Softpanorama
May the source be with you, but remember the KISS principle ;-)

Contents Bulletin Scripting in shell and Perl Network troubleshooting History Humor

Neoliberalism as a Cause of Structural Unemployment in the USA

News  Over 50 and unemployed Recommended Links The problem of inequality Computers eat people Underemployment Eroding Western living standards
The neoliberal myth of human capital Perma Temps Adverse Selection The problem of inequality Productivity Myth and "Rising labor costs" hypocrisy Scapegoating and victimization of poor  
Neoliberalism as a New Form of Corporatism Corporatism Casino Capitalism If Corporations Are People, They Are Psychopaths Toxic Managers Office Stockholm Syndrome Learned helplessness
Unemployment after graduation Fake Employment Statistics Destructiveness of GDP Mania   Financial Sector Induced Systemic Instability

Economics Pseudo Theories

Notes on Republican Economic Policy
John Kenneth Galbraith Invisible Hand Hypothesis Inflation vs. Deflation Lysenkoism Financial Humor Humor  Etc

Unemployment offices, homeless shelters,  hospitals, prisons and casinos. and are the only real growth industries of Obama Administration. In Jan 2010 35 millions, or one in eight Americans, were on food stamps.

Obama's  biggest — and only major — jobs program is the U.S. military


When I was a kid they told us that automation would "free" us from working long hours. What they didn't tell us what that they weren't going to pay us for all this leisure time we'd get.

Mass unemployment is the primary indication of the collapse of a given form of society -- James Burnham


Introduction


"Unemployment" statistics has been the political advertising media for every Administration in modern times

From comment in
The Rise of Invisible Unemployment
 The Atlantic, Nov 9, 2014

 

The institutions of neoliberal capitalism, while promoting an expanded role in the economy for "market forces" (read "financial oligarchy")  simultaneously transform labor relations. The “market” under neoliberalism certainly no longer refers to competition as a form of the production and distribution goods and services. Instead, it means something more along the lines of international financial monopolies protected by collusion between captured vassal state institutions (including neoliberal fifth column domination in the all major branches of government, especially executive and  legislative branches, educational institutions and media) and multinationals, which pay money to sustain this social order. The term “Free markets” under neoliberalism means letting rich people do what they want, not promoting efficient allocation of resources through competition and the price mechanism. The core of the fifth column are local oligarchs and so called "Chicago boys": sons and daughters of local elite who are trained for and indoctrinated for this purpose in Western universities. As aptly noted Neoliberalism – the ideology at the root of all our problems ( The Guardian,  April 15, 2016)

We internalize and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.

Never mind structural unemployment: if you don't have a job it's because you are unenterprising. Never mind the impossible costs of housing: if your credit card is maxed out, you're feckless and improvident. Never mind that your children no longer have a school playing field: if they get fat, it's your fault. In a world governed by competition, those who fall behind become defined and self-defined as losers.

Under neoliberalism labor relations assumes the form of full domination of labor by capitalists. Unions are officially suppressed and large part of middle class is brainwashed to hate using set of propaganda stories about unions corruption, welfare quinsy, lack of competitiveness in unionized industries (with Detroit as a prime story), etc.  In this sense crushing by Reagan of the strike of air controllers was one of the first manifestation of this dominance. Workers again are downgraded to the role of debt slaves, who should be glad to get subsistence wages. And, for example, wages in Wal-Mart are really on subsistence level, no question about it (Making Change at Wal-Mart » Fact Sheet – Wages):

Wal-Mart jobs are poverty-level jobs.
Wal-Mart's average sale Associate makes $8.81 per hour, according to IBISWorld, an independent market research group. This translates to annual pay of $15,576, based upon Wal-Mart's full-time status of 34 hours per week1. This is significantly below the 2010 Federal Poverty Level of $22,050 for a family of four. The Wall Street Journal reported that the average Wal-Mart cashier makes just $8.48 an hour, far below the $11.22 national average for all cashiers.

This contrasts with the capital-labor compromise that characterized the state capitalism that existed several post-WWII decades and that was crushed by neoliberalism in 1970th. Neoliberalism also brought change in the relation between financial and non-financial capital: financial capital now again like in 1920th plays a dominant role dictating the rules of the game to manufacturing sector and controlling it via banks.

Under neoliberalism the wealthy and their academic servants, see inequality as a noble outcome. University professors of economics form the most corrupt part of intellectual elite – they are nothing more than employees of the financial oligarchy paid to administer intellectual anesthetic to those among debt slaves, who still have enough time to ask what’s going on. They want to further enrich top 1%, shrink middle class making it less secure, and impoverish poor.  That's an officially state goal. Then in 1992, when asked what Iran-Contra was really all about, Bush I replied that it was done for "...the continuous consolidation of money and power into higher, tighter and righter hands."

The upward redistribution of wealth requires high unemployment to weep prols into unconditional obedience.  In other words neoliberalism and high unemployment are twins.

Under the disguise of "free market" Newspeak  neoliberals promote a type of economy which is often called a plantation economy. In this type of the economy all the resources and power are in the hands of a wealthy planter class who then gives preference for easy jobs and the easy life to their loyal toadies. The wealthy elites like cheap labor: it's much easier to  dictate their conditions of employment when unemployment is high.

Keynesian economics values the middle class and does not value unemployment or cheap labor, so it is incompatible with neoliberal ideology and needs to be suppressed.  Neoliberals created the system which richly reward stooges of neoliberalism for their loyalty to the top 1%  bestowing on them an easier life than they otherwise merit. In a meritocracy where individuals receive public goods and services that allow them to compete on a level playing field, many neoliberal academic toadies would be losers who cannot compete.

One of the most important measures of the health of an economy is the following criteria: how many fulfilling, living-wage jobs are created or destroyed (most other economic factors can be distilled to this.). For example, widely used measure of economic growth, GDP is too influenced by financial masturbation and does not distinguish useful activity from harmful or irrelevant. 

Under neoliberalism the elite revived Roman emperor Septimius Severus advice to his sons before he died at Eboracum (York) on  February 4, 211:

"Avoid infighting, pay well the soldiers, and ignore everybody else" . 

So during the Great Recession Congress simply tuned backs to unemployed. With the implicit message you just need to die out folks ;-).

Military budget at the same time was greatly expanded and several unnecessary wars were launched.  Brainwashed American public eats all those neoliberal policies like real lemmings, demonstrating the level of groupthink and lack of critical thinking that is typical for high demand cults. So the myth about highly conscious "proletariat" that Marxists cherished remains a myth. Moreover quite opposite tendencies to creation of "enlightened lower classes" show their ugly face (Chris Hedges America is a Tinderbox naked capitalism):

ictus92, July 21, 2013 at 5:07 pm

To paraphrase Madeline Albright: “What’s the point of creating a totalitarian police state if you’re not going to use it?”

So where is the American totalitarian state going? If you look at the NDAA and the discussion around repealing the Posse Comitatus Act, the key words include quelling “domestic civil unrest”… So what are the “deep government” types anticipating so hysterically?

Well, the financial crisis keeps grinding away and is about to enter another phase of collapse as “quantitative easing” has run its course. Interest rates are rising, posing “technical insolvency” of the Federal Reserve itself. What this means is that time’s up for the 46 million in the Food Stamp Supplemental Program; 56 million getting Social Security retirement or disability benefits; and at least 20 million more needing full time employment. Obviously there’s some overlap, but the total number of people living on the margins of subsistence pushes 30% of the population.

For these, they face an immediate “Final Solution”… not exactly direct extermination, but death by deprivation, illness etc. Can work camps be far off for these tens of millions and the many millions more living paycheck to paycheck? This population and their sympathizers comprise the tinder for “civil unrest”. Hence the corollary to the famous “Collect it all” (communications) is “control it all” (civil disorder following further economic collapse).

Furthermore, prolonged neglect of key infrastructure will lead inevitably to severe food, water and electric power access shortages — another source of civil unrest potential.

Of course, overseas the totalitarian police state eliminates all expression of opposition that can change policies in the quest for “Permanent War” and “full spectrum” military dominance. This ends in global military confrontation… just as the financial crisis of the 30’s gave rise to another World War… only this time around world war will pitch towards thermonuclear war in short order. That’s how totalitarian regimes collapse into catastrophe, dragging the rest of us to an unpleasant demise.

Unfortunately, I don’t think there’s a damn thing any of us can do to arrest this beserk Levithan…

tongorad, July 20, 2013 at 3:21 pm

This is America, not Denmark. In this country, tens of millions of people choose to watch FoxNews not simply because Americans are credulous idiots or at the behest of some right-wing corporate cabal, but because average Americans respect viciousness.

They are attracted to viciousness for a lot of reasons. In part, it reminds them of their bosses, whom they secretly adore. Americans hate themselves for the way they behave in public, always smiling and nodding their heads with accompanying really?s and uh-huhs to show that they’re listening to the other person, never having the guts to say what they really feel. So they vicariously scream and bully others into submission through right-wing surrogate-brutes. Spending time watching Sean Hannity is enough for your average American white male to feel less cowardly than he really is.

The left won’t accept this awful truth about the American soul, a beast that they believe they can fix “if only the people knew the Truth.”

But what if the Truth is that Americans don’t want to know the Truth? What if Americans consciously choose lies over truth when given the chance–and not even very interesting lies, but rather the blandest, dumbest and meanest lies? What if Americans are not a likeable people? The left’s wires short-circuit when confronted with this terrible possibility; the right, on the other hand, warmly embraces Middle America’s rank soul and exploits it to their full advantage. The Republicans know Americans better than the left. They know that it’s not so much Goering’s famous “bigger lie” that works here, but the dumber and meaner the lie, the more the public wants to hear it repeated.”

“We, The Spiteful” by Mark Ames

http://exiledonline.com/we-the-spiteful/

Dave, July 20, 2013 at 8:18 pm

Please consider that the “right” is far more realistic in their assessment of human nature. The “left” wants things to be according to what they think it should be, mostly because of their left wing educators. The majority of humans are not perfectible.

Even Asians, with their highly socialized societies, have behaved very badly towards those outside their country.

This tendency of self-deception of "blue color America" and resonating of Republican Party ideas within "working poor" and lower middle class, two strata of the US society that typically votes against its own economic interests is analyzed in   What's the matter with Kansas  And to fight neoliberal machine is not easy as media dominance is total, and on a new technological level, which does not require silencing of opponents, just ignoring them, approach the level typical for the USSR or Nazi Germany.  And even if some people question the system, like (at the very beginning) Tea Party did, or later "Occupy Wall Street" movement did, they are mercilessly co-opted or crashed by well paid guard labor. The latter is one of the few  types of employment which prospers under neoliberal empire. See  The Rise of Guard Labor (dollarsandsense.org)

The reality is that many rich countries including the USA now face two problems. One is a shortage of jobs, especially middle class jobs.  The other is stagnant (or falling) wages for those outside top 1%.  This is not a temporary problem. Despite all the propaganda smoke this is an immanent feature of neoliberal regimes that now dominate in the USA and most other countries.  Neoliberalism requires high unemployment as a way to keep workers in check and prevent attempts to slow down redistribution of wealth toward the top.

As George Bush Sr . noted in November 1992 neoliberalism is "the continuous consolidation of money and power into higher, tighter and righter hands". The essence is  the consolidation of money and power to the top 0.1% or even 0.01%.  In a very deep sense our new lords from financial and political oligarchy are not that different from feudal aristocracy, may be only less educated, more prone to avoid military service and much more greedy. 

Unlike Keynesian economy which put middle class in the center of society serving a buffer between rich and poor,  under neoliberalism  middle class is no longer needed as a buffer between aristocracy and proles, as repressive power of the state and regime of total surveillance (National Security State) makes an organized opposition practically impossible. The fate of "Occupy Wall Street" movement is nice illustration here.

On the other hand neoliberalism as an ideology, while discredited by event of 2008 still does not have any viable alternative.  Socialism was discredited by collapse of the USSR (which in reality was a neoliberal counterrevolution by Soviet nomenklatura including part of KGB).  Authoritarian versions of state capitalism does not look too attractive, despite being quite effective as was proven by economic progress of "Asian tigers".

Other important factors are also in play. Technology has stripped away the ability for many to hold a job and the trend continues.  In other words automation eats jobs. Outsourcing eats jobs too. Between those two trends almost no job growth left. This is a structural situation, not transitional caused by recession due to aftermath of 2008 financial bubble bust.  In other words jobs that disappeared will never return. And jobs in construction sector and finance were artificial and unsustainable in any case, crisis or no crisis (as in "what can't last forever eventually stops." )

We are in the midst of slow motion employment collapse. Eurozone unemployment recently reached 12%. The US has probably 20% rate of involuntary unemployment now. The official unemployment "rate" is lower, but that is because both 60-65 years old and 20 to 24 year olds are dropping out of the wage force.

Add to this "peak energy" problem and the situation looks really bleak. That's the funny thing about oil and modern civilization -- almost everybody in large western urban centers is dependent on mass produced technology (much of which was invented before we were born) and cheap oil (and generally cheap energy), Those who live in those urban centers no longer have any direct control or ability to produce own food or transportation energy or heating. those three activities are completely outsourced. See Peak Oil Demand is Already a Huge Problem.

Globalization is yet another problem. I was actually surprised by how many jobs large corporations managed to shred during 2008-2013 without negatively affecting  profitability.  The impression is that it is no low limit.  Usual wisdom is that if you shred too much, this labor shortage will bite you in a couple of years. This is no longer the case in the USA. No visible backlash at all.  Even consumption that should be suffering due to destruction of middle class in this process is no suffering much, because it was already mostly top 1% game and, as such, is recession proof. Here is one interesting comment form Krugman column Globalization and Macroeconomics - NYTimes.com

Floxo Australia

The analysis is flawed. The issue is not goods trade - on its own, this is relatively benign. The real problem is the associated capital drain. Owners of capital will transfer productive capital abroad for better returns. This process creates deep structural problems for all developed economies. Here are some basic predictions:

Recessions are difficult to manage and may become protracted. In a downturn, capital formation dries up but the capital drain continues. This erodes the output gap. A fiscal stimulus now has less headroom for expansion. On top of that, an increase in domestic demand may be met by investment in productive capital abroad; the domestic investment response is missing. This may even cause a fall in labor productivity ( UK productivity puzzle?).

In short, globalization IS the problem.

Unemployment and well being

Recessions generate inequality in both income and well-being: people who lose their jobs bear a disproportionate burden of the recession.  As Kathleen Geier noted the impact of unemployment on well-being it’s even worse than you thought

While reading this odd and meandering New York Times op-ed this morning, I stumbled upon a link to a fascinating study from last year on the impact of unemployment on non-monetary well-being. It was conducted by Stanford sociologist Cristobal Young, who discovered that unemployment has an even more catastrophic effect on personal happiness that we thought.

The study produced three major findings. The first is the devastating impact job loss has on personal well-being. Job loss, says Young, “produces a large drop in subjective well-being”:

Job loss into unemployment, however, is a different matter; this brings on deep distress that is greater in magnitude than the effect of changes in family structure, home-ownership or parental status. The distress of job loss is also hard to ameliorate: family income does not help, unemployment insurance appears to do little and even reemployment does not provide a full recovery [italics mine].

The second finding is that while unemployment insurance (UI) is successful as a macroeconomic stabilizer, it doesn’t make unemployed people any happier. UI, says Young:

is not central to their sense of well-being… [Snip] …[ I]t does little to support their identity, sense of purpose or self-regard.

Third, job loss has a strong, lasting negative impact on well-being that may persist for years:

[J]ob loss has consequences that linger even after people return to work. Finding a job, on average, recovers only about two thirds of the initial harm of losing a job. It is not clear how long it takes for the nonpecuniary effect of unemployment to heal.

Other research suggests that what Young refers to as “the scarring effect” of job loss can last from three to five years, or even longer. He also notes that “the more generalized fear of becoming jobless” may persist.

Young’s discussion of these findings stresses the inequality theme. He points out that “recessions generate inequality in both income and well-being: people who lose their jobs bear a disproportionate burden of the recession.” He suggests job-sharing as a way to reduce the concentrated misery of unemployment. That’s a great idea that unfortunately never seems to go anywhere. Employers today seem more interested in squeezing as much labor out of employees as possible for the lowest cost. They’re looking to shrink their payroll rather than expand it. And unfortunately, there are very few public policies that promote job-sharing, let alone do it effectively.

The sheer human misery created by the economic downturn has been stunning. The economic damage is, in some ways, the least of it. Another study shows that the long-term unemployed experience shame, loss of self-respect, and strained relationships with friends and family. They even suffer significantly higher rates of suicide.

Yesterday, Paul Krugman and others discussed the impact of economic inequality vs. unemployment on income. Krugman argued that inequality has had the greater impact, and I agree. Among other things, inequality is also the root cause of the unemployment problem. Special interests which have disproportionate power in our political system prevented more stimulus and inflicted an austerity agenda, which has had a disastrous effect on employment. Enacting an economic equality agenda will be huge political challenge, but it’s the only way I can see of ultimately resetting the priorities of our government so that it starts working on behalf of ordinary Americans again.

Official measures of unemployment

There are two popular unemployment measured U3 (commonly cited as "official unemployment rate", which dramatically understates real unemployment) and U6, which is close to actual unemployment rate as was measured during the Great Depression. U3 is often as low as half of U6 (that's why it sometimes called 50 cents unemployment rate). As The Big Picture note in the entry Unemployment Reporting

Its been pretty obvious for sometime that the Financial Media are doing a disservice to their readers by only reporting U3, given how dramatically it understates Unemployment. Indeed, consumer sentiment reports are at deep negative levels that only occur when Unemployment is much than what U3 has been saying. It is painfully obvious that U3 does not paint an accurate view of the Employment situation.

Here's the experiment I propose: Let's start reporting both, with appropriate descriptions of each. Report U3, add U6, provide monthly and year over year changes. Let the reader see the full picture, via BLS data.

See Table A-12. Alternative measures of labor underutilization

Factors that make the current unemployment structural

I would like to stress it again: many factors point to the fact that the current level of unemployment is mostly structural. In other words jobs eliminated will not be coming back. Among the most important factors we can mention:

  1. Neoliberal ideology, which prevents strong government action and direct employment by government on infrastructure projects like during New Deal. Related to the dominance of neoliberalism the hypertrophy of financial sector lead to games with "Main street" after which high, self-sustainable (aka structural) unemployment for in now a destiny for millions. Making the whole society sick.
     
  2. Outsourcing (which partially is due to much better communication channels available and computerized navigation)
     
  3. Computerization (which directly "eats jobs" much like during industrial revolution in the UK).
     
  4. High price of energy, which serves as strong depressing factor. If I remember correctly, a decade ago price of oil above $100 was considered an equivalent to permanent recession. This is never mentioned today, but still might be as true today as it was ten years ago: with the high price of oil the economic recovery is simply impossible. The only option, the only trajectory for economy is permanent stagnation.
     
  5. Growth of "lumpen-proletariat". Narcoaddicts, alcoholics, single mothers from poor families with just high school diplomas,  people with "generosity-based" high school (considerable part of Afro-Americans) and university diplomas from "diploma mills" (essentially fake diplomas),  various categories of handicapped, people with criminal records (substantial part of Afro-American male population), etc.  

The first three factors changed the distribution of power between labor and capital in favor of capital; and those guys are not inclined to take prisoners, when there is a chance to fatten their pockets.  None of the first three factors will probably be reversed soon, although neoliberal ideology is after 2008 entered a zombie state.

Also computerization and Internet allowed capital and political forces behind it much better organize politically. So like in in previous human history well organized and wealthy minority dictates its will less-organized poor majority.

I think that financial capital might eventually experience some setbacks. This bacchanalia of greed with those hedge fund  which hack financial system left and right  might come to an abrupt end with the rise of the price of oil. Even now price of oil indirectly pressure "masters of the universe".  And remember famous slogan of 2008 "Jump suckers" ;-). It reflects the society attitude to financial oligarchy and as such entail certain dangers of "blowback" for all those derivatives games.

Not under Obama watch as he is essentially a sock puppet of financial oligarchy. But eventually setback for "big finance" can happen. At the end of the day it is oil that is the real convertible currency and when oil production is diminishing or flat,  financial oligarchy will be pushed back. 

Measures taken by political elite to save financial institutions after 2008 collapse means that unemployment is a part of a general political problem with neoliberalism as a social system. Under neoliberal regime the elite can't care less about long term unemployment. National Security State ensures the security of the neoliberal elite. Elections in the USA are a sham as two party system effectively blocks candidates outside the list approved by the current elite.  The latter might even see sharp division of the society into "have" and "have nots"  as a solution of oil depletion problem (Economist's View):

bakho:

Exactly.

Monetary policy does not operate in a vacuum. Monetary policy operates in an economic system that includes fiscal and regulatory tools. It is a mistake to lock the fiscal and regulatory tools in a shed.

Fiscal policy ALWAYS operates in a recession, at least in the form of automatic stabilizers, (UI, etc.) and sometimes in the form of additional stimulus.

The meagre automatic stabilizers currently in place are enough for a mild recession, but are woefully short of what is needed in a recession like the recent one.

The primary objection to fiscal policy manipulations is that fiscal policy is more easily politicized. This overlooks the fact that monetary policy is not only political, but bankers (who constitute a wealthy special interest) have an agenda that tilts monetary policy to their own self interests.

The primary objection to using fiscal stimulus to address our unemployment crisis is POLITICAL. Wealthy special interests want pay less taxes and short term stimulus would interfere with their political agenda to roll back spending and reduce spending as a percent of GDP.

Wealthy special interests have the upper hand at the moment because enough politicians are dependent on their campaign donations. However, this politicalization of fiscal policy, doing too little to address unemployment, is the prime force behind the Fed keeping interest rates low. If enough fiscal stimulus was enacted to quickly return to full employment and inflation at or slightly above the target, the Fed would not have to consider extraordinary measures.

Anyone unhappy about extraordinary monetary measures should be urging Congress to fix unemployment now. This is not what our elites are doing. They are complaining about extraordinary monetary measures AND about additional stimulus. This suggests that these policy elites care nothing about social problems of long term unemployment, are content to have the US become a divided nation between haves and have nots and are content to oversee the creation of an underclass in order to concentrate wealthy upward.

When one is saying that unemployment became a structural problem that means that it is immune to the business cycle. For example, during the last economic expansion (Jan 2002 -Dec 2007), the median US household income dropped by $2,000. In other words many Americans were worse off at the end of an economic cycle as jobs went outsourced to low wage countries due to wage arbitrage... 

Collapse of Casino Capitalism and unemployment

The collapse of “casino capitalism” model in 2008-2009 was so profound that all sectors of the economy became depressed. As securitization mess exploded in the face of their creators as it became clear to everybody that the king is naked. Debt overhand of financial industry is tremendous and it was just socialized, not removed. Essentially it became the problem of the USA government debt. In many ways problems the USA faces now are more serious then the problems the country faced during Great Depression because economic crisis doubles as the crisis of dominant ideology -- the ideology of neoliberalism.  And the Great Recession, despite Economic Cycle Institute premature desire to bury it, is still with us. Five years in the making as of 2013.

Ideology on which FIRE sector dominance was based is now questioned and that creates additional problems both nationally and internationally, much more internationally. Internationally it means a substantial loss of the USA "soft power", the factor that played tremendous role in the decade of 1990-2000.  When other country laugh at the US financial oligarchy tribulations it is difficult to open new markets selling old neoliberalism doctrine. due to debt overhand the US dollar is replaced by currency swaps in national currency for several major trading partners of China such as Brazil and Russia.   First of all that makes the crisis even deeper and analogies between the USSR and the USA more sinister. As with Stalinists in USSR who destroyed the country economically, there is a powerful block of republican dead enders and democratic supporters of financial oligarchy (blue dogs) who  will continue to promote the current neoliberal course with its deification of "free markets" (free as in "free shooting zone"), oblivious to consequences of neoliberal policies which eat the society and protected by the size of their accounts. There is nothing new here. Oligarchic  democracies can commit suicide. Actually none lasted long. And with such a formidable political wrecking crew in action and gridlock in Congress even over minor reforms that became less probable.

For all practical purposes two party system actually works like one-party system: democrats were also captured by FIRE industries to the extent that they should not be considered an independent party, but as a slightly more moderate wing of the Republican Party. Similarly by all accounts Obama is a moderate Republican with the policies to the right of such Republican Presidents as Dwight Eisenhower and Theodore Roosevelt. In a way, Democratic Party perform the role of spoiler: it exists for the sole purpose of attracting disgruntled left-wing electorate away from more radical parties. Republicans play symmetrical role for right wing crazies. None can or want to became the agent of change. In this sense Obama electoral slogan "change we can believe in" was a nasty, cruel joke of political insiders over political outsiders.  Note how unceremoniously Obama dumped labor after his reelection, while courting it during his reelection campaign.

As private sector is still downsizing, and government can't be the employer of last resort due to dominance of neoliberal ideology, the whole situation looks more and more like Japanese lost decade. The only area where government can expand workforce are defense contractors (military keysianism):

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

It is important to understand that the USA is not just coping with the largest financial crisis in history, the USA is also going through a major restructuring of the American economy as well as the world economy due to plato in oil extraction. This transformation, which was postponed by two decades due the collapse of the USSR (which gave the USA companies half billion of new consumers and huge area to dollarize and buy assets for pennies on a dollar), will be very long, very painful and very slow. One additional factor that complicates the picture of "peak oil", is that it is  more properly can be called "end of cheap oil", as at higher prices more oil became economically available. So this is  not a peak but long plato.

As GDP is highly correlated with the energy consumption, the side effect of peak oil will probably be stagnant (close to zero after inflation) growth and with it speed up in permanent decline of the standard of living for middle class 

Also complicating the situation is the status of baby boomers which lost significant part of their savings during last two bubble bursts and now need to retire or will be pushed out of workforce. Pensions are already cuts either directly or indirectly (via inflation). For example, defined benefit pensions almost disappeared outside of government job force. After housing crash middle class no longer has a realistic prospect to fund their retirement and need to work longer: that increases competition for jobs. For middle aged professionals who are unemployed now the odds of finding reasonably paid work are low and they create additional competition for young people entering work force from universities. People over 50 now face especially poor job prospects.

At the same time corporate executives became corporate aristocracy (with differences in pay raising from 10-20 to 100-200 more of average corporate salary; this is the differences close to what used to exist in feudal societies). Most corporations are taking a lazy way out of the crisis with relentless cost-cutting.  This is a self-defeating strategy as cost cuttings eventually returns back via supply chain and bite the corporation which performs it. But so far this did not happened.

In addition productive sectors of economy are now under pressure of rampant financial speculation which serves as a huge tax on productive sectors of economy. Financial system is controlled by small number of large firms that permanently shifted their main activity into gambling and hacking of the financial system. There is some justice that computers which fueled all this crazy gambling on the strength of global reserve currency led to outsourcing of IT professionals to the extent that this part of US economy was destroyed and became a shadow of its former self in just ten years (2000-2010).

Another important sign of stagnation is that new college graduates face extremely bad job market which squeezes out anybody without substantial experience so for them it's Catch 22. Only graduates form Ivy League colleges has real prospect to get a job after graduation. Plus those with good family connections. In a way education is no longer a guarantee for better paying job, the same situation what was typical for the USSR and other countries of Eastern block during Brezhnev's stagnation.

There is also an interesting transformation of the quality of the education that also parallel transformation  experienced by the USSR in post-war period, but in especially acute form, three decades before the collapse. Private education became more like subprime lending.  It's quality became fake, as the term "diploma mills" suggests.  This rat rate to the lowest possible quality (quality instead of quality) was the central tendency in Brezhnev's USSR. 

In the USA in addition to devaluation of education caused by low quality "everything passes, everybody graduates, just pay" modus operandi of diploma mills, graduates from lower middle class families are now overloaded with debt, which creates for them really difficult situation and push many of them into low level service jobs like waiting. In other words excessive debt after college make getting into workforce using acquired specialty even more difficult as there is no space for long job search, relocation is more difficult and so on and so forth. 

There is also huge criminal industry that flourished around people desperate attempts to find well paying jobs. Many educational scams like "we will make you an ultrasound technician in six month; 90% of our graduates found jobs that pay over $60K in the first month after graduation"  or " software tester in four month; 100% of our graduates find jobs" are trying to capitalize of people desperate to find job, any job and getting into crushing debt trying to improve their chances in job market. Those criminals are not prosecuted.  For more information see:

The main source on new jobs is service sector and the lion share of new positions are McJobs

The employment growth comes mainly from the service sector which feeds off of consumer spending. It was hit by outsourcing especially in such areas as IT. Manufacturing no longer create jobs – outsourcing and computers eat them and you no longer need more people to make more stuff. 

Peter Dornan at EconoSpeak has the following comment which perhaps looks deeper at why the elite is so indifferent to mass unemployment and growing poverty in the U.S.

“…The process is more complicated: where one sits in society and the kinds of problems one typically has to solve leads to a way of thinking, and this manner of thinking then informs politics.

For centuries, the finance perspective has played a central role in economic theorizing, and there is ordinarily a body of research to support it. What I am proposing is this: economic orthodoxy is regaining control over policy because it reflects the outlook of those who occupy the upper reaches of government and business….”

http://economistsview.typepad.com/economistsview/2010/05/a-political-economy-moment.html

IMHO to get the economy out of this mess, government should concentrate on direct job creation (like was the case with Roosevelt administration), not on propping zombie banks hoping that they will generate credit necessary for creation o new jobs. Growth of credit will not happen and if it will happen it will not generate new jobs: most of it  is pushed into speculation.  Spectacular rise of S&P500 in first half of 2013 is a pretty good illustration of the process.

Long term high unemployment is a disaster for the country and disaster for the people, despite the fact that it is irrelevant for banksters, too busy playing in the huge casino they created. Failure to address this problem directly by Obama administration (which in economic terms is the second Summers-Bush administration making a joke in the slogan "change we can believe in") make Obama a real serial betrayer of people who elected him, the role he seems enjoy playing. 

Additional factors the complicates the picture

There are several additional factors that makes addressing the problem of chronic, structural unemployment even more difficult:

  1. The economic crisis coincides with deep ideological and political crisis.

    One can't solve the current problems the US are facing without the reform of the political system and institutions. Power of lobbyists need to be curtailed. Senate needs to be reformed.  Republican Party probably should be dissolved or temporary prohibited like Communists after the dissolution of the USSR as it is unable to reform. As there is no political will for political changes the crisis is structural and little people have to suffer.
     

  2. Real economy was damaged by excessive growth of  FIRE sector and associated "fictional" economy.  Real economy can't support the current size of FIRE sector and it needs now to downsized. There is no smooth, painless route back to the easy-money based false prosperity of Reagan-Clinton-Bush era (age of leveraging). A new economy needs to be created for sustainable recovery because the old, FIRE-based was unsustainable. In 2010 housing probably will decline further. Both commercial and residential construction continues to decline. States continue to cut back budgets creating negative feedback loop. Personal bankruptcies are up, more defaults are on the horizon. The U.S. economy needs to be re-structured, both on the "technical" and inter-sectoral level. That amounts to a collective, system-wide Chapter 11 re-organization. Obama administration has totally failed to sell the public on the validity of "stimulus", however named. Suspicion that this administration is a puppet of big banks had grown sharply. Trying to kick the can down the road will yield Republican Congressional majorities in both houses.
  3. The USA is experiencing the process of separation of workforce into two-tiers, with an elite class of highly paid employees at top companies and a subclass of minimal wage and part time laborers who work for less pay, have less job security and receive fewer benefits.
  4. Foreign wars have substantial financial costs and are an important drag on the USA economy. In the book True Cost of the Iraq Conflict, Joseph Stiglitz was estimated he cost at three trillion dollars of which probably only one trillion was offset by looting of Iraq resources. Afghanistan is about  $2 billion a week, and unless all heroin trade is controlled by CIA there is little that can offset those costs. This is the longest ongoing conflict in U.S. history.  And since Joseph Stiglitz book was written things became worse.

    The disability rates are higher. The cost of caring for the disabled are higher. Almost one out of two people coming back from Iraq and Afghanistan are disabled. This is an unfunded liability of—we calculate now to be almost a trillion dollars, over $900 billion. So, one of the big ways of reducing our deficit is a—is cut back some expenditures....

    With Libya and Syria added to the list, the hidden costs of foreign wars will weight on weakened economics more heavily. Annual cost per soldier oversees is approximately $1 Million per year.
  5. Rent that hypertrophied financial sector  extracts from the rest of the society continues to be a serious drag on the economy. This drag adds to substantial drag caused by foreign wars and military bases as well as huge military industrial complex. While parasites are omnipresent in nature, two large parasites instead of one might spells trouble for the host. Moreover the ascendancy of the financial sector and the decline of manufacturing in the U.S. ("Casino Capitalism" ) has implications similar to consequences of an organized crime running the country.  The creation of tangible products whose utility/quality can be more or less objectively measured were phased out in favor of "financial products," whose utility/quality is much easier to conceal behind legal/technical jargon and junk economics. That created a huge new class of white collar criminals. While Blankfein is out claiming that GS is doing God’s work, the reality is quite different: it became a training ground for new type of ruthless criminals, much more dangerous then bank robbers. Killing of Glass-Steagall by Clinton and leverage obtained by financial sector operating without regulatory limit created prerequisites to the financial panic of 2008. Glass-Steagall enshrined two principles that were abandoned:

    The violation of the second principle directly leads to a regulatory capture in which anything goes and a corresponding observed "need" to accommodate indiscretions, as with the Greenspan/Bernanke put. It perhaps should be identified as THE primary cause, since it left Wall Street with the well-founded (LTCM, Latin America debt crisis, etc. ) and since-proved belief that prudence and capital were quite unnecessary, and that reckless, sociopathic deal making is profitable. Four examples :

  6. Capture of the government and the media by financial sector makes the necessary reforms unlikely. “Failed Regulatory Oversight” is a politically correct term for corruption. The latter was probably the second reason of the current high unemployment . See Toxic Sludge is Good For You: Lies, Damn Lies and the Public Relations Industry by John C. Stauber
  7. Effects of coming CRE crash on unemployment and economy in general might be underestimated of official forecasts.  The occupancy rate is the malls and commercial buildings is still declining. Many strip malls in the country are still are empty. Nice office buildings with signs "for rent" are feature of landscape in 2013. Many buildings, even large well designed buildings with datacenter infrastructure are vacant for years and eventually are demolished.  A full scale commercial real-estate crash can also hurt the economy in a way similar to residential home estate crash. Loans that were made in 2005-2007 were refinanced for three years in 2009-2011. And again in 2012-2013. But eventually they will be coming home to roost.  This also affects the construction  sector.  Only $400 billion of loans came due by the end of 2009, but nearly $2 trillion was refinanced by 2012.  

    The collapse in the U.S. commercial real estate market is fought by the government will maximum force but government resources to fight the crisis are diminishing too. in 2011 state financial crises led to cuts in state budget. In addition, in June 2013 municipal bonds came under fire, making financing more costly.  Commercial debt is approximately one third of the size of the total residential debt and it is concentrated in the same places creating double whammy. In Florida commercial loans, broadly defined, are bigger then residential. Unlike residential real estate, problem with commercial real estate are not solved by growth of population and creation of new families.

    Retail and white-collar positions will be directly impacted by CRE crash. As stores and offices close, mall and office building owners suffer from cuts in cash flow and severely limited prospects for new tenants. Insurance companies, hedge funds and regional banks are heavily invested in CRE and are next in line so some financial jobs will be lost too. Extend and pretend might work but the question is if there is enough liquidity to stretch loans.
     

  8. Computers eat people jobs. Automation and the recent advances in robotic and computers make more and more workers redundant.  The latest victims are cashiers in supermarkets. Manufacturing jobs continue to disappear not only due to outsourcing, but also due to new computerized technologies. The reality is that manufacturing employs a mere 11.5 million workers in the U.S.A., or 9% of the workforce and this percentage will never increase substantially.

    My feeling is that even in corporate IT after drastic cuts that were the standard game for large corporations in 2008-2009, additional cuts are possible. But the situation on the ground is somewhat paradoxical as real cuts runs deeper that you would assume from headcount: a lot of current IT personnel belongs to "untouchable" caste -- wives of somebody higher up in this or linked by the supply chain company, sons of somebody important and so on. I can't give you percentage, but probably 10%-20% of "untouchables" would be an educated guess. So removing of at least 10% of the current IT workforce means removal of 12% or more those who do actual work. 

    Another factor is that cuts in IT are one way street as they stimulate replacing of people with technology and there are still tremendous potential for computerization of many areas including first of all IT itself.

    For example all this cloud initiatives are in disguise politically correct way to move things in the direction of higher automation and outsourcing because under the surface there is not much innovation in those "new" technologies.
     

  9. Oil prices despite coming down in September 2011 are back to $85-$90 level.  That level is putting additional stress on manufacturing, transportation and agriculture. Solid US growth of the past decade and earlier was dependent on two factors:

    With the rising oil all bets for re-inflating the economy (aka kicking the can down the road) are off.
     

  10. Indirect job creation strategies via stimulus to businesses seized to produce meaningful job generation. Reaganomics has put the U.S. economy into a high-unemployment equilibrium when the high-rate of labor unemployment is reinforced by the shortage (or absence) of idle, but useful capital stock due to offshoring and  outsourcing as well as chronically low consumer demand due to high level of debt. Only service sector and financial jobs can be generated with minimum capital infrastructure (for financial jobs internet connection and computer are almost all that needed). Automation of production lead to less and less workers.
     
  11. Confidence is really low.  Businesses have no confidence that customers ever return, therefore are not hiring much and scaling down the production. This chicken-egg-chicken-egg cycle has to be broken, but I am really puzzled how that is going to happen without large government role in the economy, which is big no-no for ideological consideration (the USA preaches neoliberalism as a "civil religion" similarly like USSR and other "communist" countries preached Marxism). Without large government projects employees have no confidence in their jobs, therefore are not consuming much.
     
  12. In the face of growing unemployment the current administration proved to be as incompetent as Bush administration in case of Hurricane Katrina. And that means totally incompetent.

Effects on population

Unemployment is a very harsh condition, that traumatize the workers greatly (Sliding into the Great Depression)

At first the unemployed searched eagerly and diligently for alternative sources of work. But if four months or so passed without successful reemployment, the unemployed tended to become discouraged and distraught.

After eight months of continuous unemployment, the typical unemployed worker still searches for a job, but in a desultory fashion and without much hope.

And within a year of becoming unemployed the worker is out of the labor market for all practical purposes: a job must arrive at his or her door, grab him or her by the scruff of the neck, and through him or her back into the nine-to-five routine if he or she is to be employed again.

The USA as a whole is facing the worst labor market prospects since 1929. In terms of duration of elevated unemployment we already rival the early 80s. But in no way we can expect a steep decline in the rate of unemployment in the way that happened in 1983 when unemployment declined at a brisk 2%. And permanent high unemployment creates economic conditions that feel like the USA brought back slavery. The new reserve army of the unemployed drives wages down, while average productivity continues to rise, as a way to generate surpluses to be channeled into executive bonuses. The whole sectors like IT were decimated by outsourcing. Unfortunately given the current overcapacity and ample supply of qualified job seekers in many occupations, I certainly don't expect labor arrangements and employment conditions to become more favorable.

Looks like 7% unemployment is going to become the "new normal". In any case government statistics is very suspect (see Fake Employment Statistics) and actually unemployment is higher. For example, the declining participation in work force means that actual unemployment rate is higher then reported.

Obama-Bush administration saved banks waiting most of taxpayers money and piling up debt in hopes that they restore credit flow in the economy. But this was a fallacy: banks aren’t lending to prospective home buyers, small businesses and real estate developers because bankers recognize the obvious — many of those loans won’t get repaid. Of course, as bankers refuse to lend, the stagnation becomes a self-fulfilling prophecy. But since society is burdened with too much debt, piling on more debt would not be the solution in any case.

There is no smooth, painless route back to the easy-money based false prosperity of Reagan-Clinton-Bush era (age of leveraging). We entered the age of deleveraging. Obama’s “you owe us” message to the banks is the height of naïveté’ and tells us a lot about him. In 2013 our problems are worse than they were in 2007 before the crisis. Peak credit is as dangerous for the economy as peak oil...

Corruption of economic profession

The inability of the economics profession to forecast unemployment in the short, medium, or long run would be downright comical, if not for the human tragedy involved. While the Occam Razor approach suggests incompetence as a culprit, I think it's a manifestation of the corruption of the profession by financial interests (with some "don't rock the boat" variations).  First of all, economists much like elected officials and Wall Street executives have a vested interest in keeping the perception of a robust economy. The employment data announced each month are critical to this perception. That's why government "prints up jobs out of thin air" the same way the Federal Reserve prints money. This is economic propaganda and as such it is not that much different from the over-stated earnings practiced by companies of all striped and colors.

The second problem is that fiscal policy cannot solve the problem of job creation in all circumstances, especially in deleveraging environment. Position of people like The Fed Can Help, But Fiscal Policy Is The Key To Job Creation ) is a step in right direction. But without something like Jobs Corps to get out of the current situation is very difficult. In 1982 SETH S. KING wrote in NYT (PROPOSAL FOR JOB CORPS RECALLS ROOSEVELT PLAN):

Few of this city's recent celebrations of Franklin Delano Roosevelt's 100th birthday have passed without nostalgic references to the Civilian Conservation Corps, that President's cherished vehicle for getting thousands of jobless, hungry youths off the streets and putting them to work refurbishing the nation's parks and forests.

With today's unemployment rate nearing a postwar high and new thousands of young people again unable to find work, Congress is preparing to wrestle with the Reagan Administration for money to start a new youth job training program and reconstitute the Job Corps, the pale copy of the old C.C.C. that emerged in the Carter days.

But there is little in these plans that is likely to reproduce those Depression era pictures of sturdy, bare-chested young men planting trees, building bridges and saving the nation's battered farmlands.

Nor is today's procedure-encumbered Washington, where a year usually elapses between idea and action, likely to duplicate the astonishing start on the C.C.C., which four months after being conceived had been approved by Congress and had more than 300,000 young men being clothed, housed, fed and paid $30 a month while they breathed all that fresh air.

In this crisis the main lesson was that theologically captured by free market fundamentalism government can destroy economy at a really staggering rate. This is "Back in the USSR" situation. Eight years of Clinton and eight years of Bush administration (see The Economic Consequences of Mr. Bush, by Joseph E. Stiglitz) are as good proof of this as one can ever get. Clinton and Bush regimes (especially Rubin-Greenspan alliance and "vice president from an undisclosed location" activities)  proved to be a real wrecking crew. But that does not mean that government cannot put it weight on easing the unemployment burden. Incentives such a investment tax credit matters. Not tax cuts for the rich, but direct investment credit. direct job creation which is anathema to market fundamentalism would be even better and less costly. Roosevelt administration did it, so why not capitalize on positive experience and develop it further ?

In this crisis the main lesson was that theologically captured by free market fundamentalism government can destroy economy at a really staggering rate.

In any case socializing losses and privatizing gain (crony capitalism) should be downsized. Insurance for gambling by big banks should be cut.

As long as economists believe their report card is the rise in GDP (GDP Mania), we will remain in a failure mode. A country is not defined by GDP but by the quality of life of its citizens. And quality of life cannot be assessed by a simplistic, one-dimensional metric such as GDP. The key dimensions for well-being are: employment, earnings, wealth, health, infrastructure, and living conditions. In that particular order. With employment as the critical factor: the USA looks like an underdeveloped banana republic by the current measure of unemployment and in many respect has became such.

It looks like high persistent unemployment became the defining feature of this recession. Jobs creation prospect in 2014 look pretty grim -- there is no sector other then government that can absorb redundant workforce and automation in manufacturing makes sure that those who are unemployed right now will stay unemployed in the foreseeable future. Most jobs cut are permanent, not temporary, especially in such sectors as IT (structural shift). As Robert Reich noted:

...The basic assumption that jobs will eventually return when the economy recovers is probably wrong. Some jobs will come back, of course. But the reality that no one wants to talk about is a structural change in the economy that's been going on for years but which the Great Recession has dramatically accelerated.

Under the pressure of this awful recession, many companies have found ways to cut their payrolls for good. They’ve discovered that new software and computer technologies have made workers in Asia and Latin America just about as productive as Americans, and that the Internet allows far more work to be efficiently outsourced abroad.

This means many Americans won’t be rehired unless they’re willing to settle for much lower wages and benefits. Today's official unemployment numbers hide the extent to which Americans are already on this path. Among those with jobs, a large and growing number have had to accept lower pay... Or they've lost higher-paying jobs and are now in a new ones that pays less.

The current crisis also means that financial services and real estate (FIRE) economy, this gigantic casino that the US government was trying to build for the last 25 years is now in trouble and shed workers in vast numbers (although working condition in financial industry are still good or very good depending on your position in the food chain). But the profitability of large banks and can achieved only by oversees expansion and derivatives games with foreign assets. The most profitable essentially converted themselves into hedge funds, getting most profits from trading operations, not from the traditional banking activities.

The simplest and the most obvious solution in the current situation is to cut work week and hours of work (4 days six hours a day). That will put enough people to work to make unemployment bearable and it might slightly help entertainment and hospitality industries which now is suffering more that others. From the other point of view if lower standard of living is inescapable, why not to make the transition smoother and more fun by cutting work hours.

Military Keynesianism no longer works

But that's not enough. The USA needs drastically cut military budget. Military Keynesianism no longer works as expected.  As John Maudin in his e-letter proposed (see Thoughts on the Economy- Problems and Solutions):

Mauldin: Unemployment is likely to continue to rise and last longer than ever before. We have to take care of the basic needs of those who want work but can't find it. Unemployment insurance should be extended to those who are still looking for work past the time for benefits to expire, and some program of local volunteer service should be instituted as the price for getting continued benefits after the primary benefits time period runs out. Not only will this help the community, but it will get the person out into the world where he is more likely to meet someone who can give him a job. But the costs of this program should be revenue-neutral. Something else has to be cut.

Mish: Can we deal with 15 million volunteers? Somehow I doubt it.

Mauldin: We have to re-think our military costs (I can't believe I am writing this!). We now spend almost 50% of the world's total military budget. Maybe we need to understand that we can't fight two wars and support hundreds of bases around the world. If we kill the goose, our ability to fight even one medium-sized war will be diminished. The harsh reality is that everything has to be re-evaluated. As an example, do we really need to be in Korea? If so, why can't Korea pay for much of the cost? They are now a rich nation. There are budgetary fiscal limits to being the policeman for the world.

Mish: Bingo. We can easily slash our military budget by 70% and still be the most powerful nation in the world. Moreover, it is time to declare the war in Iraq and Afghanistan over, pack our bags and leave. Gradually, over the next 5-8 years we should bring home all our troops from literally every county they are stationed.

This chart shows the absurdity of our spending.

Chart courtesy of Global Issues - World Military Spending.

By the way that chart does not include the latest increase in the US military budget. Please consider US lawmakers pass 680-billion-dollar defense budget bill

The US House of Representatives passed a 680-billion-dollar defense authorization bill on Thursday that includes funds to train Afghan security forces and more mine-resistant troop carriers.

Lawmakers defied President Barack Obama's veto threat and approved 560 million dollars to continue work on an alternative engine for the F-35 fighter jet built by General Electric and British manufacturer Rolls-Royce.

The compromise legislation would also raise military pay by 3.4 percent -- half a percentage point higher than Pentagon recommendations -- and assign 6.7 billion dollars for mine-resistant armored vehicles known as MRAPs, which is 1.2 billion dollars more than the administration had proposed.

Nearly $700 billion dollars of "defense" spending. The amount needed for actual defense is 20% of that at most, and more likely 5%. Balancing the budget is easy if you start here.

Mauldin: Glass-Steagall, or some form of it, should be brought back. Banks, which are subject to taxpayer bailouts, should not be in the investment banking and derivatives-creating business. Derivatives, especially credit default swaps, should be on an exchange, and too big to fail must go. Banks have enough risk just making loans. Leverage should be dialed down, and hedge funds selling what amounts to naked call options in any form, derivative or otherwise, should be regulated.

Mish: What we need to do is get rid of the Fed, FDIC, and fractional reserve lending. Regulation has failed every step of the way. Regulation created Fannie Mae, Freddie Mac, and the Fed. Regulation by the SEC anointed Moodys, Fitch, and the S&P as debt rating companies. We do not need more regulation, we need less regulation, a sound currency, and no Fed. Regulation is clearly the problem, yet the cries for still more regulation come from nearly every corner save the Austrian economists.

Mauldin: Let me see, is there any group I have not offended yet? But something like I am suggesting is going to have to be done at some point. There is no way we can continue forever on the current path. At some point, we will hit the wall. The fight between the bug and the windshield always ends in favor of the windshield. The bond market is going to have to see a credible effort to get back to a reasonable deficit, or we risk a very difficult economic environment. The longer we wait, the worse it will be.

Mish: "Is there any group I have not offended yet?" Yes. You failed to offend those on public pension plans. Not to fear, I did that myself in Five Major Pension Problems - One Simple Solution.

Unsolvable Problems


Top updates

Softpanorama Switchboard
Softpanorama Search


NEWS CONTENTS

Old News ;-)

Index 2017 2016 2015 2014 2013 2012 2011 2010 2009

[May 24, 2017] Universities serve as finishing schools for the ruling class by Rob Montz

May 23, 2017

Originally from: Why Colleges Fold to Students' Anti-Intellectual Hysterics The American Conservative

Middlebury College just completed its final round of disciplinary hearings for students involved in March's violent disruption of a lecture by Charles Murray, the influential but controversial social scientist.

The punishments to date have been laughably lax. Guilty students have been presented with non-official "probation" letters that'll vanish upon graduation .

This toothless response reflects a deeper rot. Middlebury, like many prestigious colleges, has steadily gravitated away from its core educational mission and now serves primarily as a sort of finishing school for the ruling class. Professors and administrators alike are simply expected to shower students with affirmation-and then hand over a degree securing smooth entry into America's elite. College has become four years of expensive fun. This is what parents and students now demand.

This change-from institutions of learning to institutions of affirming-threatens the nation's future as colleges foster a vicious strain of anti-intellectualism.

At over $60,000 a year, Middlebury's tuition buys much more than books, lodging, and classes. Students also get a campus-wide square dance , dining halls that host culinary " world tours ," lavish fitness facilities, and an annual winter carnival complete with fireworks, a hot chocolate bar, and snow sculptures.

The student body is ultra-affluent. Middlebury is among a small handful of schools with more students from the top one percent of the income distribution than those from the bottom 60 percent . And on graduation, newly christened alums are typically funneled right back into their elite enclaves, taking jobs at places like Goldman Sachs, McKinsey, and Amazon .

... ... ...

Rob Montz is a fellow at the Moving Picture Institute. Find his work at: RobMontz.com. Check out his interview with TAC executive editor Pratik Chougule at Fearless Parent Radio: http://fearlessparent.org/free-speech-controversy-us-elite-universities-episode-104/

[May 20, 2017] Outsourcing higher wage work is more profitable than outsourcing lower wage work

Notable quotes:
"... Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence. ..."
"... That's what happened with American IT. ..."
May 20, 2017 | economistsview.typepad.com
cm, May 20, 2017 at 04:51 PM
Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence.

Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work - with lower wages also labor cost as a proportion of total cost tends to be lower (not always).

And outsourcing and geographically relocating work creates other overhead costs that are not much related to the wages of the local work replaced - and those overheads are larger in relation to lower wages than in relation to higher wages.

libezkova -> cm... May 20, 2017 at 08:34 PM

"Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work"

That's what happened with American IT.

[May 19, 2017] What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; only at the beginning anything is possible

Notable quotes:
"... What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; It has a beginning when anything is possible. A middle when a broad spectrum of players prosper and there is extra money for infrastructure and public amenities. Then an end where wealth is increasingly concentrated in fewer and fewer hands and the waste stream has taken its toll. ..."
"... Tell me, when where these good old days, of "true" capitalism? Back when we were enslaving Africans? ..."
"... workers fail to ..."
"... Yeah, it's really a pity that author of such a well-written piece confuses GDP with living standards. If that was the case people wouldn't vote for nationalist and populists. ..."
"... serving their own interests; ..."
"... In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that. ..."
"... there are rumors that the Federal Liberal Party in Canada is exploring this. ..."
"... 8) Nothing in this section shall be construed to impose a duty upon: (a) A provider of an electronic store, gateway, marketplace or other means of purchasing or downloading software or applications to review or enforce compliance with this section by those applications or software; or (b) A provider of an interactive computer service to review or enforce compliance with this section by third-party content providers. As used in this paragraph, "interactive computer service" means any information service, system or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such services or systems operated or offered by libraries or educational institutions. (9) This section does not apply to general audience Internet websites, general audience online services, general audience online applications or general audience mobile applications, even if login credentials created for an operator's site, service or application may be used to access those general audience sites, services or applications. ..."
May 19, 2017 | www.nakedcapitalism.com
DJG , May 19, 2017 at 10:20 am

Definitely worth reading and reading again. What popped on first reading is the description of the rise of income in Poland and the stagnation of income in the U S of A. What pops for me on seccond reading is these paragraphs about tax evasion and income inequality: >>

One reason nothing happens is a culture of tax evasion. There's a folk belief in American business that if you pay full taxes, you're not doing your fiduciary duty, and your board will fire you.

Apple now has a quarter trillion dollars offshore that it refuses to put into direct productive use in the United States. Apple boasts that its products are designed in California-they will sell you a $300 book called Designed By Apple In California. But they do their damndest to make sure that California never sees a penny of their overseas profits.

You in the EU are all too familiar with this brand of tax evasion. Google, Amazon, Apple, Microsoft have all been under investigation or in court on charges of evading European taxes.

Another reason good intentions don't translate is that capitalism, especially venture capital, doesn't work very well when there is vast wealth inequality.

[Tax evasion isn't just a folk belief: It is taught in U.S. law schools and in business schools, along with union busting.]

Jef , May 19, 2017 at 10:52 am

What the author inadvertently points out is that capitalism, particularly the so called consumer capitalism that we have is like a board game; It has a beginning when anything is possible. A middle when a broad spectrum of players prosper and there is extra money for infrastructure and public amenities. Then an end where wealth is increasingly concentrated in fewer and fewer hands and the waste stream has taken its toll.

diptherio , May 19, 2017 at 11:49 am

Another reason good intentions don't translate is that capitalism, especially venture capital, doesn't work very well when there is vast wealth inequality.

The author does not understand that capitalism creates vast wealth inequality: that's the whole point. Inequality is a feature, not a bug, and so trying to save capitalism while eliminating vast wealth inequalities is working at cross-purposes, and only one of those aims can be successful and guess which one it always is?

justanotherprogressive , May 19, 2017 at 11:56 am

+100

Wisdom Seeker , May 19, 2017 at 12:39 pm

"capitalism creates vast wealth inequality: that's the whole point."

Not in Adam Smith's world, nor Henry Ford's. True capitalists prosper by creating wealth which improves the lives of everyone around them. Crony capitalists, the ones we have now, strip wealth from others. Witness today's bubble-and-bust cycles rather than the prior widespread economic growth.

The capitalism you see today is an abomination of the original concept, just as Mnuchin's claim to support "Glass Steagall" is an abomination. And don't get me started on the "Affordable" Care Act, or the "Patriot" act which gutted the Constitution

P.S. The original author's article is riddled with glaring factual errors, but he has the big picture right: it's time to restore Antitrust Law and apply it to the internet monopolists. And restore privacy rights and and it's a long list. Start fighting now, if you want anything to happen in your lifetime!

Carla , May 19, 2017 at 2:05 pm

The author's central thesis strikes me as correct: that Europe provides the only hope for applying any brakes whatsoever to the American tech sector. I hope someone over there is listening, as prospects here seem utterly hopeless.

MyLessThanPrimeBeef , May 19, 2017 at 2:21 pm

Freedom means people should have reasonable alternatives, choices on any product, service or ideology. Today's internet experience lacks that freedom aspect quite a bit.

diptherio , May 19, 2017 at 2:42 pm

Hokum. The "theory" is that it benefits everyone, but the reality is quite different. Tell me, when where these good old days, of "true" capitalism? Back when we were enslaving Africans? Back when we were hanging Wobblies? Back when we had to put nets around our factories to keep the workers from committing suicide? Please the dictatorship of the proletariat worked out just fine in Marx's theory, too.

clinical wasteman , May 19, 2017 at 3:00 pm

Another one for the gallery of glaring factual errors: "capitalists prosper by creating wealth". Unless that was an epic typo for something like: " workers fail to prosper while creating wealth".

As for "the original concept" of "capitalism", in which district of the astral plane did you find that? Apart from his anthropological sci-fi about the origins of money in "barter", Adam Smith generally tried to write about the real world. Just like Marx, except that Smith was speaking for a different class interest, whose "moral philosopher" imagined himself to be. For that reason, "capital" and "capitalist"(n.) were important concepts for Smith and Marx alike, but "capitalism" - a sort of hybrid implying the social reality and the ideology cheerleading for it at once without ever really distinguishing between the two - is an abstraction that neither had much time for, and one that only really caught on once both were dead.

Wisdom Seeker , May 19, 2017 at 4:01 pm

Wasteman – for a start, unlike todays Cronyists, Adam Smith understood that capitalism would not function for the benefit of all unless monopolies were restrained by government:

"The interest of the dealers [referring to stock owners, manufacturers, and merchants], however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, and absurd tax upon the rest of their fellow-citizens. (Adam Smith, Wealth of Nations (Amherst, New York: Prometheus Books, 1991), pages 219-220)"

See here for more details:
https://machineryofpolitics.wordpress.com/2012/01/04/adam-smith-on-the-crisis-of-capitalism-2/

Another interesting perspective is from J. K. Galbraith (sorry I lost the source) who pointed out that in an economy with healthy competition, profit margins are lower, but employment and wage income are necessarily higher.

diptherio , May 19, 2017 at 5:14 pm

And pray tell, who is it who will restrain the monopolists? Our elected officials, who just so happen to be under the control of those same capitalists? Which is possible due to the vast wealth inequalities that capitalism generates .

Capitalists, almost without exception, do everything in their power to avoid competition. The idea is to make a profit and competition is antithetical to that.

Lots of things are good in theory, like three-way relationships. Reality, on the other hand, feels no obligation to correspond with theory.

Vatch , May 19, 2017 at 3:27 pm

capitalism creates vast wealth inequality

Not exactly. Capitalism extends or expands existing inequality. It was the development of agriculture several thousand years ago that broke the approximate egalitarianism of the hunter gatherer lifestyle. Even that had some inequality, but not much. For more information, see the early chapters of The Great Leveler , by Walter Scheidel.

diptherio , May 19, 2017 at 5:23 pm

Hence the "vast" part. I'm not so silly as to think that before capitalism there was not wealth inequality. But not the type where a few hundred people control more wealth than a few billion. It would seem to me, on just a gut level based on a little reading, that whereas systems like feudalism were unequal but relatively stable*, i.e. the level of inequality stayed the same generation to generation, capitalism's dynamics have caused inequality to skyrocket, both nationally and globally.

*Or at least cyclically stable, as with regular debt jubilees in Sumer.

HBE , May 19, 2017 at 3:11 pm

"Living standards in Poland in 2010 had more than doubled from 1990." This sentence annoyed me to no end. Yes, the reason that is true is because every capitalist country in the world worked to smash and destroy communism without pause for its entire life and then internal and external oligarchs snatched up everything.

Living standards increased over that period in Poland but so did inequality and poverty. So the country got some shiny new consumer goods (which the author seems enamored by) while the populations poverty rate continues to climb. Thank god for privatization ("Suddenly people had cars, phones, appliances" and suddenly poverty surged as well), and the end of those no good dirty commies, right?

vlado , May 19, 2017 at 4:02 pm

Yeah, it's really a pity that author of such a well-written piece confuses GDP with living standards. If that was the case people wouldn't vote for nationalist and populists.

In any case, despite very good performance of Polish economy, its convergence to West Europe at least in terms of GDP (PPP) is questionable as the cases of Czech Republic and Slovenia show. See the article The convergence dream 25 years on in Bruegel

visitor , May 19, 2017 at 6:04 pm

There is a reason why people voted for the populist PiS and ousted the liberals who had made such a great job at bringing Poland into the EU and its "market society".

justanotherprogressive , May 19, 2017 at 10:23 am

A long but brilliant article that everyone should take the time to read! I want all the techies in my family to read it because it points out some of the uneasiness even techies feel about the their industry.

My favorite paragraph (although there were many close seconds):

"But real problems are messy. Tech culture prefers to solve harder, more abstract problems that haven't been sullied by contact with reality. So they worry about how to give Mars an earth-like climate, rather than how to give Earth an earth-like climate. They debate how to make a morally benevolent God-like AI, rather than figuring out how to put ethical guard rails around the more pedestrian AI they are introducing into every area of people's lives."
Yep .

MyLessThanPrimeBeef , May 19, 2017 at 2:28 pm

That popular vote comment is misleading as well.

A previous example was given about a hypothetical House vote, where, in yes-districts, voters are split 51-49 yes (assuming that is so lots of times, congress persons vote 'their conscience') and voters in no-districts are 90-10 for no. Yes votes win by one.

In that case, the popular vote actually is for No.

And that has nothing to do with slavery.

It's how the math works in a representative voting system.

PhilM , May 19, 2017 at 3:32 pm

Before responding to MLTPB, I'd like to voice my opinion that the OP article is thoughtful and reflects a decent level of awareness of the reality of the world, along with positive solutions that would be achievable in a polity that had the public good as its aim.

As for MLTPB's opinion on the vote, I beg to differ: it has everything to do with slavery. That's how the numbers work in our system, which is imperial, not representative. It's a bitch when instead of Augustus you get Caligula, but it doesn't change the basic reality of how the system works, and has worked since Ike. In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that.

Here is the reality: the people in any office in our federal government-basically everyone who lives in or around Washington DC-have the same relationship to American people as they have to Russian, Chinese, or Indian people: that of serving their own interests; predation, if you will; animal husbandry, if you prefer. They will act so as to extract the maximum value consistent with not-killing-the-goose-that-lays-the-golden-eggs from every person, wherever they are located, whatever their religion, whatever their nationality, as long as they are powerless, which means everyone who is a private citizen, however rich, or a small business; everyone who is not a Forbes 500 corporation.

The notion that the federal government is somehow tied to "Americans," or even to the geographical entity now known as the USA, much less to the values expressed in the so-called "founding documents," is a child's bedtime story.

It's amusing that it took the election of Trump to bring this realization about; but really, that is why some of us actually voted for Trump: to rub the idiots' noses in the reality of their political environment. (Not me, mind you; because I do not bother to vote: when I want something done, I write a check, like any experienced consumer of government services.)

There is a cure, but it is not changing the election mechanism so the choice of president results from the popular vote totals in a population of 300 million. No, it means changing it so there are 1000 presidents and 100,000 representatives and 1000 supreme courts, and 1000 republics. Those are the numbers that would achieve representative government the way it was designed to function by people who knew. Alternatively, you could reduce federal taxation to 1/10th of its current level, and assign all other taxation to the township, with a population limit of 20,000. Now you would have something that is no longer imperial.

But since most people since the dawn of history have lived under organizations that are imperial with perfect happiness, the appropriate course of action is not to struggle in futility for change, which would almost certainly do more harm than good, and result in an outcome that would just use up the world's resources more swiftly in the chaos of consumption and war. The optimum course is to watch reruns of amusing sitcoms and eat good food; to gratify the animal pleasures and such pleasures of the mind as remain to aging bodies mistreated by pharmaceuticals; and to die as quickly and painlessly as the authorities permit.

MyLessThanPrimeBeef , May 19, 2017 at 5:37 pm

In our imperial system, it does not matter to the people whether they vote, or how; it matters, occasionally, to the contestants' position in the power structure, but nothing more than that.

In that case, the popular vote question is not a question anymore (with the current 1 president, instead of 1,000 setup), as you point out here:

There is a cure, but it is not changing the election mechanism so the choice of president results from the popular vote totals in a population of 300 million.

I have mentioned before that Rome had, at one time, 2 or 4 co-emperors. You suggest 1,000 presidents, as a solution. That's nothing to do with slavery, except in the sense that we're all serfs or slaves. It about making one's voice heard within a smaller group, having someone representing you along with fewer constituents.

The inherent problem of having representatives vote, versus direct voting, is still here, as in the example given above. The math scales up and down.

Thomas Williams , May 19, 2017 at 11:04 am

Nice piece: Two things to note
– The Clintons, Bush & Obama presided over this mess and aided in it's creation but the albatross of abuse is being hung on Trump.
– He shares an enormous egotistical blind spot common to tech workers. He wants unionization and strength for tech workers but seems to advocate for a globalized work force. More than anything else, foreign workers are responsible for wage suppression in the US. Is he saying 'Tech workers are special and should be pampered but others should work for $1.85 per day"?
– The above points are not germaine to his central theme, which is important and well written. But it does raise questions about his values.

Knot Galt , May 19, 2017 at 2:13 pm

Agreed. Trump = Chucklehead and the shadow in T.S. Eliot's poem

Jacobite_In_Training , May 19, 2017 at 11:11 am

" Boycotts won't work, since opting out of a site like Google means opting out of much of modern life ."

Good .Opt out of modern life. Now. Get as far away from it as you possibly can. You'll be the better person for it. There was a time I felt 'modern life' was the place to be .Now the older me realizes 'modern life' is a sham, an illusion, and a trap.

A very cleverly designed trap, and one in which the cattle to be slaughtered all believe they are choosing their own destiny even as they are herded inexorably closer to the slaughterhouse.

Amusingly, although my younger naive and idealistic self had a significant part to play in the great tech revolutions and evolutions through the 90's and early 2000's (for which I will be eternally regretful and ashamed, given how the creations we labored on have been whored out by the pimps in the oligarchy and government) I was also incredibly lucky to have grown up on a farm and learned how to use a hoe, a hand powered washing machine, how to gather eggs and grow things.

Real things, things that can feed people. But more importantly .how to grow things like spirit and independence that do not rely on any flow of electrons to come to glorious fruition.

I also so much better understand what that prophet Edward Abbey was trying to warn us about all those decades ago .

" Growth for the sake of growth is the ideology of the cancer cell "

Tom , May 19, 2017 at 11:27 am

Indeed. The promise of technology has devolved into Clickbait Nation - where millions mindlessly click on endless deceptive headlines like rats pushing levers in a giant Skinner box.

justanotherprogressive , May 19, 2017 at 11:55 am

Is "opting out" really an option? Are we willing to opt out out of modern medicine too?
Whether we like it or not, we aren't opting out of using the internet, so we aren't opting out of anything this author talked about .

Sooooo ..wouldn't a better idea be to learn as much as we can about this technology and get involved in its decision making, so that we can control it and make it work for rather than against us?

Jacobite_In_Training , May 19, 2017 at 12:13 pm

I've had that debate before, people typically starting with the 'well, you are posting using the Internet so you aren't really opting out of anything', but thats a simplistic approach, and the process of opting out is a matter of degrees – it is never a binary on/off.

One can continue 'opting out' of aspects of society, and technology, to as extreme a position as you wish .even back to the stone age, should you choose. (sort of the ultimate boycott)

Tradeoffs are inherent to the process, no argument there .just be aware that the experience of opting out is itself liberating. You realize all these shiny objects, and expensive things, and
complicated processes that you have been raised to think of as critical necessities that cannot ever EVER be parted with .may not be so critical as you think.

Sometimes the tradeoffs will be negative, more often – in my experience – (once you have solved the problems presented by improvising/adapting/overcoming) you will find the 'tradeoffs' are a net positive.

You are, of course, a creature with free will and free to do what you choose . opt in, opt out .as you will. :)

Thuto , May 19, 2017 at 12:59 pm

Agreed, there are several gradations to this whole opting out thing. I for one am completely absent from any social media platform and feel no loss whatsoever because of this. It takes a committed group of independent thinkers to deconstruct and debunk this whole narrative that you're either "all-in" with these internet platforms or you opt out and life passes you by as you're consigned to an existence of irrelevance and ignorance about the world around you.

MoiAussie , May 19, 2017 at 1:05 pm

Perhaps it would be more accurate to say that you are very selective about the social media in which you participate.

Thuto , May 19, 2017 at 1:50 pm

If by social media we are talking facebook, instagram et al, then I have never participated in any of those. To be sure, this is not meant to sound like I take a dim view on those who do, the point is the narrative is typically framed, at least in my part of the world, as an all-in/opt-out binary in which participation in social media platforms is a prime determinant in who "remains relevant" and who doesn't

Vatch , May 19, 2017 at 3:29 pm

I don't have a MyFace account.

I love saying that!

justanotherprogressive , May 19, 2017 at 1:21 pm

I'm not sure what you think you are opting out of. If you are on the internet, then you have to have a carrier – Verizon, Comcast, etc. Do you think their data collection systems are different than what Google, Facebook, or any other social media does?

jrs , May 19, 2017 at 1:54 pm

and least they aren't funding trips to mars? :)

jrs , May 19, 2017 at 1:51 pm

Yea I think the truly open minded probably try many of the internet platforms just to see what they are like and then delete their accounts (this does not need to entail posting one's entire private life there needless to say). Not a lot of open mindedness out there really though, it's all extremes: rigid abstinence from it all, or hopeless addiction to it.

I mean I understand a priori rejection of the majority of what capitalism produces (except if it's necessary to life then well), but it is a pretty uninformed position from which to criticize (as is being addicted to it really).

PKMKII , May 19, 2017 at 2:46 pm

Even if you opt out personally, you're still going to be interacting with a lot of people, businesses, governments, etc., that are dependent on the Five Horsemen. Pay cash at the local business, but travel down the supply chain that brought the goods there and you'll run into someone using cloud storage, social media, consumer surveillance data, etc.

Wisdom Seeker , May 19, 2017 at 1:01 pm

Regarding "get involved in its decision making" –

Ordinary folks have really only two ways to do this. One is in their consumer choices. Avoid or boycott companies that abuse their customers – hit them in their wallets. The other is in their voting and political participation push privacy rights, antitrust enforcement, etc. higher on the political agenda.

It's entirely possible to be comfortably social without "social media". Personally, I boycott Facebook, Twitter, and (as much as possible) Google and Ebay. Google is tough because they have infiltrated the schools with Google Classroom (which has value, but do we really want an internet advertising company to be gathering data on our children?). Microsoft is tough because of the Office monopoly, but just because I have to use it at work doesn't mean I need to pay them any money anywhere else in my life There are also ways to buy online without using Amazon.

lyman alpha blob , May 19, 2017 at 1:58 pm

There are other search engines, browsers, email services, etc. besides those operated by the giants. DuckDuckGo, protonmail, and the Opera browser (with free built-in VPN!) work well for me.

The problem is, if these other services ever do get popular enough, the tech giants will either block them by getting their stooges appointed to Federal agencies and regulating them out of existence, or buy them.

I've been running from ISP acquisitions for years, as the little guys get bought out I have to find an even littler one. Luckily I've found a local ISP, GWI, that I've used for years now. They actually came out against the new regulations that would allow them to gather and sell their customers' data. Such anathema will probably wind up with their CEO publicly flayed for going against all that is good and holy according to the Five Horsemen.

Mel , May 19, 2017 at 1:26 pm

There are two sides to opting out.
When net neutrality is gone, then capital and market concentration will transform the internet into what cable TV is now, and nobody will need it much.
Contrariwise the big tech companies are taking over the implementation of major social functions:
– if you can't vote without the internet
– if you can't spend your money without the internet
– if you can't contact your friends without the internet
– if you can't get news without the internet - this has already happened - just look at us all here.
– if you can't join a political party without liking it on your Facebook page and following it on Twitter - there are rumors that the Federal Liberal Party in Canada is exploring this.
As I said somewhere else, all this would amount to an uncontracted and unspecified public/private partnership (various ones, actually) and all entered into unexamined. Time to examine them while they're still easy to change.

HotFlash , May 19, 2017 at 5:58 pm

there are rumors that the Federal Liberal Party in Canada is exploring this.

Interesting. Are they going to get us all free internet? If not, I think they will find a big surprise.

jrs , May 19, 2017 at 1:45 pm

To assume that workers in ANY Industry (including tech where we know the big players have rigged the labor market against tech workers) have more power than consumers seems pretty unrealistic to me. Of course consumer power is one dollar one vote and hardly democratic but at least consumers do have options and some power. The employee role is a powerless one in the U.S..

Kris Alman , May 19, 2017 at 11:40 am

We can either continue on the knowledge economy road, where our personal data is commodified. Or we could fight for a knowledge society, where we collectively access knowledge while protecting our identity and privacy. I vote for the latter.

Google would plant a chip in every child if they could. Short of that, they have insinuated themselves in public schools, hoping that every kid in America will consummate their relationship with this giant after they graduate from k-12. See this NY Times article from last weekend: How Google Took Over the Classroom

It's hard to mitigate their reach. In a landmark student privacy law passed in California (with an even weaker version passed in my state of Oregon), they built in what I call a Google exemption clause.

( 8) Nothing in this section shall be construed to impose a duty upon:
(a) A provider of an electronic store, gateway, marketplace or other means of purchasing or downloading software or applications to review or enforce compliance with this section by those applications or software; or
(b) A provider of an interactive computer service to review or enforce compliance with this section by third-party content providers. As used in this paragraph, "interactive computer service" means any information service, system or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such services or systems operated or offered by libraries or educational institutions.
(9) This section does not apply to general audience Internet websites, general audience online services, general audience online applications or general audience mobile applications, even if login credentials created for an operator's site, service or application may be used to access those general audience sites, services or applications.

The Campaign for a Commercial-Free Child and the Parent Coalition for Student Privacy (a group with which I have worked) just put out a Parent Toolkit for Student Privacy .

Patient Privacy Rights has an upcoming international summit that is free. Stream it! See: https://patientprivacyrights.org/health-privacy-summit/

MyLessThanPrimeBeef , May 19, 2017 at 2:07 pm

We can either continue on the knowledge economy road, where our personal data is commodified. Or we could fight for a knowledge society, where we collectively access knowledge while protecting our identity and privacy. I vote for the latter.

When I am not accessing knowledge, I would still prefer to remain private.

For example, what videos I access for entertainment should private. It's not knowledge I access, just something to pass time.

That those activities should b protected as well.

Privacy-protected-society is probably a broader term than knowledge society.

MyLessThanPrimeBeef , May 19, 2017 at 2:09 pm

And the Google exemption clause reads like a Facebook exemption clause as well (or Amazon or Warner Cable exemption clause).

[May 18, 2017] Toward a Jobs Guarantee at the Center for American Progress by Lambert Strether

Notable quotes:
"... By Lambert Strether of Corrente ..."
"... The Financial Times ..."
"... customer ..."
May 17, 2017 | www.nakedcapitalism.com
Posted on May 17, 2017 By Lambert Strether of Corrente

I had another topic lined up today, but this ( hat tip alert reader ChrisAtRU ) is so remarkable - and so necessary to frame contextualize immediately - I thought I should bring it your attention, dear readers. The headline is "Toward a Marshall Plan for America ," the authors are a gaggle of CAP luminaries with Neera Tanden leading and Rey Teixeira trailing, and the "Marshall Plan" indeed includes something called a "Jobs Guarantee." Of course, I trust Clinton operatives like Tanden, and Third Way types like Teixeira, about as far as I can throw a concert grand piano. Nevertheless, one sign of an idea whose time has come is that sleazy opportunists and has-beens try to get out in front of it to seize credit[1] and stay relevant. So, modified rapture.

In this brief post, I'm going to look at the political context that drove CAP - taking Tanden, Teixeira, and the gaggle as a proxy for CAP - to consider a Jobs Guarantee (JG), briefly describe the nature and purpose of a JG, and conclude with some thoughts on how Tanden, Teixeira would screw the JG up, like the good liberals they are.

Political Context for CAP's JG

Let's begin with the photo of Prairie du Chien, WI at the top of CAP's JG article. Here it is:

I went to Google Maps Street View, found Stark's Sports Shop (and Liquor Store), and took a quick look round town. Things don't look too bad, which is to say things look pretty much like they do in my own home town, in the fly-over state of Maine; many local businesses. The street lamps make my back teeth itch a little, because along with bike paths to attract professionals, they're one of those panaceas to "bring back downtown," but as it turns out Prairie du Chien has marketed itself to summer tourists quite successfully as " the oldest Euro-American settlement established on the Upper Mississippi River," so those lamps are legit! (Of course, Prairie du Chien, like so much of flyover country, is fighting an opioid problem , but that doesn't show up in Street View, or affect the tourists in any way.)

More to the point, Crawford County WI, in which Prairie du Chien is located, was one of the counties that went for Obama, twice, and then flipped to Trump ( 50.1% Trump, 44.6% Clinton ), handing Trump the election, although the CAP authors don't mention this. AP has a good round-up of interviews with Prairie du Chien residents , from which I'll extract the salient points. On "flipping," both from Obama (since he didn't deliver) and away from Trump (if he doesn't deliver):

In 2012, [Lydia Holt] voted for Barack Obama because he promised her change, but she feels that change hasn't reached her here. So last year she chose a presidential candidate unlike any she'd ever seen, the billionaire businessman who promised to help America, and people like her, win again. Many of her neighbors did, too .

In this corner of middle America, in this one, small slice of the nation that sent Trump to Washington, they are watching and they are waiting, their hopes pinned on his promised economic renaissance. And if four years from now the change he pledged hasn't found them here, the people of Crawford County said they might change again to someone else.

"[T]hings aren't going the way we want them here," she said, "so we needed to go in another direction."

And the issues:

[Holt] tugged 13 envelopes from a cabinet above the stove, each one labeled with a different debt: the house payment, the student loans, the vacuum cleaner she bought on credit.

Lydia Holt and her husband tuck money into these envelopes with each paycheck to whittle away at what they owe. They both earn about $10 an hour and, with two kids, there are usually some they can't fill. She did the math; at this rate, they'll be paying these same bills for 87 years.

Kramer said she's glad the Affordable Care Act has helped millions get insurance, but it hasn't helped her he and her husband were stunned to find premiums over $1,000 a month. Her daughter recently moved into their house with her five children, so there's no money to spare. They opted to pay the penalty of $2,000, and pray they don't get sick until Trump, she hopes, keeps his promise to replace the law with something better.

Among them is a woman who works for $10.50 an hour in a sewing factory, who still admires Obama, bristles at Trump's bluster, but can't afford health insurance. And the dairy farmer who thinks Trump is a jerk - "somebody needs to get some Gorilla Glue and glue his lips shut" - but has watched his profits plummet and was willing to take the risk.

And of course jobs (as seen in this video, "Inside the Minds and Homes of Voters in Prairie du Chien, WI," made by students at the University of Wisconsin-Milwaukee).

So that's Prairie du Chien, Wisconsin. CAP frames the electoral context this way:

While the election was decided by a small number of votes overall, there was a significant shift of votes in counties in critical Electoral College states, including Iowa, Michigan, Ohio, Pennsylvania, and Wisconsin.

(I could have told them that. In fact, I did! ) And the reasons for the shift:

What was going on in these heavily white working-class counties that might explain support for Trump? Without diminishing the importance of cultural and racial influences, it is clear to us that lingering [sic] economic pressures among important voting blocs helped to create a larger opening for Trump's victory.

We do not yet know the exact reasons for the drop in turnout among young people and black voters. But with President Obama not on the ticket to drive voter enthusiasm, it is quite possible that lingering job and wage pressures in more urban areas with lots of young people, and in areas with large populations of African-Americans, yielded similar, if distinct, economic anxiety in ways that may have depressed voter turnout among base progressives. The combined effect of economic anxiety may have been to drive white noncollege voters toward Trump and to drive down voter engagement and participation among base progressives.

Either way, issues related to lost jobs, low wages, high costs, and diminished mobility played a critical role in setting the stage for a narrow populist victory for Trump.

(I could have told them that, too. In fact, I did! ) Note the lingering "Obama Coalition" / identity politics brain damage that casually assumes "base progressives" equate to African-Americans and youth. Nevertheless, mild kudos to CAP for fighting through to the concept that "economic pressures among important voting blocs helped to create a larger opening for Trump's victory." The CAP paper then goes on to recommend a JG as an answer to such "economic pressures."[2]

Nature and Purpose of a JG

Here's the how and why of a JG (though I wrote it up, I had the help of practioners):

How would the JG work from the perspective of a working person (not an owner?) Or from the perspective of the millions of permanently disemployed? The MMT Primer :

If you are involuntarily unemployed today (or are stuck with a part-time job when you really want to work full time) you only have three choices:

Employ yourself (create your own business-something that usually goes up in recessions although most of these businesses fail) Convince an employer to hire you, adding to the firm's workforce Convince an employer to replace an existing worker, hiring you

The second option requires that the firm's employment is below optimum-it must not currently have the number of workers desired to produce the amount of output the firm thinks it can sell. …

If the firm is in equilibrium, then, producing what it believes it can sell, it will hire you only on the conditions stated in the third case-to replace an existing worker. Perhaps you promise to work harder, or better, or at a lower wage. But, obviously, that just shifts the unemployment to someone else.

It is the "dogs and bones" problem: if you bury 9 bones and send 10 dogs out to go bone-hunting you know at least one dog will come back "empty mouthed". You can take that dog and teach her lots of new tricks in bone-finding, but if you bury only 9 bones, again, some unlucky dog comes back without a bone.

The only solution is to provide a 10 th bone. That is what the JG does: it ensures a bone for every dog that wants to hunt.

It expands the options to include:

    There is a "residual" employer who will always provide a job to anyone who shows up ready and willing to work.

It expands choice. If you want to work and exhaust the first 3 alternatives listed above, there is a 4 th : the JG.

It expands choice without reducing other choices. You can still try the first 3 alternatives. You can take advantage of all the safety net alternatives provided. Or you can choose to do nothing. It is up to you.

If I were one of the millions of people permanently disemployed, I would welcome that additional choice. It's certainly far more humane than any policy on offer by either party. And the JG is in the great tradition of programs the New Deal sponsored, like the CCC, the WPA, Federal Writers' Project , and the Federal Art Project . So what's not to like? ( Here's a list of other JGs). Like the New Deal, but not temporary!

Intuitively: What the JG does is set a baseline[3] for the entire package offered to workers, and employers have to offer a better package, or not get the workers they need. When I came up here to Maine I'd quit my job voluntarily and so wasn't eligible for unemployment. Then the economy crashed, and I had no work (except for blogging) for two years. There were no jobs to be had. I would have screamed with joy for a program even remotely like this, and I don't even have dependents to take care of. It may be objected that the political process won't deliver an offer as good as the Primer suggests. Well, don't mourn. Organize. It may be objected that a reform like the JG merely reinforces the power of the 0.01%. If so, I'm not sure I'm willing to throw the currently disemployed under the bus because "worse is better," regardless. Anyhow, does "democratic control over the living wage" really sound all that squillionaire-friendly to you? Aren't they doing everything in their power to fight anything that sounds like that? The JG sounds like the slogan Lincoln ran on, to me: "Vote yourself a farm!" [3]

So, what does the JG for the economy? MMT was put together by economists; from an economists perspective, what is it good for? Why did they do that? The Primer once more:

some supporters emphasize that a program with a uniform basic wage[4] also helps to promote economic and price stability.

The JG/ELR program will act as an automatic stabilizer as employment in the program grows in recession and shrinks in economic expansion, counteracting private sector employment fluctuations. The federal government budget will become more counter-cyclical because its spending on the ELR program will likewise grow in recession and fall in expansion.

Furthermore, the uniform basic wage will reduce both inflationary pressure in a boom and deflationary pressure in a bust. In a boom, private employers can recruit from the program's pool of workers, paying a mark-up over the program wage. The pool acts like a "reserve army" of the employed, dampening wage pressures as private employment grows. In recession, workers down-sized by private employers can work at the JG/ELR wage, which puts a floor to how low wages and income can fall.

Finally, research indicates that those without work would prefer to have it :

Research by Pavlina Tcherneva and Rania Antonopoulos indicates that when asked, most people want to work. Studying how job guarantees affect women in poor countries, they find the programs are popular largely because they recognize-and more fairly distribute and ­compensate-all the child- and elder care that is now often performed by women for free (out of love or duty), off the books, or not at all.

Enough of this crap jobs at crap wages malarky!

And here's the how and why of a JG, as described by CAP :

We propose today a new jobs guarantee, and we further expect a robust[3] agenda to be developed by the commission.

The low wages and low employment rates for those without college degrees only exist because of a failure of imagination. There is no shortage of important work that needs to be done in our country. There are not nearly enough home care workers to aid the aged and disabled. Many working families with children under the age of 5 need access to affordable child care. Schools need teachers' aides, and cities need EMTs. And there is no shortage of people who could do this work. What has been missing is policy that can mobilize people.

To solve this problem, we propose a large-scale, permanent program of public employment and infrastructure investment-similar to the Works Progress Administration (WPA) during the Great Depression but modernized for the 21st century. It will increase employment and wages for those without a college degree while providing needed services that are currently out of reach for lower-income households and cash-strapped state and local governments. Furthermore, some individuals may be hired into paying public jobs in which their primary duty will be to complete intensive, full-time training for high-growth, in-demand occupations. These "public apprenticeships" could include rotations with public and private entities to gain on-the-ground experience and lead to guaranteed private-sector employment upon successful completion of training.

Such an expanded public employment program could, for example, have a target of maintaining the employment rate for prime-age workers without a bachelor's degree at the 2000 level of 79 percent. Currently, this would require the creation of 4.4 million jobs. At a living wage-which we can approximate as $15 per hour plus the cost of contributions to Social Security and Medicare via payroll taxes-the direct cost of each job would be approximately $36,000 annually. Thus, a rough estimate of the costs of this employment program would be about $158 billion in the current year. This is approximately one-quarter of Trump's proposed tax cut for the wealthy on an annual basis.

With tis background, let's look at how liberals would screw the JG up.

How a CAP JG Would Go Wrong

Before getting into a little policy detail, I'll examine a few cultural/framing issues. After all, CAP does want the program's intended recipients to accept it with good grace, no? Let me introduce the over-riding concern, from Joan C. Williams in The Financial Times : "They don't want compassion. They want respect" :

Williams warns that Republican errors alone won't give Democrats back the WWC.

Or any part of the WC; as even CAP recognizes, although WWC disproportionately voted Trump, and non-WWC disproportionately stayed home.

While [Williams] agrees that the Democrats have mobilised their base since Trump's election, she has "one simple message" for the party: it needs to show the WWC respect, "in a tone suitable for grown-ups". Democrats must say: "We regret that we have disrespected you, we now hear you." She asks: "Is this so hard? Although the risk is that the response will be, 'Oh, those poor little white people with their opioid epidemics, let's open our hearts in compassion to them.' That's going to infuriate them. They don't want compassion, they want respect."

To show respect, it would really behoove liberals to deep-six the phrase "economic anxiety," along with "economic frustrations," "economic concerns," "economic grievances," and "lingering economic pressures."[4] All these phrases make successful class warfare a psychological condition, no doubt to be treated by a professional (who by definition is not anxious, not frustrated, has no grievances, and certainly no economic pressures, because of their hourly rate (or possibly their government contract).

To show respect, it would also behoove liberals to deep-six the concept that markets come first; people who sell their labor power by the hour tend to be sensitive about such things. Take, for a tiny example, the caption beneath the image of Prairie du Chein. Let me quote it:

A customer crosses the street while leaving a shop along the main business district in Prairie du Chien, Wisconsin, January 2017.

Really? A customer ? Does the human figure have to be a customer ? Why?

Along the same lines, drop the "affordable" crap; ObamaCare should have ruined that branding already; what seems like it's affordable to CAP writers in the Beltway probably isn't affordable at all to somebody making $10 an hour. Anyhow, if something like childcare or for that matter #MedicareForAll ought to be a universal direct material benefit, then deliver it!

To show respect, abandon the "Marshall Plan" framing immediately. Because it means the "winners" are going to graciously help the "losers," right? And prudentially, liberals don't really want to get the working class asking themselves who conducted a war against them, and why, right?

To show respect, make the JG a truly universal benefit, a real guarantee, and don't turn it into an ObamaCare-like Rube Goldberg device of means-testing, worthiness detection, gatekeeping, and various complex forms of insult and degradation, like narrow networks. This passage from CAP has me concerned:

Such an expanded public employment program could, for example, have a target of maintaining the employment rate for prime-age workers without a bachelor's degree at the 2000 level of 79 percent.

That 'target" language sounds to me very much like the "dogs and bones" problem. Suppose currently we have 6 bones and 10 dogs. The "target" is 7 bones. Suppose we meet it? There are still 3 dogs without bones! Some guarantee! The JG should be simple: A job for everyone who wants one. None of this targeting or slicing and dicing demographics. The JG isn't supposed to be an employment guarantee for macro-economists (who basically have one anyone).

To show respect, make the JG set the baseline for wages (and working conditions). This passage from CAP has me concerned:

Second, because it would employ people to provide services that are currently needed but unaffordable, it would not compete with existing private-sector employment.

This language seems a bit slippery to me. If Walmart is paying $10.00 an hour, is the JG really going to pay $9.50?

Finally, you will notice that the CAP JG is shorn of any macro-economic implications. Note, for example, that replacing our current cruel system of regulating the economy by throwing people out of work isn't mentioned. Note also that CAP also accepts the false notion that Federal taxes pay for Federal spending. That puts CAP in the austerity box, meaning that the JG might be cut back just when it is most needed, not least by working people.

Conclusion

I do want to congratulate CAP, and without irony, for this passage:

[The JG] would provide the dignity of work, the value of which is significant. When useful work is not available, there are large negative consequences, ranging from depression, to a decline in family stability, to "deaths of [sic] despair."

It's good to see the Case-Deaton study penetrating the liberal hive mind. Took long enough. Oh, and this makes the JG a moral issue, too. The pallid language of "economic anxiety" should be reformulated to reflect this, as should the program itself.

NOTES

[1] The JG originally comes from the MMT community; here is a high-level summary . Oddly, or not, there's no footnote crediting MMTers. Interestingly, Stephanie Kelton, who hails from the University of Missouri at Kansas City's MMT-friendly economics department, before Sanders brought her onto the staff at the Senate Budget committee, was not able to persuade Sanders of the correctness and/or political utility of MMT generally or the JG in particular.

[2] I guess those famous Democrat 2016 post mortems will never be published, eh? This will have to do for a poor substitute. Or maybe the Democrats just want us to read Shattered .

[3] In my view, "robust" is a bullshit tell. Back when I was a hotshot consultant, the operational definition of "robust" was "contained in a very large three-ring binder."

[4] Dear God. Are these people demented? Nobody who is actually under "economic pressure" would use these words. And so far as I can tell, "lingering" means permanent.

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism ("Because markets"). I don't much care about the "ism" that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don't much care, as long as the benefits are delivered. To me, the key issue - and this is why Medicare for All is always first with me - is the tens of thousands of excess "deaths from despair," as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics - even the worthy fight to help the refugees Bush, Obama, and Clinton's wars created - bright shiny objects by comparison. Hence my frustration with the news flow - currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press - a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let's call such voices "the left." Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn't allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I've been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

ChrisAtRU , May 17, 2017 at 1:38 pm

Thank you! Thank you! Thank you!

Clive , May 17, 2017 at 2:37 pm

No, thank you!

Dead Dog , May 17, 2017 at 4:40 pm

Yes, a great essay. And thank you commentariat.
Of course, there is a potential conflict from those who want a basic income, but don't want to work. Such a position frames such people badly, but a basic income remains an essential part of a JG world IMO.
The JG would provide incentive if you didn't lose the safety net and could add to it by working in a JG program.
Most here in this place accept that a sovereign government can pay for programs which are not funded by taxes (or debt) and the JG and basic income concepts could be a way to test this in a controlled way.
The main reason I think that politicians continue to have blinkers (LA LA, CAN'T HEAR YOU) with respect to MMT is that they are scared witless of a government with unlimited spending powers. That's why we can't have nice things.

jrs , May 17, 2017 at 5:26 pm

don't want to work, hmm I don't even know if I could work in a job without a decent amount of slack (A.D.D. mind may not be capable of it or something and often not for lack of trying, though I do a decent amount of unpaid work in my precious leisure time). Or at least not the full 40 hours, so if the job guarantee bosses are slave drivers, I don't know, I'd probably be fired from my job guaranteed job period.

But what if a job was aligned with one's interest? Don't know, never experienced that.

But all that aside and never even mind unemployment, given how horrible the job circumstances are that I see many people caught in (and I definitely don't mean having slack – that's a good thing, I mean verbal ABUSE, I mean working endless hours of unpaid overtime etc.), any alternative would seem good.

nycTerrierist , May 17, 2017 at 6:19 pm

+1!

PKMKII , May 17, 2017 at 1:55 pm

The "target" language also makes me worry that they're defining optimal employment by the inflation-obsessed standards of Chicago-school economists, thus coming up short in the name of protecting the investor class.

Minor quibble: Does Maine constitute flyover country? Usually that term means the parts of the country that the well-to-do "fly over" from east coast cities to west coast ones, with perhaps an exception for Chicago. You wouldn't fly over Maine for any of those routes. Not to mention, Maine is a popular vacationing/summer home state for rich New Englanders, so it doesn't exactly have an "other" status for them the way rural Wisconsin would.

Huey Long , May 17, 2017 at 4:22 pm

I think Maine is legit flyover country as flying over Maine was once mandatory on the transatlantic route in order to Gander Airport in Newfoundland. I know, I know, it's a bit of a stretch but I'm trying here!

As for Maine's other status, you're spot on about "down east" (coastal) Maine and some of the lakes being popular with the landed gentry, but the interior of the state is sparsely populated, poor, white, and marginalized. Many of the paper mills have gone belly-up and the economy in many places consists of picking potatoes or cutting down trees.

Knifecatcher , May 17, 2017 at 5:06 pm

I used to do a lot of business travel to Nova Scotia. Hard to get there from the US without flying over Maine. But I think Lambert meant flyover in the pejorative "why would you live here when you could be an artisanal pickle maker in Brooklyn" sense.

Peham , May 17, 2017 at 2:17 pm

Thanks much! A JG as you describe plus nationalizing all our current rentier industries ought to just about do the trick.

Sutter Cane , May 17, 2017 at 2:24 pm

Are you still guaranteed a job if you happen to make any negative comments about Neera Tanden? (Asking for Matt Bruenig)

nihil obstet , May 17, 2017 at 6:50 pm

Matt Bruenig had other issues with the article: More Job Guarantee Muddle . While he points out that the jobs suggested in the article should be permanent rather than temporary jobs, I go on with my own little sense of discomfort that they all involve putting the otherwise jobless in charge of caring for the helpless. I don't find that a good idea. I've spent enough time both working with and volunteering in human service organizations to have observed that it's not really appropriate work for a lot of people, even for many good-hearted volunteers. It really dampens my enthusiasm for a JG that I have yet to see an argument for it that doesn't invoke child and elderly care as just great jobs that the jobless can be put to doing.

Just another quibble with this post. I first heard of a job guarantee and heard arguments for it in the U.S. civilian society from Michael Harrington in the early 1980s (guaranteed jobs have been a feature of the state capitalist societies that call themselves socialist throughout the 20th c.), so I don't find it particularly odd when the MMT community isn't mentioned as originating the idea. In fact, I tend to respond with "Hey, MMTers, learn some history."

jrs , May 17, 2017 at 7:06 pm

good points.

Susan the other , May 17, 2017 at 2:47 pm

Thanks for this article Lambert. Why should we trust CAP to handle this when they have done nothing toward this end in their entire history. In fact, in undeniable fact, if we don't do something about demand in this country we will have no economy left at all. For these guys to even approach a JG you know they are panicked. Nobody goes over this fact because it turns them all into instant hypocrites. I spent yesterday listening to some MMTers on U-Tube, Wray and some others. They all clearly and succinctly explain the systemic reasons for JG. Not nonsense. In fact, MMT approaches a JG as the opposite of nonsense on so many levels. As you have pointed out – these CAP people are a little late to reality. And their dear leader Obama is first in line for the blame, followed closely by Bill Clinton and his balance-the-budget cabal of bankster idiots. And etc. And these JG jobs could be just the jobs we need to turn global warming around. It could be the best spent money ever. It is a very straight-forward calculation.

Sue , May 17, 2017 at 2:57 pm

Dispel ambiguity. Call it LWUJG, Living Wage Universal Job Guarantee

Sandler , May 17, 2017 at 3:20 pm

I don't know how you even bother. America is so far away from this intellectually and culturally, there is no chance. Right now the "jobs guarantee" is get arrested for something bogus and be sentenced to prison to do forced labor for outsourcing corporations (yes this is real). Look where the GOP stands on basic issues which were settled long ago in Europe, they are in the Stone age. The Dems are right wing everywhere else.

With US institutions usually run horribly how do you expect this to be well run? Is the VA a shining example? I certainly would not have hope for this at the federal level.

Murph , May 17, 2017 at 3:43 pm

I feel the same way often but I've got to allow myself some hope once in a while. This development is at least turn in the right direction for the moment, nothing else. There's nothing wrong with being (aprehensively) pleased about that.

Sandler , May 17, 2017 at 5:29 pm

I'd like to get a basic unemployment welfare scheme going first. We don't even have that! We have an "insurance" program which requires you to first have held a job which paid enough for long enough, and then get fired, not quit. And it only pays for six months. Again, this was settled in other rich countries a long time ago.

Darius , May 17, 2017 at 6:38 pm

Swing for the fences, ladies or gentlemen. Throw incremental change overboard, along with Hillary, Tim Kaine and Neera.

Disturbed Voter , May 17, 2017 at 6:03 pm

There is a job guarantee in Castro's Cuba. So wonderful, people are swimming from Miami to Havana ever day.

Though you have it exactly right in the US the job guarantee is to be a felon on a privatized prison farm usually called a "plantation". I am looking forward to my neighbors finally being put to work. At least it is only building a Presidential Library for Obama, not a pyramid for Pharaoh.

witters , May 17, 2017 at 6:40 pm

"There is a job guarantee in Castro's Cuba. So wonderful, people are swimming from Miami to Havana ever day."

That is why Cuba will never last! It will die in minutes, without any outside help!

Mind you, here's a thought. Maybe the one's who didn't want to work, left for Florida!

diptherio , May 17, 2017 at 3:49 pm

My prediction: by the time this makes it through Congress, it will be a guarantee for no more than 15 hours per week at slightly below the minimum wage and you'll only be able to be in the program for nine months, total during your lifetime. Or am I being overly cynical?

Maybe we need to update that old saw: "First they ignore you, then they laugh at you, then they co-opt your idea and strip the soul out of it, then you kinda win but not really, but hey that's progress, right?"

Even though I'm cynical, I'm with Lambert in being for just about anything that makes us bottom-20%ers lives better, even if it is highly flawed. Heck, I'd even be for a BIG on that basis, even if Yves is right about the negative side-effects of that policy.

Huey Long , May 17, 2017 at 4:29 pm

they co-opt your idea and strip the soul out of it, then you kinda win but not really, but hey that's progress, right?"

SPOT ON!!!

This is EXACTLY what Bismark did in 1883 with his Staatssozialismus (state socialism) reforms.

Disturbed Voter , May 17, 2017 at 6:03 pm

In 1883, Germany still had hope it was only 12 years old!

Jeff , May 17, 2017 at 3:50 pm

If I understood correctly, Norway is running such a program since many years.
Basically, when you are out of a job, you get unemployment benefits (a low but decent salary, health care and other modern facilities unheard of is the US) – which last forever .
On the other hand, any public institution can call you in to help a hand: washing dishes at the school kitchen one day, waiting on the elderly the other day, helping out in the local library wherever hands are needed but not available.
So it is not really a JG, but you are guaranteed to help out your local community, and you are guaranteed a minimal income. That seems close enough to me.

Fred1 , May 17, 2017 at 4:27 pm

This is just positioning to defend against a challenger from the left who is promoting a genuine JG.

See we agree about a JG, I'm for it too and here is my 9 point proposal on my website.

robnume , May 17, 2017 at 5:56 pm

Thanks, Lambert, for a very interesting post. I combed through CAP's panel of "experts." I was not impressed.
I'm going to start my own think tank. Gonna call it CRAP: Center for Real American Progress.

lyle , May 17, 2017 at 7:18 pm

Of course in the north in the winter you could go back to shoveling snow with snow shovels (no machines allowed) and ban use by public employees of riding lawnmowers in the summer in favor of powered walk behind mowers. From what I have read this is what china did on the 3 gorges dam, partly making the project a jobs project by doing things in a human intensive way. (of course you could go back to the hand push non powered reel mower but then you have to worry about folks and heart attacks. (Or use those in their 20s for this. Growing up in MI and In this is how we mowed the yard. (in the 1950s and 1960) and for snow shoveling, my dad got a snow blower when I went off to college.
Now if you really want a low productivity way of cutting grass get one of the hand grass trimmers and set to work cutting it by that, it would employ a lot of folks and not have the exertion problem of a push mower (Again I used these in the 1960s in MI before we had the string trimmers and edgers etc. (also recall the old hand powered lawn edgers.)

craazyboy , May 17, 2017 at 8:19 pm

I'm partial to John Cleese Silly Walks. It would be creative and artistic. We need more art.

Samuel Conner , May 17, 2017 at 9:46 pm

It sounds like the CAP JG proposal is "top down" in that the "palette" of jobs to be funded is decided by the same agency (or an agency at the same level of government) as the fund disbursement authority, or is specified in the law itself.

IIRC, the JG concept proposed in the MMT primer would devolve the decision of "how to usefully employ willing underutilized workers" to local level. Funding would still be Federal. There would be some kind of "request for proposals/peer review" process to decide which locally-wanted projects would receive JG dollars (presumably in order to be a guarantee, enough projects would be approved for every locality to employ the available under-utilized willing workforce. If a locality only proposed one project, that would be funded)

It that right, Lambert? Is "top down" another way that centrists could screw up a JG? And might the "local devolution" aspect of the NEP/MMT Primer concept appeal to folks on the right?

washunate , May 18, 2017 at 12:13 am

Great write up. I obviously have a long-running disagreement on the policy prescription of JG, but I do find it interesting talking about how groups like CAP present it outside the specific confines of MMT (and, apparently, without even tipping the hat to them ?).

One concrete bit of info I would love to know is how they estimate 4.4 million workers for take-up. First, it's a hilarious instance of false precision. Second, it's remarkably low. $15/hr is approximately the median wage. Tens of millions of workers would sign up, both from the ranks of the crap jobs and from the ranks of those out of the labor force.

[May 16, 2017] Mohamed El-Erian: We get signals that the system is under enormous stress

Notable quotes:
"... "The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up." ..."
"... Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse." ..."
May 16, 2017 | www.theguardian.com

Leading economist and investor believes world leaders, and global capitalism, have reached fork in road between equality and chaos

This is the nub of El-Erian's analysis of why the developed world is approaching a fork in the road. The inequality generated by the current low-growth climate has three elements: inequality of wealth, income and opportunity. The last of the three – manifested in high youth unemployment in many eurozone countries, for example – is the most explosive element.

"The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up."

... ... ...

How do we take the high, benign road? El-Erian has a four-point plan.

First, "we need to get back to investing in things that promote economic growth, infrastructure, a more pro-growth tax system for the US, serious labour retooling ... If you're in Europe, youth employment is an issue you've really got to think about very seriously."

Second, countries that can afford to do so must "exploit the fiscal space," meaning borrowing to invest or cutting taxes. He puts the US and Germany unambiguously in that category "and to a certain extent the UK".

Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse."

Fourth, regional and global governance needs repair. He compares the eurozone to a stool with one-and-a-half legs instead of four. The complete leg is monetary union, the half is banking union. The missing legs are fiscal integration, meaning a common budget, and political harmonisation. No wonder the eurozone is unstable, he says: "You can do three legs, you can't do one and half."

To return to El-Erian's core T-junction analogy, none of the required manoeuvres sound easy. "You don't need a big bang," he replies. "If you want to take the good turn you have to see some progress on some of these elements. If you don't, then we take the other turn." He ascribes equal probabilities – "it's a political judgment."

What's an investor to do? El-Erian says his own approach, which he admits is hard for the average person to copy, is framed like a bar-bell. At one end, he's invested in high-risk startups where you don't need all to succeed. At the other, he's in cash and cash-like investments. In the middle, he'll invest in public markets only tactically.

The bottom line: "I'm risk off."

[May 12, 2017] How Financialization and the New Economy Hurt Science and Engineering Grads

Notable quotes:
"... Weinstein argues that the GUI agenda (inspired by Reaganomics) sought to prevent these salary increases. He contends that the legislation that enabled this oversupply was the Immigration Act of 1990 that expanded the H-1B nonimmigrant visa program and instituted employment-based immigration preferences. ..."
"... As I show in my book Sustainable Prosperity in the New Economy? , the beginning of the end of CWOC was the transformation of IBM, the world's leading computer company, from OEBM to NEBM from 1990 to 1994. In 1990, with 374,000 employees, IBM still bragged about its adherence to the CWOC norm (calling it "lifelong employment"), claiming that the company had not laid off anyone involuntarily since 1921. By 1994 IBM had 220,000 employees, and, with senior executives under CEO Louis Gerstner themselves getting fired for not laying off employees fast enough, CWOC was history. Over the course of the 1990s and into the 2000s, other major Old Economy companies followed IBM's example, throwing out of work older employees, many of them highly educated and with accumulated experience that had previously been highly valued by the companies. ..."
"... The salaries of S&E employees tended to increase with years of experience with the company, with a defined-benefit pension (based on years of service and highest salary levels) in retirement. These types of secure employment relations, and the high and rising pay levels associated with them, were the norm among established high-tech companies in the mid-1980s, but, as exemplified by IBM's transformation, started to become undone in the early 1990s, and were virtually extinct a decade later, as Old Economy companies either made the transition to the NEBM, or disappeared.8 The culprit in the weakening in the demand for, and earnings of, S&E PhDs from the early 1990s was the demise of CWOC-a phenomenon that Weinstein (and Teitelbaum) entirely ignore. ..."
"... As exemplified by IBM in the 1990s and beyond, a company's stock price could be raised by laying off expensive older workers and using the resultant "free" cash flow (as the purveyors of MSV called it) to do stock buybacks. 12 ..."
"... "But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO." ..."
"... During that period, the only job market for native PhD STEM students became the American Defense and Intelligence agencies, because they required security clearances and US Citizenship. I found myself driven in those directions too. ..."
"... Technology for the most part is just increasing complexity and increasing complexity has diminishing returns. With energy becoming less available, we probably need a lot less complexity. ..."
"... I wouldn't say that there is a lack of R&D - it just isn't done in-house any more. Gone are the Bell Labs and the Xerox PARCs; welcome to the brave new world of university partnerships and non-profit R&D shops (most famous: the Southwest Research Institute). ..."
"... Basically the rich are waging class war. That's the problem no matter how you slice and dice this one. This whole "New Economy" has been one big war on wages. I mean look at the collusion too between Google, Apple, and Intel to keep wages low. ..."
"... Basically it comes down to, the rich are really greedy. The issue right now for the rich is that they are desperate to keep the looting from happening, while people are increasingly aware that the system is against them. Bernie Sanders got a lot of support in the Valley and while it is a very Democratic leaning area, I cannot imagine that Trump's anti-H1B and L1B stance would have been opposed by the average employee. I think that the rich are not going to concede anything and that there needs to be some sort of solidarity union amongst all workers. ..."
"... Is there a single person here who has worked on Wall Street (writ large) who can convince us that his job or his company had an overall positive effect on the US and/or world economy over five years, ten years, or twenty-five years? ..."
"... Its not just PhDs. I know several Engineers who advise their children to do something else. It's just not worth the amount of effort that is required to be put into it and there is no future hope of a turn around. As bad as it is for graduates today, it's only going to get worse. ..."
"... They're catching up with us arts and humanities majors. Sad! ..."
"... I am a civil engineer and one of my daughters is studying to become a structural engineer. I would not have advised her to go into engineering because of the problem with the H-1B visas. ..."
"... But who am I to advise? Who can know the future? The world is just changing too fast now to really be able to advise our children on what careers to take. Besides, one of the advantages of studying engineering as you can work anywhere in the world. ..."
"... Post WWII labor overplayed its hand by the 1970's. Corporations and their decided they had had it. Corps and management proceeded to change the rules of the game on everything -- courts, trade, taxation and regulation. These countermeasures have had disastrous long term consequences. Corporations now run the country in a fascist manner. Government capture has created myriad problems beyond financialization, only one tool in the corporate quiver. Oligopolies across most to all industries comes to mind. Rail, air, health insurance, banking, defense, telecom, entertainment . ..."
"... Not sure about the labor part overplaying their hand. They just wanted an even wage and productivity rise. It is capital IMO that has overplayed its hand and the rise of neoliberal economics which has led to declines in public R&D spending. There isn't anything like the Space Race anymore. ..."
"... Frankly, labour underplayed its hand. At one point it had capital by the throat, and should have finished it off then. If peace is not an option, you should utterly and permanently destroy your enemy. ..."
"... Labor did NOT overplay its hand after WW2 - Taft-Hartley was a HUGE smack-down to labor after the privations of the Depression followed by the war effort. The decent wages during the post-war period were part of a concerted effort to convince workers that they didn't need unions and to be complacent. ..."
"... Labor leadership certainly became corrupt from all the money sloshing around without global competition due to war devastation of Europe and Japan, the Cold War, and the death throes of colonialism, but this was not due to "overplaying" their hand. ..."
"... Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation. ..."
"... Actually though, watching the train wreck that is the outlook for the youngest generation today, provides some grim amusement. For instance noting that the "bubble-driven" economy composed of companies desperate to prevent their stock becoming "badly diluted" by having fire sales on capitol and expertise that probably took their predecessors decades to build can really only have one outcome. Depression, misery, socialism. Maybe we skip the Mao route this time, maybe not. ..."
"... Gregory Peck: "The Robber Barons of old at least left something tangible in their wake - a coal mine, a railroad, banks. THIS MAN LEAVES NOTHING. HE CREATES NOTHING. HE BUILDS NOTHING. HE RUNS NOTHING. And in his wake lies nothing but a blizzard of paper to cover the pain. Oh, if he said, "I know how to run your business better than you," that would be something worth talking about. But he's not saying that. He's saying, "I'm going to kill you because at this particular moment in time, you're worth more dead than alive." https://www.youtube.com/watch?v=xJRhrow3Jws ..."
"... IBM. Poster child of everything wrong at the executive-level and the shareholder-level. ..."
"... Yes, the IBM reference is interesting.The author gives an ordinal lead to IBM as a mover from the OEBM to NEBM. I ask myself if, from a mere one large corporation managing perspective, this was IBM's 11th hour response to the by then devastating rise of its competitors like Apple & Microsoft. ..."
"... Also the irony that it did not help IBM at least in the midterm. So, IBM was the prime mover to initiate some aspects of a model change -change which every major player adhered to- in response to a new technological disadvantage vs. competitors, and in turned did not seem to do much for IBM in the immediate years. Although, if I recall well, IBM was immersed in many political battles and internal problems, legal and otherwise. Nevertheless, I doubt there was a historic inevitability on IBM's ordinal force. Outstanding work by Lazonick ..."
"... "IBM is the poster child for shenanigans. Last month, IBM reported its 20th quarter in a row of declining year over year revenues .. a 13% drop in earnings, profit margins that declined in every business segment ( much worse than expected ), free cash flow that plummeted over 50% year over year and an earnings "beat" of 3 cents per share. How could this "beat" happen? .. a negative tax rate of -23% . This is why they pay the CEO Rometti the big bucks ( estimated at $50 to $65 million last year)." ..."
"... And this is one of the Bluest of the Blue Chip companies in the world. ..."
"... Amazon has lost money every fucking quarter for the last 20 fucking years, and that Bezos motherfucker is the king. ..."
"... In addition, the rise of 401(k) based investing, in which workers are tax-incentivized to buy in to the corporate stock scheming, but lack the normal shareholder voice in corporate governance, has taken the chains off the looters as well. ..."
"... The impact on the Grads was secondary a byproduct of a larger agenda which included the transfer offshore and consolidation of "IP" of the entire American, EU and Asian industrial economies along with the withdrawl of capital, while at the same time intentionally sabotaging future innovations with the handicap of diversity. Who got the loot and capital? Usual suspects. ..."
May 12, 2017 | www.nakedcapitalism.com

... By William Lazonick, professor of economics at University of Massachusetts Lowell. Originally published at the Institute for New Economic Thinking website

How the U.S. New Economy Business Model has devalued science & engineering PhDs This note comments on Eric Weinstein's, " How and Why Government, Universities, and Industries Create Domestic Labor Shortages of Scientists and High-Tech Workers ," posted recently on INET's website.

At the outset of his paper, Weinstein argues that:

Long term labor shortages do not happen naturally in market economies. That is not to say that they don't exist. They are created when employers or government agencies tamper with the natural functioning of the wage mechanism.

The contention, written from the perspective of the late 1990s, is that in the first half of the 1990s an oversupply ("a glut") of science and engineering (S&E) labor that depressed the wages of PhD scientists and engineers was primarily the result of the promotion of a government-university-industry (GUI) agenda, coordinated by the National Science Foundation under the leadership of Erich Bloch, head of the NSF from 1984 to 1990. Beginning in 1985, the NSF predicted a shortfall of 675,000 S&E personnel in the U.S. economy over the next two decades. According to a study by the NSF's Policy Research and Analysis (PRA) division, quoted by Weinstein, salary data show that real PhD-level pay began to rise after 1982, moving from $52,000 to $64,000 in 1987 (measured in 1984 dollars). One set of salary projections show that real pay will reach $75,000 in 1996 and approach $100,000 shortly beyond the year 2000.

Weinstein argues that the GUI agenda (inspired by Reaganomics) sought to prevent these salary increases. He contends that the legislation that enabled this oversupply was the Immigration Act of 1990 that expanded the H-1B nonimmigrant visa program and instituted employment-based immigration preferences. Given that most of these foreigners came from lower-wage (Asian) nations, it is assumed that they were attracted to work in the United States by what for them were high wages, whereas Americans with S&E PhDs began to shun S&E careers as the salaries became less attractive.1

There is a lot missing from Weinstein's perspective, which is also the perspective of demographer Michael Teitelbaum, who Weinstein cites extensively and who was at the Sloan Foundation from 1983 to 2013, rising to Vice-President in 2006. Weinstein and Teitelbaum view the salaries of scientists and engineers as being determined by supply and demand on the labor market ("the natural wage rate" and "the natural functioning of the labor market"). From this (neoclassical) perspective, they completely ignore the "marketization" of employment relations for S&E workers that occurred in the U.S. business sector from the mid-1980s as well as the concomitant "financialization" of the U.S. business corporation that remains, in my view, the most damaging economic problem facing the United States. This transformation of employment relations put out of work large numbers of PhD scientists and engineers who previously had secure employment and who enjoyed high incomes and benefits as well as creative corporate careers. The marketization of employment relations brought to an end of the norm of a career with one company (CWOC)-an employment norm that was pervasive in U.S. business corporations from the 1950s to the 1980s, but that has since disappeared. 2 The "financialization" of the corporation, manifested by massive distributions to shareholders in the forms of cash dividends and stock buybacks, undermined the opportunities for business-sector S&E careers.

The major cause of marketization was the rise of the "New Economy business model" (NEBM) in which high-tech startups, primarily in information-and-communication technology (ICT) and biotechnology, lured S&E personnel away from established companies, which offered CWOC under the "Old Economy business model" (OEBM). As startups with uncertain futures, the New Economy companies could not realistically offer CWOC, but instead enticed S&E personnel away from CWOC at Old Economy companies by offering these employees stock options on top of their salaries (which were typically lower than those at the Old Economy companies). The stock options could become extremely valuable if and when the startup did an initial public offering (IPO) or a merger-and-acquisition (M&A) deal with an established publicly-listed company.

The rise in S&E PhD salaries from 1982 to 1987, identified in the NSF study that Weinstein quotes, was the result of increased demand for S&E personnel by New Economy companies, with some of the increase taking the form of stock-based pay, which in the Census data drawn from tax returns is lumped in with salaries.3 Competing with companies for S&E personnel, the rise of the NEBM in turn put pressure on salaries at Old Economy companies as they tried to use CWOC to attract and retain S&E labor in the face of the stock-based alternative. By the last half of the 1980s, this New Economy competition for talent was eroding the learning capabilities of the corporate research labs that, in many cases from the early twentieth century, had been a characteristic feature of Old Economy companies in a wide range of knowledge-intensive industries. 4

The CWOC norm under OEBM had provided employment security and rising wages from years-of-service with the company and internal promotion of S&E personnel (significant proportions of whom in science- based companies had PhDs). As I show in my book Sustainable Prosperity in the New Economy? , the beginning of the end of CWOC was the transformation of IBM, the world's leading computer company, from OEBM to NEBM from 1990 to 1994. In 1990, with 374,000 employees, IBM still bragged about its adherence to the CWOC norm (calling it "lifelong employment"), claiming that the company had not laid off anyone involuntarily since 1921. By 1994 IBM had 220,000 employees, and, with senior executives under CEO Louis Gerstner themselves getting fired for not laying off employees fast enough, CWOC was history. Over the course of the 1990s and into the 2000s, other major Old Economy companies followed IBM's example, throwing out of work older employees, many of them highly educated and with accumulated experience that had previously been highly valued by the companies.

Already in the early 1990s, the marketization of employment relations was responsible for a precipitous decline of employment at the corporate research labs that had underpinned the twentieth-century growth of Old Economy high-tech companies, of which IBM was an exemplar. In 1993, a conference held at Harvard Business School decried the "end of an era" in industrial research, with papers from the conference appearing in a volume Engines of Innovation , published in 1996.5 In the introductory chapter, entitled "Technology's Vanishing Wellspring," conference organizers and volume editors Richard Rosenbloom and William Spencer argued that industrial research (as distinct from product development) of the type that had been carried out by corporate labs in the "golden era" of the post- World War II decades "expands the base of knowledge on which existing industries depend and generates new knowledge that leads to new technologies and the birth of new industries." In the more competitive environment of the 1980s and 1990s, however, in the new industries of "biotechnology, exotic materials, and information products (and services based on them)", Rosenbloom and Spencer observed that it was more difficult for companies "to keep new technologies fully proprietary", and hence "research activities have been downsized, redirected, and restructured in recent years within most of the firms that once were among the largest sponsors of industrial research." 6

There is little doubt that S&E PhDs were major victims of this transformation. But the problem that they, along with most other members of the U.S. labor force, have faced is not simply the marketization of employment relations. For reasons that I have fully described in my publications cited above, the transition from OEBM to NEBM was accompanied by the "financialization" of the U.S. business corporation as, from the last half of the 1980s, U.S. boardrooms and business schools embraced the ideology that, for the sake of superior economic performance, a business enterprise should be run to "maximize shareholder value" (MSV). Instead of retaining employees and reinvesting in their productive capabilities, as had been the case when CWOC had prevailed, MSV advocated and legitimized the downsizing of the company's labor force and the distribution of corporate revenues to shareholders in the forms of both cash dividends and stock repurchases. 7

With the demise of CWOC, older employees were the most vulnerable, not only because they tended to have the highest salaries, but also because the shift from OEBM to NEBM was a shift from proprietary technology systems, in which employees with long years of experience were highly valued, to open technology systems that favored younger workers with the latest computer-related skills (often acquired by working at other companies). Under CWOC, older employees were more expensive not because of a "natural wage rate" that was the result of supply and demand on the S&E labor market, but because of the internal job ladders that are integral to a "retain-and-reinvest" resource-allocation regime. The salaries of S&E employees tended to increase with years of experience with the company, with a defined-benefit pension (based on years of service and highest salary levels) in retirement. These types of secure employment relations, and the high and rising pay levels associated with them, were the norm among established high-tech companies in the mid-1980s, but, as exemplified by IBM's transformation, started to become undone in the early 1990s, and were virtually extinct a decade later, as Old Economy companies either made the transition to the NEBM, or disappeared.8 The culprit in the weakening in the demand for, and earnings of, S&E PhDs from the early 1990s was the demise of CWOC-a phenomenon that Weinstein (and Teitelbaum) entirely ignore.

With the rise of NEBM, companies wanted employees who were younger and cheaper , and that was the major reason why at the end of the 1980s the ICT industry pushed for an expansion of H-1B nonimmigrant visas and employment-based immigration visas. It is not at all clear that an influx of PhDs from foreign countries via these programs was undermining the earnings of S&E PhDs in the early 1990s. Most H-1B visa holders had Bachelor's degrees when they entered the United States. At the same time, large numbers of non-immigrant visa holders entered the United States on student visas to do Master's and PhD degrees, and then looked to employment on H-1B visas to enable them to stay in the United States for extended periods (up to seven years).9 It was in response to the availability of advanced- degree graduates of U.S. universities that in 2005 an additional 20,000 H-1B visas were added to the normal cap of 65,000. Without the influx of foreign students into U.S. S&E Master's and PhD programs, many of these programs would not have survived. Through this route, the H-1B visa program has made more foreign-born PhDs available to corporations for employment in the United States. But I posit that it has been the demise of OEBM and rise of the NEBM, not an increased supply of foreign-born PhDs, that has placed downward pressure on the career earnings of the most highly educated members of the U.S. labor force.

Besides giving employers access to an expanded supply of younger and cheaper high-tech labor in the United States, the H-1B visa along with the L-1 visa for people who had previously worked for the employer for at least one year outside the United States have another valuable attribute for employers: the person on the visa is immobile on the labor market-he or she can't change jobs-whereas under NEBM the most valued high-tech workers are those who are highly mobile. This mobility of labor can boost the worker's pay package but is highly problematic for a company that needs these employees to be engaged in the collective and cumulative learning processes that are the essence of generating competitive products. Under OEBM, CWOC was the central employment institution for college-educated workers precisely because of the need for collective and cumulative learning. But it was the rise of NEBM, not the Immigration Act of 1990, that undermined CWOC. The growing dominance of NEBM with its open systems architectures then led employers to make increased use of H-1 and L-1 visas in the 1980s, prompting them to get behind an expanded cap for H-1B visas in the Immigration Act of 1990. 10

Once OEBM was attacked by NEBM, with its offer of stock-based pay, these corporations became fertile territory for the adoption of the ideology that a company should be run to "maximize shareholder value" (MSV). This momentous transformation in U.S. corporate governance occurred from the late 1980s, legitimizing the transition from a "retain-and-reinvest" to a "downsize-and-distribute" corporate- governance regime. In the 1990s and beyond, this corporate-governance transformation laid waste to CWOC across corporate America, knowledge-intensive companies included. 11 With corporate research eroding as high-tech personnel responded to the lure of stock-based pay from NEBM companies- including not only startups but also those such as Intel, Microsoft, Oracle, Sun Microsystems, and Cisco Systems that during the 1990s grew to employ tens of thousands of people, most of them with stock- based pay-senior executives at the Old Economy high-tech companies began to see their company's stock price as not only key to the size of their own stock-based pay packages but also as an instrument to compete for a broad-based of high-tech personnel. As exemplified by IBM in the 1990s and beyond, a company's stock price could be raised by laying off expensive older workers and using the resultant "free" cash flow (as the purveyors of MSV called it) to do stock buybacks. 12

As I have documented in detail, over the past three decades this legalized looting of the U.S. business corporation has only gotten worse. As shown Table 1, driven by stock buybacks, net equity issues by U.S. nonfinancial corporations were, in 2015 dollars, minus $4.5 trillion over the decade 2006-2015. In 2016 net equity issues were minus $586 billion. Net equity issues are new stock issues by companies (in this case nonfinancial corporations) minus stock retired from the market as the result of stock repurchases and M&A deals. The massively negative numbers in recent decades are the result of stock buybacks. I have calculated net equity issues as a percent of GDP by decade to provide a measure of the value of buybacks done relative to the size of the U.S. economy. In both absolute inflation-adjusted dollars and as a percent of GDP, buybacks have become a prime mode of corporate resource allocation in the U.S. economy. Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation.

Table 1: Net equity issues of nonfinancial corporations in the United States, 1946-2015, by decade, in 2015 dollars, and as a percent of GDP

Decade Net Equity Issues,

2015$ billions

Net Equity Issues

as % of GDP

1946-1955 143.2 0.56
1956-1965 110.9 0.30
1966-1975 316.0 0.58
1976-1985 -290.9 -0.40
1986-1995 -1,002.5 -1.00
1996-2005 -1,524.4 -1.09
2006-2015 -4,466.6 -2.65

Source: Board of Governors of the Federal Reserve System, Federal Reserve Statistical Release Z.1, "Financial Accounts of the United States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic Accounts," Table F-223: Corporate Equities, March 9, 2017, at https://www.federalreserve.gov/releases/z1/current/ .

Over the years 2006-2015, the 459 companies in the S&P 500 Index in January 2016 that were publicly listed over the ten-year period expended $3.9 trillion on stock buybacks, representing 53.6 percent of net income, plus another 36.7 percent of net income on dividends. Much of the remaining 9.7 percent of profits was held abroad, sheltered from U.S. taxes. Mean buybacks for these 459 companies ranged from $291 million in 2009, when the stock markets had collapsed, to $1,205 million in 2007, when the stock market peaked before the Great Financial Crisis. In 2015, with the stock market booming, mean buybacks for these companies were $1,173 million. Meanwhile, dividends declined moderately in 2009, but over the period 2006-2015 they trended up in real terms.

Among the largest repurchasers are America's premier high-tech companies. Table 2 shows the top 25 repurchasers over the decade 2006-2015. Among the companies that one would expect to employ large numbers of S&E PhDs are Exxon Mobil, Microsoft, IBM, Apple, Cisco Systems, Hewlett Packard, Pfizer, Oracle, Intel, General Electric, Johnson & Johnson, Chevron, and ConocoPhillips. We do not know the historical numbers of S&E PhDs at these companies, but I hypothesize that numbers would be much higher than they are if the companies were not financialized. Many of America's largest corporations

routinely distribute more than 100 percent of net income to shareholders, generating the extra cash by reducing cash reserves, selling off assets, taking on debt, or laying off employees.13 As I have shown, the only logical explanation for this buyback activity is that the stock-based pay that represents the vast majority of the remuneration of senior corporate executives incentivizes them to manipulate their companies' stock prices, leaving most Americans worse off. 14

Table 2: The 25 largest stock repurchasers among U.S.-based corporations, 2006-2015, showing net income (NI) stock buybacks (BB), and cash dividends (DV)

Source: Calculated from data downloaded from Standard & Poor's Compustat database.

The Weinstein-Teitelbaum focus on a GUI design to expand the supply of S&E PhDs ignores the transformations of corporate governance and employment relations that have decimated career employment for this group of workers over the past three decades. At the same time, the channeling of trillions of dollars of value created in U.S. nonfinancial corporations to the financial sector has opened up jobs on Wall Street that can provide quick income bonanzas for highly-educated members of the U.S. labor force, many of whom might have otherwise pursued S&E careers. Among the wealthiest of these Wall Street players are corporate predators-euphemistically known as "hedge-fund activists"-who have billions of dollars in assets under management with which they can attack companies to pump up their stock prices through the implementation of "downsize-and-distribute" allocation regimes and, even if it takes a few years, dump the stock for huge gains.15

In the case of Apple, we have shown how Carl Icahn used his wealth, visibility, hype, and influence to take $2 billion in stock-market gains by buying $3.6 billion of Apple shares in the summer of 2013 and selling them in the winter of 2016, even though he contributed absolutely nothing of any kind to Apple as a value-creating company.16 Apple CEO Tim Cook and his board (which includes former U.S. Vice President Al Gore) helped Icahn turn his accumulated fortune into an even bigger one by having Apple repurchase $45 billion in shares in 2014 and $36 billion in 2015-by far the two largest one-year stock buybacks of any company in history. Imagine the corporate research capabilities in which Apple could have invested, and the S&E PhDs the company could have employed, had it looked for productive ways to use even a fraction of the almost unimaginable sums that it wasted on buybacks.17 From 2011 through the first quarter of 2017, Apple spent $144 billion on buybacks and $51 billion on dividends under what it calls its "Capital Return" program. But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO. 18

A number of "hedge-fund activists"-Nelson Peltz of Trian, Daniel Loeb of Third Point, and William Ackman of Pershing Square are among the most prominent-have been able to put up one or two billion dollars to purchase small stakes in major high-tech companies, and, with the proxy votes of pension funds, mutual funds and endowments, have been able put pressure on companies, often by placing their representatives on the boards of directors, to implement "downsize-and-distribute" regimes for the sake of "maximizing shareholder value."19 In the summer of 2013, Nelson Peltz's Trian Fund Management bought DuPont stock worth $1.3 billion, representing 2.2% of shares outstanding. In May 2015 Peltz lost a proxy fight to put four of his nominees on the DuPont board, but in October 2015 DuPont CEO Ellen Kullman, who had opposed Peltz, resigned, and the new management began to implement Peltz's plans to cut costs and hit financial targets, to be done in the context of a merger with Dow Chemical, which had fallen into the hands of another corporate predator Daniel Loeb. Meanwhile, in October 2015, Peltz bought 0.8 percent of the shares of General Electric (GE), and began to pressure another iconic high-tech company to cut costs and increase its stock price. GE was already a financialized company that had done $52 billion in buybacks in the decade 2006-2015 (see Table 2)-a massive amount of money for the purpose of manipulating its stock price. Undoubtedly responding to additional pressure from Peltz, during 2016, GE, with profits of $8.0 billion, paid out $8.5 billion in dividends and spent another $22.0 billion on buybacks. This financialization of U.S. high-tech corporations undermines, among other things, the employment of S&E PhDs.

We need research on this subject to quantify its impacts. I submit, however, that such a research agenda must focus on transformations of regimes of corporate governance and employment relations. Relying on the neoclassical economist's notion of a "natural wage rate" determined by the interaction of supply and demand, Weinstein, a mathematician, and Teitelbaum, a demographer, missed the transformations in corporate governance and employment relations that marked the late 1980s and early 1990s-and beyond-and as result, in my view, failed to understand the changing fortunes of S&E PhDs in the marketized, globalized, and financialized New Economy. Given the dominance of what I have called "the myth of the market economy"20 in the thought processes of economists, Weinstein and Teitelbaum were by no means alone in erroneously focusing on supply and demand on the PhD labor market while failing to recognize the centrality of corporate governance and employment relations in determining the earnings and career prospects of S&E PhDs. It is time for new economic thinking on these critical questions.

Footnotes

Tom_Doak , May 12, 2017 at 10:08 am

It was indeed a tough article to read to the end, but this nugget near the end was worth it:

"But the company is "returning" capital to shareholders who never gave the company anything in the first place; the only time in its history that Apple has ever raised funds on the public stock market was $97 million in its 1980 IPO."

Wow!

David McClain , May 12, 2017 at 10:10 am

As one who actually lived this process, I can tell you that the premise of this article must be basically true.

Back in the early '90s I set out to fill in the gaps of my own computer science background (I'm actually an astrophysicist). And my classes were filled entirely by people from Asia, except for myself and one other Anglo. Job ads in the journals were already beginning to ask for PhD level CompSci with emphasis on, e.g., voice recognition, for a pay rate of $26K (1992 !). That was definitely appealing to the foreign students and unappealing to American STEM students.

During that period, the only job market for native PhD STEM students became the American Defense and Intelligence agencies, because they required security clearances and US Citizenship. I found myself driven in those directions too.

Now, after many years doing my own thing, I look around at the STEM marketplace and I am shocked to find large numbers of compatriots being pressured into the GIG Economy, and pay rates are appalling by former standards. There is a serious lack of expenditure on research and development today.

tony , May 12, 2017 at 10:44 am

There is a serious lack of expenditure on research and development today.

From another perspective this is just over investment in education. Technology for the most part is just increasing complexity and increasing complexity has diminishing returns. With energy becoming less available, we probably need a lot less complexity.

flora , May 12, 2017 at 10:49 am

"American Defense". hmmm, wonder if sending the jobs and know-how to China and India in the belief both will always be the US's willing subcontractors is such a good idea (from a US national defense point of view).

Ranger Rick , May 12, 2017 at 1:14 pm

I wouldn't say that there is a lack of R&D - it just isn't done in-house any more. Gone are the Bell Labs and the Xerox PARCs; welcome to the brave new world of university partnerships and non-profit R&D shops (most famous: the Southwest Research Institute).

Altandmain , May 12, 2017 at 10:21 am

Basically the rich are waging class war. That's the problem no matter how you slice and dice this one. This whole "New Economy" has been one big war on wages. I mean look at the collusion too between Google, Apple, and Intel to keep wages low.

https://www.wired.com/2015/01/apple-google-tech-giants-reach-415m-settlement-poaching-suit/

Considering how slap on the wrist this was, what incentive is there to not do it again? They know they can get away with this. Not to mention, this H1B and L1B program has become a way to keep wages low in the technology sector. In many sectors, there really isn't a "shortage" of Americans. Oh and for all the talk of these companies being "innovative", if they are prioritizing money on stock buybacks over R&D, that's not really innovative as much as it is trying to boost salaries by capitalizing on the huge cash reserves they get for being the dominant companies in their sector. Same could be said about Exxon. Not much being spent on R&D means that they are more about rent seeking rather than innovation. Perhaps not yet as blatant as those patent trolls, which are little more than shell companies that sue other companies over patents, but that is their ideal business model.

I think that at the end of the day, even though many engineers in the tech companies are in the top 10% in terms of income percentile, their interests are closer aligned with working class people. The other issue is that I bet when many of these engineers turn into their 40s, they are going to witness first hand the very real age discrimination that exists in the technology industry.

Basically it comes down to, the rich are really greedy. The issue right now for the rich is that they are desperate to keep the looting from happening, while people are increasingly aware that the system is against them. Bernie Sanders got a lot of support in the Valley and while it is a very Democratic leaning area, I cannot imagine that Trump's anti-H1B and L1B stance would have been opposed by the average employee. I think that the rich are not going to concede anything and that there needs to be some sort of solidarity union amongst all workers.

Expat , May 12, 2017 at 10:39 am

Is there a single person here who has worked on Wall Street (writ large) who can convince us that his job or his company had an overall positive effect on the US and/or world economy over five years, ten years, or twenty-five years?

I'll go first: three investment banks under my belt and one was a giant financial and moral sucking machine called Citi. The other two were wannabe's but certainly did not add value.

Sluggeaux , May 12, 2017 at 11:12 am

While "maximizing shareholder value" is the huge problem wrecking our economy, having watched the genesis of New Economic Paradigm through the experiences my wife and most of my friends going through the Silicon Valley start-up Tulip-mania from the mid-'80's through the first decade of th e 2000's, the author is hitting important points while over-simplifying and missing other equally important points, such as the role of the "Peace Dividend" in the collapse of aerospace and research funding, and the role of the Reagan and Clinton "tax reforms" in driving stock-based compensation systems.

Early on, the use of stock-based compensation drove down wage-based compensation and increased the role of financial speculators. Today, the speculators get the stock, but wages remain suppressed and only foreign workers will accept them. The author is correct: the causes are complicated, but the result drove down wages and job security for STEM workers.

mary , May 12, 2017 at 11:30 am

I got my Ph.D. in biology in 2000. It was absolutely the worst decision in my life. In fact, it actually destroyed my life, reducing me to near homelessness and starvation because-GASP--regular employers (like office jobs, retail etc.) will not hire Ph.D.s. There there is the lovely student debt that has grown exponentially, as my wages could not make the smallest dent. Convicted felons make more that I do. So to make a long story short, I started a small on-line business 9 years ago and got the FFFFF OUT of the rotten POS United States and moved to Ecuador, one of the most progressive countries in the world. I cannot believe how the US abuses its national treasures-is is truly a POS and I do not miss it for one day. I hope the US crashes and rots in hell.

JDS , May 12, 2017 at 1:45 pm

Good for you! I wish I could do the same that is, leave the country!

visitor , May 12, 2017 at 2:55 pm

Out of curiosity: what happened to your student debt when you emigrated?

fritter , May 12, 2017 at 11:40 am

Its not just PhDs. I know several Engineers who advise their children to do something else. It's just not worth the amount of effort that is required to be put into it and there is no future hope of a turn around. As bad as it is for graduates today, it's only going to get worse.

nycTerrierist , May 12, 2017 at 12:21 pm

They're catching up with us arts and humanities majors. Sad!

B1whois , May 12, 2017 at 1:14 pm

I am a civil engineer and one of my daughters is studying to become a structural engineer. I would not have advised her to go into engineering because of the problem with the H-1B visas.

But who am I to advise? Who can know the future? The world is just changing too fast now to really be able to advise our children on what careers to take. Besides, one of the advantages of studying engineering as you can work anywhere in the world.

I bought houses for each of my children and told them if they wanted to go to college they could trade the house in for the education. I personally think they should have considered keeping the house and working minimum wage jobs that they enjoy. But both of them are pursuing educations, my son to be history teacher!

cr , May 12, 2017 at 12:01 pm

Post WWII labor overplayed its hand by the 1970's. Corporations and their decided they had had it. Corps and management proceeded to change the rules of the game on everything -- courts, trade, taxation and regulation. These countermeasures have had disastrous long term consequences. Corporations now run the country in a fascist manner. Government capture has created myriad problems beyond financialization, only one tool in the corporate quiver. Oligopolies across most to all industries comes to mind. Rail, air, health insurance, banking, defense, telecom, entertainment .

But this paper is also lamenting a lack of business capex, which is directly correlated to public investment. When you decided to offshore manufacturing and fail to invest in infrastructure you get a double whammy that hits business capex. Increasing regulation and taxation on small and midsize companies has lead to consolidation. Approximately 5000 public companies have likely been consolidated. Sarbanes-Oxley added millions to compliance costs making it highly uneconomical to be a public company with less than $300 million in revenue. Dodd-Frank has created increases in cost for financial firms that had nothing to do with the crisis. In fact, the big banks have benefited enormously from implementation of this legislation.

Vatch , May 12, 2017 at 12:20 pm

For anyone else who was confused by the terminology, as I was briefly, capex = capital expenditure.

Altandmain , May 12, 2017 at 1:13 pm

Not sure about the labor part overplaying their hand. They just wanted an even wage and productivity rise. It is capital IMO that has overplayed its hand and the rise of neoliberal economics which has led to declines in public R&D spending. There isn't anything like the Space Race anymore.

tony , May 12, 2017 at 3:20 pm

Frankly, labour underplayed its hand. At one point it had capital by the throat, and should have finished it off then. If peace is not an option, you should utterly and permanently destroy your enemy.

Sluggeaux , May 12, 2017 at 4:53 pm

Labor did NOT overplay its hand after WW2 - Taft-Hartley was a HUGE smack-down to labor after the privations of the Depression followed by the war effort. The decent wages during the post-war period were part of a concerted effort to convince workers that they didn't need unions and to be complacent.

Labor leadership certainly became corrupt from all the money sloshing around without global competition due to war devastation of Europe and Japan, the Cold War, and the death throes of colonialism, but this was not due to "overplaying" their hand.

allan , May 12, 2017 at 12:15 pm

Reply to cr@May 12, 2017 at 12:01 pm

Sarbanes-Oxley Dodd-Frank

The trends described in the post predate by decades the communist tyranny [/s] imposed by those bills.
The wholesale closing or offshoring of corporate research labs already started in the 1980s,
driven in part by corporate raiders like Milken, Pickens and Icahn.
IBM, GM, Kodak, Xerox, GE they all had labs that provided jobs to STEM graduates
and a stream of discoveries and inventions to generate more jobs.
Now these are largely gone or substantially off-shored.
What has happened to corporate R&D shouldn't be used as an excuse to make life easier
for the Wall Street culture largely responsible for it.

Vatch , May 12, 2017 at 12:22 pm

Yes, any burdens imposed by Sarbanes Oxley are the fault of numerous unethical business executives over recent decades, and not the fault of people in government.

visitor , May 12, 2017 at 3:02 pm

When I was a student in IT, the shining stars at the firmament of industrial computer science and engineering R&D were Xerox PARC, DEC SRC, ATT Bell Labs and IBM Yorktown Heights.

They are gone or a shadow of their former selves.

Science Officer Smirnoff , May 12, 2017 at 12:36 pm

Contrary to popular belief, in aggregate U.S. corporations fund the stock market, not vice versa. Note that almost all of the buybacks in the decade 1976-1985 occurred in 1984 and 1985 after in November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation.

William Lazonick, "Stock Buybacks: From Retain-and-Reinvest to Downsize-and-Distribute," Center for Effective Public Management, Brookings Institution, April 2015 at http://www.brookings.edu/research/papers/2015/04/17-stock-buybacks-lazonick .

See Lazonick's footnoted paper for many loving particulars. Especially note the details of how Rule 10b-18 offers no protection from abuse and (no news to NC readers) is a pillar of general corporate asset-stripping .

Science Officer Smirnoff , May 12, 2017 at 12:43 pm

P. S. pages 10 and 11 of Lazonick's pdf lay out Rule 10b-18 in full.

David Barrera , May 12, 2017 at 12:59 pm

Thanks. Tremendous article!

Socal Rhino , May 12, 2017 at 12:59 pm

Engineering long-term career arc has been an issue since at least my father's generation (those born during WWI). Longer tenure (mid to late mid career) engineers were being eased out for young grads. When I was in a ChemE program in the 70s, advice was to follow the engineering degree with either law or a business degree because the odds of a long career doing engineering was not great. No one advised going for a PhD in engineering.

Arizona Slim , May 12, 2017 at 2:19 pm

My father had a PhD in chemical engineering.

When I asked him why he got the degree, which didn't seem necessary for someone who spent much of his career in industrial R&D, he said, "I'm like Mallory climbing Mount Everest. I got that degree because it is there."

So, there you have it. My old man getting that degree because he wanted to. And because my mother was willing to support both of them while he worked on it.

shinola , May 12, 2017 at 1:02 pm

To me, this is the money quote (literally):

"Many of America's largest corporations routinely distribute more than 100 percent of net income to shareholders, generating the extra cash by reducing cash reserves, selling off assets, taking on debt, or laying off employees the only logical explanation for this buyback activity is that the stock-based pay that represents the vast majority of the remuneration of senior corporate executives incentivizes them to manipulate their companies' stock prices "

This not only applies to the STEM sector, but nearly every large corp. in America. "Earnings quality" (i.e stock price) takes precedence over everything else leading to the crapification of products & services and devaluation of employees.

Thank gawd this type of thinking wasn't around when Jonas Salk was working on the polio vaccine.

nowhere , May 12, 2017 at 2:30 pm

Which begs the question: what discoveries are we missing out on now because of this short sighted approach?

Jim Haygood , May 12, 2017 at 1:27 pm

" In November 1982 the U.S. Securities and Exchange Commission adopted Rule 10b-18 that gave license to massive buybacks, in essence legalizing systemic stock-price manipulation and the looting of the U.S. business corporation. "

How can you have "looting" without lootees? The stockholders aren't complaining. If any party is being disadvantaged by borrowing to fund stock buybacks, it's existing bondholders. As David Swensen describes in an extended example in Pioneering Portfolio Management , managers compensated by stock options tend to treat corporate debt holders quite shabbily by piling on more debt, compromising the interest coverage ratio.

High tech companies use stock buybacks to offset their widespread granting of stock options which - absent Rule 10b-18 - would badly dilute existing stock holders over time.

Trying to paint the well-disclosed practice of stock buybacks as "looting" is histrionic ax grinding on Lazonick's part. Over-leveraged companies are going to regret it in the next recession. But that's a lamentable social phenomenon in a bubble-driven economy. Those who disagree with it are free to sell short over-leveraged stocks - perhaps a more meaningful way of expressing dissent than scribbling academic screeds.

Science Officer Smirnoff , May 12, 2017 at 1:41 pm

And political dissenters are free to emigrate.

fritter , May 12, 2017 at 2:22 pm

Well Jim, ponzi schemes work pretty well for those at the top. I suppose we shouldn't worry about it until we start getting complaints..

Actually though, watching the train wreck that is the outlook for the youngest generation today, provides some grim amusement. For instance noting that the "bubble-driven" economy composed of companies desperate to prevent their stock becoming "badly diluted" by having fire sales on capitol and expertise that probably took their predecessors decades to build can really only have one outcome. Depression, misery, socialism. Maybe we skip the Mao route this time, maybe not.

Alejandro , May 12, 2017 at 2:38 pm

Here's some related "histrionics" of your channeling D.D . an excerpt of a debate about "creative destruction" (emphasis mine) from 1991(context), chronologically, roughly following the tandem of Ronnie and Maggie.

Gregory Peck: "The Robber Barons of old at least left something tangible in their wake - a coal mine, a railroad, banks. THIS MAN LEAVES NOTHING. HE CREATES NOTHING. HE BUILDS NOTHING. HE RUNS NOTHING. And in his wake lies nothing but a blizzard of paper to cover the pain. Oh, if he said, "I know how to run your business better than you," that would be something worth talking about. But he's not saying that. He's saying, "I'm going to kill you because at this particular moment in time, you're worth more dead than alive." https://www.youtube.com/watch?v=xJRhrow3Jws

Danny Devito: "Let's have the intelligence, let's have the decency to sign the death certificate, collect the insurance, and invest in something with a future "Ah, but we can't," goes the prayer. "We can't because we have responsibility, a responsibility to our employees, to our community. What will happen to them?" I got two words for that: WHO CARES? Care about them? Why? They didn't care about you. They sucked you dry. You have no responsibility to them. For the last ten years this company bled your money. Did this community ever say, "We know times are tough. We'll lower taxes, reduce water and sewer."
https://www.youtube.com/watch?v=62kxPyNZF3Q

oho , May 12, 2017 at 1:29 pm

IBM. Poster child of everything wrong at the executive-level and the shareholder-level.

David Barrera , May 12, 2017 at 2:09 pm

Oho,

Yes, the IBM reference is interesting.The author gives an ordinal lead to IBM as a mover from the OEBM to NEBM. I ask myself if, from a mere one large corporation managing perspective, this was IBM's 11th hour response to the by then devastating rise of its competitors like Apple & Microsoft.

Also the irony that it did not help IBM at least in the midterm. So, IBM was the prime mover to initiate some aspects of a model change -change which every major player adhered to- in response to a new technological disadvantage vs. competitors, and in turned did not seem to do much for IBM in the immediate years. Although, if I recall well, IBM was immersed in many political battles and internal problems, legal and otherwise. Nevertheless, I doubt there was a historic inevitability on IBM's ordinal force. Outstanding work by Lazonick

Trout Creek , May 12, 2017 at 3:23 pm

Let me quote a noted tech analyst on IBM :

"IBM is the poster child for shenanigans. Last month, IBM reported its 20th quarter in a row of declining year over year revenues .. a 13% drop in earnings, profit margins that declined in every business segment ( much worse than expected ), free cash flow that plummeted over 50% year over year and an earnings "beat" of 3 cents per share. How could this "beat" happen? .. a negative tax rate of -23% . This is why they pay the CEO Rometti the big bucks ( estimated at $50 to $65 million last year)."

And this is one of the Bluest of the Blue Chip companies in the world.

Sue , May 12, 2017 at 6:12 pm

I read IBM spent a fortune at that time defending itself against monopolistic claims litigation. This was happening while Microsoft and Apple were clearly consolidating their oligopolistic empires. I read reports stating Oracle initial breakthroughs were taken from IBM's research work.

Thomas Williams , May 12, 2017 at 2:04 pm

Really fine piece, thanks. Also, the quality of the readers' comments is some of the highest I've seen in years of following NC

nowhere , May 12, 2017 at 2:35 pm

Not sure if anyone watches "Silicon Valley", but here is a quote that seems fitting:

Season 2 – Bad Money

Richard: Once we get a few customers and start a subscription-revenue model.

Russ: What? Revenue? No, no, no, no, no. No. If you show revenue, people will ask "How much?" And it will never be enough, but if you have no revenue, you can say you're pre-revenue. You're a potential pure play. It's not about how much you earn, it's about what you're worth. And who's worth the most? Companies that lose money. Pinterest, Snap chat No revenue. Amazon has lost money every fucking quarter for the last 20 fucking years, and that Bezos motherfucker is the king.

Wisdom Seeker , May 12, 2017 at 5:50 pm

Just wanted to point out that there is one more link in the chain to be followed: the financiers would not have such an easy time playing Nero with our economy, if the banking sector were still properly constrained by a gold standard (=limited supply of printed credit), the risk of bank runs by outraged consumers, the Glass-Steagall separation of commercial from investment banking, personal rather than corporate punishment for fraud and abuse, antitrust enforcement, etc.

In addition, the rise of 401(k) based investing, in which workers are tax-incentivized to buy in to the corporate stock scheming, but lack the normal shareholder voice in corporate governance, has taken the chains off the looters as well.

It's time to end the impunity. The government has been corrupted by the corporations, so only a populist uprising will produce reform. The uprising will require sacrifices of time, income, security. It will require boycotts of products that people like, but whose producers and vendors are evil. The products will not disappear while demand persists – but the producers and vendors must be brought to heel.

Consider the following inductees into the Corporate Hall of Shame:

pick an industry, you'll find a Hall of Shame candidate. Hit them all in the wallet until they reform.

Smitty , May 12, 2017 at 5:53 pm

The impact on the Grads was secondary a byproduct of a larger agenda which included the transfer offshore and consolidation of "IP" of the entire American, EU and Asian industrial economies along with the withdrawl of capital, while at the same time intentionally sabotaging future innovations with the handicap of diversity. Who got the loot and capital? Usual suspects.

[May 08, 2017] Warren Buffett Says Free Trade Has Turned American Workers Into Roadkill

May 08, 2017 | www.breitbart.com
"Nobody should be roadkill," Buffet said Saturday at the festival-like annual meeting of Berkshire Hathaway in Omaha, Nebraska.

The billionaire, who supported Barack Obama and backed Hillary Clinton in the 2016 election, now sounds almost Trump-ish. His comments on American workers echoed the remarks of President Donald Trump in his inaugural speech in January, which described a landscape of "American carnage" where closed factories are "scattered like tombstones."

Toward the end of the question and answer session with Buffett and his longtime sidekick Charlie Munger, investor Whitney Tilson asked if businesses should consider the fates of millions of Americans displaced by trade and technology instead of focussing solely on maximizing shareholder value. Buffett argued that free trade was a benefit to the economy at large but that politicians needed to "take care of the people who become roadkill."

This wasn't the first time Buffett has used the phrase. Back in February, he more-or-less gave this material a test run on CNBC's Squawkbox.

So free trade is wonderful for the world and for the United States, but its benefits are diffused among 320 million people. You buy your bananas cheaper because we don't try and produce them in the United States. But the penalties from free trade are terrible to specific industries. And as an investor, I can own – make a dumb decision on owning a shoe company. But if I own a good insurance company, I can diversify away the problems. If you're a 55-year-old steelworker, you can't diversify away your talents. I mean, you had it if steel or textiles or shoes become subject to total, it all moves offshore. So you want to have free trade, but you also have to take care of the people who, through no fault of their own, have spent their life learning one profession. And you can talk about retraining and all that, but it just isn't practical. And just take Berkshire Hathaway. We started with 2,000 employees in New Bedford, Mass, turning out textiles. And that business was doomed. And we had workers there who really they didn't have alternatives at age 50. Fair number of them just spoke Portuguese. They didn't have a chance. And a rich country that's prospering because of free trade, and as the world is prospering, should keep the free trade as much as possible. But they also should take care of the people that become the roadkill, you know, when an industry moves.

[May 07, 2017] Prime-Age Employment Rate Hits New High for Recovery

May 07, 2017 | economistsview.typepad.com
point , May 07, 2017 at 05:34 AM
Perhaps this report raises the possibility that this low pressure low growth economy may actually lead to a new high in the prime working age cohort, still with little wage growth.
libezkova -> point... , May 07, 2017 at 01:33 PM
Boomers are retiring and that increases employment in prime age (25-54) cohort. So to take only prime age is a little bit disingenuous. This effect needs to be taken into consideration.

Those who were born before 1950 were probably the most numerous. They all will be over 67 at the end of the year.

[May 07, 2017] Growing Inequality Under Global Capitalism naked capitalism

Notable quotes:
"... By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development and Anis Chowdhury, former Professor of Economics, University of Western Sydney, who held various senior United Nations positions in New York and Bangkok. Originally published at Inter Press Service ..."
"... Foreign Affairs ..."
May 07, 2017 | www.nakedcapitalism.com

Yves here. Even though much of the material in this post will be familiar to regular readers, some points are worth emphasizing. One defense regularly made of globalization is that even though it has lowered income of less-skilled workers in advanced economies (and even those of some skilled workers), laborers in emerging economies have gained. This picture is simplistic. As Joseph Stiglitz pointed out years ago, and the picture hasn't changed much, China has captured all of the income gains by emerging economies. Poverty in developing economies ex China hasn't budged. And the authors stress that inequality has exploded in China.

By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development and Anis Chowdhury, former Professor of Economics, University of Western Sydney, who held various senior United Nations positions in New York and Bangkok. Originally published at Inter Press Service

Income and wealth inequality has increased in recent decades, but recognition of the role of economic liberalization and globalization in exacerbating inequality has never been so widespread. The guardians of global capitalism are nervous, yet little has been done to check, let alone reverse the underlying forces.

Global Elite Alarmed by Growing Inequality

The World Economic Forum (WEF) has described severe income inequality as the biggest risk facing the world. WEF founder Klaus Schwab has observed, "We have too large a disparity in the world; we need more inclusiveness If we continue to have un-inclusive growth and we continue with the unemployment situation, particularly youth unemployment, our global society is not sustainable."

Christine Lagarde, IMF Managing Director, told political and business leaders at the WEF, "in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability." Similarly, World Bank President Jim Yong Kim has warned that failure to tackle inequality risked causing social unrest. "It's going to erupt to a great extent because of these inequalities."

In the same vein, the influential US Council of Foreign Relations' journal, Foreign Affairs , carried an article cautioning, "Inequality is indeed increasing almost everywhere in the post-industrial capitalist world . if left unaddressed, rising inequality and economic insecurity can erode social order and generate a populist backlash against the capitalist system at large."

Much Ado About Nothing?

Increasingly, the main benefits of economic growth are being captured by a tiny elite. Despite global economic stagnation for almost a decade, the number of billionaires in the world has increased to a record 2,199. The richest one per cent of the world's population now has as much wealth as the rest of the world combined. The world's eight richest people have as much wealth as the poorer half.

In India, the number of billionaires has increased at least tenfold in the past decade. India now has 111 billionaires, third in the world by country. The largest number of the world's abject poor also live in the same country - over 425 million, a third of the world's poor, and well over a third of the country's population.

Africa had a resource boom for a decade until 2014, but most people there still struggle daily for food, clean water and health care. Meanwhile, the number of people living in extreme poverty, according to the World Bank, has grown substantially to at least 330 million from 280 million in 1990!

In Europe, poor people bore the brunt of draconian austerity policies while bank bailouts mainly benefited the moneyed. 122.3 million people, or 24.4 per cent of the population in the EU-28, are at risk of poverty. Between 2009 and 2013, the number of Europeans without enough money to heat their homes or cope with unforeseen expenses, i.e., living with "severe material deprivation," rose by 7.5 million to 50 million people, while the continent is home to 342 billionaires!

In the United States, the income share of the top one per cent is at its highest level since the eve of the Great Depression, almost nine decades ago. The top 0.01 per cent, or 14,000 American families, own 22.2 per cent of its wealth, while the bottom 90 per cent, over 133 million families, own a meagre four per cent of the nation's wealth. The top five per cent of households increased their share of US wealth, especially after the 2008 financial crisis. Meanwhile, the richest one per cent tripled their share of US income within a generation.

This unprecedented wealth concentration and the corresponding deprivation of others have generated backlashes, arguably contributing to the victory of Donald Trump in the US presidential election, the Brexit referendum, the strength of Marine Le Pen in France, the Alternative for Germany, and the ascendance of the Hindutva right in secular India.

"Communist" China and Inequality

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many. Part of its huge trade surplus - due to relatively low, albeit recently rising wages - has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking "middle class" in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China's export-led development on the basis of low wages has sharply increased income inequality in the world's largest country for more than three decades. Beijing is the new "billionaire capital of the world," no longer New York. China now has 594 billionaires, 33 more than in the US!

Since the 1980s, income inequality in China has risen faster than most! China now has one of the world's highest levels of income inequality, rising mainly in the last three decades. The richest one per cent of households own a third of the country's wealth, while the poorest quarter own only one per cent. China's Gini coefficient for income rose to 0.49 in 2012 from 0.3 over three decades before when it was one of the most egalitarian countries in the world. Another survey put China's income Gini at 0.61 in 2010, greatly exceeding the US's 0.45!

12 0 24 5 0 This entry was posted in Africa , Banana republic , China , Economic fundamentals , Free markets and their discontents , Globalization , Guest Post , Income disparity , India on May 6, 2017 by Yves Smith .
Trade now with TradeStation – Highest rated for frequent traders
Subscribe to Post Comments 55 comments MoiAussie , May 6, 2017 at 4:16 am

Global Elite Alarmed by Growing Inequality is a rather misleading, or rather, abbreviated, subhead. On suspects it should be Global Elite Alarmed that Growing Inequality may not be Sustainable .

Is there any evidence anywhere that Global Elites would want voluntarily to reduce inequality?

cnchal , May 6, 2017 at 5:51 am

The reality is the global elite are alarmed that inequality isn't high enough, and fear having to give up a single dollar to the poors. There is no measuring stick big enough to measure the elite's greed.

Apple workers in China are so abused and underpaid, I am waiting for a factory rampage. When your sweat is stolen by Tim Cook colluding with the criminal leaders of China to steal all your effort for themselves, that would drive anyone nuts. Buying an Apple product means thousands of Chinese slaves are tortured.

Moneta , May 6, 2017 at 8:44 am

Proof: 1% in US keep on arguing how they only collect 20% of income but pay 40% of taxes.

They don't seem to realize that if their income had stayed at 30x the lowest paid instead of 300x, the lower paid would actually be paying more taxes.

Second, the rich typically have low incomes relative to assets so if taxes included assets, it would be interesting to see how that proportion would change.

Furthermore, why should someone get waterfront property just because of their birthright and have the audacity to tell the younger ones to pick themselves up by their bootstraps? If society does not fix the problem, Mother Nature will.

cnchal , May 6, 2017 at 9:35 am

Chinese labor get's shot if they were to try and organize a fight for better working conditions. The elite here and there conspire with each other to profit from it.

Here is proof:

Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country. China has supplied cheaper consumer goods to the world, checking inflation and improving living standards for many . Part of its huge trade surplus - due to relatively low , albeit recently rising wages - has been recycled in financial markets, mainly in the US, which helped expand credit at low interest rates there.

Thus, cheap consumer products and cheap credit have enabled the slowly shrinking "middle class" in the West to mitigate the downward pressure on their living standards despite stagnating or falling real wages and mounting personal and household debt.

China's export-led development on the basis of low wages has sharply increased income inequality in the world's largest country for more than three decades. Beijing is the new "billionaire capital of the world," no longer New York. China now has 594 billionaires, 33 more than in the US!

There are suicide prevention nets in the stairwells and around the building where Apple products are made. And they make really shitty money, compared to what they put out.

Apple has what, a fifth of a trillion stashed "offshore". Where did it come from? Right out of the sweat of those workers.

There is a fundamental difference between our politicians and Chinese politicians.

In our system, narcissists are elected and are then surrounded by psychopaths, in China it's a total brawl all the way to the top, so they skip the narcissist step.

sgt_doom , May 6, 2017 at 2:02 pm

Nicely stated!

dontknowitall , May 6, 2017 at 5:56 am

One way that inequality can be mitigated is by increasing government spending to create jobs and improve infrastructure but forecasts of the benefits can be manipulated to defeat such proposals by usually showing that less than a dollar of GDP growth is returned for each dollar of spending. Economists at North Carolina Sate U. have recently created an agnostic model stripped of partisan bias of how government spending benefits GDP and they show about $1.30 of GDP growth for each dollar spent. Let me quote (the original paper is paywalled):

" most widely used model for predicting how U.S. government spending affects gross domestic product (GDP) can be rigged using theoretical assumptions to control forecasts of how government spending will stimulate the economy Based on their observations, the researchers then developed an agnostic model, which was designed to avoid those tweaks that predispose the results to support a particular argument We found that the agnostic model predicts roughly $1.30 in near-term GDP growth for each $1 in spending."

https://phys.org/news/2017-05-impact-easily.html
https://www.aeaweb.org/articles?id=10.1257/aer.20111196&&from=f

sgt_doom , May 6, 2017 at 2:05 pm

I think most of us realize the details of how to decrease inequality - just as most of us thinking people realize that inequality increases unemployment which increases inequality - so your comment falls upon those who are tired with the oblivious who seem ignorant that the problem is not with the HOW, it is with that bloody revolution which has yet to come!

cripes , May 6, 2017 at 6:48 am

Yeah, I've always wondered what factors, besides sheer greed, elite inbreeding and stupidity, are responsible for the wide range of national GINI rankings.

According to the CIA anyway, among the most equal are affluent Germany (27.0) France (30.1) and Sweden (24.0), but also not-rich Albania (29.0) Romania (27.3) and, most equal, Slovenia at 23.7.

The European Union as a whole is rated GINA 30.1. The handful of non-European countries that crack the more equal list, strangely are, in ascending order Kazakstan (28.9) Pakistan (29.6) South Korea (30.2) and Australia (30.3).

Geographically, there is a swath of more-equal economies stretching from Western Europe to North Africa, South-west Asia (middle east) through India, Southeast Asia, Indonesia and Japan. This tends towards the idea that old-world, culturally cohesive societies have an interest in maintaining economies that promote inclusion and common interest. The Muslim barbarians and European socialists are less prone to exploiting their neighbors or throwing them overboard than we are, although Washington is working hard to remedy this situation.

Canada and Australia have wisely plotted a course closer to their European forbears than their American cousins.

Southern Africa, Latin America starting at the Rio Grande, China, Russia (bordering much more equal Kazakhstan?) and of course the USA are the heartlands of inequality. The common thread here, I presume, is their colonial heritage.

There may be something to the argument about homogeneous societies having a cultural advantage and all that, but England (32.4) and France, hardly exemplars of racial tranquility, or Australia, India and Canada seem to say otherwise.

The interesting thing seen easily on the map is that low income "developing" countries, with exceptions like Hong Kong (53.7) have a large preponderance of high GINI scores.

Middle-income China, Russia and Brazil, are joined by the always exceptional United States as continental empires with extreme inequality.

Readers thoughts?

Moneta , May 6, 2017 at 9:09 am

I'm not sure Canada can survive without socialism.

If we use current economic productivity and efficiency models, it would seem that North-South activity would make more sense than East-West. So from my perspective, if we want Canada to work, we have to share and accept higher costs and less material wealth to reach that goal.

The other issue we are facing capital from China let's say there are 10 million Chinese (we only have something like 12m households) who want to get their money out and a few million Canadians who want to get rich selling their house, you can imagine what kind of havoc the zirp/bailout/EZ money policies have unleashed on small attractive countries like Canada.

And our leaders are still denying the impact of foreign capital on our real estate market. Because these are the people who live in the overvalued urban areas and quite happy to see their home values soar.

IMO, protectionism will need to rear its ugly head.

Massinissa , May 6, 2017 at 7:04 pm

I'm not sure anyplace can survive without socialism if capitalism doesn't try and fix itself again like in the 30s. Which it might not, this time.

sgt_doom , May 6, 2017 at 2:08 pm

Remember, please, GINI scores do not accurately represent growing inequality within countries, they just supposedly represent inequality BETWEEN countries.

knowbuddhau , May 6, 2017 at 7:08 am

>>>"Meanwhile, China has increasingly participated in and grown rapidly as inequality has risen sharply in the ostensibly communist-ruled country."

Participated in what?

We're the bottom of the barrel. They're the cream on top. But the vessel is being overpressurized, accidentally on purpose. How much more can we take before the Great Blowout?

cripes , May 6, 2017 at 7:20 am

Oooops:

The common thread (to the US) with unequal China and Russia is not their "colonial heritage" but their empire-sized geography.

Also:

There is also the matter of GINI inequality within national borders, seen here: http://dev.null.org/scrapbook/2009/0420_us_gini.jpg

Surprisingly, but not to me, is that New York State holds the worst GINA rank at 49.9, a fact due not solely to the density of high income jerk-offs like Trump who claim residence there, but to the density of truly impoverished people that still remain in the five boroughs of NYC and the abandoned former industrial cities of upstate New York.

Although they report a very high 21% "poverty" rate, NYC's Commission on Equal Opportunity reports in 2012 that 40% of New York City families subsisted on less than $34,000 annually. Anyone familiar with the absurd official poverty thresholds, or the punishing cost of living in NYC for working people, well, do your own math.

Suffice it to say, national GINI rankings tell only part of the story.

There is a whole other realm of study in qualifying GINI effects by state, county, zip code or tract level.

UserFriendly , May 6, 2017 at 8:48 am

Bernie did best in the most egalitarian states interesting. Rich people vote more and if you are rich in an unequal state Bernie must sound like Satan.

MoiAussie , May 6, 2017 at 10:41 am

I guess you meant more rich people vote , but there're hidden truths in rich people vote more which are worth unpacking.

– In the US system, money talks. Rich people donate to support their future benefactors, which buys MSM speech and advertising that sways gullible votes to their side.

– Elected representatives are often in it to get rich, and are certainly bought and paid for. So rich people get the votes on the legislation that matters to them. The rest get representatives who simply don't deliver on the policies and promises that they ran on. Obama.

Susan the other , May 6, 2017 at 11:10 am

I was also thinking that broad data like the above hide the obvious solution. But I don't know how working from localities upward from towns to counties to cities to states would technically work to redistribute income. I know how they redistribute state tax money for the state's dept of education – they pool the money and distribute it per pupil evenly across all districts. The poorest districts getting the most help. So redistribution of income via taxes would have to come from the tax authority, i.e. the state. But that leaves local resources and solutions unused. As unused as they are disenfranchised from neoliberal globalization. It is just those very local communities that could be enlisted and employed to clean up the environment and do it sustainably. The state could subsidize cleanup. Organic farming. Artisans of all sorts. The fact that there is such inequality, and the fact that we are awash in garbage, pollution, and climate change seem to go hand in glove; and the mess is totally reversible. But start at the local level.

HopeLB , May 6, 2017 at 12:46 pm

Fresh water and arable land are becoming scarce and climate change will only exacerbate the trend. People could be put to useful, gratifying work using that suburban farmer's idea. Those large subsurban yards covered in meticulous lawns could be put to use feeding the world.

sgt_doom , May 6, 2017 at 2:15 pm

Thanks for your great remarks and comments - should be highly informative to many.

Also important to note - given the incredibly shrinking middle class in America (which might not always appear that way in the purposely faulty numerical data presented - or misrepresented) - that it is always worse than it appears since such data derives from the Census Bureau, which tracks ONLY wages, not income streams from capital gains (such as bonds and stocks, etc.). This (purposely) skews the size of the middle class much larger than it actually is - and it has been dramatically shrinking in America - as those rich and super-rich show up listed as in the middle class, economically.

Also, important to keep in mind that much supposed "data" comes from the National Bureau of Economics Research (NBER), which has as an emeritus , one Martin Feldstein from Harvard. Said Feldstein was a director at HCA when they were hit with the largest out-of-court penalty settlement for their Medicare/Medicaid fraud back in the 1990s. Said Feldstein was a director at Eli Lilly when they were hit with the then-largest criminal penalty for fraudulent marketing of their drugs. Said Feldstein was a director at AIG/Financial Products when they had to be bailed out by the US government for partaking in the largest insurance swindle in US history, so EVERYTHING coming out of the NBER should be considered suspect, given the character of its crew!

Anonymous2 , May 6, 2017 at 7:23 am

I wonder about Gini scores for the UK. A lot of residential central London is now owned by extremely rich people like Saudi princes and Russian oligarchs. My suspicion is that they are excluded from the figures. Their impact on the local economy by pricing just about everyone else out of this market is, however, non-trivial.

sgt_doom , May 6, 2017 at 2:18 pm

Yes, this site has carried some excellent articles in the past about this subject, GINI essentially tracks the supposed inequality among countries, not WITHIN the individual countries (or at least it fails to do so).

Something with is as appropriate to the UK as it is to America, a quote from an outstanding book, Glass House , by Brian Alexander:

"Corporate elites said they needed free-trade agreements, so they got them. Manufacturers said they needed tax breaks and public money incentives in order to keep their plants operating in the USA, so they got them. Banks and financiers needed looser regulations, so they got them. Employers said they needed weaker unions – or no unions at all – so they got them. Private equity firms said they needed carried interest and secrecy, so they got them. What did Lancaster and a hundred other town like it get? Job losses, slashed wages, poor civic leadership, social dysfunction, drugs."

Michael C. , May 6, 2017 at 8:12 am

To alter James Carville's noted quote, "It's capitalism, stupid." Or at least the way it is configured so that short term profit for the ownership class takes precedence over the immoral destruction of societies and mother earth.

Kalen , May 6, 2017 at 9:33 am

Rampant inequality, joblessness, homelessness is not a shameful aspect of unfortunate excesses of few or tragic side effect of modern mass capitalism but in fact it is its best feature, in fact absolutely necessary even critical to the success of this unbelievable confidence scheme callled capitalist socioeconomics enhanced by debt based monetary system and fiat currency.

And we all believe in that sham. We all believe in the value system and valuation of our commodified social life by somehow divine authority of few puny lowlifes in the ruling elite who are laughing at us all the way to the empty bank they own and we are indebted to.

As long as we believe that we work for money, a useless symbol of our total dependence, not for food, sustenance and shelter, as long as we believe we need money that cannot be eaten or utilized as a material for building shelter but can best be used as an emergency bathroom tissue substitute, we are lost begging for mercy enslaving ourselves to strangers for nothing but an illusion that breaths and promotes rampant inequality.

I know it sounds shocking but give it a thought if you can.

Here I found unique and controversial take on origins of money that touches upon similar theme of money itself as a propaganda tool of social control.

https://contrarianopinion.wordpress.com/2015/04/14/plutus-and-the-myth-of-money/

Moneta , May 6, 2017 at 9:52 am

Even if everyone worked their butt off or got multiple PhDs, we'd still need workers to clean radiation messes, toilet bowls or change diapers.

All our system is doing today is making everyone compete ever harder for crappy jobs.

Do we really need the education we are getting for most of the jobs out there?

justanotherprogressive , May 6, 2017 at 10:36 am

"Even if everyone worked their butt off or got multiple PhDs, we'd still need workers to clean radiation messes, toilet bowls or change diapers."

Is there some law that says that PhD's can't clean radiation messes, toilet bowls or change diapers? Shouldn't everyone be responsible for "survival work"? Why should it just be some class of "workers" that need to do those jobs? Why are some people considered so much better than others that they are exempt from "survival work"? What if everyone put some of their work time every day doing this "survival work" before they did their "careers"?

Unfortunately, this is just another example of how the neoliberal ideology has infiltrated everyone's thinking, even those who are diametrically opposed to neoliberalism on some level and why it is going to be so hard to get rid of ..

Moneta , May 6, 2017 at 11:07 am

Typically those who go to university to get PhDs do not dream of changing diapers and wiping butts.

Two big issues here are expectations management and misallocation of resources.

Unhappy individuals and misallocation of resources contribute to reduce quality of life and wealth.

Moneta , May 6, 2017 at 11:18 am

If we want PhDs to like wiping butts, we need to dissociate education from the workforce. IOW, education should be for the love of knowledge.

But why would we want those with special skills changing diapers if they could contribute in areas that improve our quality of life?

p.s. I have trouble with progressivism when it is used to level from the bottom

John Wright , May 6, 2017 at 11:17 am

My late father, who looked for employment during the Great Depression, would say "You needed a college degree to pump gas for Standard Oil".

He had a cynical view of college degrees, asserting that if degrees were necessary for jobs, the future employers should help with the training expense.

The "must get an expensive college degree" assertion is losing its effectiveness on the stressed American population, where we approach nominal full employment at poor wages.

I suspect the education that is most needed in the USA is critical thinking that serves to question the wisdom of our government and the MSM in the propaganda they promote..

Moneta , May 6, 2017 at 11:20 am

I tend to agree. If corporate America shouldered the cost of education, my intuition tells me that workers would not need as many degrees.

John Wright , May 6, 2017 at 11:44 am

My dad did have a college degree, but his experience in his father's store helped him get a job as a butcher for Safeway during the Great Depression.

As I remember the story, many were vying for the Safeway butcher job, but he outlined how his prior experience would "help them sell more meat".

All one has to do is look at the projections from the labor department for STEM job growth over the next 10 years (about 100K/year) and compare that to the similarly sized H1-B visa count that tech firms want per year to see that a STEM college education is not the safe haven in the job market that the MSM promotes.

International companies cast a world wide net for educated talent, and are probably unconcerned how much a prospective employee's degree cost to acquire.

And these corporations also want to lower their US taxes, which indirectly cuts public education funding.

Moneta , May 6, 2017 at 11:52 am

A large percentage of well paying jobs are sales related. We don't need PhD knowledge to perform in those. These require people skills and a network.

Paul Greenwood , May 6, 2017 at 3:04 pm

We don't actually need PhD outside physical sciences. It is a qualification ONLY in the Thesis subject matter. We also don't need so many Lawyers and should turn of the production line (maybe that is what inflates GDP in UK and US .lawyers billing rates ?)

Moneta , May 6, 2017 at 11:34 am

It also brings to mind all those who don't want to pay for school taxes because they don't have children.

I'm quick to remark that on the same principle, in such a system they should not accept government services from anyone younger than them.

sgt_doom , May 6, 2017 at 2:27 pm

Excellent point, but that is the purpose of Identity Politics, to erase the concept of "the worker" from our minds and thoughts, practiced by both the r-cons of the bankster party and the faux crats of the bankster party.

The r-cons' identity politics is that the "media" (still haven't found them in Amerika) are "liberal" (still have found that, either) and the r-cons are besieged by these outfits.

The faux crats wish to focus on every possible sub-grouping of humans, to the exclusion of wage earners.

Worked for decades, but I suspect it may possibly and finally be beginning to fall apart . . .

justanotherprogressive , May 6, 2017 at 10:46 am

"Do we really need the education we are getting for most of the jobs out there?"

The future belongs to those capable of handling it – the others will be cast to the wayside. Do you really want to condemn most people to being part of the wayside? Why do you think education is becoming so expensive?

No, we ALL need more education, not less.

MoiAussie , May 6, 2017 at 11:04 am

We do indeed all need more education, but not of the type that most people think. The education young people suffer through for years and then go into debt for more of is designed largely to impoverish, enslave, and brainwash. It's anti-education, creating false expectations, instilling poisonous memes, punishing independence and non-compliance.

There are exceptions of course. Education for the rich is designed to teach the rules of the game, weed out the unreliable, and establish lifetime networks.

justanotherprogressive , May 6, 2017 at 11:14 am

Absolutely true. Our current education system only creates workers – it doesn't create thinkers .

Moneta , May 6, 2017 at 11:25 am

Thank you. That is what I wanted to convey.

Norb , May 6, 2017 at 12:31 pm

I am reminded that people with curious minds are always educating themselves – formal setting or not- wealthy or not. The social system should provides an outlet for those talents and effort. The failing of todays ruling ideology is that human talent is undervalued and underutilized. In effect, built on waste and inefficiency in a broader sense. Todays economic system seems most efficient on creating inequality.

A 4 hour work day based on a livable wage could open many "educational" doors.

Norb , May 6, 2017 at 12:36 pm

I am also old enough to remember that vocational training was taken seriously in public schools without social stigma. Labor was not a dirty word. A different form of critical thinking focused on manufacture.

Another Anon , May 6, 2017 at 12:16 pm

MoiAussie,

Are you referring to the "practical" one and two year programs like the Australian TAFE system ? I got a two year computer degree from such a program almost twenty
years ago and was fairly impressed with the program. Of the twenty
people in my class, eighteen had at least a masters degree in some technical
subject though the program was designed for those who did not seek to
go to university. The ones with the advanced degrees such as myself were unemployed and so retraining.

MoiAussie , May 6, 2017 at 12:35 pm

Not at all. Practical training like TAFE (or like TAFE used to be) can be valuable, depending on what course you choose. I'm referring to primary, secondary and university education as it is offered to the mainstream today in the western world.

Primary and secondary education is degraded for reasons far too complex to get into here. Of course there are still tertiary courses and teachers that educate, but universities are now run strictly as commercial enterprises, and such teachers find it harder and harder to prosper.

Paul Greenwood , May 6, 2017 at 3:02 pm

Before John Major UK had quality courses such as City & Guilds and Part-Time University Courses – "Sandwich Courses" where working students had Block or Day Release to study and could work through their studies with access to industrial labs and equipment and university facilities. It was very cost-effective. Major turned everyone into Full-Time Students so they emerged after 3 years with no relevant industrial experience and lots of debt

Norb , May 6, 2017 at 12:05 pm

The answer to your question is No. The resistance to single payer health care in America belies that fact. Many alternative lifestyles would be possible if one could relieve exorbitant medical care from household expenses. Private businesses would be indirectly forced to offer more humane working conditions, regardless of what that work entailed by the mere fact that labor could easily relocate to a less exploiting employer. Added to that, the removal of stress accompanied by needing to deal with medical uncertainties of life. A sane society would provide care for all its members.

Guaranteed food, shelter, basic education, healthcare, and some form of work are all that is required from a just society. That should be the criteria for evaluating the system. This is not utopia, and is within reach. There is nothing technical holding this realization back. The elite create conflict to secure their position. They believe in inequality.

When you look at it, most "jobs" in capitalist society don't satisfy any legitimate human need for survival. Not to mention the needs of the remaining life on the planet. Most are satisfying manufactured wants. A cynical play on human emotion that condemns most to unhappy and stressful lives.

Change will happen when a critical mass of people can get past the fear and psychological damage that is caused by manufactured needs, excessive higher education for all being one them. In and of itself, a "higher education" is meaningless if you cannot practice the acquired skill. Are lower work hours on the horizon to accommodate all the excess degrees? Not in the least.

This is not to say that lifelong education should not be an aspirational goal. Only to stress that the social organizing structure must accommodate that goal in a meaningful way. Right now, in America, it is mostly overt exploitation. A creative way to manufacture debt slaves.

Moneta , May 6, 2017 at 12:19 pm

Once upon a time, most of the highly educated took a vow of poverty with the assurance they would be cared for in a time of need.

Today most jump on the degree bandwagon to get on the road to material consumption and end up realizing they were sold an expensive if not worthless bill of goods.

Paul Greenwood , May 6, 2017 at 2:16 pm

Before BANKS became the motor of Western Capitalism it was different. Banks were a Service Business now the rest of society SERVES the Banks

jrs , May 6, 2017 at 12:23 pm

well said

MoiAussie , May 6, 2017 at 12:56 pm

Regarding excessive higher education as a manufactured need, I think there are at least two other factors at play besides credentialism and the (futile?) pursuit of good careers.

One is the decline in the literacy, numeracy, general knowledge, and other educational achievements of your average high school graduate compared to 30 years ago. It's well recognised in universities that much of what used to be taken as known by freshpersons, today needs to be taught or retaught in the early years of a university/college course.

The second factor is simply the growing complexity and pace of change of the world we inhabit. I suspect this is a major reason behind the increase in the number of years of fulltime education the average person seems to think they require.

Paul Greenwood , May 6, 2017 at 2:18 pm

What is the US Healthcare problem ? It is a Ricardian Issue of who is taking Supernormal Profit and what the correct level of Economic Rent might be.

Maybe it is Insurance that is the problem. People buy Insurance not Health and Insurance responds only to Litigation

justanotherprogressive , May 6, 2017 at 11:13 am

+ 100
I think that people are so driven to value themselves in terms of money, that they won't even allow other ideas like this to enter their consciousness
Sadly, now is the time when we need to be thinking about other ideas, because the ones we currently accept as valid just aren't working for most of the world's people ..

Kalen , May 6, 2017 at 4:01 pm

Thank you. You seem to be the only one who got my most important point namely a subversive function of money as a propaganda of liberalism that underlie socioeconomic system of capitalism and commodification (valuation and valorization in terms of money) of environment and social relations.

What I mean by "propaganda of liberalism" is hijacking of ideas of individual Freedom to mean abandonment of common interests and separation from community, also separation from community in a form of alienation of private property from community commons and hence introduction of money as a representation of the private property, capital or collateral in a debt based monetary system.

The money is so much embedded into people's psyche that trying to explain artificiality of such an arrangement amounts to a sort of Copernican revolution of explaining reality that completely contradicts everyday common sense experience.

What's insidious in capitalism is that social relations among masses of people are forced to be negotiated by money in addition to old ways of social relations (also labor relations) being negotiated by social position and political power and/or what we call culture i.e a common set of attitudes and practices that have been empirically/historically proven beneficial for community.

People do not realize that even 200 years ago many people were living who did not use money even once in their lives since they did not need to, they produced their own food, cloths, tools, they barter other goods and even taxes they paid via field labor.

Imagine us today paying all our bills directly with our labor, one thing we have abundant and we control, not scarce money controlled solely by greedy elite.

Unemployment would be something our children would have learned about only from history pages.

B.J.M. , May 6, 2017 at 10:32 am

I guess nobody every read False Dawn: The Delusions of Global Capitalism, by John Gray then a professor at the London School of Economics. It was published in 1998 and is to this day the greatest critique of neoliberal economic dogma ever written. Then again Gray is an intellectual's intellectual so the media has always ignored him in favor of pop intellectual simpletons like Tom Friedman.

It is as if Gray had a time machine which allowed him to see the future.

Paul Greenwood , May 6, 2017 at 2:59 pm

Prior to 1914 Global Capitalism had powered ahead hindered only by US Tariff Walls such as McKinley Tariff and the upsurge in Tariffs in Germany, Russia, France and a ludicrous British commitment to Free Trade which destroyed investment in industry as capital flowed overseas. The result was 1914-18 War and the removal of Russia (the fastest-growing market) from European trade and destruction of Germany and Central Europe

Bob , May 6, 2017 at 2:04 pm

Social unrest and a populous backlash against global capitalism are always trotted out as the main effects gross economic inequalities will have. But given the elites control of the media and our economy they have the tools and power to limit unrest and any backlash. The more important effect of economic inequality is that it will destroy capitalism itself.

Paul Greenwood , May 6, 2017 at 2:14 pm

Global Elite Alarmed by Growing Inequality

That is reassuring, I would hate to think "the Global Elite" was out of touch or playing shepherdess in Hameau de la Reine; it is good to know the Controllers have their finger on the pulse and are "caring" for us.

Cynicism is well-fed in the current era.

Years ago I read Amy Chua's book "World On Fire" (2002)

and Sir James Goldsmith: "The Trap"

You can read it FREE at

Scott , May 6, 2017 at 5:08 pm

None of the workers give a shit about how rich the rich are. All they want is a living wage. That the rich, who Piketty points out are rich because they inherited wealth to start with won't pay, is insane on the part of the rich.

[May 05, 2017] My spouse teaches in an inner city school and its pretty much only the immigrant kids who have intact families providing them with support at home

May 05, 2017 | www.nakedcapitalism.com
DH , May 4, 2017 at 12:04 pm

I have always wondered how successful the big producers, such as Wall Street traders, would be if they were subjected to random stop-and-frisk of them in their cars and coming out of the bars at night like they would be regularly subjected to if they lived in poor neighborhoods. It is likely that a lot of DWI and drug charges would be filed, similar to what we see in the inner city, with attending legal issues impacting their productivity. Assuming they then faced the court system with court-provided counsel instead of highly-paid Harvard Law grads, I wonder how many of them would be back at work the next day?

My spouse teaches in an inner city school and its pretty much only the immigrant kids who have intact families providing them with support at home – most of the American (black, white, and hispanic) kids in her classes have parents in jail, domestic abuse protective orders, etc. They are frequently raised by their grandparents or other relatives. Playing outside at recess and lunch at school is very important because many of the kids live in neighborhoods where it is unsafe to play outside. Being poor is very effective at teaching kids how to be poor.

RabidGandhi , May 4, 2017 at 1:38 pm

Wonder no more: Chappelle spells it out .

[May 01, 2017] Trump: A Resisters Guide by Wesley Yang

Recommended !
Jan 21, 2017 | harpers.org
[Neo]liberalism that needs monsters to destroy can never politically engage with its enemies. It can never understand those enemies as political actors, making calculations, taking advantage of opportunities, and responding to constraints. It can never see in those enemies anything other than a black hole of motivation, a cesspool where reason goes to die.

Hence the refusal of empathy for Trump's supporters. Insofar as it marks a demand that we not abandon antiracist principle and practice for the sake of winning over a mythicized white working class, the refusal is unimpeachable. But like the know-nothing disavowal of knowledge after 9/11, when explanations of terrorism were construed as exonerations of terrorism, the refusal of empathy since 11/9 is a will to ignorance. Far simpler to imagine Trump voters as possessed by a kind of demonic intelligence, or anti-intelligence, transcending all the rules of the established order. Rather than treat Trump as the outgrowth of normal politics and traditional institutions - it is the Electoral College, after all, not some beating heart of darkness, that sent Trump to the White House - there is a disabling insistence that he and his forces are like no political formation we've seen. By encouraging us to see only novelty in his monstrosity, analyses of this kind may prove as crippling as the neocons' assessment of Saddam's regime. That, too, was held to be like no tyranny we'd seen, a despotism where the ordinary rules of politics didn't apply and knowledge of the subject was therefore useless.

Such a [neo]liberalism becomes dependent on the very thing it opposes, with a tepid mix of neoliberal markets and multicultural morals getting much-needed spice from a terrifying right. Hillary Clinton ran hard on the threat of Trump, as if his presence were enough to authorize her presidency.

Where Sanders promised to change the conversation, to make the battlefield a contest between a multicultural neoliberalism and a multiracial social democracy, Clinton sought to keep the battlefield as it has been for the past quarter-century. In this single respect, she can claim a substantial victory. It's no accident that one of the most spectacular confrontations since the election pitted the actors of Hamilton against the tweets of Trump. These fixed, frozen positions - high on rhetoric, low on action - offer an almost perfect tableau of our ongoing gridlock of recrimination.

Clinton waged this campaign on the belief that her neoliberalism of fear could defeat the ethnonationalism of the right. Let us not make the same mistake twice. Let us not be addicted to "the drug of danger," as Athena says in the Oresteia, to "the dream of the enemy that has to be crushed, like a herb, before [we] can smell freedom."

The term "meritocracy" became shorthand for a desirable societal ideal soon after it was coined by the British socialist Sir Michael Young. But Young had originally used it to describe a dystopian future. His 1958 satirical novel, The Rise of the Meritocracy, imagines the creation and growth of a national system of intelligence testing, which identifies talented young people from every stratum of society in order to install them in special schools, where they are groomed to make the best use possible of their innate advantages.

In the novel, what begins as a struggle against inherited privilege results in the consolidation of a new ruling class that derives its legitimacy from superior merit. This class becomes, within a few generations, a hereditary aristocracy in its own right. Sequestered within elite institutions, people of high intelligence marry among themselves, passing along their high social position and superior genes to their progeny. Terminal inequality is the result. The gradual shift from inheritance to merit, Young writes, made "nonsense of all their loose talk of the equality of man":

Men, after all, are notable not for the equality, but for the inequality, of their endowment. Once all the geniuses are amongst the elite, and all the morons are amongst the workers, what meaning can equality have? What ideal can be upheld except the principle of equal status for equal intelligence? What is the purpose of abolishing inequalities in nurture except to reveal and make more pronounced the inescapable inequalities of Nature?

I thought about this book often in the years before the crack-up of November 2016. In early 2015, the Harvard sociologist Robert Putnam published a book that seemed to tell as history the same story that Young had written as prophecy. Our Kids: The American Dream in Crisis opens with an evocation of the small town of Port Clinton, Ohio, where Putnam grew up in the 1950s - a "passable embodiment of the American Dream, a place that offered decent opportunity for all the kids in town, whatever their background." Port Clinton was, as Putnam is quick to concede, a nearly all-white town in a pre-feminist and pre-civil-rights America, and it was marked by the unequal distribution of power that spurred those movements into being. Yet it was also a place of high employment, strong unions, widespread homeownership, relative class equality, and generally intact two-parent families. Everyone knew one another by their first names and almost everyone was headed toward a better future; nearly three quarters of all the classmates Putnam surveyed fifty years later had surpassed their parents in both educational attainment and wealth.

When he revisited it in 2013, the town had become a kind of American nightmare. In the 1970s, the industrial base entered a terminal decline, and the town's economy declined with it. Downtown shops closed. Crime, delinquency, and drug use skyrocketed. In 1993, the factory that had offered high-wage blue-collar employment finally shuttered for good. By 2010, the rate of births to unwed mothers had risen to 40 percent. Two years later, the average worker in the county "was paid roughly 16 percent less in inflation-adjusted dollars than his or her grandfather in the early 1970s."

Young's novel ends with an editorial note informing readers that the fictional author of the text had been killed in a riot that was part of a violent populist insurrection against the meritocracy, an insurrection that the author had been insisting would pose no lasting threat to the social order. Losing every young person of promise to the meritocracy had deprived the working class of its prospective leaders, rendering it unable to coordinate a movement to manifest its political will. "Without intelligence in their heads," he wrote, "the lower classes are never more menacing than a rabble."

We are in the midst of a global insurrection against ruling elites. In the wake of the most destructive of the blows recently delivered, a furious debate arose over whether those who supported Donald Trump deserve empathy or scorn. The answer, of course, is that they deserve scorn for resorting to so depraved and false a solution to their predicament - and empathy for the predicament itself. (And not just because advances in technology are likely to make their predicament far more widely shared.) What is owed to them is not the lachrymose pity reserved for victims (though they have suffered greatly) but rather a practical appreciation of how their antagonism to the policies that determined the course of this campaign - mass immigration and free trade - was a fully political antagonism that was disregarded for decades, to our collective detriment.

A policy of benign neglect of immigration laws invites into our country a casualized workforce without any leverage, one that competes with the native-born and destroys whatever leverage the latter have to negotiate better terms for themselves. The policy is a subsidy to American agribusiness, meatpacking plants, restaurants, bars, and construction companies, and to American families who would not otherwise be able to afford the outsourcing of childcare and domestic labor that the postfeminist, dual-income family requires. At the same time, a policy of free trade pits native-born workers against foreign ones content to earn pennies on the dollar of their American counterparts.

In lieu of the social-democratic provision of childcare and other services of domestic support, we have built a privatized, ad hoc system of subsidies based on loose border enforcement - in effect, the nation cutting a deal with itself at the expense of the life chances of its native-born working class. In lieu of an industrial policy that would preserve intact the economic foundation of their lives, we rapidly dismantled our industrial base in pursuit of maximal aggregate economic growth, with no concern for the uneven distribution of the harms and the benefits. Some were enriched hugely by these policies: the college-educated bankers, accountants, consultants, technologists, lawyers, economists, and corporate executives who built a supply chain that reached to the countries where we shipped the jobs. Eventually, of course, many of these workers learned that both political parties regarded them as fungible factors of production, readily discarded in favor of a machine or a migrant willing to bunk eight to a room.

Four decades of neoliberal globalization have cleaved our country into two hostile classes, and the line cuts across the race divide. On one side, college students credential themselves for meritocratic success. On the other, the white working class increasingly comes to resemble the black underclass in indices of social disorganization. On one side of the divide, much energy is expended on the eradication of subtler inequalities; on the other side, an equality of immiseration increasingly obtains.

Even before the ruling elite sent the proletariat off to fight a misbegotten war, even before it wrecked the world economy through heedless lending, even before its politicians rescued those responsible for the crisis while allowing working-class victims of all colors to sink, the working class knew that it had been sacrificed to the interests of those sitting atop the meritocratic ladder. The hostility was never just about differing patterns in taste and consumption. It was also about one class prospering off the suffering of another. We learned this year that political interests that go neglected for decades invariably summon up demagogues who exploit them for their own gain. The demagogues will go on to betray their supporters and do enormous harm to others.

If we are to arrest the global descent into barbarism, we will have to understand the political antagonism at the heart of the meritocratic project and seek a new kind of politics. If we choose to neglect the valid interests of the working class, Trump will prove in retrospect to have been a pale harbinger of even darker nightmares to come.

[May 01, 2017] Process versus outcomes: Inequality indices as tests of fairness

Notable quotes:
"... "Another kind of inequality arising through the operation of the market is also required, in a somewhat more subtle sense, to produce equality of treatment. It can be illustrated most simply by a lottery. Consider a group of individuals who initially have equal endowments and who agree voluntarily to enter a lottery with very unequal prizes. The resultant inequality is surely required to permit the individuals in question to make most of their initial equality. Much of the inequality of income produced by payment in accordance with product reflects equalizing differences or the satisfaction of men's taste for uncertainty." ..."
"... Journal of Economic Theory ..."
"... Measuring Inequality. ..."
"... Capitalism and Freedom ..."
"... Philosophy & Public Affairs ..."
"... Equality of Opportunity, ..."
"... Handbook of Income Distribution, volume 2 ..."
May 01, 2017 | voxeu.org
The standard procedure for measuring income inequality in a society is to take the observed distribution of income and to calculate an inequality index from it. Such indices have also been interpreted as a measure of welfare loss entailed in departures from equality of outcomes for a society which is egalitarian. A classic treatment is that of the late Tony Atkinson, who asked the question: What fraction of national income would an egalitarian society be willing to give up in order to have equality? On this basis, he developed what we now call the Atkinson Index of Inequality. 1

However, this procedure faces the well-known criticism that the observed distribution is nothing but the outcome of a process, and that it is the process which matters for normative assessment. 2 In particular, it is the fairness of the underlying process which is held to be the appropriate normative standard, not whether the observed inequality of outcomes is high or low. But if we take the process versus outcomes criticism seriously, does this mean that we stop calculating inequality, since it no longer has normative validity in and of itself? The answer to this question is no. In our recent work, we argue that even within the process frame, overall indices of inequality still maintain their relevance, but now as statistical tests of fairness (Kanbur and Snell 2017).

An early proponent of the process versus outcome line of argument was Milton Friedman (1962), who brought in the consequences of risk taking for interpreting observed inequality:

"Another kind of inequality arising through the operation of the market is also required, in a somewhat more subtle sense, to produce equality of treatment. It can be illustrated most simply by a lottery. Consider a group of individuals who initially have equal endowments and who agree voluntarily to enter a lottery with very unequal prizes. The resultant inequality is surely required to permit the individuals in question to make most of their initial equality. Much of the inequality of income produced by payment in accordance with product reflects equalizing differences or the satisfaction of men's taste for uncertainty."

Friedman's argument highlights simultaneously the issue of process versus outcomes, and the fact that even when the process implies ex ante equality (free lottery choice by identical individuals), the outcome may well show – misleadingly, in his view – inequality among individuals. Even though the process itself is fair, inherent randomness may show spurious inequality in outcomes.

Suppose we wish to evaluate the process in Friedman's example. This would require an evaluation of whether the lotteries faced by the different individuals were indeed identical. If we could directly observe the lottery choices, that would be the end of the matter. But this is usually not the case. All we can observe are in fact the outcomes. The task is then to try and infer from these outcomes the nature of the process which generated them. It is clear that in order to do this we will have to provide a minimal structure to the class of processes. It is only within a given class of processes that we will be able to infer more specific properties of the process that gave rise to the outcomes we observe. In our work, we show that making these assumptions can provide considerable insight into the relationship between outcomes and process.

In particular, we motivate the use of two well-known and commonly used indices of inequality – the Theil Index and the Mean Log Deviation (MLD) – as tests of the null hypothesis of fairness versus the alternative of unfairness. 3 We show that the likelihood ratio tests for fairness within two distinct income processes are proportional to these two well used indices respectively – that is to say, the tests are metrics of whether or not each individual faces the same income process. We then suggest that instead of presenting the indices as raw numbers, one could present the p-values that the raw numbers imply – a high Theil/MLD would imply a low p-value, which in turn would indicate that the probability that incomes were generated by a fair process was low.

We call the first stylised process we consider the 'helicopter money drop'. Think of a helicopter dropping a fixed total amount of dollars onto a population. Each individual has a probability that he or she catches a dollar thrown from the helicopter. Fairness in this process is when all probabilities are equal. The likelihood ratio test for fairness in this frame is proportional to the Theil Index. We call the second stylised process the 'helicopter money stop'. Suppose that within any year, each of our individuals receives the same amount of income each 'hour' and will continue to receive this hourly amount subject to a 'stop' which is dropped by the helicopter. Fairness is now characterised by the probability of 'stopping' being the same each hour for each individual regardless of how many hours they have survived the hazard. For this process, the likelihood ratio test for fairness is proportional to MLD.

The classical hypothesis testing approach takes fairness as a sharp null and asks whether the data support it. In a Bayesian framework, fairness and unfairness are 'models' and we ask which is more likely given the observed data. We show that if fairness and unfairness are treated as equally likely, then the two indices are also proportional to a measure of how the data modifies initial agnosticism in the direction of favouring fairness or unfairness as being the more likely model generating the observations.

Returning to Friedman's example, it is obvious that in reality endowments are not equal and individuals face different lotteries. The final outcomes are thus the result of these inequalities across lotteries, as well as the inequality caused by the fact that even when a group of individuals faces the same lottery, and so are equal ex ante, there will be winners and losers ex post within that group. That portion of observed inequality which can be attributed to the initial ex ante differences across lotteries that individuals have access to, might be referred to as 'inequality of opportunity'. This is related to John Roemer's (1998) famous formulation of attributing variation in outcomes to variation in 'circumstances' (factors outside an individual's control) and 'effort' (factors within an individual's control).

We are then led to ask whether we can test for whether there are these ex ante differences ('unfairness') across groups defined by common circumstances (for example based on ethnicity and gender). We show that for the two processes, we can indeed use the Theil index and MLD to develop statistical tests for fairness across groups. Applying the methods to US data for groupings based on race, gender, health, location of birth state (North or South), and biological parents, we find that fairness is rejected. Similarly, in a Bayesian framework we find that starting with priors of fairness and unfairness being equally likely, the data move us in the direction of unfairness being more likely.

Thus, the answer to the process based critique of inequality measurement is not to stop calculating inequality indices. Rather, it is to interpret inequality indices differently, as test statistics to shed light on the fairness of the process.

References

Atkinson, A (1970), "On the Measurement of Inequality." Journal of Economic Theory 2: 244-263.

Cowell, F A (2011), Measuring Inequality. Oxford University Press, Oxford.

Friedman, M (1962) Capitalism and Freedom . University of Chicago Press.

Dworkin, R (1981), "What is Equality? Part 2: Equality of Resources." Philosophy & Public Affairs , 10(4), pages 283-345.

Kanbur, R and A Snell (2017), " Inequality Indices as Tests of Fairness ." CEPR Discussion Paper No. 11930.

Roemer, J (1998), Equality of Opportunity, Harvard University Press.

Roemer, J E and A Trannoy (2015), "Equality of Opportunity", in A B Atkinson and F Bourguignon (eds), Handbook of Income Distribution, volume 2 , pp. 217-300, Elsevier.

Endnotes

[1] See Atkinson (1970). For an overview and survey of standard methods, see Cowell (2011).

[2] Early critiques are by Sen (1979) and Dworkin (1981). A recent survey is by Roemer and Trannoy (2015).

[3] Note that MLD as sometimes also known as "Theil's second index".

[Apr 27, 2017] Rising income inequality and the death of the American dream

Apr 27, 2017 | www.nakedcapitalism.com
Tehanu , April 27, 2017 at 3:45 pm

Pleasantly surprised to see this research article on the need to combat rising income inequality and the death of the American dream in the AAAS journal Science:
http://science.sciencemag.org/content/356/6336/398

neo-realist , April 27, 2017 at 3:49 pm

Re: Boeing, It is cutting jobs in the Seattle area and not cutting any in right to work w/ little pay and benefits SC

They're also engaging in stock buybacks to enrich the present stockholders.

http://www.thestranger.com/slog/2017/04/26/25102415/seattle-times-providing-pr-for-boeings-greedy-execs

Huey Long , April 27, 2017 at 5:06 pm

Does management serve any purpose these days besides screwing workers for the benefit of squillionaire bankers and c-suite executives?

Oh, right I forgot!

They use all that MBA knowledge to game the finance system and tax laws for the benefit of squillionaire bankers and c-suite executives too.

/snark

grayslady , April 27, 2017 at 3:51 pm

I don't know why everyone is calling the Raise the Wage Act "Bernie Sanders' Minimum Wage Act," since the bill was introduced by Patty Murray. Further, the Act doesn't have anyone receiving $15 until 2024. If you live in Seattle and work for a large employer (over 500 employees), you will receive $15 per hour minimum either in 2017 or 2018, depending on whether or not the company provides health insurance as a benefit. People are hurting now . They need $15 per hour now . Once again, the Dems are "fighting" but not trying to win.

JustAnObserver , April 27, 2017 at 4:11 pm

Seems that Boeing in are trying to get under that 500 employees in Seattle hurdle in the next 2 years.

Lambert Strether Post author , April 27, 2017 at 4:31 pm

He introduced the bill:

With four times as many Democratic co-sponsors as he had just two years ago, Sen. Bernie Sanders (I-Vt.) on Wednesday morning re-introduced a bill to raise the federal minimum wage to $15 per hour.

In 2015, Sanders introduced similar legislation with just five co-sponsors. On Wednesday, he boasted 21, in addition to lead co-sponsor Sen. Patty Murray (D-Wash.). They are:

grayslady , April 27, 2017 at 8:03 pm

Actually, Patty Murray introduced the bill on April 30, 2015, which would have raised the minimum wage gradually to $12 by 2020. There were 32 original co-sponsors, all Dems. Bernie introduced a similar bill on July 22, 2015, with Ed Markey as the original co-sponsor, which would have raised the minimum wage to $15 dollars by 2020. Members of the Congressional Progressive Caucus introduced a companion bill in the House. The most recent bill is a re-introduction of Murray's bill, with Sanders now supporting $15 by 2024.

I know that many here continue to wish to believe that Sanders hasn't sold out to the Dems, but the evidence becomes clearer that he is no longer the fighter he was when he ran for President.

John k , April 27, 2017 at 8:58 pm

I hope you're wrong. But the wind did go out of his sails when he lost NY, before that he was still hoping.
I continue to see him as fighting for us, but the dems keep kicking him
the only way to kick back is third party, but a monumental effort for an older fellow. Imagine MSM, Mic, dems, reps, insurance, banks, the 1% and then the challenge to register in even a majority of states
Easier to take over greens and convert to functional, but no indication he's thinking that.

[Apr 25, 2017] Proportionality the fairness of inequality

Notable quotes:
"... My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous. ..."
"... In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs. ..."
Apr 25, 2017 | The Unz Review
80 Comments

There was a time when boys played games of marbles following strict playground rules: contestants had to stand a prescribed distance away from the little pyramid of marbles, and chuck only marbles of the prescribed size. Rules ruled. Piaget was intrigued by the explanations children gave for moral judgements, and the playground is the arena in which the concept of fairness is honed.

Piaget followed a model which is rare nowadays. He observed his own children in great detail as they grew up. His was the least representative sample in the history of psychology. Nonetheless he launched the study of the development of morality, and the conception of fairness.

The majority of experimental studies done in psychological laboratories seem to show that even young children prefer equal shares rather than unequal shares. This would suggest that people have an innate preference for socialism and the re-distribution of wealth.

In fact, this is true only if people are asked to distribute goods between people who are unknown to them, and who have not behaved in any particular way which would make them consider that some were more worthy and deserving than others.

The moment you show that one person has been more helpful than another, or has worked harder than another, then judges believe that, as a matter of fairness, the more energetic and helpful person should get a greater share.

That is fair, after all, because those who were hard-working and helpful have deserved it because of their efforts. So although there are many studies suggesting that people do not like inequality, it turns out that what they most dislike is unfairness.

Once it can be shown that a distribution is fairly based on effort then respondents will tolerate and indeed require that the distribution of wealth is proportionate to effort and not just based on the mere fact of existing. People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.

Why people prefer unequal societies. Christina Starmans , Mark Sheskin & Paul Bloom Nature Human Behaviour 1 , 0082 (2017)doi:10.1038/s41562-017-0082

https://www.nature.com/articles/s41562-017-0082

Unusually for a scientific paper, it is a good read. What really matters in these experiments is context, and once context is provided then it is clear that people accept unequal societies so long as they are based on a fair allocation of rewards, proportional to contribution.

The authors say:

There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.

The authors review a long series of experiments which seem to show that children prefer absolute equality in the sharing of rewards. Inequality is certainly a focus of political concern. It attracts those who make bold complaints of the form "The top 1% of people own XX% of the wealth" where the implication is that the owned wealth should be 1% but for foul reasons is much higher than that. This statistic contains several errors, and tends to mislead.

http://www.unz.com/jthompson/loathing-wealth

By the way, it amuses me that people who strongly object to a person's general level of ability being represented "by a single figure" have no qualms about wealth being represented "by a single figure" despite it being based on chattels, residential property (sometimes minus mortgages, sometimes not), stocks and shares, bank accounts, pension rights totals (say, at 20 times annual payments), and other quasi-monetary benefits. Such critics should relax: although wealth estimates have methodological shortcomings, an overall figure gives a reasonable estimate for comparative purposes (as do estimates of general intelligence).

The Gini coefficient (0 is equitable distribution, 100 is outrageous inequity) is well-known, and usually widely quoted without comment, since the manifest goodness of equality is assumed to be agreed by all. Laboratory studies seem to confirm that people have a deep preference for equality.

So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?

We argue here that these two sets of findings can be reconciled through a surprising empirical claim: when the data are examined closely, it turns out that there is no evidence that people are actually concerned with economic inequality at all. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.

We suggest that the perception that there is a preference for equality arises through an undue focus on special circumstances, often studied in the laboratory, where inequality and unfairness coincide. In most situations, however, including those involving real-world distributions of wealth, people's concerns about fairness lead them to favour unequal distributions.

Anyone looking for evidence that people have a natural aversion to inequality will find numerous laboratory studies that seemingly confirm their view. For example, studies have found "a universal desire for more equal pay", "egalitarian motives in humans", "egalitarianism in young children", and that "equality trumps reciprocity". A Google Scholar search for "inequality aversion" yields over 10,000 papers that bear on this topic.

Furthermore, people appear to view the equal distribution of resources as a moral good; they express anger toward those who benefit from unequal distributions.

Indeed, these data might underestimate people's preferences for unequal distributions. One follow-up study contrasted Norton and Ariely's question about the percentage of wealth that should correspond to each quintile of the American population with a question about what the average wealth should be in each quintile. The former question resulted in an ideal ratio of poorest to wealthiest of about 1/4, but for the latter question the ratio jumped to 1/50. When the connection between the two questions was explained to participants, a majority chose the higher inequality ratio as reflecting their actual beliefs for both measures.

At this stage it should be made clear that all the "equality in the lab" researchers have not been telling lies. They are aware that inequality and unfairness are being confounded, but that message has been downplayed in the telling. From a research strategy perspective, I think it shows how a particular approach (strangers in a lab) fails to produce results which map onto real world observations. When participants come together without any back history, the ideal of equality rules. When the fuller context is given a chance to be considered, then subjects in an experiment have no hesitation in rewarding those people who rise early to go to work over those who rise late to do nothing. Children not only reward those who have done more work, but also those who have been kind and helpful.

It follows, then, that if one believes that (a) people in the real world exhibit variation in effort, ability, moral deservingness, and so on, and (b) a fair system takes these considerations into account, then a preference for fairness will dictate that one should prefer unequal outcomes in actual societies.

One proposal is that fairness intuitions are rooted in adaptations for differentially responding to the prosocial and antisocial actions of others. For cooperation and pro-sociality to evolve, there has to be some solution to the problem of free-riders, cheaters, and bad actors. The usual explanation for this is that we have evolved a propensity to make bad behaviour costly and good behaviour beneficial, through punishment and reward

Our own argument against a focus on inequality is a psychological one. In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se . Rather, people have an aversion toward unfairness, and under certain special circumstances this leads them to reject unequal distributions. In other conditions, including those involving real-world distributions of wealth, it leads them to favour unequal distributions. In the current economic environment in the United States and other wealthy nations, concerns about fairness happen to lead to a preference for reducing the current level of inequality. However, in various other societies across the world and across history (for example, when faced with the communist ideals of the former USSR), concerns about fairness lead to anger about too much equality.

I have quoted from this paper at some length, because it is unusually well-written, clearly describes its techniques and its arguments, follows a logical sequence, and deals with an important topic. My final conclusion is that it leads us to an important general conclusion: the repeated finding of an effect (in this case an apparent preference for equality) should not stop us from digging deeper to check whether the methods are really picking up the causes of decisions, and whether the general effect persists in real-world settings. It turns out that when distributing rewards to unknown people, equal shares is probably a good strategy; but when distributing rewards to people who have shown varying levels of contribution, unequal rewards are often fairer.

Should we have a coefficient to measure to what extent a society provides appropriate rewards for varying levels of social contribution (effort, ability, pro-social acts)? What to call it? The Reward coefficient? Are social mobility measures an acceptable substitute?

Discarding Robespierre, should our chant instead be "Liberty, Proportionality, and Selective Association"? I may need to work on these details a little longer.

dearieme , April 18, 2017 at 2:33 pm GMT \n

"Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and ..: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?

P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. Read More

Santoculto , April 18, 2017 at 3:41 pm GMT \n

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.

You start well, =) But not, =( Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being. So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism* Likely in some official socialist countries has been but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. Read More

Santoculto , April 18, 2017 at 3:51 pm GMT \n

That is fair, after all, because those who were hard-working and helpful have deserved it because of their efforts.

Yes, this is the psychology of the masses or of the worker, more hard-WORKing you are, better, but some people take note that a lot of non-hard worker are significantly more gratified than majority. So this people perceive a big bug in the logic of [capitalistic] meritocracy.

"Hard-worker = deserved to earn more"

but

A lot of those on the elite are not hard-worker, so

And "hard-workness" is heritable/inheritable too, so something that you born with more facility to engage reduce considerably the idea that people who are not hard-working, depending for what, are just lazy. The own idea of lazyness seems complicated in this case if it is usually based on the idea of "free will", if you are lazy it's because you want to be like that.

Sloth is lazy **

Or s/he is just slow **

Slow and lazy is the same*

People who work-hard tend to work- fast* Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

dc.sunsets , April 18, 2017 at 4:40 pm GMT \n
Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania. It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

I also note that the first thing deleted from any propaganda piece we read in "the news" is context. We can't have the rubes deciding that it's okay for the surgeon who saved their mom's life after her stroke to drive a nicer car and maybe KEEP what he or she made in income last year. (Ramping taxes on the "working wealthy," i.e., people who have high incomes but are not Gates-Buffet Rich, is Job One for Leftists when they're not celebrating another white guy suicide.) Read More Agree: Daniel Chieh

Jason Liu , April 18, 2017 at 7:08 pm GMT \n
It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense. Read More

Mao Cheng Ji , April 18, 2017 at 7:16 pm GMT \n

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.

Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings – in abstract – may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country – I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless Read More

Daniel Chieh , April 18, 2017 at 8:56 pm GMT \n
@Mao Cheng Ji

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.
Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings - in abstract - may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country - I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless... I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

Reg Cæsar , April 18, 2017 at 8:57 pm GMT \n

The moment you show that one person has been more helpful than another, or has worked harder than another, then judges believe that, as a matter of fairness, the more energetic and helpful person should get a greater share.

And folks disagree on who that helper might be. Compare people's reaction to the Koch brothers and to George Soros.

OutWest , April 18, 2017 at 10:30 pm GMT \n
Perhaps it's the engineer in me, but I've observed that some driving force is necessary to make a process run. Voltage, temperature/pressure difference, or maybe wealth disparity are examples.

I had the choice of working in a local mill for good wages but a killing environment, or working my way through college with little money. Intermediate term sacrifice paid long term dividends for me and my kids/grandkids. There's also a good argument to be made that society is also better served by such self-serving efforts.

If everyone is truly equal, what is there to drive society?

Santoculto , April 18, 2017 at 10:49 pm GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

Capitalism is a short term/consumerism and parasitic-like socio-economic system. Capitalism is advantageous but it depend for whom. It's not adaptative only for short term.

Svigor , April 19, 2017 at 12:02 am GMT \n

It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense.

More "contextual" or "default" than primal or unthinking. Nobody's earned a bigger or smaller share, because everyone's qualification is simply showing up and being included in deliberation over division of spoils.

the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings – in abstract – may or may not care about.

I usually find your posts to be scheisse, but this bit (I snipped out the preamble advisedly) is pretty good, if hyperbolic. Leftist indoctrination and intimidation infect everything, and must be controlled for to get at the truth. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Svigor , April 19, 2017 at 12:05 am GMT \n

If everyone is truly equal, what is there to drive society?

Proportional rewards. Decouple rewards from production, that's what really kills motivation. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Trollmonster666 , April 19, 2017 at 12:37 am GMT \n
@dearieme "Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and .....: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?


P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. How about symmetry? Read More

Daniel Chieh , April 19, 2017 at 3:08 am GMT \n
@Santoculto Capitalism is a short term/consumerism and parasitic-like socio-economic system. Capitalism is advantageous but it depend for whom. It's not adaptative only for short term. Seems to me that most of human history of every civilization involved property at least since the dawn of agriculture allowed wealth to be stored in the form of grain. Property-less cultures were usually cultures that lacked the ability for an individual to accumulate wealth; however, only in cultures that had property allowed for the rise of more specialized classes of soldiery, tradesmen, and craftsmen. Read More
Wally , April 19, 2017 at 4:47 am GMT \n
It's revealing that those who advocate for 'equality' generally have much higher incomes than those they advocate for.

The Left has slapped together a coalition of Parasites and Perverts and seem to think they can beat the Productive.

socialism:

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2017/03/21/20170328_socialist.png

The Purpose of Political Correctness,
To Hide the Dirty Secrets of Socialism

https://www.lewrockwell.com/2016/12/thomas-dilorenzo/real-purpose-pc/ Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Wally , April 19, 2017 at 4:56 am GMT \n
300 Words @Mao Cheng Ji

In this paper we have outlined a wealth of empirical evidence suggesting that people don't care about reducing inequality per se.
Oh dear. Whatever empirical evidence in this study is suggesting, it's irrelevant. Because the people being studied have been conditioned, indoctrinated, corrupted by the society they live in. They are completely useless, for the purpose of determining what human beings - in abstract - may or may not care about.

Why don't you study people who'd grown up in a hippie commune or in an Amish village, or in an orphanage in a poor country - I knew someone who did, and he, many years later, still had no clear concept of 'property'. And at that point, when you don't accept the concept of 'property' or 'wealth', at that point the whole idea of ' distribution ', the whole premise of your musings becomes completely meaningless... Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/

excerpt:

And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Read More
Mao Cheng Ji , April 19, 2017 at 6:56 am GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous.

However, to entertain your proposition, please tell us more about your friend.

He wasn't a friend, just someone I met a few times; friend of a friend. For example: when leaving a party, the guy would just put on a jacket, anyone's jacket. Because a jacket is a jacket, it's a thing that serves the purpose. This sort of thing.

Native Americans did on wives

So, maybe they had some form of 'ownership' of women, so what. I'm not saying that there can be only two kinds of social organizations, there are many. For us, for our natural habitat, 'ownership', 'wealth', 'property', 'wage', 'debt', 'market', 'deserves' are the most basic concepts that we never question. They are our deepest underlying assumptions, internalized from the most early age. But I don't think they are embedded in human nature. Read More

JackOH , April 19, 2017 at 8:00 am GMT \n
Whew! I'd sooner expect to share a bourbon with Sasquatch and Yeti than to sight those surely mythical critters, Equality and Fairness. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
Mao Cheng Ji , April 19, 2017 at 9:57 am GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/

excerpt:

And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Michael Chrichton on the not-so-noble savages.

I don't think I mentioned any 'noble savages'; all I said was that people are conditioned by their social environment. I guess you didn't like the word 'corrupted'? Okay, I take it back, it is, perhaps, unnecessarily judgemental. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Santoculto , April 19, 2017 at 11:19 am GMT \n
@Daniel Chieh Seems to me that most of human history of every civilization involved property at least since the dawn of agriculture allowed wealth to be stored in the form of grain. Property-less cultures were usually cultures that lacked the ability for an individual to accumulate wealth; however, only in cultures that had property allowed for the rise of more specialized classes of soldiery, tradesmen, and craftsmen. So you're saying that capitalism and accumulation of wealth is basically the same thing* Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Santoculto , April 19, 2017 at 11:26 am GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/
excerpt:


And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

Yes, but it don't legitimate white europeans to act in the same way in "foreign' lands,

White colonizers just act in the same way not-so-noble savage ones,

No superiority there. Read More

Santoculto , April 19, 2017 at 11:42 am GMT \n

People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.

People don't prefer unequal societies, they tend to "rationalize' that this is a necessary evil. But i doubt most people prefer unequal/inequal societies Read More

Santoculto , April 19, 2017 at 11:47 am GMT \n

So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?

Bigger groups, bigger [genetic/instinctive levels of] diversity* Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Daniel Chieh , April 19, 2017 at 2:24 pm GMT \n
200 Words @Mao Cheng Ji

However, to entertain your proposition, please tell us more about your friend.
He wasn't a friend, just someone I met a few times; friend of a friend. For example: when leaving a party, the guy would just put on a jacket, anyone's jacket. Because a jacket is a jacket, it's a thing that serves the purpose. This sort of thing.

Native Americans did on wives
So, maybe they had some form of 'ownership' of women, so what. I'm not saying that there can be only two kinds of social organizations, there are many. For us, for our natural habitat, 'ownership', 'wealth', 'property', 'wage', 'debt', 'market', 'deserves' are the most basic concepts that we never question. They are our deepest underlying assumptions, internalized from the most early age. But I don't think they are embedded in human nature. So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist. Read More

dearieme , April 19, 2017 at 2:31 pm GMT \n
@Trollmonster666 How about symmetry? "How about symmetry?" I think we're looking for a word that contains some of the sentiment of 'fraternity' without the notion, certainly apparent in retrospect, of being compulsory.
Mao Cheng Ji , April 19, 2017 at 3:15 pm GMT \n
200 Words @Daniel Chieh So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist.

but it is an useful social technology that promotes development of society

I don't know what 'useful' might mean in this context. Inevitable, that's for sure. Rousseau wrote:

The first person who, having enclosed a plot of land, took it into his head to say this is mine and found people simple enough to believe him was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had some one pulled up the stakes or filled in the ditch and cried out to his fellow men: "Do not listen to this imposter. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!"

But then he writes:

But it is quite likely that by then things had already reached the point where they could no longer continue as they were. For this idea of property, depending on many prior ideas which could only have arisen successively, was not formed all at once in the human mind. It was necessary to make great progress, to acquire much industry and enlightenment, and to transmit and augment them from one age to another, before arriving at this final state in the state of nature.

Social evolution Read More

OutWest , April 19, 2017 at 3:45 pm GMT \n
If we were truly equal, none of us could be smarter, more industrious and certainly not more successful than the least of us. The kids seem capable of grasping this fact.

Maybe unqualified "equal" is the wrong concept as a universal parameter of fair play. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

LemmusLemmus , Website April 19, 2017 at 4:59 pm GMT \n
@James Thompson Yes, my mistake. Have corrected it to 0 for equality, 100 for inequality. Um, usually, 1 is maximum inequality (though Wikipedia says, quite logically, that you can say "100%"). Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Philip Owen , April 19, 2017 at 11:16 pm GMT \n
I am British but I work a lot in Russia. I have noticed that the Russians are prepared to put more effort into punishing a wrongdoer, in everyday affairs, than the British, who usually just stop contact. Also, Russians have a much more developed, disproportionate to my view, sense of revenge and will put resources into it. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
ThreeCranes , April 20, 2017 at 1:36 am GMT \n
200 Words If I recall correctly from my reading of Frans DeWaal's work with chimpanzees at the Yerkes National Primate Research Center, two experiments seem relevant here.

In one, two chimps in adjoining cages were given treats for pressing a button or pulling a lever. One chimp was given a slice of cucumber, the other a grape, which as a sweet is the more desirable of the two rewards. The chimp who was given the cucumber, seeing that his peer was given a better reward for the same endeavor eventually went on strike. This is suggestive of a feeling of unfairness, injustice and resentment.

In another trial, every time one chimp was rewarded with a treat for pulling the lever his companion–visible to him–was given a electric shock. After a few trials chimp #1 made the connection and–out of sympathy apparently–stopped pulling the lever, forsaking his treat.

So, DeWaal concludes that "Morality" or in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality. It is part and parcel of and to our nature as primates and builds on fellow-feeling. Hard to argue with this. Read More

ThreeCranes , April 20, 2017 at 1:43 am GMT \n
From Wiki

"In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs.

He and his students have also extensively worked on fairness, leading to a video that went viral on inequity aversion among capuchin monkeys. The most recent work in this area was the first demonstration that given a chance to play the Ultimatum game, chimpanzees respond in the same way as children and human adults by preferring the equitable outcome."

utu , April 20, 2017 at 5:05 am GMT \n
@ThreeCranes If I recall correctly from my reading of Frans DeWaal's work with chimpanzees at the Yerkes National Primate Research Center, two experiments seem relevant here.

In one, two chimps in adjoining cages were given treats for pressing a button or pulling a lever. One chimp was given a slice of cucumber, the other a grape, which as a sweet is the more desirable of the two rewards. The chimp who was given the cucumber, seeing that his peer was given a better reward for the same endeavor eventually went on strike. This is suggestive of a feeling of unfairness, injustice and resentment.

In another trial, every time one chimp was rewarded with a treat for pulling the lever his companion--visible to him--was given a electric shock. After a few trials chimp #1 made the connection and--out of sympathy apparently--stopped pulling the lever, forsaking his treat.

So, DeWaal concludes that "Morality" or in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality. It is part and parcel of and to our nature as primates and builds on fellow-feeling. Hard to argue with this.

in this case a sense of fairness, didn't begin with an awakened, enlightened consciousness due to any "higher" spirituality

I think it should be pretty obvious because lack of fairness is just like lack of symmetry in some geometric pattern. It is visible right away. It strikes you but in amoral landscape. It takes much more effort (cognitive, conceptual and linguistic) to justify and eventually internalize the lack of fairness. The default is fairness except for the ones who are not fair because they are morally defective. They are just tone deaf. They do not see the beauty of Kant's categorical imperatives.

Wally , April 20, 2017 at 5:10 am GMT \n
@Santoculto Yes, but it don't legitimate white europeans to act in the same way in ''foreign' lands, ;)

White colonizers just act in the same way not-so-noble savage ones, ;)

No superiority there. According to your Leftist logic, American Indians were xenophobic and are to be condemned for resisting European migrants.

Wally , April 20, 2017 at 5:22 am GMT \n
@Santoculto

People prefer unequal societies for the reason that they in fact they do not mind inequality if it is based on rewards for effort.
People don't prefer unequal societies, they tend to ''rationalize' that this is a necessary evil. But i doubt most people prefer unequal/inequal societies... There never has been and never will be 'equal' human societies.
The ones that tried were dismal failures simply because we are not all equal. Read More
Wally , April 20, 2017 at 5:26 am GMT \n
@ThreeCranes From Wiki

"In 2011, De Waal and his co-workers were the first to report that chimpanzees given a free choice between helping only themselves or helping themselves plus a partner, prefer the latter. In fact, De Waal does not believe these tendencies to be restricted to humans and apes, but views empathy and sympathy as universal mammalian characteristics, a view that over the past decade has gained support from studies on rodents and other mammals, such as dogs. He and his students have also extensively worked on fairness, leading to a video that went viral on inequity aversion among capuchin monkeys. The most recent work in this area was the first demonstration that given a chance to play the Ultimatum game, chimpanzees respond in the same way as children and human adults by preferring the equitable outcome." Who decides what is "equitable"? Read More

Bolt , April 20, 2017 at 6:39 am GMT \n
Counting accumulations of the measurable as a method of judging fairness or in/equality would seem a materialist trap, very US consumer. I see no mention of Bhutan's happiness index here.

Those who decide not to participate in work towards normalized social goals have a role too; they give the overachievers a group to compare themselves with and a consequent boost to their psychic well being. What's the point of a Lexus if everyone drives them? Read More

RobRich , Website April 20, 2017 at 9:50 am GMT \n
@Daniel Chieh I disagree.

Since most people have not grown up in the extreme circumstances of a commune, this still applies to the vast majority of people and the model is useful. However, to entertain your proposition, please tell us more about your friend.

My understanding of individuals raised from non-property owning societies still have certain notions of want and possession, for example Native Americans did on wives. On top of that, due to the success of property-owning societies, this suggests that capitalism is overall adaptive and advantageous. Native Americans were devout property owners. The myth of native communism has long been debunked. Read More

David , April 20, 2017 at 11:39 am GMT \n
@dearieme "Liberty, Proportionality, and Selective Association"?

I'd settle for Liberty, Proportionality, and .....: what?

I wouldn't say 'charity' because it would be misinterpreted. So would 'love'. 'Kindness'?

How about 'Amity'?


P.S. I'm no bible-basher but that book is sound on coveting, inadvisability of. I think Jesus lacked the instinct of moral indignation at free-loaders. That, for example, he couldn't see how impossible it would be to organize labor if everyone got paid the same, no matter how long he worked.

Lots of times, what Jesus recommends is totally effective but If Christian societies had ever seriously extended the forgive-your-neighbor principle regionally, let alone universally, their guts would be in seven times seventy places.

The Good Samaritan was maybe the only guy walking down the road that day that didn't actually know the jerk who'd been beaten and robbed, likely by somebody he swindled. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

ThreeCranes , April 20, 2017 at 11:41 am GMT \n
@Wally Who decides what is "equitable"? Natural selection, apparently.
Santoculto , April 20, 2017 at 12:09 pm GMT \n
@Wally There never has been and never will be 'equal' human societies.
The ones that tried were dismal failures simply because we are not all equal. Thank you for this clarification, i don't knew. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Agent76 , April 20, 2017 at 12:53 pm GMT \n
January 20, 2017 Rothschild Family Wealth is Five Times that of World's Top 8 Billionaires Combined

A recent report by Oxfam International highlights the dramatic rise in income equality by noting that the combined wealth of the world's top 8 individual billionaires is more than the lower half of the world's population, some 3.6 billion people. The intention of the report was to bring awareness to the unfairness and injustice inherent in our global economic system.

http://www.wakingtimes.com/2017/01/20/rothschild-family-wealth-five-times-worlds-top-8-billionaires-combined/

May 21, 2013 Why the whole banking system is a scam – Godfrey Bloom MEP

• European Parliament, Strasbourg, 21 May 2013

• Speaker: Godfrey Bloom MEP, UKIP (Yorkshire & Lincolnshire)

Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

anonymous , April 20, 2017 at 1:27 pm GMT \n
200 Words Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But and here's the rub should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution-a prospect that, to put it mildly, is not very likely–except possibly in the collective minds of the Sanderistas. Read More

hyperbola , April 20, 2017 at 1:29 pm GMT \n
Generation of "responses" is promulgated by keeping the level of discussion very simple minded and generic: equality vs reward-for-effort. Major considerations are (deliberately?) ignored with such a formulation.

Equality is easy to calculate and apply. Reward-for-effort is not and is easily subject to "corruption" (over-reward due to power-control that can include abuse of those "under-rewarded"). Anyone who advocates "reward-for-effort" therefore needs to START by proposing a system that guarantees that this does not degenerate into corruption.

Has anyone ever been successful in establishing a social system in which "reward-for-effort" did NOT degenerate into corruption? Perhaps as long ago as Plato usable systems were proposed (maximum allowed difference between poor/rich = 4), but these have never been implemented because of the tendency to corruption inherent in "reward-for-effort"?

Certainly we have plenty of evidence that present practice of "reward-for-effort" is highly corrupted. Read More

Daniel Chieh , April 20, 2017 at 2:05 pm GMT \n
200 Words @hyperbola Generation of "responses" is promulgated by keeping the level of discussion very simple minded and generic: equality vs reward-for-effort. Major considerations are (deliberately?) ignored with such a formulation.

Equality is easy to calculate and apply. Reward-for-effort is not and is easily subject to "corruption" (over-reward due to power-control that can include abuse of those "under-rewarded"). Anyone who advocates "reward-for-effort" therefore needs to START by proposing a system that guarantees that this does not degenerate into corruption.

Has anyone ever been successful in establishing a social system in which "reward-for-effort" did NOT degenerate into corruption? Perhaps as long ago as Plato usable systems were proposed (maximum allowed difference between poor/rich = 4), but these have never been implemented because of the tendency to corruption inherent in "reward-for-effort"?

Certainly we have plenty of evidence that present practice of "reward-for-effort" is highly corrupted. No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away – it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people – the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system. Read More

Daniel Chieh , April 20, 2017 at 2:10 pm GMT \n
@anonymous Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But...and here's the rub...should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution---a prospect that, to put it mildly, is not very likely--except possibly in the collective minds of the Sanderistas. The most psychologically difficult part of the modern economy is "why should someone be able to make more money by having money" through interest-bearing systems. While its very logical from a capitalistic perspective, its definitely the part which I think our instincts find least understandable.

The rich history against usury throughout history, including in the East, are a good example that many people found the notion difficult to accept especially when it seemed like it accumulated wealth in a class without connection to historical notions of land, protection, fealty, etc. Read More

pseudonym , April 20, 2017 at 2:13 pm GMT \n
@Santoculto
This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. You're confusing socialism with Socialism.

Two people? Each get 1/2

Eight people? Each get 1/8

Read the article again, it has nothing to do with Socialism, and everything to do with socialism. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

anon , April 20, 2017 at 3:19 pm GMT \n
@dc.sunsets Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania. It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

I also note that the first thing deleted from any propaganda piece we read in "the news" is context. We can't have the rubes deciding that it's okay for the surgeon who saved their mom's life after her stroke to drive a nicer car and maybe KEEP what he or she made in income last year. (Ramping taxes on the "working wealthy," i.e., people who have high incomes but are not Gates-Buffet Rich, is Job One for Leftists when they're not celebrating another white guy suicide.)

Today's wealth inequality is entirely an artifact of the debt bubble and related Great Asset Mania.

However, the debt bubble is/was the result of the pre-existing power and greed of the financial sector to corrupt the political/media class into rigging the game. That power and greed was restrained until the Soviet Union collapsed.

It will decrease dramatically when the social mood mania sustaining it these last 35 years rolls over.

It will decrease dramatically when unrestrained usury leads to economic collapse as it always does for a simple arithmetic reason

million people with $200/week to spend = $200 million demand

million people with $200/week
- repaying $150/week on their previous loans
- leaving $50/week to spend
= $150 million to the financial sector and $50 million demand

non-productive usury is parasitic and once unrestrained will always rapidly destroy an economy Read More Agree: anarchyst Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Perplexed , April 20, 2017 at 3:26 pm GMT \n
@Daniel Chieh So he could have committed theft, which is all fine and good until he takes your jacket but hasn't brought one of his own. This is, in fact, a common problem with communes: the "free rider" problem. Such individuals in Alberta cause significant social disharmony, for a real world example, and escalate into violence and robbery.

Ownership of property and labor may be partially a social concept, but it is an useful social technology that promotes development of society. I think contrary to your thoughts, they are often questioned but its essentially one of the most effective methods for living in the modern world.

I think that you may not considering the effect of technology and social adaptation as part of that technology; as I mentioned elsewhere, hunter-gatherer groups tend not to have a concept of property and wealth, because they can't accumulate it. But once stationary agriculture is common, accumulation of wealth and methods to defend it become common, which means that concepts of property and inequality exist. In the New York Times Magazine's first "Ethicist" column, Randy Gerber set a problem: You're leaving a restaurant on a rainy day and find that someone took your umbrella from the pail by the door. Is it okay to take someone else's? He said yes (but, if I remember correctly, only one of equal or lesser value to yours; no advice on how to evaluate a pailful of black umbrellas, though; and what if all of them are better than yours? And then, if you refrain from taking a better one, you'll still get wet, which was the justification for taking someone else's in the first place. And if you take a cheaper one, isn't that stealing from the lower classes?). Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Perplexed , April 20, 2017 at 3:43 pm GMT \n
@Bolt Counting accumulations of the measurable as a method of judging fairness or in/equality would seem a materialist trap, very US consumer. I see no mention of Bhutan's happiness index here.

Those who decide not to participate in work towards normalized social goals have a role too; they give the overachievers a group to compare themselves with and a consequent boost to their psychic well being. What's the point of a Lexus if everyone drives them? Are smokers included in Bhutan's happiness index? They can get five years in prison for violating the draconian rules. But they're smokers, so nobody cares, right? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

David , April 20, 2017 at 4:04 pm GMT \n
A comment about good science and good writing. Darwin wasn't a bad scientist or writer. Same for Faraday and Feynman. E. O. Wilson comes to mine. And Mr James Thompson is pretty good, too. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments
Mao Cheng Ji , April 20, 2017 at 5:17 pm GMT \n
@anonymous Can't say that I disagree with the researchers conclusions in principle. But when it comes to the subject of fairness vs. equality in economic issues problems arise. It seems reasonable that a janitor who works ten hours (including two hours overtime) should receive more compensation than a janitor who works eight hours (or less). Similarly, a chemist who works longer hours than another chemist should receive more compensation. But...and here's the rub...should the rate of compensation to a janitor be the same as that of a chemist and vice versa? I think not, and the reason is obvious.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation (thus a janitor would make the same amount as a chemist). This would entail not so much an economic revolution as a psychological revolution---a prospect that, to put it mildly, is not very likely--except possibly in the collective minds of the Sanderistas.

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation

No, true economic equality can only exist when no one is paid anything at all. Everything is freely shared, like, say, books in the library, or food between family members, or the well in the village center. Simple as that. Read More

Inertiller , April 20, 2017 at 5:18 pm GMT \n
200 Words Thompson sure sounds scientific, until he denigrates the scientific process. "The lab isn't like the real world." Readers should give up right there, because refuting gibberish takes time and a little thought.

But the main argument (or apology) from writers like Thompson (or Thomas Friedman) is that those that are more equal than you stoically pulled themselves up harder by their own shoes than you did. Your complaints give you away.

The appeal to these folksy simple beliefs is enourmous but many of the wealthy will maintain that they've been granted wealth because of God's will, or tithing to their church.

So fans of the meritocratic fraud will work harder. (Working dumber doesn't mean anything to them.) Just think, one day, if you're nice enough, your large corporation can break the law with impunity, you can write a a piece of software for the FIRE sector, start your own web blog on politics that datamines (for free) the thoughts, snark and feelings of the proles, and when you are CEO you'll tell the world you damn well earned all of it. Why wouldn't you? Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

dearieme , April 20, 2017 at 5:48 pm GMT \n
@Daniel Chieh The most psychologically difficult part of the modern economy is "why should someone be able to make more money by having money" through interest-bearing systems. While its very logical from a capitalistic perspective, its definitely the part which I think our instincts find least understandable.

The rich history against usury throughout history, including in the East, are a good example that many people found the notion difficult to accept especially when it seemed like it accumulated wealth in a class without connection to historical notions of land, protection, fealty, etc. "why should someone be able to make more money by having money" through interest-bearing systems

That's been put a stop to by zero and negative interest rates. For a few years at least. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Zzz , April 20, 2017 at 5:58 pm GMT \n
@Daniel Chieh No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away - it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people - the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system.

too corrupt will become incapable of outcompeting a less corrupt and more efficient system.

What if everything is one same global system? It competing with what then? Read More

Daniel Chieh , April 20, 2017 at 6:55 pm GMT \n
@Zzz

too corrupt will become incapable of outcompeting a less corrupt and more efficient system.
What if everything is one same global system? It competing with what then? Ah, yes, one world government. The solution to all ills, how silly of me not to think of it. In all realism, the only way such a system will rise to dominance is through outcompeting all other memes. It hasn't, so there's no egg for this chicken to rise about.

When attempted, as in socialistic governments, it gets corrupted because basically, human nature. Its only been shown to work in monestaries where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate. I'll revisit the vitality of it after Giant Meteor visits us, but I suspect the land-acquiring raiders will still come out ahead. Read More

Daniel Chieh , April 20, 2017 at 7:13 pm GMT \n
@Mao Cheng Ji

True economic equality in theory can only exist if everyone were paid the same amount regardless of occupation
No, true economic equality can only exist when no one is paid anything at all. Everything is freely shared, like, say, books in the library, or food between family members, or the well in the village center. Simple as that. So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. Read More

Someone in this, and too busy. , April 20, 2017 at 9:40 pm GMT \n
400 Words It's an interesting chart. Being involved with consumer bankruptcy work, I regularly meet and talk to many people who fit right into the lower end of the chart. My anecdotal opinion is that I find charts like the this one be inaccurate and skewed representations of the underlying condition of the people involved.

To begin, the chart does not associate dollar figures the various percentages of wealth. I haven't made a career of researching these facts, but I've seen the figure around that the lowest 20% of the population has a negative net worth. This means that if I could talk the lowest 20% of the people referenced in the chart into coming into my office and filing a Chapter 7 Bankruptcy, a legal action the majority of them would surely qualify for, and if, after the bankruptcy, I gave them $10 they would, all of a sudden, be thrown up into the the next highest most wealthy group of Americans. I"ve no time for researching it today, but I suspect it wouldn't take much more to push the forth lowest group into the lower end of the middle.

Another one of my other problems with these charts is they frequently exclude items most of us consider to be forms of wealth, in their determination of how much wealth people actually have. Pensions, including vested pensions, are frequently excluded. The rights to receive social security and other benefit programs is almost always excluded (maybe they are telling us something). This, of course greatly amplifies the sense that their are a lot of terribly destitute people around. Without seeing the dollar numbers or the components of the wealth included and excluded, these types of charts lend themselves to distortions.

To accumulate wealth at any level you have to have an interest in accumulating wealth. Accumulating wealth is a lot different than being showered with it. Everyone wants to win the lotto. Far fewer will save $100. Not with the competition from vacations and automobiles and electronic entertainment. It's not just hippies or tribesmen with no concept of competition who will not accumulate. I recommend that anyone who believes there is not a large percentage of the population that has absolutely no interest in taking any action designed toward accumulating wealth, who actively use it with not intention of replacing it, get out a bit more, meet new people just to know them. You don't have to invite them to your home. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

Joe Wong , April 20, 2017 at 10:13 pm GMT \n
@Santoculto

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. This comment reflects a serious case of redneck capitalist paranoia syndrome.

We all know USA is a Orwellian oligarchy police state and it is a warmonger and war criminal on the international arena despite it claims itself a democracy, so shall we say democracy does not work because USA's failure to implement democracy ideally? On the same token, it is moronic to say Socialism does not work because some jackals hijacked Socialism for their own greed just like the 'god-fearing' morally defunct evil 'puritans' hijacked democracy in the USA to fill their own greed. Read More

Joe Wong , April 20, 2017 at 10:25 pm GMT \n
@Jason Liu It's almost as though egalitarianism is a primal, unthinking position mostly adopted by children who don't know any better. The simplest and most knee-jerk definition of "fairness", defined by feeling.

The moment you step back and examine the world, inequality starts to make more sense. Perhaps inequality is inevitable and way of life, but definitely for the humanity sake we cannot grant it moral legitimacy, inequality is the dark side of humanity, it should always be treated as it is. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Joe Wong , April 20, 2017 at 10:58 pm GMT \n
@RobRich Native Americans were devout property owners. The myth of native communism has long been debunked. I would be very sceptical about any proof provided by the White to debunk anybody anything, historically the Whtie demonizes or badmouths others with fake news to make themselve superior. Orientalism and casting South American civilizations as bloodthirty barbarians are some of the ancient examples, phantom WMD and Maidan Square mob putsch are the recent examples. Read More Troll: Daniel Chieh
Joe Wong , April 20, 2017 at 11:15 pm GMT \n
@OutWest Perhaps it's the engineer in me, but I've observed that some driving force is necessary to make a process run. Voltage, temperature/pressure difference, or maybe wealth disparity are examples.

I had the choice of working in a local mill for good wages but a killing environment, or working my way through college with little money. Intermediate term sacrifice paid long tem dividends for me and my kids/grandkids. There's also a good argument to be made that society is also better served by such self-serving efforts.

If everyone is truly equal, what is there to drive society? I remember one epsoide in the Star Trek, Jean-Luc Picard explained humanity to an less developed alien that in the 23rd century, human is no longer valued material procession, human being is motived by wanting to excel, to make himself and the human being better. Are you saying we never can get there? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Joe Wong , April 20, 2017 at 11:29 pm GMT \n
@Wally Michael Chrichton on the not-so-noble savages.

http://principia-scientific.org/crichton-environmentalism-religion/
excerpt:


And what about indigenous peoples, living in a state of harmony with the Eden-like environment? Well, they never did.

On this continent, the newly arrived people who crossed the land bridge almost immediately set about wiping out hundreds of species of large animals, and they did this several thousand years before the white man showed up, to accelerate the process.

And what was the condition of life? Loving, peaceful, harmonious? Hardly: the early peoples of the New World lived in a state of constant warfare. Generations of hatred, tribal hatreds, constant battles. The warlike tribes of this continent are famous: the Comanche, Sioux, Apache, Mohawk, Aztecs, Toltec, Incas. Some of them practiced infanticide, and human sacrifice. And those tribes that were not fiercely warlike were exterminated, or learned to build their villages high in the cliffs to attain some measure of safety.

How about the human condition in the rest of the world? The Maori of New Zealand committed massacres regularly. The dyaks of Borneo were headhunters. The Polynesians, living in an environment as close to paradise as one can imagine, fought constantly, and created a society so hideously restrictive that you could lose your life if you stepped in the footprint of a chief. It was the Polynesians who gave us the very concept of taboo, as well as the word itself.

The noble savage is a fantasy, and it was never true. That anyone still believes it, 200 years after Rousseau, shows the tenacity of religious myths, their ability to hang on in the face of centuries of factual contradiction.

I am very sceptical about any proof provided by the White to debunk anybody anything, historically the White demonizes or badmouths others with fake news to make themselves superior and righteous. Orientalism and casting South American civilizations as bloodthirsty barbarians are some of the ancient examples, phantom WMD and anti-communism are the recent examples. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments
Astuteobservor II , April 21, 2017 at 12:47 am GMT \n
@Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. what he meant is that it wouldn't matter, because there will be more pizza. so why would anyone care about the last slice? of "a" pizza. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Bolt , April 21, 2017 at 4:15 am GMT \n
@Daniel Chieh Ah, yes, one world government. The solution to all ills, how silly of me not to think of it. In all realism, the only way such a system will rise to dominance is through outcompeting all other memes. It hasn't, so there's no egg for this chicken to rise about.

When attempted, as in socialistic governments, it gets corrupted because basically, human nature. Its only been shown to work in monestaries where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate. I'll revisit the vitality of it after Giant Meteor visits us, but I suspect the land-acquiring raiders will still come out ahead.

..where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate..

This ignores the cultural conditioning accepted by the group, both the monk's and the west's.
Human nature is a social construct – you can't argue on the one hand that we're are above animals because "self awareness", but on the other hand human nature/law of the jungle/social Darwinism determines our interactions.
The point is, the monks are trained in self awareness and act as a guide to accessing our better natures – fair and equitable distribution should be a hallmark of our humanity not an exception. Read More

Mao Cheng Ji , April 21, 2017 at 6:55 am GMT \n
200 Words @Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value.

So who gets the last slice of pizza?

Okay, let's see. Where I'm from, the social norm was that no one takes the last piece of bread. What you do, you break it, and take half. Then the next person can take half of that, and so on, until it turns into a crumb.

In other places I've been, the norm was: you point to the last slice and ask: 'anyone want this?' Everyone would say 'no', and then you can take it.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.

As for

Bushmen practiced both infanticide as well as abandoning the old.

what of it? Social norms ('morality') are not absolute, they are dictated by the environment. Where the alternative to infanticide and abandoning the old is extinction, they become social norms. Read More

EH , April 21, 2017 at 6:57 am GMT \n
300 Words Additional monetary wealth is valued in relation to existing wealth, so that a 1% increase has the same perceived utility whether one has $1M or $1000. This implies a logarithmic utility function for monetary wealth, an idea which is accepted in economics since it is equivalent to setting an investment goal of maximizing percentage returns, but the inescapable mathematical implication of logarithmic utility of wealth is unpopular among economists. If we assume that people have roughly equal capacity for enjoyment, then the aggregate utility of wealth for a society is maximized by its members having roughly equal wealth. For instance, a person with $100 gets a utility of log(100) = 2 from that, and someone with $1B gets a utility of log(10^9) = 9. If the billionaire's wealth is distributed so that 10M people each have $100, then the aggregate utility of that $1B rises from 9 to 20M, or over two million times as much utility.

Since wealth is valued logarithmically the effectiveness of rewards falls off exponentially, which means either that it doesn't make sense to give large rewards to individuals (assuming a goal of maximizing aggregate utility), or that rewards should be exponentially larger to maintain their effectiveness (assuming a goal of making rewards effective in individual cases). The latter way of thinking by people pursuing rewards for themselves is why wealth inequality is so great. At each step of the way, people aim to get that next few percent increase in their wealth, which becomes larger and larger in absolute terms. It's perfectly rational from the view of each individual, but it results in nearly all monetary rewards going to the people who get the least marginal utility from that money.

Those who contribute to society need to be rewarded to encourage more such contributions, but money quickly becomes an uneconomical way of rewarding people once they have more than enough for their needs - other rewards such as status become more effective and affordable for society. Read More Reply Agree/Disagree/Etc. More... This Commenter Display All Comments

John Smith , April 21, 2017 at 7:56 am GMT \n
@Santoculto

This would suggest that people have an innate preference for socialism and the re-distribution of wealth.
You start well, =)

But not, =(

Socialism don't/ never re-distribute[d] ideally the wealth NOR the power-decision, something extremely valuable as wealth in terms of individual well being.

So, in the next time, try to analyze firstly this differences between what socialistic propaganda tell you and what real socialism, aka, communism really is.

Less inequal than capitalism*

Likely in some official socialist countries has been...

but still very inequal and extremely inequal in other values such free speech and proportional fairness in individual power-decision = government deciding everything about your life without any negotiation or dialogue between interested parts. I must object.

Socialism does re-distribute the meager wealth of the working class into the pockets of the non working class and state owned business in exchange for handouts designed to keep you dependent on a system that hates you. Read More

dearieme , April 21, 2017 at 9:25 am GMT \n
@Daniel Chieh So who gets the last slice of pizza?

Even in familial systems, equality didn't exist; it just has less hostile negotiation. And under stress, Bushmen practiced both infanticide as well as abandoning the old.

You don't need currency to have an adequate stand-in for exchange of power and value. "So who gets the last slice of pizza?"

You spin a penny. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Daniel Chieh , April 21, 2017 at 1:50 pm GMT \n
@Bolt

..where living standard is intentionally low, and in a limited extent where wealth is impossible to accumulate..
This ignores the cultural conditioning accepted by the group, both the monk's and the west's.
Human nature is a social construct - you can't argue on the one hand that we're are above animals because "self awareness", but on the other hand human nature/law of the jungle/social Darwinism determines our interactions.
The point is, the monks are trained in self awareness and act as a guide to accessing our better natures - fair and equitable distribution should be a hallmark of our humanity not an exception. We aren't really all that self-aware. Even the existence of free will may be in doubt.

More importantly, as stated before, it doesn't work to outcompete other models. The monks might indeed have a successful vow of poverty, but then people who don't have a vow of poverty but with bigger axes come and take everything they have.

The way I read your sentence is to advocate self-destruction, essentially, as a hallmark of human nature. I don't agree. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Daniel Chieh , April 21, 2017 at 1:59 pm GMT \n
200 Words @Mao Cheng Ji

So who gets the last slice of pizza?
Okay, let's see. Where I'm from, the social norm was that no one takes the last piece of bread. What you do, you break it, and take half. Then the next person can take half of that, and so on, until it turns into a crumb.

In other places I've been, the norm was: you point to the last slice and ask: 'anyone want this?' Everyone would say 'no', and then you can take it.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.


As for


Bushmen practiced both infanticide as well as abandoning the old.
...what of it? Social norms ('morality') are not absolute, they are dictated by the environment. Where the alternative to infanticide and abandoning the old is extinction, they become social norms.

But in general, the typical anarchist approach is this: those who are perceived as consistently greedy (or otherwise 'anti-social') first get punished by ostracism, from the mildest form to severe (refusal to communicate with the offender). And then, if their behavior doesn't change, they get expelled from the commune.

Yup. And yet you seem knowledgeable enough not to need me to tell you the obvious results of it because it happened historically and in reality – punishment systems resulted in people minimizing effort. Even in North Korea, for example, the government found that by even slightly increasing liberalization of farms and allowing some percentage of crops to be sold for individual possession increased productivity by double-digit amounts.

People work harder when they feel like they will own the results. Negative consequences can only motivate insofar as punishment motivated slaves – they will do the minimal effort. Indeed, outperforming others can get you shamed because of that very mental aspect of proportionality.

Lack of property ownership just doesn't work, not with our brains the way it is.

This doesn't even go into aspects of the economy that are nonfungible, cannot be increased and inherently limiting, such as high productivity land, something which humanity once had to highly focus on. Now, Rousseau perhaps understood this, and deplored it – but it doesn't change the fact that was the most efficient way to develop for humanity. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Wizard of Oz , April 21, 2017 at 2:57 pm GMT \n
@Mao Cheng Ji

but it is an useful social technology that promotes development of society
I don't know what 'useful' might mean in this context. Inevitable, that's for sure. Rousseau wrote:

The first person who, having enclosed a plot of land, took it into his head to say this is mine and found people simple enough to believe him was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spared, had some one pulled up the stakes or filled in the ditch and cried out to his fellow men: "Do not listen to this imposter. You are lost if you forget that the fruits of the earth belong to all and the earth to no one!"
But then he writes:

But it is quite likely that by then things had already reached the point where they could no longer continue as they were. For this idea of property, depending on many prior ideas which could only have arisen successively, was not formed all at once in the human mind. It was necessary to make great progress, to acquire much industry and enlightenment, and to transmit and augment them from one age to another, before arriving at this final state in the state of nature.
Social evolution... Maybe you are oversimplifying tbe position you are arguing against. It is easy when discussing human nature to dismiss the idea that we have genes for respecting or being greedy for property rights but the way to look at it is different.

Start by considering what is objectively good for enjoyable human society, especially on a small scale, then consider what programming might be conducive to it. Just as it is a priori likely thst there would be some genetic programming to help us not to be fooled by liars the strong and reciprocal feeling for "mine" and "thine" needs programming that prevents taking no thought for the morrow and being fecklessly indifferent to people damaging the tools and other artefacts one has made. Read More Agree: Daniel Chieh

Santoculto , April 21, 2017 at 4:43 pm GMT \n
@Joe Wong This comment reflects a serious case of redneck capitalist paranoia syndrome.

We all know USA is a Orwellian oligarchy police state and it is a warmonger and war criminal on the international arena despite it claims itself a democracy, so shall we say democracy does not work because USA's failure to implement democracy ideally? On the same token, it is moronic to say Socialism does not work because some jackals hijacked Socialism for their own greed just like the 'god-fearing' morally defunct evil 'puritans' hijacked democracy in the USA to fill their own greed. Your opinion

but the truth

"Socialism" is even worse than capitalism, this is its monumental sin.

Be worse than a tra$h called capitalism. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Santoculto , April 21, 2017 at 4:45 pm GMT \n
@John Smith I must object.

Socialism does re-distribute the meager wealth of the working class into the pockets of the non working class and state owned business in exchange for handouts designed to keep you dependent on a system that hates you. Socialism or communism pretend to be democracy OR they are in the end, the consumation of democratic path, the "people" governing itself.

The "people". Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Mao Cheng Ji , April 21, 2017 at 5:42 pm GMT \n
200 Words @Wizard of Oz Maybe you are oversimplifying tbe position you are arguing against. It is easy when discussing human nature to dismiss the idea that we have genes for respecting or being greedy for property rights but the way to look at it is different.

Start by considering what is objectively good for enjoyable human society, especially on a small scale, then consider what programming might be conducive to it. Just as it is a priori likely thst there would be some genetic programming to help us not to be fooled by liars the strong and reciprocal feeling for "mine" and "thine" needs programming that prevents taking no thought for the morrow and being fecklessly indifferent to people damaging the tools and other artefacts one has made.

punishment systems resulted in people minimizing effort

I don't quite understand your point here. So, you're against punishment? Or, more specifically, against punishing greed? So then, can I come over, take 'your' stuff, and walk away? I don't think so.

Okay, I guess what you're saying is that socioeconomic models utilizing, in some reasonable, orderly way, the concept of ownership lead to higher productivity, technological progress, and all that. Well, sure, empirically this has been the story so far. What's not clear to me is:
1. that productivity and technological progress are all that good and desirable. The Amish don't use electricity and they seem happy. And
2. that this is the universal rule for all times. Suppose a few decades from now all the reasonable necessities are produced by unmanned machines, in abundant quantities. I don't know, 3-D printers, or something. Do you still need to own stuff? When is enough enough? Read More

Daniel Chieh , April 21, 2017 at 5:45 pm GMT \n
@Joe Wong I would be very sceptical about any proof provided by the White to debunk anybody anything, historically the Whtie demonizes or badmouths others with fake news to make themselve superior. Orientalism and casting South American civilizations as bloodthirty barbarians are some of the ancient examples, phantom WMD and Maidan Square mob putsch are the recent examples. Yes, because whites are apparently a monolithic bloc dedicated to the suppression of everyone else, especially Sweden these days. Please.

良药苦口. China needed the lesson we received. Never forget the price of weakness. That doesn't mean we should denigrate the achivements of anyone else. Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

hyperbola , April 21, 2017 at 8:56 pm GMT \n
@Daniel Chieh No model will perfectly match reality. Equality actually isn't easy to calculate due to the free rider problem, which isn't just something to handwave away - it is one of the most common ways for communes and the like to die.

Beyond that, traditional systems which reflected labor and risk taking resonated pretty well with people - the notion of someone working harder in the fields was easy to justify, as was the occupation of the soldier or even the brigand.

This isn't as much the case these days when so much of wealth is tied up by the financial sector of essentially, what was traditionally considered as usury. But the fundamental truth that inequality-based systems do tend to outcompete equality-based systems.

Corruption, incidentally, is a cost on a system and drags it down. So in a way, its self-healing, as a system that's too corrupt will become incapable of outcompeting a less corrupt and more efficient system. Already Adam Smith warned us that the system sold to us as "competitive capitalism" has nothing to do with reality. We have been suffering from "corrupt mercantilism" since at least then. It is no accident that our war for independence was fought against the jewish power family monopolies of the "city of london" and their corrupt (government "licensed") East India Co.
Exactly how do you imagine your"competitive" system is going to get started (sometime) and then be maintained? Read More Reply Agree/Disagree/Etc. More... This Commenter This Thread Hide Thread Display All Comments

Wizard of Oz , April 22, 2017 at 12:20 am GMT \n
@Mao Cheng Ji

punishment systems resulted in people minimizing effort
I don't quite understand your point here. So, you're against punishment? Or, more specifically, against punishing greed? So then, can I come over, take 'your' stuff, and walk away? I don't think so.

Okay, I guess what you're saying is that socioeconomic models utilizing, in some reasonable, orderly way, the concept of ownership lead to higher productivity, technological progress, and all that. Well, sure, empirically this has been the story so far. What's not clear to me is:
1. that productivity and technological progress are all that good and desirable. The Amish don't use electricity and they seem happy. And
2. that this is the universal rule for all times. Suppose a few decades from now all the reasonable necessities are produced by unmanned machines, in abundant quantities. I don't know, 3-D printers, or something. Do you still need to own stuff? When is enough enough? You confused me a bit because the opening quote was not mine but Daniel Chieh's. Had I time I would gladly follow you and J.M Keynes in dreaming intelligently of the prospects for our grandchildren. Keynes in 1930 seemed to imagine a world in which everyone could share his refined tastes. Now we would with at least equal realism consider making available genetic engineering on a large scale .

[Apr 19, 2017] Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

Apr 19, 2017 | economistsview.typepad.com
anne , April 17, 2017 at 05:55 AM
http://cepr.net/blogs/beat-the-press/paul-krugman-gets-retail-wrong-they-are-not-very-good-jobs

April 17, 2017

Paul Krugman Gets Retail Wrong: They are Not Very Good Jobs

Paul Krugman used his column * this morning to ask why we don't pay as much attention to the loss of jobs in retail as we do to jobs lost in mining and manufacturing. His answer is that in large part the former jobs tend to be more white and male than the latter. While this is true, although African Americans have historically been over-represented in manufacturing, there is another simpler explanation: retail jobs tend to not be very good jobs.

The basic story is that jobs in mining and manufacturing tend to offer higher pay and are far more likely to come with health care and pension benefits than retail jobs. A worker who loses a job in these sectors is unlikely to find a comparable job elsewhere. In retail, the odds are that a person who loses a job will be able to find one with similar pay and benefits.

A quick look at average weekly wages ** can make this point. In mining the average weekly wage is $1,450, in manufacturing it is $1,070, by comparison in retail it is just $555. It is worth mentioning that much of this difference is in hours worked, not the hourly pay. There is nothing wrong with working shorter workweeks (in fact, I think it is a very good idea), but for those who need a 40 hour plus workweek to make ends meet, a 30-hour a week job will not fit the bill.

This difference in job quality is apparent in the difference in separation rates by industry. (This is the percentage of workers who lose or leave their job every month.) It was 2.4 percent for the most recent month in manufacturing. By comparison, it was 4.7 percent in retail, almost twice as high. (It was 5.2 percent in mining and logging. My guess is that this is driven by logging, but I will leave that one for folks who know the industry better.)

Anyhow, it shouldn't be a mystery that we tend to be more concerned about the loss of good jobs than the loss of jobs that are not very good. If we want to ask a deeper question, as to why retail jobs are not very good, then the demographics almost certainly play a big role.

Since only a small segment of the workforce is going to be employed in manufacturing regardless of what we do on trade (even the Baker dream policy will add at most 2 million jobs), we should be focused on making retail and other service sector jobs good jobs. The full agenda for making this transformation is a long one (higher minimum wages and unions would be a big part of the picture, along with universal health care insurance and a national pension system), but there is one immediate item on the agenda.

All right minded people should be yelling about the Federal Reserve Board's interest rate hikes. The point of these hikes is to slow the economy and reduce the rate of job creation. The Fed's concern is that the labor market is getting too tight. In a tighter labor market workers, especially those at the bottom of the pecking order, are able to get larger wage increases. The Fed is ostensibly worried that this can lead to higher inflation, which can get us to a wage price spiral like we saw in the 70s.

As I and others have argued, *** there is little basis for thinking that we are anywhere close to a 1970s type inflation, with inflation consistently running below the Fed's 2.0 percent target, (which many of us think is too low anyhow). I'd love to see Krugman pushing the cause of full employment here. We should call out racism and sexism where we see it, but this is a case where there is a concrete policy that can do something to address it. Come on Paul, we need your voice.

* https://www.nytimes.com/2017/04/17/opinion/why-dont-all-jobs-matter.html

** https://www.bls.gov/news.release/empsit.t19.htm

*** http://cepr.net/blogs/beat-the-press/overall-and-core-cpi-fall-in-march

-- Dean Baker

Fred C. Dobbs -> anne... , April 17, 2017 at 06:17 AM
PK: Consider what has happened to department stores. Even as Mr. Trump was boasting about saving a few hundred jobs in manufacturing here and there, Macy's announced plans to close 68 stores and lay off 10,000 workers. Sears, another iconic institution, has expressed "substantial doubt" about its ability to stay in business.

Overall, department stores employ a third fewer people now than they did in 2001. That's half a million traditional jobs gone - about eighteen times as many jobs as were lost in coal mining over the same period.

And retailing isn't the only service industry that has been hit hard by changing technology. Another prime example is newspaper publishing, where employment has declined by 270,000, almost two-thirds of the work force, since 2000. ...

(To those that had them, they were probably
pretty decent jobs, albeit much less 'gritty'
than mining or manufacturing.)

BenIsNotYoda -> anne... , April 17, 2017 at 06:42 AM
Dean is correct. Krugman just wants to play the racism card or tell people those who wish their communities were gutted that they are stupid.
JohnH -> BenIsNotYoda... , April 17, 2017 at 06:48 AM
Elite experts are totally flummoxed...how can they pontificate solutions when they are clueless?

Roger Cohen had a very long piece about France and it discontents in the Times Sunday Review yesterday. He could not make heads or tails of the problem. Not worth the read.
https://www.nytimes.com/2017/04/14/opinion/sunday/france-in-the-end-of-days.html?rref=collection%2Fcolumn%2Froger-cohen&action=click&contentCollection=opinion&region=stream&module=stream_unit&version=latest&contentPlacement=2&pgtype=collection&_r=0

And experts wonder why nobody listens to them any more? Priceless!!!

BenIsNotYoda -> JohnH... , April 17, 2017 at 07:34 AM
clueless experts/academics. well said.
paine -> anne... , April 17, 2017 at 08:27 AM
Exactly dean
Tom aka Rusty -> anne... , April 17, 2017 at 07:39 AM
Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

Sort of a Larry Summers with a little better manners.

anne -> Tom aka Rusty... , April 17, 2017 at 08:18 AM
Krugman is an arrogant elitist who thinks people who disagree with him tend to be ignorant yahoos.

[ This is a harsh but fair criticism, and even the apology of Paul Krugman was conditional and showed no thought to the other workers insulted. ]

cm -> Tom aka Rusty... , April 17, 2017 at 08:11 AM
There is a lot of elitism to go around. People will be much more reluctant to express publicly the same as in private (or pseudonymously on the internet?). But looking down on other people and their work is pretty widespread (and in either case there is a lot of assumption about the nature of the work and the personal attributes of the people doing it - usually of a derogatory type in both cases).

I find it plausible that Krugman was referring those widespread stereotypes about job categories that (traditionally?) have not required a college degree, or have been relatively at the low end of the esteem scale in a given industry (e.g. in "tech" and manufacturing, QA/testing related work).

It must be possible to comment on such stereotypes, but there is of course always the risk of being thought to hold them oneself, or indeed being complicit in perpetuating them.

As a thought experiment, I suggest reviewing what you yourself think about occupations not held by yourself, good friends, and family members and acquaintainces you like/respect (these qualifications are deliberate). For example, you seem to think not very highly of maids.

Of course, being an RN requires significantly more training than being a maid, and not just once when you start in your career. But at some level of abstraction, anybody who does work where their autonomy is quite limited (i.e. they are not setting objectives at any level of the organization) is "just a worker". That's the very stereotype we are discussing, isn't it?

anne -> cm... , April 17, 2017 at 08:26 AM
Nicely explained.
paine -> anne... , April 17, 2017 at 08:40 AM
Yes
anne -> Tom aka Rusty... , April 17, 2017 at 08:24 AM
Krugman thinks nurses are the equivalent of maids...

[ The problem is that Paul Krugman dismissed the work of nurses and maids and gardeners as "menial." I find no evidence that Krugman understands that even after conditionally apologizing to nurses. ]

paine -> anne... , April 17, 2017 at 08:42 AM
Even if there are millions of mcjobs
out there
none are filled by mcpeople

[Apr 17, 2017] If you put the two trends together-increased individual income inequality and increased corporate savings-what were witnessing then is increasing private control over the social surplus

Notable quotes:
"... Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares. ..."
"... Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control. ..."
Apr 17, 2017 | economistsview.typepad.com
RGC , April 16, 2017 at 07:23 AM
Why is it anyone would want to save such an economic system?

April 11, 2017

from David Ruccio

"If you put the two trends together-increased individual income inequality and increased corporate savings -- what we're witnessing then is increasing private control over the social surplus.

Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares.

Any proposals to decrease tax rates for wealthy individuals and corporations will only increase that private control.

Why is it anyone would want to save such an economic system?"

https://rwer.wordpress.com/2017/04/11/why-is-it-anyone-would-want-to-save-such-an-economic-system/#more-28993

[ Tie that to the private banking system ]

anne -> RGC... , April 16, 2017 at 07:40 AM
Possibly I do not understand the matter, but I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse.
RGC -> anne... , April 16, 2017 at 07:50 AM
http://voxeu.org/article/global-corporate-saving-glut
anne -> RGC... , April 16, 2017 at 08:00 AM
https://fred.stlouisfed.org/graph/?g=dnZ6

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1948-2016

* Undistributed profits

https://fred.stlouisfed.org/graph/?g=dnYR

January 30, 2017

Net Corporate Saving * as a share of Gross Domestic Product, 1980-2016

* Undistributed profits

anne -> anne... , April 16, 2017 at 06:12 PM
Again, I was and am right.

I can find no evidence that corporate "saving" as a share of GDP in the United States is increasing. Actually, the reverse:

https://fred.stlouisfed.org/graph/?g=dnZ6

anne -> RGC... , April 16, 2017 at 08:03 AM
http://voxeu.org/article/global-corporate-saving-glut

April 5, 2017

The global corporate saving glut: Long-term evidence

By Peter Chen, Loukas Karabarbounis, and Brent Neiman

Corporate saving has increased relative to GDP and corporate investment across the world over the past three decades, reflecting how the global decline in the labour has led to increased corporate profits. This column characterises these trends using national income accounts and firm-level data, and relates them to firm characteristics and the accumulation of financial assets. In response to declines in the components of the cost of capital, a model with capital market imperfections generates an increase in corporate saving similar to that found in the data.

[ I am grateful for the reference, but I had already read the paper carefully and found no reason to agree with the assertion that there is long term evidence of a corporate saving glut. ]

RGC -> anne... , April 16, 2017 at 02:55 PM

2.2 National Accounts Structure and Identities

National accounts data include sector accounts that divide the economy into the corporate sector, the government sector, and the household and non-profit sector.

For most economies, the corporate sector can be further disaggregated into financial and non-financial corporations and the household sector can be distinguished from the non-profit sector.

National accounts data also include industry accounts that divide activity according to the International Standard Industrial
Classification, Rev. 4 (SIC).

A set of accounting identities that hold in the aggregate as well as at the sector or industry
level serve as the backbone for the national accounts.

In these accounts, the value of final
production (i.e. production net of intermediate goods) is called gross value added (GVA). When
aggregated to the economy level, GVA equals GDP less net taxes on products. GVA is detailed
in the generation of income account and equals the sum of income paid to capital, labor, and
taxes:


GVA = Gross Operating Surplus (GOS) + Compensation to Labor
+ Net Taxes on Production.


GOS captures the income available to corporations and other producing entities after paying for labor services and after subtracting taxes (and adding subsidies) associated with production.


The distribution of income account splits GOS into gross saving, dividends, and other payments to capital such as taxes on profits, interest payments, reinvested foreign earnings, and other transfers:


GOS = Gross Saving (GS) + Net Dividends | {z } Accounting Profits
+ Taxes on Profits + Interest
− Reinvested Earnings on Foreign Direct Investment + Other Transfers.


Net dividends equal dividends paid less dividends received from subsidiaries or partially-owned entities. Other transfers include social contributions and rental payments on land.

In our analyses, we define (accounting) profits as the sum of gross saving and net dividends.


The capital account connects the flow of saving to the flow of investment as follows:

GS = Net Lending + Gross Fixed Capital Formation + Changes in Inventories + Changes in Other Non-Financial Produced Assets.

The net lending position is defined as the excess of gross saving over investment spending.

https://minneapolisfed.org/research/wp/wp736.pdf

RGC -> RGC... , April 16, 2017 at 03:22 PM
GOS = Gross Saving (GS) + Net Dividends + Taxes on Profits + Interest − Reinvested Earnings on Foreign Direct Investment + Other Transfers.
reason -> RGC... , April 16, 2017 at 07:51 AM
"Wealthy individuals and large corporations are able to capture and decide on their own what to do with the surplus, with all the social ramifications associated with their decisions to invest where and when they want-or not to invest, and thus to accumulate cash, repay debt, and repurchase their own equity shares."

Or in the case of say Bill Gates in deciding which causes get assistance and which not rather than people voting on it (not that I think Bill Gates is necessarily doing harm - but why should he get to decide?).

RC AKA Darryl, Ron -> reason... , April 16, 2017 at 09:33 AM
$democracy
RGC -> reason... , April 16, 2017 at 03:25 PM
Right. And private banks get to do it routinely.

[Apr 16, 2017] The most common characteristic of people running their own business was that theyd been fired twice

Notable quotes:
"... things might have worked out with better luck on timing), you need your head examined to start a small business ..."
"... If you can tolerate the BS, it is vastly better to be on a payroll. 90% of all new businesses fail and running one is no picnic. ..."
"... And new business formation has dived in the US, due mainly IMHO to less than robust demand in many sectors of the economy. ..."
"... You're so right. It used to be that there were set asides for small businesses but nowadays Federal and State Governments are only interested in contracts with large businesses. The SBA classification for small business is based on NAICS code (used to be SIC code) is usually $1-2 million or up to 500 employees. I wonder how they can be small businesses! ..."
"... To survive, small businesses need to sell their goods/services to large businesses. Most of the decision makers who purchase these items are unreachable or already have their favorites. Unless your small business has invented a better mousetrap you're SOL! ..."
Apr 16, 2017 | www.nakedcapitalism.com
Yves Smith, April 16, 2017 at 5:00 pm

As someone who has started three businesses, two of them successful (I went to Australia right before the Gulf War started, which led to new business in Sydney coming to a complete halt for six months; things might have worked out with better luck on timing), you need your head examined to start a small business. The most common characteristic of people running their own business was that they'd been fired twice.

If you can tolerate the BS, it is vastly better to be on a payroll. 90% of all new businesses fail and running one is no picnic.

And new business formation has dived in the US, due mainly IMHO to less than robust demand in many sectors of the economy.

steelhead , April 16, 2017 at 5:41 pm

Unless your family fully bankrolls you until BK kicks in (snark). I would have loved to write as a career. Unfortunately, at the time, promises that had been made were broken and I had to go to work for a F500 just to survive right after my undergraduate degree was completed. Fate and Karma.

oh , April 16, 2017 at 5:56 pm

You're so right. It used to be that there were set asides for small businesses but nowadays Federal and State Governments are only interested in contracts with large businesses. The SBA classification for small business is based on NAICS code (used to be SIC code) is usually $1-2 million or up to 500 employees. I wonder how they can be small businesses!

To survive, small businesses need to sell their goods/services to large businesses. Most of the decision makers who purchase these items are unreachable or already have their favorites. Unless your small business has invented a better mousetrap you're SOL!

[Apr 12, 2017] The Despair of Learning That Experience No Longer Matters

Apr 12, 2017 | economistsview.typepad.com
RGC , April 12, 2017 at 06:41 AM
The Despair of Learning That Experience No Longer Matters

By Benjamin Wallace-Wells April 10, 2017

.....................

The arguments about Case and Deaton's work have been an echo of the one that consumed so much of the primary campaign, and then the general election, and which is still unresolved: whether the fury of Donald Trump's supporters came from cultural and racial grievance or from economic plight. Case and Deaton's scholarship does not settle the question. As they write, more than once, "more work is needed."

But part of what Case and Deaton offer in their new paper is an emotional logic to an economic argument. If returns to experience are in decline, if wisdom no longer pays off, then that might help suggest why a group of mostly older people who are not, as a group, disadvantaged might become convinced that the country has taken a turn for the worse. It suggests why their grievances should so idealize the past, and why all the talk about coal miners and factories, jobs in which unions have codified returns to experience into the salary structure, might become such a fixation. Whatever comes from the deliberations over Case and Deaton's statistics, there is within their numbers an especially interesting story.

http://www.newyorker.com/news/benjamin-wallace-wells/the-despair-of-learning-that-experience-no-longer-matters

[Apr 12, 2017] Why losing your job leads to a very long-lasting decline in your lifetime wages

Apr 12, 2017 | lse.ac.uk
Gregor Jarosch (2015, Chicago, Stanford): Jarosch writes a model to explain why losing your job leads to a very long-lasting decline in your lifetime wages. His hypothesis is that this is due to people climbing a ladder of jobs that are increasingly secure, so that when one has the misfortune of losing a job, this leads to a fall down the ladder and a higher likelihood of having further spells of unemployment in the future. He uses administrative social security data to find some evidence for this hypothesis.

[Apr 11, 2017] Trump administration betrayed students depply in debt

Apr 11, 2017 | economistsview.typepad.com

im1dc April 11, 2017 at 04:48 PM SoE DeVos is dangerously stupid and incompetent

"DeVos's decision to reverse some of her work "with no coherent explanation or substitute" effectively means that the Trump administration is placing the welfare of loan contractors above those of student debtors"

https://www.bloomberg.com/news/articles/2017-04-11/devos-undoes-obama-student-loan-protections

"DeVos Undoes Obama Student Loan Protections"

'Trump's education secretary wants to limit costs at a time when more than 1 million Americans are annually defaulting'

by Shahien Nasiripour...April 11, 2017...2:46 PM EDT

"Education Secretary Betsy DeVos on Tuesday rolled back an Obama administration attempt to reform how student loan servicers collect debt.

Obama issued a pair (PDF) of memorandums (PDF) last year requiring that the government's Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt. But in a memorandum (PDF) to the department's student aid office, DeVos formally withdrew the Obama memos.

The previous administration's approach, DeVos said, was inconsistent and full of shortcomings. She didn't detail how the moves fell short, and her spokesmen, Jim Bradshaw and Matthew Frendewey, didn't respond to requests for comment.

DeVos's move comes a week after one of the student loan industry's main lobbies asked for Congress's help in delaying or substantially changing the Education Department's loan servicing plans. In a pair of April 4 letters to leaders of the House and Senate appropriations committees, the National Council of Higher Education Resources said there were too many unanswered questions, including whether the Obama administration's approach would be unnecessarily expensive.

A recent epidemic of student loan defaults and what authorities describe as systematic mistreatment of borrowers prompted the Obama administration, in its waning days, to force the FSA office to emphasize how debtors are treated, rather than maximize the amount of cash they can stump up to meet their obligations.

Obama's team also sought to reduce the possibility that new contracts would be given to companies that mislead or otherwise harm debtors. The current round of contracts will terminate in 2019, and among three finalists for a new contract is Navient Corp. In January, state attorneys general in Illinois and Washington, along with the U.S. Consumer Financial Protection Bureau, or CFPB, sued Navient over allegations the company abused borrowers by taking shortcuts to boost its own bottom line. Navient has denied the allegations.

The withdrawal of the Obama administration guidelines could make Navient a more likely contender for that contract, government officials said. Navient shares moved higher after the government released DeVos's decision around 11:30 a.m. New York time. Navient stock ended up almost 2 percent.

The Obama administration vision for how federal loans would be serviced almost certainly meant the feds would have to increase how much they pay loan contractors to collect monthly payments from borrowers and counsel them on repayment options. Already, the government annually spends around $800 million to collect on almost $1.1 trillion of debt. DeVos, however, made clear that her department would focus on curbing costs.

"We must create a student loan servicing environment that provides the highest quality customer service and increases accountability and transparency for all borrowers, while also limiting the cost to taxpayers," DeVos said.

With her memo, DeVos has taken control of the complex and widely derided system in which the federal government collects monthly payments from tens of millions of Americans with government-owned student loans. The CFPB said in 2015 that the manner in which student loans are collected has been marred by "widespread failures."

DeVos's move "will certainly increase the likelihood of default," said David Bergeron, a senior fellow at the Center for American Progress, a Washington think tank with close ties to Democrats. Bergeron worked under Democratic and Republican administrations over more than 30 years at the Education Department. He retired as the head of postsecondary education.

During Obama's eight years in office, some 8.7 million Americans defaulted on their student loans, for a rate of one default roughly every 29 seconds.

Former Deputy Treasury Secretary Sarah Bloom Raskin worked on student loan policy during the latter years of the Obama administration, in part over concern that borrowers' struggles were affecting the management of U.S. debt. DeVos's decision to reverse some of her work "with no coherent explanation or substitute" effectively means that the Trump administration is placing the welfare of loan contractors above those of student debtors, she said.

In a statement Tuesday, Illinois Attorney General Lisa Madigan, who is suing Navient, agreed: "The Department of Education has decided it does not need to protect student loan borrowers."
libezkova -> im1dc... , April 11, 2017 at 05:24 PM

Thank you ! A very good finding.

[Apr 11, 2017] Legacy systems written in COBOL that depends on a shrinking pool of aging programmers to baby

Notable quotes:
"... Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style, some did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time blip. ..."
"... In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned. At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's KPMG and EY helping. ..."
"... My personal favourite is Accenture / British Gas . But then you've also got the masterclass in cockups Raytheon / U.K. Border Agency . Or for sheer breadth of failure, there's the IT Programme That Helped Kill a Whole Bank Stone Dead ( Infosys / Co-op ). ..."
"... I am an assembler expert. I have never seen a job advertised, but a I did not look very hard. Send me your work!!! IBM mainframe assembler ..."
"... What about Computer Associates? For quite a while they proudly maintained the worst reputation amongst all of those consultancy/outsourcing firms. ..."
"... My old boss used to say – a good programmer can learn a new language and be productive in it in in space of weeks (and this was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language. ..."
"... The huge shortcoming of COBOL is that there are no equivalent of editing programs. ..."
"... Original programmers rarely wrote handbooks ..."
"... That is not to say that it is impossible to move off legacy platforms ..."
"... Wherefore are ye startup godz ..."
Apr 11, 2017 | www.nakedcapitalism.com
After we've been writing about the problem of the ticking time bomb of bank legacy systems written in COBOL that depends on a shrinking pool of aging programmers to baby them for now nearly two years, Reuters reports on the issue. Chuck L flagged a Reuters story, Banks scramble to fix old systems as IT 'cowboys' ride into sunset, which made some of the points we've been making but frustratingly missed other key elements.

Here's what Reuters confirmed:

Banks and the Federal government are running mission-critical core systems on COBOL, and only a small number of older software engineers have the expertise to keep the systems running . From the article:

In the United States, the financial sector, major corporations and parts of the federal government still largely rely on it because it underpins powerful systems that were built in the 70s or 80s and never fully replaced

Experienced COBOL programmers can earn more than $100 an hour when they get called in to patch up glitches, rewrite coding manuals or make new systems work with old.

For their customers such expenses pale in comparison with what it would cost to replace the old systems altogether, not to mention the risks involved.

Here's what Reuters missed:

Why young coders are not learning COBOL . Why, in an era when IT grads find it hard to get entry-level jobs in the US, are young programmers not learning COBOL as a guaranteed meal ticket? Basically, it's completely uncool and extremely tedious to work with by modern standards. Given how narrowminded employers are, if you get good at COBOL, I woudl bet it's assumed you are only capable of doing grunt coding and would never get into the circles to work on the fantasy of getting rich by developing a hip app.

I'm sure expert readers will flag other issues, but the huge shortcoming of COBOL is that there are no equivalent of editing programs. Every line of code in a routine must be inspected and changed line by line.

How banks got in this mess in the first place. The original sin of software development is failure to document the code. In fairness, the Reuters story does allude to the issue:

But COBOL veterans say it takes more than just knowing the language itself. COBOL-based systems vary widely and original programmers rarely wrote handbooks, making trouble-shooting difficult for others.

What this does not make quite clear is that given the lack of documentation, it will always be cheaper and lower risk to have someone who is familiar with the code baby it, best of all the guy who originally wrote it. And that means any time you bring someone in, they are going to have to sort out not just the code that might be causing fits and starts, but the considerable interdependencies that have developed over time. As the article notes:

"It is immensely complex," said [former chief executive of Barclays PLC Anthony] Jenkins, who now heads startup 10x Future Technologies, which sells new IT infrastructure to banks. "Legacy systems from different generations are layered and often heavily intertwined."

I had the derivatives trading firm O'Connor & Associates as a client in the early 1990s. It was widely recognized as being one of the two best IT shops in all of Wall Street at the time. O'Connor was running the biggest private sector Unix network in the world back then. And IT was seen as critical to the firm's success; half of O'Connor's expenses went to it.

Even with it being a huge expense, and the my client, the CIO, repeatedly telling his partners that documenting the code would save 20% over the life of the software, his pleas fell on deaf ears. Even with the big commitment to building software, the trading desk heads felt it was already taking too long to get their apps into production. Speed of deployment was more important to them than cost or long-term considerations. 1 And if you saw this sort of behavior with a firm where software development was a huge expense for partners who were spending their own money, it's not hard to see how managers in a firm where the developers were much less important and management was fixated on short term earnings targets to blow off tradeoff like this entirely.

Picking up sales patter from vendors, Reuters is over-stating banks' ability to address this issue . Here is what Reuters would have you believe:

The industry appears to be reaching an inflection point, though. In the United States, banks are slowly shifting toward newer languages taking cue from overseas rivals who have already made the switch-over.

Commonwealth Bank of Australia, for instance, replaced its core banking platform in 2012 with the help of Accenture and software company SAP SE. The job ultimately took five years and cost more than 1 billion Australian dollars ($749.9 million).

Accenture is also working with software vendor Temenos Group AG to help Swedish bank Nordea make a similar transition by 2020. IBM is also setting itself up to profit from the changes, despite its defense of COBOL's relevance. It recently acquired EzSource, a company that helps programmers figure out how old COBOL programs work.

The conundrum is the more new routines banks pile on top of legacy systems, the more difficult a transition becomes. So delay only makes matters worse. Yet the incentives of everyone outside the IT areas is to hope they can ride it out and make the legacy system time bomb their successor's problem.

If you read carefully, Commonwealth is the only success story so far. And it's vastly less complex than that of many US players. First, it has roughly A$990 billion or $740 billion in assets now. While that makes it #46 in the world (and Nordea is of similar size at #44 as of June 30, 2016), JP Morgan and Bank of America are three times larger. Second, and perhaps more important, they are the product of more bank mergers. Commonwealth has acquired only four banks since the computer era. Third, many of the larger banks are major capital markets players, meaning their transaction volume relative to their asset base and product complexit is also vastly greater than for a Commonwealth. Finally, it is not impossible that as a government owned bank prior to 1990 that not being profit driven, Commonwealth's software jockeys might have documented some of the COBOL, making a transition less fraught.

Add to that that the Commonwealth project was clearly a "big IT project". Anything over $500 million comfortably falls into that category. The failure rate on big IT projects is over 50%; some experts estimate it at 80% (costly failures are disguised as well as possible; some big IT projects going off the rails are terminated early).

Mind you, that is not to say that it is impossible to move off legacy platforms. The issue is the time and cost (as well as risk). One reader, I believe Brooklyn Bridge, recounted a prototypical conversation with management in which it became clear that the cost of a migration would be three times a behemoth bank's total profit for three years. That immediately shut down the manager's interest.

Estimates like that don't factor in the high odds of overruns. And even if it is too high for some banks by a factor of five, that's still too big for most to stomach until they are forced to. So the question then becomes: can they whack off enough increments of the problem to make it digestible from a cost and risk perspective? But the flip side is that the easier parts to isolate and migrate are likely not to be the most urgent to address.

____
1 The CIO had been the head index trader and had also help build O'Connor's FX derivatives trading business, so he was well aware of the tradeoff between trading a new instrument sooner versus software life cycle costs. He was convinced his partners were being short-sighted even over the near term and had some analyses to bolster that view. So this was the not empire-building or special pleading. This was an effort at prudent management.

Clive , April 11, 2017 at 5:51 am

I got to the bit which said:

Accenture is also working with software vendor Temenos Group AG to help

and promptly splurted my coffee over my desk. "Help" is the last thing either of these two ne'redowells will be doing.

Apart from the problems ably explained in the above piece, I'm tempted to think industry PR and management gullibility to it are the two biggest risks.

Marina Bart , April 11, 2017 at 6:06 am

As someone who used to do PR for that industry (worked with Accenture, among others), I concur that those are real risks.

skippy , April 11, 2017 at 6:07 am

Heaps of IT upgrades have gone a bit wonky over here of late, Health care payroll, ATO, Centerlink, Census, all assisted by private software vendors and consultants – after – drum roll .. PR management did a "efficiency" drive [by].

Of course after legacy systems [people] were retrenched or shown the door in making government more efficient MBA style, some did hit the jack pot as consultants and made more that on the public dime . but the Gov balance sheet got a nice one time blip.

disheveled . nice self licking icecream cone thingy and its still all gov fault . two'fer

Colonel Smithers , April 11, 2017 at 7:40 am

Thank you, Skippy.

It's the same in the UK as Clive knows and can add.

In the government, projects "helped" by Siemens, especially at the Home and Passport Offices, cost billions and were abandoned. At my former employer, an eagle's nest, it was Deloittes. At my current employer, which has lost its passion to perform, it's KPMG and EY helping.

What I have read / heard is that the external consultants often cost more and will take longer to do the work than internal bidders. The banks and government(s) run an internal market and invite bids.

Clive , April 11, 2017 at 9:33 am

Oh, where to start!

My personal favourite is Accenture / British Gas . But then you've also got the masterclass in cockups Raytheon / U.K. Border Agency . Or for sheer breadth of failure, there's the IT Programme That Helped Kill a Whole Bank Stone Dead ( Infosys / Co-op ).

They keep writing books on how to avoid this sort of thing. Strangely enough, none of them ever tell CEOs or CIOs to pay people decent wages, not treat them like crap and to train up new recruits now and again. And also fail to highlight that though you might like to believe you can go into the streets in Mumbai, Manila or Shenzhen waving a dollar bill and have dozens of experienced, skilled and loyal developers run to you like a cat smelling catnip, that may only be your wishful thinking.

Just wait 'til we get started trying to implement Brexit

Raj , April 11, 2017 at 12:10 pm

Oh man, if you only had a look at the kind of graduates Infosys hires en masse and the state of graduate programmers coming out of universities here in India you'd be amazed how we still haven't had massive hacks. And now the government, so confident in the Indian IT industry's ability to make big IT systems is pushing for the universal ID system(aadhar) to be made mandatory for even booking flight tickets!

So would you recommend graduates do learn COBOL to get good jobs there in the USA?

Clive , April 11, 2017 at 12:22 pm

I'd pick something really obscure, like maybe MUMPS - yes, incredibly niche but that's the point, you can corner a market. You might not get oodles of work but what you do get you can charge the earth for. Getting real-world experience is tricky though.

Another alternative, a little more mainstream is assembler. But that is hideous. You deserve every penny if you can learn that and be productive in it.

visitor , April 11, 2017 at 1:36 pm

Is anybody still using Pick? Or RPG?

Regarding assembler: tricky, as the knowledge is tied to specific processors - and Intel, AMD and ARM keep churning new products.

Synoia , April 11, 2017 at 3:40 pm

I am an assembler expert. I have never seen a job advertised, but a I did not look very hard. Send me your work!!! IBM mainframe assembler

visitor , April 11, 2017 at 10:02 am

What about Computer Associates? For quite a while they proudly maintained the worst reputation amongst all of those consultancy/outsourcing firms.

How does Temenos compare with Oracle, anyway?

Clive , April 11, 2017 at 10:05 am

How does Temenos compare with Oracle, anyway?

Way worse. Yes, I didn't believe it was possible, either.

MoiAussie , April 11, 2017 at 6:13 am

For a bit more on why Cobol is hard to use see Why We Hate Cobol . To summarise, Cobol is barely removed from programming in assembler, i.e. at the lowest level of abstraction, with endless details needing to be taken care of. It dates pack to the punched card era.

It is particularly hard for IT grads who have learned to code in Java or C# or any modern language to come to grips with, due to the lack of features that are usually taken for granted. Those who try to are probably on their own due to a shortage of teachers/courses. It's a language that's best mastered on the job as a junior in a company that still uses it, so it's hard to get it on your CV before landing such a job.

There are potentially two types of career opportunities for those who invest the time to get up-to-speed on Cobol. The first is maintenance and minor extension of legacy Cobol applications. The second and potentially more lucrative one is developing an ability to understand exactly what a Cobol program does in order to craft a suitable replacement in a modern enterprise grade language.

MartyH , April 11, 2017 at 12:53 pm

Well, COBOL's shortcomings are part technical and part "religious". After almost fifty years in software, and with experience in many of the "modern enterprise grade languages", I would argue that the technical and business merits are poorly understood. There is an enormous pressure in the industry to be on the "latest and greatest" language/platform/framework, etc. And under such pressure to sell novelty, the strengths of older technologies are generally overlooked.

@Yves, I would be glad to share my viewpoint (biases, warts and all) at your convenience. I live nearby.

vlade , April 11, 2017 at 7:52 am

"It is particularly hard for IT grads who have learned to code in Java or C# or any modern language to come to grips with"

which tells you something about the quality of IT education these days, where "mastering" a language is more often more important than actually understanding what goes on and how.

My old boss used to say – a good programmer can learn a new language and be productive in it in in space of weeks (and this was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language.

craazyboy , April 11, 2017 at 9:32 am

IMHO, your old boss is wrong about that. Precisely because OO languages are a huge paradigm change and require a programmer to nearly abandon everything he/she knows about programming. Then get his brain around OOP patterns when designing a complex system. Not so easy.

As proof, I put forth the 30% success rate for new large projects in the latter 90s done with OOP tech. Like they say, if it was easy, everyone would be doing it.

More generally, on the subject of Cobol vs Java or C++/C#, in the heyday of OOPs rollout in the early 90s, corporate IT spent record amounts on developing new systems. As news of the Y2K problem spread, they very badly wanted to replace old Cobol/mainframe legacy systems. As things went along, many of those plans got rolled back due to perceived problems with viability, cost and trained personnel.

Part of the reason was existing Cobol IT staff took a look at OOP, then at their huge pile of Cobol legacy code and their brains melted down. I was around lots of them and they had all the symptoms of Snow Crash. [Neil Stephenson] I hope they got better.

Marco , April 11, 2017 at 12:21 pm

It never occurred to me that the OOP-lite character of the newer "hipster" languages (Golang / Go or even plain old javascript) are a response to OOP run amok.

Arizona Slim , April 11, 2017 at 9:35 am

A close friend is a retired programmer. In her mind, knowing how to solve the problem comes​ first.

MartyH , April 11, 2017 at 12:54 pm

@Arizona_Slim: I agree with her. And COBOL lets you write business logic with a minimum of distractions.

Mel , April 11, 2017 at 11:36 am

In the university course I took, we were taught Algol-60. Then it turned out that the univ. had no budget for Algol compiles for us. So we wrote our programs in Algol-60 for 'publication' and grading, and rewrote them in FORTRAN IV to run in a cheap bulk FORTRAN execution system for results. Splendid way to push home Turing's point that all computing is the same. So when the job needed COBOL, "Sure, bring it on."

rfdawn , April 11, 2017 at 1:30 pm

My old boss used to say – a good programmer can learn a new language and be productive in it in in space of weeks (and this was at the time when Object Oriented was the new huge paradigm change). A bad programmer will write bad code in any language.

Yes. Learning a new programming language is fairly easy but understanding existing patchwork code can be very hard indeed. It just gets harder if you want to make reliable changes.

HR thinking, however, demands "credentials" and languages get chosen as such based on their simple labels. They are searchable on L**kedIn!

A related limitation is the corporate aversion to spending any time or money on employee learning of either language or code. There may not be anyone out there with all the skills needed but that will not stop managers from trying to hire them or, better still, just outsourcing the whole mess.

Either choice invites fraud.

reslez , April 11, 2017 at 2:02 pm

Your boss was correct in my opinion - but also atypical. Most firms look for multi-years of experience in a language. They'll toss your resume if you don't show you've used it extensively.

Even if a new coder spent the time to learn COBOL, if he wasn't using it on the job or in pretty significant projects he would not be considered. And there aren't exactly many open source projects out there written in COBOL to prove one's competence. The limiting factor is not whether you "know" COBOL, or whether you know how to learn it. The limiting factor is the actual knowledge of the system, how it was implemented, and all the little details that never get written down no matter how good your documentation. If your system is 30+ years old it has complexity hidden in every nook and cranny.

As for the language itself, COBOL is an ancient language from a much older paradigm than what students learn in school today. Most students skip right past C, they don't learn structural programming. They expect to have extensive libraries of pre-written routines available for reuse. And they expect to work in a modern IDE (development environment), a software package that makes it much easier to write and debug code. COBOL doesn't have tools of this level.

When I was in the Air Force I was trained as a programmer. COBOL was one of the languages they "taught". I never used it, ever, and wouldn't dream of trying it today. It's simply too niche. I would never recommend anyone learn COBOL in the hopes of getting a job. Get the job first, and if it happens to include some COBOL get the expertise that way.

d , April 11, 2017 at 4:04 pm

having seen the 'high level code' in C++, not sure what makes it 'modern'.its really an out growth of C, which is basically the assembler language of Unix. which it self is no spring chicken. mostly what is called 'modern' is just the latest fad, has the highest push from vendors. and sadly what we see in IT, is that the IT trade magazines are more into what they sell, that what companies need (maybe because of advertising?)

as to why schools tend to teach these languages than others? mainly cause its hip. its also cheaper for the schools, as they dont have much in the way of infrastructure to teach them ( kids bring their own computers). course teachers are as likely to be influenced by the latest 'shinny;' thing as any one else

craazyboy , April 11, 2017 at 4:34 pm

C++ shares most of the core C spec but that's it. [variables and scope, datatypes, functions sorta, math and logic operatives, logic control statements] The reason you can read high level C++ is because it uses objects that hide the internal code and are given names that describe their use which if done right makes the code somewhat readable, along with a short comment header, and self documenting.

Then at high level most code is procedural and/or event driven, which makes it appear to function like C or any other procedural language. Without the Goto statements and subroutines, because that functionality is now encapsulated within the C++ objects. {which are a datatype that combines data structures and related functions that act on this data)

ChrisPacific , April 11, 2017 at 5:31 pm

Well put. I was going to make this point. Note that the today's IT grads struggle with Cobol for the same reason that modern airline pilots would struggle to build their own airplane. The industry has evolved and become much more specialized, and standard 'solved' problems have migrated into the core toolsets and become invisible to developers, who now work at a much higher level of abstraction. So for example a programmer who learned using BASIC on a Commodore 64 probably knows all about graphics coding by direct addressing of screen memory, which modern programmers would consider unnecessary at best and dangerous at worst. Not to mention it's exhausting drudgery compared to working with modern toolsets.

The other reason more grads don't learn COBOL is because it's a sunset technology. This is true even if systems written in COBOL are mission critical and not being replaced. As more and more COBOL programmers retire or die, banks will eventually reach the point where they don't have enough skilled staff available to keep their existing systems running. If they are in a position where they have to fix things anyway, for example due to a critical failure, they will be forced to resort to cross-training other developers, at great expense and pain for all concerned, and with no guarantee of success. One or two of these experiences will be enough to convince them that migration is necessary, whatever the cost (if their business survives them, which isn't a given when it comes to critical failures involving out of date and poorly-understood technology). And while developers with COBOL skills will be able to name their own price during those events, it's not likely to be a sustainable working environment in the longer term.

It would take a significant critical mass of younger programmers deciding to learn COBOL to change this dynamic. One person on their own isn't going to make any difference, and it's not career advice I would ever give to a young graduate looking to enter IT.

I am an experienced developer who has worked with a lot of different languages, including some quite low level ones in my early days. I don't know COBOL, but I am confident that I could learn it well enough to perform code archaeology on it given enough time (although probably nowhere near as efficiently as someone who built a career on it). Whether I could be convinced to do so is another question. If you paid me never-need-to-work-again money, then maybe. But nobody is ever going to do that unless it's a crisis, and I'm not likely to sign up for a death march situation with my current family commitments.

Steve , April 11, 2017 at 6:47 am

"Experienced COBOL programmers can earn more than $100 an hour"

Then the people hiring are getting them dirt cheap. This is a lot closer to consulting than contracting–a very specialized skill set and only a small set of people available. The rate should be $200-300/hour.

reslez , April 11, 2017 at 2:46 pm

I wonder if it has something to do with the IRS rules that made that guy fly a plane into an IRS office? Because of the rules, programmers aren't allowed to work as independent consultants. Since their employer/middleman takes a huge cut the pay they receive is a lot lower. Coders with a security clearance make quite a bit but that requires an "in", getting the clearance in the first place which most employers won't pay for.

d , April 11, 2017 at 4:05 pm

not any place i know of. maybe in an extreme crunch. cause today the most COBOL jobs have been offshored. and maybe thats why kids dont lean COBOL.

ChrisPacific , April 11, 2017 at 5:31 pm

I had the same thought. Around here if you want a good one, you would probably need to add another zero to that.

shinola , April 11, 2017 at 6:52 am

Cobol? Are they running it on refrigerator sized machines with reel-to-reel tapes?

ejf , April 11, 2017 at 8:45 am

you're right. I've seen it on cluckny databases in a clothing firm in NY State, a seed and grain distribution facility in Minnesota and a bank in Minneapolis. They're horrible and Yves is right – documentation is completely ABSENT

d , April 11, 2017 at 4:06 pm

in small business, where every penny counts, they dont see the value in documentation. not even when they get big either

Disturbed Voter , April 11, 2017 at 7:05 am

No different than the failure of the public sector to maintain dams, bridges and highways. Basic civil engineering but our business model never included maintenance nor replacement costs. That is because our business model is accounting fraud.

I grew up on Fortran, and Cobol isn't too different, just limited to 2 points past the decimal to the right. I feel so sorry for these code jockies who can't handle a bit of drudgery, who can't do squat without a gigabyte routine library to invoke. Those languages as scripting languages or report writers back in the old days.

Please hire another million Indian programmers they don't mind being poorly paid or the drudgery. Americans and Europeans are so over-rated. Business always complains they can't hire the right people some job requires 2 PhDs and we can't pay more than $30k, am I right? Business needs slaves, not employees.

d , April 11, 2017 at 4:08 pm

COBOL hasnt been restricted to 2 points to the right of decimal place. for decades

clarky90 , April 11, 2017 at 7:06 am

The 'Novopay debacle'

This was a "new payroll" system for school teachers in NZ. It was an ongoing disaster. If something as simple (?) as paying NZ teachers could turn into such a train-wreck, imagine what updating the software of the crooked banks could entail. I bet that there are secret frauds hidden in the ancient software, like the rat mummies and cat skeletons that one finds when lifting the floor of old houses.

https://en.wikipedia.org/wiki/Novopay

"Novopay is a web-based payroll system for state and state integrated schools in New Zealand, processing the pay of 110,000 teaching and support staff at 2,457 schools .. From the outset, the system led to widespread problems with over 8,000 teachers receiving the wrong pay and in some cases no pay at all; within a few months, 90% of schools were affected .."

"Many of the errors were described as 'bizarre'. One teacher was paid for 39 days, instead of 39 hours getting thousands of dollars more than he should have. Another teacher was overpaid by $39,000. She returned the money immediately, but two months later, had not been paid since. A relief teacher was paid for working at two different schools on the same day – one in Upper Hutt and the other in Auckland. Ashburton College principal, Grant McMillan, said the 'most ludicrous' problem was when "Novopay took $40,000 directly out of the school bank account to pay a number of teachers who had never worked at the college".

Can you imagine this, times 10,000,000????

d , April 11, 2017 at 4:12 pm

this wasnt COBOL. or even a technology problem. more like a management one. big failures tend to be that way

vlade , April 11, 2017 at 7:48 am

"but the huge shortcoming of COBOL is that there are no equivalent of editing programs. Every line of code in a routine must be inspected and changed line by line"
I'm not sure what you mean by this.

If you mean that COBOL doesn't have the new flash IDEs that can do smart things with "syntactic sugar", then it really depends on the demand. Smart IDEs can be written for pretty much any languages (smart IDEs work by operating on ASTs, which are part and parcel of any compiler. The problem is more of what to do if you have an externalised functions etc, which is for example why it took so long for those smart IDEs to work with C++ and its linking model). The question is whether it pays – and a lot of old COBOL hands eschew anything except for vi (or equivalent) because coding should be done by REAL MEN.

On the general IT problem. There are three problems, which are sort of related but not.

The first problem is the interconnectedness of the systems. Especially for a large bank, it's not often clear where one system ends and the other begins, what are the side-effects of running something (or not running), who exactly produces what outputs and when etc. The complexity is more often at this level than cobol (or any other) line-by-line code.

The second problem is the IT personell you get. If you're unlucky, you get coding monkeys, who barely understand _any_ programming language (there was time I didn't think people like that get hired. I now know better), and have no idea what analytical and algorithmic thinking is. If you're lucky, you get a bunch of IT geeks, who can discuss the latest technology till cows come home, know the intricate details of what a sequence point in C++ is and how it affects execution, but don't really care that much about the business. Then you get some possibly even brilliant code, but often also get unnecessary technological artifacts and new technologies just because they are fun – even though a much simpler solution would work just as well if not better. TBH, you can get this from the other side too, someone who understands the business but doesn't know even basic language techniques, which generally means their code works very well for the business, but is a nightmare to maintain (a typical population of this groups are front office quants).

If you are incredibily lucky, you get someone who understands the business and happens to know how to code well too. Unfortunately, this is almost a mythical beast, especially since neitehr IT nor the business encourage people to understand each other.

Which is what gets me to the thirds point – politics of it. And that's, TBH, is why most projects fail. Because it's easier to staff a project with 100 developers and then say all that could have been done was done, than get 10 smart people working on it, but risk that if it fails you get told you haven't spent enough resources. "We are not spending enough money" is paradoxically one of the "problems" I often see here, when the problem really is "we're not spending money smartly enough". Because in an organization budget=power. I have yet to see an IT project that would have 100+ developers that would _really_ succeed (as opposed to succeed by redefining what it was to deliver to what was actually delivered).

Oh, and last point, on the documentation. TBH, documentation of the code is superfluous if a) it's clear what business problem is being solved b) has a good set of test cases c) the code is reasonably cleanly written (which tends to be the real problem). Documenting code by anything else but example is in my experience just a costly exercise. Mind you, this is entirely different from documenting how systems hang together and how their interfaces work.

Yves Smith Post author , April 11, 2017 at 7:52 am

On the last point, I have to tell you I in short succession happened to work not just with O'Connor, but about a year later, with Bankers Trust, then regarded as the other top IT shop on Wall Street. Both CIOs would disagree with you vehemently on your claim re documentation.

vlade , April 11, 2017 at 8:25 am

Yes, in 90s there was a great deal of emphasis on code documentation. The problem with that is that the requirements in real world change really quick. Development techniques that worked for sending the man to the moon don't really work well on short-cycle user driven developments.

90s was mostly the good old waterfall method (which was really based on the NASA techniques), but even as early as 2000s it started to change a lot. Part of it come from the realization that the "building" metaphor that was the working approach for a lot of that didn't really work for code.

When you're building a bridge, it's expensive, so you have to spend a lot of time with blueprints etc. When you're doing code, documenting it in "normal" human world just adds a superfluous step. It's much more efficient to make sure your code is clean and readable than writing extra documents that tell you what the code does _and_ have to be kept in sync all the time.

Moreover, bits like pretty pictures showing the code interaction, dependencies and sometimes even more can now be generated automatically from the code, so again, it's more efficient to do that than to keep two different versions of what should be the same truth.

Yves Smith Post author , April 11, 2017 at 8:31 am

With all due respect, O'Connor and Bankers Trust were recognized at top IT shops then PRECISELY because they were the best, bar none, at "short cycle user driven developments." They were both cutting edge in derivatives because you had to knock out the coding to put new complex derivatives into production.

Don't insinuate my clients didn't know what they were talking about. They were running more difficult coding environments than you've ever dealt with even now. The pace of derivative innovation was torrid then and there hasn't been anything like it since in finance. Ten O'Connor partners made $1 billion on the sale of their firm, and it was entirely based on the IT capabilities. That was an unheard of number back then, 1993, particularly given the scale of the firm (one office in Chicago, about 250 employees).

vlade , April 11, 2017 at 9:23 am

Yves,

I can't talk about how good/bad your clients were except for generic statements – and the above were generic statements that in 90s MOST companies used waterfall.

At the same time please do not talk about what programming environments I was in, because you don't know. That's assuming it's even possible to compare coding environments – because quant libraries that first and foremost concentrate on processing data (and I don't even know it's what was the majority of your clients code) is a very very different beast from extremely UI complex but computationally trivial project, or something that has both trivial UI and computation but is very database heavy etc. etc.

I don't know what specific techniques your clients used. But the fact they WANTED to have more documentation doesn't mean that having more documentation would ACTUALLY be useful.

With all due respect, I've spent the first half of 00s talking to some of the top IT development methodologists of the time, from the Gang Of Four people to Agile Manifesto chaps, and practicing/leading/implementing SW development methodology across a number of different industries (anything from "pure" waterfall to variants of it to XP).

The general agreement across the industry was (and I believe still is) that documenting _THE CODE_ (outside of the code) was waste of time (actually it was ranging from any design doc to various levels of design doc, depending on who you were talking to).

Again, I put emphasis on the code – that is not the same as say having a good whitepaper telling you how the model you're implementing works, or what the hell the users actually want – i.e. capturing the requirements.

As an aside – implementation of new derivative payoffs can be actually done in a fairly trivial way, depending on how exactly you model them in the code. I've wrote an extensive library that did it, whose whole purpose was to deal with new products and allow them to be incubated quickly and effectively – and that most likely involved doing things that no-one at BT/O'Conner even looked at in early 1990s (because XVA wasn't even gleam in anyone's eye at that time).

Clive , April 11, 2017 at 9:54 am

Well at my TBTF, where incomprehensible chaos rules, the only thing - and I do mean the only thing - that keeps major disasters averted (perhaps "ameliorated" is putting it better) is where some of the key systems are documented. Most of the core back end is copiously and reasonably well documented and as such can survive a lot of mistreatment at the hands of the current outsourcer de jour.

But some "lower priority" applications are either poorly documented or not documented at all. And a "low priority" application is only "low priority" until it happens to sit on the critical path. Even now I have half of Bangalore (it seems so, at any rate) sitting there trying to reverse engineer some sparsely documented application - although I suspect there was documentation, it just got "lost" in a succession of handovers - desperate in their attempts to figure out what the application does and how it does it. You can hear the fear in their voices, it is scary stuff, given how crappy-little-VB6-pile-of-rubbish is now the only way to manage a key business process where there are no useable comments in the code and no other application documentation, you are totally, totally screwed.

visitor , April 11, 2017 at 3:51 pm

Your TBTF corporation is ISO 9000-3,9001/CMM/TickIt/ITIL certified, of course?

Skip Intro , April 11, 2017 at 11:48 am

It seems like you guys are talking past each other to some degree. I get the sense that vlade is talking about commenting code, and dismissing the idea of code comments that don't live with the code. Yves' former colleagues are probably referring to higher level specifications that describe the functionality, requirements, inputs, and outputs of the various software modules in the system.
If this is the case, then you're both right. Even comments in the code can tend to get out of date due to application of bug fixes, and other reasons for 'drift' in the code, unless the comments are rigorously maintained along wth the code. Were the code-level descriptions maintained somewhere else, that would be much more difficult and less useful. On the other hand the higher-level specifications are pretty essential for using, testing, and maintaining the software, and would sure be useful for someone trying to replace all or parts of the system.

Clive , April 11, 2017 at 12:30 pm

In my experience you need a combination of both. There is simply no substitute for a brief line in some ghastly nested if/then procedure that says "this section catches host offline exceptions if the transaction times out and calls the last incremental earmarked funds as a fallback" or what-have-you.

That sort of thing can save weeks of analysis. It can stop an outage from escalating from a few minutes to hours or even days.

Mathiasalexander , April 11, 2017 at 8:22 am

They could try building the new system from scratch as a stand alone and then entering all the data manually.

Ivy , April 11, 2017 at 10:39 am

There is some problem-solving/catastrophe-avoiding discussion about setting up a new bank with a clean, updated (i.e., this millennium) IT approach and then merging the old bank into that and decommissioning that old one. Many questions arise about applicable software both in-house and at all those vendor shops that would need some inter-connectivity.

Legacy systems lurk all over the economy, from banks to utilities to government and education. The O'Connor CIO advice relating to life-cycle costing was probably unheard in many places besides
The Street.

d , April 11, 2017 at 4:24 pm

building them from scratch is usually the most likely to be a failure as to many in both IT and business only know parts of the needs. and if a company cant implement a vendor supplied package to do the work, what makes us think they can do it from scratch

visitor , April 11, 2017 at 9:44 am

I did learn COBOL when I was at the University more than three decades ago, and at that time it was already decidedly "uncool". The course, given by an old-timer, was great though. I programmed in COBOL in the beginnings of my professional life (MIS applications, not banking), so I can provide a slightly different take on some of those issues.

As far as the language itself is concerned, disregard those comments about it being like "assembly". COBOL already showed its age in the 1980s, but though superannuated it is a high-level language geared at dealing with database records, money amounts (calculations with controlled accuracy), and reports. For that kind of job, it was not that bad.

The huge shortcoming of COBOL is that there are no equivalent of editing programs.

While in the old times a simple text editor was the main tool for programming in that language, modern integrated, interactive development environments for COBOL have been available for quite a while - just as there are for Java, C++ or C#.

And that is a bit of an issue. For, already in my times, a lot, possibly most COBOL was not programmed manually, but generated automatically - typically from pseudo-COBOL annotations or functional extensions inside the code. Want to access a database (say Oracle, DB2, Ingres) from COBOL, or generate a user interface (for 3270 or VT220 terminals in those days), or perform some networking? There were extensions and code generators for that. Nowadays you will also find coding utilities to manipulate XML or interface with routines in other programming languages. All introduce deviations and extensions from the COBOL norm.

If, tomorrow, I wanted to apply for a job at one of those financial institutions battling with legacy software, my rusty COBOL programming skills would not be the main problem, but my lack of knowledge of the entire development environment. That would mean knowing those additional code generators, development environments, extra COBOL-geared database/UI/networking/reporting modules. In an IBM mainframe environment, this would probably mean knowing things like REXX, IMS or DB2, CICS, etc (my background is DEC VMS and related software, not IBM stuff).

So those firms are not holding dear onto just COBOL programmers - they are desperately hoarding people who know their way around in mainframe programming environments for which training (in Universities) basically stopped in the early 1990s.

Furthermore, I suspect that some of those code generators/interfaces might themselves be decaying legacy systems whose original developers went out of business or have been slowly withdrawing from their maintenance. Correcting or adjusting manually the COBOL code generated by such tools in the absence of vendor support is lots of fun (I had to do something like that once, but it actually went smoothly).

Original programmers rarely wrote handbooks

My experience is that proper documentation has a good chance to be rigorously enforced when the software being developed is itself a commercial product to be delivered to outside parties. Then, handbooks, reference manuals and even code documentation become actual deliverables that are part of the product sold, and whose production is planned and budgeted for in software development programmes.

I presume it is difficult to ensure that effort and resources be devoted to document internal software because these are purely cost centers - not profit centers (or at least, do not appear as such directly).

That is not to say that it is impossible to move off legacy platforms

So, we knew that banks were too big to fail, too big to jail, and are still too big to bail. Are their software problems too big to nail?

d , April 11, 2017 at 4:27 pm

actually suspect banks like the rest of business dont really care about their systems, till they are down, as they will find the latest offshore company to do it cheaper.

Yves Smith Post author , April 11, 2017 at 5:58 pm

Why then have I been told that reviewing code for Y2K had to be done line by line?

I said documentation, not handbooks. And you are assuming banks hired third parties to do their development. Buying software packages and customizing them, as well as greater use of third party vendors, became a common practice only as of the 1990s.

JTMcPhee , April 11, 2017 at 10:33 am

I'm in favor of the "Samson Option" in this area.

I know it will screw me and people I care about, and "throw the world economy into chaos," but who effing cares (hint: not me) if the code pile reaches past the limits of its angle of repose, and slumps into some chaotic non-form?

Maybe a sentiment that gets me some abuse, but hey, is it not the gravamen of the story here that dysfunction and then collapse are very possible, maybe even likely?

And where are the tools to re-build this Tower of Babel, symbol of arrogant pride? Maybe G_D has once again, per the Biblical story, confounded the tongues of men (and women) to collapse their edifices and reduce them to working the dirt (what's left of it after centuries of agricultural looting and the current motions toward temperature-driven uninhabitability.)

Especially interesting that people here are seemingly proud of having taken part successfully in the construction of the whole derivatives thing. Maybe I'm misreading that. But what echoes in my mind in this context is the pride that the people of Pantex, https://en.wikipedia.org/wiki/Pantex_Plant , have in their role in keeping the world right on the ragged edge of nuclear "Game Over." On the way to Rapture, because they did G_D's work in preparing Armageddon. http://articles.chicagotribune.com/1986-09-05/features/8603060693_1_pantex-plant-nuclear-weapons-amarillo

"What a wondrous beast this human is "

lyman alpha blob , April 11, 2017 at 10:57 am

So is it time to go long on duct tape and twine?

ChrisAtRU , April 11, 2017 at 11:19 am

#Memories

My first job out of uni, I was trained as a MVS/COBOL programmer. After successfully completing the 11-week pass/fire course, I showed up to my 1st work assignment where my boss said to me, "Here's your UNIX terminal."

;-) – COBOL didn't strike me as difficult, just arcane and verbose. Converting to SAP is a costly nightmare. That caused to me to leave a job once had no desire to deal with SAP/ABAP. I'm surprised no one has come up with an acceptable next-gen thing . I remember years ago seeing an ad for Object-Oriented-COBOL in an IT magazine and I almost pissed myself laughing. On the serious side, if it's still that powerful and well represented in Banking, perhaps someone should look into an upgraded version of the language/concepts and build something easy to lift and shift COBOL++?

Wherefore are ye startup godz

#OnlyHalfKidding

#MaybeNot

Peewee , April 11, 2017 at 12:22 pm

This sounds like an opportunity for a worker's coop, to train their workers in COBOL and to get back at these banks by REALLY exploiting them good and hard.

MartyH , April 11, 2017 at 12:57 pm

@Peewee couldn't agree more! @Diptherio?

susan the other , April 11, 2017 at 1:02 pm

so is this why no one is willing to advocate regulating derivatives in an accountable way? i almost can't believe this stuff. i can't believe that we are functioning at all, financially. 80% of IT projects fail? and if legacy platforms are replaced at great time and expense, years and trillions, what guarantee is there that the new platform will not spin out just as incomprehensibly as COBOL based software evolved, with simplistic patches of other software lost in translation? And maybe many times faster. Did Tuttle do this? I think we need new sophisticated hardware, something even Tuttle can't mess with.

Skip Intro , April 11, 2017 at 3:40 pm

I think it is only 80% of 'large' IT projects fail. I think it says more about the lack of scalability of large software projects, or our (in-) ability to deal with exponential complexity growth

JimTan , April 11, 2017 at 2:34 pm

Looks like there are more than a few current NYC jobs at Accenture, Morgan Stanley, JPMorgan Chase, and Bank of America for programmers who code in COBOL.

https://www.indeed.com/jobs?q=mainframe+Cobol+&l=New+York%2C+NY

[Apr 09, 2017] Time to do some fact checking on this right wing spin

Apr 09, 2017 | economistsview.typepad.com
DeDude , April 08, 2017 at 12:31 PM
Now isn't that amazing. When you increase the income of the consumer class workers you grow the economy.

http://ritholtz.com/2017/04/new-seattle-post/

Nobody could have predicted that - at least not if they were addicted to right wing narratives.

pgl -> DeDude... , April 08, 2017 at 12:31 PM
Ritholtz has had a field day debunking the right wing intellectual garbage of Martin Perry but today he turns on right wing toadie Tim Worstall.

Great link!

pgl -> pgl... , April 08, 2017 at 12:38 PM
Worstall:

https://www.forbes.com/sites/timworstall/2017/04/05/seattles-2-9-unemployment-rate-tells-us-nothing-about-the-effects-of-seattles-minimum-wage-rise/#782d373068b8

"Sure, it's lovely that unemployment in Seattle dips under 3%. But an attempt to tie that drop in the unemployment rate to the minimum wage isn't going to work. For we can as easily note that the unemployment rate has dropped everywhere in the US over this same time period and the minimum wage hasn't risen everywhere over that time period. We've not even got a consistent correlation between minimum wages and unemployment that is.mWhat we've actually got to do is try to work out some method of what would have happened in Seattle from all of the effects of everything else other than the minimum wage, then compare it to what did happen with the minimum wage. The difference between these two will be the effect of the minimum wage rise. Seattle City Council know this, which is why they asked the University of Washington to run exactly such a study."

Worstall reaches back to this July 2016 paper:

https://evans.uw.edu/sites/default/files/MinWageReport-July2016_Final.pdf

Time to do some fact checking on this right wing spin.

[Apr 09, 2017] the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyones gross income and balance that fiscally by levying taxes that increase with income

Apr 09, 2017 | economistsview.typepad.com

Peter K. , April 08, 2017 at 11:14 AM
This might be the way to go:

http://www.demos.org/blog/3/26/15/why-fiscal-progressivity-discussions-are-so-muddled

Why Fiscal Progressivity Discussions Are So Muddled

Posted by Matt Bruenig on March 26, 2015

Yesterday I wrote about the mistaken way that I think some commentators discuss cross-country tax progressivity. Based on OECD tables and the work of Monica Prasad, the conventional wisdom is that low-inequality countries use extremely progressive transfers rather than progressive taxes to get that way. But when you look at transfer levels in these countries broken down by income decile, you often see something like this:

[chart]

That sure doesn't seem like progressive transfer spending, does it? So how can the conventional wisdom be right if the graph looks like that? Why does this graph seem on first glance to so challenge the conventional wisdom? The answer lies deep in the methodological weeds. Explaining it helps to reveal why I find these discussions to be so muddled and why I think the conveying of the conventional wisdom tends to be broadly unhelpful to normal (and often even very sophisticated) audiences.

...

Treatments of this topic that fail to convey this (and I think many of them do, often because even the writer doesn't understand what's going on) darken more than they illuminate. Really, the "progressivity" discussions in general do that, making the topic far more complicated and muddled than it needs to be.

Which is especially sad because the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyone's gross income and balance that fiscally by levying taxes that increase with income.

pgl -> Peter K.... , April 08, 2017 at 12:18 PM
Some of what he writes makes a little sense but this is really dumb:

"The bigger problem with the regressivity objection, in my view, is that dividing taxes paid by income seems to obscure the more important point. What really matters in all of this is how many dollars you are scraping from poor, middle class, and rich people."

Not considering the level of income - just how much a person pays in taxes? Heck - that makes the head tax OK. Dumbest metric for the fairness of the tax system ever.

Peter K. -> pgl... , April 08, 2017 at 01:22 PM
Learn how to read...

"Which is especially sad because the Nordic model of inequality reduction is pretty simple: use broad-based transfers to increase everyone's gross income and balance that fiscally by levying taxes that increase with income."

[Apr 06, 2017] Approximately 10 million males ages 25-54 are unemployed. Fifty-seven percent of these are on disability

Apr 06, 2017 | economistsview.typepad.com
New Deal democrat , April 05, 2017 at 05:56 AM
Via Business Insider
http://www.businessinsider.com/jamie-dimon-ceo-letter-jpmorgan-on-education-and-labor-force-participation-2017-4

This is from Jamie Dimon's letter to stockholders:

"If the work participation rate for this group [men ages 25-54] went back to just 93% – the current average for the other developed nations – approximately 10 million more people would be working in the United States. Some other highly disturbing facts include: Fifty-seven percent of these non-working males are on disability"

I don't know where he got the statistic from, but if it is true it is potent evidence that the main factor behind the 60 year long decline in prime age labor force participation by men is an increase in those on disability, probably due to both the expansion of the program, and better longevity and diagnostics -- and probably also tied in to opiate addiction as well.

pgl -> New Deal democrat... , April 05, 2017 at 08:14 AM
So does Jamie sitting on his mountain of other people's money have some magic solution that will get this EPOP back to 93%? I guess if we all bank at JPMorganChase, all will be fine? C'mon Jamie.
New Deal democrat -> pgl... , April 05, 2017 at 08:54 AM
I'm only citing him for the disability stat.

Do you happen to have any source material that would indicate whether that stat is correct or not?

pgl -> New Deal democrat... , April 05, 2017 at 09:37 AM
There has been a bit of a discussion on this - most of which I sort of found unconvincing. Sorry but I am not the expert on this one. And I doubt Jamie Dimon is not either.
EMichael -> New Deal democrat... , April 05, 2017 at 08:26 AM
Never, ever listen to Jamie Dimon about anything.

"This is another common explanation for the drop in male participation. But again it doesn't explain more than a fraction of the phenomenon.

There's not much doubt that Social Security Disability Insurance takes people out of the workforce, often by inelegant design. In order to qualify for disability payments, people typically have to prove that they cannot work full-time. SSDI critics say this policy sidelines many people who might otherwise be able to contribute to the economy.

But how many people does SSDI really remove? From 1967 to 2014, the share of prime-age men getting disability insurance rose from 1 percent to 3 percent. There is little chance that this increase is entirely the result of several million fraudulent attempts to get money without working. But even if it were, SSDI would still only explain about one-quarter of the decline in the male participation rate over that time. There are many good reasons to reform disability insurance. But it's not the singular driving force behind the decline of working men."

https://www.theatlantic.com/business/archive/2016/06/the-missing-men/488858/

pgl -> EMichael... , April 05, 2017 at 08:28 AM
When Dimon makes a recommendation re regulating his own sector, the best thing to do is just the opposite.

[Apr 04, 2017] Americans Want More Than Just Money to Live On

Apr 04, 2017 | www.bloomberg.com

APRIL 3, 2017 9:00 AM EDT

Donald Trump's election as president should have reminded liberals that Americans want more than money from their work. They responded to Trump's promise of jobs more than to Hillary Clinton's promise of government benefits because in addition to money, people also need dignity, a sense of self-reliance and respect within their community. For centuries, jobs have provided all of those.

To say that work is disappearing would be an exaggeration. But despite the low unemployment rate, fewer Americans have jobs than in years past:

[chart]

This new class of non-workers may be able to survive on the government dole, the charity of friends and family or via black-market activities like drug sales. But they've probably lost some of the dignity and respect that used to come with working for a living. Falling employment has been linked to declining marriage rates, reduced happiness and opiate abuse. Some economists even blame disappearing jobs for the recent rise in mortality rates afflicting white Americans.

What's more, the longer people stay out of the labor force, the more trouble they will have getting back into it. They lose work ethic, skills and connections, and employers become suspicious of the large gaps in the resumes. Economists Brad DeLong and Larry Summers have shown that this so-called labor-market hysteresis can have potentially large, long-lasting negative effects on the economy.

When the economy is in recession, the best approach is probably a combination of fiscal and monetary stimulus. But when the labor-force dropout problem is chronic, as it is now, a different kind of policy may be needed -- a government-job guarantee.

The U.S. has used an approach like this before. In 1935, the administration of President Franklin Roosevelt established the Works Progress Administration, which employed millions of American men, mostly in public-works projects. WPA employees received hourly wages similar to other unskilled workers in the surrounding area. Most of them built infrastructure and buildings, but a few were paid to make art and write books. The total cost of the program was high -- $1.3 billion a year, or about 1.7 percent of U.S. gross domestic product. An equivalent expenditure now would be a little more than $300 billion, or about half of federal defense spending. But the popularity of the program is hard to deny, given Roosevelt's resounding victory in his reelection bid in 1936.

The idea of a new work program isn't a new one -- economists on all sides of the political spectrum have been kicking it around for years now. It has received support from Stephanie Kelton, an adviser to the Bernie Sanders presidential campaign, and from Kevin Hassett, who is reportedly Trump's pick to lead the Council of Economic Advisers. Jeff Spross has an excellent article in Democracy exploring the idea in depth.

William Darity of Duke University has been a particularly avid promoter of a job guarantee. He describes it thus:

Any American 18 years or older would be able to find work through a federally funded public service employment program -- a "National Investment Employment Corps." Each National Investment Employment Corps job would offer individuals non-poverty wages, a minimum salary of $20,000, plus benefits including federal health insurance. The types of jobs offered could address the maintenance and construction of the nation's physical and human infrastructure, from building roads, bridges, dams and schools, to staffing high quality day care.
There is no shortage of work to be done. Even beyond the tasks Darity lists, the U.S. is full of jobs that need doing, from elder care to renovation of old decaying buildings, to cleanup of lead and other pollution, to construction and staffing of transit systems.

Darity estimates the cost of the program at $750 billion a year, Spross at $670 billion. That's about equivalent to all of the U.S.'s current anti-poverty programs, and would be about twice the size of the old WPA. So this would be a very big deal. But the true cost to society would be considerably less, because the jobs would provide value. Better infrastructure, more child care and elder care, and a cleaner, healthier environment would make the nation a richer, better place to live -- in other words, those benefits should defray much of the program's cost. Also, the program would take people off of the welfare rolls and cut government anti-poverty spending. Finally, even when the economy isn't in a recession, more income will probably increase demand in the local economy.

All told, the program could end up being a bargain. And if the guarantee is limited to distressed, low-employment areas, which could lower the costs down even more, and allow for pilot programs to establish the viability of the concept.

Many people on the left and elsewhere don't like this idea. They doubt that government make-work will provide dignity. And they believe strongly in the theory that automation will soon put large numbers of people out of a job entirely. The only solution, they say, is to change U.S. culture and values to make work less important, and to rely on programs like universal basic income. On the right, some would inevitably see the plan as a first step on the road to socialism.

Maybe the critics will prove right in the long run. But for now, forcing a dramatic change on American culture is a lot harder than simply giving people jobs. Robot-driven unemployment and new social values are still mostly in the realm of science fiction, while the American public wants jobs now. A job guarantee looks like a very good thing to try.

Peter K. said in reply to Peter K.... Do both, the UBI and Job Guarantee.

Why doesn't Noah Smith discuss Fed Fail in detail and about how conservatives forced unprecedented austerity on the economy.

This is not just "natural" or the evolution of technology, demographics and innovation.

He should be supporting an NGDP target, etc.

At very least run the economy hot.

Reply Tuesday, April 04, 2017 at 12:08 PM Peter K. said in reply to Peter K.... What Smith does not discuss is how the Fed is currently raising rates to kill jobs. Reply Tuesday, April 04, 2017 at 12:09 PM

[Apr 04, 2017] Yes progress was made from 1960 to 1975. But what after that? To dismiss the rise in inequality by saying one can reconfigure the CPI index is Heritage level nonsense.

Apr 04, 2017 | economistsview.typepad.com
pgl , April 03, 2017 at 12:21 PM
Mankiw alert. He is hyping this:

http://www.nber.org/papers/w23292

"Despite the large increase in U.S. income inequality, consumption for families at the 25th and 50th percentiles of income has grown steadily over the time period 1960-2015. The number of cars per household with below median income has doubled since 1980 and the number of bedrooms per household has grown 10 percent despite decreases in household size. The finding of zero growth in American real wages since the 1970s is driven in part by the choice of the CPI-U as the price deflator; small biases in any price deflator compound over long periods of time. Using a different deflator such as the Personal Consumption Expenditures index (PCE) yields modest growth in real wages and in median household incomes throughout the time period. Accounting for the Hamilton (1998) and Costa (2001) estimates of CPI bias yields estimated wage growth of 1 percent per year during 1975-2015. Meaningful growth in consumption for below median income families has occurred even in a prolonged period of increasing income inequality, increasing consumption inequality and a decreasing share of national income accruing to labor."

Yes progress was made from 1960 to 1975. But what after that? To dismiss the rise in inequality by saying one can reconfigure the CPI index is Heritage level nonsense.

[Apr 04, 2017] In Neo-classical Economics as a Stratagem Against Henry George

Notable quotes:
"... As with any major reform movement, the corporate backlash was predictable. In Neo-classical Economics, Gaffney reveals that this backlash took two main forms. The first was the Red Scare (1919-1989), overseen by J Edgar Hoover as Assistant Attorney General and later as FBI director. ..."
"... The second was more insidious and involved the deliberate reframing of the classical economic theory developed by Adam Smith, Locke, Hume, and Ricardo as so-called neoclassical economics. ..."
Apr 04, 2017 | economistsview.typepad.com
RGC , April 03, 2017 at 06:36 AM
Karl Marx vs Henry George

by Stuart Jeanne Bramhall / August 12th, 2013


Why do American children study Karl Marx, the villain we love to hate, in school? Yet Henry George, whose views on land and tax reform gave rise to the Progressive and Populist movements of the 1900s, is totally absent from US history books.

During the 1890s George, author of the 1879 bestseller Progress and Poverty, was the third most famous American, after Mark Twain and Thomas Edison. In 1896 he outpolled Teddy Roosevelt and was nearly elected mayor of New York.

In Neo-classical Economics as a Stratagem Against Henry George (2007), University of California economist Mason Gaffney argues that George and his Land Value Tax pose a far greater threat than Marx to America's corporate elite.

America's enormous concentration of wealth has always depended on the inherent right of the wealthy elite to seize and monopolize vast quantities of land and natural resources (oil, gas, forests, water, minerals, etc) for personal profit.

Adopting an LVT, which is far easier than launching a violent revolution, would essentially negate that right. What's more, every jurisdiction that has ever implemented an LVT finds it works exactly the way George predicted it would. Productivity, prosperity, and social wellbeing flourish, while inflation, wealth inequality, and boom and bust recessions and depressions virtually vanish.

When Progress and Poverty first came out in 1879, it started a worldwide reform movement that in the US manifested in the fiercely anti-corporate Populist Movement in the 1880s and later the Progressive Movement (1900-1920). Many important anti-corporate reforms came out of this period, including the Sherman Antitrust Act (1890), a constitutional amendment allowing Americans to elect the Senate by popular vote (prior to 1913 the Senate was appointed by state legislators), and the country's first state-owned bank, The Bank of North Dakota (1919).

The Corporate Elite Strikes Back

As with any major reform movement, the corporate backlash was predictable. In Neo-classical Economics, Gaffney reveals that this backlash took two main forms. The first was the Red Scare (1919-1989), overseen by J Edgar Hoover as Assistant Attorney General and later as FBI director.

The second was more insidious and involved the deliberate reframing of the classical economic theory developed by Adam Smith, Locke, Hume, and Ricardo as so-called neoclassical economics.

The latter totally negates Adam Smith's basic differentiation between "land", a limited, non-producible resource. and "capital", a reproducible result of past human production. Smith, Locke, Hume, and Ricardo all held that individuals have no right to seize and monopolize scarce natural resources, such as land, minerals, water, and forests. They believed that because these resources are both limited and essential for human survival, they should belong to the public.

Neoclassical economics, which first developed in the 1890s, was based on the premise that growth and development can only occur if a handful of rent-seekers are allowed to monopolize scarce land and natural resources for their personal profit. Henry George, who publicly debated the early pioneers of neoclassical economics, claimed the science of economics was being deliberately distorted to discredit him. Gaffney agrees. Because George's proposal to replace income and sales tax with single land value taxed is based on logical concepts of land, capital, labor, and rent advanced by Adam Smith, Locke, Hume, and Ricardo, they all had to be discredited.

Gaffney believes neoclassical economic theory undermines George's arguments for a single Land Value Tax in two basic ways: 1) by claiming that land is no different from other capital (ironically Marx made the identical argument) and 2) by portraying the science of economics as a series of hard choices and sacrifices that low and middle income people must make. Some examples:

If we want efficiency, we must sacrifice equity.

To attract business, we must lower taxes and shut libraries and defund schools.

To prevent inflation, we must keep a large number of Americans unemployed.

To create jobs, we must destroy the environment and pollute the air, water, and food chain.

To raise productivity, we must fire people.

Gaffney's book traces the phenomenal public support Georgism enjoyed before the tenets of neoclassical economics took hold in American universities. In addition to inspiring the Populist and Progressive movements, an LVT to fund irrigation projects in California's Central Valley made California the top producing farm state. In 1916 the first federal income tax law was introduced by Georgist members of Congress (Henry George Jr and Warren Bailey) and included virtually no tax on wages. In 1934 Georgist Upton Sinclair was almost elected governor of California.


Gaffney also identifies the robber barons whose fortunes financed the economics departments of the major universities who went on to substitute neooclassical economics for classical economic theory. At the top of this list were

Ezra Cornell (owner of both Western Union and Associated Press) – founder of Cornell University

John D Rockefeller – helped fund the University of Chicago and installed his cronies in its economics department.

J. P Morgan – investment banker and early funder of Columbia University

B&O Railroad – John Hopkins University

Southern Pacific Railroad – Stanford University

The final section of Gaffney's book lays out the tragic economic, political, and social consequences of allowing the Red Scare and neoclassical economics to stifle America's movement for a single Land Value Tax:

Economic Consequences

The corporate elite has privatized, or is privatizing, most of the public domain (including fisheries, the public airwaves, water, offshore oil and gas, and the right to clean air) without compensation to the public.

The rate of saving and capital formation continues to fall rapidly. This is the main reason there is no recovery.
Although profits soar, corporations have no incentive to invest in expansion and jobs. Instead they invest their profits in real estate, derivatives, and commodities speculation.

American capital is decayed and obsolete. The US has lost much of its steel and auto industries. Power plants and oil refineries are ancient and polluting. Most public capital (infrastructure) is old and crumbling.

The number of American farms has fallen from 6 million in 1920 to 1 million in 2007.

The USA, once so self-sufficient, has grown dangerously dependent on importing raw materials and foreign manufacturers.

The US financial system is a shambles, supported only by loading trillions of dollars of bad debts onto the taxpayers.

Real wage rates have continued to fall since 1975,
Unemployment has risen to chronically high levels.
Inequality in wealth and income continues to increase rapidly.

Political Consequences

The corporate elite has nullified all the Progressive Era electoral reforms by pouring money into politics and "deep lobbying," at all levels of government, including our institutions of higher learning and our public schools.

The corporate elite continue to pour ever more of our tax money into prisons.

Social Consequences

Homelessness has risen to new heights, in spite of decades of subsidies to home-building and, favorable tax treatment of owner-occupied homes

Hunger is rampant.

Street begging, once rare, is everywhere

Americans have experienced a sharp loss of community, honor, duty, loyalty and patriotism.

In the shadow world between crime and business there is now the vast, gray underground economy that includes tax evasion, tax avoidance, and drug-dealing.

The US which once led the world in nearly every endeavor, has fallen far behind in infant survival, in longevity, in literacy, in numeracy, in mental health.

American education no longer leads the world. Privatized education in the form of commercial TV has largely superseded public education.

http://dissidentvoice.org/2013/08/karl-marx-vs-henry-george/

[Apr 01, 2017] The General Theory of Employment, Interest, and Money

Apr 01, 2017 | economistsview.typepad.com
anne -> RC AKA Darryl, Ron... , April 01, 2017 at 11:43 AM
http://ebooks.adelaide.edu.au/k/keynes/john_maynard/k44g/chapter12.html

1936

The General Theory of Employment, Interest, and Money
By John Maynard Keynes

The State of Long-Term Expectation

[ The passage is important, but a reference is ecessary. ]

[Mar 31, 2017] Professor Thoma has the unique ability to pick up interesting links.

Mar 31, 2017 | economistsview.typepad.com
Peter K. , March 31, 2017 at 05:42 AM
David Glasner discusses how essential Professor Thoma's blog is to the Econosphere... Funny given that the web address for Uneasy Money refuses appear in Typepad.

A Tale of Three Posts
by David Glasner

March 30, 2017

Since I started blogging in July 2011, I have published 521 posts (not including this one). A number of my posts have achieved a fair amount of popularity, as measured by the number of views, which WordPress allows me to keep track of. Many, though not all, of my most widely viewed posts were mentioned by Paul Krugman in his blog. Whenever I noticed an unusually large uptick in the number of viewers visiting the blog, I usually found Krugman had linked to my post, causing a surge of viewers to my blog.

The most visitors I ever had in one day was on August 7, 2012. It was the day after I wrote a post mocking an op-ed in the Wall Street Journal by Arthur Laffer ("Arthur Laffer, Anti-Enlightenment Economist") in which, based on some questionable data, and embarrassingly bad logic, Laffer maintained that countries that had adopted fiscal stimulus after the 2008-09 downturn had weaker recoveries than countries that had practiced fiscal austerity. This was not the first or last time that Krugman linked to a post of mine, but what made it special was that Krugman linked to it while he on vacation, so that for three days, everyone who visited Krugman's blog found his post linking to my post, so that on August 7 alone, my post was viewed 7885 times, with 3004 viewing the post on August 8, 1591 on August 9, and 953 on August 10. In the entire month of August, the Laffer post was viewed 15,399 times. To this day, that post remains the most viewed post that I have ever written, having been viewed a total 17,604 times.

As you can see, the post has not maintained its popular appeal, over 87 percent of all views having occurred within three and a half weeks of its having been published. And there's no reason why it should have retained its popularity. It was a well-written post, properly taking a moderately well-known right-wing economist to task for publishing a silly piece of ideological drivel in a once-great newspaper, but there was nothing especially profound or original about it. It was just the sort of post that Krugman loves to link to, and I was at the top of his blog for three days before he published his next post.

...

But over the past six months, suddenly since October, a third post ("Gold Standard or Gold Exchange Standard: What's the Difference?"), originally published on July 1, 2015, has been attracting a lot of traffic. When first published, it was moderately successful, drawing 569 visits on July 2, 2015, which is still the most visits it has received on any single day, mostly via links from Mark Toma's blog and Brad DeLong's blog. The post was not terribly original, but I think it did a nice job of describing that evolution of the gold standard from an almost accidental and peculiarly British, institution into a totem of late nineteenth-century international monetary orthodoxy, whose principal features remain till this day surprisingly obscure even to well trained and sophisticated monetary economists and financial experts.

...

The other amazing thing about the burst of traffic to this post is that most of the visitors seem to be coming from India. Over the past 30 days since February 28, this blog has been viewed 17,165 times. The most-often viewed post in that time period was my gold-exchange standard post, which was viewed 7385 times, i.e., over 40% of all views were of that one single post. In the past 30 days, my blog was viewed from India 6446 times while my blog was viewed from the United States only 4863 times. Over the entire history of this blog, about 50% of views have been from within the US. So India is clearly where it's at now.

...

PS I realized that, by identifying Paul Krugman's blog as the blog from which many of my most popular posts have received the largest number of viewers, I inadvertently slighted Mark Thoma's indispensible blog (Economistsview.typepad.com), which really is the heart and soul of the econ blogosphere. I just checked, and I see that since my blog started in 2011, over 79,000 viewers have visited my blog via Mark's blog compared to 53,000 viewers who have visited via Krugman. And I daresay that when Krugman has linked to one of my posts, it's probably only after he followed Thoma's link to my blog, so I'm doubly indebted to Mark.

Peter K. -> pgl... , March 31, 2017 at 05:57 AM
High praise from Glasner:

"Mark Thoma's indispensible blog (Economistsview.typepad.com), which really is the heart and soul of the econ blogosphere."

Too bad you and people like you are trying to ruin it with your bullying and trolling.

Peter K. -> Peter K.... , March 31, 2017 at 06:09 AM
I also enjoy David Beckworth's podcasts. Funny enough Typepad doesn't like his website either.

His latest podcast with Jeffrey Frankel is good.

http://macromarketmusings blogspot com/2017/03/macro-musings-podcasts-jeffrey-frankel.html

At the end they have a good discussion about NGDP targetting.

I really don't understand why progressive economists don't get behind this more. The more mainstream economists seem more interested in promoting the Democrats' policy agenda and defending it from the left and from the right.

Economists could/can help social movements push policies like a higher minimum wage, UBI, guaranteed jobs, unionization/economic democracy and an NGDP target for the Fed.

Seems like Progressive [center-left] economists are more interested in defending the Federal Reserve except for DeLong who criticizes it in an indirect, oblique manner. They're in a defensive crouch all of the time.

Seems like a big blind spot to me.

paine -> Peter K.... , March 31, 2017 at 09:08 AM
The comments should never be confused
with the posts and posted links
Conjecture

We commenteers long dince lost

Large readership

Peter K. -> paine... , March 31, 2017 at 10:16 AM
"The comments should never be confused with the posts and posted links"

Did I confuse them?

libezkova -> paine... , March 31, 2017 at 10:32 AM
"The comments should never be confused with the posts and posted links"

That's wrong ! There is a strong interdependency.

Professor Thoma has the unique ability to pick up interesting links. I wonder where he finds time to read all those articles, as probably to post a dosen of links, as he often does, you need to read at least twice more articles. Probably much more the twice.

I think that this quality attracts a lot of people.

And I noticed that on average, his "Links" posts attract more comments that regular posts. Probably by the factor of two on average. Most Links posts attract over 100 comments with high number around 300.

It might also be that commenting on "Links", commenters often post their own findings and quotes, which sometimes is of high, or very high value and add to the value. Anne is one such persons.

Another interesting feature of this blog is that the "core" group of commenters is reasonably stable with many commenting for five years or more. I belong to "episodical" commenters, but I follow the blog for a long time and after a couple of years I start recognizing probably 80% of names and even now has some vague information about their personal histories.

And some of the members of the core group systematically produce a number of high quality comments almost each day. That also attracts people.

Discussions, when two commenters have opposite views of the subject to me is the most interesting part. Despite occasional shouting matches.

So it is the quality of links and posts attracts quality commenters, which in turn, further enhance the quality of the blog.

In any case: Bravo Professor Thoma !!!

Julio -> libezkova... , March 31, 2017 at 11:26 AM
Absolutely! I was originally attracted to this blog by the quality of the comments even more than the quality of Prof. Thoma's selections.

It's ironic that paine seems to be arguing that comments are relatively unimportant. His posts are always thought-provoking and foster good discussions, and one of the reasons I became a regular reader.

[Mar 31, 2017] How America's Most Prestigious Universities Bilk the U.S. Taxpayer Zero Hedge

Mar 31, 2017 | www.zerohedge.com

alphasammae , Mar 30, 2017 9:30 PM

Ivy League alumni like the illuminatis Clinton and Bushes are prepared and vetted to run Goldman Sachs, the White House and the justice system etc. A merry go 'round, this for that but at the end rather than creating personal foundations they should be creating foundations for their alma mater instead of their library mausoleum. Clinton foundation raised over $1.2 billion to be run by daughter. Sick.

old_cynic , Mar 30, 2017 11:21 PM

Flawed, sensationalistic report, clickbait for jealous masses who can't make the cut into the ivy league.

Most of the $ comes from research grants. Wouldn't you expect the best schools in the country to get research grants? Look at all the top state schools, they also attract loads of federal $.

As for endowment income being non-taxable for universities, that's a good thing IMO. Would you rather have the endowment funds for all other nonprofits taxed too? Think about hospitals and churches as examples.

dvfco -> buckstopshere , Mar 30, 2017 8:58 PM

$71,000+ for incoming class at Georgetown this fall.

$0 at U.S. Naval Academy.

Hmmm.

Cardinal Fang , Mar 30, 2017 6:19 PM

It's a big club and you ain't in it.

I worked for a Billionaire who actually said this to me.

He meant it.

This is how they think.

Notice I said 'worked'...

He tried to be a man of the people but couldn't fake it at times.

No_More , Mar 30, 2017 6:35 PM

At $120K/student/year, I'd consider perpetual studenthood at an Ivy (assuming the $120K was paid direct to me).

Talk about your pricey name brand Free Shit though (as compared to SNAP or an ObamaPhone).

pitz , Mar 30, 2017 7:32 PM

The Ivy League universities are also prolific H-1B abusers, and they use tax-free "scholarship" endowment fund earnings to advance their liberal causes.

Time to tax them properly and stop the scam of 'scholarships' and H-1B abuse.

khakuda , Mar 30, 2017 7:44 PM

Harvard and Yale each have endowments on the order of $25-$35 billion, yet always have their hands out for more.

Anteater , Mar 30, 2017 7:56 PM

The US has 1,000 Generals. Count 'em. We have 33 brigade combat teams, who comprise in battalions, companies and platoons, roughly 1,000 combat platoons. Do the math. We have so many excess Generals, each General could partner with an LT leading a platoon into battle. That's FU. Let's cut that number back to 33, one per BCT, and find KP duty for the 967, until they find the $6,000,000,000,000 of our last life savings that the Pentagon 'lost track of' and is now forever MIA.

The US has 1,000 Admirals. Count 'em. We have 430 fighting ships, if you go all the way down to fuel barges, PT boats and LSTs. Do the math. We have so many excess Admirals, each Admiral could partner with an LT leading an LST onto the beach, and still have 570 Admirals to wade ashore and declare the beachhead secured. That's FU. Let's cut that number back to 7, one per fleet, and find KP duty for the 993, until they find the $6,000,000,000,000 of our last life savings that the Pentagon 'lost track of' and is now forever MIA.

Somebody knows where our savings went! There are over 1800 unnecessary Admirals and Generals who could defend America and earn their $250,000 a year salaries for life, by ferreting out the moles, rats, leeches and gribbles at the Pentagon, clean house, right-size the armed forces, re-fund yhe VA, then hang all the MIC lobbyists from the yardarms for treason.

Faeriedust -> Anteater , Mar 30, 2017 9:06 PM

It's worse. From having relatives inside the Pentagon budget process, I've been made aware for decades that at least 1/3 of our military manpower exists not because there is any rational need for those troops, OTHER than having sufficient forces to justify retaining and promoting more high-ranking (and highly-paid) Brass.

The hierarchical structure of the military assures that there are relatively few pay billets at the top. This means that officers sitting on promotion boards are constantly faced with the demand to "pass over" and thus doom to early separation/retirement fellow officers who are perfectly competent at their jobs, just not needed by the numbers.

In the immediate post WWII era, service leaders were nervous about letting good talent go and get settled in civilian life, only to need them for the Next Big One in a few years' time. Those few years have since become six decades, and the system of holding onto popular people by "creative" billeting has become institutionalized. The Armed Forces DON'T need AT LEAST 1/3 of their personnel, especially in the higher ranks. But the higher the rank, the more personal favors are owed to them, and the more likely that a new job will be created requiring even more stars, in order to assure that they stay employed at least until they can collect retirement.

The Pentagon is the world's one and and only truly functional socialist system.

[Mar 29, 2017] The reason UK economics students revolted

Notable quotes:
"... And that's the reason UK economics students revolted: "Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins. ..."
"... why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs. ..."
"... But the answer to their question is very simple. Neoliberals are in power and they dictate what is to be taught in Economics courses. They also promote and sustain "willing charlatans" like Mankiw, who poisons and indoctrinates students with neoclassical junk. ..."
Mar 29, 2017 | economistsview.typepad.com
JohnH -> Peter K.... , March 27, 2017 at 06:51 PM
So true; "SWL has never addressed what is happening in the real world."

And that's the reason UK economics students revolted: "Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.

Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs."
https://www.theguardian.com/business/2013/oct/24/students-post-crash-economics

... ... ...

libezkova -> JohnH... , March 27, 2017 at 09:40 PM
"why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs."

https://www.theguardian.com/business/2013/oct/24/students-post-crash-economics"

That's a very good link. Thank you !

But the answer to their question is very simple. Neoliberals are in power and they dictate what is to be taught in Economics courses. They also promote and sustain "willing charlatans" like Mankiw, who poisons and indoctrinates students with neoclassical junk.

[Mar 28, 2017] It is ironic that Krugman is cited as a voice for reform -- he represents the neo-Keynesian hell weve got stuck in

Notable quotes:
"... Ironic that Krugman is cited as a voice for reform - he represents the neo-Keynesian hell we've got stuck in. ..."
"... I'm an economics student at the University of Glasgow, in second year as part of a compulsory course we were taught about alternative economic theories in comparison to Neoclassical models. ..."
"... The course has only been running for a few years but in response students have set up a very similar society to promote alternative thinking on economics. Even just half a semester on Post-Keynesian Economic theory has really opened our eyes to the alternatives within economics. ..."
"... I studied neoclassical 'economics' (it really isn't economics, just garbage) for five years. Began to take my graduate degree in the autumn of 2008 when everything was falling apart and I had no idea why. No clue whatsoever. After my masters degree in neoclassical 'economics' I still had no clue what had happened. ..."
"... Orthodox economics: Ignore money. Hence, ignore debt. Let the overall leverage of the economy increase until Ponzi finance fails and financial crisis begins. The debt deflation that follows means money gets even more concentrated towards the financial/political elite than before the crisis. Neo-feudalism makes way - finally war. ..."
"... Orthodox economists don't understand capitalism. They can't. The long time failed axioms underlying everything else in their theories don't allow them to do that. ..."
Mar 28, 2017 | discussion.theguardian.com
Febo , 25 Oct 2013 15:16

Ironic that Krugman is cited as a voice for reform - he represents the neo-Keynesian hell we've got stuck in.

JmkSweeney, 25 Oct 2013 18:46

I'm an economics student at the University of Glasgow, in second year as part of a compulsory course we were taught about alternative economic theories in comparison to Neoclassical models.

The course has only been running for a few years but in response students have set up a very similar society to promote alternative thinking on economics. Even just half a semester on Post-Keynesian Economic theory has really opened our eyes to the alternatives within economics.

DisconnectMe -> JmkSweeney , 26 Oct 2013 13:54

I studied neoclassical 'economics' (it really isn't economics, just garbage) for five years. Began to take my graduate degree in the autumn of 2008 when everything was falling apart and I had no idea why. No clue whatsoever. After my masters degree in neoclassical 'economics' I still had no clue what had happened.

Then I stumbled across Post-Keynesian economics and it took me about six months to dismiss the neoclassical garbage. If I hadn't studied that garbage for five years it would have taken me a few days.

DisconnectMe , 26 Oct 2013 02:42

Orthodox economics: Ignore money. Hence, ignore debt. Let the overall leverage of the economy increase until Ponzi finance fails and financial crisis begins. The debt deflation that follows means money gets even more concentrated towards the financial/political elite than before the crisis. Neo-feudalism makes way - finally war.

Then the cycle starts again.

Orthodox economists don't understand capitalism. They can't. The long time failed axioms underlying everything else in their theories don't allow them to do that.

What a waste of economic thinking.

[Mar 28, 2017] Economics taught by neo-classical economics is like the Natural Sciences departments being run by creationists

Notable quotes:
"... This has echoes of a protest by students in 2011 at Harvard when a group of students walked out of the lectures by Dr Gregory Manilow. What has happened to them? ..."
"... Good for them. The economics profession has been dominated by neoliberal theoreticians for far too long. It needs bringing back to the real world. ..."
"... i went to the LSE to study maths and statistics with a sprinkling of economics (my first taste of it at the time). after a few months i was of the opinion it is based on terrible assumptions. e.g. the needs of the average consumer, which are then blown up into fantastical macroeconomical proportions which only led to flawed arguments. The subsequent financial crisis only backed this up. ..."
Mar 28, 2017 | discussion.theguardian.com
RobinS , 25 Oct 2013 5:20

What a ghastly indictment of Manchester, and other economics departments - obviously being very economic with their subject. Sounds a bit like the Natural Sciences departments being run by creationists.

ResponsibleWellbeing , 25 Oct 2013 5:23

This should be the first class for the whole students in economics.
What are the limits in ecology ecosystem? And what are the needs/capacities for human flourishing?

Adventures in New Economics 2: Donut Economics, Kate Raworth

http://www.youtube.com/watch?v=VieEtdcmjtI

This is an open/complex map with a compass in values that I've built trying to go through both main concepts. It's valid for personal development / companies / communities / nations / whole planet.

bit.ly/1775pbV

Jed Bland , 25 Oct 2013 5:36

This has echoes of a protest by students in 2011 at Harvard when a group of students walked out of the lectures by Dr Gregory Manilow. What has happened to them?

I personally have observed in other disciplines that teaching tends to be a generation behind current thinking, Particularly when it has more to do with ideology than science.

Some ten years ago, a movement called the Post-Autistic Ecomoncs Movement had a considerable influence in Europe but has no doubt disappeared in the face of the greed which is central supporting feature of today's neoliberalism.

SteveTen , 25 Oct 2013 5:44

Good for them. The economics profession has been dominated by neoliberal theoreticians for far too long. It needs bringing back to the real world.

skyblueravo , 25 Oct 2013 5:45

i went to the LSE to study maths and statistics with a sprinkling of economics (my first taste of it at the time). after a few months i was of the opinion it is based on terrible assumptions. e.g. the needs of the average consumer, which are then blown up into fantastical macroeconomical proportions which only led to flawed arguments. The subsequent financial crisis only backed this up.

I commend this thinking by the students but if I was one of their parents forking out 27k i would probably tell them to pass the exams they need to and get out and start earning.

LSE is a godawful uni also, unless you have given spawn to gordon gekko dont bother with it.

kongshan , 25 Oct 2013 5:46

Alternative theories and models??? Well they are currently practiced by North Korea and these students will be more than welcomed by the Kim family to ply their trade there.

UnlearningEcon -> kongshan , 25 Oct 2013 7:58

Actually, "alternative theories" were practiced by South Korea, which has been quite a success story. It's not either the status quo or state communism, you know.

[Mar 28, 2017] The robber barons and their useful idiots have certainly achieved what they set out to do.

Mar 28, 2017 | discussion.theguardian.com
radicalchange 25 Oct 2013 6:41

For an understanding of how we came to have thrust upon us the "Dismal Science" of neo-classical economics, which took shape in the 1880's - 1890's, I recommend reading "The Corruption of Economics" by Mason Gaffney.

Here is a link to some excerpts from his book,
http://www.politicaleconomy.org/gaffney.htm

Essentially, economic thinking was hijacked by the robber barons who through building and funding universities were able to subvert the teaching of economics to suit their own agenda. Classical economics with a sound basis of three factors of production was replaced by voodhoo economics which reduced the three factors of production to only two. Whereas once "land" was a factor of production in its own right alongside "capital" and "labour", it was magicked away to be incorporated as "capital" for the purpose of the land owning robber barons.

As anyone with a few braincells would know, "land" is a distinct factor of production in its own right, and not only that, it is the primary factor since neither "capital" or "labour" would exist without it. But "land" can exist without both the other two factors which makes it unique and makes it primary and yet voodhoo economics has managed to hide this fact so well through the employment of clever mathematics to create an illusion of being a solid discipline.

http://www.henrygeorge.org/pcontents.htm

Neoclassical economics is the idiom of most economic discourse today. It is the paradigm that bends the twigs of young minds. Then it confines the florescence of older ones, like chicken-wire shaping a topiary. It took form about a hundred years ago, when Henry George and his reform proposals were a clear and present political danger and challenge to the landed and intellectual establishments of the world. Few people realize to what a degree the founders of Neoclassical economics changed the discipline for the express purpose of deflecting George, discomfiting his followers, and frustrating future students seeking to follow his arguments. The stratagem was semantic: to destroy the very words in which he expressed himself.


To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals' success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today's counterproductive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.

Not one economics graduate have I met that has heard of Henry George but yet they have all heard of Karl Marx. The robber barons and their useful idiots have certainly achieved what they set out to do.

radicalchange -> radicalchange , 25 Oct 2013 6:45

As clarification the two paragraphs in italics are excerpts from the "Corruption of Economics" by Mason Gaffney. The link to Henry George's "Progress and Poverty" is, http://www.henrygeorge.org/pcontents.htm

[Mar 28, 2017] I taught Economics for forty years and over 30 of those to Singaporean scholars destined to Oxford, Cambridge and Ivy League universities; in all those years I was aware of the lies I had to teach in order to pass university entrance exams.

Notable quotes:
"... Then Economic History was virtually withdrawn from university Economics and other courses so that only the"lies" would be taught backed up by unquestioned (i.e. purely deductive) Mathematics. It is an academic crime ..."
Mar 28, 2017 | profile.theguardian.com
ptah , 25 Oct 2013 7:55

If a viable economic solution emerged from the universities - one which remedied the classical models and trumped the broken neo-liberal systems, how would we recognise it?

To provide some context - and I am in no way qualified to discuss this topic really but, the first machines to produce logic emerging from Bletchley park were not fully recognised for their potential - the computer revolution took place elsewhere. The UK is absolute rubbish at recognising innovation!

Good luck to the students. I hope many more get involved in this debate.

ID2322670 , 25 Oct 2013 8:24

I taught Economics for forty years and over 30 of those to Singaporean scholars destined to Oxford, Cambridge and Ivy League universities; in all those years I was aware of the lies I had to teach in order to pass university entrance exams.

I attempted to follow the thesis that every economic theory however old or new was attempting to answer a unique contemporary economic problem and therefore only Economic History was of relevance in understanding a theory be Adam Smith or Keynes or even (unacademically) Thatcherism.

My students found all such information useless to passing Economics exams but interesting for "life".

Then Economic History was virtually withdrawn from university Economics and other courses so that only the"lies" would be taught backed up by unquestioned (i.e. purely deductive) Mathematics. It is an academic crime.

[Mar 28, 2017] Zombie theories continue on their path of destruction.

Notable quotes:
"... Neoliberal economics not only led to the crash of 2007/8 it is continuing to wreak havoc. A good current example is pension schemes - something we will depend on one day. They are valued using the purest form of free market thinking: the efficient markets hypothesis - the idea that asset markets always perfectly embody all relevant information. It is akin to belief in magic. ..."
"... It is amazing to read how narrow economics education is in modern Britain. It is not only intellectually unenlightened and literally dangerous, given the power many economics graduates can wield, amplified by the extraordinary sums and resources they manage, it also does a great disservice to people who are entitled to a proper education which, clearly, they are not receiving in this monotheistic model. ..."
"... It reminds me precisely of the so-called "religious education" I received in Ireland which was nothing of the sort. All I got was instruction in Catholic doctrine and ethics; there was no instruction in the beliefs of any other Christian sects, let alone what goes on in the other major world religions such as Hinduism, Judaism, or Islam. What I know about them I taught myself in later life. ..."
"... It seems that the same shameful parochial narrowness, intellectual provincialism, and "one true religion" ethic prevails in British economic so-called "education". ..."
"... On another matter, the revelation that economists "ignore empirical evidence that contradicts mainstream theories" destroys any notion that economics is a science, a silly claim I have always opposed. All that it reveals is that economists have no idea what science is. ..."
Mar 28, 2017 | discussion.theguardian.com
harrybuttle, 26 Oct 2013 7:25

Neoliberal economics not only led to the crash of 2007/8 it is continuing to wreak havoc. A good current example is pension schemes - something we will depend on one day. They are valued using the purest form of free market thinking: the efficient markets hypothesis - the idea that asset markets always perfectly embody all relevant information. It is akin to belief in magic.

Yet many professionals who run pension schemes and the government regulator all support it's use because it suits them - it deflects responsibility from them while they continue to be paid. It's effects on society are disastrous as it leads us to believe are insolvent. The government and actuarial profession accepted all this and enshrined it in law.

A topical example is the universities pension scheme the USS which BBC Newsnight and Radio 4 have just told us has a 'black hole' of a deficit.

Many of us thought that the EMH would ditched after its spectacular failure but no. Zombie theories continue on their path of destruction.

Josifer , 27 Oct 2013 01:00
It is amazing to read how narrow economics education is in modern Britain. It is not only intellectually unenlightened and literally dangerous, given the power many economics graduates can wield, amplified by the extraordinary sums and resources they manage, it also does a great disservice to people who are entitled to a proper education which, clearly, they are not receiving in this monotheistic model.

It reminds me precisely of the so-called "religious education" I received in Ireland which was nothing of the sort. All I got was instruction in Catholic doctrine and ethics; there was no instruction in the beliefs of any other Christian sects, let alone what goes on in the other major world religions such as Hinduism, Judaism, or Islam. What I know about them I taught myself in later life.

It seems that the same shameful parochial narrowness, intellectual provincialism, and "one true religion" ethic prevails in British economic so-called "education". Intellectuals ought to be utterly ashamed to propagate such blinkered views. Anyone who has never heard of Keynes is culturally illiterate; that an economics student, in particular, has never heard of Keynes is a disgrace.

On another matter, the revelation that economists "ignore empirical evidence that contradicts mainstream theories" destroys any notion that economics is a science, a silly claim I have always opposed. All that it reveals is that economists have no idea what science is.

[Mar 28, 2017] Priests of neoliberal economics need to recognize that they operate in a political environment in which their work will be seized upon by financial oligarchy, and will have real influnce of justifing thier often destrcutive for the majoroity of population policies

Delong is a typical neoliberal stooge, not that different from Mankiw, or Summers
Note that the terms "neoliberalism", "neo-classical economics" and "financial oligarchy" were never used...
Notable quotes:
"... "DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. " ..."
"... UE's conclusion is that mainstream economics needs to be taken down several notches, which would open more space for alternative approaches to economics and, indeed, alternative approaches to policy that place more weight on human outcomes, broadly understood, than the formalistic criteria of efficiency, etc. ..."
"... Simon-Wren Lewis (SWL) and Chris Dillow have both recently argued that criticising economics for the 2008 financial crisis distracts from the real source of the blame, which is banks, and therefore undermines the progressive cause. While I don't disagree that the banks deserve blame, I want to push back a bit on their argument that economics as a discipline has little to do with regressive ideas. ..."
"... Consider the case of monopoly. The economics textbooks may be against monopoly, but this is largely on the grounds that it reduces consumer welfare by increasing prices. Building on this logic, the Chicago School of anti-trust regulation has shifted the focus of anti-trust law to lowering prices for consumers. As this recent article on Amazon details, this has hidden other forms of monopoly abuse such as predatory pricing, market dominance and reduced bargaining power for workers, consumers and smaller companies. ..."
"... Or consider Reinhart and Rogoff's famous '90% debt threshold', where their statistics purportedly showed that after a country reaches 90% of sovereign debt, its growth would stall. This was used by many politicians, including George Osborne, to justify austerity - until it was revealed to be based on 'statistical errors'. Sure, R & R received a fair amount of flak for this, but they have been incredibly stubborn about the result. Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies? Why are R & R still allowed to comment on the matter with even an ounce of credibility? The case for austerity undoubtedly didn't hinge on this research alone, but imagine if a politician cited faulty medical research to approve their policies - would institutions like the BMA not feel a responsibility to condemn it? (Answer: yes, even when the politician was in another country). ..."
"... There are many more examples like this, such as Andrei Shleifer, who despite being prosecuted for fraud in post-Soviet Russia was awarded the John Bates Clark medal, probably the second most prestigious prize in the discipline, was subsequently allowed to publish papers in respected journals about how well privatisation went in Russia, and was eventually bailed out of the case by his incredibly wealthy university to the tune of $26 million. This is not to mention the disastrous Russian privatisation as a whole and the role of certain economists/economic ideas in it. ..."
"... Even worse were the Chicago boys, who advised Augusto Pinochet's horrific economic policies (and no, they were not just humble advisors, they were knee deep in the absolute worst excesses of the regime.) Without any substantive ethical code and without procedures for weeding out corrupt, dishonest or discredited work, the profession creates an environment where people can act like this and get away with it, all under the banner of the intellectual credibility 'economics' seems to confer on people. ..."
"... Mainstream economists have used mathematics to hide ideology. ..."
"... They have cherry-picked mathematical constructions with highly restrictive, idealized properties and then wedged-in economic parameters to fit their purposes. That is the case with the neoclassical production function and with the Arrow-Debreu general equilibrium model. The objective was to "prove" that economies free from government control were "natural" and best. They have been sophists from their first emergence. ..."
"... Science is not capable of devising a theory that adequately explains all the human elements and serendipitous effects of an economy - and may never be capable. However, humans are capable of organizing a society according to their needs and wants. They do it on a corporate scale all the time. It isn't perfect but it works pretty well. ..."
"... Mainstream economists have fought against a managed economy because it would reduce the influence of themselves and their plutocrat sponsors. ..."
Mar 28, 2017 | economistsview.typepad.com
Peter K. -> pgl... March 27, 2017 at 07:25 AM
Peter Dorman:

"DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. "

.... ... ...

Peter K. , March 27, 2017 at 07:20 AM
... ... ...

http://econospeak.blogspot.com/2017/03/economics-part-of-rot-part-of-treatment.html

SUNDAY, MARCH 26, 2017

Economics: Part of the Rot, Part of the Treatment, or Some of Each?

Is mainstream economics, with its false certitudes and ideological biases, one of the reasons for the dismal state of policy debate in countries like the UK and the US, or are its rigorous methods an important antidote to the ruling political foggery? That's being debated right now, live online.

Our starting point is a post on Unlearning Economics, dated March 5, which argues that the flaws of mainstream economics contribute to lousy policy on several fronts: downplaying the role of monopoly, cheerleading for the shareholder value imperative in the corporate world, knee-jerk support for trade agreements under the banner of comparative advantage, and regressive macroeconomic policy, among others. A particularly pointed paragraph brought up the Reinhart-Rogoff 90% affair and accused the economics profession of dereliction of duty by not taking action to rebuke the wrongdoers:

Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies?

UE's conclusion is that mainstream economics needs to be taken down several notches, which would open more space for alternative approaches to economics and, indeed, alternative approaches to policy that place more weight on human outcomes, broadly understood, than the formalistic criteria of efficiency, etc.

Simon Wren-Lewis responded by arguing that UE has it exactly backwards. Restricting himself to UE's critique of macroeconomics, SWL says, yes, reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy.

Yes-but, adds Brad DeLong. He largely agrees with SWL, but delves more deeply into the Reinhart-Rogoff affair. He shows that, even without the famed Excel glitch, a cursory look would reveal that R-R were trumpeting nonexistent results:

So the R-R claim that fiscal consolidation was necessary and urgent was unfounded from the get-go, and these two were both respected mainstream economists, so what can we infer? DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. In this situation, the profession as a whole has a responsibility to assess high profile but dubious work. Although he isn't explicit, my reading is that DeLong wants some sort of professional quality control, but not institutionalized in the way UE seems to call for.

...

pgl -> Peter K.... , March 27, 2017 at 07:44 AM
Yep - try reading this portion:

"reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy."

Peter K. , March 27, 2017 at 07:27 AM
https://medium.com/@UnlearningEcon/no-criticising-economics-is-not-regressive-43e114777429#.gihe5thlj

Unlearning EconomicsFollow
Mar 5

No, Criticising Economics is not Regressive

Simon-Wren Lewis (SWL) and Chris Dillow have both recently argued that criticising economics for the 2008 financial crisis distracts from the real source of the blame, which is banks, and therefore undermines the progressive cause. While I don't disagree that the banks deserve blame, I want to push back a bit on their argument that economics as a discipline has little to do with regressive ideas.

But firstly, it is my view that criticising economics needn't have an ideological motivation. Many critics, myself included, simply believe that neoclassical economics has severe shortcomings and that in order to understand the economic system properly we need better ideas. In many cases criticisms of neoclassical economics are so abstract that it's not even clear to me what the political implications of either side would be (e.g. the fact that Arrow-Debreu equilibrium might be unstable has no bearing on my view of whether capitalism itself is). I respect both SWL and Dillow immensely, but taken alone I consider this line of argument a rather feeble attempt to shut down an important scientific and philosophical debate.

Despite this, the point has some force to it: why devote so much intellectual effort to criticising economics when we could be devoting it to getting the big banks and other corporate wrongdoers? And here I think SWL and Dillow both paper over the extent to which economics has served those in power, as I will try to illustrate with a number of examples. To be clear, I'm not 'blaming' economists for all of these occurrences, but I do think the discipline seems to eschew responsibility for them, and that progressive economists have a blind spot when it comes to the practical consequences of their discipline.

Economics in Practice

I've always acknowledged that economists themselves are probably more progressive than they're usually given credit for. Nevertheless, the absence of things like power, exploitation, poverty, inequality, conflict, and disaster in most mainstream models - centred as they are around a norm of well-functioning markets, and focused on banal criteria like prices, output and efficiency - tends to anodise the subject matter. In practice, this vision of the economy detracts attention from important social issues and can even serve to conceal outright abuses. The result is that in practice, the influence of economics has often been more regressive than progressive.

Consider the case of monopoly. The economics textbooks may be against monopoly, but this is largely on the grounds that it reduces consumer welfare by increasing prices. Building on this logic, the Chicago School of anti-trust regulation has shifted the focus of anti-trust law to lowering prices for consumers. As this recent article on Amazon details, this has hidden other forms of monopoly abuse such as predatory pricing, market dominance and reduced bargaining power for workers, consumers and smaller companies.

Similarly, textbook ideas about profit maximisation and rational agents responding to incentives featured prominently in the promotion of shareholder value by Milton Friedman and other economists, which has been dominant over the past few decades and has been instrumental in increasing inequality and corporate short-termism. The potential macroeconomic impacts of corporate concentration have also been ignored by discipline until very recently - a consequence, perhaps, of the narrowing of particular subfields and the neglection of more critical systemic analysis (something similar could perhaps be said for the 2016 Prize in contract theory, though I am no expert in this area).

One type of institution which is dominated by economic ideas is central banks, yet many of their policies have had regressive elements. For instance, SWL praises economists at the Bank of England for implementing Quantitative Easing, but forgets that the Bank itself admitted that this has disproportionately benefited the wealthy. This problem goes even deeper: as J W Mason has argued, inflation targeting - a key central bank policy across the world - in practice results in workers' wages being kept down and their jobs being made more insecure in the name of combating inflation. In both cases what is painted as a relatively benign process - reducing interest rates and managing inflation, respectively - actually has quite serious social consequences, which generally aren't discussed in class or by policymakers.

In the realm of international trade, economists have been all too inclined to support trade deals - often quite vociferously - on the basis of simple ideas like comparative advantage, while ignoring (a) the actual details of the trade deals, which as Dean Baker frequently points out, tend to favour the rich and corporations and (b) their own more complex economic models, which as Dani Rodrik frequently points out, do imply that trade will harm some people while benefitting others. Uneven and unfair international trade has been a key element of the harm to workers over the past few decades, and was undoubtedly a factor in the election of Trump.

Global trade institutions like the IMF and World Bank have been dominated by economics since their inception, and using economics they inflicted massive pain through their free market 'structural adjustment' policies, which can only be described as regressive but which were fundamentally based on context-free neoclassical ideas about markets. True, these institutions may have softened somewhat in recent years, but that doesn't undo the harm they have caused. In fact, even their more recent 'bottom up' policies such as microcredit and Randomised Control Trials - both inspired by economic ideas - often seem to have benefited global and local elites at the expensive of the poorest. As Jamie Galbraith once noted in the context of the financial crisis, the discipline just has a blind spot for how ideas interact with power to produce unfair outcomes, sometimes taking the form of outright abuse and fraud. Which leads me nicely to my next argument.

Abusing Economics

Economists may complain that economic ideas have been misused by vested interests, and that this isn't their responsibility. But a huge problem with the discipline of economics is that it has virtually no institutional shields against mistakes and wrongdoing. Merton and Scholes won the biggest prize in the profession for their model of financial markets - which had become commonly adopted in options trading - in 1997. A year later those same economists required a hefty bailout when the use of their model was implicated in the collapse of the hedge fund Long-Term Capital Management, where they were both partners. Was the prize revoked? No. Were they discredited? No. Actually, even the model is still widely used, despite massively underestimating fat tails and therefore being implicated in a number of other financial crises, including 2008.

Or consider Reinhart and Rogoff's famous '90% debt threshold', where their statistics purportedly showed that after a country reaches 90% of sovereign debt, its growth would stall. This was used by many politicians, including George Osborne, to justify austerity - until it was revealed to be based on 'statistical errors'. Sure, R & R received a fair amount of flak for this, but they have been incredibly stubborn about the result. Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies? Why are R & R still allowed to comment on the matter with even an ounce of credibility? The case for austerity undoubtedly didn't hinge on this research alone, but imagine if a politician cited faulty medical research to approve their policies - would institutions like the BMA not feel a responsibility to condemn it? (Answer: yes, even when the politician was in another country).

There are many more examples like this, such as Andrei Shleifer, who despite being prosecuted for fraud in post-Soviet Russia was awarded the John Bates Clark medal, probably the second most prestigious prize in the discipline, was subsequently allowed to publish papers in respected journals about how well privatisation went in Russia, and was eventually bailed out of the case by his incredibly wealthy university to the tune of $26 million. This is not to mention the disastrous Russian privatisation as a whole and the role of certain economists/eco