econ

1) When we analyze the unemployment rate, which three categories of unemployment can we use for a more detailed picture of unemployment? How do these three differ? (3) 2) What is a ‘recession’? (1) 3) Define the term GDP and explain your definition (i.e., what are the components of your definition and what do they mean?). (4) 4) Name two different kinds of transactions in an economy that are not considered part of GDP. Why are these transactions excluded from measuring GDP? (3) 5) What is the difference between GDP and GNP? (1) 6) If we want to assess changes in economic activity, why do we use changes in real GDP for finding an answer, instead of changes in nominal GDP? (2) 7) Assume the following values: Marginal Propensity to Consume (MPC) b = 0.75; Autonomous Consumption a = 300; Investment Spending I = 600. There is no government spending at this point. a) For a consumption function C = a + bY, what is the equilibrium value for income Y here? (1) b) What is the value of Y if Investment Spending increases to 750? (0.5) c) If you add the government sector, with expenditure G = 250, what is the new equilibrium income? (For I = 750) (0.5) 8) What happens when the Marginal Propensity to Save (MPS) is reduced? How does equilibrium output change? (2) 9) What constitutes a ‘business cycle’? (Through which phases does an economy pass in the course of one cycle?) (2) 10) Compare the three multipliers that we have looked at for fiscal policy. (Which are those? How do they differ?) (3) 11) Money creation in modern banking systems: a) Describe the process of the creation of money in the banking system in general terms. (2) b) Then, work through the following numerical example: 200,- $US are newly deposited at Bank A, the only bank in country A. The reserve requirement ratio is 20%. Give the first three iterations in the process that multiplies money in the banking system. (3) c) If the process plays out all the way, what is the eventual amount of money in deposits at bank A following the initial 200,- deposit? (1) 12) Explain how different approaches to government deficits can stabilize or destabilize economies. (2)

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May 14, 2018 Issue

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Is Capitalism a Threat to Democracy?
The idea that authoritarianism attracts workers harmed by the free market, which emerged when
the Nazis were in power, has been making a comeback.

By Caleb Crain

May 7, 2018

In London, in the nineteen-thirties, the émigré Hungarian intellectual Karl Polanyi was known
among his friends as “the apocalyptic chap.” His gloom was understandable. Nearly fifty, he’d
had to leave his wife, daughter, and mother behind in Vienna shortly after Austria lurched
toward fascism, in 1933. Although he had long edited and contributed to the prestigious
Viennese weekly The Austrian Economist, which published such celebrated figures as Friedrich
Hayek and Joseph Schumpeter, he had come to discount his career as a thing of “theoretical and
practical barrenness,” and blamed himself for failing to diagnose his era’s crucial political
conflict. As so often for refugees, money was tight. Despite letters of reference from eminent
historians, Polanyi failed to land a professorship or a fellowship, though he did manage to earn
thirty-seven pounds co-editing an anti-fascist anthology, which featured essays by W. H. Auden
and Reinhold Niebuhr. In his own contribution to the book, he argued that fascism strips
democratic politics away from human society so that “only economic life remains,” a skeleton
without flesh.

In 1937, he taught in adult-education programs in Kent and Sussex, commuting by bus or train
and spending the night at a student’s house if it got too late to return home. The subject was
British economic history, which he hadn’t much studied before. As he learned how capitalism
had challenged the political system of Great Britain, the first nation in the world to industrialize,
he decided that it was no accident that fascism was infecting countries as disparate as Japan,
Croatia, and Portugal. Fascism shouldn’t be “ascribed to local causes, national mentalities, or
historical backgrounds,” he came to believe. It shouldn’t even be thought of as a political
movement. It was, rather, an “ever-given political possibility”—a reflex that could occur in any
polity experiencing a certain kind of pain. In Polanyi’s opinion, whenever the profit-making
impulse becomes deadlocked with the need to shield people from its harmful side effects, voters
are tempted by the “fascist solution”: reconcile profit and security by forfeiting civic freedom.
The insight became the keystone of his masterpiece, “The Great Transformation,” which was
published in 1944, as the world was coming to terms with the destruction that fascism had
wrought.

Today, as in the nineteen-thirties, strongmen are ascendant worldwide, purging civil servants,
subverting the judiciary, and bullying the press. In a sweeping, angry new book, “Can
Democracy Survive Global Capitalism?” (Norton), the journalist, editor, and Brandeis professor
Robert Kuttner champions Polanyi as a neglected prophet. Like Polanyi, he believes that free

markets can be crueller than citizens will tolerate, inflicting a distress that he thinks is making us
newly vulnerable to the fascist solution. In Kuttner’s description, however, today’s political
impasse is different from that of the nineteen-thirties. It is being caused not by a stalemate
between leftist governments and a reactionary business sector but by leftists in government who
have reneged on their principles. Since the demise of the Soviet Union, Kuttner contends,
America’s Democrats, Britain’s Labour Party, and many of Europe’s social democrats have
consistently tacked rightward, relinquishing concern for ordinary workers and embracing the
power of markets; they have sided with corporations and investors so many times that, by now,
workers no longer feel represented by them. When strongmen arrived promising jobs and a
shared sense of purpose, working-class voters were ready for the message.

Born in 1886 in Vienna, Karl Polanyi grew up in Budapest, in an assimilated, highly cultured
Jewish family. Polanyi’s father, an engineer who became a railroad contractor, was so
conscientious that when his business failed, around 1900, he repaid the shareholders, plunging
the family into genteel poverty. Polanyi’s mother founded a women’s college, hosted a salon,
and had a somewhat chaotic personality that a daughter-in-law once likened to “a book not yet
written.” At home, as Gareth Dale recounts in a thoughtful 2016 biography, the family spoke
German, French, and a little Hungarian; Karl also learned English, Latin, and Greek as a child. “I
was taught tolerance not only by Goethe,” he later recalled, “but also, with seemingly mutually
exclusive accents, by Dostoyevsky and John Stuart Mill.”

After university, Polanyi helped to found Hungary’s Radical Citizens’ Party, which called for
land redistribution, free trade, and extended suffrage. But he remained enough of a traditionalist
to enlist as a cavalry officer shortly after the First World War broke out. At the front, where, he
said, “the Russian winter and the blackish steppe made me feel sick at heart,” he read “Hamlet”
obsessively, and wrote letters home asking his family to send volumes of Marx, Flaubert, and
Locke. After the war, the Radical Citizens took power, but they fumbled it. In the short-lived
Communist government that followed, Polanyi was offered a position in the culture ministry by
his friend György Lukács, later a celebrated Marxist literary critic.

When the Communists fell, pogroms broke out, and Polanyi fled to Vienna. “He looked like one
who looks back on life, not forward to it,” Ilona Duczynska, who became his wife, remembered.
Duczynska was a Communist engineer, ten years younger than he was. She had smuggled tsarist
diamonds out of Russia in a tube of toothpaste and once borrowed a pistol to assassinate
Hungary’s Prime Minister, though he resigned before she could shoot him. She and Polanyi
married in 1923 and soon had a daughter.

These were the days of so-called Red Vienna, when the city’s socialist government was
providing apartments for the working class and opening new libraries and kindergartens. Polanyi
held informal seminars on socialist economics at home. He started writing for The Austrian
Economist in 1924, and he was promoted to editor-in-chief a few months before the right-wing
takeover sent him into exile. Duczynska remained in Vienna, going underground with a militia,
but, in 1936, she, too, emigrated, taking a job as a cook in a London boarding house. In 1940,
Bennington College offered Polanyi a lectureship, and he left for Vermont, where his family
soon joined him and he began to turn his lecture notes into a book. “Not since 1920 did I have a
time so rich in study and development,” he wrote.

Polanyi starts “The Great Transformation” by giving capitalism its due. For all but eighteen
months of the century prior to the First World War, he writes, a web of international trade and
investment kept peace among Europe’s great powers. Money crossed borders easily, thanks to
the gold standard, a promise by each nation’s central bank to sell gold at a fixed price in its own
currency. This both harmonized trade between countries and stabilized relative currency values.
If a nation started to sell more goods than it bought, gold streamed in, expanding the money
supply, heating up the economy, and raising prices high enough to discourage foreign buyers—at
which point, in a correction so smooth it almost seemed natural, exports sank back down to pre-
boom levels. The trouble was that the system could be gratuitously cruel. If a country went into a
recession or its currency weakened, the only remedy was to attract foreign money by forcing
prices down, cutting government spending, or raising interest rates—which, in effect, meant
throwing people out of work. “No private suffering, no restriction of sovereignty, was deemed
too great a sacrifice for the recovery of monetary integrity,” Polanyi wrote.

The system was sustainable politically only as long as those whose lives it ruined didn’t have a
say. But, in the late nineteenth and early twentieth centuries, the right to vote spread. In the
twenties and thirties, governments began trying to protect citizens’ jobs from shifts in
international prices by raising tariffs, so that, in the system’s final years, it hardened national
borders instead of opening them, and engendered what Polanyi called a “new crustacean type of
nation,” which turned away from international trade, making first one world war, and then
another, inevitable.

In Vienna, Polanyi had heard socialism dismissed as utopian, on the ground that no central
authority could efficiently manage millions of different wishes, resources, and capabilities. In
“The Great Transformation,” he swivelled this popgun around. What was utopian, he declared,
was “the concept of a self-regulating market.” Human life wasn’t as orderly as mathematics, and
only a goggle-eyed idealist would think it wise to lash people to a mechanism like the gold
standard and then turn the crank. For most of human history, he observed, money and the
exchange of goods had been embedded within culture, religion, and politics. The experiment of
subordinating a nation to a self-adjusting market hadn’t even been attempted until Britain tried it,
in the mid-eighteen-thirties, and that effort had required a great deal of coördination and behind-
the-scenes management. “Laissez-faire,” Polanyi earnestly joked, “was planned.”

On the other hand, Polanyi believed that resistance to market forces, which he dubbed “the
countermovement,” truly was spontaneous and ad hoc. He pointed to the motley of late-
nineteenth-century measures—inspecting food and drink, subsidizing irrigation, regulating coal-
mine ventilation, requiring vaccinations, protecting juvenile chimney sweeps, and so on—that
were instituted to housebreak capitalism. Because such restraints went against the laws of supply
and demand, they were despised by defenders of laissez-faire, who, Polanyi noticed, usually
argued “that the incomplete application of its principles was the reason for every and any
difficulty laid to its charge.” But what was the alternative? Once the laissez-faire machine started
running, it cheerfully annihilated the people and the natural environment that it made use of,
unless it was restrained.

Polanyi offered the example of the enclosure movement in sixteenth-century England, when
landowners tore down villages and turned common lands into private pastures. The changes

brought efficiencies that raised the land’s food yield as well as its value, in the long term
improving life for everyone. Enclosure was a good thing, in other words; the numbers said so. In
the short term, however, it dispossessed peasants who couldn’t immediately improvise a new
living, and it was only because of a countermovement—led in piecemeal fashion by the
monarchy, in a long, losing battle with Parliament—that more people didn’t die of exposure and
starvation. If you argued that resistance did not compute, you would be right, but the
countermovement, though it couldn’t stop progress, shielded people by slowing it down. It made
enclosure so gradual that, even three centuries later, the poet John Clare was lamenting its
advance in his sonnets.

In the nineteen-thirties, when Polanyi was first formulating his critique, the British economist
John Maynard Keynes was likewise arguing that capitalist economies aren’t self-adjusting. The
markets for labor, goods, and money, he showed, don’t find equilibriums independently but
through interactions with one another that can have unfortunate, counterintuitive side effects. In
hard times, economies tend to retrench, just when stimulus is most needed; the richer they get,
the less likely they are to invest enough to sustain their wealth. During the Depression, Keynes
made the case that governments should deficit-spend their way out of recessions. By the time
Polanyi’s book was published, the Keynesian view had become orthodoxy. For the next few
decades, the world’s leading economies were tightly managed by their governments. America’s
top marginal tax rate stayed at ninety-one per cent until 1964, and anti-usury laws kept a ceiling
on interest rates until the late seventies. The memory of the financial chaos of the thirties, and of
the fascism that it gave rise to, was still vivid, and the Soviet Union loomed as an alternative,
should the Western democracies fail to treat their workers well.

In terms of international monetary systems, too, Keynesianism held sway. In 1944, at the Bretton
Woods Conference, Keynes helped to negotiate a way of harmonizing exchange rates that gave
national governments enough elbow room to boost their domestic economies when necessary.
Only America continued to redeem its currency with gold. Other nations pegged their currencies
to the dollar (making it their reserve currency), but they were free to adjust their currencies’
values within limits when the need arose. Countries were allowed, and sometimes even required,
to impose capital controls, measures that limited the cross-border flow of investment capital.
With investors unable to yank money suddenly from one country to another, governments were
free to spur growth with low interest rates and to spend on social programs without fear that
inflation-averse capitalists would sell off their nations’ bonds. So weak was the political power
of investors that France, Britain, and America let inflation shrink the value of their war debts
considerably. In France, the economist Thomas Piketty has quipped, the period amounted to
“capitalism without capitalists.”

The result—highly inconvenient for free-market fundamentalists—was prosperity. In the three
decades following the Second World War, per-capita output grew faster in Western Europe and
North America than ever before or since. There were no significant banking or financial crises.
The real income of Europeans rose as much as it had in the previous hundred and fifty years, and
American unemployment, which had ranged between fourteen and twenty-five per cent in the
thirties, dropped to an average of 4.6 per cent in the fifties. The new wealth was widely shared,
too; income inequality plummeted across the developed world. And with the plenty came calm.
The economic historian Barry Eichengreen, in his new book, “The Populist Temptation”

(Oxford), reports that in twenty advanced nations no populist leader—which he defines as a
politician who is “anti-elite, authoritarian, and nativist”—took office during this golden era, and
that a far narrower share of votes went to extremist parties than before or after.

“This was the road once taken,” Kuttner writes. “There was no economic need for a different
one.” Nevertheless, we strayed—or, rather, in Kuttner’s telling, we were driven off the road after
capitalists grabbed the steering wheel away from the Keynesians. The year 1973, in his opinion,
marked “the end of the postwar social contract.” Politicians began snipping away restraints on
investors and financiers, and the economy returned to spasming and sputtering. Between 1973
and 1992, per-capita income growth in the developed world fell to half of what it had been
between 1950 and 1973. Income inequality rebounded. By 2010, the real median earnings of
prime-age American workingmen were four per cent lower than they had been in 1970.
American women’s earnings rose for a bit longer, as more women made their way into the
workforce, but declined after 2000. And, as Polanyi would have predicted, faith in democracy
slipped. Kuttner warns that support for right-wing extremists in Western Europe is even higher
today than it was in the nineteen-thirties.

But was Keynesianism pushed, or did it stumble? Kuttner’s indignation about its fall from grace
is more straightforward than the course of events that led to it. In the years following the Second
World War, Europe was swimming with dollars, thanks to the Marshall Plan and American
military aid to Europe. Beyond America’s jurisdiction, those dollars slipped free of its capital
controls, and in the nineteen-sixties investors began to sling them from country to country as
impetuously as in the days before Bretton Woods, punitively dumping the bonds of any
government that tried to run an interest rate lower than those of its peers. The cost of the
Vietnam War sparked inflation in America, and the dollar’s second life as the world’s reserve
currency risked pushing the inflation even higher. When America fell into recession in 1970, the
Federal Reserve tried to boost the country out of it by dropping interest rates, and America
became a target of opportunity for speculators: capital fled the country, taking gold with it. By
May, 1971, the United States was facing its first merchandise trade deficit since 1893, an
indication that the high dollar was discouraging foreign buyers. Unwilling to pacify investors by
inflicting austerity on voters, President Richard Nixon uncoupled the dollar from gold, ending
the Bretton Woods agreement. Then, in October, 1973, Arab nations, upset about America’s
solidarity with Israel during the Yom Kippur War, embargoed oil sales to the United States, and
the price of crude nearly quadrupled in the space of three months. Food prices skyrocketed, and,
as wallets were pinched, the country tumbled into another recession.

At this juncture, a new economic monster appeared: stagflation, a chimera of inflation, recession,
and unemployment. Keynesian economists, who didn’t think that high unemployment and
inflation could coëxist, were at a loss for how to handle it. The predicament provided an opening
for their critics, most notably Milton Friedman, who argued that incessant government
stimulation of the economy risked promoting not only inflation but the expectation of inflation,
which could then spiral out of control. Friedman declared Keynesianism discredited and
demanded that the government refrain from tampering with the economy, other than to manage
the money supply.

In 1974, Alan Greenspan, President Gerald Ford’s economic adviser and an acolyte of Ayn
Rand, likewise urged resisting political pressure to help the economy grow. “Inflation is our
domestic public enemy No. 1,” Ford declared, and the Federal Reserve raised interest rates. Five
years later, when a revolution in Iran set off a second spike in oil prices, a new round of inflation,
and yet another recession, President Jimmy Carter’s Federal Reserve chair, Paul Volcker, raised
interest rates again and again, to as high as twenty per cent. By 1982, America’s G.D.P. was
shrinking 2.2 per cent a year, and unemployment was higher than it had been since the Great
Depression. The nation had gone back to stabilizing its currency the old-fashioned way—by
throwing people out of work—and utopian faith in self-regulating free markets had made a
comeback. Kuttner thinks that this was a terrible mistake, arguing that the inflation of the
seventies was limited to particular sectors of the economy such as food and oil. That sounds a
little like special pleading. It’s not clear how Ford and Carter could have resisted the pressure
they were under to find a new policy solution once it was clear that the old one wasn’t working.

In time, Keynesians adapted their models—one adjustment took into account Friedman’s
discovery of the dangers posed by the expectation of inflation—and the resulting synthesis, New
Keynesianism, is now canonical. Both the Bush and the Obama Administrations adopted
Keynesian policies in response to the financial crisis of 2008. But when stagflation flummoxed
the Keynesians it cost them their near-monopoly on political advice-giving, and laissez-faire was
rereleased into the political sphere. In January, 1974, the United States removed constraints on
sending capital abroad. A 1978 Supreme Court decision overturned most state laws against
usury. By the early twenty-first century, Kuttner charges, every New Deal regulation on finance
was either “repealed or weakened by non-enforcement.” Starting in the eighties, developing
nations found free-market doctrine written into their loan agreements: bankers refused to extend
credit unless the nations promised to lift capital controls, balance their budgets, limit taxes and
social spending, and aim to sell more goods abroad—an uncanny replica of the austerity terms
enforced under the gold standard. The set of policies became known as the Washington
Consensus. The idea was pain in the short term for the sake of progress in the long term, but a
2011 meta-analysis was unable to find statistically significant evidence that the trade-off is worth
it. Even if it is worth it, Polanyi would have recommended tempering the short-term pain. From
2010, when austerity measures were first imposed on Greece, to 2016, its G.D.P. declined 35.6
per cent, according to the World Bank. A federally appointed panel is now pushing for a similar
approach in Puerto Rico.

There is no shortage of villains in Kuttner’s narrative: financial deregulation; supply-side tax
cuts; the decline of trade unions; the Democratic Party, which, by zigging left on identity politics
and zagging right on economics, left conservative white working-class voters amenable to
Donald Trump. Perhaps the most vexed issue Kuttner discusses, however, is trade policy—
whether American workers should be protected against cheap foreign goods and labor.

The contours of the problem call to mind Polanyi’s account of enclosures in early-modern
England. Half an hour with a supply-and-demand graph shows that free trade is better for every
nation, developed or developing, no matter how much an individual businessperson might wish
for a special tariff to protect her line of work. In a 2012 survey, eighty-five per cent of
economists agreed that, in the long run, the boons of free trade “are much larger than any effects
on employment.” But although free trade benefits a country over all, it almost always benefits

some citizens more than—and even at the expense of—others. The proportion of low-skilled
labor in America is smaller than in most countries that trade with America; economic theory
therefore predicts that international trade will, on aggregate, make low-skilled workers in the
United States worse off. The U.S. government has, since 1962, compensated workers laid off
because of free trade, but the benefit has never been adequate; only four people were certified to
receive it during its first decade. In a 2016 paper, “The China Shock,” the economists David H.
Autor, David Dorn, and Gordon H. Hanson wrote that, for every additional hundred dollars of
Chinese goods imported to an area, a manufacturing worker is likely to lose fifty-five dollars of
income, while gaining only six dollars in government help.

In a laissez-faire utopia, dislodged workers would relocate or take jobs in other industries, but
workers hurt by rivalry with China are doing neither. Maybe they don’t have the resources to
move; maybe the flood of Chinese-made goods is so extensive that there are no unaffected
manufacturing sectors for them to switch into. The authors of “The China Shock” calculate that,
between 1999 and 2011, trade with China destroyed between two million and 2.4 million
American jobs; Kuttner quotes even higher estimates. NAFTA, meanwhile, lowered the wage
growth of American high-school dropouts in affected industries by sixteen percentage points. In
“Why Liberalism Failed” (Yale), the political scientist Patrick J. Deneen denounces the
assumption that “increased purchasing power of cheap goods will compensate for the absence of
economic security.”

Kuttner follows Polanyi in attacking free-market claims of mathematic purity. “Literally no
nation has industrialized by relying on free markets,” he writes. In 1791, Alexander Hamilton
recommended that America encourage new branches of manufacturing by taxing imports and
subsidizing domestic production. Even Britain, the world’s first great champion of free trade,
started off protectionist. Kuttner believes that America stopped supporting its manufacturing
sector partly because it got into the habit, during the Cold War, of rewarding foreign allies with
access to American consumers, and eventually decided that exports of financial services, rather
than of manufactured goods, would be the country’s future. Toward the end of the century, as
American manufacturers saw the writing on the wall, they shifted production abroad

Kuttner doesn’t give a full hearing to the usual reply by defenders of laissez-faire, which is that a
transition from goods to services is inevitable in a maturing economy—that the efficiency of
American manufacturing means that it would likely be shedding workers no matter what the
government did. Even Eichengreen, a critic of globalization, notes, in “The Populist
Temptation,” that, if you graph the share of the German workforce employed in manufacturing
from 1970 to 2012, you see a steady, grim decline very similar to that of its American
counterpart, despite the fact that Germany has long spent heavily on apprenticeship and
vocational training. The industrial revolution created widely shared wealth almost magically at
its dawn: when an unemployed farmworker took a job in a factory, his power to make things
multiplied, along with his earning power, without his having to learn much. But, as factories
grew more efficient, fewer workers were needed to run them. One study has attributed eighty-
seven per cent of lost manufacturing jobs to improved productivity.

When a worker leaves a factory, her power to create wealth stops being multiplied. The only way
to increase it again is through education—by teaching her to become a sommelier, say, or an

anesthesiologist. But efficiency gains are notoriously harder to come by in service industries than
in manufacturing ones. There are only so many leashes a dog walker can hold at one time. As a
result, if an economy deindustrializes without securing a stable manufacturing core, its
productivity may erode. The dynamic has caused stagnation in Latin America and sub-Saharan
Africa, and there are signs of a comparable weakening of America’s earning power.

Meanwhile, in the factories that remain, machines have grown more complex; the few workers
they employ need to be better educated, further widening the gap between educated and
uneducated workers. Kuttner dismisses this labor-skills explanation for job loss as an “alibi” with
“an insulting subtext”: “If your economic life has gone to hell, it’s your fault.” This is
intemperate but, in Kuttner’s defense, he has been warning American politicians to protect
manufacturing jobs since 1991, and has been enlisting Polanyi in the cause for at least as long.
Moreover, he has a point: to talk about productivity-induced job loss when challenged to explain
trade-induced job loss is to change the subject. Economists estimate that advances in automation
explain only thirty to forty per cent of the premium that a college degree now adds to wages.
And though Eichengreen is right about manufacturing’s declining share of the German
workforce, it still stood at twenty per cent in 2012, which is roughly where the American share
stood three decades earlier, and the German decline has been less steep. Somehow, Germany’s
concern for its manufacturing workforce made a difference.

In any case, if one’s concern is populism, it may not matter whether jobs have been lost to trade
competition or to automation. In areas where more industrial robots have been introduced, one
analysis shows, voters were more likely to choose Trump in 2016. According to another analysis,
if competition with Chinese imports had been somehow halved, Michigan, Wisconsin, and
Pennsylvania would likely have chosen Hillary Clinton that year. Economic explanations like
these have been challenged. In April, the political scientist Diana C. Mutz published a paper
finding that Trump voters were no more likely than Clinton ones to have suffered a personal
financial setback; she concluded that Trump’s victory was more likely caused by white anxiety
about loss of status and social dominance. But it’s not surprising that Trump voters weren’t
basing their decisions on their personal circumstances, because voters almost never do. And
Mutz’s own results showed that the factors most likely to lead to a Trump vote included
pessimism about the economy and preferring Trump’s position on China to Clinton’s. It may not
be possible to untangle economic anxiety and a more tribal mind-set.

Casting about for a Polanyi-style countermovement to temper the ruthlessness of laissez-faire,
Kuttner doesn’t rule out tariffs. They’re economically inefficient, but so are unions, and, for a
follower of Polanyi, efficiency isn’t the only consideration. A decision about a nation’s
economic life, the Harvard economist Dani Rodrik writes, in “Straight Talk on Trade”
(Princeton), “may entail trading off competing social objectives—such as stability versus
innovation—or making distributional choices”; that is, deciding who gains at whose expense.
Such a decision should therefore be made by elected politicians rather than by economists.
America imposed export quotas on Japan in the seventies and eighties, to the alarm of headline
writers at the time: “Protectionist Threat,” the Times warned. But Rodrik, looking back, judges
the measures to have been reasonable ad-hoc defenses—“necessary responses to the
distributional and adjustment challenges posed by the emergence of new trade relationships.”

Trump’s chief trade negotiator served on the Reagan team that administered quotas against
Japan. A similar approach today, however, seems unlikely to work on China, whose economy is
much more messily enmeshed with America’s. You probably can’t name as many Chinese
brands as Japanese ones, even though you probably buy more Chinese-made products, because
they are sold to Americans by American companies. American workers may wish they had been
shielded from the effects of trade with China, but American businesses, by and large, don’t.
Perhaps that’s why Trump has escalated from a tariff on steel and aluminum to erratic threats of
a trade war. To achieve his campaign goal of bringing manufacturing jobs home from China, he
will have to not only impose tariffs but also convince multinationals that the tariffs will stay in
place beyond the end of his Administration. Only then will executives calculate that they can’t
just wait it out—that they have no choice but to incur the enormous costs and capital losses of
abandoning investments in China and making new ones here. It’s hard to imagine such a scheme
working, unless Trump establishes a political command over the private sector not seen in
America since the forties. That can’t be ruled out, given the state of affairs in Russia, China,
Hungary, and Turkey, but it seems more likely that Trump’s bluster will merely motivate
businesses to be deferential to him, in pursuit of favorable treatment.

“Basically there are two solutions,” Polanyi wrote in 1935. “The extension of the democratic
principle from politics to economics, or the abolition of the democratic ‘political sphere’
altogether.” In other words, socialism or fascism. The choice may not be so stark, however.
During America’s golden age of full employment, the economy came, in structural terms, as
close as it ever has to socialism, but it remained capitalist at its core, despite the government’s
restraining hand. The result was that workers shared directly in the country’s growing wealth,
whereas today proposals for fostering greater financial equality hinge on taxing winners in order
to fund programs that compensate losers. Such redistributive measures, Kuttner observes, are
only “second bests.” They don’t do much for social cohesion: winners resent the loss of earnings;
losers, the loss of dignity.

Can we return to an equality in workers’ primary incomes rather than to one brought about by
secondary redistribution? In a recent essay for the journal Democracy, the Roosevelt Institute
fellow Jennifer Harris recommends reimagining international trade as an engine for this rather
than as an obstacle to it. When negotiating trade deals, for instance, governments could make
going to bat for multinationals conditional on their agreeing to, say, pay their workers a higher
fraction of what they pay executives.

Failing that, we’d be better off with redistributive programs that are universal—parental leave,
national health care—rather than targeted. Benefits available to everyone help people without
making them feel like charity cases. Kuttner reports great things from Scandinavia, where
governments support workers directly—through wage subsidies, retraining sabbaticals, and
temporary public jobs—rather than by constraining employers’ power to fire people. “We won’t
protect jobs,” Sweden’s labor minister recently told the Times. “But we will protect workers.”
Income inequality in Scandinavia is lower than here, and a larger proportion of citizens work.
Maybe a government can insure higher pay for its workers by treating them as if they were, in
and of themselves, valuable. True, Denmark’s spending on its labor policies has at times risen to
as high as 4.5 per cent of its G.D.P., more than the share America spends on defense, and studies
show that diverse countries such as ours find it harder to muster social altruism than more

racially and culturally homogenous ones do. Nonetheless, programs like Social Security and
Medicare, instituted when a communitarian ethic was still strong in American politics, remain
popular. Why not try for more? It might make sense even if the numbers don’t add up. ♦

Published in the print edition of the May 14, 2018, issue, with the headline “Merchants of
Doom.”
Caleb Crain is the author of the novel “Necessary Errors” and the scholarly study “American
Sympathy.” His second novel, “Overthrow,” comes out this month.

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Acknowledgments
W hatever inspiration you take from these pages is the direct result of the efforts of many pas-sionate and committed people who believe in the mission and vision of the Voices On The
Economy (VOTE) Program. This book would not exist if not for the generous support of our funders.
Foremost among them is the Thomas R. Brown Foundations. Special thanks to Barbara Gray, Sarah
Smallhouse, Mary Brown Bernal, Gerry Swanson, and the entire Board of Trustees for believing in the
VOTE Program and to Norma Roberts for her administrative support over the years. The VOTE Program
was incubated at Pima Community College in Tucson, Arizona. We are deeply grateful for its ongo-
ing institutional support. And thanks also to the Political Economy Research Institute at the University
of Massachusetts Amherst, and to other individual donors, who generously supported Volume I of
this textbook.
Years ago, a book called Economic Issues Today by Robert Carson, Wade Thomas, and Jason Hecht
demonstrated how to present multiple perspectives on economic issues in a thoughtful, unbiased way.
The VOTE Program stands on their shoulders, and we are grateful to them for inspiring our work.
There are too many people on the VOTE team to thank by name, but the program has benefited from
the participation of hundreds of teachers, interns, research assistants, administrative support staff, and
students, all of whom gifted us with their ideas and enthusiasm. The VOTE Program curriculum was
shaped over the past decade by talented research assistants: Zachary Forman, Ryan Day, Sheri Pingry,
Irving Talavera, Angela Lucero, and Zachary Stout. We also relied on the careful reading and important
feedback of our beta readers: Maggie Chrisman, Veronika Gillis, Ali Godoy, Gene Gotwalt, Ilene Grabel,
Keoka Grayson, Travis Klein, Alan Lee, Ishrat Mahzabeen, Fiona Markowitz, Patrick Peatrowsky, Robert
Rubinovitz, Barbara Silverstein, and Dhun Silverstein. Our board members graciously contributed their
thoughtful critiques to this book: George DeMartino, Glenn Maller, and Amelia Craig Cramer. Finally,
this book would not exist in the form that you see here without the graphic design talents of Michael
Leclair and David Scott Allen and the keen eye of copyeditor Amanda Krause.
Writing a book takes a lot of time and focus. We are both deeply grateful to our close family mem-
bers. Laura thanks MK LeFevour for her love and support. Amy thanks Amelia and Margo Cramer for
being her anchors and guides in this long process of writing the VOTE textbook. She especially wants
to thank the many family members, friends, and colleagues who understand and support her drive to
realize the greater purpose of this project, which is to help repair the world.
Our hope is that the VOTE Program will empower people of all ages and backgrounds to find their
unique voices and join the conversations that shape our lives and our future. What that really means is that
all the effort that’s gone into creating the VOTE Program—and all the ideas in this book—are for you. We
are most grateful to you, our readers, for embarking on this adventure with an open mind and hopefully
sparking new solutions that the world desperately needs. We look forward to hearing your voice.
Amy S. Cramer, PhD
Laura Markowitz
Tucson, Arizona, 2019

Acknowledgments
Part I—Background
Chapter 1 The World Needs Your Voice
Chapter 2 Thinking About Thinking
Chapter 3 The Great Economic Thinkers
Chapter 4 Conservatives and Liberals: Conventional Theory
Chapter 5 Radical Theory
Part II—First Issues
Chapter 6 Tools to Get Started
Chapter 7 Issue: Agriculture
Chapter 8 Issue: Product Safety
Chapter 9 Tools to Move Ahead
Chapter 10 Issue: Livelihood
Chapter 11 Issue: Housing
About Voices On The Economy (VOTE)

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There’s a famous story about nineteenth-cen-tury English painter Dante Gabriel Rossetti. It may or may not be true, but it explains
why the VOTE Program exists. Our version of the
story goes like this:
One day, an elderly man approached the well-
known artist and asked Rossetti if he would be so
kind as to take a look at a few recent sketches.
After glancing at the drawings, Rossetti said, “I
don’t want to hurt your feelings, but my honest
opinion is that these don’t show much talent or
artistic skill.”
The old man looked sad but
not surprised. He held out
another portfolio. “Please,
kind sir, would you take
one more minute and look
at these sketches by a young
art student?”
Rossetti started to give them
a cursory glance, but then his
eyes widened in surprise. He
studied them closely. “These are
astonishing!” he exclaimed. “I have
never seen anything like this. With
the right encouragement, education,
and support, this artist could go far.
This kind of talent could change the whole art
world. Tell me—who made these drawings?”
Tears rolled down the old man’s wrinkled cheeks.
“I did,” he confessed, “forty years ago. But I didn’t
have any encouragement, so I never believed in
myself. I became discouraged and gave up. Now I
see that I have lost whatever talent I might have had
because I didn’t develop it.”
The world needs your talents. It desperately
needs your unique skills and your unique voice to
bring us the brilliant new solutions that will solve
our urgent economic problems—poverty, lack of
health care, homelessness, the growing national
debt, and more. But there are people like the old
man in this story who were never
encouraged, or supported, or
educated to find their voices.
They check out of the con-
versations and tell them-
selves, “My ideas don’t mat-
ter.” They end up leaving it
to others to argue and debate
and have passionate opinions.
They squander their opportuni-
ties to speak up about issues that
have everything to do with their
own happiness and well-being.
1The WorldNeeds Your Voice

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2 | Voices On The Economy
Finding Your Voice
The VOTE Program exists to prevent this tragedy
from happening to you or anyone else. VOTE stands
for Voices On The Economy. We are a nonprofit
organization whose mission is to inspire solutions
to our nation’s urgent economic problems by
building a culture of respectful listening, passionate
advocacy, and intelligent debate. We do this by
teaching you the liberal, radical, and conservative
perspectives on economic issues—side by side, in
a completely unbiased way. Then we invite you to
try on those competing voices so you can become
fluent in each one. When all of us become fluent in
multiple perspectives, the result is transformative.
We realize that those who think differently from
us are not the enemy. We step outside our echo
chambers and our minds open to new ideas and
new possibilities for solutions. Our vision for the
VOTE Program is that people from all walks of life
will find their voices on the issues and become
educated voters; combative debate will become
solution-focused conversation; and our nation
will move forward in the best possible way. In a
democracy, diversity of ideas is a gift. We need one
another’s voices to change the conversation.
We believe the world will be a better place
because of your voice. We believe you have the
capacity to make unique contributions that the
rest of us need. Your perspective could change
the whole world! You might see something that
no one else sees, which could lead to solutions
to our most challenging problems. This is no time
to tune out, fade out, or stay on the sidelines. It’s
time to get in the game. The VOTE Program will
educate, support, and encourage you, so that no
matter what you end up doing in life as a career,
you will know how to use your voice to contribute
in a meaningful and productive way to the conver-
sations about economic issues.
Why Economics?
Right now you might be thinking, “Economics?
That’s not relevant to me!” You wouldn’t be the
first to think that, but as an economics educator,
I (Amy) have to confess that I find that response
astounding and alarming. It’s like hearing a fish say
that water isn’t important. Please understand that
economics is not just about how to invest in the
stock market or how to balance your checkbook.
Did you eat today? Did you travel on a road to
get somewhere today? Are you wearing clothes?
Do you have a cell phone in your pocket? All
these things are influenced by economics. It has
everything to do with the quality of the drinking
water that comes out of your tap, whether your
seat belt works properly, what shoes you’re
wearing right now, the age at which you can
retire, your decision about whether or not to have
kids, if you can go to college, how safe you are
walking home at night, where you’re sitting right
now, where you live, your career opportunities,
and everything else you can think of. Everything
in the newspaper—from the sports section to
the TV listings—is about economics, as are the
feeds on your social media, the debates about
financial aid you hear in the hallways at school,

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Chapter 1: The World Needs Your Voice | 3
and arguments at work about the minimum wage
and benefits. And those conversations you and
your family and friends have at the dinner table
about organic food versus nonorganic food, and
what new car to buy? Yes—economics. All the
choices available to you have been, are now, and
will be shaped by economics.
Economics is relevant to your life in every way.
If you’re not yet convinced, then please take a
look at the issues we’re going to explore in the
VOTE Program (the list on the right). There’s
nothing on this list that doesn’t affect you and your
future in every way possible.
But here’s the problem that usually comes up
when people want to learn about economics:
nearly all high school and college courses are
loaded with technical model building, which can
be intimidating. It’s like you have to climb a steep
trail up a mountain of information and try not to
twist an ankle on all the jargon before you reach
the top, where you will finally feel ready to have
a voice in the policy discussions. A lot of people
give up on understanding economics before they
even try. If you are like the majority of people who
don’t want to make the climb, the VOTE Program
offers a much more accessible path. And if you’re a
person who has fallen in love with economics and
relishes the challenge of mastering mountains of
economic models, then the focus on multiple per-
spectives offered in the VOTE Program will make
your journey into this field even richer and more
exciting. No matter which path you choose, you’ll
become conversant with diverse ways of under-
standing the world.
Although I did climb the mountain, and it was
rewarding to reach the top and earn my PhD, I
was aware all along the way that many people
are left out of the conversations altogether, and
it was clear to me that this holds us back as a
society. We need everyone’s educated input to
spark brilliant new ideas about how to solve our
urgent problems. We need to become a nation
of informed voters. Yet because economics seems
so complicated, too often people leave those
debates to the “experts.” They don’t understand
the jargon, or they’re scared off by the statistics,
charts, and graphs. So I started the VOTE Program
to make economics accessible to all—and to help
you to fall in love with the questions economists
ask about how to create well-being.

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4 | Voices On The Economy
Multiple Perspectives on
Economic Issues
I went off to college in the 1970s in the midst of
the gas shortage, the coal-worker strikes, children
getting brain damage from eating lead paint chips,
prices rising as people were losing their jobs,
soaring mortgage rates, warnings about the health
effects of worsening smog, and more. The popular
media referred to the different sides of the debates
on economic issues as “conservative,” “liberal,” and
“radical.” But as a young person, I had no idea
how to evaluate them. Which one was right? What
made the most sense to me? How could I be sure I
was voting for what I really believed in? “I’ll study
economics!” I thought to myself. “That’s where
I’ll learn what I need to know to understand the
debates going on in our nation so that I can join
the conversations.”
Unfortunately, my economics classes were a
disappointment. My professors taught as if there
were only one way to think about economics.
They didn’t even mention that other perspectives
existed, and they assigned readings and textbooks
that just echoed their personal favorites. So I looked
for answers outside the classroom. I went to rallies
and protests. I listened to the speakers, but I was
disappointed that people seemed to be talking to—
and listening to—only those who agreed with their
positions. So I turned to the media for answers, but
I found newspapers and television reporting to be
more of the same echo chamber (and it’s gotten
even worse over the decades).
In the midst of my deep frustration trying to
make sense of all the noise, I was thrilled to come
across a groundbreaking academic book by Rob-
ert B. Carson, Wade L. Thomas, and Jason Hecht
called Economic Issues Today. The authors line up
different perspectives side by side and compare
them in a fair, unbiased way. It was astonishing
when I could understand the differences between
how radicals, conservatives, and liberals see the
issues. It transformed my vision of the world from
black-and-white to glorious Technicolor. All the
arguments in Congress that I read about in the
morning paper—from international trade deals
to seat-belt laws—suddenly made sense. I recog-
nized the different economic perspectives when
they were lampooned on Saturday Night Live,
satirized in political cartoons, and argued over
during my family reunions.
Using Economic Issues Today as my inspira-
tion, I created a version of this way of teaching
multiple economic perspectives that is accessible
to people of all ages, walks of life, and academic
backgrounds. VOTE uses multimedia, group exer-
cises, and role playing to trace the roots of our
current economic debates back to the ideas of the

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Chapter 1: The World Needs Your Voice | 5
great economic thinkers from the last three hun-
dred years. I launched the VOTE Program to help
you transform your world from black-and-white to
Technicolor. I created it for you—and, selfishly, for
me—because I want to share the world with peo-
ple who are respectful listeners, passionate advo-
cates, and intelligent debaters. You have opportu-
nities to vote all the time—not just at
the ballot box but also in conversa-
tions at work, at school, with family,
with friends, and with strangers. Your
voice influences the ways other peo-
ple see the world, so don’t you want
to make sure that what you’re saying
is what you actually believe? Imagine
you have a headache and need pain
medicine. You would want to know
the possible side effects of the dif-
ferent available choices. You would
read the labels first and then make
an informed decision about which
one is right for you. The VOTE Pro-
gram helps you “read the label” on
each economic approach.
Economics is a fascinating story
of the evolution of ideas. There have
been countless economic thinkers—
men and women from cultures and
nations around the world—but the
debates that largely shape our con-
versations today are credited to three
great economic thinkers who were
European men: Adam Smith, Karl
Marx, and John Maynard Keynes. In
chapter 3 you’ll learn more about
them and the ways in which their ideas still inform
the conservative, radical, and liberal views on the
most pressing problems we face as a nation. The
VOTE Program focuses on the thirteen most rele-
vant economic issues of our time, giving you the
information and tools to make up your own mind
about what you believe.
Maybe you’re thinking, “I don’t need the VOTE
Program, because I already know what I think. My
mind is made up, and I know I’m right. I know
how we should move our nation forward.” But
how well informed is your opinion? Do you truly
know what the other perspectives are saying? How
did you develop your opinion? We’re all influenced
by our families, our communities,
perhaps our religions, and more.
Consider that if you had grown up
in a different family, or a different
neighborhood, or a different reli-
gion, you might have a completely
different perspective right now. All
of our ideas about the world are
profoundly shaped by these and
other influences.
For instance, let’s say your family
members are all die-hard Cardinals
fans. On game days all the cousins
gather to watch the Cardinals play
on television and everyone wears
the team colors. When the Cardi-
nals score, everyone chants, “We
bleed Cardinal red!” When the Car-
dinals lose, everyone shouts at the
TV and accuses the other team of
cheating. (“Those umpires were
probably paid off to look the other
way, because the catcher definitely
tagged the runner at home!”) Every
holiday dinner conversation turns
into a heated debate about who
was the greatest Cardinals player of
all time. In this context, how likely
are you to become a Yankees fan?
How likely are you to decide you prefer soccer
over baseball? If your family has always been
staunchly Republican or Democrat or Democratic
Socialist, how likely are you to understand the
views of other perspectives, or to speak up for
a policy or candidate from another party? How
Adam Smith
Karl Marx
John Maynard Keynes

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6 | Voices On The Economy
likely are you to be open
to alternate points of view?
I despair when people
argue for one economic
perspective without truly
understanding the other
perspectives. It’s danger-
ous to believe that you’re
right and everyone else
is wrong when you don’t
really understand the other
points of view because you
haven’t been exposed to
what others are saying in a
fair-minded way.
Many things can happen when you’re open-
minded and have access to this information. One
possibility is that you’ll learn the other perspectives
and change your point of view. Or your original
view will grow stronger. You’ll say to yourself, “I
understand what they’re saying, and I’m even more
sure I’m right!” You may hear the strengths and
weaknesses of each argument and become open
to finding middle ground. You’ll think to yourself,
“If we compromise, we could solve this!” Another
possibility is that by hearing how the people from
other perspectives think about the issues, you will
come up with a whole new way of thinking about
solutions to our urgent economic problems.
You might be wondering why I’m making a
big deal about the importance of learning multi-
ple economic perspectives in an unbiased way. It
turns out that my experience in college wasn’t the
exception; it’s the norm. Most economics courses
and books present only a single economic view-
point—and they present it as the “truth.” The few
that do include diverse viewpoints nearly always
conclude that one or another is the “right” or “best”
economic approach. I believe introductory eco-
nomics education should empower you to make
up your own mind, not convert you to a teach-
er’s (or textbook writer’s) way of thinking. You
need to judge for yourself
and find your own voice
on the issues—not mimic
mine or anyone else’s. It
doesn’t matter to me what
you decide; I only care
that you make an informed
decision. If you study the
statistics for all the base-
ball teams and end up
more convinced than ever
that the Cardinals really
are the best baseball team
in history, that’s great. Or
if you change your mind
about the Cardinals and become a die-hard Yan-
kees fan, that’s great. Or if you decide hockey is
a much better sport than baseball, that’s great. As
you read this book, please repeat this to yourself:
“The VOTE Program is not advocating for any of
the perspectives; it’s helping me make my own
educated and informed decisions about what
I believe.”
How We Identify the Perspectives
The VOTE Program uses the terms conservative,
radical, and liberal because these are the terms
most used by the popular media to describe the
dominant ways of understanding economic issues
in our society. However, we know these are not
perfect descriptors. We’re using them as catch-all
terms to describe the general ideas of each of the
perspectives. These three umbrella terms give you
a way in to the conversations about economic
issues by drawing bright lines between them so
you can compare and contrast their approaches
in the broadest way. Over time and with practice
you’ll become more fluent in their ideas and
develop a more nuanced understanding of each
one. You’ll come to realize that there is a lot more
complexity and diversity of thought within the
radical, liberal, and conservative camps. In fact,
By hearing how people
from the other
perspectives think about
the issues, you may come
up with a whole new
way of thinking about
solutions to our urgent
economic problems.

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Chapter 1: The World Needs Your Voice | 7
they debate and argue among themselves as much
as they do with people from other perspectives.
Your Voice Is Your Vote
It’s no accident that the acronym for Voices
On The Economy spells out the word VOTE. In
a democracy we, the people, must decide what
our national priorities should be. That’s what all
the fights in politics are about. When we cast our
vote for the candidates who will represent our
views in the White House, in Congress, in the
statehouse, on the local city council, or on the
school board, for example, we’re really voting for
the economic perspective we believe will best
advance our personal interests and the interests
of our community and country. Voting is your
opportunity to say, “Here are what I believe to be
the highest priorities for our nation. Here is what
I want my future to look like. Here is the kind of
world I want to live in. This is the path forward that
I believe we should take to solve our problems.”
Even if you can’t vote at the ballot box, you can
speak up at the kitchen table, talk to your class-
mates and coworkers about issues, and use your
voice to influence the people around you. And
when you don’t vote, you let other people decide
for you what your future will look like. They—and
not you—will decide if the minimum wage should
go up, stay flat, or be eliminated. They—and not
you—will determine how much federal debt we
will have. They—and not you—will decide what
your retirement security will look like. If nothing
else, I hope reading this book convinces you to
exercise your privilege to vote whenever you get
the chance. Please remember the old man in the
story about the artist Dante Gabriel Rossetti. He
didn’t use his voice, and he missed out on his
chance to transform the world.
The VOTE Ballot
You may or may not already have opinions about
the issues we’re going to cover in this book. Either
way, let’s find out if and how your attitudes change
as you go through the VOTE Program. Below,
you’ll find the VOTE Ballot. It doesn’t matter if you
don’t know much or anything about the issues
listed there. Make your “1st Vote” by taking your
best guess. You will see that there are circles with L
for liberal, R for radical, and C for conservative. If
you’re a conservative on an issue, put a dot on the
outside edge of the circle that’s under the C. Same
goes for if you’re a liberal (under the L) or a radical
(under the R). But wait! If you’re between two of
the positions—let’s say liberal and radical—then
put a dot in between the L and the R. If you lean
a little more toward one perspective or the other,
move the dot in that direction.
Please don’t leave any issues blank. We’re going
to vote again (“2nd Vote”) at the end of each of the
issues chapters. You’ll be able to track why you
took that position (the “Why?” column) after you
become more educated and informed about the
issues and the perspectives. Please vote right now
on issues 1 through 13 before you continue read-
ing. If you printed a copy, please save it in a con-
venient place. You’ll need it thirteen more times.

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8 | Voices On The Economy
ISSUE 1st VOTE 2nd VOTE WHY?
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
C
R
L
Agriculture
Product
Safety
Livelihood
Housing
Income
Distribution
Market Power
The
Environment
Health Care
International
Trade
Retirement
Security
Economic
Stability
The Federal
Budget
Immigration
$
$
Name
VOTE Ballot
VOTING INSTRUCTIONS: • Decide which perspective you agree with on each issue.
• Place a dot on the outside circle corresponding to that perspective (C, L, R).
• If you lean toward another perspective as well, place the dot in that direction.

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Chapter 1: The World Needs Your Voice | 9
The Three Questions
of Economics
You’re ready to start your exciting voyage into
economics, but please don’t worry when I tell you
that we’re going to begin with a shipwreck. Imagine
you are stranded with others on a deserted island.
What’s the first thing you’re going to ask? “How
can I survive?” Humans throughout the ages have
been asking questions about how to survive. This
is what makes economics such an interesting social
science. Economists break down the question of
survival into three components. First, given the
resources we have, what should we make? This is
the consumption question. Should we use the
driftwood on this island to make a fire to keep
warm or to build a raft? Let’s say we decide to
build a raft. The second question, then, is how do
we make it? This is the production question. We
decide that you’ll collect the driftwood, vines, and
tree sap, and I’ll fashion a hammer from a stone and
a stick. We’ll then use these items and our labor to
build the raft. The third question is for whom do we
make it? This is the distribution question. Who
should have a place on the raft? Those other people
who also washed up on the beach—should they
build their own raft or use ours? The definition of
economics that we’ll use in this book is the study
of the consumption, production, and distribution
of goods and services—questions you would ask if
you were stranded on a deserted island.
Because you were not the only one left stranded
after the shipwreck, you also would have had to
ask questions about how to manage social interac-
tions among the survivors. How would decisions
be made? How would conflicts be resolved? What
should the group’s priorities be (e.g., laws, gov-
erning structures, and policies)? That is the sphere
of politics. Politics is the study of governance—
the systems that manage social interactions. Just
Three Questions of Economics
What to Produce?
(The Consumption question)
How to Produce?
(The Production question)
For Whom to Produce?
(The Distribution question)
Economics
The study of the Consumption,
Production, and Distribution of
good and services

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10 | Voices On The Economy
like on the island, economics and politics are
always bound together, which is why the people
who started studying this phenomenon years ago
called it political economy. Later, to dive deeper
into these topics, the fields of political science
and economics were divided into two separate
realms of inquiry. In the VOTE Program we bring
them back together because we not only explore
the economic ideas of each perspective, but we
also examine their policy ideas. Our nation has
a representative democracy or republic. We
elect others to vote on our behalf to enact laws
and policies. Our laws are passed not by a major-
ity of people in the nation but by a majority of
elected representatives, whether it’s on the school
board, or in the statehouse, or in Congress. Our
representatives can’t just enact any law they want.
All our laws and policies must align with our Con-
stitution (we call this a constitutional democ-
racy). While radicals, conservatives, and liberals
all agree that peace and prosperity can best be
delivered in a political system of constitutional
democracy, they disagree on which economic
system can best bring us the material well-being
to thrive and which policies will move us forward
as a nation. Those disagreements are the subject
of the VOTE Program and this book.
The three questions we ask in economics are
subcategories of the bigger subject of prosperity,
also known as wealth creation. When we talk
about wealth or prosperity, we don’t just mean
big bank accounts. We mean having everything
we need to flourish and live full lives
so that we can achieve our
potential. This includes the ability to go to the
dentist and get your cavity filled, to sleep on a
mattress, to wear shoes, and so forth. In other
words, we’re not just talking about the ability to
afford designer shoes and sports cars. We’re not
talking about materialism—the belief that your
possessions are the most important things in life.
We’re talking about the goods and services we
need to survive and thrive.
One of the things I’m most grateful for are my
glasses. When I put them on every morning, I’m
reminded of my favorite episode of The Twilight
Zone, a TV show I watched in the 1960s. The epi-
sode is about a man who just wants to be left alone
so he can read, but his demanding wife and his
demanding job as a bank teller keep interrupting
his reading time. So one day he slips into the bank
vault to steal a little peace and quiet with a good
book. That’s where he’s hiding when a nuclear
blast happens. He emerges from the vault and
discovers that he’s the sole survivor. At first he’s
devastated, but he quickly sees the bright side of
his situation: now he has all the time in the world
to read! As he reaches down to pick up a book,
he accidentally drops his glasses and—crunch!—
he steps on them. The last man on Earth can’t
read without glasses, and there’s no one left to
make him new ones. This is an economics story.
We determine what to make—glasses.

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Chapter 1: The World Needs Your Voice | 11
We determine how to make them—with specially
trained opticians working with glass or plastics.
And then we determine who will get them. There
are billions of people on the planet, and some
estimate that a billion or more of us need glasses
but don’t have them. Think of all the car acci-
dents that happen because of bad vision. Think
about the students who fail in school every year
because they can’t see the board. Think of the
people who fall and break bones because they
don’t have good depth perception. All this harm
and suffering could be prevented with glasses.
Who gets glasses and who doesn’t? Who gets to
live in a mansion, and who has to live on the
sidewalk? Who gets a car, and who takes the bus?
Who gets a refrigerator full of food, and who goes
hungry? These are the kinds of relevant questions
we grapple with in economics.
Important Economic Terms
There are a few terms you’ll need to know as
we get started. Inputs are what go into making
a product. Inputs are also called factors of
production or, more simply, resources. For
example, on your deserted island, you have a
coconut tree. You collect the coconut fronds and
use them to build a shelter, so in this context
coconut fronds are inputs.
Resources include three types: land, labor, and
capital. Land generally refers to anything that nat-
urally comes from the Earth, like coconut fronds,
clams, ore, diamonds, and animals (except for
humans). Soil, minerals, animal and fish stocks, and
fresh-water lakes are all considered land resources.
Labor is human exertion—physical and mental
activity. When you climb the coconut tree to pick a
coconut, that’s labor. Capital, also sometimes called
the means of production, is any equipment you
use to produce the final product, such as a sharp
rock you use to slice the coconut open. By the way,
you might have heard of a fourth resource called
the entrepreneur—the person who brings a spe-
cial talent to create new industries, new firms, and
new markets. Since not all the perspectives agree
that this is a special fourth resource, we don’t
include it on our list of resources. Some believe it’s
just another form of labor.
Inputs are what we use for production, which
simply means taking resources and turning them
into something useful or desirable. An input
might start out as one thing and become another,
as happened in the movie Cast Away. The char-
acter played by actor Tom Hanks is stranded on a
deserted island. He tries unsuccessfully to open a
coconut by banging it with a rock. Desperate and
frustrated, he flings the rock away and a piece
chips off. That chipped piece has a sharp edge,
and he’s able to use it to open the coconut. In
this example, he turned a rock into a tool. In eco-
nomic terms, we say that land (the rock) became
capital (a tool).
Everything we make is called an output, or
product. There are two kinds of products: goods
and services. Goods are tangible, meaning they
can be touched. They are physical things such as
coconut oil and computers. Services are intangible,
meaning they can’t be touched. You can’t touch a
concert, although you can touch the guitars that
the musicians play. The musicians themselves are
labor. In this context, the guitars used during the

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concert are capital because they are equipment
used to make the final product (the concert).
There are just a few more terms to know. Micro-
economics and macroeconomics are different
ways economists analyze and understand the econ-
omy. Micro means small-scale (think microscope),
and macro means large-scale. Imagine you’re play-
ing the game Pictionary. You have to draw a picture
that allows your teammate to guess the word. Let’s
say your word is farm. If you’re looking through
the lens of microeconomics, you start small and go
big, so first you draw a carrot. You add a leafy top,
squiggly lines for the roots, and a bunny nibbling on
it. From there you draw the garden growing around
the carrot, and then the barn in the distance, with a
herd of cows on the hillside. That’s how you get to
farm. If you’re looking through the lens of macro-
economics, you start big and go small, so first you
draw the whole spread—barn, farmhouse, plowed
fields, cows on the hill. Then you sketch in the gar-
den, drawing the neat rows of vegetables. Last, you
draw the carrot in its row next to the lettuces and
cabbages, and the bunny nibbling on it. It doesn’t
matter whether you go from big picture to small
picture (macroeconomics), or from small picture to
big picture (microeconomics). They are simply two
approaches to economics.
Microeconomics is the study of markets. You
go to super markets and malls, and you shop
online, so you know how it works. You want
coconut cupcakes (demand); the convenience
store has them (sup ply). Markets are places
where demanders and suppliers come together to
buy and sell. Macroeconomics looks at the whole
economy including Gross Domestic Product
(GDP), which is the measurement of all goods
and services produced by a nation; unemploy-
ment, which is the measurement of the number
of people who want jobs and don’t have them;
and inflation, which is the measurement of over-
all price increases over time.
Another term that you’ve probably used before
is theory. For our purposes, a theory is an expla-
nation of any question you want to think about.
Theories always start with a question: for exam-
ple, when you drop a piece of toast, why does
Exercise 1: Inputs and Outputs
Let’s do a quick exercise to review inputs and outputs. We’ll use the example of dentistry. Let’s say
you go to the dentist. Write down whether each item in the list that follows is an input or output. If
it’s an input, indicate whether it’s land, labor, or capital; if it’s an output, indicate whether it’s a good
or a service. The Answer Key is at the end of the chapter.
1. Teeth cleaning ______________
2. Gold for fillings ______________
3. Dental technician ______________
4. Mouth guard ______________
5. Drill ______________

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Chapter 1: The World Needs Your Voice | 13
it always land buttered side down? Why does a
dog wag her tail? What were television executives
thinking when they canceled your favorite show?
We come up with theories to answer questions we
have about the world around us. Economic the-
ories are explanations related to questions about
consumption, production, and distribution—what
to produce, how to produce, and for whom to
produce. A theory is an idea, while a system is a
set of things that work together in the real world
to form a complex whole. An economic system
is the actual consumption, production, and dis-
tribution that takes place in the real world. One
chief difference among economic systems is who
owns and/or controls the resources (land, labor,
and capital).
Over the centuries, societies have operated
under a variety of economic systems. For exam-
ple, medieval Europe operated under the eco-
nomic system of feudalism, where only the
noble classes owned the land and capital. They
controlled the labor by forcing the serfs (peas-
ants) to work for them to earn their food and
shelter. In colonial and antebellum America, we
had an economic system of slavery, in which the
masters owned the labor of the slaves. In twenti-
eth-century Europe, the Soviet Union’s economic
system was called Soviet-style communism
(state-owned capitalism), where the state con-
trolled the labor and owned the land and capital.
As a nation, we have already rejected all three of
these economic systems, so in the VOTE Program
we’re not going to be talking about things that
we already generally agree are wrong or untrue.
We won’t be suggesting, for instance, that the
Soviet Union had a successful economic system,
or insisting feudalism is best, or advocating for
us to go back to slavery. We’ll be considering the
predominant economic perspectives that people
currently debate.
Choose Your Economic System
Let’s do a little experiment. Imagine there are
two countries, and you have to choose where you
want to live. In both Country A and Country B
there is private ownership of land and capital, and
individuals control their own labor, so owners hire
other people to work for them. Let’s say each country
has an identical firm that runs an entertainment
service, “Balance It!” The employees of “Balance
It!” stand up and balance their notebooks on their
heads while they do a classic dance you might
have heard of called the hokey pokey. (Trust me,
this is actually very entertaining.) When someone’s
notebook falls, that person sits down. Eventually,
there’s only one person left standing—the “Balance
It!” winner. The reward for the winner is candy,
which represents things people want and need,
from private helicopters and exotic vacations to
dental care and college tuition. Each of the winners
in both Country A and Country B receive a huge
pile of candy, and the runners-up receive a big
pile of candy. No one else who competed receives
any candy.
Here’s where you have to make a choice: In
Country A the winners of the candy keep it all.
They start businesses that create wealth for them-
selves and jobs for others, thereby stimulating the
economy. Some voluntarily redistribute a portion
of it through philanthropy to help others meet
their basic needs. In Country B the winners keep
a substantial portion of the candy. The govern-
ment redistributes the rest of the candy to fund
programs that create more opportunities for more
people to succeed, which grows the middle class.
With money in their pockets, they buy more so
firms expand and create more jobs. Which coun-
try would you want to live in—A or B?
Have you voted? Good. Now let’s say there’s a
third country—Country C—where, instead of pri-
vate ownership, workers cooperatively (together)
own the businesses where they work, and every-
one has a vote on how the company is run. The

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worker-owners of “Balance It!” get up and do
the hokey pokey with notebooks on their heads,
and eventually one person is left standing. It is
assumed that the winner in this competition was
only the winner because everyone contributed to
“Balance It!,” so each person in Country C gets a
modest pile of candy, and a majority votes to give
the winner an extra bonus piece. Each worker
then gives a portion of their candy to a communal
fund that ensures that everyone’s basic needs are
met—housing, transportation, health care, higher
education, and so forth. This creates an incen-
tive for more cooperatively owned businesses to
form, thereby stimulating the economy.
Now that you have a third choice, please vote
again. Which country would you choose to live
in—Country A, Country B, or Country C?
Country A and Country B both represent the
economic system of capitalism, which happens
to be the dominant economic system in the United
States. In capitalism, individuals privately own land
and capital, and people have the legal right to con-
trol their labor. Country A represents the conserva-
tive view of capitalism, and Country B represents
the liberal view of capitalism, but please note that
proponents of both the conservative and liberal
perspectives believe that capitalism is the best
possible economic system. Country C is the eco-
nomic system of democratic socialism, which
represents the radical view. Proponents believe the
best economic system has a combination of public
ownership and worker ownership. We call propo-
nents of this system radicals.
Conservatives celebrate free-market capital-
ism. By “free” they mean free from government
interference. Conservatives believe free markets
create economic and social harmony, while gov-
ernment regulations and bureaucracies make
capitalism inefficient and coercive. Conservatives
believe we need to embrace a free-market system
to ensure liberty for all.
Liberals believe that businesses should be
guided by government through fair-market capi-
talism. The partnership between private enterprise
and the public sector creates equity, transparency,
accountability, and stability because, when it’s
left alone, capitalism can lead to unfair competi-
tion, market failures, and numerous other unequal
opportunities. Liberals believe we ought to guide
fair-market capitalism to ensure fairness for all.
Radicals believe capitalism is a system driven
by private profit and not by social need. They
view capitalism as a destructive system that steals
from workers and that needs to be replaced by
one that values people over profits. In the VOTE
Program we call that system democratic socialism
(but please be aware that not all radicals identify as
democratic socialists). Radicals believe that when
some resources are owned cooperatively by work-
ers and some resources are owned by the whole
society then we can build a just economic system
for all.

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Chapter 1: The World Needs Your Voice | 15
Every time I do this activ-
ity in my classes, the stu-
dents are all over the map
when it comes to choosing
which country they want
to live in—which is really
a choice between ideas
about the best way to orga-
nize the economy. This is
not at all surprising; human
beings have been fighting
about this since the begin-
ning of civilization. Just
think about our nation’s
history. The Revolutionary
War was about stopping
taxation without represen-
tation. The Civil War was in
large part to end the system
of slavery and give all peo-
ple the right to control their
own labor. World War I and
World War II challenged imperialism (one coun-
try taking control of another country’s resources).
The Korean War, Vietnam War, and Cold War were
fought to stop the spread of communism (state
ownership of resources and
state control of labor). We
fought the Gulf War, some
say, to again stand against
imperialism. The War on
Terror is seen by some to
be a fight about the own-
ership of resources. Terror-
ist Osama bin Laden, who
masterminded the attacks
on the World Trade Center
on September 11, 2001, told
his followers, “[Y]ou should
liberate yourselves from
the deception, shackles
and attrition of the capital-
ist system. . . . The capital-
ist system seeks to turn the
entire world into a fiefdom
of the major corporations.”
The history of the world is
a history of conflict over
the ownership and control of resources, and this
is likely to continue to be the case as long as there
are human beings.
The problem isn’t that we
disagree. Looking at issues
from different points of
view can and should make
us stronger. This is a gift of
democracy. The problems
occur when we disagree
without respectfully
listening to the other sides,
and when we dismiss out
of hand the validity of their
points of view.

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Change the Conversation
Up until now, we’ve been talking about liberal,
conservative, and radical economic ideas. You should
know that these ideas are often represented by
political parties in the United States. The Democratic
Party tends to follow the liberal economic idea of
government partnering with private enterprise. The
Republican Party tends to follow the conservative
economic idea that government should allow
capitalism to operate unfettered. The Democratic
Socialists of America tends to want
cooperative ownership of resources and
a participatory government. By the way,
you should know that the Democratic
Socialists are represented by a
handshake and a rose, the Republicans
are represented by an elephant, and the
Democrats are represented by a donkey.
Just as wars are fought over who
owns the resources, so too are bat-
tles waged within our nation to deter-
mine which economic perspective will
shape our nation’s policies, taxation,
trade deals, environmental standards,
and more. We have conflicts and pas-
sionate disagreements, and inevitably
some part of the population ends up
feeling disappointed with the direction
we take as a country. This is normal
in a democratic system. Sometimes
the liberal view has the majority vote;
other times the conservative approach
has the majority vote. And sometimes
(although far less often but with a definite voice
in the debate) the radical view influences national
policy. The problem isn’t that we disagree. Look-
ing at issues from different points of view can and
should make us stronger. This is a gift of democ-
racy. The problems occur when we disagree with-
out respectfully listening to the other sides, and
when we dismiss out of hand the validity of their
points of view. These are ideas that could poten-
tially move us forward as a nation. Studies have
shown that we tend to surround ourselves with
people who echo our own perspectives, which
means we don’t get enough practice listening to
other perspectives in a respectful way. Recent vot-
ing statistics show that Republicans and Democrats
are more polarized than ever, with increasing lev-
els of hostility. In decades past they regarded one
another as political opponents, but lately the rheto-
ric has become vicious—nasty memes and political
rants dominate the news and social
media. They now treat one another
as the enemy.
And where are the Democratic
Socialists in this fight? Since the Great
Recession of 2007, followed by the
Occupy Wall Street movement and
a surprisingly successful run for the
Democratic Party’s presidential nom-
ination by Senator Bernie Sanders
(an Independent from Vermont who
identified as a democratic socialist),
there has been growing interest in
the radical perspective. Socialism
was the most frequently searched
word on Merriam-Webster’s web-
site during Sanders’s 2016 presiden-
tial primary campaign. That year, a
survey by the Institute of Politics at
Harvard University revealed that half
of people ages eighteen to twen-
ty-nine didn’t support capitalism,
and a third of this group supported
socialism. The implications of this are quite signif-
icant. As Massachusetts Senator Ed Markey once
said, “Although children are only 24 percent of
the population, they’re 100 percent of our future.”
Because of the rising interest in democratic
socialism, more Democrats and Republicans have
become vigorous, vocal opponents of it.
We need to get better at understanding one anoth-
er’s points of view. Respectful listening and compro-
Republican
Democrat
Democratic Socialist

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Chapter 1: The World Needs Your Voice | 17
mise are absolutely vital in a democracy and crucial
for sparking new solutions. This is the heart of what
we’re doing here in the VOTE Program. But why
haven’t people been doing it all along? Because it’s
not easy. Bitter feuds and different ways of thinking
about our nation have existed since before the Rev-
olutionary War. Leaders debated whether the fed-
eral government or local jurisdictions should have
more power. Who should own the resources? Who
should be allowed to vote? It has always been hard
to hear ideas that contradict our own, so please
don’t be surprised if you find the VOTE Program
challenging at times. For each issue in this book,
you will be asked to argue the position of each of
the economic perspectives—even the ones you
vehemently disagree with. Why would we ask you
to do this? Because we believe that you can’t really
learn how to swim if you’ve never been in water.
You might learn the motions of the crawl, but you
can’t know what it feels like to float, or to breathe
out bubbles through your nose, or to propel your-
self across the pool by kicking your legs. Speak-
ing aloud the words and phrases of each economic
perspective is like diving into the pool. It gets you
inside the ideas so you can really understand the
complexities and nuances. Once you do that, you’ll
be able to make up your own mind about what
you believe. You’ll come to that opinion with an
educated understanding of your choices. The VOTE
Program inoculates you against believing oversim-
plified sound bites meant to be provocative and
divisive—things like “Conservatives don’t care about
the environment!” or “Radicals are un-American!” or
“Liberals are antibusiness!”
The VOTE Program is all about helping you
become engaged with the larger issues in the world
around you. Only half of eligible voters actually
cast their ballots in recent years. This is alarming
if you care about the future of our country, which
has everything to do with your future well-being.
Even if you weren’t sure how to vote on the VOTE
Ballot, you will definitely start to form your own
opinions about the issues as we cover them in this
book. The first step to becoming civically engaged
is very simply this: you have to care.

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The Next Great Economic Thinkers
The VOTE Program is going to teach you about
Adam Smith, Karl Marx, and John Maynard Keynes,
the great economic thinkers who laid out their
ideas regarding how we can best create wealth
and prosperity. We’ll trace their voices through
to today’s radical, liberal, and conservative
perspectives. My favorite daydream, which I hope
becomes reality very soon, is that not only you but
also your friends and family members will read
this book and participate in the VOTE Program.
I imagine you all seated around the dinner table.
The conversation turns to issues in the news.
Your friend says, “Okay, I get what you’re say-
ing about cracking down on companies that pol-
lute. This is what I think we should do about it,
and here’s why.”
Your sister reaches for the potatoes and says,
“Yeah, I see your point, but what if we compro-
mise and find a solution this way?”
Your neighbor passes her the salt and says, “What
you’re both saying only convinces me more that
what I believe is the best way to deal the problem
of pollution, and here’s why I think so.”
Then you leap up, so excited that you nearly
spill your soup. “I see the strengths of what you
all are saying, and I also see weaknesses in your
arguments. But listening to you just gave me an
amazing idea for a new way to think about the
environment—and about economics in general!”
We’re waiting for the next great economic
thinkers. We haven’t had a new way of thinking
about economics in nearly a century, and we’re
due for one. My dream is that you will be the
next great economic thinker. Our world desper-
ately needs you to help navigate us through the
uncertain waters ahead. We’re looking at chal-
lenges on every front: unsustainable debt, unaf-
fordable health care, food insecurity, the possi-
bility of drones and robots replacing the majority
of human workers in the years to come—not to
mention challenges we can’t yet even imagine.
We will always have disagreements. The goal
of the VOTE Program is not to unite us in agree-
ment. The point is that, through your civic engage-
ment and civil discourse, we can move forward
together and advance as a civilization. I have a
sense of urgency about this because I won’t be
here forever, and neither will you. None of us
will. I lost close family members at a young age,
so perhaps that’s why I’m so aware of mortality.
If you’re extremely lucky, you may get a hundred
years, but you don’t know when that second date
on your gravestone will arrive. No one does. So
instead let’s focus on the dash—that little line that
connects your birth date and your death date that
stands for all the days in between your arrival and
your departure. We’re all living in our dashes, as
people like to say, and it’s up to us to make the
most of this lifetime, however long it will be. It’s
up to us to use our voices to vote—to say what
we mean and add our unique, informed perspec-
tive to the conversation. Don’t let that dash go by
and then years later say with regret, “You know,
I did have an idea way back when, but I lost
it because I never really knew how to use my
voice.” My great hope for you is that on the day
you die you will look back on your life and know
that your voice made the world a better place.

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Chapter 1: The World Needs Your Voice | 19
Chapter 1: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. As new artificial intelligence inventions are used to take orders in fast food restaurants, more
workers are losing their jobs. Which of the three questions of economics relate to this situation?
A. For whom to produce?
B. What to produce?
C. Why to produce?
D. How to produce?
2. Juan is a 25-year-old quarterback for a professional football team. In terms of resources, Juan is
_____, the goal posts are _____, and the grassy playing field is _____.
A. land; labor; capital
B. labor; capital; land
C. capital; land; labor
D. labor; land; capital
3. While driving on a freeway, a rock from the truck in front of you hits your car window and cracks
it. The next day, you hire a company to replace the front windshield. In this scenario, which of the
following is true?
A. The window repair is an output, specifically a service.
B. The window repair is an output, specifically capital.
C. The window repair is an output, specifically a good.
D. The window repair is an output, specifically land.
4. What is studied in microeconomics? Choose all that apply.
A. The nursing shortage
B. The number of layoffs in the construction industry during the previous decade
C. The decrease in average prices in Japan during the 1990s
D. The advertising campaigns used to sell sneakers to teens ages 13 to 16
5. Which of the following news article headlines would be of interest to a macroeconomist?
A. The Unemployment Rate Fell By 0.4% in January
B. Wage Growth Outpaced Inflation for the First Time in a Decade
C. Mexico’s Gross Domestic Product Higher Than Expected
D. Mergers and Acquisitions Leave Only a Few Players in the Gaming Industry

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20 | Voices On The Economy
6. In the market for pens, writers and pen manufacturers meet. In this context, the writers are the
__________ and pen makers are the __________.
A. producers; consumers
B. demanders; suppliers
C. sellers; buyers
D. suppliers; demanders
7. What is the difference between an economic theory and an economic system?
A. Theories are explanations about the economy, and systems are actual economies in the
real world.
B. There is no difference—a theory and a system are synonyms.
C. Theories are studies of markets in general, while systems are studies of markets during
particular time periods.
D. Theories are actual economies in the real world, and systems are explanations about
the economy.
8. Which of the following is an economic system?
A. Feudalism
B. Slavery
C. Soviet-style communism
D. All the given choices are correct
9. In capitalism, who owns the capital (the equipment used for production)?
A. Government
B. Groups of workers
C. Private individuals
D. Consumers
10. Match the economic theory (left column) to its preferred economic system (right column).
A. Conservative i. Fair-Market Capitalism
B. Liberal ii. Free-Market Capitalism
C. Radical iii. State-Owned Capitalism
D. None of the above iv. Democratic Socialism
Answers
1. D 2. B 3. A 4. A, B, & D 5. A, B, & C 6. B 7. A 8. D 9. C 10. A – ii, B – i, C – iv, D – iii

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Chapter 1: The World Needs Your Voice | 21
Chapter 1: Key Terms
Capital
Capitalism
Constitutional democracy
Consumption
Democratic socialism
Distribution
Economic system
Economic theory
Economics
Entrepreneur
Factors of production
Fair-market capitalism
Feudalism
Free-market capitalism
Goods
Governance
Gross Domestic Product (GDP)
Inflation
Input
Labor
Land
Macroeconomics
Market
Materialism
Means of production
Microeconomics
Output
Production
Representative democracy
Republic
Resources
Services
Slavery
Soviet-style communism
State-owned capitalism
System
Theory
Unemployment
Answer Key to Exercise 1
1. Teeth cleaning Output: Service
2. Gold for fillings Input: Land
3. Dental technician Input: Labor
4. Mouth guard Output: Good
5. Drill Input: Capital

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T here’s a joke about the famous fictional detective Sherlock Holmes. It goes like this: Holmes and his crime-solving sidekick, Dr.
Watson, are on a camping trip. It’s the middle
of the night, and Holmes suddenly shakes Wat-
son awake.
“Watson! Open your eyes!”
“Huh?” Watson says groggily.
“Wake up and tell me what you see!” Holmes
says urgently.
“Uh—I see thousands of stars in the sky?”
“Yes!” says Holmes, nodding encouragingly.
“And what does that tell you?”
Watson yawns. “I suppose it tells me that the
universe is bigger and more complex than I can
comprehend, so my irritation that you woke me
up and my worry that I won’t be able to get back
to sleep are insignificant in the grand scheme
of things.”
“Yes, but what does it tell you?” Holmes
asks again.
Watson considers the night sky. “From the posi-
tion of the constellations, it tells me it’s approx-
imately half past four. And the sky is clear, so
it tells me it’s unlikely we’ll need our umbrel-
las tomorrow.”
“Yes, Watson, but what does it tell you?”
“Oh for goodness’ sake, Holmes! Just tell me
what you think it should tell me, and let me get
back to sleep!”
“It’s elementary, my dear Watson—it should tell
you that someone has stolen our tent!”
What does this story tell us? It tells us that we
each experience and interpret the world in our
own unique ways. It also tells us that more than
one thing can be true at the same time.
Here’s a little test. What do you see in figure
2.1? Do you see a vase? Do you see two faces in
silhouette? You may actually see both, depending
on how you look at it.
Figure 2.1
2Thinking About Thinking

In some aspects of our lives we’re perfectly
comfortable with the fact that there’s more than
one way to understand something. For example, if
you were asked what the right kind of food is, you
would think the question was crazy because the
right food is the food you feel like eating. That’s
correct. It might be tacos; it might be salad. Right
depends on the context. Likewise, if you were
asked what the right kind of music is, you would
roll your eyes and say, “That’s another trick ques-
tion. There’s no ‘right’ kind of music.” Of course
there isn’t! It’s a matter of opinion. But one type of
music might be more “right” in a certain context.
For instance, Beyoncé is more right than Beetho-
ven if you want to create a dance-club atmosphere
at your party. And Beethoven is more right than
Beyoncé when you perform at your classical piano
recital. So there are some issues that we agree can
have more than one correct answer. Many things
could be right.
On the other hand, there are some issues
about which we feel uncomfortable saying that
many answers could be right. Those become dif-
ficult conversations. For instance, what’s causing
global climate change? Was Christopher Colum-
bus a brave explorer or a ruthless invader? Was
life on Earth created by God in six days, or did it
evolve over millions and millions of years? There
are many issues about which we vehemently dis-
agree. You probably have strong views on these
and other controversial questions, and so does
the person sitting next to you. There are issues
about which each of us feels certain that we’re
right, and it can be very frustrating—and even
infuriating—when others are just as certain about
an opposite opinion. The beliefs that seem so
obviously certain and true have deep roots in our
families, cultures, religions, educations, national
identities, and more. Our beliefs don’t spring into
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Chapter 2: Thinking About Thinking | 25
our heads out of thin air; they are the products
of our experiences and the influences around us,
including our teachers and textbooks.
It takes profound courage to question—let alone
to go against—the beliefs of everyone around you.
That’s why sixteenth-century scientist and philos-
opher Galileo Galilei is one of my heroes. Talk
about courage! During Galileo’s lifetime, Europeans
believed the Earth was the center of the universe.
The Catholic Church considered this official doc-
trine based on the Holy Scriptures, which described
how God created the Earth and all things on it in six
days. But Galileo gathered scientific evidence that
led him to believe the Earth revolves around the
Sun. He stood up for what he believed even though
people thought he was crazy. The Church was very
powerful at that time and had little tolerance for
diverse viewpoints; it condemned ideas that con-
tradicted its doctrine. Imagine the guts it must have
taken for Galileo to tell the Pope and the inquisitors
that they were wrong. He paid a heavy price. The
Church sentenced him to life in prison for spread-
ing an idea they considered dangerous heresy. It
forced him to recant everything he ever said about
the Earth revolving around the Sun. It destroyed his
book and banned him from ever publishing any-
thing else for the rest of his life.
Eventually everyone realized Galileo was right.
The Church even apologized to him … 359 years
later. Today it would be hard to find a person
who doesn’t believe the Earth revolves around
the Sun. But do we all believe this in the same
way? Imagine you’re in class and I ask, “Who
believes the Earth revolves around the Sun?” Your
hand shoots up, and so does everyone else’s. It’s
a no-brainer. We all saw that model of the solar
system in first grade, with the Sun in the middle
and the Earth, Mercury, Venus, and the rest of
the planets revolving around it. Now I ask, “Does
anyone here think that while the Earth probably

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does revolve around the Sun, there’s a possibil-
ity that one day—maybe a hundred years from
now—we’ll have new instruments for measuring
and a totally different way of understanding the
universe, which could lead us to say that the Earth
does not revolve around the Sun?” Only some
people will raise their hands, and that’s because
we have different ways to think about truth, facts,
and new information.
Buckle up, because we’re going to get deep now.
There’s a branch of philosophy that specializes in
how we think about thinking. It’s called epistemol-
ogy. Epistemology is a complicated area of study,
but for our purposes we’re going to talk about ways
of thinking that open up conversations by consider-
ing new possibilities and ways of thinking that frus-
trate constructive conversations.
Essentialism, Non-essentialism,
Relativism, and Absolutism
Let’s consider four ways people think about
thinking. Essentialists believe there is an essence
to everything—an intrinsic and unchanging truth
that we can come to know through careful study.
They say that as we explore and learn, we can
know the truth. Therefore, our ideas about the
solar system, human life, and everything else can
be true. They say we can know a thing is true by
experiencing it through our senses (empirically)
and by applying reason and knowledge
(rationally). For example, to an essentialist, it’s
true that the Earth revolves around the Sun, and
it’s highly unlikely that new information, or new
instrumentation, or new perspectives will change
that understanding. Truths are more than just
opinion: they reflect reality. However, essentialists
change their beliefs when new knowledge is
discovered that convinces them there is a more
accurate way to understand reality. Staying open-
minded to new ideas makes sense to an essentialist
because those ideas could help bring them closer
to grasping the true essence of the thing.
Non-essentialists believe that there is no fixed
“true” essence to reality. They say that as we study
and explore and our own minds open to new
ideas, and as time passes and the contexts of his-
tory, law, human development, and other things
change, so too do our understandings of what is
true. To a non-essentialist, the things we believe
to be true are only reflections of the knowledge
we have in this moment. For example, a non-es-
sentialist says we believe right now that the Earth
revolves around the Sun, but it’s possible that new
information, or new instrumentation, or new per-
spectives will one day change that understand-
ing. Non-essentialists point out that our thoughts
and perceptions are shaped by what we think we
know, what we expect to see, and what we haven’t
even thought to look at yet. They say that it matters
a lot what we think because it’s through ideas that
we make sense of the world. So while non-essen-
tialists reject the notion that there is a fixed essence
to all things, they embrace the view that ideas have
consequences. They say that’s why it’s important
to advocate for one idea over another while at
the same time staying open-minded to new ideas,
because they could lead to consequences that
we prefer.

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Chapter 2: Thinking About Thinking | 27
We can leave it to the great philosophers to
debate whether or not there’s an essence to all
things—whether essentialists or non-essentialists
are correct. Both agree that knowledge keeps
evolving, which opens up conversations because
this mindset allows for new possibilities. Once
upon a time, people believed the Earth was flat;
even geniuses such as Leonardo da Vinci and
Isaac Newton couldn’t explain how babies were
conceived; and until fairly recently, people ridi-
culed the suggestion that doctors could prevent
infections by washing their hands. We are con-
stantly building on our knowledge from previous
discoveries. As Newton said, “If I have seen fur-
ther, it is by standing on the shoulders of giants.”
And sometimes building new knowledge requires
that we replace even deeply held beliefs, such as
the idea that the world is flat.
Let’s look at two ways of thinking that frustrate
constructive conversations. Relativists are some-
times confused with non-essentialists. Relativist
thinkers have sophisticated ways of understanding
the world as not having one fixed truth. But the
popularized version of relativism says, “Since we
can’t know what the truth actually is, you go ahead
and think what you think; I’ll go ahead and think
what I think; and in the end it doesn’t matter either
way.” No! It definitely matters because we are con-
stantly making choices and decisions based on what
we believe to be true. There are consequences to
ideas. For instance, because we believe the Sun and
not the Earth is at the center of our planetary sys-
tem, we’ve been able to launch satellites into space,
and we use a solar calendar to measure the pas-
sage of time. If you believe one idea is as good as
another, you won’t advocate for any particular one,
and there is therefore no opportunity for meaning-
ful dialogue. You might even end up not bother-
ing to vote because you think the policies we have
don’t make a difference one way or another. It’s as
if you shrug and say, “Yeah, whatever.”
Another way of thinking that frustrates con-
structive conversations is sometimes confused
with essentialism. Absolutists say, “My way is the
only right way because it is the absolute truth.”
No! This is close-minded thinking that rejects all
new ideas and leaves us stuck in the dark ages.
For instance, if we had rejected Galileo’s new way

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28 | Voices On The Economy
of looking at the planetary system, we would not
have satellites, cell phones, or countless other
inventions today. Being open-minded and curi-
ous to explore new ideas is what moves humanity
forward. Absolutists reject any idea that doesn’t fit
with their preconceived notions about the world,
which blocks opportunities for meaningful dia-
logue that could expand understanding.
When it comes to the right music or food, rela-
tivism makes sense. And when it comes to oppos-
ing human trafficking, absolutism makes sense. But
when we debate economic perspectives, rejecting
relativism and absolutism in favor of intelligent
open-mindedness makes the most sense. It’s the
only way to have the kinds of constructive conver-
sations that can lead to real solutions that move our
nation forward and make everyone’s lives better.
Economics and Pluralism
Most of us were raised to believe that what we
learned in school was true. For instance, you weren’t
given a textbook called Chemistry: One Way to Look
at It. You were taught from Chemistry: The Way It Is.
But today the vast majority of economics classes are
taught from a single perspective (liberal, radical, or
conservative). The problem is that many students
don’t even realize they are learning a perspective.
It’s just taught to them as Economics: The Way It Is.
In the meantime, economics educators are famous
for fervently disagreeing with one another about
which perspective is the “right” one. They can
be very certain that the others are dead wrong.
This absolutist way of thinking limits our potential
to see solutions. For instance, they might only
present research data that supports their views,
and if they even acknowledge that there are other
perspectives, they might quickly dismiss them as
Exercise 2: Different Ways of Thinking
Let’s practice identifying the differences between essentialist, non-essentialist, relativist, and
absolutist statements. Which is which? The Answer Key is at the end of chapter 2.
1. “As a child I was taught that the atom was the smallest particle. When scientists discovered even
smaller ones, I changed my belief. New information brings us closer to the essential truth.”
2. “If I drop a shoe from a second-story window, I am completely certain it falls to the ground because
of gravity. This is an immutable fact that will never change, so it’s a waste of time to consider other
theories or explanations.”
3. “Juan thinks the forest should be cut down so the city can build a new shopping mall. Ashley
is passionate about saving the forest. I say neither one is right or wrong; it’s just a matter
of preference.”
4. “My doctor told me to lift weights to prevent high blood pressure. Then a study came out showing
that running was more effective for my age group. New knowledge and changing contexts continually
add to what we know so that we keep improving and making decisions that are better for us.”

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Chapter 2: Thinking About Thinking | 29
illegitimate or irrelevant. And relativism—the flip
side of absolutism—is just as harmful. Believing
that it doesn’t matter what you believe also limits
our potential for finding inspiring new ideas, and it
brings us classrooms full of teachers and students
who don’t recognize that our ability to prosper and
flourish is at stake.
The VOTE Program promotes pluralism in
economics education. Pluralism means being
open to a diversity of viewpoints. It’s a commit-
ment to open-minded conversations, whether you
approach economics education as an essentialist
or a non-essentialist. It’s an opportunity to build on
existing knowledge and advance our understand-
ing by considering alternative ways to look at eco-
nomic relationships.
The Case for Pluralism in
Economics
For the last fifty years or so, there’s been
a growing movement of educators calling for
economics to be taught from more than one
perspective. But while those teachers want to
include more pluralism in their classrooms, in
some cases the decision about what to teach
is out of their hands. For example, in 2010 the
Texas State Board of Education voted to change
the state’s social studies curriculum so that it only
represented the conservative economic point of
view. Social studies teachers were required by law
to teach students that unregulated capitalism is
superior to all other economic systems and to
present Republican Party policies more favorably
than any other policies. Society loses out when
multiple perspectives are not allowed to be taught
to students. That’s why students around the world
are demanding to be taught economics from
multiple perspectives. The International Student
Initiative for Pluralism in Economics, for example,
hosts conferences and organizes students in
dozens of countries worldwide to advocate for
more pluralism in economics curricula. Economics
students and educators from all the perspectives—
radicals, conservatives, and liberals—are part of
this call for change.

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30 | Voices On The Economy
When we embrace plu-
ralism, we’re respecting
other people’s right to
think differently from our-
selves. In our democracy,
the majority rules, but the
minority deserves respect
and appreciation because it
provides the majority with
a chance to learn and test
its ideas against thoughtful
critics. Democracy is a sys-
tem of compromise, which
means we won’t always
have things our way, but
neither will anyone else.
Using your voice is espe-
cially important when you consider other ideas to
be dangerous or offensive or completely wrong.
But—and this is the important part—please make
sure you’ve listened respectfully and understood
those other points of view before you offer your
critique and alternative ideas. The process of lis-
tening to others respectfully and then engaging in
civil discourse (not leaping up to interrupt with
rude comments, snorts of disbelief, or apoplectic
rage) is not always pleasant or comfortable, but
it guarantees that we will have a healthy democ-
racy and find the best solutions to move forward
together as a nation.
Pluralism doesn’t mean just mentioning another
perspective to metaphorically pat it on the head in
a patronizing way, or to use it as a contrast to make
the favored perspective look good. It means hav-
ing an unbiased discussion of multiple perspectives.
Some books and courses appear to present diverse
economic perspectives, yet they are rife with subtle
and overt biases. Others invite students to compare
different economic systems. But the problem is the
economic systems they compare to their favored
perspective are outdated and irrelevant, so there
really isn’t any true pluralism presented. The way
the systems are presented
skews the debate. In one
often-used high school text-
book, the authors basically
ask, “Readers, do you want
to go back to an economic
system that’s based on the
kind of trade we had back
in the premodern days,
when we were all hunters,
gatherers, and farmers? No?
Well, then you don’t want a
traditional economic system.
And how would you like to
live in a communist country
like the Soviet Union, where
the government owns every-
thing and tells you what to do? No? Then you don’t
want a command economic system. That leaves
only one solution: the market economy! So, you
see, capitalism clearly is the best economic system.”
The problem with this sort of comparison is that no
one is advocating for the United States to have a tra-
ditional economy, and no one wants us to become
the next Soviet Union. This sets up some thing that
isn’t a real option just to give the impression of plu-
rality. Yes, traditional and command economic sys-
tems are important things to study, but they should
be studied in history classes, not in modern-day
economics classes. In the VOTE Program we com-
pare the relevant, contemporary choices we face
regarding our economic system: radical (democratic
socialism), conservative (free-market capitalism),
and liberal (fair-market capitalism). These three eco-
nomic systems are debated in the mainstream in our
country today, and you need to know about them
in order to have an educated and informed voice in
the world.
The VOTE Program won’t pretend to compare
different perspectives while really trying to sell you
on a personal favorite. It’s about helping you dis-
cover what you believe by presenting each of the
The VOTE Program won’t
pretend to compare
different perspectives while
really trying to sell you on a
personal favorite. It’s about
helping you discover what
you believe by presenting
each of the economic
theories in a balanced way.

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Chapter 2: Thinking About Thinking | 31
economic theories in a balanced way. Textbooks
and teachers have tremendous power. Students
implicitly trust their teachers; likewise, they trust
their textbooks to give them accurate and balanced
information—but that’s often not the case. This
textbook has been written very carefully so as not
to influence you in any direction when it comes
to the three perspectives. We respect you, and we
wholeheartedly support your right to make your
own decisions about what you believe.
Ethics and Economics
Let’s step back for a moment and consider
what economists are really arguing about. In
other words, what are these “perspectives” all
about? Each one is a different idea for how to
structure and run our economy so that we can
promote well-being by generating prosperity.
Proponents of the three perspectives we’re going
to be examining are all guided by their own sets
of ethics, which are the moral principles that
govern behavior. Ethics underlie every economic
theory, practice, and policy. They guide our
decisions about what are the right things to do.
Sometimes the bitter fights among economists
include accusations and insinuations that the
opposing sides are unethical—that they lack
integrity, honor, or decency. That, of course, may
be true of individuals from every perspective,
but it’s not true that liberals, conservatives,
or radicals are, as a group, unethical. This is
important to remember. They all care about
integrity and morality.
If you believe that people who think differently
from you can’t also be honorable and decent
human beings, then you can’t listen to them with
respect. And if they hold that prejudice about you,
then there’s no way they will hear you respectfully.
When we believe strongly in an idea, we might
be tempted to become self-righteous and want
to claim the moral high ground. It’s just another
way to close down conversations. Imagine how
disrespected you would feel if someone made
negative assumptions about you just because you
disagreed with them on how to solve the health-
care problem or how to address the national debt.
Please remember that each one of us is passion-
ate when it comes to our opinions about how the
world ought to be. That’s normal and appropriate.
It’s good to care about the world around you. We
applaud you for being engaged with ideas in a
passionate way. But please don’t dehumanize or
demonize those who think differently from you
about economics. A politician once said about her
opponent during a close-fought election: “I can’t
agree with a thing he says, but I don’t let myself

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32 | Voices On The Economy
think the worst of him as a human being.” A
reporter asked how she managed not to hate him
when he was attacking her ideas. She replied, “I
just remind myself that he’s a human being, his
mother probably loves him, and we both want the
world to be a better place, even if we don’t agree
on what that looks like or how to get there.”
It might go against the grain of everything that
you’ve ever learned in your life, but please be
open to the value of pluralism as you study eco-
nomics. Cultivating an open mind will help you
get the most out of the VOTE Program. Using
a pluralistic approach, we can concentrate our
energies on finding our best answers instead of
tearing down opposing positions.
How to Build “Theory-Plus”
You and I and everyone else have theories
about how the world works. A theory is a system
of ideas intended to explain something. Theories
always start with a question: Why is my brother so
annoying? Or why do we only see rainbows in the
afternoon? Or does the Earth revolve around the
Sun? Theories are shaped by our assumptions—
the things we believe are “givens” and that are
most relevant to the question. To build our
theory, we create a model, which represents our
assumptions, and then we draw conclusions
from our model to answer our initial questions.
These three components make up a theory. In
the VOTE Program we use “theory-plus.” The plus
refers to a fourth component: policy. Policies are
proposals for action that flow directly from our
conclusions. It’s policy that we fight about every
day in our nation—policies about what’s included
in your economics textbooks, policies about
wages, policies about hiring and firing at your
workplace. It’s because of policies that economic
theories are relevant to your life. They aren’t just
random or purely academic ideas; they have real
consequences in the world. Some people say that
academics (and economists) just sit around in their
ivory towers all day long, theorizing and gazing
at their navels, which implies that theorizing is
unimportant and maybe even a little bit useless.
No! The eminent economist Paul Samuelson, who
wrote the most widely used economics textbook
of the twentieth century, once said, “I don’t care
who writes a nation’s laws—or crafts its advanced
treaties—if I can write its economics textbooks.”
He understood that when you change people’s
minds, you change the world. When we can get
other people to believe our theory is correct and
to base policies on our theory, it changes the
entire landscape of everyone’s lives. This is true
whether the theory is about economics or houses
or astronomy or milk or anything else.
So just to review, the four components of theo-
ry-plus are assumptions, model, conclusions, and
policy. We use the term a milk chocolate piece to
remember them. Economic theories answer the
three questions economists always consider: what
to produce, how to produce, and for whom to pro-
duce. We’re going to talk about economic theories
in a minute (and spend the rest of the book talking
about them), but right now let’s use an example
that isn’t about economics to practice building a
theory. We’ll pretend we’re architects, and we’ll
start with the question, What type of house design
offers the best protection from wind and rain?
Step 1 is to establish our assumptions. Let’s say
our assumptions about houses are the following:
! A steep roof keeps rain from getting into
the house.
! Shingles are the optimal roofing material
because they lie flat on the roof, so a high wind
isn’t likely to tear them off.
! Stone is the sturdiest material for walls because
it can withstand high winds and driving rain.

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Chapter 2: Thinking About Thinking | 33
Right away, you might be thinking, “But wait!
I don’t agree with those assumptions.” Please set
aside your disagreement for the moment. Later you
can decide if you still think this theory’s assump-
tions were flawed. But before you form an opin-
ion, you need to learn the theory—especially if it’s
a dominant theory that takes up a lot of air in our
public conversations. You don’t want to find your-
self having to say, “I disagree with you but I can’t
say why, because I didn’t like your assumptions so
I didn’t bother to learn your theory.”
Now that we’ve laid out the assumptions, step 2
is to build a model that represents those assump-
tions. The model could be physical, or narrative
(words), or mathematical, or graphical. Since our
theory is about houses and we’re pretending to
be architects, we’ll build a physical model. Let’s
say we construct a scale model of a stone house
with a forty-five-degree-angle shingle roof. This is
a representation of our assumptions.
Now we’re ready to test it against wind and rain
to draw our conclusions, which is step 3. We aim
a fan at our scale model house to simulate high
winds, and then we blast it with a power sprayer
to simulate hurricane conditions. How much water
got inside? How many roof shingles flew off? We
collect that data. Then we do comparisons on scale
models of houses that have different designs—for
example, an adobe house with a flat roof and a
wood-framed house with a tile roof. We pelt them
with the same simulated wind and rain conditions.
After we’ve tested our models, we use the data we
collected to draw our conclusions. That informa-
tion answers our initial question: what is the best
way to build a house to withstand wind and rain?

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We conclude: “A stone house with a forty-five-de-
gree-angle shingle roof.” A conclusion is simply an
answer to the initial question we asked.
Policy is the practical result of a theory. Just
think about this house example. You might not
have any interest in building a stone house with
a 45-degree-angle shingle roof. But let’s say we
convince insurance companies that this is the best
house design in all circumstances. “This informa-
tion can save us a lot of money,” those companies
say. “We are going to have a new policy that we’ll
only insure stone houses with forty-five-degree-an-
gle shingle roofs because we’re convinced it will
reduce the number of claims people make.” You
really like your brick house and you don’t want to
move, but you will have to because you don’t want
to live in a house that has no insurance. So you can
start to see here how important policies are. Now
let’s say the government is also convinced by our
conclusions and creates a new policy that it will
only award contracts for stone-and-shingle-roof
houses. You’re a builder who specializes in wood-
frame homes. You will have to change your whole
business—switch suppliers, fire your carpenters,
and hire stone masons—so your firm will survive.
All the other builders will have to do it too. Soon
stone-and-shingle-roof houses are the only houses
being produced.
You may not have agreed with the assumptions
of the theory, but it won’t matter. Once policies
are created, you’re stuck—you have no choice. Do
you see the domino effect a theory can have from
assumptions, to models, to conclusions, to poli-
cies, to your life? Economic policies—tax reform,
health care, international trade agreements, immi-
gration legislation, and many, many more—have
power over every aspect of your life. Economic
policies in our country come from conservative,
radical (less frequently), and liberal theories. That’s
why we’re studying these perspectives. Don’t you
want to have a say in what’s being decided, which
will affect every aspect of your existence? We’ll be
building radical, liberal, and conservative theories
in each of the upcoming issues chapters. We’ll
describe them in a balanced way, side by side, so
you can compare their assumptions, models, and
conclusions, and form or confirm your own opin-
ions about their proposed policies.
Positive Economics and
Normative Economics
Earlier in this chapter we described how
non-essentialists and essentialists both keep
their minds open to new information that could
change their ideas about issues. Where they
differ is that essentialists believe there is an
essential truth that we can aspire to understand.
Non-essentialists believe there isn’t an essential,
unchanging truth to be discovered because
everything is shaped by context; however,
what we believe about issues matters because
beliefs have consequences. Both essentialists
and non-essentialists are open to the study of
alternative perspectives.
As you can already guess, an essentialist econ-
omist believes that theory building is a science,
meaning theories can describe things that are true
(“what is”). They say these objective truths are
facts and therefore aren’t based on value judg-
ments. They call this fact-based approach positive
economics. On the other hand, they say, policy
analysis is not a science, which means policies are
up for debate. For example, what action is best to
solve hunger? The policy decisions that are made
are based on people’s opinions and value judg-
ments (their ideas about “what should be”). Essen-
tialist economists call this normative economics.
It shouldn’t surprise you to learn that non-essen-
tialists reject the idea that economics is an objec-
tive science, as they believe that what we know is
shaped by context. They argue that assumptions,
models, and conclusions can’t describe “what is”
because facts change depending on who looks at
them, how they are looked at, and when they are

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Chapter 2: Thinking About Thinking | 35
No matter how differently essentialists and non-essentialists think about facts and
truth, they share the same agreement that policy is normative. This opens the door
to pluralism, making open-minded debates on economic issues possible.
Assumptions, Models, and Conclusions
Policies
“Normative Economics“
looked at, among other factors. Take as an exam-
ple the extensive research that has gone into the
causes of obesity. Nutrition researchers concluded
that eating too many high-carb and high-calorie
foods causes obesity. Genetic researchers con-
cluded that obesity is caused by family history.
Psychologists concluded that people overeat and
become obese because of emotional traumas.
Non-essentialists say there’s no “right” answer, but
there are significant repercussions for policies that
are drawn from each of these conclusions. They
reject the idea of positive economics. They say all
the components of theory are normative.
As you can hear, these two very different ways
of looking at theory can be a source of a lot of
conflict. It may help you later to remember this
difference in ways of thinking when you won-
der why conversations about economic issues can
become frustrating. This whole chapter on epis-
temology has brought us to this point: no matter
how differently essentialists and non-essentialists
think about facts and truth, they share the same
agreement that policy is normative. That opens
the door to pluralism, making it possible for us
to engage in policy debates with an open mind
and embrace new ideas about how to move our
country forward.
But What Is True?!
Every time I teach the VOTE Program, students
come up to me after class and say, “Can’t you just
tell me which perspective is the right one? You
know more than I do; you’ve been thinking about
this for a long time. I’m just getting started. Please
help me out and tell me what to think!”
I know it would be a thousand times easier for
you if I just told you what to believe rather than
inviting you to figure it out for yourself. I’m grateful
to the instructors who changed my life with their
charisma and the eloquent persuasion that brought
me around to their points of view. I’ll admit I some-
times feel a twinge of guilt about not being that kind
of teacher. But I hope to be a teacher and textbook
writer who provides an even more valuable service
by not pushing you in the direction that I think is
best and true. You will be better off—and the world
will be the richer for it—if you develop your own
opinions and learn how to convey them to others
who may not agree with you. It’s time to find your
voice, and I can’t wait to hear you!
Essentialist Non-essentialist
“Normative Economics”
• Facts are objective science
• Facts reflect “What Is”
• Fact are subjective
• Facts reflect “What Should Be”
“Positive Economics”

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Chapter 2: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. A biologist studies life; an economist studies the production, consumption, and distribution of goods
and services; a psychologist studies human experience. What does an epistemologist study?
A. Morality
B. The origin of the universe
C. The relationship between natural and social sciences
D. Knowledge
2. Which of the following statements would make sense to an essentialist?
A. “I know it is true because I saw it with my own eyes!”
B. “Just because I can think through a problem logically doesn’t mean it is provable.”
C. “I can collect data and see connections, but honestly I can report the results in a
multitude of ways.”
D. “I can win any argument because I have learned the art of shifting the focus so that the
other person sees things my way.”
3. Which of the following statements would make sense to a non-essentialist?
A. “Facts don’t change, even in different political, economic, cultural, and biological
contexts.”
B. “There is only one true way to interpret the economy.”
C. “Alternative theories on the economy are equally valid and therefore people should not
support one theory over another.”
D. “Important consequences result from alternative perspectives on the economy and
those consequences should be the basis of supporting one theory over another.”
4. Match the type of thinking about truth (left column) to its description (right column):
A. Empiricist i. Theories can be proven through one’s senses
B. Rationalist ii. Theories can be proven through logic and proofs
C. Absolutist iii. Theories are alternative explanations, all equally valid
D. Relativist iv. Theories are either right or wrong
5. Pluralism in economics education means an open-minded embrace of alternative theories in
the classroom and in textbooks. Which of the following use open-minded inquiry that could be
consistent with pluralism? Please choose all that apply.
A. Essentialism
B. Non-essentialism
C. Absolutism
D. Relativism

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6. Who of the following are committed to ethics (moral principles that govern behavior)? Please
choose all that apply.
A. All individuals from every perspective
B. Radicals as a group
C. Conservatives as a group
D. Liberals as a group
7. Every theory starts with certain givens (“assumptions”). A model is then developed to represent
those assumptions. Which forms may a model take?
A. Essentialist, non-essentialist, absolutist, or relativist
B. Production, consumption, or distribution
C. Descriptive, physical, graphical, or mathematical
D. All the above
8. All the following statements about conclusions are true EXCEPT:
A. Conclusions are answers to the initial questions asked.
B. Conclusions can be reached by collecting relevant data.
C. Conclusions can be reached through deductive reasoning.
D. Conclusions are actions taken to ensure a particular outcome.
9. Which one of the following is an example of a policy?
A. Minimum wage legislation is abolished.
B. Minimum wage legislation causes unemployment.
C. Minimum wage legislation results in living wages.
D. Minimum wage legislation doesn’t fix poverty.
10. Essentialists and non-essentialists differ on the subject of Positive Economics, but they agree that
__________ are the purview of Normative Economics.
A. assumptions
B. models
C. conclusions
D. policies
Answers
1. D 2. A 3. D 4. A – i, B – ii, C – iv, D – iii 5. A & B 6. B, C, & D 7. C 8. D 9. A 10. D

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When I was still a PhD student in eco-nomics, I had to take a comprehensive exam that covered much of what I’d
learned in the first year and a half of the program.
If I failed the first time, I’d have one more chance to
pass. If I failed a second time, I would be kicked out
of the program. As the exam drew closer, I stopped
sleeping so I could use those hours to study. Natu-
rally I was tired, so I started drinking caffeine, which
I never do. I drank as much Mountain Dew as
humanly possible to keep myself going. (This was
before energy drinks were invented.) If you’ve ever
tried to study for an exam when you haven’t slept
and you’re over-caffeinated, then you know where
this story is going. The night before the exam, shak-
ing from exhaustion, stress, and caffeine, all the
words on the page became jumbled and incoherent.
My brain felt scrambled, and all the ideas I thought
I’d learned during the past three semesters made
absolutely no sense. It was as if each idea was a
random jigsaw puzzle piece that didn’t fit with any
of the other random jigsaw puzzle pieces. My stress
and frustration blossomed into a full-blown panic
by one in the morning. I threw my notes in the air
and resigned myself to failing. Then I fell into bed
and slept for four hours.
Have you ever tried to put a jigsaw puzzle
together without looking at the picture on the
box? You have to scrutinize each little piece and
try to guess what the big picture looks like from
that little dash of blue next to a spot of red. Is
that an eye? Could it be a tennis racket? Unless
you’re a jigsaw puzzle expert, it’s very challeng-
ing. But doesn’t education often operate this way?
3The Great Economic Thinkers

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The teacher gives you a lot of small bits of infor-
mation, and you have to figure out what the big
picture looks like—whether it’s dates of battles
and names of treaties or the periodic table of ele-
ments. You can get so busy memorizing those lit-
tle details that you never actually grasp the big
picture of what you’re supposed to be learning,
even while you’re getting good grades. To me,
this is a lost opportunity. The big picture is the
whole point of education!
The morning of my exam, something incred-
ible happened to me. I woke up and all those
jigsaw puzzle pieces suddenly made sense. They
fit together seamlessly, and I could see the big
picture. I went into the exam feeling confident.
I passed the test and went on to earn my PhD.
I became an economics educator, but I never
forgot how it felt to be lost in the details without
knowing the big picture. I vowed to myself that
if ever I had the honor and privilege of teaching
others, I would start my courses by making sure
my students could see the big picture.
History of Economic Thought
This chapter will give you the big picture of
the history of economic thought, and it’s from
this history that today’s liberal, radical, and
conservative perspectives took root. We’re going
to tell you about three great economic thinkers
and the theories they developed. Their names
are Adam Smith, Karl Marx, and John Maynard
Keynes. Once you finish reading this chapter,
you’ll see how their different ideas still play
into our economic policy debates like familiar
melodies. You’ll recognize their refrains when
you read a newspaper article, when you watch
stand-up comedy, and when you debate politics
over coffee with your friends and family.
Adam Smith
The story of modern economics begins
in Scotland in the eighteenth century
with Adam Smith (1723–1790). He
never actually studied economics
because there was no formal study
of economics at the time. He was a
moral philosopher who pondered the
complicated question of why humans—
who had been living in societies for millennia—
were still mostly miserably poor. After much
thought, he concluded that the problem traced
back to the economic systems that kept the masses
from accumulating wealth. In Smith’s time the
predominant economic system in Europe was
mercantilism, which was based on the idea that
nations should trade goods with other nations in
order to get as much of the other country’s gold
and silver that they possibly could. Countries

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Chapter 3: The Great Economic Thinkers | 43
competed to stockpile
the most of these
precious metals, leading
governments to impose
high taxes on imports to
prevent their own nation’s
gold and silver supply from
leaving the country. Under
mercantilism, governments
granted special rights and
privileges to certain people
to participate in trade,
concentrating wealth in
the hands of only the well
connected. In other words,
it made a few people very
rich, but mercantilism
never made society as a
whole wealthy. Smith also
noted that neither had the
economic system before
mercantilism (feudalism) nor had the agrarian
(farming) economies that came before that.
Smith was excited about a newly emerging eco-
nomic system that seemed to have amazing poten-
tial. People who privately owned their land, labor,
and capital met in marketplaces, and prices were
determined for goods and services. Demanders
acquired the things they wanted, bringing them
levels of material comfort they’d never before expe-
rienced. Suppliers earned more profits than ever
before. And all of this happened without govern-
ment involvement. I’m sure you recognize this eco-
nomic system as capitalism. Smith described it in his
world-changing book, An Inquiry into the Nature
and Causes of the Wealth of Nations. Commonly
referred to as The Wealth of Nations, it was pub-
lished in 1776—coincidentally, the same year that
the American Declaration of Independence was
signed. It popularized capitalism around the world.
Smith intrigued readers with his opening descrip-
tion about the potential to create wealth. He wrote
about a pin factory where
individual workers were
only able to produce a small
number of pins in a day.
But when owners—moti-
vated by profit—had work-
ers each complete one task
of production (specialize),
the number of pins work-
ers were able to produce
dramatically increased. This
was one of many exam-
ples he gave to show how
the motivation for profit in
the context of private own-
ership works. The Wealth
of Nations became a clas-
sic during Smith’s lifetime,
which is quite unusual
because an author is usu-
ally long dead before his or
her work is considered a classic. To this day, when
we talk about classical theory in economics, we
start with Adam Smith and The Wealth of Nations.
Adam Smith is considered the father of modern
economics, as well as the person who popularized
the economic system of capitalism. He was a pro-
lific writer, and scholars who study his work like to
remind us that his thinking was actually much more
layered and nuanced than the legacy for which he’s
famous. We won’t be covering that level of detail
about him in this book, but you should know that
there are schools of economists who do nothing but
study and debate the complexity of his ideas. Please
keep in mind that we’re crediting to Smith the ideas
that are generally attributed to him and that have
influenced generations of economists that came after.
Smith wasn’t a scientist or a mathematician, so
The Wealth of Nations doesn’t include any graphs
or mathematical equations to explain his the-
ory. This was not a problem until the mid-1880s,
when the scientific method became very popu-
Smith was excited about a
newly emerging economic
system that seemed to have
amazing potential. People
who privately owned their
land, labor, and capital
met in marketplaces, and
prices were determined for
goods and services. And all
of this happened without
government involvement.

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lar. Some people wanted factual proof that what
Smith wrote about was scientifically true, so a
group of economists added math and graphs to
Smith’s work so that it would stand up to sci-
entific inquiry. This enhanced version of classical
theory is called neoclassical theory (neo means
“new”). Today, it is the mainstream (conventional)
theory of capitalism.
You’ve known about capitalism your whole
life, so the idea is hardly going to be revolution-
ary or shocking to you. Yet think about the his-
tory of the world and try to imagine how many
times a minute humans have wanted something,
whether a necessity or a luxury, but couldn’t get
it—food, dental care, education, a wedding dress,
a home, transportation, warm clothes. Maybe they
prayed to God, or begged the king, or applied to
the government bureaucrats, or took out a loan.
Maybe the things they wanted existed, but peo-
ple couldn’t afford them; or maybe the things they
wanted weren’t available; or maybe there weren’t
enough of them to go around. Adam Smith’s prom-
ise in The Wealth of Nations is that the economic
system of capitalism can bring us all untold wealth
when there is private ownership of land, labor, and
capital. Firms will make us what we want; they
will make the maximum amount using the fewest
resources; and those who choose it can have it.
Many conservatives believe popularizing capital-
ism was a game changer for humanity. Suddenly
there was a way to get the things people wanted
and needed, in a system that was open not just to
the well connected but to every free person.
The economic system of capitalism has three
types of players: demanders, suppliers, and the
government. I’ll talk about Player 3, the govern-
ment, in a minute. Player 1, the demanders, own
their own labor. They trade it to acquire money
(in other words, they get paid for their work).
Player 2, the suppliers (we also say firms or busi-
nesses), own or hire land, labor, and capital,
which could take the form of a chocolate bar fac-
tory or a sheep farm or a computer repair shop.
Demanders and suppliers meet in markets, where
prices for goods and services are determined. The
prices signal to buyers what and how much to
buy and signal to firms what and how much to
make. Price signals give firms and individuals a
reason to act. Just think of the multitude of deci-
sions being made all the time by countless people
about how to use resources. This invisible force
that directs every market at every moment is what
Smith termed the invisible hand. No one is in
charge or pulling the strings. It all happens nat-
urally.
Let’s say there are advances in robotics and
now more people want to buy personal robot
assistants because the new models clean bath-
rooms, make dinner, and play basketball with
you. When more people demand them, the price
of personal robot assistants will go up. That sig-
nals firms to make more of them. Making more
of a popular item means firms can sell more and
make more profit, and profit is why firms are in
business. Price signals play a really important role
in capitalism, functioning as incentives, meaning
they motivate people and firms to take action.
Smith further said that firms will not only make
us the kind of stuff we want and need, they’ll do
it without wasting resources. The robotics firm is
not going to hire more workers than it needs or
buy more copper wire than it needs because it
wants to make the most money possible. Firms
will produce the amount that generates the most
profit at the lowest possible cost. No law or gov-
ernment regulation directs them to do this; it sim-
ply makes sense to them because it serves their
profit interest to do it.
Let me ask you this: would you enlist to go to
war and put your life on the line to protect your
country if it produced tons of great stuff—none
of which you could afford to buy? Most likely you
wouldn’t. Those who believe capitalism is the best
economic system say that everyone who chooses

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to do so can get the great stuff. How does it work?
Price signals ensure that personal robot assistants
will go to those who most want them. Let’s say
there’s an investment banker and me, a teacher,
and we both really want one. Who is going to get
one? The person who followed price signals and
became a well-paid investment banker, or the per-
son who makes a more modest living as a teacher?
In capitalism, when we follow price signals we can
make career choices that lead us to be able to pur-
chase the goods and services we want. For exam-
ple, I chose to be an educator because I wanted
to teach economics more than I wanted to have a
personal robot assistant or a yacht or a ski chalet
in the Alps. At the end of the day, the robot will go
to the investment banker because the investment
banker wanted it more than the teacher and chose
accordingly. And this is how it should be, accord-
ing to Smith. If I really wanted that personal robot
assistant, and if I wanted to be able to acquire it
more than I cared about other things, I would have
made a different career choice and could have
been able to afford one. In capitalism, firms make
products for those who most want them. Smith
said we don’t have to rely on divine intervention,
the noblesse of a king, or good luck to get what
we most want and need because capitalism will
make it available to us through the free market.
Remember in chapter 1 we described the three
questions of economics: what to produce, how to
produce, and for whom to produce? According
to this theory, firms will make the stuff we want
(called allocative efficiency). Firms will make
the maximum amount of stuff we want at the
minimum cost (called productive efficiency).
And the stuff will go to the people who want it
most (called distributive efficiency). These are
the three outcomes of capitalism, as promised to
us by Adam Smith.
Did you notice what didn’t happen in this sce-
nario about who gets a personal robot assistant?
Player 3 didn’t get involved at all. The government
didn’t tell people to buy personal robot assistants,
and it didn’t tell firms to produce them. Smith said
that in capitalism government shouldn’t interfere
with suppliers and demanders. It should leave the
system alone to be guided by the invisible hand
that arises from price signals. (Conservatives later
popularized the French term for “leave it alone”—
laissez-faire, literally “allowed to do.”) A market
free from government involvement is called the
free market. But that doesn’t mean we don’t need

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government in capitalism. You wouldn’t labor day
and night to make money to afford that personal
robot assistant if your neighbor could just grab it
from you without any consequences. Smith said
the government should maintain a criminal jus-
tice system to protect private property rights. And
it’s not reasonable to expect that every firm will
have to construct its own power plant, manage
its own sewage, pave its own roads, and such. So
the second role of government Smith identified is
to create infrastructure. And firms aren’t going to
invest in building businesses if people from other
countries could simply march in and take over our
country, so the third role of government should
be to ensure our national security. Government
should have no other roles, he said. “Little else is
requisite to carry a state to the highest degree of
opulence from the lowest barbarism, but peace,
easy taxes, and a tolerable administration of jus-
tice: all the rest being brought about by the natural
course of things.”
The “natural course of things” he’s referring to is
the invisible hand. Today, conservatives, who are
free market capitalists, follow this idea. They believe
that all our other needs can and should be met
through private solutions including corporate and
individual philanthropy. For instance, disaster relief
is provided by nonprofit organizations and religious
organizations. They believe education, health care,
retirement security, and more are best provided
through a private system that brings people the
products they want at the lowest possible prices.
Capitalism operates on the assumption that peo-
ple and firms act out of their own self-interest—
whatever brings the most benefit to the person or
the business. Smith says that is precisely why it
works. He believed self-interest is a far more sus-
tainable motivation for caring about the common
good than a sense of altruism or social responsibil-
ity. Would drug companies risk billions investing
in research and development of new medications
if they weren’t going to make money on them? Not
likely, say proponents of capitalism. As Smith wrote
in The Wealth of Nations: “He intends only his own
gain, and he is in this, as in many other cases,
led by an invisible hand to promote an end which
was no part of his intention. By pursuing his own
interest, he frequently promotes that of the society
more effectually than when he really intends to
promote it.” In other words, Smith believed that
we will demand things that lead to our own hap-
piness—such as personal robot assistants, sky-

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Chapter 3: The Great Economic Thinkers | 47
scrapers, ballet lessons, medication, vacations, and
soup—out of self-interest. And out of their own
self-interest, firms will supply these things—not
because they’re trying to make our lives better but
because they’re trying to make money. Self-interest
is the engine that drives capitalism. Smith some-
times used the term enlightened self-interest
to describe the phenomenon that the pursuit of
self-interest is automatically the pursuit of the best
possible outcome for all of society.
Capitalism sounded amazing to the people who
read Adam Smith’s book in the late 1700s, which
is why it so quickly became a classic. The Wealth
of Nations explained that when the economy hits
a bump in the road—maybe there’s news of an
impending attack by aliens from another planet,
so spending goes down because everyone is hid-
ing under their beds—it’s not a problem. Smith
reassured readers that the economy will inevita-
bly fix itself. Here’s how it works: When people
stop buying, prices will go down. When prices go
down, wages—the price of labor—will go down.
When wages go down, it’s cheaper for firms to
produce, so firms will start hiring workers. Now
that they have money in their pockets, work-
ers start buying again—not just personal robot
assistants but skateboards, tropical fish tanks,
houses, concert tickets, computers, and all sorts
of things—and the economy picks up again. The
government doesn’t have to do a thing to fix it
because capitalism is a self-correcting system and,
according to Smith, the best system for creating
economic growth and a better standard of living
for everyone. To free-market capitalists, the key
is for government to leave it alone—laissez-faire.
Neoclassical theorists apply marginal anal-
ysis—marginal means additional—to show how
firms and individuals make profitable decisions to
do something by comparing the additional ben-
efit of doing it to the additional cost of doing it.
You might know this as cost-benefit analysis. For
example, if it costs a firm $10 to make a pizza,
and it can sell that pizza for $11, the firm would
decide to make it because the additional benefit
exceeds the additional cost. The firm would con-
tinue to make pizza until the marginal cost exceeds
the marginal benefit, and then it would stop. Deci-
sions are made on the margin, which means that
firms don’t decide they’re going to make one hun-
dred pizzas; they do a marginal analysis as they go
along to determine if they should make the one
hundredth pizza. Neoclassical theorists say optimal
decisions are made by comparing marginal cost
and marginal benefit. Should you work another
hour? If you do, you’ll earn $15, but you’ll miss
your bus and have to pay for a ride home, which
will cost you $12, and you’ll miss dinner, so you’ll
have to grab a bite to eat, which will cost you $5.
Working an extra hour will give you $15 and cost
you $17, so you will decide not to do it because
the marginal cost is greater than the marginal ben-
efit. Cost-benefit analysis is used for every kind of
decision, including whether to clean an additional
10 percent of pollutants out of the river, whether
a city should build a new line for its light-rail sys-
tem, or whether a town should open a new high
school, and so forth.
Smith’s ideas were further developed by two
influential thinkers in the twentieth century. F. A.
Hayek (1899–1992) was part of the Austrian
school of economics. Hayek ended up teaching
at the University of Chicago. Also at the Univer-
sity of Chicago was economist Milton Friedman
(1912–2006), who was part of what is known as
the Chicago school of economics. Friedman in
turn influenced President Ronald Reagan (1911–
2004), who championed supply-side econom-
ics—lower taxes and fewer government regula-
tions. Friedman’s and Hayek’s ideas inform the
conservative conversation today in the Republican
Party (also called the Grand Old Party, or GOP
for short), as well as in the Libertarian Party.
Proponents are often called the Right (or right-
wing), supply-side, and classical/neoclassical.

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To sum up the conservative economic position
presented in the VOTE Program: In capitalism,
when the economy is free from government inter-
ference, the invisible hand of price signals leads
markets to self-correct and adjust on their own
so that all can prosper. This is why we embrace
free-market capitalism through a laissez-faire
approach. Conservatives believe we need liberty
(from government interference) to flourish with
unfettered opportunities.
No one would disagree that Adam Smith’s ideas
changed the world. He founded a whole field of
study and transformed people’s lives across the
planet. By promoting capitalism, he created the
global economy that shapes every aspect of our
lives today. Yet, on the day he died—July 17,
1790—this great economic thinker said that he
wished he had accomplished more.
CONSERVATIVE
WHO
Adam Smith
The Wealth of Nations
WHEN
18th century
WHAT
Firms are privately owned and
guided by price signals
(the invisible hand).

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Chapter 3: The Great Economic Thinkers | 49
The Power of the Market
“Look at this lead pencil. There’s not a single person in the world who could make this pencil.
Remarkable statement? Not at all! The wood from which it’s made, for all I know, comes from a tree
that was cut down in the state of Washington. To cut down that tree, it took a saw. To make the saw,
it took steel. To make the steel, it took iron ore. This black center, we call it lead but it’s really . . .
compressed graphite. I think it comes from some mines in South America. . . . This red top up here,
the eraser a bit of rubber, probably comes from Malaya, where the rubber tree
isn’t even native. It was imported to South America
by some businessmen with the help of the British
government. This brass ferrule, I haven’t the slightest
idea where it came from, or the yellow paint, or the
paint that made the black lines, or the glue that holds it
together. Literally thousands of people cooperated to make
this pencil. People who don’t speak the same language,
who practice different religions, who might hate one another
if they ever met. When you go down to the store and buy this
pencil, you are in effect trading a few minutes of your time for a
few seconds of the time of all those thousands of people. What
brought them together and induced them to cooperate to make
this pencil? There was no commissar sending out orders from some
central office. It was the magic of the price system. The impersonal
operation of prices that brought them together and got them to
cooperate to make this pencil so that you can have it for a trifling sum.
That is why the operation of the free market is so essential not only to
promote productive efficiency, but even more to foster harmony and
peace among the peoples of the world.”
—Conservative economist Milton Friedman, from the PBS Series Free
to Choose, Part I, The Power of the Market

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50 | Voices On The Economy
Karl Marx
The next great economic thinker came
along in the nineteenth century. German-
born Karl Marx (1818–1883) was profoundly
influenced by The Wealth of Nations and
developed a critique of capitalism that became
the foundation of radical theory. Marx looked
around, and instead of seeing the prosperity
Adam Smith described, he witnessed masses
of people living in poverty. While agreeing with
Smith that previous economic systems such as
feudalism and mercantilism hadn’t worked to
create prosperity for the masses, he said capitalism
wasn’t working either. He published his most
influential critique in the first volume of his book
Capital (Das Kapital in German) in 1867. He
wrote that the capitalist society “that has sprouted
from the ruins of feudal society has not done away
with class antagonisms. It has but established new
classes, new conditions of oppression, new forms
of struggle in place of the old ones.”
Marx must have wondered if there was some-
thing wrong with his eyesight because he wasn’t
seeing what Adam Smith promised in The Wealth
of Nations. Instead he saw young children working
twelve-hour days in factories and miserable living
conditions in slums coated in grit from the smoke
belching out of factory chimneys. Marx theorized
that there was a direct connection between cap-
italism and the suffering of the masses. He saw
capitalism as a system in which owners steal from
wage laborers, and everyone accepts this as a
normal fact of life, rather than regarding it as a
crime. He pointed to the heart of the problem:
capitalism’s relentless drive for profit. It creates
incentives for cap-
italists (owners
of capital) to engage
in inhumane prac-
tices such as dangerous
working conditions, low
pay, polluting the environ-
ment, and more. Yes, it deliv-
ers untold wealth, said Marx, but
capitalism also brings untold mis-
ery because it’s a system that values profits over
people. He said it enriches a small minority while
making the vast majority suffer.
Consider your first job. Do you think you were
paid what you actually contributed? When I ask
my students, friends, and family this question, I
hear again and again, “Of course not!” Marx argued
that people know they’re getting paid less than
they’re contributing. My first job was selling hot
dogs on the streets of Hartford, Connecticut, and I
sold about $300 worth of hot dogs per hour. I was
paid $5.15 per hour. That was the minimum wage
back then. After the owner paid himself his wages
and then paid for all of his overhead—the hot
dogs, buns, mustard, cart, permit to sell food on
the street, and all the other costs—he kept every-

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Chapter 3: The Great Economic Thinkers | 51
thing except the $5.15 he had to pay me for each
hour I sold his hot dogs. Marx would say that the
rest of the value I created through my labor—the
surplus—was stolen from me. The owner takes
the surplus that the wage laborer produces. Marx
said that capitalism has this built-in mechanism of
theft, which he called workplace exploitation.
He said the only choices for wage laborers are to
stay and be exploited or quit and be unemployed.
According to Marx, most of us don’t see anything
wrong with workplace exploitation because we’re
taught to believe that this is normal, inevitable,
and the way it’s supposed to be. The first volume
of Capital gave people a radical new way to see
the worker’s situation.
Like Smith, Marx was simply describing what he
saw going on in the world around him. He wrote
that capitalism is a story of bloody and violent
struggle, not a harmonious meeting of suppliers
and demanders. His biggest contribution was to
shine a light on what he saw as exploitation and the
capitalist system of theft, a system rigged in favor
of the owners of the machinery, who, because of
that ownership, control wages, benefits, working
conditions, profit distribution, and more.
In addition to workplace exploitation, Marx
identified something else he saw as a big problem.
He called it capitalist competition. While owners
are not necessarily bad or greedy people, they are
stuck in a bad system, which leads them to make
harmful decisions. Here’s how it works: Let’s say an
owner of a coffee shop hires workers to sell lattes.
Her competitor—the big chain coffee shop across
the street—replaces wage laborers with machines
to cut costs. Now, if she doesn’t cut costs in the
same way, her competitor will be able to undercut
her prices and put her out of business. She may
not want to lay off workers, but to stay in business,
she will have to. Other competitors may also cut
costs by eliminating worker safety equipment, or
reducing everyone’s wages, or speeding up pro-
duction, or polluting the environment, or produc-
ing a lower-quality product, or moving their facto-
ries to countries where wages are lower. To stay
competitive and make sure her company doesn’t
go under, she will also do those things, even
though she may not want to. Radicals say we’re
all racing to the bottom, creating worse and worse
conditions for wage laborers, more and more diffi-
cult choices for owners, and less safe products for
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52 | Voices On The Economy
consumers. They say this is
business as usual in capi-
talism, where firms have to
compete to survive. Fueled
by the drive for profit, firms
will be forced to take steps
to increase their profits
even though it means mak-
ing society worse off.
Nowhere in Capital does
Marx offer solutions to the
problems of capitalism.
He only set out to write
the critique. However, in
a small pamphlet called
The Communist Manifesto,
published in 1848, co-authors Marx and Friedrich
Engels lay out a few ideas for what an alternative
economic system could look like. Their main idea
was to abolish private property and let workers
own the equipment, factories, farms, and other
capital they used to produce things. “[This new
system] … may be summed up in the single sen-
tence: Abolition of private property,” they wrote.
“… [I]t deprives no man of the ability to appro-
priate the fruits of his labour. The only thing it
deprives him of is the ability to enslave others by
means of such appropriations.” Marx and Engels
called this new economic system communism.
Their pamphlet, which offered some broad
notions, was no blueprint for a new economic
system, but it nevertheless became an inspira-
tion for the Russian Revolution of 1917. Russia’s
working class rose up and overthrew the czarist
(autocratic) system of government and the revo-
lutionaries seized all private property. But instead
of turning it over to the workers, the new govern-
ment became the new owner of the resources.
What the Russian Revolution ended up creating
was a system of state capitalism, where the
state—not the workers—owned the means of pro-
duction. It was not the communism described in
The Communist Manifesto,
but the word communism
unfortunately became con-
flated with the state capi-
talism of the Soviet Union.
When the Berlin Wall
fell in 1989, and Soviet
communism came to an
end, some critics said that
meant Marx’s ideas had
failed and were therefore
irrelevant. But radicals say
Marx’s critique of capital-
ism is as relevant today as
it ever was because capi-
talism continues to be the
world’s dominant economic system, and radi-
cals believe the abuses of capitalism continue to
destroy the lives of individuals, the integrity of
communities, and the ecosystems of the planet.
Karl Marx believed capitalism creates problems
that can’t be fixed—not by the government inter-
vening and not by the government leaving the
system alone. The problem is the capitalist sys-
tem itself.
Marx influenced socialist economist and activ-
ist Rosa Luxemburg (1871–1919), who influenced
Eugene V. Debs (1885–1926), who ran for U.S.
president five times as a Socialist Party candidate.
Debs influenced U.S. economist Richard D. Wolff,
who founded the radical organization Democracy
at Work. Wolff influenced many modern-day dem-
ocratic socialists, whose ideas influenced Vermont
Senator Bernie Sanders. Supporters of Marx’s idea
to reject capitalism are referred to as radicals, the
Far Left (or leftists), Marxists, democratic
socialists, and socialists/communists.
If we didn’t have capitalism, what kind of eco-
nomic system would bring us the things we want
and need without exploiting workers and creat-
ing suffering—the poverty, slums, sickness, misery,
and alienation—that Marx describes? The radical
Karl Marx believed
capitalism creates problems
that can’t be fixed—not by
the government intervening
and not by the government
leaving the system alone.
The problem is the
capitalist system itself.

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Chapter 3: The Great Economic Thinkers | 53
idea to replace capitalism that we talk about in
the VOTE Program is democratic socialism—an
economic system of cooperative ownership. This
includes public ownership, community owner-
ship, nonprofit ownership, and worker ownership.
With public ownership, the democratically elected
government is in charge of certain resources so it
can ensure that everyone’s basic human needs are
met—health care, utilities, higher education, trans-
portation, and more. Community ownership could
be a local park or a stadium that the municipality
owns and operates. Nonprofit ownership could be
a land conservation group owning and operating
a bird sanctuary. Worker ownership means all the
workers in the firm own it together and decide
together how the business will be run.
Imagine you work in a coffee shop, but now
you and your fellow baristas are all co-owners.
You use a democratic process to decide how much
you each should be paid. You also decide collec-
tively how to produce and price the coffee drinks
you sell, and how to distribute the profit. Radicals
call this workplace justice. Radicals point out that
while firms compete in markets, the worker-own-
ers live in the communities where they work and
therefore there is coordination among compet-
itors to make decisions that benefit not just their
bottom lines, but their own lives, the lives of their
neighbors, and the whole community.
In democratic socialism, a portion of the profit
from all cooperatively owned firms pay for things
that ensure the well-being of everyone in society,
such as health care, higher education, and trans-
portation. According to radicals, cooperatively
owned firms produce things that make people’s
lives better. The decaf coffee your firm sells will
be made without dangerous chemicals because
your family and friends are drinking it. Your
firm and other local worker-owned coffee shops
will switch from plastic lids to compostable lids
because it’s better for the landfill on the edge of
your town. And when you all go in together to

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54 | Voices On The Economy
order the new lids in bulk, everyone saves money.
When a problem arises—say the new drive-thru
window is creating traffic jams on the roads—
your neighbors, your democratically elected gov-
ernment representatives, and the worker-own-
ers at your coffee shop come together to solve
the problem. Finally, in democratic socialism the
impact of production and consumption on other
communities around the world is factored in to
your decision-making. That’s why your coffee
shop sources its beans from a collective of local
indigenous growers in Costa Rica that uses nat-
ural pesticides. Radicals say this is business as
usual in democratic socialism, where competition
goes hand in hand with coordination. Fueled by
the drive for well-being, firms will put people and
the planet before profit.
To sum up the radical economic position pre-
sented in the VOTE Program: In capitalism, the
drive for profit leads firms to exploit workers,
which creates suffering, inequality, bloody and
violent conflicts, and global crises. This is why
we instead adopt democratic socialism. All can
prosper when private ownership is replaced with
cooperative ownership, and the well-being of all is
valued over profits. Markets and competition will
still exist, say radicals, but exploitation will be
eliminated. They believe we need freedom so all
can flourish with meaningful opportunities.
Karl Marx died in exile in London on March 14,
1883. Only eleven people attended his funeral.
Years later, a large memorial was erected on his
grave. It reads, “Workers of all lands, unite!” —the
final sentence in The Communist Manifesto.
RADICAL
WHO
Karl Marx
Capital, Volume 1
WHEN
19th century
WHAT
Firms are worker-owned and
guided by the pressure for good
(the invisible synergy).
WHY
Because when the economy values
people over profits, we act in everyone’s best
interest to create prosperity.
HOW
Embrace Democratic Socialism
WHERE
In a nation with freedom so all can flourish
with meaningful opportunities.
THESE IDEAS ARE BROADLY SHARED BY
Radicals • Democratic Socialists
Marxist Theorists
Green Party • Communist Party
Socialists • Left • Far Left
Dependency/World-Systems Theorists
Labor Rights Activists • Occupy Movement

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Chapter 3: The Great Economic Thinkers | 55
The Community-Owned
Green Bay Packers
“The Green Bay Packers are a fan-owned
team. I’m asked sometimes who’s the
best owner in sports. I always say it’s the
112,000 owners of the Green Bay Packers.
This is a very unique arrangement. This
started in 1923, when fans, to keep the
team from folding in Green Bay, each
plunked down a couple of bucks to keep
the team afloat. This is a time when no
one had a sense that the NFL was going
to become the gargantuan business that
it is today. And then in 1960 when it really
did look like the league could take off, [the
NFL] wrote it into their constitution—into
their rules of incorporation—that said no
other team could be run by a nonprofit
entity. That was now not allowed. And
what’s so interesting about it is you go to
a Green Bay game, you go there knowing
that 60 percent of the concessions are
going to local charities. Even the beer
costs half as much as it does at a typical stadium. And you also know you’re not going to have an
owner who threatens to move the team to Los Angeles unless they’re given a billion-dollar enormo-
dome across town. It’s a very special relationship, and it’s one that I’ve argued a lot that should be
replicated, and then sports can be something that keeps our cities afloat instead of weighing them
down.”
– Dave Zirin, author of A People’s History of Sports in the United States,
appearing on The Laura Flanders Show
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telephones and radios, in people’s homes. More
people drove cars and went to the movies. All this
was great for the economy. The nation’s overall
wealth doubled between 1920 and 1929. But the
stock market crash in 1929 set off a financial
panic. People lost their fortunes overnight,
banks went under, and firms went out of
business. This widespread financial ruin plunged
the nation into the Great Depression. It was a scene
of mass unemployment and abject poverty that had
never been seen before in the United States. In cities
across the country, one-time bankers and socialites
stood in line with unemployed factory workers and
farmers, all hoping to get a free bowl of soup and
bread from overburdened charity organizations.
Policymakers were tearing their hair out trying
to figure out what to do. They looked to the econ-
omists of the day for advice, and what they heard
from classical theorists was, “Don’t do anything.
Just leave the economy alone and let the invisible
hand and price signals guide the markets. If you do
nothing, the economy will get back on its feet all
by itself.” But people were angry, scared, and frus-
trated; they wanted something to be done to move
the country out of the Depression. Laissez-faire
didn’t sound like much of a solution. The Russian
Revolution had taken
place only twelve
years before, and
some people started to
wonder if maybe com-
munism would be a better
economic sys tem. But poli-
cymakers weren’t interested
in rejecting capitalism—that
seemed un-American to them. Just when our
nation’s leaders were desperate for an answer, the
next great economic thinker emerged.
John Maynard Keynes (1883–1946) was a Brit-
ish economist trained in the classical school. Like
his peers, he was taught to believe that laissez-faire
capitalism worked because firms respond to price
signals. But Keynes looked around at all the people
who were starving, homeless, and desperate for a
job, and he realized that even though wages had
never been lower, firms still weren’t hiring. He wrote
in his 1936 book The General Theory of Employ-
ment, Interest and Money (also known as The Gen-
eral Theory): “Our criticism of the accepted Classical
theory of economics has consisted not so much in
finding logical flaws in its analysis as in point ing
out that its tacit assumptions are seldom or never
John Maynard Keynes
In the 1920s capitalism in the United States
seemed to be delivering on its promise of
prosperity. World War I was over, and people were
ready to enjoy life again. The Roaring Twenties
were famous for jazz music and for women finally
winning the right to vote. With more people
living in cities than ever before, there
were more electrical appliances, such as

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Chapter 3: The Great Economic Thinkers | 57
satisfied, with the result that it cannot solve the eco-
nomic problems of the actual world.” The economy
was stuck. Without jobs, people had no money to
spend, and until they started demanding products,
firms had no reason to produce and therefore no
reason to create jobs. That meant people would
continue to have no money. It was a vicious cycle.
Shouldn’t low wages have signaled firms to start
hiring, as the classical theorists argued? To Keynes it
was clear that firms were ignoring the price signal
of lower wages. Even though owners knew, logi-
cally, that if they hired workers, then those work-
ers would have money in their pockets to buy
the firm’s products, they still didn’t create jobs.
Keynes said this happened because the owners
had negative expectations—what he called ani-
mal spirits. While classical theorists were say-
ing that leaving it alone would fix the problem,
Keynes was saying yes, it would—in the long
run—but “this long run is a misleading guide to
current affairs. In the long run we are all dead.
Economists set themselves too easy, too useless a
task, if in tempestuous seasons they can only tell
us that when the storm is long passed the ocean
is flat again.” He recommended that government
take an active role to get money into people’s
pockets to immediately grow the economy and
bring prosperity back.
This is how Keynes’s idea works: Imagine it’s
1931, and you own a factory that makes roller
skates. The country is in the Great Depression, and
prices and wages have plummeted. That’s your
signal to hire more workers. So do you start hir-
ing workers to make roller skates right now? You
don’t—because no matter how inexpensive it is
to make them, you don’t believe anyone will buy
roller skates when they have no money for food,
clothes, or anything else. (This is animal spirits—
your negative expectation.) Keynes said the way
to stimulate the economy is to get people to start
spending. He saw a new role for government in
capitalism: it could help put money back in peo-
ple’s pockets by creating job programs, social secu-
rity programs, unemployment benefits, and more.
When people once again had money to spend, they
would start demanding products, which would sig-

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58 | Voices On The Economy
nal firms to start producing.
Growing demand would
lead to more production,
which would lead firms to
hire more workers. With
the return of jobs, the econ-
omy would be back on its
feet, and capitalism would
be up and running again,
bringing us untold wealth.
This new way of thinking
about the helpful hand of
government to stimulate
the economy is referred to
as the Keynesian revolu-
tion. It is also referred to
as Keynesian economics
and liberal economics. The
General Theory remains
the most influential lib-
eral critique of free-market
capitalism. Remember that
Keynes didn’t disagree that
the economy, if left alone, will self-adjust in the
long run. He just said that it was wrong, economi-
cally and morally, to wait around for that to happen
while people suffer—not when the helpful hand
of government can guide capitalism to ensure eco-
nomic stability. Pro-market policies married to gov-
ernment involvement will bring us the widespread
economic well-being we want, according to Keynes.
He rejected Karl Marx’s idea that capitalism should
be replaced. Unlike radicals, liberals believe whole-
heartedly in the wealth-building potential of capital-
ism. Liberals, like conservatives, believe it’s the best
economic system ever invented.
Liberals today continue to see an important
role for the helpful hand of government in capi-
talism, not just to stimulate the economy and max-
imize the wealth-building potential of capitalism,
but also to regulate industry so that none has an
unfair advantage over another. Fair-market capi-
talism is guided by govern-
ment to ensure stability
and equity. Stability in this
context means an economy
that doesn’t seesaw wildly
up and down but that has
constant, steady growth.
Equity means we all are
treated fairly and have what
we need to succeed. This is
subtly different from equal-
ity, which means treating
everyone the same. Let’s
say I want to watch my
local Little League team’s
final game in the playoffs.
I arrive late, only to dis-
cover that the bleachers are
already full. I find a place
to watch from behind the
fence at third base. Unfor-
tunately, my sister is too
short to see over the fence.
My best friend can see just fine, but I forgot my
glasses, so even though I can see over the fence,
the game is a blur. Equity means that we’ll each
get what we need to see the game. That might
be a stool for my sister to stand on and glasses
for me. In contrast, equality means we would each
get exactly the same thing—a stool and a pair of
glasses—whether we needed those things or not.
Equity is important to liberals because they
believe that it’s not fair that some people have a
place at the starting line while others have to start
a few yards behind and even more start miles
away. The odds are obviously stacked against
everyone in the back. Relatively few of them can
overcome the unfair disadvantage and succeed.
The starting line is a metaphor for all the things
we need in order to have to compete in capital-
ism—for example, education, health care, trans-
portation, and job opportunities. Liberals look
Keynes didn’t disagree that
the economy, if left alone,
will self-adjust in the long
run. He just said that it
was wrong, economically
and morally, to wait
around for that to happen
while people suffer—not
when the helpful hand
of government could
guide capitalism to ensure
economic stability.

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Chapter 3: The Great Economic Thinkers | 59
to government to help level the playing field so
more people can become wealthy under capital-
ism. Liberals are not, however, saying government
should ensure that everyone finishes the race or
finishes at the same time. The job of government
is to make sure we all have the same opportuni-
ties and advantages to compete. It’s up to individ-
uals to work hard, study hard, and apply them-
selves with the determination to succeed. Liberals
believe that when people take individual respon-
sibility and have the same opportunities, then cap-
italism will deliver on the promise of prosperity.
Liberals say the helpful hand of government
brings us things that we could never accomplish
on our own as individuals: Social Security, the min-
imum wage, public libraries, public transportation,
Medicare, public education, and so forth. Liberals
point out that we can thank the government for
bringing us the internet. They also say you can
thank government for protecting you from fraud-
ulent practices by firms and for protecting firms
from illegal practices by other firms. This happens
through mechanisms such as consumer protec-
tion laws, antitrust legislation, worker protections,
environmental laws, and trade protections because
government regulations ensure accountability and
transparency in capitalism. Accountability means
firms have a responsibility to society and are
answerable for their actions. Transparency means
firms must disclose information so there can be
oversight to hold them accountable.
Keynes believed that when capitalism is guided
by government, it promotes peace between coun-
tries. His ideas influenced the creation of the
International Monetary Fund, the World Bank,
and the World Trade Organization. Some credit
Keynes’s ideas with influencing President Frank-
lin D. Roosevelt, who created the New Deal
during the Great Depression. Liberal economists
also credit Keynesian thinking with pulling the
United States out of the Great Recession that
started in 2007. They say in both cases, the gov-
ernment helped people to have money to spend,
so firms were perfectly willing to start up produc-
tion again and hire more workers, which put the
economy on the road to recovery. Famous pro-
ponents of Keynesian economics include Harvard
professor John Kenneth Galbraith (1908–2006),
who advised President John F. Kennedy, and con-
temporary liberal economist Paul Krugman. Their
ideas inform the liberal conversation today in the
Democratic Party. People who follow liberal the-
ory are called Keynesians, progressives, liberals,
interventionists, and center left.

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In the media, and in the popular minds of people
in the United States, liberal refers to the fair-market
or Keynesian perspective. That’s why we use it this
way in the VOTE Program. But please be aware
that the word liberal outside the United States
refers to the free-market perspective, which in this
country is the conservative perspective. And just to
be even more confusing, the term classical liberal
is another name for conservatives.
To sum up the liberal economic position rep-
resented in the VOTE Program: Under capitalism,
when the government intervenes in the economy,
all can prosper because the private-public part-
nership stabilizes markets and creates account-
ability, transparency, and equal opportunities.
This is why we guide fair-market capitalism
with the helpful hand of government. Liberals
believe we need fairness so all can flourish with
equal opportunities.
Keynes died from a heart attack at his home in
Sussex, England, on April 21, 1946, at the age of
sixty-three. He was survived by his wife and par-
ents. His obituary in the New York Times reported
that he was “[e]xhausted by the strain of the Inter-
national Monetary Conference in Savannah, Ga.”
There is no grave for Keynes. His ashes were scat-
tered on the Downs. (Too bad, because he had
the perfect quote for his gravestone: “In the long
run, we’re all dead.”)
LIBERAL
WHO
John Maynard Keynes
The General Theory
WHEN
20th century
WHAT
Firms are privately owned and
guided by price signals and government
(the helpful hand).
WHY
Because when the economy is stable
and equitable, we have the ingenuity and
accountability to create prosperity.
HOW
Embrace Fair-Market Capitalism
WHERE
In a nation with fairness so all can flourish
with equal opportunities.
THESE IDEAS ARE BROADLY SHARED BY
Liberals • Democrats
Keynesian Theorists
Democratic Party
Progressives • Center • Center Left
Institutionalist Theorists • Social Economists
Labor Union Organizers and Members

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Excerpt from the Second Inaugural
Address of President Barak Obama
“Together we discovered that a free market only thrives
when there are rules to ensure competition and fair play.
Together we resolve that a great nation must care for
the vulnerable and protect its people from life’s worst
hazards and misfortune. Through it all, we have never
relinquished our skepticism of central authority, nor have we
succumbed to the fiction that all societies’ ills can be cured
through government alone. Our celebration of initiative
and enterprise, our insistence on hard work and personal
responsibility—these are constants in our character.… For
we, the people, understand that our country cannot succeed
when a shrinking few do very well and a growing many
barely make it. We believe that America’s prosperity must
rest upon the broad shoulders of a rising middle class.…
We understand that outworn programs are inadequate
to the needs of our time. So we must harness new ideas
and technology to remake our government, revamp our
tax code, reform our schools, and empower our citizens
with the skills they need to work hard or learn more,
reach higher…. We, the people, still believe that every citizen deserves a basic measure of security
and dignity. We must make the hard choices to reduce the cost of health care and the size of our
deficit. But we reject the belief that America must choose between caring for the generation that
built this country and investing in the generation that will build its future…. The commitments we
make to each other through Medicare and Medicaid and Social Security—these things do not sap our
initiative. They strengthen us. They do not make us a nation of takers. They free us to take the risks
that make this country great.”

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Exercise 3: “What’s My Perspective?”
You can tune your ear to start to hear the perspective someone is coming from even if that person
doesn’t say it directly. Here’s an exercise that will help. Match the following quotes from well-known
individuals to one of the three perspectives. The Answer Key is at the end of the chapter.
Quote 1: “Capitalism does not permit an even flow of economic resources. With this system, a small
privileged few are rich beyond conscience, and almost all others are doomed to be poor at some
level. That’s the way the system works. And since we know that the system will not change the rules,
we are going to have to change the system.” –Martin Luther King Jr., Civil Rights Leader
Quote 2: “We have been ruled by men who live by illusions…the illusion that there is some other way
of creating wealth than hard work and satisfying your customers.” –Margaret Thatcher, Former British
Prime Minister
Quote 3: “You cannot separate the political structure from the economic structure. One has to be
an idiot to believe that the average working person who’s making $10,000 or $12,000 a year is equal
in political power to somebody who is the head of a large bank or corporation. So if you believe in
political democracy, if you believe in equality, you have to believe in economic democracy as well.”
–Bernie Sanders, U.S. Senator
Quote 4: “It was the labor movement that helped secure so much of what we take for granted
today. The forty-hour work week, the minimum wage, family leave, health insurance, Social Security,
Medicare, retirement plans. The cornerstones of middle-class security all bear the union label.”
–Barack Obama, Former U.S. President
Quote 5: “Capitalism demands the best of every man—his rationality—and rewards him accordingly.
It leaves every man free to choose the work he likes, to specialize in it, to trade his product for the
products of others, and to go as far on the road of achievement as his ability and ambition will carry
him.” –Ayn Rand, Philosopher
Quote 6: “Governments will always play a huge part in solving big problems. They set public policy
and are uniquely able to provide the resources to make sure solutions reach everyone who needs
them. They also fund basic research, which is a crucial component of the innovation that improves life
for everyone.” –Bill Gates, Entrepreneur

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Chapter 3: The Great Economic Thinkers | 63
Three Perspectives on the Role
of Government
As we discussed in chapter 1, our nation has
a representative democracy. The scope of the
government’s involvement in our lives differs
according to the visions of conservatives, liberals,
and radicals. For conservatives, government’s role
is limited to three areas: ensuring our national
security, protecting property through a criminal
justice system, and building the infrastructure
the nation needs, such as roads, bridges, and
utilities. Liberals agree with these three roles
of government and add three more: regulating
firms to ensure transparency and accountability,
stabilizing the economy, and ensuring equity to
create opportunities. Radicals agree with all six
of these roles of government and add three more:
facilitating community councils so that people can
participate fully in their own governance, some
collective ownership of resources and production,
and providing universal benefits such as health
care, higher education, and transportation.
Conservatives, Liberals, and Radicals
National Security
Property Protection
Infrastructure
Liberals and Radicals
Transparency and Accountability
Stability
Equity
Radicals
Community Council Facilitators
Some Public Ownership
Universal Benefits
Figure 3.1
The Role of Government from Three Perspectives

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Figure 3.2
The Big Picture
Classical Theory
Adam Smith:
Wealth of Nations
1776
Neoclassical Theory
1880s
Radical Theory
Karl Marx:
Capital, Vol. 1
1867
Liberal Theory
John M. Keynes:
General Theory
1936
Present-day
Conservatives
Present-day
Liberals
Present-day
Radicals
The debates among conventional economists
have been going on since the 1930s. But even
though they were diametrically opposed to one
another’s points of view, some of the leading
economists of the past were much more cordial
and polite about voicing their disagreements. It
was a far cry from the kind of negative rhetoric
we hear in our debates today. For instance, in 1951
liberal economist John Kenneth Galbraith wrote to
conservative Milton Friedman: “You know, in many
ways, how much we enjoyed your visit here last
week. This is just my way of adding a personal
word of thanks. I hope it won’t be too long before
we see you here again. So far as I can tell, also, the
students seemed to have suffered no permanent
damage. I hope your colleagues perceive no
disconcerting change in you. On second thought, I
hope they do.” Please note the playful and friendly
tone. They could disagree but still think well of
each other. We’ve lost this ability these days. The
VOTE Program will help get us back to a place
where we can acknowledge our differences and
use the ideas of our critics and opponents to
become better thinkers and better people because
of these debates. By the way, while we talk about
the big divide in our nation as being between the
The Big Picture
Remember at the very beginning of this chapter when I promised to give you the big picture of
economics so you wouldn’t have to try to put the jigsaw puzzle together without knowing what it looks
like? Here it is:

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Chapter 3: The Great Economic Thinkers | 65
conservatives and the liberals, that’s not actually the
big divide in economics. The big divide is between
the people who reject capitalism (radicals) and
those who think America is, and ought to remain,
capitalist. Liberals and conservatives land on the
same side of that debate.
Now that you have the big picture of modern
economics, you’ll be able to understand the ori-
gins of the debates going on around you about
why we should get rid of the Environmental Pro-
tection Agency (Laissez-faire!); or why health-
care workers should own the hospitals where
they work (Worker ownership!); or why govern-
ment should require firms to install safety features
in cars (Transparency and accountability!). Every
day, people are debating economics, and I hope
you’re already starting to tune in to these conver-
sations that are taking place around you. As we
start learning about the different issues and what
the different perspectives have to say about them,
this big picture will help you understand the
core differences and figure out where you stand
and what you want to say. The VOTE Program is
asking you to decide what country you want to
live in. What do you think is the best path for-
ward? Adam Smith, Karl Marx, and John Maynard
Keynes are not just three historical figures from
some dusty past. Their ideas still influence our
conversations today. The name Voices On The
Economy (VOTE) has a double meaning. You can
hear the voices of the great economic thinkers
who have come before you, and you can use their
voices to help you find your own. We look back
through history so we can find a path forward.

WHY
Because when the economy is free
from interference, we have the right
incentives to create prosperity.
HOW
Embrace Free-Market Capitalism
WHERE
In a nation with liberty so all can
flourish with unfettered opportunities.
THESE IDEAS ARE BROADLY SHARED BY
Conservatives • Republicans
Classical/Neoclassical Theorists
Republican Party • GOP • Tea Party
Libertarians • Right • Far Right
Supply-Side • Austrian • Chicago School
Right to Work Advocates • Deregulators
RADICAL
WHO
Karl Marx
Capital, Volume 1
WHEN
19th century
WHAT
Firms are worker-owned and
guided by the pressure for good
(the invisible synergy).
WHY
Because when the economy values
people over profits, we act in everyone’s
best interest to create prosperity.
HOW
Embrace Democratic Socialism
WHERE
In a nation with freedom so all can
flourish with meaningful opportunities.
THESE IDEAS ARE BROADLY SHARED BY
Radicals • Democratic Socialists
Marxist Theorists
Green Party • Communist Party
Socialists • Left • Far Left
Dependency/World-Systems Theorists
Labor Rights Activists • Occupy Movement
LIBERAL
WHO
John Maynard Keynes
The General Theory
WHEN
20th century
WHAT
Firms are privately owned and
guided by price signals and government
(the helpful hand).
WHY
Because when the economy is stable
and equitable, we have the ingenuity
and accountability to create prosperity.
HOW
Embrace Fair-Market Capitalism
WHERE
In a nation with fairness so all can
flourish with equal opportunities.
THESE IDEAS ARE BROADLY SHARED BY
Liberals • Democrats
Keynesian Theorists
Democratic Party
Progressives • Center • Center Left
Institutionalist Theorists • Social Economists
Labor Union Organizers and Members

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Chapter 3: The Great Economic Thinkers | 67
Chapter 3: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. Who is considered to be the “Father of Modern Economics,” and which of the following describes
his area of inquiry?
A. John Maynard Keynes—How government intervention can turn a recession into
an expansion.
B. Karl Marx—How private ownership of resources leads to exploitation of working people.
C. Adam Smith—How nations become wealthy through private ownership of land, labor,
and capital.
D. Milton Friedman—How a decrease in taxes leads to an increase in economic growth.
2. A conservative would say that price signals are incentives for buyers and sellers to act. For
example, when people demand more video games, the price goes up and firms start to produce
more of them. The result is that in capitalism, firms make what people want. This is technically
referred to as:
A. Productive Efficiency
B. Allocative Efficiency
C. Distributive Efficiency
D. Economic Efficiency
3. The mathematical method used by neoclassical theory involves a type of marginal decision-
making referred to as cost-benefit analysis. Please use this type of analysis to identify a correct
decision below.
A. Eliana owns a food truck. She decides to close the truck from 2:00 p.m. – 3:00 p.m. every
day because she makes $1,200 when she stays open during that hour, while it costs her
$900 to stay open for that hour.
B. Jo Hsin pays $12 per hour for a daily swim class. Her employer gives her a wellness
incentive of $10 that she can use for any exercise class. She decides to keep swimming
because it’s more cost-effective than the only alternative available, which is an aerobics
class for $8 an hour.
C. Dominic decides not to work the night shift as a waiter and instead studies for his
economics exam. He would have made $150 in wages and tips, but if he gets an A on
the final, he will qualify for a textbook scholarship for $200 next semester.
D. Grant is a DJ at a local club. He decides to hire an assistant for the night at $400, which
means he can work two rooms instead of one and get paid an extra $350.
4. Match the significant date for radicals (left column) to its corresponding event (right column).
A. 1867 i. Capital, Volume I published
B. 1917 ii. Growing interest in democratic socialism
C. Today iii. The Russian Revolution
D. 1989 iv. Berlin Wall falls and Soviet communism ends

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68 | Voices On The Economy
5. At a privately owned hair salon that employs three workers, the owner’s weekly costs are $1,500 in
wages and $1,200 in capital and raw material (rent, shampoo, electricity, etc.). Every week, the hair
salon makes $4,000. According to radical theorists, the surplus value of __________ is produced by
and taken from the ________.
A. $1,200; capitalist
B. $2,500; workers
C. $6,700; owner
D. $1,300; laborers
6. All of the following statements are true from a radical perspective. Which one expresses the idea
of worker ownership?
A. Workers have rights to decent pay, safe working conditions, family leave, and overtime pay.
B. Workers cooperatively own the businesses in which they work rather than laboring for
others in exchange for a wage.
C. Workers value people over profits and they can band together to ensure that firms where
they work share this value.
D. Workers plan for community resources to be allocated fairly according to basic human
rights and responsibilities.
7. Liberal theory as described by John Maynard Keynes can be identified by which of the following
statements? Please choose all that apply.
A. Capitalism, along with the helpful hand of government, gives us the ideal mix of material
comfort, opportunity, innovation, and growth.
B. The only important things to defend in our economy are profits, private property, and
business interests.
C. The best way to meet the needs of the majority of people is to reject the private
ownership of capitalism and replace it with the cooperative ownership of
democratic socialism.
D. Allowing firms and consumers to respond to price signals no matter what the situation is
the best way to bring about our collective economic well-being.
8. Match the liberal government roles (left column) to their definitions (right column):
A. Transparency i. Firms are responsible for their actions
B. Accountability ii. Firms disclose information so that oversight is possible
C. Stability iii. Constant, steady growth in the economy
D. Equity iv. Everyone has what they need to succeed
9. Please choose all options below that represent the liberal perspective:
A. John Maynard Keynes, John Kenneth Galbraith, Franklin Delano Roosevelt
B. Karl Marx, Milton Friedman, Ronald Reagan
C. Progressives, Interventionists, Center Leftists, Democrats
D. Libertarians, Socialists, Austrians, Republicans

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Chapter 3: The Great Economic Thinkers | 69
Chapter 3: Key Terms
Accountability
Agrarian
Allocative efficiency
Animal spirits
Capitalist
Capitalist competition
Center Left
Classical theory
Communist
Coordination among
competitors
Cost-benefit analysis
Democratic socialist
Distributive efficiency
Enlightened self-interest
Equality
Equity
Far left
GOP
Helpful hand of government
Incentives
Interventionists
Invisible hand
Keynesian
Laissez-faire
Leftists
Libertarian Party
Marginal analysis
Marxist
Mercantilism
Neoclassical theory
Price signals
Productive efficiency
Progressives
Right
Right-wing
Self-interest
Stability
Supply-side
Surplus
Transparency
Wage laborer
Workplace exploitation
Workplace Justice
Answer Key to Exercise 3
Quote 1: Radical perspective • Quote 2: Conservative perspective • Quote 3: Radical perspective
Quote 4: Liberal perspective • Quote 5: Conservative perspective • Quote 6: Liberal perspective
10. Which of the following are functions of government shared by radicals, liberals, and
conservatives?
A. National security, accountability, and equity
B. Infrastructure, property protection, and national security
C. Universal benefits, stability, and property protection
D. Some public ownership, infrastructure, and equity
Answers
1. C 2. B 3. C 4. A – i, B – iii, C – ii, D – iv 5. D 6. B 7. A 8. A – ii, B – i, C – iii, D – iv
9. A & C 10. B

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REUTERS / Mike Segar – stock.adobe.com
4Conservatives and Liberals: Conventional Theory
Tatyana McFadden was born in the Soviet Union in 1989. She came into the world with a congenital condition called spina bifida,
which left her without the use of her legs. “My
mother, like many people in Russia at that time,
couldn’t afford to care for me properly,” McFad-
den writes in her autobiography Ya Sama! The
newborn was placed in a government hospi-
tal, where doctors expected her to die within a
few weeks. When it looked like she would sur-
vive, she was transferred to a state-run orphan-
age. There, McFadden lay in
a crib all day, in a room with
a dozen other children. She
described how she eventually
learned to climb out of her
crib and scoot around on her
hands, dragging her twisted
legs behind her. There were
no wheelchairs in the orphan-
age. She writes that living con-
ditions were harsh. Showers
were hose-downs with cold
water. Her clothes were ill-fit-
ting castoffs. Meals consisted
of porridge for breakfast and
thin soups with bits of boiled
vegetables for lunch and din-
ner. She never left the orphanage for field trips
or outings or to play in a park. “There were no
books to read,” writes McFadden, “no television
to watch, no Internet to explore. There was no
one to teach me, no one to read to me. My days
had no names; my hours had no numbers.”
At the age of six, McFadden was adopted by
an American family and brought to the United
States. For the first time in her life she had proper
nutrition, education, and medical care—including
surgeries to straighten her legs. She also got her
first wheelchair, and her parents
enrolled her in sports programs,
which is where McFadden dis-
covered her love of racing. With
all these new experiences and
resources, and with hard work
and determination, she became
the fastest female wheelchair
racer in the world. A Paralym-
pian champion since age fifteen,
she dominated in sprints and
middle-distance and marathon
racing, setting world records.
For many consecutive years she
won the Boston, London, New
York, and Chicago marathons,
which no one before her had
R
E
U
T
E
R
S
/ D
an
n
y M
o
lo
sh
o
k – sto
ck.ad
o
b
e
.co
m

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72 | Voices On The Economy
ever done even once. Her picture was featured on
millions of cans of Coca-Cola, on McDonald’s cups,
and on banners lining the streets of London and
Rio de Janeiro. She’s shared the red carpet with
princes, rock stars, sports icons, and politicians.
After she graduated from college, she went on to
earn a graduate degree in education. Her life and
her story inspire people of all ages and abilities.
Liberals and conservatives say we could fill vol-
umes with stories of people like McFadden, who
found opportunities in the United States. They say
through hard work and determination anyone can
realize the American Dream of a good job, nice
things, a home, and opportunities for upward
mobility. Both conservatives and liberals believe
America is the promised land of opportunity
because of capitalism. They say that it’s capitalism
that creates the levels of prosperity that make it
possible for all of us to realize our potential.
Some people mistakenly think that since they
don’t believe owning sports cars or Rolex watches
or designer clothes is what gives meaning to their
lives, the conversation about capitalism isn’t rele-
vant to them. Please understand that materialism
isn’t capitalism. The promise of maximum eco-
nomic well-being Adam Smith wrote about in The
Wealth of Nations isn’t about amassing private
helicopters and yachts, say liberals and conserva-
tives. It’s about having the prosperity to thrive and
live meaningful lives so we can achieve our full
potential. They say capitalism makes it possible
for us to have coats to keep us warm in winter,
a decent place to live, good-quality health care,
food on the table, education, wedding celebra-
tions, and vacations—and yes, for some, private
helicopters and yachts, as well.

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Chapter 4: Conservatives and Liberals—Conventional Theory | 73
Building Conventional Theory
Conservatives and liberals share the same theoretical framework (way of analyzing
economics), which is called conventional
theory. By the way, it’s called conventional theory,
or sometimes mainstream theory, because it’s the
most popular way of thinking about capitalism.
In chapter 2 we demonstrated how to build the-
ory-plus (a milk chocolate piece). In this chapter
we’ll build conventional theory to discover how
conservatives and liberals answer the what, how,
and for-whom questions of economics. Just to
review, a theory is built with three components:
assumptions, models, and conclusions, and then,
from the conclusions, policy recommendations
emerge. Liberals and conservatives agree on the
assumptions, models, and conclusions. However,
they disagree when it comes to policy. After we
build conventional theory, we’ll discuss their dif-
ferent policy ideas. Then we’ll build radical theory
in chapter 5. It needs its own chapter because rad-
icals do not agree with the assumptions, models,
or conclusions of conventional theory. We’re going
to learn how to build the theories of these three
major economic perspectives because, in order to
think critically about the liberal, radical, and con-
servative views on the issues covered in the VOTE
Program, you’ll need to know the basis of their
policy recommendations.

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74 | Voices On The Economy
Assumptions
Assumptions are statements that the builders
of a theory believe don’t have to be proven
because they see them as self-evident “givens.”
Conventional theory starts with the assumption
of scarcity, which is to say that resources are
not limitless. For example, our country only has
a certain amount of fresh water and a certain
number of electricians and tractors. There are limits
to our land (anything that comes naturally from
the Earth), labor (human exertion), and capital
(equipment). Because all input resources are
limited, outputs (goods and services) are limited.
Conventional theorists say this assumption makes
logical sense because if all the land downtown is
already in use for other purposes, we can’t make
more land to put up another apartment building.
We can’t make unlimited oil changes, chocolate
bars, mattresses, rock concerts, pharmaceuticals,
or anything else, because eventually we’ll run out
of resources to produce those things.
The second assumption is that individuals
maximize their happiness by seeking to acquire
more goods and services and that we each have
the ability to make the best decisions about what
will bring us the most happiness because we are
rational (logical) beings. For example, if some-
one asks you if you would like one chocolate bar
or two chocolate bars, conventional theorists say
you’ll choose two because you are self-interested
and you know that more chocolate is better than
less. A rational person will choose to get more of
the things that create happiness. This is going to
be true whether we’re talking about more candy
bars or vacations, if those are things that make
you happy. It’s also true about giving more dona-
tions to the local food bank, if that’s what makes
you happy.
The third assumption is that firms maximize
profit by transforming resources into products
that people want, using technology to do so.
Technology refers to know-how—the best way to
put capital, land, and labor together to produce
something in a way that uses the fewest resources
to make the most stuff. In popular usage technol-
ogy has come to mean machines such as com-
puters and other electronics, and that’s because
machines generally help us use fewer resources
when we make products. Conventional theo-
rists say firms use technology because they are
made up of people acting rationally to maximize
their profit.
By the way, if you’ve ever taken another eco-
nomics course, you may have learned that the
definition of economics is “the study of scarcity
in a world of unlimited wants.” We don’t use that
definition of economics in the VOTE Program
because these assumptions of scarcity and unlim-
ited wants are not shared by radical theorists.
Model
It’s time to build a model. Remember, a model
is simply a representation of the assumptions.
We’ll use words to start describing the model, and
later we’ll switch over to graphs.
The first assumption—scarcity—is about the
natural world. We’ll actually save that discussion
for later in the book. For now, let’s model the sec-
ond assumption (individuals act in their self-in-
terest to maximize their happiness) and the third
assumption (firms act in their self-interest to max-
imize their profit). Notice that the driving force
behind these latter two assumptions is self-inter-
est. According to conventional theory, it is human
nature to be self-interested no matter what the
economic system.
Remember markets? Well, in an output market,
individuals are the demanders, and firms are the
suppliers. Markets are the building blocks of the
economy. There are two actors: demanders and
suppliers. Demanders are those who want to buy.
You’ve been a demander all your life. Sometimes
you’re called a consumer, household, individual,
or buyer. Suppliers offer something for sale.

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Chapter 4: Conservatives and Liberals—Conventional Theory | 75
They are also called producers, vendors, firms, or
sellers. Please note that when we talk about the
video game market, or the chocolate bar market,
or the pedicure market, we’re not looking at a
single company that supplies those goods and
services; we’re looking at all the firms that supply
video games or chocolate bars or pedicures—and
all the demanders of those goods and services.
When suppliers and demanders meet in a mar-
ket, demanders will try to buy at a low price since
the lower the price, the more they can afford to
buy, which maximizes their happiness. Suppliers
will try to sell at a high price since the higher the
price, the more money they will make, thereby
maximizing their profit.
The Law of Demand
What is the most important determinant
for whether someone buys something or sells
something? Price! That’s what conventional
theorist say. When the price is right, we’re willing
to act, and that price also influences the quantity
(amount) we’ll buy or sell. How much would you
pay for a chocolate bar? Forty cents? Fifty cents?
A dollar? Quantity demanded is the number
of units of chocolate bars people will demand
at any given price. When price changes, the
quantity demanded changes. To state the obvious,
when the price of chocolate bars is high, people
buy fewer. When the price is low, people buy
more. This reflects the assumption of individuals
maximizing their happiness, and conventional
theorists call it the law of demand. Here’s how
you would write it in symbols: P��QD� (when
price goes up, quantity demanded goes down).
The opposite is also true: P��QD� (when price
goes down, quantity demanded goes up).
Ceteris Paribus
Hold on a minute. It isn’t only price that
determines if we’ll buy more or less, according
to conventional theory. There are all sorts of
other things going on in the economy that affect
markets. There might be a new cure for diabetes,
so people who previously avoided chocolate bars
are now rushing to the store to stock up on them.
Or there might be a new report that says eating
chocolate bars increases intelligence, and now
parents everywhere are forcing their children to
eat chocolate bars day and night. In other words,
many things influence a demander’s decision to
buy or not to buy chocolate bars. Conventional
theorists know that it’s simply not possible to factor
in everything that’s happening in the market. So
for the purposes of describing the law of demand,
they assume nothing else is changing besides the
price and quantity demanded. They use the term
ceteris paribus, which is a Latin term that means
“with all other factors or conditions remaining
the same.” The law of demand says, “When price
goes up, quantity demanded goes down, ceteris
paribus.” When we read ceteris paribus, it tells
us that the law of demand isn’t factoring in a
cure for diabetes or studies about chocolate bars
and intelligence.

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76 | Voices On The Economy
The Law of Supply
Now imagine that you’re a supplier. That
might be harder to imagine because we’re mostly
demanders. But pretend you own a chocolate
bar factory. At what price would you sell your
chocolate bars? A dollar? Fifty cents? Forty cents?
Quantity supplied is the number of units of
chocolate bars you would supply at any given
price. Typically, when the price of chocolate bars
is high, you would supply more; when the price is
low, you would supply fewer. The law of supply
says, “When price goes up, quantity supplied goes
up; when price goes down, quantity supplied
goes down, ceteris paribus.” In symbols it looks
like this: P��QS� or P��QS�.
Joining Demand and Supply
So here’s how it works: on their own, suppliers
and demanders are stuck. How will demanders get
what they need? How will suppliers sell their goods
and services? It’s when we bring them together—
when demand meets supply—that markets emerge
and prices are determined. For conservatives and
liberals, this is where the magic happens. When
demand and supply come together and prices are
determined, they signal demanders and suppliers
to spring into action. Demanders buy more or less
depending on price, and suppliers sell more or less
depending on price. Because of price signals, say
conventional theorists, markets work to bring us
what we want and need, and suppliers produce
them in the right quantities. And this is thought to
happen without anyone planning it or managing
it—as if guided by an invisible hand.
Let’s take a closer look at how prices are deter-
mined. In table 4.1 you can see some made-up
numbers about chocolate bars that reflect the law
of supply and the law of demand. When chocolate
bars cost $1.00, quantity supplied (QS) is six hun-
dred units. When the price goes down to $0.60,
QS goes down to four hundred units. That reflects
the law of supply—the quantity supplied will fall
when price goes down. In other words, suppli-
ers will supply less when the price goes down.
And what happens to quantity demanded (QD)?
At the price of $1.00, QD is two hundred units.
When the price goes down to $0.60, quantity
demanded increases to four hundred units, which
reflects the law of demand. Quantity demanded
increases when prices go down. In other words,
people will demand more chocolate bars when
the price is lower. Can you see what’s happening?
Conventional theorists say, “When price does this,
quantity does that.” In other words, price hap-
pens first and drives the quantity change. They
call price the independent variable and quan-
tity the dependent variable. Quantity changes
when price changes. Price goes first. Just keep
that in mind.
Price
Quantity
Supplied
Quantity
Demanded
Surplus or
Shortage
$1.00 600 200
Surplus:
QS > QD and P �
$0.80 500 300
Surplus:
QS > QD and P �
$0.60 400 400
Equilibrium:
QS = QD, No P !
$0.40 300 500
Shortage:
QD > QS and P �
$0.20 200 600
Shortage:
QD > QS and P �
Table 4.1
Demand and Supply Schedule

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Chapter 4: Conservatives and Liberals—Conventional Theory | 77
Equilibrium
There’s something else really important to
notice in table 4.1. Do you see what happens when
chocolate bars are at $0.60? Quantity supplied
is equal to quantity demanded. Conventional
theorists call this golden moment equilibrium.
Remember how Adam Smith assured us that the
invisible hand guarantees that firms will supply
the things we want and will supply the right
amount of them so that everyone who chooses
can get them? Equilibrium is the reason why.
Assuming ceteris paribus, there is no reason for
price to change when it’s at equilibrium, because
everyone who wants the chocolate bars at that
price can have the chocolate bars, and firms will
supply exactly the right number of chocolate bars.
At equilibrium, price is stable because there is no
unmet demand or unsold supply.
Surplus and Shortage
There are two more things to notice in table
4.1 (still assuming ceteris paribus). When the
price of chocolate bars is $1.00, firms will supply
six hundred chocolate bars, and individuals will
demand two hundred chocolate bars. That means
firms will have four hundred extra chocolate bars.
This is called a surplus. (But please note that this
word is used differently from the way we used it in
chapter 3 when we were discussing radical theory.
Here we mean surplus to be when there is more
supply than there is demand for a product.) At any
price above equilibrium there will be a surplus,
but conventional theorists say that the surplus will
be temporary because of price signals. Think of
the day after Valentine’s Day, when candy makers
are stuck with heart-shaped boxes of candy that
nobody wants because the holiday is over, and
everyone has a chocolate hangover from eating
too many truffles. Candy makers will drop their
prices, and bargain hunters will be willing to buy

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78 | Voices On The Economy
that candy at the lower price, and the market for
Valentine’s Day candy will return to equilibrium.
The opposite is called a shortage. At $0.20,
for example, firms will supply two hundred
chocolate bars, and individuals will demand six
hundred chocolate bars. That means there aren’t
enough chocolate bars for all the people who
want them. Quantity supplied is less than quan-
tity demanded, so price goes up. Think of the
day before Valentine’s Day, when you and all
the other procrastinators rush into the store to
buy last-minute roses because you don’t want to
disappoint your beloved. But you discover there
are only a few scraggly ones left—not enough to
go around. Now there is a shortage. Florists will
raise their prices because procrastinators will be
willing to pay more. The market will once again
find equilibrium. Conventional theory says that
whether there’s a surplus or a shortage, equilib-
rium is like a magnet, pulling the market back to
the point where quantity supplied equals quantity
demanded. They say that in the market there’s
never a problem of having too many or too few
things, because prices will automatically adjust
people’s incentives to supply and demand, which
will always bring the market back to equilibrium.
In a well-functioning economy, no one wants
a surplus or a shortage, and the great news is we
don’t have to have either, say conservatives and
liberals. You don’t have to wake up in the middle
of the night and worry if the convenience store
will have coffee tomorrow. If there’s a surplus or
a shortage, price signals will automatically bring
the market back to equilibrium, ceteris paribus.
The Joy of Graphing
Okay, “joy” may be an overstatement, but we
hope you’ll come to appreciate the elegance of
graphs. Think of them as tools that allow you to
create fast summaries of large tables of information.
Graphs are the language of conventional theory.
In case this is intimidating, just think of it as a
picture of something—like when a friend texts
you emojis to communicate without words that
she needs caffeine and misses her cat. You
already may be comfortable with graphing, but
if you aren’t yet, please don’t worry; it won’t take
you long to catch on. With a little practice, you’ll
be able to read a graph and understand the gist
of what it represents with almost as much ease
as you can interpret your friend’s text messages.
Once we get into the issues chapters, you’ll
need your graph-reading skills to understand
how conservative and liberal economists view
economic issues.
Conventional theorists understand that the
world is a very complex system, with countless
factors at play that impact the economy—human
psychology, history, biology, weather, family
dynamics, demographics, technology, and much
more. A model only depicts a tiny slice of this
complexity. Imagine you want to drive to the
beach. You punch the address into your Maps
app and wait for it to find the fastest route. Imag-
ine what the trip would be like if your app also
referenced every tree, shrub, and flower along the
way. That information would be accurate but not

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Chapter 4: Conservatives and Liberals—Conventional Theory | 79
relevant to you. In fact, you would be so tangled
up in all the botanical details that by the time
you made it to the beach—if you ever actually
arrived—you would have missed the best waves
for surfing. Conventional theorists say mod-
els don’t need to show every possible piece of
information about the economy; they just need
to focus on the relevant aspects of the problems
we want to solve. Graphs are versatile tools for
conventional theorists. They can be simple, or
they can show multiple variables, and they even
can be multidimensional (although in this book
we’re only using two-dimensional graphs). The
bottom line? Graphs allow conventional theorists
to cut through all the noise and help economists
understand how markets—and the economy as
a whole—change so that they can find solutions.
You can draw graphs to model the electric car
market, the flower market, the coconut market,
the acupuncture market, and any other market.
We’re going to draw a graph of the chocolate bar
market using the numbers from table 4.1. Our
graph will simply compress all the information
into one picture that’s easy to see. Please note
that we’re using made-up numbers. This is simply
an exercise to reflect the law of supply and law
of demand in our model of the second and third
assumptions of conventional theory.
Liberals and conservatives use graphical mod-
els to deliver a quick snapshot of the relationship
between two variables—price and quantity—in
our chocolate bar market. When price changes,
quantity also changes. Changes in price come first.
By the way, if you’re a mathematician, then please
be warned that the way economists draw graphs
might give you a headache. That’s because they
place the independent variable (price, or P) on the
vertical line (y axis) and the dependent variable
(quantity, or Q) on the horizontal line (x axis). We
know what you’re going to say: “That’s wrong!” In
standard mathematics it’s the opposite—the inde-
pendent variable is always on the x axis and the
dependent variable is always on the y axis. We
have no idea why economists started doing it this
way, but we advise you to just roll with it.
Let’s draw the chocolate bar market graph.
Begin by making a horizontal line for the bot-
tom of your graph. Label it Q for quantity, mean-
ing how many chocolate bars. You can jot in the
numbers from left to right, beginning with zero
(also called the origin) and going up to six hun-
dred in increments of one hundred. The numbers
get bigger as you move toward the right. The ver-
tical line goes on the left side. Label it P for price.
Jot in the prices, beginning with zero (the origin
point) on the bottom, up to $1.00, in increments
of $0.20. The numbers get bigger as you move
up. Don’t forget to give your graph a name. This
would be “Chocolate Bar Market.”
Now you’re going to plot the points on your
graph. Think of them as players on two soccer
teams: supply, represented by an S, and demand,
repre sented by a D. There are two actors in the
market—the supplier and the demander. To fig-
ure out where Team S and Team D players need
to take their positions on your graph, check out
table 4.1. (If you already know how to do this,
you can skim this paragraph.) Let’s begin with

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80 | Voices On The Economy
supply. When the price (P) of chocolate bars is
$1.00, quantity supplied (QS) is six hundred. Put
one of your players (represented by a dot) in that
position on your graph. When the price is $0.80,
quantity supplied is five hundred. Put a dot in
that spot, and so on. When you fill in all the dots,
connect them to make a line, and label it S. Team
S is all set up on the field now, and you have just
succeeded in creating the supply curve. (Even if
it looks like a straight line, economists refer to it
as a curve.) While you’re admiring your supply
curve, notice how when price goes up, quantity
supplied goes up. Liberals and conservatives call
this a positive relationship and also say that
this curve has a positive slope. These are terms
you need to know because conventional theorists
use them as shorthand to describe their graphs.
Now plot the points for demand, and label the
line connecting all the dots D. This is the demand
curve. If you did it correctly, when the price (P)
is $0.20, quantity demanded (QD) is six hundred,
and when price is $0.40, quantity demanded is five
hundred. Now, while you admire your fabulous
demand curve, notice that when price goes down,
quantity demanded goes up. Conservatives and
liberals call this an inverse relationship and also
say that this curve has a negative slope.
$1.00
P1
P
.60
.80
.40
.20
200 300 400 500 600
S
D
Q
Chocolate Bar Supply
$1.00
P
.60
.80
.40
.20
200 300 400 500 600
D
Chocolate Bar Demand
0 0 Q
Figure 4.1
Supply Curve and Demand Curve

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Chapter 4: Conservatives and Liberals—Conventional Theory | 81
$1.00
P1
P
.60
.80
.40
.20
200 300 400 500 600
S
D
Q
Q1
Chocolate Bar Market
0
Figure 4.2
Market Graph: Equilibrium
Here’s where it gets interesting: check out what
happens at $0.60 when we bring together sup-
ply and demand (as exhibited in figure 4.2). Do
you see that this is where Team Supply and Team
Demand intersect? This point is equilibrium. You
can see the dot in the center. This is literally and
figuratively the goal for liberals and conservatives.
Equilibrium is represented by the price at which
the quantity of chocolate bars supplied equals the
quantity of chocolate bars demanded. As we dis-
cussed above, this is the golden moment. There is
neither a shortage nor a surplus of chocolate bars.
In our example, the chocolate bar market is in
equilibrium at $0.60, when four hundred choco-
late bars are supplied and four hundred chocolate
bars are demanded. Congratulations! You have
just created a model of a market using conven-
tional theory.
How to Read Shortages and Surpluses
You can see in figure 4.2 that at points below
equilibrium (prices below $0.60), the quantity
supplied is much less than the quantity demanded,
which tells you there’s a shortage. And you can
see that at points above equilibrium (prices above
$0.60), the quantity supplied is greater than the
quantity demanded, which tells you there’s a surplus.
People often become confused about how to read
a surplus and a shortage on the graph. Check out
figure 4.3. Look at a price above equilibrium—let’s
say $0.80—and follow it horizontally across the
graph. You’ll first cross the demand curve, and that
point is the quantity demanded (QD = 300) at $0.80.
If you keep traveling to the right, you’ll next cross
the supply curve, and that point is the quantity
supplied (QS = 500) at $0.80. When quantity
supplied is greater than quantity demanded, as it is
at all prices above equilibrium, there is a surplus.
When there’s a surplus, prices tend to come down.
And when prices start coming down, firms become
less willing to supply and consumers become
more willing to buy. Eventually, they will meet at
equilibrium (four hundred bars at $0.60).
$1.00
P1
P
.60
.80
.40
.20
200 300 400 500 600
S
D
Q
Q1
Chocolate Bar Market
0
Figure 4.3
Market Graph: Self-Adjusting

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82 | Voices On The Economy
The opposite happens if you’re at prices below
equilibrium. When quantity supplied is less than
quantity demanded (QS < QD), there is a shortage. When there’s a shortage, prices tend to go up. When prices start to go up, firms are more willing to supply and consumers are less willing to buy, until we end up back at equilibrium. And that’s why—separate from any outside influence—there can never be a permanent shortage or surplus, say conventional economists. Prices and quanti- ties will always return to equilibrium. Just med- itate on this for a moment: in the conventional theory model of markets, in equilibrium there will never be overproduction or underproduction of anything, in the long run. Why Do Prices Ever Change? We’ve just finished saying that prices will always tend toward equilibrium and be stable there, but that doesn’t make sense. In the real world, prices are changing all the time. When we originally drew the chocolate bar market graph, we assumed ceteris paribus—that the only thing affecting quantity was a change in price. But actually, according to conventional theory, there are a number of external factors that can influence price. We’re going to identify and use twelve factors to see how they influence markets at any given time. By the way, right now we’ll talk about external factors as if they only occur one at a time. In reality, a lot of things can change at once. So how do we model price changes? Up until now, we’ve been talking about points on the curve and calling them quantity supplied and quantity demanded. When the price goes up, we move along (up and down) the curve to a new point of quantity supplied or quantity demanded. But if something else changes—one of the twelve exter- nal factors we’re about to discuss—it won’t just change a point on the curve; it will change the entire curve so that the level of demand or supply increases or decreases at every price level. There is a change in demand or a change in supply, which means you must shift (the whole curve moves) to the left or to the right. You draw a brand-new P1 S D Chocolate Bar Market P D Chocolate Bar Market D2 D2 SS 2 S2 Left is Less Right is MoRe $1.00 P1 .60 .80 .40 .20 200 300 400 500 600 Q Q1 $1.00 P1 .60 .80 .40 .20 200 300 400 500 600 Q1 Left is Less Right is MoRe P Q0 0 Figure 4.4 Shifting Demand and Supply Curves Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 4: Conservatives and Liberals—Conventional Theory | 83 curve on the graph and label it D2 or S2 to rep- resent the new change. When the demand curve shifts to the left, the quantity decreases at every price level; when it shifts to the right, the quantity increases at every price level. Just remember Left is Less, Right is moRe. The graphs are getting busy in figure 4.4. But here’s the good news: you’ll be able to find the new equilibrium very easily, and since you already know the relationships between price and quantity for both supply and demand, you can leave off the numbers on the axes. Six Factors That Shift the Demand Curve Imagine you’re walking down the aisle at the grocery store, hunting for a snack. Chocolate bars are on sale. A lower price is definitely an incentive to buy. You jingle the change in your pocket and wonder, “What other things besides price might influence my decision about what snack to buy?” If you’re a conventional theorist, you would ask it this way: “What are the factors that shift demand?” Let’s look at six external factors that shift the demand curve to the right or to the left, changing people’s decisions about what snack to buy at every price. For each example given, please note that the opposite would shift the demand curve the other way. 1. Income: When people have more or less money to spend. For example, average wages go up. People have more money, so they demand more chocolate bars. Demand shifts right. 2. Preference: When desire for something changes. For instance, a recent study shows that chocolate increases intelligence. Every- one wants to be the smartest person in the room, so people demand more chocolate bars. Demand shifts right. 3. Prices of Complements and Substitutes: A complement is something that goes with a product. A substitute is something that can be used instead of the product. For example, ice cream is on sale, and it’s a decent sub- stitute for chocolate bars when people crave a sweet treat, so people buy the ice cream and demand fewer chocolate bars. Demand shifts left. They also like milk to comple- ment their chocolate bars—the two just taste perfect together, so when the price of milk goes down, people buy more chocolate bars. Demand shifts right. 4. Availability: When it’s more or less conve- nient for people to get the product (we also call it the “laziness factor”). For instance, zoning laws change, and convenience stores selling candy pop up on nearly every corner of every neighborhood, so people buy more chocolate bars. Demand shifts right. 5. Future Expectations of Price, Income, and Preference: When people anticipate changes and act accordingly. For example, people expect the price of chocolate bars to go up as Halloween approaches, so they stock up on chocolate bars before mid-Octo- ber. Demand shifts right. Or they expect their salaries to go up, so they buy more choco- late bars today. Demands shifts right. Or they expect that they will want fewer chocolate bars on January 1, when they make their annual New Year’s resolutions to eat health- ier, so they buy fewer in December. Demand shifts left. 6. Number of Buyers: When there are overall more or fewer people who are potential buy- ers. For instance, a new law requires choco- late bar buyers to be eighteen years old. No one seventeen or younger can buy chocolate bars, so fewer people buy chocolate bars. Demand shifts left. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 84 | Voices On The Economy When you subtract ceteris paribus from the demand equation and allow factors to change, such as the six listed above, you need a new way to represent the relationship between supply and demand on your graph. You do this by shifting your entire demand curve to the left or to the right, as shown in figure 4.4. Six Factors That Shift the Supply Curve Imagine you own a chocolate bar factory. You’re perusing your monthly financial report and wondering about whether to increase or decrease your supply of chocolate bars at every level. Let’s look at six external factors that shift the supply curve to the right or to the left, changing how much firms supply. For each example given, please note that the opposite would shift the supply curve the other way. 1. Cost of Inputs: When firms must spend more or less for the resources to make their prod- ucts. For instance, a hurricane in the Carib- bean drives sugar prices up, so firms supply fewer chocolate bars. Supply shifts left. 2. Number of Firms: When there are more or fewer total number of suppliers of a partic- ular product. For instance, accounting fraud and mismanagement drive some chocolate bar firms out of business, so fewer chocolate bars are supplied. Supply shifts left. 3. Taxes, Subsidies, and Regulations: When government legislation leads firms to pay more or less. For example, an increase in corporate taxes, a decrease in subsidies for chocolate bars, or an increase in government regulations for safety equipment in chocolate bar factories means fewer chocolate bars are supplied. Supply shifts left. 4. Prices of Related Goods: When it’s possible for firms to make a different product using the same resources, firms will make the high- er-priced product. For instance, chocolate bar factories can use the same labor and equip- ment to make chocolate-covered pretzels, so when the price of chocolate-covered pretzels is higher than the price of chocolate bars, firms switch production and fewer chocolate bars are supplied. Supply shifts left. 5. Changes in Technology: When firms can make more or less output with the same resources because procedures for production become more or less efficient. For example, firms develop a new packaging system that doubles production without costing more, so more chocolate bars are supplied. Supply shifts right. 6. Future Expectations: When firms antici- pate a change in the price of the product. For instance, firms expect the price of choco- late bars to go up around Halloween, so they supply fewer in the months leading up to October. Supply shifts left. So remember, when you subtract ceteris pari- bus from the supply equation, you need to show it on your graph. You do this by shifting the entire supply curve to the left or to the right. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 4: Conservatives and Liberals—Conventional Theory | 85 Exercise 4.1: Market Change Guide Let’s use the Market Change Guide to analyze how this could affect the market for soda. US taking steps to ban junk food from school WASHINGTON—The Obama administration will begin a drive this week to expel Pepsi, french fries and Snickers bars from the nation’s schools in hopes of reducing the number of children who get fat during their school years. In legislation soon to be intro- duced, candy and sugary beverages would be banned, and many schools would be required to offer more nu- tritious fare. To that end, Agriculture Secretary Tom Vilsack will deliver a speech today at the National Press Club in which he will insist, according to excerpts provided to the New York Times, that any vending machines that remain in schools be “filled with nutritious offerings to make the healthy choice the easy choice for our nation’s children.” First lady Michelle Obama said last month that she would lead an initiative to reduce childhood obesity, and her involvement “shows the importance all of us place on this issue,” Vilsack said. THE NEW YORK TIMES C o u rt e sy o f th e A ri zo n a D ai ly S ta r 1. Identify the market and write the name below the graph. 2. Determine the market change 2a. Search for the relevant factor (on the graph to the right, draw the market change and also describe it in words under each step below) 2b. Shift demand or supply 2c. Slide with the price change 2d. Settle at the new equilibrium Q� Shrinking Market | Q� Growing Market Market:___________________________________ 3. Decisions (Yes, No, Maybe, Not Applicable) 3a. Purchase before this change? ______ 3b. Choose a career in this industry? ______ 3c. Invest now? ______ Demand * Income * Preference * Number of Buyers * Availability/Convenience * Prices of Comps and Subs * Future Expectations Supply * Cost of Inputs * Number of Firms * Taxes/Subsidies/Regulations * Prices of Related Goods * Changes in Technology * Future Expectations P1 P S D QQ 1 Now that you understand market changes from the conservative and liberal perspectives, you can start to analyze stories you read in the newspaper and make graphical models of the market changes. For example, here is a story about the controversy around selling junk food in schools. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 86 | Voices On The Economy First, identify the market. That’s easy. It’s the soda market. Write that on the line below the graph on the right side of the page. Second, determine the market change. This happens in four parts: ! For part A, search for the relevant factor. Soda will not be sold in schools, and even though students are still allowed to bring it in their lunchboxes, soda will be less available at school and less conve- nient for students to buy. Check the twelve relevant factors and find “Availability/Convenience.” Check the box next to that factor. ! For part B, shift the demand or supply curve. Remember, you don’t need actual data points (num- bers) to plot a new curve. We’re just showing relationships between price and quantity. Since the relevant factor affects demand, you shift the demand curve, and since it’s going to drop when soda becomes less available, demand shifts to the left. Draw the shift on your graph. ! For part C, slide (move along) with the price change. At the original price, quantity supplied (QS) is greater than quantity demanded (QD), which means the soda market has a surplus. When there’s a surplus, price tends to come down. As price comes down, firms are less willing to supply, so there’s movement along the supply curve down and to the left. Consumers become more willing to demand, and there’s movement along the demand curve down and to the right. You write it this way on your Market Change Guide: QS > QD, Surplus, P tends�.
! For part D, settle at the new equilibrium. Do you see it on your graph? It’s the new price where quan-
tity supplied meets quantity demanded. This is what conventional economists call the new market
clearing price. The new equilibrium price is lower, and the new equilibrium quantity is lower. This
shows that the market for soda is shrinking. This is a lot of information that you’re getting from your
graph, and the easy way to write it on the Market Change Guide looks like this:
New Eq. P�
New Eq. Q�
Search, Shift, Slide, Settle. This is how you analyze changes in markets from the conventional
perspective. You can do your own analysis whenever you come across a news story. For instance, when
you hear that the government is getting rid of regulations on air bags in cars, or when there’s a frost
in Florida that kills the orange crop, or when a health report comes out that says kale can extend your
life. How will those markets be affected, and what difference will it make in your life?
There’s one more thing left to do on your Market Change Guide: Decide. Liberals and conservatives
say that understanding market changes can help you make the wisest investments, the best purchasing
decisions, and the best career choices so that you can get the things you want in life. Look at your graph
and ask yourself if the best time to buy soda is now—before the sale of junk food is banned in

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
Chapter 4: Conservatives and Liberals—Conventional Theory | 87
schools—or after that new policy takes effect. You can see that you wouldn’t decide to buy soda now,
because the price is going to go down. Is this the best time to choose a career working for a soda
company? No, because when markets shrink, so do job opportunities in those firms. Is this the right
time to invest in a soda firm? No, because the stock price will likely fall as a result of this change.
You can fill in those decisions at the bottom right side of the Market Change Guide. (Yes-Y; No-N,
Maybe-M; Not Applicable-NA.)
X
ANSWER KEY: Exercise 4.1
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also
describe it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Market:___________________________________
3. Decisions (Yes, No, Maybe, Not Applicable)
3a. Purchase before this change? ______
3b. Choose a career in this industry? ______
3c. Invest now? ______
P1
P
S
D
QQ
1
The Soda Market
Q2
P2
D2
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
Demand Shifts Left
QS > QD, Surplus, P tends �
N
N
N
New Eq. P� | New Eq. Q�
The Soda Market
X

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88 | Voices On The Economy
Union OKs new contract, ending Tucson bus strike
The 42-day Tucson bus
strike ended Wednesday
when drivers, mechanics and
other members of Teamsters
Local 104 voted to accept a
new contract.
The vote was 351-41, an
89 percent approval, said
Teamsters Local 104 President
Andy Marshall.
Everyone gets a raise under
the new contract, he said, but
he wouldn’t release contract
details, saying he didn’t want
to inflame opinions of people
who are angry about the strike.
Professional Transit Man-
agement, the contracted oper-
ator of the city’s Sun Tran bus
system, also would not give
details about the contract.
There were no addition-
al city tax dollars in the deal,
which stays within the ap-
proved city budget for Sun
Tran, Marshall said. Additional
details were not immediately
available.
Sun Tran buses will be back
to a normal schedule starting
Thursday, Sept. 17. During the
strike, the number of buses and
bus routes was limited, making
for long waits in the heat.
Since the strike began, the
Tucson Unified School Dis-
trict has been providing bus
service to high school students
who rely on Sun Tran to get to
class. Though full Sun Tran
service is resuming, TUSD
will continue to transport
those students through the end
of the week, said spokeswom-
an Stefanie Boe.
See STRIKE, A4
By Becky Pallack
ARIZONA DAILY STAR
C
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th
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Union members try to listen from outside, with standing
room only inside, during the voting.
Exercise 4.2: Market Change Guide
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also
describe it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Market:___________________________________
3. Decisions (Yes, No, Maybe, Not Applicable)
3a. Purchase before this change? ______
3b. Choose a career in this industry? ______
3c. Invest now? ______
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
P1
P
S
D
QQ
1
Please use the Market Change Guide to analyze how the end of the bus strike could potentially
affect the market for public transportation. The Answer Key is below, but please don’t look until
you fill yours in completely.

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Chapter 4: Conservatives and Liberals—Conventional Theory | 89
X
ANSWER KEY: Exercise 4.2
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also
describe it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Market:___________________________________
3. Decisions (Yes, No, Maybe, Not Applicable)
3a. Purchase before this change? ______
3b. Choose a career in this industry? ______
3c. Invest now? ______
P1
P
S
D
QQ
1
The Public Transportation Market
Q2
P2
S2
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
Supply Shifts Left
QD > QS, Surplus, P tends � Y
M
NANew Eq. P� | New Eq. Q�
The Public Transportation Market
X

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90 | Voices On The Economy
Western US sees triple-digit temps in early heat wave
LAS VEGAS—Parts of
the Western U.S. are getting
an early taste of scorching
summer heat, forcing officials
in California, Oregon and the
desert Southwest states to
heed the warnings of danger-
ous, triple-digit temperatures
in the first week of June.
Organizers rescheduled
California’s state track and
field championship events to
start in the evening hours Fri-
day and Saturday. The com-
petition is being held in Clo-
vis in the San Joaquin Valley,
where daily highs are expect-
ed to top 100 degrees through
the weekend, according to the
National Weather Service.
Precautions are also in
place ahead of Portland’s
Rose Festival on Saturday in
Oregon, when the mercury is
expected to rise to 99 degrees
in the city and 103 degrees
downstate in Medford.
Marching bands have
asked event officials if they
can ditch some of the pomp
and circumstances by taking
off their hats and changing
their uniforms during judged
performances to cope with
the stifling heat, according
to spokesman Rich Jarvis.
The popular festival is also
renting mist machines and
handing out sunscreen around
a carnival area on the Willa-
mette River waterfront.
“We’re telling people,
‘Beware,’ ” Jarvis said. “It’s
going to be tough.”
By Sally Ho
THE ASSOCIATED PRESS
C
o
u
rt
e
sy
o
f
th
e
A
ri
zo
n
a
D
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S
ta
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Exercise 4.3: Market Change Guide
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also
describe it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Market:___________________________________
3. Decisions (Yes, No, Maybe, Not Applicable)
3a. Purchase before this change? ______
3b. Choose a career in this industry? ______
3c. Invest now? ______
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
P1
P
S
D
QQ
1
Please use the Market Change Guide to analyze how higher temperatures could potentially affect
the ice cream market. The Answer Key can be found at the end of the chapter.

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
Chapter 4: Conservatives and Liberals—Conventional Theory | 91
Price Signals and the Invisible Hand
Markets represent what happens when
demand and supply are joined together: they
create price signals, which are incentives for firms
and individuals to act. From the conventional
perspective, the invisible hand is a metaphor for
the process by which this happens—with no one
person or government entity masterminding it.
Like a maestro conducting the great symphony
of capitalism, the invisible hand guides suppliers
to produce what demanders want. And it ensures
that suppliers will make the most output at the
minimum cost; and that the products will go
to the demanders who want them the most.
Conventional theorists say it’s when we’re guided
by the invisible hand that our economic well-
being is ensured. They say we just have to look
around us to know that capitalism is the best
possible economic system.
Imagine you’re an alien from outer space,
hovering above Earth in your spaceship. When
you peer down at the planet through your giant
unblinking alien eye, you see shining cities and
productive farmland. You see industries improv-
ing every day, creating better products and better
technologies. Your eye swivels one way, and you
see that some of the earthlings are coming up with
innovative ideas and working day and night on
their start-ups, which end up changing the whole
world for the better. Your eye swivels the other
way, and you see that humans have pantries and
refrigerators full of all kinds of delicious foods
from different places around the world. Amazed,
you zoom your ship closer to the atmosphere to
take a better look. You see a bustling city with all
kinds of transportation and housing, and people
from diverse backgrounds and cultures engag-
ing with one another in the trade of goods and
services. All around them are a wide variety of
shops, housing, parks, entertainments, and jobs.
You wonder how all this came to be, and you
want to take a closer look. So you zip on your
human suit, and, disguised as one of them, you
walk the streets. You discover that earthlings have
marvelously advanced medical technology and
gleaming hospitals with state-of-the-art instru-
ments and people whose sole job is to come up
with new medicines and treatments. Earthlings

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92 | Voices On The Economy
are motivated by self-interest to get their wants
and needs met, and firms are motivated by self-in-
terest to gain profit, yet their self-interests create
the greater good. Deeply impressed, you return
to your ship. You can’t see the invisible hand, but
you can see the effects of this marvelous mech-
anism on this lovely blue-green planet. Where
there is capitalism, profit brings prosperity to
societies and gives humans what they want and
need. As you turn your ship away from Earth, you
think to yourself, “What a grand idea!”
Conclusions
We just created the market change model of
conventional theory. Now let’s take a look at the
conclusions liberal and conservative economists
draw from it. Remember, conclusions are simply
the answers to the original questions.
What to Produce?
The model shows that in a market economy,
firms make us what we want (allocative
efficiency). When demanders want something,
demand for it shifts and a higher price results.
The higher price signals firms to act in their own
self-interest to maximize profit by supplying it
in the right quantity. Price signals tell suppliers
what to produce because the market economy is
guided as if by an invisible hand.
How to Produce?
The model shows that firms make us the
maximum amount of goods and services possible
using the fewest possible resources (productive
efficiency). To maximize profit, firms won’t hire
more workers than they need, or buy more delivery
trucks than they need, or rent more factory space
than they need, because those actions would cut
into their profit. Firms won’t waste resources,
because their self-interest motivates them to
maximize their profit. Price signals tell suppliers
how to produce because the market economy is
guided as if by an invisible hand.
For Whom to Produce?
The model shows that in capitalism, firms’
products go to those who most want those
products and therefore make choices to be able to
get them (distributive efficiency). Although people
have limited budgets that keep them from getting
absolutely everything they want, in capitalism, when
people are unhappy with their budget constraints,
they can invest in themselves—by getting more
training, for instance—so that they can qualify for
jobs that pay a higher wage, enabling them to be
able to satisfy their wants and needs. People follow
price signals in the labor market to know which jobs

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Chapter 4: Conservatives and Liberals—Conventional Theory | 93
will bring them the income that will afford them
the things they want and need. Price signals tell
suppliers for whom to produce because the market
economy is guided as if by an invisible hand.
Enlightened Self-Interest
Conventional theory says that we flourish as
a society because when individuals and firms
act out of their own self-interest, those actions
enhance the well-being of all. Adam Smith wrote,
“It is not from the benevolence of the butcher, the
brewer, or the baker that we expect our dinner,
but from their regard to their own self-interest.
We address ourselves not to their humanity but
to their self-love, and never talk to them of our
own necessities, but of their advantages.” What
he meant by “advantages” was profits. Profit
is the way we make one another better off. As
individuals, on our own we can’t possibly make
all the things or provide all the services that we
want and need. We’re continually depending on
others, just as others are constantly relying on us
to provide what they want and need. One person
creates value (writes a book, invents an app, bakes
a cake, walks dogs, cuts hair) and then engages
in voluntary exchange with other people. So if
you make ovens and other people want and need
an oven, they exchange their work as teacher or
bricklayer, for example, to earn a wage, which
they then trade for the ovens you produce.
You already know this, of course. But conser-
vatives and liberals would urge you to really con-
sider what it means for your life. Consider that
there are people all over the world who have no
ovens. People in those countries often have to
spend their whole day gathering firewood just so
they can cook their stew over the flames and bake
their bread in the hot coals. Since you didn’t have
to go out and gather wood to make your dinner,
you had time to read this book, to start a busi-
ness, to do volunteer work. Adam Smith said that
by acting in our own individual self-interest, we
end up serving the interests of the whole commu-
nity—without any intention to do so. That’s what
he meant by enlightened self-interest.
The Benefits of the
Invisible Hand
! Products We Desire
! High Standard of Living
! Abundance
! Incentives and Rewards
! Entreprenuerial Innovation
! Social Mobility
! State-of-the-Art Advancements
! Investment
! Profit
! Business Opportunities
! Jobs
! Maximum Social Welfare
! Choice
! Autonomy
! Cooperation
! Thriving Communities
! International Trade
! Prosperity
! Peace and Social Harmony

Policy
Liberals and conservatives both believe that
capitalism is the greatest economic system; they
have that in common. But, like two siblings who
grow up in the same house and both love and
respect their parents, they still have bitter rivalries
about everything else. In fact, there are three
siblings in this book: radicals are the third, and
we’ll learn about radical theory in chapter 5. All

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
94 | Voices On The Economy
three economic perspectives share the same desire
for everyone to flourish in our society, but they
have very different visions for how to get there.
When it comes to policy—the course of action an
individual, group, or government takes based on
the conclusions of a theory—conservatives and
liberals only agree that it should be pro-capitalism.
Beyond that point of agreement, they have very
different ideas about which policies will solve our
urgent economic problems.
Liberals believe capitalism works best when
there is a partnership between firms and govern-
ment because this stabilizes and stimulates the
economy and makes competition in the market-
place more equitable. Liberals believe it’s not a
good idea to rely on the invisible hand alone to
bring markets back into balance. Because busi-
ness owners have an incentive to seek their own
self-interest, the government is needed to step in
and guide capitalism to ensure accountability and
transparency, stability, and equity. Acting in the
public’s interest, politicians and bureaucrats are in
the best position to design solutions to problems
because our government can take all interests
into consideration without being influenced by a
profit motive. And for those in society who fall
through the cracks, the government creates safety
nets to ensure the well-being of all.
For liberals, the story of Tatyana McFadden
shows how powerful the public-private part-
nership can be. Without a partnership between
government and business, there would have
been no accessibility ramps for her wheelchair
at the schools she attended, the stores where she
shopped, or the airports where she traveled. With-
out the helpful hand of government, there would
have been no wheelchair-accessible bus to pick
her up and drop her off at school every day. It
was because of the public-private partnership that
McFadden had access to the education, transpor-
tation, and health care she needed, say liberals.
And it was because of government that McFad-
den was assured she could attend the university
of her choice without being discriminated against

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Chapter 4: Conservatives and Liberals—Conventional Theory | 95
based on her disability,
so she could have equal
opportunities to realize her
dreams. They say McFad-
den was able to realize
her potential because of
fair-market capitalism.
Conservatives believe
that government should
have only three roles: to
protect private property
(criminal justice system), to
build infrastructure (roads
and public works), and
to provide national secu-
rity. But when it comes
to markets, conservatives
believe in the laissez-faire
approach to capitalism,
meaning the government should leave markets
alone and allow them to self-adjust through price
signals and the invisible hand. They say politi-
cians have the same incentive as anyone else to
act in their own self-interest, which means that
instead of making impartial decisions that serve
the public interest, government ends up serving
the interests of the groups that finance political
campaigns. Conservatives say the better approach
to solving problems in capitalism is to leave it up
to business owners, who know their own indus-
tries and therefore understand better than biased
politicians how to solve problems. They say
the profit motive will ensure that the owners of
firms make the most efficient decisions. And for
those in society who fall
through the cracks, fami-
lies, religious institutions,
nonprofit organizations,
and private and corporate
philanthropy create the
safety nets that ensure the
well-being of all.
For conservatives, the
story of Tatyana McFadden
shows the power of the free
market. Without needing to
be told by the government,
firms produced the gym
equipment she needed to
train and become a cham-
pion. Without being told by
government, the producers
of her racing wheelchairs
created state-of-the-art designs that improved the
sport for her and many other athletes. Without
the government meddling, McFadden was able to
secure sponsorships from corporations that pro-
vided her with what she needed to realize her
dreams. Conservatives say that Tatyana McFadden
was helped to realize her potential by free-mar-
ket capitalism.
This difference in approach to solving prob-
lems is the heart of the debate between Repub-
licans and Democrats when it comes to eco-
nomic issues. We’ll be examining that debate and
those issues, including the radical (Democratic
Socialist) perspective, in each of the upcoming
issues chapters.
When it comes to
policy, conservatives
and liberals only agree
that it should be pro-
capitalism. Beyond that
point of agreement,
they have very different
ideas on which policies
will solve our urgent
economic problems.

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96 | Voices On The Economy
1.
Conventional Theory: Capitalism
ASSUMPTIONS 2.MODEL
i. Scarcity
ii. Individuals Maximize Happiness
iii. Firms Maximize Profits
i. Production Possibilities Curve
ii. Law of Demand
iii. Law of Supply
Self-Interest
Determinants of Demand
1. Income
2. Preference
3. Number of Buyers
4. Availability/Convenience
5. Prices of Substitutes and
Complements
6. Future Expectations
Determinants of Supply
1. Cost of Inputs
2. Number of Firms
3. Taxes/Subsidies/Regulations
4. Prices of Related Goods
5. Changes in Technology
6. Future Expectations3.CONCLUSIONS
Market: Price Signals lead to the Invisible Hand
Enlightened Self-Interest
Conservative Policy
a. Embrace Free-Market
Capitalism
b. Reject Government
Interference
• Self-Correction and
Opportunity
Liberal Policy
a. Embrace Fair-Market
Capitalism
b. Support Government
Partnership
• Stability and Equity
I. What to Produce?
Firms make what
people want.
II. How to Produce?
Firms make as much
as possible using the
fewest resources.
III. For Whom to Produce?
Firms’ products go to
those who want
them most.

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Chapter 4: Conservatives and Liberals—Conventional Theory | 97
Conventional Critique of Socialism
In politics today, conservatives (Republicans) and liberals (Democrats) are bitter opponents
who constantly shout down each other’s
economic ideas. Their arguments center on how
much government involvement there should be
within capitalism, but as you just read, they are
in perfect agreement that capitalism is the best
economic system for creating prosperity. For this
reason, they both strongly oppose the radical idea
that capitalism should be replaced by democratic
socialism. In chapter 5 we’ll be taking a closer
look at the radical critique of capitalism. Right
now let’s take a closer look at the conventional
critique of socialism.
No Private Ownership
Socialism, be it democratic socialism, market
socialism, communalism, or any other form, has
at its foundation the communal ownership of
property. Sometimes this is also called government
ownership, or public ownership, or cooperative
ownership. Whatever it’s called, say liberals and
conservatives, abolishing private ownership and
trading it for communal ownership will always result
in less productivity and a lower standard of living
for everyone. You probably learned in elementary
school that in 1620 a group of colonists sailed to
the New World on the Mayflower and established
a settlement in Plymouth, Massachusetts. Many
settlers before them had tried to make a go of it
in the “New World,” but they all failed because of
famine and disease. You may have learned that
the Pilgrims only survived thanks to the help they
received from local Native Americans, who taught
the newcomers how to grow corn. You also may
have learned that the first Thanksgiving was a
celebration of the Pilgrims’ first bountiful harvest,
which signaled a turn in history—European settlers
were finally able to survive and go on to build this
nation. But this version of the story is not quite
right, according to some conventional economists.
They say the Pilgrim settlement almost failed
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because of the lack of private property rights. This
is how they tell the story:
When their settlement was first established, the
colonists drafted a document called the Mayflower
Compact, which established the rules for the new
colony. They agreed that instead of privately
owning their own land and growing food on it,
they would have a communal farm where every-
one worked the fields together. When this was
put into practice, however, there were problems.
Everyone received the same share of rations from
their communal store of supplies, and according
to the written accounts by the first governor, this
bred resentment because lazy workers received
the same amount of resources as hard workers.
So what was the point of working hard? There
wasn’t any—which is why people stopped work-
ing in the communally owned fields. The gover-
nor of the colony described in his diary how food
was left to rot in the fields because no one was
willing to go out and harvest it. Even those who
had previously shown themselves to be industri-
ous and diligent were unmotivated because of
communal ownership. The settlers ate through
their store of food and then started to go hungry.
Out of desperation the governor allocated sepa-
rate parcels of land to the colonists to farm. He
told them they could keep what they grew to feed
themselves and their families. Now highly moti-
vated to work hard because they would reap the
rewards, the colonists became industrious. They
planted more corn, had healthier harvests, and
ultimately flourished. According to this telling of
the Pilgrim story, private property was the game
changer. From the conventional perspective, this
is a cautionary tale. Socialism’s ban on private
property inevitably leads to poverty for all.
No Profit
The reward system of profit motivates people
to be productive, work hard, and innovate,
according to conservatives and liberals, and
socialism is doomed to fail—and indeed has
failed wherever it has been tried—because when
there is no profit motive, there is no incentive to
work hard. Here is how they see it: in capitalism
people are willing to toil, struggle, take risks, and
overcome hardships when they know they will
benefit directly from the rewards. In socialism
there is no direct reward for going the extra mile,
improving one’s skills, or coming up with brilliant
new ideas because profit is taken by the group
and distributed communally. Socialism’s rejection
of the profit motive kills off the entrepreneurial
spirit. Great achievements don’t come from
government bureaucracies but from individuals
pursuing their own self-interest. In fact, socialism
actually creates a disincentive for people to come
up with new inventions and technologies. Workers
in socialism have more incentive to protect their
job security than to come up with efficiencies that
could improve production if the result were to
make them less necessary. If they aren’t going to
directly benefit from the profits those innovations
bring, then why should they bother? In every case,
say conventional critics, socialism lowers the bar
for productivity and leaves us in the dark ages.
No Price Signals
Socialism creates the worst scenario for an
economy, say liberals and conservatives. Here’s
their argument: It strangles the very things that
leads to the rational distribution of resources, which
are price signals. They are incredibly complex
and elegant mechanisms to distribute resources
to their best possible uses, but in socialism the
whole system crashes. Suppose government is the
only provider of health care (socialized medicine
is a common scenario in socialism). It will be the
only demander of ambulances, X-ray machines,
and bandages. The costs for those resources
should reflect how desirable and abundant they
are, but when there is only one demander—
government—the cost doesn’t reflect that at all.

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For producers, this means there’s no way to
determine the ideal quantity to produce. Price
guides those kinds of decisions. The end result is
that resources are used inefficiently.
There’s another problem with not having price
signals, say conventional critics. In socialized
medicine there is no price for health care since it’s
provided for free. It’s not in a market; therefore,
people end up overusing it. Without a price signal
for health-care services, the provider—the social-
ist government—can’t know if it’s a good idea to
continue offering preventive yoga classes or if it
should use that budget for vaccination programs.
Prices are vital in a world of scarcity because they
direct how society allocates resources so that
people can actually get what they need and want.
Prices are the beacons that guide decisions about
how to move forward.
There are no substitutes for price signals, say
conventional theorists, and socialism fails at its
attempts to achieve the same outcomes through
central planning. Picture a group of people in a
conference room somewhere deciding for us what
will be produced, how it will be produced, and
for whom it will be produced. Failure is inevita-
ble when any socialist government tries to replace
price signals with a planned economy because
economic systems are too complex and unpre-
dictable, and all the moving parts are constantly
in motion. Socialists may have the best intentions
to create prosperity but micromanagement won’t
work. There is no rational way any individual,
group, or government can make all those count-
less decisions that are guided organically through
price signals and the invisible hand of capitalism.
Whatever tortured calculation the planning com-
mittee in a central office somewhere comes up
with will inevitably lead to the wrong allocation
of resources, which will give people the wrong
combination of products and the wrong quantities
of products. For instance, they’ll decide to make
stretch polyester shirts instead of the cotton shirts
that people actually want. It will lead to shortages
and surpluses—warehouses stuffed with boxes of
stretch polyester shirts that no one wants, and long
lines of people desperate to buy one of the few
cotton shirts that were produced.
One reason central planning fails, say conven-
tional theorists, is the local knowledge prob-
lem—the fact that government planners lack the
very specific industry knowledge that private own-
ers have cultivated through training and experi-
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ence about production. This is not something that
a government committee can know. It includes
things like the quirks of the particular technology
in that industry, the regional transportation delays
that can happen, where to find the best tools and
materials, the challenges of finding workers with
the right skills, the distribution opportunities that
are possible during certain seasons of the year, and
so forth. A central planning committee can’t repli-
cate this local knowledge, say conventional crit-
ics, and trying to use it to circumvent price signals
threatens our prosperity.
No Hierarchy
Socialist workplaces are often cooperatively
owned and run on a democratic basis, with each
worker-owner having a vote on decisions about
what to produce, how to produce, and for whom
to produce. From the conventional perspective,
there is good reason to be cautious about using
democratic decision-making in firms. If, for exam-
ple, a firm owned by the workers democratically
decides to offer a base wage of $30 per hour,
the business might quickly become unprofitable
and uncompetitive if that decision was made in
the absence of price-signal feedback. Democratic
socialism can actually jeopardize long-term sus-
tainably of firms, they argue. It can become mob
rule, and then firms won’t make the hard decisions
that benefit the company (and society). Further,
they say that in cooperatively owned firms there’s
a high transaction cost—the time it takes to lis-
ten to everyone’s ideas and feelings about every
matter pertaining to the running of the firm. The
bottom line for conservatives and liberals is that
both mob rule and high transaction costs lead to
stagnating businesses and a stagnating economy.
No Competition
When we trade capitalist markets for socialist
government control, we end up with mediocre
products, no choice, and bureaucratic red tape,
say liberals and conservatives. Here’s the crux of
their argument: Suppose there is only one shoe
company in your socialist country—communally
owned, of course. It makes only one kind
of pinchy shoe in a frumpy style with cheap
materials. Government-controlled industries can
be inefficient and wasteful, can fail to produce
what people want, and can overcharge because
they have no competition. You need to have
shoes to wear, so you’ll have to buy the pinchy
ones because there are no other options. No
competition means there’s no incentive to invent
more comfortable and stylish shoes. This is true not
just about shoes but about everything in society
because in socialism the government controls
whole sectors of the economy—including health
care, housing, transportation, higher education,
and so forth. Without competition, we won’t get
state-of-the-art health care, or high-speed trains,
or the most energy-efficient housing, but we will
get high-priced and low-quality products, say
conservatives and liberals. They believe socialism
leads to a low standard of living in which everyone
is stuck together in the misery of mediocrity and
unmet needs.
No Democracy
Liberals and conservatives often warn that
socialism inevitably erodes democracy and leads
to totalitarianism. They offer several reasons why
this outcome occurs. The first is that socialism’s
central planning takes away individual choice.
Even though people can still go to the polls on
election day and cast a vote, it’s never on the
ballot to change the ownership of the sectors that
the government controls—the health care system,
public utilities, transportation, and so forth.
Liberty, choice, and self-determination are traded
for more government control, and the end result
is less democratic control by the people.
The second reason conservatives and liberals
are concerned about socialism eroding democracy

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is their belief that abuse of power is more likely
to occur when control of the economy is in the
hands of a few people—even the most well-inten-
tioned people—because there are fewer checks
and balances to keep bureaucrats honest. Instead
of the government staying out of business (free
market) or partnering with business (fair market),
socialism empowers the government to run busi-
nesses, and so inevitably the government must
take on the role of tyrant and enforcer because
socialism is a system that demotivates workers.
When workers aren’t productive, the whole soci-
ety is on the brink of starvation and deprivation,
so the only choice left to the government is to
step in and force people to work. They may not
want to be tyrants, but socialist governments must
make sure wealth is generated to keep the whole
system going—even if that means terrorizing peo-
ple to keep them fed.
A third argument raised by conventional theo-
rists is that in a socialist economy there is bound
to be less productivity, which means more hunger
and deprivation, so it’s natural that people will take
desperate measures to feed their families. Illegal
private markets will form to compete with social-
ist-controlled markets. The government will have
to ban black markets because they are a form of
private ownership and those who participate are
therefore stealing from the socialist system. The
government will have to take on a policing role,
interrupting black-market trading and prosecuting
people for economic crimes. Critics say that the
The Dangers of Socialism
According to Conventional Theory
CAUSE EFFECT
No private property Poverty for all
No profit No innovations
No price signals Misallocation and inefficient use of resources
No hierarchy Mob rule and high transaction costs
No competition High prices and low-quality products
No democracy Totalitarianism

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outcome of socialism is government coercing peo-
ple to comply with an economic system they don’t
actually want.
The fourth argument for why socialism leads
to totalitarianism arises from the conventional
assumption of the scarcity of resources. Conserva-
tives and liberals say that with private ownership,
price emerges from voluntary trade in markets,
and price moves people’s desires and behaviors
to distribute scarce resources in the best ways to
meet wants and needs. But socialism forces society
to allocate resources toward certain things (hous-
ing, health care, transportation, education, and so
forth), which means those resources aren’t avail-
able for other things that people might want or
need more. Liberals and conservatives say social-
ism leads to loss of democracy, freedom, and lib-
erty; coercion and violence; and abuse of power.
Economic Well-Being from
Diverse Perspectives
T he VOTE Program doesn’t advocate for one economic theory over another. Our method
is to line up the liberal, radical, and conservative
perspectives sides by side in a balanced and accurate
way so that you can understand their analyses,
evaluate their ideas for yourself, and make up your
own mind about what you believe. Then you can
use your voice to join the conversation. As we delve
into the thirteen issues of the VOTE Program, we’ll
be putting on a mask (metaphorically, of course)
and channeling the voices of the conservative,
radical, and liberal perspectives for each of the
issues and articulating their different ideas for
creating economic well-being. The best way to hear
these “voices” is to imagine that you’re listening to
someone who is a passionate advocate for that
perspective. This person really wants you to picture
what their ideal world would look like if our country
followed their policies for economic well-being. Try
to imagine what their utopian vision would be like.
Do you agree with their views? Is that the world you
want to live in? Does their analysis of the problem
make sense to you? Does their solution make sense
to you?
In the VOTE Program we believe that through
a process of respectful listening, passionate advo-
cacy, and intelligent debate, we’ll find ways to solve
our nation’s most entrenched problems. As you go
through this process you might come to believe in
your own views even more strongly or see ways
for the proponents of the different perspectives to
cooperate, compromise, or collaborate on solu-
tions. You might be convinced to change your per-
spective, or maybe you’ll be sparked to come up
with brilliant new solutions.
Let’s practice listening to the voices of the liber-
als and conservatives as they describe their visions
for economic well-being in the section below. At the
end of chapter 5, we’ll hear the voice of the radi-
cal perspective.

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The Conservative Voice:
Free-Market Capitalism
Life, liberty, and the pursuit of happiness are
inalienable rights we all cherish. When we create
prosperity, we can realize the American Dream
because economic well-being is the foundation
of a good life. It allows us to flourish and thrive.
What is the best way to create wealth in our
nation? The best way is through unfettered capi-
talism as our economic system, with government
as our political foundation. The economic sys-
tem of free markets, resting on strong constitu-
tional protections of private property, gives us
all the liberty to realize our highest potential. It
unleashes our ability to accumulate the greatest
wealth and enjoy the highest standard of living,
and it allows us to take care of our most vulnera-
ble populations.
For thousands of years human beings wal-
lowed in abject poverty. A select few experienced
comfort and material wealth, but the vast major-
ity of people led miserable lives of deprivation.
Then we were given the gift of capitalism. People
could own their own land, their own labor, and
their own capital. Acting from self-interest, indi-
viduals and firms came together in free markets,
and that’s when the transformation happened:
humanity went from the gutter to the skyscraper.
How did we get to the skyscraper? Humans
achieved new heights of prosperity through free
markets, price signals, and the invisible hand. Act-
ing from self-interest, individuals demanded sky-
scrapers—and cars, and health care, and entertain-

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ment, and everything else we wanted for a good life.
Acting in their self-interest, firms responded when
the prices for those products went up—by pro-
ducing more skyscrapers, more cars, more health
care, more entertainment, and more of everything
else we wanted. When we leave capitalism to its
own devices, firms make us what we want, and
they do so on their own initiative—not because
they are told to do so or out of a sense of altruism.
They make us what we want because they follow
their own motivation to maximize profit. They not
only make us what we want, but they achieve lev-
els of production along the way that our ancestors
could never have imagined. Through enlightened
self-interest, the free market gives us untold wealth
because individual self-interest is beneficial to the
greater good. The invisible hand is the force that
guides the endless ebb and flow of supply and
demand to ensure that we get our needs met. We
never have to worry about having enough food
or enough housing or enough transportation if we
make good decisions in our lives, because the free
market delivers everything we want in abundance.
When we leave capitalism to its own devices on a
foundation of constitutional democracy, the result
is perfect equilibrium in every market, to our col-
lective well-being. We can thank capitalism for
every meal, every pair of jeans, and every time the
lights turn on.
When capitalism is unfettered, all of us are
afforded ample opportunities to get exactly what
we want, regardless of class, race, age, gender,
national origin, sexual orientation, religion, or abil-
ity. Through hard work and personal initiative, we
are all able to realize our potential, contribute our
genius, support society through our philanthropy,
and flourish. Free from government interference in
the free market, firms don’t discriminate or engage
in favoritism or bias, because those behaviors are
contrary to the drive to maximize their profit. That
means the playing field is level. Everyone has the
chance to succeed and prosper. We’re fortunate to
live in a democracy where we are guaranteed the
right to the pursuit of happiness. Only when we
leave capitalism alone will it deliver on that prom-
ise of freedom because it is inherently efficient,
equitable, and responsive. It creates the best possi-
ble conditions for us to thrive. When we leave cap-
italism to its own devices, we realize the American
Dream with peace and social harmony.
The Liberal Voice:
Fair-Market Capitalism
Life, liberty, and the pursuit of happiness are
inalienable rights we all cherish. When we create
prosperity, we can realize the American Dream
because economic well-being is the foundation
of a good life. It allows us to flourish and thrive.
What is the best way to create wealth in our
nation? The best way is through capitalism in part-
nership with a democratically elected government.
The economic system of capitalism, resting on the
strong constitutional protections of a free and open
society, ensures fairness and opportunities for all
of us to realize our highest potential. It unleashes
our ability to accumulate the greatest wealth and
enjoy the highest standard of living, and it allows
us to take care of our most vulnerable populations.
Throughout the ages, human beings have strug-
gled to rise out of poverty. For millennia we scraped
by in conditions of squalor. Only a select few were
able to achieve lives of comfort and material secu-
rity. Then capitalism came along, and private own-
ership of land, labor, and capital enabled some
people to prosper, though many never moved up

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Chapter 4: Conservatives and Liberals—Conventional Theory | 105
the economic ladder. Uniting capitalism with our
representative government, we created opportuni-
ties for those left behind and left out. Government
programs and public-private partnerships leveled
the playing field so more of us could prosper, and
that’s when we all realized the promises of capital-
ism: humanity went from silver spoons for a few to
a feast of opportunities for the masses.
How did we create this feast? Government and
private industry came together to act in the best
interests of us all, taking into account our needs now
and the needs of future generations. Government
invests in social infrastructure that serves our collec-
tive self-interest—things like highways, education,
public safety, clean water, health care, transporta-
tion, and more. Because of the dynamic partnership
between private-sector capitalism and public-sector
government, firms are able to innovate and create
jobs and products that improve our lives immeasur-
ably, so more people can partake of the feast of cap-
italism. Capitalism is driven by the profit motive, and
it joins with government, which is driven to benefit
the public at large. Together they bring us what we
could never create on our own as individuals. We
act in both our own self-interest and our collective
self-interest to create the best possible conditions to
thrive. We never have to worry about having access
to a health-care system, and we get the best-trained
doctors, cutting-edge treatments, and innovative
technologies. We never have to worry about facing
natural disasters or other emergencies on our own,
and we get the most effective equipment and best-
trained personnel. We all win because we all have
access to the things we need, including jobs, safe
products, and a clean environment.
Through hard work, personal initiative, and
assurance of fair competition, we are each able to
realize our genius, contribute to society, and flour-
ish. These opportunities are available to people
of every class, race, gender, age, national origin,
sexual orientation, religion, and ability because
the government has ensured that the playing field

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is level. Through the harmonious partnership of
capitalism and democracy, firms don’t discrim-
inate or engage in favoritism or bias. Everyone
has an equal chance to succeed and prosper. And
in hard times the public-private partnership gets
the economy back on track through stimulus pro-
grams and regulations. We’re extremely fortunate
to have a government that is of the people, by
the people, and for the people. It protects prop-
erty rights and human rights, the environment,
and vulnerable groups that would otherwise be
excluded from sharing in the rewards of capital-
ism. It ensures that capitalist competition is fair and
equitable. It ensures that people who work hard
will prosper. Capitalism’s private ownership and
profit incentive, coupled with government’s com-
mitment to our collective well-being, deliver the
American Dream with peace and social harmony.
More Sides to the Story
Now you understand how conservatives and
liberals analyze economic issues. You know why
they differ on their ideas about policy and the
role of government in markets and why they are
united in their view that socialism is a dangerous,
wrongheaded economic system. But there’s
more to the story. In the next chapter you’ll
read the radical critique of capitalism and learn
how democratic socialists derive their economic
policies. Then you’ll have everything you need
to decode the conversations taking place around
you. You’ll be ready to apply what you’ve learned
to analyzing the thirteen economic issues of the
VOTE Program and help guide the future of our
nation by using your voice. In the words of the
Spider-Man comic book: “With great power there
must also come great responsibility!”
Chapter 4: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. All the following are assumptions (givens) of conventional theory EXCEPT:
A. Scarcity of resources is an unchanging condition of the natural world.
B. Human nature dictates that people will be cooperative and altruistic.
C. The self-interest of firms is to maximize their profits.
D. The self-interest of individuals is to maximize their happiness by acquiring more goods
and services.
2. The Law of Supply and the Law of Demand identify relationships between price and quantity. The
law of demand states that when price goes up, quantity demanded __________, while the law of
supply states that when price goes up, quantity supplied __________.
A. decreases; decreases
B. decreases; increases
C. increases; increases
D. increases; decreases

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Chapter 4: Conservatives and Liberals—Conventional Theory | 107
3. Consider the bicycle market graph below. Please identify the quantity of bicycles supplied and
demanded at $400 and the way in which equilibrium will ultimately be restored.
A. Quantity Demanded (QD) is less than
Quantity Supplied (QS). Given this surplus,
price will tend to go up and the market will
settle at equilibrium (P = $600; Q = 400).
B. Quantity Demanded (QD) is greater than
Quantity Supplied (QS). Given this shortage,
price will tend to go down and the market
will settle at equilibrium (P = $600; Q = 400).
C. Quantity Supplied (QS) is greater than
Quantity Demanded (QD). Given this surplus,
price will tend to go down and the market
will settle at equilibrium (P = $600; Q = 400).
D. Quantity Supplied (QS) is less than Quantity
Demanded (QD). Given this shortage, price
will tend to go up and the market will settle at equilibrium (P = $600; Q = 400).
4. In the coffee market, which of the following will shift the demand curve to the right? Choose all that
apply.
A. It is expected that the price for coffee will go up because of weather-related problems in
Central America.
B. A new tax is imposed on coffee producers.
C. Average incomes increase.
D. The price of tea goes down.
Please use the Market Change Guide to answer the next two questions.
5. Advances in artificial intelligence are being used to more effectively fill containers of shampoo, hand
lotion, liquid soap, and similar kinds of products. Please use this information to determine the order
of the market change in the sunscreen market.
A. Search i. QS > QD, Surplus, Price tends �
B. Shift ii. Supply shifts right
C. Slide iii. Equilibrium price �; Equilibrium quantity �
D. Settle iv. Increase in technology
$1,000
P1
P
$600
$800
$400
$200
200 300 400 500 600
S
D
Q
The Bicycle Market
0

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6. Please pick the graph that matches the market change described in question #5 and then identify
what decisions make the most sense (refer to part 3 of the Market Change Guide).
A. Graph iv; Purchase after change? Y; Career in industry? Y; Invest now? Y
B. Graph i; Purchase after change? Y; Career in industry? N; Invest now? N
C. Graph ii; Purchase after change? N; Career in industry? M; Invest now? M
D. Graph iii; Purchase after change? N; Career in industry? N; Invest now? N
7. Conclusions answer the original questions: how to produce, what to produce, and for whom to
produce. Conventional theory’s conclusions show that in capitalism firms won’t hire more workers
than they need or engage in wasting resources at any level of production. As a result, we end up
with __________.
A. Distributive Efficiency
B. Productive Efficiency
C. Allocative Efficiency
D. All the above
P1
P
S
D
QQ
1
The Sunscreen Market
Q2
P2
D2
i
P1
P
S
D
QQ
1
The Sunscreen Market
Q2
P2
D2
ii
P1
P
S
D
QQ
1
The Sunscreen Market
Q2
P2
S2
iii
P1
P
S
D
QQ
1
The Sunscreen Market
Q2
P2
S2
iv

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Chapter 4: Conservatives and Liberals—Conventional Theory | 109
8. Liberals and conservatives agree on the assumptions, model, and conclusions of conventional
theory, but they disagree when it comes to policy. Which of the following represents their policy
positions?
A. Conservatives want democracy in the workplace; liberals want more
government oversight.
B. Liberals want government to leave markets alone; conservatives want more
government oversight.
C. Conservatives want the invisible hand to guide the market; liberals want a partnership
between government and business to guide the market.
D. Liberals want the invisible hand and community councils to create prosperity;
conservatives want self-interest and regulations to create prosperity.
9. Conventional theorists believe that socialism is dangerous to the prosperity of a society. Please
pick the statement(s) below that is/are consistent with this conventional argument.
A. Central planning leads to too many price signals.
B. Without private property, no one works hard.
C. Without the government’s help, firms won’t know what to produce.
D. No profit motive means there’s no incentive to innovate.
10. Conservatives and liberals say that in socialism the lack of hierarchy leads to which of the
following outcomes?
A. Increased prosperity
B. Mob rule
C. High transaction costs
D. B and C only
Answers
1. B 2. B 3. D 4. A & C 5. A – iv, B – ii, C – i, D – iii 6. A 7. B 8. C 9. B & D 10. D

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110 | Voices On The Economy
Chapter 4: Key Terms
Central planning
Ceteris paribus
Complement
Conventional theory
Curve
Demand curve
Demanders
Dependent variable
Determinants of Demand
Income
Preference
Price of complements/
substitutes
Availability
Future Expectations
Number of buyers
Determinants of Supply
Cost of inputs
Number of firms
Taxes, subsidies, regulations
Prices of related goods
Changes in technology
Future expectations
Equilibrium
Graph
Independent variable
Inverse relationship
Law of demand
Law of supply
Local knowledge problem
Move along
Negative slope
Origin
Positive relationship
Positive slope
Quantity demanded
Quantity supplied
Scarcity
Shift
Shortage
Substitute
Suppliers
Supply curve
Surplus
Technology
Transaction cost
Answer Key to Exercise 4.3
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also
describe it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Market:___________________________________
3. Decisions (Yes, No, Maybe, Not Applicable)
3a. Purchase before this change? ______
3b. Choose a career in this industry? ______
3c. Invest now? ______
P1
P
S
D
QQ
1
The Ice Cream Market
Q2
P2
D2
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
Demand Shifts Right
QD > QS, Shortage, P tends � Y
Y
YNew Eq. P� | New Eq. Q�
X
The Ice Cream Market

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You might have heard of the Occupy move-ment, which began four years after the start of the Great Recession in 2007. It
started as Occupy Wall Street—a protest move-
ment against what activists saw as the corporate
greed that led to the biggest economic disaster
in our country since the Great Depression. The
Occupy movement organizers accused the gov-
ernment of not holding banks accountable for the
economic mess they had made. They said govern-
ment spent taxpayers’ dollars to bail out the very
banks that had sent the nation into the economic
tailspin in the first place. The Occupy movement
spread to cities across
the country. It was
2011, and millions of
people had lost their
homes to foreclosures,
millions of companies
were out of business,
and unemployment
rates across the nation
soared. Protesters were
also fueled by out-
rage that 1 percent of
the world’s wealthiest
people owned more
than the other 99 per-
cent of the population. They occupied parks and
other public spaces in their cities and towns and
demanded economic justice, which they defined
as an end to the grotesquely enormous divide
between the richest and the poorest, and an end
to corporate influence in politics. Their motto was
“We are the 99 percent!”
The Occupy movement started out peacefully,
but some demonstrations turned violent when
protesters and police confronted each other.
Police were sent to break up protesters’ encamp-
ments, and some activists were forcibly removed
from public spaces. Others were hit with pep-
per spray. Emotions
ran high when police
hauled people away
in handcuffs. The
Occupy movement
eventually disbanded,
but its message con-
tinues to echo in the
words of political
leaders. In 2016 U.S.
Senator Bernie Sand-
ers, an Independent
from Vermont, sought
the Democratic Party
nomination for presi-
5Radical Theory
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114 | Voices On The Economy
dent. Sanders spoke passionately about disman-
tling big banks and closing the gap between the
1 percent and the 99 percent. More than 13.2
million people voted for him, and some analysts
believe that number doesn’t come close to cap-
turing the broader level of support he had among
youth and others who couldn’t vote. For instance,
surveys after the primary election revealed that
many who supported Sanders cast their votes for
the other candidates because they didn’t believe
he could win. The unexpected groundswell of
support for Sanders crossed all demographics
and took both Democrats and Republicans by
surprise, particularly because Sanders identified
as a democratic socialist. Before his primary run,
few Americans had heard of democratic social-
ism. The most basic definition is that democratic
socialism is an economic system that prioritizes
people over profits.
“Democratic socialism means that we must
create an economy that works for all, not just
the very wealthy,” Sanders explained in a 2015
Time magazine article. He also said, “My vision—
it’s not just making modest changes around the
edge.” He was referring to his call for free tuition
at public universities, campaign finance reform,
and single-payer health care. He advocated for
many democratic socialist ideals, including paid
family leave for workers, Wall Street reform, and
universal health care. Although he didn’t win the
nomination, his ideas and the ideals of democratic
socialism changed the public conversation about
economic solutions. In the 2018 midterm election,
dozens of candidates ran as democratic socialists
on the national, state, and local levels, and many
won seats against longtime incumbents.
There was another Occupy movement that
had a very different outcome than the one in the
United States. Argentina struggled with an eco-
nomic depression from 1998 until 2002, with the
economy fully collapsing in 2001. With millions
of people out of work and thousands of facto-
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Chapter 5: Radical Theory | 115
ries shut down, the wage laborers who had once
been employed in the factories that churned out
auto parts, bread, ceramics, and other products
suddenly found themselves living in ghost towns
of boarded-up factories. The way Occupy activists
tell this story, the government was overwhelmed
by the crisis and offered the unemployed pop-
ulation little relief and no real solutions to the
economic mess. So workers came up with their
own solution. They took over the factories where
they had once been employed. They knew how
to run the machines, so they got them up and
running again and went into business together
as worker-owners. They used a democratic pro-
cess to manage the businesses. Each worker had
a voice and a vote, and they decided collectively
what, how, and for whom to produce. The idea
of cooperative ownership caught on all over the
country, with thousands of workers taking over
the factories where they had once been employ-
ees. The empresas recuperadas (recovered busi-
nesses) movement, as it was called, made the fac-
tories productive again, brought back jobs, gave
communities a chance to recover, and helped the
economy start to improve. Worker-owners across
Argentina banded together under the motto that
translates as “Occupy. Resist. Produce.”
Karl Marx would certainly have been heartened
by this story. He was the one who famously said,
“Workers of the world, unite; you have nothing to
lose but your chains.” But replacing private own-
ership with cooperative ownership in Argentina
was not a harmonious process, as Marx could have
predicted. He said capitalists would not willingly
give up their power, and warned that capitalism
leads to bloody, violent confrontations between
workers and law enforcement, whose duty it is to
protect the private property rights of the capitalist
owners. In Argentina, eventually the worker-own-
ers and the private owners took their battles to
court. The workers argued that they had a legit-
imate right to the capital (machinery and factory
space) because their tax dollars had funded those
factories for years through government grants,
loans, tax breaks, and subsidies. A documentary
was made about a ceramics factory called Zanon.
When the workers won their battle in court, they
changed the name of the business to FaSinPat,
short for Fábrica Sin Patrones (Factory Without
Bosses). Other worker-owners also won their
court cases. As of 2017, there were more than
three hundred cooperatively owned companies in
Argentina, including factories, hotels, media com-
panies, transportation firms, schools, restaurants,
health-care providers, and more.
U
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Cooperative Ownership in
Democratic Socialism
Democratic socialism can have many different
forms of ownership, including public ownership
of certain institutions, community ownership,
nonprofit ownership, and cooperative ownership.
In the VOTE Program we describe the form of
democratic socialism that uses a combination of all
these, while emphasizing cooperative ownership.
Seven in ten people in the United States work
for someone else. That means three in ten are
either self-employed or have an ownership
stake in their workplaces. Imagine you and your
co-workers are each partial owners of the place
where you work. This is called a cooperative.
Cooperatives (co-ops, for short) are jointly owned
and democratically run enterprises. They can be
firms, public utilities, universities, or any other
kind of business. With cooperative ownership,
people voluntarily work together to meet their
shared social, economic, cultural, and political
needs. There are a variety of forms this can take.
Worker-owned cooperatives are literally
owned by the workers and governed democrat-
ically, meaning everyone has a voice and a vote
and is part of the decision-making process. But
it won’t look the same in every firm, because
worker-owned cooperatives each decide how to
structure the business. For example, every mem-
ber might vote on all or most management deci-
sions. Or worker-owners might vote periodically,
while leaving the day-to-day decision-making to
designated managers who have expertise in those
areas. Some firms have rotating decision-making
positions so that everyone in the company has an
opportunity to take leadership in those roles. You
may be interested to learn that worker-owners gen-
erally each have a say in the company’s pay scale
and benefits, in the hours they work, and in what
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Chapter 5: Radical Theory | 117
and how and for whom their firm produces. This
is considered a major plus of worker ownership,
say radicals. Cooperatives may be small locally run
businesses. They can also be large multinational
corporations or any size in between.
In Cleveland, Ohio, for example, the Ever-
green Cooperatives are a network of three linked
worker cooperatives that started out in 2008 with
a laundry service and then added a solar installa-
tion and energy retrofit business. Now they also
have one of the larger urban greenhouses in the
United States that produces hydroponic lettuce
and other vegetables and herbs. Evergreen uses
a mixed model of cooperative and community
ownership with a community-controlled corpora-
tion that oversees the cooperatives.
In the Basque Country of Spain, a worker-owned
corporation called Mondragon started out in 1956
producing paraffin heaters. By 2017 the multi-
national corporation comprised more than 250
worker-owned companies with more than 80,000
workers across the globe—most of whom are
worker-owners. With tens of billions of dollars in
total assets, it was listed as one of Spain’s largest
multinational corporations. It has businesses in
finance, industry, retail, and knowledge (including
a cooperatively owned university).
Consumer cooperatives, which are owned by
the customers, who each get a share of the profit.
Sometimes it’s in the form of a discount. You may
already be a member of one. Examples include the
Green Bay Packers, REI, Nationwide Mutual Insur-
ance Company, credit unions, food co-ops, and a
wide variety of housing cooperatives. Consumer
co-ops are structured so that member-owners may
vote on certain aspects of the business.
Producer/marketing cooperatives are made
up of independently owned businesses (some
privately owned and some cooperatively owned).
The owners collectively market and sell their
goods under one brand or label. You might have
been buying products for years from co-ops
without even knowing it. For example, Organic
Valley, Sunkist, Ocean Spray, Welch’s, and Land
O’Lakes are all cooperatives. Many producer/mar-
keting cooperatives are in the business of agricul-
tural products. This is simply because it’s often
more profitable for independent farmers to band
together and market their products under one
label they own together rather than to sell their
products to a big corporation that will take more
of the profits and not give the farmers a say.

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118 | Voices On The Economy
Purchasing/retail cooperatives are also
made up of independently owned businesses
(some privately owned and some cooperatively
owned). They come together under one brand or
label to purchase inputs, which saves them money.
You’ve probably done business with at least one
of these co-ops. Examples include Ace Hardware,
Best Western, Carpet One Floor & Home, NAPA
Auto Parts, and ShopRite Supermarkets.
Just to be clear, cooperatives all have a demo-
cratic structure, but they are not “one size fits all.”
The way they are set up and run reflects the val-
ues, personalities, and desires of those involved.
They create their own organizational structures
and rules to establish work cultures, missions,
and diversity, and these reflect their collective val-
ues and priorities.
Radicals point out that cooperatives aren’t just
an interesting theoretical idea; they are already a
significant—and growing—part of the U.S. econ-
omy, with tens of thousands in operation. Radicals
say that in countries around the world, coopera-
tives have been part of the economy and people’s
lives for decades. A United Nations study reports
that there are millions of cooperatives around the
globe, which employ hundreds of millions of peo-
ple. It says that a billion people are either mem-
bers or clients of cooperatives. Radicals believe
that through cooperatives, workers lift themselves
out of poverty, creating a society where everyone
can thrive. Here’s how Mondragon describes its
philosophy: “A conscious commitment to coop-
erate and to progress together. People who col-
laborate and join efforts and dedication. People
united to do great things. To be more competi-
tive. To get further. That is Mondragon. Joint work
to overcome extraordinary challenges. Humanity
at work.”
Co-op Statistics
Worldwide Number of Cooperatives:
3.0 million (U.S. 40 thousand)
Worldwide Number of Members:
1 billion (U.S. 350 million)
Worldwide Employment:
280 million
Worldwide Turnover in U.S. Dollars:
2.1 trillion

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Chapter 5: Radical Theory | 119
Building Radical Theory in Two Parts
Remember, Karl Marx was a philosopher who spent most of his life working on a critique
of capitalism while writing very little about what
kind of economic system should replace it. That’s
where it gets interesting. For more than a century,
radicals—who generally agree on the assumptions,
model, and conclusions of the critique of
capitalism—have bitterly argued and passionately
disagreed about what Marx really thought was
the best alternative to capitalism (policy). In the
VOTE Program the radical perspective we present
is democratic socialism simply because that is the
economic system that is currently discussed in
the mainstream debate in the United States. We’re
going to build radical theory in two parts: since
Marx’s work is a critique of capitalism, part 1 is
capitalism; part 2 is democratic socialism.
Radical theory starts with a set of questions
concerning wealth creation that should sound
very familiar to you by now. What should we
produce, how should we produce and for whom
should we produce it? We build theory with three
components: assumptions, model, and conclu-
sions. After we build the theory of capitalism from
the radical perspective, we’ll discuss the policy
that emerges from the conclusions. Then we’ll do
the same for democratic socialism.
Assumptions
As you will recall, assumptions are statements
that don’t have to be proven; they are self-
evident “givens” about human nature and the
natural world. These can be applied to capitalism,
democratic socialism, or any economic system.
The first radical assumption is that there is a
surplus. To break it down for you, just imagine
that in every generation there are people who
can’t produce anything—infants, disabled people,
the elderly, and so forth. So how do they manage
to survive? Every society has members who pro-
duce more goods and services than they need for
their own personal survival. That’s the surplus. If
you produce wheat, or shoes, or medicine, you
don’t just produce enough for you; you produce
more than you can consume as an individual.
Radicals assume that surplus is produced no mat-
ter what the economic system (feudalism, mer-
cantilism, capitalism, democratic socialism, and so
forth), and that this has been true since humans
first came into existence. It’s self-evident, they
say, since it’s the only way human society could
possibly have survived and reproduced itself over
time. At different times in your life your survival
has and will depend on the surplus produced by
others.
The second assumption of radical theory is
class process. This simply says that, when it
comes to surplus, there are differences between
who makes the surplus (production), who takes
the surplus (appropriation), and who ultimately
gets portions of the surplus (distribution). Class
process wouldn’t be an issue if you were the only
one on your deserted island. In that case, you
would be all three—the maker, the taker, and the
getter of the surplus. But in human society it’s
more complicated than that. For example, in feu-
dalism a surplus of food is produced. The serfs
make it, the lords take it, and they distribute some
of it to the knights, who keep the serfs in line and
maintain the feudal system. In a slave economy
the slaves make it, and the slave owners take it
and distribute some of it to the overseers, politi-
cians, and law enforcement—those who maintain
the slave system. In Soviet-style communism the
workers make it, and the state takes it and distrib-
utes some of it to the military, bureaucrats, and
politicians—those who maintain the communist
system. In our current economic system—capital-

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120 | Voices On The Economy
ism—the wage laborers make it, and the owners
take it and distribute some of it to the manag-
ers, lawyers, and politicians—those who maintain
the capitalist system. In democratic socialism the
worker-owners make it and take it, and then they
distribute some of it to themselves, to commu-
nity institutions, and to government—all of which
maintain democratic socialism.
The third assumption of radical theory is that
there are dynamic interactions over surplus.
People struggle over the production, control,
and distribution of the surplus because every-
one wants to get their hands on it. Regardless of
the economic system, there’s always going to be
conflict over the surplus, say radicals. To picture
this, imagine the Super Bowl. You know what
happens at kickoff: every player on both teams
scrambles at top speed to claim the most advanta-
geous position to take control of the football (the
surplus). The desire to catch that ball and control
it is the force that compels the players to race
around the field. Everyone is driven to interact in
whatever ways will help them get the ball. A foot-
ball game is an easy way to picture dynamic inter-
actions over surplus. Players block and tackle one
another to the ground as they each try to be the
one to control the ball. But let’s also consider the
host of other dynamic and contradictory forces
at work in the background of the game—factors
that influence who succeeds. There’s the weather,
the players’ training and equipment, interpersonal
relationships among teammates, rivalries between
teams, old injuries, the screams of the fans, the
quality of sleep the players had the night before,
the time of day, the position of the sun, the coach’s
mood, the referee’s allergies, and more. Many
people really love to watch football because they
are fascinated by the complex interweave of all
these dynamic forces—competition, cooperation,
harmony, discord, and skill, among others. When
it comes to surplus, however, it’s not a game, say
radicals. The stakes are life-and-death. Who gets
food and shelter, healthcare, and everything else,
and who doesn’t get those things, will determine
who survives and who perishes.
Although many radicals might not term it this
way, class process and the dynamic interactions
over surplus are driven by people’s desire to take

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Chapter 5: Radical Theory | 121
care of the needs of themselves, their families, and
their friends. In other words, it assumes that we
each have a self-interested stake in who makes it,
who takes it, and who gets it. Radicals say self-in-
terest in capitalism grows into a destructive force,
while in democratic socialism it grows into a ben-
eficial force that recognizes that our well-being is
intrinsically connected to the well-being of others.
In other words, self-interest is mutual interest.
Model
Economics studies human society and social
relationships. Of course, economists from all the
perspectives understand that the world is a very
complex place, with countless factors constantly
at play—human psychology, history, biology,
the weather, family dynamics, demographics,
technology, and much more. They all consider
economic relationships as being one part of a vast
and complex social totality, which comprises
all the dynamic social relationships that coexist
and impact one another constantly. How radicals
depart from conventional theory is by holding
this holistic view of economics at the forefront
of their model. They look at economic issues in
the context of the complex interactions among
everything in the social totality because every
individual part of the social totality, including the
economy, is influenced by and has an influence
on every other part.
If this is hard to picture, think about health
care. Radicals say you might assume the system
we have now is just normal and the way it’s sup-
posed to be. But when your grandmother was a
girl, the pediatrician made house calls. Fifty years
ago, no one thought it made any sense to bring
a child with a high fever to an urgent care cen-
ter. In fact, those didn’t even exist. Sick children
stayed at home in bed with soup, and then the
doctor showed up with a bag of instruments and
did the exam right there. There was no WebMD
where parents could look up symptoms online
and double-check that the doctor diagnosed their
child correctly, because there was no internet.
Radicals say our health-care system is the result
of a complex intersection of economic, sociologi-
cal, psychological, scientific, biological, and other
factors. They say in twenty years health care will
look quite different from the way it looks today,
as will education, transportation, and everything
else. Everything is constantly changing and con-
tinually in flux, and everything influences every
other thing to the point that it wouldn’t exist in
this particular way without those influences.
If your head is spinning right now, you’re not
alone. Social totality is a huge idea, and radicals
know that it can seem chaotic and unmanageable.
Here’s something that will help.
Have you ever seen a Rubik’s Cube? It’s a six-
sided puzzle that was invented in 1974 and quickly
became wildly popular. (This was before video
games and phone apps.) The standard size has
nine colored squares on each side of the cube.
The goal is to twist and turn the rows so that you
land all the same-colored squares together—one
side all yellow, another side all green, and so on.
But here’s the frustrating catch: every time you
turn a row, every facet of the cube changes con-
figuration. You can’t move just one square without

On a standard three-by-three Rubik’s Cube,
there are more than forty-three quintillion pos-
sible combinations of colored squares. This
would make it the most frustrating puzzle ever
invented if not for one small detail: the middle
squares of each of the six sides of the cube are
fixed points. In other words, those six core points
never move, but all the other colored squares
twist and shift around them. Once you know that
everything else moves around these fixed cen-
ter points, you can solve the puzzle quite easily.
A seventeen-year-old from the Netherlands set
a new world record in 2014, solving the Rubik’s
Cube in 5.55 seconds. (That same year, someone
else set the record for solving the Rubik’s Cube
using only his feet. It took him 25.14 seconds.) If
you smashed the Rubik’s Cube, all the moveable
squares would fall away, and you’d be left hold-
ing the six core points.
The VOTE Program uses the Six-Core Cube to
represent the radical model (just as conventional
theory uses the market graph). Because the radi-
cal model has two parts—describe capitalism and
describe democratic socialism—there is a Six-
Core Cube of capitalism and a Six-Core Cube of
democratic socialism. The social totality is exactly
the same in both economic systems, but their six
core points differ.
Radical Theory Model: Capitalism
Earlier you read that radicals believe that in
every economic system a surplus is produced.
Let’s first model the assumption of surplus to see
how it occurs in capitalism.
Labor Theory of Value
Imagine a world where someone owns a
chocolate bar factory. They buy the mixing
machines and the wrapping machines. They buy
the sugar, milk, and cocoa. Now they have to hire
wage laborers to run the machines that mix the
ingredients to make the chocolate bars.
A worker applies for a job at that factory. The
owner will try to get the worker to labor for the
lowest possible wage, while the worker will try
to get the owner to pay them the highest possi-
ble wage. Their conversation might seem cordial,
but radicals say the owner and worker are actually
locked in a struggle over who will gain the most
benefit. They struggle over what the wage should
be, what vacation time the worker will get, how
many hours of labor the worker will provide, and
how much sick leave they will earn over time. Rad-
icals say that in capitalism the owner will always
give the worker the lowest possible wages and
benefits in order to maximize the firm’s profit, and
the worker will always want the highest possible
wages and benefits in order to live a good life.
There are two categories of workers, according
to Karl Marx. He said a productive worker is

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Chapter 5: Radical Theory | 123
one who works with machines and raw materi-
als to make something that can be sold. Unpro-
ductive workers are those whose labor doesn’t
directly produce a good or service that can be
sold, but who are crucial to the business, none-
theless. Unproductive workers include janitors,
managers, administrative assistants, bookkeepers,
and other support workers, as well as the factory
owners, who bring together the resources and
enable the process of production. So now, let’s
say the chocolate bar factory owner and worker
agree that the worker will make chocolate bars
for $20 per hour, working for ten hours a day.
The owner pays the worker $200 a day to pro-
duce chocolate bars on their machines using the
ingredients they bought. The costs for materials,
machines, and nonproductive workers, includ-
ing the owner’s salary, total $3,000 per day. In a
ten-hour shift the productive worker makes four
hundred bags of chocolate bars, which the owner
sells for $10 a bag. In those ten hours the total
revenue earned is $4,000, and after the owner’s
costs of $3,000, the productive worker’s labor
added $1,000 of value. A quick summary of this
is in figure 5.2.
Those machines and ingredients didn’t get
together and mix themselves. The productive
worker’s labor brought them together and turned
them into chocolate bars that are worth more
than the components parts are worth individually.
The owner paid the worker $200, which radicals
call necessary labor. It was determined through
that silent struggle to be the necessary amount
the owner had to pay to get the worker to come
to work, and the necessary amount the owner
will have to pay to get the worker to come back
to work again tomorrow. The leftover $800 is
called surplus labor. Since in capitalism it takes
the form of money (in other words, it’s not bags
of chocolate bars), Marx called it surplus value
and wanted us to recognize that it is the labor of
productive workers that creates the surplus. Rad-
Figure 5.2
The Labor Theory of Value
Example: Chocolate (bags per day)
Owner (capitalist) hires a factory worker $20/hour
Worker works 10 hours $200
Costs (raw materials, capital,
support workers)
$3,000
Final product $10/bag
400 bags per day $4,000
Surplus Value
(source of surplus value is unpaid labor)
$800
$200
(Necessary Labor)
$800
(Surplus Labor)
$1,000

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icals model surplus using this labor theory of
value, which shows that productive labor creates
the surplus.
Workplace Exploitation
Now let’s model the radical assumption of class
process—who makes the surplus, who takes the
surplus, and who gets shares of the surplus. In
capitalism it’s the productive worker who makes
the surplus. The worker is also known as the
proletariat or laborer. In capitalism it’s the owner
who takes the surplus. Owners are also called
capitalist and bourgeoisie. So back to figure 5.2,
check out the bottom line that represents that
$1,000 of value created by the productive worker.
The owners pays $200 in agreed-upon wages to
the worker. But what about that other $800? The
owner pockets it. The act of the owner taking
the surplus from the productive worker is called
workplace exploitation. Radicals say workplace
exploitation is perfectly legal and occurs all day
long, every day, worldwide. The value of people’s
labor above what they are paid is stolen every
single day, yet no one protests this theft. Not the
people whose labor is stolen, and not the people
doing the stealing. This class conflict, (or class
struggle) is so normalized that everyone accepts it
as a fact of life, and no one even thinks to change
the system. Radicals say people living in capitalism
assume that exploitation is as inevitable and
unchangeable as gravity. We don’t even question
it. In fact, we only see two choices: to be exploited
or to be the one doing the exploiting. According
to radicals, the vast majority will choose to be the
owner—the boss, the exploiter—and this is how
capitalism perpetuates itself.
When radicals use the word exploitation, they
mean only that the surplus value of labor is stolen
from the laborers by the owners of capital. But this
word has become a catch-all phrase to refer to a
whole variety of abuses, and radicals say this has
exacerbated the problem because it makes work-
place exploitation even more invisible. For instance,
owners may create unsafe working conditions, give
wage laborers slop to eat at lunchtime, and keep
the bathrooms locked except during breaks. Rad-
icals say that while these behaviors are appalling
and probably illegal, we should use the terms abu-
sive, immoral, or wrong, but we shouldn’t call them

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exploitation. This is not just a random vocabulary
lesson. Radicals believe there needs to be one spe-
cific word for the act of stealing from wage laborers
so that workers can finally recognize what’s hap-
pening and rise up together to change the system.
Finally, who gets the surplus in capitalism? The
owner of the chocolate bar factory takes the sur-
plus but doesn’t keep it all for themselves, say
radical theorists. They give a portion of it to the
factory managers, since the owners may not live
in the towns where their factories are located, and
even if they do, they can’t be everywhere at once
in the workplace. Managers make sure the wage
laborers are not stealing cocoa or slacking off.
And owners need to be certain the wage laborers
can’t sue them, so they give some of the surplus
to lawyers to write employment contracts in the
owners’ favor. They give a portion of the surplus
to the accountants to show the profit as a return
on their investments and not as theft. They also
need to ensure that there aren’t too many expen-
sive regulations and taxes imposed on the choco-
late bar industry by government, so some of that
surplus goes to support whichever political parties
are in power and to lobbyists who promote their
industry’s interests. Radicals say those managers,
lawyers, accountants, and lobbyists—in addition to
owners—get portions of the surplus, which moti-
vates them to maintain the capitalist system.
Capitalist Competition
To model the third assumption, the dynamic
interactions over surplus in capitalism, we
need to describe capitalist competition. While
workplace exploitation describes the struggle that
takes place between owners and wage laborers,
capitalist competition describes the struggle that
takes place among capitalist owners. People often
use nature metaphors to talk about this kind of
competition—“It’s a jungle out there,” or “It’s a
dog-eat-dog world,” or “You’re either the shark
or you’re shark food.” Capitalist competition is a
matter of survival. For example, if one chocolate
bar factory owner decides to dump compostable
waste in the landfill to save money, all the other
chocolate bar factory owners will be pressured
to dump their waste in the landfills as well so
they can stay competitive. If they can’t stay
competitive, they will be driven out of business.
Radicals are often accused of painting owners as
greedy people who are only interested in lining
their own pockets with profits and flying around
in private helicopters. But radicals say that’s not
true. They believe owners can be perfectly nice
people—and probably are—but owners are
caught in a system (capitalism) that forces them
to make harmful decisions in order to maximize
their profit because they are competing with all
the other owners in their industry. The stakes are
high. Everyone wants their firm to stay in business.
Joining Workplace Exploitation with
Capitalist Competition
When we join workplace exploitation and
capitalist competition, we get the pressure for
bad: owners are motivated to do the wrong thing.
They make decisions that value profit over the
well-being of people and the planet, and as a
result the social totality is impacted in negative
ways, say radicals. Let’s look at six scenarios that
describe how the pressure for bad works.
Scenario 1: The Rich Get Richer. A chocolate
bar factory owner is golfing with the owner of a
rival firm and says, “I just bought those new pack-
aging machines, and now we’ve boosted our pro-
duction.” His competitor considers the implications
of buying even more machines for her factory—
what Marx called the accumulation of capital.
“I’m all for improving our efficiency,” she says,
“but think about the serious consequences if we

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all buy those machines and we all boost our pro-
duction. My employees will produce twice the
chocolate bars on those new machines at their
same hourly wage, so I’ll be increasing the level
of workplace exploitation and creating higher
and higher levels of income inequality. And with
those new machines increasing production, we
would lay off unnecessary workers and save even
more money. But should we penalize workers
who have been doing an exemplary job? With so
many out of work, it will drive down the wages
of the workers who remain because unemployed
workers will be lining up for their jobs.” Marx
called them the reserve army of the unem-
ployed. “That feels wrong,” she says.
“So don’t do it,” says her competitor.
But if she doesn’t do it, and he does, and so do
all the other chocolate bar factory owners, then
her firm won’t survive. So she will do it. That is
the pressure for bad. Radicals say that because
of private ownership of the means of produc-
tion, capitalism causes increased levels of worker
exploitation, greater and greater income inequal-
ity between owners and wage laborers, and
higher rates of unemployment.
Scenario 2: Gaming the System. Two choco-
late bar factory owners are old friends from business
school. They meet for coffee and one tells the other,
“I’m getting ready to launch a new line of sugar-free
chocolate bars. We’re using a new, less-expensive
sweetener that’s still controversial, but as soon as
we convince the FDA to approve it, we’re going to
make a bundle. Our lobbyist down in Washington
says we’ll get the green light next month with a few
campaign contributions in the right pockets. We’ll
be able to increase our profits exponentially!”
Her colleague has read the preliminary stud-
ies on that sweetener, which show that it can be
dangerous for people with diabetes. “If it could
harm consumers, then it shouldn’t be approved,”
he thinks to himself. “I certainly don’t want my
chocolate bars to harm anyone.” He tells her, “I
don’t want to pressure a government agency to
approve a potentially unsafe product.”
“Then don’t do it,” she says.
But he will do it—because of the pressure for
bad. If his firm doesn’t switch to the cheaper
sweetener when it gets approved, then his costs
will be higher than his competitors’ costs. They
will undersell him, and his company won’t sur-
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vive. Radicals say that in capitalism decisions are
in the hands of a few—top-down governance—
so we’ll get unsafe products.
Scenario 3: Kicked to the Curb. At a confec-
tioners’ trade show, the owner of a chocolate bar
factory meets a competitor from another state. He
tells her, “Even though sales are down, our num-
bers look good because we cut our company’s
pension plan.”
She is appalled by this revelation. “My work-
ers have been with my company for generations,”
she says. “I don’t want to take away their retire-
ment security.”
“So don’t do it,” he says.
But she will—because of the pressure for bad.
If she doesn’t do it but all her competitors do,
then she won’t be able to compete, and she’ll
go out of business. Radicals say that in capital-
ism individuals are at risk, and workers are not
assured of having a safe and secure retirement.
Scenario 4: Go Big or Go Home. A chocolate
bar factory owner and a competitor meet for lunch.
She says, “Our firm is struggling, so I’m going to run
ads that convince people that chocolate bars make
them sexier, sportier, happier, healthier, and smarter.
I’ve lined up a marketing firm to spread this idea,
and we’re funding research to ‘prove’ that people
can raise their IQs by eating our chocolate bars.”
Her competitor thinks to himself, “That’s just
wrong!” Aloud, he says, “You know, I think of
myself as a person who is bringing a little sweet-
ness into the world and giving people a quality
product. But if I knowingly lie about the bene-
fits of chocolate bars, I won’t be able to sleep at
night. I don’t want to do it.”
“So don’t do it,” she says. “We’ll make sure the
ads say those benefits are specific to our brand,
and when our ad campaign succeeds, we’ll buy
your company out from under you.”
So he will do it—because of the pressure for
bad, he can’t afford not to. Radicals say that pro-
duction for profit brings us products that are nei-
ther beneficial nor useful. We end up with public
health crises and unfair competition.
Scenario 5: Planet in Peril. Two chocolate
bar factory owners meet at a sales conference.
One says, “Our new conveyor belt system is so
efficient that we doubled production this quarter.
If you want to stay in the game, you should get
on board with this new machinery.”
Her competitor says, “Wait a minute: if we dou-
ble production, we’ll all need a lot more resources.
Dairy farmers will have to raze the forests to make
room for more cows to get us the milk we’ll need.
And we’ll need to double the size of our fleet of
trucks to distribute all that chocolate, which means
we’ll be creating more carbon pollution.” He tells
her, “I’m just not comfortable participating in
something that has so many detrimental outcomes
for our society. I don’t want to do it.”

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She says, “So don’t do it.”
But he will do it because of the pressure for
bad. If he doesn’t, and she and all the other fac-
tory owners do, then his firm won’t be able to
survive. Radicals say that in capitalism unsustain-
able production depletes resources, harms the
environment, and is shortsighted because capi-
talists are more concerned with making a profit
right now than with planning for a healthy future.
Scenario 6: Race to the Bottom. A chocolate
bar factory owner hears that competitors are plan-
ning to move to countries with cheaper labor. His
company has been an anchor in the community
for fifty years, employing nearly half the adult pop-
ulation—not to mention all the business it gives to
local office supply firms, electricians, and plumb-
ers. The taxes his firm pays go to fund the local
schools, parks, and roads. If he moves the factory
overseas, the community will become a ghost
town. He calls a competitor to share his concerns.
“So don’t do it,” she says.
But he will—because of the pressure for bad.
If he stays and all the other firms move, he won’t
be able to compete, and his firm will go out of
business. Either way, the owner will hurt the com-
munity. So, reluctantly, he moves his factory to a
developing nation, and so do the other chocolate
bar factory owners. Now they only have to pay $5
per hour for labor instead of the $20 they were
paying. A few years later, if they find a country
where they can pay $1.50 per hour, it will make
financial sense to abandon the new community
and move there next. Radicals say that in capital-
ism destructive globalization leads to unhealthy
communities around the world.
Representing the Pressure for Bad
The Rubik’s Cube we showed earlier in the
chapter describes the radical perspective’s holistic
view of the economy—when one part of the
social totality shifts around one of the six core
points, every other part is affected. Capitalism’s
six core points are problematic, say radicals,
because no matter how you try to twist and turn,
they create the pressure for bad, so we’ll never
solve our economic problems.
Radical Theory’s Six Core Points
of Capitalism
1. Private Ownership: Owners (capitalists) buy
the machinery and then hire wage laborers to
produce on those machines while they pay the
wage laborers less than the value they create.
2. Top-Down Governance: Government is
structured in such a way that decision-mak-
ing is in the hands of a few, and people are
not empowered to make decisions beyond
their occasional vote in an election.
3. Individuals at Risk: Basic human needs are
not guaranteed, so people live in fear and
worry about their material well-being—health
care, food, education, housing, and so forth.
4. Production for Profit: Firms make things
that bring them the most profit, regardless of
whether or not those products are necessary,
useful, or safe.
5. Unsustainable Production: Firms produce
without considering the long-term effects of
their products and production processes on
the environment and humanity, which puts
the well-being of future generations at risk.
6. Unhealthy Communities: Firms fail to take
into account the impact of the production,
consumption, and distribution of their prod-
ucts here and around the world, resulting in
a host of harmful outcomes to individuals,
communities, and the environment.

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ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Figure 5.3
Radical Model of Capitalism
The Drive for Profit and the
Visible Suffering
The six core points of capitalism guide
countless decisions in the social totality. They
exert a pressure for bad that motivates owners,
government officials, and others to value profit at
the expense of the well-being of people and the
planet. Radicals say we just have to look around
us to see that the pressure for bad leads to the
visible suffering: poverty, hunger, sickness, wars,
climate crises, inequality, debt, and more. They say
capitalism is a destructive economic system that’s
killing our planet.
Imagine you’re an alien from outer space, hover-
ing above Earth in your spaceship. When you peer
down at the planet through your giant unblinking
alien eye, you see masses of humans living in des-
perate poverty. Your eye swivels one way, and you
see that some of those earthlings are working at
the planet’s worst jobs—sometimes two or three
jobs—yet they don’t earn enough to feed their chil-
dren. Your eye swivels the other way, and you see
that some humans have pantries and refrigerators
full of food that’s spoiling because they can’t eat it
all. Baffled, you zoom your ship closer to the atmo-
sphere to take a better look. You see a prosperous
city, yet there are people living under plastic tarps
in parks, under bridges, and in cardboard boxes in
filthy alleyways. All around them, you see houses
and apartments lying empty. This confuses you,
and you wonder if perhaps you’re not understand-
ing human society because you’re still too far away.
So you zip on your human suit, and, disguised as
one of them, you walk the streets. You discover
that earthlings have marvelously advanced medi-
cal technology and gleaming hospitals with state-
of-the-art instruments. Yet masses of people still
suffer because they can’t afford health care. They
die slowly and painfully from conditions that could
be easily treated. Some are children. Deeply con-
fused and distraught, you return to your ship. You
can’t imagine why the visible suffering exists when
clearly the lovely blue-green planet has everything

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necessary to take care of everyone’s basic human
needs. As you turn your ship away from Earth, you
think to yourself, “What a waste!”
Radical Theory Conclusions:
Capitalism
Now that we’ve created the model for radical
theory’s critique of capitalism, let’s take a look
at the conclusions that radical theorists draw
from it. Remember, the model answers the
original questions:
What to Produce?
The model shows that in capitalism firms pro-
duce what serves their profit interests, regardless
of whether or not it is something beneficial or
what people actually want. By distorting people’s
preferences through advertising and questionable
research, for example, firms manipulate consumers
into thinking they need what the firm makes and
convince people they are getting what they want.
Firms must always look for ways to hook consum-
ers to want more. This happens because capitalism
is a system that values profits over people.
How to Produce?
The model shows that in capitalism firms gen-
erate output at an unacceptable cost to society.
The problem is not that capitalism is a system that
creates wealth, say radicals—it does create the
untold wealth that was promised by Adam Smith.
But the pursuit of that wealth in the context of the
drive for profit leads to unacceptable costs.
For Whom to Produce?
The model shows that in capitalism wages don’t
reflect what workers contribute. Workers create the
surplus through their labor, but the fruits of their
labor (the surplus value) is stolen from them. The
surplus value goes to those who maintain and per-
petuate the capitalist system. These are the groups
that prosper under capitalism. They get to buy
more than they need—two homes, six cars, clos-
ets full of things—while most workers can barely
afford the necessities of life.
Alienation
Living in a capitalist society, we can understand
why we often feel so bleak, disconnected,
isolated, and estranged from one another, say
radicals. It’s because success is measured by the

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bottom line. Radicals believe profit is important
because it creates opportunities for people to
flourish and innovate. But when we’re pressured
into chasing the almighty dollar and grabbing
short-term gains while ignoring the long-term
ramifications of our choices, everyone suffers.
That includes the people who are exploited and
the people who make their profit off the sweat
of others. Radicals say that capitalism’s drive for
profit—valuing financial gain over the well-being
of people and the planet—creates an unhealthy,
destructive, singular focus that undermines
peace and harmony, a clean environment, safe
communities where everyone can flourish, and
meaningful connections to our fellow humans.
In capitalism, the absence of connection to
one’s work, to one’s workplace, to what is made,
and to one another is called alienation. Radicals
say that this experience arises in four ways:
! Workers have no control over or rights to the
products they make. Their labor is treated like
a commodity, no different from any other input
that’s bought and sold, as if there’s no differ-
ence between a worker and a machine.
! Since capitalism sets people up to compete
with one another for the job, for the raise, for
the extra shift, for the manager’s approval, for
the owner’s largesse, for the market share, and
so forth, people become isolated and estranged
from one another.
! Workers are alienated from the decisions their
firms make about production and the ways in
which those decisions (and products) impact
the community and the wider world.
! Workers are alienated from what Marx believed
was intrinsic to human nature: to want to con-
tribute meaning, beauty, and usefulness to
shape the world according to our vision and
values. Radicals say that capitalism frustrates
this inherent need each person has, and in the
process drains us of our humanity.
Radical theorists conclude that when self-inter-
est is planted in the soil of capitalism, self-interest
becomes destructive and leads to alienation. They
say capitalism is based on a set of perverse incen-
tives that actually undermine the connection that
people truly want and need.
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Radical Theory Policy: Capitalism
Based on their conclusions, radicals say
we should reject capitalism as an economic
system. Historically, humans have had a variety
of economic systems, and when Adam Smith
first popularized capitalism, it was embraced as
an improvement over feudalism, mercantilism,
slavery, and other flawed systems. While Marx
agreed that capitalism created unprecedented
levels of wealth, he also said it created
unacceptable levels of destruction and suffering.
Therefore, capitalism is not the answer for human
well-being. He wrote, “The modern bourgeois
society that has sprouted from the ruins of feudal
society has not done away with class antagonisms.
It has but established new classes, new conditions
of oppression, new forms of struggle in place of
the old ones.” Radicals today agree that there are
better options—other economic systems that will
bring us maximum well-being and end the visible
suffering of capitalism.
Radical Theory Model:
Democratic Socialism
Some modern radicals believe democratic
socialism is the best system to solve the problems
that we experience in capitalism and bring us the
levels of wealth and well-being that we all want.
Let’s now build the model of democratic socialism.
Collective Creation of Value
To model the assumption of surplus in
democratic socialism, let’s describe how radicals
understand the way surplus is created. In a
democratic socialist system the worker-owners
come together to produce goods and services.
Regardless of the different roles workers have
within the firm—machinist, accountant, designer,
rock star, forklift operator, choreographer, and
so forth—surplus is created when productive
labor is applied to raw materials and machines.
Think of yourself making lattes in your worker-
owned coffee shop, using your labor to operate
the espresso machine to turn the coffee beans
and milk (raw materials) into delicious coffee
beverages. Or think of a rock band creating
surplus by playing guitars, drums, and keyboards
in a theater to entertain people who purchased
tickets. You get the picture. This is called the
collective creation of value.
Workplace Justice
After the costs—salaries, raw materials,
machines, utilities, concert T-shirts, and all the
other expenses—are paid, there is a surplus.
The assumption of class process in democratic
socialism (who makes the surplus, who takes the
surplus, and who gets the surplus) is that when
workers have an ownership stake in the firm, they
decide these things cooperatively. In democratic
socialism, worker-owners not only make the
surplus, but they also take the surplus. Radicals
say that when there is no distinction between the
makers and the takers, there is no theft (workplace
exploitation). Instead, there is workplace justice.
And the worker-owners decide together, using
a democratic process, who gets the surplus. For
example, they might vote to use it to expand
and reinvest in the firm (purchase some sweet
new amplifiers, in the case of the rock band), to
create an emergency fund, or for philanthropy.
Just as capitalists give some of the surplus to
politicians and others who perpetuate capitalism,
democratic socialists also make sure surplus goes
to perpetuate democratic socialism, which means
cooperatively owned enterprises hire lawyers,
industry advocates, and accountants. Some of the
surplus goes to the community through taxes to
provide universal access to the things necessary to
survive and thrive, including health care, education,
transportation, housing, childcare, and retirement
security. Radicals say this distribution of the surplus
raises the standard of living for everyone.

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Because the worker-owners use a democratic
process to decide how to divide the surplus
among themselves as salaries, there is usually a
limit to how much the highest-paid worker can
earn compared to the company’s lowest-paid
worker. The worker-owners establish a pay scale
based on factors such as whether the position is
full time or part time and the worker’s seniority,
skill, education, and experience. They decide
whether or not to have a base pay for every
worker, and whether they want to use some of
the surplus to give themselves bonuses.
Coordination among Competitors
To model the assumption of the dynamic
interactions over surplus in democratic socialism,
we need to describe coordination among
competitors. While workplace justice describes
the relationships among worker-owners,
coordination among competitors describes the
way firms compete and cooperate for the greater
well-being of society. People often use metaphors
for teamwork to describe coordination—“Many
hands make light work,” or “In unity there is
strength,” or “No person is an island.” Coordination
is a matter of survival because we all depend on
one another for our continued existence and
for our success. For example, worker-owned
chocolate bar firms might coordinate to create a
composting program so their landfills don’t get
overloaded and produce methane gas, which is a
hazard to everyone’s health and the planet.
Radicals are often accused of not caring about
profit, but they say that’s definitely not the case.
They understand that profit is very important for
keeping businesses afloat. However, while it’s
vital to the success of any enterprise, profit is not
the most important driver of well-being. Firms
need profit to succeed financially, but ultimately,
“success” means being a positive force in the world.
Radicals are also accused of painting worker-
owners as saintly people who have no interest in
profit and are driven purely by altruism, but radicals
say that’s not true. They believe worker-owners
can be selfish and even unpleasant people—and
some probably are—but they are part of a system
(democratic socialism) that pressures them to make
decisions that benefit society because they live in
the communities where they work and they are
accountable to one another.

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Joining Workplace Justice with
Coordination among Competitors
When we join workplace justice and
coordination among competitors, we get the
pressure for good: worker-owners are motivated
to do the right thing. They make decisions that
value people and the planet over profit, and as
a result the social totality is impacted in positive
ways. Let’s look at six radical scenarios that
describe how the pressure for good works.
Scenario 1: More than a Paycheck. A choc-
olate bar factory worker-owner is golfing with a
worker-owner from a competing firm and says,
“Our firm just bought those new packaging
machines, and they’re so efficient that our pro-
duction has shot up. We just voted to give every-
one in the company raises next quarter. And with
some of the profit we’re going to invest in expan-
sion and create more positions in our firm.”
His competitor says, “That sounds amazing. At
our next cooperative meeting I’m going to sug-
gest we vote on buying those machines too.”
“You should do it,” he says. “It’s good for our
whole community if all our firms do well.”
Radicals say that because of cooperative own-
ership of the means of production, democratic
socialism ensures just compensation, more equi-
table income distribution, and stable jobs.
Scenario 2: Of the People, by the People,
for the People. A worker-owner of a choco-
late bar firm meets an old friend from business
school who is also a worker-owner in a chocolate
bar firm. She says, “Did you read the latest news
report about some of our competitors? The new
sweetener they’re using in their sugar-free prod-
uct lines are making people sick. The government
convened a Product Safety Council with scientists,
public health experts, and representatives from
firms and consumer groups. They decided that all
candy producers will need to test new sweeteners
more extensively before we can send our prod-
ucts to market.”
Her friends says, “I’m glad to hear it. We all want
to be safe. Let’s get our firms to work together to
develop a testing process. It will be more effi-
cient, and we can share our ideas with the council
delegate from the chocolate bar industry. I think
we’ll have valuable expertise to offer.”

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Radicals say that in democratic socialism partic-
ipatory governance—decision-making that occurs
through collaborations among community, firms,
government, and other stakeholders—brings us
safe products.
Scenario 3: We Have Each Other’s Backs.
At a confectioners’ trade show, a worker-owner
in a chocolate bar factory meets a competitor.
He says, “Our company offers generous benefits,
including a supplemental pension plan and early
retirement options. Of course, our firm also pays
into the universal retirement fund that takes care
of everyone. We all do. Now we’re negotiating
with a cooperatively owned elder-care firm to see
if we can get a day program started for our most
vulnerable retirees.”
“That sounds like a great benefit,” she says.
“What if our firm goes in on that with you? We
could probably get a better deal if there are more
of us and we would bring the care company
more business.”
Radicals say that in democratic socialism there
are social safeguards that guarantee that people
will have a secure and dignified retirement.
Scenario 4: The Right Stuff. Two choco-
late bar factory worker-owners meet for coffee.
“My firm is struggling,” says one. “We’re hoping
business turns around with our new marketing
campaign for chocolate protein bars. There’ve
been all those new studies on the importance of
protein, and we’re playing up the health benefits
of chocolate when it’s eaten in moderation. We
think this could be a game-changer for the candy
industry.”
Her colleague says, “I’ll talk to my fellow work-
er-owners and see what they think, but I like the
idea of adding a healthier product to our line
as well.”
Radicals say that in democratic socialism firms
produce for use, making things that are beneficial
and helpful.
Scenario 5: Save the Earth. Two acquain-
tances meet at a sales conference. Both are work-
er-owners of chocolate bar firms. One says, “Our
firm invested in a new conveyor belt system, and
we could easily double our production. But some
of us are worried about the long-term effects of
higher production. For one thing, the dairy farm-
ers will have to cut back the forest to create more
grazing land for the cows, and this will hurt the
environment. We figured out that our firm can
easily meet our revenue goals for this fiscal year

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if we only work four days a week with the new
machines. At our next worker-owner meeting, I’m
going to propose that instead of producing more,
we each take off one day a week.”
“That sounds awesome!” his competitor says.
“We bought a new packaging machine, and it’s
speeding up our production. I’m worried about
adding more trucks to our fleet and increasing
our firm’s carbon footprint. I’ll bring your idea
back to my firm. An extra day off would give us
more time to be with our families and do volun-
teer work in the community.”
Radicals say that in democratic socialism coop-
eratively owned firms produce sustainably, pro-
tecting the environment for generations to come.
Scenario 6: Think Globally, Act Locally. A
worker-owned chocolate bar factory is visited by a
trade representative from Central America who tells
the worker-owners about a cooperative of indig-
enous cacao bean growers who keep the profits
from their own businesses. “I think we should sup-
port them by buying their product,” says one work-
er-owner. “If a majority agree, let’s bring this up at
our national association meeting and see if we can
get other firms to start sourcing their beans from
growers that are cooperatives.”
Another worker-owner says, “It will be more
expensive than what we’ve been paying, but
there are troubling reports that some producers
we’ve been buying from are using child labor. I
don’t think our firm should support that.”
“I agree,” says another worker-owner, “and I
think we should let those other growers know
why we’re not going to be giving them our busi-
ness anymore. Let’s use our buying power to
pressure them into ending that practice and tak-
ing care of their communities.”
Radicals say that in democratic socialism a
commitment by firms to healthy communities—
their own and those where they do business—
promotes safe and thriving communities around
the world.
Representing the Pressure for Good
The Six-Core Cube of democratic socialism
(figure 5.4) represents the radical model’s view
of the vastly complex relationships among the
systems of human society. It models the way
every part is impacted when one aspect shifts—
as farming whirls past immigration, it crosses
anthropology, slides past markets, and dips under
the federal budget, and so forth. Remember, all
these components of the social totality swivel
around the middle squares of the cube, which are
the six core points of the cube. The six core points
below describe the pressure for good in democratic
socialism and how the social totality is impacted.
Radical Theory’s Six Core Points of
Democratic Socialism
1. Cooperative Ownership: People come
together collaboratively as joint owners of
their firms, housing, public utilities, and so
forth, making decisions about policies and
structures through a democratic process of
one person, one vote.
2. Participatory Governance: Decisions are
made by councils convened by public officials,
with members including experts, representatives
from cooperatively owned firms, special inter-
est groups, the community, and others. Com-
munity councils serve the interests of society in
ways that are transparent and accountable.
3. Social Safeguards: Basic human needs
are both a right and a responsibility. Things
like water, electricity, higher education,
health care, housing, and transportation are
supported by the whole society to bene-
fit everyone.
4. Production for Use: The driving force for
firms is to produce things that people need

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Chapter 5: Radical Theory | 137
and that improve their lives, rather than
producing for the sole purpose of making
a profit.
5. Sustainable Production: Firms use best
practices to produce in such a way that
resources will continue to be viable for gen-
erations to come.
6. Healthy Communities: Firms take into
account the impact of production, consump-
tion, and distribution of their products around
the world, resulting in a host of beneficial
outcomes to individuals, communities, and
the environment.
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
Figure 5.3
Radical Model of Democratic Socialism
The Invisible Synergy
The six core points guide countless decisions
in democratic socialism. They are a pressure for
good that leads democratic socialist societies
to prioritize the well-being of people and
the planet even when it cuts into their profits.
The pressure for good leads to the invisible
synergy. Synergy is a word from Greek that
means “working together.” In quantum physics,
synergy describes the phenomenon of two
things coming together to create something
greater than the sum of its parts. Synergy defies
the mathematics we’ve all been taught that says
one plus one can only equal two. It arises from
people coming together as individuals, firms, and
government within the values and opportunities
of democratic socialism. Without central planning
or any person or government orchestrating it, the
invisible synergy brings us more useful products
and more sustainability, say radicals. More job
satisfaction and more of our human needs met,
more accountability and transparency and more
thriving communities. The drive for well-being in
democratic socialism puts our entire planet—and
the future of humanity and every other species—
in the best possible position, according to radicals.
They say we just have to look around us to know
that democratic socialism brings us the quality of
life we all want and need.
Imagine you’re an alien from outer space, hover-
ing above Earth in your spaceship. When you peer
down at the planet through your giant unblink-
ing alien eye, you see masses of humans living in
harmony. Your eye swivels one way, and you see
that earthlings are working hard and contributing
to their own well-being and that of their families,
while at the same time benefiting the whole soci-
ety. Your eye swivels the other way, and you see
that everyone has pantries and refrigerators full of
healthy foods and none go hungry. Intrigued, you
zoom your ship closer to the atmosphere to take
a better look. You see a prosperous city where
everyone has a home because it is a basic human
right. You see humans living in a variety of hous-
ing—some of it for individuals and families, some
cooperative, and some with care for elders and
people with disabilities. You are even more curious
about human culture, so you zip on your human
suit, and disguised as one of them, you walk the

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streets. You discover that earthlings have marvel-
ously advanced medical technology and gleam-
ing hospitals with state-of-the-art instruments, and
everyone has equal access to this wonderful med-
icine because it’s a basic human right. Impressed
and inspired, you return to your ship. You realize
that there is an invisible synergy that makes human
society thrive because everyone sharing resources
and working together creates opportunities and
well-being that is more than just the sum of all the
parts. The lovely blue-green planet has everything
necessary to take care of everyone’s wants and
needs, and humans have found a way to share in
the bounty, to the benefit of all. As you turn your
ship away from Earth, you think to yourself, “What
an inspired idea!”

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Chapter 5: Radical Theory | 139
US taking steps to ban junk
food from school
WASHINGTON—The Obama
administration will begin a drive
this week to expel Pepsi, french fries
and Snickers bars from the nation’s
schools in hopes of reducing the
number of children who get fat during
their school years.
In legislation soon to be intro-
duced, candy and sugary beverages
would be banned, and many schools
would be required to offer more nu-
tritious fare.
To that end, Agriculture Secretary
Tom Vilsack will deliver a speech
today at the National Press Club in
which he will insist, according to
excerpts provided to the New York
Times, that any vending machines
that remain in schools be “filled
with nutritious offerings to make the
healthy choice the easy choice for our
nation’s children.”
First lady Michelle Obama said last
month that she would lead an initiative
to reduce childhood obesity, and her
involvement “shows the importance all
of us place on this issue,” Vilsack said.
THE NEW YORK TIMES
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Capitalism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Bad
The pressure for bad is a motivation to…
4. Expose the Visible Suffering (outcome)
Democratic Socialism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Good
The pressure for good is a motivation to…
4. Reveal the Invisible Synergy (outcome)
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Democratic Socialism
* Worker Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
Exercise 5.1: Six-Core Cube Guide
Let’s use the Six-Core Cube Guide to analyze this story from the radical perspective.
Now that you understand the six core points of capitalism and the six core points of democratic
socialism, you are ready to analyze stories you read in the newspaper and hear on the news. For exam-
ple, here is a story about the controversy around selling junk food in schools.

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! Start on the left side (capitalism). First, identify the problem. In this article, the problem is child-
hood obesity.
! Second, choose a relevant core point from the list. While you could make a case for all six, the
most relevant one is Production for Profit. Remember, that means firms make things that bring
them the most profit regardless of whether or not those products are necessary, useful, or safe.
! Third, describe the pressure for bad. This is what motivates firms, governments, communities,
and individuals. Here is where you write what happens as a result of the core point you selected.
In this case, firms produce and market unhealthy and addictive foods to young people because of
the drive for profit.
! Fourth, expose the visible suffering, which is the outcome in capitalism. In this case, when firms
produce for profit, we get public health crises.
Now let’s fill in the right side (democratic socialism).
! First, identify the problem. It will be the same as it is in capitalism, so you can write “child-
hood obesity.”
! Second, choose a relevant core point from the list. While you could make a case for all six, the
most relevant one is Production for Use. Remember, that means the driving force for firms is to
produce things that people need and that improve their lives, rather than producing for the sole
purpose of making a profit.
! Third, describe the pressure for good. This is what motivates firms, governments, communities,
and individuals. Here is where you write what happens as a result of the core point you selected. In
this case, firms produce and market delicious, healthy snacks and sodas, in moderation, to young
people because of the drive for well-being.
! Fourth, reveal the invisible synergy, which is the outcome in democratic socialism. When firms
produce for use, we get healthy communities.

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Chapter 5: Radical Theory | 141
Capitalism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3. Describe the Pressure for Bad
The pressure for bad is a motivation to…
4. Expose the Visible Suffering (outcome)
Democratic Socialism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3. Describe the Pressure for Good
The pressure for good is a motivation to…
4. Reveal the Invisible Synergy (outcome)
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Democratic Socialism
* Worker Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
Childhood obesity Childhood obesity
x x
produce and market unhealthy, addictive foods
to young people because of the drive for profit.
produce and market delicious, healthy snacks and
soda , in moderation, to young people because of
the drive for well-being.
When firms produce for profit, we get public
health crises.
When firms produce for use, we get
healthy communities.
ANSWER KEY: Exercise 5.1

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142 | Voices On The Economy
Union OKs new contract, Ending Tucson bus strike
The 42-day Tucson bus
strike ended Wednesday
when drivers, mechanics and
other members of Teamsters
Local 104 voted to accept a
new contract.
The vote was 351-41, an
89 percent approval, said
Teamsters Local 104 President
Andy Marshall.
Everyone gets a raise under
the new contract, he said, but
he wouldn’t release contract
details, saying he didn’t want
to inflame opinions of people
who are angry about the strike.
Professional Transit Man-
agement, the contracted oper-
ator of the city’s Sun Tran bus
system, also would not give
details about the contract.
There were no addition-
al city tax dollars in the deal,
which stays within the ap-
proved city budget for Sun
Tran, Marshall said. Additional
details were not immediately
available.
Sun Tran buses will be back
to a normal schedule starting
Thursday, Sept. 17. During the
strike, the number of buses and
bus routes was limited, making
for long waits in the heat.
Since the strike began, the
Tucson Unified School Dis-
trict has been providing bus
service to high school students
who rely on Sun Tran to get to
class. Though full Sun Tran
service is resuming, TUSD
will continue to transport
those students through the end
of the week, said spokeswom-
an Stefanie Boe.
See STRIKE, A4
By Becky Pallack
ARIZONA DAILY STAR
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Union members try to listen from outside, with standing
room only inside, during the voting.
Capitalism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Bad
The pressure for bad is a motivation to…
4. Expose the Visible Suffering (outcome)
Democratic Socialism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Good
The pressure for good is a motivation to…
4. Reveal the Invisible Synergy (outcome)
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Democratic Socialism
* Worker Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
Exercise 5.2: Six-Core Cube Guide
Please use the Six-Core Cube Guide to analyze this story from the radical perspective. The Answer Key is
below, but please don’t look until you fill yours out completely.

2. Choose a relevant core
point to explain the problem
3. Describe the Pressure for Bad
The pressure for bad is a motivation to…
4. Expose the Visible Suffering (outcome)
Democratic Socialism
1. Identify the problem

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144 | Voices On The Economy
Capitalism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Bad
The pressure for bad is a motivation to…
4. Expose the Visible Suffering (outcome)
Democratic Socialism
1. Identify the problem
2. Choose a relevant core
point to explain the problem
3 Describe the Pressure for Good
The pressure for good is a motivation to…
4.Reveal the Invisible Synergy (outcome)
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Democratic Socialism
* Worker Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
Western US sees triple-digit temps in early heat wave
LAS VEGAS—Parts of
the Western U.S. are getting
an early taste of scorching
summer heat, forcing officials
in California, Oregon and the
desert Southwest states to
heed the warnings of danger-
ous, triple-digit temperatures
in the first week of June.
Organizers rescheduled
California’s state track and
field championship events to
start in the evening hours Fri-
day and Saturday. The com-
petition is being held in Clo-
vis in the San Joaquin Valley,
where daily highs are expect-
ed to top 100 degrees through
the weekend, according to the
National Weather Service.
Precautions are also in
place ahead of Portland’s
Rose Festival on Saturday in
Oregon, when the mercury is
expected to rise to 99 degrees
in the city and 103 degrees
downstate in Medford.
Marching bands have
asked event officials if they
can ditch some of the pomp
and circumstances by taking
off their hats and changing
their uniforms during judged
performances to cope with
the stifling heat, according
to spokesman Rich Jarvis.
The popular festival is also
renting mist machines and
handing out sunscreen around
a carnival area on the Willa-
mette River waterfront.
“We’re telling people,
‘Beware,’ ” Jarvis said. “It’s
going to be tough.”
By Sally Ho
THE ASSOCIATED PRESS
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Exercise 5.3: Six-Core Cube Guide
Please use the Six-Core Cube Guide to analyze this story from the radical perspective. The Answer Key
can be found at the end of this chapter.

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Chapter 5: Radical Theory | 145
Radical Theory Conclusions:
Democratic Socialism
The radical theory of democratic socialism
has three conclusions that answer the original
questions of economics:
What to Produce?
The model shows that cooperatively owned firms
produce things people need and want and that are
beneficial to society. This includes providing social
safeguards—health care, transportation, higher edu-
cation, and other basic human needs. This outcome
occurs because democratic socialism is a system
that values people and the planet over profits.
How to Produce?
The model shows that in democratic socialism
firms produce sustainably. Through a commit-
ment to participatory governance and democratic
decision-making, they are guided by the invisible
synergy to make decisions that promote healthy
communities here and around the globe.
For Whom to Produce?
The model shows that in democratic socialism
worker-owners enjoy the fruits of their own labor,
and their wages reflect what they contribute. A
portion of the surplus also goes to expanding
their enterprises, meeting the larger community’s
needs, and all the other services—legal, account-
ing, security, government—that ensure the future
success of democratic socialism.
Connection
All human beings long for peace, prosperity,
and the freedom to live their highest and best
selves, say radicals. To achieve those things, we
need a strong economy, and profit is only one—
albeit important—part. Profit enables firms to stay
in business and create the things that are good
and useful for people. It funds a decent standard
of living for worker-owners, circulates back into
the community to support local institutions, and
ensures the social safeguards that are everyone’s
rights and responsibilities. But focusing on profit
alone can’t give us what we want and need to
thrive, say radicals. They believe that in democratic
socialism the drive for well-being brings us peace
and prosperity, a clean environment and renewable
resources for generations to come, dignity and
respect in the workplace, fair compensation, and
release from worry about survival so we can
each achieve our potential. When workers in
cooperatively owned businesses forego higher
profits for themselves, it’s so there can be a higher
standard of living for everyone. Radicals point out
that this doesn’t occur because worker-owners are
more saintly or evolved than anyone else. They say
it’s because there’s an intrinsic understanding that
we are all interdependent—self-interest is mutual
interest—and when we act with that understanding,
the economy flourishes.
In radical theory, a positive feeling of cama-
raderie, mutual support, shared purpose, and
belonging is called connection. This experience
arises in democratic socialism in four ways:
! With cooperative ownership, workers have
control over, and rights to, the products they
make. Their labor is valued and respected.
! When workers are connected as co-own-
ers, one person’s success is a success for the
whole firm, so worker-owners are connected
by mutual interest to cooperate and bring out
the best in one another.
! Because every worker is an owner, each per-
son contributes not just hours of labor but also
a voice and a vote to shape and represent the
firm’s mission in the world. This creates a sense
of belonging and mutual respect.
! Cooperative ownership enables people to
contribute something of meaning, beauty, and

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146 | Voices On The Economy
usefulness through their labor. In democratic
socialism, people are able to shape the world
according to their own visions and values. In
the process, they can deeply connect with their
own humanity.
Radicals conclude that when planted in the
soil of democratic socialism, we recognize that
our self-interest is our mutual interest, and an
ever-upward spiral of well-being is ensured. They
say that democratic socialism is based on a set of
positive incentives that bring us the connection
we truly want and need.
The Benefits of the
Invisible Synergy
! Worker Ownership
! Prosperity
! Income Equality
! Sustainable Production
! Jobs and Stable Prices
! Safe Working Conditions
! Universal Health Care
! Housing for All
! Abundance
! Safe and Thriving Communities
! Clean Environment
! Fair Competition
! Sustainable Balanced Budgets
! Secure and Dignified Retirement
! Social Harmony
! Peace and Cooperation
! Safe and Useful Products
! Innovations and Advancements
! Fair Trade Relationships

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Chapter 5: Radical Theory | 147
Policy
Based on the conclusions, the course of action
radicals propose is to replace our current economic
system of capitalism with democratic socialism.
They say it would create unprecedented levels of
well-being because it has justice and commitment
to the common good at its core. In democratic
socialism, workers are paid what they contribute,
the government upholds the interests of the people,
society provides each person with what they need to
get their basic needs met, firms’ products are useful
and beneficial, production processes guarantee that
future generations will also flourish, and people
make decisions that improve communities here and
throughout the world. This economic system brings
us peace and prosperity.
Radicals say that the Occupy movement in the
United States and the growing support for demo-
cratic socialist ideals reflect a growing disillusion-
ment with capitalism in our nation and a desire
for radical change. From spontaneous encamp-
ments in public parks to protest the excesses of
capitalism, to electing socialist representatives,
radical ideas are taking hold, they say—an evolu-
tion, not a revolution, to bring us a brighter future
of economic justice. Radicals say that even though
the number of people who identify as democratic
socialists is still relatively small, these ideas are
shaping the mainstream conversations about pol-
icy. To quote an Ethiopian proverb: “When spider
webs unite, they can tie up a lion.”
D
avid
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h
an
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o
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, C
C
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3.0

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148 | Voices On The Economy
Radical Theory: Capitalism vs. Democratic Socialism
Radical Policy
a. Reject Capitalism
b. Embrace Democratic
Socialism
• Justice and the
Common Good
Six-Core Cube: Capitalism
1. Private Ownership
2. Top-Down Governance
3. Individuals at Risk
4. Production for Profit
5. Unsustainable Production
6. Unhealthy Communities
1.ASSUMPTIONS
i. Surplus
ii. The Class Process
iii. Dynamic Interactions over Surplus
Self-Interest
2.MODEL
i. Labor Theory of Value
ii. Workplace Exploitation
iii. Capitalist Competition
Pressure for Bad leads to The Visible Suffering
3.CONCLUSIONS
Destructive Self-Interest and Alienation
I. What to Produce?
Firms make what serves
their profit interests.
II. How to Produce?
Firms maximize output,
but at an unacceptable
cost to society.
III. For Whom to Produce?
Firms’ products go to
those who directly/
indirectly exploit others.
1.ASSUMPTIONS
i. Surplus
ii. The Class Process
iii. Dynamic Interactions over Surplus
Self-Interest
Capitalism Democratic Socialism
2.MODEL
i. Collective Creation of Value
ii. Workplace Justice
iii. Coordination among Competitors
Pressure for Good leads to The Invisible Synergy
3.CONCLUSIONS
Mutual Interest and Connection
I. What to Produce?
Firms make what
people want and need.
II. How to Produce?
Firms anchor communities
and produce sustainability.
III. For Whom to Produce?
Firms’ products go to
worker-owners, firms,
and community.
Six-Core Cube: Democratic Socialism
1. Cooperative Ownership
2. Participatory Governance
3. Social Safeguards
4. Production for Use
5. Sustainable Production
6. Healthy Communities

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Chapter 5: Radical Theory | 149
The VOTE Program doesn’t advocate for one
economic theory over another. Our method is
to line up the radical, conservative, and liberal
perspectives side by side in a balanced and
unbiased way so you can understand them,
evaluate their ideas for yourself, and make up
your own mind about what you believe. Then you
can use your voice to join the conversation. The
best way to hear these “voices” is to imagine that
you’re listening to someone who is a passionate
advocate for that perspective. This person really
wants you to envision what their ideal world would
look like if our country followed their policies for
economic well-being. You can practice respectful
listening and try to imagine what their utopian
ideal sounds like. Do you agree with their views?
Does their analysis of the problem make sense
to you? Does their solution make sense to you?
This process of respectful listening, passionate
advocacy, and intelligent debate is how we’ll find
our way forward. Maybe you’ll be convinced to
change your mind, or you’ll be even more certain
that your view is the best one. Maybe you’ll hear
places where compromise and trade-offs make
sense. Maybe you’ll be sparked to come up with
brilliant new solutions.
In chapter 4 we practiced listening to the voices
of conservatives and liberals. Now let’s hear the
radical vision for economic well-being.
The Radical Voice: Democratic
Socialism
Life, liberty, and the pursuit of happiness are
inalienable rights we all cherish. When we create
prosperity, we can realize the American Dream
because economic well-being is the foundation
of a good life. It allows us to flourish and thrive.
What is the best way to create wealth in our
nation? The best way is through democratic
socialism. When democracy is seamlessly inter-
woven with the economic system of socialism and
rests on strong constitutional values of justice, it
gives us freedom to live balanced and meaningful
lives. It unleashes our potential to accumulate the
greatest wealth and enjoy the highest standard of
living, and it allows us to take care of our most
vulnerable populations.
Brutal poverty has been the common condition
of humans for much of our history because most
economic systems are built on one group of peo-
ple exploiting (stealing from) another group of
people: slave masters and slaves, lords and serfs,
the state and workers, and private owners and
wage laborers. At the same time, political sys-
tems enforced this theft—and continue to do so
today. Democratic socialism corrects the glaring
injustice of workplace exploitation. It operates
from a holistic view of individual and collective
well-being and recognizes that when we cooper-
Economic Well-Being from
Diverse Perspectives

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150 | Voices On The Economy
ate and collaborate, we generate abundant wealth
and everyone’s needs can be met. It is this under-
standing of our interconnectedness that gives
democratic socialism the power to transform our
lives. Humanity goes from chains to freedom.
We are set free to achieve our highest potential
because the driving force in democratic socialism
is to create a good quality of life for all, along with
desirable and useful products. Profits are import-
ant, but they are not the first priority. We are guided
by the pressure for good that arises when we value
people over profits, which leads to an invisible
synergy that gives us more than just the sum of the
individual parts. When we act in ways that serve
our mutual interest, we come together in connec-
tion, and as a result we are able to live healthy,
balanced lives. Democratic socialism is guided by
six core points. Through cooperative ownership,
we prosper because we benefit directly from the
fruits of our own labor. Through a commitment
to social safeguards, people are freed from crush-
ing debt and worry about paying for college tui-
tion, medical care, transportation, and other basic
human needs because each person has a right and
a responsibility to make sure these are available
to everyone. Firms are committed to producing
things that are useful and helpful to people. While
profit is of course important to the survival of any
firm, those profits are made without manipulating
society’s needs and desires. Through a commit-
ment to sustainable production, firms make deci-
sions that are good for communities and ensure
that resources will be available for generations to
come. A commitment to participatory governance
brings together public officials, worker-owners,
and representatives from other stakeholder groups
to engage in open-minded dialogue and find the
best ways forward. These collaborations result
in transparency, accountability, and innovation.
Through a commitment to healthy communities,
we recognize that we share one Earth and that
our global interests are inextricably tied to our
local decisions. Democratic socialism gives us the

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Chapter 5: Radical Theory | 151
Chapter 5: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. Match the type of cooperative (left column) with its definition (right column).
A. Worker-owned i. Customers join and have an ownership stake in the business
B. Producer/Marketing ii. Businesses come together under one label to advertise
C. Purchasing/Retail iii. Businesses come together under one label to buy inputs
D. Consumer iv. People who work in the organization own it
2. Please choose the correct meaning of the radical assumption of surplus.
A. The natural world provides more resources than people need and want.
B. At all points of production, quantity supplied is greater than quantity demanded.
C. When people make products, they naturally make more than they need for themselves.
D. The benefits that individuals get when they pay less money than they would have been
willing to pay, and that firms get when they make more money than they would have
been willing to accept.
3. In a privately owned window company, each week the owner pays $1,250 in labor costs and $3,000
in capital, raw material, and support workers (including the owner’s own salary). The company
earns $5,000 per week. According to radical theorists, the surplus value is ________. It is produced
by the ________ and is taken by the ________.
A. $750; laborers; capitalists
B. $2,000; workers; owners
C. $3,750; bourgeoisie; proletariat
D. $750; workers; workers
freedom, security, and opportunity to do what is
best for ourselves, for our communities, and for
our planet.
Democratic socialism joins two of the most
inspired and practical political and economic sys-
tems humans have ever known: democracy and
socialism. It creates opportunities for each one of
us to realize our genius, leadership potential, and
capacity to contribute to society and flourish. These
opportunities are freely available to people of
every class, race, gender, age, national origin, sex-
ual orientation, religion, and ability. We can have it
all—material comfort; affordable, healthy, and safe
products; housing; medical care; security in our old
age; beneficial trade relationships; jobs; and stable
prices—as well as a clean environment and ethical
relationships with one another. Democratic social-
ism delivers the American Dream with peace and
social harmony.

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152 | Voices On The Economy
4. Which of the following statements are true about capitalist competition in capitalism according to
radicals? Choose all that apply:
A. The bourgeoisie are not necessarily bad people.
B. Profit maximization is the primary measure of success.
C. It’s a dog-eat-dog world where only the winners survive.
D. Owners are stuck in a bad system that pushes them to do the wrong thing.
5. In a worker-owned window company, each week the co-owners pay $1,250 in productive labor
costs and $3,000 in capital, raw material, and unproductive labor costs per week. The company
earns $5,000 per week. According to radical theorists, the surplus value is ________. It is produced
by the _______ and is taken by the ________.
A. $750; laborers; capitalists
B. $2,000; workers; owners
C. $3,750; bourgeoisie; proletariat
D. $750; workers; workers
6. Which of the following statements are true about coordination among competitors in democratic
socialism? Choose all that apply
A. Co-workers are not necessarily good people.
B. Profit is important, but not more important than the well-being of people and the planet.
C. In unity there is strength, so when cooperatively owned firms do well it benefits everyone
in the community, including competitors.
D. Co-owners are stuck in a good system that pushes them to do the right thing.
Please use the Market Change Guide to answer the next two questions.
7. Advances in artificial intelligence are being used to more efficiently fill containers of personal-care
products such as shampoo, hand lotion, toothpaste, and liquid soap. Choose the relevant core
point of capitalism and identify the pressure for bad and the visible suffering. (Hint: an answer is
only correct if it’s relevant to this scenario.)
A. Top-Down Governance. Firms pay off government officials. Visible suffering: unsafe
products.
B. Individuals at Risk. Firms price their personal-care products so high that only the wealthiest
1 percent of the population can afford them. Visible suffering: public health crises.
C. Healthy Communities. Firms move production out of the country to take advantage of
the new technology and lower environmental standards. Visible suffering: unemployment
and pollution.
D. Private Ownership. Firms lay off workers and increase the rate of exploitation for those
who are left. Visible suffering: growing income disparity.

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Chapter 5: Radical Theory | 153
8. Advances in artificial intelligence are being used to more efficiently fill containers of personal-care
products such as shampoo, hand lotion, toothpaste, and liquid soap. Choose the relevant core
point of democratic socialism and identify the pressure for good and the invisible synergy. (Hint: an
answer is only correct if it’s relevant to this scenario.)
A. Participatory Governance. Groups of stakeholders decide that product testing is
necessary. Invisible synergy: safe products.
B. Social Safeguards. Individuals and firms pay into the system so that everyone is
guaranteed health care, including personal-care products. Invisible synergy: preventive
care increases.
C. Healthy Communities. Firms produce locally so they are committed to a zero
carbon footprint. Invisible synergy: firms create more worker-owner positions in their
communities and reduce pollution.
D. Cooperative ownership: Firms adopt the new technology, and with increased efficiency
co-owners will get bonuses and time off and the firm will invest in plant-based
containers. Invisible synergy: higher standard of living and more leisure time.
9. According to radicals, all the following are examples of connection that occur in democratic
socialism EXCEPT:
A. Workers have a voice and a vote in the firm’s mission.
B. Workers contribute something of meaning, beauty, and usefulness to the world.
C. Workers are either winners or losers in their firms, so when one is promoted, another
is demoted.
D. Workers have control over and rights to the products they make.
10. Which of the following are radical policies?
A. Reject capitalism
B. Embrace democratic socialism
C. Prioritize justice and the common good
D. All the above
Answers
1. A – iv, B – ii, C – iii, D – i 2. C 3. A 4. A, B, C, & D 5. D 6. A, B, C, & D 7. D 8. D 9. C 10. D

2. Choose a relevant core
point to explain the problem
3. Describe the Pressure for Good
The pressure for good is a motivation to…
4. Reveal the Invisible Synergy (outcome)
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Democratic Socialism
* Worker Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
Higher than usual
temperatures
Higher than usual
temperatures
x x
continue using fossil fuel because of the drive
for profit.
switch to renewable energy because of the drive
for well-being.
when we have unsustainable production, we
have climate change and more disruptive,
weather-related disasters.
when we have sustainable production, we get
a planet in balance and fewer weather-related
natural disasters.
Answer Key to Exercise 5.3
Chapter 5: Key Terms
Accumulation of capital
Alienation
Bourgeoisie
Class process
Class struggle
Collective creation of value
Connection
Consumer cooperative
Cooperative
Dynamic interactions over surplus
Exploitation
Holistic
Invisible synergy
Labor theory of value
Mutual interest
Necessary labor
Participatory governance
Pressure for bad
Pressure for good
Producer/marketing cooperative
Productive worker
Proletariat
Purchasing/retail cooperative
Reserve army of the
unemployed
Six Core Points of Capitalism
Private ownership
Top-down governance
Individuals at risk
Production for profit
Unsustainable production
Unhealthy communities
Six Core Points of
Democratic Socialism
Cooperative ownership
Participatory governance
Social safeguards
Production for use
Sustainable production
Healthy communities
Social totality
Surplus
Surplus labor
Surplus value
Unproductive worker
Visible suffering
Worker-owned cooperatives
Workplace justice

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6Tools to Get Started
There’s an old economics joke about a trav-eler who visits an island inhabited by can-nibals. He passes by a butcher shop that
specializes in human brains. The sign in the win-
dow reads: “Artists’ Brains, $9/lb—Philosophers’
Brains, $12/lb—Scientists’ Brains, $15/lb—Econo-
mists’ Brains, $19/lb.”
“Wow!” the traveler exclaims. “Those econo-
mists’ brains must be popular.”
The butcher overhears and says, “Are you kid-
ding? Do you have any idea how many econo-
mists you have to kill to get a pound of brains?!”
When you’re done groaning, let me tell you the
VOTE Program’s twist on this scenario. It will help
you think about our three different perspectives.
“Wow!” the traveler exclaims. “Those econ-
omists’ brains are expensive. They must be in
demand.”
“All brains are in
demand,” a liberal shop-
per says, “but econo-
mists’ brains are by far
the tastiest. Everyone
loves them, but this
butcher has cornered
the market. Now he
takes advantage of us
consumers by pur-
posely offering fewer
economists’ brains for sale, and then he jacks up
his prices. It’s outrageous! We need government
to protect consumers and the other butchers from
this kind of unfair advantage by regulating the
market.”
The conservative butcher says, “I’m not doing
anything wrong. You’re the one who’s got it all
wrong. This is just a matter of supply and demand.
It’s true that economists’ brains are more popular,
but do you have any idea how many economists I
have to kill to get a pound of brains?! That’s what
drives up the prices. I’m not taking advantage
of consumers, and nothing is stopping the other
butchers from selling economists’ brains at lower
prices. It’s a free market.”
The butcher’s radical apprentice grumbles,
“Hah! You’ve both got it wrong. I’m the one
doing all the work of
killing the economists,
yet I’m getting paid a
pittance. I can’t even
afford to buy the econ-
omists’ brains that I pro-
duce! The price of those
brains is high because
of the drive for profit.
What we ought to do is
switch from capitalism
to democratic socialism.

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158 | Voices On The Economy
If this butcher shop were owned by the workers,
and all the firms on our island were cooperatively
owned, we would all get paid what we actually
contribute. Then we could all afford these tasty
economists’ brains.”
We don’t live on an island of cannibals, so
we can’t have an informed opinion about this
debate—but we can have informed opinions
about the economic debates that shape every
aspect of life where we live. You’re about to
get into the nitty gritty details of those debates.
You’ve been through basic training—learned the
philosophy and history of economic thought as
well as conventional and radical theory. There are
just two more things to cover so you’ll be per-
fectly prepared to dive into the issues. First, you’ll
need to make sure you’re not bringing along a
load of stereotypes about the different perspec-
tives. They’ll weigh you down, and this mission
will never get off the ground. Second, you’ll need
to learn a few new radical and conventional tools.
We’ll be using them to analyze the first two eco-
nomic issues in the VOTE Program, which are
Agriculture and Product Safety.
Challenging the Stereotypes
Radicals, conservatives, and liberals don’t agree
on the causes of economic problems, and so it’s no
surprise that they don’t agree on the best possible
solutions to those problems. In fact, while it may
seem like the three perspectives disagree on just
about everything except that puppies and kittens
are cute, they actually all want the same general
outcome for each issue. Are you skeptical? You’re
not alone. The idea that all three perspectives
want the same outcome is the most controversial
assumption of the VOTE Program. Many people
disagree. They protest that conservatives, radicals,
and liberals don’t all want a clean environment,
affordable housing for all, and an end to poverty.
“No!” we often hear from students and other
economists. “Some perspectives don’t want those
things for everyone!” They point to policies
proposed by each perspective that potentially
could, or do (in their respective opinions), lead
to harmful outcomes for some people. Here are
examples of the kinds of things we hear again
and again when we teach the three perspectives
side by side in the VOTE Program:
“They want to take away our health care and
let people die!”
“They want to drive businesses under with end-
less regulations!”
“They want to give freeloaders the same rewards
we give hard-working people.”
We believe that when you understand the visions
from which liberals, radicals, and conservatives
operate—the visions for economic well-being we
described in chapters 4 and 5—then you will under-
stand the world each perspective hopes to create.
Their respective policy proposals come from a uto-
pian idea of what would work in an ideal world—a
world in which their perspective reigns supreme. In
every case, all three perspectives really do want the
exact same outcomes. It’s only when you’re stand-
ing outside their world views and looking in that it
might seem as if they don’t. We’ll be stating these
shared outcomes explicitly in each issues chapter.
Below (table 6.1) is a summary of the shared prob-
lem statements that all the perspectives can agree
on, along with their shared goals.
All the perspectives are searching for solutions
that will create the best possible world for all of
us. Thinking the best of each perspective is a vir-
tue for VOTE Program participants. When you
entertain the ideas of other perspectives in a fair
and open-minded way, and when you graciously
give others the benefit of the doubt that they, too,
want outcomes that are beneficial for everyone,
then your mind opens to considering their ideas.
With that mental attitude, you are in a position
to be inspired by diverse ideas, and that inspira-
tion can spark brilliant new solutions for the best
pathways forward.

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Chapter 6: Tools to Get Started | 159
Issue Name Shared Problem Shared Goal
Agriculture Instability in farming threatens food security A secure food system
Product Safety Products can cause harm The protection that people want
Livelihood Poverty causes suffering End poverty
Housing Unaffordable housing leads to homelessness Affordable housing for all
Income Distribution Income inequality can cause social conflict Income that rewards contributions
Market Power Large firms can abuse their power in markets The best products at
reasonable prices
The Environment Polluted air, water, and land Breathable air, drinkable water, habitable land
Health Care Lack of access to high-quality health care Health and well-being for all
International Trade Foreign trade can cause conflicts Improved standard of living through trade
Retirement Security Seniors are economically vulnerable Care and peace of mind for
the elderly
Economic Stability Inflation and unemployment
undermine prosperity
Stable prices and full employment
$
$ The Federal Budget Long-term, escalating debt holds us back as a nation
Financial freedom to invest in
our future
Immigration Integrating newcomers into society
is challenging
Newcomers make positive
contributions to society
Table 6.1
Shared Problems and Shared Goals

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160 | Voices On The Economy
What Is a Stereotype?
Have you ever felt as if
you weren’t being seen
for who you really are—
as a unique and complex
individual? Have you ever
felt that you never even
had a chance to be seen as
an individual because the
other person already made
up their mind about you
based on how you look, or
act, or where you’re from?
It’s a terribly frustrating
feeling. A stereotype is
an oversimplified—and
often unflattering and
unfair—idea about a group
of people, and if you
happen to belong to that
group, or are in some way
associated with that group,
the stereotype gets slapped
on you without you being
able to do anything about it. The other person
may not even be conscious of making automatic
assumptions about you. Whether conscious
or unconscious, stereotypes make it nearly
impossible for others to form a fair impression
of who you really are. It doesn’t matter that you
happen to be a complex and unique person with
a great sense of humor and a terrible singing
voice, or that you are obsessed with video games
and someday want to travel to every country on
the equator. When people judge you through
the lenses of their stereotypes, they sum you up
in the most narrow and ungenerous way. You
might find yourself seething with resentment,
shame, rage, and frustration. You might find
yourself stereotyping them in return. Do you see
the situation unfolding here? No one is being
considered as a complex individual, no one is
being given the benefit
of the doubt, and no one
is open to being curious.
How likely are you to start
a respectful dialogue with
someone you stereotype,
or with someone who
stereotypes you?
Let’s be real about the
fact that not only are we
sometimes stereotyped,
but we also stereotype
others. It’s an unfortunate
part of being human that
we all carry around certain
preconceived ideas about
other groups of people.
They are most often asso-
ciated with gender, race,
religion, sexual orienta-
tion, national origin, class,
age, ability, political and
economic perspectives,
culture, and legal status, as
well as a host of other categories. Why do stereo-
types even exist? Sociologists and psychologists
who have studied this phenomenon say stereo-
types serve, in part, to make us feel better about
our own group identity. It may be the least noble
characteristic of humans that in order to feel bet-
ter about ourselves, we often put down others.
Stereotyping is a lazy habit. For example, con-
sider this one: “All women love shoes.” Some
people argue that there’s a grain of truth in ste-
reotypes, but the problem with that defense is
that even if a woman coincidentally happens to
love shoes, it’s never fair or accurate to assume all
women love shoes. When we stereotype, we’re
too lazy to be curious about the other person.
We don’t bother to find out what the individual
actually likes or thinks or wants or knows, so we
pull out the old stereotype and feel smugly supe-
A stereotype is an
oversimplified—and
often unflattering and
unfair—idea about a
group of people, and if
you happen to belong to
that group, or are in some
way associated with that
group, the stereotype
gets slapped on you
without you being able to
do anything about it.

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Chapter 6: Tools to Get Started | 161
rior or comfortably complacent. And of course we
take for granted that our own group is made up
of unique individuals who have diverse character-
istics—shoe lovers, shoe haters, shoe-“meh” peo-
ple. Can’t we just realize the same is true for peo-
ple who are not in our group? It seems like the
simplest thing to do, yet we all fail to reject the
stereotypes we unconsciously and consciously
hold about people who are not in our political
parties, religions, social classes, genders, races,
and so forth.
You might be thinking all this talk about ste-
reotyping is unnecessary because they are mostly
harmless and sometimes even funny. After all,
some of the best stand-up comedy plays off ste-
reotypes, right? Maybe. But in the context of the
VOTE Program, stereotypes are a buzzkill. They
make it impossible for you to hear all the per-
spectives with an open mind. Imagine if before
you even hear their ideas, you’re thinking, “Those
radicals are all dangerous extremists,” or “Those
liberals are idiots,” or “Those conservatives are all
liars.” I guarantee that without an open mind you
will not only struggle with the Issues chapters in
this book, but you will also have a hard time in
life when you interact with people who are dif-
ferent from you and who think differently from
you. Every religion and culture has some version
of the idea “Do unto others as you would have
others do unto you.” Please keep that in mind
when you run up against stereotypes about con-
servatives, liberals, and radicals—and especially
keep this in mind if you’re tempted to fall back on
them when you disagree with other perspectives.
Rejecting stereotypes will help you to be a better
person, and it will open you up to a rich diversity
of thoughts and opinions.
One more thing to keep in mind about stereo-
types: there’s a difference between people who
are socially liberal, conservative, or radical and
those who are economically radical, conservative,
or liberal. Views on gun laws, abortion, legaliz-

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162 | Voices On The Economy
ing marijuana, the separation of church and state,
and other social questions don’t necessarily link
to economic views. Because all these social issues
are hotly debated in contemporary society, it’s
easy to get confused. Just remember that an eco-
nomic conservative can be anti-gun, an economic
radical can be against legalizing marijuana, and
an economic liberal can be against the separation
of church and state. Social views and economic
perspectives don’t always match up. In the VOTE
Program we’re only exploring economic views.
It’s going to be useful to recognize some of the
most common stereotypes about each perspective
so you can challenge them in your own mind and
when they come up in debates and conversation.
These are by no means all the ones you’ll hear in
the world, but this sampling will give you prac-
tice recognizing and responding to biases about
diverse points of view.
Four Common Stereotypes
about Liberals
Stereotype 1: Liberals Believe the Solution
to All Problems Is a Government Handout.
The stereotype of the bleeding-heart liberal
who wants to open the government’s wallet and
pass out tax dollars to anyone who whines has
long been used against liberals when they want
to institute social programs to help struggling
businesses, families, and individuals. It’s the
helpful hand of government that lifts people out
of poverty, say liberals, through programs that
create equal opportunities that give everyone a
fair shot to compete in capitalism. Government
programs are not handouts; they are hand-
ups, according to liberals. And govern ment
intervention doesn’t weaken us—it strength ens
us as a nation. Whether government support is in
the form of Head Start programs for pre schoolers,
food assistance for the hungry, drug rehabilitation
programs that divert people from prisons, or job
training programs that give people marketable
skills, liberals say fair-market capital ism opens the
doors to prosperity for all.
Liberals say a civil society is one in which we all
take care of those who need help so that everyone
can realize their potential and become contributing
members of society. Government programs correct
inequalities and power differences that make
the playing field uneven. Liberals say capitalism
flourishes when everyone has equal access to
opportunities, so it’s smart to feed people who
are hungry, educate people who are illiterate, and
give job training to the unemployed. From the
liberal perspective, this kind of investment is the
only way more Americans will be able to realize
their potential and use their talents and skills to
make our nation as prosperous as it can be.
Stereotype 2: Democrats Are the Party of
the Elite and the Wishy-Washy. The stereotype
of the Democrats—the political party of the lib-
erals—as constantly waffling and flip-flopping
on policy is untrue and unfair, say liberals. They
point out that decisiveness may look like strength,
but it’s like the old saying, “When all you have
is a hammer, every problem looks like a nail.”
Liberals say that instead of hammering away at
every problem and saying, “See how strong and
decisive I am!” it makes more sense to study the
problem from many angles to find the best solu-
tions. By understanding the context and circum-
stances of problems and entertaining different
ideas, we can find the best solutions that will lead
to an economy that works for the greater good.
It’s not wishy washy to come up with complex
solutions to problems, say liberals, and it’s not
elite to be intelligent. The idea that liberals are
elitists with PhDs and law degrees who talk over
everyone else’s head while nothing gets done in
Washington couldn’t be further from the truth.
Liberals come from every social class and educa-
tional background. But they say if “elitism” means
not sticking your fingers in your ears and block-

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ing out information that doesn’t agree with your
preconceived notions, then they proudly claim
the title.
Liberals believe it’s just good sense to make
informed decisions by incorporating new infor-
mation and doing research to help chart the best
course and then change direction when new
information comes to light. Could that look like
flip-flopping? Yes. But liberals call it wisdom
when leaders’ and policymakers’ ideas become
more nuanced with new information. They say
we should embrace complexity and use our intel-
ligence to develop the best solutions. Liberals like
to quote John Maynard Keynes, who said, “When
the facts change, I change my mind—what do
you do, sir?”
Stereotype 3: Liberals Are “Politically
Correct.” A common stereotype of liberals is that
they always want to give some people special
treatment—LGBTQ people, women, people of
color, people with disabilities, and so on. Liber-
als say the term politically correct is a put-down
because it suggests they are insincere in their com-
mitment to equality and only interested in their
personal gain (such as votes on election day). Not
true, say liberals. Equality is the very heart of their
economic values. They say that their commitment
to fair play opens the door wider for more people
to participate in capitalism and thereby improve
the economy. They would like you to please note
that they are not calling for “special treatment”
but for equal opportunities for all, which is a core
American ideal. They say they are often misun-
derstood as wanting equal outcomes for all, but
that’s not true. They believe it’s up to the individ-
ual to work hard and persevere in order to suc-
ceed. They offer people a fair start on the ladder
to success, but we all have to do our own climb-
ing. Liberals are proud of their successes securing
the rights of people with disabilities to have equal
access to jobs, passing the Fair Pay Act, and more.
The foundation of the liberal economic perspec-
tive is that when more people are able to contrib-
ute to society, the whole nation prospers. They
believe we achieve the highest participation by
using government programs to remove barriers of
discrimination and lack of opportunity.
Liberals say that lack of opportunity can also
come about because of personal bad luck—maybe
you were born into a family that struggled in pov-
erty for generations, or your home was carried
away in a flood, or medical bills led you to bank-
ruptcy. They say that is why we need government
programs to help people get back on their feet.
Fair-market capitalism gives all people a chance
to compete equally and achieve the wealth and
well-being we all desire. Liberals see themselves
as humanistic and inclusive—as people who act
from conscience. They see themselves as standing
up for the rules and making sure everyone plays
fair so that capitalism can work for individuals
and for the nation as a whole.
Stereotype 4: Liberals Are Antibusiness.
Often during budget debates, liberals are stereo-
typed as being “antibusiness” when they advocate
for taxes on the rich and regulations on firms. This
couldn’t be farther from the truth, say liberals,
who see themselves as champions of capitalism.
They believe business makes us all better off by
creating jobs and making the things people want
and need, and liberals say that’s precisely why we
need a partnership between business and govern-
ment. It’s through regulations that create account-
ability and transparency that firms can thrive in
a fair marketplace, they say, and it also protects
firms from a few bad apples crashing the whole
system and spoiling it for everyone. For instance,
liberals say that if we didn’t have environmental
regulations, a few firms could end up destroying
the resources that other firms need to produce
and prosper in capitalism, such as clean water,
clean air, and healthy forests. Without oversight,
say liberals, we will kill the goose that lays the
golden egg. They believe government helps busi-

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ness by protecting fair competition and ensuring
that a few firms don’t end up with the power to
manipulate prices.
Liberals believe regulations on businesses and
taxes on the wealthy protect capitalism because
these measures prevent extreme levels of inequal-
ity. They worry that if the income divide grows
too wide, people will take to the streets out of
frustration and reject capitalism altogether, which
would threaten our whole way of life. And by
the way, they add, taxes on the wealthy actually
grow the economy because they fund the gov-
ernment programs that put money in people’s
pockets, and then people go out and spend it,
which is very good for business. As demand goes
up, firms expand and create more jobs, and the
whole economic system prospers. So liberals are
proud to be what they believe is the party of the
responsible taxers and smart spenders who prime
the pump of the economy when necessary, pay
it back as the economy grows, and, throughout it
all, support businesses to thrive.
Four Common Stereotypes
about Radicals
Stereotype 1: Radicals Are a Bunch
of Idealistic Hippies. Radicals are often
lampooned as 1960s hippie throwbacks who
believe that one day we’ll all unite in solidarity,
hold hands, and sing “Kum ba yah” while we work
together in perfect cooperation. Radicals laugh at
this stereotype. They say of course cooperatively
owned enterprises don’t rely on everyone getting
along or sacrificing their individual needs for
the greater good. In fact, they say, democratic
socialism is actually the most self-interested
economic system because when workers have skin
in the game as owners of their firms, and when
everyone has a voice in participatory government,
then people have the best chances of getting their
individual needs met. To radicals, the most self-
interested way to survive in a competitive world
is to join forces with others who share your goals
and interests. They say the wolf who runs with a
pack eats better than the wolf who hunts alone.
If “idealistic” means believing that there’s a bet-
ter economic system than capitalism, then radicals
proudly claim the title. They say there will always
be a pressure for bad in capitalism, which will
always lead to the visible suffering of humankind.
In contrast, they say democratic socialism creates
a pressure for good, so even if you’re a nasty, self-
ish, greedy individual, it doesn’t matter—you’ll
work collaboratively with others because it’s the
best way to get your needs met. They believe
it’s self-interested—not idealistic—to collaborate,
coordinate, and cooperate.
Stereotype 2: Democratic Socialists Are
Anti-wealth. No human is anti-wealth, if by
“wealth” we mean getting our needs and wants
met, say radicals. They say this stereotype is com-
pletely unfounded because of course everyone
wants the material things that help us to survive,
thrive, and flourish—kitchen gadgets, Broadway
plays, energy drinks, headphones, colored pens,
sneakers with gel soles, and everything else we
value. Rejecting capitalism doesn’t mean there
won’t be wealth, they say. Under democratic
socialism, firms still need to make a profit to stay
in business. There are still markets and prices,
and businesses still produce the things people
want. Radicals say if the cooperatively owned
firms make rickety bicycles or moldy bread, or
if the packages don’t get delivered on time, or if
companies squander their resources, then those
businesses won’t survive. The big difference
between democratic socialism and capitalism is
that it’s up to the worker-owners to decide how
wealth will be produced, consumed, and distrib-
uted, and radicals say this is how we end up with
the invisible synergy that makes society wealthy
and healthy.
Radicals say it’s actually capitalism that’s anti-

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wealth—for the 99 percent. The way they see
it, when you work for a low wage, and you not
only have to pay your rent and food and phone
bills from that paycheck, but you also have to
pay for your own health care, your own college
tuition, your own bus pass to get to work, and
more, you’re left with less than nothing. Under
capitalism, the majority of people are struggling
to dig out from under a mountain of debt, and
not because they’re buying private helicopters
and expensive jewelry, say radicals, but because
they’re just trying to get their basic needs met.
In democratic socialism, social safeguards such
as health care, education, housing, transporta-
tion, and retirement security are funded through
everyone’s contributions. Radicals say that even
though taxes are higher, people don’t have to
pay for everything on their own. Society provides
those big-ticket items such as a college education
at much lower costs than each person would have
to pay to provide them individually. Radicals say
that under democratic socialism we get levels of
wealth, security, and well-being that only the 1
percent enjoy now under capitalism.
Stereotype 3: Radicals Want to Pay an
Uneducated Janitor the Same as an Inven-
tor with a PhD. This stereotype is completely
untrue. There is no rule in democratic socialism
that says everyone in a cooperatively owned enter-
prise has to be paid the same amount. According
to radicals, wages can be based on skill, experi-
ence, education, seniority, and many other fac-
tors. The worker-owners decide for themselves
the salaries, base pay, hours, bonuses, vacation
time, paid leave, and more. But radicals say what
is ensured is that in democratic socialism there
is dramatically less discrepancy between what
the lowest-paid and highest-paid workers earn.
Instead of the highest-paid workers making four
hundred times the average wage laborer’s salary,
it might be more like six or seven times more. So
the janitor probably won’t get paid the same as
the inventor of the company’s best-selling new
widget, but the disparity in pay between the two
will be a lot less than it would be in capitalism,
say radicals, and that means more money is avail-
able to fund everyone’s well-being.
Radicals don’t agree with the capitalist idea that
entrepreneurs are a fourth resource—as import-
ant as land, labor, and capital. The way they look
at it, while the chef in your favorite restaurant
is important, you wouldn’t dine there if the ser-
vice was bad, or if the dishes were dirty, or if
the floor was sticky. They say you can have a
great idea about creating a car company and take
great financial risks and work day and night—but
without the engineers, the mechanics, the weld-
ers, the painters, and the administrative assistants,
you won’t have any cars. Sure, entrepreneurs are
important, say radicals, but cooperatively owned
enterprises operate with respect for the contri-
butions of everyone’s work, understanding that
each person plays a role in the overall success of
the business.
Stereotype 4: Radicals Want a Revolution.
This stereotype is often used to scare people
away from listening to the ideas that radicals have
to offer. In fact, say radicals, the peaceful change
from capitalism to democratic socialism is already
underway. They point to the tens of thousands of
cooperatively owned businesses that are already
thriving in the United States, turning over trillions
of dollars annually. They point to the diverse can-
didates running in local, state, and national elec-
tions as democratic socialists. Radicals say Amer-
icans are already rejecting capitalism, and more
are jumping on the democratic socialism train
every day, sickened by the gross income inequal-
ity between the 1 percent and the 99 percent.
Radicals believe we don’t have to kill off capi-
talism in a bloody revolution to realize the vision
of a world in which it’s replaced by a democratic
socialist economic system. But they acknowl-
edge that part of the power of capitalism is that

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it makes us believe it’s so monolithic that it can
never be changed. Radicals like the quote by
anthropologist Margaret Mead: “Never doubt that
a small group of thoughtful, committed citizens
can change the world; indeed, it’s the only thing
that ever has.” Radicals say change can evolve in
small increments, like tiny grains of sand shifting
a little at a time until suddenly they hit a tipping
point and turn into a landslide.
Four Common Stereotypes
about Conservatives
Stereotype 1: Conservatives Are Greedy
and Heartless. This stereotype is often meant
as a put-down, implying that conservatives will
trample on everyone else at the dessert buffet so
they can grab the biggest piece of the pie for
themselves. Conservatives have a very different
way of looking at it. They say that if by “greedy”
you mean motivated to make the most profit, then
yes. In that case, greed is the best possible fuel for
the economy. They believe that when they work
hard to maximize their profit, and when they earn
that big piece of pie, they will naturally grow their
business, which means they will create jobs for
everyone and grow the entire economy. In that
way, all those other people at the dessert buffet
will get their pie too—because the profit motive
leads to a bigger pie for everyone. Conservative
economists like the old saying, “A rising tide will
lift all boats.” They say everyone benefits when
we pursue our own self-interest; however, if we
have to split the pie equally, we’re all going to
end up with a lousy crumb of crust.
Conservatives are also stereotyped as heart-
less and unsympathetic when it comes to helping
those less fortunate. But conservatives say they
are as concerned as anyone else about living in
a society where all people thrive and have what
they need to contribute and prosper. Charitable
giving is a long-standing practice among conser-
vatives, and not just out of a sense of altruism.
Taking care of those less fortunate is in their own
self-interest because it makes the streets safer, the
schools better, and communities more pleasant
places to live. And they say philanthropy is good
business because it gives firms a good reputation.
This stereotype is usually used as a put-down
when conservatives object to social welfare pro-
grams. But from their point of view, government
handouts don’t do anyone any favors, because
they actually enable people to be unproductive.
As former conservative House of Representatives
leader Paul Ryan (a Republican from Wisconsin)
once said, those welfare programs turn the “safety
net into a hammock that lulls able-bodied peo-
ple into complacency and dependence.” Conser-
vatives believe free-market capitalism creates the
incentives for people to make the choices that
will bring them the happiness they want. They are
strong advocates for individuals taking personal
responsibility for themselves and their families by
staying in school, working hard, seizing oppor-
tunities, staying out of trouble with the law, and
otherwise being productive members of society.
Stereotype 2: Republicans Are the Party of
the Rich. It’s simply not true that conservatives are
all rich. According to an oft-cited 2016 study by Flor-
ida State University political scientist Douglas Ahler
and data researcher Gaurav Sood, only 2 percent of
Republicans made more than $250,000 a year. The
researchers also found that the majorities of both
the Republican Party and the Democratic Party were
middle class (the research did not include dem-
ocratic socialists). So why does this stereotype of
the rich Republican persist? The researchers say the
mass media popularizes certain images of Republi-
cans so that people end up forming a stereotypical
idea from what they see, read, and hear in the news.
This leaves everyone with a skewed impression of
all the political parties. We end up believing there
is a deeper income divide among Republicans and
Democrats than actually exists.

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When critics say conservatives just want to
make the rich richer, conservatives respond with
a hearty, “Yes, and that’s a good thing. When was
the last time a poor person gave you a job?” They
say it’s the rich who prime the pump of the econ-
omy by expanding industry and creating employ-
ment opportunities. And they say the rich create
the kinds of jobs that help the country produce
the things we want and need, as opposed to cre-
ating more jobs for government bureaucrats, who
only slow down innovation with red tape and
regulations. Conservatives view entrepreneurs as
a fourth resource (in addition to land, labor, and
capital), and they see capitalism as a reward sys-
tem for those hardworking and creative geniuses.
“We want them to get rich,” conservatives say.
“Wealth motivates entrepreneurs to create the
things that make our lives better.” They believe
that, without the profit motive, those treasured
members of society would not have put in the
sweat and hard work and taken on the risks that
brought us lasers, wrinkle-free shirts, cell phones,
computers, airlines, and amusement parks. With-
out the profit motive, there would be no jobs or
innovations, and communities would fail to thrive.
Conservatives support the rich to keep creating
wealth because they believe that is what moves
us all steadily upward toward more prosperity.
Stereotype 3: Conservatives Want to Pre-
tend Everyone Has an Equal Chance to Suc-
ceed. Please remember that conservatives include
people of all genders, races, religions, sexual ori-
entations, physical abilities, and every other kind
of diversity. They know as well as anyone else that
racism, sexism, and other forms of discrimination
exist. But economic conservatives believe social
justice and equality come about through free-mar-
ket capitalism because it gives all people the incen-
tives and the opportunities to compete equally to
achieve the wealth and well-being they desire.
Conservatives see themselves as moral, responsi-
ble adults who take charge of their own lives, and
they expect others to do the same. They believe
people can rise on their own merits because the
system of capitalism is color-blind, gender-blind,
and blind to other differences. If a person pro-
duces something that others demand, prosperity
will be created. They say it’s that simple.
From the early days of classical theory,
free-market capitalists spoke out against slavery,
and the neoclassical economists continued this
tradition. They believe humans should deter-
mine for themselves the best use of their privately
owned resources, including to whom and under
what conditions to sell their labor. They believe
slavery—an economic system where someone
owns the labor of another person—is incompat-
ible with capitalism because it leads to a misal-
location of resources. For example, a slave may
have been best employed as a lawyer, while a
plantation owner might have been best used to
dig ditches. A nineteenth-century Scottish philos-
opher named Thomas Carlyle criticized classical
theory, calling it a “dismal science” for its anti-
slavery position. Other economists slammed him
for it, although Carlyle’s label persists to this day.
(Unfortunately, most people who use this phrase
don’t know the background and mistakenly think
it means that economics is boring or constantly
delivering bad news.)
Stereotype 4: Conservatives Are Stubborn
and Pigheaded. A common stereotype of con-
servatives is that they won’t compromise, and even
actively stonewall, when they don’t get their way.
If their critics mean they won’t compromise their
principles, then “guilty as charged,” say conserva-
tives, who believe it’s an excellent thing for people
to stand up for what they believe. Conservatives
say it’s not stubborn or pigheaded to hold to one’s
strong beliefs in the face of opposition. In fact,
they say this is something to cherish and preserve
because it’s only when they bring their convictions
to the table that they can make their best contribu-
tions to the conversation and be an integral part of

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the process that moves our nation forward.
A related stereotype is that conservatives stub-
bornly resist change. Please don’t think conser-
vatives are just a bunch of stodgy old-timers who
grump about how things used to be better when
they were young and about how the world is
going to ruin. People who align with the conser-
vative economic perspective are all ages and from
all walks of life. What they share is the belief that
free-market capitalism is the champion of eco-
nomic innovation, progress, and advancements.
They defend conservative principles because they
believe these are the only way to achieve a thriv-
ing society. Conservatives say their uncompromis-
ing position is a good thing because we shouldn’t
compromise what we know will bring us the
greatest prosperity. Furthermore, they say that this
is what we’re supposed to do in a democracy.
We’re supposed to be passionate advocates for
our positions and try to persuade others. They say
that in a democracy we should not water down
our ideals just so we can unite in agreement. Con-
servatives believe compromise should not mean
selling out.
Exercise 6: Think Again
Choose one of the stereotypes below and say if it’s true or false. If false, explain to a friend or
classmate your rationale. The Answer Key is at the end of the chapter.
1. Conservatives are greedy.
2. Radicals are anti-wealth.
3. Liberals are politically correct.
4. Republicans are stubborn.
5. Democrats are wishy-washy.
6. Democratic socialists want a bloody revolution.

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Conventional Theory Tools
Conservatives and liberals say the secret to
capitalism’s unprecedented success as an economic
system that brings us untold wealth is the invisible
hand that guides it—the unseen force created by
countless price signals, which direct us to create
maximum economic well-being without any one
person, entity, or government directing the activities
of the economy. In chapter 4 you learned that
conventional theorists see equilibrium as the point
on the graph that represents the optimal amount
of goods and services at the optimal prices. This
maximizes our social welfare, which is when
society uses its resources in the best possible way
for the greatest good—no waste, no inefficiency.
Marginal Cost and Marginal Benefit
But how can conventional theorists actually
know we are maximizing our social welfare?
They look at it in two different ways. Let’s use
the asparagus market as an example. Remember
marginal analysis, where decisions are made
by comparing the additional benefit (marginal
benefit) and the additional cost (marginal cost)
of doing something? The supply curve in figure
6.1 represents farmers’ willingness to supply
asparagus at different prices. What makes them
willing or unwilling? As firms supply units, their
marginal costs go up. There’s a complicated
explanation for this, which we will look at in a
later chapter, but for now just imagine that when
the asparagus farmer first grows a crop, the
land is rich with nutrients. Putting more units of
asparagus into production means the farmer must
improve the soil with costly fertilizers, resulting in
higher costs. Therefore, the farmer will be willing
to supply more units only at a higher price.
Conventional theorists say the supply curve is the
marginal cost (MC) curve.
The demand curve in figure 6.1 represents
consumers’ willingness to demand asparagus at
different prices. But what makes them willing or
Expanding the Models for
Agriculture and Product Safety
In the next two chapters, we’ll be exploring the first two VOTE issues: Agriculture and Product Safety. Before we delve into these and the other issues, we’ll start by either learning new tools or learning
new applications of existing tools to help us analyze the issues from the conventional and radical
perspectives. To get started, let’s review the models you’ve already learned in chapters 4 and 5 and add
a few new twists.

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170 | Voices On The Economy
unwilling? As people consume more of a product,
their marginal benefit (happiness) goes down.
The first pound of grilled asparagus will give
them more pleasure than the pounds they will
continue to eat. Consuming more units results in
lower additional benefits. Therefore, consumers
will be willing to demand more units at a lower
price. Conventional theorists say the demand
curve is the marginal benefit (MB) curve.
At equilibrium—the golden moment—the mar-
ginal cost is equal to the marginal benefit. This point
is the maximization of our social welfare. We can
see it in figure 6.1. Everyone who chooses aspara-
gus can get it, and the asparagus farmers are sup-
plying the right amount, which means resources
are being used in the best possible way. You can
see why other points on the graph aren’t maximiz-
ing our social welfare. Looking vertically, at every
point to the left of equilibrium quantity (Q1) the
marginal benefit is greater than the marginal cost,
which means more resources should be dedicated
to asparagus production. And looking vertically,
at every point to the right of equilibrium quantity
(Q1) the marginal cost is greater than the marginal
benefit, which means that fewer resources should
be dedicated to asparagus production. It’s only at
equilibrium that we’re using our resources in the
optimal way as a society.
P1
P
S = MC
D = MB
QQ1
The Asparagus Market
Figure 6.1
Marginal Cost and Marginal Benefit

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Chapter 6: Tools to Get Started | 171
Total Surplus
The second way conventional theorists show
that equilibrium represents the optimal use of
our resources as a society is by looking at the
consumer and producer surplus. In the asparagus
market, some consumers would actually have
been willing to pay more for asparagus (at
prices above equilibrium). And some producers
would actually have been willing to accept less
for asparagus (at prices below equilibrium). Let’s
graphically describe this willingness:
Consumer Surplus
Producer Surplus
P1
P
S
D
QQ1
The Asparagus Market
Figure 6.2
Consumer Surplus and Producer Surplus
In figure 6.2 the top triangle (between the
equilibrium price and the demand curve) is called
the consumer surplus—the amount consumers
were willing to pay above the equilibrium price.
When the market price was $3.00, for example,
and you were willing to pay up to $4.50 for it
because you love grilled asparagus, that $1.50 dif-
ference is the consumer surplus. In this graph the
bottom triangle (between the equilibrium price
and the supply curve) is called the producer
surplus—the amount for which producers were
willing to sell their asparagus below the equilib-
rium price. When the market price was $3.00, for
example, and your firm was willing to sell aspar-
agus for $1.50, that $1.50 difference is the pro-
ducer surplus. Please note that the word surplus
in this context is different from how we’ve used
it in previous chapters. It refers to the difference
between the amount a consumer is willing to pay
or a producer is willing to sell and the equilibrium
price—not the point at which quantity supplied is
greater than quantity demanded, or the amount
that is left over after all other expenses are paid.
As you already know, this isn’t just about a sin-
gle asparagus firm. The asparagus market model
describes all producers and all consumers in that
market. The important thing to recognize about
consumer surplus and producer surplus, say con-
ventional theorists, is that all the resources firms
and individuals were willing to spend are now
freed up for other uses, and this is good for them
individually as well as for the whole economy.
Total Surplus
Social Welfare
=
P
S
D
QThe Asparagus Market
Figure 6.3
Total Surplus and Social Welfare
Together, those two triangles of consumer sur-
plus and producer surplus create the total sur-
plus. The entire purple area in figure 6.3 rep-
resents the maximization of social welfare, which

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conventional theorists think of as the sum total of
the value gained in society by engaging in trade
to improve quality of life. In case it’s not per-
fectly clear to you from the graph, think about it
this way: liberals and conservatives say this is a
picture of the optimal satisfaction of our needs
and wants regarding asparagus (and every other
market, of course—asparagus is just our exam-
ple). We’re neither overproducing and wasting
resources nor are we underproducing and lacking
the products we want and need.
Triangle Trade-Off
So how can we apply this tool of social welfare
to answer the question of what happens when the
market changes because of government involve-
ment? Let’s say you read in the newspaper that
new rules for asparagus farmers require them to
disclose the names of the pesticides they will be
using on fields near schools in the coming year,
and farmers must have the soil on the borders of
those fields tested by an independent laboratory
every month to make sure the toxic chemicals
are not affecting school grounds. How will this
new government regulation impact the asparagus
market? Conventional theorists use the Market
Change Guide to find out (figure 6.4).
The first step is to Search. Looking through
the twelve factors, you see that there has been a
regulation imposed on farmers. They will have to
pay more money for soil testing and other admin-
istrative costs. That’s one of the factors that Shifts
supply to the left. So, Shift to the left—Left is
Less—which means supply goes down at every
price level. Step three is Slide. Since supply shifts
to the left, asparagus is no longer at equilibrium
at the original price. Draw a horizontal line from
the original price. It hits the new supply curve
first, and the demand curve second. Quantity
demanded is greater than quantity supplied. That
is a shortage, which means prices start to rise. As
prices start to rise, move up and along the supply
curve and the demand curve to the new equilib-
rium price. Step four is Settle. The demand and
supply curves cross. What do you see? The equi-
librium price has increased, and the equilibrium
quantity has decreased.
Here’s what’s interesting to notice in figure
6.5: because of the regulation, a bite has been
taken out of the total surplus—a triangle-shaped
bite that represents the lesser amount of aspar-
agus that is being traded in the market. We call
this the triangle trade-off. In this case, it shows
lower production.

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Liberals and conservatives agree that the trian-
gle trade-off shows us a technically accurate pic-
ture of the change in total surplus when govern-
ment gets involved in a market. But they disagree
about whether the triangle trade-off is good, bad,
or neutral. Conservatives read figure 6.5 in the
following way: because government got involved,
society is now at a lower level of asparagus trade.
That gray triangle, which they call the efficiency
loss or deadweight loss, represents the poten-
tial trade that could have happened in the market,
but didn’t because of government interference.
Conservatives say government interference results
in a loss of efficiency for the economy as a whole,
which brings us lower social welfare. And they
say the problem would have fixed itself because
if producers were actually doing something that
was causing harm to children, then they either
would have voluntarily changed to a safer pes-
ticide or consumers would have refused to buy
the products until the firm changed pesticides. In
Market Change Guide: Asparagus Regulation
1. Identify the market and write the
name below the graph.
2. Determine the market change
2a. Search for the relevant factor
(on the graph to the right, draw the market change and also describe
it in words under each step below)
2b. Shift demand or supply
2c. Slide with the price change
2d. Settle at the new equilibrium
Q� Shrinking Market | Q� Growing Market
Total Surplus
Triangle Trade-Off P1
P
S
D
QQ
1
The Asparagus Market
Q2
P2
S2
Demand
* Income
* Preference
* Number of Buyers
* Availability/Convenience
* Prices of Comps and Subs
* Future Expectations
Supply
* Cost of Inputs
* Number of Firms
* Taxes/Subsidies/Regulations
* Prices of Related Goods
* Changes in Technology
* Future Expectations
Supply Shifts Left
QD > QS, Shortage, P Tends �
New Eq. P � | New Eq. Q �
X
Total Surplus
Triangle Trade-OffP1
P
S
D
QQ
1
The Asparagus Market
Q2
P2
S2
Figure 6.5
Lower Production Triangle Trade-Off
Figure 6.4
Market Change Guide: Asparagus Regulation

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either case, the market would self-correct.
Liberals interpret the triangle trade-off differ-
ently. They say there was potential harm that
asparagus firms needed to preempt, and the gov-
ernment, through regulation, partnered with the
asparagus industry to make sure their production
process caused no harm to people. Liberals view
that gray triangle as equity gain. It represents
the market adjustment that government wisely
facilitated. Liberals say government intervention
results in a market correction, which brings us
more social welfare.
When the government gets involved by increas-
ing supply rather than decreasing it, the debate
between conservatives and liberals will be exactly
the same, although the triangle trade-off will be on
the right side of the equilibrium point, representing
higher production, as seen in figure 6.6. Again, lib-
erals would call this equity gain while conservatives
would call it efficiency loss or deadweight loss.
When it comes to securing our food system
and addressing product safety, these are the kinds
of disagreements that liberals and conservatives
have about government involvement and social
welfare. The policies we will be debating in chap-
ters 7 and 8 are agricultural subsidies and product
safety regulations.
Agricultural (Farm) Subsidies. This is
financial support given by the government to pro-
ducers of agricultural products. There are a vari-
ety of farm subsidies, including cash payments,
crop insurance, disaster assistance, agricultural
research, and more. Subsidies are a liberal pro-
gram generally intended to ensure an uninter-
rupted food supply. As you can see in figure 6.7,
they shift the supply curve to the right, making
firms more willing to supply at every price level,
resulting in lower prices and higher quantities.
In chapter 7 you’ll be seeing alternative per-
spectives on subsidies using the wheat market
graph when conservatives and liberals argue for
their points of view. They have different ways of
thinking about whether farm subsidies are helpful
or harmful in ensuring a secure food system.
Product Safety Regulations. These are stan-
dards that lawmakers believe firms must follow
to prevent risks to consumers at all levels of pro-
duction and distribution. This includes the design,
Triangle Trade-OffP1
P
S
D
QQ
1
The Asparagus Market
Q2
P2
S2S2
Figure 6.6
Higher Production Triangle Trade-Off
Total Surplus
P1
P
S
D
QQ
1
The Wheat Market
Q2
P2
S2S2
Figure 6.7
Subsidies in the Wheat Market

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manufacture, distribution, and sale of products.
Product safety regulations are liberal programs
intended to protect consumers from harm. There
are a wide range of government agencies that
oversee consumer safety, including the Food
and Drug Administration, the Consumer Product
Safety Commission, the National Highway Traffic
Safety Administration, and others. You can see in
figure 6.8, that product safety regulations shift the
supply curve to the left because firms’ expenses
go up when they comply with regulations. Reg-
ulations make firms less willing to supply at
every price level, resulting in higher prices and
lower quantities.
In chapter 8 you’ll be seeing alternative per-
spectives on product safety regulations using
the automobile market graph when liberals and
conservatives argue for their points of view. They
have different ways of thinking about whether
product safety regulations are helpful or harmful
in bringing people the protection they want.
P1
P
S
D
QQ
1
The Automobile Market
Q2
P2
S2
Figure 6.8
Regulations in the Automobile Market
Radical Theory Tools
Now let’s take a look at the radical tools you
need to understand their point of view on the
issues of Agriculture and Product Safety. Radicals
say that to analyze an issue, we ideally would
see all the ways the core points move together
simultaneously in the constantly shifting social
totality. But that is just too vast and complex an
exercise and probably impossible to do without
a highly advanced supercomputer, which hasn’t
been invented yet. So here’s the radical method for
dealing with this seemingly impossible task: focus
on one core point at a time as a portal into the
issue. As we drill down into that single core point,
not only will we be able to analyze the issue,
but radicals say we also will be able to glimpse
how all the core points simultaneously interact to
impact the whole economy. Please keep in mind
that assignment of these “portal” core points in
each of the VOTE issues is somewhat arbitrary
because each is relevant for every issue. Since
radicals take a holistic view of the economy, the
core points can’t be separated or thought of as
separate from the whole. This may be giving
you a brain freeze, but just keep in mind that
this makes the radical tools very versatile. Later,
you might come back and analyze the same issue
using a different core point as your portal, which
will offer different insights into the issues. The
core points that we’ll be using as tools in chapters
7 and 8 revolve around governance. Please recall
that government under democratic socialism
looks much like what we have in capitalism in
certain respects: a representative democracy with
elected officials, three branches of government,
and taxation. A big difference between
government under capitalism and government
under democratic socialism is how decisions are
made: top-down versus participatory.
With the radical perspective there are always
two parts: describe capitalism and describe demo-
cratic socialism. The description of capitalism will

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focus on the core point of top-down governance.
Top-down governance occurs when decision-mak-
ing is left in the hands of a few elected officials
and bureaucrats, and people are not empowered
to have a say beyond their occasional vote in an
election. The description of democratic socialism
will focus on the core point of participatory gov-
ernance. Participatory governance occurs when
diverse stakeholders—representatives from coop-
eratively owned firms, consumers, community
interest groups, experts in the field, public officials,
and so forth—work together to generate enforce-
able action plans and policies that improve life
for people.
Capitalism: Top-Down Governance
Radicals say there are two problems with our
current system of democracy under capitalism.
The first is that while a person may go through
the yearly ritual of casting a vote in an election,
that’s usually the extent of their participation in
the political process. Just think of all the things
that impact our lives about which we don’t have a
vote, say radicals: our workplaces, our industries,
new development in our neighborhoods, the air
quality in our cities, what goes into our water
supply, and more. They say that because of
capitalism, we lose the chance for full participatory
democracy and end up with a diluted form of
representative government. This occurs in part
because to get elected, politicians must accept
hefty corporate campaign contributions. In turn,
they are expected to prioritize the profit-making
interests of private owners. In capitalism, say
radical theorists, decisions that affect us all are left
in the hands of those who aren’t really working
for us but who are working for the wealthiest.
According to radicals, even if we had a gov-
ernment that wasn’t being unduly influenced by
special interest groups, democracy under capital-
ism brings us top-down governance, with deci-
sions being made by those who lack local exper-
tise about the issues. Politicians and bureaucrats
in a far-off city can’t possibly understand the full
impact of their decisions on local communities,
say radicals. They lack the relevant knowledge,
history, and context. Even the best-intentioned
public officials will miss the mark. The stake-
holders and experts with vital input have no real
power. In the end, say radicals, top-down gover-
nance makes problems worse even if the inten-
tion of politicians and bureaucrats is to help. This
is how top-down governance looks in capitalism:
Scenario 1. You’re an asparagus farm owner,
and you meet an old friend from college who
owns a competing asparagus firm. She says, “Did
you hear? Those citrus growers hired a lobbyist
to go down to Washington and get them govern-
ment subsidies. Now orange growers are making
a bundle. We ought to hire a lobbyist and get
ourselves some of those subsidies too.”
You think this is a terrible idea. “I don’t want a
government handout,” you say. “It’s not necessary,
and it will cost taxpayers more money. I don’t
want any part of that.”
“So don’t do it!” she says.

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But you will do it—because if you don’t and the
other asparagus growers do, you’ll be driven out
of business. Radicals say top-down governance
in capitalism means the drive for profit corrupts
producers, politicians, and lobbyists, leaving the
government and not the community influencing
what gets produced.
Scenario 2. You’re golfing with another aspar-
agus farm owner. He tells you, “We’re spraying our
fields with that new pesticide, and it’s saving us a
bundle. But now the government is threatening to
regulate. They’re starting with fields near schools,
but soon they’re going to require all asparagus
farms to disclose the chemicals we use. It’s going
to open us up to lawsuits every time a kid gets a
cold! We have to figure out a way to get around
this. Let’s all kick in and contribute to political
campaigns of candidates who will oppose regula-
tions. If that doesn’t work, let’s hire lawyers to get
us exemptions.”
You say, “I don’t want to do that! It’s so wrong!
We know there are possible links between the
new pesticide and liver cancer. Maybe it should
be regulated.”
He says, “So don’t do it!”
But you will—because if you don’t, you could
lose the farm. Radicals say top-down governance
leads to corporations covering up wrongdoings
and cheating the system.
Scenario 3. You’re at a fertilizer trade show,
and you meet a farm owner from another state,
who says, “Have you heard that the government is
giving tax breaks to farmers who switch to grow-
ing crops that can be used as biofuels? Washing-
ton is worried about our national security and our
dependence on fossil fuels. I’m going to plow up
my asparagus fields and plant corn, which can be
processed and made into ethanol.”
You say, “Those lawmakers might mean well,
but the last time the government came up with
policies about biofuel, there were all kinds of
unintended consequences. They didn’t solve our
dependence on fossil fuels, and some of those

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policies ended up creating hardships for people
because the price of corn skyrocketed.”
She says, “So don’t do it!”
But you will do it—because if you don’t and
all the other firms do, you won’t stay in business.
Radicals say that, in capitalism, top-down gover-
nance leads to unintended consequences because
while the decision-makers might put together an
advisory committee with owners, consumers,
national security experts, scientists, and others, in
the end a few bureaucrats make the decisions—
either because it’s most expedient or because the
politicians are influenced by special interests. The
result is either a narrow attempt to solve big, com-
plex problems or an insincere attempt to come up
with inclusive solutions.
Democratic Socialism:
Participatory Governance
Radicals believe that when we have an economic
system of democratic socialism, in the context of
our constitutional democracy, we experience true
representation because our elected officials on
every level of government are guided by the will
of their constituents through a mechanism called
community councils. These are groups of stake-
holders with the power to decide on the policies,
budgets, programs, and priorities that they want for
their regions and for the nation—and on changes
they want made to existing ones. It is the job of
those who hold elected offices—from Congress to
local school boards—to convene community coun-
cils of their constituents and to facilitate their con-
structive discussions. They bring the groups’ ideas
to the voting bodies—Congress, the state house,
the school board—and work to get them passed.
The people who serve on community councils are
primarily the stakeholders who have the most to
gain and lose from the decisions that are made.
These include delegates chosen by their industries,
neighborhoods, and firms to represent their inter-
ests. There are also experts from relevant fields,
advocacy groups, public officials, consumers, and
more. For example, if the issue is the use of pesti-
cides on asparagus fields, then community coun-
cil members would include consumer advocates,
delegates from the pesticide industry and farming
firms, environmentalists, nutritionists, public health
experts, and neighborhood representatives.
Elected representatives not only convene com-
munity councils, but they and their staff also pro-
vide expert facilitation so that meetings are effec-
tive and constructive. Community councils rely on
interest-based negotiation, which is a strategy
of identifying the diverse and sometimes contra-
dictory needs and concerns of everyone at the
table. For example, some may want ways to ensure
accountability and transparency from firms, while
others may want more support for research and
development. Once it becomes clear what the
interests are for each stakeholder, the community
council members work together to create win-
win proposals that address everyone’s needs and
concerns, and then they vote on those proposals.
After the community council comes to a majority
decision, the elected representative works to get

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their proposals passed into law. Because this is a
democracy, there are back-and-forth discussions
and debates with other lawmakers to find sup-
port for their various ideas. Elected officials take
new information back to their community coun-
cils, where the group discusses the feasibility,
merits, and drawbacks of potential compromises
and trade-offs. There may be times when elected
officials must make decisions without the input of
the community council. For instance, if there’s an
issue of national security, it may not be feasible
to share sensitive information with a larger group
of people. If a decision must be made quickly
to respond to a crisis or disaster, there may not
be time to convene a community council. Or if a
decision needs to be made for the greater good
of the nation, the elected official might vote for it
even if it’s not the top priority of the local region.
These overrides of the community’s desires are
rare occurrences in participatory governance.
Radicals say representative democracy without
the corrupting influence of campaign contribu-
tions by special interest groups has a built-in fail-
safe against corruption and abuse of power. If
elected officials don’t represent the interests of
their constituents, then they won’t be reelected.
It’s the nature of a democracy that no one gets
everything they want every time, but this par-
ticipatory process gives us laws, policies, and
budgets that reflect what the majority want and
need, say radicals. And it ensures that the needs
and concerns of those in the minority also have
a voice because they have a seat at the table.
Community councils address every issue—Food
Security Councils, Product Safety Councils, Acces-
sible Health Care Councils, Affordable Housing
Councils, and so forth. Some say it is just too
cumbersome to involve so many people as deci-
sion-makers. Radicals counter that participatory
governance is the most effective for the long
term because policies that we adopt truly repre-
sent the will of the broadest spectrum of society
and the wisdom of the many stakeholders.
When it comes to ensuring a secure food sys-
tem and bringing people the level of safety they
want in their products, radicals offer alternative
ideas to top-down agricultural subsidies and
product safety regulations:

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Food Security Council’s Emergency and
Innovation Funds. The government makes
money available to help farmers prepare for,
respond to, and adapt to instability in agriculture.
The policies for how distribute the funds come
from stakeholders, including farmers, community
leaders, consumers, conservationists, scientists,
and public officials. For example, funds enable
farmers and scientists to collaborate on developing
new strains of drought-resistant crops. They pay
for farmers to get trained in best practices of rain-
water harvesting, the latest methods for protecting
crops from diseases and pests, and techniques to
restore soil after erosion from storms. On top of
that, farmers receive financial assistance to help
them recover after disasters.
Product Safety Council’s Hazard Assess-
ment Protocols. Government gives firms
support and resources to reduce the risks of
dangerous flaws in their products’ designs, man-
ufacture, and use by consumers. The policies for
how to do this come from representatives from
firms, industry, consumer groups, safety experts,
engineers, and others. The Product Safety Coun-
cil develops protocols for firms to follow, and
the government provides oversight and enforce-
ment of these policies. For example, teams of
outside experts review the product designs for
flaws or potential unintended consequences.
Other experts test prototypes for problems that
could cause the product to be dangerous, such
as defective component parts or malfunctions.
Outside inspectors monitor the production
process, checking for possible contamination,
human error, wrong calibrations of machinery,
and other issues that might cause a product to
become unsafe for its intended use. They also
monitor the safety of workers. Experts in market-
ing and communications review users’ manuals,
product warnings, and age gradings on pack-
aging, and make sure product descriptions are
accurate. The protocols help firms to produce
safer products. And in the event of an unsafe
product reaching the market, the government
will facilitate a recall.
From start to finish, participatory governance sup-
ports businesses and consumers. This is how partic-
ipatory governance looks in democratic socialism:
Scenario 1. You’re a worker-owner of an aspar-
agus farm, and you meet an old friend from col-
lege who is a worker-owner of a competing aspar-
agus farm. She says, “The Food Security Council is
convening, and I hear they’re proposing an Emer-
gency and Innovation Fund so that we farmers can
invest in drought-resistant seeds and better irriga-
tion systems to weather the next dry spell.”
You say, “That’s a great idea! Everyone counts
on us to produce their food. Our firm will defi-
nitely send a letter of support to our region’s del-
egate. We want an Emergency and Innovation
Fund. Let’s spread the word to the community
and other worker-owned farms so they can voice
their support for it as well.”
She says, “Let’s do it!”
You’ll do it because participatory governance
delivers long-term plans and decisions that are
beneficial for firms and communities.
Scenario 2. You’re playing golf with another
worker-owner of an asparagus farm. He says, “We
just got the alert from the Product Safety Council
that the cheaper pesticide we’ve been using is
going through the Hazard Assessment Protocols
again because it’s just come to light that it may
be linked to liver cancer. We had an emergency
vote last night, and all the worker-owners of my
farm unanimously decided to stop using it on our
fields immediately, even though it will cost us
more to use the safer alternative.”
You say, “I’ll have to talk to my co-owners, but
I’m sure everyone will want our firm to switch over
to the safer pesticide too—even if it hasn’t been
banned yet. And we’ll want to talk with our Prod-
uct Safety Council delegate to find out which pes-
ticides it recommends as the safest for asparagus.”

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He says, “Let’s do it!”
You’ll do it because with participatory gover-
nance, all the relevant stakeholders have a seat
at the table and therefore everyone has buy-in
because they trust the process.
Scenario 3. You’re at a fertilizer trade show,
and you meet a worker-owner from another state
who says, “Worker-owned farms in my state were
just offered money by our Food Security Council
to convert five acres of our fields over to renew-
able energy. It’s one part of a bigger plan in our
state to make all the farms more self-sustaining.”
You say, “That’s a great idea. It will save our
farm money on energy bills and protect us long
into the future.”
He says, “You should do it!”
You’ll do it because participatory governance
solves big, complex problems by harnessing the
ideas, passion, and creative thinking of multi-
ple stakeholders.
Six-Core Cube Guide
Now that you know the core point of top-down
governance in capitalism and the core point of
participatory governance in democratic socialism,
you can use the Six-Core Cube Guide (figure 6.9)
to analyze the same scenario we addressed in
the conventional tools section. You read in the
newspaper that asparagus farmers are required to
disclose the names of the pesticides they will be
using on fields near schools in the coming year,
and they must have the soil on the borders of those
fields tested monthly by independent laboratories
to make sure the toxic chemicals are not affecting
school grounds. How will this new government
regulation impact the asparagus market?
Figure 6.9
Six-Core Cube Guide: Asparagus Regulation
Capitalism
1. Identify the problem.
Pesticides may cause harm
to people and the
environment.
2. Choose a relevant core point
to explain the problem
3. Describe the Pressure for Bad
The pressure for bad is a motivation to…
influence regulations to approve use of
cheaper, harmful pesticides because of the
drive for profits.
4. Expose the Visible Suffering (outcome)
With top-down governance, we get an insecure
food system with unsafe products.
Democratic Socialism
1. Identify the problem.
Pesticides may cause harm
to people and the
environment.
2. Choose a relevant core point
to explain the problem
3. Describe the Pressure for Good
The pressure for good is a motivation to…
collaborate on hazard assessment protocols
because of the drive for well-being.
4. Reveal the Invisible Synergy (outcome)
With participatory governance, we get food
security and safe products.
ProductionFor Profit Privat
e
Ownership
Top-DownGovernance
The Six-C
ore Cube
of Capita
lism
Six Core Points of Capitalism
* Private Ownership
* Top-Down Governance
* Individuals at Risk
* Production for Profit
* Unsustainable Production
* Unhealthy Communities
X
Six-Core Cube Guide
Six Core Points of Democratic Socialism
* Cooperative Ownership
* Participatory Governance
* Social Safeguards
* Production for Use
* Sustainable Production
* Healthy Communities
X
ProductionFor Use CooperativeOwnership
Participator
y
Governance
The Six-C
ore Cube
of Demo
cratic So
cialism

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You’re Ready for the Issues
You will be hearing more about top-down gov-
ernance and participatory governance in chapters
7 and 8, when radicals argue for their point of
view about whether agricultural subsidies can
solve the problem of insecurity in agriculture and
whether product safety regulations can bring peo-
ple the level of safety they want. Although we are
using these particular points to discuss the next
two issues, please remember that in every case all
the core points are relevant to every issue. Feel
free to use them all when you’re debating and
discussing the issues in the real world.
We’re about to start the first issues chapters.
Just to give you a sense of what that will be like,
here is how the chapters are organized: First, I’ll
tell you a story that brings the issue into focus
so we can narrow down and define the problem
shared by all the perspectives (and recognize
the shared outcome they hope to create). Then
we’re going to identify the policy debate—that’s
the course of action everyone is arguing about.
After that comes the really fun part. We’ll put on
masks (metaphorically) and speak to you in the
voices of the conservative, radical, and liberal
perspectives. Regarding which one goes first,
we’re treating it like that inevitable argument you
had if there were siblings in your family and you
had to ride in a car together and everyone wanted
to sit in the front seat: the perspectives will be
taking turns. At the very end of each issue, it will
be your turn to put on the masks and speak from
each of the voices, but I’ll tell you more about
that later. Let’s get started!

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
Chapter 6: Tools to Get Started | 183
Chapter 6: Test Yourself!
Below are multiple-choice questions to help you review the material you just read in this chapter.
You can find the answers below.
1. All perspectives share the same economic problems and goals, even though they differ on the
best ways to solve those problems. Please match the issue with the shared goal.
A. Agriculture i. Affordable housing for all
B. Product Safety ii. End poverty
C. Livelihood iii. The protection that people want
D. Housing iv. A secure food system
2. Which of the following statements are true about stereotypes? Please choose all that apply.
A. Stereotypes are always oversimplified, often unflattering, and definitely unfair ideas
about groups of people.
B. Stereotypes keep people from seeing others as unique individuals and lead to narrow
and ungenerous ideas about people who are different from us in some way.
C. Breaking down stereotypes for just one identity (e.g., economic) is correlated to, and
necessarily breaks down, stereotypes for other identities (e.g., social).
D. Stereotypes make it difficult to have respectful dialogues.
3. Consider the market for winter jackets. According to conventional theorists, equilibrium represents
the maximization of our collective social welfare. Please choose the two arguments they use to
make this point.
A. At points to the left of equilibrium,
MB < MC and to the right of equilibrium, MB > MC. Equilibrium is the perfect spot
where MB = MC and resources are used in
their best possible way.
B. At points to the left of equilibrium,
MB > MC and to the right of equilibrium,
MB < MC. Equilibrium is the perfect spot where MB = MC and resources are used in their best possible way. C. To the left of equilibrium, consumers would be willing to pay less (“Consumer Surplus”) and firms would be willing to receive more money (“Producer Surplus”). Equilibrium is the perfect spot where Total Surplus is maximized. D. To the left of equilibrium, consumers would be willing to pay more (“Consumer Surplus”) and firms would be willing to receive less money (“Producer Surplus”). Equilibrium is the perfect spot where Total Surplus is maximized. P1 P P1 Q1 S D Q The Winter Jacket Market Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 184 | Voices On The Economy 4. Which of the following statements are true from both the liberal and conservative perspectives? Choose all that apply. A. The grey triangle trade-off represents an efficiency loss and a loss in social welfare. B. The grey triangle trade-off represents an equity gain and a gain in social welfare. C. The grey triangle trade-off represents a change in production and resource use as a result of government action. D. The grey triangle trade-off represents standard market change steps, specifically search, shift, slide, and settle. 5. Agricultural (farm) subsidies are a liberal policy to address instability in agriculture. Subsidies may take a variety of forms (crop insurance, direct payments, and more). One function of subsidies is to give farmers incentives to produce more of a subsidized product. While liberals and conservatives disagree about whether this is a positive or negative policy, they agree that the resulting equilibrium price will __________ while the equilibrium quantity will __________. A. decrease; increase B. decrease; decrease C. increase; increase D. increase; decrease Triangle Trade-OffP1 P S D QQ 1 The Winter Jacket Market Q2 P2 S2S2 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 6: Tools to Get Started | 185 6. Please pick the graph that shows the effect on the sunscreen market of a new product safety regulation that requires firms to do additional testing. A. i B. ii C. iii D. iv 7. From the radical perspective, all the following are problems with top-down governance EXCEPT: A. Elected officials have sole decision-making authority once they are in office. B. Special interest groups influence politicians through campaign contributions. C. Representative democracy means that elected officials represent constituents instead of each person representing themselves. D. Affected parties are often asked to take on an advisory role, rather than a decision- making role. P1 P S D QQ 1 The Sunscreen Market Q2 P2 D2 i P1 P S D QQ 1 The Sunscreen Market Q2 P2 D2 ii P1 P S D QQ 1 The Sunscreen Market Q2 P2 S2 iii P1 P S D QQ 1 The Sunscreen Market Q2 P2 S2 iv Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 186 | Voices On The Economy 8. According to radical theory, participatory government has many functions, including: A. To convene and facilitate community councils B. To work to get community council decisions passed into law C. To override community council decisions in rare cases of national and domestic security issues D. All the above 9. In what way would a Food Security Council’s Emergency and Innovation Fund work? A. The federal government works on its own and requires farmers to find self-sustaining ways to rotate crops and set aside conservation land. B. Government officials listen respectfully to the advice of the councils, but ultimately representatives vote their conscience. This includes the use of direct payment subsidies when needed. C. Elected officials convene Food Security Councils, which determine the type and amount of funding needed to ensure a stable food supply. D. During years of famine, the fund builds up and the council goes on hiatus. It becomes active only during times of catastrophe. 10. A Product Safety Council’s Hazard Assessment Protocol is a set of steps firms follow to bring new products to market. Which one of these choices best describes the ways the protocols are determined and who or what enforces them? A. Groups of stakeholders are convened by elected officials to determine the safety of new products. B. Groups of stakeholders are like jury selection in our current society---no particular skills are needed. C. Groups of stakeholders advise their assigned government officials on sets of protocols to pursue and hope that the government chooses to convene a Product Safety Council. D. Groups of stakeholders are often motivated by profits over people. To avoid this, government officials have the ultimate decision-making authority. Answers 1. A – iv, B – iii, C – ii, D – i 2. A, B, & D 3. B & D 4. C 5. A 6. C 7. C 8. D 9. C 10. A Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 6: Tools to Get Started | 187 Chapter 6: Key Terms Community councils Consumer surplus Deadweight loss Efficiency loss Equity gain Interest-based negotiation Producer surplus Marginal benefit Marginal cost Social welfare Stereotype Total surplus Triangle trade-off Answer Key to Exercise 6 1. False. Conservatives believe that when people act in their self-interest to make a profit, they’re doing everyone a favor because they turn around and create jobs so that more people can prosper. 2. False. Radicals believe that wealth is important to the well-being of society. They just want to make sure the 99 percent have access to it, and not just the 1 percent. 3. False. Liberals believe that in the race to succeed, some people are unfairly held back by prejudice and lack of opportunity. They want to level the playing field so everyone has a chance to prosper. 4. False. Republicans believe compromise should not mean selling out our principles. It’s only when they bring their convictions to the table that they can make their best contributions to the conversation. 5. False. Democrats don’t see every problem as a nail that needs a hammer. They understand that problems are complex and nuanced thinking leads them to find the best solutions. 6. False. Democratic socialists say the change from capitalism to democratic socialism is already evolving in a peaceful way, with more people choosing cooperative ownership and voting for democratic socialist candidates across the nation. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About ch7 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 7Issue: AGRICULTURE Everything you eat is brought to you by nature. Our food is grown and harvested in myriad ways. But there’s a problem that humans have aways faced when it comes to our food security: nature is unpredictable. Picture a dust storm that’s a thousand miles wide. You first see it as a black smudge on the horizon, but then it’s rolling toward you—a wall of dust that grows bigger with each passing min- ute. You’re standing outside your house, and you’re watching hundreds of thousands of tons of topsoil carried on raging winds, speeding toward you at a hundred miles per hour! When it hits, you remember to close your mouth. You cover your face and shut your eyes, but the grit gets in anyway, and you’re coughing up dust. When the monster storm finally moves off to engulf the next town over, you see that your whole world is half bur- ied under sand. Your home, your family’s farm, your town—it’s all laid to waste. I know it sounds like a Hollywood disas- ter movie, but this really happened on April 14, 1935. It’s known as Black Sunday. And this storm wasn’t an isolated event. Black Sunday was 1 of 263 dust storms that blew through the southern Great Plains of the United States during a ten-year period. In 1934 alone, there were 38 dust storms. That’s more than 3 per month. I was in elementary school when I first learned about the Dust Bowl. The decade-long disaster merited just one page in our social studies text- book. I remember the grainy black-and-white photograph of a dilapidated farmhouse mostly covered in sand. My teacher explained that the Dust Bowl was caused by a period of severe drought in the 1930s. The way we discussed it, I thought it was a horrific one-time natural disas- ter that could never happen again. It wasn’t until decades later that I learned it was one of the worst nat- ural and human- made ecological disasters to affect the United States. The Dust Bowl killed nearly seven thousand people and left more than Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 190 | Voices On The Economy two million people homeless. It killed animals and ruined ecosystems, and it turned much of the southern Great Plains into a desolate landscape. The origin of the Dust Bowl traces back to the 1860s. The U.S. government wanted to settle the West and create more prosperity in our nation. Congress passed the Homestead Act, which allowed pioneers to claim 160 acres of land in the Great Plains for free if they farmed it. Later bills expanded the acreage to 320 and then to 640. People rushed to load up their wagons and stake their claims in Kansas, Nebraska, and the Dako- tas, and later in Texas, Oklahoma, New Mexico, and Colorado. Picture grasslands where the buf- falo once roamed. Now picture industrious pio- neers plowing it up to plant their wheat and corn. The Plains Indians had sustained themselves on the grasslands of the Great Plains for millen- nia—but not by farming. They hunted buffalo and traded with other Native people for crops because land in the Great Plains wasn’t easy to farm. The ground was covered with tough grasses that had long roots, which made it hard to plow. And the weather was unpredictable, with peri- odic droughts, high winds, and extreme tempera- tures. Even the earliest European explorers rec- ognized that the area lacked the right conditions for farming. But in the early 1900s the weather happened to be unusually cooperative, with steady rains that brought bountiful harvests. So more people opti- mistically headed west to homestead, while others (called “suitcase farmers”) staked their claims and then hired workers to farm the land while they went back home. Between 1900 and 1930 there were one million pioneers in the Great Plains. In 1930—which, by the way, was the start of the Great Depression—the first of four long droughts hit the southern Great Plains. The dry period lasted ten years. The land dried up, and extreme temperatures and high winds made con- ditions harsh. Those climate conditions in the past were balanced by the grasses that had evolved there over time to anchor the soil with their deep roots. But this time, with more than one hundred million acres of those grasses plowed up to make way for wheat, corn, and other crops with shallow roots, the soil dried out and turned to dust. That U .S . P u b lic D o m ain Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 191 dust was at the mercy of the high winds. That’s how Black Sunday and the other dust storms came to be. And the black blizzards didn’t just affect the prairie states; the storms made their way east too, as described on the History Channel: “[A] massive dust storm two miles high traveled two thousand miles before hitting the East Coast on May 11, 1934. For five hours, a fog of prairie dirt enshrouded landmarks such as the Statue of Lib- erty and the U.S. Capitol, inside which lawmakers were debating a soil conservation bill.” After the drought ended, the people who remained in the Great Plains returned to farming. Today there are family farmers and large corpo- rate enterprises growing crops on that land. They use better soil conservation methods and farming practices, and agriculture is once again a thriving industry in that region. Droughts are managed by irrigating with water from the Ogallala Aqui- fer, an underground reservoir. That water supply is not limitless, however, and some experts are concerned that it’s being overused. They warn that there may be another Dust Bowl in our near future. The Dust Bowl is a shocking story. It illustrates not only a historical event that happened nearly one hundred years ago but also something that could happen again. Even under the best con- ditions, with best practices, there will always be instability in farming because no one has yet learned how to control the weather or how to predict threats to crops—insects, diseases, toxic spills, and more. Radicals, conservatives, and lib- erals all agree that instability in farming threat- ens our food security. But as you might imagine, they don’t agree on how to ensure a secure food system. The policy we’re going to debate in this chapter is agricultural subsidies. Understanding the Issue of Agriculture “My grandfather used to say that once in your life you need a doctor, a lawyer, a policeman, and a preacher,” said inspirational speaker Brenda Schoepp. “But every day, three times a day, you need a farmer!” Our ability to feed ourselves is a fundamental issue of survival. We’ve known since the begin- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 192 | Voices On The Economy ning of human history that agriculture is a very risky and unstable enterprise. In fact, of all the issues we’re going to be exploring in the VOTE Program, this is the one people have been grap- pling with the longest. For most of human history we’ve had to spend all our days producing food for our next meals. In America today, the vast majority of us aren’t farmers. We rely on the local grocery store—that is, the market—to supply us with what we need. What Is Agriculture? Let me ask you this: When you bite into a cheese sandwich, do you wonder who grew the wheat for the bread? Do you know who raised the chickens that laid the eggs that went into the mayo? Do you ever wonder about the farmers who milked the cows and made the cheese? How did that food get to your plate? Let’s do a little experiment. Make a grocery list right now. Jot down five items you want to pick up at the store later. We’ll come back to this. First, let’s define our terms for this chapter. Agriculture is the science and practice of farm- ing for the purposes of growing crops and raising animals to sustain us with food and clothing. The term agribusiness describes modern commercial farms that use advanced technology. The terms big ag, corporate ag, and large-scale agricul- ture all refer to the largest agriculture firms. Just to give you an idea of the scope of farming in our nation, the United States has long been the largest exporter of food in the world. There were more than two million farms in 2017. Half of those were small farms of forty-five acres or fewer, accord- ing to the U.S. Department of Agriculture (USDA). More than nine hundred million acres are used for farming, and close to 70 percent of the farm- land in the nation is controlled by the top 10 per- cent of farming enterprises. Another term you might have heard in conver- sations about agriculture is commodity. It means a product is interchangeable no matter who pro- duces it. So a bushel of wheat grown in Minne- sota is no different from a bushel of wheat grown in Nebraska. Soft commodities are agricultural products such as wheat and corn, and hard com- modities are products that are mined, such as Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 193 gold, oil, and silver. Commodities exchanges, also known as commodities markets, are mar- kets where farmers trade not their crops but finan- cial agreements about the price at which they will eventually sell their crops. These are called futures. Futures are simply financial agreements (contracts) that a farmer will sell a set amount of their crop— ten bushels of wheat, for example— at a set price and on a set date in the future, and that a buyer will purchase that amount of wheat at that price, on that set date. With futures trading, wheat farmers can protect themselves from going out of business by being assured in advance of earning a certain income from a portion or all of their expected harvest. This hedge (lessening the chance of loss) might sometimes result in lower total profits if the price goes up at harvest time, but it functions as a stabilizing tool for farmers in case the price of wheat goes down. There are two more relevant terms for this chapter. Agricultural dumping refers to exporting commodities at prices that are below what they cost to produce. Food aid refers to agricultural products donated by the government to other nations that are in need of assistance to feed their populations. The Farm Bill Have you ever seen a hockey game? Imagine the puck whizzing across the ice until it gets slapped in the opposite direction then whacked back, only to reverse course again and careen off the side, ricochet off a skate, and slam into the goalie’s mask. Well, that’s a fairly accurate metaphor for Congress’s approach to agricultural programs. The government has long been making policies that pertain to agriculture—the USDA was created in 1862 by President Abraham Lincoln, when more than half of Americans were farmers (today it’s less than 2 percent). There’s a dense list of bills that were passed to try to ensure a stable food system. Here are a few notable ones: the Federal Meat Inspection Act of 1890, the Soil Conservation and Domestic Allotment Act of 1936, the National School Lunch Act of 1946, the Farmer-to-Consumer Direct Marketing Act of 1976, and the Healthy Forests Restoration Act of 2003. You don’t need to know the details about these— just know that agricultural policy historically has been complicated and deeply rooted in our nation’s history. You probably haven’t ever heard of the Federal Meat Inspection Act, or any of those others, but you may have heard of the policy that dominates the national conversation today. In fact, if you’re twenty years old, there have already been four versions of it during your lifetime. It’s called the Farm Bill. It was originally called the Agricul- tural Adjustment Act of 1933, signed by President Franklin D. Roosevelt. In 1938 Congress passed a new version of the Farm Bill and agreed that the issue of agriculture was so important that it Year Bill 2018 Farm Bill Agriculture Improvement Act of 2018 2014 Farm Bill Agricultural Act of 2014 2008 Farm Bill Food, Conservation, and Energy Act 2002 Farm Bill Farm Security and Rural Investment Act 1996 Farm Bill Federal Agriculture Improvement and Reform Act 1990 Farm Bill Food, Agriculture, Conservation, and Trade Act 1985 Farm Bill Food Security Act 1981 Farm Bill Agriculture and Food Act 1977 Farm Bill Food and Agriculture Act 1973 Farm Bill Agricultural and Consumer Protection Act 1970 Farm Bill Agricultural Act of 1970 1965 Farm Bill Food and Agricultural Act 1956 Farm Bill Agriculture Act of 1956 1954 Farm Bill Agricultural Act of 1954 1949 Farm Bill Agricultural Act of 1949 1948 Farm Bill Agricultural Act of 1948 1938 Farm Bill Agricultural Adjustment Act of 1938 1933 Farm Bill Agricultural Adjustment Act of 1933 Table 7.1 History of the Farm Bill Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 194 | Voices On The Economy should be reconsidered every five years moving forward. The Farm Bill is the federal government’s policy to address everything related to agriculture, including farming, ranching, nutrition, and more. Agricultural Subsidies The Farm Bill has always been controversial. You may have heard about the fights around the Supplemental Nutrition Assistance Program (SNAP), which is the biggest program funded through the Farm Bill. The part of the Farm Bill we’ll be debating, agricultural subsidies, is also highly contentious. Here are a few examples of subsidy programs in the current and past Farm Bills: Crop insurance is a program that’s been around in some form since 1938. The intention behind it is to help farmers stay in business when something unexpected and detrimental happens. Crop insurance works like your car insurance— when you have an accident, your insurance com- pany pays to fix your bumper. Farmers buy crop insurance from private companies and are cov- ered in case weather events ruin their crops— droughts, floods, tornadoes, and so forth. The government gets involved by paying (subsidizing) private insurers to offer crop insurance to farm- ers at a reduced rate and by subsidizing farmers to help them pay the premiums (the cost of the insurance policy). Loans and loan guarantees are programs intended to help farmers pay their overhead costs and to expand their production. They also are meant to enable farmers to time the sale of their crops so that they will make the most profit. Farm- ers typically have to wait until their crops are sold before they make any money, so they rely on loans to cover up-front costs of supplies, including seeds, fertilizer, hay, plows, and so forth. In 1916 the Fed- eral Farm Loan Act created cooperative banks to lend farmers money. Over time, it morphed into the Farm Credit System, which is a government-run program with billions of dollars in assets. Disaster assistance is a government pro- gram intended to help farmers who lose crops because of natural disasters—droughts, freezes, hurricanes, floods, pest infestations, and so forth. Disaster assistance is paid to farmers on top of crop insurance. Direct payments are meant to give farmers an incentive to keep their land in production rather than selling it off to developers. The government pays farmers for owning wheat acreage, corn acreage, or soy acreage, and so forth. Conservation reserve programs are intended to create incentives for land conservation so that farmers will preserve vulnerable ecosystems. The government subsidizes farmers to take a certain amount of their land out of production. Crop commodity programs are meant to protect farmers when prices for their commodi- ties fall lower than what they were counting on charging in order to stay in business. The govern- ment subsidizes unexpected dips in price. Food promotion initiatives use the govern- ment to boost markets for farmers at home and abroad. For example, the government has spon- sored public service announcements to promote the health benefits of milk and dairy products for children. Agricultural research programs are meant to use the government to develop better farm- ing technologies. The government has allocated money for research and education in agriculture, including creating land-grant universities. All of these subsidy programs are a continual source of debate. From the 1940s through the 1980s, when commodity prices were high, Con- gress entertained the idea of getting rid of or reducing subsidies. But as soon as prices for agri- cultural products dropped, Congress expanded subsidies to farmers. (Can you hear the hockey puck whizzing by?) In 1996 Congress passed the Freedom to Farm law, which was a move away from subsidies (whizz!), but shortly thereafter it Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 195 significantly increased subsidies (whack!). In 2002 Congress passed a new Farm Bill that increased subsidy payments, added new crops to the list of those subsidized, and created a new price guarantee program (whoosh!). In 2008 Congress added subsidies for sugar and for certain fruits and vegetables (whomp!). The 2014 Farm Bill mostly ended the direct payment program and several other subsidy programs (whoosh!), while it expanded crop insurance (whack!). There were even more changes in the 2018 Farm Bill, and where the hockey puck slides next no one knows. More than one hundred different crops are subsidized, and traditionally, the top five have been wheat, corn, rice, soy, and cotton. Remem- ber I asked you to make a grocery list? Check it right now. How many of the items on your list are made from subsidized crops? I’m guessing it’s many of them. So you can see that this issue is relevant to your life and what’s in your lunch box . . . and hanging in your closet . . . and on the menu at your favorite restaurant. Now you have the lay of the land. You know the definitions and the history of what our nation has already been doing to address the problem of instability in agriculture. You have what you need to analyze competing ideas about how to solve this problem. That means you’re ready for the best part of the VOTE Program. It’s time to hear the voices of the different perspectives on the issue. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 196 | Voices On The Economy Voices on Agriculture Conservatives, radicals, and liberals all agree that instability in farming threatens food security, and they all share the same goal of having a secure food system. But they strongly disagree about how to achieve that end. Should we leave agriculture markets alone and let the invisible hand of free- market capitalism ensure a secure food system? Should we use the helping hand of government subsidies in fair- market capitalism to bring us a secure food system? Should we use Food Security Councils’ Emergency and Innovation Funds in democratic socialism to plan for a secure food system? The policy we’re going to debate is subsidies, which is a liberal idea. We’re going to put on three different masks and talk to you in the voices of the three perspectives. The goal is to persuade you that each perspective is the right one so that you can make up your own mind. Which one makes you nod in agreement as you read along? Which one makes you so angry that you have smoke coming out of your ears? Which one leaves you shaking your head in disbelief that anyone could see it that way? You don’t have to agree or disagree with a perspective. You just need to practice respectful listening with an open mind so you can understand all the arguments. At the end of each perspective you’ll find a summary of each point of view. You’ll also find eight Talking Points. These are meant to be read aloud to someone else so that you can try on the words and become fluent in the different per- spectives. Say them with passion—as if you really mean what you’re saying. Please don’t just read the words as if you’re reading the instructions for assembling a bookshelf. It’s extremely likely that you will deeply disagree with some of the Talking Points, but please say them anyway. By speaking them aloud, you’ll gain deeper insight into how others think, which may help you become more persua- sive about your own point of view. There are three rules for Talking Points: Say them aloud, say them with passion, and avoid mockery and sarcasm. That way you can make up your own mind and find your own voice. Then you can join the conversation as a passionate advocate for what you believe is the best way forward as a nation. You might even come up with a new solution. That is what the VOTE Program is all about. One last note: please remember that VOTE doesn’t take a position on any of these issues. We’re just channeling the voices of the perspec- tives. The conservative voice will go first for this issue, and then for each subsequent issue we’ll change the order in which we present the per- spectives to keep it balanced. Here we go! Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 197 If they’d had to pay their own money for the land, those homesteaders would have investigated its suitability and concluded that it lacked the proper climate and didn’t have sufficient rainfall for wheat production. The Plains Indians and early settlers all knew that the Great Plains were not suitable for sustainable European-style agriculture, but that fact was ignored because the government was handing out free land. Did we learn from our mistakes? Sadly, we did not. Government meddling continues today, as farmers in the Great Plains are subsidized to produce wheat. And if that’s not bad enough, those farmers are not being charged appropriately for the water they use, which means they overuse it and drain the aquifer. This can’t be sustained. We’re heading for another Dust Bowl, and it’s the government’s fault. Let’s consider the wheat market when there’s a drought (figure 7.1). Farmers’ costs go up because they need to pay for more irrigation. As a result, some wheat farmers will go out of business, some will switch to growing more drought-tolerant crops, and some will choose to switch to produc- ing a crop that brings a higher price. For instance, if people are paying more for kale (because kale is suddenly popular), those wheat farmers will start to grow kale. You can see in figure 7.1 that in all these cases, the supply curve for wheat will shift to the left and the price of wheat will go up. Yes, the wheat market will shrink, but everyone who wants the wheat at this higher price gets it, and because those farmers who still produce wheat can get a higher price for it, they can afford to pay the higher costs for water during the drought. That’s how free-market capitalism works: farmers follow price signals and appropriately value their resources (for instance, water). In the end, farm- ers, guided by price signals, produce what people want. Without anyone having to pass a law or dictate what suppliers and demanders should do, the invisible hand guides the market to maximize our social welfare. ConservativeVoice on Agriculture Remember the Dust Bowl and all those homesteaders who went out to the Great Plains to farm their free land? Well, if you think about it, the Homestead Act was like a subsidy since it provided land for free. And what a disastrous idea that turned out to be! We ended up with the Dust Bowl because the government interfered with price signals. People got the land for free, so they didn’t value it. They didn’t make the kinds of calculations that were needed to determine if this land was actually suitable for wheat production or for growing any kind of crop. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 198 | Voices On The Economy P1 P S D QQ 1 The Wheat Market Q2 P2 S2 Figure 7.1 Conservative View Remember when you went to the grocery store to buy bread, mayo, and cheddar for your cheese sandwich? Did you rush out at dawn so you could be the first one there in case they ran out? No! The free market has always brought you the food you want—and it always will—so you don’t have to worry. When the government leaves them alone, agricultural markets thrive. We have a secure food system because producers grow the most they can in the most efficient way to maximize their profit. Everyone who wants the food at that price can get it, and producers supply the types of food people want. If we want more kale, we get more kale. If we want organic carrots, we get organic carrots. In free-market capitalism, prices signal to farmers what to produce. The best way to address instability in agriculture is to leave markets alone to self-adjust. Firms will adapt and innovate, and we will all get the food we want at the right price. Instability in farming is real, and so is insta- bility in every market. When there’s a hurricane, for instance, the airline market is affected, the dog-walking market is affected, the skateboard market is affected, and so forth. If you think about it, change is the only thing you can really count on in life. But instead of seeing this as a problem, Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 199 there’s another way to look at it: see it as an opportu- nity. When you’re in a sail- boat and you’re trying to go from island to island, you rely on the winds to get you there, but they are constantly changing, so you have to adapt. One wind dies down or changes direction, so you read the wind on the water and then bring your boat around to pick up a better wind to carry you to your destina- tion. Sometimes it’s even stronger and gets you there faster, or it might carry you to a place you didn’t antici- pate, which opens up even more opportunities. Crisis and opportunity are two sides of the same coin. Businesses will always have times of struggle, but, liberals, it makes absolutely no sense to try to come to the aid of every dog walker, every airline, and every skateboard producer. It makes no sense to trade the rational solution of following price signals for the chaos of trying to put out every fire for every firm in every industry when there’s instability. And we shouldn’t come to the aid of every farmer. You liberals claim there’s something special about agricultural instability that justifies all those farm subsidies, but that’s just not true. Even if we accepted the premise that agriculture needs to be treated differently from all other industries, subsidies don’t work. Those government handouts create even more instability and in fact create an efficiency loss. Subsidies give farmers incentives to stay in the wheat business during periods of drought—even to expand production of the subsi- dized products by plowing up more land for wheat. When the government starts paying farmers to pro- duce things that it decides should be produced, we don’t get the right mix of products, because subsi- dies destroy price signals. Farmers follow an artifi- cial, government-manip- ulated signal to produce wheat instead of following free-market prices. The result is that we end up with too much wheat and not enough kale, avocados, and everything else peo- ple actually desire. Our tax dollars are paying farmers to produce things that no one wants. Subsidies create inefficiency—resources are wasted—and they reduce our social welfare. And then what happens? The government buys up the excess wheat and dumps it on developing coun- tries, pushing their farmers out of business, which creates international crises and trade wars. So once again liberals try to solve a problem and end up making it worse. And the radical idea of Food Security Coun- cils’ Emergency and Innovation Funds to replace agricultural subsidies? How is that not just a new name for subsidies? Whatever radicals want to call it, it’s government meddling, which means it will continue to create the same problems we already have. Wait—the problems won’t be the same: they’ll be a thousand times worse because dem- ocratic socialism is a system that rejects profit. There is no incentive for anyone to work hard or innovate. It’s the profit motive that leads agribusi- ness to invest in research and development so we can go to the store and buy food that’s more nutritious and won’t spoil as quickly. Democratic socialism is destined to fail—if it could even get Let’s end the wasteful programs that flush taxpayer dollars down the toilet and create all the wrong incentives. Our nation is most secure and our farming industry is most robust when we produce efficiently, which means leaving markets alone to self-adjust. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 200 | Voices On The Economy off the ground in the first place—because without the profit motive our ability to feed ourselves is at risk. Radicals say their tax-dollar-funded Emer- gency and Innovation Funds created through par- ticipatory governance (and those endless meet- ings of their Food Security Councils) help them plan for the long term. Yikes! Radicals want agri- cultural decisions—and every other decision you can think of—to be made by committee. This is a scary and dangerous idea. Can you imagine this group of “stakeholders” sitting in a room some- where, drawing up their pie charts and telling farmers what to grow, how much to grow, how to grow it, and what percentage of the land they can use for different crops? Would anyone in their right mind want to live in that country? No one can predict the weather or a sudden kale craze or a study that shows amazing health benefits of popcorn, and in capitalism we don’t need to because we already have long-term planning: it’s called “following price signals.” There is no need to put a committee together to bail out farms or to tell farmers how to do their business. If there’s a hurricane or a drought, price signals will guide farmers to use their resources most efficiently, and the profit motive of capitalism ensures that farmers will want to get up at the crack of dawn and do the hard work it takes to bring us the food we want and need. We should reject agricultural subsidies so that unfettered markets can ensure a secure food sys- tem. Let’s end the wasteful programs that flush taxpayer dollars down the toilet and create all the wrong incentives. Our nation is most secure and our farming industry is most robust when we produce efficiently, which means leaving markets alone to self-adjust. That will bring us the most pos- sible foods in the right quantities at the right prices. We can choose whatever diets we want without the government imposing its will on our dinner plates. When agricultural firms want more stability, they purchase private crop insurance policies to minimize the risks of a failed harvest because of a disaster. And farmers will do what they’ve been doing for years to minimize the risks of falling prices, which is to make a deal to sell their future harvest at a fixed price so they can make sure they will be able to stay in business. Trading in futures has long given farmers the stability they want and at the same time has stabilized the prices we pay at the grocery store. Free-market capitalism brings us the wheat we want, the kale we want, and the avocados we want. We get all this by leaving the market alone and letting the profit motive give us a stable and flourishing food system. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 201 ConservativeFree-Market Capitalism BIG PICTURE The best way to address instability in agriculture is to leave markets alone to self-adjust. Firms will adapt and innovate, and we will all get the food we want at the right price. POLICY POSITION Instability in farming threatens food security, but . . . " Liberal policies of government handouts distort price signals, throwing markets off balance and ruining international relations. " Radical policies of government handouts in an economic system with no profit motive jeopardize our ability to feed ourselves. SOLUTION Reject agricultural subsidies so that unfettered markets can ensure a secure food system: ! Private crop insurance and futures trading emerge. ! Deliver the food we want and need through unfettered prices. P1 P S D QQ 1 The Wheat Market Q2 P2 S2 Agriculture Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 202 | Voices On The Economy Agriculture Talking Points: Conservative 1. Capitalism works best when we leave it alone. The free-market approach is simple and elegant: the con- sumer and the farmer meet in a market without any government interference, and since farmers want to make money, they’ll produce what people want to buy. That’s how we get the food we want at the right price. The free market is a win-win every time for suppliers and demanders. 2. There’s a saying that every crisis is an opportunity. Instability in agriculture gives farmers an opportunity to innovate and adapt. There’s instability in every industry—not just agriculture. For instance, since they know there will be years of drought, firms have an incentive to develop crops that use less water. Innovation is how we get a growing and healthy economy. Firms that are flexible and can respond to change will survive, and that’s how it should be. 3. Liberal subsidies are supposed to fix a problem, but they end up creating more problems because govern- ment handouts reward firms for stagnating. Why should farmers adopt better business practices or meet changing market demands when the heavy hand of government pays them not to? The solution is simple: get rid of subsidies and let farmers come up with their own creative solutions. Let’s stop enabling an entire industry to run on welfare. 4. Agricultural subsidies are a huge waste of taxpayer dollars. Money comes out of our pockets to pay farmers to overproduce crops that nobody wants. All that excess food floods the market, and we end up wasting our scarce resources. And it gets worse—because then we dump those products on developing countries, which pushes their own farmers out of business and causes international trade crises. Liberals, you’ve been running this scam on the American taxpayer for nearly one hundred years. It’s time to get rid of subsidies. 5. No one can possibly plan the economy by committee—and that’s especially true in agriculture. The radical idea of Food Security Councils is a disaster waiting to happen. They are doomed to fail because there is no possible way any one person or group could ever figure out how to allocate resources to the right place, at the right time, in the right amounts to give us the wide variety of food we want in the quantities we need. 6. Worker-owned farms in democratic socialism are not going to provide the whole nation with the food it wants. You radicals think there’s something wrong with big corporations in the food industry, as if your to- mato is better because it was grown by a worker-owned farm down the road. But profit-driven agribusiness invests in research and development to bring us products with higher nutritional value and less spoilage— all at lower prices. They bring us an abundance of food options, no matter what the season. 7. Is there instability in agriculture? Of course there is! That’s why farmers buy crop insurance policies to mitigate the risk of loss in case of a disaster. And that’s why they make deals with buyers to sell a portion of their future harvest at a fixed price. They can take measures on their own to make it possible to stay in business even if the price falls. This is how farmers have historically adapted and innovated to ensure that we get the food we want and need. 8. In free-market capitalism, markets self-correct when we leave them alone. So all we need to do to have a secure food system is to stop subsidizing farmers to produce food that no one wants. And while we’re at it, let’s stop paying farmers to keep growing unsustainable products. Instead, we should let the invisible hand guide farmers to produce the food our nation actually wants and needs. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 203 Great Plains, or to ensure that water was used appropriately. We needed a partnership between farmers and government to put the right amount of land into production so that farmers didn’t destroy the ecosystem. If there had been more government involvement, we could have pre- vented the Dust Bowl! We learned from that unfor- tunate experience. Today we benefit from public agencies that support and protect agriculture. But in those same Great Plains states that experienced the Dust Bowl, farmers are unsustainably draining the aquifer. Without government intervention to regulate the water usage, we could end up with another Dust Bowl. Let’s consider the wheat market when there’s a drought. Because of higher water costs and some farmers going out of business, the supply curve would shift to the left, bringing about a higher wheat price and a shrinking wheat market. In normal circumstances it’s perfectly fine when this happens because markets will self-adjust in the long run. But food is not the same as any other product. We can live without ski resorts. We can’t live without food. Food is necessary for our survival today and every day. The good news is that there is something we can do to restore the market to what it looked like before the drought. We can shift the supply curve to the right—back to where it was before the drought—by using subsidy programs. In figure 7.2 you can see that subsidies shift the supply curve back to the right because subsidy programs offset farmers’ costs for water so they can continue to produce our wheat and continue to stay in business and grow LiberalVoice on Agriculture T he Homestead Act created incentives for settlers to make a better life for themselves and at the same time grow the food needed to feed our nation. The government created avenues of opportunity for prosperity and well-being by offering free land. The problem was not that the government gave land to settlers; the problem was that the government didn’t partner with those homesteaders to ensure that they used best practices in farming, or to ensure that some land was being conserved, or to ensure that trees were left as wind breaks across the Agriculture Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 204 | Voices On The Economy the food we need. With the helpful hand of gov- ernment, firms are no longer at the mercy of weather, pests, or other unexpected threats. Sub- sidies create an equity gain that brings us more social welfare because we get the wheat we want in the quantities we want and at a low price—all while preserving our nation’s farming enterprises. P2 P S1 D QQ 1 The Wheat Market Q2 P1 S Figure 7.2 Liberal View A stable food supply is of the utmost impor- tance to our national security. Imagine if we didn’t have subsidies and there was a drought. Wheat farmers would start to go out of business. They would sell their farmland to housing and strip-mall developers. When conditions for wheat production became favorable again—when the drought ended—they wouldn’t be able to resume their farming businesses and grow our nation’s wheat. You can’t turn a condominium back into a wheat field. The land would be forever lost to food production. We would become dependent on other nations to sell us wheat. Just consider military history for a moment. How are wars won? By keeping food from your enemy. Our trading partners today could easily become our enemies tomorrow, so protecting our domestic food sup- ply is critical to our national security. We don’t want to be dependent on other nations for our survival. What can save us from this stark sce- nario? Agricultural subsidies. They protect our food supply by preserving our farming industry. This is the best way to protect our national secu- rity and make sure we have the food we want. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 205 Radicals, what a bril- liant idea for your Food Security Councils to create Emergency and Innovation Funds for farmers. Wait— that sounds so familiar… because that’s exactly what subsidies are! You are clearly right that when there is a weather event or natural disaster that puts farmers at risk of going out of business, we need to step in and help. We’ve been doing this for genera- tions. It’s called “crop insur- ance,” “disaster assistance,” “loans,” and more. And we already fund expert advice for farmers on best practices. It’s called the USDA. We don’t need to switch over to democratic socialism to have a community solution. We have already come together to make sure our nation’s food system is protected. What do you think the government is? It’s us! And we already have a democracy that is of the people, by the people, and for the people. Your Food Security Councils are impractical. You can’t ask people with busy lives and businesses of their own to sit through endless committee meetings. The USDA has paid staff and experts who work for us, and it already has mechanisms in place to get feedback from stakeholders. So while we’re glad you agree with us that we need farm subsidies, let’s be clear that the way you want to go about providing them is alarming and dangerous. First, it’s impractical, and second, democratic socialism undermines the incentive for farmers to toil and labor to feed our nation. Cooperatively owned farms will always be hampered by freeloaders who don’t want to work hard yet expect to reap the rewards. The profit motive is the reward system that is the key to plentiful food produc- tion and a successful econ- omy. Farming enterprises of every size in capitalism bring us innovation, moti- vation, and refrigerators filled with every kind of food that people want. If you want organic, free- range, non-GMO food, then capitalism will make sure your local store is stocked with those foods. Without the profit motive and pri- vate ownership, we’ll be left with food shortages, higher prices, and fewer choices. The last thing we would ever want to do is to throw out the very system that creates our wealth in the first place. Democratic socialism has the equation wrong: it’s democracy plus capitalism, not democracy plus socialism, that brings us max- imum well-being. Conservatives, you love your mantra that mar- kets left alone will self-adjust, but we don’t live in a time bubble. It’s dangerous and misguided to sit on our hands and wait for everything to work itself out while we watch our ability to feed our nation wither and die. We can’t afford to become vulnerable to foreign domination. Your do-noth- ing approach leads to the worst outcomes for our social welfare. Consider farmers—the hardwork- ing, dedicated people who built this country and who sustain us all. If there’s a drought and we do nothing, they lose their farms through no fault of their own. Private crop insurance without gov- ernment support is unaffordable, and the futures market is a gamble that might not pay off for farmers in the end. What happens to consumers? You’re at the supermarket, looking to buy bread, cheese, and mayo for your cheese sandwich, but A relatively small investment of our tax dollars brings us a priceless return: national security, a robust farming industry, low food prices, and more food choices than people have ever had in the history of humanity. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 206 | Voices On The Economy there was a drought, and we did nothing. If you can even find bread at the store, you can’t afford to buy it because the price is triple what it had been. Higher prices and lower quantities are what we get when we do nothing. Conservatives say subsidies create too much wheat production— but that’s not a problem. When other nations get hit with famines, wars, and tsunamis, and all the other countries respond with food aid, we can also be good global citizens by sending over our wheat. If we follow the free-market plan and get rid of subsidies, we end up with a four-way loss: our nation loses its food security, our farmers lose their businesses, our consumers lose with higher prices, and the entire world loses when we can’t come to the assistance of those in need. We should support agricultural subsidies to ensure a secure food system. A relatively small investment of our tax dollars brings us a priceless return: national security, a robust farming industry, low food prices, and more food choices than peo- ple have ever had in the history of humanity. We should strengthen subsidy programs to motivate farmers to continue to grow the food our nation needs to stay strong and free. And while we enjoy living in a land of plenty, we can also help our international neighbors as good global citizens by offering food aid in times of war and famine. We should continue our subsidy programs while mak- ing sure they don’t get corrupted by powerful agri- businesses. Only in this way will subsidies be used as they were intended, and we will have the wheat we want, the kale we want, and the avocados we want. We will also have stable markets so we can maintain our food independence and preserve our nation’s precious farmland. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 207 LiberalFair-Market Capitalism BIG PICTURE Agricultural subsidies protect our food supply by preserving our farming industry. This is the best way to protect our national security and make sure we have the food we want. POLICY POSITION Instability in farming threatens food security, but . . . " Radical policies are just subsidies by a different name but burdened with impractical bureaucracy, limited choices, and food shortages. " Conservative policies give us a four-way loss: bad for farmers, bad for consumers, bad for national security, and bad for international relations. SOLUTION Support agricultural subsidies to ensure a secure food system: ! Strengthen protections for our food independence. ! Preserve our nation’s farmland. P2 P S1 D QQ 1 The Wheat Market Q2 P1 S Agriculture Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 208 | Voices On The Economy Agriculture Talking Points: Liberal 1. Farmers are the quiet, hardworking heroes of our country. Without putting on a uniform or taking up arms, they safeguard our national security by ensuring our food independence. Agricultural subsidies keep us from becoming vulnerable to foreign powers for our very survival because they keep farms in production. And they help farmers have peace of mind when their livelihoods—and our nation’s food security—are threatened. 2. Agriculture is a risky business. No one can predict the weather, and climate change is causing even more unpredictable weather events. In addition, we face the constant threat of global economic instability, terror- ism, and wars. All of those factors could affect our food supply, but they don’t. We don’t have to worry about empty shelves at the grocery store, because our farming industry is protected by agricultural subsidies. 3. Radicals, your idea for Food Security Councils to create Emergency and Innovation Funds is pure genius! If only we had such a thing … wait a minute—we already do. It’s called “subsidies.” You just came up with a fancy new name for crop insurance. The only difference between your solution and ours is that subsidies are part of an amazing, profit-driven system called capitalism that creates incentives for farmers to work from sun up to sun down to grow the food that feeds our country. 4. If you want non-GMO, organic, gluten-free, grass-fed, free-range, pesticide-free, fair-trade, no-growth- hormone products, then capitalism will supply it. Fair-market capitalism will bring you the food you want. In democratic socialism, cooperatively owned farms are held back by lazy freeloaders who have no moti- vation to put in a hard day’s work since they’re going to take a share of the profit in any case. If we have to rely on worker-owned farms to feed the nation, then we’re all in trouble. 5. The conservative idea that in times of crisis farmers will adapt and innovate sounds good on paper, but without subsidies, farmers will “adapt” by selling off their land to developers. Once farmland is turned into a housing development, a shopping mall, or a parking lot, it’s lost forever to food production. Without arable land, our whole nation will become dependent on other countries for our food. This would be a disaster for our national sovereignty. 6. Conservatives, farmers can’t afford private insurance on their own, and futures markets are a gamble that could easily lose them the farm. Leave it to you to reject farm subsidies, which have worked for decades. Of course there’s instability in every industry, but agriculture isn’t just any industry. We can’t survive without food! We don’t want high prices and limited products at the grocery store every time there’s a drought or hurricane. Agricultural subsidies keep farmers producing in a high-risk industry. 7. Everyone needs to eat. Food is the foundation of our well-being, so it makes perfect sense to support and protect our food source—the farming industry. The helping hand of government makes it possible for farmers to sleep well at night knowing that their businesses won’t go under the next time there’s a weather event or human-made disaster. And you and I can sleep well at night knowing that tomorrow, and next week, and ten years from now, our nation will be able to feed itself. 8. Can you imagine the chaos and frustration that would occur if every time there was a drought or a hurricane, you and everyone else in our nation would have to wonder if you could find the ingredients for dinner, and if you could afford them? Agricultural subsidies give us a four-way win: farmers win because they stay in busi- ness, you win with low prices and availability of the food you want, the country wins because we can depend on ourselves for a secure food system, and the developing world wins when we give it our surplus food. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 209 supposed to create homes for people and feed the nation, but that’s not how it worked. Suitcase farmers saw a way to make easy money off this free land deal. They claimed their land, but they never actually moved there. Instead, they paid wage laborers to plow up acreage when prices were high, and then they abandoned the land when there was no more profit to be made. Suit- case farmers ruined the Great Plains. They may not have wanted to devastate the land and sur- rounding communities, but the pressure for bad led them to do whatever was most expedient to make a buck. And the irony is that they did it in a perfectly legal way through the Homestead Act. By the way, what happened to those wage laborers? They became Dust Bowl refugees! This production-for-profit economic system destroyed land and lives. It destroyed our nation’s food sys- tem once, and it’s doing it again. Today, large-scale farming corporations in the Great Plains—like the suitcase farmers who had no commitment to the community—are draining the aquifer beyond what it can sustain. Under capitalism, we will end up with another Dust Bowl. Let’s use the Six-Core Cube of democratic social- ism and drill down through the core point of par- ticipatory governance to see how we get a secure food system. Imagine a world where people come together before the weather event that threatens food production and help the farming indus- try prepare for, adapt, and respond to inevitable catastrophes. In democratic socialism, elected offi- cials convene and facilitate Food Security Councils. Made up of multiple stakeholders, these partici- patory community councils have the authority to make decisions. Bringing together their different areas of expertise, their different needs, and their different concerns, council members collabora- tively decide how to address problems and what resources to allocate to programs. At that point, the elected officials are tasked with representing those decisions in the larger legislative arena to try to get them passed into law. That’s how Food Secu- rity Councils work. So, for example, Food Security Radical AgricultureVoice on Agriculture The Dust Bowl may have looked like a natural disaster, but it wasn’t natural—it was human-made. It didn’t happen because there wasn’t enough government or because there was too much government; it happened because of capitalism. The drive for profit led Europeans to steal the land from the Plains Indians. Capitalism gave farmers incentives to plow up the land, which ended up devastating the ecosystem. The drive for profit caused Black Sunday and turned one hundred million acres of farmland into wasteland. The Homestead Act was Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 210 | Voices On The Economy Councils would ensure that cooperatively owned farms have the funding to switch to drought-resistant crops, that farmers get training in the best methods to har- vest rainwater for irrigation, and that they can afford to restore degraded soil after a tornado. Because planning is important for the success of any endeavor, these mea- sures would be put in place before disaster strikes. With participatory governance, the people with the most knowledge and expertise, as well as those who have the most at stake, all have a voice, so we get the best ideas for preventing crop failure, for recovering from disasters, and for developing innovations to improve production. Worker-owned farms and farming communities don’t have to worry that their firms will go out of business or that their commu- nities will become ghost towns. SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism Figure 7.3 Radical View Do you know what the weather will be next week? Next month? Next year? Of course you don’t—no one does. So here’s how we make sure you will have your cheddar, bread, and mayo for your cheese sandwich: we plan for instability. Long-term plan- ning is an ancient idea, by the way. Remember Joseph from the Bible? He inter- preted the Pharaoh’s dream that there would be seven years of plenty, followed by seven years of drought. Out of that prediction came a long-term plan to stockpile grain during the years of plenty so no one would starve during the years of drought. Because Egypt had that long-term plan, it became the dominant power in the region during the drought years. We don’t need a dream interpreter to tell us that we are going to have cycles of abundant harvests and lean harvests. Instability is inevitable, and that means the stakeholders who make decisions about protecting our food system—farmers, con- sumer groups, communities, scientists, public officials, industry experts, and so forth—plan together for the future. Food Security Councils anticipate problems and set aside resources for unforeseen calamities because we understand that everyone benefits when our worker-owned farms stay in business and thrive. They serve as local economic anchors with their prosperous enterprises, and because they live in the com- munities where they work, they are motivated to take care of the land and use best practices. Participatory governance brings the nation a sta- ble, healthy, and balanced food system. It funds Instability is inevitable, and that means the stakeholders who make decisions about protecting our food system—farmers, consumer groups, communities, scientists, public officials, industry experts, and so forth— plan together for the future. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 211 innovation and best practices to plan and pre- pare for catastrophes. Because of capitalism, our food system is threat- ened and will never be secure. We can under- stand most clearly why this is so when we see the way top-down governance works. When deci- sion-making is left in the hands of a few elected officials, they are supposed to make decisions for the good of their constituents, but the stake- holders aren’t truly represented. Why? Because in capitalism firms are forced to buy off politicians with big donations so our elected officials will represent their special interests. That’s how we get corporate welfare in the form of agricultural subsidies. That’s why our representatives vote to cut regulations so that big ag can spray our food with their toxic pesticides to save a buck. A firm that doesn’t want to play this game of crony capi- talism is a firm that won’t survive. With top-down governance, there’s only one outcome: a govern- ment that’s in the pocket of big ag. We’re left with their profit-maximizing, low-quality, unhealthy foods that destroy our bodies and our planet. In capitalism the health of our nation’s food system is left to wither on the vine. Instability in farming threatens food security, but conservatives have it all wrong. With free-mar- ket capitalism, when we leave it alone, big ag is perfectly happy to watch the small farms go out of business. Then they swoop in and buy up the farmland at a low price. They’re just there to suck all the profits they can get out of the land—not to be part of a healthy, sustainable community. Wheat, corn, and soybeans are the highest-profit crops, so that’s what they produce. Conservatives, you say free-market capitalism brings us the food we want, and you say we get innovations that move us forward as a nation. That’s a warped spin on what really happens. Big ag spends billions on food scientists to invent new ways to turn those crops into the most addictive products possible and on advertising executives and researchers to Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 212 | Voices On The Economy come up with ingenious new ways to convince us that we want and need those products. Here’s your price signal incentive at work: get us hooked on cheese puffs and sugary cereals so we will buy more and consume more and never feel full while we grow obese and sicken from diabetes and heart disease. Corporate agribusiness rakes in the profits and calls it a “win” and pours more money into research for even more ways to corrupt our food system for profit. Don’t get me wrong—these aren’t bad people. They’re stuck in a rotten eco- nomic system. Caving in to the pressure for bad is the only way their firms can survive in capitalism. Liberals, let’s drop the patriotic pretense that subsidies are mainly benefitting our nation’s heroic farmers who might lose everything because of bad luck and bad weather. The agribusinesses that produce our food make more money than most nations. They are in zero danger of going out of business because of a weather event. Those big farming enterprises make their money off the backs of migrant wage laborers, who get paid a pittance. And big ag has zero commitment to sustainable farming, so they spray toxic chemi- cals, factory farm animals, and pollute groundwa- ter, rivers, and streams. Farm lobbyists for big ag pay off politicians to make sure the crops that are most profitable—soy, wheat, and corn—get the most subsidies. The whole middle section of our supermarkets is stocked with nothing but highly processed foods made with those crops—pack- aged foods that are unhealthy and addictive. Even if you want to eat healthy, you may not be able to afford to. Not when it costs three times more to buy a bag of fresh vegetables than to buy a bag of cheese puffs or a box of sugary cereal. So what you liberals have done is created a state-subsi- dized national health epidemic of obesity, car- diovascular disease, and diabetes. Let’s also not forget that we then turn around and dump our excess subsidized products on developing coun- tries and in the process push their farmers out of work. A food system built on tax-funded subsi- dies is unpalatable and rotten to the core. We should replace agricultural subsidies with the Food Security Councils’ Emergency and Inno- vation Funds to bring us a secure food system. They provide expertise and financial support so worker-owned farms can plan and prepare for unforeseen challenges. These funds also help farm- ing communities to rebuild and adapt after severe weather events by promoting best practices and the latest research and innovations for sustainabil- ity. Participatory governance is true representative democracy, and through its Food Security Councils we get smart investment in agriculture, ensuring that our nation will continue to have the wheat we want, the kale we want, and the avocados we want. Let participatory governance in democratic social- ism preserve and support farming communities. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 213 RadicalDemocratic Socialism BIG PICTURE Participatory governance brings the nation a stable, healthy, and balanced food system. It funds innovation and best practices to plan and prepare for catastrophes. POLICY POSITION Instability in farming threatens food security, but . . . " Conservative policies of leaving agricultural markets alone enable big ag to give us unhealthy, addictive food and the illusion of choice. " Liberal policies of subsidies only serve to feed big ag, which exploits workers, ruins the land, and destroys farming communities. SOLUTION Replace agricultural subsidies with Food Security Councils to bring us a secure food system: ! Emergency and Innovation Funds. ! Preserve and support farming communities. Agriculture SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 214 | Voices On The Economy Agriculture Talking Points: Radical 1. With participatory governance, we plan ahead instead of waiting for disaster to strike farms and wipe them out. Food Security Councils invest in research and development of drought-resistant crops, water-harvest- ing systems, and sustainable equipment. When all the stakeholders have a place at the table and real pow- er to make decisions, we can fund innovations and best practices to make our food system more secure. 2. A stable food system isn’t just about having a lot of food on the store shelves; it’s about having healthy, affordable choices. In democratic socialism we know that the farmers who produce our food care about the land and use best practices because they live in the communities where they farm, and their food not only feeds the nation, but it also feeds their families and their neighbors. We can trust that the food on our plates nourishes not only our bodies but also our whole society. 3. Conservatives, you say the profit motive makes our lives better, but all I see are supermarkets filled with foods that make us sick. Big ag is killing us with obesity, diabetes, and heart disease. Because of capitalist compe- tition, they hire food scientists to design our meals, snacks, and drinks to be addictive so we’ll keep buying more and more. Instead of being in the business of feeding people healthy food that sustains us, their busi- ness is all about making the most profit. In the meantime we get sicker and more addicted. 4. The conservative idea to do nothing is dangerous. Our food system is vulnerable to weather and hu- man-made disasters. Without a plan in place, the most vulnerable farms will go under, and greedy mul- tinational corporations will happily swoop in and buy them up for a pittance. We can’t afford to lose our farming communities to outside investors. We need people who will care for the land because they live and work there, and because they want to sustain it for their children and grandchildren. 5. The liberal policy of subsidies underwrites big ag’s destruction of our food system, our health, and our future. Our tax dollars fund unsustainable, dangerous practices like producing dairy with hormones and spraying our vegetables with toxic chemicals. Then liberals turn around and dump the leftovers on poor countries. This drives their farmers out of business, and entire nations become dependent on our handouts to survive. Lib- erals’ intentions may have been humanitarian, but their policies destroy food systems throughout the world. 6. Let’s be honest about what’s really going on here, liberals: rich agribusiness pays off politicians to push farm subsidies in their favor. This is an example of crony capitalism at its worst. Your subsidies are a well-packaged scam to make taxpayers believe we’re participating in a patriotic act to save our country’s family farms. But in reality you have us subsidizing companies that have more money than many nations and are in zero danger of going out of business. 7. Everybody’s gotta eat! Food Security Councils make sure we have the food we want because they un- derstand what it takes for farms to succeed, what consumers want, and how to feed our nation. Why? The people at the table represent all the stakeholders. They are the farmers, the consumers, the industry experts, the environmentalists, the hydrologists, our public officials, and more. It’s through participatory governance that we get a sustainable and secure food system. 8. We all plan ahead for possible calamities. That just makes good sense. Through participatory governance, Food Security Councils give farmers Emergency and Innovation Funds to prepare, adapt, and recover from disasters. Farmers are not left on their own to sink or swim. With money set aside for the express purpose of helping them in times of crisis, and with research and development to strengthen their farming opera- tions, we all win with thriving farming communities and a secure food system. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 215 The Shared Outcome You can hear in the voices above that conservatives, liberals, and radicals share the same goal. They all want a secure food system for our nation. They all agree that the ability to feed ourselves is a fundamental issue of survival every single day, and that issue will never go away. It’s been around forever, and it will continue to be relevant until the end of human civilization. Now it’s time for you to be part of the conversation. Your Rock-Star Moment Have you ever wanted to be a rock star? To be the lead singer in the band, you have to learn how to sing, which means breathing the right way, staying on key, and training yourself to pick up cues from the band so you don’t start your solo late and embarrass yourself. It takes a lot of practice to get so good at it that, when you finally get out on stage and start to sing, you feel pumped up and confident and unsurprised when the audience roars with approval. Rock stars make it look easy, but that’s because they worked backstage for years to get that good. We can’t promise you that the VOTE Program will turn you into a rock star, but it will definitely give you voice lessons and practice opportunities. As we mentioned earlier, a big part of the VOTE Program is practicing how to articulate ideas from each of the perspectives. Just like a rock star captivates the audience, your task is to captivate your listeners with your gift of persuasion. After each Issues chapter we’ll be practicing this important skill using four dif- ferent kinds of exercises: debates, posters, skits, and “breakfast with the family” role-plays. For this chapter, your first voice exercise is a debate. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 216 | Voices On The Economy Activity: Debate and Re-vote It’s time for the first VOTE activity. The goal of the VOTE activities is for participants to articulate each assigned perspective persuasively in a positive light. Remember, you are advocating for its theoretical construct. Sarcasm, insults, and name-calling are off limits, and please don’t do an impersonation of a celebrity, friend, family member, or colleague who identifies with that perspective—even if you’re really good at impersonations. But do feel free to criticize opposing perspectives with intelligent ideas, satire, and humor. You’ll be asked to articulate the different perspectives for all the issues in the VOTE Program. With so much practice, you’ll soon be hopping up on the stage of life with full confidence in your amazing rock-star voice on the economy. 1. Debate Instructions Get together with friends, classmates, or family members; review the talking points and perspective summaries with them; and then decide who will represent each perspective. You have to have at least three people, and if you have more than three, you can form teams. The name of the game is to articulate your assigned perspective in the most convincing way, whether or not it’s the one you agree with. Make sure that you argue not only for why your position is right but also for why the other positions are misguided. Learning to debate this way will help you to become a more persuasive person, and your voice will carry more weight. You’re going to want to try it a few times, rotating through the perspectives until you become fluent in each one. 2. Revisit Your VOTE Ballot The VOTE Program is all about helping you think critically about the issues and have informed opinions. Now that you’ve made a passionate case for a perspective—and hopefully listened respectfully and with an open mind as your friends, colleagues, and family members made their passionate arguments for the other perspectives—please go back to the VOTE Ballot and vote again on Agriculture by putting a mark on the outside of the circle where it most lines up with your position. Has your position changed since your first vote, or are you more certain than ever that your original position was correct? Have you shifted a bit toward another perspective, or completely changed your perspective? Be sure to fill out the part of the form that asks “Why?” Remember, we aren’t trying to convince you to vote in a specific way. The VOTE Program is meant to help you make your own decision in an informed way, and that is what you have just done. Congratulations on completing the first issue! Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 217 Chapter 7: Test Yourself! Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below. 1. Which of the following is a true statement? A. Agriculture refers to growing crops and raising animals in relation to food production only. B. Agriculture refers to growing crops and raising animals in relation to food and clothing production. C. The term agriculture is defined as large-scale production, while the term farming is defined as small-scale production. D. More than 70 percent of our nation’s land is used for agriculture. 2. When a product is the same regardless of where it was produced or who produced it, we use which term to describe it? A. Commodity B. Future C. Hedge D. Soft product 3. The Farm Bill, which is the federal government’s policy in relation to agriculture, was first passed in ____ (originally called the “Agricultural Adjustment Act”), and it is reviewed and reconsidered approximately every _____ years. A. 1968; five B. 1903; ten C. 1933; five D. 2000; five 4. Match the subsidy program (left column) to its intention (right column). A. Crop insurance i. To help keep farmers in business B. Direct payments ii. To help with cash flow issues C. Loan guarantees iii. To help develop new technologies D. Agricultural research iv. To help cover losses from weather events 5. Which of the following statements is/are true from a conservative perspective? A. If the price of cotton is too low, farmers will leave the industry and the price will self-correct by increasing. B. Agricultural subsidies for cotton will make society better off. C. When we subsidize cotton, it creates a surplus of it in our country. D. A and C only. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 218 | Voices On The Economy 6. Which of the following statements is/are true from a liberal perspective? A. Without farm subsidies, we put our whole nation at risk of becoming dependent on other countries for food. B. Subsidies help farmers more than people in other industries. C. Agriculture subsidies decrease retail food prices in grocery stores. D. A and C only. 7. Which of the following statements is/are true from the radical perspective? A. In capitalism, when firms follow price signals the nation is ensured of the most food and the types of food that people want. B. Firms manipulate people to become addicted to unhealthy food and in the process create public health crises. C. CEOs of big ag pay off politicians to make more profits, but that’s because they have to in order for their firms to survive. D. B and C only. 8. Please choose the correct conservative interpretation of this wheat market graph. A. Increasing crop insurance will shift supply to the left, thereby increasing the price of wheat. B. When the price of wheat is too low relative to costs, farmers will switch to producing products that are more profitable. C. Capitalism’s profit-driven focus results in too much wheat produced at too high of a price. D. The supply of wheat will shift up and to the right as government interferes with subsidies, resulting in firms making too little wheat. 9. Please choose the correct liberal interpretation of this wheat market graph. A. When the price of wheat is too low relative to costs, farmers will switch to producing products that are more profitable. B. During severe weather events, subsidies are necessary to keep farmers in business and result in lower prices for wheat as a side benefit. C. Capitalism naturally results in more wheat being produced during a weather event, which ensures our national security. D. None of the answers above is correct. P1 P S D QQ 1 The Wheat Market Q2 P2 S2 P2 P S1 D QQ 1 The Wheat Market Q2 P1 S Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 7: Agriculture | 219 Answers 1. B 2. A 3. C 4. A – iv, B – i, C – ii, D – iii 5. D 6. D 7. D 8. B 9. B 10. C 10. Please choose the correct radical interpretation of this Six-Core Cube of democratic socialism. A. Democratic socialism is the economic system that best results in food security because the government owns and runs all the farms. B. In capitalism, government is of the people, by the people, and for the people, which means our well-being is guaranteed. C. Our nation’s food security is best ensured when stakeholders such as farmers, consumers, government officials, and others set the policies. D. Participatory governance means that elected officials independently decide on the best agricultural policies, which means we get the most food for the most people. SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism Chapter 7: Key Terms Agribusiness Agricultural research Agriculture Big ag Commodities exchanges Commodities markets Commodity Conservation reserve Corporate ag Crop commodity program Crop insurance Direct payments Disaster assistance Dumping Farm Bill Food aid Food promotion Futures Hard commodities Hedge Large-scale agriculture Loan guarantees Loans Soft commodities Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About ch8 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 8Issue: PRODUCT SAFETY The first car I ever bought was a gorgeous metallic blue Volkswagen Bug that one of our family friends sold to me when I was eighteen. It was refurbished, but it looked to me like it was in mint condition. I fell in love at first sight and happily handed over my $500. A few days later, I drove it to a mechanic to get it checked out. That’s when he delivered the bad news: “The frame is completely rusted out. If you hit a deep pothole, the whole car could fall apart and you could die.” My father heard this and was furious. I’d never seen him so angry. He called the family friend and ranted: “How could you sell my daughter a car that’s unsafe? Do you not care about whether you’re directly responsible for somebody’s death? Every time she drives it, her life is at risk!” The woman was appalled to hear that the car she sold me was a deathtrap. “I had no idea! I’m so very sorry,” she said, and she immediately gave me a refund and took the car back. I had been riding in cars all my life and hadn’t really wor- ried about my safety. When I was growing up, our version of seat belts was Mom throwing her arm out to stop us from hitting the dashboard of our station wagon when she slammed on the brakes. I realized I had always assumed that when a person died in a car crash, it was because of something unlucky—like a patch of black ice on the road that no one could have known was there, or a deer jumping in front of the car, which no one could have foreseen. Or maybe it was something they did wrong—like driving drunk or falling asleep at the wheel. For the first time it occurred to me that there were car accidents that happened not because of bad luck or someone being irresponsible or making a mistake but because the car itself was unsafe. I started to wonder about the safety of all the prod- ucts in my life. Was the fire retardant in my mat- tress poisoning me? Was the off-gas from our new carpets giving me lung dis- ease? Was my orange juice tainted with toxic pesticides? I started to read about the whole issue of product safety and its poster child, the Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 222 | Voices On The Economy Chevy Corvair. It launched the national debate about product safety and corporate responsibility. Here’s what happened. General Motors designed a new compact car that came out in 1960—the Chevy Corvair—which had a new type of suspen- sion system. GM’s engineers recommended that the car include an anti-sway bar to prevent rollovers, but management made the decision not to install it as standard equipment. Instead, they relied on the cost-free fix of adjusting the tire pressure to com- pensate for the weight differential that could cause a rollover if a driver oversteered. Later, GM offered drivers the anti-sway bar as an aftermarket option, and eventually it installed it as standard equipment on later models of the Corvair. Hundreds of people died in Corvair rollovers, and GM was sued dozens of times. The story of the Corvair was recounted in the 1965 book Unsafe at Any Speed, written by a young lawyer named Ralph Nader. He dubbed the Corvair the “unsafest” car, and that’s how it became the poster child for the issue of product safety. (By the way, a decade later an independent study conducted by the National Highway Traffic Safety Administration didn’t find the Corvair to be any less safe than comparable cars of that time.) The fact that people are gravely injured and even die from products is a tragedy. Everyone knows it’s in the nature of innovation that some- times things go wrong, and there are unintended consequences from products. And when firms do something illegal—covering up knowledge of potential harm from a product or purposely mak- ing a product more harmful, for example—those companies should be held accountable through the justice system. But in all other cases, what should be done to ensure the safety we want in the products we use? Conservatives, radicals, and liberals all agree that products can cause harm. But as you might imagine, they don’t agree on how to ensure the protection that people want. The policy we’re going to debate is product safety regulations. © G re g G je rd in g e n C C B Y 2.0 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 223 Understanding the Issue of Product Safety “I am convinced that material things can contribute a lot to making one’s life pleasant,” wrote billionaire banker David Rockefeller, “but, basically, if you do not have very good friends and relatives who matter to you, life will be really empty and sad, and material things cease to be important.” Wise people in every culture have echoed this sentiment that happiness comes from the quality of our relationships, not from the stuff we own. However, on a practical level, material well-being is vitally important for our survival. We absolutely need food, clean water, and shelter to continue to exist. If you don’t have those things, then over time you will be physically compromised. Right now, billions of cells and countless intricate bio- logical systems are at work in your body keep- ing you alive and making it possible for you to think, move, digest, and read this page, among everything else going on under your skin. If you think about it, your physical existence is actually quite fragile. You wake up in the morning and heat up your frozen breakfast burrito. Could the microwave oven be causing brain damage? You hop in the shower. Is the water spraying down on you tainted with heavy metals that cause blood cancer? You wash your hair. Does the perfume in the shampoo trigger asthma attacks? Before you head out for the day, you fill your water bottle. Is it made with plastics that cause liver problems? You catch your bus on time. Is the braking system safe? The issue of product safety is about ensuring that products won’t end up injuring us or killing us. Of course, we all know that happiness comes from connection with friends and family, but if we can’t count on the safety of the material things we interact with on a daily basis, we may not be around to enjoy those connections. What Is Product Safety? Imagine it’s flu season and you go to your nearest pharmacy to get a flu shot. While you’re there, you pick up some herbal cold medicine and a random box of party lights that you find on the clearance shelf. On a piece of paper, jot down “flu shot, herbal cold medicine, and string of party lights.” We’ll come back to this later. Product safety refers to the potential for goods and services to cause harm to consumers. This issue is one of the easiest to understand in the VOTE Program because your life is filled with products, and it always will be. Let’s define our terms for this issue. Product safety is also some- times called consumer safety or consumer protection. Product safety standards are crite- ria or requirements that firms must meet before they can offer their products on the market. Most product safety standards are concerned with the risks of electrical, chemical, fire, or mechanical hazard or whether a product poses a danger to children. There are safety standards for nearly every product you can think of—spas, tablets, drywall, refrigerators, fabrics, mattresses, painkill- ers, meat, carpeting, workout equipment, ventila- tion systems, and so on. Just to give you an idea Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 224 | Voices On The Economy of the scope of this issue, there are twenty-nine million injuries every year and twenty-two thou- sand deaths caused by products. More people ages one to thirty-six die from unsafe products than from cancer or heart disease. In 2017 alone there were 251,700 reported injuries related just to toys. There were tens of thousands of visits to the emergency room as a result of people being harmed by unstable furniture, appliances, and other heavy objects tipping over on top of them. Some of these people were even killed. Compliance means a firm is following or meeting the government-mandated or indus- try-recommended product safety standards. But please keep in mind that just because a firm is in compliance doesn’t guarantee that the prod- uct is safe. It simply means that the firm is not violating safety standards. Some product hazards come from design defects (an electric drill bit flies off when operated at top speed) or manufactur- ing flaws (a toxic solvent is used to clean beer vats). Some come from consumer use (buckling an infant car seat incorrectly). Prevention is a measure taken before the product is designed, produced, or sold to minimize the possibility that it will cause harm. For example, the electric drill goes through a testing phase to make sure the bit is secure at high speeds and won’t fly off when you’re making a birdhouse. The beer firm sends the new solvent to the lab to make sure it’s not toxic before it’s used to clean the vats. The infant car seat producer includes a diagram for users so they can properly install it. A common prevention measure is the age-grading recommendation on children’s toys, which is meant to prevent infants and toddlers from choking on small pieces. Qual- ity control is the process of testing samples of products so producers can assess whether they are safe even if they are made in different batches, by different workers, or on different machines. Some prevention and quality-control measures are done voluntarily by firms, some are required by various industries in order to be certified, and some are mandated by government regulation. A safe product is one that, when installed and maintained according to specifications and when used in the right way for its intended purpose, can be relied on not to cause harm. Interestingly, Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 225 even though smoking causes lung cancer, a cig- arette is technically safe if it doesn’t explode in your face when you light it. But what happens when a product is found to be unsafe? Sometimes it is taken off the market through a product recall. In this case, the producer either refunds con- sumers’ money or replaces the faulty part or product. For millennia, humans have been finding ways to manage the risk of potential harm from products. In ancient times, cup bearers were tasked with taking the first tastes of the food and drink of royalty to ensure that they weren’t laced with poison. The ancient Mesopotamian king Hammurabi carved his consumer protection laws in clay tablets back in 1754 BCE. The Code of Hammurabi described how weights and measures were regulated to make sure no one was cheating in the marketplace. It also outlined laws to ensure that products were safe. Skip ahead to the late 1800s and the proliferation of “patent medicines,” which were marketed as remedies purported to cure all kinds of ailments using secret, allegedly government-patented ingredients. Advertised in magazines and newspapers and sold in stores and off the backs of wagons by traveling “snake oil” salesmen, many of these elixirs contained alcohol, opiates, cocaine, and arsenic, as well as other harmful and addictive ingredients. They made children, elders, and adults sick and addicted—and even killed people. This spurred Congress to pass the Pure Food and Drug Act in 1906. Producers were held accountable for false advertising and had to disclose the ingredients in their products. Fast-forward to the cereal box on your breakfast table. On the front it tells you how much cereal is in the box, and on the side it lists all the ingredients, plus the nutritional values found in a serving. It also tells you if your bran flakes were made on machinery that processed nuts, soy, or peanuts, in case you’re allergic to any of those foods. That information didn’t randomly appear there. The labeling, product warnings, packaging specifications, product testing, and more reflect the efforts of firms, industries, and government to manage the risk of harm from products. There are a variety of ways we respond to unsafe products as a society: Top 10 Product Recalls 1. Takata Airbags 2. VW Deisel Engine 3. Vioxx Pain Medication 4. Firestone Tires 5. Samsung Galaxy Note 7 6. General Motors Ignition Switch 7. Pfizer Bextra Pain Medication 8. Toyota Floor Mat 9. Peanut Corp. of America Peanuts 10. Johnson & Johnson Tylenol Source: Dan Burrows, Kiplinger, “10 Biggest Product Recalls of all Time,” March 26, 2018. U S P u b lic D o m ain Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 226 | Voices On The Economy ! Consumers Individuals can vote with their wallets and stop buying unsafe products. When that number reaches critical mass, the firms will either correct the design or drop the product. The idea that consumers are the ones who control what they buy and there- fore what is produced is called consumer sover- eignty. For example, a snack food made by Fri- to-Lay called Wow! contained a compound called olestra. It turned out that this fat substitute acted like a laxative, and consumers ended up with severe stomach cramps. Sales fell dramatically, and the firm eventually discontinued that product. Advocacy groups can organize boycotts and public awareness campaigns to influence more people to vote with their wallets. These can be community groups, nonprofit organizations, and other groups of concerned citizen. They may also advocate for safer products from industry and firms and act as a clearinghouse for information. For example, groups of parents and child-safety experts pressured makers of playground equip- ment to create safer play environments for kids. Individuals and groups of people can sue firms if they think the company was negligent—that is, failed to take reasonable measures to ensure the product would not cause harm. In 2018, the year’s biggest product-liability verdict was $4.69 billion against Johnson & Johnson. The jury ruled in favor of the twenty-two women who claimed that the firm’s talcum powder caused their ovarian cancer. ! Firms Voluntary product recalls can be issued by firms when one of their products turns out to be unsafe. A famous example is the Samsung Galaxy Note 7, which was voluntarily recalled by the manufacturer after the battery was found to overheat and explode. Trade associations may also set standards, pro- vide certification, and enforce compliance to man- age risk from products. For example, the American Association of Blood Products (AABP) has set stan- dards to ensure that blood is safe for transfusions. ! Government The government can issue and enforce regu- lations when a product is unsafe. For example, it banned the use of a popular pesticide called DDT after it was found to cause premature births as well as a host of other symptoms. Government Regulations There is no overarching law that addresses harmful products, but a long list of government agencies are tasked with overseeing product safety on the federal, state, and local levels. They create and enforce product safety standards. They also require firms to test products regularly in order to demonstrate that they are in compliance, and some agencies collect data on injuries and product recalls—among other things—to inform the public and identify best practices for the industry. There are government regulations about the safety of your local amusement park rides, the solar panels on your roof, and the food that’s served at your local restaurant. Because many of the products we use are made in other countries—or use ingredients or parts made in other countries—imports are also regulated by the government. The United States imports more than $2 trillion worth of products from 230 countries every year, and globally there are an estimated 700 new product safety regulations a year. In a global economy the issue of product safety becomes exponentially more complicated. For instance, some pesticides that are banned for use in the United States can still be produced for export. Farmers in other countries buy these chemicals and spray them on their fields. Then they turn around and export their vegetables, fruit, and meat to the United States. It shows up on the shelf in your grocery store, and no product safety regulations were violated. This has been called the “circle of poison.” Whether government should be the watch- dog for consumer safety is a controversial topic. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 227 Nevertheless, there have been a variety of con- sumer protection and workplace safety agencies for more than a century, and the government has created new ones relatively recently. Here are a few examples: Food and Drug Administration (FDA): Cre- ated in 1906, its mandate is to protect and pro- mote public health by supervising food safety, packaging and labeling, tobacco products, dietary supplements, pharmaceuticals, vaccines, blood transfusions, medical devices, cosmetics, veteri- nary products, and more. For instance, the FDA investigated the potential harm from tobacco use and tobacco addiction. It regulates tobacco prod- ucts so that companies can’t market or sell to chil- dren. The FDA also issues recalls on unsafe prod- ucts. For example, it recalled pet food that was contaminated with an industrial chemical called melamine, which causes harm to animals. To give you an idea of how many recalls the FDA issues, the average for the past few years has been more than four hundred annually. That’s more than one a day. National Highway Traffic Safety Adminis- tration (NHTSA): Founded in 1970, the NHTSA gives consumers information about cars. You can look at their safety ratings before you buy a car and find out about manufacturer recalls. The NHTSA regulates things like airbags to make sure they deploy correctly and to protect consumers from ones that spray shrapnel. It also regulates odometer fraud (making a car you’re looking to buy appear to have fewer miles than it actually has). Most recently, it also regulates self-driv- ing cars. Consumer Product Safety Commission (CPSC): Founded in 1972, its mandate is to ensure the safety of consumer products. According to the CPSC, damage from unsafe products costs the nation $1 trillion every year. Examples of recalls include children’s sleepwear for not conforming to the federal flammability standard, SCUBA reg- ulators for drowning hazard, dishwashers for fire hazard, windup toys for choking hazard, and a cake knife because the handle can break during use and cut the user. In each case, the CPSC rec- ommends that “[c]onsumers should immediately stop using this product.” To give you an idea of how often CPSC recalls occur, there were nine- ty-three children’s products recalled in 2017. Consumer Financial Protection Bureau (CFPB): Created in 2011, its mandate is to pro- tect consumers from unfair, deceptive, or abusive practices in financial markets. If you take out a loan that financially ruins you, this threatens your ability to house yourself and feed yourself and your family, which makes it a product safety issue. The CFPB offers tools to help consumers make good financial choices, and it investigates predatory companies that break the law. For example, the CFPB went after the payday loans industry because companies loaned money to people who could not afford to pay them back and charged high interest rates (of 1,000 percent in some cases). The CFPB ruled that before loans are issued, the lender must determine that the borrower can afford the loan. This list barely scratches the surface of gov- ernment agencies tasked with regulating product safety. For example, the Federal Aviation Adminis- tration (FAA) oversees the safety of airplanes. The Occupational Safety and Health Administration (OSHA) regulates the machinery used in indus- try and the safety of workplaces. The Environ- mental Protection Agency (EPA) regulates chem- icals that are used commercially. After reading all these acronyms, you might understand why some people call it an “alphabet soup” of govern- ment agencies. Remember your visit to the pharmacy for a flu shot, when you also picked up some herbal cold medicine and that string of party lights from the clearance shelf? Now look at the list of federal agencies above and find the one that regulates Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 228 | Voices On The Economy your flu shot. If you picked the FDA, you’re right. How about the agency that oversees the safety of that string of party lights? If you chose the CPSC, you are correct. Now here’s a slightly complicated one: which agency oversees your herbal cold medicine? If you chose the FDA, you’re right—but you should know that while the FDA tested your flu shot to make sure it really does protect you against the flu and does not contain harmful sub- stances, it did not test your herbal cold medicine to make sure it does what it claims. When it comes to dietary supplements—protein powders, omega 3 oils, and calcium, for example—the FDA only checks that products have the ingredients they say they have. It doesn’t test them for safety or effec- tiveness. When you leave the pharmacy and drive away, which federal agency rates the braking sys- tem in your car? The NHTSA. Later, when you go online at home and discover that your bank signed you up for a credit card that you never requested, which agency do you call to complain? The CFPB. At work the next day, you and your coworkers all start to feel nauseated when the air-conditioning system is turned on. Which agency checks that your workplace is safe? OSHA. The point here is that in the background of your life, whether you want them to or not, government regulations touch on nearly every aspect of your daily interactions with a vast number of products. Now you have the lay of the land. You know the definitions and the history of what our nation has already been doing to address the problem of product safety. You have what you need to analyze competing ideas about how to solve this problem. It’s time to hear the voices of the differ- ent perspectives on the issue. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 229 Voices on Product Safety Conservatives, radicals, and liberals all agree that products can cause harm, and they all share the same goal of ensuring the protection that people want. But they strongly disagree about how do that. Should government agencies partner with firms and industry to create safety standards? Should stakeholders come together in Product Safety Councils so that everyone has a voice and a buy-in regarding safety standards? Should we be leaving markets alone so that consumers can vote with their dollars and firms can respond with the desired safety standards? It’s time to put on a “mask” and debate this policy from each of the perspectives. Please remember that we are not taking a personal position on any of these issues. We’re just channeling the voices of the perspectives. The policy we’re going to debate is product safety regulations, which is a liberal idea. We change the order of who goes first each time. For this issue, it’s the liberal’s turn to go first. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 230 | Voices On The Economy LiberalVoice on Product Safety Think back to the Chevy Corvair story. General Motors knew that when it chose not to put in the anti-sway bar, it would cause a potential problem with rollovers. But to save money, the company decided not to include it, and instead said that the problem could be fixed by either changing tire pressure or by purchasing the anti-sway bar as an aftermarket option. But those options were not communicated well enough to consumers, leading to the deaths of hundreds of people. If there had been government regula- tions in place we could have ensured that GM—and all the car companies—had clear product safety standards to prevent rollovers. None of those vic- tims would have had to die senseless deaths, GM would have been spared expensive lawsuits and terrible public relations, and the Chevy Corvair could have become the model for a whole new line of safe and sporty cars. The issue of car safety is still very relevant today, and the need for regu- lation hasn’t gone away. GM was sued in 2015 for installing faulty switches on some of its cars, which resulted in 124 deaths. We need to strengthen the public-private partnership between government and business so that drivers won’t be harmed in cars that roll over or catch on fire or crash because of a design flaw or manufacturing defect. Let’s consider the market for automobiles. When there are government regulations, all firms must install standard safety features such as anti- lock brakes, airbags, backup cameras, and steel frames. And all the firms are required to test their vehicles for safety before their cars go to market. In figure 8.1 you can see that with the higher costs to firms of installing more equipment and running tests, the supply curve shifts to the left, resulting in higher prices and lower quantities of cars. But drivers, passengers, and pedestrians all benefit because cars are safer. And this doesn’t unfairly burden individual firms, because all car compa- nies have to comply with the same product safety standards. Therefore, it keeps competition fair. With the partnership between government and industry, we have better guarantees that our prod- ucts are safe. The whole society benefits because people get the safety they want and firms can stay in business and thrive. Product Safety Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 231 P1 P S D QQ 1 The Automobile Market Q2 P2 S2 Figure 8.1 Liberal View When you walk through the parking lot at the grocery store, the backup camera that the gov- ernment required the automaker to install in my car could save your life. If our choice is that we all pay a little more for a safer car or risk dying or killing someone else in an unsafe car, it’s a no-brainer. You and I both benefit when every- one’s car has all the latest safety features. You and I both benefit when we can trust that the prod- ucts in our lives won’t injure or kill us. When my daughter was growing up, every morning I would pop two slices of bread into the toaster for her breakfast before school. I don’t know how toast- ers actually work, but I knew I could trust that ours was not going to explode, because I checked the Consumer Product Safety Commission’s web- site for toaster safety recalls before I purchased it. I’m grateful to all the government agencies that ensure the safety of all the products you and I interact with every day. Do these agencies need F D A .g o v Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 232 | Voices On The Economy our tax dollars to fund their operations, staff, and research? Yes. Do regula- tions raise prices for the products we buy? Yes. Are our choices limited to only safe products? Yes. And guess what: that’s perfectly okay with me! I want my government to work for me to help me and my family stay safe. Because consumer protection agen- cies exist, I don’t have to worry that I haven’t done thorough enough research to be sure every product I use is safe. I didn’t have to wonder whether my daughter’s crayons were poi- sonous, or whether the lenses of her glasses were made from materials that could shatter into pieces and blind her, or whether her toothpaste con- tained cancer-causing chemicals. In fair-market capitalism, the government hires neutral, trained experts to do the research and make the results available so that firms can learn from others’ mis- takes and successes and improve their designs and so that consumers are empowered to make informed choices. Those scientists and research- ers don’t work for the firms; they work for us. That means we can count on getting unbiased results. The government-industry partnership develops best practices and gives a helping hand to manufacturers to produce safe products. This is money well spent. Federal consumer safety agen- cies and regulations ensure reliably safe products and accurate information to make good choices. Products can cause harm to consumers, but, radicals, the problem is not capitalism. The profit motive inspires innovation and brings us the high standard of living and the products that we want. In democratic socialism firms will end up making nothing but dull wooden toys for our chil- dren because you’ll go overboard trying to ensure everyone’s safety. When Product Safety Councils of “stakeholders” decide what firms can produce and how they can make it, we’ll all be living in a nightmare scenario of over-caution. Toasters can catch fire? We’d better learn to heat our bread on sticks over the flame. Creativity would be stifled and progress would be impossible. We’d still be waiting for cell phones to be allowed on the market because con- cerned stakeholders would insist on endless stud- ies of the safety of cell-phone towers in relation to the migratory routes of snowy egrets. The few products that do make it through the maze of the Hazard Assessment Protocols might be safer, but we won’t have anything that we actually want. We want our cell phones and our 3-D printers and our delicious breakfast burritos that we can throw in our convenient microwave ovens on the way out the door. In fair-market capitalism, we can have it all—the great stuff that we want and safe products—because government is there to ensure the safe part, and capitalism is there to ensure the great-stuff part. We don’t have to make a choice between safety and innovation, and we don’t have to bog ourselves down with endless committee meetings. Product Safety Councils won’t work, because there are too many competing agendas, so nothing constructive would ever get done. Let’s face it: not everyone’s opinions and information are of equal relevance. When we guide capitalism with a public-private partnership, we have impar- tial experts who represent everyone’s concerns In fair-market capitalism, we can have it all—the great stuff that we want and safe products— because government is there to ensure the safe part, and capitalism is there to ensure the great-stuff part. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 233 in the most intelligent and efficient ways to help firms and consumers make responsible decisions. This brings us the optimal social welfare. Conservatives, you say the government should stay out of it and let the consumer decide what and what not to buy. So you’re saying you want to wait until after you drink the orange juice to learn you’ve been poisoned with arsenic? You want to find out after you stepped into the elevator that the cables are faulty? This nightmare would be your (extremely short) life if you woke up in a world with no government regulations. Yes, gov- ernment intervention brings us higher prices and higher taxes, but think about the priceless value of not being injured or killed by unsafe products. Think of the money you don’t have to shell out to pay hospital bills, lawyers, workers’ compensa- tion, sick pay, and funeral expenses. The conser- vative solution is to say, “Buyer beware!” Sure, we can make efforts on our own to do research into products, but none of us has the time to research every single product we use. We can’t fund long- term studies on our own. We can’t pay inspec- tors to make sure packaging is safe. We don’t have our own labs to test products. This is an impossible undertaking on our own, but luckily, we have fair and impartial government agencies that work for us and do this work. Conservatives, while you grumble about living in a “nanny state,” the minute your child gets salmonella poisoning, you’ll be the first to blame the government for not doing enough to ensure food safety. You are lucky to live in a country where the government has your back. Fair-market capitalism gives us the best products, the safest products, and the opti- mal social well-being. We should support product safety regulations to ensure the level of protection that people want. And by investing in more product safety testing and research, we can strengthen the government’s ability to avert future tragedies. We can trade a little red tape for being able to sleep well at night know- ing that our pillow isn’t poisoning us with off-gas- ses and the puppy chow isn’t killing our dogs. The government is in the best position to hold firms accountable to safety standards. Our government agencies are the envy of the world. They exist to help us make informed decisions and to help firms create the best designs and manufacturing prac- tices. The public-private partnership brings us safe cell phones, safe microwave ovens, and safe break- fast burritos. The helpful hand of government is a win-win that’s worked for a hundred years. It gives us the infrastructure for transparency and account- ability and improves our quality of life. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 234 | Voices On The Economy LiberalFair-Market Capitalism BIG PICTURE Federal consumer safety agencies and regulations ensure reliably safe products and accurate information to make good choices. POLICY POSITION Products can cause harm, but . . . " Radical policies to let committees of stakeholders oversee product safety stifle creativity and ingenuity with unproductive bureaucracy. " Conservative policies to leave it to consumers and firms to ensure the safety of products lead to preventable catastrophes. SOLUTION Support product safety regulations to ensure the protection people want: ! Strengthen government agencies to protect consumers. ! Hold firms accountable to do the right thing. P1 P S D QQ 1 The Automobile Market Q2 P2 S2 Product Safety Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 235 Product Safety Talking Points: Liberal 1. Do you trust that the toy you bought doesn’t have lead paint on it? You can trust it because we have prod- uct safety regulations and government agencies to enforce them. It’s a fact of life that sometimes products can cause harm. But we mitigate the risks through sensible safety standards. We’re fortunate to have a government with the resources and reach to do this work for us. We don’t have to wait for catastrophes to happen to get the level of protection we want. 2. Money can’t buy you happiness, and it can’t give you back your life if you’re killed in a terrible accident because of an unsafe product. That’s why I have no problem paying a little bit more to know a product won’t harm or kill me or my loved ones—or anyone else. When government and business come together to create more safety in our products, the whole society benefits, and we all live happier, healthier, and longer lives. 3. Radicals, you think the profit motive always leads firms to take risks with people’s safety, but that’s misguid- ed thinking. The profit motive gives firms incentives to improve their designs and make safer products. On the other hand, your granola may be safe, but it is also dry and flavorless. Invention requires risk-taking and creative thinking. You will never make the best granola—or the best anything—because your entrepreneurs have no motivation to think outside the dull cardboard box. 4. The democratic socialists have once again come up with a genius idea: groups of people coming together with government to make products safer. Thank you for supporting consumer protection agencies, which we already have! Without boring ourselves to death in endless Product Safety Council meetings, fair-mar- ket capitalism has efficient government agencies with power to oversee and enforce regulations. We can have it all without overthrowing capitalism, which is the best economic system ever created. 5. Conservatives say the free market will naturally give us safe products, but we hear in the news every day about products that harm and even kill people. Maybe over time the market would bring us safe products, but in the meantime, people are getting sick, being maimed, and dying. Some firms will promise anything to get you to buy their product, but they deliberately don’t tell you about the possible negative side effects. Government makes products safer by holding firms accountable to give full disclosures to consumers. 6. Republicans claim that consumer safety regulations do nothing more than create red tape and raise prices. Would you rather have a cheaper product that could make you sick or kill you? Or would you rather have a slightly more expensive but safer product? Republicans are in denial about the true price of those “cheap- er” products: the hospital bills, the missed work because of injuries and illness, and the funeral costs when unsafe products lead to death. 7. Our federal agencies can collect and disseminate the information about product safety that we as individu- als would never be able to gather on our own. It would be impossible for an individual consumer to amass the data necessary to do a comparative analysis for every product used in daily life. Government works for us and gets it done, and we each pay a few tax dollars to get this life-saving service. It’s a great deal. We should be grateful to live in a country where we have consumer protection agencies. 8. In capitalism, firms are motivated to make us what we want, but sometimes their products have design flaws, or the inputs they use are tainted, or the assembly is faulty. Firms get sued, and they lose money and their good reputations. Consumer protection agencies help them by creating safety standards. Because all firms must be accountable, no one suffers from unfair competition. Businesses thrive and consumers stay safe because of government regulations. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 236 | Voices On The Economy GM made the wrong choice, although it was per- fectly legal. It wasn’t that the CEO or managers or stockholders were bad people. It was because they were stuck in the bad system of capitalism, which values profit over people. Now just imag- ine what they felt on that morning when they opened the newspaper and saw the headline about a Corvair driver dying in a rollover. This is what GM’s executives had to go through over and over again as the injury and death reports about the Corvair piled up—and all because of capitalist competition and the pressure for bad. In order to survive—to feed their kids and pay their mortgages—they were forced to leave drivers vul- nerable to harm instead of making the anti-sway bar standard equipment. Decades later, a differ- ent group of GM executives was forced to leave faulty switches in cars they manufactured instead of replacing them with ones that worked safely. The loved ones of those who were injured and killed by a system that values profit over peo- ple will bear those losses forever. In capitalism these kinds of tragedies happen all the time and will continue to happen. Because of the drive for profit, it’s not a matter of if—it’s a matter of when. Let’s use the Six-Core Cube of democratic socialism and drill down through the core point of participatory governance to see how we get safe products. Imagine that a new car design is coming to market, and instead of a top-down federal agency, we have a Product Safety Council made up of industry representatives, consumers, civil and mechanical engineers, safety experts, and other stakeholders. They have the power to approve new products and to set safety standards. When there is a safety issue in the design, mem- bers share their expertise and concerns so that firms can fix the flaw before the cars are allowed on the road. It might be as simple as requiring a corrective part to be installed on all the cars RadicalVoice on Product Safety Product Safety T ry to imagine for a moment why GM decided not to include the anti-sway bar as standard equipment on the Corvair, even after the engineer told the CEO and managers that the car could roll over without that part. “Other car companies aren’t making anti-sway bars standard equipment on their cars,” someone with decision-making power must have said. “That means if we do it, our competitors’ cars will cost less than ours. People will buy their cheaper cars, which will affect our bottom line. If we want to stay competitive and survive, we can’t do it.” Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 237 or a redesign to correct the problem. Product Safety Councils work because firms are accountable to their customers and to the whole society. There’s a pressure for good that leads them to want to fix problems before products go to market. In demo- cratic socialism, firms have the support they need to make safe products, and firms have buy-in to com- ply with safety standards. And not only that, but it saves them from having to pay for costly recalls, noncompliance fines, legal fees, and settlements, and they keep their good reputations with customers. Participatory gover- nance is good for consumers, and it’s good for business. It creates an infrastructure for safety innovations, and it opens up user-friendly path- ways to launching new products. SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism Figure 8.2 Radical View The very worst thing that I can imagine is that I would be responsible for harming another person, especially if it could have been avoided. When I was in my early twenties, I had a job as a cook. One after- noon we were prepping for dinner, and I ques- tioned whether the fish we were going to serve that night was starting to go bad. The owner told me, “If we put some marinade on it, it will probably be fine.” I wasn’t surprised. She often dismissed food safety regulations because she thought of them as being imposed by bureau- crats in Washington or the statehouse—people who’d probably never even worked in the restau- rant industry. And while we would occasionally have surprise inspections from the county board of health to make sure the refrigerators were cold enough and the kitchen was kept clean, there was no inspector in the kitchen that day to smell the fish, so the owner was willing to take the risk that she wouldn’t get caught. With participatory governance, this story would have gone down very differently. The Product Safety Council that sets the standards is literally made up of we, the people—including restaurant industry represen- tatives, public health experts, consumers, suppli- ers, and other stakeholders. They come together to decide what kinds of oversight, transparency, and support for firms to put into place. Safe fish, safe microwave ovens, and safe toothbrushes are everyone’s concern. Participatory governance enables the best ideas to percolate up, which means consumers and firms have a built-in com- mitment to instituting those government policies. Product Safety Councils work because firms are accountable to their customers and to the whole society. There’s a pressure for good that leads them to want to fix problems before products go to market. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 238 | Voices On The Economy And because workers own their own firms and produce things that are used by their families, friends, and neighbors, and because there’s a broader social commitment to everyone’s well-be- ing, there is even more reason to produce the safest possible products. That’s the beauty of the invisible synergy in democratic socialism. Par- ticipatory governance leads to safe products by harnessing the expertise and buy-in of many stakeholders to create the most innovative and practical standards and practices. As long as we have capitalism, we will always have unsafe products. We can understand why this is so when we see the way top-down gover- nance works. Decision-making is left in the hands of a few elected officials, so diverse stakeholders aren’t truly represented and have no say. At the same time, businesses are under constant pres- sure to boost their bottom lines because of capitalist competi- tion, so they use their influence to pressure government to do away with safety regulations or to create agencies that are simply façades with no real effective- ness—even though this means the safety of the products they make is compromised. It’s top- down governance that makes it possible for government to be bought off by special interests. Whether the government does nothing or genuinely tries to do something, in capitalism we will continue to be buried under an avalanche of unsafe products. The pernicious effects of the drive for profit leave us all at risk of life and limb. Conservatives, you’re deluded to think that markets left alone will adjust themselves and natu- rally weed out unsafe products. It’s a lie that cap- italism gives us what we want. No one I know wants toxic chemicals in their food, or airbags that don’t deploy, or toasters that explode. Capitalism keeps on giving us illnesses, public health crises, injuries, and deaths. That should be proof enough that your economic system doesn’t work. Let’s be real about the fact that, in free-market capitalism, harm is cost-effective up to a carefully calcu- lated point. We see again and again that firms are pressured to pay off the fine or settle the lawsuit rather than change their harmful yet profitable practices. The capitalist approach, fueled by the drive for profit and the pressure for bad, is to try to get away with unsafe practices for as long as it enhances the bottom line, to admit no wrong- doing if caught, and to give the least amount to the victims if forced to pay damages. Free-mar- R e u te rs / G ary C am e ro n - sto ck.ad o b e .co m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 239 ket capitalism is a free-for-all of “do anything for profit” behavior on the part of firms. On the other hand, your plan to end all government involve- ment in product safety would be the fastest way to transform capitalism into democratic socialism. When our loved ones end up in the hospital, in a wheelchair, or at the mortuary from all those unsafe, free-market-made products, everyone will wake up from the nightmare of capitalism and insist we get rid of this destructive system that, over and over again, creates the visible suffering. Liberals, your regulations lull us into a false sense of security that the government has our backs with its agencies and regulations. But it’s a lie. Government acts like the vice principal, giving corporations detention and a slap on the wrist, but we all know full well that firms will gladly pay the fines when it’s more profitable for them to be negligent. That’s business as usual in fair-market capitalism. When the government tells firms they have to build cars with steel frames, those firms will use the cheapest, lowest-grade, least-safe steel to maximize their profit. This is how the con- sumer is sacrificed to profit again and again under capitalism, and there’s no amount of government oversight that can fix this fatal flaw. You can’t reg- ulate us out of this mess. It’s like that game called Whac-A-Mole. When a critter pops out of a hole, you have to whack it back down with your mal- let, only to have another critter pop up out of another hole. You frantically whack away, but it’s impossible to win. Government plays the role of the mallet in this impossible game of “Gotcha!” You might occasionally get lucky and hit one, but this process will never solve the problem of unsafe products. We should replace top-down product safety regulations with Product Safety Council policies to bring us the level of safety that people want. For example, Hazard Assessment Protocols guide firms to create safer products. When a new product is designed and manufactured, teams of experts assist firms with testing and review to make sure there are no dangerous flaws that could cause harm. Firms have a clear pathway to bring new and redesigned products to market safely. When diverse stakeholders work together, we get the highest level of safety. Participatory governance is true representative democracy, and through Prod- uct Safety Councils we are ensured of policies that lead firms to establish sensible mechanisms for accountability and transparency so that we can have safe cell phones, safe microwaves, and safe breakfast burritos. In democratic socialism we can trust that the products in our lives have been made with our best interests in mind. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 240 | Voices On The Economy RadicalDemocratic Socialism BIG PICTURE Participatory governance ensures that we have safe products by harnessing the expertise and buy-in of many stakeholders to create the most innovative and practical standards and practices. POLICY POSITION Products can cause harm, but . . . " Conservative policies leave consumers vulnerable to harm because in free-market capitalism unsafe products are inevitable and even acceptable when cost-effective. " Liberal policies lull us into a false sense of security because capitalism will always lead firms to value profit over the safety of people. SOLUTION Replace top-down product safety regulations with Product Safety Council policies to bring us the level of protection that people want: ! Establish Hazard Assessment Protocols. ! Firms have buy-in to produce safe products. Product Safety SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 241 Product Safety Talking Points: Radical 1. We all want to sleep peacefully at night knowing the products in our lives aren’t making us sick or harming our loved ones. And we all want to sleep peacefully at night knowing that the products we make aren’t causing harm. We can have this when workers own their own firms and produce things that are used by their families, friends, and neighbors. We are safe when our economic system values the well-being of all. 2. Product Safety Councils make sense because they bring together the people who know something about the product and about safety—experts from industry, firms, consumer groups, and other stakeholders. They decide what policies and practices we need so we can be sure our breakfast burritos aren’t poison- ing us and our cell phones won’t explode. With participatory governance, good ideas percolate up and become our nation’s policies, so we all have buy-in. This is why it works. 3. The conservative idea to leave it alone really leaves the fox in charge of the hen house. It won’t make us safer; it will do the opposite—because in free-market capitalism, profit is the incentive for firms to act. They cheap out and cut corners on safety in order to boost their bottom lines and beat out the competition. Again and again we hear about firms who did the math and concluded that harming their customers was cost-effective up to a carefully calculated point. 4. Republicans, you say the free market gives us what we want, but the last time I checked, no one wants toxic chemicals in their food, or airbags that kill front-seat passengers, or toys coated in lead paint. Your simple-minded idea that the market will naturally self-adjust to give us the safety we want is incredibly dan- gerous. How many will first have to die? When it’s in our power to prevent tragedies, we absolutely should. 5. Have you heard the expression, “When the cat is away, the mice will play”? When it comes to product safety in fair-market capitalism, firms are constantly pressured to cut corners, buy off politicians, and get regulations eased to maximize their profit. Government agencies don’t keep us safe. So let’s stop wasting our tax dollars on a bulky bureaucratic system, and let’s stop pretending a Band-Aid is a cure. 6. Liberals, face facts: your alphabet soup of consumer protection agencies hasn’t solved the problem of un- safe products, and it never will. Government acts like the vice principal, giving corporations detention and a slap on the wrist, but those firms will gladly pay the fines and continue making unsafe products when it brings them more profit. That’s business as usual in capitalism. The Democrats’ idea of government regu- lation will never ensure our safety because it’s a top-down solution in a profit-driven system. 7. Product Safety Councils’ Hazard Assessment Protocols are a win-win for firms and for society because we get the safety we want, and firms get the support they need when they launch new and redesigned prod- ucts. Firms have a seat at the table, and so do other stakeholders. Government takes on the role of conve- ner, facilitator, and clearinghouse for useful information. Participatory governance in democratic socialism harnesses the ideas of diverse experts to help businesses produce with society’s best interests in mind. 8. I’m tired of worrying that my phone is giving me a brain tumor or that the airbag in my car might kill me. I want to live in a society where I can trust that the products I use won’t harm me. Is that too much to ask? Apparently, it is—in capitalism! There’s only one way to really be sure firms are committed to making us the safest possible products, and that’s through democratic socialism. Firms are pressured to do the right thing because while profit is important to any business, it’s never more important than people’s well-being. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 242 | Voices On The Economy showed it wasn’t. He crucified GM and tarnished its reputation, but in fact GM did the right thing. Not only did the firm make the anti-sway bar available, but it also let customers know that they could also prevent rollovers by simply adjusting the tire pressure—a fix that didn’t require them to purchase anything. GM respected its custom- ers by giving them the choice of what safety fea- tures to have in their cars. Free-market capital- ism brings us the level of safety we want in our cars, our toasters, and all our products because firms are highly motivated to make profit. Their long-term survival depends on a solid reputation with consumers. There’s always going to be dan- ger with cars, as with any product, and it’s up to consumers to do the research and understand the risks and options. In our current “nanny state” of government interference, the problem of prod- uct safety is made worse because the mountain of government agencies and regulations gives consumers the false impression that they don’t have to do their own research. Free-market cap- italism works because everyone is self-interested and therefore takes responsibility for the level of safety they want. Let’s consider the market for automobiles. If there’s a safety issue with rollovers, some people will decide not to buy that car. As you can see in figure 8.3, when people don’t buy it (decrease in preference), the demand curve shifts to the left, and we get fewer cars. This is simple stuff—you already know the basics of the law of supply and the law of demand. But look at what happened: we just solved the problem. By leaving it alone, the market adjusted and brought us fewer unsafe cars. Guided by the invisible hand—meaning no individual or committee or government agency had to do a thing—the free market self-ad- justed to bring us safer products. If a product is unsafe, and if safety is important to you, then ConservativeVoice on Product Safety Product Safety B ack in 1960, people were excited to drive that gorgeous Chevy Corvair. The automaker had come up with a sporty new design with innovative features to please its customers. The majority of Corvair drivers had no problems with their cars. And when the company learned about the rollover issue, it manufactured an aftermarket part and then allowed customers to make up their own minds about whether to buy it. Ralph Nader got it all wrong. He accused GM of corporate negligence and dubbed the Corvair the “unsafest car in America,” but later tests Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 243 don’t buy that product. Less demand means the price goes down, and that signals firms to produce something else. They say, “Gosh, people don’t want our unsafe cars. They must want a better suspension system.” Or “They must want water bottles that don’t have BPA.” Or “They must want pajamas that aren’t flammable.” Because they are in business to make money, firms will change their designs and production protocols to make us the safe products we want. All we have to do is leave it alone, and we get what we want. P1 P S D QQ 1 The Automobile Market Q2 P2 D2 Figure 8.3 Conservative View Before I turned eigh- teen, my parents made the decisions about what I could buy. I couldn’t wait to become an adult—the captain of my own ship, making my own pur- chasing choices. I heard the expression “The con- sumer is king,” and I was really looking forward to feeling that way. What a shocker to find out that consumer sovereignty is a lie. I became an adult and discovered there are gov- ernment agencies hovering over me like an overpro- tective nanny telling me what I can and cannot buy. My car has to have side airbags, and I’m forced to pay for them even if I don’t want them. My breakfast cereal box has to dis- close all the nutritional values of the ingredients, and we consumers are paying for that whether we want this information or not. But before I purchase something new, I always look up the reviews first. Should I stay at that hotel? Should I buy that treadmill? Should I try the tacos at that new Mexican restaurant? Research on products is at our fingertips, with countless websites ded- icated to reviews. As far back as 1930, you could find unbiased research on products in Consumer Reports and elsewhere. If I want to know how much niacin is in a serving of my cereal, I can go online and find out. I don’t need the government to micromanage my information. What I do need is lower taxes and lower prices. When we fire the nanny, we get both because firms aren’t forced to sell us features we don’t want. Am I worried that I won’t be able to find a safe toaster or a safe The fact is that we don’t need any committee, council, agency, or long lists of regulations to represent the needs and desires of consumers. Those wants and needs are already communicated through the choices we make every day when we vote with our wallets. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 244 | Voices On The Economy power drill? No! Firms want to make money, and if a safe drill is what I want, that’s what they’ll pro- duce. We don’t need to regulate this simple trans- action. We need to respect consumer sovereignty and the profit motive that guides firms to make us all better off. Markets self-regulate to bring us the level of safety we want in products when we are free to choose for ourselves. The problem of products being potentially harm- ful to consumers is real. From prehistoric times when humans hunted mastodons with pointy spears, to the colonial days when people danger- ously galloped on horseback to get from town to town, to this morning when you made a cup of cof- fee in your kitchen, people have always been at risk of harm from products. Here’s a news flash: driving down the highway in a metal box at seventy miles per hour is dangerous! Danger is a fact of life. Liberals, regulatory agencies are not the answer to unsafe products, and in fact your policies end up making products even less safe. Before the FDA required pharmacies to use child-resistant pill bottles, adults were careful to put medications out of reach. Then the government said all pill bottles had to have child-safety locks. What hap- pened? A percentage of children found ways to get into them—those caps aren’t foolproof—but adults felt a false sense of security and carelessly left pill bottles in their reach. The result was more medicine-related poisonings. Likewise, when the government required drivers to wear seat belts, suddenly people had a false sense of security and so they drove more recklessly, which led to more tragedy. When we rely on the nanny to tell us it’s safe to cross the street, we don’t take responsibility to learn to look both ways to make sure we won’t get hit by a bus. On top of that, all those govern- ment agencies limit innovation and choice—and cost us a bundle along the way when our taxes go up and prices for products skyrocket. If I’m dying Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 245 and there’s an experimental drug that could give me a sliver of a chance to live, I should be allowed to weigh the risks and decide whether to take it. But your regulations require pharmaceutical com- panies to get the FDA’s green light before I can take it. How ridiculous is it that the FDA would deny me the chance to live because the drug might kill me? Risk is part of innovation, and the govern- ment shouldn’t hold us back from being explorers, experimenters, and entrepreneurs if that’s what we choose. Had the Federal Aviation Administra- tion been around when the Wright brothers were experimenting with flight, they would never have been allowed to get off the ground. Radicals, your solution to solicit everyone’s input to ensure the safety of products is the fun- damental premise of free-market capitalism. Just think of price signals as being the most efficient and effective Product Safety Council, where each and every consumer expresses their needs and concerns about the level of safety they want by voting with their wallets. That’s how we communi- cate to firms the level of safety to give us. Everyone already has a say through price signals. And the beauty is that we can achieve this without your time-wasting committee meetings. Your idea of participatory governance is even worse than the liberal nanny state because not only will we be left with fewer choices, higher prices, and higher taxes, but we’ll also lose the profit motive, which would at least salvage our cell phones, our 3-D printers, and our convenient and delicious breakfast burri- tos. It makes no sense to strip away the engine of innovation and progress and trade it for a return trip to the dark ages. Under democratic socialism, the only thing we’ll be able to buy are dull wooden toys, and then your council will decide we can’t even have those because some “stakeholder” is worried about the possibility of splinters so then more Hazard Assessment Protocols would be cre- ated. Your way is the road to poverty for all. We should reject product safety regulations so that the free market can bring us the level of pro- tection people want. Consumer demand drives the market. People do the research and decide what products to buy. If they want more infor- mation, then suppliers will start supplying that through new industries, or firms will see the ben- efits of making available more information about safety so they can stay competitive. Firms will voluntarily invest in the testing that’s needed to ensure safer products because they follow the profit motive, and safe products are good for business. The fact is that we don’t need any com- mittee, council, agency, or long list of regulations to represent the needs and desires of consum- ers. Those wants and needs are already commu- nicated through the choices we make every day when we decide what to buy and what not to buy. We get safe cell phones, safe microwaves, and safe breakfast burritos, without higher prices and soaring taxes. When we rid society of sti- fling government interference, it’s a win-win for firms and for society because we get innovative products cheaper, faster—and safer, if that’s what we want. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 246 | Voices On The Economy ConservativeFree-Market Capitalism BIG PICTURE Markets self-regulate to bring us the level of safety we want in products when we are free to choose for ourselves. POLICY POSITION Products can cause harm to consumers, but . . . " Liberal policies result in a false sense of security, fewer choices, squelched innovation, higher taxes, and higher prices. " Radical policies are bad for business—wildly inefficient, and kill the drive for progress. SOLUTION Reject product safety regulations so that the free market brings us the level of protection people want: ! Firms follow the profit motive. ! Consumer demand determines safety of goods and services. P1 P S D QQ 1 The Automobile Market Q2 P2 D2 Product Safety Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 247 Product Safety Talking Points: Conservative 1. The beauty of free-market capitalism is that all we have to do is leave markets alone and unsafe products will no longer be produced. Consumers will vote with their dollars. They won’t buy the product, and then firms will either change the product to make it safe or they’ll make something else or the firm will go bel- ly-up. In any case, the unsafe product will no longer be a problem. 2. When the government comes in like an overbearing parent and insists that we all have to have side airbags in our cars or we all have to be told how much niacin is in a serving of our breakfast cereal, we lose. We pay higher prices and higher taxes to fund all those government bureaucrats—and to top it off, we end up with fewer choices. It’s time to fire the nannies. It’s time to trust ourselves to make the best decisions for our own safety. 3. You liberals think that the FDA and OSHA and all those other government agencies are keeping us safe, but they’re doing the opposite by giving consumers a false sense of security. You require people to wear seat belts, and then people drive faster because they feel invulnerable, which leads to more accidents. And all the red tape generated by those agencies keeps useful products from reaching the market because it takes so long to navigate the maze of safety regulations. 4. I don’t need the Democrats’ regulations to know that I shouldn’t give my baby something sharp to play with or that I should research something potentially harmful before I use it. Firms will give us the informa- tion we need and want because they want us to buy their products. They don’t need the government to tell them to do this. Their own self-interest will lead them to be transparent and accountable, bringing us the product safety we want. 5. The radical solution of a Product Safety Council, with its Hazard Assessment Protocols, is an even worse idea than government agencies. In democratic socialism, firms are subjected to decision by committee at every turn—committees of people who have competing agendas—so nothing will ever get approved. In the meantime, taxes will skyrocket, prices will soar. We’ll all end up sitting in the dark, huddled miserably around our fires, toasting overpriced bread on sticks. 6. Radicals, you want to throw out the very thing that has given you a safe, convenient, and comfortable lifestyle. We won’t get that in democratic socialism, because there’s no incentive to work hard or innovate because there is no profit motive. When you go home and brush your teeth tonight, your mouth won’t be minty fresh because of toothpaste. It will be minty fresh and cavity-free because of capitalism . . . you’re welcome! 7. Government safety regulations hurt businesses and consumers because they lead to higher prices, more red tape, and higher taxes. Consumers pay the price every year on tax day and every time they make a purchase. Firms pay the price because it slows down innovation and drives up the costs of production. All those regu- latory agencies are completely unnecessary. When we leave the market alone, we’ll get the level of product safety we want because people won’t buy products they don’t want. It’s that simple. 8. We can solve the problem of product safety by getting government out of the way and letting the market solve itself. Consumers can make their own decisions, and if more research is needed, then a market for independent, unbiased product safety information will emerge. This is the beauty of free-market capital- ism. So instead of overthinking this, let’s dig out from under the suffocating avalanche of product safety regulations. Then we consumers will be in charge of our own lives. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 248 | Voices On The Economy The Shared Outcome All three perspectives share the same goal to create the level of product safety that people want. The desire to be safe and not cause harm to others through products is a fundamental issue of survival every single day. This issue will never go away. It’s been around forever, and it will continue to be relevant until the end of human civilization. Now you understand the issue and the different points of view. You’re ready to be part of the conversation. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 249 Activity: Breakfast with the Family and Re-vote 1. Breakfast with the Family Get together with friends, classmates, or family members and share the talking points and perspective summaries with them. Then assign roles to three people—one for each perspective. Now pretend you’re having breakfast as a family, and you’re all reading the paper and having a discussion about the cartoon below from your respective perspectives. Breakfast with the family is like a debate, only you’re all focused on the same cartoon. (By the way, you could do this with an article or an op-ed as well.) The other difference is that unlike a debate, you already know one another on a personal level, so that changes the vibe. If you have more than three people, make teams and swap players out every few minutes. The game is to try to convince the other people that you’re right and they’re wrong. See if you can articulate a perspective that isn’t the one you (currently) agree with. Make sure you argue not only why your position is right but also why both of the other perspectives are misguided. When you do this, you will become a more persuasive person as a result, and your voice will carry more weight. I predict you’re going to enjoy this game, and if you first try it in the classroom, role playing as different family members, you’re going to want to try it again with your own friends and family. B ab y B lu e s © 2015 B ab y B lu e s P artn e rsh ip , D ist. b y K in g F e atu re s S yn d icate , In c. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 250 | Voices On The Economy Chapter 8: Test Yourself! Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below. 1. Product safety addresses the possibility of goods and services causing harm to consumers. What are product safety standards? A. The predetermined level of safety that products must meet before firms are allowed to bring them to market. B. A set of international safety rules that predetermine which countries can produce which products. C. The safety offered for consumers of only cars, electrical equipment, food, and drugs. D. A and C only. 2. Match the product safety term (left column) to its definition (right column). A. Compliance i. Build safety features into the initial design B. Quality Control ii. Take the product off the market C. Prevention iii. Test samples of products for safety D. Product Recall iv. Follow product safety standards as recommended or required 3. Humans have a long and interesting history of managing risk from products, dating back to Hammurabi’s Code and the Bible. Please choose the ways that consumers can manage risk. A. Government agency regulations B. Voluntary product recalls C. Boycotts, public awareness campaigns, and lawsuits D. Trade-group certifications, standards, and compliance enforcement 2. Revisit Your VOTE Ballot After you’ve made a passionate case for a perspective—and hopefully heard your friends, classmates, and family members make their passionate cases for other perspectives—please go back to the VOTE Ballot and vote again on Product Safety. Are you more certain than ever that your original position best represents your opinion? Have you shifted toward a different perspective? Make sure to fill out the “Why?” section. The VOTE Program is all about helping you think critically about the issues and have informed opinions. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 251 4. Let’s say you have a serious coffee habit. You drink five cups in the morning, followed by five cups at noon, and then another three at night. Which government agency is tasked with ensuring that the coffee you drink isn’t laced with toxic substances? A. NHTSA B. FDA C. OSHA D. CPSC 5. Liberals believe we won’t be ensured safe products if we give up the economic system of __________, as radicals want, or if we follow the conservative idea of leaving it to consumers to stop demanding unsafe products, a process called __________. A. capitalism; stagnation B. democratic socialism; incentives driver C. state-owned capitalism; hand-in-hand D. capitalism; consumer sovereignty 6. According to radicals, the main reason that consumer safety violations are inevitable in capitalism is: A. Class process B. Capitalist competition C. Workplace exploitation D. Labor theory of value 7. Which of the following do conservatives claim is the cost of government-imposed product safety regulations? Choose all that apply. A. Fewer choices B. Higher prices C. Purchase of private information services D. Higher taxes Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 252 | Voices On The Economy 8. Please choose the correct liberal interpretation of this automobile market graph: A. Product safety regulations will result in firms being less willing to produce unsafe cars because of the lower price. B. Product safety regulations will result in less demand for unsafe cars by shifting the demand curve to the left. C. Product safety regulations will shift the supply curve to the left, resulting in fewer unsafe cars. D. Product safety regulations will result in higher equilibrium prices, but the equilibrium quantity of cars will increase as well. 9. Please choose the correct radical interpretation of this Six- Core Cube: A. The role of elected officials is to communicate the findings and recommendations of the Product Safety Councils and do their best to bring those policies to fruition. B. The role of elected officials is to convene and facilitate advisory groups in the form of Product Safety Councils, and then use their best judgment to make final decisions regarding policy. C. The role of elected officials is to meet with other elected officials in legislative forums (local, state, federal) and represent their best determination of their constituents’ needs. D. The role of elected officials is to get into office and do whatever is necessary to promote their own personal interests. 10. Please choose the correct conservative interpretation of this automobile market graph. A. If people don’t want unsafe cars, the supply curve will shift to the right, resulting in lower equilibrium prices and lower equilibrium quantities of unsafe products. B. If people don’t want unsafe cars, the demand curve will shift to the left, resulting in lower equilibrium prices and lower equilibrium quantities of unsafe products. C. If people don’t want unsafe cars, the resulting shortage at the original price will push prices down, making both firms and consumers unwilling to engage in trade. D. If people don’t want unsafe cars, the demand curve will shift to the left, resulting in lower quantities of unsafe products, but at a higher price. P1 P S D QQ 1 The Automobile Market Q2 P2 S2 SocialSafeguards CooperativeOwnership Participatory Governance The Six-C ore Cube of Demo cratic So cialism P1 P S D QQ 1 The Automobile Market Q2 P2 D2 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 8: Product Safety | 253 Chapter 8: Key Terms Compliance Consumer protection Consumer safety Consumer sovereignty Negligent Prevention Product recall Product safety Quality control Safe product Answers 1. A 2. A – iv, B – iii, C – i, D – ii 3. C 4. B 5. D 6. B 7. A, B, & D 8. C 9. A 10. B Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About ch9 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 9Tools to Move Ahead You might have heard this classic example of a moral dilemma. A man sits at his wife’s bedside, feeling helpless because he can’t save her from a wasting illness. There is a new medicine that could cure her, but the man doesn’t have $2,000 to pay for it. He tried to borrow the money from his neighbors and friends, but they had little to spare. He begged the bank officer to approve his loan application, but it was denied because he had no collateral. He pawned his pocket watch and his wife’s wedding ring, which were their only valuables, and for weeks he fran- tically worked extra shifts at his job until he was numb with weariness, but he is still short more than $1,000. The doctor has just told him that if his wife doesn’t get the medicine on this very night, she will surely be gone by morning. Desperate, he races back to the pharmacy just as the pharmacist is locking up for the night. He begs the man to accept half the payment now and swears he will pay the balance plus whatever interest rate the phar- macist names if only he can have the medicine now to save her life. The pharmacist shakes his head sympathetically and says it simply isn’t pos- sible. So the man starts to stumble home, numb with grief, to say a final farewell to his beloved wife. But then he stops and looks back at the shop. All he would have to do is break a window and the cure could be in his hands. She wouldn’t have to die. Would it be wrong for him to steal the medicine to save his wife’s life? How do we know what’s the right thing to do and what’s the wrong thing to do in any given situation? This is a question that has been asked for millennia across every culture by leaders, edu- cators, philosophers, religious scholars, psychol- ogists, and others. It’s an important question for the VOTE Program because we are asking you to form reasoned opinions about what policies we should adopt to address economic problems. What do we and don’t we fund as a society? What do we and don’t we regulate? Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 256 | Voices On The Economy What do we and don’t we prioritize as a nation? Some of the most bitter fights in our country revolve around disagreements about right and wrong. Is it right or wrong to fund programs for people in poverty? Is it right or wrong to tax some people at a higher rate than other people? Is it right or wrong to promote international trade? At different times in our history, we could pas- sionately but respectfully disagree about how to fix our nation’s economic problems. These days, we treat those who think differently as the “enemy.” We are less and less willing to listen with an open mind to different points of view and to consider diverse perspectives. We are less will- ing to see others as ideological opponents rather than as bitter enemies. We often find ourselves thinking, saying, or just assuming that those ideas we disagree with—or the person who disagrees with us—are unethical (lacking integrity, honor, or decency). We may even believe that ideas for economic solutions that differ from ours are dangerous and the people who advocate them should be silenced. Should the man steal the medicine for his wife? There is no universally accepted answer to this question, even among moral philosophers. One person might believe stealing is always wrong. Another might believe it’s justified if it will save a life. Another might think it would be okay for him to steal it if he saves her life and then turns him- self in to the police to face the consequences. But what if stealing the medicine means someone else who could have paid for it dies because there’s a limited supply? Does the wife have a basic right to life-saving medicine as a human being? Does the pharmacist, who owns the medicine, have the right to charge any amount for it? Hopefully, you won’t ever be faced with this Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 257 particular dilemma, but the point of this hypothetical scenario is to show you that there are many ways people think about right and wrong and poten- tially many gray areas that require nuanced think- ing. This is relevant to the VOTE Program because when you hear the differ- ent policy ideas of the lib- erals, conservatives, and radicals, you might reflex- ively shut out or shout down the ones that don’t line up with your way of thinking. But that’s not going to be helpful. While the goal here is not to get you to agree with those ideas, it is to help you understand what other people have to say and why they see the world the way they do. Facts or Value Judgments? There is a subtext running beneath the surface of all the disagreements we’ve been hearing up to this point in the VOTE Program—the arguments about theoretical differences, the competing stereotypes, and the different policy ideas each perspective proposes. When we’ve asked you to practice the voices of the various perspectives to really try to understand what the others are saying, this subtext likely tripped you up at times. So let’s bring it to the surface now and hold it up to the light and figure out how to keep it from getting in the way of constructive discussions about our urgent economic issues. What is it? It’s our fundamental disagreement over “truth” and “facts.” In chapter 2, we touched on the differences between essentialist and non-essentialist think- ing. If you recall, essential- ists believe there is a fixed truth to everything that can be known through our rational minds and through empirical evidence. Essen- tialist economists—and they can be from any per- spective—believe that the- ory building (assumptions, model, conclusions) is a science that gives us facts, which are objective truths. This fact-based approach to determining “what is” is called positive econom- ics. For example, a positive statement would be “Eight percent of Americans go to bed hungry every night.” However, what to do to address that fact (the policy) is a whole other realm of thinking that relies on value judgments to determine “what should be.” This is called nor- mative economics. So to an essentialist, a fact is a fact, but policies are up for debate. On the other hand, if you recall, non-essen- tialists —and they, too, can be from any perspec- tive—reject positive economics because they don’t believe in objective truth. They believe that every- thing we think is shaped by context. That means the ideas behind our assumptions, model, con- clusions, and policies will change depending on who looks at them, how they are looked at, and when they are looked at, among other factors. So for a non-essentialist, everything—including how we measure hunger—is subjective. It depends on when it was measured, how people defined hun- ger, how data was collected, the questions that were and were not asked, and so forth. Therefore, to a non-essentialist, there is no positive econom- ics. Everything is normative. Knowing about positive and normative anal- During a heated debate, when it starts to feel as if you’re talking apples and oranges, knowing about positive and normative analyses might help you discover better ways to express your point of view in such a way that the other person can hear you. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 258 | Voices On The Economy yses will help you assess where you’re coming from and where the other person is coming from during a heated debate. It’s another layer to the conversation that is now explicit for you. Are they frustrated with you because you’re saying this thing is a fact? Are you frustrated with them because they’re not accepting what is, to you, so obviously subjective? When it starts to feel as if you’re talking apples and oranges—“what is” ver- sus “what should be”—remember this point about essentialism and non-essentialism. It might help you discover better ways to express your point of view so that the other person can understand where you’re coming from. Before we explore the issues of Livelihood and Housing in the following two chapters, let’s con- sider the basic rules of civil discourse, which are strategies for having constructive and respectful conversations even when you’re challenged by ideas you vehemently disagree with and can’t support in any way. And then we’ll explore some new radical and conventional tools to help you analyze the upcoming issues. Civil Discourse We’ve already established that radicals, liberals, and conservatives all want the same general outcome for each issue. Even so, we come into this conversation—and into the VOTE Program— with certain biases against the other perspectives, and it’s not useful to pretend we don’t have them. It’s a challenge to engage in civil discourse— respectful conversations intended to enhance understanding—instead of retreating or attacking out of fear, moral outrage, or self-righteousness. Those reactions will shut down any possibility of having the important conversations we need to be having to move our nation forward. The good news is that many have walked this path before us and found constructive ways to engage in civil discourse. We can take inspiration from the friendship between John Adams, the second U.S. president, and Thomas Jefferson, who followed him to the White House as the third U.S. president. They met at the start of the Revolutionary War and worked together for American independence, but they developed opposite points of view about the role of government. Their ability to be civil toward each other despite their strongly held opinions was tested when they ran against each other for president. But—and here’s the inspiring part— although for a time they were bitter opponents, they reconciled later in life and started writing each other letters again and shared their ideas about philosophy, religion, and politics. They still disagreed, but they also found ways to appreciate and learn from each other’s point of view. They discovered there were some topics about which they actually agreed. Adams and Jefferson had their flaws—just like we all do—but they demonstrated that it’s possible even for longtime ideological foes to find not just common ground but also appreciation for those who advocate for different perspectives. By a strange coincidence, they both died on July 4, 1826. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 259 If you believe in democracy, then please con- sider that diversity of ideas is a gift—not a threat. If we lose the ability to stay committed to democ- racy when conversations become contentious, we could crash the whole system. In the span of human history, we’ve had democracy for a very short time and, in some countries, only intermit- tently. And there’s no assurance that it will endure for us. We think our nation is stable, but all nations are actually quite fragile. History shows us that they rise and fall. What’s so special about diversity? We might secretly believe that life would be a whole lot easier if everyone just thought the same as we do. But it would be a disaster for humanity, just as it would be a disaster in nature if there was no diversity. Scientists say variety in ecosystems is the key to ensuring survival. Imagine if all the trees in a forest were the same species, and a beetle that devoured that kind of tree appeared one day. The whole forest would be wiped out. But a forest made up of many types of trees would survive not just the beetle infestation but also droughts, fires, fungi, and more. In much the same way, we humans need a diversity of ideas to survive. We need different ways of thinking to intermin- gle and recombine to bring us new resilience, strength, and wisdom. When a seed of an idea from someone else drifts into your mind, it could potentially blossom into a solution that the world needs. You might be the one to see a whole new approach to collaborate or compromise, or you might be the one to find a brilliant new way to move us forward as a nation. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 260 | Voices On The Economy Guideline 1: Listen Thoughtfully. When you automatically want to dismiss what the other person is saying, wait! Try to be mindful. Listen more carefully and even ask them to please repeat what they just said so you can really take it in. Lis- ten and consider their argument before you react or respond. To make sure you’ve really heard, try to reflect back what they’ve said and ask, “Did I understand you correctly?” That way the other person will feel heard and respected. You’re not saying you agree with their assessment of the issue or their policy idea; you’re saying you’re trying to understand how they see it. By slowing down and listening thoughtfully, you can man- age your own emotional reactions and be a better listener. And here’s one more tip: your body lan- guage can speak volumes about your openness to what a person is saying. For example, crossed arms can sometimes indicate to people that you feel closed or even skeptical. Tapping your foot or bouncing your knee indicates impatience. Nod- ding indicates you’re hearing them, while shaking your head indicates you’re rejecting what you’re hearing. Guideline 2: Critique Issues—Not Individ- uals. Don’t make it personal. Focus on the issues rather than on the individual during a debate or difficult conversation. Otherwise, you may run the risk of discounting some really good ideas because of your feelings, assumptions, or stereotypes about the messenger rather than the message itself. You don’t have to like other people to give their ideas a fair hearing, even if their ideas for economic solu- tions seem wrongheaded to you. Guideline 3: Use Your Biofeedback. Be mindful of your physical and emotional reactions during difficult conversations. When you start to feel defensive, take a deep breath and tune in to where you’re feeling the stress or tension in your body. Take another breath and try to relax. It can be emotionally draining or triggering to hear ideas that are diametrically opposed to your own. You might even feel personally attacked. As you breathe, remind yourself that, while the experience may be unpleasant, it’s important to find common ground with others. Being mindful of your reac- tions before you respond makes it more likely that the conversation will stay civil rather than devolving into a shouting match or shutting down before you’ve come to any mutual understanding. Guideline 4: Remember that Empathy Helps. When it’s your turn to share your views, remember that others may feel personally attacked by your ideas, just as you felt when they shared their views. Because you know how it feels, try to let yourself empathize and be kind. You can say aloud or just think to yourself, “I understand this may be hard to hear.” Kindness and empathy are great bridge builders. They can remind you and your ideological opponents that your shared Six Guidelines for Civil Discourse I like to use the word human when I talk about people. “You’re a wonderful human,” I’ll tell a student or my cousin or the IT person who helps me with my computer. I do this because I like to be reminded that no matter how far apart we are in our views about the way the world should be, there is so much more we have in common as human beings. If an alien spaceship were to appear in the sky right now, and we were suddenly facing an invasion by extraterrestrials, I predict that it wouldn’t matter what labels we used for ourselves—conservatives, radicals, or liberals. We would immediately recognize that first and foremost we are humans, and we’re in it together. These guidelines for engaging in civil discourse are really about helping you acknowledge and respect the humanity of other people even while you’re feeling very unhappy with their ideas. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 261 Exercise 9: Keep It Civil Choose the guideline that will be most helpful to create civil discourse in each of the following situations. The Answer Key is at the end of this chapter. 1. As you listen to your opponent describe their ideas, you start to grind your teeth in frustration. 2. Before the conversation starts, you think, “I hate the way my opponent talks and dresses.” 3. You tune out when the other person starts to talk and focus on what you plan to say when it’s your turn. 4. Even though you felt upset when your opponent was talking, you can’t understand why they are so upset hearing your ideas. 5. Before they even finish, you jump to conclusions and assume you know what they are going to say—and you reject it out of hand. 6. To drive home your point, you shout and shake your fist at your opponent. humanity links you to one another, even if your ideas clash with theirs. Guideline 5: Aim for Peaceful Persuasion. Please be a passionate advocate, but make sure you’re not threatening or abusive—emotionally, physically, or verbally. Don’t be a bully. It won’t help you convert anyone to your way of thinking, and it will just make the rift wider. Instead, chal- lenge others’ ideas by using intelligent arguments backed by evidence from trustworthy sources (not social media memes). So, for example, you wouldn’t want to say, “Anyone who believes that really should have some sense whipped into them.” Instead, you’d want to say, “In the 1980s we tried that policy and what resulted was prob- lematic. Let’s look at the data.” Guideline 6: Be Open-Minded. It’s useful to identify the places where you and your opponents agree and disagree. You may discover areas where you can find common ground, compromise, gen- erate new ideas, become more certain of your own ideas, or change your mind. Remember that the point of civil discourse isn’t to be right or to win; the point is to be heard respectfully and have your ideas be understood, and to hear others respect- fully and understand where they are coming from. The point of an open mind is to grow wiser. These six guidelines for civil discourse may not seem that complicated, but they’re going to take some practice, so please be patient with yourself and with others. One last tip for you: when you’re done with the conversation, try to thank the oth- ers who participated for sharing their ideas and for listening to yours. Remember, if it was stressful or unpleasant or heated for you, then it probably was for them, too. Congratulate one another on getting through it, and remind one another that debate and discourse can get easier with practice. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 262 | Voices On The Economy Conventional Theory Tools In this section we’re going to look at the difference between input markets and output markets and learn about price controls and elasticity. The policy debates about livelihood and housing are based on different ways liberals and conservatives interpret the information that emerges when these ideas are applied. Input Markets vs. Output Markets So far in this book we’ve only talked about output markets, which are the markets for final goods and services such as flip-flops, oil changes, and pizzas. Input markets are the markets for the land, labor, and capital (factors of production) firms need in order to make those final goods and services. Both input markets and output markets are guided by price signals, say conventional the- orists. But the significant difference between these kinds of markets is that in an input market the demanders are not individuals trying to maximize their happiness; they are firms trying to maximize their profit. At the same time, the suppliers may be firms, but they also may be workers or landlords or contractors or other parties who provide the land, labor, and capital to make the final goods and ser- vices. Consider the guitar market. Guitars are an out- put. Demanders are the consumers, and suppliers are the guitar producers. Nylon strings are a very important input for producing acoustic guitars. The guitar firms demand nylon strings from the nylon string producers—that’s an input market. Other input markets for guitar making include factory space, wood, tools, sandpaper, luthiers (a person who makes stringed instruments), sales- people, IT staff, bookkeepers, and of course the low-skilled workers who answer phones, sweep the factory floor, stock the shelves, staff the mail- room, make guitar deliveries, and run errands. Price Controls A price control occurs when the government, for whatever reason, passes a law to regulate the price in a market to limit either how high or how low it can go. These can be used in both input and output markets. In the past we’ve had price controls in the mar kets for bread, rice, electricity, gasoline, wages, and rent, among others. Conservatives and liberals (conventional theorists) tell us that when we leave markets alone (laissez faire) they will always tend toward equilibrium. That’s because if there’s a price that’s below the equilibrium price, then a predictable chain reaction occurs: more individuals will be interested in buying, fewer firms will be interested in selling, and a shortage will result. With any shortage, there’s a pressure for the price to rise. As prices start rising, suppliers become more willing to supply, demanders become less willing to demand, and quantity supplied and quantity demanded meet at a new equilibrium point. The Expanding the Models for Livelihood and Housing In the next two chapters, we’ll be exploring two more economic issues: Livelihood and Housing. Before we dive in, you’ll need to learn a few new tools to help you analyze the issues from the conventional and radical perspectives. The great news is that you already have a firm foundation in conventional and radical theories, so these new tools will feel familiar, and they will reveal intriguing new information to consider. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 263 same kind of chain reaction happens if the reverse occurs. If the price rises above equilibrium price, then fewer individuals will be interested in buying and more firms will be interested in selling, which creates a surplus. When that happens, there’s a pressure for the price to fall. As prices start falling, demanders become more willing to demand, and suppliers become less willing to supply, and quantity supplied and quantity demanded meet at a new equilibrium point. Conventional theorists agree that this is the way markets will always work if left alone for long enough. There can be no permanent surpluses or shortages in capitalism because price signals eventually bring the whole system back into equi- librium. But from time to time the government passes laws to stop prices in cer- tain markets from rising or falling—even knowing that shortages and surpluses will result. This is the heart of the debate we’ll be explor- ing in the chapters on Live- lihood and Housing. There are two kinds of price controls: price ceil- ings and price floors. A price ceiling sets a max- imum amount that can be charged for a prod- uct. It can be set at any level, but an effective price ceiling is set below equilibrium to keep the price (P) lower than would occur naturally. For a variety of reasons, the government may want prices to be lower than the equilibrium price in order to draw more people into the market. For example, the government might want to motivate more people to eat chocolate because of a study linking chocolate consumption and higher intelli- gence. But take a look at figure 9.1. Does some- thing seem strange to you? A ceiling is up above your head, but the line for the price ceiling on the graph is actually below equilibrium. What’s that all about? Just think about a helium balloon. A ceiling keeps it from doing what it would naturally do on its own—float up, up, and away. This is exactly what a price ceiling does. It pre- vents the price from rising to equilibrium, which is where it would naturally go. Take another look at the figure and you’ll see Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 264 | Voices On The Economy that the quantity supplied (QS) is less than the quantity demanded (QD), which means a short- age. Price ceilings tend to cause shortages. P1 P S D QQ 1 Chocolate Bar Market QS P Ceiling QD Figure 9.1 Price Ceiling A price floor sets a minimum amount that can be charged for a product. It can be set at any level, but an effective price floor is set above equilibrium to keep the price high. For a variety of reasons, the government may want the price to be higher than the current equilibrium price. For example, the government might want to push people out of the chocolate bar market because of the proven rela- tionship between chocolate consumption and obe- sity. But take a look at figure 9.2. Was there some mistake? A floor is below your feet, but the line for the price floor on the graph is actually above equi- librium. What’s going on? Think about it this way: if you’re standing on the second floor of a building, the floor keeps you from dropping to the ground, which is where you would naturally fall because of gravity. This is exactly what a price floor does. It prevents the price from falling to equilibrium, which is where it would naturally go without the price control. And look at how the quantity sup- plied is greater than the quantity demanded. Price floors tend to cause surpluses. P1 P S D QQ 1 Chocolate Bar Market QD QS P Floor Figure 9.2 Price Floor Price Elasticity Before you make up your mind about what you think about price controls, there’s another tool you need to know. If you and I were to take a foot- long stretchy rubber snake and play tug-of-war with it, how far would the snake stretch, relative to the force of our tugging? We might stretch it ten feet between us—that’s pretty far. We would say the stretchy snake is sensitive, responsive, or elastic. But if we tried to play tug-of-war with a hard plastic snake, it wouldn’t stretch at all—not even an inch. So we would say the solid snake is insensitive, unresponsive, or ine lastic. In market models we use this idea of elasticity to analyze how sensitive the quantity demanded and quantity supplied are when there is a change in price. The terms we use to talk about this are price elasticity of demand and price elasticity of supply. Let’s Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 265 practice using them in sentences: When the price of medicine goes up, people’s demand for it will fall only by a small amount. So we say, “The price elasticity of demand for medicine is inelastic.” When the price of pizza goes up, firms will supply a lot more pizza. So we say, “The price elasticity of supply for pizza is elastic.” Wait a minute. Don’t we already know from the law of demand that when price goes up, the quantity demanded goes down? And don’t we already know from the law of supply that when price goes up, the quantity supplied increases? Yes, we do already know that. But what elasticity adds to this conversation is to tell us by how much. Price Elasticity of Demand. Will you buy something if the price suddenly skyrockets? That depends on the elasticity (sensitivity to the price) of what you want to buy. One of the most expen- sive medicines ever sold, Soliris, treats a rare type of anemia that affects relatively few people. At one point, the price for the drug went up to $440,000 a year. People who have the disease will die with- out this medication. Now, let’s say you have this terrible disease. Will you buy Soliris even if the price goes up? Of course you will, if you can. Some people will be priced out of the market, but everyone else will beg, borrow, and possibly even steal to buy it because they need it to stay alive. In other words, the price elasticity of demand for Soliris is highly insensitive to a change in price. It’s the hard plastic snake—relatively inelastic. Price elasticity of demand —how sensitive quan- tity demanded is to a change in price—is based on four criteria, which are listed in order from most important to least important. 1. Necessity vs. Luxury. The most important thing that determines whether the quantity demanded is sen- sitive or insensitive to price change is whether you need the product. If it’s a neces- sity, you will buy it even if the price skyrockets. The price elasticity of demand for necessities is inelastic, so quantity demanded will fall very little when price goes up. On the other hand, if it’s a luxury item such as a robotic vacuum cleaner, you won’t buy it when the price goes up. The price elasticity of demand for luxuries is elas- tic. Quantity demanded will fall significantly when the price goes up. 2. Number of Substitutes. Let’s say you go to the pharmacy with your prescription for Soliris and you find out that the price went up from $4,400 a year to $440,000 a year. After you recover from the shock, the first thing you would likely ask the pharmacist is, “Do you sell any cheaper versions of that medicine? I’ll take generic!” The fewer substitutes there are, the more likely you will be to buy Soliris at any price, which makes the demand price inelastic. The more substi- tutes there are, the less likely you will be to buy it at that price, which makes the demand price elastic. 3. Fraction of Income. Let’s say you ate a lot of garlic for lunch and you have a date. You really want a breath mint. At the store you discover the price of breath mints has dou- bled. They now cost $2. The extra dollar is such a small fraction of your income that you go ahead and buy them anyway. This is a case of demand that is price inelastic. Now let’s say it took you a year to save up Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 266 | Voices On The Economy $5,000 to buy a used car. When you go to the dealer with your $5,000 in hand, the car you had your eye on now has a sticker that says “Hot Deal! $10,000!” You won’t buy it at that higher price if the extra $5,000 is a big frac- tion of your income. The bigger the fraction of income, the more price elastic is demand. 4. Time Factor. Let’s say you’re running late, but when you get in the car, you remember that you’ve been running on empty for two days. If you run out of fuel, you’ll miss an important appointment, so you pull into the nearest refueling station. That’s when you see the price has doubled overnight. Do you buy it anyway? If your immediate need to be on time is greater than your need to save money, then yes—you’ll buy it anyway. Your demand for a good is price inelastic when the need for something is immediate. But over time, you won’t need fuel as urgently, because you’ll find substitutes. You’ll join a rideshare pro- gram or take public transportation. Assuming that the price for fuel stays high, the demand will be price elastic in the future. Let’s see what elasticity looks like on a graph, where flip-flops are a luxury with many substi- tutes (elastic) and sunglasses are a necessity with few good substitutes (inelastic). Notice on the Market Demand for Sunglasses graph (figure 9.3, on the left) that when the price goes from $5 to $10, the steep curve shows that quantity demanded for sunglasses falls by one unit. On the Market Demand for Flip-Flops graph (figure 9.3, on the right), when the price goes from $5 to $10, the flat curve shows that quantity demanded for flip- flops falls by thirty units. The flat slope shows an elastic demand curve—when price goes up, quan- tity demanded falls a lot. The steep slope shows an inelastic demand curve—when price goes up, quantity demanded falls a little. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 267 If you want an easy way to remember what elas- ticity and inelasticity look like on a graph, check out these graphs below (figure 9.4). Look at the left two graphs: each represents the extreme of elastic and inelastic. A perfectly inelastic demand curve means that no matter how high the price goes up, you will still buy it. A perfectly elastic demand curve means you’ll buy it at a particular price, but if that price increases even by a penny, quantity demanded will fall to zero. It’s easy to remember which one is which: on the right two graphs, where purple lines are overlaid, one forms the letter I for inelastic, and the other forms the letter E for elastic. By the way, please note that when we talk in general terms about elasticity and inelasticity, we’re meaning it’s relatively elastic or inelastic. In contrast, we say “perfectly elastic” or “perfectly inelastic” when it’s absolutely so. Total Revenue and Price Elasticity of Demand. The amount that a firm is going to earn by selling a unit of its product at a particular price (in other words, the price of a pair of flip- flops multiplied by the quantity of flip-flops sold) is called total revenue. The relationship between total revenue and price elasticity of demand is important. The firm will be motivated either to increase or decrease price depending on elasticity. Consider the demand for sunglasses. In the left P1 = 5 P D Q Market Demand for Sunglasses Q2 = 10 P2 = 10 Q1 = 11 P1 = 5 P D Q Market Demand for Flip-Flops Q2 = 10 P2 = 10 Q1 = 40 Figure 9.3 Elasticity and Market Demand P1 P D QPerfectly Elastic P1 P D QPerfectly Inlastic P1 P D QPerfectly Elastic P1 P D QPerfectly Inlastic Figure 9.4 Perfectly Elastic and Perfectly Inelastic Demand Curves Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 268 | Voices On The Economy graph above (figure 9.5), sunglasses originally sell for $5 a pair. The quantity sold at that price is ten units. The total revenue is $50. Now let’s say the price for sunglasses goes up to $10. The quan- tity demanded falls, but only by one unit—down to nine units—because sunglasses are a neces- sity, and there are no substitutes. Sunglasses are a product with inelastic demand. Total revenue goes from $50 to $90. So you can see that when demand for a product is inelastic, firms will want to raise prices because when prices go up, total revenue increases. That’s not surprising. Most people think, “Of course firms always want to raise their prices to make more money.” But that isn’t true. Firms only want to raise prices when the price elasticity of demand is inelastic because many people will buy the product anyway, which will bring firms a higher total revenue. On the other hand, what will a firm do when demand for their product is elastic? Let’s say you sell flip-flops at $5 a pair. The quantity demanded is forty units so the total revenue is $200. But when the price doubles to $10 a pair, the quantity demanded falls dramatically to ten units because many people switch over to sandals, so the total revenue plum- mets to $100. So you can see that when the price for a product demanded is elastic, firms are likely to lower prices so they can make more money. Price Elasticity of Supply. We’ve looked at elasticity from the demand side, but there is another aspect to consider. What difference does elasticity make to supply? As a supplier of sunglasses, for example, you ask, “When the price for sunglasses increases, how sensitive (or responsive) will my firm be to supplying more sunglasses?” Price elasticity of supply is based on a variety of different determinants, some of which include: 1. Available Inputs. When suppliers are able to produce more of a product quickly because inputs are readily available, then supply is price elastic. That means when price goes up even by a small amount, the quantity supplied can increase by a lot. Your pizza company can easily thaw out more cheese from the freezer or run to the distributor and buy more cheese at the last minute so they can throw together P1 = 5 P D Q Market Demand for Sunglasses Q2 = 10 P2 = 10 Q1 = 11 P1 = 5 P D Q Market Demand for Flip-Flops Q2 = 10 P2 = 10 Q1 = 40 Figure 9.5 Total Revenue and Price Elasticity of Demand Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 269 many more pizzas when the price goes up on Super Bowl Sunday. Supply for pizza is elastic. But the cruise ship company can’t create more honeymoon suites at the last minute if the price goes up when hordes of newlyweds suddenly all want to book honeymoon suites. Supply for honeymoon suites on cruise ships is inelastic. 2. Inventories. If it’s difficult to keep inventories of a product, supply will be inelastic. “Diffi- cult” here means that when a product sits in a warehouse or is otherwise not in the market, firms have to pay money to store or main- tain the product, or they have to pay taxes on that unsold inventory. When they don’t have a ready stock of inventory on hand, produc- ers are unable to increase supply when price goes up. Clearly, you can keep an inventory of sunglasses without incurring great costs, but you can’t keep an inventory of movie the- aters without having a lot of costs. Therefore, the supply of sunglasses is elastic, whereas the supply of movie theaters is inelastic. 3. Complexity of Production. When the process of producing a good or service is complicated, the price elasticity of supply will be inelastic. Complex production makes it challenging for firms to react quickly to price changes because it requires specialized land, machinery, and labor that can’t easily be substituted or coor- dinated. Making flip-flops is relatively simple, requiring plastic, one or two machines, and a workspace with electricity. Making movie the- aters, on the other hand, is a very complicated process, involving surround-sound systems, popcorn machines, specialized seating, high- tech screens and projection systems, along with heating, cooling, electricity, and plumbing—not to mention land and zoning permits. Therefore, the supply of movie theaters is inelastic, while the supply of flip-flops is elastic. 4. Time Factor. When a supplier runs short of a product that can’t be replaced quickly— movie theaters or honeymoon suites on that cruise ship—there’s nothing to be done for the moment. Supply is inelastic. But in the future, Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 270 | Voices On The Economy supply could become elastic as firms increase their capacity to produce more. For instance, over time the cruise ship company could build more or larger cruise ships with more honey- moon suites. Figure 9.6 is what price elasticity of supply looks like on a graph. The steep curve means the supply price is inelastic: when price goes up, firms won’t increase their supply by very much. The flat curve means when the price goes up, firms will be willing to supply a lot more. Factoring Elasticity into Price Controls Finally, it’s time to put together these tools so we can apply them to the issues of Livelihood and Housing. When a price ceiling or price floor is set, a shortage or a surplus will result, according to conventional theory. This doesn’t change when we factor in elasticity. But now the important question becomes: how much of a shortage or a surplus will result? Imagine we have a price control in the electricity market. Because electricity is necessary for survival and has very few substitutes, the demand curve is highly inelastic. As for the supply curve, because electricity needs elaborate infrastructures and can’t be easily stored, the supply curve is also highly inelastic. Now let’s combine elasticity with price controls. Here’s where the conversation gets really interesting. Take a look at figures 9.7 and 9.8. As you can see, the price ceiling creates a shortage in both cases, but it’s less extreme when elasticity is factored in. This is where liberals and conservatives diverge. Both agree that elasticity is a fact in markets, and they agree that over time demand and supply become more elastic as new substitutes are brought to market. But they dis- agree on whether a price control—with a result- ing surplus or shortage—is ever justified. Liberals say that when government puts a price ceiling on electricity, which is price inelastic on both the demand and supply sides, suddenly the many people who haven’t been able to afford electricity can now heat their homes and turn on lights and surf the internet. Liberals also say that the shortage that results from the price control is minimal and less relevant than the fact that nec- essary electricity is going to people who need it P1 = 5 P Q Market Supply for Honeymoon Suites on Cruise Ships Q1 = 10 P2 = 10 Q2 = 11 P1 = 5 P S Q Market Supply for Pizzas Q1 = 10 P2 = 10 Q2 = 40 S Figure 9.6 Elasticity and Market Supply Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 271 to survive and thrive. They argue that price con- trols can make good economic sense. And while elasticities could change over time, their point is that right now the price elasticity of electricity is inelastic on both the demand and supply sides. On the other hand, conservatives say a price ceil- ing is never a good idea in any situation because it locks in shortages and surpluses, and that’s a problem regardless of how big or small they are. Rolling blackouts would ensue, which would hurt everyone. On top of that, as price elastic- ity changes over time, those shortages and sur- pluses will become even more extreme. Besides, they say, a price ceiling doesn’t help in any case. Those who couldn’t afford electricity will still be sitting in the dark when producers no longer have incentives to make electricity. When it comes to ending poverty and address- ing the lack of affordable housing, these are the kinds of arguments that conservatives and liberals have about price controls. The policies we will be debating in chapters 10 and 11 are minimum wage legislation (price floor) and rent control laws (price ceiling). Minimum Wage Legislation. The minimum wage sets a price floor on the labor market. Just like any other market, the low-skilled labor market is guided by price signals. Because labor is an input market, we refer to the price as the wage (W) and the quantity as the number of workers (N). The suppliers are the workers, and the demanders are the firms. Workers will supply more labor at a higher wage, and firms will demand more labor at a lower wage. But before we can draw a graph depicting the low-skilled labor market, we need to determine the elasticity of low-skilled labor demand and the elasticity of low-skilled labor supply. In other words, how sensitive is the quan- tity of labor demanded or the quantity of labor supplied to a change in the wage? If the wage goes up, the firm will lay off workers, but how many? That depends on the elasticity of demand for low-skilled labor. And if the wage goes up, how many more workers will supply low-skilled labor in that market? That depends on the price elasticity of labor supply. The determinants for elasticity in input markets are different from the determinants we discussed P1 P S D QQ 1 Electricity Market QS Price Ceiling QD P1 P S D QQ 1 Electricity Market QS Price Ceiling QD Figure 9.7 Price Controls without Showing Elasticity Figure 9.8 Price Controls Showing Elasticity Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 272 | Voices On The Economy above for output markets, but there is some over- lap. Substitutions, for instance, play a big role in the elasticity of labor demand. What else can be substi- tuted for the input? In the low-skilled labor market, when wages go up, fast-food restaurants, custodial services, hotels, landscaping firms, and so forth will continue to hire low-skilled workers because they don’t have the option of replacing them with a machine that can do the work—at least not yet. If they did, they would have already acquired those machines. So far, there is no machine that can effec- tively bus tables at the burger joint or sweep the floor at the guitar factory. Even if the wage for table bussers or floor sweepers goes up, for now the firm will continue to hire workers because they are nec- essary for the success of the business. When wages go down, firms are even more likely to continue to hire low-skilled workers rather than trying to invent or invest significantly in machines to replace them. The elasticity of labor demanded in the low-skilled labor market is inelastic. Adaptability plays a big role in determining the elasticity of labor supplied. How easy is it for workers to use their current skills in a different job? For example, if you work as a shelf stocker in a grocery store and the wage drops for low-skilled jobs, you probably will keep working at the lower wage because your skill isn’t easily transferrable to working as a luthier, a tennis player, or a sushi chef. When wages go down, low-skilled workers have no specialized skills that could transfer to a new job, so they won’t leave even if the pay decreases, because they have no other options. What happens when the wage goes up? Since wages are generally laddered—workers with higher skills also get a pay raise when low-skilled workers get a pay raise— higher-skilled workers won’t be drawn to compete for low-skilled labor jobs. The elasticity of labor supplied in the low-skilled labor market is inelastic. Figure 9.9 shows the low-skilled labor market with inelastic demand and supply. You’ll notice the slopes are quite steep for both demand and supply. Figure 9.10 shows the same market with the minimum wage price floor. Since the supply of low-skilled workers is greater than demand at that price floor, a surplus of workers will result (unemployment). You will see this graph again in chapter 10, when conservatives and liberals offer their perspectives about whether the minimum wage is beneficial or harmful for solving poverty. W1 W S D NN1 Low-Skilled Labor Market Figure 9.9 Inelastic Demand and Supply W1 W S D NN1 Low-Skilled Labor Market ND Wage Floor NS Figure 9.10 Price Controls and Elasticity Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 273 By the way, you should know that some analysts (from both perspectives) have different ideas about the degree of elasticity for low-skilled labor supply and demand. However, this disagreement doesn’t substantively change the debate we’ll be having in chapter 10. For our purposes, we’ll assume that this point of contention is not an issue. Rent Control Laws. Housing is an output mar- ket and takes many forms, including apartments, manufactured homes, duplexes, single-family homes, mansions, and so forth. In chapter 11 we’ll be considering rent control in the low-end apart- ment market. Rent control laws set a price ceiling in the housing market. As you can see in figure 9.11, the price is rent (R), and the quantity is the number of apartments supplied and demanded (Q). The suppliers are the landlords (property owners), and we know they are willing to supply more low-end apartments when the rent goes up. The supply curve is upward sloping. Demanders are the ten- ants. We know tenants are willing to demand more low-end apartments when the rent goes down. The demand curve is downward sloping. But how elastic is the supply and demand of low-end apartments? If rents go down, by how much less will landlords supply low-end apart- ments and by how much more will tenants demand those apartments? To determine this, we consider the main determinants for the price elasticity of demand and supply in output markets. Let’s start with demand. When rents for low-end apartments go up, tenants pay the higher rent since apartments are a necessity—people need a place to live in order to survive. And there are very few substitutes for low-end apartments apart from moving into a homeless shelter. On the other hand, when rents go down for low-end apartments, people who live in duplexes, single-family homes, standard and lux- ury apartments, and mansions aren’t going to race to get their rental applications in for low-end apart- ment buildings. It’s not a substitute for higher-end housing. For these reasons, the price elasticity of demand for low-end apartments is highly inelastic. On the supply side, suppliers can’t easily make more low-end apartments when rents go up because inputs aren’t readily available—appro- priate building lots are scarce, and cranes, bull- dozers, and skilled builders are hard to schedule, and so forth. And when rents go down, low-end apartments can’t easily be stored. It costs owners P1 R S D QQ1 Low-End Apartment Market Figure 9.11 Inelastic Demand and Supply P1 R S D QQ1 Low-End Apartment Market QS Price Ceiling QD Figure 9.12 Price Controls and Elasticity Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 274 | Voices On The Economy money to leave them unrented because they still have to pay taxes and maintenance on the apart- ments. That means it’s not cost-effective to hold on to inventory when rents go down by keeping them empty. For these reasons, the price elasticity of supply is also highly inelastic. Figure 9.11 shows the low-end rental apartment market with inelastic demand and supply. You’ll notice the slopes are quite steep for both curves. You can also see the same market with a rent con- trol price ceiling (figure 9.12). Since the quantity demanded is greater than the quantity supplied at that price ceiling, a shortage of housing will result. You will see this graph again in chapter 11, when conservatives and liberals argue for their points of view about whether rent control laws are benefi- cial or harmful for solving the problem of lack of affordable housing. Radical Theory Tools Now let’s take a look at the radical tools you will need to understand their point of view on the issues of Livelihood and Housing. Remember, with the radical perspective there are always two parts: describe capitalism and describe democratic socialism. In chapters 10 and 11 the description of capitalism will focus on the core point of private ownership. Private ownership occurs when individuals privately own land and capital and hire wage laborers to produce goods and services. Cooperative ownership occurs when people freely come together to jointly own land and capital, including firms, housing, public utilities, and so forth, making decisions about policies and structures through a democratic process of one person, one vote. Capitalism: Private Ownership Marx offered two central critiques of private ownership in capitalism. The first is workplace exploitation. Wage laborers are hired by private owners to operate the machines and transform raw materials into products, yet they are not paid the full value of their labor. Instead, the surplus value they create is stolen by owners, who keep portions for themselves and distribute other portions to those who maintain this system of exploitation. The second critique is alienation. In capitalism private owners must treat the labor of workers as a commodity—as if humans are in the same category as machines. Instead of work enabling people to contribute their unique gifts to society, work becomes a dehumanizing experience in which wage laborers are alienated from one another, from their jobs, from the things they produce, and from the processes of production. If you think about it, say contemporary radi- cals, it’s an enormous task to feed, house, clothe, and care for the human population. No individual could produce everything needed for their own survival. It’s necessary that we labor as a society to produce what we all need to thrive. But in a Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 275 system of private ownership we can’t have our housing, our health care, our education, and every other thing we need to live a decent life, they say, because the main purpose of private ownership is not to give us those things. Instead, the primary goal is to maximize profit for the owners. In the process some people might get some or even all of what they need, but the system of capitalism is not set up to generate well-being for everyone. Radicals say private ownership benefits the few— not the masses. This is how private ownership looks in capitalism: Scenario 1. You own a construction company, and you meet an old friend from college who owns a competing firm. She says, “Our profits were down so we forced out the union and fired workers who were used to those higher wages. We replaced them with low-skilled workers. We don’t have to pay as much and we can just train them on the job.” You think this is a terrible idea. “I don’t want to fire my workers,” you say. “These are the dedi- cated people who helped me grow my company and made it successful.” “So don’t do it!” she says. But you will do it—because if you don’t and the other firms do, you’ll be driven out of busi- ness. Radicals say private ownership in capitalism leads to more workplace exploitation. Scenario 2. You’re golfing with another con- struction firm owner, who tells you, “I’ve started to buy up dilapidated houses in the low-income part of town. I’ll only have to do the bare min- imum to make them livable, and then I’ll turn around and rent them out for a healthy profit. I’ll be raking in the money. You should do the same.” You say, “I don’t want to do that. It’s so wrong. The people in those neighborhoods are already struggling to get by. We’ll just be making their lives harder by charging high rents for substan- dard housing.” He says, “So don’t do it!” But you will do it or your firm won’t survive. Radicals say when the necessities of life are run through a system of private ownership, masses of people end up worse off. Scenario 3. You’re at a cement trade show, and you meet a construction firm owner from another Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 276 | Voices On The Economy state, who says, “Cities and states around the coun- try are throwing all kinds of incentives our way to get us to move our businesses to their areas. They’re begging us to bring job opportunities, so we can write our own tickets. We can make millions more in rebates, credits, and tax exemptions, and all we have to do is set up shop wherever we can get the sweetest deal. And if we want to move in a few years to another area that makes us a better offer, we can. You should get in on this.” You say, “It seems wrong to fund our private business expenses with taxpayer money, and I don’t want to play one city off against another when those communities are already hurting financially. Yes, we’ll bring jobs, but we’ll also push up the cost of living and create gentrification, which will push the poor out of their neighborhoods. And if I eventually move my firm to a city with a better offer, the employees I’ll have to fire will lose the jobs their tax dollars paid me to create. This seems like a terrible idea. I don’t want to do it.” She says, “So don’t do it!” But you will do it or you won’t be able to com- pete, and you could lose everything. Radicals say in capitalism private owners profit from public money, yet the public has no say in how their business decisions affect the public’s well-being. Democratic Socialism: Cooperative Ownership Cooperative ownership leverages the mutual interests of participants because when people have an ownership stake in the places where they work, live, shop, and study, then people have skin in the game so the pressure for good leads them to make decisions that are beneficial to the well-being of all. Radicals say when people must rely on one another for the success of their enterprise, they become highly motivated to find creative and equitable solutions to conflicts and challenges. A central characteristic of cooperative ownership is that people make decisions together about everything from rental rates and pay scales to worker benefits, management policies, and production processes. Radicals say when there is worker ownership, there is no exploitation, because those who make the surplus are the same as those who take the surplus, and they make decisions together about how to distribute it. Instead of feeling alienated, cooperative owners experience a sense of pride in their workplaces, the things they produce, their communities, and their homes—and a feeling of connection to their coworkers, co-owners, and co-residents. When it comes to ending poverty and the lack of affordable housing, radicals offer alternative ideas to minimum wage legislation and rent control laws. Worker-Owned Business Incubators. To address poverty in democratic socialism, Work- er-Owned Business Incubators offer coopera- tive owners financial resources, technical support, legal advice, and community networking so they can take a good idea and turn it into a successful worker-owned business. While they help start-ups create feasible business plans and find funding, these business support centers also provide ongo- ing professional development to existing work- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 277 er-owned firms so they can expand their entrepre- neurial capacity. Incubators serve as clearinghouses for cooperative owners to share resources with other worker-owned enterprises, inspire new ideas, and research best practices. They provide mentor- ing, consulting, and opportunities to develop new markets. Because the success of firms is vital to a thriving economy for all, Worker-Owned Business Incubators are supported by taxpayer funds. Resident-Owned Communities (ROCs). To address the lack of affordable housing, radicals use cooperative housing, which comes in all shapes and sizes. The one thing Resident-Owned Com- munities have in common is that the structure is co-owned or co-leased by the residents, who make management decisions collaboratively—for instance, how to handle noise disturbances, safety concerns, maintenance schedules, and so forth. ROCs can be anything from manufactured home communities, to luxury apartment buildings, to intentional cohousing communities where resi- dents have private living quarters and share com- mon spaces. This is how cooperative ownership looks in democratic socialism: Scenario 1. You’re a worker-owner of a con- struction firm, and you meet an old friend from college who is a worker-owner of a competing construction firm. She says, “Our profits were way down last quarter so we turned to the Work- er-Owned Business Incubator in our city for advice. Their team analyzed our business plan and pro- duction costs and recommended that we vote on taking across-the-board pay cuts for three months so we can afford new equipment upgrades. They forecast a boost in production within a quarter.” You say, “Our firm also took a hit last quarter. We’ve been scrambling to figure out a way forward. I’ll suggest we also get advice from our local Work- er-Owned Business Incubator. Last time we con- sulted them, they helped us get a loan to expand.” She says, “You should do it!” So both your firms will do it because, with cooperative ownership in democratic socialism, every firm’s success is good for the whole com- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 278 | Voices On The Economy munity, and everyone is invested in the institutions and structures that support businesses. Scenario 2. You’re play- ing golf with another work- er-owner of a construction firm. He says, “Our firm voted to put money into a fund that we worker-own- ers can borrow from to buy into resident-owned housing cooperatives in our community. Will your firm want to be part of this fund?” You say, “I’m sure we will because there’s already been talk from a number of my co-owners about start- ing their own resident-owned apartment complex. They want it to be specifically for families with small children and elderly parents.” He says, “You should do it!” Both of your firms will do it because coopera- tive ownership in democratic socialism makes it possible for people to have the housing they want in their communities. Scenario 3. You’re at a building supply trade show, and you meet a worker-owner from another state, who says, “When we launched our business with the help of the Worker-Owned Business Incubator a few years ago, the consulting team brokered a partnership between our company and a local university and hospital to use our services. We agreed to help more of our work- er-owners afford houses in the neighborhoods adjacent to those anchor institutions to improve those neighborhoods. A group of younger coop- erative owners got together and created a resi- dent-owned mixed-in- come housing community. There’s been a snowball effect. That neighborhood is revitalized, and new businesses are springing up there every week.” You say, “Our coopera- tive also transformed some of the run-down neighbor- hoods near our factory by investing in the community. But we hadn’t considered partnering with our local anchor institutions. That sounds like good business. I’ll bring that idea up at our next meeting.” She says, “You should do it!” Your firm will do it because cooperative own- ership in democratic socialism creates sustainable communities for generations to come. You’re Ready for the Next Two Issues You’ve come to the end of chapter 9, and you now have the tools you need to understand the policy debates about livelihood and housing. Hopefully, you’re starting to understand the sub- tle and obvious ways our three perspectives look at the big questions—questions that affect you in every way in your own life. What are we actually going to make with everything we have available to us? How are we going to make those things? And who is going to get them? As you read about livelihood and housing, you’ll start to figure out what you believe are the best ways forward to end poverty and to create affordable housing. Radicals say when people must rely on one another for the success of their enterprise, they become highly motivated to find creative and equitable solutions to conflicts and challenges. The pressure for good leads them to make decisions that are beneficial to the well- being of all. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 279 Chapter 9: Test Yourself! Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below. 1. You say, “Studies show that people are more likely to have an accident on a bicycle than on an electric scooter. This is a proven fact, so I’m getting a scooter.” Your uncle says, “That can’t be right, because I know so many people who have had accidents on scooters and never on bicycles.” Your mom says, “Facts are tricky. I want to know if the study considered city streets or country roads. How did it define ‘accidents’? Were children included in the statistics?” In this conversation, your approach is ___________, your uncle’s is ____________, and your mom’s is ________________. A. positive; positive; positive B. normative; positive; normative C. positive; normative; normative D. positive; positive; normative 2. Which of the following statements are true about civil discourse? Please choose all that apply. A. Expressing moral outrage is important to show how passionate you feel about an issue. B. It’s important to listen respectfully except when you know your opponent is completely wrong. C. Avoiding difficult conversations or pretending to agree is the best way to have a civil dialogue. D. It’s important to criticize ideas, but not individuals. 3. A price control is a price set by law to be above or below the equilibrium price. Which statement about this graph is true? A. This price floor will cause a shortage of milk. B. This price ceiling will cause a shortage of milk. C. This price floor will cause a surplus of milk. D. This price ceiling will cause a surplus of milk. 4. In a city that has buses, a subway system, rideshare services, and bicycle lanes, a taxi company is considering raising its rates. You are hired as an economist to analyze how this price increase could affect the company’s total revenue and profits. What advice would you give? A. Do not raise rates right away. The price elasticity of demand will become inelastic over time. B. Keep rates the same. The price elasticity of demand is neither elastic nor inelastic. C. Do not raise rates and maybe even lower them. The price elasticity of demand is elastic. D. Raise rates. The price elasticity of demand is inelastic. P1 P S D QQ 1 Milk Market QS Price Ceiling QD Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 280 | Voices On The Economy 5. A minimum wage is a __________ set above equilibrium wage for low-skilled workers. This means __________. A. price ceiling; given the inelasticity of low-skilled labor supply and demand, a small surplus of workers will result B. price floor; given the elastic nature of low-skilled labor supply and demand, a large shortage of workers will result C. price ceiling; given the elastic nature of low-skilled labor supply and demand, a large surplus of workers will result D. price floor; given the inelasticity of low-skilled labor supply and demand, a small surplus of workers will result 6. Rent Control is a program that affects millions of tenants and landlords every year. Which of the following statements is an accurate portrayal of the elasticity of low-end apartment demand and supply? A. Because there are few substitutes for low-end apartments and because they can’t be easily stored, both supply and demand are relatively inelastic. B. As rents for low-end apartments go down, lots of other types of renters will enter the market, making the demand of low-end apartments relatively elastic, while the ease of converting apartments to office space makes the supply of low-end apartments relatively elastic. C. Elasticity of supply and demand of low-end apartments is irrelevant to the discussion of rent control. D. While the necessity of low-end apartments makes demand relatively elastic, the expense of holding an inventory of low-end apartments makes supply relatively inelastic. 7. Marx criticized private ownership because of its impact on wage laborers. Which two of the following options represent his views on this subject? A. Owners of capital exploit workers. B. Workers are alienated from one another and the products they make. C. For survival, private owners are forced to make choices that benefit society as a whole. D. Workers who own their own companies cooperatively have a higher standard of living. 8. Match the idea about cooperative ownership (left column) to its meaning (right column). A. Connection i. Creative and equitable solutions B. Democratic ii. Those who make the surplus also take it decision-making C. No exploitation iii. A voice and a vote D. Cooperation iv. Sense of pride in workplace and home 9. Worker-Owned Business Incubators offer all of the following EXCEPT: A. Financial and technical support B. Standards for hiring and firing part-time employees C. Research on best practices D. Business planning and mentoring Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 9: Tools to Move Ahead | 281 Chapter 9: Key Terms Civil discourse Elastic Elasticity Inelastic Input markets Minimum wage Output markets Perfectly elastic Perfectly inelastic Price ceiling Price controls Price elasticity of demand Price elasticity of supply Price floor Rent control Resident-Owned Communities Total revenue Worker-Owned Business Incubators Answer Key to Exercise 9 1. Use Your Biofeedback 2. Critique Issues—Not Individuals 3. Listen Thoughtfully 4. Remember that Empathy Helps 5. Be Open-Minded 6. Aim for Peaceful Persuasion 10. What kind of housing can be a Resident-Owned Community (ROC)? A. Mobile home park B. Luxury apartments C. Suburban single-family homes D. All the above—any kind of housing can be an ROC Answers 1. D 2. D 3. B 4. C 5. D 6. A 7. A & B 8. A – iv, B – iii, C – ii, D – i 9. B 10. D Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About ch10 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 10Issue:LIVELIHOOD Have you ever wondered what you would do if you couldn’t afford your life? Years ago, I read a newspaper story about an Ohio man named Timothy Bowers. He was sixty-three years old when the Great Recession of 2007 hit and he was laid off from his job making deliv- eries for a pharmaceutical wholesaler. When he looked at his budget, Bowers realized there was no way he would be able to afford his life on a minimum-wage job, which was the only employ- ment he was likely to find. So he came up with an extreme financial plan. Bowers walked into a Columbus bank and held up a teller at gunpoint. He demanded $80, and then he walked over to the bank’s security guard and turned himself in. Yes, Timothy Bowers’s financial plan was to get himself arrested and thrown in prison. You see, he knew that bank robbery carried a three-year prison term, which meant he would be ensured a roof over his head, three meals a day, health care, and clothes until his release at age sixty-six. At that point, he would be old enough to draw on his social security. His story was reported around the country. It might surprise you to learn that Timothy Bowers isn’t the only one with this extreme financial plan. It’s more common than you might think. Whether lib- eral, radical, or conservative, we can all agree that something has gone terribly wrong in our nation when people choose prison over freedom. Every time I think about the harsh realities of poverty and the choices people are forced to make to survive, I wonder about a group of students I taught years ago. I’ve spent most of my teaching career in higher education, but for five years I taught sixth-grade social studies in a school where 85 percent of the student body qual- ified for free lunch. That’s another way of saying that most of them lived in poverty. It was one of my all-time favor- ite jobs. Because few students in my classes had ever been outside the R e u te rs/B rian S yn d e r - sto ck.ad o b e .co m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 284 | Voices On The Economy neighborhood, I started a program called Around the World to ignite their interest in different cul- tures and ideas. We learned about a new country every week. On Fridays I brought in food from the country we were studying so they could taste different cuisines. We made costumes and learned about different sports, beliefs, histories, languages, and more. My hope was that one day they would have the education and support to experience the wonders of the world firsthand. But the reality was that most of the students in our school had parents and grandparents who also grew up in poverty. Many were from that same neighborhood and had never left. Some of my students lived in homes without electricity, which meant they couldn’t see the page to do their homework at night. Others had no running water because their parents couldn’t pay the util- ity bills. One of my students told me she lived in a room with six other people. They had to sleep in shifts. It was normal for many of my students to come to school hungry and to go to bed hungry. Their main meal of the day was the lunch they were served in the school cafeteria. I don’t know what they ate on weekends, when the school was closed. Most of them had loving, caring, and con- cerned parents and grandparents who neverthe- less rarely showed up for parent-teacher confer- ences. They had no time because they struggled to make ends meet by working at two or three low-paying jobs. Money doesn’t guarantee happiness, but pov- erty guarantees suffering. Hunger hurts. Not having medical treatment hurts. Being homeless hurts. Tens of millions of people in our coun- try don’t have livelihoods that sustain them. This is not just their problem; it’s everyone’s problem because we’re not able to realize our highest potential as a nation when people are working hard but still can’t get ahead. They spend all their time struggling to survive, and they have no time or energy left to contribute their brilliance and tal- ents to the world. Conservatives, radicals, and lib- erals all agree that poverty causes suffering, and they all want an end to poverty. The policy we’re going to debate is minimum-wage legislation. Understanding the Issue of Livelihood “Only in our dreams are we free,” wrote novelist Terry Pratchett. “The rest of the time we need wages.” A livelihood is the way people support their existence—how they earn the income they need in order to pay for the basic necessities of life. The general definition of poverty is having Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 285 an insufficient livelihood to afford the things one needs to survive. When you’re forced to do without those things, you suffer. For example, if you can’t afford medical treatment, you live with pain. If you can’t pay for food, you go to bed hungry. If you can’t pay the gas bill, you shiver from the cold all winter. A “good” livelihood fundamentally means you’re able to earn enough money to cover your expenses so you don’t have to worry about the electricity being shut off, or the bank repossessing your car, or the landlord evicting you from your apartment because you’re behind on the rent. Poverty causes physical suffering and deprivation, and it also causes emotional stress when your financial situation seems depressingly hopeless. The odds of suddenly inheriting a fortune or picking the winning lottery numbers are astro- nomically low, but the more feasible answer to poverty is a job that pays enough for you to meet your needs. Do you know how much your life costs? Let’s do an exercise. On a piece of paper, write down the average cost of your (or your family’s) monthly expenses. You can estimate if you need to, but please include groceries (food, cleaning products, personal care products, and so forth), clothes, housing (rent or mortgage, main- tenance, and taxes), utilities (water, electricity, natural gas, sewage, and trash/recycling collec- tion), transportation (bus pass, car payments, gas, insurance, and maintenance), education (tuition, tutoring, and other lessons), health care (medi- cations, doctor visits, insurance premiums, gym memberships, dentist visits, glasses), communica- tion (your cell phone, tablet, computer, Wi-Fi), and entertainment (movies, sports, video games, event tickets, restaurants, vacations), and any other regular payments you make (pet care and student loan or credit card debt payments, for example). Now multiply that number by twelve, which is the number of months in a year, and that gives you a pretty good idea of the amount you or your family need to earn to afford your life every year. But just to be clear, that’s a low estimate because it doesn’t include unexpected expenses such as replacing a broken appliance, or repairs after a fender bender, or an unexpected trip to attend a wedding or funeral, or a surprise root canal, or all the holiday, birthday, and Valentine’s Day gifts you want to buy. It also doesn’t include Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 286 | Voices On The Economy cost-of-living increases. Hang on to this piece of paper, and feel free to keep it private. We’re going to revisit this number later. What Is Poverty? Poverty can look different and can be experienced in different ways. Some low-income people have a roof over their heads and some don’t. Some have jobs, and some can’t or don’t work for a variety of reasons. You’ve probably seen homeless people living on the streets, pushing their belongings around in a shopping cart. You may not have seen families living in their cars or elderly people who have to choose every month between buying medication or buying food. Millions of working families struggle to pay their bills and fall further and further behind every month. The working poor are people who have regular jobs but still don’t earn enough to cover their minimum expenses. Where do we draw the line and say this person is poor and that person isn’t? That is a controversial question, and one that has a direct impact on tens of millions of Americans. If their incomes before taxes fall below the poverty line—it’s technically called the poverty threshold—then they qualify for government assistance, including food stamps, housing, early childhood programs, and health care. They also may qualify for privately funded scholarships, emergency food aid from nonprofit organizations, and more. If they earn even a single dollar above the poverty threshold, then they won’t get that assistance. The story of how the current poverty threshold is calculated starts back in 1963, when an economist named Mollie Orshansky was working in the Social Security Administration. She was studying the poverty rate of children in the United States. To figure out which children could be considered poor, she first calculated the min- imum daily amount of food a person needed to survive. Then she estimated what that food would cost and multiplied it by the number of days in the year. Since the U.S. Department of Agriculture estimated that families spent on average a third of their income on food, Orshansky simply multiplied that number by three, and that’s how she came up with the equation for the poverty threshold. When President Lyndon B. Johnson established the Office of Economic Opportunity, Orshansky’s formula was adopted as the Official Poverty Measure (OPM). S o cial S e cu rity A d m in istratio n H isto ry A rch ive s You may have already noticed the big flaw in the OPM: It only looks at what it costs for food. It ignores the costs of housing, health care, clothes, transportation, day care, utilities, and other essen- tials. And it doesn’t factor in whether you live in low-cost rural Arkansas or New York City, which is one of the most expensive places on Earth. So your cash income before taxes, regard- less of where you live, has to be lower than the OPM poverty threshold for you to be considered “poor.” The poverty threshold is the same for all Americans. But before you blame Mollie Orshan- sky, you should know that she actually came up with more than one hundred different threshold numbers that took into account the different costs Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 287 for food based on where a person lived and how many people were in the family. But that more com- plex equation wasn’t the one adopted by the gov- ernment. Before she died in 2006, at the age of nine- ty-one, she’d had more than fifty years to witness how her calculation was used in the most narrow way to define poverty in America, which was not what she had ever intended. Today the government continues to triple the inflation-adjusted cost of a 1963 minimum-food diet, adjusting for family size, composition, and the age of the person or people in the household, in order to determine the OPM. Most people agree this is flawed. In 2010 the government came up with a more nuanced way to calculate the poverty threshold: the Supplemental Poverty Measure (SPM). It is a more comprehensive look at a per- son’s income level. Instead of setting the level at the OPM’s three meals a day, it sets a poverty threshold that includes food, clothing, shelter, and utility costs (often called FCSU for short). To determine whether a person or family falls above or below that line, the SPM calculates income by adding together a person’s cash income adjusted for the local cost of living, and then adds in-kind (noncash) benefits, such as housing assistance, school lunches, and SNAP. It then subtracts nec- essary expenses such as taxes, child-support pay- ments, out-of-pocket medical expenses, child-care costs, and work expenses, and that final number is the income that a person would compare to the SPM to see if they fall below the poverty threshold. Also, it has a more expan- sive definition of a house- hold, including people who aren’t legally related but who live together. It also sets separate thresh- olds for renters and home- owners, adjusting for dif- ferent housing costs in different geographic areas. Most people agree that the SPM offers a much more accurate and realistic pic- ture of the financial status of Americans. Yet the OPM continues to be the mea- surement used by the gov- ernment to determine who is and who isn’t poor, even though it’s problematic from every perspective. You can see the importance of this difference in the definition of the poverty threshold when you compare numbers of how many people in the United States fall under the poverty line. Accord- ing to the U.S. Census Bureau, in 2017 there were 39.7 million who fell below the OPM and nearly 44 million who fell below the SPM. So just think about this: if the SPM had been the measure used to determine who qualifies for public assistance, there would have been an additional 4.3 million recipients that year. Remember that monthly budget you wrote out earlier? Take another look at your estimate for how much your (or your family’s) life costs for a year. This gives you a reference point for con- sidering the official government numbers listed above. If you fall above the poverty line but still worry about money all the time, you’re not alone. According to a 2017 Federal Reserve report, Eco- nomic Well-Being of U.S. Households, 40 percent of Americans can’t cover an emergency expense If you fall above the poverty line but still worry about money all the time, you’re not alone. Forty percent of Americans can’t cover an emergency expense of $400. That means nearly half of us are one missed paycheck, car accident, or medical diagnosis away from financial ruin. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 288 | Voices On The Economy of $400. That means nearly half of us are one missed paycheck, car accident, or medical diag- nosis away from financial ruin. Workers and Wages Poverty has been a fact of human existence for millennia, and today billions of people on the planet suffer because they can’t afford to meet their basic needs. This issue is one of the most persistent problems we face as a species. In modern societies we can’t go out and hunt and gather whatever we need to survive. Instead we need jobs that pay us enough to afford our lives. At the same time, society needs productive workers to make the things that everyone requires for survival. The contributions of workers to the prosperity and strength of the nation is recognized around the world every year, but the day on which the celebrations happen has an interesting backstory. On May 1, 1886, a new law mandating an eight- hour workday was supposed to take effect in Illi- nois. When some employers chose to ignore it, workers went on strike. At a Chicago labor rally three days later, a bomb exploded, killing eleven people—some were police and some were strik- ing workers. This became known as the Haymar- ket affair (depending on their perspectives, some also called it the Haymarket riot or the Haymar- ket massacre). In 1891 the International Socialist Labor Congress voted to celebrate International Workers’ Day on May Day (May 1) to honor those who had been killed during the Haymarket affair five years earlier. However, U.S. President Grover Cleveland didn’t want Labor Day to be associated with Haymarket, so in 1894 he chose September for our nation’s celebration of workers. Today, International Workers’ Day is celebrated around the world on May 1 in honor of those who died in Chicago, while in the United States we observe Labor Day on the first Monday of September. Although it’s not observed these days, May 1 is actually known as Loyalty Day in the United States. The idea for it started in 1921, and it was made an official national holiday in 1958. On Loyalty Day people were encouraged to pledge their loyalty to the United States—to affirm that they weren’t communists. It’s no coincidence that Loyalty Day was popular in the 1920s and 1950s because these were the two periods in U.S. his- tory in which there was intense anti-communist sentiment (known as the Red Scare). The groups that advocated for an eight-hour workday back in the late 1800s were labor unions, which are organized associations of workers. Unions were first established in the United States in the 1860s and have been—and still are—a controversial institution in the United States and in other countries around the world. Union members pay dues to the organization and elect representatives who negotiate on their behalf with management. The idea behind unions is that workers have more power to demand bet- ter pay and better working conditions when they negotiate collectively rather than each person negotiating with management individually. The process is called collective bargaining. When unions and management are unable to come to an agreement, union workers may go on strike— that is, they refuse to work—as a way to apply pressure to management. Workers who cross the picket line and continue to work during a strike, or who are hired to replace striking workers, are called strikebreakers. The derogatory term you might have heard used is scabs. The establishment of labor unions in this coun- try and around the world has been fraught, with many heated and often violent fights between workers and management. In this country, unions pushed for the laws that established the forty-hour work week, child labor laws, safer working condi- tions, and better wages and benefits for workers. In 1935 the National Labor Relations Act, signed by President Franklin D. Roosevelt, regulated Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 289 R E U T E R S /D avid R yd e r - sto ck.ad o b e .co m labor unions. It allowed businesses to be one of four types with respect to unions: a closed shop, meaning all workers must be members of the union and pay dues; a union shop, where some work- ers are allowed to put off becoming union mem- bers until a set amount of time; an agency shop, where workers can choose to join the union and pay union dues or not join but still pay the same fee as union members; or an open shop, where workers aren’t required to be in a union or to pay any fees to the union. The height of union involve- ment was in 1954, when more than a third of U.S. workers were union members. By 2018 only one in ten belonged to a union, but unions still play a role in many industries. For example, in 2018 the University of Vermont Medical Center workers went on strike over stalled contract negotiations. Also that year, service industry workers around the nation went on strike to demand union represen- tation, and Arizona teachers went on a walkout to protest low wages and decreases in school fund- ing. (The teachers couldn’t call it a strike because they’re not legally allowed to strike, according to the state’s constitution.) The union movement has been challenged more recently by the Right to Work movement, which pushes back against the idea of manda- tory membership in unions. As of 2017 there were twenty-seven states that had right-to-work laws, allowing workers to refuse to become union members and pay union fees. They argue that it’s not fair to compel a worker to join a union as a condition for employment because this violates the worker’s rights. This is controversial because, some argue, those workers still benefit from the Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 290 | Voices On The Economy union’s collective bargaining, and therefore it isn’t fair that they don’t pay dues and support the union’s work. Government Policies and Programs Back in 1913 the U.S. Department of Labor was established “to foster, promote, and develop the welfare of working people, to improve their working conditions, and to advance their oppor- tunities for profitable employment,” according to the bill signed by President William Howard Taft. Since then, the government has had a variety of policies that affect livelihood and address poverty. In the twentieth century there were two main government initiatives aimed at solving poverty. The first, in the 1930s, was Roosevelt’s New Deal, which was intended to pull the nation out of the Great Depression. The second, in the 1960s, was President Lyndon B. Johnson’s War on Poverty, announced on January 8, 1964, during his State of the Union address. At the time the national poverty rate was close to 20 percent, and John- son explained, “Our aim is not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.” As part of the War on Poverty, John- son signed the Equal Pay Act, which made it illegal to pay women less than men for their work in the same jobs. In addition, the Civil Rights Act made it illegal to discriminate based on race, sex, national origin, religion, and other categories in hiring. Johnson also signed the Economic Opportunity Act, which created the Office of Economic Oppor- tunity. You’ve probably heard of some of the pro- grams that came out of the War on Poverty: Supple- mental Nutrition Assistance Program (SNAP—also known as food stamps), Medicaid (health care for low-income people), and many other programs that continue today. Here are a few: Job Corps: Administered by the U.S. Depart- ment of Labor, Job Corps was originally intended to give low-income youth opportunities to get job experience and training by working for the federal government to improve national parks, national forests, and national land. Today it gives people ages sixteen to twenty-four vocational and educational training, and it offers certifica- tion programs for jobs such as nursing assistants, clinical medical assistants, dental assistants, emer- gency medical technicians, and insurance claims processors. Head Start for School Readiness: Head Start programs are premised on the idea that multi- generational poverty can end if children enter the school system mentally, physically, and socially ready and able to learn. Administered by the U.S. Department of Health and Human Services, funds are allocated to a wide variety of agencies to serve children from birth to age five. Programs include early childhood education, nutrition support for children and pregnant mothers, health care, and social services. AmeriCorps VISTA (Volunteers in Service to America): VISTA started in 1965 as a domes- tic version of the Peace Corps. Service volunteers were assigned to work in impoverished commu- nities around the nation. In 1993 VISTA became part of AmeriCorps, which is administered by the Corporation for National and Community Service. This public-private partnership pays young peo- ple a small salary for a year of service and learning in schools and nonprofit organizations that serve underprivileged people. For example, Ameri- Corps volunteers worked with the Red Cross to help after hurricanes. Federal TRIO Programs: Administered by the U.S. Department of Education, the idea is to create pathways out of poverty through higher education. TRIO offers a variety of programs, including Upward Bound, which provides grants to low-income rural students so they can be the first in their families to attend college. Veterans Upward Bound supports those who have served in the military by offering mentoring, tutoring, and other assistance so they can attend college. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 291 Educational Opportunity Centers serve low-in- come adults who want to pursue post-secondary education by offering financial planning and help with applications. Whether any of these government programs actually improved outcomes and moved people out of poverty is still hotly debated today, but the stated intention was to give low-income people the education, skills, and experience to work their way up the economic ladder. Each president since Johnson has had their own approach to solving poverty. Generally speaking, Democratic presi- dents have supported the expansion of these types of government programs. For example, President Barack Obama signed the Lilly Ledbetter Fair Pay Act, which made it possible for women to sue for damages in the case of wage discrimination. And generally speaking, Republican presidents have primarily advocated for reducing or eliminating social welfare programs in favor of private-sector solutions. For example, President George H. W. Bush’s Points of Light Foundation emphasized the role of volunteerism and philanthropy. Democratic socialists, for their part, have primarily called for universal basic income and tax-supported public education through university. In the background of all these programs, poli- cies, and ideas, there’s a debate that our country has been having since the Great Depression. It is centered on whether or not the liberal idea of minimum-wage legislation is an effective policy for addressing poverty. It’s a complicated ques- tion, so let’s dive in. Minimum-Wage Legislation The idea for the federal minimum wage came out of President Franklin D. Roosevelt’s New Deal. It’s the lowest amount permitted by law to pay a worker per hour. When the minimum wage was first established in 1938 as part of the Fair Labor Standards Act, it was set at $0.25 per hour. The country was still struggling to get out of the Great Depression, and Roosevelt regarded the new law as a way to stimulate spending. The contemporary debate about raising the minimum wage is a conversation about how to ensure a decent livelihood, but Roosevelt never intended the minimum wage to be a direct solution to poverty. He explained, “The proposition is simply this: if all employers will work together to shorten hours and to raise wages, we can put people back to work.” He wanted to get more money into the pockets of working people so they would go out and buy things. This would signal firms to ramp up their production, which would create more jobs. He also believed the minimum wage would be fair to firms, saying: “No employer will suffer because the relative level of competitive cost will advance by the same amount for all of them.” He hoped this approach would bring the nation out of the Great Depression and lift people out of poverty. The federal minimum wage is adjusted by an act of Congress; it doesn’t rise automatically with the annual rise in the cost of living (you may Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 292 | Voices On The Economy know this by its acronym, COLA, which stands for cost-of-living adjustment). In 2019 it was $7.25 per hour. That had been the rate since July 2009. So from 1938 to 2019, the country went from a federal minimum wage of $0.25 per hour to $7.25 per hour, which is a 2,800 percent increase. That sounds amazing until you consider the difference in what a quarter could buy in 1938 versus what $7.25 could buy in 2019. Many people suffer from money illusion, which is believing that the face value of a dollar bill—the nominal amount of money—is what matters, as opposed to the real amount, which is what it can buy based on the current prices. Let’s say I offer you $5,000 to help me pull weeds for an hour. You say, “That sounds amazing! I can work for two hours and afford to buy a car!” But what if the cost of living was much higher than it is today? If I told you that you couldn’t even buy a banana for $5,000, would you still want to work for me for that wage? The real value of money is what you can actu- ally buy with that amount. Money is something that we trade for goods and services, so you want to make sure you’re not under any illusions that the amount of money you have will get you more of those things than it actually will. This is extremely relevant when you’re thinking about wages. Let’s say your employer rewards you with a 2 percent raise at the beginning of the year because you’re doing an excellent job. You’re delighted to see more money in your weekly paycheck until you realize that the cost of living has gone up 3 percent in the last year. So even though your paycheck is now bigger, it buys you less because average prices are higher. Do you see the problem? Even with the raise, you are financially worse off than you were a year ago. This is why knowing the dif- ference between nominal amount and real amount is so important when it comes to wages. To have a realistic discussion of the role of min- imum wage in people’s lives, we need to consider the real value of the minimum wage as opposed to the nominal value. If in 2019 you wanted to buy as much with your $7.25 per hour minimum wage as you could in 2009, you would actually need to earn $8.68 per hour. So in real terms, the Figure 10.1 Nominal and Real Wages Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 293 C R E D IT R E U T E R S /C h ip E ast - sto ck.ad o b e .co m minimum wage is worth 17.95 percent less than it was a decade earlier. And as you can see in figure 10.1, that difference was at its height in the late 1960s, meaning you could buy a whole lot more with a $1.60 per hour minimum-wage job in 1968 than you could with a $7.25 minimum-wage job in 2016. The federal minimum wage is only one wage floor. States, counties, and cities can pass their own laws setting a minimum wage. In 2019 there were twenty-nine states that had a higher mini- mum wage than the federal rate. Workers in those areas must be paid whichever rate is higher. For example, if Seattle has a higher minimum wage than the state of Washington, a worker in Seattle will be paid the higher amount. We think of the minimum wage as the bottom rung of the income ladder, but some jobs pay even less because there are exemptions to federal, state, and city laws. For example, in some cases farmworkers, tipped employees, independent contractors, babysitters, seasonal and recreational workers, commissioned salespeople, newspaper delivery people, and minors and young workers may be paid below minimum wage. Also, firms that have fewer than a certain number of employees may be exempted from paying their workers the minimum wage. How many people are affected by mini- mum-wage legislation? Slightly more than half a million people earned the federal minimum wage in 2017, according to the Bureau of Labor Statis- tics. That might not sound like a big number, but tens of millions of people earn the state or local minimum wage. And because the minimum wage establishes the lowest wage that an employer can pay, it has an impact on every salary up the ladder. Let’s say you’ve worked in a business for five years and you’re making $11 an hour. If the minimum wage goes up to $11 an hour, your employer will likely offer you a higher hourly wage to reward you for your seniority at the firm and to convince you to stay. It’s safe to say that all firms, workers, and consumers across the United States are affected in some way by the debate over minimum-wage legislation. Now you have the lay of the land. You know the definitions and the history of what our nation has already been doing to address the issue of livelihood. You have what you need to analyze competing ideas about how to solve this prob- lem. It’s time to hear the voices of the differ ent perspectives on the issue. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 294 | Voices On The Economy R adicals, liberals, and conservatives all agree that poverty causes suffering, and they all share the same goal of ending poverty. But they strongly disagree about how to do it. Should we develop more worker-owned businesses to eliminate poverty? Should we let free-market capitalism move people out of poverty through an unfettered labor market? Should the government strengthen minimum wage laws to lift the standard of living for workers? The policy we’re going to debate is minimum-wage legislation, which is a liberal idea. It’s time to put on a “mask” and debate this pol- icy from each of the perspectives. Please remem- ber that we are not taking a personal position on any of these issues. We’re channeling the voices of the perspectives so you can hear what the debates sound like and then make up your own mind about what you believe. We change the order of who goes first each time. For this issue, the radical voice will start. Voices on Livelihood Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 295 Every day that I stood in front of my sixth-grade class, I saw the fallout of poverty. It was wrong that my students couldn’t concentrate on their work because their stomachs were growling. It was wrong that they didn’t hand in their assignments because the electricity had been turned off at home and it was too dark to read. Their parents worked hard at jobs that society needed done— cleaning houses, digging ditches, serving as cashiers, doing yard work, and R Livelihood adical Voice on Livelihood bussing tables—yet they still didn’t earn enough money to put food on the table or stay ahead of their bills. Every day in our country families struggle without the most basic necessities—no indoor plumbing, no proper nutrition, no ade- quate place to live. In capitalism wages for low- skilled labor are so low that even working at two or three different jobs doesn’t afford a decent livelihood. The parents of my students wanted a better life for themselves and their children, but the system of capitalism keeps people stuck at the bottom. Workers aren’t paid their fair share of the value they create, be it in a privately owned company, a hierarchical nonprofit organization, or a top-down government agency. At the end of the school year I was haunted by the awareness that my students were likely to end up as trapped in poverty as their parents. There might be a few exceptions who would manage to finish school. They would get their degrees and find better-pay- ing jobs. But then they would face decades of stu- dent loan payments in addition to the emptiness of knowing that their “success” meant they would have to exploit others or benefit in some way from that exploitation. Those are the only choices anyone gets in capitalism: exploit or be exploited. Let’s use the Six-Core Cube of democratic social- ism to drill down through the core point of cooper- ative ownership to see how we make it possible for workers to have decent livelihoods. Across indus- tries and in every community, worker-owners are able to earn a decent living because they enjoy the fruits of their own labor and no one exploits them. Imagine a group of workers getting together and realizing that one has a truck, another has a car- pet-cleaning machine, another is an expert at floor waxing, and another has bookkeeping experience. They decide to pool their skills and resources and invest together to launch a cleaning business, which they will own cooperatively. It takes hard work and long hours to start a company, but they share the labor, expenses, and profits. When the business Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 296 | Voices On The Economy expands, new people buy in and become co-owners. When life circumstances change, a co-owner may choose to sell their share of the company back to the other co-owners. With coop- erative ownership, there is no private owner stealing the surplus value of the work- ers’ labor, which means that at the end of the month, after the firm’s bills are paid, there is more profit to share among the worker-owners. If the firm flounders, they work together to improve their services and business practices because each has a personal stake and invest- ment in the success of the enterprise. With cooper- ative ownership, workers earn decent livelihoods, so they can create a bet- ter quality of life for themselves, their families, and their communities. Participator y Governance ProductionFor Use Cooperative Ownership The Six-C ore Cube of Demo cratic So cialism Figure 10.2 Radical View In college I was hired to deliver pizzas. I used my own car (a chartreuse-col- ored 1975 VW Bug, by the way), and money for gas and maintenance came out of my own pocket. The job paid below minimum wage because it was expected that I would earn tips. That first night, I discovered the local college kids liked to order the $9.99 pizza, hand me a $10 bill, and tell me to “keep the change.” And then, when my shift ended at two in the morning, the owner said, “Now mop the floors.” Any job can be sat- isfying, but not when the worker is exploited and disrespected. That’s why we need cooperative own- ership. Later in life, when I became a full-time teacher and mother, I chose to hire a local work- er-owned landscaping company for my home instead of a company that used wage laborers. The worker-owners were highly motivated to make their company succeed, so they did an excellent job. And I felt good knowing my landscapers were not only doing their best work for me, but they were also getting more than just a paycheck. They each had an equal say in pay, benefits, and the division of labor, and also in how their firm was run. When they made decisions about what to plant and what chemicals to use, they consid- ered the impact on the community because they and their families lived there too. The company incorporated the latest technology and tools, but new innovations didn’t put workers’ jobs at risk. Instead, everyone benefited from the upgrades. We end poverty with cooperative ownership in Cooperative owners work together to improve their services and business practices because each has a personal stake and investment in the success of the enterprise. They earn decent livelihoods, which means they are able to create a better quality of life for themselves, their families, and their communities. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 297 democratic socialism because people prosper directly from their own hard work. When work- ers own the means of production and use demo- cratic processes to make decisions, it ensures that everyone can earn a decent livelihood. No one wakes up in the morning and thinks, “Today, I’d like to toil at back-breaking, mind-numbing jobs for very little money. I’d like to work long shifts and never get to see my kids, and I’d really like to worry about putting food on the table, clothes on our backs, and a roof over our heads while I take on a second and third job—even though I still won’t be able to get ahead of the bills.” But that’s what happens every day in capitalism for masses of people. I remember in kindergarten one of the first lessons I learned from Mrs. Hutchinson was that stealing is wrong. Isn’t that what we all learned? Yet every day in capitalism private owners steal from their workers, and this theft is completely legal. It’s not even a secret. But we all just accept it as a fact of life. We’ll never solve the problem of poverty in capitalism because it’s an economic system built on exploitation and the relentless drive for profits. Conservatives, you say we should get rid of the minimum wage and let the labor market magi- cally self-adjust to bring the right wage for low- skilled workers. You keep trying to sell us on a stale fantasy of free-market capitalism as the cure for poverty. But the reality is that free-market cap- italism leads to a nightmare of suffering. Just look at our history! The relationship between owners and wage laborers has always been bloody and violent. Why? Because owners need to exploit workers in order to survive, and workers need the theft to stop in order to rise out of poverty. They need justice. You love to point the finger at imaginary “freeloaders” in democratic socialism, but capitalism is a system of freeloaders who live off the sweat of hardworking people. The drive for profit forces owners to exploit them. They buy new machines and productivity goes up, but guess what? Workers’ wages don’t. Then they lay off workers and thereby create a reserve army of the unemployed. Now workers have to scramble to compete with one another for the few jobs that remain, which alienates them from one another and further drives down wages. That’s how own- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 298 | Voices On The Economy ers continually increase the rate of exploitation, whether they want to or not. And let’s be clear: your free-market capitalism counts on it. In any direction you move, leaving it alone creates ever- higher levels of poverty. Liberals, your minimum-wage “fix” only lessens the amount of the theft—it doesn’t eliminate it. Let’s say you raise the minimum wage from $5 to $10 per hour. When workers create $15 of value each hour, instead of $10 being stolen, $5 gets picked from their pockets every hour. How is this fixing anything? I’m certain that my kindergarten teacher didn’t say that stealing a lot is bad, although steal- ing a little is okay. Stealing anything is wrong! Your minimum-wage legislation is just a slightly more palatable way to package the theft. And it keeps us from making the real changes necessary to eliminate poverty because it keeps workers’ bel- lies filled just enough so that they’ll go back to work the next day, but without demanding their fair share. At the same time, firms constantly make an end-run around your minimum wage. They just pick up and move or outsource the jobs to low- er-wage countries or countries with no minimum wage so they can exploit foreign workers. In the end, the minimum wage might actually make pov- erty worse than the conservatives’ idea of leaving it alone. The policy gives us more unemployment and more poverty worldwide. No matter how you slice it, you can’t solve the issue of livelihood with fair-market capitalism because that whole term is a contradiction: there’s no such thing as fairness when there is no workplace justice. We should replace minimum-wage legislation with Worker-Owned Business Incubators to end poverty. They give technical and financial support to start-ups and to existing cooperatively owned firms, including loans, mentoring, grants, research on best practices, and so forth. Worker-Owned Business Incubators, funded with tax dollars, help entrepreneurs bring their new innovations to market, investing in the good ideas that benefit society. Supporting new business is an investment that gives back, because a portion of the sur- plus firms generate funds everyone’s health care, higher education, transportation, and other basic needs. Sharing responsibility for these high-cost goods and services establishes the foundation of well-being across the nation, ensuring that people will not be impoverished. When we have coop- erative ownership in democratic socialism, firms make decisions that are good for the many and not just for the few. That’s how we get food on the table, a roof over our heads, and clothes on our backs. That’s how we’re set up to live happy and meaningful lives. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 299 RadicalDemocratic Socialism BIG PICTURE When workers own the means of production and use democratic processes to make decisions, it ensures that everyone can earn a decent livelihood. POLICY POSITION Poverty causes suffering, but . . . " Conservative policies lead to more poverty because survival in capitalism depends on increasing rates of workplace exploitation and a reserve army of the unemployed. " Liberal policies may lessen the theft—barely—but don’t fix the underlying problem, and they leave workers with the false belief that this is as good as it gets. SOLUTION Replace minimum-wage legislation with Worker-Owned Business Incubators to end poverty: ! Support new enterprises to build the economy. ! Meet basic needs to alleviate financial burdens. Livelihood Participator y Governance ProductionFor Use Cooperative Ownership The Six-C ore Cube of Demo cratic So cialism Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 300 | Voices On The Economy Livelihood Talking Points: Radical 1. We end poverty with cooperative ownership in democratic socialism because people prosper directly from their own hard work. When we go to work we’re valued and respected as equals. It’s energizing to work in a place where we’re all highly motivated to make our businesses succeed. Of course we are—because we share directly in the rewards. 2. With cooperative ownership, we get more than a paycheck. We get a real say in what goes on at work, from what’s in our paychecks to what benefits we get. We decide together how the firm is run, and the ways we want our companies to impact our community and the planet. We don’t have to worry that when we improve our business with the latest artificial intelligence it will put people’s jobs at risk. Our goal is to make life better for ourselves and for our whole society. 3. Conservatives, once again you try to sell us your free-market fantasy of the labor market, but every day in capitalism, private owners steal from their workers. And those low-skilled workers have no choice but to put up with this theft and spend their lives laboring for low pay and no benefits. You love to point the finger at imaginary “freeloaders” in democratic socialism, but capitalism is a system of freeloaders who live off the sweat of hardworking people. 4. Owners exploit workers because it brings them profit, and when we leave it alone, as conservatives want to do, then those owners have no constraints. When they buy new machines and productivity goes up, work- ers’ wages don’t. Then, because of those new machines, owners lay off workers and create a reserve army of the unemployed. While workers scramble to compete for the few jobs that remain, wages are driven down even more. Every way you look at it, the workers are the losers in free-market capitalism. 5. Liberals, you want to be the good guys who fight for a better livelihood for workers by pushing for a higher minimum wage. But the problem isn’t how much the hourly wage is; the problem is that the whole system of capitalism is based on private owners exploiting productive workers. A higher minimum wage won’t solve that. Minimum wage may limit the amount owners can steal, but the stealing continues. All you’re doing is trying to give us a slightly more palatable way to package the theft. 6. The minimum wage creates a dangerous illusion that all it takes to solve poverty is a few more dollars in workers’ paychecks. This keeps us from making the real changes that would eliminate poverty. It keeps workers’ bellies filled just enough so that they will go back to work the next day. And in our global econ- omy, firms do an end-run around the minimum wage and move jobs to countries where labor is cheaper. Fair-market capitalism is a contradiction. There’s no fairness without workplace justice. 7. Worker-Owned Business Incubators make it possible for more cooperatively owned firms to launch, and they help firms succeed by giving them technical and financial support—loans, mentoring, grants, research on best practices, and so forth. Through cooperative ownership, people enjoy the fruits of their own labor and prosper. Our tax dollars fund the incubators because our whole society benefits when entrepreneurs bring their new innovations to market and when businesses thrive. 8. By supporting more people in forming successful cooperatively owned enterprises, we raise everyone’s standard of living because a portion of the surplus that’s generated by every firm pays for everyone’s basic needs—health care, higher education, transportation, and so forth. Sharing responsibility for these high-cost goods and services establishes the foundation of well-being across the nation: opportunities to prosper and freedom from worry about meeting our material needs. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 301 out of poverty. It’s only when people have the right motivations to act that they become the scientists, doctors, teachers, and plumbers our nation needs. I knew with a sinking heart that many of my stu- dents would end up stuck in the same trap of poverty. And it’s completely unnecessary because there are plenty of ways to get ahead in this coun- try. They could have learned a trade and eventu- ally started a business. They could have earned a degree, found a skilled job, and worked their way up the ladder to success. This country is brim- ming with opportunities, but people need the right incentives to make the effort. Let’s consider the low-skilled labor market. When we leave it alone, if the equilibrium wage is too low relative to the cost of living for a decent livelihood, it will self-adjust and the problem of poverty is solved. How does this happen? In a nation that doesn’t have a minimum wage to dis- tort price signals, the low wage for low-skilled labor signals to people, “If you stay in this low- skilled labor market, you’re not going to be able to afford your life.” Those who are able will get out of this market by finishing their education or getting job training or applying for a better job so they can get the livelihood they need. Of course they will— because they are motivated to have the things they need in life, and no one is giving them handouts. In figure 10.3 you can see that as they leave the market, the supply of low-skilled labor will shift to the left and the wage will naturally rise. Those who are left in the low-skilled labor market will be the people who are actually appropriate for those jobs—those who can only do low-skilled work, for mental, physical, and emotional reasons. They will now get paid a decent wage. Those who are perfectly capable of doing higher-skilled work will start to climb the ladder of success and enjoy more prosperity. People at every level benefit when we leave the labor market alone to self-adjust. ConservativeVoice on Livelihood Livelihood When I taught sixth grade, it was sad and frustrating to see how the parents and grandparents of my low-income students had gotten stuck in poverty. They depended on government handouts to get by—food stamps, housing vouchers, Medicaid, and more. Those who worked had low-skilled jobs that paid wages the government artificially inflated above what they should have been. All this government interference created a perfect storm of disincentives for people to get a marketable skill and education that would actually lift them and their families Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 302 | Voices On The Economy W1 W S D NN1 Low-Skilled Labor Market N2 S2 W2 Figure 10.3 Conservative View My brother-in-law is a perfect example of how price signals motivate people to make the choices that bring them the kind of life they want. He’s a very bright guy, but he flunked out of every school he went to until one summer he worked as a roofer in Phoenix, Arizona, in brutal 116-degree heat. It dawned on him that this sort of grueling manual labor was going to be the only option open to him if he didn’t finish his degree. So he fled back to the classroom, applied himself to his studies, and even- tually became a doctor. Today, he owns a private plane and a ski condo, and he saves people’s lives. That’s a success story we want to repeat across our nation. Not everyone has the ability to become a doctor, but everyone can contribute to society and in the process create a good life for themselves. When I was training to be a teacher, I worked in a school for young people who had severe disabili- ties. It was so moving to see them eagerly learning how to do all kinds of important jobs—sorting the mail, working a cash register, bussing a table, and other work that we consider “low-skilled.” Becom- ing employable meant a chance at more indepen- dence. We do a great service to people who have no other choices beyond low-skilled jobs—includ- ing people just starting their work lives—when we get rid of the incentive to stay for those who don’t belong in that market. That’s how the people who actually belong there can finally get paid a livable wage. Through free-market capitalism and the profit motive, people follow price signals and have incentives to make choices that allow them to prosper. When you see a bird that you think looks hungry, you feel sorry for it, so you feed it. It R E U T E R S /C LO D A G H K ILC O Y N E - sto ck.ad o b e .co m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 303 seems like you’re doing the compassionate thing. But then what happens? The bird becomes depen- dent on your bird feeder and stops using its own innate abilities to find worms and seeds to feed itself. It becomes impov- erished. You meant well, but you taught the bird to be helpless, and now you have significantly reduced its chances of survival. It’s the same in parenting. You love your children and want to give them every- thing you didn’t have, but so often you forget to give them what you did have, which was the motivation to work hard and over- come obstacles to achieve what you want in life. This is exactly what happens with low-skilled workers who rely on government handouts and policies that supposedly protect them. Instead of helping them, government interference ends up demoti- vating them to take responsibility for their own lives. What might have started with good inten- tions ends up leaving people stranded in poverty. You liberals might have your hearts in the right place, but here’s the problem that so often shows up with your policies: you say that you want to solve poverty, but you actually make it worse. Min- imum wage is a disaster. You require firms to pay a wage that’s above equilibrium, and what happens? Employers hire fewer workers and unemployment goes up. Right off the bat, your policy creates more poverty—not less. And those workers who get laid off won’t be saying, “Hey, that’s okay. The surplus of workers created by the lib- eral minimum wage wasn’t that much, so no problem.” And let’s not ignore the fact that when firms are forced to pay a minimum wage, they may not be able to stay in business, which means more job losses. If they do manage to stay afloat, they will have to pay more for labor, which means they’ll have to charge more for products, and that drives up prices. So all those now-unemployed people have no income and are slapped with higher prices for everything they need to survive. Good job, lib- erals. Let’s hit them when they’re down. Do you remember the last time you had to do a group project at work or at school? Argh! There’s always someone in the group who coasts along doing nothing and still gets rewarded with the good grade, the bonus, or the promotion. Those free riders let everyone else put in the time and hard work while they sit with their hands out, ready to reap the benefits. Radicals, your idea of cooperative ownership is basically a group proj- ect on steroids. You poison the whole work ethic because the people who would have worked hard don’t want to be suckers, so they stop working too, and then nothing gets produced. On top of that, in democratic socialism you give people free health care, free transportation, free this, and free that. Sounds nice until you realize that now no one is motivated to do anything. Why should they be, when everything is handed to them? Obviously, The free market is our only viable solution for people to prosper because when wages aren’t set by a government bureaucrat, they’re determined by the reality of supply and demand. Everyone who wants a job will get a job at whatever wage naturally emerges. And everyone will be working in the jobs for which they’re best suited. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 304 | Voices On The Economy this plan isn’t going to be sustainable—not when no one is producing, and people are lined up to collect their freebies. We end up with impoverish- ment of the masses. Worker-Owned Business Incu- bators spread this harmful idea like an uncovered sneeze during flu season. They give money away to cooperatively owned businesses. But whose money are the incubators and the businesses using? Their own? Not a chance! They’re gambling with our tax dollars. And when the start-ups fail— because statistically that’s what happens to most new businesses, especially in democratic social- ism, which uses mob rule to make decisions and has no expert at the helm—the incubators will just reach into the community pocket and grab more cash to risk on another dead-end idea. We should reject minimum-wage legisla- tion and let price signals guide the low-skilled labor market to end poverty. The free market is our only viable solution for people to prosper because when wages aren’t set by a government bureaucrat, they’re determined by the reality of supply and demand. That’s great news. It means that everyone who wants a job will get a job at whatever wage naturally emerges. And every- one will be working in the jobs for which they’re best suited. When we pursue our self-interest in a system of private ownership and unregulated markets, we get the best outcomes. People are motivated to get out of the low-skilled labor market and use their talents and skills to bring the world inventions that make everyone’s lives better, entertainment that moves and delights us, beautiful buildings where we can live and work, and everything else we want. Those who stay in the low-skilled labor market can finally earn a decent wage, and some people will use it as the first step on the ladder to better opportunities. Leaving the low-skilled labor market alone, peo- ple will have food on the table, clothes on their backs, and a roof over their heads. People will be guided to make decisions that not only serve their own well-being but also expand the well-being of our whole society. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 305 ConservativeFree-Market Capitalism BIG PICTURE Through free-market capitalism and the profit motive, people follow price signals and have incentives to make choices that allow them to prosper. POLICY POSITION Poverty causes suffering, but . . . " Liberal policies of minimum wages make poverty worse by creating higher unemployment, driving up prices, and forcing firms to go under. " Radical policies to create more worker-owned firms sap motivation to work hard and waste tax dollars on enterprises that are doomed to fail. SOLUTION Reject minimum-wage legislation so that the invisible hand can end poverty: ! People are motivated to move up the ladder. ! Livable wages arise naturally. W1 W S D NN1 Low-Skilled Labor Market N2 S2 W2 Livelihood Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 306 | Voices On The Economy Livelihood Talking Points: Conservative 1. Poverty solves itself when markets are free from government meddling. When the price signal for low- skilled work is free from interference, those who can do higher-skilled work will be motivated to make choices that will put them in a position to earn a better livelihood. They’ll finish their education, learn marketable skills, work hard, and apply for better-paying jobs. They’ll work their way up the ladder to prosperity. 2. We’ll always need low-skilled workers, and there are people whose skill levels are appropriate for low- skilled jobs. When the price for wages is left alone, the people who weren’t appropriate for those jobs leave the market. This is good because they shouldn’t have been in that market in the first place. We should let wages adjust naturally to where they should have been all along. Then people who belong in the low-skilled job market can finally earn a decent livelihood. 3. When you see a bird that looks hungry, you feel sorry for it, and you feed it. It seems like you’re doing the compassionate thing. But then what happens? The bird becomes dependent on your bird feeder and stops using its own innate abilities to find worms and seeds to feed itself. It becomes impoverished. Lib- erals, this is exactly what you do when you make low-skilled workers dependent on handouts and policies that supposedly protect them. You demotivate them and in the process leave them stranded in poverty. 4. The minimum wage jacks up employers’ costs so firms have to lay off workers or go out of business. Either way, we get more unemployment. Ouch. And now those firms have to raise the prices of their products because they’re paying higher wages. Cost of living goes up. Double ouch. So the great idea liberals have to solve poverty leaves people unemployed and paying more for everything. This is what they always do— attempt to solve a problem with government meddling and end up making things worse. 5. We all want to create wealth, but trading private ownership and wage labor for cooperative ownership means that some people will coast along and grab a free ride on the backs of diligent, hardworking peo- ple. And those hard workers don’t want to be suckers, so they’ll eventually stop working hard because why should they break a sweat if no one else is? Radicals, you poison the whole work ethic because in demo- cratic socialism no one is motivated and nothing gets done. 6. Worker-Owned Business Incubators are government-funded committees that use our tax dollars to fund start-ups. Here’s the problem with this idea: I won’t be dedicated to the success of my cooperatively owned business because it’s not my money I’m risking. So when my new enterprise fails because none of us really knows what we’re doing, it takes us forever to vote on every decision, and we have no expert at the helm, we’ll just go back to the committee and let the community fund our next dead-end idea. 7. Here’s why the free market is our only viable solution for people to make a good living. In the low-skilled labor market, the wage isn’t set by a government bureaucrat. It’s determined by the reality of supply and demand. That’s great news because it means everyone who wants a job will get a job at whatever wage naturally emerges. Those who stay in the low-skilled labor market finally can earn a decent wage, and some will use it as the first step on the ladder to better opportunities. 8. We’ve had the minimum wage for decades, but it hasn’t ended poverty; it just perpetuates it. If we were freed from the shackles of a government-mandated price floor, workers would naturally be motivated to act in their own self-interest to improve their skills and move into higher-paying jobs. People will be guided by price signals to make choices to prosper. This is how we thrive as individuals and in the process make our nation stronger. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 307 prodigies. Those exceptional cases are inspiring, but those stories also become a barrier to solving the problem of poverty for everyone because we get used to the idea that only the very talented deserve to rise and for the rest it’s going to be a lifetime of economic struggle. Not a single one of my students was recruited by the NBA or given a full ride to Harvard, and while I and the other teachers talked about college as an option for our students, we knew the odds were stacked against them. America should live up to its promise as a land of opportunity, but it’s an empty promise when people spend all their waking hours work- ing two or three jobs and still fall below the pov- erty line. The term working poor should be an oxymoron. We need to fix the system and give people a fair shot at rising in the world. Let’s consider the low-skilled labor market. As we know, a price floor in any market will always bring about a surplus, and a surplus of low-skilled workers indicates unemployment. But applying the tool of elasticity reveals by how much unem- ployment will go up. This is extremely import- ant in our conversation about the minimum wage and whether it will end poverty. In the low-skilled labor market, both the supply and demand curves are highly inelastic. When we put a price floor—a minimum wage—on highly inelastic supply and demand curves, we end up with only a small sur- plus of low-skilled workers. And that minimal job loss caused by the price floor will be reversed immediately, as you can see in figure 10.4. Why? Because when poor people get money in their pockets they spend it right away. Firms respond to the increased demand by expanding and creat- ing more jobs, which means the demand for low- LiberalVoice on Livelihood Livelihood In the middle school where I taught sixth-grade social studies, I often felt uncomfortable talking about America as the land of opportunity for all. I was acutely aware of the irony of saying this to students whose parents and grandparents had never gotten a toehold on the ladder to success. Most of them had been born and raised and still lived in the same run-down neighborhood, and I knew that the chances of my students escaping during their lifetimes was statistically low. We all hear about the kids who make it out because they are geniuses or Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 308 | Voices On The Economy skilled workers goes up. That’s how the minimum wage creates more employment. Poverty is solved and society as a whole flourishes. W1 W S D NN1 Low-Skilled Labor Market N2 D2 Wage Floor Figure 10.4 Liberal View I was recently cleaning the windows of my fifth- floor apartment, and while leaning precariously over the balcony, I couldn’t help but think about how window washers are always at risk of fall- ing to their deaths if they don’t know what they’re doing. My arms were aching as I squeegeed off the last window, and I had a new appreciation for the workers who make it look so effortless. Later I went out to lunch and watched the server pour cups of coffee without spilling a drop and expertly balance heavy trays piled high with plates of waf- fles and burgers. On the way back to my air-condi- tioned office, I noticed three groundskeepers using a clever system of ropes looped over branches to guide dead tree limbs safely down without hitting themselves or the cars parked on the street below. We should be thanking the people who do these backbreaking and challenging jobs that we call “low-skilled,” but that actually require a lot of skill to do them well. And we should be making sure workers can earn a decent livelihood for their hard work, because it’s right and fair. It’s not just good for low-income workers—it’s good for all workers because wages are laddered. That means when the bottom rung starts higher, all the rungs above it also go up. Through a minimum wage, workers earn a decent living, enabling them to buy the things they need, and with increased demand, firms hire more R E U T E R S /Lu cas Jackso n Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 309 workers, which is how pov- erty is eliminated. Radicals, your idea to replace the minimum wage with cooperative owner- ship will not only make poverty worse for people who are already poor, but it will lead to more of us being poor. You want to throw out the very thing that solves poverty, which is fair-market capitalism, and replace it with your one, straitjacket approach to business. Here’s a real- ity check: in the context of democratic socialism, cooperative ownership won’t generate wealth. The entrepreneurs who bring us the new ideas that become tomorrow’s eco- nomic drivers have no motivation to spend years tinkering in the garage or toiling in the lab to perfect a new design, because the rewards of genius, talent, and effort will have to be shared with people who didn’t work hard or have great ideas. And when workers are forced to buy into the firms where they work, they’ll end up stuck there, suffocated by the lack of opportunities to try new careers. Your Worker-Owned Business Incubators will make it possible for poor peo- ple to buy into a cooperatively owned firm, but how will that be good for the business when low-skilled people with no expertise or skills to contribute are handed a share of the company? The businesses will fail! And to make it worse, the low-skilled worker won’t even be able to get an entry-level job, because in democratic social- ism firms aren’t allowed to hire wage laborers. So how will they ever get the experience they need to succeed? Radicals, you take away opportuni- ties for people to gain the skills that could become a stepping-stone to improv- ing their lives. You take away people’s best shot at escaping from poverty. Please don’t incubate more of this misguided idea. Conservatives, your do-nothing approach to improving the livelihoods of the poor leaves low- skilled workers vulnerable to being paid an unfairly low wage. You say that if someone doesn’t like the wage, then that person can just leave the low-skilled labor market and go back to school and get training to qualify for a higher-pay- ing job. Stop blaming poverty on people being unmotivated to improve their lives. No one wants to be poor! Have you looked at the price of tui- tion lately? And day care? And how will they pay their bills while they’re in school? It’s also naïve to say a person can just move into a better-paying job overnight. Most of the working poor have few options, which is why they get stuck in low-wage jobs in the first place. Your idea to abolish the minimum wage is like abandoning them in the middle of the ocean with no life preservers and telling them it’s their fault if they drown because they aren’t motivated enough to swim faster. Leaving it alone ultimately hurts all of us. When low-income people aren’t mak ing a fair wage, and therefore they can’t afford to buy products, firms will have to lay off workers. That unemployment will create even more poverty. Eventually firms will go out of business. Leaving it alone leads to unemployment, hurts low-skilled workers, and puts our whole economy at risk. We should be thanking the people who do these backbreaking and challenging jobs that we call “low-skilled” but that actually require a lot of skill to do them well. And we should be making sure workers can earn a decent livelihood for their hard work because it’s right and fair. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 310 | Voices On The Economy We should support minimum-wage legislation to end poverty. It’s a lifeline for motivated peo- ple who are struggling to earn a decent living and make their lives better. We need to strengthen the policy so that people who work forty hours or more a week at low-skilled jobs can, at the very least, be able to afford the basic necessi- ties of life for themselves and their families. A minimum wage that is a living wage makes that possible. It needs to be calculated based on a realistic assessment of what people actually need to earn in order to support themselves and their families. Raising it so that it’s a living wage is the right and fair thing to do, and we’re fortunate that we can do this in fair-market capitalism, which supports both workers and firms so that all can prosper. Getting more money into the pockets of low-income people stimulates the economy because they spend the money right away. The boost in demand is a boon for businesses, which turn around and hire more workers. This is how we create more prosperity for all. With a living wage, low-skilled workers will have food on the table, clothes on their backs, and a roof over their heads. Strengthening the minimum wage is good for individuals, families, communities, and firms because it creates the optimal conditions for our whole nation to thrive. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 311 LiberalFair-Market Capitalism BIG PICTURE Through a minimum wage, workers earn a decent living, enabling them to buy the things they need, and increased demand leads firms to hire more workers, which is how poverty is eliminated. POLICY POSITION Poverty causes suffering, but . . . " Radical policies squelch entrepreneurial drive and impoverish the whole society, while firms flounder and workers stagnate. " Conservative policies to leave it alone exacerbate poverty because working people stay poor and firms go under when people have no money to buy their products. SOLUTION Support minimum-wage legislation to end poverty: ! Raise it to a living wage. ! Boost the whole economy. W1 W S D NN1 Low-Skilled Labor Market N2 D2 Wage Floor Livelihood Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 312 | Voices On The Economy Livelihood Talking Points: Liberal 1. Have you ever waited tables at a diner on a Sunday morning? Have you ever mowed lawns and trimmed trees at a resort? Have you ever cleaned motel rooms? Those jobs require hard work, focus, and expertise, but we dismiss them as “low-skilled” and don’t pay those workers a decent wage. Nobody who works full time should be living in poverty. The term working poor should be an oxymoron. Low-skilled workers deserve our thanks and should be paid a living wage. 2. Do you want to know how to end poverty? Guarantee all workers a living wage. That will lift millions of peo- ple out of poverty. And getting more money to low-income people stimulates the economy because they have so many material needs that they spend the money in their pockets right away. The boost in demand helps business and circles back around to workers when firms expand and start hiring. A living wage means more jobs, and more jobs mean more prosperity for all. 3. Radicals, you want to throw out the very thing that solves poverty, which is fair-market capitalism. Democratic socialism won’t generate wealth, because the entrepreneurs who bring us the new ideas that become to- morrow’s economic drivers have no motivation to spend years tinkering in the garage or toiling in the lab to perfect a new design. With cooperative ownership the rewards of genius, talent, and effort are shared with people who didn’t do all that hard work. 4. Are you still working in the first job you ever had? Probably not. Most people start out in entry-level posi- tions and look for ways to move up the ladder. But in democratic socialism people will have to try to find a firm that wants them as a co-owner—even though they have no skills or experience. And because firms aren’t allowed to hire wage laborers, those people won’t even be able to get an entry-level job. Radicals take away opportunities for people to have the stepping-stones needed to move up in life. 5. Conservatives blame the poor for being unmotivated to improve their lives. It’s naïve to think a person can just move into a better-paying job overnight. Have you looked at the price of tuition lately? How will they pay their bills while they’re in school? Most of the working poor have few options, which is why they get stuck in low-wage work. The free-market approach makes the odds worse that they’ll ever be able to work their way up to a decent livelihood. 6. When people are stuck in poverty because they can’t earn a fair wage, the whole economy suffers. Con- servatives, you shoot yourselves in the foot by opposing the minimum wage because when people have no money in their pockets, businesses don’t thrive. Firms have to lay off more workers or go belly-up. So then we end up with higher rates of poverty. Once again, your idea to do nothing puts our whole economy at risk. 7. We should support minimum-wage legislation to end poverty. It’s a lifeline for motivated people struggling to move out of poverty. We should strengthen the policy by raising it to be a living wage. It’s the right and fair thing to do. If people work forty hours or more a week, they should be able to afford the basic neces- sities of life for themselves and their families. 8. Strengthening the minimum wage creates the optimal conditions for our whole nation to thrive. When we base it on a realistic assessment of what a person needs to earn to afford a decent life, we transform the lives of the working poor and give them a fair chance to rise in the world. It’s through fair-market capitalism that we create the best pathway out of poverty. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 313 The Shared Outcome The issue of livelihood has been with us since the beginning of human civilization and will always be our central priority because it speaks to our survival. We will always strive to earn enough to afford what we need to support ourselves and our families. All perspectives agree that it is both desirable and possible to end poverty. So it’s time for you to try on the different perspectives and join the conversation as a respectful listener, passionate advocate, and intelligent debater. In this way, you will find your own voice, and you may even spark some new ideas in the process that can bring people the livelihoods that will enable them to thrive. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 314 | Voices On The Economy Activity: Skit and Re-vote 1. Skit Instructions Get together with friends, classmates, or family members and share the talking points and perspective summaries with them. Then work together to write a VOTE skit. This is a five-minute performance that you and your classmates (or friends and family members) create to advocate for a perspective while critiquing the other two perspectives on livelihood. It should have a title, setting, characters, and a story line. You might also want to plan for a few props and simple costumes. When you write up the different lines of dialogue, make sure everyone has a role and feels comfortable saying their lines—and understands what they’re saying. This is your chance to win the Oscar for best performance and to move people’s minds to new ways of thinking. Give your audience goosebumps by really capturing the heart of the different points of view. Rehearse your skit at least twice. You don’t have to memorize your lines—you can read them—but please speak with emotion and conviction so your audience stays engaged. You don’t want to sound like you’re reading or you’ll put your audience to sleep. 2. Revisit Your VOTE Ballot Now that you’ve made a passionate case for a perspective—and hopefully heard your friends, classmates, and family members make their passionate cases for other perspectives—please go back to the VOTE Ballot and vote again on Livelihood. Are you more certain than ever that your original position was correct? Have you shifted toward a different perspective? Be sure to fill in the “Why?” section. The VOTE Program is all about helping you think critically about the issues and have informed opinions. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 315 Chapter 10: Test Yourself! Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below. 1. Which one of the following answers describes the term livelihood? A. The income under which people qualify for government assistance. B. When people who have regular jobs remain poor. C. The way in which people are able to meet their basic necessities of life. D. An inability to meet the basic necessities of life. 2. Match the term related to poverty (left column) to its definition (right column). A. Supplemental Poverty Measure (SPM) i. Income (broadly defined as cash earnings with benefits added and costs subtracted) compared to costs for food/utilities/shelter/clothing. B. Official Poverty Measure (OPM) ii. Income (narrowly defined as cash earnings) compared to the cost of food times three. C. Poverty Threshold iii. Income generated from full-time work is not sufficient to meet basic needs. D. Working Poor iv. Income level below which government assistance is available. 3. Which of the following statements are true? Choose all that apply. A. Labor union representatives bargain with management on workers’ behalf over pay, hours, benefits, and working conditions. B. Labor union representatives negotiate on workers’ behalf about which workers will be paid the minimum wage and which workers will be exempt. C. Right to Work laws make it illegal for employers or unions to require union membership or to collect union dues without the explicit agreement of each employee. D. Right to Work laws make it illegal to exempt certain groups from minimum-wage legislation, e.g., youth, farmworkers, tipped employees, etc. 4. Let’s say you dropped out of high school five years ago and now you want to go to community college. Which government program is intended to help you achieve your goal? A. Head Start B. TRIO C. Minimum Wage D. Job Core Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 316 | Voices On The Economy 5. According to radical theory, the main problem with a capitalist economy is that owners of capital hire wage laborers to use the owners’ machines to make products, but those workers are paid less than the value they contribute. The process by which the capitalists take the surplus value produced by workers is called __________. A. pressure for bad B. capitalist competition C. workplace exploitation D. discrimination 6. According to liberals, which problems will result if we don’t have a capitalist economic system that’s balanced with minimum-wage legislation? Choose all that apply. A. Unfair low wages B. Working poor C. Unemployment D. Stagnation 7. A server at a restaurant overhears a liberal, a radical, and a conservative arguing about minimum- wage legislation. As she hands them the check, they ask her what she thinks. “Well, if the minimum wage went up, maybe I could pay my bills,” she says. Which of the following statements reflects the conservative’s response to the server? A. “You’ve got it right. A raise in the minimum wage leads to a livable wage. The benefits to workers outweigh the loss to the corporations.” B. “You’ve got it completely wrong. If the minimum wage goes up, firms will lay off workers and raise prices, which means you might lose your job and be forced to pay more for the things you need.” C. “You’ve got it completely wrong. Raising the minimum wage won’t fix poverty, because capitalism is the cause. To create real change, we need worker-owned cooperatives.” D. “You’ve got it right. When the minimum wage goes up, more people will have money to spend so firms will expand and start to hire. More people will have money in their wallets and good jobs.” Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 10: Livelihood | 317 8. Please choose the correct radical interpretation of this Six-Core Cube. A. In democratic socialism, government cooperatively owns all of the businesses, hires all of the workers, and pays everyone a living wage, resulting in decent livelihoods for all. B. In democratic socialism, workers own businesses cooperatively while basic human needs are funded and provided by the society as a whole, resulting in decent livelihoods for all. C. In democratic socialism, a minimum wage is guaranteed to all employees based on the independent decisions of elected officials, resulting in decent livelihoods for all. D. In democratic socialism, people make individual choices of what to supply and what to demand, resulting in decent livelihoods for the maximum number of people. 9. Please choose the correct conservative interpretation of this graph of the low-skilled labor market. A. The low-skilled labor market will naturally adjust to a higher wage when those who were previously flooding the market are given the appropriate motivation to seek higher-skilled work. B. The low-skilled labor market will appropriately self-correct to a higher wage when people with skills no longer have incentives to participate due to the high taxes necessary to pay for government programs, and they return to the low-skilled labor market. C. The government is an impediment to higher wages. Instead, Right to Work laws create a wage floor, the supply curve shifts to the left, and higher wages result. D. Both A & C. Participator y Governance ProductionFor Use Cooperative Ownership The Six-C ore Cube of Demo cratic So cialism W1 W S D NN1 Low-Skilled Labor Market N2 S2 W2 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 318 | Voices On The Economy Chapter 10: Key Terms Agency shop Closed shop Collective bargaining Labor unions Livelihood Money illusion Nominal amount Official Poverty Measure (OPM) Open shop Poverty Poverty threshold Real amount Red Scare Right to Work movement Scabs Strike Strikebreakers Supplemental Poverty Measure (SPM) Union shop Working poor 10. Please choose the correct liberal interpretation of this graph of the low-skilled labor market. A. The minimum wage increases employment in the low-skilled labor market and raises the salaries of all employees because wages are laddered. B. A higher minimum wage will not only raise pay for low-skilled workers, but those higher wages will also incentivize firms to produce, expand, and hire more workers, resulting in higher wages and more employment. C. For a higher minimum wage, it isn’t necessary to set a wage floor. Instead, regulations can be imposed on all firms equally, thereby shifting the demand curve of low-skilled labor to the right and bringing about a higher wage. D. A combination of A & B. W1 W S D NN1 Low-Skilled Labor Market N2 D2 Wage Floor Answers 1. C 2. A – i, B – ii, C – iv, D – iii 3. A & C 4. B 5. C 6. A, B, C, & D 7. B 8. B 9. A 10. B Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About ch11 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About When I was a child, I loved the game Monopoly. I had four friends in the neighborhood, and we used to race home after school to play. I still remember lying on a scratchy carpet and carefully counting out $1,500 in pastel-colored bills for each player. It felt like a fortune. We took turns choosing our metal tokens—shoe, iron, dog, car, thimble. It was a good omen when I rolled the highest number and got to go first. I loved the strategy and the camaraderie of our Monopoly games. There was wheeling and dealing, and there were tough deci- sions to be made. Should I buy the railroad, which delivered a steady return on investment, or save my money just in case I landed on Park Place? Should I build houses or save my cash to buy more properties? I learned what a utility was from playing Monopoly. It was always very satisfying to pass Go and collect $200. But when I landed on someone else’s property, the owner would stick out a hand and demand the rent: “Pay up!” Paper money would be flung across the board. Monopoly sometimes caused bitter fights. We would accuse one another of cheating or of gang- ing up and making side deals. Sometimes, we would get so upset that we would stop talking to one another for a few days. But then we’d be huddled around the Monopoly board again the next week, playing to win. And I loved to win! We all did. I still remember feeling confident and clever. Losing was a different story. When things started to go downhill and I had to mortgage my properties and sell back my houses to the bank for half the money I’d paid for them, I would feel utterly defeated. We think of Monopoly as child’s play, but it actu- ally teaches us lessons for life. It taught me how to think about investing, taking risks, and plan- ning ahead. It taught me that success depends on a combination of factors, including luck, hard work, and talent. I still hear 11Issue:HOUSING Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 322 | Voices On The Economy echoes of those childhood arguments we had over Monopoly games in the angry debates in society today. People accuse one another of taking advan- tage by charging too much rent, or of cheating, or of colluding and making side deals. There are argu- ments over whether some people are unfairly jailed while other people have a “Get Out Jail Free” card. Monopoly has been played by a billion peo- ple around the world. It’s been played underwa- ter, in a moving elevator, in world tournaments, and it’s even been played in space. The game has been translated into 47 languages and sold in 114 countries. The history of Monopoly is fascinating. As you may have noticed, Monopoly is a game about capitalism—privately buying and selling land and developing it to make a profit. But the irony I want to share with you is that originally the game from which Monopoly was derived was meant to criticize this very idea that land should be privately owned. The version of the game that we play today was developed by an out-of-work home heater salesman named Charles Darrow. He’d lost his job during the Great Depression, so he sat in his house in Philadelphia and redesigned a game that had already been around for thirty years. The original concept was the brainchild of journalist and actress Lizzie Magie in 1903. She had been influenced by an economist named Henry George, and she designed her game to demonstrate George’s idea that private ownership of land worked well for some owners but worked terribly for tenants. Magie called it The Landlord’s Game. The players who were tenants struggled to survive and keep their homes, while the play- ers who were landlords strategized ways to make more profit from their properties. Although the Landlord’s Game was intended to point out prob- lems that arise from private ownership of land, by the time Charles Darrow sold Monopoly to Parker Brothers in 1935, it had become a celebration of capitalism and a training ground for how to profit from the private ownership of land. For many of us, Monopoly was our first intro- duction to the complex world of housing. We learned to buy and sell real estate, pay rent, secure mortgages, deal with banks, budget our limited dollars, and handle unexpected personal financial crises. But as I’m sure you are aware, in the real world the issue of housing is not a game. It’s vital to our survival. In this chapter, conserva- tives, liberals, and radicals all agree that unafford- able housing leads to homelessness. They share the same goal of creating affordable housing for all. But they strongly disagree about how to do it. The policy we’re going to debate in this chapter is rent control laws. Understanding the Issue of Housing “The ache for home lives in all of us,” wrote poet Maya Angelou, “the safe place where we can go as we are and not be questioned.” Another poet, Robert Frost, wrote, “Home is the place where, when you have to go there, they have to take you in.” Sentimental ideas about home abound. I’m sure you’ve heard “Home is where the heart is” and “Home, sweet home” and Dorothy’s famous line in The Wizard of Oz, “There’s no place like home.” The emotional experience of home is central to our psychological and spiritual well- being. But that’s not what we’re going to be talking about in this chapter. Our conversation focuses on the availability and affordability of the actual physical spaces where people live. Housing is fundamental to our existence. We all need a place that shelters us from storms, extreme temperatures, wild animals, and other threats to our continued existence. We all need a space in which to conduct our personal lives—make food, sleep, bathe, raise children, and close the door on the world to enjoy a measure of privacy. Let’s do a little exercise. Go to the real estate section of your local newspaper or check out an apartment rental site online and look up what it Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 323 costs to rent a one-bedroom apartment in your area. What is the absolute cheapest rent you can find? Now do a little digging and find out what the minimum wage is in your area. Write that down too. We’ll come back to this later. What Is Housing? Housing simply refers to places where people live—our residences. We humans have come up with a marvelous variety, including single-fam- ily homes, cabins, mansions, nursing homes, mobile homes, palaces, low-end apartments, RVs, group homes, cooperative housing, manufactured homes, castles, condominiums, yurts, luxury apart- ments, trailers, lofts, boxcar homes, assisted-living facilities, and more. In the course of your lifetime it’s very likely that you’ll end up living in a variety of homes. The options you’ll have will depend on whether you find yourself in an urban, suburban, or rural area and on your finances. It’s helpful to understand the alternatives so you can make the right choice for your situation. Apartments are residential units. They might be in a high-rise building or in a house subdi- vided into sev eral units. Some apartment build- ings are investment properties owned by individ- uals or by for-profit corporations and rented out to ten ants. A tenant is the person who leases (rents) a property from a landlord (owner). Rent is the term for the regu lar payment a tenant makes to an owner for use of the property. Can you guess what the highest rent in New York City ran in 2014? CNN reported that one tenant paid half a million dollars to rent a six-bedroom suite for a month. It took up the entire 39th floor of the Pierre Hotel. If tenants fail to pay the rent on time, or vio- late the rental contract in other ways, landlords may evict them, which is a legal process to force a renter to vacate the property. In some cases, owners hire property managers to maintain the property and manage the tenants, including negotiating leases, collecting rents, and respond- ing to requests for repairs and other matters. When people occupy an empty or abandoned property without paying rent to the owner they are called squatters. While apartments are intended to be rented out, other privately owned housing may either be owner-occupied or rented out by the owner. For Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 324 | Voices On The Economy example, condominiums (also known as con- dos) are residential units in a building or complex of buildings that are privately owned by individ- uals who also own a percentage of the shared spaces—hallways, lobby, the land on which it’s built, and so forth. Condos generally have condo- minium associations (COAs), which are elected bodies made up of owners. COAs establish and enforce rules and requirements for renters and owners. They make decisions about things like parking, noise, pets, weeds, garbage, paint colors, and more. A condo board, which is an elected body made up of owners who are required to be members of the COA, reviews complaints, makes policy, and oversees the property manage- ment company. If you buy a condo, you’ll pay a monthly fee to the COA to maintain the common areas such as the landscaping, hallways, roof, ele- vators, and so forth. Of all the types of housing there are, you’re probably most familiar with privately owned sin- gle-family homes. The land and the structure are owned by individuals. The structures are detached and vary in size and shape, from McMansions to mobile homes. When I was growing up, one of my best friends had a mobile home in Vermont, which was fantastic for me during ski season. Whenever I stayed there I marveled at how clever it was that someone had invented a home that a person could put down in a convenient place and then take with them if they wanted to move. The average size of a new single-family home in the United States is around 2,500 square feet, but in the past decade tiny houses have become more popular. These range from 100 to 400 square feet. Some of them are built on trailers or made from repurposed boxcars. One of the more unconventional types of single-family homes are Earthships, which are structures made from recycled materials such as glass bottles and used tires. Whatever typical or unusual form they come in, single-family homes that are part of planned developments often have homeowners associations (HOAs). In order to purchase a home in one of those developments, owners must join the HOA and pay regular dues. Governing boards are usually made up of home- owners, who create and enforce the rules for the neighborhood. These might focus on issues like parking regulations, paint colors, landscaping, and trash collection. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 325 Unlike privately owned housing, cooperative housing, also known as Resident-Owned Com- munities (ROCs), come in a variety of types. But no matter what type it is, all ROCs have in com- mon that the structure and land are co-owned or co-leased by the residents, who make manage- ment decisions collaboratively. In resident-owned mobile home communities, for example, the residents co-own the land. An elected board made up of resident-owners decides how much co-owners will pay into a common fund every month to cover property taxes, maintenance, and other fees. They also decide the priorities for investment in their community. They might vote to repave the roads, or install a basketball court, or put in better lighting, and so forth. Co-op apartments are often confused with condos. These resident-owned communities are entirely owned by a nonprofit corporation estab- lished by residents, so when you buy a co-op apartment, you actually purchase shares in the corporation—you own a percentage of the whole apartment building, but don’t directly own your individual apartment. Co-ops are governed by a co-op board made up of representatives elected from among the shareholders (all of whom are residents). The co-op board sets policies and over- sees the management of the property and use of the co-op fees that shareholders pay every month. My aunt Barbara lives in New York City in a co-op apartment. She’s away a lot—sometimes for six months at a time—and I often think it would be great to sublet her condo for part of the year. But her co-op board voted not to allow sublets. Board members can change the policy if that’s what the residents want. Co-op owners are active partici- pants in the decision-making process about their building. For example, they vote on who can move in as a new resident (legally, they can only consider a potential shareholder’s financial status and will- ingness to follow the co-op’s rules). They decide whether units can be rented to non-owners, have a say in what kind of new roof or playground or hallway carpeting should be purchased, and so on. When I was in college I lived in a group house instead of living in the dorm. It was fun because there was always someone around to talk to, and we shared cooking and other chores. We had weekly meetings to discuss whose turn it was to clean the bathroom. This kind of experience is fairly typical Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 326 | Voices On The Economy for many college-age people. Later, I was interested to learn that some people continue to live in group housing. Co-housing communities are active in thirty-six states and in many countries around the world. Sometimes they are also called intentional communities. A person may own their own sep- arate home, or the land on which it’s built, or a percentage of the living space in a shared building. What’s the same in each community is that residents generally participate in the design of the commu- nity and are intentional about creating opportunities for social interactions among those who live there. They typically share some communal spaces. For example, they might design a central courtyard or a community garden. They might create a kitchen and dining area large enough for the whole community to gather and share meals. They might have com- munity pools, recreation rooms, and so forth. Every- one takes responsibility for maintaining the prop- erty together and making decisions together using a democratic process. By the way, this is not the same as a commune, which is an intentional community where people share incomes and all the spaces are communally owned. There are a wide array of financing arrange- ments for housing. Cooperative housing is some- times funded by loans from traditional and co-op- erative banks and credit unions as well as land leases from community land trusts (CLTs). These are nonprofit organizations that buy up land and take it out of the for-profit real estate sector so it can be made available for housing and other uses. If you own a property privately, you probably had to get a mortgage to buy it. That’s a loan for which you pay interest. The lender (usu- ally a bank) holds a lien on the property, which means it has the right to claim it if you don’t pay back the loan. If you default on your loan—that is, you don’t pay what you owe every month— the bank can foreclose, which means it takes full possession of the property and you forfeit all the money you paid for it up to that point. That’s the worst-case scenario for homeowners. No matter what kind of housing you live in, there’s always a risk that something will go wrong. It could be a financial catastrophe, a natural disas- ter, or a personal crisis. If you lose your home, your options for housing are limited. Many localities offer temporary housing, which is a place where peo- ple who either have no home or are temporarily unable to use their home may stay on a time-limited basis. Some of these include homeless shelters, tran- sitional housing, extended-stay motels, drop-in cen- ters, halfway houses, and emergency shelters that are set up during storms and other extreme weather events. Losing a home is one of the most stressful and traumatic experiences a person can have. That’s why this issue of housing is so important. Affordability and Homelessness The federal definition of affordable housing is a residence that costs no more than 30 percent of a person’s gross annual income, including all utilities—gas, electricity, water, sewage, trash, recycling, and so forth. If you pay more than that, you are considered cost burdened. José Morales rented an apartment in a working- class neighborhood in San Francisco for forty years. When he first moved in, it was easily affordable on his salary as a tennis instructor. Then he hurt his back, and rents went up, and by 2007 he was paying $864 a month to stay in his apartment. But his entire monthly income was only $900. That left him with a grand total of Federal definition: 30% of your income Do you live in affordable housing ? Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 327 $36 to pay for everything else—food, electricity, transportation, medication, clothes, telephone, and more. In other words, Morales spent 96 percent of his annual net income on rent. He was one medical emergency or accident away from homelessness, and the same is true for tens of millions of people in the United States today. Think about your situation. What is 30 per- cent of the annual income of your household? Remember I asked you to write down the rent for a one-bedroom apartment and the minimum wage in your area? Take a look at those numbers and calculate how much a person makes working forty hours a week at that wage. When you have the number, multiply it by fifty-two weeks and that gives you the gross annual income for a min- imum-wage job in your area. Now multiply that number by 0.30 (which is 30 percent). That is the amount a person can afford for housing where you live—including utilities—without being cost burdened. Now check the monthly rent for the lowest-cost rental you found. Is it affordable? Keep in mind that the rent might not include the utili- ties, so that will cost extra. Look up the address of the rental and ask yourself whether a person living in that neighborhood would need a car to get to work. Is it close to public transportation? What’s the crime rate? Are the schools decent? Is there a grocery store nearby? These are the ques- tions a person asks when searching for housing. This exercise looks at a one-bedroom rental, but now imagine a family needs affordable hous- ing. They would be looking at a two-bedroom or bigger rental. What are the prices like for those units? According to the National Low Income Housing Coalition (figure 11.1), if you lived in Colorado in 2018, for example, you would need to earn nearly $24 an hour to afford a two-bed- Figure 11.1 Hourly Wage Needed to Afford Housing Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 328 | Voices On The Economy room apartment. The U.S. Department of Hous- ing and Urban Development (HUD) reported that there was no place in the country where a family with only one full-time worker earning the min- imum wage could afford to rent a two-bedroom apartment. In the United States in 2017, nearly half of all renters were cost burdened. In Florida, for example, the cost-burden rate was 56 percent. In Miami, it was nearly 63 percent. Being able to afford a place to live is critically important to a person’s well-being. That might help explain the success of a political party based in New York City called the Rent Is Too Damn High. It was founded by Vietnam War veteran Jimmy McMillan. He ran for mayor of New York City three times, and he also ran for governor in 2010. “The people I represent can’t afford to pay their rent,” he said during a televised debate. “They’re being laid off right now as I speak. They can’t eat breakfast, lunch, or dinner. Listen! Some- one’s child’s stomach just growled.” Although his name wasn’t on the final ballot, McMillan garnered more than forty-one thousand write-in votes. In our country, people worry about what will happen if they lose their homes. They worry that they will end up homeless. It’s hard to know exactly how many people in the United States are homeless, but every year on a given night in January, HUD tracks how many people are staying in homeless shelters, other tem- porary housing, and on the streets. It’s called a point-in-time count. In 2017 there were approx- imately 554,000 homeless people counted on that January night. Single adults made up the largest population, while a third were households with children. HUD identifies four different categories of homelessness: those who are already home- less, those who are about to become homeless, families with children who don’t have stable hous- ing, and people who flee their homes because of domestic violence and don’t have another place to live or resources or support to obtain housing. Many experts believe that the actual number of homeless people is significantly higher than the point-in-time count shows. They say it’s extremely challenging to locate and identify homeless peo- Lu cy N ich o lso n /R E U T E R S A d o b e sto ck.co m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 329 ple in the wide variety of situations in which they live. Many can’t get a bed in a shelter or don’t want to go into a shelter because they have a mental illness or are afraid of violence. Some live in their cars, tem- porarily stay on couches at the homes of friends or relatives, and so forth. The lack of affordable housing is the number one cause of homelessness, according to the National Law Center on Homelessness & Poverty. Unemployment, poverty, and low wages are the sec- ond, third, and fourth iden- tified causes. This is a problem that affects com- munities across the entire country. Without a place to call home, it’s very challenging for a person to get an education; find and keep a job; keep fam- ilies together; maintain good health, hygiene, and nutrition; and stay safe. To be homeless is to be terribly vulnerable. One cold snap or heat wave or bad storm could mean death—not to mention the violence, hunger, illness, and deprivation that stalks homeless people. Across the country, public and private pro- grams address the issue of affordable hous- ing. We’ll talk more about public efforts below. On the private sector side, there are a variety of approaches to provide housing and make it affordable for the poor, and there are a variety of types of organizations that are involved. Religious groups and nonprofits support and sponsor local homeless shelters and other housing programs. One of the most well-known nonprofit organiza- tions is Habitat for Humanity, which has helped more than four million people afford housing since 1976 through its volunteer home-building and renovation programs. Private philanthropy is another significant player. A funding collaborative of nine private foundations— among them the Kresge Foundation, the Bill & Melinda Gates Founda- tion, and the MacArthur Foundation—has invested tens of millions of dollars to address the shortage of affordable rental hous- ing throughout the nation. The corporate sector has launched multimillion-dol- lar initiatives for affordable housing, including Unit- edHealthcare’s investment of $5.1 million to convert a vacant commercial building in Boston into an affordable housing development. The tech firms Cisco, LinkedIn, and Pure Storage together donated $20 million to support affordable housing in Silicon Valley. There are many potential benefits for corporate investment in affordable housing. It’s good for the company’s reputation, it’s good for the com- munities where they are headquartered, and it’s good for ensuring a stable workforce. Housing Legislation and Rent Control Using government to address the issue of affordable housing has long been a controversial idea. The first federal law to deal with low- income housing was the United States Housing Act of 1937, also known as the Wagner-Steagall Act. Signed by President Franklin D. Roosevelt as part of the New Deal, it was intended to eliminate unsafe and unsanitary housing conditions for the poor, clean up slums, and help low-income families have a decent place to live through public housing options. Public housing, which still Without a place to call home, it’s very challenging for a person to get an education; find and keep a job; keep families together; maintain good health, hygiene, and nutrition; and stay safe. To be homeless is to be terribly vulnerable. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 330 | Voices On The Economy exists today, is funded by the federal government and administered on the state and local levels. These apartments, single-family homes, and other types of residences are rented to eligible low- income, disabled, and elderly tenants at a rate lower than the market price. These and other public housing programs are managed by public housing authorities (PHAs), which are private firms that are paid by the government to screen tenants for income eligibility, perform inspections of the properties, collect rents, maintain the properties, and so forth. Close to one million households lived in public housing in 2018, according to HUD. By the way, a household includes all the people living under the same roof, whether or not they are related. HUD is the central government agency in charge of public housing and other housing programs. Before President Lyndon B. Johnson signed the Housing and Urban Development Act of 1965, there were a number of federal agencies that dealt with housing. These were all consol- idated under HUD, which then became a cabi- net-level position. Under Johnson, the Fair Hous- ing Act, which was part of the Civil Rights Act of 1968, made it illegal to discriminate on the basis of race, color, religion, and national origin when renting or selling real estate. In the 1970s the government changed strate- gies. The Housing and Community Development Act of 1974, under President Gerald Ford, insti- tuted Community Development Block Grants (CDBGs), which are federal funds given to local jurisdictions so that people who live in those areas can decide how to use the money to address pov- erty and homelessness in their own communi- ties. The government’s role also changed, so that instead of building the actual physical buildings to house people, it switched to funding programs that subsidize the rents in the private housing market. In particular, the 1974 law made signif- icant changes to Section 8 housing. (It’s called Section 8 because it originally came from Section 8 of the Housing Act of 1937.) There are two Section 8 programs you might have heard of. One is Project-Based Rental Assistance, where funds are paid to owners of private properties that are HUD-approved to be low-income housing. They then offer housing at a lower rate. The rental subsidy is tied to the rental unit, so when tenants move out, the unit con- tinues to be rent-subsidized for the next Section 8–qualified tenant. In other words, tenants don’t take the subsidy with them when they move to another property. Just to give you an idea of the size of this program, in 2018 there were 1.2 mil- © K u rt B au sch ard t C C B Y-S A 2.0 Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 331 lion units of project-based rentals, according to HUD. But there was a prob- lem with public housing and Section 8 housing that worried residents and law- makers alike. The problem was that these programs concentrated poverty in certain areas, and that cor- related with higher crime rates, worse schools, and other social ills. The second Section 8 program, tenant based housing choice vouchers, were meant to counteract this concern by giving low-income renters more options for where to live. Those who qualify receive a rent-subsidy voucher that they can use in the private housing market as long as the unit is approved by HUD. If the tenant moves, the voucher moves with them and they can use it to rent a different approved unit. In 2018 there were more than 2.2 million tenants using housing choice vouchers, according to HUD. The intention of the program is to make rents affordable for low-income tenants, thin out the concentration of poverty, and create more mixed-income communities. Who is eligible for Section 8 housing? HUD deter- mines this by income level, taking into account the average median income for each region. It clearly wouldn’t be fair to compare Oklahoma City with Los Angeles. To determine income eligibility, the agency identifies three categories: If you’re low income, you earn 80 percent of the median income in your area. If you’re very low income, it’s 50 per- cent. And if you’re extremely low income, it’s 30 percent. HUD prioritizes extremely low income people and then very low income people for Sec- tion 8 programs. But the supply of Section 8 hous- ing for both programs is far less than the demand. Some affordable-housing advo- cates estimate that there are only around a third of the number of units avail- able than what’s actually needed to house those who are extremely low income. Waiting lists are typical for all HUD programs. Once a person is on the waiting list, it can take years to get into affordable housing. And in some areas of the country, it can take years just to get on the waiting list itself. There have been a slew of other housing programs in the decades since 1974 that address affordable housing. Some are designed to help low-income tenants afford to buy their own homes. Some focus on housing for the disabled and elderly, and others are aimed at revitalizing existing public housing properties and turning them into mixed-income developments. The U.S. Department of Agricul- ture (USDA) offers housing assistance in rural areas, including rental assistance, home loans, and cooperative housing for the elderly and dis- abled. In total, the federal dollars spent on all the above housing assistance programs in 2018 came to 43.9 billion dollars, according to the Center on Budget and Policy Priorities. A program not included in those numbers, but widely in use, is the Low-Income Housing Tax Credit (LIHTC), designed to give incentives to investors to finance lower-profit housing projects. For example, religious institutions that own land and that have a mission to help the poor partner with private developers to build affordable hous- ing. Since the program was created under the Tax Reform Act of 1986, more than three million units The issue of affordable housing is very relevant for many, including the middle class. There seems to be one policy that keeps coming up as an option when housing prices become unaffordable in a community. That policy is rent control. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 332 | Voices On The Economy have been built using LIHTC. Another effort to create more affordable housing is inclusionary zoning, which requires landlords to rent or sell a certain number of units in new developments at a reduced rate to low-income tenants. All the housing programs we’ve just been describing are designed primarily for the very poor. But the issue of affordable housing is very relevant for the middle class as well. There seems to be one policy that keeps coming up as an option when housing prices become unafford- able for people up and down the income ladder. That policy is rent control. Rent control laws have been around in cities and local jurisdictions for decades as another variation of a public strategy to address the issue of affordable housing. What makes rent control different from public housing and Section 8 programs is that eligibility is not based on a person’s income. Instead, it focuses on landlords, limiting how much they are allowed to charge for rent and how much they can raise existing rents (this is called rent stabilization). Oregon made history in 2019 by being the first to pass a statewide rent control law, followed by the state of New York a few months later. For the most part, rent con- trol has been allowed in only a dozen or so states. Yet, in some of the country’s largest cities, rent control is commonplace. In 2014 more than a million peo- ple in New York City lived in either rent-controlled or rent-stabilized apartments. That same year, half the rental units in Washington, DC, were rent con- trolled. In San Francisco it was 75 percent, and in Los Angeles it was 80 percent of multifamily units. Recently—as witnessed in New York State and Oregon—there’s been a growing movement to expand rent control in states where it already exists and to overturn bans and exemptions on rent control laws in the rest of the country. At the same time, there’s been pushback against rent control laws. For example, a proposition to repeal a California law that limits the state’s ability to determine types of rent control failed in 2018. The bottom line is that of all the government policies and programs meant to address affordable housing, rent control affects the most households in our nation. As you can tell, this is a hotly contested issue. And now you have the lay of the land. You know the definitions and the history of what our nation has already been doing to address the problem of housing. You have what you need to analyze competing ideas about how to solve this problem. It’s time to hear the voices of the different per spectives on the issue. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 333 Voices on Housing Liberals, radicals, and conservatives all agree that unaffordable housing leads to homelessness. They share the same goal to create affordable housing for all, but as you might have guessed, they don’t agree on how to do it. Should we leave the market alone and let price signals for rents solve the affordable housing problem? Should people own their own residences cooperatively as a way to make housing affordable? Should the government help people to afford housing by passing laws to control rent prices? The policy we’re going to debate is rent control laws, which is a liberal idea. It’s time to put on a mask and debate this policy from each of the perspectives. Please remember that we are not taking a personal position on any of these issues. We’re just channeling the voices of the perspectives. As you know by now, we change the order of who goes first each time. For this issue, it’s the conservative’s turn to go first. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 334 | Voices On The Economy ConservativeVoice on Housing Housing I loved Monopoly because it taught me so much about having a successful financial life. It taught me when to buy, when to sell, and how to plan ahead. It helped me to hone my skills of negotiation and deal making. It taught me not to get sidelined by unexpected setbacks and to take advantage of lucky breaks. It taught me that no matter where you start off in life, there are going to be opportunities. But you have to get in the game in order to succeed. I got in the game when I left home to go to college. While I couldn’t afford Park Place on my student budget, I found affordable housing. Depending on my financial circumstances, I lived in dorms, in a student group house, and in a postage-stamp-sized studio apartment that rattled every time a train went by. In graduate school, I had a small stipend, so I split the rent on a one-bedroom apartment with my sister and her husband. Years later, with my career on track, I moved to a city where I was able to afford to buy a house. After building up equity in it over years, I sold it, and my family moved into a rental apart- ment. We used the money from the sale of our property to pay for our daughter’s college tuition. That was a strategy I can trace back to my Monop- oly days. As I head toward retirement, we might decide to buy another house, or to keep renting, or to move into a retirement community, or to get an RV and hit the road. Monopoly teaches us to have a strategy, stay nimble, and change course when necessary. In the game of life, whatever the roll of the dice, if we play it smart and let price signals guide our decisions, it will work out in the best possible way. Consider the low-end apartment market. Imagine that the rent goes up to an unaffordable level, and you are living there. What would you do? You would do the only logical thing there is to do: you would move to a more affordable place. When housing is too expensive, people move out and find substitutions. You might share a place with a group of friends. You might move to a location that has lower rents. Or you might get a job where room and board are included. And what happens to the demand curve for low- end apartments when you and hordes of other people move out? It shifts to the left, which means the equilibrium price falls. As you can see in figure 11.2, because of the inelasticity of supply and demand for low-end apartments, rents go down by a lot. On top of that, there is only a very slight decrease in equilibrium quantity, which means low-end apartments remain available and Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 335 abundant, with plenty of choices and affordability for all budgets. So just by being left alone, the problem solves itself. R1 R S D QQ1 Low-End Apartment Market Q2 R2 D2 Figure 11.2 Conservative View When Gotham City is in trouble, the commis- sioner calls for Batman by beaming a signal into the sky. Today, there are areas of the country that are frantically signaling that they need peo- ple to move there, and their signal is price. Rents are low! My cousin is a perfect example of how this decision-making works. After high school, he decided not to go to college, and staying in his parents’ home wasn’t an option. He’s a smart guy, so he determined that the best thing to do would be to move to whatever place in the coun- try had the cheapest possible housing relative to the highest possible pay for entry-level work. This was the 1980s, before the internet became ubiqui- tous, so he actually went to the library and paged through big books of statistics to look up average housing costs and average salaries. That’s how he found the ideal location: Indianapolis. He packed up his things and moved there. He did what any person should do, which is to follow price sig- nals. When housing is unaffordable in one area, move to a more affordable area. And this strategy is not just good for you—it’s good for the nation. This is how we bring the doctors, the business- M ik e S e g ar /R E U T E R S A d o b e st o ck .c o m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 336 | Voices On The Economy people, and the teachers to the communities that need them the most. When we let the invisible hand of free-market capitalism guide people’s choices, they get the housing they want, and producers are motivated to supply it. Affordable housing is a wonderful thing, but the radical idea of Resi- dent-Owned Communities sounds like a nightmare of mutual cooperative destruction. Just imagine the constant meetings about whether we’re allowed to cook fish because it stinks up the hallways. There are huge transaction costs for all that bickering and time-consuming group pro- cess, which make living in resident-owned housing cooperatives another full-time job. I work hard to afford a roof over my head, and my home is my castle. When I come home from work, the last thing I want is to have other people telling me what to do and how to do it. Our homes should be our sanctuaries. “No thanks” to cooper- ative ownership. And community land trusts are another terrible idea. Radicals want the govern- ment to buy up land so that committees of peo- ple can decide where to build affordable housing. That might sound good on paper, but the paper is wrong because no CLT can possibly plan for what the best use of that land should be. There are too many moving parts. It’s the profit motive and price signals that move resources to their optimal use so that we get the housing we need. Disrupting that delicate balance by pulling land out of the private market means we’ll end up with too much or too little housing relative to the jobs available, to the population, to the avail- able water, and so forth. In democratic socialism we’ll have empty apartments in one place, and widespread homelessness in another. How do we get afford- able housing? First and foremost, we support visionary entrepreneur- ship. It’s the developers and investors who take the risks to supply our housing, and they are the ones who should reap the well-earned rewards. We would never want to discourage anyone from being in the business of providing housing. Like- wise, we would never want to discourage anyone from becoming a landlord. Some people are not in the position to own a home, nor do they even want to. Some people would rather rent than take on the repair bills, property taxes, yard work, and worry about depreciating values of their investment. Thank goodness there are landlords who are willing to provide rentals and take those burdens off their tenants. It is unfair and wrong for the govern- ment to single out the housing industry and pun- ish landlords with a bad policy. We don’t punish auto mechanics by requiring them to fix cars at half the price. We don’t punish shoe manufactur- ers by requiring them to sell sneakers at half the price. So how can we justify requiring landlords to rent units below market price? Bottom line: rent control isn’t fair to them. How do we get affordable housing? First and foremost, we support visionary entrepreneurship. It’s the developers and investors who take the risks to supply our housing, and they are the ones who should reap the well- earned rewards. We would never want to discourage anyone from being in the business of providing housing. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 337 The liberal policy of rent control laws doesn’t solve the problem of lack of affordable housing; it actually creates homelessness. Here’s how it happens: The government passes a law that says rents for low-end apartments have to be below the equilibrium rent. Now the quantity demanded for those apartments increases. Of course it does, because people want to pay less for housing. But what else happens? Landlords want to make a profit, but lower rents mean less profit, so they supply fewer low-end apartments. It’s an undeni- able fact that rent control gives us shortages. In this case, it’s a shortage of low-end apartments, and presto! Government intervention brings us homelessness. And on top of that, the low-end rental apartments that are left become even worse places to live. With rent control, landlords have less money and no incentive to invest back into their properties for upkeep and improvements, so the housing falls into disrepair. Some people accuse owners of being “slumlords,” but owners who want to make the properties better can’t when the government holds them back with rent control. So you can thank a liberal for leaky fau- cets, peeling paint, and broken screens. We should reject rent control laws so that price signals direct resources to their best use to ensure affordable housing for all. People will optimize their circumstances by moving to the places that afford them the best housing options along with job opportunities, and the whole country will be better off when communities are robust. Devel- opers will build the variety of affordable housing that people want because it’s profitable. And for those who fall through the cracks, private philan- thropy will provide affordable housing. It’s in our human nature to take care of our friends, families, and communities. And firms participate because it enhances their reputation and it lifts the quality of life for the communities where they are based and where they do business. Also, religious groups and nonprofits provide affordable housing because it’s their mission to care for others. When we allow price signals to direct housing choices and com- bine that with private philanthropy, everyone who wants housing can have it. Landlords will be moti- vated to maintain their rental properties, so ten- ants will have nicer places to live. This is how we get swamplands turned into high-rise apartments, empty lots turned into affordable housing devel- opments, and desert scrub turned into flourish- ing mobile home communities. When we get rid of government interference and allow the profit motive to guide our choices, we’ll solve the prob- lem of homelessness, and people will be safer, healthier, and happier. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 338 | Voices On The Economy ConservativeFree-Market Capitalism BIG PICTURE When the invisible hand of free-market capitalism guides housing choices, people get the housing they want and producers are motivated to supply it. POLICY POSITION Unaffordable housing leads to homelessness, but . . . " Radical policies intrude on the sanctity of our homes, and by trading price signals for central planning, we’re left with empty apartments in one place and widespread homelessness in another. " Liberal policies of rent control oppress landlords and hurt tenants while creating shortages of affordable housing, which only brings us more homelessness. SOLUTION Reject rent-control laws so that unfettered price signals ensure affordable housing for all: ! People optimize their circumstances. ! Private philanthropy is the safety net. R1 R S D QQ1 Low-End Apartment Market Q2 R2 D2 Housing Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 339 Housing Talking Points: Conservative 1. Everyone needs housing. We all have to keep a roof over our heads. And producers need profit. This is a perfect relationship because when we leave the market alone, suppliers will supply the housing that peo- ple want. When the rent is too high, that sends a signal and tenants will move out. When they move out, it creates a surplus of housing, and the prices fall. Guess what? We’ve just solved the problem of affordable housing through free-market capitalism. 2. Every community has to have doctors, engineers, people who know how to fix computers, and so forth. We live in a big country, so how does it happen that we have the right variety of workers in the communi- ties that need them? Price signals make this happen. If housing isn’t affordable in one area, people will be motivated to relocate to areas where housing is affordable relative to the pay for their professions. Freely determined price signals mean that communities are robust and people have affordable places to live. 3. Radicals, your plan of Resident-Owned Communities sounds like a nightmare of mutual cooperative de- struction. I don’t want to live in a place where everyone is in my business and there are constant meetings to regulate whether people are allowed to cook fish because it stinks up the hallways. I work my butt off to have a roof over my head, and my home is my castle. Your plan would turn my sanctuary into a nightmare of nosy neighbors and endless bickering. 4. Democratic socialists want the government to buy up land for community land trusts so committees of people will decide where to build affordable housing. But they can’t possibly know the best use of that land without price signals. There are too many moving parts. Disrupting that delicate balance means cha- os—too much housing in one place and not enough in another. 5. Liberals, it’s wrong to require landlords to rent units below market price. Rent control isn’t fair to owners. They’re the ones who take the risks and who should reap the well-earned rewards for providing housing. In our nation, private property owners have rights. Interfering with their ability to make a profit is a violation of those rights. We don’t punish auto mechanics by requiring them to fix cars at half the price. We don’t punish shoe manufacturers by requiring them to sell sneakers at half the price. 6. Rent-control laws cause shortages of affordable housing because when you lower the price for something, of course more demanders are going to want it, and of course fewer suppliers are going to make it. That’s why it’s Democrats’ fault that developers are unwilling to build affordable housing in the places where people need it the most. If we stopped chasing out the investors, we would solve homelessness. As usual, the so-called liberal fix makes the problem worse. 7. The profit motive is the engine that drives our whole economy. It’s profit that motivates developers to build us the housing we need. Free-market capitalism gets people out of shelters and tent cities and into housing where they can flourish. And when a person hits a bump in the road, individual, corporate, religious, and nonprofit philanthropy helps to get them back on their feet without interfering with price signals. 8. Free-market capitalism provides an abundance of housing options for all. People follow price signals and optimize their circumstances so they can flourish. Housing is affordable and available when we let the per- fectly self-adjusting system of capitalism inform our choices. We all want a roof over our heads and a place to call our own. And we can have it. That is the beauty of our economic system. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 340 | Voices On The Economy R HOUSINGadicalVoice on Housing Have you ever started to lose at Monopoly? I can remember games where I spent too many turns in jail, and then I kept landing on properties that other people already owned. I did the only thing I could do, which was to start mortgaging my properties, and then eventually I sold them to my opponents just so I could pay the rent. I still remember the sickening feeling in my gut as every roll of the die landed me on someone else’s property and another rent check was due. There was no safe place for me on the board except jail, but then it was hardly worth playing anymore. The owners—my friends, my cousins, my siblings—saw my plight, but they shrugged and said, “Sure, we’d like to give you a break, but we can’t because our com- petitors aren’t doing that, so when we land on a new property we won’t have the money to buy it, but they will and we’ll lose the game.” At a certain point I just gave up and vowed never to play that dreadful game again. But the problem in real-life capitalism is that we have to play because it’s the only game in town. And is the aim of the game of capitalism to get people into housing? No! It’s to make money off people who are desperate to have a roof over their heads so they can survive. This is what Lizzie Magie was trying to demon- strate with The Landlord’s Game. Let’s use the Six-Core Cube of democratic social- ism and drill down through the core point of coop- erative ownership to see how we get affordable housing. Think of any kind of housing where you might want to live and imagine that it’s not owned by a corporation or a bank. Instead, it’s owned jointly by the residents. You might move into a high-rise apartment building that’s cooperatively owned and become one of the shareholders. Or you might get together with a group of friends, neighbors, or strangers and create a co-housing community in the suburbs where together you own the land and each has a single-family home and you share a kitchen, garden, and swimming pool. Or you might be part of a group that converts empty fields into a cooperatively owned mobile home park. In democratic socialism there is a commitment to providing a wide variety of decent, affordable housing options for everyone, including vulnerable populations. For those who need help beyond the social safeguards already provided in democratic socialism, government-assisted ROCs ensure that they have adequate, affordable hous- ing. In every community, stakeholders are empow- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 341 ered to decide how the land in their communities will be used to develop the housing that’s needed. By taking land out of pri- vate markets and making it a shared resource, we can fulfill our obligation as a society to provide hous- ing as a basic human right. Firms have the incentive to build the housing that communities want because it earns them an honest liv- ing and improves their own cities and neighborhoods. In every way, cooperative ownership is good for indi- viduals, for businesses, and for the nation. When peo- ple have the housing they need—and when they can pay for it without going broke—the whole soci- ety benefits. Participator y Governance ProductionFor Use Cooperative Ownership The Six-C ore Cube of Demo cratic So cialism Figure 11.3 Radical View When I was in my thir- ties, I was in a position to “own” a home. I put that word in quotation marks because after signing the mortgage papers, I real- ized the bank actually owned more of the house than I did. But it was “my” house since I was respon- sible for all the mainte- nance and repair bills, the property taxes, and the insurance. I was aware that, as a homeowner, I could lose my invest- ment through all sorts of bad luck. I worried about floods, earthquakes, roof leaks, mold, and electrical fires. Eventually, I sold the house and moved into a rental apartment. Now I lie awake at night worry- ing that the corporation that owns the building will jack up my rent and I’ll have to move. No matter which way we turn in capitalism, hous- ing is rigged against us because the profit-driven bank and the profit-driven corporation are forced to sacrifice our housing security for their bottom lines. In democratic socialism cooperative own- ership of housing gives us control over our own homes. Co-owners make decisions using a dem- ocratic process, and housing is one of our social safeguards, which means affordable housing is a priority for every community. It makes the most sense when housing is an investment in people, not an investment for profit. There is plenty of money to afford everything we need to produce decent and sustainable options as a society when we have cooperative ownership. When housing By taking land out of private markets and making it a shared resource, we can fulfill our obligation as a society to provide housing as a basic human right. In democratic socialism firms have the incentive to build the housing that communities want because it earns them an honest living and improves their own cities and neighborhoods. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 342 | Voices On The Economy is cooperatively owned we get a wide variety of affordable and desirable options, and individuals have a vote and a voice in their living situations. As long as we have capitalism, we will always suffer from a lack of affordable housing because the problem is private ownership. Land should belong to everyone. But in capitalism land is just another resource to be monetized by banks and corporations. The vast majority of us are at their mercy. And land shouldn’t be treated as a com- modity to buy and sell for profit. This scarce and precious resource belongs to all of us, but in cap- italism it’s not being used to create the housing people need. In crowded urban areas, for exam- ple, speculators buy up apartment buildings and allow them to fall into disrepair or stay empty in the hopes that the area will become gentrified. Gentrification is a strategy to renovate prop- erties when neighborhoods become desirable so as to attract more affluent tenants, thereby pushing out the low-income residents. As a con- sequence, people are homeless because they can’t find affordable housing. Even if you own a home, the minute you fall on hard times and can’t make your mortgage payments, the bank swoops in and forecloses. Same goes if you fall behind on the rent—you’re evicted. Then those private owners and banks turn around and pres- sure local government to pass anti-vagrancy laws, so even the streets are no longer an option for you because homelessness is now a crime. No matter what your current circumstance in life may be, you’re a few rent checks or mortgage pay- ments away from ending up homeless. That’s the promise of capitalism. Liberals, your government housing policies are like the Titanic. The whole system is sinking, but you keep rearranging the deck chairs as if this is going to keep the whole thing afloat. First you came up with public housing to replace slums— and then your housing projects turned into slums. Then you came up with Section 8 housing, which continued to concentrate poverty and its atten- dant problems in those areas. So you introduced the voucher system. It is slightly less patronizing to people because it promises them some per- sonal choice in the matter of where they live, but the program still can’t possibly meet the needs of the lines of people waiting years just to get on the five-year-long waiting list. Low-Income Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 343 Housing Tax Credits are another capitalist scam to line the pockets of developers and investors while pretending they are creating the affordable housing we need. In reality there are so many loopholes that only a fraction of those units actu- ally go to low-income people. And rent control is no solution either. Even if there were rent control laws across the whole nation, capitalism feeds on profit, so by making housing less profitable for landlords, you discourage them from providing housing. That leads to more homelessness. Liber- als, your efforts are futile: you’re trying to fix what can’t be fixed: the systemic failure of capitalism. It’s a sinking ship that leaves millions without a roof over their heads, and millions more waiting in dread to join them. Conservatives, you are guilty of selling us the lie that unfettered capitalism brings us the best quality of life. Your American Dream is a hoax. Millions and millions of hardworking people can barely afford to rent a decent place to live. Across the nation they give their blood, sweat, and tears to their jobs and still have to worry every day about keeping a roof over their heads. And your solution is a bad joke. People who are unable to find affordable housing can’t just move themselves and their families to another city. The disruption to everyone’s lives and their social networks and communities would be devastating. Your plan would create masses of domestic migrants. The problem isn’t that this country doesn’t have the resources to provide housing for all. We could solve homelessness and build strong communi- ties today if we stopped seeing the provision of housing as a way to make a buck. If we leave it to your free-market capitalism, landlords will always raise rents as high as they can get away with while they maximize their profit by doing the minimum upkeep and repairs—even when this hurts their tenants. And even if they don’t want to evict ten- ants who can’t pay, or turn people out of their homes to convert the property into more prof- itable vacation rentals, private owners will do it anyway. In capitalism a landlord who isn’t doing that is a landlord who doesn’t survive. The result is homelessness on a massive scale. This is the true story of free-market capitalism—a tragic tale repeated over and over. We should replace rent control with Resi- dent-Owned Communities to ensure affordable housing for all. These can be any type of hous- ing people want, with any type of structure that people decide. ROCs are flexible and adaptable, and they respect people’s dignity and well-be- ing. In democratic socialism no one else can own your home and profit from your need to put a roof over your head. Housing is a right and also a responsibility, so everyone pays in to a universal housing fund as part of their taxes. The money is given to those who need it. It might take the form of a housing voucher for a family, funds for new developments, or direct provision of hous- ing through government-assisted ROCs. Commu- nity land trusts work with stakeholders in their local areas to plan the best use of land for afford- able housing now and into the future. When land is used for the good of everyone, then we get swamplands turned into co-op high-rise apart- ments, empty lots turned into co-housing devel- opments, and desert scrub turned into flourishing resident-owned mobile home communities. With cooperative ownership, we no longer have the problem of homelessness, and everyone can have a home base from which they can succeed and thrive. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 344 | Voices On The Economy RadicalDemocratic Socialism BIG PICTURE When housing is cooperatively owned, we get a wide variety of affordable and desirable options, and individuals have a vote and a voice in their living situations. POLICY POSITION Unaffordable housing leads to homelessness, but . . . " Liberal policies, whether tax credits, vouchers, or public housing, can’t ever be sustainable solutions because they don’t challenge the core problems of private ownership and the drive for profit. " Conservative policies will lead to more homelessness because when housing is a for-profit enterprise, landlords will charge the most rent they can in order to grow their profits. SOLUTION Replace rent control laws with Resident-Owned Cooperatives to ensure affordable housing for all: ! Community land trusts lease the land in perpetuity. ! A home is a basic human right. Housing Participator y Governance ProductionFor Use Cooperative Ownership The Six-C ore Cube of Demo cratic So cialism Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 345 Housing Talking Points: Radical 1. In democratic socialism cooperative ownership of housing gives us hands-on control over where we live. Co-owners make decisions together using a democratic process of one person, one vote. That means you can feel secure knowing your monthly fees won’t just go up arbitrarily and things that need to be repaired will actually get fixed. And when bad luck strikes—like a plumbing problem or a tornado—co-owners come together and take care of it. 2. Housing is not a luxury; it’s a necessity for our survival. Communities make it a priority to ensure there are affordable options for people at every stage of their lives. Because it’s both a right and a responsibility, uni- versal housing is funded through taxes. When housing is an investment in people and not an investment for profit, there is plenty of money in our communities to afford everything we need to produce decent and sustainable options. No one has to live in fear of being homeless. 3. In fair-market capitalism, every attempt to provide public housing fails because residents don’t have an ownership stake, a voice, or a vote. We see again and again that those projects turn into slums. Lib- eral programs may mean well, but they end up being patronizing and dehumanizing to low-income people. Those programs only appear to address serious economic problems, but the underlying cause—private ownership—is still the real problem. 4. Liberals, first you came up with public housing to replace slums—and then your housing projects turned into slums. Section 8 housing isn’t much better, so you introduced the voucher system. Now people wait for years just to get on the five-year waiting list! Low-Income Housing Tax Credits? A scam to line the pock- ets of developers and investors, so please don’t pretend it’s bringing us the affordable housing we need. And rent control? A bad patch job that doesn’t fix the problem. 5. If capitalism really worked, then we wouldn’t have tens of millions of people who can barely afford to rent a decent place to live, and millions more who are homeless. Hardworking people across the nation worry every day about keeping a roof over their heads. We don’t solve homelessness by advising them to move somewhere else. We solve it the minute we stop seeing the provision of housing as a way to make a buck. 6. Conservatives think price signals will magically save the day and cure us of homelessness. They won’t. In free-market capitalism landlords will always raise rents as high as they can get away with, and they maxi- mize their profit by doing the minimum upkeep and repairs. Even if they don’t want to evict tenants who can’t pay, or turn their affordable housing into profitable vacation rentals, they will. In capitalism, a landlord who isn’t doing that is a landlord who doesn’t survive. 7. People must have homes to succeed in life. That’s why we all contribute to ensure that housing is a basic right. For those who need help beyond the social safeguards already provided in democratic socialism, government-assisted ROCs ensure that they have adequate, affordable housing—now and into the future. Community Land Trusts plan the best uses of land, and that makes sense because land should belong to everyone. 8. In democratic socialism we get a wide range of affordable housing choices. You like being around other people? Choose co-housing, where everyone shares meals and responsibilities, or a co-op apartment, where neighbors make decisions together, or a resident-owned mobile home park. You’d rather do your own thing? Choose a single-family home. The point is that no one is making a profit off your need to put a roof over your head, and that’s how we solve the problem of the lack of affordable housing. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 346 | Voices On The Economy LiberalVoice on Housing Housing I loved to play Monopoly, and even when I lost a game, I was eager to play again. That’s because we all started off as equals on the game board, which meant I always felt hopeful that I could win the next one. No one had an unfair advantage—we were all given the same $1,500 in Monopoly money before the first turn, and we all began the journey around the board from the same square. In the real world, though, we don’t all start out with the same resources and in the same place in life. Some are born into wealthy families that own lots of properties. Some are born into middle-class families that scrape by, weighed down by debt. And some are born into low-income families that are homeless. These dif- ferent circumstances make a huge difference in the opportunities we get in the game of life. But those who are “winners” often don’t see it that way. They believe they deserve what they have, and they don’t recognize that they benefited from an uneven playing field from day one. A social psychologist named Paul K. Piff, at the University of California, Berkeley, actually studied the phe- nomenon of how people behave when they win at Monopoly. Piff arranged it so that one player had an unfair advantage throughout the game— rolling more than two dice each turn, starting with twice the money, and collecting more than $200 for passing Go. The researchers observed that players with the unfair advantage exhibited louder, ruder, and more obnoxious behaviors as they started to win (they hogged the pretzels!), even though the game was clearly rigged in their favor. The advantaged players credited their suc- cess to their strategy and believed they were enti- tled to their gains because of their hard work and skill. It’s often true that those who live in a bub- ble of privilege end up feeling entitled to hav- ing more than others, and often they blame the “losers” for not working hard enough or being smart enough or special enough. Monopoly is an imperfect reflection of capitalism because in life we don’t all start out on that even playing field. The Piff experiment is much more like real life. Our policies have to take that into account and give people equal opportunities to live in afford- able housing. Let’s consider the low-end apartment market. Imagine you’re a person who can’t afford the rent. There are very few substitutes for low-end apart- ments, and when landlords have the power to raise rents above 30 percent of a person’s income—the definition of affordability—then we end up with more people who are cost-burdened and vulner- Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 347 able to becoming homeless. Without government intervention, what would be your options for affordable housing in this situation? Your sister’s sofa until she kicks you out, the local park until you get arrested for vagrancy, or your car until it’s repossessed or towed. But before it comes to that, rent-control laws can help keep your low-end apart- ment affordable. How? State or local government sets a price ceiling on rent. Of course we know that price ceilings can cause unacceptable shortages, but not in this case, because of the inelastic nature on both the demand and the supply sides. As you can see in figure 11.4, rent control creates hardly any shortage at all, while making rents affordable for low-income tenants. This is a good policy for landlords as well because they benefit from having a stable tenant population and reliable cash flow. That minimal shortage will be alleviated by gov- ernment-supported affordable housing programs, including vouchers and tax credits. Rent control laws with government incentives for landlords not only keep low-end apartments affordable, but they also bring us more of the housing we need. P1 R S D QQ1 Low-End Apartment Market QS Price Ceiling QD Figure 11.4 Liberal View A year ago, I was walking into the grocery store, and I happened to catch the eye of a home- less man in his mid-twenties standing by the door. He looked startled. “Wait,” he said, “weren’t you my sixth-grade teacher?” I had last seen Tyler (I’ve changed his name here) when he was eleven years old and full of promise and big dreams for his life. Now he was homeless. He told me Lu cy N ic h o ls o n /R E U T E R S A d o b e st o ck .c o m Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 348 | Voices On The Economy he’d fallen on hard times and lost his apartment. He looked exhausted and defeated. I remembered him as a bright, curious boy, but in his present cir- cumstances it would be very challenging for him to get a job—no address, unwashed, using all his energy just to survive another day. I offered to buy him some groceries, and he hesitated, embar- rassed. I insisted. We each took a cart, and he rolled past the aisles of junk food and zeroed in on protein—a roast chicken, lunch meats, milk. I couldn’t convince him to take more. Before we parted, I told him where he could find information on government-assisted housing programs and offered to help. He thanked me, shouldered his backpack, and walked off into the night. My heart breaks when I think of all the homeless people like Tyler. I couldn’t possibly take them all grocery shopping, but I’m grateful I live in a country where we do the right thing and help people who need affordable housing. Through tax-supported public housing programs and policies such as rent control, we keep individ- uals and families from falling through the cracks. With a home, they can have the good nutrition, rest, hygiene, and safety they need to flourish and be contributing members of society. Through rent control laws, we get a stable supply of affordable housing, which means people can afford to keep a roof over their heads. Conservatives, you have faith in the invisible hand to make all things right, but price signals are morally neutral. On the other hand, our higher moral value as a society is to care for one another and promote equity. And it’s in our self-interest to do so because the help- ful hand of government is what makes our nation strong. We all benefit when we end homeless- ness. Your idea to leave landlords to their own devices will mean soar- ing rents. It’s guaranteed because we know that when a product is neces- sary, with few substitutes, the producer will make more money by raising the price. But when that happens with housing, it creates mass homeless- ness. There is no substitute for housing—not the car, not the park bench, not the temporary homeless shelter. And private philanthropy is wonderful, but it will never be enough. Solving homelessness is a massive undertaking that can only be done with the resources of our govern- ment in partnership with the private sector. Your flippant notion that low-income families can just pack up and move to a new place where housing is affordable is completely naïve. It’s expensive to move to a new place, and once they get there, those low-income tenants will be at the mercy of a new landlord who can gouge them with impu- nity. If you had your way and we got rid of rent control laws and government housing assistance programs, it would create chaos and suffering for millions of families. You can’t tell people to pull themselves up by their bootstraps and then take away their boots. Radicals, your idea to leave it to community land trusts to lease public land for cooperatively owned housing is rife with potential for crony- ism. There is a limited amount of land on which Rent control helps landlords by ensuring steady income streams and stable tenants. We strengthen the program by giving landlords more options and more incentives to invest in affordable housing. This is fair, and it also creates buy-in from landlords. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 349 housing can be built, so which group of wannabe cooperative owners will get the lease? It will be the group that knows the most people who show up to the meeting, has the most friends, knows the stakeholders on the committee, and so forth. Also, without the profit motive, the buildings will never be constructed because the plumber, the electrician, the mason, the architect, and every- one else won’t bother showing up for work every day. Not every project is motivated by altruism. Those builders are not always building housing for only their own family and friends. People respond to profit, which you devalue in demo- cratic socialism. But let’s say you do somehow manage to get your cooperatively owned housing built. Then the nightmare really begins. Endless meetings, factions bickering, and residents fight- ing to make every decision. Droves of people will beg to go back to the better system of capitalism, where they can rent an apartment, be assured of affordable housing because there is rent control, and go home at night to the blissful peace and quiet of their own private lives with no endless cooperative meetings to endure. We should support rent control policies to ensure affordable housing for all. It helps low-in- come tenants by making rents affordable, it helps communities by creating more affordable hous- ing options, and it helps landlords by ensur- ing steady income streams and stable tenants. We should strengthen the program by bringing rent control to more areas of the country where affordable housing is desperately needed, and by giving landlords more options and more incen- tives to invest in affordable housing—property tax breaks, funds for repairs, and so forth. This is fair, and it also creates buy-in from landlords. Every single state is dealing with a lack of suf- ficient affordable housing. Getting people into affordable housing saves our nation billions in programs that address the fallout from homeless- ness—hunger, crime, drug addiction, and disease. When the government partners with the private sector, swamplands turn into affordable and ele- gant high-rise apartments, empty lots turn into affordable, mixed-income housing developments, and desert scrub turns into affordable and lovely mobile home communities. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 350 | Voices On The Economy LiberalFair-Market Capitalism BIG PICTURE Through rent control laws, we get a stable supply of affordable housing, which means people can afford to keep a roof over their heads. POLICY POSITION Unaffordable housing leads to homelessness, but . . . " Conservative policies to eliminate rent control lead to even more homelessness because landlords can and do take advantage of tenants’ economic vulnerability. " Radical policies lead to cronyism, weak construction (if buildings even go up at all), and a nightmare of endless meetings. SOLUTION Support rent control policies to ensure affordable housing for all: ! Strengthen with incentives for landlords. ! Save billions when homelessness ends. P1 R S D QQ1 Low-End Apartment Market QS Price Ceiling QD Housing Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 351 Housing Talking Points: Liberal 1. A home isn’t a luxury—it’s a basic necessity for every human being. It’s the foundation for well-being—for decent nutrition, for good hygiene, for a good night’s rest, for personal safety. No matter whether it’s a tiny attic apartment or a palace, home is our personal sanctuary. It’s in our self-interest to ensure that everyone has an affordable home because homelessness traps people in poverty, which ultimately ends up draining society’s resources. 2. Homelessness derails people’s lives, and we miss out on the contributions they could be making if they weren’t so dragged down with the business of daily survival. We’re fortunate to have a government that does the right thing by partnering with private industry to create more affordable public housing and affordable private housing options. Instead of turning our backs on the homeless, we build a thriving economy and stronger society. 3. Conservatives, relocating is expensive, and these are poor people, so telling low-income people to pack up and move to a new city is not a practical solution. And even if they managed to move, without rent control, they’d just be at the mercy of a new landlord who will gouge them with impunity. You’re the first to preach about hard work and people needing to pull themselves up by their bootstraps. But then you turn around and want to take away their boots. 4. Capitalism works beautifully because people act from their self-interest to maximize their profit, which generates abundant wealth. But when it comes to a product that is also a basic necessity, such as housing, the profit motive needs to be reined in. There are no real substitutes for affordable housing—not the car, not the park bench, not the temporary homeless shelter. Private philanthropy can’t house everyone, and doing nothing gets us nowhere. . 5. Radicals, there is a limited amount of land on which housing can be built, so which group of your wannabe cooperative owners will get the lease from the community land trust? Your system is set up for the worst kind of cronyism. Human nature doesn’t change just because you switch over to democratic socialism. People are not motivated by altruism. Profit is the reason they get out of bed in the morning and show up at your building site. No profit? No building, no affordable housing, and more homelessness. 6. Can you imagine a worse nightmare than cooperative housing with a bunch of democratic socialists? Endless meetings, factions, and infighting to make every little decision. You’ll be walking into a war zone every time you go home. People will rise up and demand a return to the sanity of capitalism and private ownership, where they can come home to their rent-controlled apartment and enjoy the blissful peace and quiet of their own private lives with no endless cooperative meetings to endure. 7. Rent control laws make housing affordable for low-income people and also help landlords, because they can rely on a steady income stream and low turnover of their tenants. Let’s strengthen the program by giving landlords more options and more incentives to invest in affordable housing—property tax breaks, funds for repairs, and so forth. This is fair, and it also creates buy-in from owners. 8. There is not one state in the union that doesn’t struggle with a lack of sufficient affordable housing. Getting people into affordable homes saves our nation billions in programs that address the fallout from homeless- ness—hunger, crime, drug addiction, and disease. When the government partners with the private sector, we get the affordable housing we need. The government has the power to use programs and regulations to fix the problem. When we can fix a problem, we should. Talking Points Rules: • Say these aloud to someone else. • Say them with conviction and passion, even if you disagree. • Please avoid mockery and sarcasm. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 352 | Voices On The Economy The Shared Outcome All three perspectives share the same goal of creating affordable housing for all. The issue of housing has been with us since the beginning of human civilization and will always be a central priority because we can’t survive without it. We will always need a roof over our heads. All perspectives agree that it is both desirable and possible to end homelessness and make housing affordable. So it’s time for you to try on the different perspectives and join the conversation as a respectful listener, passionate advocate, and intelligent debater. In this way, you’ll find your own voice on housing, and you may even spark some new ideas in the process that can solve this problem. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About Chapter 11: Housing | 353 Activity: Poster and Re-vote 1. Activity Instructions Get together with friends, classmates, or family members and share the talking points and perspective summaries with them. Read them aloud together. Then, work together to create a poster from one of the perspectives. Let your creative juices flow. Whatever you draw, make sure the images and words are big enough so that people in the back of the room can see and read your poster. Try to use no more than twelve words, and please don’t use copied images, graphs, or technical language (for instance, the word inelastic). Your poster should include a positive view of the perspective you’re representing and also critiques of the other two perspectives. Be prepared to present your poster and explain what’s going on in the images—but at the same time, make sure it also speaks for itself. 2. Revisit Your VOTE Ballot Now that you’ve made a passionate case for a perspective on housing—and hopefully heard your friends, classmates, and family members make their passionate cases for other perspectives—please go back to the VOTE Ballot and vote again on Housing. Are you more certain than ever that your original position was correct? Have you shifted toward a different perspective? Be sure to fill in the “Why?” section. The VOTE Program is all about helping you think critically about the issues and have informed opinions. Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About 354 | Voices On The Economy Chapter 11: Test Yourself! Below are multiple-choice questions to help you review the material you just read in this chapter. You can find the answers below. 1. Imagine that you earn $2,000 a month gross (before taxes) and that you’ve found a one-bedroom apartment to rent for $600 per month (not including electricity, gas, water, and trash). Is this apartment affordable according to the federal definition of affordability? A. Yes, $600 is 30 percent of your gross earnings of $2,000 and your housing is therefore officially affordable. B. No, because the rent doesn’t include utilities. Once those are factored in, you will have to spend more than 30 percent of your gross income on housing. C. Yes, because your annual gross income is $24,000, and your annual rent is $7,200, which is an affordable 30 percent of your gross income. D. No, because in addition to the utilities not being paid, it is also necessary to factor in property taxes. This amount will be much higher than the 30 percent affordability number of $600 per month for the base rent. 2. Match the type of housing (left column) to its definition (right column). A. Apartment i. Residential units in which both the land and the entire structure are privately owned. B. Condominium ii. Residential units in a building are owned by a
nonprofit corporation in which the residents own
shares.
C. Co-op iii. Residential units in a building plus a percentage
of shared spaces are privately owned.
D. Single-Family Home iv. Residential units in a building are owned by a
landlord and rented by a tenant.

3. Which of the following addresses the problem of unaffordable housing from the private sector?
Choose all that apply.
A. Religious groups
B. Nonprofit organizations
C. Private philanthropy
D. Public housing authorities
4. Suppose you are struggling financially and are having trouble paying the rent. You turn to the
government for assistance and eventually you’re approved to move into a particular apartment
complex where the units are rent-subsidized. Which one of the choices below describes your new
housing situation?
A. Section 8: Tenant-Based Housing Choice Vouchers
B. Section 8: Project-Based Rental Assistance
C. Public Housing
D. Low-Income Housing Tax Credit

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Chapter 11: Housing | 355
5. From the viewpoint of a conservative, what is most likely to happen when price ceilings are imposed
on residential rents?
A. Those whose needs for housing are most urgent will be able to get the housing they want.
B. Poor people will be able to find adequate low-end housing.
C. Homeowners will reduce their own use of housing space, making more available to others.
D. People will have difficulty finding low-end housing to rent.
6. Please complete the following sentence from the radical perspective: “Housing is a basic human
necessity, and/but in capitalism____________________”
A. the main purpose of housing is to monetize it, not to provide shelter.
B. price signals ensure that the best, least expensive, highest-quality options will be available
to the most people.
C. rent control causes a shortage when fewer landlords choose to supply and more tenants
choose to demand.
D. a combination of private and public efforts to ensure affordable housing means that
everyone who needs a home gets a home.
7. Liberals believe that both radical and conservative policies lead to increased levels of homelessness,
but for different reasons. Their critique of conservatives focuses on __________, while their critique
of radicals focuses on __________.
A. price floors; lack of commitment to representative democracy
B. surplus of low-end apartments; allocation of land, labor, and capital
C. elasticity of demand; allocation of land
D. price ceilings; the socialist tendency toward dictatorship
8. Please choose the correct conservative interpretation of this low-end apartment market graph.
A. When the rent is too high in one place, people
leave in search of affordable rents elsewhere. This
not only gets people into affordable housing, but
it is how we populate the country according to the
needs of each community.
B. Affordable housing is ensured when a price ceiling
is set in the market, thereby shifting the demand
curve left, from D to D2.
C. By eliminating all government housing programs
and policies, the demand for low-end housing
decreases, resulting in lower rents and fewer
available units.
D. The best way to reduce rents and increase
affordability of low-end apartments is to make it
less profitable for firms to supply. When this happens, demanders drop out of the market
and prices respond.
R1
R
S
D
QQ1
Low-End Apartment Market
Q2
R2
D2

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356 | Voices On The Economy
9. Please choose the correct radical interpretation of this Six-Core Cube.
A. When land is privately owned people get the right
mix of low-end, high-end, and middle-end housing
that society needs to prosper.
B. Low-income people have access to affordable
housing because the government builds, controls,
and allocates all the housing.
C. Cooperative ownership gives people the right mix
of options for the kind of affordable housing they
need to prosper.
D. B & C only.
10. Please choose the correct liberal interpretation of this low-
end apartment market graph.
A. As with all price ceilings, unsustainable levels of
housing shortages (and therefore homelessness)
will result.
B. Inelastic supply and demand of low-end apartment
rentals means that price ceilings initially will lead to
minimal housing shortage.
C. The minimal shortage is alleviated through
government affordable housing programs.
D. B & C only.
Participator
y
Governance
ProductionFor Use Cooperative
Ownership
The Six-C
ore Cube
of Demo
cratic So
cialism
P1
R
S
D
QQ1
Low-End Apartment Market
QS
Price
Ceiling
QD
Answers
1. B 2. A – iv, B – iii, C – ii, D – i 3. A, B, & C 4. B 5. D 6. A 7. C 8. A 9. C 10. D

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Chapter 11: Housing | 357
Chapter 11: Key Terms
Affordable housing
Apartment
Commune
Community Development Block
Grants (CDBG)
Community land trust
Condo board
Condominium
Condominium association
Co-housing
Co-op apartment
Co-op board
Cost burdened
Default
Evict
Foreclosure
Gentrification
Homeowners association
Household
Housing
Inclusionary zoning
Intentional community
Landlord
Lien
Low-income housing tax credit
Mobile home community
Mortgage
Point-in-time count
Project-based rental assistance
Property manager
Public housing
Public housing authorities
Rent
Rent stabilization
Section 8
Single-family home
Squatters
Temporary housing
Tenant
Tenant-based housing
choice vouchers
Utilities

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
358 | Voices On The Economy
Attention Readers!
Here is a preview of what will be covered in The VOTE Textbook, Volume II:
Part III—Microeconomic Issues
Chapter 12 Issue: Income Distribution
Chapter 13 Issue: Market Power
Chapter 14 Issue: The Environment
Chapter 15 Issue: Health Care
Part IV—Macroeconomic Issues
Chapter 16 Tools for the Big Picture
Chapter 17 Issue: International Trade
Chapter 18 Issue: Retirement Security
Chapter 19 Issue: Economic Stability
Chapter 20 Issue: The Federal Budget
Part V—New Conversations
Chapter 21 Approaching a New Issue: Immigration
Chapter 22 Your Voice, Our Future
Glossary of Terms
Index

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
| 359
ABOUT VOICES ON
THE ECONOMY (VOTE)
Our Mission: Inspire solutions to our nation’s urgent economic problems by building a culture
of respectful listening, passionate advocacy, and intelligent debate.
Our Method: Line up the liberal, radical, and conservative perspectives on economic issues—
side by side, in a completely unbiased way—and invite people to try on those competing voices so they
can fluently articulate each one.
Our Vision: People from all walks of life find their voices on the issues and become educated
voters, combative debate becomes solution-focused conversation, and the nation moves forward in the
best possible way.
Voices On The Economy (VOTE), Inc., is an award-winning nonprofit organization that addresses a debilitating problem in our nation. We all know that conservatives, radicals, and liberals routinely
vilify and reject one another’s ideas out of hand. But these are ideas that could spark brilliant solutions
to our critical economic problems, if only we would hear them with an open mind. The stakes couldn’t
be higher. If we don’t find alternatives to scornful debates, the logjams will continue. We risk our
nation’s prosperity and our collective well-being.
Many people think, “Economics? That’s not relevant to me.” Not true! Economics is about everything
in our lives—from smog in the atmosphere, to quality health care, to hunger in our country, to afford-
able housing. As a nation, we could have everything we need for all to thrive, but what we don’t yet
have are the creative economic solutions to realize this potential. The VOTE Program is founded on the
belief that system change is possible. We can address the root causes of our most pressing problems.
It’s time to dispel the notion that finding those solutions is a task best left to the experts. VOTE inspires
all of us to become the next great economic thinkers who can solve the core human question of how
to create prosperity.
This program is the antidote to toxic economic partisanship and limited thinking in the classroom,
media, and wider society. We present fair, accurate, and balanced views of multiple economic per-
spectives. The best solutions to move our nation forward come from pluralistic thinking—not shouting
one another down and shutting out good ideas. We change the conversation by giving participants
hands-on practice with civil discourse while at the same time teaching basic economic literacy so
that every person from every background can enter the larger conversations in an informed way and
“vote”—at the ballot box, at the kitchen table, and in every other area of life.
Each of us has a stake in the future of our country. Each of us has a responsibility to be informed
about the pressing economic issues that affect us all: Agriculture, Product Safety, Livelihood, Housing,
Income Distribution, Market Power, the Environment, Health Care, International Trade, Retirement
Security, Economic Stability, the Federal Budget, and Immigration. By analyzing issues from the lib-

Front | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | About
360 | Voices On The Economy
eral, conservative, and radical perspectives, we maximize our ability to find ingenious solutions. Our
award-winning program is taught in classrooms, prisons, senior centers, churches, synagogues, political
organizations, and more.
But please don’t think the VOTE Program is just a curriculum. Better to compare it to a Sputnik
moment. People had looked up at the sky for millennia, but the launch of the first satellite sparked the
human imagination in a new way, and a whole generation fell in love with space exploration. VOTE
sparks people to fall in love with the questions economists have been asking for hundreds of years:
How do we create a community where people have what they need to flourish? How do we create
a world where we are released from worry about our physical well-being and are free to make our
unique, positive contributions to society? There are no limits to the possibilities and beauty of what we
can accomplish through our economic relationships when we harness the intelligence and imagination
of the whole nation to create economic well-being for all.
Our History
Since 1992 Amy S. Cramer, PhD, has been teaching multiple perspectives on economic issues. After
earning her doctorate in economics from the University of Massachusetts Amherst, she developed a unique
interdisciplinary program that evolved over the decades to become Voices On The Economy (VOTE). In
2015 VOTE launched as a 501(c)3 nonprofit organization. Dr. Cramer’s teaching experience includes peo-
ple of all ages and education levels. She served on the faculty at Trinity College, Clark University, and the
University of Arizona. Currently she is a full-time economics professor and discipline coordinator for Pima
Community College (PCC) in southern Arizona. In 2017 Cramer and journalist Laura Markowitz began
collaborating on Voices On The Economy: How Open-Minded Exploration of Rival Perspectives Can Spark
Solutions to Our Urgent Economic Problems. Markowitz is a National Magazine Award–winning feature
writer, editor, and contributing producer for Arizona Public Media.

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