Conversable Economist

Olivier Blanchard has a new book coming out, titled Fiscal Policy Under Low Interest Rates.  Because it’s the 21st century, a full draft of the book is available at the MIT Press website and you can leave comments and reactions there. The “review period” for comments ends on January 18–which is to say that Blanchard will start doing his final revision of the draft at that time. But the plan is for the draft itself remain online until the final version of the book is published later in 2022.

For a flavor of what’s in the book, Blanchard has written a short essay: “Why low interest rates force us to revisit the scope and role of fiscal policy: 45 takeaways” (Peterson Institute for International Economics, December 21, 2021). As the title implies, it’s a list of 45 takeaways from the book. Here’s a selection:

1. Safe real interest rates have declined steadily since the mid-1980s. The decline is due neither to the global financial crisis nor to the COVID-19 crisis. It has been common to all advanced economies. …

5. The decline in rates must be traced to deep low-frequency factors, shifts in saving, investment, risk and market risk aversion, liquidity, and preference for liquidity. Many suspects have been identified. None has been convicted. Going through the list, few of them, however, seem likely to quickly turn around. One cannot and should not be sure, but secular stagnation appears likely to last. …

10. As neutral rates have declined over the last 30 years, they have, on the way down … [become] lower than growth rates (r*<g) … 

11. The fact that r<g has important implications for debt dynamics. Put simply, it gives countries more fiscal space. They can run (some) primary deficits and keep their debt ratios (the ratio of debt to GDP) constant, or even decrease them. …

17. Public investment spending, to the extent that it generates future increases in fiscal revenues, can be partly financed by debt without threatening debt sustainability, something that any rule should reflect. Too often, the application of simple rules has led to inefficient cuts in public investment.

18. This does not imply, however, that all public investment should be financed by debt. Even if the investment generates large social returns, if it does not generate sufficient fiscal revenues, directly in the form of fees or indirectly from higher revenues from higher future output, it may still potentially threaten debt sustainability. …

32. In discussing optimal fiscal policy, it is useful to start with two extreme views. The first can be called the “pure public finance” view. It implicitly assumes that monetary policy can maintain output at potential and focuses on the role of debt in smoothing taxes in the face of variations in spending or in affecting the welfare of current versus future generations.

33. The second view assumes implicitly that monetary policy is not or cannot be used and that the main task of fiscal policy is thus macro stabilization. This view is known as the “functional finance” view, so baptized by Abba Lerner. In this case, fiscal policy must compensate for variations in private demand in order to maintain output at potential. If private demand is chronically low, then governments must run sustained deficits. …

45. A case of too much? To boost the US recovery from the initial COVID-19 shocks, the Biden administration embarked in 2021 on a major fiscal expansion. The strategy (again, if indeed it was a strategy) was for fiscal policy to increase demand and thus increase the neutral rate, and for monetary policy to delay the adjustment of the policy rate to the neutral rate, and in the process generate temporary inflation. Inflation has turned out to be much higher than expected. Was the fiscal expansion too strong? Was the strategy a mistake?

Everyone knows there was a Great Depression. The information is readily available. But those who lived through the Great Depression tended to show lasting patterns of behavior–like high rates of saving and low participation in stock markets. Experiencing an event directly is different from knowing about it in other ways. It turns out that these “experience effects” are widespread: for example, related to economic events like experience of high inflation or unemployment. In the next few years, we are likely to find out that there are lasting experience effects from the COVID pandemic, too.

Ulrike Malmendier lays out some of the theory and evidence in her 2020 JEEA-FBBVA Lecture to the European Economic Association, now published as “Exposure, Experience, and Expertise: Why Personal Histories Matter in Economics” (Journal of European Economic Association, December 2021, 19(6), pp. 2857–2894; also available as NBER Working Paper 29336, October 2021). From the abstract:

Personal experiences of economic outcomes, from global financial crises to individual-level job losses, can shape individual beliefs, risk attitudes, and choices for years to come. A growing literature on experience effects shows that individuals act as if past outcomes that they experienced were overly likely to occur again, even if they are fully informed about the actual likelihood. This reaction to past experiences is long-lasting though it decays over time as individuals accumulate new experiences. Modern brain science helps understand these processes. Evidence on neural plasticity reveals that personal experiences and learning alter the strength of neural connections and fine-tune
the brain structure to those past experiences (“use-dependent brain”).

Malmendier provides a range of evidence on this theme, including a study of economic behavior of those who experienced the Great Depression. Here, I’ll just give a sample of that evidence from various studies in the narrow category of those who have had experiences of high inflation. Estimates of overall inflation in the US economy are easily available and well-publicized. But people’s own estimates of inflation are biased up or down from the official number by the changes in the prices of goods and services that they personally have purchased in the last year or so.

For example, older Americans who experienced and lived through the high US inflation rates of the 1970s are more likely to expect higher inflation than somewhat younger adults who did not–although the two groups have had identical macroeconomic experiences for the last several decades. In turn, these expectations about inflation affect current behavior, like the choice between a fixed-rate or adjustable-rate mortgage, or whether it is important to own a home at all as a hedge against inflation. Similar results arise if one looks at immigrants to the United States who had different personal experiences of inflation in their countries of origin.

There is a common pattern that women tend to expect higher rates of inflation than men. It turns out that this pattern can be largely explained by women having more direct exposure to changing prices in grocery stores.

The influence of experience on expectations even holds true for members of the Federal Reserve Board of Governors, who make explicit forecasts of inflation and also vote on monetary policy. The research finds: “In other words, personal past experiences induce FOMC
members to make worse [inflation] forecasts than they would if they were simply following the suggestions of their staff.” In turn, these experience-biased predictions about inflation are then linked to how Fed governors vote on monetary policy.

Of course, inflation is not the only way in which an especially salient early experience can affect attitudes for the long run. An effective mentoring program, for example, seeks to create a long-run effect. Getting to know someone of different religion, race/ethnicity, nationality early in life–say, by sharing an activity or a dorm room– can have a lasting effect on attitudes.

What about the pandemic? Malmendier writes: “Did living through the pandemic alter us in the longer run, beyond the explanatory power of changed financial and other personal circumstances and beyond the arrival of new information? The growing research on experience effects implies that the answer is yes—that there will be long-term changes in beliefs and behavior even “ceteris paribus”, even if we were actually back to a world pre–COVID-19.”

She offers a vivid example of John Barry, who is author of the 2004 book The Great Influenza: The Story of the Deadliest Pandemic in History, which focuses on the 1918 Spanish flu pandemic and became a best-seller in 2020. If anyone would have been ready for a new pandemic, surely it would be someone like Barry? Malmendier writes:

In the context of the COVID-19 pandemic, the infectious disease researcher John Barry from Tulane University, whose book about the 1918 Spanish Influenza pandemic had reemerged as a best seller in 2020, described this notion when asked about his experience of living through the COVID-19 pandemic and whether he had expected to witness a pandemic like this when he wrote the book. His answer was: “Yes and no. I think anybody who understands anything about infectious disease recognized that we were going to, sooner or later, face something like this; …. But, intellectually understanding it, is one thing, and having it hit you is something quite different. So, I am like everyone else in that sense” … In other words, even Barry was shaken and “hit” by this pandemic experience, and no scientific knowledge (“information”) could prepare him. He felt “like everyone else” despite knowing the science of respiratory disease epidemics, knowing the likelihood of their emergence, and knowing the effects on humanity. Intellectually understanding—having the information—is one thing. “Having it hit you is something quite different”, even for highly trained, well informed professionals.

It will be a few years before we have the data to answer questions about long-lived effects of the pandemic. But there are a range of possibilities for how it may affect the behavior of those who lived through it: desire to work remotely vs. in-person; the attractiveness of being in a downtown urban center; attending live performances; consulting health care providers in-person or online; receiving education or training in-person or online; future attitudes about vaccinations; expectations that the government will sent checks to households and/or firms when similar situations arise in the future; and so on and so on. In the future, those who lived through the pandemic in different conditions (say, different occupations or living situations) may have permanently different reactions to some of these issues. In a decade or two, those of us who have lived through the pandemic are likely to have permanently different attitudes about at least some of these issues compared with younger folks who heard or read about the panic, but didn’t live it.

Writer and Poet Roya Hakakian arrived in the United States from Iran in 1985. Her most recent book is A Beginner’s Guide to America: For the Immigrant and the Curious (2021). The most recent issue of Capitalism and Society publishes a short excerpt from the book titled “When New Immigrants First Go to an American Supermarket.” Here, I’ll give an excerpt of that excerpt.

About visiting a US grocery story, Hakakian writes:

In one particular aisle, you find cans of beef, chicken, and fish priced much lower than others you had seen in previous aisles. Pleased with your find, you pile them into your cart. Then you hesitate when you see a picture of a dog or a cat on each can. You remember the feral cats and emaciated dogs that used to roam your streets. They were sometimes hunted, sometimes banned for being unclean, and always unloved. It is not until you see leashes, rubber bones, and miniature sweaters in a large bin in the same aisle, all 40 percent off, that you realize the unthinkable is true: Americans feed proper food to their pets here, and even dress them. To think that you were about to stock your cabinets with animal feed! What would your former countrymen say if they got wind of this? You can hear the wisecracks: He went all the way to America to eat dog food! It will be years until you learn that pets are venerated in this country, at times even as much as, if not more than, children. For now, you gingerly put the cans back and hurry into the next aisle.

There you will be mystified once more. On shelf after shelf, you will find enough boxes to declare a republic of cereal. All your life, you had known cereal to have only one shape, color, and flavor, at the most two. It came in a smaller box than the ones before you, with only a few words written on each. As if the supersized boxes were not enough, the many sentences make you feel there is something far more respectable than mere cereal inside. In the face of all the variety, you wonder if you really knew cereal before. Do not let this imposing lineup crowd your vision and get in the way of seeing what transcends mere cereal. While so much variety rightly strikes you as frivolous, you must remember it is the presence of variety that matters. Simply put, the past was a black-and-white picture, and America, Technicolor. Cereal is proof that you have left the universe of Manichaean options, where you usually had to consider between bad and mediocre. (The quality of good had plummeted, since it was always all that was available.) You are in the land of choice, where you must think and select according to your own taste. Open the floodgates of inhibition.

I was also intrigued by Hakakian description of being surrounded by a nation of fund-raisers for small causes:

You used to give a coin or two to the poor of your city, or drop a banknote in the collection box at your place of worship, or help a neighbor or a friend with a loan. But these were a few small exercises at best. Here, people give regularly. Squirrels collect acorns, and Americans raise money. It is as natural as any instinct for them. Children offer lemonade on sidewalks to raise money for the kittens at the animal shelter. Girl Scouts go door-to-door selling cookies so other aspiring girls can become Scouts too, and do the same. Mothers organize bake sales to help pay for a new neighborhood playground. Teens give to the GoFundMe campaign of a filmmaker working on a documentary about the endangered aardvarks of Angola. Even Santa, the nation’s gift giver in chief, appears at the threshold of major department stores every December, ringing a bell at the side of a siren-red donation bucket. Overworked cashiers will not scan your items before listlessly asking if you would like to donate a dollar to the fight against something or other. Once a year, arsonists take a day off so firefighters can stand at intersections holding up their rubber boots, charming drivers into pitching in a few dollars. At the registers of greasy gas stations, two things are always guaranteed: the noxious smell of fuel and the cardboard quarter receptacle for St. Jude Children’s Research Hospital. In some movie theaters, films cannot start unless the ushers have walked aisle to aisle passing the empty popcorn container to collect money for whatever the star in the public service announcement
urged the viewers to donate to. Entertainers hold telethons to raise money for this disease or that. Rock bands compose songs for disaster victims and give them their proceeds. Radio broadcasts are interrupted so the hosts can make appeals for a donation, which the local attorney or dermatologist matches. Runners run, bikers bike, and comics crack jokes, all to help raise money for the needy. Politicians bombard their supporters with emails, asking them to give five, ten, twenty, or more dollars toward making a better tomorrow, when, in addition to a higher minimum wage and universal healthcare, there will also surely be more emails asking you to donate again. Corporations have charitable arms. Dignitaries ask for money to build homes for the destitute. In television commercials, celebrities, holding doe-eyed babies in their arms, urge viewers to adopt a child on another continent through a monthly contribution. Anything is possible in America, even raising a baby by subscription.

When Americans do not raise money, they raise necessities. They have book drives, blood drives, food drives, turkey drives, even car drives. If they cannot solicit you in person, they send you letters. Heaps of envelopes arrive in America’s mailboxes every week asking the
citizens to donate to one organization or another. Fundraising is a behemoth as vast as any industry. … You may be naturalized already, but unless you begin writing checks for people you have never met, living in places you would never visit, you are not a real American.

No nation so rich has ever asked for more money. They do not need the order or the permission of some authority to tell them what to raise and for what cause. They take matters into their own hands and wage campaigns to save the pandas, protect the bees, or reverse beach erosion. What is at the heart of all this fundraising is the same thing that is at the heart of all other perfectly American things—an irrepressible self.

For interested readers, here’s the full Table of Contents for this most recent issue of Capitalism and Society, with abstract and links to papers.

Recent Research on Income Distribution: An Overview of the Field
By Gerald Auten
The distribution of income in the United States has long been of interest to economists. Using data on tax returns, Piketty and Saez (2003) concluded that top income shares had more than doubled since 1980. This paper helped trigger broader public concerns about rising inequality and stagnating incomes for lower- and middle-class households. But this paper was criticized by academics for using a narrow definition of income that failed to account for the dramatic growth of Social Security, Medicare, and other transfer programs and for ignoring the effects of declining marriage rates and smaller household size. More recent work by Piketty, Saez, and Zucman (2018) addressed some of these issues using a broader income measure based on national income but still found dramatic increases in top income shares. Their new analysis has also been criticized for overstating top income shares due to certain assumptions used to allocate income not reported on tax returns. This paper examines these issues in measuring the distribution of income, compares the analysis and results of recent studies, and presents a more nuanced view of income inequality over time. While there is always uncertainty about distributional analysis, the best available evidence suggests that top income shares are lower and have increased less than some have claimed and that real incomes have increased over time for all income groups, though not necessarily for every household. Click here to read the paper.

Markets and Regulation in the Age of Big Tech
By Kaushik Basu, Aviv Caspi, and Robert Hockett
The digital revolution, along with the growth of the companies known collectively as Big Tech, is transforming the global economy and giving rise to novel policy challenges. This paper analyzes the microeconomic foundations of this change, particularly how the natures of competition and oligopolistic equilibria are changing as a result of the large returns to scale and the global connectivity made possible by these new technologies. We then discuss how these changes fit into the existing regulatory landscape and argue that, for certain kinds of large digital-platform firms, existing antitrust laws may not be adequate. We conclude by considering more radical reform, such as requiring certain platform firms to be organized as nonprofits or public utilities.
Click here to read the paper.

The Pursuit of Coherence in Mainstream Macroeconomic Methodology
By Sheila Dow
The coherence of mainstream macroeconomics is threatened by inconsistency between the core theoretical model and the empirically grounded models used for policy advice. The field has evolved in response to policy demands in the wake of the 2008 financial crisis. But this evolution has been constrained by the emphasis of the core theoretical approach on a particular representation of microfoundations. Yet the notion of internal consistency by which this microfoundations project is justified is challenged by a broader philosophical notion of consistency. The long-running expression of opposition in mainstream macroeconomics between logical and empirical coherence (or between rigor and realism) accordingly requires further examination of how real economic systems are understood and how knowledge about them is to be built and assessed. If mainstream macroeconomics is to continue to deviate from the core model by virtue of open-system ontology, then in order to ensure coherence, the characteristics of that system need to be articulated, and their implications for methodology worked out.​​ Click here to read the paper.

On the Economics of Economic Knowledge
By Dominique Foray
In this paper, we argue for building a research agenda to analyze economic knowledge as an
economic good and explore the socioeconomic institutions that can be relied upon to produce, distribute, and use economic knowledge in an efficient manner. In our opinion, the benefits of such an approach, as well as the value of its future contributions to the understanding of the foundations of the economic dynamic, are obvious. Click here to read the paper.

When New Immigrants First Go to an American Supermarket
By Roya Hakakian
When newly arrived immigrants first glance into an American supermarket, shock may well be their first reaction. So writes Roya Hakakian, author and poet, in her new book A Beginner’s
Guide to America for the Immigrant and the Curious (2021), which walks the reader through the immigrants’ first moments on American soil to the final ceremony of hard-earned
naturalization. In those early days after the immigrant first arrives, the tiniest details can
register at great magnitudes, from the head-spinning varieties of cereal to highway signs.
According to Hakakian, these are the things that make the newly arrived so keenly aware of
the contrasts between their lives before and after immigration. She draws a portrait that
showcases America as a land of abundance, while unpacking the meanings behind the plenty.
Click here to read the paper.

Can Free Trade Be Part of Green, Resilient, and Inclusive Development?
By Mari Pangestu and Enrique Aldaz-Carroll
Trade has been a means to development by generating jobs, spurring economic growth, and reducing poverty. However, the gains from trade have shown to be less than equally distributed, hurting at times some localities and segments of countries’ populations. The COVID-19 pandemic has also shown that global value chains (GVCs) are susceptible to serious disruptions. The climate crisis has raised attention on carbon emissions from the transportation of merchandise exports and imports. If trade is to remain a driving force for growth, job creation, and poverty reduction and part of countries’ effort to set a new path towards green, resilient and inclusive development, understanding how the gains from trade are distributed and how the impacts of trade can be better managed is of critical importance. This paper reviews the evidence bearing on these concerns and considers policy responses that could enable trade, and particularly GVCs, to contribute more to a green, resilient, and inclusive recovery for developing countries. What is needed is the combination of old policies like trade facilitation, business environment, and skills with new and green policies including a new treatment of carbon, emphasis on diversification, social-protection measures, and improvements in the international trade order. Click here to read the paper.

The Quest for Economic Freedom in India
By Shruti Rajagopalan
This paper studies the 1991 reforms, as the beginning of the transition towards a market
economy from the socialist policies in the first four decades of the Indian republic. Tracking
the major reforms in the three decades since 1991, I argue that economic control and statist
policies are the norm and that reforms enhancing economic freedom are the outliers. After an excellent start by the Rao-Singh team in 1991, and a gaining of momentum during the Vajpayee government (1999-2004), India’s liberalization and reform process has slowed down
considerably in the last decade. The slowdown in the reform process, ad hoc regulation, as well as disastrous policies like demonetization, have become the new trend in Indian economic policy. Simultaneously, India’s high rates of growth post-liberalization have also slowed down, especially in the last five years, a trend that was visible before the pandemic. The reason is that Indian policymakers pursued socialism for the first four decades after independence and never fully committed to the pursuit of economic freedom after the initial set of reforms in the 1990s and early 2000s. The main lesson from the history of India’s reforms is that the problem is systemic and structural and requires a deeper commitment to markets to fix its upside-down state-market relationship. Click here to read the paper.

An Equilibrium Model of Corporate Environmental and Social Governance
By Richard Robb, Vinay Viswanathan, and Martin Sattell
We develop a formal model to study the consequences for firms of adopting environmental and social governance (ESG) constraints. In the presence of information asymmetries, we find that a firm may reduce earnings variability by binding itself to ESG rules, thereby lowering the interest rates that creditors charge and raising expected profits. The gains are likely to be far greater when ESG constraints not only reassure creditors but also limit the ability of self-serving managers to work against the interests of shareholders. For most parameter values, though, we find that adherence to ESG lowers returns and increases risk. The predictions of our model contrast with those of two influential studies by Morgan Stanley. In the first, Morgan Stanley (2015) claims that ESG systematically raises investors’ returns. In the more recent, it claims that ESG reduces investors’ downside risk (Morgan Stanley 2019). We summarize our earlier critique (Robb and Sattell 2016) showing that the results of the first Morgan Stanley study cannot be replicated, and we go on to show that the results of the second study arise from two errors: (1) Morgan Stanley uses the default benchmark (S&P 500 Total Return Index) supplied by Morningstar Direct rather than the benchmark appropriate to each fund, and (2) the conclusions drawn from median returns are an artifact of microfunds, many with less than $10 million under management. Upon correcting these errors, we arrive at the opposite conclusion, one consistent with the literature: ESG investors sacrifice a small amount of return for any amount of risk. A great deal remains to be done to determine whether ESG is effective or ineffective in addressing social concerns. Our contribution here is to propose a versatile, tractable model that can start to address vital questions in a more rigorous framework than we find in the literature. In particular, we show how ESG might raise social welfare by multiples of the private costs and how our model can quantify the trade-off. Click here to read the paper.

Three Myths about US Economic Inequality and Social Mobility
By Xi Song, Michael S. Lachanski, and Thomas S. Coleman
Income inequality has increased dramatically in the United States since the 1970s. However, we argue in this paper that many common perceptions about causes and consequences of rising inequality are misleading or even false. Using first-hand empirical analyses and meta- analyses of previously published work, we present and demystify three key facts about the rise in US inequality that have been given too little attention in recent debates. First, inequality has risen throughout the distribution. Post-tax and transfer income levels have grown in the middle and bottom of the distribution, not the top alone – the top 1% does not take all. Second, the trend in intergenerational social mobility has remained largely stable over the last four decades. The relative gap in mobility opportunities between children from poor and rich families has barely changed – the “Great Gatsby curve,” which predicts a general negative relationship between income inequality and intergenerational mobility, does not apply to the US. Third, changes in the return to human capital caused by shifts in the supply and demand for educated and skilled labor have played a crucial role in the rise in income inequality since the 1970s – rising corporate concentration and employer market power (monopsony) do not appear to be a key culprit. Click here to read the paper.

When seeking to justify my career as an editor, I sometimes say that my value-added happens through subtraction: that is, if the final version of the paper as it appears in the Journal of Economic Perspectives makes all the same points, but is 8000 words of text instead of 10,000 words, then I have saved time for readers.  It is fairly standard for me to reduce the lengths of first drafts by 20%, although the trims are sometimes much greater. I once cut a first draft that was over 80 pages to less than 20 pages.

Back in the Dark Ages before word-processing, there was a natural incentive to keep papers short: namely, you (or someone) had to retype each draft. But in a word-processing world, there is a tendency to respond to any given concern by adding either a little or a lot.  The implicit assumptions behind this approach are that longer explanations are more clear, and that the reader’s time has zero cost.

In fact, there may be a cognitive bias in favor of adding, rather than subtracting. In “People systematically overlook subtractive changes,” Gabrielle S. Adams, Benjamin A. Converse,
Andrew H. Hales and Leidy E. Klotz run a series of experiments to see whether people are more prone to add or subtract in different settings (Nature, April 7, 2021).

For example, one set of experiments shows the players an illustration of a miniature golf hole, and asks them for their suggestions for improvements. Notice that this situation allows for either additions or subtractions. However, some players were told explicitly that they could offer additions or subtractions, while others were not offered any cues. Those who were reminded of the possibility of using subtractions were much more likely to do so.

Another set of experiments presented the players with the graphs shown below. The players could click on a white square to turn it green, or a green square to turn it white. The players were supposed to adjust the figure so that it was symmetric both from side to side and from top to bottom. The players were also told that the goal was to create symmetry with as few clicks as possible.

Consider Panel D as one example. One way to create the requested symmetry is to add four green squares to the upper-right, bottom-right, and bottom-left of the figure. another way is to delete the four green squares in the upper-left. Subtraction requires fewer clicks. But unless people are prompted with the idea that subtraction is a possibility, or unless they have multiple chanced to do this kind of puzzle and thus to learn from experience, subtraction is a less likely choice.

Or course, extrapolating from these kinds of experiments to broader contexts is fraught with difficulties. But I’ll just say that in my experience as an editor, there’s clearly a bias toward addition. No author ever says: “I have a really hard time adding to my earlier drafts.” Many authors say: “I have a hard time with trimming my earlier drafts.” But even if longer papers are more clear (a proposition that would need some proving), it remains true that the time of readers is limited. One hopes that a given paper has considerably more readers than authors. If that is true, then time spent on subtraction from a given draft will produce an overall savings of time for the economics profession as a whole,

Of course, there are other possible implications of a bias toward addition. Adams, Converse,
Hales and Klotz write:

As with many heuristics, it is possible that defaulting to a search for additive ideas often serves its users well. However, the tendency to overlook subtraction may be implicated in a variety of costly modern trends, including overburdened minds and schedules, increasing red tape in institutions and humanity’s encroachment on the safe operating
conditions for life on Earth. If people default to adequate additive transformations—without considering comparable (and sometimes superior) subtractive alternatives—they may be missing opportunities to make their lives more fulfilling, their institutions more effective and their planet more liveable.

Perhaps some of the New Year’s resolutions for 2022 should involve not what you can add to your life or your daily routine or your to-do list, but instead what you can subtract from it.

Pretty much every economics major confronts a very similar set of required classes: intro micro, intro macro, intermediate micro, intermediate macro, and econometrics. Some places combine the intro courses, or add a required calculus course, or sometimes a course in accounting. Then econ majors get a few electives and a senior project. When I Iook at those requirements, I find myself thinking that a lot of students come to economics expecting to interact with big policy questions of the day, but until they have survived this gauntlet of required courses, they often don’t get much chance to do so.

This mismatch between what incoming students are hoping and expecting and the requirements of the econ major reminds me of great comment at the start of an edited volume in political science. The topic of the book doesn’t matter for my point, but for the record, the book is Natural right and political right : essays in honor of Harry V. Jaffa, edited by Schramm, Peter W. Schramm and Thomas B. Silver, a compilation of essays published in 1984 as a festschrift for Jaffa’s 65th birthday. Schramm and Silver begin their introduction to the book this way:

Imagine yourself marooned on a desert island with only ten books to read, but in this case books not of your own choosing. Suppose them all to be books written by behavioral political scientists during the last 20 years. Question: Do you think that you would die first of boredom, or of self-inflicted wounds?

This was the situation of many students of undergraduate political science in the 1960’s … Except that we didn’t realize that we were living on a desert island. And although we had been intellectually starved to death, we never realized that we were dead. … As young political scientists, we had had drilled into us the central tenet of positivism: the distinction between facts and values … Qua political scientists, we were islands unto ourselves in the midst of the ferocious and bloody political controversies of the sixties, cut off from the citizen’s perspective on political questions.

Of course, I apply these sentiments to economics. For many undergraduate students with broad interests in the economy and public policy, if surrounded by the required curriculum for economics majors, would they die first of boredom or self-inflicted wounds? Are too many undergrad econ majors (or potential majors who headed somewhere else) being intellectually starved to death, cut off from the citizen’s perspective?

Along similar lines, I think of the famous line from the movie Casablanca, with Humphrey Bogart in the role of Rick Blaine and Claude Raines as Captain Renault.

Captain Renault: And what in heaven’s name brought you to Casablanca?

Rick Blaine quote: My health. I came to Casablanca for the waters.

Captain Renault: The waters? What waters? We’re in the desert.

Rick Blaine: I was misinformed.

One can imagine a parallel exchange between a distraught college student and an adviser:

Adviser: And why in heaven’s name are you majoring in economics?

Student: My intellectual interests and passions. I came to economics to study real-world problems, ranging from poverty and inequality to environmental protection, antitrust, and provision of health care and education.

Advisor: Real-world problem? What real-world problems? Your courseload for the next wo years is introductory micro, introductory macro, intermediate micro, intermediate macro, econometrics, and a mandatory accounting course.

Student: I was misinformed.

Given who I am and what I do, I’m naturally a huge fan of teaching economic theory and terminology. But my sense is that a lot of undergraduate economics majors end up completing the major with a relatively narrow range of knowledge about real-world topics and policies, because there just wasn’t enough time for many electives. So you have econ majors who don’t know much about taxation or Social Security, because they didn’t have room in the schedule for a public finance course; or who don’t know much about environmental economics, or international trade, or antitrust, or health economics, or inequality, or poverty, or infrastructure, and so on and so on–because there was only room in their schedule for a few electives. Of course, graduate students and researchers need to specialize. But the undergraduate curriculum in economics could often be better-connected to the observable economy around us.

The following article was published, as shown, in the Journal of Applied Behavior Analysis in Fall 1974. I discovered it when it was mentioned by Michael S. Weisbach in his recent book The Economist’s Craft: An Introduction to Research, Publishing, and Professional Development.

As the Managing Editor of a professional academic journal, I am strongly committed to putting a lid on the length of articles. I believe that prose which is more crisp is also more easily understood, and that longer articles also tend to be less-read. With that well-known economist sense of humor, I sometimes say that a large part of value-added comes through subtraction. But even for me, this article is a little terse.

In the “Acknowledgements” to his 2010 collection of essays called Studies on Science and the Innovation Process, Nathan Rosenberg wrote: “[M]y long-standing conviction [is] that the most powerful contributions to the rise in measured economic productivity in the last half of the twentieth century was the innovation that we call “`the deadline.'”

His comment was slightly tongue-in-cheek. Rosenberg (who died in 2015) was a lovely man: I knew him a little and worked with him as an editor on a couple of his papers. However, his many virtues did not include being someone who would reliably meet deadlines. Indeed, in the book acknowledgements he was gracefully thanking those who went out of their way to help him meet the publication deadlines.

According to the Oxford English Dictionary, the word “deadline” in the sense of a timeline for completion of a task is a 20th century American coinage. The word “deadline” first appears in the 1860s, with the most common usage referring to a line around prison or a stockade, where those who crossed the line without authorization would be shot. Another usage at about the same time period referred to a “dead line” in relationship to the kind of fishing (called “ledgering”), where the fishing line is slack because the bait sits on the bottom of a river or lake.

In the early 20th century, the word evolves to a printing usage. When printing something at that time, you created a “plate” that fit the size of the printing press. There was a “deadline” around the edge of the plate, and any type that was outside the deadline would not actually show up in print. By 1920, there was apparently a silent movie, unseen by me, called “Deadline at 11,” which involved a plucky newspaper reporter who had to solve the case in time for the newspaper to get the story into print–which suggests that the term in it’s modern meaning of “time limit” was in use before then.

But Rosenberg’s side comment about deadlines is worth considering, nonetheless. Many of us live our professional lives engaging in what behavioral economists have called called “the planning fallacy”–that is, perpetually making plans and setting timelines, underestimating the time that will probably be needed and overcommitting our time, and then scrambling to get the work done as the deadline approaches–and then scrambling further when we miss some of the deadlines, but try not to miss them by too much. Indeed, a modern economy involves many elements of coordination, both inside companies and between companies throughout the chain of production. The complex patterns of coordination don’t happen by chance: they require sequences of activities, mediated by deadlines.

Adam Smith is often treated in popular discussions as a cardboard cut-out caricature of a fundamentalist believer in the superiority of markets, and nothing more. As anyone who has actually read Smith will tell you, such a belief goes well beyond oversimplification or even parody and into the realm of travesty. Here’s a passage from Smith’s first great work, The Moral Sentiments, published in 1759 (that is, 17 years before The Wealth of Nations), in which he diagnoses and discusses a social ill that has only persisted in the centuries since then. Smith wrote:

This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages.

Here, I’ll follow with a more extended quotation for broader contest. The quotation is taken from the edition of The Moral Sentiments available at the ever-useful Library of Economics and Library website. It’s from Section II, Ch. . Again, here’s Smith:

This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages.

We desire both to be respectable and to be respected. We dread both to be contemptible and to be contemned. But, upon coming into the world, we soon find that wisdom and virtue are by no means the sole objects of respect; nor vice and folly, of contempt. We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent. To deserve, to acquire, and to enjoy the respect and admiration of mankind, are the great objects of ambition and emulation. Two different roads are presented to us, equally leading to the attainment of this so much desired object; the one, by the study of wisdom and the practice of virtue; the other, by the acquisition of wealth and greatness. Two different characters are presented to our emulation; the one, of proud ambition and ostentatious avidity. the other, of humble modesty and equitable justice. Two different models, two different pictures, are held out to us, according to which we may fashion our own character and behaviour; the one more gaudy and glittering in its colouring; the other more correct and more exquisitely beautiful in its outline: the one forcing itself upon the notice of every wandering eye; the other, attracting the attention of scarce any body but the most studious and careful observer. They are the wise and the virtuous chiefly, a select, though, I am afraid, but a small party, who are the real and steady admirers of wisdom and virtue. The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness.

The respect which we feel for wisdom and virtue is, no doubt, different from that which we conceive for wealth and greatness; and it requires no very nice discernment to distinguish the difference. But, notwithstanding this difference, those sentiments bear a very considerable resemblance to one another. In some particular features they are, no doubt, different, but, in the general air of the countenance, they seem to be so very nearly the same, that inattentive observers are very apt to mistake the one for the other. In equal degrees of merit there is scarce any man who does not respect more the rich and the great, than the poor and the humble. With most men the presumption and vanity of the former are much more admired, than the real and solid merit of the latter. … The profligacy of a man of fashion is looked upon with much less contempt and aversion, than that of a man of meaner condition. In the latter, a single transgression of the rules of temperance and propriety, is commonly more resented, than the constant and avowed contempt of them ever is in the former.

In the middling and inferior stations of life, the road to virtue and that to fortune, to such fortune, at least, as men in such stations can reasonably expect to acquire, are, happily in most cases, very nearly the same. In all the middling and inferior professions, real and solid professional abilities, joined to prudent, just, firm, and temperate conduct, can very seldom fail of success. Abilities will even sometimes prevail where the conduct is by no means correct. Either habitual imprudence, however, or injustice, or weakness, or profligacy, will always cloud, and sometimes depress altogether, the most splendid professional abilities. Men in the inferior and middling stations of life, besides, can never be great enough to be above the law, which must generally overawe them into some sort of respect for, at least, the more important rules of justice. The success of such people, too, almost always depends upon the favour and good opinion of their neighbours and equals; and without a tolerably regular conduct these can very seldom be obtained. The good old proverb, therefore, that honesty is the best policy, holds, in such situations, almost always perfectly true. In such situations, therefore, we may generally expect a considerable degree of virtue; and, fortunately for the good morals of society, these are the situations of by far the greater part of mankind.

In the superior stations of life the case is unhappily not always the same. … To attain to this envied situation, the candidates for fortune too frequently abandon the paths of virtue; for unhappily, the road which leads to the one, and that which leads to the other, lie sometimes in very opposite directions. But the ambitious man flatters himself that, in the splendid situation to which he advances, he will have so many means of commanding the respect and admiration of mankind, and will be enabled to act with such superior propriety and grace, that the lustre of his future conduct will entirely cover, or efface, the foulness of the steps by which he arrived at that elevation. In many governments the candidates for the highest stations are above the law; and, if they can attain the object of their ambition, they have no fear of being called to account for the means by which they acquired it. … But, though they should be so lucky as to attain that wished-for greatness, they are always most miserably disappointed in the happiness which they expect to enjoy in it. It is not ease or pleasure, but always honour, of one kind or another, though frequently an honour very ill understood, that the ambitious man really pursues. But the honour of his exalted station appears, both in his own eyes and in those of other people, polluted and defiled by the baseness of the means through which he rose to it.

Charles Dickens wrote what has become one of the iconic stories of Christmas day and Christmas spirit in A Christmas Carol. But of course, the experiences of Ebenezer Scrooge are a story, not a piece of reporting. Here’s a piece by Dickens written for the weekly journal Household Words that he edited from 1850 to 1859. It’s from the issue of January 26, 1856, with his first-person reporting on “A Nightly Scene in London.” Poverty in high-income countries is no longer as ghastly as in Victorian England, but for those who take the time to see it in our own time and place, surely it is ghastly enough. Thus, I repeat this post each year on Christmas day.

Economists might also wince just a bit at how Dickens describes the reaction of some economists to poverty, those who Dickens calls “the unreasonable disciples of a reasonable school.” Dickens writes: “I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity …” 

Here’s a fuller passage from Dickens:

A NIGHTLY SCENE IN LONDON

On the fifth of last November, I, the Conductor of this journal, accompanied by a friend well-known to the public, accidentally strayed into Whitechapel. It was a miserable evening; very dark, very muddy, and raining hard.

There are many woful sights in that part of London, and it has been well-known to me in most of its aspects for many years. We had forgotten the mud and rain in slowly walking along and looking about us, when we found ourselves, at eight o’clock, before the Workhouse.

Crouched against the wall of the Workhouse, in the dark street, on the muddy pavement-stones, with the rain raining upon them, were five bundles of rags. They were motionless, and had no resemblance to the human form. Five great beehives, covered with rags— five dead bodies taken out of graves, tied neck and heels, and covered with rags— would have looked like those five bundles upon which the rain rained down in the public street.

“What is this! ” said my companion. “What is this!”

“Some miserable people shut out of the Casual Ward, I think,” said I.

We had stopped before the five ragged mounds, and were quite rooted to the spot by their horrible appearance. Five awful Sphinxes by the wayside, crying to every passer-by, ” Stop and guess! What is to be the end of a state of society that leaves us here!”

As we stood looking at them, a decent working-man, having the appearance of a stone-mason, touched me on the shoulder.

“This is an awful sight, sir,” said he, “in a Christian country!”

“GOD knows it is, my friend,” said I.

“I have often seen it much worse than this, as I have been going home from my work. I have counted fifteen, twenty, five-and-twenty, many a time. It’s a shocking thing to see.”

“A shocking thing, indeed,” said I and my companion together. The man lingered near
us a little while, wished us good-night, and went on.

We should have felt it brutal in us who had a better chance of being heard than the working-man, to leave the thing as it was, so we knocked at the Workhouse Gate. I undertook to be spokesman. The moment the gate was opened by an old pauper, I went in, followed close by my companion. I lost no
time in passing the old porter, for I saw in his watery eye a disposition to shut us out.

“Be so good as to give that card to the master of the Workhouse, and say I shall be glad to speak to him for a moment.”

We were in a kind of covered gateway, and the old porter went across it with the card. Before he had got to a door on our left, a man in a cloak and hat bounced out of it very sharply, as if he were in the nightly habit of being bullied and of returning the compliment.

“Now, gentlemen,” said he in a loud voice, “what do you want here?”

“First,” said I, ” will you do me the favor to look at that card in your hand. Perhaps you may know my name.”

“Yes,” says he, looking at it. ” I know this name.”

“Good. I only want to ask you a plain question in a civil manner, and there is not the least occasion for either of us to be angry. It would be very foolish in me to blame you, and I don’t blame you. I may
find fault with the system you administer, but pray understand that I know you are here to do a duty pointed out to you, and that I have no doubt you do it. Now, I hope you won’t object to tell me what I want to know.”

“No,” said he, quite mollified, and very reasonable, ” not at all. What is it?”

“Do you know that there are five wretched creatures outside?”

“I haven’t seen them, but I dare say there are.”

“Do you doubt that there are?”

“No, not at all. There might be many more.”

”Are they men? Or women?”

“Women, I suppose. Very likely one or two of them were there last night, and the night before last.”

“There all night, do you mean?”

“Very likely.”

My companion and I looked at one another, and the master of the Workhouse added quickly, “Why, Lord bless my soul, what am I to do? What can I do ? The place is full. The place is always full—every night. I must give the preference to women with children, mustn’t I? You wouldn’t have me not do that?”

“Surely not,” said I. “It is a very humane principle, and quite right; and I am glad to hear of it. Don’t forget that I don’t blame you.”

“Well!” said he. And subdued himself again. …

“Just so. I wanted to know no more. You have answered my question civilly and readily, and I am much obliged to you. I have nothing to say against you, but quite the contrary. Good night!”

“Good night, gentlemen!” And out we came again.

We went to the ragged bundle nearest to the Workhouse-door, and I touched it. No movement replying, I gently shook it. The rags began to be slowly stirred within, and by little and little a head was unshrouded. The head of a young woman of three or four and twenty, as I should judge; gaunt with want, and foul with dirt; but not naturally ugly.

“Tell us,” said I, stooping down. “Why are you lying here?”

“Because I can’t get into the Workhouse.”

She spoke in a faint dull way, and had no curiosity or interest left. She looked dreamily at the black sky and the falling rain, but never looked at me or my companion.

“Were you here last night?”

“Yes, All last night. And the night afore too.”

“Do you know any of these others?”

“I know her next but one. She was here last night, and she told me she come out of Essex. I don’t know no more of her.”

“You were here all last night, but you have not been here all day?”

“No. Not all day.”

“Where have you been all day?”

“About the streets.”

”What have you had to eat?”

“Nothing.”

“Come!” said I. “Think a little. You are tired and have been asleep, and don’t quite consider what you are saying to us. You have had something to eat to-day. Come! Think of it!”

“No I haven’t. Nothing but such bits as I could pick up about the market. Why, look at me!”

She bared her neck, and I covered it up again.

“If you had a shilling to get some supper and a lodging, should you know where to get it?”

“Yes. I could do that.”

“For GOD’S sake get it then!”

I put the money into her hand, and she feebly rose up and went away. She never thanked me, never looked at me— melted away into the miserable night, in the strangest manner I ever saw. I have seen many strange things, but not one that has left a deeper impression on my memory than the dull impassive way in which that worn-out heap of misery took that piece of money, and was lost.

One by one I spoke to all the five. In every one, interest and curiosity were as extinct as in the first. They were all dull and languid. No one made any sort of profession or complaint; no one cared to look at me; no one thanked me. When I came to the third, I suppose she saw that my companion
and I glanced, with a new horror upon us, at the two last, who had dropped against each other in their sleep, and were lying like broken images. She said, she believed they were young sisters. These were the only words that were originated among the five.

And now let me close this terrible account with a redeeming and beautiful trait of the poorest of the poor. When we came out of the Workhouse, we had gone across the road to a public house, finding ourselves without silver, to get change for a sovereign. I held the money in my hand while I was speaking to the five apparitions. Our being so engaged, attracted the attention of many people of the very poor sort usual to that place; as we leaned over the mounds of rags, they eagerly leaned over us to see and hear; what I had in my hand, and what I said, and what I did, must have been plain to nearly all the concourse. When the last of the five had got up and faded away, the spectators opened to let us pass; and not one of them, by word, or look, or gesture, begged of us.

Many of the observant faces were quick enough to know that it would have been a relief to us to have got rid of the rest of the money with any hope of doing good with it. But, there was a feeling among them all, that their necessities were not to be placed by the side of such a spectacle; and they opened a way for us in profound silence, and let us go.

My companion wrote to me, next day, that the five ragged bundles had been upon his bed all night. I debated how to add our testimony to that of many other persons who from time to time are impelled to write to the newspapers, by having come upon some shameful and shocking sight of this description. I resolved to write in these pages an exact account of what we had seen, but to wait until after Christmas, in order that there might be no heat or haste. I know that the unreasonable disciples of a reasonable school, demented disciples who push arithmetic and political economy beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be all-sufficient for every case, can easily prove that such things ought to be, and that no man has any business to mind them. Without disparaging those indispensable sciences in their sanity, I utterly renounce and abominate them in their insanity; and I address people with a respect for the spirit of the New Testament, who do mind such things, and who think them infamous in our streets.

There’s a sort of parlor game that the economically-minded sometimes play around the Christmas holiday, related to A Christmas Carol, by Charles Dickens. Was Dickens writing his story as an attack on economics, capitalism, and selfishness? After all, his depiction of Ebenezer Scrooge, along with his use of phrases like “decrease the surplus population” and the sarcastic use of “a good man of business” would suggest as much, and a classic example of such an interpretation is here. Or was Dickens just telling a good story with distinct characters? After all, Scrooge is portrayed as an outlier in the business community. The warm portrayal of Mr. Fezziwig certainly opens the possibility that one can be a successful man of business as well as a good employer and a decent human being. And if Scrooge hadn’t saved money, would he have been able to save Tiny Tim?

It’s all a good “talker,” as they say about the topics that get kicked around on radio shows every day. As part of my own holiday break, I republish this essay each year near or on Christmas day.

I went looking for some other perspectives on how Charles Dickens perceived capitalism that were not embedded in a fictional setting. In particular, I checked the weekly journal Household Words, which Dickens edited from 1850 to 1859. Articles in Household Words do not have authors provided. However, Anne Lohrli went through the business and financial records of the publication, which identified the authors and showed who had been paid for each article. The internal records of the journal show that Dickens was the author of this piece from the issue of February 11, 1854, called “On Strike.” (Lohrli’s book is called Household Words: A Weekly Journal 1850-59, conducted by Charles Dickens, University of Toronto Press, 1973. Household Words is freely available on-line at at site hosted by the University of Buckingham, with support from the Leverhulme Trust and other donors.)

The article does not seem especially well-known today, but it is the source of a couple of the most common quotations from Charles Dickens about “political economy,” as the study of economics was usually called at the time. Early in the piece, Dickens wrote: “Political Economy was a great and useful science in its own way and its own place; but … I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods.” Later in the article, Dickens wrote: “[P]olitical economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it.”

But more broadly, the article is of interest because Dickens, telling the story in the first person, takes the position that in thinking about a strike taking place in the town of Preston, one need not take the side either of management or labor. Instead, Dickens writes, one may “be a friend to both,” and feel that the strike is “to be deplored on all accounts.” Of course, the problem with a middle-of-the-road position is that you can end up being hit by ideological traffic going in both directions. But the ability of Dickens to sympathize with people in a wide range of positions is surely part what gives his novels and his world-view such lasting power. The article goes into a fair amount of detail, and can be read on-line, so I will content myself here with a substantial excerpt.

Here’s a portion of the 1854 essay by Dickens:

“ON STRIKE”

Travelling down to Preston a week from this date, I chanced to sit opposite to a very acute, very determined, very emphatic personage, with a stout railway rug so drawn over his chest that he looked as if he were sitting up in bed with his great coat, hat, and gloves on, severely contemplating your humble servant from behind a large blue and grey checked counterpane. In calling him emphatic, I do
not mean that he was warm; he was coldly and bitingly emphatic as a frosty wind is.

“You are going through to Preston, sir?” says he, as soon as we were clear of the
CharPrimrose Hill tunnel.

The receipt of this question was like the receipt of a jerk of the nose; he was so short and sharp.

“Yes.”

“This Preston strike is a nice piece of business!” said the gentleman. “A pretty piece of business!”

“It is very much to be deplored,” said I, “on all accounts.”

“They want to be ground. That’s what they want to bring ’em to their senses,” said the gentleman; whom I had already began to call in my own mind Mr. Snapper, and whom I may as well call by that name here as by any other. *

I deferentially enquired, who wanted to be ground?

“The hands,” said Mr. Snapper. ” The hands on strike, and the hands who help ’em.”

I remarked that if that was all they wanted, they must be a very unreasonable people, for surely they had had a little grinding, one way and another, already. Mr. Snapper eyed me with sternness, and after opening and shutting his leathern-gloved hands several times outside his counterpane, asked me
abruptly, ” Was I a delegate?”

I set Mr. Snapper right on that point, and told him I was no delegate.

“I am glad to hear it,” said Mr. Snapper. “But a friend to the Strike, I believe?”

“Not at all,” said I.

“A friend to the Lock-out?” pursued Mr. Snapper.

“Not in the least,” said I,

Mr. Snapper’s rising opinion of me fell again, and he gave me to understand that a man must either be a friend to the Masters or a friend to the Hands.

“He may be a friend to both,” said I.

Mr. Snapper didn’t see that; there was no medium in the Political Economy of the subject. I retorted on Mr. Snapper, that Political Economy was a great and useful science in its own way and its own place; but that I did not transplant my definition of it from the Common Prayer Book, and make it a great king above all gods. Mr. Snapper tucked himself up as if to keep me off, folded his arms on the top of his counterpane, leaned back and looked out of the window.

“Pray what would you have, sir,” enquire Mr. Snapper, suddenly withdrawing his eyes from the prospect to me, “in the relations between Capital and Labour, but Political Economy?”

I always avoid the stereotyped terms in these discussions as much as I can, for I have observed, in my little way, that they often supply the place of sense and moderation. I therefore took my gentleman up with the words employers and employed, in preference to Capital and Labour.

“I believe,” said I, “that into the relations between employers and employed, as into all the relations of this life, there must enter something of feeling and sentiment; something of mutual explanation, forbearance, and consideration; something which is not to be found in Mr. M’CulIoch’s dictionary, and is not exactly stateable in figures; otherwise those relations are wrong and rotten at the core and will never bear sound fruit.”

Mr. Snapper laughed at me. As I thought I had just as good reason to laugh at Mr. Snapper, I did so, and we were both contented. …

Mr. Snapper had no doubt, after this, that I thought the hands had a right to combine?

“Surely,” said I. ” A perfect right to combine in any lawful manner. The fact of their being able to combine and accustomed to combine may, I can easily conceive, be a protection to them. The blame even of this business is not all on one side. I think the associated Lock-out was a grave error. And
when you Preston masters—”

“I am not a Preston master,” interrupted Mr. Snapper.

“When the respectable combined body of Preston masters,” said I, ” in the beginning of this unhappy difference, laid down the principle that no man should be employed henceforth who belonged to any combination—such as their own—they attempted to carry with a high hand a partial and unfair impossibility, and were obliged to abandon it. This was an unwise proceeding, and the first defeat.”

Mr. Snapper had known, all along, that I was no friend to the masters.

“Pardon me,” said I; ” I am unfeignedly a friend to the masters, and have many friends among them.”

“Yet you think these hands in the right?” quoth Mr. Snapper.

“By no means,” said I; ” I fear they are at present engaged in an unreasonable struggle, wherein they began ill and cannot end well.”

Mr. Snapper, evidently regarding me as neither fish, flesh, nor fowl, begged to know after a pause if he might enquire whether I was going to Preston on business?

Indeed I was going there, in my unbusinesslike manner, I confessed, to look at the strike.

“To look at the strike!” echoed Mr. Snapper fixing his hat on firmly with both hands. “To look at it! Might I ask you now, with what object you are going to look at it?”

“Certainly,” said I. ” I read, even in liberal pages, the hardest Political Economy—of an extraordinary description too sometimes, and certainly not to be found in the books—as the only touchstone of this strike. I see, this very day in a to-morrow’s liberal paper, some astonishing novelties in the politico-economical way, showing how profits and wages have no connexion whatever; coupled with such references to these hands as might be made by a very irascible General to rebels and brigands in arms. Now, if it be the case that some of the highest virtues of the working people still shine through them brighter than ever in their conduct of this mistake of theirs, perhaps the fact may reasonably suggest to me—and to others besides me—that there is some little things wanting in the relations between them and their employers, which neither political economy nor Drum-head proclamation writing will altogether supply, and which we cannot too soon or too temperately unite in trying to
find out.”

Mr. Snapper, after again opening and shutting his gloved hands several times, drew the counterpane higher over his chest, and went to bed in disgust. He got up at Rugby, took himself and counterpane into another carriage, and left me to pursue my journey alone. …

In any aspect in which it can be viewed, this strike and lock-out is a deplorable calamity. In its waste of time, in its waste of a great people’s energy, in its waste of wages, in its waste of wealth that seeks to be employed, in its encroachment on the means of many thousands who are labouring from day to day, in the gulf of separation it hourly deepens between those whose interests must be understood to be identical or must be destroyed, it is a great national affliction. But, at this pass, anger is of no use, starving out is of no use—for what will that do, five years hence, but overshadow all the mills in England with the growth of a bitter remembrance? —political economy is a mere skeleton unless it has a little human covering and filling out, a little human bloom upon it, and a little human warmth in it. Gentlemen are found, in great manufacturing towns, ready enough to extol imbecile mediation with dangerous madmen abroad; can none of them be brought to think of authorised mediation and explanation at home? I do not suppose that such a knotted difficulty as this, is to be at all untangled by a morning-party in the Adelphi; but I would entreat both sides now so miserably opposed, to consider whether there are no men in England above suspicion, to whom they might refer the matters in dispute, with a perfect confidence above all things in the desire of those men to act justly, and in their sincere attachment to their countrymen of every rank and to their country.

Masters right, or men right; masters wrong, or men wrong; both right, or both wrong; there is certain ruin to both in the continuance or frequent revival of this breach. And from the ever-widening circle of their decay, what drop in the social ocean shall be free!