People From Boston

"1950: George Homans, The Human Group — advances small-group theory and research; attempts to extrapolate from a single group to understanding the social system."

"A comparative social science requires a generalized system of concepts which will enable the scientific observer to compare and contrast large bodies of concretely different social phenomena in consistent terms."

"It is really intolerable that we can say only one thing at a time; for social behavior displays many features at the same time, and so in taking them up one by one we necessarily do outrage to its rich, dark, organic unity."

"To consider social behavior as an exchange of goods may clarify the relations among four bodies of theory: behavioral psychology, economics, propositions about the dynamics of influence, and propositions about the structure of small groups."

"Social behavior is an exchange of goods, material goods but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them. This process of influence tends to work out at equilibrium to a balance in the exchanges"

"A learned man, Emile Durkheim,"

"In choosing between alternative actions, a person will choose that one for which, as perceived by him at the time, the value, V, of the result, multiplied by the probability, p, of getting the result, is the greater."

"Success in the sociologists' aim might lead, in T. S. Eliot's phrase, to "systems so perfect that no one would need to be good." This view forgets that men long ago committed themselves to the endeavor to control their own collective behavior, not only in the ways sanctioned by the churches but in others, by making it to men's interest to do good. And they have increasingly based the endeavor on an understanding of natural laws of human behavior, those of economics, for example. So that the question is not: Shall this kind of control be undertaken? but: Where shall it stop? A sociologist might also argue that his religious critics have more faith in him than in their own doctrine, the doctrine that man is infinitely tough and resourceful and is not easily cheated of his freedom to sin. What God has given no man can take away, certainly no sociologist. More seriously, he might argue that the social sciences are not in train to eliminate morality but to make greater demands of it. A sociology that shows us unsuspected or not hitherto understood ways in which men are bound up with one another invites more refined answers to the question: "Am I my brother's keeper?""

"Institutions are human behavior, and they are, therefore, to be explained by the characteristics of that behavior."

"We usually assume that when people steal things, they steal because they want them. They may want them because they can eat them, wear them or otherwise use them; or because they can sell them; or even-if we are given to a psychoanalytic turn of mind because on some deep symbolic level they substitute or stand for something unconsciously desired but forbidden. All of these explanations have this in common, that they assume that the stealing is a means to an end, namely, the possession of some object of value, and that it is, in this sense, rational and utilitarian. However, the fact cannot be blinked-and this fact is of crucial importance in defining our problem-that much gang stealing has no such motivation at all."

"If we wanted to establish the reality of a social system as a complex of mutually dependent elements, why not begin by studying a system small enough so that we could, so to speak, see all the way around it, small enough so that all the relevant observations could be made in detail and at first hand?"

"It is generally assumed that... register data are more representative than court data, which are the result of a long selective process of complaint, arrest, arraignment and prosecution."

"Justice David Souter served our Court with great distinction for nearly twenty years. He brought uncommon wisdom and kindness to a lifetime of public service. . . . He will be greatly missed."

"I think the case is so strong that I can tell you the day you see a camera come into our courtroom, it's going to roll over my dead body."

""Democracy works "only if the people have faith in those who govern, and that faith is bound to be shattered when high officials and their appointees engage in activities which arouse suspicions of malfeasance and corruption." United States v. Mississippi Valley Generating Co., 364 U. S. 520, 562 (1961)"

"What I worry about is that when problems are not addressed, people will not know who is responsible. And when the problems get bad enough – as they might do, for example, another serious terrorist attack, as they might do with another financial meltdown – some one person will come forward and say, "Give me total power, and I will solve this problem." That is how the Roman republic fell….That is how democracy dies. And if something is not done to improve the level of civic knowledge, that is what you should worry about at night."

"Whatever court we are in, whatever we are doing, whether we are in a trial court or an appellate court, at the end of our task some human being is going to be affected. Some human life is going to be changed in some way by what we do, whether we do it as trial judges or whether we do it as appellate judges, as far removed from the trial arena as it is possible to be. And so we had better use every power of our minds and our hearts and our beings to get those rulings right."

"Rangers! Lead the way!"

"We are used to rhetoric that casts “government” as a threat to our liberties. By making it clear that the workplace is a form of government (that the state is not the only government that rules us), we can make clear how the authority that employers have over workers threatens their dignity and autonomy. By naming that government as “private” — that is, as kept private from the workers, as something employers claim is none of the workers’ business — we can make more vivid the fact that workers are laboring under arbitrary, unaccountable dictatorships."

"If free market prices don't give people what they morally deserve, should we try to regulate factor prices so that they do track producers' moral deserts? Hayek offered two compelling arguments against this proposal. First, if you fix prices on a backward-looking standard, they will no longer be able to perform their informational function. Producers will produce for what was demanded last quarter, even if it isn't demanded today. This creates enormous waste and generates huge opportunity costs. We'd be much poorer in an economy that worked like this. […] Hayek was right. It might sound like a compelling idea, to make sure that people receive the income they morally deserve. But orienting the economy around this goal, assuming it is achievable at all (and there are principled doubts about that), would doom us to poverty and serfdom. It would abolish capitalism, along with its chief virtues. It isn't worth the draconian costs."

"Several implications follow from Hayek's insights into the nature of capitalism.(a) The claim "I deserve my pretax income" is not generally true. Nor should the basic organization of property rules be based on considerations of moral desert. Hence, claims about desert have no standing in deciding whether taxation for the purpose of funding social insurance is just. (b) The claim that people rocked by the viccisitudes of the market, or poor people generally, are getting what they deserve is also not generally true. To moralize people's misfortunes in this way is both ignorant and mean. Capitalism continuously and randomly pulls the rug out from under even the most prudent and diligent people. It is in principle impossible for even the most prudent to forsee all the market turns that could undo them. (If it were possible, then efficient socialist planning would be possible, too. But it isn't.) (c) Capitalist markets are highly dynamic and volatile. This means that at any one time, lots of people are going under. Often, the consequences of this would be catastrophic, absent concerted intervention to avert the outcomes generated by markets. For example, the economist Amartya Sen has documented that sudden shifts in people's incomes (which are often due to market volatility), and not absolute food shortages, are a principal cause of famine. (d) The volatility of capitalist markets creates a profound and urgent need for insurance, over and above the insurance needs people would have under more stable (but stagnant) economic systems. This need is increased also by the fact that capitalism inspires a love of personal independence, and hence brings about the smaller ("nuclear") family forms that alone are compatible with it. We no longer belong to vast tribes and clans. This sharply reduces the ability of individuals under capitalism to pool risks within families, and limits the claims they can effectively make on nonhousehold (extended) family members for assistance. To avoid or at least ameliorate disaster and disruption, people need to pool the risks of capitalism."

"Incarceration in prison or a local jail sets poor people up for exploitation in a forced labor system. New Deal laws once prohibited the use of prison labor except for state institutions. Businesses won the right to use prison labor in 1979. They won an exception from minimum wage laws for prison workers in 1995. This led to the employment of hundreds of thousands of inmates of federal and state prisons for mere pennies per hour. Many are forced to work in unsafe conditions without protective equipment, because workplace health and safety laws do not apply to prison workers."

"In Bentham's vision, the poor should be treated like criminals, forced to labor in prison for the private profit of capitalist entrepreneurs. Such a totalitarian idea might seem remote from purportedly enlightened twenty-first-century practices in liberal democracies. Yet both the criminalization of poverty, and the subjection of the criminalized poor to unpaid labor for corporate profit, exist in the United States today."

"Foster's great success as a teacher, reflected in his textbooks Argumentation and Debating (1908) and Essentials of Exposition and Argument (1911), led to his remarkably early promotion to full professor at Bowdoin in 1905. The vision of an "ideal college" discussed in Administration of the College Curriculum (1911), based on his Ph.D. dissertation at Teachers College of Columbia University, led to his selection in 1910 as first president of Reed College in Portland, Oregon. At Reed, Foster promoted a democratic spirit and serious intellectual pursuits, instituting seminars, theses, and comprehensive examinations, while excluding fraternities, sororities, and competitive intercollegiate sports. His educational experiment at Reed attracted national attention. He later returned to his early interest in rhetoric, publishing books on Basic Principles of Speech (with Lew Sarett, 1936) and Speech (1942)."

"Foster gained widespread attention when he announced that Reed, from the start, would reject competitive intercollegiate sports and fraternal organizations in favor of a democratic and intellectual environment, with emphasis on a quality of teaching compatible with his idea of a “Johns Hopkins for undergraduates.” He also eschewed grading in an effort to underscore Reed’s commitment to knowledge for knowledge’s sake, and set the senior thesis and oral exam as mandatory goalposts for graduation."

"Formal debate is a kind of game. In the time limit, the order of speakers, the alternation of sides, the give and take of rebuttal, the fixed rules of conduct, the ethics of the contest, the qualifications for success, and the final awarding of victory, debate has much in common with tennis."

"The daily expenditures by consumers for new consumers' goods, upon which business stability largely depends, are determined in part by the total volume of money in circulation, in part by other factors including the frequency with which that money is returned to consumers. The flow of money, therefore, from use in consumption to another use in consumption should not be overlooked in studies of the causes and conditions of business fluctuations. It is the purpose of this paper to describe certain aspects of this circuit flow of money, to raise the question whether it does not deserve more attention that it has yet received in our analyses of business cycles, and to suggest pertinent lines of investigation. Unfortunately, the statistics upon which the most important conclusions concerning this subject must be based are not at hand and are not likely to be for a long time to come. The following discussion will have served its purpose if it stimulates further inquiry in profitable directions and helps to hasten the day when the necessary statistics are available."

"The diagram on the opposite page, similar in plan and purpose to one devised by Mr. M. C. Rorty, represents, in a general way, the circuit flow of money. To find fault with this diagram from an engineering standpoint would not be difficult; neither would it be sensible. All we should ask of these reservoirs and pipes is that they serve the purpose at hand. In the main, subject to certain qualifica qualifications to be made presently, this diagram does serve our purpose. It pictures the flow of money when business is relatively stable."

"The reference to the source of authority should be definite. Such vague phrases as the following, common though they are, are worthless as proof : —"

"The double reservoir at the top shows the amount of money in the hands of individuals and available for expenditure in consumption. This is what we have previously called the consumers' fund. The reservoir is divided into two parts in order graphically to represent the fact that a large part of the money received by individuals is income, most of which is spent in consumption; while a smaller part is money received from the sale of real estate, bonds and stocks, most of which is reinvested. The two parts of the reservoir, however, are connected with pipes, in order to take account of the fact that some income is invested and some money received from the sale of securities is spent in consumption. These connecting pipes are important. We must bear in mind that they are always partly, and never wholly, clogged. By their aid, we may visualize the fact that we have no means of knowing how much of the consumers' fund actually will be spent in consumption in any given period of time."

"Let us not be surprised, however, if the study of the principles of argumentation — or even Burke's much mis-taught Speech — seems dry without the prospect of actual debate. We should hardly expect a half-back to feel much enthusiasm over reading the rules of the game and tackling a dummy if he could not look forward to tackling a man. When elocution and argumentative writing have failed to stimulate interest, formal debate may succeed, for it is a kind of game. In the time limit, the order of speakers, the alternation of rides, the actual struggle of opposing forces, the give and take of rebuttal, the fixed rules and the ethics of conduct, the qualifications for success, and the final awarding of victory, debate has much in common with tennis and football."

"The great superiority of debating, as the schools should look upon it, lies in the fact that it adds to many of the elements of the present absorbing interest in athletics those educational values which contribute directly to the highest type of citizenship."

"It is not easy to phrase the proposition so that it shall mean precisely what we wish to argue; so that it shall include the whole matter at issue, nothing more and nothing less ; so that there shall be no possible ambiguity. Yet, unless the proposition is so phrased, a debate may degenerate into a lifeless quibble concerning the meaning of the terms, under which the living heart of the question is buried."

"At home, as well as abroad, there is paralyzing uncertainty among business men as to whether the Reserve Board will allow that expansion of bank credit without which such prosperity as we have had in recent years simply cannot last. In short, the Board has created a state of mind which breeds business depression."

"The empirical successes of [the three-factor model] suggest that it is an equilibrium pricing model, a three-factor version of Merton’s (1973) intertemporal CAPM (ICAPM) or Ross’s (1976) arbitrage pricing theory (APT). In this view, SMB and HML mimic combinations of two underlying risk factors or state variables of special hedging concern to investors."

"Our results are disturbing in that, like Fama and French (1992), they suggest that traditional measures of risk do not determine expected returns. In equilibrium asset pricing models the covariance structure of returns determines expected returns. Yet we find that variables that reliably predict the future covariance structure do not predict future returns. Our results indicate that high book-to-market stocks and stocks with low capitalizations have high average returns whether or not they have the return patterns (i.e., covariances) of other small and high book-to-market stocks. Similarly, after controlling for size and book-to-market ratios, a common share that ‘act like’ a bond (i.e., has a low market beta) has the same expected return as other common shares with high market betas."

"One of the early presidents of Harvard College wrote a dissertation on the question, "Whether angels speak any language; if so, whether it is Hebrew." Much futile discussion on such questions has at various times brought debating into ill repute. A question should offer something more than an ingenious exercise; it should offer the chance of arriving at some conclusion regarded by the particular audience or disputants as of some practical importance. It should be discarded if, like the proposition, "The pen is mightier than the sword/' it offers no possibility of arriving at reasonably sound conclusions through the process of argument."

"There is no way to predict the price of stocks and bonds over the next few days or weeks. But it is quite possible to foresee the broad course of these prices over longer periods, such as the next three to five years. These findings, which might seem both surprising and contradictory, were made and analyzed by this year’s Laureates, Eugene Fama, Lars Peter Hansen and Robert Shiller."

"If active managers win, it has to be at the expense of other active managers. And when you add them all up, the returns of active managers have to be literally zero, before costs. Then after costs, it's a big negative sign"

"If assets are priced rationally, variables that are related to average returns, such as size and book-to-market equity, must proxy for sensitivity to common (shared and thus undiversifiable) risk factors in returns. The time-series regressions give direct evidence on this issue. In particular, the slopes and R2 values show whether mimicking portfolios for risk factors related to size and [book-to-market] capture shared variation in stock and bond returns not explained by other factors."

"Although size and book to market equity seem like ad hoc variables for explaining average stock returns, we have reason to expect that they proxy for common risk factors in returns."

"The question is when is good? The answer is never."

"Unless disputants understand the meaning attached by each other to the terms of a controversy, they may worry along indefinitely without making an inch of progress. The contending parties may think they agree on the proposition, when, as a matter of fact, their apparent agreement is due to ambiguity in the use of the terms. On the other hand, the contending parties may work themselves into a quarrel over imaginary disagreements concerning ideas, when in fact they are merely confused as to the meaning of words. Disputes which seem interminable are sometimes ended abruptly and happily upon the accidental discovery that the parties in dispute agreed all the time as to the real questions at issue, while neither side understood what the other side meant."

"From a more theoretical viewpoint, one can focus on the nexus between the present and the future. A financial instrument typically represents a property right to receive future cash flows. Such cash flows will, of course, come in the future – hence the economics of time must be understood. In many cases the flows are uncertain, hence the need for an approach to the economics of uncertainty. In addition, cash flows in the far future may depend on actions taken (or not taken) in the near future. This gives rise to the need for a theory of the economics of options (broadly construed). Finally, one needs information to estimate likely future outcomes, hence the requirement for an understanding of the economics of information. I define financial economics so that it embraces all four of these important, difficult, and fascinating aspects of economics."

"The central question for positive financial economics is valuation – what is the value today of a set of future prospective cash flows? The central question for normative financial economics is the appropriate use of financial instruments in a world in which values are set wholly or partially in accord with the principles of positive financial economics."

"Firms that have a high BE/ME (a low stock price relative to book value) tend to have low earnings on assets. Conversely, low BE/ME (a high stock price relative to book value) is associated with persistently high earnings."

""Any graduate of the ___ Business School should be able to beat an index fund over the course of a market cycle." Statements such as these are made with alarming frequency by investment professionals. In some cases, subtle and sophisticated reasoning may be involved. More often (alas), the conclusions can only be justified by assuming that the laws of arithmetic have been suspended for the convenience of those who choose to pursue careers as active managers."

"The " general" definition may give you no hint as to the way in which a particular assertion is meant to be interpreted. When, therefore, as in formal debate, a proposition is advanced by persons other than those who discuss it, clearness in defining is not sufficient. In such cases a definition must have two qualities: it must be clear, and it must be satisfactory to the persons addressed. They must know what the speaker means, and they must be convinced that his meaning is the correct one, — correct for that particular proposition at the time and place and under the conditions of that particular debate. Otherwise, they may object in the end that he has proved, not the given proposition, but another which he has substituted for it by means of arbitrary definitions."

"Most grown-up people get rid of the childish notion that whatever appears in print is true, but many cling to the equally absurd notion that the printing of a statement does give it some claim to dignity and credence. For the purposes of argumentation, let us here make this point emphatic: The mere fact that a statement appears in print lends not one atom to its value. Every assertion that is brought forward — though it may have been printed a thousand times and repeated a million times — must be challenged and tested before it can be regarded as trustworthy testimony of authority, — before it can be of any value as evidence."

"Before Mary Follett, industrial groups had seldom been the subject of study of political or social scientists. It was her special merit to turn from the traditional subjects of study - the state or the community as a whole - progressively to concentrate on the study of industry... Her approach was to analyse the nature of the consent on which any democratic group is based by examining the psychological factors underlying it. This consent, she suggested, is not static but a continuous process, generating new and living group ideas through the interpenetration of individual ideas."