A Curiously Ahistorical Viral Video on Inequality

10 03 2013

In the last few days, a short video on income inequality in the United States has gone viral. The video clip is based on research by HBS Professor Michael Norton, who did a survey asking Americans what they thought the ideal distribution of wealth in the United States ought to be. Essentially, the asked participants how much of the national wealth should each quintile of the US population control (i.e., the top 20%, the bottom 20%, the middle 20% slices). Norton then compared these numbers with the actual degree of inequality. The results were shown in the video.

I believe that rising inequality is a problem. I believe that there is a lot that governments can do to combat this trend. I think that President Obama is absolutely right to ask Congress to increase taxes on the wealthy. However, I would question Norton’s methodology, which involved asking average Americans to pick a number out of the air to describe the degree of income equality that thought was ideal.

I find this video to be even more problematic.

This video is essentially ahistorical and says almost nothing about whether inequality has increased over time. (There is a brief reference to the fact inequality has increased since the 1970s but that’s it). Norton’s published research cites the research showing that inequality in the US has increased dramatically since about 1980. Among people who teach American history and American political economy, the basic story of income inequality in twentieth century America is well-known. US society in the early twentieth century was highly inegalitarian. Then, during the New Deal and WWII eras, the Gini coefficient plummeted. The United States became a society with a large middle class and few people at the very extremes. Since 1980, inequality has reverted to Gilded Age proportions. Paul Krugman has helped to popularize this stylized account of American inequality in the New York Times.

Somehow, this important data was left on the cutting room floor by the creators of the video. The omission of the historical context is unfortunate for several reasons.

First, the omission of the historical information discourages the viewer from thinking about the causes of rising inequality. Obviously a short video can’t engage with the debate about the causes of rising inequality. Is rising inequality driven by globalization, technological progress, fiscal policy (i.e., Republican tax cuts for the rich), or some combination of the above? However, mentioning that inequality began to rise around 1980 would be a way of getting viewers to think about why it has increased.

Second, a historical or empirical approach is more likely to convince viewers than the more deductive or philosophical approach taken in this video. This video might appeal to followers of the late Harvard philosopher John Rawls, who conducted some interesting thought experiments about how much inequality we ought to permit. The average person, however, is more likely to be convinced by empirical data. The average person is a bit like Edmund Burke. He or she tends to be suspicious of attempts to bring the real world in line with grandiose theories and philosophical speculations. Tell someone that society ought to adopt principle x, and they will likely ask “Has any real world society done this? How did things work out for that society? Is that society similar enough to our country to make the adoption of principle x feasible?”

The argument that there are tribal societies on this planet in which economic inequality is very low likely isn’t going to convince many voters to support a more egalitarian distribution of wealth. After all, these societies can be dismissed as primitive, alien, and left-overs from a distant period of human history. Pointing out that societies that other Western industrial democracies have lower inequality than the United States would be more convincing, since some of these societies are objectively very successful (great companies, high GDP per capita, and trains that make Amtrak look like crap). However, when we use this approach, we run into the problem of anti-foreigner bias: people might dismiss the Danes and French because they live far away and eat smelly cheese.

To my mind, the argument for equality most likely to win over middle-of-the-road Americans is a historical one: between the 1940s and 1970s, the distribution of wealth in the US was much more egalitarian than it is now and the country experienced rapid economic growth. Americans are a practical people who believe that the proof of the pudding is in the eating. The Middle-Class America of Paul Krugman’s childhood is neither exotic nor ancient history. It is within the living memory of many people today. Tell people that a vote for equality is a vote for post-war prosperity, and you will have a winning argument.

Less Equal Than in 1774?

20 09 2012

Economic inequality had become a prominent feature of this year’s presidential election campaign. Just a few years ago there were those who claimed that class politics were dead in the United States and the Western world more generally. The Occupy Movement and the furore about Mitt Romney’s statement about the 47% have falsified these claims: competing definitions of equality are now central to electoral politics in the United States.

The current political climate has increased the public’s interest in the history of inequality.  Yesterday, Salon.com posted an article that claimed that economic inequality in the United States was now greater than it had been in 1774. This article, which was written by Natasha Lennard, was widely circulated and commented on.  The article was based on research by two academics, Peter Lindert of UC-Davis and Jeffrey Williamson of Harvard.

The current debate about economic inequality in the United States offers economic historians a wonderful opportunity to disseminate their research findings to the general public. It’s a “teachable moment” as we educators say.

Among economic historians, it is well known that inequality trends are non-linear: it is possible for measurable economic inequality in a society to go up and then go down, or vice versa. The basic story of economic inequality in the United States goes something like this: in the colonial period up and then up to about the Civil War, wealth and income was fairly evenly distributed among (white) families. Unlike Europe, where there was a vast gap between the aristocracy and the hungry poor, the United States c. 1800 had few really rich people and few desperately poor (white) people. Benjamin Franklin said that American society was characterized by a “happy mediocrity”. [1]Industrialization and urbanization after 1850 changed this, so that during the Gilded Age of the late 19th century, US society had become much more stratified. The period after the Civil War inaugurated a social revolution in the United States that witnessed rapid urbanisation, the rise of Big Business, and the growth of family fortunes, like that of the Rockefellers. In the Gilded Age, some rich American families built European-style mansions and even married into the British aristocracy. In reaction to these changes in society, new political movements such as the Populists, the Progressives, and more militant labour unions emerged. [2]  The introduction of peacetime income tax in 1913 was a response to increasing discontent with the level of inequality in America.


Income inequality in the United States remained fairly high until the New Deal when the United States was rapidly reverted into being a country with low income inequality. Economic historians call this the Great Compression. Between 1933 and 1945 the United States became a society with a fairly egalitarian distribution of wealth and a vast middle class that included unionized blue collar workers. Capitalism was tamed, the wealthy under FDR, Truman, and Eisenhower paid tax rates that were extremely high by today’s standards. Paul Krugman fondly refers to this society as the “middle-class society of my childhood.”[3]

Great Compression


This situation persisted until roughly 1980. Since then inequality has increased dramatically. The United States is now reverting into a society of haves and have-nots. The trend in Britain and, to a lesser extent Canada, has been similar. Economic historians continue to debate the exact reasons for the re-polarization of society since 1980s. Some attribute it to technological change and globalization, which decimated the old blue-collar working class. Others argue that taxation policy, particularly the massive tax cuts for the wealthy under Reagan and George W. Bush, explain why inequality had grown. See here.


I’m inclined to think that politics (i.e., the Reagan tax cuts) explain most of the increase inequality, as other countries with similar levels of technology and exposure to globalization have not experienced a marked increase in inequality in after-tax incomes. I’m thinking of Scandinavian countries here. Richard Wilkinson wrote inThe Spirit Level: Why More Equal Societies Almost Always Do Better, “if you want to live the American dream, move to Denmark.”

Income inequality since 1980


In any event, there is a lot of good research on the history of inequality out there. It needs to be showcased to the broader public as it can inform political debate. Kudos to Salon’s Natasha Lennard for starting this process.

[1] Benjamin Franklin, ‘Information to Those Who Would Remove to America’ Sept. 1782 in The Writings of Benjamin Franklin, edited by Albert Henry Smyth (New York: Macmillan, 1905–7), vol. 8:603–14. The historiography on inequality and social class in early North America is discussed in Gordon S. Wood, The Radicalism of the American Revolution (New York: A.A. Knopf, 1992), 44-53. Peter Lindert,  “When Did Inequality Rise in Britain and America?” Journal of Income Distribution. 9 (2000): 11-25; Peter Lindert, “Three Centuries of Inequality in Britain and America.” In A.B. Atkinson and François Bourguignon (eds.), Handbook of Income Distribution, volume 1.  Amsterdam: Elsevier Science, 2000, Ch. 3 (pp. 167-216).

[2] Glenn Porter,, The Rise of Big Business, 1860-1920, 3rd ed. (Harlan Davidson, 2006); Alan Trachtenberg, The Incorporation of America: Culture and Society in The Gilded Age, 1st ed., American century series (New York: Hill and Wang, 1982); Bryant Morey French, Mark Twain and The Gilded Age, the Book That Named an Era (Dallas: Southern Methodist University Press, 1965).

[3] Claudia Goldin and Robert A. Margo, “The Great Compression: The Wage Structure in the United States at Mid- Century,” The Quarterly Journal of Economics 107, no. 1 (February 1992): 1-34.


The Changing Justification for Tax Cuts: From Efficiency to Fairness

24 04 2011

The Changing Justification for Tax Cuts: From Efficiency to Fairness

Matt Yglesias has posted something interesting about the ongoing debate in the US about tax cuts for the wealthy. He notes that people on the right of the political spectrum traditionally defended tax cuts for the wealthy on the grounds that they would spur economic growth. In effect, they were asking voters to trade the principle of economic equality away for higher economic growth. The famous trickle-down metaphor said that the best way to help the poor was to invigorate the economy with a bit more inequality.

There is more and more empirical evidence that the Reaganite formula for economic growth (cut taxes and regulation) doesn’t actually work. Much of this evidence, I am proud to say, has come from the discipline of economic history. There is a great deal of evidence of the suggest that there isn’t necessarily at trade-off between growth and equity. For most of human history, massive inequality was a fact of life: there was a huge gap between the peasants and the wealthy in Elizabethan England, but this sure didn’t produce modern economic growth. Even during the British Industrial Revolution, the rate of economic growth in Britian was pretty slow by today’s standard, less than 1% per year. Really rapid economic growth only became common in the Western world at roughly the time these countries were starting to create welfare states. In the 30 years after 1945, when there was consensus in favour of fairly generous welfare states in the United States and other Western countries, economic growth was rapid. Income tax rates for the wealthy were sky high in 1950s America, but this didn’t keep the US from enjoying tremendous prosperity. Presumably there was enough inequality in Eisenhower’s America to encourage the Don Drapers of the world to work hard.  The period since the late 1970s, which saw the erosion of the redistributive state in most Western countries (as represented by Reaganite tax cuts, Thatcher, Prop 13, etc.), also saw a slow-down in economic growth and technological progress.

So now that the economic argument in favour of cutting taxes for the rich has been shot to hell, the right’s justification for tax cuts has shifted from economic efficiency to equity: the right is now arguing in favour of tax cuts for the wealthy on the grounds of fairness.

Yglesias summarizing the new argument coming from right-wing figures such as Arthur Brooks, Yglesias writes:

It’s not that higher taxes on our Galtian Overlords would backfire and make us worse off. It’s just that it would be immoral of us to ask them to pay more taxes even if doing so would, in fact, improve overall human welfare.

Two days ago, the Center for American Progress in DC in hosted a public forum with leading economists and policy experts to discuss the proposition that a focus on equity and economic inclusion is necessary to grow the U.S. economy. In the companion framing paper titled “Is Equity the Superior Growth Model?” authors Sarah Treuhaft from PolicyLink and David Madland from American Progress discuss how economic growth has been slower and less broadly shared over the past several decades, leaving more and more families, even entire communities, behind with diminishing prospects for catching up. Let me quote from their excellent paper at length:

Economists have long considered the relationship between equity and economic growth. Early economic thinking was heavily shaped by Simon Kuznets, a Nobel Prizewinning economist, who argued that economic inequality increases while a country is developing, and then after a certain average income is attained, inequality begins to decrease. His explanation for this pattern was that shifting from agriculture to industry caused inequality to rise but further growth led to increased economic opportunities as well as equalizing government policies.

Kuznets Curve

Kuznets Curve

This argument and its graphical representation—the inverted U-shaped Kuznets curve—suggested that inequity was good for economic growth, at least at the early stages of development. Alas, overwhelming evidence has accumulated that development does not quite work like Kuznets predicted.

Many countries have not become first less and then more equal as they develop. Instead, there have been a wide variety of development patterns, with some countries growing relatively equally at all points in their development and others growing unequally at all points in their development, and still others vacillating between relatively equal and unequal. South Korea, for example, has seen relatively equitable economic growth throughout the past 60 years as it developed from a relatively poor country to a middle-upper-income country. Brazil, historically one of the most inequitable countries, has in very recent years begun to grow more equally. And in the United States, from the 1940s to the 1970s, economic growth went with increased equality, but since the 1970s, additional growth has reduced equity.

The real world has not conformed to the Kuznets curve. Still, the idea that there is a tradeoff between growth and equity did not just go away. Instead, it remained influential, even for advanced countries, though the hypothesis was largely untested.

Read more here.

Update: Krugman has commented on Yglesias’s post. See here also.

Bliss on Taxation in Canada (Nostalgianomics)

18 02 2010

Michael Bliss, who is one of Canada’s most accomplished historians, has published a piece in the Globe and Mail calling for Canada’s system of taxation to be made more progressive. I really admire Bliss’s work as a historian and he makes an interesting case in this op-ed piece, but there are some ideas lurking in his piece that I cannot let pass without comment.

Bliss writes: “Inequality of compensation has soared in our time, as the rich have become much richer and much less taxed. Higher taxes on high incomes would begin to narrow the immense chasm that has opened up between the über-rich and the ordinary North American. If properly applied, they could put an end to the frustrating debate about the obscene salaries and bonuses that we pay not only to flailing financiers but to mediocre professional athletes.”

There is no such country as North America. Canada and the United States are very different countries when it comes to inequality. One common measure of income inequality is the Gini coefficient.  The most egalitarian society in the world is Denmark, with where the Gini coefficient is 24.7, according to the UN stats. In Canada, the Gini coefficient is 32.6. This makes Canada’s distribution of income somewhat more egalitarian than in France, Australia, the United Kingdom and far more egalitarian than in the United States, where the Gini coefficient is 40.8. Moreover, while the level of inequality in the USA has increased dramatically since the 1970s, it has remained roughly the same in Canada. Anyway, the divergence is partly a function of different economies producing different distributions of pre-tax incomes (there are lots of well-paying jobs for male high-school graduates in Canada) and partly because of different tax regimes (read Geoffrey Hales’s excellent book on this subject). Executive compensation is also lower in Canada than in the USA. My point is that we can’t say that the same trends are at work on both sides of the border.

“From 1945 to the 1960s, the United States and Canada experienced what appears to be a golden age of affluence, growth and, by our standards, increasing social equality.”

The  relatively egalitarian distribution of incomes in the US between the New Deal and the 1973 oil shock was due to a conjunction of factors that simply aren’t present today. Tax policy is just one of them. The world is more globalized (as workers in Flint, Michigan will tell you), the labour movement and the big Chandlerian corporations have declined, technology has automated certain formerly well-paying jobs out of existence, there is more immigration from low-wage countries, and gender roles are massively different. Bliss’s piece reminds me of Paul Krugman’s nostalgia for the relatively egalitarian society of the United States of his childhood. As critics have pointed out, Krugman’s “nostalgianomics” overlooks important flaws of 1950s American society (very limited immigration, women being kept out of a workforce).

We watched an episode of Mad Men last night. Neither I nor my wife would want to live in the society Krugman and Bliss appear to regard as some sort of golden age.

Canada’s egalitarianism is generally a good thing (it makes muggings less common), but it also has some drawbacks that we should acknowledge too. For one thing, it probably makes university students less competitive.  I also suspect that it is one of the reasons why the expected rate of return on investment in a university degree is lower in Canada than in the United States.

Update: I have been asked by a reader to back up my claim that the ROI on a university degree in Canada is lower than in the US. This OECD data shows that the present value of a degree is lower, which certainly suggests that the ROI is lower.

2009 OECD Report on Education, “Education at a Glance” Chart A8.1. Economic returns for an individual obtaining upper secondary or post-secondary non-tertiary education, ISCED 3/4, and for an individual obtaining tertiary education

“The chart depicts the present value of an investment’s future cash flows net of  the initial investment,  discounted by 5% interest rate. Investments in tertiary education generate substantial financial rewards in most OECD countries. Male students in Italy, Portugal and the United States can expect to gain more than USD150 000 over their working lives by investing in tertiary education. The returns for female tertiary students exceed USD 100 000 in Korea and Portugal. With few exceptions, the returns for investing in a tertiary education are higher than for upper secondary or post-secondary non-tertiary education… For males the returns are USD 81 000 compared with USD 40 000 and for females USD 51 000  compared with USD 26 000. Incentives to continue education on a tertiary level are thus strong for males and females in most countries.”

Direct cost Foregone earnings Gross earnings benefits Net present value of a post-secondary degree
Country Male Female Male Female Male Female Male Female
Australia -2,810 -2,810 -22,021 -22,719 73,492 70,932 49,482 25,782
Austria -2,032 -2,032 -38,001 -36,463 146,283 103,739 62,805 33,435
Belgium -1,441 -1,441 -32,999 -28,338 63,700 91,261 13,659 37,145
Canada -2,161 -2,161 -23,450 -24,386 91,065 71,299 53,918 37,540
Czech Republic -1,722 -1,722 -15,426 -14,635 44,843 50,019 63,524 55,584
Denmark -578 -578 -27,078 -27,534 111,279 82,278 23,587 2,828
Finland -138 -138 -22,955 -22,309 50,777 32,073 10,432 -2,020
France -2,119 -2,119 -30,492 -27,181 41,450 44,826 5,284 8,081
Germany -5,085 -5,085 -27,421 -27,631 51,356 109,920 19,134 32,039
Hungary -577 -577 -15,805 -15,024 38,406 39,545 15,046 19,029
Ireland -599 -599 -29,199 -28,740 66,937 76,038 31,618 35,058
Italy -1,114 -1,114 -35,954 -30,570 89,302 75,509 21,487 30,417
Korea -2,865 -2,865 -11,898 -11,980 68,412 4,787 50,950 -12,011
New Zealand -3,113 -3,113 -28,129 -27,056 83,873 75,997 31,051 11,511
Norway -2,372 -2,372 -33,342 -33,625 133,548 83,842 84,606 27,123
Poland -194 -194 -9,622 -8,202 31,601 40,648 27,137 31,933
Portugal -11 -11 -20,562 -16,867 123,842 88,143 62,570 50,158
Spain -481 -481 -5,925 -4,348 52,086 45,557 37,604 48,136
Sweden -19 -19 -19,592 -21,107 93,464 69,113 43,505 23,900
Turkey -324 -324 -10,837 -11,750 37,719 48,598 16,308 15,126
United States -2,689 -2,689 -21,168 -21,572 180,543 126,069 112,929 81,889
AVG -1,545 -1,545 -22,946 -22,002 79,713 68,104 39,840 28,223

The other interesting stat I would like to share is that ROI on a university education appears to be increasing. I know the cost of education has gone up a bit, but the earnings premium of college graduates has skyrocketed, at least in the United States. As globalization has accelerated and more manual labour jobs have been sent offshore, the gap between what a university graduate can earn and the earnings of high school graduates has opened up. Let me quote a recent report from the US College Board:

“The earnings premium for college education has increased over time:
Among men, the earnings premium for a college degree increased from 19 percent in 1975, to
37 percent in 1985, 56 percent in 1995, and 63 percent in 2005.
The earnings premium for women is larger—70 percent in 2005. It was 47 percent in 1985, but
has not increased since 1995.”

Anyway, I should get back to work….

Supply/Demand for Different Types of History

16 02 2010

I am very supportive of the new website ActiveHistory.ca. The point of ActiveHistory.ca is to link academic historians to the world of public policy by showing how historians’ research can be useful. Recent papers on their website include: Paul Axelrod, Universities and the Great Depression: Then and Now? and Yves Montenay, Pourquoi le Vietnam s’en tire et Cuba s’enfonce.

ActiveHistory’s Ian Milligan has published an interesting post on the mismatch between the types of history professional historians are interested in supplying and the types of history “the public” wishes to consume. There is some evidence to support Milligan’s thesis that there is a mismatch. Military history dominates the History Channel and the history shelves of the chain bookstores with which I am familiar (Chapters, Borders, Barnes and Noble, and Waterstones), yet most history departments lack specialists in military history. This is true even in the United States, which is a superpower with soldiers in more than 100 countries!  See here. (I suspect that the decision of university departments to avoid teaching of military history is pleasing to army officers, since it results in a public less capable of scrutinizing their actions and budgets). I agree with much of what Milligan is saying.

Chapters Book Store in Toronto

However, I would question some of the other claims Milligan makes in his post. Milligan begins his post by complaining that it was hard for ActiveHistory.ca to find historians capable of commenting on the recent financial crisis. He writes: “There simply aren’t many Canadian historians who study the economy anymore. This was put fairly starkly to me in a conversation with a senior historian at York University, as we went through the list of faculty that Active History might contact. There certainly were a few – and many of them are very accomplished (and busy) scholars – but you could almost count them on one hand.”

First, I would ask Milligan whether he contacted historians outside of Canada. This would make sense, given that we are talking about an international financial crisis. A specialist in Canadian economic history would be well equipped to talk about how Canadian governments have responded to past international financial crises, but to find out why financial crisis happen in the first place, it might make sense to speak to an international scholar. Moreover, we need to keep in mind that not all academics who study the past are located in history departments. There are great historians located in sociology departments, political science faculties, business schools, and women’s studies centres.  Kenneth Rogoff, a co-author of This Time It is Different: Eight Centuries of Financial Folly, is based in an economics department. Niall Ferguson, whose PhD is in history, is now cross appointed between the history department at Harvard and the Stern School of Business in New York. Last summer, Ferguson had a very public and very nasty feud with Nobel Laureate Paul Krugman about the economist prospects of the United States that was, in part, a debate about how we should interpret the Great Depression. See Ferguson’s “History Lessons for Economists in Thrall to Keynes” and Krugman’s response on his New York Times blog. The debate between Krugman and Ferguson was very nasty (it prompted one of these scholars “to deploy the nuclear weapon of American academic arguments — an accusation of racism“), but it was also an argument about different theories of economic history, so I don’t think it is fair for Milligan to say that nobody in the academy is qualified to talk about the Great Depression in historical terms!

Closer to home, the staff of ActiveHistory might have considered contacting Joe Martin, a business historian based in the Rotman School of Business at University of Toronto. Martin was interviewed on BNN on the 80th anniversary of the 1929 stock market crash about possible historical parallels with the present-day. In his interview, Martin stressed that protectionism in the United States and other countries conspired to turn a recession in the Great Depression. Martin also alluded to the fact Ben Bernanke, the current Chairman of the Federal Reserve, is an expert on the Great Depression.  (See Bernanke’s 2000 book on this topic).

Here is another problem with Milligan’s post. In discussing the mismatch between public and academic history, Milligan uses the term “public” in the singular, which is a problem for several reasons. Historical reading preferences are different in Quebec than in English-speaking Canada (you see little military history in bookstores in Quebec and lots of books on some aspect of the “national question”). I suspect that there are other, albeit more subtle, differences in the history book markets between English-speaking countries (e.g., the UK, Canada, USA).  Let’s not forget that many people get their information about the past from historical novels rather than historical non-fiction. (There may be a gender difference in buying habits here– ask Amazon for the hard data).

Moreover, no country’s public is monolithic. University-educated people will have difference preferences with regard to history than non-university educated people:  some, but not all, ordinary people equate history with the study of their immediate localities or the histories of professional sports teams. Many members of the learned professions are interested in learning something about their professions: Canadian historian Christopher Moore has published an official history of one of Canada’s biggest law firm.

Government agencies consume various types of historical knowledge (e.g., First Nations land claims research or studies on the Shiite-Sunni division in Iraq). The British website on which ActiveHistory is based (History and Policy) presents historical research on topics such as “How (not) to cut government spending and reduce public sector debt” by Glen O’Hara which are unlikely to interest the masses but which are bound to be very interesting to the key decision-makers who really matter in semi-democratic countries such as Britain or the United States or Canada (senior civil servants, central bankers, cabinet ministers).

Typical event sponsored by the Office of the Historian, United States Department of State

One mismatch between supply and demand which Milligan does not address relates to the countries chosen for study. If you at the American Historical Association data on the job market for history PhDs in the United States, you will see that there is a disparity between the types of history PhDs being produced and the national specialists that history departments need. When history departments advertise for specialists in the history of distant regions such as East Asia or Africa, there get few CVs because relatively few historians do doctorates on such countries. At the same time, there is a glut of history PhDs who have specialised in the history of the United States: the new number of new doctorates in American history produced each year is vastly greater than the number of jobs advertised in that field.

It also appears that historians in some nations are more likely to study foreign countries than the histories of their own backyards. Consider a recent book by Richard J. Evans, a specialist in German history based at Cambridge University.  In Cosmopolitan Islanders: British Historians and the European Continent, Evans shows that the curriculum of British history departments in far more international than the curriculum of history department in many European countries. In Poland or Italy, an undergraduate student in history will learn a great deal about their respective national historians and very little about the histories of foreign nations. British university departments are strong in British history, but they have plenty of specialists in the histories of other countries (Alas, as Mark Mazower  notes in his review of Evans, the curriculum is still pretty Euro-centric, an impression supported by this data on PhD thesis topics).

Historians in Canadian history departments need to give some thought as to whether or not we have achieved the right balance between Canadian history and the pasts of other countries in the undergraduate curriculum. I love the study of Canada, but I feel that I wouldn’t be able to understand Canada’s past without a good grounding in the histories of the United States and Britain. Moreover, I wish that I had learned more about the histories of non-Western countries as an undergraduate. I’m ashamed to say that my only undergraduate exposure to the history of East Asia was a seminar on 20th-century Chinese history.  Canadian history departments focus on the teaching of Canadian history because the secondary curriculum is heavy on Canadian history and the major function of a Canadian history department is to teach future high school teachers. (In Canada, all history teachers must have a BA in history).  Needless to say, as a Canadian historian living in a world of finite resources I can’t be an entirely disinterested observer of the debate about how we balance the teaching of Canadians, Western, and non-Western histories (!), but it is a debate well worth having.

P.S. If you are interested in the feud between Krugman and Ferguson, check out this video:

Krugman on the Tobin Tax

28 11 2009

The Nobel Laureate economist Paul Krugman has come out in favour of imposing a small tax on each financial transaction. The tax, which would be a small fraction on one percent of the value of each transaction, would have a trivial impact on long-term investment but would discourage short-term speculation on the price of stocks, currencies, and other assets.  Krugman’s proposal has been inspired by the work of the deceased economist James Tobin and by Gordon Brown, who recently mused that a Tobin Tax would be a good idea. CNBC’s Jim Cramer, who is neither a Nobel Laureate nor a world statesman, has also endorsed a sort of Tobin Tax.

I suspect that if all of the world’s actual and potential financial centres implemented such a tax, large financial institutions would have no choice but to pay. But   what if one or two countries refused to implement this tax? Wouldn’t currency speculators move to that country?  Financial services are highly mobile. After all, the SarbOx legislation in the US caused much business to shift from Wall Street to the City of London.

Toronto's Financial District Today

It seems to me that if the other Western countries implemented a Tobin Tax, there would be a golden opportunity to make Toronto a global financial centre. The Canadian government could simply announce that is had no intention of imposing a Tobin Tax.

For more on this issue see here, here, and here.