Archive for the history in the 21st century Category

Opportunity cost

In my not so humble opinion, it is the single most important economic idea.

Nothing in life is free. Everything has a cost. You can’t get something for nothing. If you want something, you’re going to have to give something else up. There’s no such thing as a free lunch.

(Actually, one might argue for close to three hundred years of free (or at least really close to free) lunches, but that’s another lesson for another day.)

It’s just about the first term talked about in any economics textbook. And, frankly, I can’t imagine an economics course taught anywhere where it hasn’t come up, multiple times. Personally, I have trouble going an entire class meeting without using and/or mentioning it.

Opportunity cost.

The true cost of any action is the value of the next best opportunity foregone as a result of taking that action.

So why is it that economics teachers have been singularly inept at getting the concept across? Why is it that, despite the phrase have been used in introeconomics economics classes over the last several generations, at least as often as “supply and demand,” and more often than “inflation” or “recession”, and far more often than “stock market” or “public policy” or “profit,” that so few people understand it?

I mean, after all, millions of people have done the Economics 1 class in the century or three since the concept was first understood and the phrase coined. But communicating the concept in a way that understanding trickled down to wide-spread understanding and use in public economic discourse? It has to count as one of economic teaching professions most spectacular failures.

I bring all this up because in my interaction with colleagues and leaders in “higher education” over recent weeks I have been regularly reminded, again, of just how few in the educated and chattering classes get the idea.

Like most institutions below the highest tier, i.e. those of us whose endowments are a couple hundred million or less (and often a lot less), ours had seen its share of solemn faces over the last few years. First we moaned about the recession (forgetting that, just as in most recessions of the past, education spending moves counter-cyclically as people strive to escape unemployment risks by acquiring new varieties of human capital). And now we’re concerned about something called a “permanent recessionary economy” (whatever the eff *that* is; it can’t be a term coined by any serious economist, surely, not even a Bernanke wannabe). All of

So, in honor of our school’s sesquicentennial, we’ve got a new task force studying the college’s direction for the future. (Our current President loves looking at things through lenses of “strategic planning.” His first major act upon being hired about a decade ago was to form multiple — as in like 12 or 17 — “task forces,” each populated by representatives from a whole bunch of “constituencies,” to come up with an integrated strategic plan.}

But my criticism here is not of the President, or even of the idea and processes of strategic planning. Though I have disagreed with both at times in the past (and probably will again), the President has the track record to support his leadership judgment. Strategic planning has a long pedigree in management circles. And, lets face it, the academic world has demonstrated a long-standing commitment to the values of governance by committee and consensus-building. It’s the way we do things. And it’s going to continue to be the way we do things for the foreseeable future.

No, my concern is the quality of the discussion within those consensus-building committees and task forces — and in conversations between those committees and the rest of us. My concern is that part of the consensus shared across all those task forces and constituencies — the consensus that will ultimately shape the findings and the decision-making — is fundamentally flawed.

In recent on-campus presentations, the President pointed out — and correctly so — that “we’re going to have to change what we do and expect.” It may be a bit of clichéd management speak, but it’s still correct in its basic sentiment. Schools like ours are going to have to make some tough choices about what they can do (and what they can’t do) over the next couple decades.

So today our department chair shared with us a “planning and positioning” document (I presume it comes from the task force). This lists ten “defining characteristics that must be sustained.

And lest you think that this is just a step in the prioritization of mission objectives, a list of items to be weighed against each other as we narrow them down to three or five manageable strategic objectives, the same document also lists 10 “transformational opportunities to be strengthened, 12 “goals for student learning,” and 33 “strategic actions to enhance operational stewardship. So someone somewhere has to find a way to take these 65 valued bits of the college and decide which ones really matter and which ones will be merely boilerplate for college catalogs, recruiting/marketing materials, and the like.

Good luck. No, I’m not going to criticize the President here. I wouldn’t want his job for anything, thank you very much.

Will we “interested parties” help? Not likely. No more than it’s likely that the NFL and the organization formerly known as its players union will wake up tomorrow morning and immediately replace their chest thumping about the significance of this or that without recognizing that some valuable this or that has to be given up.

Next week’s department meeting — and, I presume all the other department and program and leadership and committee meetings that happen like clockwork around here — will devote some serious time to discussion of the task force and its objectives. Blah, blah, blah, and more blah blah blah. Everyone will get a chance to speak.

And everyone who speaks will talk about how essential and beneficial pursuit of their particular favorite goals are, about how much we’ll have to give up if we don’t pursue that particular essential and beneficial thing.

Virtually no one will engage the President’s real point. The opportunity cost point. The point that we’re going to have to give up things that are valuable. Things that are really valuable.

We’re going to have to choose. Yet no one’s going to confront the question of how we decide which “good thing” is worth more and which “good thing” is worth less.

Not even, I expect, me.

Because, if you’re wondering what I’m going to say in such discussions, the answer is, probably not very much.

Oh, I expect I’ll be unable to wholly resist the desire to speak my own piece. After all, I have my own personal list of “essential and important bits” (can you say, “economics for citizenship,” “quantitative literacy,” and “higher order listening skills”?). And I’m no less blinded by the truth of my beliefs than my colleagues are of theirs.

But my speaking is more a reflection of my inability to keep my mouth shut, than it is out of any hope that I’ll convince anyone. Frankly, I’m nearly 100% convinced at this point that the consensus here about anything Wade says about the needs of higher education is near absolute. And near absolute on the position that Wade is a flake whose ideas are far too unrealistic to pay any serious attention to.

No, I don’t expect to convince anyone here (save the three people who still listen to me) of anything that matters.

But that’s not the sad thing. The sad thing is that everyone thinks this “critical” collective approach to the “issues” of ours, this having each of us share the advantages of our favorite bits of the mission, is somehow going to deal successfully with the opportunity cost problem.

No, having a long list of objectives now isn’t the problem. The problem is that without careful and honest and correct attention to the tradeoffs of opportunity cost, we’re going to end up with a vague set of objectives, many incompatible in their pursuit. And as the President and leadership make one after another of those tough choices — since you don’t eliminate the need to make tradeoffs just by keeping everything on the published list of essentials, and so someone has to make the choice — you merely postpone the inevitable and perhaps change who decides which tradeoffs are made.

And when the tradeoffs are made, expect them to be accompanied by more-than-necessary bad feelings.

The college can afford an occasional frustrated Wade — he’s a flake, after all. But you aren’t going to deal with the needed change by just ignoring a couple flakes, any more than you’ll solve serious revenue shortfalls by reducing photocopy budgets. You’re going to have to get rid of some valuable people and some valuable programs and some objectives really worth pursuing.

Because opportunity cost is not a flaky idea.

Just ask Greece.

Or Portugal.

For that matter, look at the consequences here in America we’re just starting to see with regard to the profligate spending in pursuit of “good ideas” by America’s own state and federal governments. The consequences of decades worth of trying to cheat the tradeoffs of opportunity cost.

You want to know why the quality of discourse in the Wisconsin mess is so low? It’s low because virtually no one seems to want to admit the constraints of opportunity cost.

Because opportunity cost is not an idea we can dismiss as easily as we can sneer at the flakier of those who might be pointing it out.

No, opportunity cost is something else. Something that applies whether we get it or not.

It is, to steal a phrase from Agent Smith, “the sound of inevitability.”

Me, I blame economics teachers.

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Just found out I’ll be chairing the annual teaching roundtable at next month’s Economic and Business Society conference in Columbus, Ohio.

It’s not a surprise. I was one of the leaders in adding a teaching session to the conference back in Providence in 2007. And even though other problems kept me from proposing a session myself this year (the same ones that have kept me away from Iterations for some time), as an EBHS trustee, I’ve been a long-time advocate of putting teaching-related content on the program. Last year, in Braga, Portugal, I and others managed to finangle two sessions. I imagine we could have had a second session this year as well (the conference chair, Jason Taylor from Central Michigan, is also a fan of teaching sessions). But I just haven’t had time to assemble conference panels and such.

Or even to prepare a paper of my own. The reality is that it is extremely difficult to find time to do research/write in any significant way during terms. And last summer, I was occupied primarily with getting my mother moved into assisted living and rewriting an economic history that had gone quite badly the previous iteration. Add in recurring bouts of depression and learning in December that I have Type II diabetes, and I just haven’t had time to make proposals or write papers.

But I am looking forward to the trip, for personal reasons and professional ones alike.

First, I just love this conference and its people. I haven’t missed one since first going in 2002. It’s the only academic conference I go to every year anymore. Many years it is the only one I go to.

This is partly because of my evolving interests mean I’m more likely to attend non-academic conferences than academic ones with my limited travel dollars. But it’s also because EBHS offers something I haven’t found in any other organization — a dedication to multi-disciplinary collegiality and scholarship. As far as I know, EBHS is the only organization out there that regularly focuses on bringing lots of economic historians together with lots of business historians.

Oh, you’ll see the occasional economic historian presenting before a business history group, or an occasional business historian doing the same before economic historians, but the dominant world view is always one or the other. Which isn’t bad — it’s just that EBHS then provides a very valuable niche.

And we need that kind of scholarship. We need more people who regularly engage in the extended exchange of ideas and careful listening to people with different ways of doing things. It’s too easy to convince ourselves of the importance of marginal scholarship when we only interact with people who share our discipline’s methods.

And, what is even more important, it seems to me, we need it for our teaching. Teachers whose only contact with “research” comes with those who do the same kind of research are going to be much less likely to interact effectively with students who have learned to value other kinds of methodologies.
We rarely get the top scholars of our fields, much less “big names.” (Unless they’re serving as keynote speakers. Last year we managed Michael Bordo, Li Bozhong, and Patrick O’Brien (oh yes, and the Portuguese Minister of State, Fernando Teixeira dos Santos. This year I’m looking forward to seeing Dick Steckel.) But we get people I consider more important: the people on the ground who teach economics, business, and history at 2nd, 3rd, and 4th tier schools.

People less concerned with living in the penthouses of technical research, but people committed to keeping the foundations of the building filled in with sturdy examples and rooms furnished in ways that visitors (i.e. students) find welcoming and worth buying.

As people know, I have lots of problems with the way higher education is done today, particularly at lower-tier schools like my own. Serious problems. Fundamental disagreements with the way things usually get done. Deep fears about the future of what we do and its usefulness.

But places like EBHS give me confidence to go on.

Not because the people of EHBS are somehow more convinced about my arguments. They aren’t. I expect many of them see my idealism and out-of-the-box ideas as flaky (or as dangerous) just like my Luther colleagues do.

In fact I know they do. Because unlike my Luther colleagues, they have listened and conversed with me both deeply and often over the years.

No, I don’t go to EBHS every year because it’s made up of people who share my philosophical or pedagogical or political bent. It isn’t, and they don’t.

No, I have gone to EBHS every year because it’s made up of people who I know will listen. Who, though they rarely go far outside a particular scholarship or teaching box themselves, they recognize the fundamental importance of deeply listening to those who do.

So if you’re interested, and able to find a way to spend a few days the Hyatt on Capitol Square in Columbus, come over and join us April 14-16. You won’t regret it.

And you don’t have to be on staff somewhere as an economic or business historian. We’ve had accountants, political scientists, and philosophers. I’ve chaired panels with bankers and with bureaucrats. Heck, a couple years ago, I had a panelist from a federal government agency who wrote an outstanding paper on the history of x-ray medicine.

And how often are you going to find me willing to put “federal government” and “outstanding” in the same sentence.

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I just realized it has been over a year since my last post.  Unacceptable.

I shan’t go into all the details.  It’ll just get me in whine mode, and I’d rather save that mode for things that are important, namely rants about politicians, the current education system, and other iterative topics of this blog.

I will make one observation for those of you wondering where the economy is going.  (I don’t know why people ask me the “what do you think about the economy?” question all the time.  After all, I teach economics.  That’s not the same as knowing where the economy is going.  If anything, I expect the two are negatively correlated variables.)  But for those of you who insist on asking, here’s a bit of an economic observation:  if I had spare money to invest  right now, I’m pretty sure I’d put a serious chunk of it into “health care for senior citizens”.  Having dealt with the ups and downs of being a caregiver for an elderly parent, I’ve got to see a bit of what the youngsters out there are going to deal as the Baby Boom generation (i.e. mine) ages.  Forget about worrying about your 401(k), Gen Yers.  Think about how you’re going to deal with all us old farts when we pass 75.

There is going to be one crapload of a lot of old people out there.  And our generation, unlike my mother’s generation, has defined “low savings rate”.  Add in the fact that ours is the first generation of entitlement, and you’re going to have a nightmare.

Weep, Gen Y.  You’re going to have to deal with our incontinence, our congestive heart disease, our Type II diabetes, and all the rest.  For years, because we’re going to be living at least as long as our parents, and our parents were a fecund lot.

And no, the government can’t solve this one for you.  Sorry.  I hate to tell you this, but they’ve been clueless for decades.

Your generation cares a lot about sustainabilty.  Well, guess what, you are going to have to figure out how to sustain, not what this economy is doing right now….you’re going to have to figure out how to sustain unprecedented economic growth.  You’re going to have to reinvent the economic world the way the Europeans re-invented it a couple hundred years ago.

You’ve made a good start.

But the solution to dealing with us old farts is going to be tough.  I don’t care what the worriers and entitlement-people and the politicos who think all solutions are found in someone else’s pocket say.  You’ve got one “social task” ahead of you:  you need  to figure out not just “sustainable” growth.  You need to figure out how to grow growth itself.

We’ll help, of course.  But pretty soon we’re going to be old enough to demand you service our retirement “needs.”

Good luck.

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I admit it.  I’m an unapologetic enthusiast for the new and cool.

I can’t think of a time I’d rather be living in.  Today’s flat world is the most exciting place of change since the British started finding new ways to combine steam and iron in the Industrial Revolution, and its happening in a world with a lot more economic wealth.

Though I’d rather be living it as 25 years younger and several hundred thousand dollars wealthier, and it would be nicer to live where I didn’t have to worry about winter soon making its annual five month visit, I think there is no place in history that I’d rather be living in right now than the world circa 2008.

Which brings me to the place of history and its study amidst all this change.

Because while I’m an enthusiast for the future, I’m also an enthusiast for the past.  Despite having written a dissertation on the economic history of company law in Victorian Britain, I remain interested in how companies work, how law works, and in what happened during that 63 years and 7 months Queen Victoria occupied the throne of the United Kingdom.

(It’s another reason, I suppose, for academics referring to the PhD as the “terminal degree”:  after having endured all the stuff that finishing the thing takes, it’s a good bet that your deep interest in the subject is going to be on life support.)

History remains a passion, and not just the history of the Victorians.  For example, I am currently reading a book on trade in the ancient world.  (More on that in a bit.)

Yet I’ve had greater and greater difficulty convincing my fellow enthusiasts about the future (i.e., the students in my economics and history classes) that there is deep value to be had from studying the people, events, and technologies of the past.  Let’s be honest, after all:  the people are dead, the events can’t be changed, and the technologies are several generations obsolete.

And let’s also be honest about those “lessons from the past”.  While they are real and while they are important, they are complicated and difficult to draw.  Between the time when the past happened and today there have been many continuities and many, many changes, and it’s very difficult untangling which is which.

The book on ancient trade that I just alluded to, Barry Cunliffe’s The Extraordinary Voyage of Pytheas the Greek (Penguin, 2002) is an excellent illustration.  It reveals its author’s erudition (he’s a professor of European archaeology at Oxford) at every turn, and paints a detailed picture of the ancient trader’s world, of the lure of tin and the discovery of Britain.  But it is not an easy read.  Given that I’ve been reading bits and pieces of the story for several months now and have only just now passed the halfway point of Cunliffe’s 184-page book, I don’t expect to be assigning it in my economic history course.

Yet it is oddly compelling, and a book well worth the effort.  But it will take effort.

But is it really worth that effort?  What does the story of Pytheas the Massaliot (Massalia is the ancient name for what has become the modern French city of Marseille) offer for better understanding of the world of 2008?  It is after all the ultimate in stories about long-dead people, long unchangeable events, and long obsolete technologies.  Apart from French antiquarians and Oxford archaeologists, I don’t expect there are 500 people in the world who care about the ancient name of Marseille, and not many more who care about ancient trade routes or the history of tin.  Answering the “What’s in it for me?” would appear to be an insurmountable question.

Well let me point out three big reasons.

First, lets look at that stuff about trade routes.  Today’s is a world made and remade daily by trade.  When people speak of “globalization,” they’re describing a world defined by its trade.  Yet, as any good economic historian will tell you, globalization is not a recent phenomenon.  Indeed, as the story of Pytheas the Greek points out, it’s been going on for millennia.  So what’s different, really, about the 21st century’s version?  What makes our globalization so special, for good or for bad?   Well, it seems to me, you can’t answer these questions unless you get deep into the details.  Unless you think about how trade works,  about how raw materials and goods get from where they are to where they end up.  In short, you need to know about trade routes.  And the routes of trade are a lot more complicated than the half-page “circular flow” diagram that is to be found in most introductory economics textbooks.

Which brings me to the second and third reasons.   Reading along with Cunliffe as he pieces together the trade routes of the ancient world reveals just how difficult it truly is to figure out who is actually trading with whom in a global market.  And it reveals all the judgment calls one must make about “evidence” along the way of that figuring out.

If you’ve got a mind that works well with abstraction, the theoretical concepts of economics (supply and demand, opportunity cost, national income, technology, and the rest) are fairly straightforward.  But to put those concepts to work with real world situations is complicated and messy work.  Especially if you want to do it well.

Because while the 21st may put unprecedented amounts of “data” at our fingertips — just do a couple Google searches and click on a few links — converting that data into “evidence” is detailed and frustrating work.  It requires the user of data to make constant judgments and interpretations.

But when you live in a world with so much data to hand, it’s very hard to see those judgments being made.  That’s where Cunliffe’s story comes in. He is very transparent about where and how and why he’s making inferences and interpretations.

Indeed that transparency is part of what makes reading his book such slow going.  I can imagine my students saying, if I were so foolish as to assign the book and then ask for their evaluation of the book, “but he takes so long to say anything!”

Yet I’m not sure there’s any more important skill people in the 21st century have to develop than empirical judgment.  It is so, so easy for political and business and religious charlatans to just inundate us with “information”.  We must have tools of judgment as good as our tools of information transmission.  We need advanced tools, the kind of tools hitherto the province of PhD-level historians and archaeologists, and we need those tools in the hands of everyday users of information with a bachelor’s degree or less.

We need the study of history today.  More, not less, than ever before.

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