American Exceptionalism Lall Ramrattan • Michael Szenberg American Exceptionalism Economics, Finance, Political Economy, and Economic Laws Lall Ramrattan Michael Szenberg UC Berkeley Extension Touro College Berkeley, CA, USA Brooklyn, NY, USA Holy Names University Oakland, CA, USA

ISBN 978-3-030-05556-1 ISBN 978-3-030-05557-8 (eBook) https://doi.org/10.1007/978-3-030-05557-8

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This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland To my wife, Noreena, my kids, Devi, Shanti and Rajan, Hari, and Rani and Jonathan, and my grandchildren, Brian, Sabrina, Aditi, and Abhishek. I will love them forever. —L.R. B”H Dedicated to the memory of my sister, Esther, for bringing me to these shores; to the memory of my father, Henoch, for his wisdom and my mother, Sara, for giving birth to me—twice; and my grandparents, who died on Kiddush Hashem, Abraham Mordchai and Feigel Rosensaft, and Itzhak Meir and Chava Szenberg, to my children, Marc and Naomi, and Avi and Tova; to my grandchildren, Chaim and Elki Herzog, Moshe and Batya Shain, Nachum and Devorah Wolmark, Chanoch, Ephraim, Ayala, Menachem Yehuda, and Yaakov Nosson, and to my great-grandchildren, Chanoch, Faigala, Moshe, Chaya Avigail, and Chaim Baruch. And to my wife, Miriam; and to the righteous German-Austrian officer who took my immediate family to a hiding place one by one from the Braun concentration camp just days before the last transport to Auschwitz, where most of my family perished, and to Tomasz Mirowski for providing my family a hiding place after our escape from the camp. —M.S. Foreword

As the second decade of the twenty-first century concludes, the issue of American Exceptionalism is again forefront on the minds of scholars around the world. Some argue that the United States is retreating from its long-held position as the bastion of democracy and liberty by pointing out its ongoing reinforcement of stringent immigration policies, its newly erected protection- ist trade barriers, its erosions of personal voting rights, and its disengagement from international treaties and organizations. Others argue that American Exceptionalism never existed—that it is a myth, and that the United States, although unique in many ways, is not destined to be the eternal standard bearer of personal and economic freedom. While the future remains unknow- able, this volume persuasively and successfully builds the case for American Exceptionalism—that the political systems, the civic and social institutions, and the economic philosophies and policies of the United States have irrevo- cably changed the world for the better in immeasurable ways. Michael Szenberg and Lall Ramrattan are especially suited to tell this story—two American economists with distinctly different immigrant backgrounds who see America and its history through a lens not readily available to the native born. Their arguments are inherently rooted in the economic way of thinking but their approach encompasses the beneficial aspects of sociological thought and political theory. Within these pages the reader will encounter economic modeling, history, philosophy,

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­psychology, religion, and biography. An eclectic array of thinkers, phi- losophies, and world views—some familiar and some more obscure—are used to describe how and why American Exceptionalism came to be and why it is important to understand. This volume will prove useful to all of those trying to comprehend where America stands in the world today and, therefore, where the future will likely take us. I invite you to explore Szenberg and Ramrattan’s view of American Exceptionalism.

Editor-in-Chief, The American Economist Paul W. Grimes Professor of Economics, Pittsburg State University Emeritus Professor of Economics Mississippi State University Preface and Acknowledgments

American Exceptionalism has been historically referred to as the belief that the United States differs qualitatively from other nations because of its distinctive economic, political, and religious institutions. As Michael wit- nessed the atrocities committed by the Nazi and communist dictatorial regimes in Poland, he saw this firsthand. When he was in his first year of high school, a communist official held an assembly and asked for students’ opinions on certain policies. One student offered an opposing opinion— and subsequently disappeared, along with his family. A similar story hap- pened to Michael’s sister when she went to visit a friend one afternoon in the Polish mining town of Sosnowiec. As she walked into the building, the super stopped her and told her that the friend’s family had never lived there. She was confused, having visited the friend in the building and even spoken with the super frequently before, and opened her mouth to respond. The super responded forcefully this time, telling her to go home and not to return. This is the cruel face of authoritarian power. Thus, the origins of American Exceptionalism stem from the idea that the United States is different from other countries in that it has a specific world mis- sion to spread liberty and democracy. America’s pursuit of truth allows constitutionally many differing and opposing views to be heard. In the process of preparing this book on Exceptionalism, we have accu- mulated numerous debts and it is our pleasure to acknowledge the

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­individuals and institutions that have made this volume possible. First we would like to thank Elizabeth Graber, a truly gifted editor whose personal interest in this project was encouraging to us, and Dr. Danna Messer for reviewing the manuscript and offering valuable comments. Progress from draft manuscript to final version was aided by Stephanie Miodus, our very talented assistant who currently attends Temple University pursuing a PhD in School Psychology. We are deeply indebted to the Editor-in-Chief of The American Economist Paul W. Grimes for penning the foreword to this book and being a primary source of inspiration, encouragement, and support over the years. Thanks also to our important champion and mentor, Dr. Victor R. Fuchs, past president of the American Economic Association—a shining example of excellence, without whom our lives would have been less fulfilling—and to Henry J. Kaiser, Jr., Professor Emeritus at Stanford University. I owe an awesome debt of gratitude to Alan Zimmerman and Iuliana Ismailescu, for their goodness of heart, enduring support, positive attitude, gracious good cheer, and deep friendship. They have an electricity around them and a sense of commitment. In the same category, I would like to include Renee Blinder, Elena Goldman, Laura Nowak, Miriam Tsymuk, Carmen Urma, Sergiu Viorel Urma, and Joshua Zilberberg who are all dear friends. They are a constant source of affection. I also want to recognize Elki and Chaim Herzog; Batya and Moshe Shain; Chanoch and Ephraim Kunin; Devorah and Nachum Wolmark; Ayala Szenberg and Menachem Yehuda Feifer; and Yaakov Nosson Szenberg. They work with diligence, character, good humor, exactitude, and patience. They have all lightened many a task. Their assistance was incalculable and I am grateful to them. As I stroll down memory lane with my rusty wheels turning, my heart warms with gratitude toward Ester Budek Robbins, Lisa Ferraro, Laura Garcia, Anna Geller, Yelena Glants, Iva Joseph, Janet Lieben-Ulman, Jennifer Loftus, Sadia Nabi, Larisa Parkhomovsky, Andrea Pascarelli, Ira Robbins, Sandra Shpilberg, Marina Slavina, Justyna Tuniewicz, Janet Ulman, and Aleena Wee—my past talented and devoted graduate research assistants who have helped directly and indirectly in more ways than I can list. They all lead successful, productive lives. Their input lives on in these pages. Preface and Acknowledgments xi

In addition, a number of former students, who are part of my extended family, deserve thanks for their invaluable input and assistance—Tamar Gomez, Lorene Hiris, Richard LaRocca, Luba Sagui, Tehila Tamaiev, Cathyann Tully, and Sonja Wiedenmann. Once again, thanks to my wife, Miriam, and to Naomi, my daughter, an ophthalmologist, and to my son, Avi, a lawyer, and their spouses, Marc and Tova, as well. Special thanks to Touro’s Vice Presidents Stanley Boylan, Robert Goldschmidt, Rabbi Moshe D. Krupka, and David Raab, and Deans Henry M. Abramson, Barry Bressler, Sandra Brock, Avery Horowitz, Moshe Sokol, Marian Stoltz-Loike, and Dr. Melech Press, Chairman of the Psychology Department—for their ongoing support and commit- ment to scholarly endeavors and helping me navigate Touro’s waters. And to Dr. Mark Hasten, the chairman of Touro College’s Board of Trustees and Board of Overseers, for his friendship and support. My deepest gratitude goes to Dr. Alan Kadish, president of Touro College and University System, for his extraordinary leadership, dedica- tion to excellence, kindness, cheerfulness, and inspiration. He is the backbone of the organization, holding the wheel and steering Touro’s ship in the right direction. Contents

1 Introduction 1

2 American Exceptionalism: Quantitative and Qualitative 5

3 American Exceptionalism from an Economic Point of View 43

4 Some American Exceptional Contributions in Finance 185

5 American Exceptionalism: Political Economy and Economic Laws 265

Index 379

xiii List of Figures

Fig. 2.1 External and internal mappings of categories in American Exceptionalism 7 Fig. 2.2 Political, moral-psychological, and institutional models 8 Fig. 2.3 Three branches ratings 1974 to current 37 Fig. 2.4 Periodgram 38 Fig. 3.1 Critical Path to early English settlement of North America 51 Fig. 3.2 Alexander Hamilton’s economic system as Treasury Secretary, 9/11/1789. (Sources: Sylla and Cowen 2018 and Rothbard 2002) 75 Fig. 3.3 Henry C. Carey versus classical economic development model. (Sources: Derived from several sources. Morrison (1986)) 83 Fig. 3.4 Carey’s reproducible values model 85 Fig. 3.5 Walker line 86 Fig. 4.1 Markov two states diagram. (Sources: Privault 2013; Klenke 2008; Brzezniak and Zastawniak 2000) 213 Fig. 4.2 Tree diagram of martingale process: total outcome, Omega, filtration, and probability. (Sources: Heyde 1972; Karlin and Taylor 1975; Doob 1942, 1971) 218 Fig. 4.3 Heat flow diagram for solution to Black-Sholes model 225 Fig. 4.4 Lucas asset pricing tree diagram. (Note: Down Nodes are shaded) 237

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Fig. 4.5 Stochastic process with two distributions. (Source: Samuelson 1972, Volume 3, pp. 784, 787) 252 Fig. 5.1 Foundation of law. (Sources: [FH]: Hayek, Fredrich A., The Constitution of Liberty, A Gateway Edition, Chicago, Ill., 1972. [LH]: LeBuffe, Francis P., and James V. Hayes, The American Philosophy of Law. Crusader Press, Inc., New York, 1947. [MM]: Mercuro, Nicholas and Steven G. Mederma, Economics and the Law, Second Edition, Princeton University Press, New Jersey, 2006, pp. 18–19. [NM]: Mercuro, Nicholas, The Jurisprudential Niche Occupied by Law and Economics, The Journal of Jurisprudence, 2009, pp. 61–109. [RP]: Posner, Richard, The Economics of Justice, Harvard University Press, Mass., 1998. Marxian Legal Relation and Forms of State are taken from the Material Conditions of Life, and not from the Human Mind. Economic Structure put them on as clothe. (Lenin, V.I., p. 410), Lenin, V. I., Collected Works, Volume 1: 1893–1895, Moscow Publishers, p. 138. [Digital Reprints, 2008 www.marx2mao.com]) 267 Fig. 5.2 Aristotle view of virtue For Aristotle, virtue is essentially a middle ground between two extremes The extremes are vices (NE—Bk.2. Chap. 9.), shown in the figure as moving away from the mean on the run axis It is not faculties, good or bad; praise or blame (NE 2.4) Each virtue produces a good, which attain the extreme good on the rise axis Justice, Courage, Temperance,  Aristotle( Virtue) = f magnificence, magnanimity, liberality,  placability, prudence, wisdom NE Nicomachean Ethics 280 Fig. 5.3 Correlation of some of Aristotle’s views on law. (Sources: AD refers to Aristotle Dictionary (1963). Edited by Thomas Kiernan. NY: Philosophical Library. BC refers to Cardoso, Benjamin N. (1921). The Nature of the Judicial Process. New Haven, CT: Yale University Press. CF refers to Carl Friedrich (1963). NE refers to Aristotle (1906). The Nicomachean Ethics. Translated by F. H. Peters. London: Kegan Paul, Trench, Trubner & Co, LTD.) List of Figures xvii

Top and Bottom sides measure educational function of law; Left and Right sides measure maintenance of peace function of law; the main diagonal shows arbitrating controversies (CF, p. 24). Upper and Lower triangles show that both Positive and Common laws have these functions as their end or final cause The pointed arrows around the box indicate that the whole operation leads to DJ and CJ. On the one hand, CJ is like an arithmetic proportion in the sense that the law treats everyone as a unit—everyone is equal before law, and judgment is usually regarding gains and losses. For example, a judge is concerned with the damage done, treating the individuals as equal. The redress is in terms of gains to the injured and losses to the injurer (Aristotle, NE, p. 149) On the other hand, DJ is like a geometric proportionality where a reward depends on effort. Aristotle treats DJ in terms of justice = fairness. The latter is a mean between too much and too little shares that the individual is worth or merits, which is measured in terms of free birth in democracies, wealth in oligarchies, and personal merit in Aristocracies (NE, pp. 145–146). Aristotle gave this geometric proportion as an example: a / b = c / d (p. 147) 282 Fig. 5.4 Plato and Aristotle views of virtue and the law 285 Fig. 5.5 Classification of religious and civil laws in terms of beliefs and science One opinion is that what one believes in one can come to know (science). If degrees of belief can turned into probability between λλ= []01. then wecan write PB= ()+−()1 λ S. If λ = 0, then Science prevails, and if λ = 1 then beliefs prevail Source for the motivation of the diagram: Russell, Strauss Religious and Civil laws are antagonistic and seek reconcili- ation. Plato’s philosopher king is based on such a solution. The Enlightenment period seeks to purge revelation from the laws, moving toward political atheism 305 Fig. 5.6 The separation of powers 351 List of Tables

Table 2.1 Approval ratings: three branches 36 Table 2.2 Spectral coherence analysis 38 Table 3.1 Specification of Settler-Indian game in Prisonerʼs Dilemma 53 Table 3.2 Population for some original states 58 Table 3.3 Colonial population 58 Table 3.4 Exceptional American economic ideas and predecessors 76 Table 3.5 Income and rank of standard deviation of Friedman’s test 165 Table 4.1 Phases of development of Arrow-Debreu general equilibrium model 198 Table 4.2 Date-states-commodity space 200 Table 4.3 Spot-market portfolio of securities to hold to satisfy planned consumption 202 Table 4.4 Exceptional financial high theories 206 Table 4.5 Changing concepts of futures and price by H. Working 209 Table 5.1 Pre-Socratic views 273 Table 5.2 The paradigmatic ideas of five authors 335

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