Re: Standard economic models and poverty

[Deborah Groban Olson <dgo@esoplaw.com>]

Dear David:

        It may not "sing" to those with more evolved economic theories than me,
but to me it makes great sense to try to develop that approach. It has the
advantage of being able to speak within the accepted paradigm. Even if the
accepted paradigm is wrong, if evidence can be generated to prove the point
you are making, it gives activists for economic democracy or shared
capitalism another hook on which to hang our policy proposals.  

        We need to move from the theoretical to the concrete research and
experimental stage of this process. In order to get there, we need to have
a series of research and experimental or demonstration projects. It is from
the results of these that we will be able to take the next steps. Some of
these include simple research documenting the effects on employee or other
forms of broadened ownership, such as those that have been done in the
State of Washington by Kardas and Keogh, and the soon to be published Ohio
study by Logue and Yates.

        I encourage you to flesh out the research design for the project you 
wish
to pursue. I cannot promise that we will support it, but at least we can
consider it, and try to find you links to people who may be able to help you.

        Best regards,
        Deb Olson
At 04:25 PM 1/12/00 -0500, you wrote:
>>>> Michael Harrington <mharrington@milken-inst.org> 01/12/00 02:58PM 
>AS for economists, I think they do understand how the rich get rich, what
>they can't explain is why poverty persists. Perhaps they have a blind eye to
>the role of capital endowments and distribution but the pat answer is that
>different endowments explain inequality - education, social and physical
>environment, intelligence, wealth, natural resources, etc. They conclude
>that policy can best address the problems of education and social
>environment but we in COG and any astute observer knows this won't be
>enough. 
>
>-------------------------------------
>
>I think the other problem is that poverty is pretty hard to tackle using 
>standard economic models.  The persistence of poverty is not itself a 
>surprising consequence of the standard model, as within that model you get 
>based on what you've got.  It is difficult, however, for the standard model 
>to describe widespread poverty amongst great wealth as either superior or 
>inferior to the same economy distributed broadly.  Since no individual is 
>considered more or less significant within the model, and there is no easy 
>way to aggregate individual utility functions (i.e. add up individual 
>happiness and sadness), there is no real way for the standard model to 
>address the instinct held by most of us that concentrated wealth makes for a 
>bad society.
>
>I honestly believe that there >is< ground to be won in economics by trying 
>to show that concentrated wealth tends to slow economic growth, and 
>otherwise screw up the macroeconomy, as well as show that "stakeholder" 
>ownership tends to produce superior microeconomic outcomes. Unfortunately, 
>this is not an approach which "sings" to the inner being of most activists 
>in the field of capital democratization.  I just happen to be on the skinny 
>end of the bell curve (as usual)...
>
>Oh, good to be back on the list (post Christmas hiatus)
>

Deborah Groban Olson
Project Co-ordinator
Capital Ownership Group Project
Ohio Employee Ownership Center
Kent State University
c/o Shared Equity Strategies, Inc.
3163 Penobscot Building 
Detroit, MI 48226
(313) 331-7821 or (313) 964-2460
(f) (313) 331-2567
email: dgo@esoplaw.com
web site: http://cog.kent.edu