard com-

modities are products that are mined, such as

Chapter 7: Agriculture | 193

gold, oil, and silver. Commodities exchanges, also known as commodities markets, are mar- kets where farmers trade not their crops but finan-

cial agreements about the price at which they

will eventually sell their crops. These are called

futures. Futures are simply financial agreements (contracts) that a farmer will sell a set amount of

their crop— ten bushels of wheat, for example—

at a set price and on a set date in the future, and

that a buyer will purchase that amount of wheat

at that price, on that set date. With futures trading,

wheat farmers can protect themselves from going

out of business by being assured in advance of

earning a certain income from a portion or all of

their expected harvest. This hedge (lessening the chance of loss) might sometimes result in lower

total profits if the price goes up at harvest time,

but it functions as a stabilizing tool for farmers in

case the price of wheat goes down.

There are two more relevant terms for this

chapter. Agricultural dumping refers to exporting commodities at prices that are below what they

cost to produce. Food aid refers to agricultural products donated by the government to other

nations that are in need of assistance to feed

their populations.

The Farm Bill

Have you ever seen a hockey game? Imagine

the puck whizzing across the ice until it gets

slapped in the opposite direction then whacked

back, only to reverse course again and careen

off the side, ricochet off a skate, and slam into

the goalie’s mask. Well, that’s a fairly accurate

metaphor for Congress’s approach to agricultural

programs. The government has long been making

policies that pertain to agriculture—the USDA was

created in 1862 by President Abraham Lincoln,

when more than half of Americans were farmers

(today it’s less than 2 percent). There’s a dense

list of bills that were passed to try to ensure a

stable food system. Here are a few notable ones:

the Federal Meat Inspection Act of 1890, the Soil

Conservation and Domestic Allotment Act of

1936, the National School Lunch Act of 1946, the

Farmer-to-Consumer Direct Marketing Act of 1976,

and the Healthy Forests Restoration Act of 2003.

You don’t need to know the details about these—

just know that agricultural policy historically

has been complicated and deeply rooted in our

nation’s history.

You probably haven’t ever heard of the Federal

Meat Inspection Act, or any of those others, but

you may have heard of the policy that dominates

the national conversation today. In fact, if you’re

twenty years old, there have already been four

versions of it during your lifetime. It’s called the

Farm Bill. It was originally called the Agricul- tural Adjustment Act of 1933, signed by President

Franklin D. Roosevelt. In 1938 Congress passed

a new version of the Farm Bill and agreed that

the issue of agriculture was so important that it

Year Bill

2018 Farm Bill Agriculture Improvement Act of 2018

2014 Farm Bill Agricultural Act of 2014

2008 Farm Bill Food, Conservation, and Energy Act

2002 Farm Bill Farm Security and Rural Investment Act

1996 Farm Bill Federal Agriculture Improvement and Reform Act

1990 Farm Bill Food, Agriculture, Conservation, and Trade Act

1985 Farm Bill Food Security Act

1981 Farm Bill Agriculture and Food Act

1977 Farm Bill Food and Agriculture Act

1973 Farm Bill Agricultural and Consumer Protection Act

1970 Farm Bill Agricultural Act of 1970

1965 Farm Bill Food and Agricultural Act

1956 Farm Bill Agriculture Act of 1956

1954 Farm Bill Agricultural Act of 1954

1949 Farm Bill Agricultural Act of 1949

1948 Farm Bill Agricultural Act of 1948

1938 Farm Bill Agricultural Adjustment Act of 1938

1933 Farm Bill Agricultural Adjustment Act of 1933

Table 7.1 History of the Farm Bill

194 | Voices On The Economy

should be reconsidered every five years moving

forward. The Farm Bill is the federal government’s

policy to address everything related to agriculture,

including farming, ranching, nutrition, and more.

Agricultural Subsidies

The Farm Bill has always been controversial.

You may have heard about the fights around

the Supplemental Nutrition Assistance Program

(SNAP), which is the biggest program funded

through the Farm Bill. The part of the Farm Bill we’ll

be debating, agricultural subsidies, is also highly

contentious. Here are a few examples of subsidy

programs in the current and past Farm Bills:

Crop insurance is a program that’s been around in some form since 1938. The intention

behind it is to help farmers stay in business when

something unexpected and detrimental happens.

Crop insurance works like your car insurance—

when you have an accident, your insurance com-

pany pays to fix your bumper. Farmers buy crop

insurance from private companies and are cov-

ered in case weather events ruin their crops—

droughts, floods, tornadoes, and so forth. The

government gets involved by paying (subsidizing)

private insurers to offer crop insurance to farm-

ers at a reduced rate and by subsidizing farmers

to help them pay the premiums (the cost of the

insurance policy).

Loans and loan guarantees are programs intended to help farmers pay their overhead costs

and to expand their production. They also are

meant to enable farmers to time the sale of their

crops so that they will make the most profit. Farm-

ers typically have to wait until their crops are sold

before they make any money, so they rely on loans

to cover up-front costs of supplies, including seeds,

fertilizer, hay, plows, and so forth. In 1916 the Fed-

eral Farm Loan Act created cooperative banks to

lend farmers money. Over time, it morphed into

the Farm Credit System, which is a government-run

program with billions of dollars in assets.

Disaster assistance is a government pro- gram intended to help farmers who lose crops

because of natural disasters—droughts, freezes,

hurricanes, floods, pest infestations, and so forth.

Disaster assistance is paid to farmers on top of

crop insurance.

Direct payments are meant to give farmers an incentive to keep their land in production rather

than selling it off to developers. The government

pays farmers for owning wheat acreage, corn

acreage, or soy acreage, and so forth.

Conservation reserve programs are intended to create incentives for land conservation so that

farmers will preserve vulnerable ecosystems. The

government subsidizes farmers to take a certain

amount of their land out of production.

Crop commodity programs are meant to protect farmers when prices for their commodi-

ties fall lower than what they were counting on

charging in order to stay in business. The govern-

ment subsidizes unexpected dips in price.

Food promotion initiatives use the govern- ment to boost markets for farmers at home and

abroad. For example, the government has spon-

sored public service announcements to promote

the health benefits of milk and dairy products for

children.

Agricultural research programs are meant to use the government to develop better farm-

ing technologies. The government has allocated

money for research and education in agriculture,

including creating land-grant universities.

All of these subsidy programs are a continual

source of debate. From the 1940s through the

1980s, when commodity prices were high, Con-

gress entertained the idea of getting rid of or

reducing subsidies. But as soon as prices for agri-

cultural products dropped, Congress expanded

subsidies to farmers. (Can you hear the hockey

puck whizzing by?) In 1996 Congress passed the

Freedom to Farm law, which was a move away

from subsidies (whizz!), but shortly thereafter it

Chapter 7: Agriculture | 195

significantly increased subsidies (whack!). In 2002 Congress passed a new Farm Bill that increased

subsidy payments, added new crops to the list

of those subsidized, and created a new price

guarantee program (whoosh!). In 2008 Congress added subsidies for sugar and for certain fruits

and vegetables (whomp!). The 2014 Farm Bill mostly ended the direct payment program and

several other subsidy programs (whoosh!), while it expanded crop insurance (whack!). There were even more changes in the 2018 Farm Bill, and

where the hockey puck slides next no one knows.

More than one hundred different crops are

subsidized, and traditionally, the top five have

been wheat, corn, rice, soy, and cotton. Remem-

ber I asked you to make a grocery list? Check it

right now. How many of the items on your list

are made from subsidized crops? I’m guessing it’s

many of them. So you can see that this issue is

relevant to your life and what’s in your lunch box

. . . and hanging in your closet . . . and on the

menu at your favorite restaurant.

Now you have the lay of the land. You know

the definitions and the history of what our nation

has already been doing to address the problem of

instability in agriculture. You have what you need

to analyze competing ideas about how to solve this

problem. That means you’re ready for the best part

of the VOTE Program. It’s time to hear the voices

of the different perspectives on the issue.

196 | Voices On The Economy

Voices on Agriculture Conservatives, radicals, and liberals all agree that instability in farming threatens food security, and they all share the same goal of having a secure

food system. But they strongly disagree about how

to achieve that end. Should we leave agriculture

markets alone and let the invisible hand of free-

market capitalism ensure a

secure food system? Should

we use the helping hand of

government subsidies in fair-

market capitalism to bring us

a secure food system? Should

we use Food Security Councils’

Emergency and Innovation

Funds in democratic socialism

to plan for a secure food

system? The policy we’re

going to debate is subsidies,

which is a liberal idea.

We’re going to put on three

different masks and talk to

you in the voices of the three perspectives. The

goal is to persuade you that each perspective is the

right one so that you can make up your own mind.

Which one makes you nod in agreement as you

read along? Which one makes you so angry that

you have smoke coming out of your ears? Which

one leaves you shaking your head in disbelief that

anyone could see it that way? You don’t have to

agree or disagree with a perspective. You just need

to practice respectful listening with an open mind

so you can understand all the arguments.

At the end of each perspective you’ll find a

summary of each point of view. You’ll also find

eight Talking Points. These are meant to be read

aloud to someone else so that you can try on

the words and become fluent in the different per-

spectives. Say them with passion—as if you really

mean what you’re saying. Please don’t just read

the words as if you’re reading the instructions for

assembling a bookshelf. It’s

extremely likely that you will

deeply disagree with some

of the Talking Points, but

please say them anyway. By

speaking them aloud, you’ll

gain deeper insight into how

others think, which may help

you become more persua-

sive about your own point

of view. There are three

rules for Talking Points: Say

them aloud, say them with

passion, and avoid mockery

and sarcasm. That way you

can make up your own mind and find your own voice. Then you can join the conversation as a

passionate advocate for what you believe is the

best way forward as a nation. You might even

come up with a new solution. That is what the

VOTE Program is all about.

One last note: please remember that VOTE

doesn’t take a position on any of these issues.

We’re just channeling the voices of the perspec-

tives. The conservative voice will go first for this

issue, and then for each subsequent issue we’ll

change the order in which we present the per-

spectives to keep it balanced. Here we go!

Chapter 7: Agriculture | 197

If they’d had to pay their own money for the land,

those homesteaders would have investigated its

suitability and concluded that it lacked the proper

climate and didn’t have sufficient rainfall for wheat

production. The Plains Indians and early settlers

all knew that the Great Plains were not suitable for

sustainable European-style agriculture, but that fact

was ignored because the government was handing out free land. Did we learn from our mistakes?

Sadly, we did not. Government meddling continues

today, as farmers in the Great Plains are subsidized

to produce wheat. And if that’s not bad enough,

those farmers are not being charged appropriately

for the water they use, which means they overuse

it and drain the aquifer. This can’t be sustained.

We’re heading for another Dust Bowl, and it’s the

government’s fault.

Let’s consider the wheat market when there’s a

drought (figure 7.1). Farmers’ costs go up because

they need to pay for more irrigation. As a result,

some wheat farmers will go out of business, some

will switch to growing more drought-tolerant

crops, and some will choose to switch to produc-

ing a crop that brings a higher price. For instance,

if people are paying more for kale (because kale is

suddenly popular), those wheat farmers will start

to grow kale. You can see in figure 7.1 that in all

these cases, the supply curve for wheat will shift

to the left and the price of wheat will go up. Yes,

the wheat market will shrink, but everyone who

wants the wheat at this higher price gets it, and

because those farmers who still produce wheat

can get a higher price for it, they can afford to

pay the higher costs for water during the drought.

That’s how free-market capitalism works: farmers

follow price signals and appropriately value their

resources (for instance, water). In the end, farm-

ers, guided by price signals, produce what people

want. Without anyone having to pass a law or

dictate what suppliers and demanders should do,

the invisible hand guides the market to maximize

our social welfare.

ConservativeVoice on Agriculture Remember the Dust Bowl and all those homesteaders who went out to the Great Plains to farm their free land? Well, if you think about it, the Homestead Act was like a subsidy since it provided land for free. And what a disastrous idea

that turned out to be! We ended up with the Dust Bowl because the government

interfered with price signals. People got the land for free, so they didn’t value it.

They didn’t make the kinds of calculations that were needed to determine if this

land was actually suitable for wheat production or for growing any kind of crop.

198 | Voices On The Economy

P S

QQ 1

The Wheat Market Q2

Figure 7.1 Conservative View

Remember when you went to the grocery store

to buy bread, mayo, and cheddar for your cheese

sandwich? Did you rush out at dawn so you could

be the first one there in case they ran out? No! The

free market has always brought you the food you

want—and it always will—so you don’t have to

worry. When the government leaves them alone,

agricultural markets thrive. We have a secure food

system because producers grow the most they can

in the most efficient way to maximize their profit.

Everyone who wants the food at that price can get

it, and producers supply the types of food people

want. If we want more kale, we get more kale. If

we want organic carrots, we get organic carrots. In

free-market capitalism, prices signal to farmers what

to produce. The best way to address instability in

agriculture is to leave markets alone to self-adjust.

Firms will adapt and innovate, and we will all get

the food we want at the right price.

Instability in farming is real, and so is insta-

bility in every market. When there’s a hurricane, for instance, the airline market is affected, the

dog-walking market is affected, the skateboard

market is affected, and so forth. If you think about

it, change is the only thing you can really count

on in life. But instead of seeing this as a problem,

Chapter 7: Agriculture | 199

there’s another way to look

at it: see it as an opportu-

nity. When you’re in a sail-

boat and you’re trying to

go from island to island,

you rely on the winds to

get you there, but they

are constantly changing,

so you have to adapt. One

wind dies down or changes

direction, so you read the

wind on the water and then

bring your boat around to

pick up a better wind to

carry you to your destina-

tion. Sometimes it’s even

stronger and gets you there

faster, or it might carry you

to a place you didn’t antici-

pate, which opens up even

more opportunities. Crisis

and opportunity are two sides of the same coin.

Businesses will always have times of struggle,

but, liberals, it makes absolutely no sense to try to

come to the aid of every dog walker, every airline,

and every skateboard producer. It makes no sense

to trade the rational solution of following price

signals for the chaos of trying to put out every

fire for every firm in every industry when there’s

instability. And we shouldn’t come to the aid of every farmer. You liberals claim there’s something

special about agricultural instability that justifies all

those farm subsidies, but that’s just not true. Even

if we accepted the premise that agriculture needs

to be treated differently from all other industries,

subsidies don’t work. Those government handouts

create even more instability and in fact create an

efficiency loss. Subsidies give farmers incentives

to stay in the wheat business during periods of

drought—even to expand production of the subsi-

dized products by plowing up more land for wheat.

When the government starts paying farmers to pro-

duce things that it decides should be produced, we

don’t get the right mix of

products, because subsi-

dies destroy price signals.

Farmers follow an artifi-

cial, government-manip-

ulated signal to produce

wheat instead of following

free-market prices. The

result is that we end up

with too much wheat and

not enough kale, avocados,

and everything else peo-

ple actually desire. Our tax

dollars are paying farmers

to produce things that no

one wants. Subsidies create

inefficiency—resources are

wasted—and they reduce

our social welfare. And

then what happens? The government buys up the

excess wheat and dumps it on developing coun-

tries, pushing their farmers out of business, which

creates international crises and trade wars. So once

again liberals try to solve a problem and end up

making it worse.

And the radical idea of Food Security Coun-

cils’ Emergency and Innovation Funds to replace

agricultural subsidies? How is that not just a new

name for subsidies? Whatever radicals want to call

it, it’s government meddling, which means it will

continue to create the same problems we already

have. Wait—the problems won’t be the same:

they’ll be a thousand times worse because dem-

ocratic socialism is a system that rejects profit.

There is no incentive for anyone to work hard or

innovate. It’s the profit motive that leads agribusi-

ness to invest in research and development so

we can go to the store and buy food that’s more

nutritious and won’t spoil as quickly. Democratic

socialism is destined to fail—if it could even get

Let’s end the wasteful

programs that flush

taxpayer dollars down

the toilet and create all

the wrong incentives.

Our nation is most secure

and our farming industry

is most robust when we

produce efficiently, which

means leaving markets

alone to self-adjust.

200 | Voices On The Economy

off the ground in the first place—because without

the profit motive our ability to feed ourselves is

at risk. Radicals say their tax-dollar-funded Emer-

gency and Innovation Funds created through par-

ticipatory governance (and those endless meet-

ings of their Food Security Councils) help them

plan for the long term. Yikes! Radicals want agri-

cultural decisions—and every other decision you

can think of—to be made by committee. This is a

scary and dangerous idea. Can you imagine this

group of “stakeholders” sitting in a room some-

where, drawing up their pie charts and telling

farmers what to grow, how much to grow, how

to grow it, and what percentage of the land they

can use for different crops? Would anyone in their

right mind want to live in that country? No one

can predict the weather or a sudden kale craze

or a study that shows amazing health benefits

of popcorn, and in capitalism we don’t need to

because we already have long-term planning: it’s

called “following price signals.” There is no need

to put a committee together to bail out farms or

to tell farmers how to do their business. If there’s

a hurricane or a drought, price signals will guide

farmers to use their resources most efficiently,

and the profit motive of capitalism ensures that

farmers will want to get up at the crack of dawn

and do the hard work it takes to bring us the food

we want and need.

We should reject agricultural subsidies so that

unfettered markets can ensure a secure food sys-

tem. Let’s end the wasteful programs that flush

taxpayer dollars down the toilet and create all

the wrong incentives. Our nation is most secure

and our farming industry is most robust when we

produce efficiently, which means leaving markets

alone to self-adjust. That will bring us the most pos-

sible foods in the right quantities at the right prices.

We can choose whatever diets we want without

the government imposing its will on our dinner

plates. When agricultural firms want more stability,

they purchase private crop insurance policies to

minimize the risks of a failed harvest because of

a disaster. And farmers will do what they’ve been

doing for years to minimize the risks of falling

prices, which is to make a deal to sell their future

harvest at a fixed price so they can make sure they

will be able to stay in business. Trading in futures

has long given farmers the stability they want and

at the same time has stabilized the prices we pay

at the grocery store. Free-market capitalism brings

us the wheat we want, the kale we want, and the

avocados we want. We get all this by leaving the

market alone and letting the profit motive give us

a stable and flourishing food system.

Chapter 7: Agriculture | 201

ConservativeFree-Market Capitalism BIG PICTURE The best way to address instability in agriculture is to leave markets alone to self-adjust. Firms will adapt and innovate, and we will all get the food we want at the right price.

POLICY POSITION Instability in farming threatens food security, but . . .

" Liberal policies of government handouts distort price signals, throwing markets off balance and ruining international relations.

" Radical policies of government handouts in an economic system with no profit motive jeopardize our ability to feed ourselves.

SOLUTION Reject agricultural subsidies so that unfettered markets can ensure a secure food system:

! Private crop insurance and futures trading emerge.

! Deliver the food we want and need through unfettered prices.

P S

QQ 1

The Wheat Market Q2

Agriculture

202 | Voices On The Economy

Agriculture Talking Points: Conservative 1. Capitalism works best when we leave it alone. The free-market approach is simple and elegant: the con-

sumer and the farmer meet in a market without any government interference, and since farmers want to make money, they’ll produce what people want to buy. That’s how we get the food we want at the right price. The free market is a win-win every time for suppliers and demanders.

2. There’s a saying that every crisis is an opportunity. Instability in agriculture gives farmers an opportunity to innovate and adapt. There’s instability in every industry—not just agriculture. For instance, since they know there will be years of drought, firms have an incentive to develop crops that use less water. Innovation is how we get a growing and healthy economy. Firms that are flexible and can respond to change will survive, and that’s how it should be.

3. Liberal subsidies are supposed to fix a problem, but they end up creating more problems because govern- ment handouts reward firms for stagnating. Why should farmers adopt better business practices or meet changing market demands when the heavy hand of government pays them not to? The solution is simple: get rid of subsidies and let farmers come up with their own creative solutions. Let’s stop enabling an entire industry to run on welfare.

4. Agricultural subsidies are a huge waste of taxpayer dollars. Money comes out of our pockets to pay farmers to overproduce crops that nobody wants. All that excess food floods the market, and we end up wasting our scarce resources. And it gets worse—because then we dump those products on developing countries, which pushes their own farmers out of business and causes international trade crises. Liberals, you’ve been running this scam on the American taxpayer for nearly one hundred years. It’s time to get rid of subsidies.

5. No one can possibly plan the economy by committee—and that’s especially true in agriculture. The radical idea of Food Security Councils is a disaster waiting to happen. They are doomed to fail because there is no possible way any one person or group could ever figure out how to allocate resources to the right place, at the right time, in the right amounts to give us the wide variety of food we want in the quantities we need.

6. Worker-owned farms in democratic socialism are not going to provide the whole nation with the food it wants. You radicals think there’s something wrong with big corporations in the food industry, as if your to- mato is better because it was grown by a worker-owned farm down the road. But profit-driven agribusiness invests in research and development to bring us products with higher nutritional value and less spoilage— all at lower prices. They bring us an abundance of food options, no matter what the season.

7. Is there instability in agriculture? Of course there is! That’s why farmers buy crop insurance policies to mitigate the risk of loss in case of a disaster. And that’s why they make deals with buyers to sell a portion of their future harvest at a fixed price. They can take measures on their own to make it possible to stay in business even if the price falls. This is how farmers have historically adapted and innovated to ensure that we get the food we want and need.

8. In free-market capitalism, markets self-correct when we leave them alone. So all we need to do to have a secure food system is to stop subsidizing farmers to produce food that no one wants. And while we’re at it, let’s stop paying farmers to keep growing unsustainable products. Instead, we should let the invisible hand guide farmers to produce the food our nation actually wants and needs.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 7: Agriculture | 203

Great Plains, or to ensure that water was used

appropriately. We needed a partnership between

farmers and government to put the right amount

of land into production so that farmers didn’t

destroy the ecosystem. If there had been more government involvement, we could have pre-

vented the Dust Bowl! We learned from that unfor-

tunate experience. Today we benefit from public

agencies that support and protect agriculture. But

in those same Great Plains states that experienced

the Dust Bowl, farmers are unsustainably draining

the aquifer. Without government intervention to

regulate the water usage, we could end up with

another Dust Bowl.

Let’s consider the wheat market when there’s

a drought. Because of higher water costs and

some farmers going out of business, the supply

curve would shift to the left, bringing about a

higher wheat price and a shrinking wheat market.

In normal circumstances it’s perfectly fine when

this happens because markets will self-adjust in

the long run. But food is not the same as any

other product. We can live without ski resorts. We

can’t live without food. Food is necessary for our

survival today and every day. The good news is

that there is something we can do to restore the

market to what it looked like before the drought.

We can shift the supply curve to the right—back

to where it was before the drought—by using

subsidy programs. In figure 7.2 you can see that

subsidies shift the supply curve back to the right

because subsidy programs offset farmers’ costs

for water so they can continue to produce our

wheat and continue to stay in business and grow

LiberalVoice on Agriculture T he Homestead Act created incentives for settlers to make a better life for themselves and at the same time grow the food needed to feed our nation. The government created avenues of opportunity for prosperity and well-being by

offering free land. The problem was not that the government gave land to settlers;

the problem was that the government didn’t partner with those homesteaders to

ensure that they used best practices in farming, or to ensure that some land was

being conserved, or to ensure that trees were left as wind breaks across the

Agriculture

204 | Voices On The Economy

the food we need. With the helpful hand of gov-

ernment, firms are no longer at the mercy of

weather, pests, or other unexpected threats. Sub-

sidies create an equity gain that brings us more

social welfare because we get the wheat we want

in the quantities we want and at a low price—all while preserving our nation’s farming enterprises.

P S1

QQ 1

The Wheat Market Q2

Figure 7.2 Liberal View

A stable food supply is of the utmost impor-

tance to our national security. Imagine if we

didn’t have subsidies and there was a drought.

Wheat farmers would start to go out of business.

They would sell their farmland to housing and

strip-mall developers. When conditions for wheat

production became favorable again—when the

drought ended—they wouldn’t be able to resume

their farming businesses and grow our nation’s

wheat. You can’t turn a condominium back into

a wheat field. The land would be forever lost to

food production. We would become dependent

on other nations to sell us wheat. Just consider

military history for a moment. How are wars won?

By keeping food from your enemy. Our trading

partners today could easily become our enemies

tomorrow, so protecting our domestic food sup-

ply is critical to our national security. We don’t

want to be dependent on other nations for our

survival. What can save us from this stark sce-

nario? Agricultural subsidies. They protect our

food supply by preserving our farming industry.

This is the best way to protect our national secu-

rity and make sure we have the food we want.

Chapter 7: Agriculture | 205

Radicals, what a bril-

liant idea for your Food

Security Councils to create

Emergency and Innovation

Funds for farmers. Wait—

that sounds so familiar…

because that’s exactly

what subsidies are! You

are clearly right that when

there is a weather event or

natural disaster that puts

farmers at risk of going

out of business, we need

to step in and help. We’ve

been doing this for genera-

tions. It’s called “crop insur-

ance,” “disaster assistance,”

“loans,” and more. And we

already fund expert advice

for farmers on best practices. It’s called the USDA.

We don’t need to switch over to democratic

socialism to have a community solution. We have

already come together to make sure our nation’s

food system is protected. What do you think the

government is? It’s us! And we already have a

democracy that is of the people, by the people,

and for the people. Your Food Security Councils

are impractical. You can’t ask people with busy

lives and businesses of their own to sit through

endless committee meetings. The USDA has paid

staff and experts who work for us, and it already

has mechanisms in place to get feedback from

stakeholders. So while we’re glad you agree with

us that we need farm subsidies, let’s be clear that

the way you want to go about providing them

is alarming and dangerous. First, it’s impractical,

and second, democratic socialism undermines the

incentive for farmers to toil and labor to feed our

nation. Cooperatively owned farms will always

be hampered by freeloaders who don’t want to

work hard yet expect to reap the rewards. The

profit motive is the reward system that is the key

to plentiful food produc-

tion and a successful econ-

omy. Farming enterprises

of every size in capitalism

bring us innovation, moti-

vation, and refrigerators

filled with every kind of

food that people want. If

you want organic, free-

range, non-GMO food, then

capitalism will make sure

your local store is stocked

with those foods. Without

the profit motive and pri-

vate ownership, we’ll be

left with food shortages,

higher prices, and fewer

choices. The last thing we

would ever want to do is to

throw out the very system that creates our wealth

in the first place. Democratic socialism has the

equation wrong: it’s democracy plus capitalism,

not democracy plus socialism, that brings us max-

imum well-being.

Conservatives, you love your mantra that mar-

kets left alone will self-adjust, but we don’t live in

a time bubble. It’s dangerous and misguided to

sit on our hands and wait for everything to work

itself out while we watch our ability to feed our

nation wither and die. We can’t afford to become

vulnerable to foreign domination. Your do-noth-

ing approach leads to the worst outcomes for our

social welfare. Consider farmers—the hardwork-

ing, dedicated people who built this country and

who sustain us all. If there’s a drought and we do

nothing, they lose their farms through no fault

of their own. Private crop insurance without gov-

ernment support is unaffordable, and the futures

market is a gamble that might not pay off for

farmers in the end. What happens to consumers?

You’re at the supermarket, looking to buy bread,

cheese, and mayo for your cheese sandwich, but

A relatively small

investment of our tax

dollars brings us a

priceless return: national

security, a robust farming

industry, low food prices,

and more food choices

than people have

ever had in the history

of humanity.

206 | Voices On The Economy

there was a drought, and we did nothing. If you

can even find bread at the store, you can’t afford

to buy it because the price is triple what it had

been. Higher prices and lower quantities are what

we get when we do nothing. Conservatives say

subsidies create too much wheat production—

but that’s not a problem. When other nations get

hit with famines, wars, and tsunamis, and all the

other countries respond with food aid, we can

also be good global citizens by sending over our

wheat. If we follow the free-market plan and get

rid of subsidies, we end up with a four-way loss:

our nation loses its food security, our farmers lose

their businesses, our consumers lose with higher

prices, and the entire world loses when we can’t

come to the assistance of those in need.

We should support agricultural subsidies to

ensure a secure food system. A relatively small

investment of our tax dollars brings us a priceless

return: national security, a robust farming industry,

low food prices, and more food choices than peo-

ple have ever had in the history of humanity. We

should strengthen subsidy programs to motivate

farmers to continue to grow the food our nation

needs to stay strong and free. And while we enjoy

living in a land of plenty, we can also help our

international neighbors as good global citizens by

offering food aid in times of war and famine. We

should continue our subsidy programs while mak-

ing sure they don’t get corrupted by powerful agri-

businesses. Only in this way will subsidies be used

as they were intended, and we will have the wheat

we want, the kale we want, and the avocados we

want. We will also have stable markets so we can

maintain our food independence and preserve our

nation’s precious farmland.

Chapter 7: Agriculture | 207

LiberalFair-Market Capitalism BIG PICTURE Agricultural subsidies protect our food supply by preserving our farming industry. This is the best way to protect our national security and make sure we have the food we want.

POLICY POSITION Instability in farming threatens food security, but . . .

" Radical policies are just subsidies by a different name but burdened with impractical bureaucracy, limited choices, and food shortages.

" Conservative policies give us a four-way loss: bad for farmers, bad for consumers, bad for national security, and bad for international relations.

SOLUTION Support agricultural subsidies to ensure a secure food system:

! Strengthen protections for our food independence.

! Preserve our nation’s farmland.

P S1

QQ 1

The Wheat Market Q2

Agriculture

208 | Voices On The Economy

Agriculture Talking Points: Liberal 1. Farmers are the quiet, hardworking heroes of our country. Without putting on a uniform or taking up arms,

they safeguard our national security by ensuring our food independence. Agricultural subsidies keep us from becoming vulnerable to foreign powers for our very survival because they keep farms in production. And they help farmers have peace of mind when their livelihoods—and our nation’s food security—are threatened.

2. Agriculture is a risky business. No one can predict the weather, and climate change is causing even more unpredictable weather events. In addition, we face the constant threat of global economic instability, terror- ism, and wars. All of those factors could affect our food supply, but they don’t. We don’t have to worry about empty shelves at the grocery store, because our farming industry is protected by agricultural subsidies.

3. Radicals, your idea for Food Security Councils to create Emergency and Innovation Funds is pure genius! If only we had such a thing … wait a minute—we already do. It’s called “subsidies.” You just came up with a fancy new name for crop insurance. The only difference between your solution and ours is that subsidies are part of an amazing, profit-driven system called capitalism that creates incentives for farmers to work from sun up to sun down to grow the food that feeds our country.

4. If you want non-GMO, organic, gluten-free, grass-fed, free-range, pesticide-free, fair-trade, no-growth- hormone products, then capitalism will supply it. Fair-market capitalism will bring you the food you want. In democratic socialism, cooperatively owned farms are held back by lazy freeloaders who have no moti- vation to put in a hard day’s work since they’re going to take a share of the profit in any case. If we have to rely on worker-owned farms to feed the nation, then we’re all in trouble.

5. The conservative idea that in times of crisis farmers will adapt and innovate sounds good on paper, but without subsidies, farmers will “adapt” by selling off their land to developers. Once farmland is turned into a housing development, a shopping mall, or a parking lot, it’s lost forever to food production. Without arable land, our whole nation will become dependent on other countries for our food. This would be a disaster for our national sovereignty.

6. Conservatives, farmers can’t afford private insurance on their own, and futures markets are a gamble that could easily lose them the farm. Leave it to you to reject farm subsidies, which have worked for decades. Of course there’s instability in every industry, but agriculture isn’t just any industry. We can’t survive without food! We don’t want high prices and limited products at the grocery store every time there’s a drought or hurricane. Agricultural subsidies keep farmers producing in a high-risk industry.

7. Everyone needs to eat. Food is the foundation of our well-being, so it makes perfect sense to support and protect our food source—the farming industry. The helping hand of government makes it possible for farmers to sleep well at night knowing that their businesses won’t go under the next time there’s a weather event or human-made disaster. And you and I can sleep well at night knowing that tomorrow, and next week, and ten years from now, our nation will be able to feed itself.

8. Can you imagine the chaos and frustration that would occur if every time there was a drought or a hurricane, you and everyone else in our nation would have to wonder if you could find the ingredients for dinner, and if you could afford them? Agricultural subsidies give us a four-way win: farmers win because they stay in busi- ness, you win with low prices and availability of the food you want, the country wins because we can depend on ourselves for a secure food system, and the developing world wins when we give it our surplus food.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 7: Agriculture | 209

supposed to create homes for people and feed

the nation, but that’s not how it worked. Suitcase

farmers saw a way to make easy money off this

free land deal. They claimed their land, but they

never actually moved there. Instead, they paid

wage laborers to plow up acreage when prices

were high, and then they abandoned the land

when there was no more profit to be made. Suit-

case farmers ruined the Great Plains. They may

not have wanted to devastate the land and sur-

rounding communities, but the pressure for bad

led them to do whatever was most expedient to

make a buck. And the irony is that they did it

in a perfectly legal way through the Homestead

Act. By the way, what happened to those wage

laborers? They became Dust Bowl refugees! This

production-for-profit economic system destroyed

land and lives. It destroyed our nation’s food sys-

tem once, and it’s doing it again. Today, large-scale

farming corporations in the Great Plains—like

the suitcase farmers who had no commitment to

the community—are draining the aquifer beyond

what it can sustain. Under capitalism, we will end up with another Dust Bowl.

Let’s use the Six-Core Cube of democratic social-

ism and drill down through the core point of par-

ticipatory governance to see how we get a secure

food system. Imagine a world where people come

together before the weather event that threatens

food production and help the farming indus-

try prepare for, adapt, and respond to inevitable

catastrophes. In democratic socialism, elected offi-

cials convene and facilitate Food Security Councils.

Made up of multiple stakeholders, these partici-

patory community councils have the authority to

make decisions. Bringing together their different

areas of expertise, their different needs, and their

different concerns, council members collabora-

tively decide how to address problems and what

resources to allocate to programs. At that point, the

elected officials are tasked with representing those

decisions in the larger legislative arena to try to

get them passed into law. That’s how Food Secu-

rity Councils work. So, for example, Food Security

Radical AgricultureVoice on Agriculture The Dust Bowl may have looked like a natural disaster, but it wasn’t natural—it was human-made. It didn’t happen because there wasn’t enough government or because there was too much government; it happened because

of capitalism. The drive for profit led Europeans to steal the land from the Plains

Indians. Capitalism gave farmers incentives to plow up the land, which ended up

devastating the ecosystem. The drive for profit caused Black Sunday and turned

one hundred million acres of farmland into wasteland. The Homestead Act was

210 | Voices On The Economy

Councils would ensure that

cooperatively owned farms

have the funding to switch

to drought-resistant crops,

that farmers get training in

the best methods to har-

vest rainwater for irrigation,

and that they can afford to

restore degraded soil after a

tornado. Because planning

is important for the success

of any endeavor, these mea-

sures would be put in place

before disaster strikes. With

participatory governance,

the people with the most

knowledge and expertise,

as well as those who have

the most at stake, all have

a voice, so we get the best

ideas for preventing crop failure, for recovering

from disasters, and for developing innovations to

improve production. Worker-owned farms and

farming communities don’t have to worry that their

firms will go out of business or that their commu-

nities will become ghost towns.

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

Figure 7.3 Radical View

Do you know what the

weather will be next week?

Next month? Next year?

Of course you don’t—no

one does. So here’s how

we make sure you will

have your cheddar, bread,

and mayo for your cheese

sandwich: we plan for

instability. Long-term plan-

ning is an ancient idea, by

the way. Remember Joseph

from the Bible? He inter-

preted the Pharaoh’s dream

that there would be seven

years of plenty, followed

by seven years of drought.

Out of that prediction

came a long-term plan to

stockpile grain during the

years of plenty so no one would starve during

the years of drought. Because Egypt had that

long-term plan, it became the dominant power

in the region during the drought years. We don’t

need a dream interpreter to tell us that we are

going to have cycles of abundant harvests and

lean harvests. Instability is inevitable, and that

means the stakeholders who make decisions

about protecting our food system—farmers, con-

sumer groups, communities, scientists, public

officials, industry experts, and so forth—plan

together for the future. Food Security Councils

anticipate problems and set aside resources for

unforeseen calamities because we understand

that everyone benefits when our worker-owned

farms stay in business and thrive. They serve as

local economic anchors with their prosperous

enterprises, and because they live in the com-

munities where they work, they are motivated

to take care of the land and use best practices.

Participatory governance brings the nation a sta-

ble, healthy, and balanced food system. It funds

Instability is inevitable, and that means the stakeholders who

make decisions about protecting our food

system—farmers, consumer groups,

communities, scientists, public officials, industry experts, and so forth—

plan together for the future.

Chapter 7: Agriculture | 211

innovation and best practices to plan and pre-

pare for catastrophes.

Because of capitalism, our food system is threat-

ened and will never be secure. We can under-

stand most clearly why this is so when we see

the way top-down governance works. When deci-

sion-making is left in the hands of a few elected

officials, they are supposed to make decisions

for the good of their constituents, but the stake-

holders aren’t truly represented. Why? Because in

capitalism firms are forced to buy off politicians

with big donations so our elected officials will

represent their special interests. That’s how we

get corporate welfare in the form of agricultural

subsidies. That’s why our representatives vote to

cut regulations so that big ag can spray our food

with their toxic pesticides to save a buck. A firm

that doesn’t want to play this game of crony capi-

talism is a firm that won’t survive. With top-down

governance, there’s only one outcome: a govern-

ment that’s in the pocket of big ag. We’re left with

their profit-maximizing, low-quality, unhealthy

foods that destroy our bodies and our planet. In

capitalism the health of our nation’s food system

is left to wither on the vine.

Instability in farming threatens food security,

but conservatives have it all wrong. With free-mar-

ket capitalism, when we leave it alone, big ag is

perfectly happy to watch the small farms go out

of business. Then they swoop in and buy up the

farmland at a low price. They’re just there to suck

all the profits they can get out of the land—not

to be part of a healthy, sustainable community.

Wheat, corn, and soybeans are the highest-profit

crops, so that’s what they produce. Conservatives,

you say free-market capitalism brings us the food

we want, and you say we get innovations that

move us forward as a nation. That’s a warped spin

on what really happens. Big ag spends billions on

food scientists to invent new ways to turn those

crops into the most addictive products possible

and on advertising executives and researchers to

212 | Voices On The Economy

come up with ingenious new ways to convince

us that we want and need those products. Here’s

your price signal incentive at work: get us hooked

on cheese puffs and sugary cereals so we will buy

more and consume more and never feel full while

we grow obese and sicken from diabetes and

heart disease. Corporate agribusiness rakes in the

profits and calls it a “win” and pours more money

into research for even more ways to corrupt our

food system for profit. Don’t get me wrong—these

aren’t bad people. They’re stuck in a rotten eco-

nomic system. Caving in to the pressure for bad is

the only way their firms can survive in capitalism.

Liberals, let’s drop the patriotic pretense that

subsidies are mainly benefitting our nation’s

heroic farmers who might lose everything because

of bad luck and bad weather. The agribusinesses

that produce our food make more money than

most nations. They are in zero danger of going

out of business because of a weather event.

Those big farming enterprises make their money

off the backs of migrant wage laborers, who get

paid a pittance. And big ag has zero commitment

to sustainable farming, so they spray toxic chemi-

cals, factory farm animals, and pollute groundwa-

ter, rivers, and streams. Farm lobbyists for big ag

pay off politicians to make sure the crops that are

most profitable—soy, wheat, and corn—get the

most subsidies. The whole middle section of our

supermarkets is stocked with nothing but highly

processed foods made with those crops—pack-

aged foods that are unhealthy and addictive. Even

if you want to eat healthy, you may not be able to

afford to. Not when it costs three times more to

buy a bag of fresh vegetables than to buy a bag

of cheese puffs or a box of sugary cereal. So what

you liberals have done is created a state-subsi-

dized national health epidemic of obesity, car-

diovascular disease, and diabetes. Let’s also not

forget that we then turn around and dump our

excess subsidized products on developing coun-

tries and in the process push their farmers out of

work. A food system built on tax-funded subsi-

dies is unpalatable and rotten to the core.

We should replace agricultural subsidies with

the Food Security Councils’ Emergency and Inno-

vation Funds to bring us a secure food system.

They provide expertise and financial support so

worker-owned farms can plan and prepare for

unforeseen challenges. These funds also help farm-

ing communities to rebuild and adapt after severe

weather events by promoting best practices and

the latest research and innovations for sustainabil-

ity. Participatory governance is true representative

democracy, and through its Food Security Councils

we get smart investment in agriculture, ensuring

that our nation will continue to have the wheat we

want, the kale we want, and the avocados we want.

Let participatory governance in democratic social-

ism preserve and support farming communities.

Chapter 7: Agriculture | 213

RadicalDemocratic Socialism BIG PICTURE Participatory governance brings the nation a stable, healthy, and balanced food system. It funds innovation and best practices to plan and prepare for catastrophes.

POLICY POSITION Instability in farming threatens food security, but . . .

" Conservative policies of leaving agricultural markets alone enable big ag to give us unhealthy, addictive food and the illusion of choice.

" Liberal policies of subsidies only serve to feed big ag, which exploits workers, ruins the land, and destroys farming communities.

SOLUTION Replace agricultural subsidies with Food Security Councils to bring us a secure food system:

! Emergency and Innovation Funds.

! Preserve and support farming communities.

Agriculture

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

214 | Voices On The Economy

Agriculture Talking Points: Radical 1. With participatory governance, we plan ahead instead of waiting for disaster to strike farms and wipe them

out. Food Security Councils invest in research and development of drought-resistant crops, water-harvest- ing systems, and sustainable equipment. When all the stakeholders have a place at the table and real pow- er to make decisions, we can fund innovations and best practices to make our food system more secure.

2. A stable food system isn’t just about having a lot of food on the store shelves; it’s about having healthy, affordable choices. In democratic socialism we know that the farmers who produce our food care about the land and use best practices because they live in the communities where they farm, and their food not only feeds the nation, but it also feeds their families and their neighbors. We can trust that the food on our plates nourishes not only our bodies but also our whole society.

3. Conservatives, you say the profit motive makes our lives better, but all I see are supermarkets filled with foods that make us sick. Big ag is killing us with obesity, diabetes, and heart disease. Because of capitalist compe- tition, they hire food scientists to design our meals, snacks, and drinks to be addictive so we’ll keep buying more and more. Instead of being in the business of feeding people healthy food that sustains us, their busi- ness is all about making the most profit. In the meantime we get sicker and more addicted.

4. The conservative idea to do nothing is dangerous. Our food system is vulnerable to weather and hu- man-made disasters. Without a plan in place, the most vulnerable farms will go under, and greedy mul- tinational corporations will happily swoop in and buy them up for a pittance. We can’t afford to lose our farming communities to outside investors. We need people who will care for the land because they live and work there, and because they want to sustain it for their children and grandchildren.

5. The liberal policy of subsidies underwrites big ag’s destruction of our food system, our health, and our future. Our tax dollars fund unsustainable, dangerous practices like producing dairy with hormones and spraying our vegetables with toxic chemicals. Then liberals turn around and dump the leftovers on poor countries. This drives their farmers out of business, and entire nations become dependent on our handouts to survive. Lib- erals’ intentions may have been humanitarian, but their policies destroy food systems throughout the world.

6. Let’s be honest about what’s really going on here, liberals: rich agribusiness pays off politicians to push farm subsidies in their favor. This is an example of crony capitalism at its worst. Your subsidies are a well-packaged scam to make taxpayers believe we’re participating in a patriotic act to save our country’s family farms. But in reality you have us subsidizing companies that have more money than many nations and are in zero danger of going out of business.

7. Everybody’s gotta eat! Food Security Councils make sure we have the food we want because they un- derstand what it takes for farms to succeed, what consumers want, and how to feed our nation. Why? The people at the table represent all the stakeholders. They are the farmers, the consumers, the industry experts, the environmentalists, the hydrologists, our public officials, and more. It’s through participatory governance that we get a sustainable and secure food system.

8. We all plan ahead for possible calamities. That just makes good sense. Through participatory governance, Food Security Councils give farmers Emergency and Innovation Funds to prepare, adapt, and recover from disasters. Farmers are not left on their own to sink or swim. With money set aside for the express purpose of helping them in times of crisis, and with research and development to strengthen their farming opera- tions, we all win with thriving farming communities and a secure food system.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 7: Agriculture | 215

The Shared Outcome

You can hear in the voices above that

conservatives, liberals, and radicals share the

same goal. They all want a secure food system for

our nation. They all agree that the ability to feed

ourselves is a fundamental issue of survival every

single day, and that issue will never go away. It’s

been around forever, and it will continue to be

relevant until the end of human civilization. Now

it’s time for you to be part of the conversation.

Your Rock-Star Moment

Have you ever wanted to be a rock star? To

be the lead singer in the band, you have to learn

how to sing, which means breathing the right

way, staying on key, and training yourself to pick

up cues from the band so you don’t start your

solo late and embarrass yourself. It takes a lot

of practice to get so good at it that, when you

finally get out on stage and start to sing, you

feel pumped up and confident and unsurprised

when the audience roars with approval. Rock

stars make it look easy, but that’s because they

worked backstage for years to get that good. We

can’t promise you that the VOTE Program will

turn you into a rock star, but it will definitely give

you voice lessons and practice opportunities. As

we mentioned earlier, a big part of the VOTE

Program is practicing how to articulate ideas from

each of the perspectives.

Just like a rock star captivates the audience,

your task is to captivate your listeners with your

gift of persuasion. After each Issues chapter we’ll

be practicing this important skill using four dif-

ferent kinds of exercises: debates, posters, skits,

and “breakfast with the family” role-plays. For this

chapter, your first voice exercise is a debate.

216 | Voices On The Economy

Activity: Debate and Re-vote It’s time for the first VOTE activity. The goal of the VOTE activities is for participants to articulate

each assigned perspective persuasively in a positive light. Remember, you are advocating for

its theoretical construct. Sarcasm, insults, and name-calling are off limits, and please don’t do

an impersonation of a celebrity, friend, family member, or colleague who identifies with that

perspective—even if you’re really good at impersonations. But do feel free to criticize opposing

perspectives with intelligent ideas, satire, and humor. You’ll be asked to articulate the different

perspectives for all the issues in the VOTE Program. With so much practice, you’ll soon be hopping

up on the stage of life with full confidence in your amazing rock-star voice on the economy.

1. Debate Instructions

Get together with friends, classmates, or family members; review the talking points and perspective

summaries with them; and then decide who will represent each perspective. You have to have at

least three people, and if you have more than three, you can form teams. The name of the game is

to articulate your assigned perspective in the most convincing way, whether or not it’s the one you

agree with. Make sure that you argue not only for why your position is right but also for why the other

positions are misguided. Learning to debate this way will help you to become a more persuasive

person, and your voice will carry more weight. You’re going to want to try it a few times, rotating

through the perspectives until you become fluent in each one.

2. Revisit Your VOTE Ballot

The VOTE Program is all about helping you think critically about the issues and have informed

opinions. Now that you’ve made a passionate case for a perspective—and hopefully listened

respectfully and with an open mind as your friends, colleagues, and family members made their

passionate arguments for the other perspectives—please go back to the VOTE Ballot and vote again

on Agriculture by putting a mark on the outside of the circle where it most lines up with your position.

Has your position changed since your first vote, or are you more certain than ever that your original

position was correct? Have you shifted a bit toward another perspective, or completely changed your

perspective? Be sure to fill out the part of the form that asks “Why?” Remember, we aren’t trying

to convince you to vote in a specific way. The VOTE Program is meant to help you make your own

decision in an informed way, and that is what you have just done. Congratulations on completing the

first issue!

Chapter 7: Agriculture | 217

Chapter 7: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Which of the following is a true statement? A. Agriculture refers to growing crops and raising animals in relation to food production only. B. Agriculture refers to growing crops and raising animals in relation to food and

clothing production.

C. The term agriculture is defined as large-scale production, while the term farming is defined as small-scale production.

D. More than 70 percent of our nation’s land is used for agriculture.

2. When a product is the same regardless of where it was produced or who produced it, we use which term to describe it?

A. Commodity B. Future C. Hedge D. Soft product

3. The Farm Bill, which is the federal government’s policy in relation to agriculture, was first passed in ____ (originally called the “Agricultural Adjustment Act”), and it is reviewed and reconsidered approximately every _____ years.

A. 1968; five B. 1903; ten C. 1933; five D. 2000; five

4. Match the subsidy program (left column) to its intention (right column). A. Crop insurance i. To help keep farmers in business B. Direct payments ii. To help with cash flow issues C. Loan guarantees iii. To help develop new technologies D. Agricultural research iv. To help cover losses from

weather events

5. Which of the following statements is/are true from a conservative perspective? A. If the price of cotton is too low, farmers will leave the industry and the price will

self-correct by increasing.

B. Agricultural subsidies for cotton will make society better off. C. When we subsidize cotton, it creates a surplus of it in our country. D. A and C only.

218 | Voices On The Economy

6. Which of the following statements is/are true from a liberal perspective? A. Without farm subsidies, we put our whole nation at risk of becoming dependent on

other countries for food.

B. Subsidies help farmers more than people in other industries. C. Agriculture subsidies decrease retail food prices in grocery stores. D. A and C only.

7. Which of the following statements is/are true from the radical perspective? A. In capitalism, when firms follow price signals the nation is ensured of the most food and

the types of food that people want.

B. Firms manipulate people to become addicted to unhealthy food and in the process create public health crises.

C. CEOs of big ag pay off politicians to make more profits, but that’s because they have to in order for their firms to survive.

D. B and C only.

8. Please choose the correct conservative interpretation of this wheat market graph. A. Increasing crop insurance will shift supply to

the left, thereby increasing the price of wheat.

B. When the price of wheat is too low relative to costs, farmers will switch to producing products that are more profitable.

C. Capitalism’s profit-driven focus results in too much wheat produced at too high of a price.

D. The supply of wheat will shift up and to the right as government interferes with subsidies, resulting in firms making too little wheat.

9. Please choose the correct liberal interpretation of this wheat market graph. A. When the price of wheat is too low relative to

costs, farmers will switch to producing products that are more profitable.

B. During severe weather events, subsidies are necessary to keep farmers in business and result in lower prices for wheat as a side benefit.

C. Capitalism naturally results in more wheat being produced during a weather event, which ensures our national security.

D. None of the answers above is correct.

P S

QQ 1

The Wheat Market Q2

P S1

QQ 1

The Wheat Market Q2

Chapter 7: Agriculture | 219

Answers

1. B 2. A 3. C 4. A – iv, B – i, C – ii, D – iii 5. D 6. D 7. D 8. B 9. B 10. C

10. Please choose the correct radical interpretation of this Six-Core Cube of democratic socialism. A. Democratic socialism is the economic

system that best results in food security because the government owns and runs all the farms.

B. In capitalism, government is of the people, by the people, and for the people, which means our well-being is guaranteed.

C. Our nation’s food security is best ensured when stakeholders such as farmers, consumers, government officials, and others set the policies.

D. Participatory governance means that elected officials independently decide on the best agricultural policies, which means we get the most food for the most people.

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

Chapter 7: Key Terms Agribusiness Agricultural research Agriculture Big ag Commodities exchanges Commodities markets Commodity Conservation reserve Corporate ag

Crop commodity program Crop insurance Direct payments Disaster assistance Dumping Farm Bill Food aid Food promotion Futures

Hard commodities Hedge Large-scale agriculture Loan guarantees Loans Soft commodities

ch8

8Issue: PRODUCT SAFETY The first car I ever bought was a gorgeous metallic blue Volkswagen Bug that one of our family friends sold to me when I was eighteen. It was refurbished, but it looked to

me like it was in mint condition. I fell in love at

first sight and happily handed over my $500. A

few days later, I drove it to a mechanic to get it

checked out. That’s when he delivered the bad

news: “The frame is completely rusted out. If you

hit a deep pothole, the whole car could fall apart

and you could die.” My father heard this and was

furious. I’d never seen him so angry. He called

the family friend and ranted: “How could you

sell my daughter a car that’s unsafe? Do you not

care about whether you’re directly responsible for

somebody’s death? Every time she drives it, her

life is at risk!” The woman was appalled to hear

that the car she sold

me was a deathtrap.

“I had no idea! I’m so

very sorry,” she said,

and she immediately

gave me a refund and

took the car back.

I had been riding

in cars all my life and

hadn’t really wor-

ried about my safety.

When I was growing up, our version of seat

belts was Mom throwing her arm out to stop us

from hitting the dashboard of our station wagon

when she slammed on the brakes. I realized I had

always assumed that when a person died in a car

crash, it was because of something unlucky—like

a patch of black ice on the road that no one could

have known was there, or a deer jumping in front

of the car, which no one could have foreseen.

Or maybe it was something they did wrong—like

driving drunk or falling asleep at the wheel. For

the first time it occurred to me that there were

car accidents that happened not because of bad

luck or someone being irresponsible or making

a mistake but because the car itself was unsafe. I

started to wonder about the safety of all the prod-

ucts in my life. Was the fire retardant in my mat-

tress poisoning me?

Was the off-gas from

our new carpets

giving me lung dis-

ease? Was my orange

juice tainted with

toxic pesticides? I

started to read about

the whole issue of

product safety and

its poster child, the

222 | Voices On The Economy

Chevy Corvair. It launched the national debate

about product safety and corporate responsibility.

Here’s what happened. General Motors designed

a new compact car that came out in 1960—the

Chevy Corvair—which had a new type of suspen-

sion system. GM’s engineers recommended that the

car include an anti-sway bar to prevent rollovers,

but management made the decision not to install it

as standard equipment. Instead, they relied on the

cost-free fix of adjusting the tire pressure to com-

pensate for the weight differential that could cause

a rollover if a driver oversteered. Later, GM offered

drivers the anti-sway bar as an aftermarket option,

and eventually it installed it as standard equipment

on later models of the Corvair. Hundreds of people

died in Corvair rollovers, and GM was sued dozens

of times. The story of the Corvair was recounted

in the 1965 book Unsafe at Any Speed, written by a young lawyer named Ralph Nader. He dubbed

the Corvair the “unsafest” car, and that’s how it

became the poster child for the issue of product

safety. (By the way, a decade later an independent

study conducted by the National Highway Traffic

Safety Administration didn’t find the Corvair to be

any less safe than comparable cars of that time.)

The fact that people are gravely injured and

even die from products is a tragedy. Everyone

knows it’s in the nature of innovation that some-

times things go wrong, and there are unintended

consequences from products. And when firms

do something illegal—covering up knowledge of

potential harm from a product or purposely mak-

ing a product more harmful, for example—those

companies should be held accountable through

the justice system. But in all other cases, what

should be done to ensure the safety we want in

the products we use? Conservatives, radicals, and

liberals all agree that products can cause harm.

But as you might imagine, they don’t agree on

how to ensure the protection that people want.

The policy we’re going to debate is product

safety regulations.

re g

G je

rd in

g e

n C

C B

Y 2.0

Chapter 8: Product Safety | 223

Understanding the Issue of Product Safety

“I am convinced that material things can

contribute a lot to making one’s life pleasant,”

wrote billionaire banker David Rockefeller, “but,

basically, if you do not have very good friends

and relatives who matter to you, life will be really

empty and sad, and material things cease to

be important.”

Wise people in every culture have echoed this

sentiment that happiness comes from the quality

of our relationships, not from the stuff we own.

However, on a practical level, material well-being

is vitally important for our survival. We absolutely

need food, clean water, and shelter to continue

to exist. If you don’t have those things, then over

time you will be physically compromised. Right

now, billions of cells and countless intricate bio-

logical systems are at work in your body keep-

ing you alive and making it possible for you to

think, move, digest, and read this page, among

everything else going on under your skin. If you

think about it, your physical existence is actually

quite fragile. You wake up in the morning and

heat up your frozen breakfast burrito. Could the

microwave oven be causing brain damage? You

hop in the shower. Is the water spraying down on

you tainted with heavy metals that cause blood

cancer? You wash your hair. Does the perfume in

the shampoo trigger asthma attacks? Before you

head out for the day, you fill your water bottle. Is

it made with plastics that cause liver problems?

You catch your bus on time. Is the braking system

safe? The issue of product safety is about ensuring

that products won’t end up injuring us or killing

us. Of course, we all know that happiness comes

from connection with friends and family, but if

we can’t count on the safety of the material things

we interact with on a daily basis, we may not be

around to enjoy those connections.

What Is Product Safety?

Imagine it’s flu season and you go to your

nearest pharmacy to get a flu shot. While you’re

there, you pick up some herbal cold medicine

and a random box of party lights that you find

on the clearance shelf. On a piece of paper, jot

down “flu shot, herbal cold medicine, and string

of party lights.” We’ll come back to this later.

Product safety refers to the potential for goods and services to cause harm to consumers.

This issue is one of the easiest to understand in

the VOTE Program because your life is filled with

products, and it always will be. Let’s define our

terms for this issue. Product safety is also some-

times called consumer safety or consumer protection. Product safety standards are crite- ria or requirements that firms must meet before

they can offer their products on the market. Most

product safety standards are concerned with the

risks of electrical, chemical, fire, or mechanical

hazard or whether a product poses a danger to

children. There are safety standards for nearly

every product you can think of—spas, tablets,

drywall, refrigerators, fabrics, mattresses, painkill-

ers, meat, carpeting, workout equipment, ventila-

tion systems, and so on. Just to give you an idea

224 | Voices On The Economy

of the scope of this issue, there are twenty-nine

million injuries every year and twenty-two thou-

sand deaths caused by products. More people

ages one to thirty-six die from unsafe products

than from cancer or heart disease. In 2017 alone

there were 251,700 reported injuries related just

to toys. There were tens of thousands of visits to

the emergency room as a result of people being

harmed by unstable furniture, appliances, and

other heavy objects tipping over on top of them.

Some of these people were even killed.

Compliance means a firm is following or meeting the government-mandated or indus-

try-recommended product safety standards. But

please keep in mind that just because a firm is

in compliance doesn’t guarantee that the prod-

uct is safe. It simply means that the firm is not

violating safety standards. Some product hazards

come from design defects (an electric drill bit flies

off when operated at top speed) or manufactur-

ing flaws (a toxic solvent is used to clean beer

vats). Some come from consumer use (buckling

an infant car seat incorrectly). Prevention is a measure taken before the product is designed,

produced, or sold to minimize the possibility that

it will cause harm. For example, the electric drill

goes through a testing phase to make sure the bit

is secure at high speeds and won’t fly off when

you’re making a birdhouse. The beer firm sends

the new solvent to the lab to make sure it’s not

toxic before it’s used to clean the vats. The infant

car seat producer includes a diagram for users so

they can properly install it. A common prevention

measure is the age-grading recommendation on

children’s toys, which is meant to prevent infants

and toddlers from choking on small pieces. Qual- ity control is the process of testing samples of products so producers can assess whether they

are safe even if they are made in different batches,

by different workers, or on different machines.

Some prevention and quality-control measures

are done voluntarily by firms, some are required

by various industries in order to be certified, and

some are mandated by government regulation.

A safe product is one that, when installed and maintained according to specifications and when

used in the right way for its intended purpose,

can be relied on not to cause harm. Interestingly,

Chapter 8: Product Safety | 225

even though smoking causes lung cancer, a cig-

arette is technically safe if it doesn’t explode in

your face when you light it. But

what happens when a product is

found to be unsafe? Sometimes it is

taken off the market through a

product recall. In this case, the producer either refunds con-

sumers’ money or replaces the

faulty part or product.

For millennia, humans have

been finding ways to manage

the risk of potential harm from

products. In ancient times,

cup bearers were tasked with

taking the first tastes of the

food and drink of royalty to

ensure that they weren’t laced with poison. The

ancient Mesopotamian king Hammurabi carved

his consumer protection laws in clay tablets

back in 1754 BCE. The Code of Hammurabi

described how weights and measures were

regulated to make sure no one was cheating in

the marketplace. It also outlined laws to ensure

that products were safe. Skip ahead to the late

1800s and the proliferation of “patent medicines,”

which were marketed as remedies purported to

cure all kinds of ailments using secret, allegedly

government-patented ingredients. Advertised in

magazines and newspapers and sold in stores

and off the backs of wagons by traveling “snake

oil” salesmen, many of these elixirs contained

alcohol, opiates, cocaine, and arsenic, as well

as other harmful and addictive ingredients.

They made children, elders, and adults sick and

addicted—and even killed people. This spurred

Congress to pass the Pure Food and Drug Act in

1906. Producers were held accountable for false

advertising and had to disclose the ingredients in

their products. Fast-forward to the cereal box on

your breakfast table. On the front it tells you how

much cereal is in the box, and on the side it lists all

the ingredients, plus the nutritional values found

in a serving. It also tells you if your bran flakes

were made on machinery that

processed nuts, soy, or peanuts,

in case you’re allergic to any of

those foods. That information

didn’t randomly appear there.

The labeling, product warnings,

packaging specifications, product

testing, and more reflect the

efforts of firms, industries, and

government to manage the risk

of harm from products.

There are a variety of ways

we respond to unsafe products

as a society:

Top 10 Product Recalls 1. Takata Airbags

2. VW Deisel Engine

3. Vioxx Pain Medication

4. Firestone Tires

5. Samsung Galaxy Note 7

6. General Motors Ignition Switch

7. Pfizer Bextra Pain Medication

8. Toyota Floor Mat

9. Peanut Corp. of America Peanuts

10. Johnson & Johnson Tylenol

Source: Dan Burrows, Kiplinger, “10 Biggest Product Recalls of all Time,” March 26, 2018.

U S

P u

b lic D

o m

ain

226 | Voices On The Economy

! Consumers Individuals can vote with their wallets and stop

buying unsafe products. When that number reaches

critical mass, the firms will either correct the design

or drop the product. The idea that consumers are

the ones who control what they buy and there-

fore what is produced is called consumer sover- eignty. For example, a snack food made by Fri- to-Lay called Wow! contained a compound called

olestra. It turned out that this fat substitute acted

like a laxative, and consumers ended up with

severe stomach cramps. Sales fell dramatically, and

the firm eventually discontinued that product.

Advocacy groups can organize boycotts and

public awareness campaigns to influence more

people to vote with their wallets. These can be

community groups, nonprofit organizations, and

other groups of concerned citizen. They may also

advocate for safer products from industry and

firms and act as a clearinghouse for information.

For example, groups of parents and child-safety

experts pressured makers of playground equip-

ment to create safer play environments for kids.

Individuals and groups of people can sue firms

if they think the company was negligent—that is, failed to take reasonable measures to ensure the

product would not cause harm. In 2018, the year’s

biggest product-liability verdict was $4.69 billion

against Johnson & Johnson. The jury ruled in favor

of the twenty-two women who claimed that the

firm’s talcum powder caused their ovarian cancer.

! Firms Voluntary product recalls can be issued by firms

when one of their products turns out to be unsafe.

A famous example is the Samsung Galaxy Note 7,

which was voluntarily recalled by the manufacturer

after the battery was found to overheat and explode.

Trade associations may also set standards, pro-

vide certification, and enforce compliance to man-

age risk from products. For example, the American

Association of Blood Products (AABP) has set stan-

dards to ensure that blood is safe for transfusions.

! Government The government can issue and enforce regu-

lations when a product is unsafe. For example, it

banned the use of a popular pesticide called DDT

after it was found to cause premature births as

well as a host of other symptoms.

Government Regulations

There is no overarching law that addresses

harmful products, but a long list of government

agencies are tasked with overseeing product

safety on the federal, state, and local levels. They

create and enforce product safety standards. They

also require firms to test products regularly in

order to demonstrate that they are in compliance,

and some agencies collect data on injuries and

product recalls—among other things—to inform

the public and identify best practices for the

industry. There are government regulations about

the safety of your local amusement park rides,

the solar panels on your roof, and the food

that’s served at your local restaurant. Because

many of the products we use are made in other

countries—or use ingredients or parts made in

other countries—imports are also regulated by the

government. The United States imports more than

$2 trillion worth of products from 230 countries

every year, and globally there are an estimated

700 new product safety regulations a year.

In a global economy the issue of product

safety becomes exponentially more complicated.

For instance, some pesticides that are banned

for use in the United States can still be produced

for export. Farmers in other countries buy these

chemicals and spray them on their fields. Then

they turn around and export their vegetables,

fruit, and meat to the United States. It shows up

on the shelf in your grocery store, and no product

safety regulations were violated. This has been

called the “circle of poison.”

Whether government should be the watch-

dog for consumer safety is a controversial topic.

Chapter 8: Product Safety | 227

Nevertheless, there have been a variety of con-

sumer protection and workplace safety agencies

for more than a century, and the government has

created new ones relatively recently. Here are a

few examples:

Food and Drug Administration (FDA): Cre- ated in 1906, its mandate is to protect and pro-

mote public health by supervising food safety,

packaging and labeling, tobacco products, dietary

supplements, pharmaceuticals, vaccines, blood

transfusions, medical devices, cosmetics, veteri-

nary products, and more. For instance, the FDA

investigated the potential harm from tobacco use

and tobacco addiction. It regulates tobacco prod-

ucts so that companies can’t market or sell to chil-

dren. The FDA also issues recalls on unsafe prod-

ucts. For example, it recalled pet food that was

contaminated with an industrial chemical called

melamine, which causes harm to animals. To give

you an idea of how many recalls the FDA issues,

the average for the past few years has been more

than four hundred annually. That’s more than one

a day.

National Highway Traffic Safety Adminis- tration (NHTSA): Founded in 1970, the NHTSA gives consumers information about cars. You

can look at their safety ratings before you buy a

car and find out about manufacturer recalls. The

NHTSA regulates things like airbags to make sure

they deploy correctly and to protect consumers

from ones that spray shrapnel. It also regulates

odometer fraud (making a car you’re looking to

buy appear to have fewer miles than it actually

has). Most recently, it also regulates self-driv-

ing cars.

Consumer Product Safety Commission (CPSC): Founded in 1972, its mandate is to ensure the safety of consumer products. According to the

CPSC, damage from unsafe products costs the

nation $1 trillion every year. Examples of recalls

include children’s sleepwear for not conforming

to the federal flammability standard, SCUBA reg-

ulators for drowning hazard, dishwashers for fire

hazard, windup toys for choking hazard, and a

cake knife because the handle can break during

use and cut the user. In each case, the CPSC rec-

ommends that “[c]onsumers should immediately

stop using this product.” To give you an idea of

how often CPSC recalls occur, there were nine-

ty-three children’s products recalled in 2017.

Consumer Financial Protection Bureau (CFPB): Created in 2011, its mandate is to pro- tect consumers from unfair, deceptive, or abusive

practices in financial markets. If you take out

a loan that financially ruins you, this threatens

your ability to house yourself and feed yourself

and your family, which makes it a product safety

issue. The CFPB offers tools to help consumers

make good financial choices, and it investigates

predatory companies that break the law. For

example, the CFPB went after the payday loans

industry because companies loaned money to

people who could not afford to pay them back

and charged high interest rates (of 1,000 percent

in some cases). The CFPB ruled that before loans

are issued, the lender must determine that the

borrower can afford the loan.

This list barely scratches the surface of gov-

ernment agencies tasked with regulating product

safety. For example, the Federal Aviation Adminis-

tration (FAA) oversees the safety of airplanes. The

Occupational Safety and Health Administration

(OSHA) regulates the machinery used in indus-

try and the safety of workplaces. The Environ-

mental Protection Agency (EPA) regulates chem-

icals that are used commercially. After reading

all these acronyms, you might understand why

some people call it an “alphabet soup” of govern-

ment agencies.

Remember your visit to the pharmacy for a flu

shot, when you also picked up some herbal cold

medicine and that string of party lights from the

clearance shelf? Now look at the list of federal

agencies above and find the one that regulates

228 | Voices On The Economy

your flu shot. If you picked the FDA, you’re right.

How about the agency that oversees the safety of

that string of party lights? If you chose the CPSC,

you are correct. Now here’s a slightly complicated

one: which agency oversees your herbal cold

medicine? If you chose the FDA, you’re right—but

you should know that while the FDA tested your

flu shot to make sure it really does protect you

against the flu and does not contain harmful sub-

stances, it did not test your herbal cold medicine

to make sure it does what it claims. When it comes

to dietary supplements—protein powders, omega

3 oils, and calcium, for example—the FDA only

checks that products have the ingredients they say

they have. It doesn’t test them for safety or effec-

tiveness. When you leave the pharmacy and drive

away, which federal agency rates the braking sys-

tem in your car? The NHTSA. Later, when you go

online at home and discover that your bank signed

you up for a credit card that you never requested,

which agency do you call to complain? The CFPB.

At work the next day, you and your coworkers all

start to feel nauseated when the air-conditioning

system is turned on. Which agency checks that

your workplace is safe? OSHA. The point here is

that in the background of your life, whether you

want them to or not, government regulations touch

on nearly every aspect of your daily interactions

with a vast number of products.

Now you have the lay of the land. You know

the definitions and the history of what our nation

has already been doing to address the problem

of product safety. You have what you need to

analyze competing ideas about how to solve this

problem. It’s time to hear the voices of the differ-

ent perspectives on the issue.

Chapter 8: Product Safety | 229

Voices on Product Safety Conservatives, radicals, and liberals all agree that products can cause harm, and they all share the same goal of ensuring

the protection that people want.

But they strongly disagree about

how do that. Should government

agencies partner with firms

and industry to create safety

standards? Should stakeholders

come together in Product Safety

Councils so that everyone has a

voice and a buy-in regarding safety

standards? Should we be

leaving markets alone

so that consumers can vote with their dollars and

firms can respond with the desired safety

standards? It’s time to put on a “mask”

and debate this policy from each of

the perspectives. Please remember

that we are not taking a personal

position on any of these issues.

We’re just channeling the voices of

the perspectives. The policy we’re

going to debate is product safety

regulations, which is a liberal idea.

We change the order of who goes first

each time. For this issue, it’s the

liberal’s turn to go first.

230 | Voices On The Economy

LiberalVoice on Product Safety Think back to the Chevy Corvair story. General Motors knew that when it chose not to put in the anti-sway bar, it would cause a potential problem with rollovers. But to save money, the company decided not to include it, and

instead said that the problem could be fixed by either changing tire pressure or

by purchasing the anti-sway bar as an aftermarket option. But those options were

not communicated well enough to consumers, leading to the deaths of hundreds

of people. If there had been government regula-

tions in place we could have ensured that GM—and

all the car companies—had clear product safety

standards to prevent rollovers. None of those vic-

tims would have had to die senseless deaths, GM

would have been spared expensive lawsuits and

terrible public relations, and the Chevy Corvair

could have become the model for a whole new

line of safe and sporty cars. The issue of car safety

is still very relevant today, and the need for regu-

lation hasn’t gone away. GM was sued in 2015 for

installing faulty switches on some of its cars, which

resulted in 124 deaths. We need to strengthen the

public-private partnership between government

and business so that drivers won’t be harmed in

cars that roll over or catch on fire or crash because

of a design flaw or manufacturing defect.

Let’s consider the market for automobiles.

When there are government regulations, all firms

must install standard safety features such as anti-

lock brakes, airbags, backup cameras, and steel

frames. And all the firms are required to test their

vehicles for safety before their cars go to market.

In figure 8.1 you can see that with the higher costs

to firms of installing more equipment and running

tests, the supply curve shifts to the left, resulting

in higher prices and lower quantities of cars. But

drivers, passengers, and pedestrians all benefit

because cars are safer. And this doesn’t unfairly

burden individual firms, because all car compa-

nies have to comply with the same product safety

standards. Therefore, it keeps competition fair.

With the partnership between government and

industry, we have better guarantees that our prod-

ucts are safe. The whole society benefits because

people get the safety they want and firms can stay

in business and thrive.

Product Safety

Chapter 8: Product Safety | 231

P S

QQ 1

The Automobile Market Q2

Figure 8.1 Liberal View

When you walk through the parking lot at the

grocery store, the backup camera that the gov-

ernment required the automaker to install in my

car could save your life. If our choice is that we

all pay a little more for a safer car or risk dying

or killing someone else in an unsafe car, it’s a

no-brainer. You and I both benefit when every-

one’s car has all the latest safety features. You and

I both benefit when we can trust that the prod-

ucts in our lives won’t injure or kill us. When my

daughter was growing up, every morning I would

pop two slices of bread into the toaster for her

breakfast before school. I don’t know how toast-

ers actually work, but I knew I could trust that

ours was not going to explode, because I checked

the Consumer Product Safety Commission’s web-

site for toaster safety recalls before I purchased it.

I’m grateful to all the government agencies that

ensure the safety of all the products you and I

interact with every day. Do these agencies need

F D

A .g

o v

232 | Voices On The Economy

our tax dollars to fund

their operations, staff, and

research? Yes. Do regula-

tions raise prices for the

products we buy? Yes. Are

our choices limited to only

safe products? Yes. And

guess what: that’s perfectly

okay with me! I want my

government to work for

me to help me and my

family stay safe. Because

consumer protection agen-

cies exist, I don’t have to

worry that I haven’t done

thorough enough research

to be sure every product I

use is safe. I didn’t have to

wonder whether my daughter’s crayons were poi-

sonous, or whether the lenses of her glasses were

made from materials that could shatter into pieces

and blind her, or whether her toothpaste con-

tained cancer-causing chemicals. In fair-market

capitalism, the government hires neutral, trained

experts to do the research and make the results

available so that firms can learn from others’ mis-

takes and successes and improve their designs

and so that consumers are empowered to make

informed choices. Those scientists and research-

ers don’t work for the firms; they work for us.

That means we can count on getting unbiased

results. The government-industry partnership

develops best practices and gives a helping hand

to manufacturers to produce safe products. This is

money well spent. Federal consumer safety agen-

cies and regulations ensure reliably safe products

and accurate information to make good choices.

Products can cause harm to consumers, but,

radicals, the problem is not capitalism. The profit

motive inspires innovation and brings us the

high standard of living and the products that we

want. In democratic socialism firms will end up

making nothing but dull

wooden toys for our chil-

dren because you’ll go

overboard trying to ensure

everyone’s safety. When

Product Safety Councils of

“stakeholders” decide what

firms can produce and

how they can make it, we’ll

all be living in a nightmare

scenario of over-caution.

Toasters can catch fire?

We’d better learn to heat

our bread on sticks over

the flame. Creativity would

be stifled and progress

would be impossible. We’d

still be waiting for cell

phones to be allowed on the market because con-

cerned stakeholders would insist on endless stud-

ies of the safety of cell-phone towers in relation

to the migratory routes of snowy egrets. The few

products that do make it through the maze of the

Hazard Assessment Protocols might be safer, but

we won’t have anything that we actually want. We

want our cell phones and our 3-D printers and

our delicious breakfast burritos that we can throw

in our convenient microwave ovens on the way

out the door. In fair-market capitalism, we can

have it all—the great stuff that we want and safe products—because government is there to ensure

the safe part, and capitalism is there to ensure the

great-stuff part. We don’t have to make a choice

between safety and innovation, and we don’t have

to bog ourselves down with endless committee

meetings. Product Safety Councils won’t work,

because there are too many competing agendas,

so nothing constructive would ever get done. Let’s

face it: not everyone’s opinions and information

are of equal relevance. When we guide capitalism

with a public-private partnership, we have impar-

tial experts who represent everyone’s concerns

In fair-market capitalism,

we can have it all—the

great stuff that we want

and safe products—

because government is

there to ensure the safe

part, and capitalism is

there to ensure the

great-stuff part.

Chapter 8: Product Safety | 233

in the most intelligent and efficient ways to help

firms and consumers make responsible decisions.

This brings us the optimal social welfare.

Conservatives, you say the government should

stay out of it and let the consumer decide what

and what not to buy. So you’re saying you want to

wait until after you drink the orange juice to learn you’ve been poisoned with arsenic? You want to

find out after you stepped into the elevator that the cables are faulty? This nightmare would be

your (extremely short) life if you woke up in a

world with no government regulations. Yes, gov-

ernment intervention brings us higher prices and

higher taxes, but think about the priceless value

of not being injured or killed by unsafe products.

Think of the money you don’t have to shell out

to pay hospital bills, lawyers, workers’ compensa-

tion, sick pay, and funeral expenses. The conser-

vative solution is to say, “Buyer beware!” Sure, we

can make efforts on our own to do research into

products, but none of us has the time to research

every single product we use. We can’t fund long-

term studies on our own. We can’t pay inspec-

tors to make sure packaging is safe. We don’t

have our own labs to test products. This is an

impossible undertaking on our own, but luckily,

we have fair and impartial government agencies

that work for us and do this work. Conservatives,

while you grumble about living in a “nanny state,”

the minute your child gets salmonella poisoning,

you’ll be the first to blame the government for

not doing enough to ensure food safety. You are

lucky to live in a country where the government

has your back. Fair-market capitalism gives us the

best products, the safest products, and the opti-

mal social well-being.

We should support product safety regulations to

ensure the level of protection that people want.

And by investing in more product safety testing

and research, we can strengthen the government’s

ability to avert future tragedies. We can trade a little

red tape for being able to sleep well at night know-

ing that our pillow isn’t poisoning us with off-gas-

ses and the puppy chow isn’t killing our dogs. The

government is in the best position to hold firms

accountable to safety standards. Our government

agencies are the envy of the world. They exist to

help us make informed decisions and to help firms

create the best designs and manufacturing prac-

tices. The public-private partnership brings us safe

cell phones, safe microwave ovens, and safe break-

fast burritos. The helpful hand of government is a

win-win that’s worked for a hundred years. It gives

us the infrastructure for transparency and account-

ability and improves our quality of life.

234 | Voices On The Economy

LiberalFair-Market Capitalism BIG PICTURE Federal consumer safety agencies and regulations ensure reliably safe products and accurate information to make good choices.

POLICY POSITION Products can cause harm, but . . .

" Radical policies to let committees of stakeholders oversee product safety stifle creativity and ingenuity with unproductive bureaucracy.

" Conservative policies to leave it to consumers and firms to ensure the safety of products lead to preventable catastrophes.

SOLUTION Support product safety regulations to ensure the protection people want:

! Strengthen government agencies to protect consumers.

! Hold firms accountable to do the right thing.

P S

QQ 1

The Automobile Market Q2

Product Safety

Chapter 8: Product Safety | 235

Product Safety Talking Points: Liberal 1. Do you trust that the toy you bought doesn’t have lead paint on it? You can trust it because we have prod-

uct safety regulations and government agencies to enforce them. It’s a fact of life that sometimes products can cause harm. But we mitigate the risks through sensible safety standards. We’re fortunate to have a government with the resources and reach to do this work for us. We don’t have to wait for catastrophes to happen to get the level of protection we want.

2. Money can’t buy you happiness, and it can’t give you back your life if you’re killed in a terrible accident because of an unsafe product. That’s why I have no problem paying a little bit more to know a product won’t harm or kill me or my loved ones—or anyone else. When government and business come together to create more safety in our products, the whole society benefits, and we all live happier, healthier, and longer lives.

3. Radicals, you think the profit motive always leads firms to take risks with people’s safety, but that’s misguid- ed thinking. The profit motive gives firms incentives to improve their designs and make safer products. On the other hand, your granola may be safe, but it is also dry and flavorless. Invention requires risk-taking and creative thinking. You will never make the best granola—or the best anything—because your entrepreneurs have no motivation to think outside the dull cardboard box.

4. The democratic socialists have once again come up with a genius idea: groups of people coming together with government to make products safer. Thank you for supporting consumer protection agencies, which we already have! Without boring ourselves to death in endless Product Safety Council meetings, fair-mar- ket capitalism has efficient government agencies with power to oversee and enforce regulations. We can have it all without overthrowing capitalism, which is the best economic system ever created.

5. Conservatives say the free market will naturally give us safe products, but we hear in the news every day about products that harm and even kill people. Maybe over time the market would bring us safe products, but in the meantime, people are getting sick, being maimed, and dying. Some firms will promise anything to get you to buy their product, but they deliberately don’t tell you about the possible negative side effects. Government makes products safer by holding firms accountable to give full disclosures to consumers.

6. Republicans claim that consumer safety regulations do nothing more than create red tape and raise prices. Would you rather have a cheaper product that could make you sick or kill you? Or would you rather have a slightly more expensive but safer product? Republicans are in denial about the true price of those “cheap- er” products: the hospital bills, the missed work because of injuries and illness, and the funeral costs when unsafe products lead to death.

7. Our federal agencies can collect and disseminate the information about product safety that we as individu- als would never be able to gather on our own. It would be impossible for an individual consumer to amass the data necessary to do a comparative analysis for every product used in daily life. Government works for us and gets it done, and we each pay a few tax dollars to get this life-saving service. It’s a great deal. We should be grateful to live in a country where we have consumer protection agencies.

8. In capitalism, firms are motivated to make us what we want, but sometimes their products have design flaws, or the inputs they use are tainted, or the assembly is faulty. Firms get sued, and they lose money and their good reputations. Consumer protection agencies help them by creating safety standards. Because all firms must be accountable, no one suffers from unfair competition. Businesses thrive and consumers stay safe because of government regulations.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

236 | Voices On The Economy

GM made the wrong choice, although it was per-

fectly legal. It wasn’t that the CEO or managers

or stockholders were bad people. It was because

they were stuck in the bad system of capitalism,

which values profit over people. Now just imag-

ine what they felt on that morning when they

opened the newspaper and saw the headline

about a Corvair driver dying in a rollover. This

is what GM’s executives had to go through over

and over again as the injury and death reports

about the Corvair piled up—and all because of

capitalist competition and the pressure for bad. In

order to survive—to feed their kids and pay their

mortgages—they were forced to leave drivers vul-

nerable to harm instead of making the anti-sway

bar standard equipment. Decades later, a differ-

ent group of GM executives was forced to leave

faulty switches in cars they manufactured instead

of replacing them with ones that worked safely.

The loved ones of those who were injured and

killed by a system that values profit over peo-

ple will bear those losses forever. In capitalism

these kinds of tragedies happen all the time and

will continue to happen. Because of the drive for

profit, it’s not a matter of if—it’s a matter of when.

Let’s use the Six-Core Cube of democratic

socialism and drill down through the core point

of participatory governance to see how we get

safe products. Imagine that a new car design is

coming to market, and instead of a top-down

federal agency, we have a Product Safety Council

made up of industry representatives, consumers,

civil and mechanical engineers, safety experts,

and other stakeholders. They have the power to

approve new products and to set safety standards.

When there is a safety issue in the design, mem-

bers share their expertise and concerns so that

firms can fix the flaw before the cars are allowed

on the road. It might be as simple as requiring

a corrective part to be installed on all the cars

RadicalVoice on Product Safety Product Safety T ry to imagine for a moment why GM decided not to include the anti-sway bar as standard equipment on the Corvair, even after the engineer told the CEO and managers that the car could roll over without that part. “Other car companies

aren’t making anti-sway bars standard equipment on their cars,” someone with

decision-making power must have said. “That means if we do it, our competitors’

cars will cost less than ours. People will buy their cheaper cars, which will affect

our bottom line. If we want to stay competitive and survive, we can’t do it.”

Chapter 8: Product Safety | 237

or a redesign to correct the

problem. Product Safety

Councils work because

firms are accountable to

their customers and to

the whole society. There’s

a pressure for good that

leads them to want to fix

problems before products

go to market. In demo-

cratic socialism, firms have

the support they need to

make safe products, and

firms have buy-in to com-

ply with safety standards.

And not only that, but it

saves them from having

to pay for costly recalls,

noncompliance fines, legal

fees, and settlements, and they keep their good

reputations with customers. Participatory gover-

nance is good for consumers, and it’s good for

business. It creates an infrastructure for safety

innovations, and it opens up user-friendly path-

ways to launching new products.

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

Figure 8.2 Radical View

The very worst thing

that I can imagine is that

I would be responsible for

harming another person,

especially if it could have

been avoided. When I was

in my early twenties, I had

a job as a cook. One after-

noon we were prepping

for dinner, and I ques-

tioned whether the fish we

were going to serve that

night was starting to go

bad. The owner told me,

“If we put some marinade

on it, it will probably be

fine.” I wasn’t surprised.

She often dismissed food

safety regulations because

she thought of them as being imposed by bureau-

crats in Washington or the statehouse—people

who’d probably never even worked in the restau-

rant industry. And while we would occasionally

have surprise inspections from the county board

of health to make sure the refrigerators were cold

enough and the kitchen was kept clean, there

was no inspector in the kitchen that day to smell

the fish, so the owner was willing to take the risk

that she wouldn’t get caught. With participatory

governance, this story would have gone down

very differently. The Product Safety Council that

sets the standards is literally made up of we, the

people—including restaurant industry represen-

tatives, public health experts, consumers, suppli-

ers, and other stakeholders. They come together

to decide what kinds of oversight, transparency,

and support for firms to put into place. Safe fish,

safe microwave ovens, and safe toothbrushes are

everyone’s concern. Participatory governance

enables the best ideas to percolate up, which

means consumers and firms have a built-in com-

mitment to instituting those government policies.

Product Safety Councils

work because firms are

accountable to their

customers and to the

whole society. There’s a

pressure for good that

leads them to want to fix

problems before products

go to market.

238 | Voices On The Economy

And because workers own their own firms and

produce things that are used by their families,

friends, and neighbors, and because there’s a

broader social commitment to everyone’s well-be-

ing, there is even more reason to produce the

safest possible products. That’s the beauty of the

invisible synergy in democratic socialism. Par-

ticipatory governance leads to safe products by

harnessing the expertise and buy-in of many

stakeholders to create the most innovative and

practical standards and practices.

As long as we have capitalism, we will always

have unsafe products. We can understand why

this is so when we see the way top-down gover-

nance works. Decision-making is left in the hands

of a few elected officials, so diverse stakeholders

aren’t truly represented and have no say. At the

same time, businesses are under constant pres-

sure to boost their bottom lines

because of capitalist competi-

tion, so they use their influence

to pressure government to do

away with safety regulations or

to create agencies that are simply

façades with no real effective-

ness—even though this means

the safety of the products they

make is compromised. It’s top-

down governance that makes it

possible for government to be

bought off by special interests.

Whether the government does

nothing or genuinely tries to do

something, in capitalism we will

continue to be buried under an

avalanche of unsafe products.

The pernicious effects of the

drive for profit leave us all at

risk of life and limb.

Conservatives, you’re deluded

to think that markets left alone

will adjust themselves and natu-

rally weed out unsafe products. It’s a lie that cap-

italism gives us what we want. No one I know

wants toxic chemicals in their food, or airbags that

don’t deploy, or toasters that explode. Capitalism

keeps on giving us illnesses, public health crises,

injuries, and deaths. That should be proof enough

that your economic system doesn’t work. Let’s be

real about the fact that, in free-market capitalism,

harm is cost-effective up to a carefully calcu-

lated point. We see again and again that firms are

pressured to pay off the fine or settle the lawsuit

rather than change their harmful yet profitable

practices. The capitalist approach, fueled by the

drive for profit and the pressure for bad, is to try

to get away with unsafe practices for as long as

it enhances the bottom line, to admit no wrong-

doing if caught, and to give the least amount to

the victims if forced to pay damages. Free-mar-

R e

u te

rs / G ary C

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Chapter 8: Product Safety | 239

ket capitalism is a free-for-all of “do anything for

profit” behavior on the part of firms. On the other

hand, your plan to end all government involve-

ment in product safety would be the fastest way to transform capitalism into democratic socialism.

When our loved ones end up in the hospital, in

a wheelchair, or at the mortuary from all those

unsafe, free-market-made products, everyone will

wake up from the nightmare of capitalism and

insist we get rid of this destructive system that,

over and over again, creates the visible suffering.

Liberals, your regulations lull us into a false

sense of security that the government has our

backs with its agencies and regulations. But it’s a

lie. Government acts like the vice principal, giving

corporations detention and a slap on the wrist,

but we all know full well that firms will gladly pay

the fines when it’s more profitable for them to be

negligent. That’s business as usual in fair-market

capitalism. When the government tells firms they

have to build cars with steel frames, those firms

will use the cheapest, lowest-grade, least-safe

steel to maximize their profit. This is how the con-

sumer is sacrificed to profit again and again under

capitalism, and there’s no amount of government

oversight that can fix this fatal flaw. You can’t reg-

ulate us out of this mess. It’s like that game called

Whac-A-Mole. When a critter pops out of a hole,

you have to whack it back down with your mal-

let, only to have another critter pop up out of

another hole. You frantically whack away, but it’s

impossible to win. Government plays the role of

the mallet in this impossible game of “Gotcha!”

You might occasionally get lucky and hit one,

but this process will never solve the problem of

unsafe products.

We should replace top-down product safety

regulations with Product Safety Council policies

to bring us the level of safety that people want.

For example, Hazard Assessment Protocols guide

firms to create safer products. When a new product

is designed and manufactured, teams of experts

assist firms with testing and review to make sure

there are no dangerous flaws that could cause

harm. Firms have a clear pathway to bring new

and redesigned products to market safely. When

diverse stakeholders work together, we get the

highest level of safety. Participatory governance is

true representative democracy, and through Prod-

uct Safety Councils we are ensured of policies

that lead firms to establish sensible mechanisms

for accountability and transparency so that we

can have safe cell phones, safe microwaves, and

safe breakfast burritos. In democratic socialism

we can trust that the products in our lives have

been made with our best interests in mind.

240 | Voices On The Economy

RadicalDemocratic Socialism BIG PICTURE Participatory governance ensures that we have safe products by harnessing the expertise and buy-in of many stakeholders to create the most innovative and practical standards and practices.

POLICY POSITION Products can cause harm, but . . .

" Conservative policies leave consumers vulnerable to harm because in free-market capitalism unsafe products are inevitable and even acceptable when cost-effective.

" Liberal policies lull us into a false sense of security because capitalism will always lead firms to value profit over the safety of people.

SOLUTION Replace top-down product safety regulations with Product Safety Council policies to bring us the level of protection that people want:

! Establish Hazard Assessment Protocols.

! Firms have buy-in to produce safe products.

Product Safety

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

Chapter 8: Product Safety | 241

Product Safety Talking Points: Radical 1. We all want to sleep peacefully at night knowing the products in our lives aren’t making us sick or harming

our loved ones. And we all want to sleep peacefully at night knowing that the products we make aren’t causing harm. We can have this when workers own their own firms and produce things that are used by their families, friends, and neighbors. We are safe when our economic system values the well-being of all.

2. Product Safety Councils make sense because they bring together the people who know something about the product and about safety—experts from industry, firms, consumer groups, and other stakeholders. They decide what policies and practices we need so we can be sure our breakfast burritos aren’t poison- ing us and our cell phones won’t explode. With participatory governance, good ideas percolate up and become our nation’s policies, so we all have buy-in. This is why it works.

3. The conservative idea to leave it alone really leaves the fox in charge of the hen house. It won’t make us safer; it will do the opposite—because in free-market capitalism, profit is the incentive for firms to act. They cheap out and cut corners on safety in order to boost their bottom lines and beat out the competition. Again and again we hear about firms who did the math and concluded that harming their customers was cost-effective up to a carefully calculated point.

4. Republicans, you say the free market gives us what we want, but the last time I checked, no one wants toxic chemicals in their food, or airbags that kill front-seat passengers, or toys coated in lead paint. Your simple-minded idea that the market will naturally self-adjust to give us the safety we want is incredibly dan- gerous. How many will first have to die? When it’s in our power to prevent tragedies, we absolutely should.

5. Have you heard the expression, “When the cat is away, the mice will play”? When it comes to product safety in fair-market capitalism, firms are constantly pressured to cut corners, buy off politicians, and get regulations eased to maximize their profit. Government agencies don’t keep us safe. So let’s stop wasting our tax dollars on a bulky bureaucratic system, and let’s stop pretending a Band-Aid is a cure.

6. Liberals, face facts: your alphabet soup of consumer protection agencies hasn’t solved the problem of un- safe products, and it never will. Government acts like the vice principal, giving corporations detention and a slap on the wrist, but those firms will gladly pay the fines and continue making unsafe products when it brings them more profit. That’s business as usual in capitalism. The Democrats’ idea of government regu- lation will never ensure our safety because it’s a top-down solution in a profit-driven system.

7. Product Safety Councils’ Hazard Assessment Protocols are a win-win for firms and for society because we get the safety we want, and firms get the support they need when they launch new and redesigned prod- ucts. Firms have a seat at the table, and so do other stakeholders. Government takes on the role of conve- ner, facilitator, and clearinghouse for useful information. Participatory governance in democratic socialism harnesses the ideas of diverse experts to help businesses produce with society’s best interests in mind.

8. I’m tired of worrying that my phone is giving me a brain tumor or that the airbag in my car might kill me. I want to live in a society where I can trust that the products I use won’t harm me. Is that too much to ask? Apparently, it is—in capitalism! There’s only one way to really be sure firms are committed to making us the safest possible products, and that’s through democratic socialism. Firms are pressured to do the right thing because while profit is important to any business, it’s never more important than people’s well-being.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

242 | Voices On The Economy

showed it wasn’t. He crucified GM and tarnished

its reputation, but in fact GM did the right thing.

Not only did the firm make the anti-sway bar

available, but it also let customers know that they

could also prevent rollovers by simply adjusting

the tire pressure—a fix that didn’t require them

to purchase anything. GM respected its custom-

ers by giving them the choice of what safety fea-

tures to have in their cars. Free-market capital-

ism brings us the level of safety we want in our

cars, our toasters, and all our products because

firms are highly motivated to make profit. Their

long-term survival depends on a solid reputation

with consumers. There’s always going to be dan-

ger with cars, as with any product, and it’s up

to consumers to do the research and understand

the risks and options. In our current “nanny state”

of government interference, the problem of prod-

uct safety is made worse because the mountain

of government agencies and regulations gives

consumers the false impression that they don’t

have to do their own research. Free-market cap-

italism works because everyone is self-interested

and therefore takes responsibility for the level of

safety they want.

Let’s consider the market for automobiles. If

there’s a safety issue with rollovers, some people

will decide not to buy that car. As you can see in

figure 8.3, when people don’t buy it (decrease in

preference), the demand curve shifts to the left,

and we get fewer cars. This is simple stuff—you

already know the basics of the law of supply and

the law of demand. But look at what happened:

we just solved the problem. By leaving it alone,

the market adjusted and brought us fewer unsafe

cars. Guided by the invisible hand—meaning no

individual or committee or government agency

had to do a thing—the free market self-ad-

justed to bring us safer products. If a product

is unsafe, and if safety is important to you, then

ConservativeVoice on Product Safety Product Safety B ack in 1960, people were excited to drive that gorgeous Chevy Corvair. The automaker had come up with a sporty new design with innovative features to please its customers. The majority of Corvair drivers had no problems with their

cars. And when the company learned about the rollover issue, it manufactured an

aftermarket part and then allowed customers to make up their own minds about

whether to buy it. Ralph Nader got it all wrong. He accused GM of corporate

negligence and dubbed the Corvair the “unsafest car in America,” but later tests

Chapter 8: Product Safety | 243

don’t buy that product.

Less demand means the

price goes down, and that

signals firms to produce

something else. They say,

“Gosh, people don’t want

our unsafe cars. They must

want a better suspension

system.” Or “They must

want water bottles that

don’t have BPA.” Or “They

must want pajamas that

aren’t flammable.” Because

they are in business to

make money, firms will

change their designs and

production protocols to

make us the safe products

we want. All we have to do

is leave it alone, and we

get what we want.

P S

QQ 1

The Automobile Market Q2

Figure 8.3 Conservative View

Before I turned eigh-

teen, my parents made

the decisions about what I

could buy. I couldn’t wait

to become an adult—the

captain of my own ship,

making my own pur-

chasing choices. I heard

the expression “The con-

sumer is king,” and I was

really looking forward to

feeling that way. What a

shocker to find out that

consumer sovereignty is a

lie. I became an adult and

discovered there are gov-

ernment agencies hovering

over me like an overpro-

tective nanny telling me

what I can and cannot buy.

My car has to have side

airbags, and I’m forced to

pay for them even if I don’t

want them. My breakfast cereal box has to dis-

close all the nutritional values of the ingredients,

and we consumers are paying for that whether

we want this information or not. But before I

purchase something new, I always look up the

reviews first. Should I stay at that hotel? Should I

buy that treadmill? Should I try the tacos at that

new Mexican restaurant? Research on products

is at our fingertips, with countless websites ded-

icated to reviews. As far back as 1930, you could

find unbiased research on products in Consumer Reports and elsewhere. If I want to know how much niacin is in a serving of my cereal, I can go

online and find out. I don’t need the government

to micromanage my information. What I do need

is lower taxes and lower prices. When we fire the

nanny, we get both because firms aren’t forced

to sell us features we don’t want. Am I worried

that I won’t be able to find a safe toaster or a safe

The fact is that we don’t

need any committee,

council, agency, or long

lists of regulations to

represent the needs and

desires of consumers.

Those wants and

needs are already

communicated through

the choices we make

every day when we vote

with our wallets.

244 | Voices On The Economy

power drill? No! Firms want to make money, and

if a safe drill is what I want, that’s what they’ll pro-

duce. We don’t need to regulate this simple trans-

action. We need to respect consumer sovereignty

and the profit motive that guides firms to make us

all better off. Markets self-regulate to bring us the

level of safety we want in products when we are

free to choose for ourselves.

The problem of products being potentially harm-

ful to consumers is real. From prehistoric times

when humans hunted mastodons with pointy

spears, to the colonial days when people danger-

ously galloped on horseback to get from town to

town, to this morning when you made a cup of cof-

fee in your kitchen, people have always been at risk

of harm from products. Here’s a news flash: driving

down the highway in a metal box at seventy miles

per hour is dangerous! Danger is a fact of life.

Liberals, regulatory agencies are not the answer

to unsafe products, and in fact your policies end

up making products even less safe. Before the

FDA required pharmacies to use child-resistant

pill bottles, adults were careful to put medications

out of reach. Then the government said all pill

bottles had to have child-safety locks. What hap-

pened? A percentage of children found ways to

get into them—those caps aren’t foolproof—but

adults felt a false sense of security and carelessly

left pill bottles in their reach. The result was more

medicine-related poisonings. Likewise, when the

government required drivers to wear seat belts,

suddenly people had a false sense of security and

so they drove more recklessly, which led to more

tragedy. When we rely on the nanny to tell us it’s

safe to cross the street, we don’t take responsibility

to learn to look both ways to make sure we won’t

get hit by a bus. On top of that, all those govern-

ment agencies limit innovation and choice—and

cost us a bundle along the way when our taxes go

up and prices for products skyrocket. If I’m dying

Chapter 8: Product Safety | 245

and there’s an experimental drug that could give

me a sliver of a chance to live, I should be allowed

to weigh the risks and decide whether to take it.

But your regulations require pharmaceutical com-

panies to get the FDA’s green light before I can

take it. How ridiculous is it that the FDA would

deny me the chance to live because the drug might

kill me? Risk is part of innovation, and the govern-

ment shouldn’t hold us back from being explorers,

experimenters, and entrepreneurs if that’s what

we choose. Had the Federal Aviation Administra-

tion been around when the Wright brothers were

experimenting with flight, they would never have

been allowed to get off the ground.

Radicals, your solution to solicit everyone’s

input to ensure the safety of products is the fun-

damental premise of free-market capitalism. Just

think of price signals as being the most efficient

and effective Product Safety Council, where each

and every consumer expresses their needs and

concerns about the level of safety they want by

voting with their wallets. That’s how we communi-

cate to firms the level of safety to give us. Everyone

already has a say through price signals. And the

beauty is that we can achieve this without your

time-wasting committee meetings. Your idea of

participatory governance is even worse than the

liberal nanny state because not only will we be left

with fewer choices, higher prices, and higher taxes,

but we’ll also lose the profit motive, which would

at least salvage our cell phones, our 3-D printers,

and our convenient and delicious breakfast burri-

tos. It makes no sense to strip away the engine of

innovation and progress and trade it for a return

trip to the dark ages. Under democratic socialism,

the only thing we’ll be able to buy are dull wooden

toys, and then your council will decide we can’t

even have those because some “stakeholder” is

worried about the possibility of splinters so then

more Hazard Assessment Protocols would be cre-

ated. Your way is the road to poverty for all.

We should reject product safety regulations so

that the free market can bring us the level of pro-

tection people want. Consumer demand drives

the market. People do the research and decide

what products to buy. If they want more infor-

mation, then suppliers will start supplying that

through new industries, or firms will see the ben-

efits of making available more information about

safety so they can stay competitive. Firms will

voluntarily invest in the testing that’s needed to

ensure safer products because they follow the

profit motive, and safe products are good for

business. The fact is that we don’t need any com-

mittee, council, agency, or long list of regulations

to represent the needs and desires of consum-

ers. Those wants and needs are already commu-

nicated through the choices we make every day

when we decide what to buy and what not to

buy. We get safe cell phones, safe microwaves,

and safe breakfast burritos, without higher prices

and soaring taxes. When we rid society of sti-

fling government interference, it’s a win-win for

firms and for society because we get innovative

products cheaper, faster—and safer, if that’s what

we want.

246 | Voices On The Economy

ConservativeFree-Market Capitalism BIG PICTURE Markets self-regulate to bring us the level of safety we want in products when we are free to choose for ourselves.

POLICY POSITION Products can cause harm to consumers, but . . .

" Liberal policies result in a false sense of security, fewer choices, squelched innovation, higher taxes, and higher prices.

" Radical policies are bad for business—wildly inefficient, and kill the drive for progress.

SOLUTION Reject product safety regulations so that the free market brings us the level of protection people want:

! Firms follow the profit motive.

! Consumer demand determines safety of goods and services.

P S

QQ 1

The Automobile Market Q2

Product Safety

Chapter 8: Product Safety | 247

Product Safety Talking Points: Conservative 1. The beauty of free-market capitalism is that all we have to do is leave markets alone and unsafe products

will no longer be produced. Consumers will vote with their dollars. They won’t buy the product, and then firms will either change the product to make it safe or they’ll make something else or the firm will go bel- ly-up. In any case, the unsafe product will no longer be a problem.

2. When the government comes in like an overbearing parent and insists that we all have to have side airbags in our cars or we all have to be told how much niacin is in a serving of our breakfast cereal, we lose. We pay higher prices and higher taxes to fund all those government bureaucrats—and to top it off, we end up with fewer choices. It’s time to fire the nannies. It’s time to trust ourselves to make the best decisions for our own safety.

3. You liberals think that the FDA and OSHA and all those other government agencies are keeping us safe, but they’re doing the opposite by giving consumers a false sense of security. You require people to wear seat belts, and then people drive faster because they feel invulnerable, which leads to more accidents. And all the red tape generated by those agencies keeps useful products from reaching the market because it takes so long to navigate the maze of safety regulations.

4. I don’t need the Democrats’ regulations to know that I shouldn’t give my baby something sharp to play with or that I should research something potentially harmful before I use it. Firms will give us the informa- tion we need and want because they want us to buy their products. They don’t need the government to tell them to do this. Their own self-interest will lead them to be transparent and accountable, bringing us the product safety we want.

5. The radical solution of a Product Safety Council, with its Hazard Assessment Protocols, is an even worse idea than government agencies. In democratic socialism, firms are subjected to decision by committee at every turn—committees of people who have competing agendas—so nothing will ever get approved. In the meantime, taxes will skyrocket, prices will soar. We’ll all end up sitting in the dark, huddled miserably around our fires, toasting overpriced bread on sticks.

6. Radicals, you want to throw out the very thing that has given you a safe, convenient, and comfortable lifestyle. We won’t get that in democratic socialism, because there’s no incentive to work hard or innovate because there is no profit motive. When you go home and brush your teeth tonight, your mouth won’t be minty fresh because of toothpaste. It will be minty fresh and cavity-free because of capitalism . . . you’re welcome!

7. Government safety regulations hurt businesses and consumers because they lead to higher prices, more red tape, and higher taxes. Consumers pay the price every year on tax day and every time they make a purchase. Firms pay the price because it slows down innovation and drives up the costs of production. All those regu- latory agencies are completely unnecessary. When we leave the market alone, we’ll get the level of product safety we want because people won’t buy products they don’t want. It’s that simple.

8. We can solve the problem of product safety by getting government out of the way and letting the market solve itself. Consumers can make their own decisions, and if more research is needed, then a market for independent, unbiased product safety information will emerge. This is the beauty of free-market capital- ism. So instead of overthinking this, let’s dig out from under the suffocating avalanche of product safety regulations. Then we consumers will be in charge of our own lives.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

248 | Voices On The Economy

The Shared Outcome

All three perspectives share the same goal to

create the level of product safety that people

want. The desire to be safe and not cause harm

to others through products is a fundamental issue

of survival every single day. This issue will never

go away. It’s been around forever, and it will

continue to be relevant until the end of human

civilization. Now you understand the issue and

the different points of view. You’re ready to be

part of the conversation.

Chapter 8: Product Safety | 249

Activity: Breakfast with the Family and Re-vote 1. Breakfast with the Family

Get together with friends, classmates, or family members and share the talking points and perspective

summaries with them. Then assign roles to three people—one for each perspective. Now pretend

you’re having breakfast as a family, and you’re all reading the paper and having a discussion about the

cartoon below from your respective perspectives. Breakfast with the family is like a debate, only you’re

all focused on the same cartoon. (By the way, you could do this with an article or an op-ed as well.)

The other difference is that unlike a debate, you already know one another on a personal level, so that

changes the vibe. If you have more than three people, make teams and swap players out every few

minutes. The game is to try to convince the other people that you’re right and they’re wrong. See if you

can articulate a perspective that isn’t the one you (currently) agree with. Make sure you argue not only

why your position is right but also why both of the other perspectives are misguided. When you do this,

you will become a more persuasive person as a result, and your voice will carry more weight. I predict

you’re going to enjoy this game, and if you first try it in the classroom, role playing as different family

members, you’re going to want to try it again with your own friends and family.

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250 | Voices On The Economy

Chapter 8: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Product safety addresses the possibility of goods and services causing harm to consumers. What are product safety standards?

A. The predetermined level of safety that products must meet before firms are allowed to bring them to market.

B. A set of international safety rules that predetermine which countries can produce which products.

C. The safety offered for consumers of only cars, electrical equipment, food, and drugs. D. A and C only.

2. Match the product safety term (left column) to its definition (right column). A. Compliance i. Build safety features into the initial design B. Quality Control ii. Take the product off the market C. Prevention iii. Test samples of products for safety D. Product Recall iv. Follow product safety standards as recommended or required

3. Humans have a long and interesting history of managing risk from products, dating back to Hammurabi’s Code and the Bible. Please choose the ways that consumers can manage risk.

A. Government agency regulations B. Voluntary product recalls C. Boycotts, public awareness campaigns, and lawsuits D. Trade-group certifications, standards, and compliance enforcement

2. Revisit Your VOTE Ballot

After you’ve made a passionate case for a perspective—and hopefully heard your friends, classmates,

and family members make their passionate cases for other perspectives—please go back to the VOTE

Ballot and vote again on Product Safety. Are you more certain than ever that your original position

best represents your opinion? Have you shifted toward a different perspective? Make sure to fill out

the “Why?” section. The VOTE Program is all about helping you think critically about the issues and

have informed opinions.

Chapter 8: Product Safety | 251

4. Let’s say you have a serious coffee habit. You drink five cups in the morning, followed by five cups at noon, and then another three at night. Which government agency is tasked with ensuring that the coffee you drink isn’t laced with toxic substances?

A. NHTSA B. FDA C. OSHA D. CPSC

5. Liberals believe we won’t be ensured safe products if we give up the economic system of __________, as radicals want, or if we follow the conservative idea of leaving it to consumers to stop demanding unsafe products, a process called __________.

A. capitalism; stagnation B. democratic socialism; incentives driver C. state-owned capitalism; hand-in-hand D. capitalism; consumer sovereignty

6. According to radicals, the main reason that consumer safety violations are inevitable in capitalism is:

A. Class process B. Capitalist competition C. Workplace exploitation D. Labor theory of value

7. Which of the following do conservatives claim is the cost of government-imposed product safety regulations? Choose all that apply.

A. Fewer choices B. Higher prices C. Purchase of private information services D. Higher taxes

252 | Voices On The Economy

8. Please choose the correct liberal interpretation of this automobile market graph:

A. Product safety regulations will result in firms being less willing to produce unsafe cars because of the lower price.

B. Product safety regulations will result in less demand for unsafe cars by shifting the demand curve to the left.

C. Product safety regulations will shift the supply curve to the left, resulting in fewer unsafe cars.

D. Product safety regulations will result in higher equilibrium prices, but the equilibrium quantity of cars will increase as well.

9. Please choose the correct radical interpretation of this Six- Core Cube:

A. The role of elected officials is to communicate the findings and recommendations of the Product Safety Councils and do their best to bring those policies to fruition.

B. The role of elected officials is to convene and facilitate advisory groups in the form of Product Safety Councils, and then use their best judgment to make final decisions regarding policy.

C. The role of elected officials is to meet with other elected officials in legislative forums (local, state, federal) and represent their best determination of their constituents’ needs.

D. The role of elected officials is to get into office and do whatever is necessary to promote their own personal interests.

10. Please choose the correct conservative interpretation of this automobile market graph.

A. If people don’t want unsafe cars, the supply curve will shift to the right, resulting in lower equilibrium prices and lower equilibrium quantities of unsafe products.

B. If people don’t want unsafe cars, the demand curve will shift to the left, resulting in lower equilibrium prices and lower equilibrium quantities of unsafe products.

C. If people don’t want unsafe cars, the resulting shortage at the original price will push prices down, making both firms and consumers unwilling to engage in trade.

D. If people don’t want unsafe cars, the demand curve will shift to the left, resulting in lower quantities of unsafe products, but at a higher price.

P S

QQ 1

The Automobile Market Q2

SocialSafeguards

CooperativeOwnership Participatory Governance

The Six-C ore Cube

of Demo cratic So

cialism

P S

QQ 1

The Automobile Market Q2

Chapter 8: Product Safety | 253

Chapter 8: Key Terms Compliance Consumer protection Consumer safety Consumer sovereignty

Negligent Prevention Product recall Product safety

Quality control Safe product

Answers

1. A 2. A – iv, B – iii, C – i, D – ii 3. C 4. B 5. D 6. B 7. A, B, & D 8. C 9. A 10. B

ch9

9Tools to Move Ahead You might have heard this classic example of a moral dilemma. A man sits at his wife’s bedside, feeling helpless because he can’t save her from a wasting illness. There is a new

medicine that could cure her, but the man doesn’t

have $2,000 to pay for it. He tried to borrow the

money from his neighbors and friends, but they

had little to spare. He begged the bank officer to

approve his loan application, but it was denied

because he had no collateral. He pawned his

pocket watch and his wife’s wedding ring, which

were their only valuables, and for weeks he fran-

tically worked extra shifts at his job until he was

numb with weariness, but he is still short more

than $1,000. The doctor has just told him that if

his wife doesn’t get the medicine on this very

night, she will surely

be gone by morning.

Desperate, he races

back to the pharmacy

just as the pharmacist

is locking up for the

night. He begs the

man to accept half

the payment now and

swears he will pay the

balance plus whatever

interest rate the phar-

macist names if only he can have the medicine

now to save her life. The pharmacist shakes his

head sympathetically and says it simply isn’t pos-

sible. So the man starts to stumble home, numb

with grief, to say a final farewell to his beloved

wife. But then he stops and looks back at the

shop. All he would have to do is break a window

and the cure could be in his hands. She wouldn’t

have to die. Would it be wrong for him to steal

the medicine to save his wife’s life?

How do we know what’s the right thing to do

and what’s the wrong thing to do in any given

situation? This is a question that has been asked

for millennia across every culture by leaders, edu-

cators, philosophers, religious scholars, psychol-

ogists, and others. It’s an important question for

the VOTE Program

because we are

asking you to form

reasoned opinions

about what policies

we should adopt to

address economic

problems. What do

we and don’t we

fund as a society?

What do we and

don’t we regulate?

256 | Voices On The Economy

What do we and don’t we prioritize as a nation?

Some of the most bitter fights in our country

revolve around disagreements about right and

wrong. Is it right or wrong to fund programs for

people in poverty? Is it right or wrong to tax some

people at a higher rate than other people? Is it

right or wrong to promote international trade?

At different times in our history, we could pas-

sionately but respectfully disagree about how

to fix our nation’s economic problems. These

days, we treat those who think differently as the

“enemy.” We are less and less willing to listen

with an open mind to different points of view and

to consider diverse perspectives. We are less will-

ing to see others as ideological opponents rather

than as bitter enemies. We often find ourselves

thinking, saying, or just assuming that those ideas

we disagree with—or the person who disagrees

with us—are unethical (lacking integrity, honor,

or decency). We may even believe that ideas

for economic solutions that differ from ours are

dangerous and the people who advocate them

should be silenced.

Should the man steal the medicine for his wife?

There is no universally accepted answer to this

question, even among moral philosophers. One

person might believe stealing is always wrong.

Another might believe it’s justified if it will save a

life. Another might think it would be okay for him

to steal it if he saves her life and then turns him-

self in to the police to face the consequences. But

what if stealing the medicine means someone else

who could have paid for it dies because there’s a

limited supply? Does the wife have a basic right

to life-saving medicine as a human being? Does

the pharmacist, who owns the medicine, have the

right to charge any amount for it?

Hopefully, you won’t ever be faced with this

Chapter 9: Tools to Move Ahead | 257

particular dilemma, but the

point of this hypothetical

scenario is to show you

that there are many ways

people think about right

and wrong and poten-

tially many gray areas that

require nuanced think-

ing. This is relevant to the

VOTE Program because

when you hear the differ-

ent policy ideas of the lib-

erals, conservatives, and

radicals, you might reflex-

ively shut out or shout

down the ones that don’t

line up with your way of

thinking. But that’s not

going to be helpful. While

the goal here is not to get you to agree with those

ideas, it is to help you understand what other

people have to say and why they see the world

the way they do.

Facts or Value Judgments?

There is a subtext running beneath the surface

of all the disagreements we’ve been hearing

up to this point in the VOTE Program—the

arguments about theoretical differences, the

competing stereotypes, and the different policy

ideas each perspective proposes. When we’ve

asked you to practice the voices of the various

perspectives to really try to understand what the

others are saying, this subtext likely tripped you

up at times. So let’s bring it to the surface now

and hold it up to the light and figure out how to

keep it from getting in the way of constructive

discussions about our urgent economic issues.

What is it? It’s our fundamental disagreement

over “truth” and “facts.”

In chapter 2, we touched on the differences

between essentialist and non-essentialist think-

ing. If you recall, essential-

ists believe there is a fixed

truth to everything that

can be known through our

rational minds and through

empirical evidence. Essen-

tialist economists—and

they can be from any per-

spective—believe that the-

ory building (assumptions,

model, conclusions) is a

science that gives us facts,

which are objective truths.

This fact-based approach

to determining “what is”

is called positive econom-

ics. For example, a positive

statement would be “Eight

percent of Americans go to

bed hungry every night.” However, what to do

to address that fact (the policy) is a whole other

realm of thinking that relies on value judgments

to determine “what should be.” This is called nor-

mative economics. So to an essentialist, a fact is a

fact, but policies are up for debate.

On the other hand, if you recall, non-essen- tialists —and they, too, can be from any perspec-

tive—reject positive economics because they don’t

believe in objective truth. They believe that every-

thing we think is shaped by context. That means

the ideas behind our assumptions, model, con-

clusions, and policies will change depending on

who looks at them, how they are looked at, and

when they are looked at, among other factors. So

for a non-essentialist, everything—including how

we measure hunger—is subjective. It depends on

when it was measured, how people defined hun-

ger, how data was collected, the questions that

were and were not asked, and so forth. Therefore,

to a non-essentialist, there is no positive econom-

ics. Everything is normative.

Knowing about positive and normative anal-

During a heated debate, when it starts to feel as if you’re talking apples and oranges, knowing about positive and normative

analyses might help you discover better ways to express your point of

view in such a way that the other person can

hear you.

258 | Voices On The Economy

yses will help you assess where you’re coming

from and where the other person is coming from

during a heated debate. It’s another layer to the

conversation that is now explicit for you. Are

they frustrated with you because you’re saying

this thing is a fact? Are you frustrated with them

because they’re not accepting what is, to you, so

obviously subjective? When it starts to feel as if

you’re talking apples and oranges—“what is” ver-

sus “what should be”—remember this point about

essentialism and non-essentialism. It might help

you discover better ways to express your point

of view so that the other person can understand

where you’re coming from.

Before we explore the issues of Livelihood and

Housing in the following two chapters, let’s con-

sider the basic rules of civil discourse, which are

strategies for having constructive and respectful

conversations even when you’re challenged by

ideas you vehemently disagree with and can’t

support in any way. And then we’ll explore some

new radical and conventional tools to help you

analyze the upcoming issues.

Civil Discourse

We’ve already established that radicals, liberals,

and conservatives all want the same general

outcome for each issue. Even so, we come into

this conversation—and into the VOTE Program—

with certain biases against the other perspectives,

and it’s not useful to pretend we don’t have them.

It’s a challenge to engage in civil discourse— respectful conversations intended to enhance

understanding—instead of retreating or attacking

out of fear, moral outrage, or self-righteousness.

Those reactions will shut down any possibility of

having the important conversations we need to

be having to move our nation forward. The good

news is that many have walked this path before

us and found constructive ways to engage in

civil discourse. We can take inspiration from the

friendship between John Adams, the second U.S.

president, and Thomas Jefferson, who followed

him to the White House as the third U.S. president.

They met at the start of the Revolutionary War and

worked together for American independence, but

they developed opposite points of view about the

role of government. Their ability to be civil toward

each other despite their strongly held opinions

was tested when they ran against each other for

president. But—and here’s the inspiring part—

although for a time they were bitter opponents,

they reconciled later in life and started writing

each other letters again and shared their ideas

about philosophy, religion, and politics. They still

disagreed, but they also found ways to appreciate

and learn from each other’s point of view. They

discovered there were some topics about which

they actually agreed. Adams and Jefferson

had their flaws—just like we all do—but they

demonstrated that it’s possible even for longtime

ideological foes to find not just common ground

but also appreciation for those who advocate for

different perspectives. By a strange coincidence,

they both died on July 4, 1826.

Chapter 9: Tools to Move Ahead | 259

If you believe in democracy, then please con-

sider that diversity of ideas is a gift—not a threat.

If we lose the ability to stay committed to democ-

racy when conversations become contentious,

we could crash the whole system. In the span of

human history, we’ve had democracy for a very

short time and, in some countries, only intermit-

tently. And there’s no assurance that it will endure

for us. We think our nation is stable, but all

nations are actually quite fragile. History shows

us that they rise and fall.

What’s so special about diversity? We might

secretly believe that life would be a whole lot

easier if everyone just thought the same as we

do. But it would be a disaster for humanity, just

as it would be a disaster in nature if there was no

diversity. Scientists say variety in ecosystems is the

key to ensuring survival. Imagine if all the trees in

a forest were the same species, and a beetle that

devoured that kind of tree appeared one day. The

whole forest would be wiped out. But a forest

made up of many types of trees would survive

not just the beetle infestation but also droughts,

fires, fungi, and more. In much the same way,

we humans need a diversity of ideas to survive.

We need different ways of thinking to intermin-

gle and recombine to bring us new resilience,

strength, and wisdom. When a seed of an idea

from someone else drifts into your mind, it could

potentially blossom into a solution that the world

needs. You might be the one to see a whole new

approach to collaborate or compromise, or you

might be the one to find a brilliant new way to

move us forward as a nation.

260 | Voices On The Economy

Guideline 1: Listen Thoughtfully. When you automatically want to dismiss what the other

person is saying, wait! Try to be mindful. Listen

more carefully and even ask them to please repeat

what they just said so you can really take it in. Lis-

ten and consider their argument before you react

or respond. To make sure you’ve really heard, try

to reflect back what they’ve said and ask, “Did

I understand you correctly?” That way the other

person will feel heard and respected. You’re not

saying you agree with their assessment of the

issue or their policy idea; you’re saying you’re

trying to understand how they see it. By slowing

down and listening thoughtfully, you can man-

age your own emotional reactions and be a better

listener. And here’s one more tip: your body lan-

guage can speak volumes about your openness

to what a person is saying. For example, crossed

arms can sometimes indicate to people that you

feel closed or even skeptical. Tapping your foot

or bouncing your knee indicates impatience. Nod-

ding indicates you’re hearing them, while shaking

your head indicates you’re rejecting what you’re

hearing.

Guideline 2: Critique Issues—Not Individ- uals. Don’t make it personal. Focus on the issues rather than on the individual during a debate or

difficult conversation. Otherwise, you may run the

risk of discounting some really good ideas because

of your feelings, assumptions, or stereotypes about

the messenger rather than the message itself. You

don’t have to like other people to give their ideas a

fair hearing, even if their ideas for economic solu-

tions seem wrongheaded to you.

Guideline 3: Use Your Biofeedback. Be mindful of your physical and emotional reactions

during difficult conversations. When you start to

feel defensive, take a deep breath and tune in

to where you’re feeling the stress or tension in

your body. Take another breath and try to relax. It

can be emotionally draining or triggering to hear

ideas that are diametrically opposed to your own.

You might even feel personally attacked. As you

breathe, remind yourself that, while the experience

may be unpleasant, it’s important to find common

ground with others. Being mindful of your reac-

tions before you respond makes it more likely

that the conversation will stay civil rather than

devolving into a shouting match or shutting down

before you’ve come to any mutual understanding.

Guideline 4: Remember that Empathy Helps. When it’s your turn to share your views, remember that others may feel personally attacked

by your ideas, just as you felt when they shared

their views. Because you know how it feels, try

to let yourself empathize and be kind. You can

say aloud or just think to yourself, “I understand

this may be hard to hear.” Kindness and empathy

are great bridge builders. They can remind you

and your ideological opponents that your shared

Six Guidelines for Civil Discourse I like to use the word human when I talk about people. “You’re a wonderful human,” I’ll tell a student or my cousin or the IT person who helps me with my computer. I do this because I like to be reminded that no matter how far apart we are in our views about the way the world should be, there

is so much more we have in common as human beings. If an alien spaceship were to appear in the

sky right now, and we were suddenly facing an invasion by extraterrestrials, I predict that it wouldn’t

matter what labels we used for ourselves—conservatives, radicals, or liberals. We would immediately

recognize that first and foremost we are humans, and we’re in it together. These guidelines for engaging

in civil discourse are really about helping you acknowledge and respect the humanity of other people

even while you’re feeling very unhappy with their ideas.

Chapter 9: Tools to Move Ahead | 261

Exercise 9: Keep It Civil Choose the guideline that will be most helpful to create civil discourse in each of the following

situations. The Answer Key is at the end of this chapter.

1. As you listen to your opponent describe their ideas, you start to grind your teeth in frustration.

2. Before the conversation starts, you think, “I hate the way my opponent talks and dresses.”

3. You tune out when the other person starts to talk and focus on what you plan to say when it’s your turn.

4. Even though you felt upset when your opponent was talking, you can’t understand why they are so

upset hearing your ideas.

5. Before they even finish, you jump to conclusions and assume you know what they are going to

say—and you reject it out of hand.

6. To drive home your point, you shout and shake your fist at your opponent.

humanity links you to one another, even if your

ideas clash with theirs.

Guideline 5: Aim for Peaceful Persuasion. Please be a passionate advocate, but make sure

you’re not threatening or abusive—emotionally,

physically, or verbally. Don’t be a bully. It won’t

help you convert anyone to your way of thinking,

and it will just make the rift wider. Instead, chal-

lenge others’ ideas by using intelligent arguments

backed by evidence from trustworthy sources

(not social media memes). So, for example, you

wouldn’t want to say, “Anyone who believes that

really should have some sense whipped into

them.” Instead, you’d want to say, “In the 1980s

we tried that policy and what resulted was prob-

lematic. Let’s look at the data.”

Guideline 6: Be Open-Minded. It’s useful to identify the places where you and your opponents

agree and disagree. You may discover areas where

you can find common ground, compromise, gen-

erate new ideas, become more certain of your own

ideas, or change your mind. Remember that the

point of civil discourse isn’t to be right or to win;

the point is to be heard respectfully and have your

ideas be understood, and to hear others respect-

fully and understand where they are coming from.

The point of an open mind is to grow wiser.

These six guidelines for civil discourse may not

seem that complicated, but they’re going to take

some practice, so please be patient with yourself

and with others. One last tip for you: when you’re

done with the conversation, try to thank the oth-

ers who participated for sharing their ideas and

for listening to yours. Remember, if it was stressful

or unpleasant or heated for you, then it probably

was for them, too. Congratulate one another on

getting through it, and remind one another that

debate and discourse can get easier with practice.

262 | Voices On The Economy

Conventional Theory Tools

In this section we’re going to look at the difference

between input markets and output markets and

learn about price controls and elasticity. The

policy debates about livelihood and housing are

based on different ways liberals and conservatives

interpret the information that emerges when these

ideas are applied.

Input Markets vs. Output Markets So far in this book we’ve only talked about

output markets, which are the markets for final goods and services such as flip-flops, oil changes,

and pizzas. Input markets are the markets for the land, labor, and capital (factors of production)

firms need in order to make those final goods and

services. Both input markets and output markets

are guided by price signals, say conventional the-

orists. But the significant difference between these

kinds of markets is that in an input market the

demanders are not individuals trying to maximize

their happiness; they are firms trying to maximize

their profit. At the same time, the suppliers may be

firms, but they also may be workers or landlords or

contractors or other parties who provide the land,

labor, and capital to make the final goods and ser-

vices.

Consider the guitar market. Guitars are an out-

put. Demanders are the consumers, and suppliers

are the guitar producers. Nylon strings are a very

important input for producing acoustic guitars.

The guitar firms demand nylon strings from the

nylon string producers—that’s an input market.

Other input markets for guitar making include

factory space, wood, tools, sandpaper, luthiers (a

person who makes stringed instruments), sales-

people, IT staff, bookkeepers, and of course the

low-skilled workers who answer phones, sweep

the factory floor, stock the shelves, staff the mail-

room, make guitar deliveries, and run errands.

Price Controls

A price control occurs when the government, for whatever reason, passes a law to regulate

the price in a market to limit either how high or

how low it can go. These can be used in both

input and output markets. In the past we’ve had price controls in the mar kets for bread, rice,

electricity, gasoline, wages, and rent, among

others. Conservatives and liberals (conventional

theorists) tell us that when we leave markets

alone (laissez faire) they will always tend toward equilibrium. That’s because if there’s a price that’s

below the equilibrium price, then a predictable

chain reaction occurs: more individuals will be

interested in buying, fewer firms will be interested

in selling, and a shortage will result. With any

shortage, there’s a pressure for the price to rise.

As prices start rising, suppliers become more

willing to supply, demanders become less willing

to demand, and quantity supplied and quantity

demanded meet at a new equilibrium point. The

Expanding the Models for Livelihood and Housing

In the next two chapters, we’ll be exploring two more economic issues: Livelihood and Housing. Before we dive in, you’ll need to learn a few new tools to help you analyze the issues from the conventional and radical perspectives. The great news is that you already have a firm foundation in

conventional and radical theories, so these new tools will feel familiar, and they will reveal intriguing

new information to consider.

Chapter 9: Tools to Move Ahead | 263

same kind of chain reaction happens if the reverse

occurs. If the price rises above equilibrium price,

then fewer individuals will be interested in buying

and more firms will be interested in selling, which

creates a surplus. When that happens, there’s a

pressure for the price to fall. As prices start falling,

demanders become more willing to demand, and

suppliers become less willing to supply, and

quantity supplied and quantity demanded meet

at a new equilibrium point.

Conventional theorists agree that this is the way

markets will always work if left alone for long

enough. There can be no permanent surpluses

or shortages in capitalism because price signals

eventually bring the whole system back into equi-

librium. But from time to

time the government passes

laws to stop prices in cer-

tain markets from rising or

falling—even knowing that

shortages and surpluses will

result. This is the heart of

the debate we’ll be explor-

ing in the chapters on Live-

lihood and Housing.

There are two kinds of

price controls: price ceil-

ings and price floors. A price ceiling sets a max- imum amount that can be charged for a prod-

uct. It can be set at any level, but an effective

price ceiling is set below equilibrium to keep the

price (P) lower than would occur naturally. For

a variety of reasons, the government may want

prices to be lower than the equilibrium price in

order to draw more people into the market. For

example, the government might want to motivate

more people to eat chocolate because of a study

linking chocolate consumption and higher intelli-

gence. But take a look at figure 9.1. Does some-

thing seem strange to you? A ceiling is up above

your head, but the line for the price ceiling on the

graph is actually below equilibrium. What’s that

all about? Just think about

a helium balloon. A ceiling

keeps it from doing what

it would naturally do on

its own—float up, up, and

away. This is exactly what

a price ceiling does. It pre-

vents the price from rising

to equilibrium, which is

where it would naturally

go. Take another look at

the figure and you’ll see

264 | Voices On The Economy

that the quantity supplied (QS) is less than the

quantity demanded (QD), which means a short-

age. Price ceilings tend to cause shortages.

P S

QQ 1

Chocolate Bar Market

P Ceiling

Figure 9.1 Price Ceiling

A price floor sets a minimum amount that can be charged for a product. It can be set at any level,

but an effective price floor is set above equilibrium

to keep the price high. For a variety of reasons, the

government may want the price to be higher than

the current equilibrium price. For example, the

government might want to push people out of the

chocolate bar market because of the proven rela-

tionship between chocolate consumption and obe-

sity. But take a look at figure 9.2. Was there some

mistake? A floor is below your feet, but the line for

the price floor on the graph is actually above equi-

librium. What’s going on? Think about it this way: if

you’re standing on the second floor of a building,

the floor keeps you from dropping to the ground,

which is where you would naturally fall because

of gravity. This is exactly what a price floor does.

It prevents the price from falling to equilibrium,

which is where it would naturally go without the

price control. And look at how the quantity sup-

plied is greater than the quantity demanded. Price

floors tend to cause surpluses.

P S

QQ 1

Chocolate Bar Market

QD QS

P Floor

Figure 9.2 Price Floor

Price Elasticity

Before you make up your mind about what you

think about price controls, there’s another tool you

need to know. If you and I were to take a foot-

long stretchy rubber snake and play tug-of-war

with it, how far would the snake stretch, relative

to the force of our tugging? We might stretch it

ten feet between us—that’s pretty far. We would

say the stretchy snake is sensitive, responsive, or

elastic. But if we tried to play tug-of-war with a hard plastic snake, it wouldn’t stretch at all—not

even an inch. So we would say the solid snake is

insensitive, unresponsive, or ine lastic. In market models we use this idea of elasticity to analyze how sensitive the quantity demanded and quantity

supplied are when there is a change in price. The

terms we use to talk about this are price elasticity of demand and price elasticity of supply. Let’s

Chapter 9: Tools to Move Ahead | 265

practice using them in

sentences: When the

price of medicine goes

up, people’s demand

for it will fall only by

a small amount. So we

say, “The price elasticity

of demand for medicine

is inelastic.” When the

price of pizza goes

up, firms will supply a

lot more pizza. So we say, “The price elasticity of

supply for pizza is elastic.” Wait a minute. Don’t

we already know from the law of demand that

when price goes up, the quantity demanded goes

down? And don’t we already know from the law

of supply that when price goes up, the quantity

supplied increases? Yes, we do already know that.

But what elasticity adds to this conversation is to

tell us by how much. Price Elasticity of Demand. Will you buy

something if the price suddenly skyrockets? That

depends on the elasticity (sensitivity to the price)

of what you want to buy. One of the most expen-

sive medicines ever sold, Soliris, treats a rare type

of anemia that affects relatively few people. At one

point, the price for the drug went up to $440,000

a year. People who have the disease will die with-

out this medication. Now, let’s say you have this

terrible disease. Will you buy Soliris even if the

price goes up? Of course you will, if you can.

Some people will be priced out of the market, but

everyone else will beg, borrow, and possibly even

steal to buy it because they need it to stay alive.

In other words, the price elasticity of demand for

Soliris is highly insensitive to a change in price.

It’s the hard plastic snake—relatively inelastic.

Price elasticity of demand —how sensitive quan-

tity demanded is to a change in price—is based on

four criteria, which are listed in order from most

important to least important.

1. Necessity vs. Luxury. The most important thing that

determines whether the

quantity demanded is sen-

sitive or insensitive to price

change is whether you need

the product. If it’s a neces-

sity, you will buy it even if

the price skyrockets. The

price elasticity of demand

for necessities is inelastic, so

quantity demanded will fall very little when

price goes up. On the other hand, if it’s a

luxury item such as a robotic vacuum cleaner,

you won’t buy it when the price goes up. The

price elasticity of demand for luxuries is elas-

tic. Quantity demanded will fall significantly

when the price goes up.

2. Number of Substitutes. Let’s say you go to the pharmacy with your prescription for Soliris and

you find out that the price went up from $4,400

a year to $440,000 a year. After you recover

from the shock, the first thing you would likely

ask the pharmacist is, “Do you sell any cheaper

versions of that medicine? I’ll take generic!” The

fewer substitutes there are, the more likely you

will be to buy Soliris at any price, which makes

the demand price inelastic. The more substi-

tutes there are, the less likely you will be to

buy it at that price, which makes the demand

price elastic.

3. Fraction of Income. Let’s say you ate a lot of garlic for lunch and you have a date. You

really want a breath mint. At the store you

discover the price of breath mints has dou-

bled. They now cost $2. The extra dollar is

such a small fraction of your income that

you go ahead and buy them anyway. This

is a case of demand that is price inelastic.

Now let’s say it took you a year to save up

266 | Voices On The Economy

$5,000 to buy a used car. When you go to the

dealer with your $5,000 in hand, the car you

had your eye on now has a sticker that says

“Hot Deal! $10,000!” You won’t buy it at that

higher price if the extra $5,000 is a big frac-

tion of your income. The bigger the fraction

of income, the more price elastic is demand.

4. Time Factor. Let’s say you’re running late, but when you get in the car, you remember

that you’ve been running on empty for two

days. If you run out of fuel, you’ll miss an

important appointment, so you pull into the

nearest refueling station. That’s when you see

the price has doubled overnight. Do you buy

it anyway? If your immediate need to be on

time is greater than your need to save money,

then yes—you’ll buy it anyway. Your demand

for a good is price inelastic when the need for

something is immediate. But over time, you

won’t need fuel as urgently, because you’ll

find substitutes. You’ll join a rideshare pro-

gram or take public transportation. Assuming

that the price for fuel stays high, the demand

will be price elastic in the future.

Let’s see what elasticity looks like on a graph,

where flip-flops are a luxury with many substi-

tutes (elastic) and sunglasses are a necessity with

few good substitutes (inelastic). Notice on the

Market Demand for Sunglasses graph (figure 9.3,

on the left) that when the price goes from $5 to

$10, the steep curve shows that quantity demanded

for sunglasses falls by one unit. On the Market

Demand for Flip-Flops graph (figure 9.3, on the

right), when the price goes from $5 to $10, the

flat curve shows that quantity demanded for flip-

flops falls by thirty units. The flat slope shows an

elastic demand curve—when price goes up, quan-

tity demanded falls a lot. The steep slope shows

an inelastic demand curve—when price goes up,

quantity demanded falls a little.

Chapter 9: Tools to Move Ahead | 267

If you want an easy way to remember what elas-

ticity and inelasticity look like on a graph, check

out these graphs below (figure 9.4). Look at the

left two graphs: each represents the extreme of

elastic and inelastic. A perfectly inelastic demand curve means that no matter how high the price

goes up, you will still buy it. A perfectly elastic demand curve means you’ll buy it at a particular

price, but if that price increases even by a penny,

quantity demanded will fall to zero. It’s easy to

remember which one is which: on the right two

graphs, where purple lines are overlaid, one forms

the letter I for inelastic, and the other forms the letter E for elastic. By the way, please note that

when we talk in general terms about elasticity and

inelasticity, we’re meaning it’s relatively elastic or inelastic. In contrast, we say “perfectly elastic” or

“perfectly inelastic” when it’s absolutely so.

Total Revenue and Price Elasticity of Demand. The amount that a firm is going to earn by selling a unit of its product at a particular

price (in other words, the price of a pair of flip-

flops multiplied by the quantity of flip-flops sold)

is called total revenue. The relationship between total revenue and price elasticity of demand is

important. The firm will be motivated either to

increase or decrease price depending on elasticity.

Consider the demand for sunglasses. In the left

P1 = 5

D Q

Market Demand for Sunglasses

Q2 = 10

P2 = 10

Q1 = 11

P1 = 5

Market Demand for Flip-Flops

Q2 = 10

P2 = 10

Q1 = 40

Figure 9.3 Elasticity and Market Demand

QPerfectly Elastic

D QPerfectly Inlastic

QPerfectly Elastic

D QPerfectly Inlastic

Figure 9.4 Perfectly Elastic and Perfectly Inelastic Demand Curves

268 | Voices On The Economy

graph above (figure 9.5), sunglasses originally sell

for $5 a pair. The quantity sold at that price is ten

units. The total revenue is $50. Now let’s say the

price for sunglasses goes up to $10. The quan-

tity demanded falls, but only by one unit—down

to nine units—because sunglasses are a neces-

sity, and there are no substitutes. Sunglasses are

a product with inelastic demand. Total revenue

goes from $50 to $90. So you can see that when

demand for a product is inelastic, firms will want

to raise prices because when prices go up, total

revenue increases. That’s not surprising. Most

people think, “Of course firms always want to

raise their prices to make more money.” But that

isn’t true. Firms only want to raise prices when

the price elasticity of demand is inelastic because

many people will buy the product anyway, which

will bring firms a higher total revenue. On the

other hand, what will a firm do when demand for

their product is elastic? Let’s say you sell flip-flops

at $5 a pair. The quantity demanded is forty units

so the total revenue is $200. But when the price

doubles to $10 a pair, the quantity demanded falls

dramatically to ten units because many people

switch over to sandals, so the total revenue plum-

mets to $100. So you can see that when the price

for a product demanded is elastic, firms are likely

to lower prices so they can make more money.

Price Elasticity of Supply. We’ve looked at elasticity from the demand side, but there is

another aspect to consider. What difference

does elasticity make to supply? As a supplier

of sunglasses, for example, you ask, “When the

price for sunglasses increases, how sensitive (or

responsive) will my firm be to supplying more

sunglasses?” Price elasticity of supply is based

on a variety of different determinants, some of

which include:

1. Available Inputs. When suppliers are able to produce more of a product quickly because

inputs are readily available, then supply is price

elastic. That means when price goes up even

by a small amount, the quantity supplied can

increase by a lot. Your pizza company can

easily thaw out more cheese from the freezer

or run to the distributor and buy more cheese

at the last minute so they can throw together

P1 = 5

D Q

Market Demand for Sunglasses

Q2 = 10

P2 = 10

Q1 = 11

P1 = 5

Market Demand for Flip-Flops

Q2 = 10

P2 = 10

Q1 = 40

Figure 9.5 Total Revenue and Price Elasticity of Demand

Chapter 9: Tools to Move Ahead | 269

many more pizzas when the price goes up on

Super Bowl Sunday. Supply for pizza is elastic.

But the cruise ship company can’t create more

honeymoon suites at the last minute if the price

goes up when hordes of newlyweds suddenly

all want to book honeymoon suites. Supply for

honeymoon suites on cruise ships is inelastic.

2. Inventories. If it’s difficult to keep inventories of a product, supply will be inelastic. “Diffi-

cult” here means that when a product sits in a

warehouse or is otherwise not in the market,

firms have to pay money to store or main-

tain the product, or they have to pay taxes on

that unsold inventory. When they don’t have

a ready stock of inventory on hand, produc-

ers are unable to increase supply when price

goes up. Clearly, you can keep an inventory

of sunglasses without incurring great costs,

but you can’t keep an inventory of movie the-

aters without having a lot of costs. Therefore,

the supply of sunglasses is elastic, whereas

the supply of movie theaters is inelastic.

3. Complexity of Production. When the process of producing a good or service is complicated,

the price elasticity of supply will be inelastic.

Complex production makes it challenging for

firms to react quickly to price changes because

it requires specialized land, machinery, and

labor that can’t easily be substituted or coor-

dinated. Making flip-flops is relatively simple,

requiring plastic, one or two machines, and a

workspace with electricity. Making movie the-

aters, on the other hand, is a very complicated

process, involving surround-sound systems,

popcorn machines, specialized seating, high-

tech screens and projection systems, along with

heating, cooling, electricity, and plumbing—not

to mention land and zoning permits. Therefore,

the supply of movie theaters is inelastic, while

the supply of flip-flops is elastic.

4. Time Factor. When a supplier runs short of a product that can’t be replaced quickly—

movie theaters or honeymoon suites on that

cruise ship—there’s nothing to be done for the

moment. Supply is inelastic. But in the future,

270 | Voices On The Economy

supply could become elastic as firms increase

their capacity to produce more. For instance,

over time the cruise ship company could build

more or larger cruise ships with more honey-

moon suites.

Figure 9.6 is what price elasticity of supply

looks like on a graph. The steep curve means

the supply price is inelastic: when price goes up,

firms won’t increase their supply by very much.

The flat curve means when the price goes up,

firms will be willing to supply a lot more.

Factoring Elasticity into Price Controls

Finally, it’s time to put together these tools so

we can apply them to the issues of Livelihood and

Housing. When a price ceiling or price floor is set,

a shortage or a surplus will result, according to

conventional theory. This doesn’t change when we

factor in elasticity. But now the important question

becomes: how much of a shortage or a surplus will result?

Imagine we have a price control in the

electricity market. Because electricity is necessary

for survival and has very few substitutes, the

demand curve is highly inelastic. As for the

supply curve, because electricity needs elaborate

infrastructures and can’t be easily stored, the

supply curve is also highly inelastic. Now let’s

combine elasticity with price controls. Here’s

where the conversation gets really interesting.

Take a look at figures 9.7 and 9.8.

As you can see, the price ceiling creates a

shortage in both cases, but it’s less extreme when

elasticity is factored in. This is where liberals and

conservatives diverge. Both agree that elasticity is

a fact in markets, and they agree that over time

demand and supply become more elastic as new

substitutes are brought to market. But they dis-

agree on whether a price control—with a result-

ing surplus or shortage—is ever justified.

Liberals say that when government puts a price

ceiling on electricity, which is price inelastic on

both the demand and supply sides, suddenly the

many people who haven’t been able to afford

electricity can now heat their homes and turn on

lights and surf the internet. Liberals also say that

the shortage that results from the price control is

minimal and less relevant than the fact that nec-

essary electricity is going to people who need it

P1 = 5

Market Supply for Honeymoon Suites on Cruise Ships

Q1 = 10

P2 = 10

Q2 = 11

P1 = 5

Market Supply for Pizzas

Q1 = 10

P2 = 10

Q2 = 40

Figure 9.6 Elasticity and Market Supply

Chapter 9: Tools to Move Ahead | 271

to survive and thrive. They argue that price con-

trols can make good economic sense. And while

elasticities could change over time, their point is

that right now the price elasticity of electricity is inelastic on both the demand and supply sides.

On the other hand, conservatives say a price ceil-

ing is never a good idea in any situation because

it locks in shortages and surpluses, and that’s a

problem regardless of how big or small they are.

Rolling blackouts would ensue, which would

hurt everyone. On top of that, as price elastic-

ity changes over time, those shortages and sur- pluses will become even more extreme. Besides,

they say, a price ceiling doesn’t help in any case.

Those who couldn’t afford electricity will still be

sitting in the dark when producers no longer have

incentives to make electricity.

When it comes to ending poverty and address-

ing the lack of affordable housing, these are the

kinds of arguments that conservatives and liberals

have about price controls. The policies we will

be debating in chapters 10 and 11 are minimum

wage legislation (price floor) and rent control

laws (price ceiling).

Minimum Wage Legislation. The minimum wage sets a price floor on the labor market. Just like any other market, the low-skilled labor market is

guided by price signals. Because labor is an input

market, we refer to the price as the wage (W) and

the quantity as the number of workers (N). The

suppliers are the workers, and the demanders are

the firms. Workers will supply more labor at a

higher wage, and firms will demand more labor

at a lower wage. But before we can draw a graph

depicting the low-skilled labor market, we need

to determine the elasticity of low-skilled labor

demand and the elasticity of low-skilled labor

supply. In other words, how sensitive is the quan- tity of labor demanded or the quantity of labor

supplied to a change in the wage? If the wage

goes up, the firm will lay off workers, but how

many? That depends on the elasticity of demand

for low-skilled labor. And if the wage goes up,

how many more workers will supply low-skilled

labor in that market? That depends on the price

elasticity of labor supply.

The determinants for elasticity in input markets

are different from the determinants we discussed

P S

QQ 1

Electricity Market

Price Ceiling

QQ 1

Electricity Market

Price Ceiling

Figure 9.7 Price Controls without Showing Elasticity

Figure 9.8 Price Controls Showing Elasticity

272 | Voices On The Economy

above for output markets, but there is some over-

lap. Substitutions, for instance, play a big role in the

elasticity of labor demand. What else can be substi-

tuted for the input? In the low-skilled labor market,

when wages go up, fast-food restaurants, custodial

services, hotels, landscaping firms, and so forth

will continue to hire low-skilled workers because

they don’t have the option of replacing them with

a machine that can do the work—at least not yet.

If they did, they would have already acquired those

machines. So far, there is no machine that can effec-

tively bus tables at the burger joint or sweep the

floor at the guitar factory. Even if the wage for table

bussers or floor sweepers goes up, for now the firm

will continue to hire workers because they are nec-

essary for the success of the business. When wages

go down, firms are even more likely to continue to

hire low-skilled workers rather than trying to invent

or invest significantly in machines to replace them.

The elasticity of labor demanded in the low-skilled

labor market is inelastic.

Adaptability plays a big role in determining

the elasticity of labor supplied. How easy is it for

workers to use their current skills in a different job?

For example, if you work as a shelf stocker in a

grocery store and the wage drops for low-skilled

jobs, you probably will keep working at the lower

wage because your skill isn’t easily transferrable to

working as a luthier, a tennis player, or a sushi chef.

When wages go down, low-skilled workers have

no specialized skills that could transfer to a new

job, so they won’t leave even if the pay decreases,

because they have no other options. What happens

when the wage goes up? Since wages are generally

laddered—workers with higher skills also get a pay

raise when low-skilled workers get a pay raise—

higher-skilled workers won’t be drawn to compete

for low-skilled labor jobs. The elasticity of labor

supplied in the low-skilled labor market is inelastic.

Figure 9.9 shows the low-skilled labor market

with inelastic demand and supply. You’ll notice

the slopes are quite steep for both demand and

supply. Figure 9.10 shows the same market with

the minimum wage price floor. Since the supply

of low-skilled workers is greater than demand at

that price floor, a surplus of workers will result

(unemployment). You will see this graph again in

chapter 10, when conservatives and liberals offer

their perspectives about whether the minimum

wage is beneficial or harmful for solving poverty.

NN1

Low-Skilled Labor Market

Figure 9.9 Inelastic Demand and Supply

NN1

Low-Skilled Labor Market

Wage Floor

Figure 9.10 Price Controls and Elasticity

Chapter 9: Tools to Move Ahead | 273

By the way, you should know that some analysts

(from both perspectives) have different ideas about

the degree of elasticity for low-skilled labor supply

and demand. However, this disagreement doesn’t

substantively change the debate we’ll be having

in chapter 10. For our purposes, we’ll assume that

this point of contention is not an issue.

Rent Control Laws. Housing is an output mar- ket and takes many forms, including apartments,

manufactured homes, duplexes, single-family

homes, mansions, and so forth. In chapter 11 we’ll

be considering rent control in the low-end apart-

ment market. Rent control laws set a price ceiling in the housing market. As you can see in figure 9.11,

the price is rent (R), and the quantity is the number

of apartments supplied and demanded (Q). The

suppliers are the landlords (property owners), and

we know they are willing to supply more low-end

apartments when the rent goes up. The supply

curve is upward sloping. Demanders are the ten-

ants. We know tenants are willing to demand more

low-end apartments when the rent goes down.

The demand curve is downward sloping.

But how elastic is the supply and demand of

low-end apartments? If rents go down, by how

much less will landlords supply low-end apart-

ments and by how much more will tenants demand

those apartments? To determine this, we consider

the main determinants for the price elasticity of

demand and supply in output markets. Let’s start

with demand. When rents for low-end apartments

go up, tenants pay the higher rent since apartments

are a necessity—people need a place to live in

order to survive. And there are very few substitutes

for low-end apartments apart from moving into a

homeless shelter. On the other hand, when rents

go down for low-end apartments, people who live

in duplexes, single-family homes, standard and lux-

ury apartments, and mansions aren’t going to race

to get their rental applications in for low-end apart-

ment buildings. It’s not a substitute for higher-end

housing. For these reasons, the price elasticity of

demand for low-end apartments is highly inelastic.

On the supply side, suppliers can’t easily make

more low-end apartments when rents go up

because inputs aren’t readily available—appro-

priate building lots are scarce, and cranes, bull-

dozers, and skilled builders are hard to schedule,

and so forth. And when rents go down, low-end

apartments can’t easily be stored. It costs owners

QQ1

Low-End Apartment Market

Figure 9.11 Inelastic Demand and Supply

QQ1

Low-End Apartment Market

Price Ceiling

Figure 9.12 Price Controls and Elasticity

274 | Voices On The Economy

money to leave them unrented because they still

have to pay taxes and maintenance on the apart-

ments. That means it’s not cost-effective to hold

on to inventory when rents go down by keeping

them empty. For these reasons, the price elasticity

of supply is also highly inelastic.

Figure 9.11 shows the low-end rental apartment

market with inelastic demand and supply. You’ll

notice the slopes are quite steep for both curves.

You can also see the same market with a rent con-

trol price ceiling (figure 9.12). Since the quantity

demanded is greater than the quantity supplied at

that price ceiling, a shortage of housing will result.

You will see this graph again in chapter 11, when

conservatives and liberals argue for their points of

view about whether rent control laws are benefi-

cial or harmful for solving the problem of lack of

affordable housing.

Radical Theory Tools

Now let’s take a look at the radical tools you will

need to understand their point of view on the

issues of Livelihood and Housing. Remember,

with the radical perspective there are always

two parts: describe capitalism and describe

democratic socialism. In chapters 10 and 11 the

description of capitalism will focus on the core

point of private ownership. Private ownership

occurs when individuals privately own land and

capital and hire wage laborers to produce goods

and services. Cooperative ownership occurs

when people freely come together to jointly own

land and capital, including firms, housing, public

utilities, and so forth, making decisions about

policies and structures through a democratic

process of one person, one vote.

Capitalism: Private Ownership

Marx offered two central critiques of private

ownership in capitalism. The first is workplace

exploitation. Wage laborers are hired by private

owners to operate the machines and transform

raw materials into products, yet they are not paid

the full value of their labor. Instead, the surplus

value they create is stolen by owners, who keep

portions for themselves and distribute other

portions to those who maintain this system of

exploitation. The second critique is alienation.

In capitalism private owners must treat the labor

of workers as a commodity—as if humans are

in the same category as machines. Instead of

work enabling people to contribute their unique

gifts to society, work becomes a dehumanizing

experience in which wage laborers are alienated

from one another, from their jobs, from the

things they produce, and from the processes

of production.

If you think about it, say contemporary radi-

cals, it’s an enormous task to feed, house, clothe,

and care for the human population. No individual

could produce everything needed for their own

survival. It’s necessary that we labor as a society

to produce what we all need to thrive. But in a

Chapter 9: Tools to Move Ahead | 275

system of private ownership we can’t have our

housing, our health care, our education, and every

other thing we need to live a decent life, they say,

because the main purpose of private ownership

is not to give us those things. Instead, the primary

goal is to maximize profit for the owners. In the

process some people might get some or even all

of what they need, but the system of capitalism

is not set up to generate well-being for everyone.

Radicals say private ownership benefits the few—

not the masses. This is how private ownership

looks in capitalism:

Scenario 1. You own a construction company, and you meet an old friend from college who

owns a competing firm. She says, “Our profits

were down so we forced out the union and fired

workers who were used to those higher wages.

We replaced them with low-skilled workers. We

don’t have to pay as much and we can just train

them on the job.”

You think this is a terrible idea. “I don’t want

to fire my workers,” you say. “These are the dedi-

cated people who helped me grow my company

and made it successful.”

“So don’t do it!” she says.

But you will do it—because if you don’t and

the other firms do, you’ll be driven out of busi-

ness. Radicals say private ownership in capitalism

leads to more workplace exploitation.

Scenario 2. You’re golfing with another con- struction firm owner, who tells you, “I’ve started

to buy up dilapidated houses in the low-income

part of town. I’ll only have to do the bare min-

imum to make them livable, and then I’ll turn

around and rent them out for a healthy profit. I’ll

be raking in the money. You should do the same.”

You say, “I don’t want to do that. It’s so wrong.

The people in those neighborhoods are already

struggling to get by. We’ll just be making their

lives harder by charging high rents for substan-

dard housing.”

He says, “So don’t do it!”

But you will do it or your firm won’t survive.

Radicals say when the necessities of life are run

through a system of private ownership, masses of

people end up worse off.

Scenario 3. You’re at a cement trade show, and you meet a construction firm owner from another

276 | Voices On The Economy

state, who says, “Cities and states around the coun-

try are throwing all kinds of incentives our way to

get us to move our businesses to their areas. They’re

begging us to bring job opportunities, so we can

write our own tickets. We can make millions more

in rebates, credits, and tax exemptions, and all we

have to do is set up shop wherever we can get the

sweetest deal. And if we want to move in a few

years to another area that makes us a better offer,

we can. You should get in on this.”

You say, “It seems wrong to fund our private

business expenses with taxpayer money, and I

don’t want to play one city off against another when

those communities are already hurting financially.

Yes, we’ll bring jobs, but we’ll also push up the

cost of living and create gentrification, which will

push the poor out of their neighborhoods. And if

I eventually move my firm to a city with a better

offer, the employees I’ll have to fire will lose the

jobs their tax dollars paid me to create. This seems

like a terrible idea. I don’t want to do it.”

She says, “So don’t do it!”

But you will do it or you won’t be able to com-

pete, and you could lose everything. Radicals say

in capitalism private owners profit from public

money, yet the public has no say in how their

business decisions affect the public’s well-being.

Democratic Socialism: Cooperative Ownership

Cooperative ownership leverages the mutual

interests of participants because when people

have an ownership stake in the places where

they work, live, shop, and study, then people

have skin in the game so the pressure for good

leads them to make decisions that are beneficial

to the well-being of all. Radicals say when people

must rely on one another for the success of their

enterprise, they become highly motivated to find

creative and equitable solutions to conflicts and

challenges. A central characteristic of cooperative

ownership is that people make decisions together

about everything from rental rates and pay scales

to worker benefits, management policies, and

production processes. Radicals say when there

is worker ownership, there is no exploitation,

because those who make the surplus are the same

as those who take the surplus, and they make

decisions together about how to distribute it.

Instead of feeling alienated, cooperative owners

experience a sense of pride in their workplaces,

the things they produce, their communities, and

their homes—and a feeling of connection to their

coworkers, co-owners, and co-residents.

When it comes to ending poverty and the lack of

affordable housing, radicals offer alternative ideas

to minimum wage legislation and rent control laws.

Worker-Owned Business Incubators. To address poverty in democratic socialism, Work- er-Owned Business Incubators offer coopera- tive owners financial resources, technical support,

legal advice, and community networking so they

can take a good idea and turn it into a successful

worker-owned business. While they help start-ups

create feasible business plans and find funding,

these business support centers also provide ongo-

ing professional development to existing work-

Chapter 9: Tools to Move Ahead | 277

er-owned firms so they can expand their entrepre-

neurial capacity. Incubators serve as clearinghouses

for cooperative owners to share resources with

other worker-owned enterprises, inspire new ideas,

and research best practices. They provide mentor-

ing, consulting, and opportunities to develop new

markets. Because the success of firms is vital to a

thriving economy for all, Worker-Owned Business

Incubators are supported by taxpayer funds.

Resident-Owned Communities (ROCs). To address the lack of affordable housing, radicals use

cooperative housing, which comes in all shapes

and sizes. The one thing Resident-Owned Com- munities have in common is that the structure is co-owned or co-leased by the residents, who

make management decisions collaboratively—for

instance, how to handle noise disturbances, safety

concerns, maintenance schedules, and so forth.

ROCs can be anything from manufactured home

communities, to luxury apartment buildings, to

intentional cohousing communities where resi-

dents have private living quarters and share com-

mon spaces. This is how cooperative ownership

looks in democratic socialism:

Scenario 1. You’re a worker-owner of a con- struction firm, and you meet an old friend from

college who is a worker-owner of a competing

construction firm. She says, “Our profits were

way down last quarter so we turned to the Work-

er-Owned Business Incubator in our city for advice.

Their team analyzed our business plan and pro-

duction costs and recommended that we vote on

taking across-the-board pay cuts for three months

so we can afford new equipment upgrades. They

forecast a boost in production within a quarter.”

You say, “Our firm also took a hit last quarter.

We’ve been scrambling to figure out a way forward.

I’ll suggest we also get advice from our local Work-

er-Owned Business Incubator. Last time we con-

sulted them, they helped us get a loan to expand.”

She says, “You should do it!”

So both your firms will do it because, with

cooperative ownership in democratic socialism,

every firm’s success is good for the whole com-

278 | Voices On The Economy

munity, and everyone is

invested in the institutions

and structures that support

businesses.

Scenario 2. You’re play- ing golf with another work-

er-owner of a construction

firm. He says, “Our firm

voted to put money into a

fund that we worker-own-

ers can borrow from to

buy into resident-owned

housing cooperatives in

our community. Will your

firm want to be part of this

fund?”

You say, “I’m sure we

will because there’s already

been talk from a number of

my co-owners about start-

ing their own resident-owned apartment complex.

They want it to be specifically for families with

small children and elderly parents.”

He says, “You should do it!”

Both of your firms will do it because coopera-

tive ownership in democratic socialism makes it

possible for people to have the housing they want

in their communities.

Scenario 3. You’re at a building supply trade show, and you meet a worker-owner from another

state, who says, “When we launched our business

with the help of the Worker-Owned Business

Incubator a few years ago, the consulting team

brokered a partnership between our company

and a local university and hospital to use our

services. We agreed to help more of our work-

er-owners afford houses in the neighborhoods

adjacent to those anchor institutions to improve

those neighborhoods. A group of younger coop-

erative owners got together and created a resi-

dent-owned mixed-in-

come housing community.

There’s been a snowball

effect. That neighborhood

is revitalized, and new

businesses are springing

up there every week.”

You say, “Our coopera-

tive also transformed some

of the run-down neighbor-

hoods near our factory by

investing in the community.

But we hadn’t considered

partnering with our local

anchor institutions. That

sounds like good business.

I’ll bring that idea up at our

next meeting.”

She says, “You should

do it!”

Your firm will do it because cooperative own-

ership in democratic socialism creates sustainable

communities for generations to come.

You’re Ready for the Next Two Issues

You’ve come to the end of chapter 9, and you

now have the tools you need to understand the

policy debates about livelihood and housing.

Hopefully, you’re starting to understand the sub-

tle and obvious ways our three perspectives look

at the big questions—questions that affect you in

every way in your own life. What are we actually

going to make with everything we have available

to us? How are we going to make those things?

And who is going to get them? As you read about

livelihood and housing, you’ll start to figure out

what you believe are the best ways forward to

end poverty and to create affordable housing.

Radicals say when people must rely on one another

for the success of their enterprise, they become highly motivated to find creative and equitable

solutions to conflicts and challenges. The pressure for good leads them to make decisions that are beneficial to the well-

being of all.

Chapter 9: Tools to Move Ahead | 279

Chapter 9: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. You say, “Studies show that people are more likely to have an accident on a bicycle than on an electric scooter. This is a proven fact, so I’m getting a scooter.” Your uncle says, “That can’t be right, because I know so many people who have had accidents on scooters and never on bicycles.” Your mom says, “Facts are tricky. I want to know if the study considered city streets or country roads. How did it define ‘accidents’? Were children included in the statistics?” In this conversation, your approach is ___________, your uncle’s is ____________, and your mom’s is ________________.

A. positive; positive; positive B. normative; positive; normative C. positive; normative; normative D. positive; positive; normative

2. Which of the following statements are true about civil discourse? Please choose all that apply. A. Expressing moral outrage is important to show how passionate you feel about an issue. B. It’s important to listen respectfully except when you know your opponent is

completely wrong.

C. Avoiding difficult conversations or pretending to agree is the best way to have a civil dialogue.

D. It’s important to criticize ideas, but not individuals.

3. A price control is a price set by law to be above or below the equilibrium price. Which statement about this graph is true?

A. This price floor will cause a shortage of milk. B. This price ceiling will cause a shortage of milk. C. This price floor will cause a surplus of milk. D. This price ceiling will cause a surplus of milk.

4. In a city that has buses, a subway system, rideshare services, and bicycle lanes, a taxi company is considering raising its rates. You are hired as an economist to analyze how this price increase could affect the company’s total revenue and profits. What advice would you give?

A. Do not raise rates right away. The price elasticity of demand will become inelastic over time.

B. Keep rates the same. The price elasticity of demand is neither elastic nor inelastic. C. Do not raise rates and maybe even lower them. The price elasticity of demand is elastic. D. Raise rates. The price elasticity of demand is inelastic.

P S

QQ 1

Milk Market

Price Ceiling

280 | Voices On The Economy

5. A minimum wage is a __________ set above equilibrium wage for low-skilled workers. This means __________.

A. price ceiling; given the inelasticity of low-skilled labor supply and demand, a small surplus of workers will result

B. price floor; given the elastic nature of low-skilled labor supply and demand, a large shortage of workers will result

C. price ceiling; given the elastic nature of low-skilled labor supply and demand, a large surplus of workers will result

D. price floor; given the inelasticity of low-skilled labor supply and demand, a small surplus of workers will result

6. Rent Control is a program that affects millions of tenants and landlords every year. Which of the following statements is an accurate portrayal of the elasticity of low-end apartment demand and supply?

A. Because there are few substitutes for low-end apartments and because they can’t be easily stored, both supply and demand are relatively inelastic.

B. As rents for low-end apartments go down, lots of other types of renters will enter the market, making the demand of low-end apartments relatively elastic, while the ease of converting apartments to office space makes the supply of low-end apartments relatively elastic.

C. Elasticity of supply and demand of low-end apartments is irrelevant to the discussion of rent control.

D. While the necessity of low-end apartments makes demand relatively elastic, the expense of holding an inventory of low-end apartments makes supply relatively inelastic.

7. Marx criticized private ownership because of its impact on wage laborers. Which two of the following options represent his views on this subject?

A. Owners of capital exploit workers. B. Workers are alienated from one another and the products they make. C. For survival, private owners are forced to make choices that benefit society as a whole. D. Workers who own their own companies cooperatively have a higher standard of living.

8. Match the idea about cooperative ownership (left column) to its meaning (right column). A. Connection i. Creative and equitable solutions B. Democratic ii. Those who make the surplus also take it

decision-making

C. No exploitation iii. A voice and a vote D. Cooperation iv. Sense of pride in workplace and home

9. Worker-Owned Business Incubators offer all of the following EXCEPT: A. Financial and technical support B. Standards for hiring and firing part-time employees C. Research on best practices D. Business planning and mentoring

Chapter 9: Tools to Move Ahead | 281

Chapter 9: Key Terms Civil discourse Elastic Elasticity Inelastic Input markets Minimum wage Output markets

Perfectly elastic Perfectly inelastic Price ceiling Price controls Price elasticity of demand Price elasticity of supply Price floor

Rent control Resident-Owned Communities Total revenue Worker-Owned Business

Incubators

Answer Key to Exercise 9

1. Use Your Biofeedback

2. Critique Issues—Not Individuals

3. Listen Thoughtfully

4. Remember that Empathy Helps

5. Be Open-Minded

6. Aim for Peaceful Persuasion

10. What kind of housing can be a Resident-Owned Community (ROC)? A. Mobile home park B. Luxury apartments C. Suburban single-family homes D. All the above—any kind of housing can be an ROC

Answers

1. D 2. D 3. B 4. C 5. D 6. A 7. A & B 8. A – iv, B – iii, C – ii, D – i 9. B 10. D

ch10

10Issue:LIVELIHOOD Have you ever wondered what you would do if you couldn’t afford your life? Years ago, I read a newspaper story about an Ohio man named Timothy Bowers. He was sixty-three

years old when the Great Recession of 2007 hit

and he was laid off from his job making deliv-

eries for a pharmaceutical wholesaler. When he

looked at his budget, Bowers realized there was

no way he would be able to afford his life on a

minimum-wage job, which was the only employ-

ment he was likely to find. So he came up with

an extreme financial plan. Bowers walked into a

Columbus bank and held up a teller at gunpoint.

He demanded $80, and then he walked over to

the bank’s security guard and turned himself in.

Yes, Timothy Bowers’s

financial plan was to

get himself arrested

and thrown in prison.

You see, he knew that

bank robbery carried a

three-year prison term,

which meant he would

be ensured a roof over

his head, three meals

a day, health care,

and clothes until his

release at age sixty-six. At that point, he would

be old enough to draw on his social security. His

story was reported around the country. It might

surprise you to learn that Timothy Bowers isn’t

the only one with this extreme financial plan. It’s

more common than you might think. Whether lib-

eral, radical, or conservative, we can all agree that

something has gone terribly wrong in our nation

when people choose prison over freedom.

Every time I think about the harsh realities of

poverty and the choices people are forced to make

to survive, I wonder about a group of students I

taught years ago. I’ve spent most of my teaching

career in higher education, but for five years I

taught sixth-grade social studies in a school where

85 percent of the

student body qual-

ified for free lunch.

That’s another way

of saying that most

of them lived in

poverty. It was one

of my all-time favor-

ite jobs. Because

few students in my

classes had ever

been outside the

R e

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rs/B rian

S yn

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r - sto ck.ad

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284 | Voices On The Economy

neighborhood, I started a program called Around

the World to ignite their interest in different cul-

tures and ideas. We learned about a new country

every week. On Fridays I brought in food from

the country we were studying so they could

taste different cuisines. We made costumes and

learned about different sports, beliefs, histories,

languages, and more. My hope was that one day

they would have the education and support to

experience the wonders of the world firsthand.

But the reality was that most of the students in

our school had parents and grandparents who

also grew up in poverty. Many were from that

same neighborhood and had never left. Some of

my students lived in homes without electricity,

which meant they couldn’t see the page to do

their homework at night. Others had no running

water because their parents couldn’t pay the util-

ity bills. One of my students told me she lived in

a room with six other people. They had to sleep

in shifts. It was normal for many of my students to

come to school hungry and to go to bed hungry.

Their main meal of the day was the lunch they

were served in the school cafeteria. I don’t know

what they ate on weekends, when the school was

closed. Most of them had loving, caring, and con-

cerned parents and grandparents who neverthe-

less rarely showed up for parent-teacher confer-

ences. They had no time because they struggled

to make ends meet by working at two or three

low-paying jobs.

Money doesn’t guarantee happiness, but pov-

erty guarantees suffering. Hunger hurts. Not

having medical treatment hurts. Being homeless

hurts. Tens of millions of people in our coun-

try don’t have livelihoods that sustain them. This

is not just their problem; it’s everyone’s problem

because we’re not able to realize our highest

potential as a nation when people are working

hard but still can’t get ahead. They spend all their

time struggling to survive, and they have no time

or energy left to contribute their brilliance and tal-

ents to the world. Conservatives, radicals, and lib-

erals all agree that poverty causes suffering, and

they all want an end to poverty. The policy we’re

going to debate is minimum-wage legislation.

Understanding the Issue of Livelihood

“Only in our dreams are we free,” wrote novelist

Terry Pratchett. “The rest of the time we need

wages.” A livelihood is the way people support their existence—how they earn the income they

need in order to pay for the basic necessities of

life. The general definition of poverty is having

Chapter 10: Livelihood | 285

an insufficient livelihood to afford the things one

needs to survive. When you’re forced to do without

those things, you suffer. For example, if you can’t

afford medical treatment, you live with pain. If

you can’t pay for food, you go to bed hungry.

If you can’t pay the gas bill, you shiver from the

cold all winter. A “good” livelihood fundamentally

means you’re able to earn enough money to

cover your expenses so you don’t have to worry

about the electricity being shut off, or the bank

repossessing your car, or the landlord evicting

you from your apartment because you’re behind

on the rent. Poverty causes physical suffering and

deprivation, and it also causes emotional stress

when your financial situation seems depressingly

hopeless.

The odds of suddenly inheriting a fortune or

picking the winning lottery numbers are astro-

nomically low, but the more feasible answer to

poverty is a job that pays enough for you to meet

your needs. Do you know how much your life

costs? Let’s do an exercise. On a piece of paper,

write down the average cost of your (or your

family’s) monthly expenses. You can estimate if

you need to, but please include groceries (food,

cleaning products, personal care products, and so

forth), clothes, housing (rent or mortgage, main-

tenance, and taxes), utilities (water, electricity,

natural gas, sewage, and trash/recycling collec-

tion), transportation (bus pass, car payments, gas,

insurance, and maintenance), education (tuition,

tutoring, and other lessons), health care (medi-

cations, doctor visits, insurance premiums, gym

memberships, dentist visits, glasses), communica-

tion (your cell phone, tablet, computer, Wi-Fi),

and entertainment (movies, sports, video games,

event tickets, restaurants, vacations), and any

other regular payments you make (pet care and

student loan or credit card debt payments, for

example). Now multiply that number by twelve,

which is the number of months in a year, and that

gives you a pretty good idea of the amount you or

your family need to earn to afford your life every

year. But just to be clear, that’s a low estimate

because it doesn’t include unexpected expenses

such as replacing a broken appliance, or repairs

after a fender bender, or an unexpected trip to

attend a wedding or funeral, or a surprise root

canal, or all the holiday, birthday, and Valentine’s

Day gifts you want to buy. It also doesn’t include

286 | Voices On The Economy

cost-of-living increases. Hang on to this piece of

paper, and feel free to keep it private. We’re going

to revisit this number later.

What Is Poverty?

Poverty can look different and can be

experienced in different ways. Some low-income

people have a roof over their heads and some

don’t. Some have jobs, and some can’t or don’t

work for a variety of reasons. You’ve probably

seen homeless people living on the streets,

pushing their belongings around in a shopping

cart. You may not have seen families living in their

cars or elderly people who have to choose every

month between buying medication or buying

food. Millions of working families struggle to pay

their bills and fall further and further behind every

month. The working poor are people who have regular jobs but still don’t earn enough to cover

their minimum expenses.

Where do we draw the line and say this person

is poor and that person isn’t? That is a controversial

question, and one that has a direct impact on tens

of millions of Americans. If their incomes before

taxes fall below the poverty line—it’s technically

called the poverty threshold—then they qualify for government assistance, including food stamps,

housing, early childhood programs, and health

care. They also may qualify for privately funded

scholarships, emergency food aid from nonprofit

organizations, and more. If they earn even a single

dollar above the poverty threshold, then they won’t

get that assistance. The story of how the current

poverty threshold is calculated starts back in 1963,

when an economist named Mollie Orshansky was

working in the Social Security Administration. She

was studying the poverty rate of children in the

United States. To figure out which children could

be considered poor, she first calculated the min-

imum daily amount of food a person needed to

survive. Then she estimated what that food would

cost and multiplied it by the number of days in

the year. Since the U.S. Department of Agriculture

estimated that families spent on average a third of

their income on food, Orshansky simply multiplied

that number by three, and that’s how she came

up with the equation for the poverty threshold.

When President Lyndon B. Johnson established

the Office of Economic Opportunity, Orshansky’s

formula was adopted as the Official Poverty Measure (OPM).

S o

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You may have already noticed the big flaw in

the OPM: It only looks at what it costs for food. It

ignores the costs of housing, health care, clothes,

transportation, day care, utilities, and other essen-

tials. And it doesn’t factor in whether you live

in low-cost rural Arkansas or New York City,

which is one of the most expensive places on

Earth. So your cash income before taxes, regard-

less of where you live, has to be lower than the

OPM poverty threshold for you to be considered

“poor.” The poverty threshold is the same for all

Americans. But before you blame Mollie Orshan-

sky, you should know that she actually came up

with more than one hundred different threshold

numbers that took into account the different costs

Chapter 10: Livelihood | 287

for food based on where

a person lived and how

many people were in the

family. But that more com-

plex equation wasn’t the

one adopted by the gov-

ernment. Before she died

in 2006, at the age of nine-

ty-one, she’d had more than

fifty years to witness how

her calculation was used

in the most narrow way to

define poverty in America,

which was not what she

had ever intended.

Today the government

continues to triple the

inflation-adjusted cost of a

1963 minimum-food diet,

adjusting for family size,

composition, and the age

of the person or people in the household, in

order to determine the OPM. Most people agree

this is flawed. In 2010 the government came up

with a more nuanced way to calculate the poverty

threshold: the Supplemental Poverty Measure (SPM). It is a more comprehensive look at a per- son’s income level. Instead of setting the level at

the OPM’s three meals a day, it sets a poverty

threshold that includes food, clothing, shelter,

and utility costs (often called FCSU for short). To

determine whether a person or family falls above

or below that line, the SPM calculates income by

adding together a person’s cash income adjusted

for the local cost of living, and then adds in-kind

(noncash) benefits, such as housing assistance,

school lunches, and SNAP. It then subtracts nec-

essary expenses such as taxes, child-support pay-

ments, out-of-pocket medical expenses, child-care

costs, and work expenses, and that final number

is the income that a person would compare to the

SPM to see if they fall below the poverty threshold.

Also, it has a more expan-

sive definition of a house-

hold, including people

who aren’t legally related

but who live together. It

also sets separate thresh-

olds for renters and home-

owners, adjusting for dif-

ferent housing costs in

different geographic areas.

Most people agree that the

SPM offers a much more

accurate and realistic pic-

ture of the financial status

of Americans. Yet the OPM

continues to be the mea-

surement used by the gov-

ernment to determine who

is and who isn’t poor, even

though it’s problematic

from every perspective.

You can see the importance of this difference in

the definition of the poverty threshold when you

compare numbers of how many people in the

United States fall under the poverty line. Accord-

ing to the U.S. Census Bureau, in 2017 there were

39.7 million who fell below the OPM and nearly

44 million who fell below the SPM. So just think

about this: if the SPM had been the measure used

to determine who qualifies for public assistance,

there would have been an additional 4.3 million

recipients that year.

Remember that monthly budget you wrote out

earlier? Take another look at your estimate for

how much your (or your family’s) life costs for

a year. This gives you a reference point for con-

sidering the official government numbers listed

above. If you fall above the poverty line but still

worry about money all the time, you’re not alone.

According to a 2017 Federal Reserve report, Eco- nomic Well-Being of U.S. Households, 40 percent of Americans can’t cover an emergency expense

If you fall above the poverty line but still worry about money all the time,

you’re not alone. Forty percent of Americans

can’t cover an emergency expense of $400. That means nearly half of us

are one missed paycheck, car accident, or medical

diagnosis away from financial ruin.

288 | Voices On The Economy

of $400. That means nearly half of us are one

missed paycheck, car accident, or medical diag-

nosis away from financial ruin.

Workers and Wages

Poverty has been a fact of human existence

for millennia, and today billions of people on

the planet suffer because they can’t afford to

meet their basic needs. This issue is one of the

most persistent problems we face as a species.

In modern societies we can’t go out and hunt

and gather whatever we need to survive. Instead

we need jobs that pay us enough to afford our

lives. At the same time, society needs productive

workers to make the things that everyone requires

for survival.

The contributions of workers to the prosperity

and strength of the nation is recognized around

the world every year, but the day on which the

celebrations happen has an interesting backstory.

On May 1, 1886, a new law mandating an eight-

hour workday was supposed to take effect in Illi-

nois. When some employers chose to ignore it,

workers went on strike. At a Chicago labor rally

three days later, a bomb exploded, killing eleven

people—some were police and some were strik-

ing workers. This became known as the Haymar-

ket affair (depending on their perspectives, some

also called it the Haymarket riot or the Haymar-

ket massacre). In 1891 the International Socialist

Labor Congress voted to celebrate International

Workers’ Day on May Day (May 1) to honor those

who had been killed during the Haymarket affair

five years earlier. However, U.S. President Grover

Cleveland didn’t want Labor Day to be associated

with Haymarket, so in 1894 he chose September

for our nation’s celebration of workers. Today,

International Workers’ Day is celebrated around

the world on May 1 in honor of those who died

in Chicago, while in the United States we observe

Labor Day on the first Monday of September.

Although it’s not observed these days, May 1

is actually known as Loyalty Day in the United

States. The idea for it started in 1921, and it was

made an official national holiday in 1958. On

Loyalty Day people were encouraged to pledge

their loyalty to the United States—to affirm that

they weren’t communists. It’s no coincidence that

Loyalty Day was popular in the 1920s and 1950s

because these were the two periods in U.S. his-

tory in which there was intense anti-communist

sentiment (known as the Red Scare). The groups that advocated for an eight-hour

workday back in the late 1800s were labor unions, which are organized associations of workers. Unions were first established in the

United States in the 1860s and have been—and

still are—a controversial institution in the United

States and in other countries around the world.

Union members pay dues to the organization

and elect representatives who negotiate on their

behalf with management. The idea behind unions

is that workers have more power to demand bet-

ter pay and better working conditions when they

negotiate collectively rather than each person

negotiating with management individually. The

process is called collective bargaining. When unions and management are unable to come to

an agreement, union workers may go on strike— that is, they refuse to work—as a way to apply

pressure to management. Workers who cross the

picket line and continue to work during a strike,

or who are hired to replace striking workers, are

called strikebreakers. The derogatory term you might have heard used is scabs.

The establishment of labor unions in this coun-

try and around the world has been fraught, with

many heated and often violent fights between

workers and management. In this country, unions

pushed for the laws that established the forty-hour

work week, child labor laws, safer working condi-

tions, and better wages and benefits for workers.

In 1935 the National Labor Relations Act, signed

by President Franklin D. Roosevelt, regulated

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labor unions. It allowed businesses to be one of

four types with respect to unions: a closed shop, meaning all workers must be members of the union

and pay dues; a union shop, where some work- ers are allowed to put off becoming union mem-

bers until a set amount of time; an agency shop, where workers can choose to join the union and

pay union dues or not join but still pay the same

fee as union members; or an open shop, where workers aren’t required to be in a union or to pay

any fees to the union. The height of union involve-

ment was in 1954, when more than a third of U.S.

workers were union members. By 2018 only one

in ten belonged to a union, but unions still play

a role in many industries. For example, in 2018

the University of Vermont Medical Center workers

went on strike over stalled contract negotiations.

Also that year, service industry workers around the

nation went on strike to demand union represen-

tation, and Arizona teachers went on a walkout to

protest low wages and decreases in school fund-

ing. (The teachers couldn’t call it a strike because

they’re not legally allowed to strike, according to

the state’s constitution.)

The union movement has been challenged

more recently by the Right to Work movement,

which pushes back against the idea of manda-

tory membership in unions. As of 2017 there

were twenty-seven states that had right-to-work

laws, allowing workers to refuse to become union

members and pay union fees. They argue that it’s

not fair to compel a worker to join a union as a

condition for employment because this violates

the worker’s rights. This is controversial because,

some argue, those workers still benefit from the

290 | Voices On The Economy

union’s collective bargaining, and therefore it

isn’t fair that they don’t pay dues and support the

union’s work.

Government Policies and Programs Back in 1913 the U.S. Department of Labor

was established “to foster, promote, and develop

the welfare of working people, to improve their

working conditions, and to advance their oppor-

tunities for profitable employment,” according to

the bill signed by President William Howard Taft.

Since then, the government has had a variety of

policies that affect livelihood and address poverty.

In the twentieth century there were two main

government initiatives aimed at solving poverty.

The first, in the 1930s, was Roosevelt’s New Deal,

which was intended to pull the nation out of the

Great Depression. The second, in the 1960s, was

President Lyndon B. Johnson’s War on Poverty,

announced on January 8, 1964, during his State

of the Union address. At the time the national

poverty rate was close to 20 percent, and John-

son explained, “Our aim is not only to relieve the

symptom of poverty, but to cure it and, above all,

to prevent it.” As part of the War on Poverty, John-

son signed the Equal Pay Act, which made it illegal

to pay women less than men for their work in the

same jobs. In addition, the Civil Rights Act made it

illegal to discriminate based on race, sex, national

origin, religion, and other categories in hiring.

Johnson also signed the Economic Opportunity

Act, which created the Office of Economic Oppor-

tunity. You’ve probably heard of some of the pro-

grams that came out of the War on Poverty: Supple-

mental Nutrition Assistance Program (SNAP—also

known as food stamps), Medicaid (health care for

low-income people), and many other programs

that continue today. Here are a few:

Job Corps: Administered by the U.S. Depart- ment of Labor, Job Corps was originally intended

to give low-income youth opportunities to get

job experience and training by working for the

federal government to improve national parks,

national forests, and national land. Today it gives

people ages sixteen to twenty-four vocational

and educational training, and it offers certifica-

tion programs for jobs such as nursing assistants,

clinical medical assistants, dental assistants, emer-

gency medical technicians, and insurance claims

processors.

Head Start for School Readiness: Head Start programs are premised on the idea that multi-

generational poverty can end if children enter the

school system mentally, physically, and socially

ready and able to learn. Administered by the U.S.

Department of Health and Human Services, funds

are allocated to a wide variety of agencies to serve

children from birth to age five. Programs include

early childhood education, nutrition support for

children and pregnant mothers, health care, and

social services.

AmeriCorps VISTA (Volunteers in Service to America): VISTA started in 1965 as a domes- tic version of the Peace Corps. Service volunteers

were assigned to work in impoverished commu-

nities around the nation. In 1993 VISTA became

part of AmeriCorps, which is administered by the

Corporation for National and Community Service.

This public-private partnership pays young peo-

ple a small salary for a year of service and learning

in schools and nonprofit organizations that serve

underprivileged people. For example, Ameri-

Corps volunteers worked with the Red Cross to

help after hurricanes.

Federal TRIO Programs: Administered by the U.S. Department of Education, the idea is to

create pathways out of poverty through higher

education. TRIO offers a variety of programs,

including Upward Bound, which provides grants

to low-income rural students so they can be the

first in their families to attend college. Veterans

Upward Bound supports those who have served

in the military by offering mentoring, tutoring,

and other assistance so they can attend college.

Chapter 10: Livelihood | 291

Educational Opportunity Centers serve low-in-

come adults who want to pursue post-secondary

education by offering financial planning and help

with applications.

Whether any of these government programs

actually improved outcomes and moved people

out of poverty is still hotly debated today, but the

stated intention was to give low-income people

the education, skills, and experience to work their

way up the economic ladder. Each president since

Johnson has had their own approach to solving

poverty. Generally speaking, Democratic presi-

dents have supported the expansion of these types

of government programs. For example, President

Barack Obama signed the Lilly Ledbetter Fair Pay

Act, which made it possible for women to sue for

damages in the case of wage discrimination. And

generally speaking, Republican presidents have

primarily advocated for reducing or eliminating

social welfare programs in favor of private-sector

solutions. For example, President George H. W.

Bush’s Points of Light Foundation emphasized the

role of volunteerism and philanthropy. Democratic

socialists, for their part, have primarily called for

universal basic income and tax-supported public

education through university.

In the background of all these programs, poli-

cies, and ideas, there’s a debate that our country

has been having since the Great Depression. It

is centered on whether or not the liberal idea of

minimum-wage legislation is an effective policy

for addressing poverty. It’s a complicated ques-

tion, so let’s dive in.

Minimum-Wage Legislation

The idea for the federal minimum wage came out of President Franklin D. Roosevelt’s New

Deal. It’s the lowest amount permitted by law

to pay a worker per hour. When the minimum

wage was first established in 1938 as part of the

Fair Labor Standards Act, it was set at $0.25 per

hour. The country was still struggling to get out

of the Great Depression, and Roosevelt regarded

the new law as a way to stimulate spending. The

contemporary debate about raising the minimum

wage is a conversation about how to ensure a

decent livelihood, but Roosevelt never intended

the minimum wage to be a direct solution to

poverty. He explained, “The proposition is simply

this: if all employers will work together to shorten

hours and to raise wages, we can put people back

to work.” He wanted to get more money into the

pockets of working people so they would go out

and buy things. This would signal firms to ramp

up their production, which would create more

jobs. He also believed the minimum wage would

be fair to firms, saying: “No employer will suffer

because the relative level of competitive cost will

advance by the same amount for all of them.” He

hoped this approach would bring the nation out

of the Great Depression and lift people out of

poverty.

The federal minimum wage is adjusted by an

act of Congress; it doesn’t rise automatically with

the annual rise in the cost of living (you may

292 | Voices On The Economy

know this by its acronym, COLA, which stands

for cost-of-living adjustment). In 2019 it was $7.25

per hour. That had been the rate since July 2009.

So from 1938 to 2019, the country went from a

federal minimum wage of $0.25 per hour to $7.25

per hour, which is a 2,800 percent increase. That

sounds amazing until you consider the difference

in what a quarter could buy in 1938 versus what

$7.25 could buy in 2019. Many people suffer from

money illusion, which is believing that the face value of a dollar bill—the nominal amount of money—is what matters, as opposed to the real amount, which is what it can buy based on the current prices. Let’s say I offer you $5,000 to help

me pull weeds for an hour. You say, “That sounds

amazing! I can work for two hours and afford

to buy a car!” But what if the cost of living was

much higher than it is today? If I told you that you

couldn’t even buy a banana for $5,000, would you

still want to work for me for that wage?

The real value of money is what you can actu-

ally buy with that amount. Money is something that

we trade for goods and services, so you want to

make sure you’re not under any illusions that the

amount of money you have will get you more of

those things than it actually will. This is extremely

relevant when you’re thinking about wages. Let’s

say your employer rewards you with a 2 percent

raise at the beginning of the year because you’re

doing an excellent job. You’re delighted to see

more money in your weekly paycheck until you

realize that the cost of living has gone up 3 percent

in the last year. So even though your paycheck

is now bigger, it buys you less because average

prices are higher. Do you see the problem? Even

with the raise, you are financially worse off than

you were a year ago. This is why knowing the dif-

ference between nominal amount and real amount

is so important when it comes to wages.

To have a realistic discussion of the role of min-

imum wage in people’s lives, we need to consider

the real value of the minimum wage as opposed

to the nominal value. If in 2019 you wanted to

buy as much with your $7.25 per hour minimum

wage as you could in 2009, you would actually

need to earn $8.68 per hour. So in real terms, the

Figure 10.1 Nominal and Real Wages

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minimum wage is worth 17.95 percent less than it was a decade earlier. And as you can see in figure

10.1, that difference was at its height in the late

1960s, meaning you could buy a whole lot more

with a $1.60 per hour minimum-wage job in 1968

than you could with a $7.25 minimum-wage job

in 2016.

The federal minimum wage is only one wage

floor. States, counties, and cities can pass their

own laws setting a minimum wage. In 2019 there

were twenty-nine states that had a higher mini-

mum wage than the federal rate. Workers in those

areas must be paid whichever rate is higher. For

example, if Seattle has a higher minimum wage

than the state of Washington, a worker in Seattle

will be paid the higher amount. We think of the

minimum wage as the bottom rung of the income

ladder, but some jobs pay even less because there

are exemptions to federal, state, and city laws.

For example, in some cases farmworkers, tipped

employees, independent contractors, babysitters,

seasonal and recreational workers, commissioned

salespeople, newspaper delivery people, and

minors and young workers may be paid below

minimum wage. Also, firms that have fewer than

a certain number of employees may be exempted

from paying their workers the minimum wage.

How many people are affected by mini-

mum-wage legislation? Slightly more than half a

million people earned the federal minimum wage

in 2017, according to the Bureau of Labor Statis-

tics. That might not sound like a big number, but

tens of millions of people earn the state or local

minimum wage. And because the minimum wage

establishes the lowest wage that an employer

can pay, it has an impact on every salary up the

ladder. Let’s say you’ve worked in a business for

five years and you’re making $11 an hour. If the

minimum wage goes up to $11 an hour, your

employer will likely offer you a higher hourly

wage to reward you for your seniority at the firm

and to convince you to stay. It’s safe to say that all

firms, workers, and consumers across the United

States are affected in some way by the debate

over minimum-wage legislation.

Now you have the lay of the land. You know

the definitions and the history of what our nation

has already been doing to address the issue of

livelihood. You have what you need to analyze

competing ideas about how to solve this prob- lem. It’s time to hear the voices of the differ ent

perspectives on the issue.

294 | Voices On The Economy

R adicals, liberals, and conservatives all agree that poverty causes suffering, and they all share the same goal of ending poverty. But they strongly

disagree about how to do it. Should we develop

more worker-owned businesses to eliminate

poverty? Should we let free-market capitalism move

people out of poverty through an unfettered

labor market? Should the government

strengthen minimum wage laws to lift the

standard of living for workers? The policy

we’re going to debate is minimum-wage

legislation, which is a liberal idea.

It’s time to put on a “mask” and debate this pol-

icy from each of the perspectives. Please remem-

ber that we are not taking a personal position on

any of these issues. We’re channeling the voices of

the perspectives so you can hear what the debates

sound like and then make up your own mind

about what you believe. We change

the order of who goes first each

time. For this issue, the radical

voice will start.

Voices on Livelihood

Chapter 10: Livelihood | 295

Every day that I stood in front of my sixth-grade class, I saw the fallout of poverty. It was wrong that my students couldn’t concentrate on their work because their stomachs were growling. It was wrong that they didn’t hand in

their assignments because the electricity had been turned off at home and it was

too dark to read. Their parents worked hard at jobs that society needed done—

cleaning houses, digging ditches, serving as cashiers, doing yard work, and

R Livelihood

adical Voice on Livelihood

bussing tables—yet they still didn’t earn enough

money to put food on the table or stay ahead

of their bills. Every day in our country families

struggle without the most basic necessities—no

indoor plumbing, no proper nutrition, no ade-

quate place to live. In capitalism wages for low-

skilled labor are so low that even working at two

or three different jobs doesn’t afford a decent

livelihood. The parents of my students wanted a

better life for themselves and their children, but

the system of capitalism keeps people stuck at

the bottom. Workers aren’t paid their fair share of

the value they create, be it in a privately owned

company, a hierarchical nonprofit organization,

or a top-down government agency. At the end of

the school year I was haunted by the awareness

that my students were likely to end up as trapped

in poverty as their parents. There might be a few

exceptions who would manage to finish school.

They would get their degrees and find better-pay-

ing jobs. But then they would face decades of stu-

dent loan payments in addition to the emptiness

of knowing that their “success” meant they would

have to exploit others or benefit in some way

from that exploitation. Those are the only choices

anyone gets in capitalism: exploit or be exploited.

Let’s use the Six-Core Cube of democratic social-

ism to drill down through the core point of cooper-

ative ownership to see how we make it possible for

workers to have decent livelihoods. Across indus-

tries and in every community, worker-owners are

able to earn a decent living because they enjoy the

fruits of their own labor and no one exploits them.

Imagine a group of workers getting together and

realizing that one has a truck, another has a car-

pet-cleaning machine, another is an expert at floor

waxing, and another has bookkeeping experience.

They decide to pool their skills and resources and

invest together to launch a cleaning business, which

they will own cooperatively. It takes hard work and

long hours to start a company, but they share the

labor, expenses, and profits. When the business

296 | Voices On The Economy

expands, new people buy

in and become co-owners.

When life circumstances

change, a co-owner may

choose to sell their share

of the company back to the

other co-owners. With coop-

erative ownership, there is no

private owner stealing the

surplus value of the work-

ers’ labor, which means that

at the end of the month,

after the firm’s bills are paid,

there is more profit to share

among the worker-owners.

If the firm flounders, they

work together to improve

their services and business

practices because each has

a personal stake and invest-

ment in the success of the

enterprise. With cooper-

ative ownership, workers

earn decent livelihoods, so they can create a bet-

ter quality of life for themselves, their families, and

their communities.

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

of Demo cratic So

cialism

Figure 10.2 Radical View

In college I was hired to

deliver pizzas. I used my

own car (a chartreuse-col-

ored 1975 VW Bug, by the

way), and money for gas

and maintenance came out

of my own pocket. The job

paid below minimum wage

because it was expected

that I would earn tips. That

first night, I discovered the

local college kids liked to

order the $9.99 pizza, hand

me a $10 bill, and tell me

to “keep the change.” And

then, when my shift ended

at two in the morning, the

owner said, “Now mop the

floors.” Any job can be sat-

isfying, but not when the

worker is exploited and

disrespected. That’s why

we need cooperative own-

ership. Later in life, when I became a full-time

teacher and mother, I chose to hire a local work-

er-owned landscaping company for my home

instead of a company that used wage laborers. The

worker-owners were highly motivated to make

their company succeed, so they did an excellent

job. And I felt good knowing my landscapers

were not only doing their best work for me, but

they were also getting more than just a paycheck.

They each had an equal say in pay, benefits, and

the division of labor, and also in how their firm

was run. When they made decisions about what

to plant and what chemicals to use, they consid-

ered the impact on the community because they

and their families lived there too. The company

incorporated the latest technology and tools, but

new innovations didn’t put workers’ jobs at risk.

Instead, everyone benefited from the upgrades.

We end poverty with cooperative ownership in

Cooperative owners work together to improve their

services and business practices because each

has a personal stake and investment in the success

of the enterprise. They earn decent livelihoods,

which means they are able to create a

better quality of life for themselves, their families,

and their communities.

Chapter 10: Livelihood | 297

democratic socialism because people prosper

directly from their own hard work. When work-

ers own the means of production and use demo-

cratic processes to make decisions, it ensures that

everyone can earn a decent livelihood.

No one wakes up in the morning and

thinks, “Today, I’d like to toil at back-breaking,

mind-numbing jobs for very little money. I’d like

to work long shifts and never get to see my kids,

and I’d really like to worry about putting food

on the table, clothes on our backs, and a roof

over our heads while I take on a second and

third job—even though I still won’t be able to

get ahead of the bills.” But that’s what happens

every day in capitalism for masses of people. I

remember in kindergarten one of the first lessons

I learned from Mrs. Hutchinson was that stealing

is wrong. Isn’t that what we all learned? Yet every

day in capitalism private owners steal from their

workers, and this theft is completely legal. It’s not

even a secret. But we all just accept it as a fact of

life. We’ll never solve the problem of poverty in

capitalism because it’s an economic system built

on exploitation and the relentless drive for profits.

Conservatives, you say we should get rid of the

minimum wage and let the labor market magi-

cally self-adjust to bring the right wage for low-

skilled workers. You keep trying to sell us on a

stale fantasy of free-market capitalism as the cure

for poverty. But the reality is that free-market cap-

italism leads to a nightmare of suffering. Just look

at our history! The relationship between owners

and wage laborers has always been bloody and

violent. Why? Because owners need to exploit

workers in order to survive, and workers need

the theft to stop in order to rise out of poverty.

They need justice. You love to point the finger at

imaginary “freeloaders” in democratic socialism,

but capitalism is a system of freeloaders who live

off the sweat of hardworking people. The drive

for profit forces owners to exploit them. They

buy new machines and productivity goes up, but

guess what? Workers’ wages don’t. Then they lay

off workers and thereby create a reserve army of

the unemployed. Now workers have to scramble

to compete with one another for the few jobs that

remain, which alienates them from one another

and further drives down wages. That’s how own-

298 | Voices On The Economy

ers continually increase the rate of exploitation,

whether they want to or not. And let’s be clear:

your free-market capitalism counts on it. In any

direction you move, leaving it alone creates ever-

higher levels of poverty.

Liberals, your minimum-wage “fix” only lessens

the amount of the theft—it doesn’t eliminate it. Let’s

say you raise the minimum wage from $5 to $10

per hour. When workers create $15 of value each

hour, instead of $10 being stolen, $5 gets picked

from their pockets every hour. How is this fixing

anything? I’m certain that my kindergarten teacher

didn’t say that stealing a lot is bad, although steal-

ing a little is okay. Stealing anything is wrong! Your

minimum-wage legislation is just a slightly more

palatable way to package the theft. And it keeps

us from making the real changes necessary to

eliminate poverty because it keeps workers’ bel-

lies filled just enough so that they’ll go back to

work the next day, but without demanding their

fair share. At the same time, firms constantly make

an end-run around your minimum wage. They just

pick up and move or outsource the jobs to low-

er-wage countries or countries with no minimum

wage so they can exploit foreign workers. In the

end, the minimum wage might actually make pov-

erty worse than the conservatives’ idea of leaving

it alone. The policy gives us more unemployment

and more poverty worldwide. No matter how you

slice it, you can’t solve the issue of livelihood with

fair-market capitalism because that whole term is

a contradiction: there’s no such thing as fairness

when there is no workplace justice.

We should replace minimum-wage legislation

with Worker-Owned Business Incubators to end

poverty. They give technical and financial support

to start-ups and to existing cooperatively owned

firms, including loans, mentoring, grants, research

on best practices, and so forth. Worker-Owned

Business Incubators, funded with tax dollars,

help entrepreneurs bring their new innovations

to market, investing in the good ideas that benefit

society. Supporting new business is an investment

that gives back, because a portion of the sur-

plus firms generate funds everyone’s health care,

higher education, transportation, and other basic

needs. Sharing responsibility for these high-cost

goods and services establishes the foundation of

well-being across the nation, ensuring that people

will not be impoverished. When we have coop-

erative ownership in democratic socialism, firms

make decisions that are good for the many and

not just for the few. That’s how we get food on

the table, a roof over our heads, and clothes on

our backs. That’s how we’re set up to live happy

and meaningful lives.

Chapter 10: Livelihood | 299

RadicalDemocratic Socialism BIG PICTURE When workers own the means of production and use democratic processes to make decisions, it ensures that everyone can earn a decent livelihood.

POLICY POSITION Poverty causes suffering, but . . .

" Conservative policies lead to more poverty because survival in capitalism depends on increasing rates of workplace exploitation and a reserve army of the unemployed.

" Liberal policies may lessen the theft—barely—but don’t fix the underlying problem, and they leave workers with the false belief that this is as good as it gets.

SOLUTION Replace minimum-wage legislation with Worker-Owned Business Incubators to end poverty:

! Support new enterprises to build the economy.

! Meet basic needs to alleviate financial burdens.

Livelihood

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

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cialism

300 | Voices On The Economy

Livelihood Talking Points: Radical 1. We end poverty with cooperative ownership in democratic socialism because people prosper directly from

their own hard work. When we go to work we’re valued and respected as equals. It’s energizing to work in a place where we’re all highly motivated to make our businesses succeed. Of course we are—because we share directly in the rewards.

2. With cooperative ownership, we get more than a paycheck. We get a real say in what goes on at work, from what’s in our paychecks to what benefits we get. We decide together how the firm is run, and the ways we want our companies to impact our community and the planet. We don’t have to worry that when we improve our business with the latest artificial intelligence it will put people’s jobs at risk. Our goal is to make life better for ourselves and for our whole society.

3. Conservatives, once again you try to sell us your free-market fantasy of the labor market, but every day in capitalism, private owners steal from their workers. And those low-skilled workers have no choice but to put up with this theft and spend their lives laboring for low pay and no benefits. You love to point the finger at imaginary “freeloaders” in democratic socialism, but capitalism is a system of freeloaders who live off the sweat of hardworking people.

4. Owners exploit workers because it brings them profit, and when we leave it alone, as conservatives want to do, then those owners have no constraints. When they buy new machines and productivity goes up, work- ers’ wages don’t. Then, because of those new machines, owners lay off workers and create a reserve army of the unemployed. While workers scramble to compete for the few jobs that remain, wages are driven down even more. Every way you look at it, the workers are the losers in free-market capitalism.

5. Liberals, you want to be the good guys who fight for a better livelihood for workers by pushing for a higher minimum wage. But the problem isn’t how much the hourly wage is; the problem is that the whole system of capitalism is based on private owners exploiting productive workers. A higher minimum wage won’t solve that. Minimum wage may limit the amount owners can steal, but the stealing continues. All you’re doing is trying to give us a slightly more palatable way to package the theft.

6. The minimum wage creates a dangerous illusion that all it takes to solve poverty is a few more dollars in workers’ paychecks. This keeps us from making the real changes that would eliminate poverty. It keeps workers’ bellies filled just enough so that they will go back to work the next day. And in our global econ- omy, firms do an end-run around the minimum wage and move jobs to countries where labor is cheaper. Fair-market capitalism is a contradiction. There’s no fairness without workplace justice.

7. Worker-Owned Business Incubators make it possible for more cooperatively owned firms to launch, and they help firms succeed by giving them technical and financial support—loans, mentoring, grants, research on best practices, and so forth. Through cooperative ownership, people enjoy the fruits of their own labor and prosper. Our tax dollars fund the incubators because our whole society benefits when entrepreneurs bring their new innovations to market and when businesses thrive.

8. By supporting more people in forming successful cooperatively owned enterprises, we raise everyone’s standard of living because a portion of the surplus that’s generated by every firm pays for everyone’s basic needs—health care, higher education, transportation, and so forth. Sharing responsibility for these high-cost goods and services establishes the foundation of well-being across the nation: opportunities to prosper and freedom from worry about meeting our material needs.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 10: Livelihood | 301

out of poverty. It’s only when people have the right

motivations to act that they become the scientists,

doctors, teachers, and plumbers our nation needs.

I knew with a sinking heart that many of my stu-

dents would end up stuck in the same trap of

poverty. And it’s completely unnecessary because

there are plenty of ways to get ahead in this coun-

try. They could have learned a trade and eventu-

ally started a business. They could have earned

a degree, found a skilled job, and worked their

way up the ladder to success. This country is brim-

ming with opportunities, but people need the right

incentives to make the effort.

Let’s consider the low-skilled labor market.

When we leave it alone, if the equilibrium wage

is too low relative to the cost of living for a decent

livelihood, it will self-adjust and the problem of

poverty is solved. How does this happen? In a

nation that doesn’t have a minimum wage to dis-

tort price signals, the low wage for low-skilled

labor signals to people, “If you stay in this low-

skilled labor market, you’re not going to be able to

afford your life.” Those who are able will get out of

this market by finishing their education or getting

job training or applying for a better job so they can

get the livelihood they need. Of course they will—

because they are motivated to have the things they

need in life, and no one is giving them handouts.

In figure 10.3 you can see that as they leave the

market, the supply of low-skilled labor will shift

to the left and the wage will naturally rise. Those

who are left in the low-skilled labor market will be

the people who are actually appropriate for those

jobs—those who can only do low-skilled work, for mental, physical, and emotional reasons. They

will now get paid a decent wage. Those who are

perfectly capable of doing higher-skilled work will

start to climb the ladder of success and enjoy more

prosperity. People at every level benefit when we

leave the labor market alone to self-adjust.

ConservativeVoice on Livelihood Livelihood When I taught sixth grade, it was sad and frustrating to see how the parents and grandparents of my low-income students had gotten stuck in poverty. They depended on government handouts to get by—food stamps, housing

vouchers, Medicaid, and more. Those who worked had low-skilled jobs that paid

wages the government artificially inflated above what they should have been. All

this government interference created a perfect storm of disincentives for people to

get a marketable skill and education that would actually lift them and their families

302 | Voices On The Economy

NN1

Low-Skilled Labor Market

Figure 10.3 Conservative View

My brother-in-law is a perfect example of how

price signals motivate people to make the choices

that bring them the kind of life they want. He’s a

very bright guy, but he flunked out of every school

he went to until one summer he worked as a roofer

in Phoenix, Arizona, in brutal 116-degree heat. It

dawned on him that this sort of grueling manual

labor was going to be the only option open to him

if he didn’t finish his degree. So he fled back to the

classroom, applied himself to his studies, and even-

tually became a doctor. Today, he owns a private

plane and a ski condo, and he saves people’s lives.

That’s a success story we want to repeat across our

nation. Not everyone has the ability to become a

doctor, but everyone can contribute to society and

in the process create a good life for themselves.

When I was training to be a teacher, I worked in a

school for young people who had severe disabili-

ties. It was so moving to see them eagerly learning

how to do all kinds of important jobs—sorting the

mail, working a cash register, bussing a table, and

other work that we consider “low-skilled.” Becom-

ing employable meant a chance at more indepen-

dence. We do a great service to people who have

no other choices beyond low-skilled jobs—includ-

ing people just starting their work lives—when

we get rid of the incentive to stay for those who

don’t belong in that market. That’s how the people

who actually belong there can finally get paid a

livable wage. Through free-market capitalism and

the profit motive, people follow price signals and

have incentives to make choices that allow them

to prosper.

When you see a bird that you think looks

hungry, you feel sorry for it, so you feed it. It

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seems like you’re doing

the compassionate thing.

But then what happens?

The bird becomes depen-

dent on your bird feeder

and stops using its own

innate abilities to find

worms and seeds to feed

itself. It becomes impov-

erished. You meant well,

but you taught the bird to

be helpless, and now you

have significantly reduced

its chances of survival. It’s

the same in parenting. You

love your children and

want to give them every-

thing you didn’t have, but

so often you forget to give

them what you did have, which was the motivation

to work hard and over-

come obstacles to achieve

what you want in life. This

is exactly what happens

with low-skilled workers

who rely on government handouts and policies

that supposedly protect them. Instead of helping

them, government interference ends up demoti-

vating them to take responsibility for their own

lives. What might have started with good inten-

tions ends up leaving people stranded in poverty.

You liberals might have your hearts in the right

place, but here’s the problem that so often shows

up with your policies: you say that you want to

solve poverty, but you actually make it worse. Min-

imum wage is a disaster. You require firms to pay a

wage that’s above equilibrium, and what happens?

Employers hire fewer workers and unemployment

goes up. Right off the bat, your policy creates more

poverty—not less. And those workers who get laid

off won’t be saying, “Hey, that’s okay. The surplus of

workers created by the lib-

eral minimum wage wasn’t

that much, so no problem.”

And let’s not ignore the fact

that when firms are forced

to pay a minimum wage,

they may not be able to stay

in business, which means

more job losses. If they do

manage to stay afloat, they

will have to pay more for

labor, which means they’ll

have to charge more for

products, and that drives

up prices. So all those

now-unemployed people

have no income and are

slapped with higher prices

for everything they need

to survive. Good job, lib-

erals. Let’s hit them when

they’re down.

Do you remember the

last time you had to do a

group project at work or

at school? Argh! There’s

always someone in the group who coasts along

doing nothing and still gets rewarded with the

good grade, the bonus, or the promotion. Those

free riders let everyone else put in the time and

hard work while they sit with their hands out,

ready to reap the benefits. Radicals, your idea of

cooperative ownership is basically a group proj-

ect on steroids. You poison the whole work ethic

because the people who would have worked hard

don’t want to be suckers, so they stop working

too, and then nothing gets produced. On top of

that, in democratic socialism you give people free

health care, free transportation, free this, and free

that. Sounds nice until you realize that now no one

is motivated to do anything. Why should they be, when everything is handed to them? Obviously,

The free market is our only viable solution

for people to prosper because when

wages aren’t set by a government bureaucrat, they’re determined by

the reality of supply and demand. Everyone who

wants a job will get a job at whatever wage

naturally emerges. And everyone will be working

in the jobs for which they’re best suited.

304 | Voices On The Economy

this plan isn’t going to be sustainable—not when

no one is producing, and people are lined up to

collect their freebies. We end up with impoverish-

ment of the masses. Worker-Owned Business Incu-

bators spread this harmful idea like an uncovered

sneeze during flu season. They give money away

to cooperatively owned businesses. But whose

money are the incubators and the businesses

using? Their own? Not a chance! They’re gambling

with our tax dollars. And when the start-ups fail—

because statistically that’s what happens to most

new businesses, especially in democratic social-

ism, which uses mob rule to make decisions and

has no expert at the helm—the incubators will just

reach into the community pocket and grab more

cash to risk on another dead-end idea.

We should reject minimum-wage legisla-

tion and let price signals guide the low-skilled

labor market to end poverty. The free market is

our only viable solution for people to prosper

because when wages aren’t set by a government

bureaucrat, they’re determined by the reality of

supply and demand. That’s great news. It means

that everyone who wants a job will get a job at

whatever wage naturally emerges. And every-

one will be working in the jobs for which they’re

best suited. When we pursue our self-interest in

a system of private ownership and unregulated

markets, we get the best outcomes. People are

motivated to get out of the low-skilled labor

market and use their talents and skills to bring

the world inventions that make everyone’s lives

better, entertainment that moves and delights us,

beautiful buildings where we can live and work,

and everything else we want. Those who stay in

the low-skilled labor market can finally earn a

decent wage, and some people will use it as the

first step on the ladder to better opportunities.

Leaving the low-skilled labor market alone, peo-

ple will have food on the table, clothes on their

backs, and a roof over their heads. People will be

guided to make decisions that not only serve their

own well-being but also expand the well-being of

our whole society.

Chapter 10: Livelihood | 305

ConservativeFree-Market Capitalism BIG PICTURE Through free-market capitalism and the profit motive, people follow price signals and have incentives to make choices that allow them to prosper.

POLICY POSITION Poverty causes suffering, but . . .

" Liberal policies of minimum wages make poverty worse by creating higher unemployment, driving up prices, and forcing firms to go under.

" Radical policies to create more worker-owned firms sap motivation to work hard and waste tax dollars on enterprises that are doomed to fail.

SOLUTION Reject minimum-wage legislation so that the invisible hand can end poverty:

! People are motivated to move up the ladder.

! Livable wages arise naturally.

NN1

Low-Skilled Labor Market

Livelihood

306 | Voices On The Economy

Livelihood Talking Points: Conservative 1. Poverty solves itself when markets are free from government meddling. When the price signal for low-

skilled work is free from interference, those who can do higher-skilled work will be motivated to make choices that will put them in a position to earn a better livelihood. They’ll finish their education, learn marketable skills, work hard, and apply for better-paying jobs. They’ll work their way up the ladder to prosperity.

2. We’ll always need low-skilled workers, and there are people whose skill levels are appropriate for low- skilled jobs. When the price for wages is left alone, the people who weren’t appropriate for those jobs leave the market. This is good because they shouldn’t have been in that market in the first place. We should let wages adjust naturally to where they should have been all along. Then people who belong in the low-skilled job market can finally earn a decent livelihood.

3. When you see a bird that looks hungry, you feel sorry for it, and you feed it. It seems like you’re doing the compassionate thing. But then what happens? The bird becomes dependent on your bird feeder and stops using its own innate abilities to find worms and seeds to feed itself. It becomes impoverished. Lib- erals, this is exactly what you do when you make low-skilled workers dependent on handouts and policies that supposedly protect them. You demotivate them and in the process leave them stranded in poverty.

4. The minimum wage jacks up employers’ costs so firms have to lay off workers or go out of business. Either way, we get more unemployment. Ouch. And now those firms have to raise the prices of their products because they’re paying higher wages. Cost of living goes up. Double ouch. So the great idea liberals have to solve poverty leaves people unemployed and paying more for everything. This is what they always do— attempt to solve a problem with government meddling and end up making things worse.

5. We all want to create wealth, but trading private ownership and wage labor for cooperative ownership means that some people will coast along and grab a free ride on the backs of diligent, hardworking peo- ple. And those hard workers don’t want to be suckers, so they’ll eventually stop working hard because why should they break a sweat if no one else is? Radicals, you poison the whole work ethic because in demo- cratic socialism no one is motivated and nothing gets done.

6. Worker-Owned Business Incubators are government-funded committees that use our tax dollars to fund start-ups. Here’s the problem with this idea: I won’t be dedicated to the success of my cooperatively owned business because it’s not my money I’m risking. So when my new enterprise fails because none of us really knows what we’re doing, it takes us forever to vote on every decision, and we have no expert at the helm, we’ll just go back to the committee and let the community fund our next dead-end idea.

7. Here’s why the free market is our only viable solution for people to make a good living. In the low-skilled labor market, the wage isn’t set by a government bureaucrat. It’s determined by the reality of supply and demand. That’s great news because it means everyone who wants a job will get a job at whatever wage naturally emerges. Those who stay in the low-skilled labor market finally can earn a decent wage, and some will use it as the first step on the ladder to better opportunities.

8. We’ve had the minimum wage for decades, but it hasn’t ended poverty; it just perpetuates it. If we were freed from the shackles of a government-mandated price floor, workers would naturally be motivated to act in their own self-interest to improve their skills and move into higher-paying jobs. People will be guided by price signals to make choices to prosper. This is how we thrive as individuals and in the process make our nation stronger.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 10: Livelihood | 307

prodigies. Those exceptional cases are inspiring,

but those stories also become a barrier to solving

the problem of poverty for everyone because we

get used to the idea that only the very talented

deserve to rise and for the rest it’s going to be a

lifetime of economic struggle. Not a single one of

my students was recruited by the NBA or given

a full ride to Harvard, and while I and the other

teachers talked about college as an option for our

students, we knew the odds were stacked against

them. America should live up to its promise as

a land of opportunity, but it’s an empty promise

when people spend all their waking hours work-

ing two or three jobs and still fall below the pov-

erty line. The term working poor should be an oxymoron. We need to fix the system and give

people a fair shot at rising in the world.

Let’s consider the low-skilled labor market. As

we know, a price floor in any market will always

bring about a surplus, and a surplus of low-skilled

workers indicates unemployment. But applying

the tool of elasticity reveals by how much unem- ployment will go up. This is extremely import-

ant in our conversation about the minimum wage

and whether it will end poverty. In the low-skilled

labor market, both the supply and demand curves

are highly inelastic. When we put a price floor—a

minimum wage—on highly inelastic supply and

demand curves, we end up with only a small sur-

plus of low-skilled workers. And that minimal job

loss caused by the price floor will be reversed

immediately, as you can see in figure 10.4. Why?

Because when poor people get money in their

pockets they spend it right away. Firms respond

to the increased demand by expanding and creat-

ing more jobs, which means the demand for low-

LiberalVoice on Livelihood Livelihood In the middle school where I taught sixth-grade social studies, I often felt uncomfortable talking about America as the land of opportunity for all. I was acutely aware of the irony of saying this to students whose parents and grandparents

had never gotten a toehold on the ladder to success. Most of them had been

born and raised and still lived in the same run-down neighborhood, and I knew

that the chances of my students escaping during their lifetimes was statistically

low. We all hear about the kids who make it out because they are geniuses or

308 | Voices On The Economy

skilled workers goes up. That’s how the minimum

wage creates more employment. Poverty is solved

and society as a whole flourishes.

NN1

Low-Skilled Labor Market

Wage Floor

Figure 10.4 Liberal View

I was recently cleaning the windows of my fifth-

floor apartment, and while leaning precariously

over the balcony, I couldn’t help but think about

how window washers are always at risk of fall-

ing to their deaths if they don’t know what they’re

doing. My arms were aching as I squeegeed off

the last window, and I had a new appreciation for

the workers who make it look so effortless. Later

I went out to lunch and watched the server pour

cups of coffee without spilling a drop and expertly

balance heavy trays piled high with plates of waf-

fles and burgers. On the way back to my air-condi-

tioned office, I noticed three groundskeepers using

a clever system of ropes looped over branches to

guide dead tree limbs safely down without hitting

themselves or the cars parked on the street below.

We should be thanking the people who do these

backbreaking and challenging jobs that we call

“low-skilled,” but that actually require a lot of skill

to do them well. And we should be making sure

workers can earn a decent livelihood for their hard

work, because it’s right and fair. It’s not just good

for low-income workers—it’s good for all workers

because wages are laddered. That means when the

bottom rung starts higher, all the rungs above it also

go up. Through a minimum wage, workers earn a

decent living, enabling them to buy the things they

need, and with increased demand, firms hire more

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workers, which is how pov-

erty is eliminated.

Radicals, your idea to

replace the minimum wage

with cooperative owner-

ship will not only make

poverty worse for people

who are already poor, but

it will lead to more of us

being poor. You want to

throw out the very thing

that solves poverty, which

is fair-market capitalism,

and replace it with your

one, straitjacket approach

to business. Here’s a real-

ity check: in the context

of democratic socialism,

cooperative ownership

won’t generate wealth. The

entrepreneurs who bring

us the new ideas that become tomorrow’s eco-

nomic drivers have no motivation to spend years

tinkering in the garage or toiling in the lab to

perfect a new design, because the rewards of

genius, talent, and effort will have to be shared

with people who didn’t work hard or have great

ideas. And when workers are forced to buy into

the firms where they work, they’ll end up stuck

there, suffocated by the lack of opportunities to

try new careers. Your Worker-Owned Business

Incubators will make it possible for poor peo-

ple to buy into a cooperatively owned firm, but

how will that be good for the business when

low-skilled people with no expertise or skills to

contribute are handed a share of the company?

The businesses will fail! And to make it worse,

the low-skilled worker won’t even be able to get

an entry-level job, because in democratic social-

ism firms aren’t allowed to hire wage laborers. So

how will they ever get the experience they need

to succeed? Radicals, you take away opportuni-

ties for people to gain the

skills that could become a

stepping-stone to improv-

ing their lives. You take

away people’s best shot

at escaping from poverty.

Please don’t incubate more

of this misguided idea.

Conservatives, your

do-nothing approach to

improving the livelihoods

of the poor leaves low-

skilled workers vulnerable

to being paid an unfairly

low wage. You say that if

someone doesn’t like the

wage, then that person can

just leave the low-skilled

labor market and go back

to school and get training

to qualify for a higher-pay-

ing job. Stop blaming poverty on people being

unmotivated to improve their lives. No one wants

to be poor! Have you looked at the price of tui-

tion lately? And day care? And how will they pay

their bills while they’re in school? It’s also naïve

to say a person can just move into a better-paying

job overnight. Most of the working poor have few

options, which is why they get stuck in low-wage

jobs in the first place. Your idea to abolish the

minimum wage is like abandoning them in the

middle of the ocean with no life preservers and

telling them it’s their fault if they drown because

they aren’t motivated enough to swim faster.

Leaving it alone ultimately hurts all of us. When low-income people aren’t mak ing a fair wage, and

therefore they can’t afford to buy products, firms

will have to lay off workers. That unemployment

will create even more poverty. Eventually firms

will go out of business. Leaving it alone leads to

unemployment, hurts low-skilled workers, and

puts our whole economy at risk.

We should be thanking the people who do

these backbreaking and challenging jobs that we call “low-skilled” but that

actually require a lot of skill to do them well. And

we should be making sure workers can earn a

decent livelihood for their hard work because it’s

right and fair.

310 | Voices On The Economy

We should support minimum-wage legislation

to end poverty. It’s a lifeline for motivated peo-

ple who are struggling to earn a decent living

and make their lives better. We need to strengthen

the policy so that people who work forty hours

or more a week at low-skilled jobs can, at the

very least, be able to afford the basic necessi-

ties of life for themselves and their families. A

minimum wage that is a living wage makes that

possible. It needs to be calculated based on a

realistic assessment of what people actually need

to earn in order to support themselves and their

families. Raising it so that it’s a living wage is the

right and fair thing to do, and we’re fortunate that

we can do this in fair-market capitalism, which

supports both workers and firms so that all can

prosper. Getting more money into the pockets

of low-income people stimulates the economy

because they spend the money right away. The

boost in demand is a boon for businesses, which

turn around and hire more workers. This is how

we create more prosperity for all. With a living

wage, low-skilled workers will have food on the

table, clothes on their backs, and a roof over their

heads. Strengthening the minimum wage is good

for individuals, families, communities, and firms

because it creates the optimal conditions for our

whole nation to thrive.

Chapter 10: Livelihood | 311

LiberalFair-Market Capitalism BIG PICTURE Through a minimum wage, workers earn a decent living, enabling them to buy the things they need, and increased demand leads firms to hire more workers, which is how poverty is eliminated.

POLICY POSITION Poverty causes suffering, but . . .

" Radical policies squelch entrepreneurial drive and impoverish the whole society, while firms flounder and workers stagnate.

" Conservative policies to leave it alone exacerbate poverty because working people stay poor and firms go under when people have no money to buy their products.

SOLUTION Support minimum-wage legislation to end poverty:

! Raise it to a living wage.

! Boost the whole economy. W1

NN1

Low-Skilled Labor Market

Wage Floor

Livelihood

312 | Voices On The Economy

Livelihood Talking Points: Liberal 1. Have you ever waited tables at a diner on a Sunday morning? Have you ever mowed lawns and trimmed

trees at a resort? Have you ever cleaned motel rooms? Those jobs require hard work, focus, and expertise, but we dismiss them as “low-skilled” and don’t pay those workers a decent wage. Nobody who works full time should be living in poverty. The term working poor should be an oxymoron. Low-skilled workers deserve our thanks and should be paid a living wage.

2. Do you want to know how to end poverty? Guarantee all workers a living wage. That will lift millions of peo- ple out of poverty. And getting more money to low-income people stimulates the economy because they have so many material needs that they spend the money in their pockets right away. The boost in demand helps business and circles back around to workers when firms expand and start hiring. A living wage means more jobs, and more jobs mean more prosperity for all.

3. Radicals, you want to throw out the very thing that solves poverty, which is fair-market capitalism. Democratic socialism won’t generate wealth, because the entrepreneurs who bring us the new ideas that become to- morrow’s economic drivers have no motivation to spend years tinkering in the garage or toiling in the lab to perfect a new design. With cooperative ownership the rewards of genius, talent, and effort are shared with people who didn’t do all that hard work.

4. Are you still working in the first job you ever had? Probably not. Most people start out in entry-level posi- tions and look for ways to move up the ladder. But in democratic socialism people will have to try to find a firm that wants them as a co-owner—even though they have no skills or experience. And because firms aren’t allowed to hire wage laborers, those people won’t even be able to get an entry-level job. Radicals take away opportunities for people to have the stepping-stones needed to move up in life.

5. Conservatives blame the poor for being unmotivated to improve their lives. It’s naïve to think a person can just move into a better-paying job overnight. Have you looked at the price of tuition lately? How will they pay their bills while they’re in school? Most of the working poor have few options, which is why they get stuck in low-wage work. The free-market approach makes the odds worse that they’ll ever be able to work their way up to a decent livelihood.

6. When people are stuck in poverty because they can’t earn a fair wage, the whole economy suffers. Con- servatives, you shoot yourselves in the foot by opposing the minimum wage because when people have no money in their pockets, businesses don’t thrive. Firms have to lay off more workers or go belly-up. So then we end up with higher rates of poverty. Once again, your idea to do nothing puts our whole economy at risk.

7. We should support minimum-wage legislation to end poverty. It’s a lifeline for motivated people struggling to move out of poverty. We should strengthen the policy by raising it to be a living wage. It’s the right and fair thing to do. If people work forty hours or more a week, they should be able to afford the basic neces- sities of life for themselves and their families.

8. Strengthening the minimum wage creates the optimal conditions for our whole nation to thrive. When we base it on a realistic assessment of what a person needs to earn to afford a decent life, we transform the lives of the working poor and give them a fair chance to rise in the world. It’s through fair-market capitalism that we create the best pathway out of poverty.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

Chapter 10: Livelihood | 313

The Shared Outcome

The issue of livelihood has been with us since

the beginning of human civilization and will

always be our central priority because it speaks to

our survival. We will always strive to earn enough

to afford what we need to support ourselves and

our families. All perspectives agree that it is both

desirable and possible to end poverty. So it’s

time for you to try on the different perspectives

and join the conversation as a respectful listener,

passionate advocate, and intelligent debater. In

this way, you will find your own voice, and you

may even spark some new ideas in the process

that can bring people the livelihoods that will

enable them to thrive.

314 | Voices On The Economy

Activity: Skit and Re-vote 1. Skit Instructions

Get together with friends, classmates, or family members and share the talking points and perspective

summaries with them. Then work together to write a VOTE skit. This is a five-minute performance that

you and your classmates (or friends and family members) create to advocate for a perspective while

critiquing the other two perspectives on livelihood. It should have a title, setting, characters, and a

story line. You might also want to plan for a few props and simple costumes. When you write up the

different lines of dialogue, make sure everyone has a role and feels comfortable saying their lines—and

understands what they’re saying. This is your chance to win the Oscar for best performance and to

move people’s minds to new ways of thinking. Give your audience goosebumps by really capturing

the heart of the different points of view. Rehearse your skit at least twice. You don’t have to memorize

your lines—you can read them—but please speak with emotion and conviction so your audience stays

engaged. You don’t want to sound like you’re reading or you’ll put your audience to sleep.

2. Revisit Your VOTE Ballot

Now that you’ve made a passionate case for a perspective—and hopefully heard your friends,

classmates, and family members make their passionate cases for other perspectives—please go

back to the VOTE Ballot and vote again on Livelihood. Are you more certain than ever that your

original position was correct? Have you shifted toward a different perspective? Be sure to fill in the

“Why?” section. The VOTE Program is all about helping you think critically about the issues and have

informed opinions.

Chapter 10: Livelihood | 315

Chapter 10: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Which one of the following answers describes the term livelihood? A. The income under which people qualify for government assistance. B. When people who have regular jobs remain poor. C. The way in which people are able to meet their basic necessities of life. D. An inability to meet the basic necessities of life.

2. Match the term related to poverty (left column) to its definition (right column).

A. Supplemental Poverty Measure (SPM)

i. Income (broadly defined as cash earnings with benefits added and costs subtracted) compared to costs for food/utilities/shelter/clothing.

B. Official Poverty Measure (OPM) ii. Income (narrowly defined as cash earnings) compared to the cost of food times three.

C. Poverty Threshold iii. Income generated from full-time work is not sufficient to meet basic needs.

D. Working Poor iv. Income level below which government assistance is available.

3. Which of the following statements are true? Choose all that apply. A. Labor union representatives bargain with management on workers’ behalf over pay,

hours, benefits, and working conditions.

B. Labor union representatives negotiate on workers’ behalf about which workers will be paid the minimum wage and which workers will be exempt.

C. Right to Work laws make it illegal for employers or unions to require union membership or to collect union dues without the explicit agreement of each employee.

D. Right to Work laws make it illegal to exempt certain groups from minimum-wage legislation, e.g., youth, farmworkers, tipped employees, etc.

4. Let’s say you dropped out of high school five years ago and now you want to go to community college. Which government program is intended to help you achieve your goal?

A. Head Start B. TRIO C. Minimum Wage D. Job Core

316 | Voices On The Economy

5. According to radical theory, the main problem with a capitalist economy is that owners of capital hire wage laborers to use the owners’ machines to make products, but those workers are paid less than the value they contribute. The process by which the capitalists take the surplus value produced by workers is called __________.

A. pressure for bad B. capitalist competition C. workplace exploitation D. discrimination

6. According to liberals, which problems will result if we don’t have a capitalist economic system that’s balanced with minimum-wage legislation? Choose all that apply.

A. Unfair low wages B. Working poor C. Unemployment D. Stagnation

7. A server at a restaurant overhears a liberal, a radical, and a conservative arguing about minimum- wage legislation. As she hands them the check, they ask her what she thinks. “Well, if the minimum wage went up, maybe I could pay my bills,” she says. Which of the following statements reflects the conservative’s response to the server?

A. “You’ve got it right. A raise in the minimum wage leads to a livable wage. The benefits to workers outweigh the loss to the corporations.”

B. “You’ve got it completely wrong. If the minimum wage goes up, firms will lay off workers and raise prices, which means you might lose your job and be forced to pay more for the things you need.”

C. “You’ve got it completely wrong. Raising the minimum wage won’t fix poverty, because capitalism is the cause. To create real change, we need worker-owned cooperatives.”

D. “You’ve got it right. When the minimum wage goes up, more people will have money to spend so firms will expand and start to hire. More people will have money in their wallets and good jobs.”

Chapter 10: Livelihood | 317

8. Please choose the correct radical interpretation of this Six-Core Cube. A. In democratic socialism, government cooperatively

owns all of the businesses, hires all of the workers, and pays everyone a living wage, resulting in decent livelihoods for all.

B. In democratic socialism, workers own businesses cooperatively while basic human needs are funded and provided by the society as a whole, resulting in decent livelihoods for all.

C. In democratic socialism, a minimum wage is guaranteed to all employees based on the independent decisions of elected officials, resulting in decent livelihoods for all.

D. In democratic socialism, people make individual choices of what to supply and what to demand, resulting in decent livelihoods for the maximum number of people.

9. Please choose the correct conservative interpretation of this graph of the low-skilled labor market.

A. The low-skilled labor market will naturally adjust to a higher wage when those who were previously flooding the market are given the appropriate motivation to seek higher-skilled work.

B. The low-skilled labor market will appropriately self-correct to a higher wage when people with skills no longer have incentives to participate due to the high taxes necessary to pay for government programs, and they return to the low-skilled labor market.

C. The government is an impediment to higher wages. Instead, Right to Work laws create a wage floor, the supply curve shifts to the left, and higher wages result.

D. Both A & C.

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

of Demo cratic So

cialism

NN1

Low-Skilled Labor Market

318 | Voices On The Economy

Chapter 10: Key Terms Agency shop Closed shop Collective bargaining Labor unions Livelihood Money illusion Nominal amount Official Poverty Measure (OPM)

Open shop Poverty Poverty threshold Real amount Red Scare Right to Work movement Scabs Strike

Strikebreakers Supplemental Poverty Measure

(SPM) Union shop Working poor

10. Please choose the correct liberal interpretation of this graph of the low-skilled labor market.

A. The minimum wage increases employment in the low-skilled labor market and raises the salaries of all employees because wages are laddered.

B. A higher minimum wage will not only raise pay for low-skilled workers, but those higher wages will also incentivize firms to produce, expand, and hire more workers, resulting in higher wages and more employment.

C. For a higher minimum wage, it isn’t necessary to set a wage floor. Instead, regulations can be imposed on all firms equally, thereby shifting the demand curve of low-skilled labor to the right and bringing about a higher wage.

D. A combination of A & B.

NN1

Low-Skilled Labor Market

Wage Floor

Answers

1. C 2. A – i, B – ii, C – iv, D – iii 3. A & C 4. B 5. C 6. A, B, C, & D 7. B 8. B 9. A 10. B

ch11

When I was a child, I loved the game Monopoly. I had four friends in the neighborhood, and we used to race home after school to play. I still remember lying

on a scratchy carpet and carefully counting out

$1,500 in pastel-colored bills for each player. It

felt like a fortune. We took turns choosing our

metal tokens—shoe, iron, dog, car, thimble. It was

a good omen when I rolled the highest number

and got to go first. I loved the strategy and the

camaraderie of our Monopoly games. There was

wheeling and dealing, and there were tough deci-

sions to be made. Should I buy the railroad, which

delivered a steady return on investment, or save

my money just in case I landed on Park Place?

Should I build houses or

save my cash to buy more

properties? I learned

what a utility was from

playing Monopoly. It was

always very satisfying to

pass Go and collect $200. But when I landed on

someone else’s property,

the owner would stick

out a hand and demand

the rent: “Pay up!” Paper money would be flung

across the board.

Monopoly sometimes caused bitter fights. We

would accuse one another of cheating or of gang-

ing up and making side deals. Sometimes, we

would get so upset that we would stop talking

to one another for a few days. But then we’d be

huddled around the Monopoly board again the

next week, playing to win. And I loved to win!

We all did. I still remember feeling confident and

clever. Losing was a different story. When things

started to go downhill and I had to mortgage my

properties and sell back my houses to the bank

for half the money I’d paid for them, I would feel

utterly defeated.

We think of Monopoly

as child’s play, but it actu-

ally teaches us lessons

for life. It taught me how

to think about investing,

taking risks, and plan-

ning ahead. It taught me

that success depends on

a combination of factors,

including luck, hard work,

and talent. I still hear

11Issue:HOUSING

322 | Voices On The Economy

echoes of those childhood arguments we had over

Monopoly games in the angry debates in society

today. People accuse one another of taking advan-

tage by charging too much rent, or of cheating, or

of colluding and making side deals. There are argu-

ments over whether some people are unfairly jailed

while other people have a “Get Out Jail Free” card.

Monopoly has been played by a billion peo-

ple around the world. It’s been played underwa-

ter, in a moving elevator, in world tournaments,

and it’s even been played in space. The game has

been translated into 47 languages and sold in 114

countries. The history of Monopoly is fascinating.

As you may have noticed, Monopoly is a game

about capitalism—privately buying and selling

land and developing it to make a profit. But the

irony I want to share with you is that originally

the game from which Monopoly was derived was

meant to criticize this very idea that land should

be privately owned. The version of the game that

we play today was developed by an out-of-work

home heater salesman named Charles Darrow.

He’d lost his job during the Great Depression, so

he sat in his house in Philadelphia and redesigned

a game that had already been around for thirty

years. The original concept was the brainchild of

journalist and actress Lizzie Magie in 1903. She

had been influenced by an economist named

Henry George, and she designed her game to

demonstrate George’s idea that private ownership

of land worked well for some owners but worked

terribly for tenants. Magie called it The Landlord’s

Game. The players who were tenants struggled

to survive and keep their homes, while the play-

ers who were landlords strategized ways to make

more profit from their properties. Although the

Landlord’s Game was intended to point out prob-

lems that arise from private ownership of land, by

the time Charles Darrow sold Monopoly to Parker

Brothers in 1935, it had become a celebration of

capitalism and a training ground for how to profit

from the private ownership of land.

For many of us, Monopoly was our first intro-

duction to the complex world of housing. We

learned to buy and sell real estate, pay rent,

secure mortgages, deal with banks, budget our

limited dollars, and handle unexpected personal

financial crises. But as I’m sure you are aware, in

the real world the issue of housing is not a game.

It’s vital to our survival. In this chapter, conserva-

tives, liberals, and radicals all agree that unafford-

able housing leads to homelessness. They share

the same goal of creating affordable housing for

all. But they strongly disagree about how to do it.

The policy we’re going to debate in this chapter

is rent control laws.

Understanding the Issue of Housing

“The ache for home lives in all of us,” wrote poet

Maya Angelou, “the safe place where we can go

as we are and not be questioned.” Another poet,

Robert Frost, wrote, “Home is the place where,

when you have to go there, they have to take you

in.” Sentimental ideas about home abound. I’m

sure you’ve heard “Home is where the heart is”

and “Home, sweet home” and Dorothy’s famous

line in The Wizard of Oz, “There’s no place like home.” The emotional experience of home is

central to our psychological and spiritual well-

being. But that’s not what we’re going to be talking about in this chapter. Our conversation

focuses on the availability and affordability of

the actual physical spaces where people live.

Housing is fundamental to our existence. We all

need a place that shelters us from storms, extreme

temperatures, wild animals, and other threats to

our continued existence. We all need a space in

which to conduct our personal lives—make food,

sleep, bathe, raise children, and close the door on

the world to enjoy a measure of privacy.

Let’s do a little exercise. Go to the real estate

section of your local newspaper or check out an

apartment rental site online and look up what it

Chapter 11: Housing | 323

costs to rent a one-bedroom apartment in your

area. What is the absolute cheapest rent you can

find? Now do a little digging and find out what

the minimum wage is in your area. Write that

down too. We’ll come back to this later.

What Is Housing? Housing simply refers to places where people

live—our residences. We humans have come up

with a marvelous variety, including single-fam-

ily homes, cabins, mansions, nursing homes,

mobile homes, palaces, low-end apartments, RVs,

group homes, cooperative housing, manufactured

homes, castles, condominiums, yurts, luxury apart-

ments, trailers, lofts, boxcar homes, assisted-living

facilities, and more. In the course of your lifetime

it’s very likely that you’ll end up living in a variety

of homes. The options you’ll have will depend on

whether you find yourself in an urban, suburban,

or rural area and on your finances. It’s helpful to

understand the alternatives so you can make the

right choice for your situation.

Apartments are residential units. They might be in a high-rise building or in a house subdi- vided into sev eral units. Some apartment build-

ings are investment properties owned by individ-

uals or by for-profit corporations and rented out

to ten ants. A tenant is the person who leases (rents) a property from a landlord (owner). Rent is the term for the regu lar payment a tenant makes to an owner for use of the property. Can

you guess what the highest rent in New York City

ran in 2014? CNN reported that one tenant paid

half a million dollars to rent a six-bedroom suite

for a month. It took up the entire 39th floor of the

Pierre Hotel.

If tenants fail to pay the rent on time, or vio-

late the rental contract in other ways, landlords

may evict them, which is a legal process to force a renter to vacate the property. In some cases,

owners hire property managers to maintain the property and manage the tenants, including

negotiating leases, collecting rents, and respond-

ing to requests for repairs and other matters.

When people occupy an empty or abandoned

property without paying rent to the owner they

are called squatters. While apartments are intended to be rented

out, other privately owned housing may either be

owner-occupied or rented out by the owner. For

324 | Voices On The Economy

example, condominiums (also known as con- dos) are residential units in a building or complex

of buildings that are privately owned by individ-

uals who also own a percentage of the shared

spaces—hallways, lobby, the land on which it’s

built, and so forth. Condos generally have condo- minium associations (COAs), which are elected bodies made up of owners. COAs establish and

enforce rules and requirements for renters and

owners. They make decisions about things like

parking, noise, pets, weeds, garbage, paint colors,

and more. A condo board, which is an elected body made up of owners who are required to

be members of the COA, reviews complaints,

makes policy, and oversees the property manage-

ment company. If you buy a condo, you’ll pay a

monthly fee to the COA to maintain the common

areas such as the landscaping, hallways, roof, ele-

vators, and so forth.

Of all the types of housing there are, you’re

probably most familiar with privately owned sin- gle-family homes. The land and the structure are owned by individuals. The structures are detached

and vary in size and shape, from McMansions to

mobile homes. When I was growing up, one of my

best friends had a mobile home in Vermont, which

was fantastic for me during ski season. Whenever

I stayed there I marveled at how clever it was that

someone had invented a home that a person could

put down in a convenient place and then take

with them if they wanted to move. The average

size of a new single-family home in the United

States is around 2,500 square feet, but in the past

decade tiny houses have become more popular.

These range from 100 to 400 square feet. Some of

them are built on trailers or made from repurposed

boxcars. One of the more unconventional types

of single-family homes are Earthships, which are

structures made from recycled materials such as

glass bottles and used tires. Whatever typical or

unusual form they come in, single-family homes

that are part of planned developments often have

homeowners associations (HOAs). In order to purchase a home in one of those developments,

owners must join the HOA and pay regular dues.

Governing boards are usually made up of home-

owners, who create and enforce the rules for the

neighborhood. These might focus on issues like

parking regulations, paint colors, landscaping, and

trash collection.

Chapter 11: Housing | 325

Unlike privately owned housing, cooperative

housing, also known as Resident-Owned Com-

munities (ROCs), come in a variety of types. But

no matter what type it is, all ROCs have in com-

mon that the structure and land are co-owned or co-leased by the residents, who make manage-

ment decisions collaboratively. In resident-owned

mobile home communities, for example, the residents co-own the land. An elected board

made up of resident-owners decides how much

co-owners will pay into a common fund every

month to cover property taxes, maintenance, and

other fees. They also decide the priorities for

investment in their community. They might vote

to repave the roads, or install a basketball court,

or put in better lighting, and so forth.

Co-op apartments are often confused with condos. These resident-owned communities are

entirely owned by a nonprofit corporation estab-

lished by residents, so when you buy a co-op

apartment, you actually purchase shares in the

corporation—you own a percentage of the whole

apartment building, but don’t directly own your

individual apartment. Co-ops are governed by a

co-op board made up of representatives elected

from among the shareholders (all of whom are residents). The co-op board sets policies and over-

sees the management of the property and use of

the co-op fees that shareholders pay every month.

My aunt Barbara lives in New York City in a co-op

apartment. She’s away a lot—sometimes for six

months at a time—and I often think it would be

great to sublet her condo for part of the year. But

her co-op board voted not to allow sublets. Board

members can change the policy if that’s what the

residents want. Co-op owners are active partici-

pants in the decision-making process about their

building. For example, they vote on who can move

in as a new resident (legally, they can only consider

a potential shareholder’s financial status and will-

ingness to follow the co-op’s rules). They decide

whether units can be rented to non-owners, have

a say in what kind of new roof or playground or

hallway carpeting should be purchased, and so on.

When I was in college I lived in a group house

instead of living in the dorm. It was fun because

there was always someone around to talk to, and we

shared cooking and other chores. We had weekly

meetings to discuss whose turn it was to clean the

bathroom. This kind of experience is fairly typical

326 | Voices On The Economy

for many college-age people. Later, I was interested

to learn that some people continue to live in group

housing. Co-housing communities are active in thirty-six states and in many countries around the

world. Sometimes they are also called intentional communities. A person may own their own sep- arate home, or the land on which it’s built, or a

percentage of the living space in a shared building.

What’s the same in each community is that residents

generally participate in the design of the commu-

nity and are intentional about creating opportunities

for social interactions among those who live there.

They typically share some communal spaces. For

example, they might design a central courtyard or a

community garden. They might create a kitchen and

dining area large enough for the whole community

to gather and share meals. They might have com-

munity pools, recreation rooms, and so forth. Every-

one takes responsibility for maintaining the prop-

erty together and making decisions together using a

democratic process. By the way, this is not the same

as a commune, which is an intentional community where people share incomes and all the spaces are

communally owned.

There are a wide array of financing arrange-

ments for housing. Cooperative housing is some-

times funded by loans from traditional and co-op-

erative banks and credit unions as well as land

leases from community land trusts (CLTs). These are nonprofit organizations that buy up

land and take it out of the for-profit real estate

sector so it can be made available for housing and

other uses. If you own a property privately, you

probably had to get a mortgage to buy it. That’s a loan for which you pay interest. The lender (usu-

ally a bank) holds a lien on the property, which means it has the right to claim it if you don’t pay

back the loan. If you default on your loan—that is, you don’t pay what you owe every month—

the bank can foreclose, which means it takes full possession of the property and you forfeit all the

money you paid for it up to that point. That’s the

worst-case scenario for homeowners.

No matter what kind of housing you live in,

there’s always a risk that something will go wrong.

It could be a financial catastrophe, a natural disas-

ter, or a personal crisis. If you lose your home, your

options for housing are limited. Many localities offer

temporary housing, which is a place where peo- ple who either have no home or are temporarily

unable to use their home may stay on a time-limited

basis. Some of these include homeless shelters, tran-

sitional housing, extended-stay motels, drop-in cen-

ters, halfway houses, and emergency shelters that

are set up during storms and other extreme weather

events. Losing a home is one of the most stressful

and traumatic experiences a person can have. That’s

why this issue of housing is so important.

Affordability and Homelessness

The federal definition of affordable housing is a residence that costs no more than 30 percent

of a person’s gross annual income, including all

utilities—gas, electricity, water, sewage, trash, recycling, and so forth. If you pay more than that,

you are considered cost burdened. José Morales rented an apartment in a working-

class neighborhood in San Francisco for forty

years. When he first moved in, it was easily

affordable on his salary as a tennis instructor.

Then he hurt his back, and rents went up, and

by 2007 he was paying $864 a month to stay in

his apartment. But his entire monthly income

was only $900. That left him with a grand total of Federal definition: 30% of your income

Do you live in affordable housing ?

Chapter 11: Housing | 327

$36 to pay for everything else—food, electricity,

transportation, medication, clothes, telephone,

and more. In other words, Morales spent 96

percent of his annual net income on rent. He was

one medical emergency or accident away from

homelessness, and the same is true for tens of

millions of people in the United States today.

Think about your situation. What is 30 per-

cent of the annual income of your household?

Remember I asked you to write down the rent

for a one-bedroom apartment and the minimum

wage in your area? Take a look at those numbers

and calculate how much a person makes working

forty hours a week at that wage. When you have

the number, multiply it by fifty-two weeks and

that gives you the gross annual income for a min-

imum-wage job in your area. Now multiply that

number by 0.30 (which is 30 percent). That is the

amount a person can afford for housing where

you live—including utilities—without being cost

burdened. Now check the monthly rent for the

lowest-cost rental you found. Is it affordable? Keep

in mind that the rent might not include the utili-

ties, so that will cost extra. Look up the address

of the rental and ask yourself whether a person

living in that neighborhood would need a car to

get to work. Is it close to public transportation?

What’s the crime rate? Are the schools decent? Is

there a grocery store nearby? These are the ques-

tions a person asks when searching for housing.

This exercise looks at a one-bedroom rental,

but now imagine a family needs affordable hous-

ing. They would be looking at a two-bedroom or

bigger rental. What are the prices like for those

units? According to the National Low Income

Housing Coalition (figure 11.1), if you lived in

Colorado in 2018, for example, you would need

to earn nearly $24 an hour to afford a two-bed-

Figure 11.1 Hourly Wage Needed to Afford Housing

328 | Voices On The Economy

room apartment. The U.S. Department of Hous-

ing and Urban Development (HUD) reported that

there was no place in the country where a family

with only one full-time worker earning the min-

imum wage could afford to rent a two-bedroom

apartment. In the United States in 2017, nearly

half of all renters were cost burdened. In Florida,

for example, the cost-burden rate was 56 percent.

In Miami, it was nearly 63 percent.

Being able to afford a place to live is critically

important to a person’s well-being. That might

help explain the success of a political party based

in New York City called the Rent Is Too Damn

High. It was founded by Vietnam War veteran

Jimmy McMillan. He ran for mayor of New York

City three times, and he also ran for governor

in 2010. “The people I represent can’t afford to

pay their rent,” he said during a televised debate.

“They’re being laid off right now as I speak. They

can’t eat breakfast, lunch, or dinner. Listen! Some-

one’s child’s stomach just growled.” Although

his name wasn’t on the final ballot, McMillan

garnered more than forty-one thousand write-in

votes. In our country, people worry about what

will happen if they lose their homes. They worry

that they will end up homeless.

It’s hard to know exactly how many people in

the United States are homeless, but every year on

a given night in January, HUD tracks how many

people are staying in homeless shelters, other tem-

porary housing, and on the streets. It’s called a

point-in-time count. In 2017 there were approx- imately 554,000 homeless people counted on that

January night. Single adults made up the largest

population, while a third were households with

children. HUD identifies four different categories

of homelessness: those who are already home-

less, those who are about to become homeless,

families with children who don’t have stable hous-

ing, and people who flee their homes because of

domestic violence and don’t have another place

to live or resources or support to obtain housing.

Many experts believe that the actual number of

homeless people is significantly higher than the

point-in-time count shows. They say it’s extremely

challenging to locate and identify homeless peo-

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ple in the wide variety of

situations in which they

live. Many can’t get a bed

in a shelter or don’t want

to go into a shelter because

they have a mental illness

or are afraid of violence.

Some live in their cars, tem-

porarily stay on couches

at the homes of friends or

relatives, and so forth. The

lack of affordable housing

is the number one cause of

homelessness, according to

the National Law Center on

Homelessness & Poverty.

Unemployment, poverty,

and low wages are the sec-

ond, third, and fourth iden-

tified causes. This is a problem that affects com-

munities across the entire country. Without a place

to call home, it’s very challenging for a person to

get an education; find and keep a job; keep fam-

ilies together; maintain good health, hygiene, and

nutrition; and stay safe. To be homeless is to be

terribly vulnerable. One cold snap or heat wave

or bad storm could mean death—not to mention

the violence, hunger, illness, and deprivation that

stalks homeless people.

Across the country, public and private pro-

grams address the issue of affordable hous-

ing. We’ll talk more about public efforts below.

On the private sector side, there are a variety

of approaches to provide housing and make it

affordable for the poor, and there are a variety of

types of organizations that are involved. Religious

groups and nonprofits support and sponsor local

homeless shelters and other housing programs.

One of the most well-known nonprofit organiza-

tions is Habitat for Humanity, which has helped

more than four million people afford housing

since 1976 through its volunteer home-building

and renovation programs.

Private philanthropy is

another significant player.

A funding collaborative of

nine private foundations—

among them the Kresge

Foundation, the Bill &

Melinda Gates Founda-

tion, and the MacArthur

Foundation—has invested

tens of millions of dollars

to address the shortage

of affordable rental hous-

ing throughout the nation.

The corporate sector has

launched multimillion-dol-

lar initiatives for affordable

housing, including Unit-

edHealthcare’s investment

of $5.1 million to convert a vacant commercial

building in Boston into an affordable housing

development. The tech firms Cisco, LinkedIn,

and Pure Storage together donated $20 million

to support affordable housing in Silicon Valley.

There are many potential benefits for corporate

investment in affordable housing. It’s good for

the company’s reputation, it’s good for the com-

munities where they are headquartered, and it’s

good for ensuring a stable workforce.

Housing Legislation and Rent Control

Using government to address the issue of

affordable housing has long been a controversial

idea. The first federal law to deal with low-

income housing was the United States Housing

Act of 1937, also known as the Wagner-Steagall

Act. Signed by President Franklin D. Roosevelt as

part of the New Deal, it was intended to eliminate

unsafe and unsanitary housing conditions for

the poor, clean up slums, and help low-income

families have a decent place to live through public

housing options. Public housing, which still

Without a place to call home, it’s very

challenging for a person to get an education; find and keep a job;

keep families together; maintain good health, hygiene, and nutrition;

and stay safe. To be homeless is to be terribly vulnerable.

330 | Voices On The Economy

exists today, is funded by the federal government

and administered on the state and local levels.

These apartments, single-family homes, and other

types of residences are rented to eligible low-

income, disabled, and elderly tenants at a rate

lower than the market price. These and other

public housing programs are managed by public housing authorities (PHAs), which are private firms that are paid by the government to screen

tenants for income eligibility, perform inspections

of the properties, collect rents, maintain the

properties, and so forth. Close to one million

households lived in public housing in 2018,

according to HUD. By the way, a household includes all the people living under the same

roof, whether or not they are related.

HUD is the central government agency in

charge of public housing and other housing

programs. Before President Lyndon B. Johnson

signed the Housing and Urban Development Act

of 1965, there were a number of federal agencies

that dealt with housing. These were all consol-

idated under HUD, which then became a cabi-

net-level position. Under Johnson, the Fair Hous- ing Act, which was part of the Civil Rights Act of

1968, made it illegal to discriminate on the basis

of race, color, religion, and national origin when

renting or selling real estate.

In the 1970s the government changed strate-

gies. The Housing and Community Development Act of 1974, under President Gerald Ford, insti-

tuted Community Development Block Grants (CDBGs), which are federal funds given to local jurisdictions so that people who live in those areas

can decide how to use the money to address pov-

erty and homelessness in their own communi-

ties. The government’s role also changed, so that

instead of building the actual physical buildings

to house people, it switched to funding programs

that subsidize the rents in the private housing

market. In particular, the 1974 law made signif-

icant changes to Section 8 housing. (It’s called Section 8 because it originally came from Section

8 of the Housing Act of 1937.)

There are two Section 8 programs you might

have heard of. One is Project-Based Rental Assistance, where funds are paid to owners of private properties that are HUD-approved to be

low-income housing. They then offer housing at a

lower rate. The rental subsidy is tied to the rental

unit, so when tenants move out, the unit con-

tinues to be rent-subsidized for the next Section

8–qualified tenant. In other words, tenants don’t

take the subsidy with them when they move to

another property. Just to give you an idea of the

size of this program, in 2018 there were 1.2 mil-

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Chapter 11: Housing | 331

lion units of project-based

rentals, according to HUD.

But there was a prob-

lem with public housing

and Section 8 housing that

worried residents and law-

makers alike. The problem

was that these programs

concentrated poverty in

certain areas, and that cor-

related with higher crime

rates, worse schools, and

other social ills. The second

Section 8 program, tenant based housing choice vouchers, were meant to counteract this concern by

giving low-income renters

more options for where

to live. Those who qualify receive a rent-subsidy

voucher that they can use in the private housing

market as long as the unit is approved by HUD. If

the tenant moves, the voucher moves with them

and they can use it to rent a different approved

unit. In 2018 there were more than 2.2 million

tenants using housing choice vouchers, according

to HUD. The intention of the program is to make

rents affordable for low-income tenants, thin out

the concentration of poverty, and create more

mixed-income communities.

Who is eligible for Section 8 housing? HUD deter-

mines this by income level, taking into account the

average median income for each region. It clearly

wouldn’t be fair to compare Oklahoma City with

Los Angeles. To determine income eligibility, the

agency identifies three categories: If you’re low

income, you earn 80 percent of the median income

in your area. If you’re very low income, it’s 50 per-

cent. And if you’re extremely low income, it’s 30

percent. HUD prioritizes extremely low income

people and then very low income people for Sec-

tion 8 programs. But the supply of Section 8 hous-

ing for both programs is far

less than the demand. Some

affordable-housing advo-

cates estimate that there

are only around a third of

the number of units avail-

able than what’s actually

needed to house those who

are extremely low income.

Waiting lists are typical for

all HUD programs. Once a

person is on the waiting list,

it can take years to get into

affordable housing. And in

some areas of the country,

it can take years just to get

on the waiting list itself.

There have been a slew

of other housing programs

in the decades since 1974 that address affordable

housing. Some are designed to help low-income

tenants afford to buy their own homes. Some focus

on housing for the disabled and elderly, and others

are aimed at revitalizing existing public housing

properties and turning them into mixed-income

developments. The U.S. Department of Agricul-

ture (USDA) offers housing assistance in rural

areas, including rental assistance, home loans,

and cooperative housing for the elderly and dis-

abled. In total, the federal dollars spent on all the

above housing assistance programs in 2018 came

to 43.9 billion dollars, according to the Center on

Budget and Policy Priorities.

A program not included in those numbers, but

widely in use, is the Low-Income Housing Tax Credit (LIHTC), designed to give incentives to investors to finance lower-profit housing projects.

For example, religious institutions that own land

and that have a mission to help the poor partner

with private developers to build affordable hous-

ing. Since the program was created under the Tax

Reform Act of 1986, more than three million units

The issue of affordable housing is very relevant for many, including the

middle class. There seems to be one policy

that keeps coming up as an option when

housing prices become unaffordable in a

community. That policy is rent control.

332 | Voices On The Economy

have been built using LIHTC. Another effort to

create more affordable housing is inclusionary zoning, which requires landlords to rent or sell a certain number of units in new developments at a

reduced rate to low-income tenants.

All the housing programs we’ve just been

describing are designed primarily for the very

poor. But the issue of affordable housing is very

relevant for the middle class as well. There seems

to be one policy that keeps coming up as an

option when housing prices become unafford-

able for people up and down the income ladder.

That policy is rent control. Rent control laws have

been around in cities and local jurisdictions for

decades as another variation of a public strategy

to address the issue of affordable housing. What

makes rent control different from public housing

and Section 8 programs is that eligibility is not

based on a person’s income. Instead, it focuses

on landlords, limiting how much they are allowed

to charge for rent and how much they can raise

existing rents (this is called rent stabilization). Oregon made history in 2019 by being the

first to pass a statewide rent control law,

followed by the state of New York a few

months later. For the most part, rent con-

trol has been allowed in only

a dozen or so states. Yet, in

some of the country’s largest cities, rent control is

commonplace. In 2014 more than a million peo-

ple in New York City lived in either rent-controlled

or rent-stabilized apartments. That same year, half

the rental units in Washington, DC, were rent con-

trolled. In San Francisco it was 75 percent, and

in Los Angeles it was 80 percent of multifamily

units. Recently—as witnessed in New York State

and Oregon—there’s been a growing movement

to expand rent control in states where it already

exists and to overturn bans and exemptions on

rent control laws in the rest of the country. At

the same time, there’s been pushback against rent

control laws. For example, a proposition to repeal

a California law that limits the state’s ability to

determine types of rent control failed in 2018.

The bottom line is that of all the government

policies and programs meant to address affordable

housing, rent control affects the most households in

our nation. As you can tell, this is a hotly contested

issue. And now you have the lay of the land. You

know the definitions and the history of what our

nation has already been doing to address the

problem of housing. You have what you

need to analyze competing ideas about

how to solve this problem. It’s time to

hear the voices of the different per spectives on the issue.

Chapter 11: Housing | 333

Voices on Housing

Liberals, radicals, and conservatives all agree that unaffordable housing leads to homelessness. They share the same goal to create affordable

housing for all, but as you might have guessed,

they don’t agree on how to do it. Should we leave

the market alone and let price signals for rents

solve the affordable housing problem? Should

people own their own residences cooperatively

as a way to make housing affordable? Should the

government help people to afford housing by

passing laws to control rent prices? The policy

we’re going to debate is rent control laws, which

is a liberal idea. It’s time to put on a mask and

debate this policy from each of the perspectives.

Please remember that we are not taking a

personal position on any of these issues. We’re

just channeling the voices of the perspectives.

As you know by now, we change the order of

who goes first each time. For this issue, it’s the

conservative’s turn to go first.

334 | Voices On The Economy

ConservativeVoice on Housing Housing I loved Monopoly because it taught me so much about having a successful financial life. It taught me when to buy, when to sell, and how to plan ahead. It helped me to hone my skills of negotiation and deal making. It taught me not

to get sidelined by unexpected setbacks and to take advantage of lucky breaks.

It taught me that no matter where you start off in life, there are going to be

opportunities. But you have to get in the game in order to succeed. I got in the

game when I left home to go to college. While I couldn’t afford Park Place on

my student budget, I found affordable housing.

Depending on my financial circumstances, I lived

in dorms, in a student group house, and in a

postage-stamp-sized studio apartment that rattled

every time a train went by. In graduate school,

I had a small stipend, so I split the rent on a

one-bedroom apartment with my sister and her

husband. Years later, with my career on track, I

moved to a city where I was able to afford to buy

a house. After building up equity in it over years,

I sold it, and my family moved into a rental apart-

ment. We used the money from the sale of our

property to pay for our daughter’s college tuition.

That was a strategy I can trace back to my Monop-

oly days. As I head toward retirement, we might

decide to buy another house, or to keep renting,

or to move into a retirement community, or to get

an RV and hit the road. Monopoly teaches us to

have a strategy, stay nimble, and change course

when necessary. In the game of life, whatever the

roll of the dice, if we play it smart and let price

signals guide our decisions, it will work out in the

best possible way.

Consider the low-end apartment market.

Imagine that the rent goes up to an unaffordable

level, and you are living there. What would you

do? You would do the only logical thing there

is to do: you would move to a more affordable

place. When housing is too expensive, people

move out and find substitutions. You might share

a place with a group of friends. You might move

to a location that has lower rents. Or you might

get a job where room and board are included.

And what happens to the demand curve for low-

end apartments when you and hordes of other

people move out? It shifts to the left, which

means the equilibrium price falls. As you can see

in figure 11.2, because of the inelasticity of supply

and demand for low-end apartments, rents go

down by a lot. On top of that, there is only a very

slight decrease in equilibrium quantity, which

means low-end apartments remain available and

Chapter 11: Housing | 335

abundant, with plenty of choices and affordability

for all budgets. So just by being left alone, the

problem solves itself.

QQ1

Low-End Apartment Market

Figure 11.2 Conservative View

When Gotham City is in trouble, the commis-

sioner calls for Batman by beaming a signal into

the sky. Today, there are areas of the country

that are frantically signaling that they need peo-

ple to move there, and their signal is price. Rents

are low! My cousin is a perfect example of how

this decision-making works. After high school,

he decided not to go to college, and staying in

his parents’ home wasn’t an option. He’s a smart

guy, so he determined that the best thing to do

would be to move to whatever place in the coun-

try had the cheapest possible housing relative to

the highest possible pay for entry-level work. This

was the 1980s, before the internet became ubiqui-

tous, so he actually went to the library and paged

through big books of statistics to look up average

housing costs and average salaries. That’s how he

found the ideal location: Indianapolis. He packed

up his things and moved there. He did what any

person should do, which is to follow price sig-

nals. When housing is unaffordable in one area,

move to a more affordable area. And this strategy

is not just good for you—it’s good for the nation.

This is how we bring the doctors, the business-

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people, and the teachers

to the communities that

need them the most. When

we let the invisible hand

of free-market capitalism

guide people’s choices,

they get the housing they

want, and producers are

motivated to supply it.

Affordable housing is

a wonderful thing, but

the radical idea of Resi-

dent-Owned Communities

sounds like a nightmare

of mutual cooperative

destruction. Just imagine

the constant meetings about

whether we’re allowed to

cook fish because it stinks

up the hallways. There

are huge transaction costs

for all that bickering and

time-consuming group pro-

cess, which make living in

resident-owned housing

cooperatives another full-time job. I work hard

to afford a roof over my head, and my home is

my castle. When I come home from work, the

last thing I want is to have other people telling

me what to do and how to do it. Our homes

should be our sanctuaries. “No thanks” to cooper-

ative ownership. And community land trusts are

another terrible idea. Radicals want the govern-

ment to buy up land so that committees of peo-

ple can decide where to build affordable housing.

That might sound good on paper, but the paper is

wrong because no CLT can possibly plan for what

the best use of that land should be. There are too

many moving parts. It’s the profit motive and price

signals that move resources to their optimal use

so that we get the housing we need. Disrupting

that delicate balance by pulling land out of the

private market means we’ll

end up with too much or

too little housing relative

to the jobs available, to the

population, to the avail-

able water, and so forth. In

democratic socialism we’ll

have empty apartments in

one place, and widespread

homelessness in another.

How do we get afford-

able housing? First and

foremost, we support

visionary entrepreneur-

ship. It’s the developers

and investors who take

the risks to supply our

housing, and they are the

ones who should reap

the well-earned rewards.

We would never want to

discourage anyone from

being in the business of

providing housing. Like-

wise, we would never

want to discourage anyone from becoming a

landlord. Some people are not in the position to

own a home, nor do they even want to. Some

people would rather rent than take on the repair

bills, property taxes, yard work, and worry about

depreciating values of their investment. Thank

goodness there are landlords who are willing to

provide rentals and take those burdens off their

tenants. It is unfair and wrong for the govern-

ment to single out the housing industry and pun-

ish landlords with a bad policy. We don’t punish

auto mechanics by requiring them to fix cars at

half the price. We don’t punish shoe manufactur-

ers by requiring them to sell sneakers at half the

price. So how can we justify requiring landlords

to rent units below market price? Bottom line:

rent control isn’t fair to them.

How do we get affordable housing? First and foremost,

we support visionary entrepreneurship. It’s the developers and investors

who take the risks to supply our housing, and they are the ones who should reap the well- earned rewards. We would never want to

discourage anyone from being in the business of

providing housing.

Chapter 11: Housing | 337

The liberal policy of rent control laws doesn’t

solve the problem of lack of affordable housing;

it actually creates homelessness. Here’s how it happens: The government passes a law that says

rents for low-end apartments have to be below

the equilibrium rent. Now the quantity demanded

for those apartments increases. Of course it does,

because people want to pay less for housing. But

what else happens? Landlords want to make a

profit, but lower rents mean less profit, so they

supply fewer low-end apartments. It’s an undeni-

able fact that rent control gives us shortages. In

this case, it’s a shortage of low-end apartments,

and presto! Government intervention brings us

homelessness. And on top of that, the low-end

rental apartments that are left become even worse

places to live. With rent control, landlords have

less money and no incentive to invest back into

their properties for upkeep and improvements,

so the housing falls into disrepair. Some people

accuse owners of being “slumlords,” but owners

who want to make the properties better can’t

when the government holds them back with rent

control. So you can thank a liberal for leaky fau-

cets, peeling paint, and broken screens.

We should reject rent control laws so that price

signals direct resources to their best use to ensure

affordable housing for all. People will optimize

their circumstances by moving to the places that

afford them the best housing options along with

job opportunities, and the whole country will be

better off when communities are robust. Devel-

opers will build the variety of affordable housing

that people want because it’s profitable. And for

those who fall through the cracks, private philan-

thropy will provide affordable housing. It’s in our

human nature to take care of our friends, families,

and communities. And firms participate because it

enhances their reputation and it lifts the quality of

life for the communities where they are based and

where they do business. Also, religious groups and

nonprofits provide affordable housing because it’s

their mission to care for others. When we allow

price signals to direct housing choices and com-

bine that with private philanthropy, everyone who

wants housing can have it. Landlords will be moti-

vated to maintain their rental properties, so ten-

ants will have nicer places to live. This is how we

get swamplands turned into high-rise apartments,

empty lots turned into affordable housing devel-

opments, and desert scrub turned into flourish-

ing mobile home communities. When we get rid

of government interference and allow the profit

motive to guide our choices, we’ll solve the prob-

lem of homelessness, and people will be safer,

healthier, and happier.

338 | Voices On The Economy

ConservativeFree-Market Capitalism BIG PICTURE When the invisible hand of free-market capitalism guides housing choices, people get the housing they want and producers are motivated to supply it.

POLICY POSITION Unaffordable housing leads to homelessness, but . . .

" Radical policies intrude on the sanctity of our homes, and by trading price signals for central planning, we’re left with empty apartments in one place and widespread homelessness in another.

" Liberal policies of rent control oppress landlords and hurt tenants while creating shortages of affordable housing, which only brings us more homelessness.

SOLUTION Reject rent-control laws so that unfettered price signals ensure affordable housing for all:

! People optimize their circumstances.

! Private philanthropy is the safety net.

QQ1

Low-End Apartment Market

Housing

Chapter 11: Housing | 339

Housing Talking Points: Conservative 1. Everyone needs housing. We all have to keep a roof over our heads. And producers need profit. This is a

perfect relationship because when we leave the market alone, suppliers will supply the housing that peo- ple want. When the rent is too high, that sends a signal and tenants will move out. When they move out, it creates a surplus of housing, and the prices fall. Guess what? We’ve just solved the problem of affordable housing through free-market capitalism.

2. Every community has to have doctors, engineers, people who know how to fix computers, and so forth. We live in a big country, so how does it happen that we have the right variety of workers in the communi- ties that need them? Price signals make this happen. If housing isn’t affordable in one area, people will be motivated to relocate to areas where housing is affordable relative to the pay for their professions. Freely determined price signals mean that communities are robust and people have affordable places to live.

3. Radicals, your plan of Resident-Owned Communities sounds like a nightmare of mutual cooperative de- struction. I don’t want to live in a place where everyone is in my business and there are constant meetings to regulate whether people are allowed to cook fish because it stinks up the hallways. I work my butt off to have a roof over my head, and my home is my castle. Your plan would turn my sanctuary into a nightmare of nosy neighbors and endless bickering.

4. Democratic socialists want the government to buy up land for community land trusts so committees of people will decide where to build affordable housing. But they can’t possibly know the best use of that land without price signals. There are too many moving parts. Disrupting that delicate balance means cha- os—too much housing in one place and not enough in another.

5. Liberals, it’s wrong to require landlords to rent units below market price. Rent control isn’t fair to owners. They’re the ones who take the risks and who should reap the well-earned rewards for providing housing. In our nation, private property owners have rights. Interfering with their ability to make a profit is a violation of those rights. We don’t punish auto mechanics by requiring them to fix cars at half the price. We don’t punish shoe manufacturers by requiring them to sell sneakers at half the price.

6. Rent-control laws cause shortages of affordable housing because when you lower the price for something, of course more demanders are going to want it, and of course fewer suppliers are going to make it. That’s why it’s Democrats’ fault that developers are unwilling to build affordable housing in the places where people need it the most. If we stopped chasing out the investors, we would solve homelessness. As usual, the so-called liberal fix makes the problem worse.

7. The profit motive is the engine that drives our whole economy. It’s profit that motivates developers to build us the housing we need. Free-market capitalism gets people out of shelters and tent cities and into housing where they can flourish. And when a person hits a bump in the road, individual, corporate, religious, and nonprofit philanthropy helps to get them back on their feet without interfering with price signals.

8. Free-market capitalism provides an abundance of housing options for all. People follow price signals and optimize their circumstances so they can flourish. Housing is affordable and available when we let the per- fectly self-adjusting system of capitalism inform our choices. We all want a roof over our heads and a place to call our own. And we can have it. That is the beauty of our economic system.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

340 | Voices On The Economy

R HOUSINGadicalVoice on Housing Have you ever started to lose at Monopoly? I can remember games where I spent too many turns in jail, and then I kept landing on properties that other people already owned. I did the only thing I could do, which was to start

mortgaging my properties, and then eventually I sold them to my opponents just

so I could pay the rent. I still remember the sickening feeling in my gut as every

roll of the die landed me on someone else’s property and another rent check

was due. There was no safe place for me on the board except jail, but then it was

hardly worth playing anymore. The owners—my

friends, my cousins, my siblings—saw my plight,

but they shrugged and said, “Sure, we’d like to

give you a break, but we can’t because our com-

petitors aren’t doing that, so when we land on a

new property we won’t have the money to buy it,

but they will and we’ll lose the game.” At a certain

point I just gave up and vowed never to play that

dreadful game again. But the problem in real-life

capitalism is that we have to play because it’s the

only game in town. And is the aim of the game

of capitalism to get people into housing? No! It’s

to make money off people who are desperate to

have a roof over their heads so they can survive.

This is what Lizzie Magie was trying to demon-

strate with The Landlord’s Game.

Let’s use the Six-Core Cube of democratic social-

ism and drill down through the core point of coop-

erative ownership to see how we get affordable

housing. Think of any kind of housing where you

might want to live and imagine that it’s not owned

by a corporation or a bank. Instead, it’s owned

jointly by the residents. You might move into a

high-rise apartment building that’s cooperatively

owned and become one of the shareholders. Or

you might get together with a group of friends,

neighbors, or strangers and create a co-housing

community in the suburbs where together you

own the land and each has a single-family home

and you share a kitchen, garden, and swimming

pool. Or you might be part of a group that converts

empty fields into a cooperatively owned mobile

home park. In democratic socialism there is a

commitment to providing a wide variety of decent,

affordable housing options for everyone, including

vulnerable populations. For those who need help

beyond the social safeguards already provided in

democratic socialism, government-assisted ROCs

ensure that they have adequate, affordable hous-

ing. In every community, stakeholders are empow-

Chapter 11: Housing | 341

ered to decide how the

land in their communities

will be used to develop

the housing that’s needed.

By taking land out of pri-

vate markets and making it

a shared resource, we can

fulfill our obligation as a

society to provide hous-

ing as a basic human right.

Firms have the incentive

to build the housing that

communities want because

it earns them an honest liv-

ing and improves their own

cities and neighborhoods.

In every way, cooperative

ownership is good for indi-

viduals, for businesses, and

for the nation. When peo-

ple have the housing they

need—and when they can

pay for it without going

broke—the whole soci-

ety benefits.

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

of Demo cratic So

cialism

Figure 11.3 Radical View

When I was in my thir-

ties, I was in a position to

“own” a home. I put that

word in quotation marks

because after signing the

mortgage papers, I real-

ized the bank actually

owned more of the house

than I did. But it was “my”

house since I was respon-

sible for all the mainte-

nance and repair bills, the

property taxes, and the

insurance. I was aware

that, as a homeowner,

I could lose my invest-

ment through all sorts of

bad luck. I worried about

floods, earthquakes, roof

leaks, mold, and electrical

fires. Eventually, I sold the

house and moved into a

rental apartment. Now I

lie awake at night worry-

ing that the corporation

that owns the building

will jack up my rent and I’ll have to move. No

matter which way we turn in capitalism, hous-

ing is rigged against us because the profit-driven

bank and the profit-driven corporation are forced

to sacrifice our housing security for their bottom

lines. In democratic socialism cooperative own-

ership of housing gives us control over our own

homes. Co-owners make decisions using a dem-

ocratic process, and housing is one of our social

safeguards, which means affordable housing is a

priority for every community. It makes the most

sense when housing is an investment in people,

not an investment for profit. There is plenty of

money to afford everything we need to produce

decent and sustainable options as a society when

we have cooperative ownership. When housing

By taking land out of private markets and making it a shared

resource, we can fulfill our obligation as a society to provide housing as a basic human right. In democratic socialism

firms have the incentive to build the housing

that communities want because it earns them an honest living and improves their own

cities and neighborhoods.

342 | Voices On The Economy

is cooperatively owned we get a wide variety of

affordable and desirable options, and individuals

have a vote and a voice in their living situations.

As long as we have capitalism, we will always

suffer from a lack of affordable housing because

the problem is private ownership. Land should

belong to everyone. But in capitalism land is just

another resource to be monetized by banks and

corporations. The vast majority of us are at their

mercy. And land shouldn’t be treated as a com-

modity to buy and sell for profit. This scarce and

precious resource belongs to all of us, but in cap-

italism it’s not being used to create the housing

people need. In crowded urban areas, for exam-

ple, speculators buy up apartment buildings and

allow them to fall into disrepair or stay empty in

the hopes that the area will become gentrified.

Gentrification is a strategy to renovate prop- erties when neighborhoods become desirable

so as to attract more affluent tenants, thereby

pushing out the low-income residents. As a con-

sequence, people are homeless because they

can’t find affordable housing. Even if you own

a home, the minute you fall on hard times and

can’t make your mortgage payments, the bank

swoops in and forecloses. Same goes if you fall

behind on the rent—you’re evicted. Then those

private owners and banks turn around and pres-

sure local government to pass anti-vagrancy laws,

so even the streets are no longer an option for

you because homelessness is now a crime. No

matter what your current circumstance in life may

be, you’re a few rent checks or mortgage pay-

ments away from ending up homeless. That’s the

promise of capitalism.

Liberals, your government housing policies are

like the Titanic. The whole system is sinking, but you keep rearranging the deck chairs as if this is

going to keep the whole thing afloat. First you

came up with public housing to replace slums—

and then your housing projects turned into slums.

Then you came up with Section 8 housing, which

continued to concentrate poverty and its atten-

dant problems in those areas. So you introduced

the voucher system. It is slightly less patronizing

to people because it promises them some per-

sonal choice in the matter of where they live, but

the program still can’t possibly meet the needs

of the lines of people waiting years just to get

on the five-year-long waiting list. Low-Income

Chapter 11: Housing | 343

Housing Tax Credits are another capitalist scam

to line the pockets of developers and investors

while pretending they are creating the affordable

housing we need. In reality there are so many

loopholes that only a fraction of those units actu-

ally go to low-income people. And rent control is

no solution either. Even if there were rent control

laws across the whole nation, capitalism feeds on

profit, so by making housing less profitable for

landlords, you discourage them from providing

housing. That leads to more homelessness. Liber-

als, your efforts are futile: you’re trying to fix what

can’t be fixed: the systemic failure of capitalism.

It’s a sinking ship that leaves millions without a

roof over their heads, and millions more waiting

in dread to join them.

Conservatives, you are guilty of selling us the

lie that unfettered capitalism brings us the best

quality of life. Your American Dream is a hoax.

Millions and millions of hardworking people can

barely afford to rent a decent place to live. Across

the nation they give their blood, sweat, and tears

to their jobs and still have to worry every day

about keeping a roof over their heads. And your

solution is a bad joke. People who are unable to

find affordable housing can’t just move themselves

and their families to another city. The disruption

to everyone’s lives and their social networks and

communities would be devastating. Your plan

would create masses of domestic migrants. The

problem isn’t that this country doesn’t have the

resources to provide housing for all. We could

solve homelessness and build strong communi-

ties today if we stopped seeing the provision of

housing as a way to make a buck. If we leave it to

your free-market capitalism, landlords will always

raise rents as high as they can get away with while

they maximize their profit by doing the minimum

upkeep and repairs—even when this hurts their

tenants. And even if they don’t want to evict ten-

ants who can’t pay, or turn people out of their

homes to convert the property into more prof-

itable vacation rentals, private owners will do it

anyway. In capitalism a landlord who isn’t doing

that is a landlord who doesn’t survive. The result

is homelessness on a massive scale. This is the

true story of free-market capitalism—a tragic tale

repeated over and over.

We should replace rent control with Resi-

dent-Owned Communities to ensure affordable

housing for all. These can be any type of hous-

ing people want, with any type of structure that

people decide. ROCs are flexible and adaptable,

and they respect people’s dignity and well-be-

ing. In democratic socialism no one else can own

your home and profit from your need to put a

roof over your head. Housing is a right and also

a responsibility, so everyone pays in to a universal

housing fund as part of their taxes. The money

is given to those who need it. It might take the

form of a housing voucher for a family, funds for

new developments, or direct provision of hous-

ing through government-assisted ROCs. Commu-

nity land trusts work with stakeholders in their

local areas to plan the best use of land for afford-

able housing now and into the future. When land

is used for the good of everyone, then we get

swamplands turned into co-op high-rise apart-

ments, empty lots turned into co-housing devel-

opments, and desert scrub turned into flourishing

resident-owned mobile home communities. With

cooperative ownership, we no longer have the

problem of homelessness, and everyone can have

a home base from which they can succeed and

thrive.

344 | Voices On The Economy

RadicalDemocratic Socialism BIG PICTURE When housing is cooperatively owned, we get a wide variety of affordable and desirable options, and individuals have a vote and a voice in their living situations.

POLICY POSITION Unaffordable housing leads to homelessness, but . . .

" Liberal policies, whether tax credits, vouchers, or public housing, can’t ever be sustainable solutions because they don’t challenge the core problems of private ownership and the drive for profit.

" Conservative policies will lead to more homelessness because when housing is a for-profit enterprise, landlords will charge the most rent they can in order to grow their profits.

SOLUTION Replace rent control laws with Resident-Owned Cooperatives to ensure affordable housing for all:

! Community land trusts lease the land in perpetuity.

! A home is a basic human right.

Housing

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

of Demo cratic So

cialism

Chapter 11: Housing | 345

Housing Talking Points: Radical 1. In democratic socialism cooperative ownership of housing gives us hands-on control over where we live.

Co-owners make decisions together using a democratic process of one person, one vote. That means you can feel secure knowing your monthly fees won’t just go up arbitrarily and things that need to be repaired will actually get fixed. And when bad luck strikes—like a plumbing problem or a tornado—co-owners come together and take care of it.

2. Housing is not a luxury; it’s a necessity for our survival. Communities make it a priority to ensure there are affordable options for people at every stage of their lives. Because it’s both a right and a responsibility, uni- versal housing is funded through taxes. When housing is an investment in people and not an investment for profit, there is plenty of money in our communities to afford everything we need to produce decent and sustainable options. No one has to live in fear of being homeless.

3. In fair-market capitalism, every attempt to provide public housing fails because residents don’t have an ownership stake, a voice, or a vote. We see again and again that those projects turn into slums. Lib- eral programs may mean well, but they end up being patronizing and dehumanizing to low-income people. Those programs only appear to address serious economic problems, but the underlying cause—private ownership—is still the real problem.

4. Liberals, first you came up with public housing to replace slums—and then your housing projects turned into slums. Section 8 housing isn’t much better, so you introduced the voucher system. Now people wait for years just to get on the five-year waiting list! Low-Income Housing Tax Credits? A scam to line the pock- ets of developers and investors, so please don’t pretend it’s bringing us the affordable housing we need. And rent control? A bad patch job that doesn’t fix the problem.

5. If capitalism really worked, then we wouldn’t have tens of millions of people who can barely afford to rent a decent place to live, and millions more who are homeless. Hardworking people across the nation worry every day about keeping a roof over their heads. We don’t solve homelessness by advising them to move somewhere else. We solve it the minute we stop seeing the provision of housing as a way to make a buck.

6. Conservatives think price signals will magically save the day and cure us of homelessness. They won’t. In free-market capitalism landlords will always raise rents as high as they can get away with, and they maxi- mize their profit by doing the minimum upkeep and repairs. Even if they don’t want to evict tenants who can’t pay, or turn their affordable housing into profitable vacation rentals, they will. In capitalism, a landlord who isn’t doing that is a landlord who doesn’t survive.

7. People must have homes to succeed in life. That’s why we all contribute to ensure that housing is a basic right. For those who need help beyond the social safeguards already provided in democratic socialism, government-assisted ROCs ensure that they have adequate, affordable housing—now and into the future. Community Land Trusts plan the best uses of land, and that makes sense because land should belong to everyone.

8. In democratic socialism we get a wide range of affordable housing choices. You like being around other people? Choose co-housing, where everyone shares meals and responsibilities, or a co-op apartment, where neighbors make decisions together, or a resident-owned mobile home park. You’d rather do your own thing? Choose a single-family home. The point is that no one is making a profit off your need to put a roof over your head, and that’s how we solve the problem of the lack of affordable housing.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

346 | Voices On The Economy

LiberalVoice on Housing Housing I loved to play Monopoly, and even when I lost a game, I was eager to play again. That’s because we all started off as equals on the game board, which meant I always felt hopeful that I could win the next one. No one had an unfair

advantage—we were all given the same $1,500 in Monopoly money before the

first turn, and we all began the journey around the board from the same square. In

the real world, though, we don’t all start out with the same resources and in the same

place in life. Some are born into wealthy families that own lots of properties. Some

are born into middle-class families that scrape by,

weighed down by debt. And some are born into

low-income families that are homeless. These dif-

ferent circumstances make a huge difference in

the opportunities we get in the game of life. But

those who are “winners” often don’t see it that

way. They believe they deserve what they have,

and they don’t recognize that they benefited from

an uneven playing field from day one. A social

psychologist named Paul K. Piff, at the University

of California, Berkeley, actually studied the phe-

nomenon of how people behave when they win

at Monopoly. Piff arranged it so that one player

had an unfair advantage throughout the game—

rolling more than two dice each turn, starting

with twice the money, and collecting more than

$200 for passing Go. The researchers observed that players with the unfair advantage exhibited

louder, ruder, and more obnoxious behaviors as

they started to win (they hogged the pretzels!),

even though the game was clearly rigged in their

favor. The advantaged players credited their suc-

cess to their strategy and believed they were enti-

tled to their gains because of their hard work and

skill. It’s often true that those who live in a bub-

ble of privilege end up feeling entitled to hav-

ing more than others, and often they blame the

“losers” for not working hard enough or being

smart enough or special enough. Monopoly is an

imperfect reflection of capitalism because in life

we don’t all start out on that even playing field.

The Piff experiment is much more like real life.

Our policies have to take that into account and

give people equal opportunities to live in afford-

able housing.

Let’s consider the low-end apartment market.

Imagine you’re a person who can’t afford the rent.

There are very few substitutes for low-end apart-

ments, and when landlords have the power to raise

rents above 30 percent of a person’s income—the

definition of affordability—then we end up with

more people who are cost-burdened and vulner-

Chapter 11: Housing | 347

able to becoming homeless. Without government

intervention, what would be your options for

affordable housing in this situation? Your sister’s

sofa until she kicks you out, the local park until

you get arrested for vagrancy, or your car until it’s

repossessed or towed. But before it comes to that,

rent-control laws can help keep your low-end apart-

ment affordable. How? State or local government

sets a price ceiling on rent. Of course we know that

price ceilings can cause unacceptable shortages,

but not in this case, because of the inelastic nature

on both the demand and the supply sides. As you

can see in figure 11.4, rent control creates hardly

any shortage at all, while making rents affordable

for low-income tenants. This is a good policy for

landlords as well because they benefit from having

a stable tenant population and reliable cash flow.

That minimal shortage will be alleviated by gov-

ernment-supported affordable housing programs,

including vouchers and tax credits. Rent control

laws with government incentives for landlords not

only keep low-end apartments affordable, but they

also bring us more of the housing we need.

QQ1

Low-End Apartment Market

Price Ceiling

Figure 11.4 Liberal View

A year ago, I was walking into the grocery

store, and I happened to catch the eye of a home-

less man in his mid-twenties standing by the door.

He looked startled. “Wait,” he said, “weren’t you

my sixth-grade teacher?” I had last seen Tyler (I’ve

changed his name here) when he was eleven

years old and full of promise and big dreams

for his life. Now he was homeless. He told me

Lu cy

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348 | Voices On The Economy

he’d fallen on hard times

and lost his apartment.

He looked exhausted and

defeated. I remembered

him as a bright, curious

boy, but in his present cir-

cumstances it would be

very challenging for him

to get a job—no address,

unwashed, using all his

energy just to survive

another day. I offered to

buy him some groceries,

and he hesitated, embar-

rassed. I insisted. We each

took a cart, and he rolled

past the aisles of junk

food and zeroed in on

protein—a roast chicken,

lunch meats, milk. I couldn’t convince him to take

more. Before we parted, I told him where he could

find information on government-assisted housing

programs and offered to help. He thanked me,

shouldered his backpack, and walked off into the

night. My heart breaks when I think of all the

homeless people like Tyler. I couldn’t possibly

take them all grocery shopping, but I’m grateful

I live in a country where we do the right thing

and help people who need affordable housing.

Through tax-supported public housing programs

and policies such as rent control, we keep individ-

uals and families from falling through the cracks.

With a home, they can have the good nutrition,

rest, hygiene, and safety they need to flourish and

be contributing members of society. Through rent

control laws, we get a stable supply of affordable

housing, which means people can afford to keep

a roof over their heads.

Conservatives, you have faith in the invisible

hand to make all things right, but price signals are

morally neutral. On the other hand, our higher

moral value as a society is to care for one another

and promote equity. And

it’s in our self-interest to

do so because the help-

ful hand of government

is what makes our nation

strong. We all benefit

when we end homeless-

ness. Your idea to leave

landlords to their own

devices will mean soar-

ing rents. It’s guaranteed

because we know that

when a product is neces-

sary, with few substitutes,

the producer will make

more money by raising

the price. But when that

happens with housing, it

creates mass homeless-

ness. There is no substitute for housing—not

the car, not the park bench, not the temporary

homeless shelter. And private philanthropy is

wonderful, but it will never be enough. Solving

homelessness is a massive undertaking that can

only be done with the resources of our govern-

ment in partnership with the private sector. Your

flippant notion that low-income families can just

pack up and move to a new place where housing

is affordable is completely naïve. It’s expensive

to move to a new place, and once they get there,

those low-income tenants will be at the mercy of

a new landlord who can gouge them with impu-

nity. If you had your way and we got rid of rent

control laws and government housing assistance

programs, it would create chaos and suffering for

millions of families. You can’t tell people to pull

themselves up by their bootstraps and then take

away their boots.

Radicals, your idea to leave it to community

land trusts to lease public land for cooperatively

owned housing is rife with potential for crony-

ism. There is a limited amount of land on which

Rent control helps landlords by ensuring

steady income streams and stable tenants. We strengthen the program

by giving landlords more options and more incentives to invest in

affordable housing. This is fair, and it also creates buy-in from landlords.

Chapter 11: Housing | 349

housing can be built, so which group of wannabe

cooperative owners will get the lease? It will be

the group that knows the most people who show

up to the meeting, has the most friends, knows

the stakeholders on the committee, and so forth.

Also, without the profit motive, the buildings will

never be constructed because the plumber, the

electrician, the mason, the architect, and every-

one else won’t bother showing up for work every

day. Not every project is motivated by altruism.

Those builders are not always building housing

for only their own family and friends. People

respond to profit, which you devalue in demo-

cratic socialism. But let’s say you do somehow

manage to get your cooperatively owned housing

built. Then the nightmare really begins. Endless

meetings, factions bickering, and residents fight-

ing to make every decision. Droves of people will

beg to go back to the better system of capitalism,

where they can rent an apartment, be assured of

affordable housing because there is rent control,

and go home at night to the blissful peace and

quiet of their own private lives with no endless

cooperative meetings to endure.

We should support rent control policies to

ensure affordable housing for all. It helps low-in-

come tenants by making rents affordable, it helps

communities by creating more affordable hous-

ing options, and it helps landlords by ensur-

ing steady income streams and stable tenants.

We should strengthen the program by bringing

rent control to more areas of the country where

affordable housing is desperately needed, and by

giving landlords more options and more incen-

tives to invest in affordable housing—property

tax breaks, funds for repairs, and so forth. This

is fair, and it also creates buy-in from landlords.

Every single state is dealing with a lack of suf-

ficient affordable housing. Getting people into

affordable housing saves our nation billions in

programs that address the fallout from homeless-

ness—hunger, crime, drug addiction, and disease.

When the government partners with the private

sector, swamplands turn into affordable and ele-

gant high-rise apartments, empty lots turn into

affordable, mixed-income housing developments,

and desert scrub turns into affordable and lovely

mobile home communities.

350 | Voices On The Economy

LiberalFair-Market Capitalism BIG PICTURE Through rent control laws, we get a stable supply of affordable housing, which means people can afford to keep a roof over their heads.

POLICY POSITION Unaffordable housing leads to homelessness, but . . .

" Conservative policies to eliminate rent control lead to even more homelessness because landlords can and do take advantage of tenants’ economic vulnerability.

" Radical policies lead to cronyism, weak construction (if buildings even go up at all), and a nightmare of endless meetings.

SOLUTION Support rent control policies to ensure affordable housing for all:

! Strengthen with incentives for landlords.

! Save billions when homelessness ends.

QQ1

Low-End Apartment Market

Price Ceiling

Housing

Chapter 11: Housing | 351

Housing Talking Points: Liberal 1. A home isn’t a luxury—it’s a basic necessity for every human being. It’s the foundation for well-being—for

decent nutrition, for good hygiene, for a good night’s rest, for personal safety. No matter whether it’s a tiny attic apartment or a palace, home is our personal sanctuary. It’s in our self-interest to ensure that everyone has an affordable home because homelessness traps people in poverty, which ultimately ends up draining society’s resources.

2. Homelessness derails people’s lives, and we miss out on the contributions they could be making if they weren’t so dragged down with the business of daily survival. We’re fortunate to have a government that does the right thing by partnering with private industry to create more affordable public housing and affordable private housing options. Instead of turning our backs on the homeless, we build a thriving economy and stronger society.

3. Conservatives, relocating is expensive, and these are poor people, so telling low-income people to pack up and move to a new city is not a practical solution. And even if they managed to move, without rent control, they’d just be at the mercy of a new landlord who will gouge them with impunity. You’re the first to preach about hard work and people needing to pull themselves up by their bootstraps. But then you turn around and want to take away their boots.

4. Capitalism works beautifully because people act from their self-interest to maximize their profit, which generates abundant wealth. But when it comes to a product that is also a basic necessity, such as housing, the profit motive needs to be reined in. There are no real substitutes for affordable housing—not the car, not the park bench, not the temporary homeless shelter. Private philanthropy can’t house everyone, and doing nothing gets us nowhere. .

5. Radicals, there is a limited amount of land on which housing can be built, so which group of your wannabe cooperative owners will get the lease from the community land trust? Your system is set up for the worst kind of cronyism. Human nature doesn’t change just because you switch over to democratic socialism. People are not motivated by altruism. Profit is the reason they get out of bed in the morning and show up at your building site. No profit? No building, no affordable housing, and more homelessness.

6. Can you imagine a worse nightmare than cooperative housing with a bunch of democratic socialists? Endless meetings, factions, and infighting to make every little decision. You’ll be walking into a war zone every time you go home. People will rise up and demand a return to the sanity of capitalism and private ownership, where they can come home to their rent-controlled apartment and enjoy the blissful peace and quiet of their own private lives with no endless cooperative meetings to endure.

7. Rent control laws make housing affordable for low-income people and also help landlords, because they can rely on a steady income stream and low turnover of their tenants. Let’s strengthen the program by giving landlords more options and more incentives to invest in affordable housing—property tax breaks, funds for repairs, and so forth. This is fair, and it also creates buy-in from owners.

8. There is not one state in the union that doesn’t struggle with a lack of sufficient affordable housing. Getting people into affordable homes saves our nation billions in programs that address the fallout from homeless- ness—hunger, crime, drug addiction, and disease. When the government partners with the private sector, we get the affordable housing we need. The government has the power to use programs and regulations to fix the problem. When we can fix a problem, we should.

Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm.

352 | Voices On The Economy

The Shared Outcome

All three perspectives share the same goal of

creating affordable housing for all. The issue of

housing has been with us since the beginning of

human civilization and will always be a central

priority because we can’t survive without it.

We will always need a roof over our heads. All

perspectives agree that it is both desirable and

possible to end homelessness and make housing

affordable. So it’s time for you to try on the

different perspectives and join the conversation

as a respectful listener, passionate advocate, and

intelligent debater. In this way, you’ll find your

own voice on housing, and you may even spark

some new ideas in the process that can solve this

problem.

Chapter 11: Housing | 353

Activity: Poster and Re-vote 1. Activity Instructions

Get together with friends, classmates, or family members and share the talking points and perspective

summaries with them. Read them aloud together. Then, work together to create a poster from one

of the perspectives. Let your creative juices flow. Whatever you draw, make sure the images and

words are big enough so that people in the back of the room can see and read your poster. Try to

use no more than twelve words, and please don’t use copied images, graphs, or technical language

(for instance, the word inelastic). Your poster should include a positive view of the perspective you’re

representing and also critiques of the other two perspectives. Be prepared to present your poster and

explain what’s going on in the images—but at the same time, make sure it also speaks for itself.

2. Revisit Your VOTE Ballot

Now that you’ve made a passionate case for a perspective on housing—and hopefully heard your

friends, classmates, and family members make their passionate cases for other perspectives—please

go back to the VOTE Ballot and vote again on Housing. Are you more certain than ever that your

original position was correct? Have you shifted toward a different perspective? Be sure to fill in the

“Why?” section. The VOTE Program is all about helping you think critically about the issues and have

informed opinions.

354 | Voices On The Economy

Chapter 11: Test Yourself!

Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below.

1. Imagine that you earn $2,000 a month gross (before taxes) and that you’ve found a one-bedroom apartment to rent for $600 per month (not including electricity, gas, water, and trash). Is this apartment affordable according to the federal definition of affordability?

A. Yes, $600 is 30 percent of your gross earnings of $2,000 and your housing is therefore officially affordable.

B. No, because the rent doesn’t include utilities. Once those are factored in, you will have to spend more than 30 percent of your gross income on housing.

C. Yes, because your annual gross income is $24,000, and your annual rent is $7,200, which is an affordable 30 percent of your gross income.

D. No, because in addition to the utilities not being paid, it is also necessary to factor in property taxes. This amount will be much higher than the 30 percent affordability number of $600 per month for the base rent.

2. Match the type of housing (left column) to its definition (right column).

A. Apartment i. Residential units in which both the land and the entire structure are privately owned.

B. Condominium ii. Residential units in a building are owned by a nonprofit corporation in which the residents own shares.

C. Co-op iii. Residential units in a building plus a percentage of shared spaces are privately owned.

D. Single-Family Home iv. Residential units in a building are owned by a landlord and rented by a tenant.

3. Which of the following addresses the problem of unaffordable housing from the private sector?

Choose all that apply.

A. Religious groups B. Nonprofit organizations C. Private philanthropy D. Public housing authorities

4. Suppose you are struggling financially and are having trouble paying the rent. You turn to the government for assistance and eventually you’re approved to move into a particular apartment complex where the units are rent-subsidized. Which one of the choices below describes your new housing situation?

A. Section 8: Tenant-Based Housing Choice Vouchers B. Section 8: Project-Based Rental Assistance C. Public Housing D. Low-Income Housing Tax Credit

Chapter 11: Housing | 355

5. From the viewpoint of a conservative, what is most likely to happen when price ceilings are imposed on residential rents?

A. Those whose needs for housing are most urgent will be able to get the housing they want. B. Poor people will be able to find adequate low-end housing. C. Homeowners will reduce their own use of housing space, making more available to others. D. People will have difficulty finding low-end housing to rent.

6. Please complete the following sentence from the radical perspective: “Housing is a basic human necessity, and/but in capitalism____________________”

A. the main purpose of housing is to monetize it, not to provide shelter. B. price signals ensure that the best, least expensive, highest-quality options will be available

to the most people.

C. rent control causes a shortage when fewer landlords choose to supply and more tenants choose to demand.

D. a combination of private and public efforts to ensure affordable housing means that everyone who needs a home gets a home.

7. Liberals believe that both radical and conservative policies lead to increased levels of homelessness, but for different reasons. Their critique of conservatives focuses on __________, while their critique of radicals focuses on __________.

A. price floors; lack of commitment to representative democracy B. surplus of low-end apartments; allocation of land, labor, and capital C. elasticity of demand; allocation of land D. price ceilings; the socialist tendency toward dictatorship

8. Please choose the correct conservative interpretation of this low-end apartment market graph. A. When the rent is too high in one place, people

leave in search of affordable rents elsewhere. This not only gets people into affordable housing, but it is how we populate the country according to the needs of each community.

B. Affordable housing is ensured when a price ceiling is set in the market, thereby shifting the demand curve left, from D to D2.

C. By eliminating all government housing programs and policies, the demand for low-end housing decreases, resulting in lower rents and fewer available units.

D. The best way to reduce rents and increase affordability of low-end apartments is to make it less profitable for firms to supply. When this happens, demanders drop out of the market and prices respond.

QQ1

Low-End Apartment Market

356 | Voices On The Economy

9. Please choose the correct radical interpretation of this Six-Core Cube. A. When land is privately owned people get the right

mix of low-end, high-end, and middle-end housing that society needs to prosper.

B. Low-income people have access to affordable housing because the government builds, controls, and allocates all the housing.

C. Cooperative ownership gives people the right mix of options for the kind of affordable housing they need to prosper.

D. B & C only.

10. Please choose the correct liberal interpretation of this low- end apartment market graph.

A. As with all price ceilings, unsustainable levels of housing shortages (and therefore homelessness) will result.

B. Inelastic supply and demand of low-end apartment rentals means that price ceilings initially will lead to minimal housing shortage.

C. The minimal shortage is alleviated through government affordable housing programs.

D. B & C only.

Participator y

Governance

ProductionFor Use Cooperative Ownership

The Six-C ore Cube

of Demo cratic So

cialism

QQ1

Low-End Apartment Market

Price Ceiling

Answers

1. B 2. A – iv, B – iii, C – ii, D – i 3. A, B, & C 4. B 5. D 6. A 7. C 8. A 9. C 10. D

Chapter 11: Housing | 357

Chapter 11: Key Terms

Affordable housing Apartment Commune Community Development Block

Grants (CDBG) Community land trust Condo board Condominium Condominium association Co-housing Co-op apartment Co-op board Cost burdened Default

Evict Foreclosure Gentrification Homeowners association Household Housing Inclusionary zoning Intentional community Landlord Lien Low-income housing tax credit Mobile home community Mortgage Point-in-time count

Project-based rental assistance Property manager Public housing Public housing authorities Rent Rent stabilization Section 8 Single-family home Squatters Temporary housing Tenant Tenant-based housing

choice vouchers Utilities

358 | Voices On The Economy

Attention Readers! Here is a preview of what will be covered in The VOTE Textbook, Volume II:

Part III—Microeconomic Issues

Chapter 12 Issue: Income Distribution

Chapter 13 Issue: Market Power

Chapter 14 Issue: The Environment

Chapter 15 Issue: Health Care

Part IV—Macroeconomic Issues

Chapter 16 Tools for the Big Picture

Chapter 17 Issue: International Trade

Chapter 18 Issue: Retirement Security

Chapter 19 Issue: Economic Stability

Chapter 20 Issue: The Federal Budget

Part V—New Conversations

Chapter 21 Approaching a New Issue: Immigration

Chapter 22 Your Voice, Our Future

Glossary of Terms

Index

| 359

ABOUT VOICES ON THE ECONOMY (VOTE)

Our Mission: Inspire solutions to our nation’s urgent economic problems by building a culture of respectful listening, passionate advocacy, and intelligent debate.

Our Method: Line up the liberal, radical, and conservative perspectives on economic issues— side by side, in a completely unbiased way—and invite people to try on those competing voices so they

can fluently articulate each one.

Our Vision: People from all walks of life find their voices on the issues and become educated voters, combative debate becomes solution-focused conversation, and the nation moves forward in the

best possible way.

Voices On The Economy (VOTE), Inc., is an award-winning nonprofit organization that addresses a debilitating problem in our nation. We all know that conservatives, radicals, and liberals routinely vilify and reject one another’s ideas out of hand. But these are ideas that could spark brilliant solutions

to our critical economic problems, if only we would hear them with an open mind. The stakes couldn’t

be higher. If we don’t find alternatives to scornful debates, the logjams will continue. We risk our

nation’s prosperity and our collective well-being.

Many people think, “Economics? That’s not relevant to me.” Not true! Economics is about everything in our lives—from smog in the atmosphere, to quality health care, to hunger in our country, to afford-

able housing. As a nation, we could have everything we need for all to thrive, but what we don’t yet

have are the creative economic solutions to realize this potential. The VOTE Program is founded on the

belief that system change is possible. We can address the root causes of our most pressing problems. It’s time to dispel the notion that finding those solutions is a task best left to the experts. VOTE inspires

all of us to become the next great economic thinkers who can solve the core human question of how

to create prosperity.

This program is the antidote to toxic economic partisanship and limited thinking in the classroom,

media, and wider society. We present fair, accurate, and balanced views of multiple economic per-

spectives. The best solutions to move our nation forward come from pluralistic thinking—not shouting

one another down and shutting out good ideas. We change the conversation by giving participants

hands-on practice with civil discourse while at the same time teaching basic economic literacy so

that every person from every background can enter the larger conversations in an informed way and

“vote”—at the ballot box, at the kitchen table, and in every other area of life.

Each of us has a stake in the future of our country. Each of us has a responsibility to be informed

about the pressing economic issues that affect us all: Agriculture, Product Safety, Livelihood, Housing,

Income Distribution, Market Power, the Environment, Health Care, International Trade, Retirement

Security, Economic Stability, the Federal Budget, and Immigration. By analyzing issues from the lib-

360 | Voices On The Economy

eral, conservative, and radical perspectives, we maximize our ability to find ingenious solutions. Our

award-winning program is taught in classrooms, prisons, senior centers, churches, synagogues, political

organizations, and more.

But please don’t think the VOTE Program is just a curriculum. Better to compare it to a Sputnik

moment. People had looked up at the sky for millennia, but the launch of the first satellite sparked the

human imagination in a new way, and a whole generation fell in love with space exploration. VOTE

sparks people to fall in love with the questions economists have been asking for hundreds of years:

How do we create a community where people have what they need to flourish? How do we create

a world where we are released from worry about our physical well-being and are free to make our

unique, positive contributions to society? There are no limits to the possibilities and beauty of what we

can accomplish through our economic relationships when we harness the intelligence and imagination

of the whole nation to create economic well-being for all.

Our History Since 1992 Amy S. Cramer, PhD, has been teaching multiple perspectives on economic issues. After

earning her doctorate in economics from the University of Massachusetts Amherst, she developed a unique

interdisciplinary program that evolved over the decades to become Voices On The Economy (VOTE). In

2015 VOTE launched as a 501(c)3 nonprofit organization. Dr. Cramer’s teaching experience includes peo-

ple of all ages and education levels. She served on the faculty at Trinity College, Clark University, and the

University of Arizona. Currently she is a full-time economics professor and discipline coordinator for Pima

Community College (PCC) in southern Arizona. In 2017 Cramer and journalist Laura Markowitz began

collaborating on Voices On The Economy: How Open-Minded Exploration of Rival Perspectives Can Spark Solutions to Our Urgent Economic Problems. Markowitz is a National Magazine Award–winning feature writer, editor, and contributing producer for Arizona Public Media.