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Science, PseudoScience and Society

Advance of Zombie ideas in XX and XXI centuries

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  Programmers have a very precise understanding of truth. You can’t lie to a compiler. Try it sometime. Garbage in, garbage out. Booleans, the ones and zeros, trues and falses, make up the world programmers live in. That’s all there is! I think programming is deep, it teaches us about the non-cyber universe we live in. There’s something spiritual about computers, and I want to understand it.

Nick Geoghegan

Science has been misused for political purposes many times in history. However, the most glaring examples of politically motivated pseudoscience happened just recently, in XX century. That means that it is useful to review historic examples of "Zombie ideas" used for political purposes and the pattern that defines that abuse.

The important lesson of XX century is that discredited economic and political ideas, no matter how absurd,  don't die as long as they serve well power that be.  In a way they are real living dead, sucking blood from humans.  Those ideas that should have died long ago, still shamble forward, like Zombies. Usage of such ideas is one of the most dangerous deception schemes practiced  by modern elites

It's not easy to write about pseudo science. The problem has to do with the fluid nature of the concept. It has no single, precise meaning and there is little agreement about its constituent elements. But first and foremost it involved subjugation of scientific aims to political goals and deliberate attempt in deception and subsequent cover up. But recently almost all social and economic science became political and all politics involved deception: to say that a politician is not lying is the same as to say that an alcoholic is not drinking. Still there are different degrees of lies and different level of density of the "cloud of deception".

Discredited ideas with political support or "Zombies" can be extremely dangerous for people who oppose them.  Lysenkoism probably represents classic early example when an set of obvious lies was supported by repressive apparatus of state and dissenters were prosecuted and sentenced to Gulag.  For nearly 45 years, the Soviet government used propaganda to foster unproven theories of agriculture promoted by Trofim Lysenko. Scientists seeking favor with the Soviet hierarchy produced fake experimental data in support of Lysenko’s false claims. Contradicting scientific evidence from the fields of biology and genetics was simply banned. University programs taught only Lysenkoism . This state supported attempt to suppress generics  continued for over forty years, until 1964, and even managed to spread to other communist countries, such as  China.

What we saw it as a tragedy in Stalin's Russia genetics, we now see it as a farce in USA economics with neo-classical economics flourishing with the supportive guidance of neoliberal state and financial oligarchy.

The whole neoclassical economics is essentially a set of zombie ideas which are kept in the forefront by financial oligarchy. The financial crisis of 2008 buried key ideas of  'free market liberalism' (aka neoliberalism), such as the 'Efficient Markets Hypothesis', yet these zombie ideas still were dug our, dressed and continue to be sold via major newspapers and journals. Much like Lysenkoism in the USSR by CPSU. See

This is  a real Faustian bargain for academic scholars. One can trade the independence for political influence, good salary and other perks. It is also helps in the power grab. And despite popular image of scientists, they proved to be as corruptible, if not more corruptible, as anybody else. Historically the scientific community is generally held together and all its affairs are peacefully managed through its joint acceptance of the same fundamental scientific beliefs. Science is best practiced in a voluntary, peaceful and free atmosphere.

But that idyllic arrangement firmly belongs to  the past. Now we can talk only about the level of political pressure on scientists via research grants, not so much about presence or absence of such a pressure.  What really matters as far as politics and science is concerned is what type of environment the individual scientists have to work in and what degree of freedom they can enjoy.

Historically the situation changed irrevocably since early XX contrary, which signified discovery of atomic particles.  It should be understood that the modern scientist, built in the modern "neoliberal" democracies, is at the same time - and it is possible that even in the first place - a political agent, a manipulator. For the unwashed masses a public scientist represent the ultimate carrier of truth for a given discipline, so his opinion have a distinct political weight. And the architects of these systems use this values of scientists to the fullest extent possible. Like we can see with neoclassical economics, scientists have turned into an instrument of cognitive manipulation, when  under the guise of science financial oligarchy promote beneficial to itself a false and simplistic picture of the world, which brainwash the masses into "correct" thinking.

In this sense one can say that Lysenkoism represented a natural side effect of  shrinking of freedom of the scientific community and growing influence of political power on science. As by Frederick Seitz noted in his The Present Danger To Science and Society

Everyone knows that the scientific community faces financial problems at the present time. If that were its only problem, some form of restructuring and allocation of funds, perhaps along lines well tested in Europe and modified in characteristic American ways, might provide solutions that would lead to stability and balance well into the next century. Unfortunately, the situation is more complex, made so by the fact that the scientific establishment has become the object of controversy from both outside and inside its special domain. The most important aspects of the controversy are of a new kind and direct attention away from matters that are sufficiently urgent to be the focus of a great deal of the community's attention.

The assaults on science from the outside arise from such movements as the ugly form of "political correctness" that has taken root in important portions of our academic community. There are to be found, in addition, certain tendencies toward a home-grown variant of the anti-intellectual Lysenkoism that afflicted science in the Stalinist Soviet Union. So-called fraud cases are being dealt with in new, bureaucratic ways that cut across the traditional methods of arriving at truth in science. From inside the scientific community, meanwhile, there are challenges that go far beyond those that arise from the intense competition for the limited funds that are available to nourish the country's scientific endeavor.

The critical issue of arriving at a balanced approach to funding for science is being subordinated to issues made to seem urgent by unhealthy alliances of scientists and bureaucrats. Science and the integrity of its practitioners are under attack and, increasingly, legislators and bureaucrats shape the decisions that determine which paths scientific research should take. There is, in addition, a sinister tendency, especially in environmental affairs, toward considering the undertaking of expensive projects that are proposed by some scientists to remedy worst-case formulations of problems before the radical and expensive remedies are proven to be needed. They are viewed seriously though they are based on the advice of opportunistic alarmists in science who leap ahead of what is learned from solid research to encourage support for the expensive remedies they perceive to be necessary. The potential for very great damage to science and society is real.

Of course, the rise of 'Lysenkoism' in the Soviet Union in the late 40th of the twentieth century is one of the most tragic pages of the history of science.  Trofim Lysenko, a Soviet agronomist, came to prominence as the proponent of a theory of heredity that stood in direct opposition to Mendelianism. The details of this theory need not concern us, except to note that it was 'Larmarckist' in its contention that it is possible for organisms to inherit acquired characteristics.  This was wrong and the principles of Mendelianism - the theory of heredity - were well understood by then. But Lysenko theory fitted nicely with the Soviet ideology. Particularly, the idea that acquired characteristics could be inherited held out the promise of the perfectibility of mankind which as strange as it may sound was the necessary precondition to irreversible victory of socialism/communism (later when nationalistic forces  tore apart the USSR  it became clear that such hopes are completely misplaced). 

So the Stalinist state intervened in the pre-exiting scientific struggle by declaring the victor and the consequences, certainly for many of the scientists involved and arguably also for the USSR agriculture, were disastrous.  The essence of Lysenkoism is that pseudo-scientific theory became a pseudo-religious cult and the power of state was used to suppress dissidents. Many scientists were exiled; some killed. Unfortunately we cannot dismiss the obviously pernicious use of ideology by Lysenko and his supporters simply as an aberration of the era that is often brushed aside as 'the cult of personality' (with or without naming the personality in question). This proved to be much more dangerous and at the same time remarkably resilient phenomenon that survived the dissolution of the USSR. Actually the situation repeated with the USA economics when anything that was not neo-classic was suppressed was by-and-large similar although this time this time it happened without any killings.

Do not fool yourself that Lysenkoism is irrevocably connected with communist ideology. The link was poorly accidental. In reality Lysenkoism emerged more like a cult which was extremely convenient for the control freaks in high position in government. It's not a secret that a lot of high-level administrators in academic institutions belong to the category of micromanagers and as such they are naturally predisposed to Lysenkoism.  

In general "Lysenkovisation of  science" occurs when the state tries to control both the methodologies and goals of scientific activity and that happens all over the world, although to different degree.

In the USSR huge bureaucratic institutions such as VASKhNIL and VIEM had been set up with the specific goal to control resources and, especially, scientific press.  Part of the reason that Lysenkoism gained official support in the Soviet Union was because the Mendelian approach to genetics contradicted official ideology, in particular, Engels's dialectical materialism. In early 50th, just before his death Stalin began to sense that Lysenkoism can hinder practical science by interfering with the academic atmosphere of toleration of dissent most conducive to scientific accomplishment. He even went as far as to declare that

“no science can develop and proper without the clash of opinions, without freedom of criticism.”

But it was too late...

Other governments are also far from being immune from this kind of tendency to select between scientific theories on the basis of ideology rather than the balance of evidence.

More benign variant of Lysenkoism that does not rely on the power of the state is usually called Cargo Cult ScienceAnother related term is "Mayberry Machiavellis". A long time ago -- well, actually it was just a year, but it seems like a lot longer than that -- a former Bush advisor John DiIulio got into quite a bit of trouble for revealing to Esquire that the White House did not possess, in any conventional definition of the term, a policy-making process:

...on social policy and related issues, the lack of even basic policy knowledge, and the only casual interest in knowing more, was somewhat breathtaking—discussions by fairly senior people who meant Medicaid but were talking Medicare; near-instant shifts from discussing any actual policy pros and cons to discussing political communications, media strategy, et cetera. Even quite junior staff would sometimes hear quite senior staff pooh-pooh any need to dig deeper for pertinent information on a given issue...

This gave rise to what you might call Mayberry Machiavellis—staff, senior and junior, who consistently talked and acted as if the height of political sophistication consisted in reducing every issue to its simplest, black-and-white terms for public consumption, then steering legislative initiatives or policy proposals as far right as possible.

Dan Gardner - Senior Writer for The Ottawa Citizen writes: "Cabinet meetings were scripted, Mr. O'Neill discovered, by White House staffers who sent advance notes to cabinet secretaries telling them when they were 'supposed to speak, about what, and for how long.'" Is this the shadow of Politburo or what?

There are also strong analogies between Reaganomics and Lysenkoism. Useful discussion is at  "The Financial Crisis and the Systemic Failure of Academic Economics"

The Financial Crisis and the Systemic Failure of Academic Economics, by David Colander, Hans Föllmer, Armin Haas, Michael Goldberg, Katarina Juselius, Alan Kirman, and Thomas Lux: [From the conclusion] ..."We believe that economics has been trapped in a sub-optimal equilibrium in which much of its research efforts are not directed towards the most prevalent needs of society. Paradoxically self-reinforcing feedback effects within the profession may have led to the dominance of a paradigm that has no solid methodological basis and whose empirical performance is, to say the least, modest. Defining away the most prevalent economic problems of modern economies and failing to communicate the limitations and assumptions of its popular models, the economics profession bears some responsibility for the current crisis. It has failed in its duty to society to provide as much insight as possible into the workings of the economy and in providing warnings about the tools it created. It has also been reluctant to emphasize the limitations of its analysis. We believe that the failure to even envisage the current problems of the worldwide financial system and the inability of standard macro and finance models to provide any insight into ongoing events make a strong case for a major reorientation in these areas and a reconsideration of their basic premises."

While at the surface it looks like rent-seeking behavior of dishonest economists the analogy is pretty strong. A broad critique of Neoclassical economics has been put forward in the book Debunking Economics by Steve Keen  See, for example:

Dr. Nikolai Bezroukov


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If history repeats itself...how incapable must Man be of learning from experience

George Bernard Shaw

"No science is immune to the infection of politics and the corruption of power."

Jacob Bronowski (1908-1974),
British scientist, author.
Encounter (London, July 1971).

[Nov 04, 2019] Postmodernism The Ideological Embellishment of Neoliberalism by Vaska

Notable quotes:
"... Robert Pfaller: Until the late 1970s, all "Western" (capitalist) governments, right or left, pursued a Keynesian economic policy of state investment and deficit spending. (Even Richard Nixon is said to have once, in the early 1970ies, stated, "We are all Keynesians"). This lead to a considerable decrease of inequality in Western societies in the first three decades after WWII, as the numbers presented by Thomas Piketty and Branko Milanovic in their books prove. Apparently, it was seen as necessary to appease Western workers with high wages and high employment rates in order to prevent them from becoming communists. ..."
"... Whenever the social-democratic left came into power, for example with Tony Blair, or Gerhard Schroeder, they proved to be the even more radical neoliberal reformers. As a consequence, leftist parties did not have an economic alternative to what their conservative and liberal opponents offered. Thus they had to find another point of distinction. This is how the left became "cultural" (while, of course, ceasing to be a "left"): from now on the marks of distinction were produced by all kinds of concerns for minorities or subaltern groups. And instead of promoting economic equality and equal rights for all groups, the left now focused on symbolic "recognition" and "visibility" for these groups. ..."
"... Thus not only all economic and social concerns were sacrificed for the sake of sexual and ethnic minorities, but even the sake of these minorities itself. Since a good part of the problem of these groups was precisely economic, social and juridical, and not cultural or symbolic. And whenever you really solve a problem of a minority group, the visibility of this group decreases. But by insisting on the visibility of these groups, the policies of the new pseudo-left succeded at making the problems of these groups permanent – and, of course, at pissing off many other people who started to guess that the concern for minorities was actually just a pretext for pursuing a most brutal policy of increasing economic inequality. ..."
OffGuardian
Robert Pfaller interviewed by Kamran Baradaran, via ILNA
The ruling ideology since the fall of the Berlin Wall, or even earlier, is postmodernism. This is the ideological embellishment that the brutal neoliberal attack on Western societies' welfare (that was launched in the late 1970s) required in order to attain a "human", "liberal" and "progressive" face.

Robert Pfaller is one of the most distinguished figures in today's radical Left. He teaches at the University of Art and Industrial Design in Linz, Austria. He is a founding member of the Viennese psychoanalytic research group 'stuzzicadenti'.

Pfaller is the author of books such as On the Pleasure Principle in Culture: Illusions Without Owners , Interpassivity: The Aesthetics of Delegated Enjoyment , among others. Below is the ILNA's interview with this authoritative philosopher on the Fall of Berlin Wall and "Idea of Communism".

ILNA: What is the role of "pleasure principle" in a world after the Berlin Wall? What role does the lack of ideological dichotomy, which unveils itself as absent of a powerful left state, play in dismantling democracy?

Robert Pfaller: Until the late 1970s, all "Western" (capitalist) governments, right or left, pursued a Keynesian economic policy of state investment and deficit spending. (Even Richard Nixon is said to have once, in the early 1970ies, stated, "We are all Keynesians"). This lead to a considerable decrease of inequality in Western societies in the first three decades after WWII, as the numbers presented by Thomas Piketty and Branko Milanovic in their books prove. Apparently, it was seen as necessary to appease Western workers with high wages and high employment rates in order to prevent them from becoming communists.

Ironically one could say that it was precisely Western workers who profited considerably of "real existing socialism" in the Eastern European countries.

At the very moment when the "threat" of real existing socialism was not felt anymore, due to the Western economic and military superiority in the 1980ies (that led to the fall of the Berlin Wall), the economic paradigm in the Western countries shifted. All of a sudden, all governments, left or right, pursued a neoliberal economic policy (of privatization, austerity politics, the subjection of education and health sectors under the rule of profitability, liberalization of regulations for the migration of capital and cheap labour, limitation of democratic sovereignty, etc.).

Whenever the social-democratic left came into power, for example with Tony Blair, or Gerhard Schroeder, they proved to be the even more radical neoliberal reformers. As a consequence, leftist parties did not have an economic alternative to what their conservative and liberal opponents offered. Thus they had to find another point of distinction. This is how the left became "cultural" (while, of course, ceasing to be a "left"): from now on the marks of distinction were produced by all kinds of concerns for minorities or subaltern groups. And instead of promoting economic equality and equal rights for all groups, the left now focused on symbolic "recognition" and "visibility" for these groups.

Thus not only all economic and social concerns were sacrificed for the sake of sexual and ethnic minorities, but even the sake of these minorities itself. Since a good part of the problem of these groups was precisely economic, social and juridical, and not cultural or symbolic. And whenever you really solve a problem of a minority group, the visibility of this group decreases. But by insisting on the visibility of these groups, the policies of the new pseudo-left succeded at making the problems of these groups permanent – and, of course, at pissing off many other people who started to guess that the concern for minorities was actually just a pretext for pursuing a most brutal policy of increasing economic inequality.

ILNA: The world after the Berlin Wall is mainly considered as post-ideological. Does ideology has truly decamped from our world or it has only taken more perverse forms? On the other hand, many liberals believe that our world today is based on the promise of happiness. In this sense, how does capitalism promotes itself on the basis of this ideology?

Robert Pfaller: The ruling ideology since the fall of the Berlin Wall, or even earlier, is postmodernism. This is the ideological embellishment that the brutal neoliberal attack on Western societies' welfare (that was launched in the late 1970s) required in order to attain a "human", "liberal" and "progressive" face. This coalition between an economic policy that serves the interest of a tiny minority, and an ideology that appears to "include" everybody is what Nancy Fraser has aptly called "progressive neoliberalism". It consists of neoliberalism, plus postmodernism as its ideological superstructure.

The ideology of postmodernism today has some of its most prominent symptoms in the omnipresent concern about "discrimination" (for example, of "people of color") and in the resentment against "old, white men". This is particularly funny in countries like Germany: since, of course, there has been massive racism and slavery in Germany in the 20th century – yet the victims of this racism and slavery in Germany have in the first place been white men (Jews, communists, Gypsies, red army prisoners of war, etc.).

Here it is most obvious that a certain German pseudo-leftism does not care for the real problems of this society, but prefers to import some of the problems that US-society has to deal with. As Louis Althusser has remarked, ideology always consists in trading in your real problems for the imaginary problems that you would prefer to have.

The general ideological task of postmodernism is to present all existing injustice as an effect of discrimination. This is, of course, funny again: Since every discrimination presupposes an already established class structure of inequality. If you do not have unequal places, you cannot distribute individuals in a discriminating way, even if you want to do so. Thus progressive neoliberalism massively increases social inequality, while distributing all minority groups in an "equal" way over the unequal places.

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MASTER OF UNIVE

Abbreviate & reduce to lowest common denominator which is hyperinflation by today's standards given that we are indeed all Keynesians now that leveraged debt no longer suffices to prop Wall Street up.

Welcome to the New World Disorder.

Screw 'postmodernism' & Chicago School 'neoliberalism'!

MOU

Danubium

There is no such thing as "post-modernism".

The derided fad is an organic evolution of the ideologies of "modernity" and the "Enlightenment", and represents the logical conclusion of their core premise: the "enlightened self" as the source of truth instead of the pre-modern epistemologies of divine revelation, tradition and reason.
It does not represent any "liberation" from restrictive thought, as the "self" can only ever be "enlightened" by cult-like submission to dogma or groupthink that gives tangible meaning to the intangible buzzword, its apparent relativism is a product of social detachment of the intellectual class and its complete and utter apathy towards the human condition.

The connection to neoliberalism is the latter's totalitarian contention of reducing the entirety of human condition into a gender-neutral cosmopolitan self expressing nondescript market preferences in a conceptual vacuum, a contention celebrated by its ideologues as "liberation" and "humanism" despite its inherent repression and inhumanity.

The trend is not ts successor or opponent, but rather modernism itself in its degenerative, terminal stage.

Monobazeus
Well said
bevin
"..'identity politics,' which pretty much encapsulate the central concerns of what these days is deemed to represent what little of the 'left' survives, plays into the hands of the neoliberal ruling establishment(s), because at bottom it is a 'politics' that has been emptied of all that is substantively political.."

Agreed. And the truth is that the message is much clearer than that of the critics, below.
So it ought to be for the world, sliding into fascism, in which we live in might have been baked by the neo-liberals but it was iced by 57 varieties of Blairites . The cowards who flinched led by the traitors who sneered.

Norman Pilon
So cutting through all of the verbiage, the upshot of Pfaller's contentions seems to be that 'identity politics,' which pretty much encapsulate the central concerns of what these days is deemed to represent what little of the 'left' survives, plays into the hands of the neoliberal ruling establishment(s), because at bottom it is a 'politics' that has been emptied of all that is substantively political, namely, the fight for an equitable production and distribution of goods, both material and cultural, ensuring a decent life for all.

Difficult not to agree.

For indeed, "If you do not have unequal places, you cannot distribute individuals in a discriminating way, even if you want to do so."

Capricornia Man
You've nailed it, Norman. In many countries, the left's obsession with identity politics has driven class politics to the periphery of its concerns, which is exactly where the neoliberals want it to be. It's why the working class just isn't interested.
Martin Usher
It must be fun to sit on top of the heap watching the great unwashed squabbling over the crumbs.
Red Allover
The world needs another put down of postmodern philosophy like it needs a Bob Dylan album of Sinatra covers . . .
maxine chiu
I'm glad the article was short .I don't think I'm stupid but too much pseudo-intellectualism makes me fall asleep.
Tim Jenkins
Lol, especially when there are some galling glaring errors within " too much pseudo-intellectualism "

Thanks for the laugh, maxine,

Let them stew & chew (chiu) on our comments 🙂

Bootlyboob
As with any use of an -ism though, you need sort the wheat from the chaff when it comes to using 'postmodernism'. Do you mean Baudrillard and Delueze? or do you mean some dirty cunt like Bernard Henri-Levy. There is a bit of a difference.
Bootlyboob
Ok, so Levi is not really a postmodernist. But still, there are philosphers of postmodernism that were, and still are, worth reading.
BigB
Postmodernism: what is it? I defy anyone to give a coherent and specific definition. Not least, because the one 'Classical Liberal' philosopher who did – Stephen Hicks – used the term as a blanket commodification of all post-Enlightenment thought starting with Rousseau's Romanticism. So PoMo has pre-Modern roots? When the left start playing broad and wide with political philosophical categories too – grafting PoMo onto post-Classical roots as a seeming post-Berlin Wall emergence what actually is being said? With such a depth and breadth of human inquiry being commodified as 'PoMo' – arguably, nothing useful.

Neoliberalism is Classic Liberalism writ large. The basic unit of Classicism is an individuated, independent, intentional, individual identitarianism as an atom of the rational ('moral') market and its self-maximising agency. Only, the 'Rights of Man' and the 'Social Contract' have been transfered from the Person (collectively: "We the People " as a the democratic sovereign power) to the Corporation as the new 'Neo-Classicist' supranational sovereign. Fundamentally, nothing has changed.

As pointed out below: this was already well underway by November 1991 – as a structural-function of the burgeoning Euromarkets. These were themselves on the rise as the largest source of global capital *before* the Nixon Shock in 1971. There is an argument to be made that they actually caused the abandoning of Breton Woods and the Gold Standard. Nonetheless, 1991 is a somewhat arbitrary date for the transition from 'High Modernity' to 'PostModernity'. Philosophers. political, and social scientists – as Wittgenstein pointed out – perhaps are victims of their own commodification and naming crisis? Don't get me started on 'post-Humanism' but what does PoMo actually mean?

As the article hints at: the grafting of some subjectivist single rights issues to the ultra-objectivist core market rationality of neoliberalism is an intentional character masking. Even the 'neoliberal CNS' (central nervous system) of the WEF admits to four distinct phases of globalisation. The current 'Globalisation 4.0' – concurrent with the 'Fourth Industrial Revolution' – is a further development of this quasi-subjectivist propagandic ploy. Globalisation is now humanist, sovereigntist, environmentalist, and technologist (technocratic). Its ultimate *telos* is 'fully automated luxury communism' or the harmoniousness of man and nature under an ecolological *Tianxia* the sustainable 'Ecological Civilisation'. Which, I would hope, absolutely nobody is gullible enough to believe?

Who says the leopard cannot change its spots? It can, and indeed does. Neoliberalism is a big-data micromarketing driven technocratic engine of reproduction tailored to the identitarian individual. PoMo – in one sense – is thus the logical extremisation of Classical Liberalism which is happening within the Classical Liberal tradition. It is certainly not a successor state or 'Fourth Political Theory' which is one of the few things Aleksandr Dugin gets right.

This is why the term needs defintion and precisification or, preferably, abandoning. If both the left and right bandy the term around as a eupehemism for what either does not like – the term can only be a noun of incoherence. Much like 'antisemitism': it becomes a negative projection of all undesirable effects onto the 'Other'. Which, when either end of the political spectrum nihilates the Other leaves us with the vicious dehumanisation of the 'traditional' identitarian fascist centre. All binary arguments using shared synthetic terminology – that are plastic in meaning depending on who is using the term – cancel each other out.

Of which, much of which is objectified and commodified as 'PoMo' was a reaction against. A reaction that anticipated the breakdown of the identitarian and sectarian 'technological postmodern' society. So how can that logically be a 'reaction against' and an 'embelishment to' neoliberalism'?

This is not a mere instance of pedantry: I/we are witnessing the decoherence of language due to an extremisation of generalisation and abstraction of sense and meaning. That meaning is deferred is a post-structuralist tenet: but one that proceeds from the extreme objectivisation of language (one to one mapping of meaning as the analytical signified/signifier relationship) and the mathematicisation of logic (post-Fregian 'meta-ontology') not its subjectivisation.

If PoMo means anything: it is a rich and authentic vein of human inquiry that was/is a creative attempt to rescue us from a pure objectivist Hell (David Ray Griffin's "positive postmodernism"). One that was/is not entirely satisfactory; merely because it has not yet completed. In the midst: we have the morbid hybrid symptomatology of the old Classical Libertarian fascism trying to recuperate the new Universal Humanism for which PoMo is a meaningless label. Especially if it is used to character masque the perennial philosophy of Humanism that has been dehumanised and subjugated by successive identitarian regimes of knowledge and power since forever in pre-Antiquity.

We are all human: only some humans are ideologically more human than others is the counter-history of humanity. When we encounter such ideologically imprecise degenerative labels as 'PoMo' – that can mean anything to anyone (but favours the status quo) this makes a nonsense of at least 5,000 years of thought. Is it any wonder that we are super-ordinated by those who can better dictate who we are? Language is overpower and writing is supra-sovereign administration and bureaucracy over the 'owness' of identity. Its co-option by the pseudoleft is a complete denigration and betrayal of the potential of a new Humanism. The key to which is the spiritual recovery and embodiment of who we really are – proto-linguistically and pre-ontologically – before all these meaningless labels get in the way.

Bootlyboob
You said it better than I ever could.

Stephen Hick's book is quite the laugh. I tried to read it but it made no sense. From memory, it starts at Kant and Hegel and gets them completely wrong, (he even draws little charts with their ideas in tabulated form, WTF?) so I quickly deleted the .pdf. Any book that begins with a summary of these two philosophers and then thinks they can hold my attention until they get to their take on 'postmodernism' is sorely mistaken. Postmodernism is a made up label for about four or five French intellectuals in the 1970's that somehow took over the world and completely fucked it up. Why do I somehow not follow this line of 'thought'?

Reg
No, Postmodernism is a real thing, it is the capitalist assimilation of situationism to overcome the crisis of profit in the 70s caused by overproduction and the attempt by the 1% to recapture a greater a greater % of GDP that they had lost due to the post war settlement. This was an increasingly a zero sum game economy after Germany and Japan had rebuilt their manufacturing capacity, with the US constrained by a widening trade deficit and the cost of the cold and Vietnam war increasing US debt. The inflation spikes in the 70s is only reflective of these competing demands.

The problem of modernism is than peoples needs are easily saited, particularly in conditions of overproduction. Postmodern production is all about creating virtual needs that are unsatisfied. The desire for status or belonging or identity are infinite, and overcomes the dead time of 'valourisation' (time taken for investment to turn into profit) of capital by switching to virtual production of weightless capitalism. The creation of 'intangible asset's such as trade marks, while off shoring production is central. This is a form of rentier extraction, as the creation of a trade mark creates no real value if you have offshored not only production but R&D to China. This is why fiance, and free movement of capital supported by monetary policy and independent central banks are central to Postmodern neo-liberal production. The problem being that intangible assets are easy to replace and require monopoly protection supported by a Imperial hegemon to maintain rentier extraction. Why does China need a US or UK trade mark of products where both innovation and production increasingly come from China? How long can the US as a diminishing empire maintain rentier extraction at the point of a military it increasingly cannot afford, particularly against a military and economic superpower like China? It is no accident US companies that have managed to monetise internet technologies are monopolies, google, microsoft, Apple. An operating system for example has a reproduction cost of zero, the same can be said of films or music, so the natural price is zero, only a monopoly maintains profit.

The connection to situationism is the cry of May 68 'Make your dreams reality', which was marketised by making peoples dreams very interesting ones about fitted kitchens, where even 'self actualisation was developed into a product, where even ones own body identity became a product to be developed at a price. This is at the extreme end of Marxist alienation as not only work or the home becomes alienated, but the body itself.
David Harvey covers some of this quite well in his "The condition of Postmodernity". Adam Curtis also covers quite well in 'The Trap' and the 'Century of the self'.

BigB
I'm inclined to agree with everything you write. It would fall into what I called 'precisification' and actual definition. What you describe is pure Baudrillard: that capitalism reproduces as a holistic system of objects that we buy into without ever satisfying the artificial advertorial need to buy. What we actually seek is a holism of self that cannot be replaced by a holism of objects hence an encoded need for dissatisfaction articulated as dissatisfaction a Hyperrealism of the eternally desiring capitalist subject. But Baudrillard rejected the label too.

What I was pointing out was the idea of 'contested concept'. Sure, if we define terms, let's use it. Without that pre-agreed defintion: the term is meaningless. As are many of our grandiloquent ideas of 'Democracy', 'Freedom', 'Prosperity', and especially 'Peace'. Language is partisan and polarised. Plastic words like 'change' can mean anything and intentionally do. And the convention of naming creates its own decoherence sequence. What follows 'postmodernism'? Post-humanism is an assault on sense and meaning. As is the current idea that "reality is the greatest illusion of all".

We are having a real communication breakdown due to the limitations of the language and out proliferation of beliefs. Baudrillard also anticipated the involution and implosion of the Code. He was speaking from a de Saussurian (semiologic) perspective. Cognitive Linguistics makes this ever more clear. Language is maninly frames and metaphors. Over expand them over too many cognitive domains: and the sense and meaning capability is diluted toward meaninglessnes – where reality is no longer real. This puts us in the inferiorised position of having our terms – and thus our meaning – dictated by a cognitive elite a linguistic 'noocracy' (which is homologous with the plutocracy – who can afford private education).

Capitalism itself is a purely linguistic phenomena: which is so far off the beaten track I'm not even going to expand on it. Except to say: that a pre-existing system of objects giving rise to a separate system of thoughts – separate objectivity and subjectivity – is becoming less tenable to defend. I'd prefer to think in terms of 'embodiment' and 'disembodiment' rather than distinct historical phases. And open and closed cognitive cycles rather than discreet psycholgical phases. We cannot be post-humans if we never embodied our humanism fully. And we cannot be be post-modern when we have never fully lived in the present having invented a disembodied reality without us in it, which we proliferated trans-historically the so-called 'remembered present'.

Language and our ideas of reality are close-correlates – I would argue very close correlates. They are breaking down because language and realism are disembodied which, in itself is ludicrous to say. But we have inherited and formalised an idealism that is exactly that. Meaning resides in an immaterial intellect in an intangible mind floating around in an abstract neo-Platonic heaven waiting for Reason to concur with it. Which is metaphysical bullshit, but it is also the foundation of culture and 'Realism'. Which makes my position 'anti-Realist'. Can you see my problem with socio-philosophical labels now!? They can carry sense if used carefully, as you did. In general discourse they mean whatever they want to mean. Which generally means they will be used against you.

Ramdan
"the SPIRITUAL RECOVERY and embodiment of who we really are – PROTO-LINGUISTICALLY and PRE-ONTOLOGICALLY – BEFORE all these MEANINGLESS LABELS get in the way."

Thanks BigB. I just took the liberty to add emphasis.

Robbobbobin
Smarty pants (label).
Robert Laine
A reply to the article worthy of another Off-G article (or perhaps a book) which would include at a minimum the importance of non-dualistic thinking, misuse of language in the creation of MSM and government narratives and the need to be conscious of living life from time to time while we talk about it. Thankyou, BigB.
Simon Hodges
Don't you love how all these people discuss postmodernism without ever bothering to define what it is. How confused. Hicks and Peterson see postmodernists as Neo-Marxists and this guy sees them as Neoliberals. None of the main theorists that have been associated with Postmodernism and Post-Structuralism and I'm thinking Derrida, Baudrillard and Foucault here (not that I see Foucault as really belonging in the group) would not even accept the term 'postmodernism' as they would see it as an inappropriate form of stereo-typography with no coherent meaning or definition and that presupposing that one can simply trade such signifiers in 'transparent' communication and for us all to think and understand the same thing that 'postmodernism' as a body of texts and ideas might be 'constituted by' is a large part of the problem under discussion. I often think that a large question that arises from Derrida's project is not to study communication as such but to study and understand miss-communication and how and why it comes about and what is involved in our misunderstandings. If people don't get that about 'postmodern' and post-structuralist theories then they've not understood any thing about it.
BigB
You are absolutely right: the way we think in commodities of identities – as huge generalizations and blanket abstractions – tends toward grand narration and meaninglessness. Which is at once dehumanising, ethnocentric, exceptionalist, imperialist in a way that favours dominion and overpower. All these tendencies are encoded in the hierarchical structures of the language – as "vicious" binary constructivisms. In short, socio-linguistic culture is a regime of overpower and subjugation. One that is "philosopho-political" and hyper-normalises our discrimination.

Deleuze went further when he said language is "univocal". We only have one equiprimordial concept of identity – Being. It is our ontological primitive singularity of sense and meaning. Everything we identity – as "Difference" – is in terms of Being (non-Being is it's binary mirror state) as an object with attributes (substances). Being is differentiated into hierarchies (the more attributes, the more "substantial"- the 'greater' the being) which are made "real" by "Repetition" hence Difference and Repetition. The language of Dominion, polarization, and overpower is a reified "grand ontological narrative" constructivism. One dominated by absolutised conceptual Being. That's all.

[One in which we are naturally inferiorised in our unconscious relationship of being qua Being in which we are dominated by a conceptual "Oedipal Father" – the singularity of the Known – but that's another primal 'onto-theocratic' narrative the grandest of then all].

One that we are born and acculturated into. Which the majority accept and never question. How many people question not just their processes of thought but the structure of their processes of thought? A thought cannot escape its own structure and that structure is inherently dominative. If not in it's immediacy then deferred somewhere else via a coduit of systemic violence structured as a "violent hierarchy" of opposition and Othering.

Which is the ultimate mis-communication of anything that can be said to be "real" non-dominative, egalitarian, empathic, etc. Which, of course, if we realise the full implications we can change the way we think and the "naturalised" power structures we collectively validate.

When people let their opinions be formed for them, and commodify Romanticism, German Idealism, Marxism, Phenomenology, Structuralism, Post-Structuralism, Existentialism, etc as the pseudo-word "PoMo" – only to dismiss it they are unbeknowingly validating the hegemony of power and false-knowledge over. Then paradoxically using those binary power structures to rail about being dominated!

Those linguistic power structures dominate politics too. The "political unconscious" is binary and oppositional which tends toward negation and favours the status quo but how many people think in terms of the psychopolitical and psycholinguistic algorithms of power and politics?

Derrida's project is now our project and it has hardly yet begun. Not least because cognitive linguistics were unkown to Derrida. That's how knowledge works by contemporising and updating previous knowledge from Structuralism to Post-Structuralism to

Nihilating anything that can be called "PoMo" (including that other pseudo-label "Cultural Marxism") condemns us to another 200 years of Classical Liberalism which should be enough impetus to compel everyone to embrace the positive aspects of PoMo! Especially post-post-structuralism that stupid naming convention again

Simon Hodges
I think a lot of people forget that both Derrida and Baudrillard died before the financial crisis. I don't think either of them like myself at that time paid much attention to economics and markets as they worked within very specific and focused fields. Derrida spent his whole life analysing phonocentrism and logocentrism throughout the history of philosophy and Baudrillard was more a cultural sociologist then anything else. They like most people assumed that neoliberalism was working and they enjoyed well paid jobs and great celebrity so they didn't have much cause to pay that much attention to politics. Following the Invasion of Iraq Derrida did come out very strongly against the US calling it the biggest and most dangerous rogue state in the world and he cited and quoted Chomsky's excellent work. We should also include the UK as the second biggest rogue state.

Once the GFC happened I realized that my knowledge on those subjects was virtually zero and I have since spent years looking at them all very closely. I think Derrida and Baudrillard would have become very political following the GFC and even more so now given current events with the yellow vests in France. Shame those two great thinkers died before all the corruption of neoliberalism was finally revealed. I believe that would have had a great deal to say about it Derrida at least was a very moral and ethical man.

Bootlyboob
I think you would like this essay if you have not read it already.

https://cidadeinseguranca.files.wordpress.com/2012/02/deleuze_control.pdf

Simon Hodges
There's a good video by Cuck Philosophy on YouTube covering control societies below.

https://www.youtube.com/embed/B_i8_WuyqAY?version=3&rel=1&fs=1&autohide=2&showsearch=0&showinfo=1&iv_load_policy=1&start=3&wmode=transparent

If anyone wants a good overview of postmodernism and post-structuralism Cuck philosophy has has some excellent videos covering the subject matter and ideas. He explains how postmodernism has nothing to do with identity politics and shows how Hick and Peterson have fundamentally misunderstood postmodernism. He also has 3 videos covering postmodern basics and some others on Derrida and Baudrillard. You will not find the concepts explained better though one can never give a comprehensive review as such things are essentially beyond us.

He puts too much weight on Foucault for my liking but that's just the fact that my understanding of postmodernism is obviously different to his because all of our largely chance encounters with different texts at different times, which mean that we all come away with slightly different ideas about what these things might mean at any given time. Even in relation to differences in our own ideas from day to day or year to year.

Bootlyboob
Yes, that's why I mentioned the article in relation to your earlier comment. I don't think any of these philosophers would have changed their stances based on the events 20 or 30 post their deaths. They essentially predicted the course that society has taken.
Simon Hodges
Judith Butler took part in the occupy wall street movement and she's a post-structuralist so she has clearly changed her mind since the GFC. Deleuze may have to a certain extent have predicted such things but that doesn't necessarily mean they would have been happy about them. Derrida always spoke of the 'democracy' to come. Instead what we are looking forward to is tech based technocratic totalitarianism. I don't go along with Deleuze on that matter anyway. I don't see a discreet transition from one to the other but rather see us having to endure the combined worst of both scenarios.
Bootlyboob
In relation to Peterson. I did write an email to him once and he wrote back to me saying he does indeed like the writings of Deleuze and Baudrillard. But it was a one line response. I'm still assuming he merely uses a false reading of Derrida as a prop to advance his own arguments.
Simon Hodges
Peterson doesn't understand that postmodernism is not the source of identity politics or cultural marxism. That source is Anglo sociology. I was doing an MSc in sociology back in 1994/95 and they had been transitioning away from Marx and class conflict to Nietzsche and power conflicts understood within a very simplistic definition of power as a simple binary opposition of forces between and 'oppressor' and a 'resistor'.

They borrow a bit from Foucault but they cannot accept his postmodern conclusions as power is necessarily revealed as a positive force that actually constructs us all: in which case one cannot really object to it on political grounds. Let's face it, these cultural ex-Marxists (now actually an elitist Nietzschean ubermench) don't seem to object to power's miss-functioning at all on any kind of institutional level but solely concentrate on supposed power relations at the personal level.

That's all if you buy into 'power'at all as such. Baudrillard wrote 'Forget Foucault' and that 'the more one sees power everywhere the less one is able to speak thereof'. I try and stay clear of any theory that tries to account for everything with a single concept or perspective as they end up over-determining and reductionist.

Steve Hayes
A major benefit (for the elites) of postmodernism is its epistemological relativism, which denies the fundamentally important commitments to objectivity, to facts and evidence. This results in the absurd situation where all the matters is the narrative. This obvious fact is partially obscured by the substitution of emotion for evidence and logic. https://viewsandstories.blogspot.com/2018/06/emotion-substitutes-for-evidence-and.html
Seamus Padraig
Yup. Among other things, po-mo 'theory' enables Orwell's doublethink .
BigB
This is exactly the misunderstanding of a mythical "po-mo 'theory'" – if such a thing exists – that I am getting at. 'Po-mo theory' is in fact a modernity/postmodernity hybrid theory. Pomo theory is yet to emerge.

For instance: Derrida talked of the 'alterity' of language and consciousness that was neither subjectivist nor objectivist. He also spoke of 'inversion/subversion' – where one bipolar oppositional term becomes the new dominant ie 'black over white' or 'female over male'. This, he made specifically clear, was just as violent a domination as the old normal. How is this enabling 'doublethink'.

If you actually study where Derrida, Baudrillard, Deleuze; etc where taking their 'semiotics' it was to the 'Middle Way' of language – much the same destination as Buddhism. This is the clear and precise non-domination of either extreme of language. Only, they never supplied the praxis; and their followers and denigrators where not as prescient.

There is so much more to come from de Saussurian/Piercian semiotics and Bergsonian/Whiteheadian process philosophy. We have barely scratched the surface. One possibility is the fabled East/West synthesis of thought that quantum physics and neuroscience hint at.

What yo do not realise is that our true identity is lost in the language. Specifically: the Law of Identity and the Law of the Excluded Middle of our current Theory of Mind prevent the understanding of consciousness. To understand why you actually have to read and understand the linguistic foundations of the very theory you have just dismissed.

Robbobbobin
"Specifically: the Law of Identity and the Law of the Excluded Middle of our current Theory of Mind prevent the understanding of consciousness."

Yes, but. What do you mean by " our current Theory of Mind"?

Tim Jenkins
Was that a promo for Po-mo theory, BigB ? (chuckle)
BigB
In fact: if followed through – PoMo leads to the point of decoherence of all narrative constructivism. Which is the same point the Buddhist Yogacara/Madhyamaka synthesis leads to. Which is the same point quantum physics and contemporary cognitive neuroscience leads to. The fact of a pre-existent, mind-independent, objective ground for reality is no longer tenable. Objectivism is dead. But so is subjectivism.

What is yet to appear is a coherent narrative that accommodates this. Precisely because language does not allow this. It is either subjectivism or objectivism tertium non datur – a third is not given. It is precisely within the excluded middle of language that the understanding of consciouness lies. The reason we have an ontological cosmogony without consciousness lies precisely in the objectification and commodification of language. All propositions and narratives are ultimately false especially this one.

Crucially, just because we cannot create a narrative construction or identity for 'reality' – does not mean we cannot experience 'reality'. Which is what a propositional device like a Zen koan refers to

All linguistic constructivism – whether objective or subjective – acts as a covering of reality. We take the ontological narrative imaginary for the real 'abhuta-parikalpa'. Both object and subject are pratitya-samutpada – co-evolutionary contingent dependendencies. The disjunction of all dualities via ersatz spatio-temporality creates Samsara. The ending of Samsara is the ending and re-uniting of all falsely dichotomised binary definitions. About which: we can say precisely nothing.

Does this mean language is dead? No way. Language is there for the reclamation by understanding its superimpositional qualitiy (upacara). A metaphoric understanding that George Lakoff has reached with Mark Johnston totally independently of Buddhism. I call it 'poetic objectivism' of 'critical realism' which is the non-nihilational, non-solipsistic, middle way. Which precisely nihilates both elitism and capitalism: which is why there is so much confusion around the language. There is more at stake than mere linguistics. The future of humanity will be determined by our relationship with our languages.

vexarb
@BigB: "The fact of a pre-existent, mind-independent, objective ground for reality is no longer tenable. Objectivism is dead."

Do you mean that there is more to life than just "atoms and empty space"? Plato, Dante and Blake (to name the first 3 who popped into my head) would have agreed with that: the ground of objective reality is mind -- the mind of God.

"The atoms of Democritus, and Newton's particles of Light,
Are sands upon the Red Sea shore,
Where Israel's tents do shine so bright".

Tim Jenkins
Funnily enough, I was only writing just yesterday on OffG's 'India's Tryst with Destiny' article, just what poor standards we have in the Education of our children today, in urgent need of massive revisions, which I've highlighted and how the guilt lays squarely on the shoulders of Scientists & Academia in our Universities, from Physics to History & Law & the 'Physiology of Psychology' these guys really just don't 'cut it' anymore resting on Laurels, living in Fear and corrupted by capitalism >>> wholly !

Somebody should be shot, I say for Terrorist Acts !

Corruption is the Destruction of Culture &

"The Destruction of Culture is a Terrorist Act", now officially,
in international Law @UNESCO (thanks, Irina Bokova)

Would the author of this piece like to review & correct some obviously glaring errors ?

George
Good article. On this topic, I read an essay by the late Ellen Meiksins Wood where she noted that our splendid "new Left" are all at once too pessimistic and too optimistic. Too pessimistic because they blandly assume that socialism is dead and so all struggles in that direction are futile. Too optimistic because they assume that this (up till now) bearable capitalism around them can simply continue with its shopping sprees, pop celebrity culture, soap operas, scandal sheets, ineffectual though comfortable tut-tutting over corrupt and stupid politicians and – best of all – its endless opportunity for writing postmodernist deconstructions of all those phenomena. Why bother getting your hands dirty with an actual worker's struggle when you can write yet another glamorously "radical" critique of the latest Hollywood blockbuster (which in truth just ends up as another advert for it)?
Fair Dinkum
During the 50's and 60's most folks living in Western cultures were happy with their lot: One house, one car, one spouse, one job, three or four kids and enough money to live the 'good life'
Then along came Vance Packard's 'Hidden Persuaders'and hell broke loose.
The One Per Cent saw an opportunity of unlimited exploitation and they ran with it.
They're still running (albeit in jets and yachts) and us Proles are either struggling or crawling.
Greed is neither Left or Right.
It exists for its own self gratification.
Seamus Padraig
Excellent article and very true. Just one minor quibble:

This coalition between an economic policy that serves the interest of a tiny minority, and an ideology that appears to "include" everybody is what Nancy Fraser has aptly called "progressive neoliberalism".

Actually, post-modernism doesn't include everybody -- just the 'marginalized' and 'disenfranchised' minorities whom Michel Foucault championed. The whole thing resembles nothing so much as the old capitalist strategy of playing off the Lumpenproletariat against the proletariat, to borrow the original Marxist terminology.

Stephen Morrell
The following facile claim doesn't bear scrutiny: "At the very moment when the "threat" of real existing socialism was not felt anymore, due to the Western economic and military superiority in the 1980ies (that led to the fall of the Berlin Wall), the economic paradigm in the Western countries shifted."

The economic paradigm shifted well before the 1980s and it had nothing to do with "Western economic and military superiority in the 1980ies". The death knell of Keynesianism was sounded with the de-linking of the US dollar and the gold standard in 1971 and the first oil crisis of 1973. Subsequently, the 1970s were marked by a continuous and escalating campaign of capital strikes which produced both high inflation and high unemployment ('stagflation') in the main imperial centres. These strikes persisted until the bourgeoisie's servants were able to implement their desired 'free market' measures in the 1980s, the key ones being smashing of trade union power and consequent devastation of working conditions and living standards, privatisation of essential services, dissolution of social welfare and all the rest. All in the name of 'encouraging investment'.

The fear of 'existing socialism' (and of the military might of Eastern Europe and the USSR) persisted right up to the restoration of capitalism in the USSR in 1991-92. The post-soviet triumphalism (to that moronic and ultimate post-modernist war cry, 'The End of History') only opened the floodgates for the imposition of the neoliberal paradigm over the whole globe. The real essence of the 'globalisation' ideology has been this imposition of imperial monopoly and hegemony on economically backward but resource-rich countries that hitherto could gain some respite or succour from the USSR and Eastern Europe as an alternative to the tender mercies of the World Bank and IMF whose terms correspondingly centred on the neoliberal paradigm.

The key class-war victories of the 1980s by the ruling class, especially in the main Anglophone imperial centres (exemplified by the air traffic controllers strike in Reagan's US and the Great Coal Strike in Thatcher's England), were the necessary condition to them getting their way domestically. However, the dissolution of the USSR not only allowed the imperialists to rampage internationally (through the World Bank, IMF, WTO, etc) but gave great fillip to their initial class-war victories at home to impose with impunity ever more grinding impoverishment and austerity on the working class and oppressed -- from the 1990s right up to fraught and crisis-ridden present. The impunity was fuelled in many countries by that domestic accompaniment to the dissolution of the USSR, the rapidly spiralling and terminal decline of the mass Stalinist Communist parties, the bourgeoisie's bogeyman.

Finally, productivity in the capitalist west was always higher than in post-capitalist countries. The latter universally have been socialised economies built in economically backward countries and saddled with stultifying Stalinist bureaucracies, including in the USSR and Eastern Europe. Capitalist productivity didn't suddenly exceed that in the USSR or Eastern Europe in the 1980s.

So, overall, the 'triumph' of the neoliberal paradigm didn't really have much to do with the imperialist lie of "Western economic and military superiority in the 1980ies". That fairytale might fit into some post-modernist relativist epistemology of everything being equally 'true' or 'valid', but in the real world it doesn't hold up empirically or logically. In Anglophone philosophic academia at least, post-modernism really picked up only after Althusser strangled his wife, and hyper-objectivist structuralism correspondingly was strangled by hyper-subjectivist post-modernism.

Seamus Padraig

The death knell of Keynesianism was sounded with the de-linking of the US dollar and the gold standard in 1971 and the first oil crisis of 1973.

Not really, no. In fact, we still do have Keynesianism; but now, it's just a Keynsianism for the banks, the corporations and the MIC rather than the rest of us. But check the stats: the governments of West are still heavily involved in deficit spending–US deficits, in fact, haven't been this big since WW2! Wish I got some of that money

Tim Jenkins
I find this kind of a pointless discussion on Keynes & so on

"Capitalism has Failed." Christine Lagarde 27/5/2014 Mansion House

"Socialism for the Rich" (Stiglitz: Nobel Economic laureate, 2008/9)

More important is the structuring of Central Banks to discuss and
Richard A. Werner's sound observations in the link

http://www.sciencedirect.com/science/article/pii/S1057521915001477

Riddle me this Seamus: this year we just got a new statue of Woodrow Wilson in Plovdiv BG.
Last year we got a statue of John no-name McCain in Sofia Bulgaria
See the patterns in the most poverty stricken EU nation ?
Not difficult !

vexarb
Seamus, me too! At least, wish I could get some of my own money back.
Tim Jenkins
Whenever I think about some serious R.O.I. of time & money & family contributions to Tech. Designs, lost in the '80's, I have to play some music or switch to Zen mode 🙂
vexarb
@Tim: "R.O.I (Return On Investment)". The first time I have come across that P.O.V (Point Of View) on this site. The essence of Darwin's theory of evolutionary progress: to slowly build on an initial slight advantage. The 80s (I was there), Maggie Snatcher, Baroness Muck, no such thing as Society, the years that the Locust has eaten. Little ROI despite a tsunami of fiat money swirling around the electronic world. Where is the ROI from capital in the WC.Clinton / B.Liar / Brown regimes, that were so boastful of their economic policies. Where are the snows of yesteryear?
Tim Jenkins
Well said, Stephen: this wholly weird wee article certainly begs the question, how old is & where was this tainted memory & member of academia in the 'Winter of '79' ? and how could he have possibly missed all the denationalisation/privatisation, beginning with NFC and onwards, throughout the '80's, under Thatcher ? Culminating in screwing UK societal futures, by failing to rollout Fibre Optic Cable in the UK, (except for the Square Mile city interests of London) which Boris now promises to do today, nationwide,

a mere 30 years too damn late, when it would have been so cheap, back then and production costs could have been tied to contracts of sale of the elite British Tech. at that time

http://www.techradar.com/news/world-of-tech/how-the-uk-lost-the-broadband-race-in-1990-1224784/2

Worth reading both part one & two of that link, imo scandalous !

Nice wholly suitable reference to Althusser 😉 say no more.

Talk about 'Bonkers' 🙂 we shan't be buying the book, for sure 🙂

Your comment was way more valuable. Do people get paid for writing things like this, these days. I was just outside Linz for 2 months, just before last Christmas and I found more knowledgeable people on the street, in & around Hitler's ole' 'patch', during his formative years, on the streets of Linz: where the joke goes something along the lines of

"If a homeless unemployed artist can't make it in Austria, he has nothing to fear, knowing that he can be on the road to becoming the Chancellor of Germany in just another year "

BigB
I was right with you to the end, Stephen. Althusser killed his wife for sure: but he was deemed insane and never stood trial. He was almost certainly suffering from a combination of conditions, exacerbated by a severe form of PTSD, as we would call it now.

Whether or not one has sympathy for this has become highly politicised. Classic Liberals, anti-communists, and radical feminists always seem to portray the 'murder' as a rational act of the misogynistic male in the grips of a radical philosophy for which wife murder is as natural a consequence as the Gulag. His supporters try to portray the 'mercy' killing of Helene as an 'act of love'. It wasn't that simple though, was it? Nor that black and white.

I cannot imagine what life was like in a German concentration camp for someone who was already suffering from mental illness. From what I have read: the 'treatment' available in the '50s was worse than the underlying condition. He was also 'self-medicating'. I cannot imagine what the state of his mind was in 1980: but I am inclined to cut him some slack. A lot of slack.

I cannot agree with your last statement. Althusser's madness was not a global trigger event – proceeding as a natural consequence from "hyper-subjectivist post-modernism". Which makes for a literary original, but highly inaccurate metaphor. Not least because Althusser was generally considered as a Structuralist himself.

Other than that, great comment.

Stephen Morrell
I understand your sentiments toward Althusser, and am sorry if my remarks about him were insensitive or offensive. However, I know from personal experience of hardline Althusserian academic philosophers who suddenly became post-modernists after the unfortunate incident. The point I was trying to make was that his philosophy wasn't abandoned for philosophical reasons but non-philosophical, moral ones. It wasn't a condemnation of Althusser. It was a condemnation of many of his followers.

I made no claim that this was some kind of 'global trigger event'. Philosophy departments, or ideas as such, don't bring change. If post-modernism didn't become useful to at least some sectors of the ruling class at some point, then it would have remained an academic backwater (as it should have). Nor that post-modernism was some kind of 'natural consequence' of structuralism (which is what I think you meant). Philosophically, it was a certainly one reaction to structuralism, one among several. Other more rational reactions to structuralism included EP Thompson's and Sebastiano Timpinaro's.

As Marx said, "the ideas of the ruling class are in every epoch the ruling ideas" [German Ideology], and if the ruling class finds some of them useful they'll adopt them. Or as Milton Friedman, one of the main proponents of neoliberalism, proclaimed: "Only a crisis – actual or perceived – produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around." Post-modernism, as a philosophy 'lying around', serves as a nice philosophical/ideological fit for the intelligentsia to rationalise the anti-science ideology the ruling class today is foisting on rest of the population.

Politically, Althusser was disowned by many French leftists for his support of the thoroughly counter-revolutionary role of the Stalinist PCF in the 1968 May events. His authority lasted for over a decade longer in the Anglophone countries.

Lochearn
"In Anglophone philosophic academia at least, post-modernism really picked up only after Althusser strangled his wife, and hyper-objectivist structuralism correspondingly was strangled by hyper-subjectivist post-modernism."

Wonderful sentence. I'll keep that – if I may – for some imaginary dinner table with some imaginary academic friends.

Tim Jenkins
I was thinking exactly the same and imagining the window of opportunity to provoke 🙂
some sound conversation, after some spluttering of red w(h)ine 😉
Stephen Morrell
Thank you. I'll rephrase it to improve it slightly if you like:

In Anglophone philosophic academia at least, post-modernism really picked up only after Althusser strangled his wife, and in revenge hyper-objectivist structuralism was strangled by hyper-subjectivist post-modernism.

Red Allover
Mr. Morrell's use of the phrase "stultifying Stalinist bureaucracies," to describe the actually existing Socialist societies of the Eastern bloc, indicates to me that he is very much of the bourgeois mind set that he purports to criticize. This "plague on both your houses" attitude is very typical of the lower middle class intellectual in capitalist countries, c.f. Chomsky, Zizek, etc.
Stephen Morrell
On the contrary, all the remaining workers states (China, North Korea, Viet Nam, Laos and Cuba) must be defended against imperialist attack and internal counterrevolution despite the bureaucratic castes that hold political power in these countries. Political, not social, revolutions are needed to sweep away these bureaucracies to establish organs of workers democracy and political power (eg soviets) which never existed in these countries (unlike in the first years of the USSR).

To his last days, the dying Lenin fought the rising bureaucracy led by Stalin, but Russia's backwardness and the failure of the revolution to spread to an advanced country (especially Germany, October 1923) drove its rise. Its ideological shell was the profoundly reactionary outlook and program of 'Socialism in One Country' (and only one country). And while Stalin defeated him and his followers, it was Trotsky who came to a Marxist, materialist understanding of what produced and drove the Soviet Thermidor. Trotsky didn't go running off to the bourgeoisie of the world blubbering about a 'new class' the way Kautsky, Djilas, Shachtman, Cliff, et al. did.

The restoration of capitalism in the Soviet Union was a profound defeat for the working class worldwide, as it would be for the remaining workers states. Now if that's a 'bourgeois mindset' of a 'lower middle class intellectual', be my guest and nominate the bourgeois or petty bourgeois layers that hold such views. Certainly Chomsky, Zizek et al. couldn't agree with such an outlook, but it's only the bourgeoisie and the Stalinists who contend that the workers states are 'socialist' or 'communist'. Only a true post-modernist could delude themselves into concurring, or claim that the political repression, censorship and corrupting bureaucratism of the Stalinist regimes were indeed not stultifying.

Red Allover
Thanks for your intelligent response. I am very familiar with the Trotskyist positions you outline. I could give you the Leninist rebuttal to each of them, but you are probably familiar with them as well. I don't want to waste your time, or mine. However,
if you don't mind me asking, exactly at what point do you feel capitalism was restored in the USSR? It was, I take it, with the first Five Year Plan, not the NEP?
Also, the Socialist or, to use your nomenclature, "Stalinist" system, that was destroyed in the the USSR in the 1990s–it was, in truth, just one form of capitalism replaced by another form of capitalism? Would this summarize your view accurately?
Stephen Morrell
Capitalism was restored in the USSR in 1991-92. Stalinism was not another form of capitalism, as the Third Campists would contend. The Stalinist bureaucracy rested on exactly the same property relations a socialist system would which were destroyed with Yeltsin's (and Bush's) counterrevolution. Last, I've never labelled the Stalinist bureaucracy as a 'system'.
GMW
Perhaps if you changed your moniker to: "Troll Allover" one could take you seriously, well, not really – 'seriously' – but at least in a sort of weird, twisted & warped post-modern sense – eh?
Red Allover
I'm sorry, what is the argument you are making? I know name calling is beneath intelligent, educated people.

[Oct 29, 2019] https://www.opendemocracy.net/en/oureconomy/impoverished-economics-unpacking-economics-nobel-prize/

Oct 29, 2019 | www.opendemocracy.net

October 18, 2019

Impoverished economics? Unpacking the economics Nobel Prize
When the world is facing large systemic crises, why is the economics profession celebrating small technical fixes?
By Ingrid Harvold Kvangraven

This week it was announced that Abhijit Banerjee, Esther Duflo and Michael Kremer won the Economics Nobel Prize (or more accurately: the 'Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel'). The trio of economists were awarded the prize for "their experimental approach to alleviating global poverty".

On social media and in mainstream newspapers, there was an exceptional level of praise for the laureates, reflecting their existing rockstar status within development economics. The Financial Times even claimed that the "Economics Nobel for poverty work will help restore profession's relevance". However, the widespread calls for celebration need to be considered with a cautionary counterweight.

The experimental approach to poverty alleviation relies on so-called Randomized Control Trials (RCTs). Inspired by studies in medicine, the approach targets specific interventions to a randomly selected group (schools, classes, mothers, etc), and then compares how specific outcomes change in the recipient group versus those who did not receive the treatment. As the groups are assumed to be otherwise similar, the difference in outcomes can be causally attributed to the intervention.

While the laureates were first pioneering this work in the 1990s in Kenyan schools, the approach is now widely considered the new "gold standard" in development economics, also sometimes simply called "New Economics". The approach has become enormously influential among governments, international agencies and NGOs. The body of work pioneered by the laureates, or the randomistas as they are sometimes called, is meant to alleviate poverty through simple interventions such as combating teacher absenteeism, through cash transfers, and through stimulating positive thinking among the people living in poverty. Sound good so far?

While the laureates' approach to poverty research and policy may seem harmless, if not laudable, there are many reasons for concern. Both heterodox and mainstream economists as well as other social scientists have long provided thorough critique of the turn towards RCTs in economics, on philosophical, epistemological, political and methodological grounds. The concerns with the approach can be roughly grouped into questions of focus, theory, and methodology.

Focus: tackling symptoms and thinking small

The approach that is being promoted is concerned with poverty, not development, and is thus a part of the larger trend in development economics that is moving away from development as structural transformation to development as poverty alleviation. This movement towards "thinking small" is a part of a broader trend, which has squeezed out questions related to global economic institutions, trade, agricultural, industrial and fiscal policy, and the role of political dynamics, in favor of the best ways to make smaller technical interventions.

The interventions considered by the Nobel laureates tend to be removed from analyses of power and wider social change. In fact, the Nobel committee specifically gave it to Banerjee, Duflo and Kremer for addressing "smaller, more manageable questions," rather than big ideas. While such small interventions might generate positive results at the micro-level, they do little to challenge the systems that produce the problems.

For example, rather than challenging the cuts to the school systems that are forced by austerity, the focus of the randomistas directs our attention to absenteeism of teachers, the effects of school meals and the number of teachers in the classroom on learning. Meanwhile, their lack of challenge to the existing economic order is perhaps also precisely one of the secrets to media and donor appeal, and ultimately also their success.

The lack of engagement with the conditions that create poverty has led many critics to question to what extent RCTs will actually be able to significantly reduce global poverty. A further consequence of this impoverished economics is that it limits the types of questions we can ask, and it leads us "to imagine too few ways to change the world".

Theory: methodological individualism lives on

In a 2017 speech, Duflo famously likened economists to plumbers. In her view the role of an economist is to solve real world problems in specific situations. This is a dangerous assertion, as it suggests that the "plumbing" the randomistas are doing is purely technical, and not guided by theory or values. However, the randomistas' approach to economics is not objective, value-neutral, nor pragmatic, but rather, rooted in a particular theoretical framework and world view – neoclassical microeconomic theory and methodological individualism.

The experiments' grounding has implications for how experiments are designed and the underlying assumptions about individual and collective behavior that are made. Perhaps the most obvious example of this is that the laureates often argue that specific aspects of poverty can be solved by correcting cognitive biases. Unsurprisingly, there is much overlap between the work of randomistas and the mainstream behavioral economists, including a focus on nudges that may facilitate better choices on the part of people living in poverty.

Another example is Duflo's analysis of women empowerment. Naila Kabeer argues that it employs an understanding of human behavior "uncritically informed by neoclassical microeconomic theory." Since all behavior can allegedly be explained as manifestations of individual maximizing behavior, alternative explanations are dispensed with. Because of this, Duflo fails to understand a series of other important factors related to women's empowerment, such as the role of sustained struggle by women's organizations for rights or the need to address unfair distribution of unpaid work that limits women's ability to participate in the community.

Note that there is nothing embedded in RCTs that forces randomistas to assume individuals are rational optimizing agents. These assumptions come from the economics tradition. This is therefore not a critique of RCTs per se, but of the way RCTs are employed in the laureates' work and in most of mainstream economics.

Method: If you didn't randomize it, is it really knowledge?

While understanding causal processes is important in development economics, as in other social science disciplines, RCTs do so in a very limited way. The causal model underlying RCTs focuses on causal effects rather than causal mechanisms. Not only do RCTs not tell us exactly what mechanisms are involved when something works, they also do not tell us whether the policy in question can be reliably implemented elsewhere. In order to make such a judgement, a broader assessment of economic and social realities is unavoidable.

Assuming that interventions are valid across geographies and scale suggests that micro results are independent of their macroeconomic environment. However, while "effects" on individuals and households are not separate from the societies in which they exist, randomistas give little acknowledgement to other ways of knowing about the world that might help us better understand individual motivations and socio-economic situations. As it is difficult to achieve truly random sampling in human communities, it is perhaps not surprising that when RCTs are replicated, they may come to substantially different results than the original.

Not only do RCTs rarely have external validity, but the specific circumstances needed to understand the extent to which the experiments may have external validity are usually inadequately reported. This has led even critics within the mainstream to argue that there are misunderstandings about what RCTs are capable of accomplishing. A deeper epistemological critique involves the problematic underlying assumption that there is one specific true impact that can be uncovered through experiments.

Recent research has found that alternative attempts to assess the success of programs transferring assets to women in extreme poverty in West Bengal and Sindh have been far superior to RCTs, which provide very limited explanations for the patterns of outcomes observed. The research concludes that it is unlikely that RCTs will be able to acknowledge the central role of human agency in project success if they confine themselves to quantitative methods alone.

There are also serious ethical problems at stake. Among these are issues such as lying, instrumentalizing people, the role of consent, accountability, and foreign intervention, in addition to the choice of who gets treatment. While ethical concerns regarding potential harm to groups is discussed extensively in the medical literature, it receives less attention in economics, despite the many ethically dubious experimental studies (e.g. allowing bribes for people to get their drivers' licences in India or incentivizing Hong Kong university students into participation in an antiauthoritarian protest). Finally, the colonial dimensions of US-based researchers intervening to estimate what is best for people in the Global South cannot be ignored.

Why it matters: limits to knowledge and policy-making

There will always be research that is more or less relevant for development, so why does it matter what the randomistas do? Well, as the Nobel Committee stated, their "experimental research methods now entirely dominate development economics". A serious epistemological problem arises when the definition of what rigour and evidence means gets narrowed down to one single approach that has so many limitations. This shift has taken place over the past couple of decades in development economics, and is now strengthened by the 2019 Nobel Prize. As both Banerjee and Duflo acknowledged in interviews after the prize was announced, this is not just a prize for them, but a prize for the entire movement.

The discipline has not always been this way. The history of thought on development economics is rich with debates about how capital accumulation differs across space, the role of institutions in shaping behavior and economic development, the legacies of colonialism and imperialism, unequal exchange, the global governance of technology, the role of fiscal policy, and the relationship between agriculture and industry. The larger questions have since been pushed out of the discipline, in favor of debates about smaller interventions.

The rise of the randomistas also matters because the randomistas are committed to provoke results, not just provide an understanding of the situations in which people living in poverty find themselves. In fact, it is one of their stated goals to produce a "better integration between theory and empirical practice". A key argument by the randomistas is that "all too often development policy is based on fads, and randomised evaluations could allow it to be based on evidence".

However, the narrowness of the randomized trials is impractical for most forms of policies. While RCTs tend to test at most a couple of variations of a policy, in the real world of development, interventions are overlapping and synergistic. This reality recently led 15 leading economists to call to "evaluate whole public policies" rather than assess "short-term impacts of micro-projects," given that what is needed is systems-level thinking to tackle the scale of overlapping crises. Furthermore, the value of experimentation in policy-making, rather than promoting pre-prescribed policies, should not be neglected.

The concept of "evidence-based policy" associated with the randomistas needs some unpacking. It is important to note that policies are informed by reflections on values and objectives, which economists are not necessarily well-suited to intervene in. Of course, evidence should be a part of a policy-making process, but the pursuit of ineffective policies is often driven by political priorities rather than lack of evidence.

While randomistas might respond to this by arguing that their trials are precisely meant to de-politicize public policy, this is not necessarily a desirable step. Policy decisions are political in nature, and shielding these value judgements from public scrutiny and debate does little to strengthen democratic decision making. Suggesting that policy-making can be depoliticized is dangerous and it belittles the agency and participation of people in policy-making. After all, why should a policy that has been proven effective through an RCT carry more weight than, for example, policies driven by people's demands and political and social mobilisation?

While the Nobel Prize does leave those of us concerned with broader political economy challenges in the world anxious, not everything is doom and gloom. Firstly, the Nobel directs attention to the persistence of poverty in the world and the need to do something about it. What we as critical development economists now need to do is to challenge the fact that the Prize also legitimizes a prescriptive view of how to find solutions to global problems.

Secondly, the fact that a woman and a person of color were awarded a prize that is usually reserved for white men is a step forward for a more open and inclusive field. Duflo herself recognizes that the gender imbalance among Nobel Prize winners reflects a "structural" problem in the economics profession and that her profession lacks ethnic diversity.

However, it is obvious that to challenge racism, sexism and Eurocentrism in economics, it is not enough to simply be more inclusive of women and people of color that are firmly placed at the top of the narrow, Eurocentric mainstream. To truly achieve a more open and democratic science it is necessary to push for a field that is welcoming of a plurality of viewpoints, methodologies, theoretical frameworks, forms of knowledge, and perspectives.

This is a massive challenge, but the systemic, global crises we face require broad, interdisciplinary engagement in debates about possible solutions.


Ingrid Harvold Kvangraven is a Lecturer in International Development at the University of York. Reply Saturday, October 26, 2019 at 11:52 AM Paine said in reply to anne... Development v poverty amelioration

A Very basic goal conflict indeed


Transformation
will never come
thru
More effective off sets
to
Institutionally produced
misery powerlesses
helplessness

In a word
Systemic human

" redundancy "

Reply Sunday, October 27, 2019 at 07:14 AM anne said in reply to anne... https://africasacountry.com/2019/10/the-poverty-of-poor-economics

October 17, 2019

The poverty of poor economics
The winners of the Nobel Prize in Economics experiment on the poor, but their research doesn't solve poverty.
By Grieve Chelwa and Seán Muller

Monday, the Swedish Academy of Sciences awarded the "Nobel Prize" in economics to Abhijit Banerjee, Esther Duflo and Michael Kremer for "their experimental approach to alleviating global poverty."

...

Banerjee and Duflo teach at MIT while Kremer is at Harvard. The trio have been at the forefront of pushing the use of randomized control trials (RCTs) in the sub-discipline of economics known as development economics.... The main idea behind their work is that RCTs allow us to know what works and doesn't work in development because of its "experimental" approach. RCTs are most well-known for their use in medicine and involve the random assignment of interventions into "treatment" and "control" groups. And just like in medicine, so the argument goes, RCTs allow us to know which development pill to swallow because of the rigor associated with the experimental approach. Banerjee and Duflo popularized their work in a 2011 book "Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty."

Even though other Nobel prize awards often attract public controversy (peace and literature come to mind), the economics prize has largely flown under the radar with prize announcements often met with the same shrugging of the shoulders as, for example, the chemistry prize. This year has however been different (and so was the year that Milton Friedman, that high priest of neoliberalism, won).

A broad section of commentary, particularly from the Global South, has puzzled over the Committee's decision to not only reward an approach that many consider as suffering from serious ethical and methodological problems, but also extol its virtues and supposed benefits for poor people.

Many of the trio's RCTs have been performed on black and brown people in poor parts of the world. And here, serious ethical and moral questions have been raised particularly about the types of experiments that the randomistas, as they are colloquially known, have been allowed to perform. In one study in western Kenya, which is one-half of the epicenter of this kind of experimentation, randomistas deliberately gave some villages more money and others less money to check if villages receiving less would become envious of those receiving more. The study's authors, without any sense of shame, titled their paper "Is Your Gain My Pain?" In another study in India, the other half of the epicenter, researchers installed intrusive cameras in class rooms to police teacher attendance (this study was actually favorably mentioned by the Swedish Academy). There are some superficial rationalizations for this sort of thing, but studies of this kind -- and there are many -- would never have seen the light of day had the experimental subjects been rich Westerners.

There are also concerns around the extractive nature of the RCT enterprise. To execute these interventions, randomistas rely on massive teams of local assistants (local academics, students, community workers, etcetera) who often make non-trivial contributions to the projects. Similarly, those to be studied (the poor villagers) lend their incalculable emotional labor to these projects (it is often unclear whether they have been adequately consulted or if the randomistas have simply struck deals with local officials). The villagers are the ones that have to deal with all the community-level disruptions that the randomistas introduce and then leave behind once they've gone back to their cushy lives in the US and Europe.

And while there is an increasing amount of posturing to compensate for this exploitation, with some researchers gushing about how they and their "native assistants" are bosom buddies, the payoffs of the projects (lucrative career advancement, fame, speaking gigs, etcetera) only ever accrue to the randomistas and randomistas alone. The extreme case is obviously this week's award.

Beyond the ethics of the Nobel winners, their disciples, and the institutions they have created in their image are two serious methodological problems that fundamentally undermine their findings.

The first is that the vast majority of studies conducted using these methods (our rough guess is more than 90%) have no formal basis for generalization. In other words, there is no basis to believe that the findings of these studies can be applied beyond the narrow confines of the population on which the experiments are undertaken. This is simply fatal for policy purposes.

The prize giving committee addresses this only in passing by saying that "the laureates have also been at the forefront of research on the issue of [whether experimental results apply in other contexts]." This is misleading at best and false at worst. There are some advocates of randomised trials who have done important research on the problem, but the majority of key contributions are not by advocates of randomised trials and the three awardees have been marginal contributors. The more important point is simply that if the problem of whether experimental results are relevant outside the experiment has not been resolved, how can it be claimed that the trio's work is "reducing world poverty?"

The second contradiction is more widely understood: despite the gushing headlines in the Western press, there is simply no evidence that policy based on randomized trials is better than alternatives. Countries that are now developed did not need foreign researchers running experiments on local poor people to grow their economies. There is ample historical evidence that growth, development and dramatic reductions in poverty can be achieved without randomised trials. Randomistas claim that their methods are the holy grail of development yet they have not presented any serious arguments to show why theirs is the appropriate response. Instead, the case that such methods are crucial for policy is largely taken for granted by them because they think they are doing "science." But while they are certainly imitating what researchers in various scientific disciplines do, the claim that the results are as reliable and useful for economic and social questions is unsupported. It is instead a matter of blind faith -- as with the conviction many such individuals appear to have of a calling to save the poor, usually black and brown, masses of the world.

We do not have a view on whether these individuals ought to have been awarded the prize -- prizes are usually somewhat dubious in their arbitrariness and historical contingency. But the claims made about the usefulness and credibility of the methods employed are concerning, both because they are unfounded and because they inform a missionary complex that we believe is more of a threat to the progress of developing countries than it is an aid.


Grieve Chelwa teaches economics at the University of Cape Town. Seán Muller teaches economics at the University of Johannesburg. Reply Sunday, October 27, 2019 at 12:40 PM anne said in reply to anne... How curious that China starting from being among the poorest of countries, far poorer than India in 1980, and having a population that is now 1.4 billion could have raised hundreds of millions to middle class well-being, could have raised hundreds of millions from poverty and coming ever closer to ending severe poverty in 2020, would have no economist worth a Nobel prize for work on poverty. To me, this is a travesty of awarding the Nobel Prize for work on poverty to 3 Massachusetts economists.

Distressing that the astonishing and wonderful progress China has made against poverty should be given no attention and credit by the Nobel Prize folks or by the articles about the prize that I have so far read. This tells me that the Massachusetts work on poverty and evaluation of the work is highly problematic, which I already knew from reading the work. Reply Sunday, October 27, 2019 at 12:44 PM

[Oct 23, 2019] The treason of the intellectuals The Undoing of Thought by Roger Kimball

Highly recommended!
Supporting neoliberalism is the key treason of contemporary intellectuals eeho were instrumental in decimating the New Deal capitalism, to say nothing about neocon, who downgraded themselves into intellectual prostitutes of MIC mad try to destroy post WWII order.
Notable quotes:
"... More and more, intellectuals were abandoning their attachment to the traditional panoply of philosophical and scholarly ideals. One clear sign of the change was the attack on the Enlightenment ideal of universal humanity and the concomitant glorification of various particularisms. ..."
"... "Our age is indeed the age of the intellectual organization of political hatreds ," he wrote near the beginning of the book. "It will be one of its chief claims to notice in the moral history of humanity." There was no need to add that its place in moral history would be as a cautionary tale. In little more than a decade, Benda's prediction that, because of the "great betrayal" of the intellectuals, humanity was "heading for the greatest and most perfect war ever seen in the world," would achieve a terrifying corroboration. ..."
"... In Plato's Gorgias , for instance, the sophist Callicles expresses his contempt for Socrates' devotion to philosophy: "I feel toward philosophers very much as I do toward those who lisp and play the child." Callicles taunts Socrates with the idea that "the more powerful, the better, and the stronger" are simply different words for the same thing. Successfully pursued, he insists, "luxury and intemperance are virtue and happiness, and all the rest is tinsel." How contemporary Callicles sounds! ..."
"... In Benda's formula, this boils down to the conviction that "politics decides morality." To be sure, the cynicism that Callicles espoused is perennial: like the poor, it will be always with us. What Benda found novel was the accreditation of such cynicism by intellectuals. "It is true indeed that these new 'clerks' declare that they do not know what is meant by justice, truth, and other 'metaphysical fogs,' that for them the true is determined by the useful, the just by circumstances," he noted. "All these things were taught by Callicles, but with this difference; he revolted all the important thinkers of his time." ..."
"... In other words, the real treason of the intellectuals was not that they countenanced Callicles but that they championed him. ..."
"... His doctrine of "the will to power," his contempt for the "slave morality" of Christianity, his plea for an ethic "beyond good and evil," his infatuation with violence -- all epitomize the disastrous "pragmatism" that marks the intellectual's "treason." The real problem was not the unattainability but the disintegration of ideals, an event that Nietzsche hailed as the "transvaluation of all values." "Formerly," Benda observed, "leaders of States practiced realism, but did not honor it; With them morality was violated but moral notions remained intact, and that is why, in spite of all their violence, they did not disturb civilization ." ..."
"... From the savage flowering of ethnic hatreds in Eastern Europe and the former Soviet Union to the mendacious demands for political correctness and multiculturalism on college campuses across America and Europe, the treason of the intellectuals continues to play out its unedifying drama. Benda spoke of "a cataclysm in the moral notions of those who educate the world." That cataclysm is erupting in every corner of cultural life today. ..."
"... Finkielkraut catalogues several prominent strategies that contemporary intellectuals have employed to retreat from the universal. A frequent point of reference is the eighteenth-century German Romantic philosopher Johann Gottfried Herder. "From the beginning, or to be more precise, from the time of Plato until that of Voltaire," he writes, "human diversity had come before the tribunal of universal values; with Herder the eternal values were condemned by the court of diversity." ..."
"... Finkielkraut focuses especially on Herder's definitively anti-Enlightenment idea of the Volksgeist or "national spirit." ..."
"... Nevertheless, the multiculturalists' obsession with "diversity" and ethnic origins is in many ways a contemporary redaction of Herder's elevation of racial particularism over the universalizing mandate of reason ..."
"... In Goethe's words, "A generalized tolerance will be best achieved if we leave undisturbed whatever it is which constitutes the special character of particular individuals and peoples, whilst at the same time we retain the conviction that the distinctive worth of anything with true merit lies in its belonging to all humanity." ..."
"... The geography of intellectual betrayal has changed dramatically in the last sixty-odd years. In 1927, intellectuals still had something definite to betray. In today's "postmodernist" world, the terrain is far mushier: the claims of tradition are much attenuated and betrayal is often only a matter of acquiescence. ..."
"... In the broadest terms, The Undoing of Thought is a brief for the principles of the Enlightenment. Among other things, this means that it is a brief for the idea that mankind is united by a common humanity that transcends ethnic, racial, and sexual divisions ..."
"... Granted, the belief that there is "Jewish thinking" or "Soviet science" or "Aryan art" is no longer as widespread as it once was. But the dispersal of these particular chimeras has provided no inoculation against kindred fabrications: "African knowledge," "female language," "Eurocentric science": these are among today's talismanic fetishes. ..."
"... Then, too, one finds a stunning array of anti-Enlightenment phantasmagoria congregated under the banner of "anti-positivism." The idea that history is a "myth," that the truths of science are merely "fictions" dressed up in forbidding clothes, that reason and language are powerless to discover the truth -- more, that truth itself is a deceitful ideological construct: these and other absurdities are now part of the standard intellectual diet of Western intellectuals. The Frankfurt School Marxists Max Horkheimer and Theodor Adorno gave an exemplary but by no means uncharacteristic demonstration of one strain of this brand of anti-rational animus in the mid-1940s. ..."
"... Historically, the Enlightenment arose as a deeply anti-clerical and, perforce, anti-traditional movement. Its goal, in Kant's famous phrase, was to release man from his "self-imposed immaturity." ..."
"... The process of disintegration has lately become an explicit attack on culture. This is not simply to say that there are many anti-intellectual elements in society: that has always been the case. "Non-thought," in Finkielkraut's phrase, has always co-existed with the life of the mind. The innovation of contemporary culture is to have obliterated the distinction between the two. ..."
"... There are many sides to this phenomenon. What Finkielkraut has given us is not a systematic dissection but a kind of pathologist's scrapbook. He reminds us, for example, that the multiculturalists' demand for "diversity" requires the eclipse of the individual in favor of the group ..."
"... To a large extent, the abdication of reason demanded by multiculturalism has been the result of what we might call the subjection of culture to anthropology. ..."
"... In describing this process of leveling, Finkielkraut distinguishes between those who wish to obliterate distinctions in the name of politics and those who do so out of a kind of narcissism. The multiculturalists wave the standard of radical politics and say (in the words of a nineteenth-century Russian populist slogan that Finkielkraut quotes): "A pair of boots is worth more than Shakespeare." ..."
"... The upshot is not only that Shakespeare is downgraded, but also that the bootmaker is elevated. "It is not just that high culture must be demystified; sport, fashion and leisure now lay claim to high cultural status." A grotesque fantasy? ..."
"... . Finkielkraut notes that the rhetoric of postmodernism is in some ways similar to the rhetoric of Enlightenment. Both look forward to releasing man from his "self-imposed immaturity." But there is this difference: Enlightenment looks to culture as a repository of values that transcend the self, postmodernism looks to the fleeting desires of the isolated self as the only legitimate source of value ..."
"... The products of culture are valuable only as a source of amusement or distraction. In order to realize the freedom that postmodernism promises, culture must be transformed into a field of arbitrary "options." "The post-modern individual," Finkielkraut writes, "is a free and easy bundle of fleeting and contingent appetites. He has forgotten that liberty involves more than the ability to change one's chains, and that culture itself is more than a satiated whim." ..."
"... "'All cultures are equally legitimate and everything is cultural,' is the common cry of affluent society's spoiled children and of the detractors of the West. ..."
"... There is another, perhaps even darker, result of the undoing of thought. The disintegration of faith in reason and common humanity leads not only to a destruction of standards, but also involves a crisis of courage. ..."
"... As the impassioned proponents of "diversity" meet the postmodern apostles of acquiescence, fanaticism mixes with apathy to challenge the commitment required to preserve freedom. ..."
"... Communism may have been effectively discredited. But "what is dying along with it is not the totalitarian cast of mind, but the idea of a world common to all men." ..."
Dec 01, 1992 | www.moonofalabama.org

On the abandonment of Enlightenment intellectualism, and the emergence of a new form of Volksgeist.

When hatred of culture becomes itself a part of culture, the life of the mind loses all meaning. -- Alain Finkielkraut, The Undoing of Thought

Today we are trying to spread knowledge everywhere. Who knows if in centuries to come there will not be universities for re-establishing our former ignorance? -- Georg Christoph Lichtenberg (1742-1799)

I n 1927, the French essayist Julien Benda published his famous attack on the intellectual corruption of the age, La Trahison des clercs. I said "famous," but perhaps "once famous" would have been more accurate. For today, in the United States anyway, only the title of the book, not its argument, enjoys much currency. "La trahison des clercs": it is one of those memorable phrases that bristles with hints and associations without stating anything definite. Benda tells us that he uses the term "clerc" in "the medieval sense," i.e., to mean "scribe," someone we would now call a member of the intelligentsia. Academics and journalists, pundits, moralists, and pontificators of all varieties are in this sense clercs . The English translation, The Treason of the Intellectuals , 1 sums it up neatly.

The "treason" in question was the betrayal by the "clerks" of their vocation as intellectuals. From the time of the pre-Socratics, intellectuals, considered in their role as intellectuals, had been a breed apart. In Benda's terms, they were understood to be "all those whose activity essentially is not the pursuit of practical aims, all those who seek their joy in the practice of an art or a science or a metaphysical speculation, in short in the possession of non-material advantages." Thanks to such men, Benda wrote, "humanity did evil for two thousand years, but honored good. This contradiction was an honor to the human species, and formed the rift whereby civilization slipped into the world."

According to Benda, however, this situation was changing. More and more, intellectuals were abandoning their attachment to the traditional panoply of philosophical and scholarly ideals. One clear sign of the change was the attack on the Enlightenment ideal of universal humanity and the concomitant glorification of various particularisms. The attack on the universal went forward in social and political life as well as in the refined precincts of epistemology and metaphysics: "Those who for centuries had exhorted men, at least theoretically, to deaden the feeling of their differences have now come to praise them, according to where the sermon is given, for their 'fidelity to the French soul,' 'the immutability of their German consciousness,' for the 'fervor of their Italian hearts.'" In short, intellectuals began to immerse themselves in the unsettlingly practical and material world of political passions: precisely those passions, Benda observed, "owing to which men rise up against other men, the chief of which are racial passions, class passions and national passions." The "rift" into which civilization had been wont to slip narrowed and threatened to close altogether.

Writing at a moment when ethnic and nationalistic hatreds were beginning to tear Europe asunder, Benda's diagnosis assumed the lineaments of a prophecy -- a prophecy that continues to have deep resonance today. "Our age is indeed the age of the intellectual organization of political hatreds ," he wrote near the beginning of the book. "It will be one of its chief claims to notice in the moral history of humanity." There was no need to add that its place in moral history would be as a cautionary tale. In little more than a decade, Benda's prediction that, because of the "great betrayal" of the intellectuals, humanity was "heading for the greatest and most perfect war ever seen in the world," would achieve a terrifying corroboration.

J ulien Benda was not so naïve as to believe that intellectuals as a class had ever entirely abstained from political involvement, or, indeed, from involvement in the realm of practical affairs. Nor did he believe that intellectuals, as citizens, necessarily should abstain from political commitment or practical affairs. The "treason" or betrayal he sought to publish concerned the way that intellectuals had lately allowed political commitment to insinuate itself into their understanding of the intellectual vocation as such. Increasingly, Benda claimed, politics was "mingled with their work as artists, as men of learning, as philosophers." The ideal of disinterestedness, the universality of truth: such guiding principles were contemptuously deployed as masks when they were not jettisoned altogether. It was in this sense that he castigated the " desire to abase the values of knowledge before the values of action ."

In its crassest but perhaps also most powerful form, this desire led to that familiar phenomenon Benda dubbed "the cult of success." It is summed up, he writes, in "the teaching that says that when a will is successful that fact alone gives it a moral value, whereas the will which fails is for that reason alone deserving of contempt." In itself, this idea is hardly novel, as history from the Greek sophists on down reminds us. In Plato's Gorgias , for instance, the sophist Callicles expresses his contempt for Socrates' devotion to philosophy: "I feel toward philosophers very much as I do toward those who lisp and play the child." Callicles taunts Socrates with the idea that "the more powerful, the better, and the stronger" are simply different words for the same thing. Successfully pursued, he insists, "luxury and intemperance are virtue and happiness, and all the rest is tinsel." How contemporary Callicles sounds!

In Benda's formula, this boils down to the conviction that "politics decides morality." To be sure, the cynicism that Callicles espoused is perennial: like the poor, it will be always with us. What Benda found novel was the accreditation of such cynicism by intellectuals. "It is true indeed that these new 'clerks' declare that they do not know what is meant by justice, truth, and other 'metaphysical fogs,' that for them the true is determined by the useful, the just by circumstances," he noted. "All these things were taught by Callicles, but with this difference; he revolted all the important thinkers of his time."

In other words, the real treason of the intellectuals was not that they countenanced Callicles but that they championed him. To appreciate the force of Benda's thesis one need only think of that most influential modern Callicles, Friedrich Nietzsche. His doctrine of "the will to power," his contempt for the "slave morality" of Christianity, his plea for an ethic "beyond good and evil," his infatuation with violence -- all epitomize the disastrous "pragmatism" that marks the intellectual's "treason." The real problem was not the unattainability but the disintegration of ideals, an event that Nietzsche hailed as the "transvaluation of all values." "Formerly," Benda observed, "leaders of States practiced realism, but did not honor it; With them morality was violated but moral notions remained intact, and that is why, in spite of all their violence, they did not disturb civilization ."

Benda understood that the stakes were high: the treason of the intellectuals signaled not simply the corruption of a bunch of scribblers but a fundamental betrayal of culture. By embracing the ethic of Callicles, intellectuals had, Benda reckoned, precipitated "one of the most remarkable turning points in the moral history of the human species. It is impossible," he continued,

to exaggerate the importance of a movement whereby those who for twenty centuries taught Man that the criterion of the morality of an act is its disinterestedness, that good is a decree of his reason insofar as it is universal, that his will is only moral if it seeks its law outside its objects, should begin to teach him that the moral act is the act whereby he secures his existence against an environment which disputes it, that his will is moral insofar as it is a will "to power," that the part of his soul which determines what is good is its "will to live" wherein it is most "hostile to all reason," that the morality of an act is measured by its adaptation to its end, and that the only morality is the morality of circumstances. The educators of the human mind now take sides with Callicles against Socrates, a revolution which I dare to say seems to me more important than all political upheavals.

T he Treason of the Intellectuals is an energetic hodgepodge of a book. The philosopher Jean-François Revel recently described it as "one of the fussiest pleas on behalf of the necessary independence of intellectuals." Certainly it is rich, quirky, erudite, digressive, and polemical: more an exclamation than an analysis. Partisan in its claims for disinterestedness, it is ruthless in its defense of intellectual high-mindedness. Yet given the horrific events that unfolded in the decades following its publication, Benda's unremitting attack on the politicization of the intellect and ethnic separatism cannot but strike us as prescient. And given the continuing echo in our own time of the problems he anatomized, the relevance of his observations to our situation can hardly be doubted. From the savage flowering of ethnic hatreds in Eastern Europe and the former Soviet Union to the mendacious demands for political correctness and multiculturalism on college campuses across America and Europe, the treason of the intellectuals continues to play out its unedifying drama. Benda spoke of "a cataclysm in the moral notions of those who educate the world." That cataclysm is erupting in every corner of cultural life today.

In 1988, the young French philosopher and cultural critic Alain Finkielkraut took up where Benda left off, producing a brief but searching inventory of our contemporary cataclysms. Entitled La Défaite de la pensée 2 ("The 'Defeat' or 'Undoing' of Thought"), his essay is in part an updated taxonomy of intellectual betrayals. In this sense, the book is a trahison des clercs for the post-Communist world, a world dominated as much by the leveling imperatives of pop culture as by resurgent nationalism and ethnic separatism. Beginning with Benda, Finkielkraut catalogues several prominent strategies that contemporary intellectuals have employed to retreat from the universal. A frequent point of reference is the eighteenth-century German Romantic philosopher Johann Gottfried Herder. "From the beginning, or to be more precise, from the time of Plato until that of Voltaire," he writes, "human diversity had come before the tribunal of universal values; with Herder the eternal values were condemned by the court of diversity."

Finkielkraut focuses especially on Herder's definitively anti-Enlightenment idea of the Volksgeist or "national spirit." Quoting the French historian Joseph Renan, he describes the idea as "the most dangerous explosive of modern times." "Nothing," he writes, "can stop a state that has become prey to the Volksgeist ." It is one of Finkielkraut's leitmotifs that today's multiculturalists are in many respects Herder's (generally unwitting) heirs.

True, Herder's emphasis on history and language did much to temper the tendency to abstraction that one finds in some expressions of the Enlightenment. Ernst Cassirer even remarked that "Herder's achievement is one of the greatest intellectual triumphs of the philosophy of the Enlightenment."

Nevertheless, the multiculturalists' obsession with "diversity" and ethnic origins is in many ways a contemporary redaction of Herder's elevation of racial particularism over the universalizing mandate of reason. Finkielkraut opposes this just as the mature Goethe once took issue with Herder's adoration of the Volksgeist. Finkielkraut concedes that we all "relate to a particular tradition" and are "shaped by our national identity." But, unlike the multiculturalists, he soberly insists that "this reality merit[s] some recognition, not idolatry."

In Goethe's words, "A generalized tolerance will be best achieved if we leave undisturbed whatever it is which constitutes the special character of particular individuals and peoples, whilst at the same time we retain the conviction that the distinctive worth of anything with true merit lies in its belonging to all humanity."

The Undoing of Thought resembles The Treason of the Intellectuals stylistically as well as thematically. Both books are sometimes breathless congeries of sources and aperçus. And Finkielkraut, like Benda (and, indeed, like Montaigne), tends to proceed more by collage than by demonstration. But he does not simply recapitulate Benda's argument.

The geography of intellectual betrayal has changed dramatically in the last sixty-odd years. In 1927, intellectuals still had something definite to betray. In today's "postmodernist" world, the terrain is far mushier: the claims of tradition are much attenuated and betrayal is often only a matter of acquiescence. Finkielkraut's distinctive contribution is to have taken the measure of the cultural swamp that surrounds us, to have delineated the links joining the politicization of the intellect and its current forms of debasement.

In the broadest terms, The Undoing of Thought is a brief for the principles of the Enlightenment. Among other things, this means that it is a brief for the idea that mankind is united by a common humanity that transcends ethnic, racial, and sexual divisions.

The humanizing "reason" that Enlightenment champions is a universal reason, sharable, in principle, by all. Such ideals have not fared well in the twentieth century: Herder's progeny have labored hard to discredit them. Granted, the belief that there is "Jewish thinking" or "Soviet science" or "Aryan art" is no longer as widespread as it once was. But the dispersal of these particular chimeras has provided no inoculation against kindred fabrications: "African knowledge," "female language," "Eurocentric science": these are among today's talismanic fetishes.

Then, too, one finds a stunning array of anti-Enlightenment phantasmagoria congregated under the banner of "anti-positivism." The idea that history is a "myth," that the truths of science are merely "fictions" dressed up in forbidding clothes, that reason and language are powerless to discover the truth -- more, that truth itself is a deceitful ideological construct: these and other absurdities are now part of the standard intellectual diet of Western intellectuals. The Frankfurt School Marxists Max Horkheimer and Theodor Adorno gave an exemplary but by no means uncharacteristic demonstration of one strain of this brand of anti-rational animus in the mid-1940s.

Safely ensconced in Los Angeles, these refugees from Hitler's Reich published an influential essay on the concept of Enlightenment. Among much else, they assured readers that "Enlightenment is totalitarian." Never mind that at that very moment the Nazi war machine -- what one might be forgiven for calling real totalitarianism -- was busy liquidating millions of people in order to fulfill another set of anti-Enlightenment fantasies inspired by devotion to the Volksgeist .

The diatribe that Horkheimer and Adorno mounted against the concept of Enlightenment reminds us of an important peculiarity about the history of Enlightenment: namely, that it is a movement of thought that began as a reaction against tradition and has now emerged as one of tradition's most important safeguards. Historically, the Enlightenment arose as a deeply anti-clerical and, perforce, anti-traditional movement. Its goal, in Kant's famous phrase, was to release man from his "self-imposed immaturity."

The chief enemy of Enlightenment was "superstition," an omnibus term that included all manner of religious, philosophical, and moral ideas. But as the sociologist Edward Shils has noted, although the Enlightenment was in important respects "antithetical to tradition" in its origins, its success was due in large part "to the fact that it was promulgated and pursued in a society in which substantive traditions were rather strong." "It was successful against its enemies," Shils notes in his book Tradition (1981),

because the enemies were strong enough to resist its complete victory over them. Living on a soil of substantive traditionality, the ideas of the Enlightenment advanced without undoing themselves. As long as respect for authority on the one side and self-confidence in those exercising authority on the other persisted, the Enlightenment's ideal of emancipation through the exercise of reason went forward. It did not ravage society as it would have done had society lost all legitimacy.

It is this mature form of Enlightenment, championing reason but respectful of tradition, that Finkielkraut holds up as an ideal.

W hat Finkielkraut calls "the undoing of thought" flows from the widespread disintegration of a faith. At the center of that faith is the assumption that the life of thought is "the higher life" and that culture -- what the Germans call Bildung -- is its end or goal.

The process of disintegration has lately become an explicit attack on culture. This is not simply to say that there are many anti-intellectual elements in society: that has always been the case. "Non-thought," in Finkielkraut's phrase, has always co-existed with the life of the mind. The innovation of contemporary culture is to have obliterated the distinction between the two. "It is," he writes, "the first time in European history that non-thought has donned the same label and enjoyed the same status as thought itself, and the first time that those who, in the name of 'high culture,' dare to call this non-thought by its name, are dismissed as racists and reactionaries." The attack is perpetrated not from outside, by uncomprehending barbarians, but chiefly from inside, by a new class of barbarians, the self-made barbarians of the intelligentsia. This is the undoing of thought. This is the new "treason of the intellectuals."

There are many sides to this phenomenon. What Finkielkraut has given us is not a systematic dissection but a kind of pathologist's scrapbook. He reminds us, for example, that the multiculturalists' demand for "diversity" requires the eclipse of the individual in favor of the group . "Their most extraordinary feat," he observes, "is to have put forward as the ultimate individual liberty the unconditional primacy of the collective." Western rationalism and individualism are rejected in the name of a more "authentic" cult.

One example: Finkielkraut quotes a champion of multiculturalism who maintains that "to help immigrants means first of all respecting them for what they are, respecting whatever they aspire to in their national life, in their distinctive culture and in their attachment to their spiritual and religious roots." Would this, Finkielkraut asks, include "respecting" those religious codes which demanded that the barren woman be cast out and the adulteress be punished with death?

What about those cultures in which the testimony of one man counts for that of two women? In which female circumcision is practiced? In which slavery flourishes? In which mixed marriages are forbidden and polygamy encouraged? Multiculturalism, as Finkielkraut points out, requires that we respect such practices. To criticize them is to be dismissed as "racist" and "ethnocentric." In this secular age, "cultural identity" steps in where the transcendent once was: "Fanaticism is indefensible when it appeals to heaven, but beyond reproach when it is grounded in antiquity and cultural distinctiveness."

To a large extent, the abdication of reason demanded by multiculturalism has been the result of what we might call the subjection of culture to anthropology. Finkielkraut speaks in this context of a "cheerful confusion which raises everyday anthropological practices to the pinnacle of the human race's greatest achievements." This process began in the nineteenth century, but it has been greatly accelerated in our own age. One thinks, for example, of the tireless campaigning of that great anthropological leveler, Claude Lévi-Strauss. Lévi-Strauss is assuredly a brilliant writer, but he has also been an extraordinarily baneful influence. Already in the early 1950s, when he was pontificating for UNESCO , he was urging all and sundry to "fight against ranking cultural differences hierarchically." In La Pensée sauvage (1961), he warned against the "false antinomy between logical and prelogical mentality" and was careful in his descriptions of natives to refer to "so-called primitive thought." "So-called" indeed. In a famous article on race and history, Lévi-Strauss maintained that the barbarian was not the opposite of the civilized man but "first of all the man who believes there is such a thing as barbarism." That of course is good to know. It helps one to appreciate Lévi-Strauss's claim, in Tristes Tropiques (1955), that the "true purpose of civilization" is to produce "inertia." As one ruminates on the proposition that cultures should not be ranked hierarchically, it is also well to consider what Lévi-Strauss coyly refers to as "the positive forms of cannibalism." For Lévi-Strauss, cannibalism has been unfairly stigmatized in the "so-called" civilized West. In fact, he explains, cannibalism was "often observed with great discretion, the vital mouthful being made up of a small quantity of organic matter mixed, on occasion, with other forms of food." What, merely a "vital mouthful"? Not to worry! Only an ignoramus who believed that there were important distinctions, qualitative distinctions, between the barbarian and the civilized man could possibly think of objecting.

Of course, the attack on distinctions that Finkielkraut castigates takes place not only among cultures but also within a given culture. Here again, the anthropological imperative has played a major role. "Under the equalizing eye of social science," he writes,

hierarchies are abolished, and all the criteria of taste are exposed as arbitrary. From now on no rigid division separates masterpieces from run-of-the mill works. The same fundamental structure, the same general and elemental traits are common to the "great" novels (whose excellence will henceforth be demystified by the accompanying quotation marks) and plebian types of narrative activity.

F or confirmation of this, one need only glance at the pronouncements of our critics. Whether working in the academy or other cultural institutions, they bring us the same news: there is "no such thing" as intrinsic merit, "quality" is an only ideological construction, aesthetic value is a distillation of social power, etc., etc.

In describing this process of leveling, Finkielkraut distinguishes between those who wish to obliterate distinctions in the name of politics and those who do so out of a kind of narcissism. The multiculturalists wave the standard of radical politics and say (in the words of a nineteenth-century Russian populist slogan that Finkielkraut quotes): "A pair of boots is worth more than Shakespeare."

Those whom Finkielkraut calls "postmodernists," waving the standard of radical chic, declare that Shakespeare is no better than the latest fashion -- no better, say, than the newest item offered by Calvin Klein. The litany that Finkielkraut recites is familiar:

A comic which combines exciting intrigue and some pretty pictures is just as good as a Nabokov novel. What little Lolitas read is as good as Lolita . An effective publicity slogan counts for as much as a poem by Apollinaire or Francis Ponge . The footballer and the choreographer, the painter and the couturier, the writer and the ad-man, the musician and the rock-and-roller, are all the same: creators. We must scrap the prejudice which restricts that title to certain people and regards others as sub-cultural.

The upshot is not only that Shakespeare is downgraded, but also that the bootmaker is elevated. "It is not just that high culture must be demystified; sport, fashion and leisure now lay claim to high cultural status." A grotesque fantasy? Anyone who thinks so should take a moment to recall the major exhibition called "High & Low: Modern Art and Popular Culture" that the Museum of Modern Art mounted a few years ago: it might have been called "Krazy Kat Meets Picasso." Few events can have so consummately summed up the corrosive trivialization of culture now perpetrated by those entrusted with preserving it. Among other things, that exhibition demonstrated the extent to which the apotheosis of popular culture undermines the very possibility of appreciating high art on its own terms.

When the distinction between culture and entertainment is obliterated, high art is orphaned, exiled from the only context in which its distinctive meaning can manifest itself: Picasso becomes a kind of cartoon. This, more than any elitism or obscurity, is the real threat to culture today. As Hannah Arendt once observed, "there are many great authors of the past who have survived centuries of oblivion and neglect, but it is still an open question whether they will be able to survive an entertaining version of what they have to say."

And this brings us to the question of freedom. Finkielkraut notes that the rhetoric of postmodernism is in some ways similar to the rhetoric of Enlightenment. Both look forward to releasing man from his "self-imposed immaturity." But there is this difference: Enlightenment looks to culture as a repository of values that transcend the self, postmodernism looks to the fleeting desires of the isolated self as the only legitimate source of value.

For the postmodernist, then, "culture is no longer seen as a means of emancipation, but as one of the élitist obstacles to this." The products of culture are valuable only as a source of amusement or distraction. In order to realize the freedom that postmodernism promises, culture must be transformed into a field of arbitrary "options." "The post-modern individual," Finkielkraut writes, "is a free and easy bundle of fleeting and contingent appetites. He has forgotten that liberty involves more than the ability to change one's chains, and that culture itself is more than a satiated whim."

What Finkielkraut has understood with admirable clarity is that modern attacks on elitism represent not the extension but the destruction of culture. "Democracy," he writes, "once implied access to culture for everybody. From now on it is going to mean everyone's right to the culture of his choice." This may sound marvelous -- it is after all the slogan one hears shouted in academic and cultural institutions across the country -- but the result is precisely the opposite of what was intended.

"'All cultures are equally legitimate and everything is cultural,' is the common cry of affluent society's spoiled children and of the detractors of the West." The irony, alas, is that by removing standards and declaring that "anything goes," one does not get more culture, one gets more and more debased imitations of culture. This fraud is the dirty secret that our cultural commissars refuse to acknowledge.

There is another, perhaps even darker, result of the undoing of thought. The disintegration of faith in reason and common humanity leads not only to a destruction of standards, but also involves a crisis of courage. "A careless indifference to grand causes," Finkielkraut warns, "has its counterpart in abdication in the face of force." As the impassioned proponents of "diversity" meet the postmodern apostles of acquiescence, fanaticism mixes with apathy to challenge the commitment required to preserve freedom.

Communism may have been effectively discredited. But "what is dying along with it is not the totalitarian cast of mind, but the idea of a world common to all men."

Julien Benda took his epigraph for La Trahison des clercs from the nineteenth-century French philosopher Charles Renouvier: Le monde souffre du manque de foi en une vérité transcendante : "The world suffers from lack of faith in a transcendent truth." Without some such faith, we are powerless against the depredations of intellectuals who have embraced the nihilism of Callicles as their truth.

1 The Treason of the Intellectuals, by Julien Benda, translated by Richard Aldington, was first published in 1928. This translation is still in print from Norton.

2 La Défaite de la pensée , by Alain Finkielkraut; Gallimard, 162 pages, 72 FF . It is available in English, in a translation by Dennis O'Keeffe, as The Undoing of Thought (The Claridge Press [London], 133 pages, £6.95 paper).

Roger Kimball is Editor and Publisher of The New Criterion and President and Publisher of Encounter Books. His latest book is The Fortunes of Permanence: Culture and Anarchy in an Age of Amnesia (St. Augustine's Press)

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[Oct 05, 2019] Everything is fake in the current neoliberal discourse, be it political or economic, and it is not that easy to understand how they are deceiving us. Lies that are so sophisticated that often it is impossible to tell they are actually lies, not facts

Highly recommended!
Oct 05, 2019 | economistsview.typepad.com

likbez -> anne... , October 05, 2019 at 04:40 PM

Anne,

Let me serve as a devil advocate here.

Japan has a shrinking population. Can you explain to me why on the Earth they need economic growth?

This preoccupation with "growth" (with narrow and false one dimensional and very questionable measurements via GDP, which includes the FIRE sector) is a fallacy promoted by neoliberalism.

Neoliberalism proved to be quite sophisticated religions with its own set of True Believers in Eric Hoffer's terminology.

A lot of current economic statistics suffer from "mathiness".

For example, the narrow definition of unemployment used in U3 is just a classic example of pseudoscience in full bloom. It can be mentioned only if U6 mentioned first. Otherwise, this is another "opium for the people" ;-) An attempt to hide the real situation in the neoliberal "job market" in which has sustained real unemployment rate is always over 10% and which has a disappearing pool of well-paying middle-class jobs. Which produced current narco-epidemics (in 2018, 1400 people were shot in half a year in Chicago ( http://www.chicagotribune.com/news/breaking/ct-met-weekend-shooting-violence-20180709-story.html ); imagine that). While I doubt that people will hang Pelosi on the street post, her successor might not be so lucky ;-)

Everything is fake in the current neoliberal discourse, be it political or economic, and it is not that easy to understand how they are deceiving us. Lies that are so sophisticated that often it is impossible to tell they are actually lies, not facts. The whole neoliberal society is just big an Empire of Illusions, the kingdom of lies and distortions.

I would call it a new type of theocratic state if you wish.

And probably only one in ten, if not one in a hundred economists deserve to be called scientists. Most are charlatans pushing fake papers on useless conferences.

It is simply amazing that the neoliberal society, which is based on "universal deception," can exist for so long.

[Oct 03, 2019] Infectious Narratives in Economics

Oct 03, 2019 | economistsview.typepad.com

anne , October 02, 2019 at 06:25 AM

https://www.bloomberg.com/news/articles/2019-10-01/robert-shiller-on-infectious-narratives-in-economics-excerpt

October 1, 2019

Infectious Narratives in Economics
By Robert Shiller - Bloomberg

"Narrative EconomicsHow Stories Go Viral & Drive Major Economic Events"

Concerns that inventions of new machines powered by water, wind, horse, or steam, or that use human power more efficiently, might replace workers and cause massive unemployment have an extremely long history, going back to ancient times. Aristotle imagined a future in which "the shuttle would weave and the plectrum touch the lyre without a hand to guide them." In such a world, "chief workmen would not want servants, nor masters slaves," he concluded.

Still, it wasn't until the 19th century, an era that brought innovations such as the water-powered textile loom, the mechanical thresher, and the Corliss steam engine, that concerns about technology-based unemployment took center stage. The narrative was particularly contagious during economic depressions when many were unemployed.

The phrase "technological unemployment" first appeared in 1917, but it started its epidemic upswing in 1928. The count for "technological unemployment" skyrockets in the 1930s in Google Ngrams, tracing a hump-shaped pattern, rising through time for a while and then falling, much as is regularly seen with infection diseases. The "technological unemployment" curve peaked in 1933, the worst year of the Great Depression.

Frequency of Appearance
Appearances in books, as a share of all words

[Graph]

It is curious that the narrative epidemic of technological unemployment began in 1928, a time of prosperity before the Great Depression. How did the epidemic start? In March 1928, U.S. Senator Robert Wagner stated his belief that unemployment was much higher than recognized, and he asked the Department of Labor to do a study. Later that month the department delivered the study that produced the first official unemployment rates published by the U.S. government. The study estimated that there were 1,874,030 unemployed people in the United States and 23,348,602 wage earners, implying an unemployment rate of 7.4%. This high estimated unemployment rate came at a time of great prosperity, and it led people to question what would cause such high unemployment amidst abundance.

A month later, the Baltimore Sun ran an article referring to the theories of Sumner H. Slichter, who in later decades became a prominent labor economist. In the article, readers are told that Slichter noted several causes of unemployment but said technological unemployment was "at present the most serious." The reason: "We are eliminating jobs through labor-saving methods faster than we are creating them." These words, alongside the new official reporting of unemployment statistics, created a contagion of the idea that a new era of technological unemployment had arrived. The earlier agricultural depression, with its associated fears of labor-saving machinery, began to look like a model for an industrial depression to follow.

Stuart Chase, who later coined the term the "New Deal," published Men and Machines in May 1929, during a period of rapidly rising stock prices. The real, inflation-corrected, U.S. stock market, as measured by the S&P Composite Index, rose a final 20% in the five months after the book's publication, before the infamous October 1929 crash. But concerns about rising unemployment were apparent even during the boom period. According to Chase, we were approaching the "zero hour of accelerating unemployment":

Machinery saves labour in a given process; one man replaces ten. A certain number of these men are needed to build and service a new machine, but some of them are permanently displaced.   If purchasing power has reached its limits of expansion because mechanization is progressing at an unheard of rate, only unemployment can result. In other words, from now on, the better able we are to produce, the worse we shall be off.  This is the economy of the madhouse.

This is significant: The narrative of out-of-control unemployment was already starting to go viral before there was any sign of the stock market crash of 1929.

During the week before the October 28–29 stock market crash, a national business show was running in New York in a convention center (since demolished) adjacent to Grand Central Station that many Wall Street people passed through to and from work. The show emphasized immense progress in robot technology in the office workplace. After the show moved to Chicago in November, the following description appeared in the Chicago Daily Tribune:

Exhibits in the national business show yesterday revealed that the business office of the future will be a factory in which machines will replace the human element, when the robot -- the mechanical man -- will be the principal office worker. 

There were addressers, autographers, billers, calculators, cancelers, binders, coin changers, form printers, duplicators, envelope sealers and openers, folders, labelers, mail meters, pay roll machines, tabulators, transcribers, and other mechanical marvels. 

A typewriting machine pounded out letters in forty different languages. A portable computing machine which could be carried by a traveling salesman was on exhibit.

By 1930 the crash itself was often attributed to the surplus of goods made possible by new technology. According to the Washington Post, "When the climax was reached in the last months of 1929 a period of adversity was inevitable because the people did not have enough money to buy the surplus goods which they had produced."

Fear of robots was not strong in most of the 1920s, when the word robot was coined. Historian Amy Sue Bix offers a theory to explain why this was so: The kinds of innovations that received popular acclaim in the 1920s didn't obviously replace jobs. If asked to describe new technology, people would perhaps think first of the Model T Ford, whose sales had burgeoned to 1.5 million cars a year by the early part of the decade. Radio stations, which first appeared around 1920, provided an exciting new form of information and entertainment, but they did not obviously replace many existing jobs. More and more homes were getting wired for electricity, with many possibilities for new gadgets that required electricity.

By the 1930s, Bix notes, the news had replaced stories of exciting new consumer products with stories of job-replacing innovations. Dial telephones replaced switchboard operators. Mammoth continuous-strip steel mills replaced steel workers. New loading equipment replaced coal workers. Breakfast cereal producers bought machines that automatically filled cereal boxes. Telegraphs became automatic. Armies of linotype machines in multiple cities allowed one central operator to set type for printing newspapers by remote control. New machines dug ditches. Airplanes had robot copilots. Concrete mixers laid and spread new roads. Tractors and reaper-thresher combines created a new agricultural revolution. Sound movies began to replace the orchestras that played at movie theaters. And, of course, the decade of the 1930s saw massive unemployment in the United States, with the unemployment rate reaching an estimated 25% in 1933.

It is difficult to know which came first, the chicken or the egg. Were all these stories of job-threatening innovations spurred by the exceptional pace of such innovations? Or did the stories reflect a change in the news media's interest in such innovations because of public concern about technological unemployment? The likely answer is "a little of both."

The "labor-saving machines" narrative was strongly connected to an underconsumption or overproduction theory: the idea that people couldn't possibly consume all of the output produced by machines, with chronic unemployment the inevitable result. The theory's origins date to the 1600s, but it picked up steam in the 1920s. It was mentioned in newspaper articles within days of the stock market crash of October 28–29, 1929.

The real peak of these narratives was in the 1930s, during which time they appeared five times as often as in any other decade, according to a search of Proquest's database of newspapers.

The topic now appears largely in articles about the history of economic thought, but it is worth considering why it had such a strong hold on the popular imagination during the Great Depression, why the narrative epidemic could recur, and the appropriate mutations or environmental changes that would increase contagion.

Today, underconsumption sounds like a bland technical phrase, but it had considerable emotional charge during the Great Depression, as it symbolized a deep injustice and collective folly. At the time it was mostly a popular theory, not an academic theory.

In the 1932 presidential campaign, Franklin Roosevelt ran against incumbent Herbert Hoover, who had been unsuccessful with deficit spending to restore the economy. Roosevelt gave a speech in which he articulated the already-popular theory of underconsumption. His masterstroke was putting it in the form of a story inspired by Lewis Carroll's famous children's book Alice's Adventures in Wonderland. In that book, a bright and inquisitive little girl named Alice meets many strange creatures that talk in nonsense and self-contradictions. Roosevelt's version of this story replaced his opponent with the Jabberwock, a speaker of nonsense:

A puzzled, somewhat skeptical Alice asked the Republican leadership some simple questions.

Will not the printing and selling of more stocks and bonds, the building of new plants and the increase of efficiency produce more goods than we can buy? No, shouted the Jabberwock, the more we produce the more we can buy.

What if we produce a surplus? Oh, we can sell it to foreign consumers.

How can the foreigners buy it? Why we will lend them the money.

Of course, these foreigners will pay us back by sending us their goods? Oh, not at all, says Humpty Dumpty. We sit on a high wall called a tariff.

How will the foreigners pay off these loans? That is easy. Did you ever hear of a moratorium?

On the face of it, underconsumption seemed to explain the high unemployment of the Great Depression, but academic economists never seriously embraced the theory, which had never been soundly explained.

The massive unemployment caused by the Great Depression set off serious social problems. For example, in the United States it caused the forced deportation (then called repatriation) of a million workers of Mexican origin. The goal was to free up jobs for "real" Americans. The popular narrative supported these deportations, and there was little public protest. Newspaper reports showed photos of happy Mexican Americans waving goodbye at the train station on their way back to their original home to help the Mexican nation.

The dial telephone also played an important part in narratives about unemployment and the associated underconsumption. During the Great Depression, there rose a narrative focus on the loss of telephone operators' jobs, and the transition to dial telephones was troubled by moral qualms that by adopting the dial phone one was complicit in destroying a job. Three weeks after dial phones were installed in the U.S. Senate in 1930, Senator Carter Glass introduced a resolution to have them torn out and replaced with the older phones. Noting that operators' jobs would be lost, he expressed true moral indignation against the new phones:

I ask unanimous consent to take from the table Senate resolution 74 directing the sergeant at arms to have these abominable dial telephones taken out on the Senate side .  I object to being transformed into one of the employees of the telephone company without compensation.

His resolution passed, and the dial phones were removed. It is hard to imagine that such a resolution would have passed if the nation had not been experiencing high unemployment. This story fed a contagious economic narrative that helped augment the atmosphere of fear associated with the contraction in aggregate demand during the Great Depression.

The loss of jobs to robots (that is, automation) became a major explanation of the Great Depression, and, hence, a perceived major cause of it. Even if the man hasn't lost his job yet, he will consume less owing to the prospect or possibility of losing his job. The U.S. presidential candidate who lost to Herbert Hoover in 1928, Al Smith, wrote in the Boston Globe in 1931:

We know now that much unemployment can be directly traced to the growing use of machinery intended to replace man power.   The human psychology of it is simple and understandable to everybody. A man who is not sure of his job will not spend his money. He will rather hoard it and it is difficult to blame him for so doing as against the day of want.

Albert Einstein, the world's most celebrated physicist, believed this narrative, saying in 1933 that the Great Depression was the result of technical progress:

According to my conviction it cannot be doubted that the severe economic depression is to be traced back for the most part to internal economic causes; the improvement in the apparatus of production through technical invention and organization has decreased the need for human labor, and thereby caused the elimination of a part of labor from the economic circuit, and thereby caused a progressive decrease in the purchasing power of the consumers.

By that time, people had begun to label labor-saving inventions as "robots," even if there were no mechanical men to be seen. One article in the Los Angeles Times in early 1931, about a year into the Great Depression, said that robots then were already the "equivalent of 80 million hand-workers in the United States alone," while the male labor force was only 40 million.

Though the technological unemployment narrative faded after 1935 (as revealed by Google Ngrams), it did not go away completely. Instead, it continued to exert some influence in the runup to World War II, until new narrative constellations about the war became contagious.

Many historians point to massive unemployment in Germany to explain the accession to power of the Nazi Party and Adolf Hitler in the election of 1933, the worst year of the Depression. But rarely mentioned today is the fact that a Nazi Party official promised that year to make it illegal in Germany to replace men with machines.

To go viral again, the labor-saving machines narrative needed a new twist after World War II, a twist that could seem to reinforce the newly rediscovered appreciation of human intelligence, and, ultimately, of the human brain. The narrative turned to the new "electronic brains" -- that is, computers.

anne -> anne... , October 02, 2019 at 06:29 AM
Correcting spacing:

Narrative Economics
How Stories Go Viral & Drive Major Economic Events
By Robert Shiller

[Sep 26, 2019] The real trouble with Capitalism: stupid/corrupt economists

Sep 26, 2019 | economistsview.typepad.com

Egmont Kakarot-Handtke , September 25, 2019 at 02:30 PM

ICYMI

The real trouble with Capitalism: stupid/corrupt economists
Comment on Chris Dillow on 'The trouble with capitalism'

For the full text (4950 characters) see here
https://axecorg.blogspot.com/2019/09/the-real-trouble-with-capitalism.html

Egmont Kakarot-Handtke

likbez -> Egmont Kakarot-Handtke ... , September 25, 2019 at 05:39 PM
Great, thank you !

I would argue that

(1) They are not stupid, they were simply bought

(2) This is not Capitalism, this is Neoliberalism.

But with those minor modifications you point stands: "The real trouble with Neoliberalism: bought/corrupt economists" ... "And this means that [neoliberal/neo-classical] economics is proto-scientific garbage."

Here is an extended quote from your comment so that people can more fully appreciate this line of thinking:

== quote ==

Chris Dillow quotes Martin Wolf: "What we increasingly seem to have is an unstable rentier capitalism, weakened competition, feeble productivity growth, high inequality and, not coincidentally, an increasingly degraded democracy."

Chris Dillow then sets out to explain the trouble with Capitalism: "The Bank of England has given us a big clue here. It points out that the rising profit share (a strong sign of increased monopoly) is largely confined to the US. In the UK, the share of profits in GDP has flatlined in recent years. Few, however, would argue that UK capitalism is less dysfunctional than its US counterpart. Which suggests that the problem with capitalism is not increased monopoly. So what is it? Here, I commend some brilliant work by Michael Roberts. Many of the faults Martin discusses have their origin in a declining rate of profit ― a decline which became acute in the 1970s but which was never wholly reversed."

The whole intellectual/moral misery of economists is contained in this paragraph. Chris Dillow's explanation starts with the "share of profits in GDP" and ends with the "rate of profit". Not only are these entirely different things but macroeconomic profit is not defined, to begin with.

The simple reason is that neither Chris Dillow nor Martin Wolf nor Michael Roberts knows what profit is.#1 This sad fate they share with Walrasians, Keynesians, Marxians, Austrians, and MMTers. The dirty secret of economics is that since Adam Smith/Karl Marx economists do not know what profit is.#2, #3

And this means that economics is proto-scientific garbage but economists have not realized it to this day.

... ... ...
== end ==

[Sep 25, 2019] Capitalism, Alone: Four important -- but somewhat hidden -- themes by Branko Milanovic

Sep 25, 2019 | economistsview.typepad.com

anne , September 24, 2019 at 10:26 AM

https://glineq.blogspot.com/2019/09/capitalism-alone-four-important-but.html

September 24, 2019

Capitalism, Alone: Four important--but somewhat hidden--themes

I review here four important, but perhaps not immediately apparent, themes from my Capitalism, Alone. The book contains many other, more topical, subjects that are likely to attract readers' and reviewers' attention much more than the somewhat abstract or philosophical issues briefly reviewed here.

1. Capitalism as the only mode of production in the world. During the previous high point of the British-led globalization, capitalism shared the world with various feudal or feudal-like systems characterized with unfree labor: forced labor was abolished in Austria-Hungary in 1848, serfdom in Russia in 1861, slavery ended in the US in 1865, and in Brazil only in 1888, And labor tied to land continued to exist in India and to a lesser degree in China. Then, after 1917, capitalism had to share the world with communism which, at its peak, included almost a third of the world population. It is only after 1989, that capitalism is not only a dominant, but the sole, system of organizing production (Chapter 1).

2. The global historical role of communism. The existence of capitalism (economic way to organize society) throughout the world does not imply that the political systems must be organized in the same way everywhere. The origins of political systems are very different. In China and Vietnam, communism was the tool whereby indigenous capitalism was introduced (explained below). The difference in the "genesis" of capitalism, that is, in the way capitalism was "created" in various countries explains why there are at least two types of capitalism today. I am doubtful that there would ever be a single type of capitalism covering the entire globe.

To understand the point about the different origins, one needs to start from the question of the role of communism in global history and thus from the interpretation (histoire raisonéee) of the 20th century (Chapter 3).

There are two major narratives of the 20th century: liberal and Marxist; they are both "Jerusalem"-like in the Russian philosopher Berdiaff's terminology. They see the world evolving from less developed toward more developed stages ending in either a terminus of liberal capitalist democracy or Communism (society of plenty).

Both narratives face significant problems in the interpretation of the 20th century. Liberal narrative is unable to explain the outbreak of the First World War which, given the liberal arguments about the spread of capitalism, (peaceful) trade, and interdependence between countries and individuals that ostensibly abhor conflict should never have happened, and certainly not in the way it did -- namely by involving in the most destructive war up to date all advanced capitalism countries. Second, liberal narrative treats both fascism and communism as essentially "mistakes" (cul de sacs) on the road to a chiliastic liberal democracy without providing much of reasoning as to why these two "mistakes" happened. Thus the liberal explanations for both the outbreak of the War and the two "cul de sacs" are often ad hoc, emphasizing the role of individual actors or idiosyncratic events.

Marxist interpretation of the 20th century is much more convincing in both its explanation of World War I (imperialism as the highest stage of capitalism) and fascism (an attempt by the weakened bourgeoise to thwart left-wing revolutions). But Marxist view is entirely powerless to explain 1989, the fall of communist regimes, and hence unable to provide any explanation for the role of communism in global history. The fall of communism, in a strict Marxist view of the world, is an abomination, as inexplicable as if a feudal society having had experienced a bourgeois revolution of rights were suddenly to "regress" and to reimpose serfdom and the tripartite class division. Marxism has therefore given up trying to provide an explanation for the 20th century history.

The reason for this failure lies in the fact that Marxism never made a meaningful distinction between standard Marxist schemes regarding the succession of socio-economic formations (what I call the Western Path of Development, WPD) and the evolution of poorer and colonized countries. Classical Marxism never asked seriously whether the WPD is applicable in their case. It believed that poorer and colonized countries will simply follow, with a time lag, the developments in the advanced countries, and that colonization and indeed imperialism will produce the capitalist transformation of these societies. This was Marx's explicit view on the role of English colonialism in Asia. But colonialism proved too weak for such a global task, and succeeded in introducing capitalism only in small entropot enclaves such as Hong Kong, Singapore and parts of South Africa.

Enabling colonized countries to effect both their social and national liberations (note there was never a need for the latter in advanced countries) was the world-historical role of communism. It was only Communist or left-wing parties that could prosecute successfully both revolutions. The national revolution meant political independence. The social revolution meant abolishment of feudal growth-inhibiting institutions (power of usurious landlords, labor tied to land, gender discrimination, lack of access to education by the poor, religious turpitude etc.). Communism thus cleared the path for the development of indigenous capitalism. Functionally, in the colonized Third World societies, it played the same role that domestic bourgeoisies played in the West. For indigenous capitalism could be established only once feudal institutions were swept away.

The concise definition of communism is hence: communism is a social system that enabled backward and colonized societies to abolish feudalism, regain economic and political independence, and build indigenous capitalism.

3. The global dominion of capitalism was made possible thanks to (and in turn it exacerbates) certain human traits that, from an ethical point, are questionable . Much greater commercialization and greater wealth have in many ways made us more polished in our manners (as per Montesquieu) but have done so using what were traditionally regarded as vices -- desire for pleasure, power and profit (as per Mandeville). Vices are both fundamental for hyper-commercialized capitalism to be "born" and are supported by it. Philosophers accept them not because they are by themselves desirable, but because allowing their limited exercise allows the achievement of a greater social good: material affluence (Smith; Hume).

Yet the contrast between acceptable behavior in hyper-commercialized world and traditional concepts of justice, ethics, shame, honor, and loss of face, create a chasm which is filled with hypocrisy; one cannot openly accept that one has sold for a sum of money his/her right to free speech or ability to disagree with one's boss, and thus arises the need to cover up these facts with lies or misrepresentation of reality.

From the book:

"The domination of capitalism as the best, or rather the only, way to organize production and distribution seems absolute. No challenger appears in sight. Capitalism gained this position thanks to its ability, through the appeal to self-interest and desire to own property, to organize people so that they managed, in a decentralized fashion, to create wealth and increase the standard of living of an average human being on the planet by many times -- something that only a century ago was considered almost utopian.

But this economic success made more acute the discrepancy between the ability to live better and longer lives and the lack of a commensurate increase in morality, or even happiness. The greater material abundance did make people's manners and behavior to each other better: since elementary needs, and much more than that, were satisfied, people no longer needed to engage in a Hobbesian struggle of all against all. Manners became more polished, people more considerate.

But this external polish was achieved at the cost of people being increasingly driven by self-interest alone, even in many ordinary and personal affairs. The capitalist spirit, a testimony to the generalized success of capitalism, penetrated deeply into people's individual lives. Since extending capitalism to family and intimate life was antithetical to centuries-old views about sacrifice, hospitality, friendship, family ties, and the like, it was not easy to openly accept that all such norms had become superseded by self-interest. This unease created a huge area where hypocrisy reigned. Thus, ultimately, the material success of capitalism came to be associated with a reign of half-truths in our private lives."

4. Capitalist system cannot be changed. The dominion of hyper-commercial capitalism was established thanks to our desire to permanently keep on improving our material conditions, to keep on getting richer, a desire which capitalism satisfies the best. This has led to the creation of a system of values that puts monetary success as its top. In many ways it is a desirable evolution because "believing" in money alone does away with other traditional and discriminatory hierarchical markers.

In order for capitalism to exist it needs to grow and to expand to ever new areas and new products. But capitalism exists not outside of us, as a external system. It is individuals, that is, us, who, in our daily lives, create capitalism and provide it with new fields of action -- so much that we had transformed our homes into capital, and our free time into a resource. This extraordinary commodification of almost all, including what used to be very private, activities was made possible by our internalization of the system of values where money acquisition is placed on the pinnacle. If this were not the case, we would not have commodified practically all that can be (as of now) commodified.

Capitalism, in order to expand, needs greed. Greed has been entirely accepted by us. The economic system and the system of values are interdependent and mutually reinforcing. Our system of values enables hyper-commercialized capitalism to function and expand. It then follows that no change in the economic system can be imagined without a change in the system of values that underpins it, which the system promotes, and with which we are, in our everyday activities, fully comfortable. But to produce such a change in values seems, at present, to be an impossible task. It has been tried before and ended in the most ignominious failure. We are thus locked in capitalism. And in our activities, day in, day out, we support and reinforce it.

-- Branko Milanovic

[Sep 22, 2019] Neoliberalism Political Success, Economic Failure Portside by Robert Kuttner

Highly recommended!
The key to the success of neoliberal was a bunch on bought intellectual prostitutes like Milton Friedman and the drive to occupy economic departments of the the universities using money from the financial elite. which along with think tank continued mercenary army of neoliberalism who fought and win the battle with weakened New Del capitalism supporters. After that neoliberalism was from those departments like the centers of infection via indoctrination of each new generation of students. Which is a classic mixture of Bolsheviks methods and Trotskyite theory adapted tot he need of financial oligarchy.
Essentially we see the tragedy of Lysenkoism replayed in the USA. When false theory supported by financial oligarchy and then state forcefully suppressed all other economic thought and became the only politically correct theory in the USA and Western Europe.
Notable quotes:
"... The neoliberal counterrevolution, in theory and policy, has reversed or undermined nearly every aspect of managed capitalism -- from progressive taxation, welfare transfers, and antitrust, to the empowerment of workers and the regulation of banks and other major industries. ..."
"... Neoliberalism's premise is that free markets can regulate themselves; that government is inherently incompetent, captive to special interests, and an intrusion on the efficiency of the market; that in distributive terms, market outcomes are basically deserved; and that redistribution creates perverse incentives by punishing the economy's winners and rewarding its losers. So government should get out of the market's way. ..."
"... Now, after nearly half a century, the verdict is in. Virtually every one of these policies has failed, even on their own terms. ..."
"... Economic power has resulted in feedback loops of political power, in which elites make rules that bolster further concentration. ..."
"... The culprit isn't just "markets" -- some impersonal force that somehow got loose again. This is a story of power using theory. The mixed economy was undone by economic elites, who revised rules for their own benefit. They invested heavily in friendly theorists to bless this shift as sound and necessary economics, and friendly politicians to put those theories into practice. ..."
"... The grand neoliberal experiment of the past 40 years has demonstrated that markets in fact do not regulate themselves. Managed markets turn out to be more equitable and more efficient. ..."
"... The British political economist Colin Crouch captured this anomaly in a book nicely titled The Strange Non-Death of Neoliberalism . Why did neoliberalism not die? As Crouch observed, neoliberalism failed both as theory and as policy, but succeeded superbly as power politics for economic elites. ..."
"... The neoliberal ascendance has had another calamitous cost -- to democratic legitimacy. As government ceased to buffer market forces, daily life has become more of a struggle for ordinary people. ..."
"... After the Berlin Wall came down in 1989, ours was widely billed as an era when triumphant liberal capitalism would march hand in hand with liberal democracy. But in a few brief decades, the ostensibly secure regime of liberal democracy has collapsed in nation after nation, with echoes of the 1930s. ..."
"... As the great political historian Karl Polanyi warned, when markets overwhelm society, ordinary people often turn to tyrants. In regimes that border on neofascist, klepto-capitalists get along just fine with dictators, undermining the neoliberal premise of capitalism and democracy as complements. ..."
"... Classically, the premise of a "free market" is that government simply gets out of the way. This is nonsensical, since all markets are creatures of rules, most fundamentally rules defining property, but also rules defining credit, debt, and bankruptcy; rules defining patents, trademarks, and copyrights; rules defining terms of labor; and so on. Even deregulation requires rules. In Polanyi's words, "laissez-faire was planned." ..."
"... Around the same time, the term neoconservative was used as a self-description by former liberals who embraced conservatism, on cultural, racial, economic, and foreign-policy grounds. Neoconservatives were neoliberals in economics. ..."
"... Lavishly funded centers and tenured chairs were underwritten by the Olin, Scaife, Bradley, and other far-right foundations to promote such variants of free-market theory as law and economics, public choice, rational choice, cost-benefit analysis, maximize-shareholder-value, and kindred schools of thought. These theories colonized several academic disciplines. All were variations on the claim that markets worked and that government should get out of the way. ..."
"... Market failure was dismissed as a rare special case; government failure was said to be ubiquitous. Theorists worked hand in glove with lobbyists and with public officials. But in every major case where neoliberal theory generated policy, the result was political success and economic failure. ..."
"... For example, supply-side economics became the justification for tax cuts, on the premise that taxes punished enterprise. ..."
"... Robert Bork's "antitrust paradox," holding that antitrust enforcement actually weakened competition, was used as the doctrine to sideline the Sherman and Clayton Acts. Supposedly, if government just got out of the way, market forces would remain more competitive because monopoly pricing would invite innovation and new entrants to the market. In practice, industry after industry became more heavily concentrated. ..."
"... Human capital theory, another variant of neoliberal application of markets to partly social questions, justified deregulating labor markets and crushing labor unions. Unions supposedly used their power to get workers paid more than their market worth. Likewise minimum wage laws. But the era of depressed wages has actually seen a decline in rates of productivity growth ..."
"... Financial deregulation is neoliberalism's most palpable deregulatory failure, but far from the only one ..."
"... Air travel has been a poster child for advocates of deregulation, but the actual record is mixed at best. Airline deregulation produced serial bankruptcies of every major U.S. airline, often at the cost of worker pay and pension funds. ..."
"... Ticket prices have declined on average over the past two decades, but the traveling public suffers from a crazy quilt of fares, declining service, shrinking seats and legroom, and exorbitant penalties for the perfectly normal sin of having to change plans. ..."
"... A similar example is the privatization of transportation services such as highways and even parking meters. In several Midwestern states, toll roads have been sold to private vendors. The governor who makes the deal gains a temporary fiscal windfall, while drivers end up paying higher tolls often for decades. Investment bankers who broker the deal also take their cut. Some of the money does go into highway improvements, but that could have been done more efficiently in the traditional way via direct public ownership and competitive bidding. ..."
"... The Affordable Care Act is a form of voucher. But the regulated private insurance markets in the ACA have not fully lived up to their promise, in part because of the extensive market power retained by private insurers and in part because the right has relentlessly sought to sabotage the program -- another political feedback loop. The sponsors assumed that competition would lower costs and increase consumer choice. But in too many counties, there are three or fewer competing plans, and in some cases just one. ..."
"... In practice, this degenerates into an infinite regress of regulator versus commercial profit-maximizer, reminiscent of Mad magazine's "Spy versus Spy," with the industry doing end runs to Congress to further rig the rules. Straight-ahead public insurance such as Medicare is generally far more efficient. ..."
"... Several forms of deregulation -- of airlines, trucking, and electric power -- began not under Reagan but under Carter. Financial deregulation took off under Bill Clinton. Democratic presidents, as much as Republicans, promoted trade deals that undermined social standards. Cost-benefit analysis by the Office of Information and Regulatory Affairs (OIRA) was more of a choke point under Barack Obama than under George W. Bush. ..."
"... Dozens of nations, from Latin America to East Asia, went through this cycle of boom, bust, and then IMF pile-on. Greece is still suffering the impact. ..."
"... In fact, Japan, South Korea, smaller Asian nations, and above all China had thrived by rejecting every major tenet of neoliberalism. Their capital markets were tightly regulated and insulated from foreign speculative capital. They developed world-class industries as state-led cartels that favored domestic production and supply. East Asia got into trouble only when it followed IMF dictates to throw open capital markets, and in the aftermath they recovered by closing those markets and assembling war chests of hard currency so that they'd never again have to go begging to the IMF ..."
"... The basic argument of neoliberalism can fit on a bumper sticker. Markets work; governments don't . If you want to embellish that story, there are two corollaries: Markets embody human freedom. And with markets, people basically get what they deserve; to alter market outcomes is to spoil the poor and punish the productive. That conclusion logically flows from the premise that markets are efficient. Milton Friedman became rich, famous, and influential by teasing out the several implications of these simple premises. ..."
"... The failed neoliberal experiment also makes the case not just for better-regulated capitalism but for direct public alternatives as well. Banking, done properly, especially the provision of mortgage finance, is close to a public utility. Much of it could be public. ..."
Aug 25, 2019 | portside.org
The invisible hand is more like a thumb on the scale for the world's elites. That's why market fundamentalism has been unmasked as bogus economics but keeps winning politically. This article appears in the Summer 2019 issue of The American Prospect magazine. Subscribe here .

Since the late 1970s, we've had a grand experiment to test the claim that free markets really do work best. This resurrection occurred despite the practical failure of laissez-faire in the 1930s, the resulting humiliation of free-market theory, and the contrasting success of managed capitalism during the three-decade postwar boom.

Yet when growth faltered in the 1970s, libertarian economic theory got another turn at bat. This revival proved extremely convenient for the conservatives who came to power in the 1980s. The neoliberal counterrevolution, in theory and policy, has reversed or undermined nearly every aspect of managed capitalism -- from progressive taxation, welfare transfers, and antitrust, to the empowerment of workers and the regulation of banks and other major industries.

Neoliberalism's premise is that free markets can regulate themselves; that government is inherently incompetent, captive to special interests, and an intrusion on the efficiency of the market; that in distributive terms, market outcomes are basically deserved; and that redistribution creates perverse incentives by punishing the economy's winners and rewarding its losers. So government should get out of the market's way.

By the 1990s, even moderate liberals had been converted to the belief that social objectives can be achieved by harnessing the power of markets. Intermittent periods of governance by Democratic presidents slowed but did not reverse the slide to neoliberal policy and doctrine. The corporate wing of the Democratic Party approved.

Now, after nearly half a century, the verdict is in. Virtually every one of these policies has failed, even on their own terms. Enterprise has been richly rewarded, taxes have been cut, and regulation reduced or privatized. The economy is vastly more unequal, yet economic growth is slower and more chaotic than during the era of managed capitalism. Deregulation has produced not salutary competition, but market concentration. Economic power has resulted in feedback loops of political power, in which elites make rules that bolster further concentration.

The culprit isn't just "markets" -- some impersonal force that somehow got loose again. This is a story of power using theory. The mixed economy was undone by economic elites, who revised rules for their own benefit. They invested heavily in friendly theorists to bless this shift as sound and necessary economics, and friendly politicians to put those theories into practice.

Recent years have seen two spectacular cases of market mispricing with devastating consequences: the near-depression of 2008 and irreversible climate change. The economic collapse of 2008 was the result of the deregulation of finance. It cost the real U.S. economy upwards of $15 trillion (and vastly more globally), depending on how you count, far more than any conceivable efficiency gain that might be credited to financial innovation. Free-market theory presumes that innovation is necessarily benign. But much of the financial engineering of the deregulatory era was self-serving, opaque, and corrupt -- the opposite of an efficient and transparent market.

The existential threat of global climate change reflects the incompetence of markets to accurately price carbon and the escalating costs of pollution. The British economist Nicholas Stern has aptly termed the worsening climate catastrophe history's greatest case of market failure. Here again, this is not just the result of failed theory. The entrenched political power of extractive industries and their political allies influences the rules and the market price of carbon. This is less an invisible hand than a thumb on the scale. The premise of efficient markets provides useful cover.

The grand neoliberal experiment of the past 40 years has demonstrated that markets in fact do not regulate themselves. Managed markets turn out to be more equitable and more efficient. Yet the theory and practical influence of neoliberalism marches splendidly on, because it is so useful to society's most powerful people -- as a scholarly veneer to what would otherwise be a raw power grab. The British political economist Colin Crouch captured this anomaly in a book nicely titled The Strange Non-Death of Neoliberalism . Why did neoliberalism not die? As Crouch observed, neoliberalism failed both as theory and as policy, but succeeded superbly as power politics for economic elites.

The neoliberal ascendance has had another calamitous cost -- to democratic legitimacy. As government ceased to buffer market forces, daily life has become more of a struggle for ordinary people. The elements of a decent middle-class life are elusive -- reliable jobs and careers, adequate pensions, secure medical care, affordable housing, and college that doesn't require a lifetime of debt. Meanwhile, life has become ever sweeter for economic elites, whose income and wealth have pulled away and whose loyalty to place, neighbor, and nation has become more contingent and less reliable.

Large numbers of people, in turn, have given up on the promise of affirmative government, and on democracy itself. After the Berlin Wall came down in 1989, ours was widely billed as an era when triumphant liberal capitalism would march hand in hand with liberal democracy. But in a few brief decades, the ostensibly secure regime of liberal democracy has collapsed in nation after nation, with echoes of the 1930s.

As the great political historian Karl Polanyi warned, when markets overwhelm society, ordinary people often turn to tyrants. In regimes that border on neofascist, klepto-capitalists get along just fine with dictators, undermining the neoliberal premise of capitalism and democracy as complements. Several authoritarian thugs, playing on tribal nationalism as the antidote to capitalist cosmopolitanism, are surprisingly popular.

It's also important to appreciate that neoliberalism is not laissez-faire. Classically, the premise of a "free market" is that government simply gets out of the way. This is nonsensical, since all markets are creatures of rules, most fundamentally rules defining property, but also rules defining credit, debt, and bankruptcy; rules defining patents, trademarks, and copyrights; rules defining terms of labor; and so on. Even deregulation requires rules. In Polanyi's words, "laissez-faire was planned."

The political question is who gets to make the rules, and for whose benefit. The neoliberalism of Friedrich Hayek and Milton Friedman invoked free markets, but in practice the neoliberal regime has promoted rules created by and for private owners of capital, to keep democratic government from asserting rules of fair competition or countervailing social interests. The regime has rules protecting pharmaceutical giants from the right of consumers to import prescription drugs or to benefit from generics. The rules of competition and intellectual property generally have been tilted to protect incumbents. Rules of bankruptcy have been tilted in favor of creditors. Deceptive mortgages require elaborate rules, written by the financial sector and then enforced by government. Patent rules have allowed agribusiness and giant chemical companies like Monsanto to take over much of agriculture -- the opposite of open markets. Industry has invented rules requiring employees and consumers to submit to binding arbitration and to relinquish a range of statutory and common-law rights.

Neoliberalism as Theory, Policy, and Power

It's worth taking a moment to unpack the term "neoliberalism." The coinage can be confusing to American ears because the "liberal" part refers not to the word's ordinary American usage, meaning moderately left-of-center, but to classical economic liberalism otherwise known as free-market economics. The "neo" part refers to the reassertion of the claim that the laissez-faire model of the economy was basically correct after all.

Few proponents of these views embraced the term neoliberal . Mostly, they called themselves free-market conservatives. "Neoliberal" was a coinage used mainly by their critics, sometimes as a neutral descriptive term, sometimes as an epithet. The use became widespread in the era of Margaret Thatcher and Ronald Reagan.

To add to the confusion, a different and partly overlapping usage was advanced in the 1970s by the group around the Washington Monthly magazine. They used "neoliberal" to mean a new, less statist form of American liberalism. Around the same time, the term neoconservative was used as a self-description by former liberals who embraced conservatism, on cultural, racial, economic, and foreign-policy grounds. Neoconservatives were neoliberals in economics.

Beginning in the 1970s, resurrected free-market theory was interwoven with both conservative politics and significant investments in the production of theorists and policy intellectuals. This occurred not just in well-known conservative think tanks such as the American Enterprise Institute, Heritage, Cato, and the Manhattan Institute, but through more insidious investments in academia. Lavishly funded centers and tenured chairs were underwritten by the Olin, Scaife, Bradley, and other far-right foundations to promote such variants of free-market theory as law and economics, public choice, rational choice, cost-benefit analysis, maximize-shareholder-value, and kindred schools of thought. These theories colonized several academic disciplines. All were variations on the claim that markets worked and that government should get out of the way.

Each of these bodies of sub-theory relied upon its own variant of neoliberal ideology. An intensified version of the theory of comparative advantage was used not just to cut tariffs but to use globalization as all-purpose deregulation. The theory of maximizing shareholder value was deployed to undermine the entire range of financial regulation and workers' rights. Cost-benefit analysis, emphasizing costs and discounting benefits, was used to discredit a good deal of health, safety, and environmental regulation. Public choice theory, associated with the economist James Buchanan and an entire ensuing school of economics and political science, was used to impeach democracy itself, on the premise that policies were hopelessly afflicted by "rent-seekers" and "free-riders."

Click here to read how Robert Kuttner has been unmasking the fallacies of neoliberalism for decades

Market failure was dismissed as a rare special case; government failure was said to be ubiquitous. Theorists worked hand in glove with lobbyists and with public officials. But in every major case where neoliberal theory generated policy, the result was political success and economic failure.

For example, supply-side economics became the justification for tax cuts, on the premise that taxes punished enterprise. Supposedly, if taxes were cut, especially taxes on capital and on income from capital, the resulting spur to economic activity would be so potent that deficits would be far less than predicted by "static" economic projections, and perhaps even pay for themselves. There have been six rounds of this experiment, from the tax cuts sponsored by Jimmy Carter in 1978 to the immense 2017 Tax Cuts and Jobs Act signed by Donald Trump. In every case some economic stimulus did result, mainly from the Keynesian jolt to demand, but in every case deficits increased significantly. Conservatives simply stopped caring about deficits. The tax cuts were often inefficient as well as inequitable, since the loopholes steered investment to tax-favored uses rather than the most economically logical ones. Dozens of America's most profitable corporations paid no taxes.

Robert Bork's "antitrust paradox," holding that antitrust enforcement actually weakened competition, was used as the doctrine to sideline the Sherman and Clayton Acts. Supposedly, if government just got out of the way, market forces would remain more competitive because monopoly pricing would invite innovation and new entrants to the market. In practice, industry after industry became more heavily concentrated. Incumbents got in the habit of buying out innovators or using their market power to crush them. This pattern is especially insidious in the tech economy of platform monopolies, where giants that provide platforms, such as Google and Amazon, use their market power and superior access to customer data to out-compete rivals who use their platforms. Markets, once again, require rules beyond the benign competence of the market actors themselves. Only democratic government can set equitable rules. And when democracy falters, undemocratic governments in cahoots with corrupt private plutocrats will make the rules.

Human capital theory, another variant of neoliberal application of markets to partly social questions, justified deregulating labor markets and crushing labor unions. Unions supposedly used their power to get workers paid more than their market worth. Likewise minimum wage laws. But the era of depressed wages has actually seen a decline in rates of productivity growth. Conversely, does any serious person think that the inflated pay of the financial moguls who crashed the economy accurately reflects their contribution to economic activity? In the case of hedge funds and private equity, the high incomes of fund sponsors are the result of transfers of wealth and income from employees, other stakeholders, and operating companies to the fund managers, not the fruits of more efficient management.

There is a broad literature discrediting this body of pseudo-scholarly work in great detail. Much of neoliberalism represents the ever-reliable victory of assumption over evidence. Yet neoliberal theory lived on because it was so convenient for elites, and because of the inertial power of the intellectual capital that had been created. The well-funded neoliberal habitat has provided comfortable careers for two generations of scholars and pseudo-scholars who migrate between academia, think tanks, K Street, op-ed pages, government, Wall Street, and back again. So even if the theory has been demolished both by scholarly rebuttal and by events, it thrives in powerful institutions and among their political allies.

The Practical Failure of Neoliberal Policies

Financial deregulation is neoliberalism's most palpable deregulatory failure, but far from the only one. Electricity deregulation on balance has increased monopoly power and raised costs to consumers, but has failed to offer meaningful "shopping around" opportunities to bring down prices. We have gone from regulated monopolies with predictable earnings, costs, wages, and consumer protections to deregulated monopolies or oligopolies with substantial pricing power. Since the Bell breakup, the telephone system tells a similar story of re-concentration, dwindling competition, price-gouging, and union-bashing.

Air travel has been a poster child for advocates of deregulation, but the actual record is mixed at best. Airline deregulation produced serial bankruptcies of every major U.S. airline, often at the cost of worker pay and pension funds.

Ticket prices have declined on average over the past two decades, but the traveling public suffers from a crazy quilt of fares, declining service, shrinking seats and legroom, and exorbitant penalties for the perfectly normal sin of having to change plans. Studies have shown that fares actually declined at a faster rate in the 20 years before deregulation in 1978 than in the 20 years afterward, because the prime source of greater efficiency in airline travel is the introduction of more fuel-efficient planes.

The roller-coaster experience of airline profits and losses has reduced the capacity of airlines to purchase more fuel-efficient aircraft, and the average age of the fleet keeps increasing. The use of "fortress hubs" to defend market pricing power has reduced the percentage of nonstop flights, the most efficient way to fly from one point to another.

Robert Bork's spurious arguments that antitrust enforcement hurt competition became the basis for dismantling antitrust. Massive concentration resulted. Charles Tasnadi/AP Photo

In addition to deregulation, three prime areas of practical neoliberal policies are the use of vouchers as "market-like" means to social goals, the privatization of public services, and the use of tax subsides rather than direct outlays. In every case, government revenues are involved, so this is far from a free market to begin with. But the premise is that market disciplines can achieve public purposes more efficiently than direct public provision.

The evidence provides small comfort for these claims. One core problem is that the programs invariably give too much to the for-profit middlemen at the expense of the intended beneficiaries. A related problem is that the process of using vouchers and contracts invites corruption. It is a different form of "rent-seeking" -- pursuit of monopoly profits -- than that attributed to government by public choice theorists, but corruption nonetheless. Often, direct public provision is far more transparent and accountable than a web of contractors.

A further problem is that in practice there is often far less competition than imagined, because of oligopoly power, vendor lock-in, and vendor political influence. These experiments in marketization to serve social goals do not operate in some Platonic policy laboratory, where the only objective is true market efficiency yoked to the public good. They operate in the grubby world of practical politics, where the vendors are closely allied with conservative politicians whose purposes may be to discredit social transfers entirely, or to reward corporate allies, or to benefit from kickbacks either directly or as campaign contributions.

Privatized prisons are a case in point. A few large, scandal-ridden companies have gotten most of the contracts, often through political influence. Far from bringing better quality and management efficiency, they have profited by diverting operating funds and worsening conditions that were already deplorable, and finding new ways to charge inmates higher fees for necessary services such as phone calls. To the extent that money was actually saved, most of the savings came from reducing the pay and professionalism of guards, increasing overcrowding, and decreasing already inadequate budgets for food and medical care.

A similar example is the privatization of transportation services such as highways and even parking meters. In several Midwestern states, toll roads have been sold to private vendors. The governor who makes the deal gains a temporary fiscal windfall, while drivers end up paying higher tolls often for decades. Investment bankers who broker the deal also take their cut. Some of the money does go into highway improvements, but that could have been done more efficiently in the traditional way via direct public ownership and competitive bidding.

Housing vouchers substantially reward landlords who use the vouchers to fill empty houses with poor people until the neighborhood gentrifies, at which point the owner is free to quit the program and charge market rentals. Thus public funds are used to underwrite a privately owned, quasi-social housing sector -- whose social character is only temporary. No permanent social housing is produced despite the extensive public outlay. The companion use of tax incentives to attract passive investment in affordable housing promotes economically inefficient tax shelters, and shunts public funds into the pockets of the investors -- money that might otherwise have gone directly to the housing.

The Affordable Care Act is a form of voucher. But the regulated private insurance markets in the ACA have not fully lived up to their promise, in part because of the extensive market power retained by private insurers and in part because the right has relentlessly sought to sabotage the program -- another political feedback loop. The sponsors assumed that competition would lower costs and increase consumer choice. But in too many counties, there are three or fewer competing plans, and in some cases just one.

As more insurance plans and hospital systems become for-profit, massive investment goes into such wasteful activities as manipulation of billing, "risk selection," and other gaming of the rules. Our mixed-market system of health care requires massive regulation to work with tolerable efficiency. In practice, this degenerates into an infinite regress of regulator versus commercial profit-maximizer, reminiscent of Mad magazine's "Spy versus Spy," with the industry doing end runs to Congress to further rig the rules. Straight-ahead public insurance such as Medicare is generally far more efficient.

An extensive literature has demonstrated that for-profit voucher schools do no better and often do worse than comparable public schools, and are vulnerable to multiple forms of gaming and corruption. Proprietors of voucher schools are superb at finding ways of excluding costly special-needs students, so that those costs are imposed on what remains of public schools; they excel at gaming test results. While some voucher and charter schools, especially nonprofit ones, sometimes improve on average school performance, so do many public schools. The record is also muddied by the fact that many ostensibly nonprofit schools contract out management to for-profit companies.

Tax preferences have long been used ostensibly to serve social goals. The Earned Income Tax Credit is considered one of the more successful cases of using market-like measures -- in this case a refundable tax credit -- to achieve the social goal of increasing worker take-home pay. It has also been touted as the rare case of bipartisan collaboration. Liberals get more money for workers. Conservatives get to reward the deserving poor, since the EITC is conditioned on employment. Conservatives get a further ideological win, since the EITC is effectively a wage subsidy from the government, but is experienced as a tax refund rather than a benefit of government.

Recent research, however, shows that the EITC is primarily a subsidy of low-wage employers, who are able to pay their workers a lot less than a market-clearing wage. In industries such as nursing homes or warehouses, where many workers qualified for the EITC work side by side with ones not eligible, the non-EITC workers get substandard wages. The existence of the EITC depresses the level of the wages that have to come out of the employer's pocket.

Neoliberalism's Influence on Liberals

As free-market theory resurged, many moderate liberals embraced these policies. In the inflationary 1970s, regulation became a scapegoat that supposedly deterred salutary price competition. Some, such as economist Alfred Kahn, President Carter's adviser on deregulation, supported deregulation on what he saw as the merits. Other moderates supported neoliberal policies opportunistically, to curry favor with powerful industries and donors. Market-like policies were also embraced by liberals as a tactical way to find common ground with conservatives.

Several forms of deregulation -- of airlines, trucking, and electric power -- began not under Reagan but under Carter. Financial deregulation took off under Bill Clinton. Democratic presidents, as much as Republicans, promoted trade deals that undermined social standards. Cost-benefit analysis by the Office of Information and Regulatory Affairs (OIRA) was more of a choke point under Barack Obama than under George W. Bush.

"Command and control" became an all-purpose pejorative for disparaging perfectly sensible and efficient regulation. "Market-like" became a fashionable concept, not just on the free-market right but on the moderate left. Cass Sunstein, who served as Obama's anti-regulation czar,uses the example of "nudges" as a more market-like and hence superior alternative to direct regulation, though with rare exceptions their impact is trivial. Moreover, nudges only work in tandem with regulation.

There are indeed some interventionist policies that use market incentives to serve social goals. But contrary to free-market theory, the market-like incentives first require substantial regulation and are not a substitute for it. A good example is the Clean Air Act Amendments of 1990, which used tradable emission rights to cut the output of sulfur dioxide, the cause of acid rain. This was supported by both the George H.W. Bush administration and by leading Democrats. But before the trading regime could work, Congress first had to establish permissible ceilings on sulfur dioxide output -- pure command and control.

There are many other instances, such as nutrition labeling, truth-in-lending, and disclosure of EPA gas mileage results, where the market-like premise of a better-informed consumer complements command regulation but is no substitute for it. Nearly all of the increase in fuel efficiency, for example, is the result of command regulations that require auto fleets to hit a gas mileage target. The fact that EPA gas mileage figures are prominently disclosed on new car stickers may have modest influence, but motor fuels are so underpriced that car companies have success selling gas-guzzlers despite the consumer labeling.

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Bill Clinton and his Treasury Secretary, Robert Rubin, were big promoters of financial deregulation.

Politically, whatever rationale there was for liberals to make common ground with libertarians is now largely gone. The authors of the 2017 Tax Cuts and Jobs Act made no attempt to meet Democrats partway; they excluded the opposition from the legislative process entirely. This was opportunistic tax cutting for elites, pure and simple. The right today also abandoned the quest for a middle ground on environmental policy, on anti-poverty policy, on health policy -- on virtually everything. Neoliberal ideology did its historic job of weakening intellectual and popular support for the proposition that affirmative government can better the lives of citizens and that the Democratic Party is a reliable steward of that social compact. Since Reagan, the right's embrace of the free market has evolved from partly principled idealism into pure opportunism and obstruction.

Neoliberalism and Hyper-Globalism

The post-1990 rules of globalization, supported by conservatives and moderate liberals alike, are the quintessence of neoliberalism. At Bretton Woods in 1944, the use of fixed exchange rates and controls on speculative private capital, plus the creation of the IMFand World Bank, were intended to allow member countries to practice national forms of managed capitalism, insulated from the destructive and deflationary influences of short-term speculative private capital flows. As doctrine and power shifted in the 1970s, the IMF, the World Bank, and later the WTO, which replaced the old GATT, mutated into their ideological opposite. Rather than instruments of support for mixed national economies, they became enforcers of neoliberal policies.

The standard package of the "Washington Consensus" of approved policies for developing nations included demands that they open their capital markets to speculative private finance, as well as cutting taxes on capital, weakening social transfers, and gutting labor regulation and public ownership. But private capital investment in poor countries proved to be fickle. The result was often excessive inflows during the boom part of the cycle and punitive withdrawals during the bust -- the opposite of the patient, long-term development capital that these countries needed and that was provided by the World Bank of an earlier era. During the bust phase, the IMF typically imposes even more stringent neoliberal demands as the price of financial bailouts, including perverse budgetary austerity, supposedly to restore the confidence of the very speculative capital markets responsible for the boom-bust cycle.

Dozens of nations, from Latin America to East Asia, went through this cycle of boom, bust, and then IMF pile-on. Greece is still suffering the impact. After 1990, hyper-globalism also included trade treaties whose terms favored multinational corporations. Traditionally, trade agreements had been mainly about reciprocal reductions of tariffs. Nations were free to have whatever brand of regulation, public investment, or social policies they chose. With the advent of the WTO, many policies other than tariffs were branded as trade distorting, even as takings without compensation. Trade deals were used to give foreign capital free access and to dismantle national regulation and public ownership. Special courts were created in which foreign corporations and investors could do end runs around national authorities to challenge regulation for impeding commerce.

At first, the sponsors of the new trade regime tried to claim the successful economies of East Asia as evidence of the success of the neoliberal recipe. Supposedly, these nations had succeeded by pursuing "export-led growth," exposing their domestic economies to salutary competition. But these claims were soon exposed as the opposite of what had actually occurred. In fact, Japan, South Korea, smaller Asian nations, and above all China had thrived by rejecting every major tenet of neoliberalism. Their capital markets were tightly regulated and insulated from foreign speculative capital. They developed world-class industries as state-led cartels that favored domestic production and supply. East Asia got into trouble only when it followed IMF dictates to throw open capital markets, and in the aftermath they recovered by closing those markets and assembling war chests of hard currency so that they'd never again have to go begging to the IMF. Enthusiasts of hyper-globalization also claimed that it benefited poor countries by increasing export opportunities, but as the success of East Asia shows, there is more than one way to boost exports -- and many poorer countries suffered under the terms of the global neoliberal regime.

Nor was the damage confined to the developing world. As the work of Harvard economist Dani Rodrik has demonstrated, democracy requires a polity. For better or for worse, the polity and democratic citizenship are national. By enhancing the global market at the expense of the democratic state, the current brand of hyper-globalization deliberately weakens the capacity of states to regulate markets, and weakens democracy itself.

When Do Markets Work?

The failure of neoliberalism as economic and social policy does not mean that markets never work. A command economy is even more utopian and perverse than a neoliberal one. The practical quest is for an efficient and equitable middle ground.

The neoliberal story of how the economy operates assumes a largely frictionless marketplace, where prices are set by supply and demand, and the price mechanism allocates resources to their optimal use in the economy as a whole. For this discipline to work as advertised, however, there can be no market power, competition must be plentiful, sellers and buyers must have roughly equal information, and there can be no significant externalities. Much of the 20th century was practical proof that these conditions did not describe a good part of the actual economy. And if markets priced things wrong, the market system did not aggregate to an efficient equilibrium, and depressions could become self-deepening. As Keynes demonstrated, only a massive jolt of government spending could restart the engines, even if market pricing was partly violated in the process.

Nonetheless, in many sectors of the economy, the process of buying and selling is close enough to the textbook conditions of perfect competition that the price system works tolerably well. Supermarkets, for instance, deliver roughly accurate prices because of the consumer's freedom and knowledge to shop around. Likewise much of retailing. However, when we get into major realms of the economy with positive or negative externalities, such as education and health, markets are not sufficient. And in other major realms, such as pharmaceuticals, where corporations use their political power to rig the terms of patents, the market doesn't produce a cure.

The basic argument of neoliberalism can fit on a bumper sticker. Markets work; governments don't . If you want to embellish that story, there are two corollaries: Markets embody human freedom. And with markets, people basically get what they deserve; to alter market outcomes is to spoil the poor and punish the productive. That conclusion logically flows from the premise that markets are efficient. Milton Friedman became rich, famous, and influential by teasing out the several implications of these simple premises.

It is much harder to articulate the case for a mixed economy than the case for free markets, precisely because the mixed economy is mixed. The rebuttal takes several paragraphs. The more complex story holds that markets are substantially efficient in some realms but far from efficient in others, because of positive and negative externalities, the tendency of financial markets to create cycles of boom and bust, the intersection of self-interest and corruption, the asymmetry of information between company and consumer, the asymmetry of power between corporation and employee, the power of the powerful to rig the rules, and the fact that there are realms of human life (the right to vote, human liberty, security of one's person) that should not be marketized.

And if markets are not perfectly efficient, then distributive questions are partly political choices. Some societies pay pre-K teachers the minimum wage as glorified babysitters. Others educate and compensate them as professionals. There is no "correct" market-derived wage, because pre-kindergarten is a social good and the issue of how to train and compensate teachers is a social choice, not a market choice. The same is true of the other human services, including medicine. Nor is there a theoretically correct set of rules for patents, trademarks, and copyrights. These are politically derived, either balancing the interests of innovation with those of diffusion -- or being politically captured by incumbent industries.

Governments can in principle improve on market outcomes via regulation, but that fact is complicated by the risk of regulatory capture. So another issue that arises is market failure versus polity failure, which brings us back to the urgency of strong democracy and effective government.

After Neoliberalism

The political reversal of neoliberalism can only come through practical politics and policies that demonstrate how government often can serve citizens more equitably and efficiently than markets. Revision of theory will take care of itself. There is no shortage of dissenting theorists and empirical policy researchers whose scholarly work has been vindicated by events. What they need is not more theory but more influence, both in the academy and in the corridors of power. They are available to advise a new progressive administration, if that administration can get elected and if it refrains from hiring neoliberal advisers.

There are also some relatively new areas that invite policy innovation. These include regulation of privacy rights versus entrepreneurial liberties in the digital realm; how to think of the internet as a common carrier; how to update competition and antitrust policy as platform monopolies exert new forms of market power; how to modernize labor-market policy in the era of the gig economy; and the role of deeper income supplements as machines replace human workers.

The failed neoliberal experiment also makes the case not just for better-regulated capitalism but for direct public alternatives as well. Banking, done properly, especially the provision of mortgage finance, is close to a public utility. Much of it could be public. A great deal of research is done more honestly and more cost-effectively in public, peer-reviewed institutions such as the NIH than by a substantially corrupt private pharmaceutical industry.

Social housing often is more cost-effective than so-called public-private partnerships. Public power is more efficient to generate, less prone to monopolistic price-gouging, and friendlier to the needed green transition than private power. The public option in health care is far more efficient than the current crazy quilt in which each layer of complexity adds opacity and cost. Public provision does require public oversight, but that is more straightforward and transparent than the byzantine dance of regulation and counter-regulation.

The two other benefits of direct public provision are that the public gets direct evidence of government delivering something of value, and that the countervailing power of democracy to harness markets is enhanced. A mixed economy depends above all on a strong democracy -- one even stronger than the democracy that succumbed to the corrupting influence of economic elites and their neoliberal intellectual allies beginning half a century ago. The antidote to the resurrected neoliberal fable is the resurrection of democracy -- strong enough to tame the market in a way that tames it for keeps.


Robert Kuttner is co-founder and co-editor of The American Prospect, and professor at Brandeis University's Heller School. His latest book is The Stakes: 2020 and the Survival of American Democracy . In addition to writing for the Prospect, he writes for HuffPost, The Boston Globe, and The New York Review of Books.

Read the original article at Prospect.org.

Used with the permission. © The American Prospect, Prospect.org, 2019. All rights reserved.

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[Sep 21, 2019] In Praise of Mediocrity by Tim Wu

Notable quotes:
"... But there's a deeper reason, I've come to think, that so many people don't have hobbies: We're afraid of being bad at them. Or rather, we are intimidated by the expectation -- itself a hallmark of our intensely public, performative age -- that we must actually be skilled at what we do in our free time. Our "hobbies," if that's even the word for them anymore, have become too serious, too demanding, too much an occasion to become anxious about whether you are really the person you claim to be. ..."
"... If you're a jogger, it is no longer enough to cruise around the block; you're training for the next marathon. If you're a painter, you are no longer passing a pleasant afternoon, just you, your watercolors and your water lilies; you are trying to land a gallery show or at least garner a respectable social media following. When your identity is linked to your hobby -- you're a yogi, a surfer, a rock climber -- you'd better be good at it, or else who are you? ..."
"... Lost here is the gentle pursuit of a modest competence, the doing of something just because you enjoy it, not because you are good at it. Hobbies, let me remind you, are supposed to be something different from work. But alien values like "the pursuit of excellence" have crept into and corrupted what was once the realm of leisure, leaving little room for the true amateur. The population of our country now seems divided between the semipro hobbyists (some as devoted as Olympic athletes) and those who retreat into the passive, screeny leisure that is the signature of our technological moment. ..."
Oct 10, 2018 | www.nytimes.com

I'm a little surprised by how many people tell me they have no hobbies. It may seem a small thing, but -- at the risk of sounding grandiose -- I see it as a sign of a civilization in decline. The idea of leisure, after all, is a hard-won achievement; it presupposes that we have overcome the exigencies of brute survival. Yet here in the United States, the wealthiest country in history, we seem to have forgotten the importance of doing things solely because we enjoy them.

Yes, I know: We are all so very busy. Between work and family and social obligations, where are we supposed to find the time?

But there's a deeper reason, I've come to think, that so many people don't have hobbies: We're afraid of being bad at them. Or rather, we are intimidated by the expectation -- itself a hallmark of our intensely public, performative age -- that we must actually be skilled at what we do in our free time. Our "hobbies," if that's even the word for them anymore, have become too serious, too demanding, too much an occasion to become anxious about whether you are really the person you claim to be.

If you're a jogger, it is no longer enough to cruise around the block; you're training for the next marathon. If you're a painter, you are no longer passing a pleasant afternoon, just you, your watercolors and your water lilies; you are trying to land a gallery show or at least garner a respectable social media following. When your identity is linked to your hobby -- you're a yogi, a surfer, a rock climber -- you'd better be good at it, or else who are you?

Lost here is the gentle pursuit of a modest competence, the doing of something just because you enjoy it, not because you are good at it. Hobbies, let me remind you, are supposed to be something different from work. But alien values like "the pursuit of excellence" have crept into and corrupted what was once the realm of leisure, leaving little room for the true amateur. The population of our country now seems divided between the semipro hobbyists (some as devoted as Olympic athletes) and those who retreat into the passive, screeny leisure that is the signature of our technological moment.

I don't deny that you can derive a lot of meaning from pursuing an activity at the highest level. I would never begrudge someone a lifetime devotion to a passion or an inborn talent. There are depths of experience that come with mastery. But there is also a real and pure joy, a sweet, childlike delight, that comes from just learning and trying to get better. Looking back, you will find that the best years of, say, scuba-diving or doing carpentry were those you spent on the learning curve, when there was exaltation in the mere act of doing.

In a way that we rarely appreciate, the demands of excellence are at war with what we call freedom. For to permit yourself to do only that which you are good at is to be trapped in a cage whose bars are not steel but self-judgment. Especially when it comes to physical pursuits, but also with many other endeavors, most of us will be truly excellent only at whatever we started doing in our teens. What if you decide in your 40s, as I have, that you want to learn to surf? What if you decide in your 60s that you want to learn to speak Italian? The expectation of excellence can be stultifying.

Liberty and equality are supposed to make possible the pursuit of happiness. It would be unfortunate if we were to protect the means only to neglect the end. A democracy, when it is working correctly, allows men and women to develop into free people; but it falls to us as individuals to use that opportunity to find purpose, joy and contentment.

Lest this sound suspiciously like an elaborate plea for people to take more time off from work -- well, yes. Though I'd like to put the suggestion more grandly: The promise of our civilization, the point of all our labor and technological progress, is to free us from the struggle for survival and to make room for higher pursuits. But demanding excellence in all that we do can undermine that; it can threaten and even destroy freedom. It steals from us one of life's greatest rewards -- the simple pleasure of doing something you merely, but truly, enjoy.

Tim Wu ( @superwuster ) is a law professor at Columbia, the author of "The Attention Merchants: The Epic Struggle to Get Inside Our Heads" and a contributing opinion writer. A version of this article appears in print on Sept. 30, 2018 , on Page SR 6 of the New York edition with the headline: In Praise of Mediocrity.

[Sep 19, 2019] Attributing Malice To Incompetence Dmitry Fadeyev

Never ascribe to malice that which is adequately explained by incompetence. ~ Napoleon
Jul 03, 2012 | fadeyev.net

People look for reasons to get offended when they don't get the things they want. It's a defensive reaction against the feeling of powerlessness, of events not going according to plan because of outside forces you can't control. Instead of accepting your lack of control in a given situation, you attribute malice to some actor or other, so now it's no longer a case of you at the mercy of the world, it's a case of some other agent causing you grief -- it becomes personal. By attributing malice to, say, someone else's incompetence, you turn your powerlessness into battle. This appeases the ego because there is now the idea of somebody caring about what you want, of somebody reacting to your wishes, albeit negatively, rather than ignoring you altogether.

>>

Instead of trying to find an outlet for your anger, prevent it in the first place by destroying its fuel. Instead of assuming that things have got to go your way, assume that they will only probably go your way if you've made the right preparations, and if they don't, see if it was a lack of action on your part or simply a case of outside forces that you couldn't control, whether accounted for or not. If it's the former, learn from it, if the latter, be content knowing that you've done all that was in your power. The feeling of powerlessness comes from feeling the constraints of the world around you, but instead of seeing them as enemy forces that try to fight you to prevent your movement, see them as terrain you have to move around to get to where you want to be.

>>

To live under constraint is a misfortune, but there is no constraint to live under constraint.

Seneca

[Sep 19, 2019] In praise of incompetence by Willem Buiter

Dec 28, 2008 | ft.com / maverecon
A monopoly is a bad thing. It invites abuse of the power it controls. Sometimes it is not the worst thing that could happen. Anarchy or the 'state of nature', can be worse. I don't know whether Thomas Hobbes was right for all time and places in asserting that man is not by nature a social animal and that society could not exist except by the power of the state - the wielder of the monopoly of legitimate coercive power.

There may have been some bucolic, idyllic communities that dispensed with the institution of the state, where the fundamental rights of people ( life, health, liberty) and property rights could be enforced effectively by individual action or through acts of spontaneous cooperation without external, third-party enforcement. But once we get to communities exceeding a dozen or at most a gross of people, an institution endowed with the monopoly on the legitimate use of force against its own citizens appears to have evolved, to have been created or to have been imposed everywhere.

>>

From Chapter 13 of The Leviathan, Thomas Hobbes's rhetoric in making the case for the state in human affairs, is magnificent :

"Whatsoever therefore is consequent to a time of war, where every man is enemy to every man, the same consequent to the time wherein men live without other security than what their own strength and their own invention shall furnish them withal.

In such condition there is no place for industry, because the fruit thereof is uncertain: and consequently no culture of the earth; no navigation, nor use of the commodities that may be imported by sea; no commodious building; no instruments of moving and removing such things as require much force; no knowledge of the face of the earth; no account of time; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of man, solitary, poor, nasty, brutish, and short. "

>>

As positive descriptions, that is, characterizations of what is likely to happen without a minimally effective state, rather than of what ought to happen, I much prefer Hobbes to Locke. However, as a normative characterization of what ought to be in the state of nature, and of how the institution of government and the state can be made to serve the interests and rights of man, I'm with Locke.

According to Locke, "The state of Nature has a law of Nature to govern it" , and that law is Reason. Reason teaches that "no one ought to harm another in his life, health, liberty or possessions". When attempts by individuals to prevent or punish transgressions of natural law are ineffective, a limited and restricted role for government emerges "naturally".

>

Locke's view of the state of nature is in part motivated from his Christian belief: the reason we may not harm another human being is that we are all God's children, and therefore the possessions of God. We do not own ourselves.

>>

The fact that we grant the state (and the government in charge of the instruments of the state) a normative raison d'être and acknowledge the universality of its presence in every historical organized human society, does not mean we should respect, let alone trust the state.

The state is a necessary evil. It is necessary for the reasons outlined by Hobbes, Locke and many other worldly philosophers. It is evil because I know of no example of a state that has not abused its power over its citizens. Nor do I know of a society where the state does not try to extend its control over the lives of the citizens to domains that are none of its business and that are not material to the performance of the key tasks of the state. Every action, legislative initiative, executive order, legal ruling or administrative decision must therefore be scrutinized with the eyes of a hawk and with a deep and abiding mistrust of both the motivations and the likely consequences of any state action or initiative.

The simple rule of thumb as regards both new and existing laws, rules and regulations should be: when in doubt, throw it out.

>>

Every restriction on our liberties - our right to speak, write, criticize and offend as we please, to act and organize in opposition to the government of the day, to embarrass it and to show it up by forcing it to look into the mirror of its own leaked secrets - must be resisted. We cannot afford to believe any government's protestations that it is acting in good faith and will safeguard the confidentiality of any information it extracts from us.

Public safety and national security are never sufficient reasons for restricting the freedom of the citizens. The primary duty of the state is to safeguard our freedom against internal and external threats. The primary duty of an informed citizenry is to limit the domain of the state - to keep the government under control and to prevent it from becoming a threat to our liberties.

>

The threat posed by our own government to our liberty and fundamental rights is a constant one. Most of the time it is a much greater, direct and immediate threat than that posed by foreign states (through conquest or extortion) or by external non-government agents, the violent NGOs like Al Qaeda.

>

In a limited number of countries a fair degree of personal and political freedom has been achieved during the past three or four centuries. I have been fortunate to always have been a resident in this blessed corner of the universe - in the Netherlands, Luxembourg, Belgium, the United Kingdom and the United States. I have, however, visited many countries where these freedoms never took hold or took hold but briefly and have been whittled away again.

>>

I have become convinced that the price of freedom is eternal vigilance against the encroachment by the powers of the state on the private domain. The better-intentioned a government professes to be, and the better-intentioned it truly is when it first gains office, the more it is to be distrusted.

After even the most liberal-minded, open-government-committed party takes hold of the reins of government, it takes never more than a single term of office, four years - five at the most - before paranoia takes over. Disagreement becomes dissent, dissent becomes disloyalty, disloyalty becomes betrayal and betrayal becomes treason.

The public interest merges seamlessly with the private interest of the incumbents. The state bureaucracy, where it has not been taken over by government loyalists on day one of the new administration, is gradually transformed into an arm of the government. Some formal checks and balances often remain, parliament and the courts among them, but they too are often feeble to begin with and weaken further as the term office of the incumbent government lengthens.

>

I have watched this process at work in the UK since I returned here in 1994. It was breath-taking and depressing to observe the transformation of New Labour after 1997, from the party of open government, human rights and civil liberties into an increasingly paranoid group of power-hogging and repressive political control freaks, who have done more damage to fundamental human rights in the past 11 years than any other (sequence of) government(s) in any comparable-length stretch of time since the Glorious Revolution.

>>

Fortunately, despite their worst intentions, they have not been very competent - a more competent government could have done much more damage to our freedom and civil liberties.

The price of freedom may be a weaker and less efficient state than a conventional utilitarian cost-benefit analysis would dictate. That is not surprising, as utilitarianism leads to paternalism (possibly with a detour via libertarian paternalism - the latest political oxymoron), and paternalism leads to authoritarianism and ultimately to totalitarianism as surely as the statement: " I'm from the government and I am here to help you" , will before long be followed by "and I know what is good for you, and for society at large - so up against the wall, you ." .

>

It is not possible, I believe, to have 'strong but limited' government or 'efficient and effective but restricted, bounded and confined' government. The reason is that the same capabilities that make a government (as the manager of the state) strong, efficient and effective in the the pursuit of set tasks and objectives, will also drive that government to increase the scale and scope of its ambitions and the degree of control it exercises over every aspect of our lives.

>

The historical-institutional processes that drive the evolution of the state are quite likely to result in an all-absorbing Leviathan. This is because the main actors competing for the control of the government and thus of the apparatus of the state are recruited by political processes that select for people with a hunger for power, ruthlessness, a belief that the ends justify the means and an unquestioned faith that the common good (as seen by the aspiring politico) always takes precedence over individual rights and liberties. We have to hobble this would-be Leviathan if we value what is left of our rights and liberties.

>

In the UK, restoring the power of parliament, badly eroded by the demise of the House of Lords as a serious upper chamber, would be a step towards restoring checks and balances, especially if the new upper chamber could be elected by proportional representation.

>

Cleaning up the incomprehensible structure of the UK judiciary, with some members of the judiciary cropping up in parliament and others in the executive, is also long overdue. A written, modern Bill of Rights would also help to redress the balance of power between the overweening executive and the rest - the timid, gutless and toothless parliament, the emasculated judiciary and the disenfranchised electorate.

>

But I doubt whether any of this will be enough to safeguard our freedom. Fortunately we have one firm ally: government incompetence and ignorance.

>>

So whenever I come across yet another egregious example of government inefficiency (be it waiting since 1989 for work on Cross Rail to start, another laptop with confidential information left on the train, interminable blockages of major access roads by non-synchronized excavations arranged by the electric power company, the gas company, the phone company, the cable TV company and the maintainer of the Greater London drains, or unsuccessful attempts to have a broken water mains repaired during a period when an Official Drought Order was in effect) I feel strangely uplifted. A government and a state apparatus that cannot punch their way out of a wet paper bag when it comes to so many important and useful things may not be able to mount much of a threat to our freedom and civil liberties after all.

The price of freedom is government inefficiency. An ignorant and uninformed state is the corner stone of liberty. Constitutional reform designed to limit the competence of the government and the quantity and quality of the information it has at its disposal should figure prominently in the next Queen's Speech.

December 28th, 2008 in Chindia , Culture , Economics , Environment , Ethics , European Union , Politics , Religion | Permalink

Selected Comments
  1. [ ] Buiter absolutely nails what New Labour have become. It's the perfect summation of everything that's happened since 1997 in two paragraphs. After even the most liberal-minded, open-government-committed party takes hold of the reins of [ ]

    Posted by: Nailed. at adoption curve dot net | December 28th, 2008 at 8:07 am | Report this comment

    >Faith in government is more important then being vigilant.

    If you list countries where the people most trust/distrust their government you will find that the countries where people believe their government will do the right thing are the more pleasant places on earth.

    >>

    If you don't trust government will do the right thing then you do not only have to live with inefficiencies but also with bridges crashing in rivers.

    Posted by: Von Hohenheim | December 28th, 2008 at 11:21 am | Report this comment

    >>As an American, I cannot believe you are capable of writing all that you have, with such conviction, clarity and truth, and yet not be able to see why our founding fathers saw the need to ensure that in order to safeguard these freedoms as coded in our constitution, they also saw the need to ensure the right of our electorate to wield marshal implements of force via the second amendment.

    Alas in hind-site, it has not done, nor will it ever do the Americans much good, as they are only a but a decade or so behind the UK in the state of their civil liberties.

    Perhaps the ignorance and incompetence of the electorate is more than evenly matched with the same on the part of the government, such would be paint a bleak picture for the civil liberties of any country.

    Posted by: Jason Drekler | December 28th, 2008 at 12:35 pm | Report this comment
  2. from the kirchner argentina

    and as a person who survived the internal exile under the military dictatorship by living in the inadvertent loopholes and oversights...
    hear! hear!

    Posted by: mangy cat | December 28th, 2008 at 3:00 pm | Report this comment

  3. I agree with your observations, but I don't think it is good idea to rely on incompetence to safeguard us from encroaching government. A few years ago there was an article (I think) in The Economist, arguing (with the example of Italy) that corruption there was positive as people could buy their way out of the more overbearing regulations.

    Relying on either corruption or incompetence to be there when you want it strikes me as foolish.
    Incidentally, while some forms of proportional representation might be a good idea, the one that politicians seem to lust after these days is the Party List system, which is clearly worse than the disease.

    Posted by: Alex | December 28th, 2008 at 4:14 pm | Report this comment

    >Willem, as usual your blog is antidepressive.

    But, I wonder whether the problem of government can really be solved by limiting the competence of goverment and restricting the information at its disposal.

    >

    People who need power may be more easily able to gain control of incompetent governments than competent ones. Transparency is necessary (but not sufficient) to hold public officials accountable.

    >>

    Because human nature is the root cause of governments abusing their power, this has to be taken account of in prevention.

    My solution would be for the right to vote, or stand for public office, or be employed as a journalist to be given to people who have passed an examination on Thomas Paine's ideas, in particular that goverment officials are public servants, and their postition is a temporary privilege, not a permamanent entitlement.

    Posted by: Michael | December 28th, 2008 at 10:08 pm | Report this comment
  4. "The polis was made for the amatuer. Its ideal was that every citizen should play his part in all of its many activities - an ideal that is recognizably descended from the generous homeric conception of arete as an all round excellence and an all round activity. It implies a respect for the wholeness or the oneness of life, and consequent dislike of specialization. It implies a contempt for efficiency - or rather a much higher idea of efficiency which exists not in one department of life, but in life itself.

    The state to be effective needs a loyal, blind and specialized machinery.

    >>

    If you want to undermine the power of the state then you need to revive the ancient Greek concept of polis. The Decision making process at all levels should me entrusted to the people who as citizens should have as their right and obligation the exercising for a short period of time of certain civil service duties in conformity with their knowledge and professional skills.

    Posted by: Bad Boy | December 29th, 2008 at 12:15 am | Report this comment
    >>[ ] FT.com | Willem Buiter's Maverecon | In praise of government incompetence

    "It was breath-taking and depressing to observe the transformation of New Labour after 1997, from the party of open government, human rights and civil liberties into an increasingly paranoid group of power-hogging and repressive political control freaks, who have done more damage to fundamental human rights in the past 11 years than any other (sequence of) government(s) in any comparable-length stretch of time since the Glorious Revolution." (tags: politics labour newlabour buiter willembuiter ft comment commentary) Filed under Play | [ ]

    Posted by: links for 2008-12-28 at adoption curve dot net | December 29th, 2008 at 1:02 am | Report this comment

    >>here, here, too.

    Unfortunately for us libertarians, this incompetence is going to be costly when

    1) trillions are spent as anti-depressants.
    2) regulations/taxes are built to counter balance the squeeling pigs at the troth.
    3) efficiencies are lost due to the large amount of effort navigating the loop holes.

    Posted by: bob goodwin | December 29th, 2008 at 8:19 am | Report this comment
  5. I'm with Will on this one. In my experience the only good governments are unpopular ones. All in all this piece seems to be a good argument for proportional representation. Let's have permanently hamstrung governments, then we can all be industrious, cultivate the earth, import commodities by sea, build commodiously, move and remove things using instruments which require much force, know the face of the earth, account for time, cultivate the arts, write letters, socialise and most of all, be free of fear. Which of course is what our political representatives want for us all, now don't they?

    Posted by: Johnstone | December 29th, 2008 at 11:29 am | Report this comment

  6. hear hear. I have witnessed first hand paternalistic and repressive regimes in the Middle East who use national security to legitimise their control and intrusion into the lives of their people.

    It is unbelievable that the Labour Govt is salami slicing away our liberty in much the same way and even more unbelievable that the people of this country, a country that first espoused and defended modern notions of liberty, should remain so passive and docile in the face of creeping tyranny.

    >>

    We are betraying every man and woman who sacrificed their own liberty in the face of oppression in order to defend ours.

    Posted by: Fadi | December 29th, 2008 at 1:11 pm | Report this comment
  7. [ ] 29th, 2008 · No Comments It was breath-taking and depressing to observe the transformation of New Labour after 1997, from the party [ ]

    Posted by: Quite | December 29th, 2008 at 3:05 pm | Report this comment

    >Professor Buiter,

    Like Alex, it seems to me that relying on government incompetence is not enough.

    >>

    During the twentieth century, totalitarian regimes managed to assume political control after public confidence had eroded because of the perceived incompetence of their predecessors. Perhaps a minimum level of competence is a necessary evil, but how is it ensured?

    The quote below from your blog may point to an answer, "After even the most liberal-minded, open-government-committed party takes hold of the reins of government, it takes never more than a single term of office, four years - five at the most - before paranoia takes over. Disagreement becomes dissent, dissent becomes disloyalty, disloyalty becomes betrayal and betrayal becomes treason. The public interest merges seamlessly with the private interest of the incumbents. The state bureaucracy, where it has not been taken over by government loyalists on day one of the new administration, is gradually transformed into an arm of the government."

    >

    Limiting individual politicians to one term in the government has merit or perhaps even to one term as an MP. It could be included in your ."written, modern Bill of Rights (which) would also help to redress the balance of power between the overweening executive and the rest - the timid, gutless and toothless parliament, the emasculated judiciary and the disenfranchised electorate".

    >>

    The elimination of a life-time career in parliamentary politics may make parliament less timid, gutless and toothless and even enhance government competence.

    Posted by: ROBERT | December 29th, 2008 at 10:22 pm | Report this comment
  8. Government may be inherently incompetent at certain functions, such as road repair, but they have proven themselves to be inherent experts at another function, repression.

    Thus I am not comforted one bit to know that an army of bureaucrats cannot build a better levee or process a basic permit within a month. These are not core competencies for a monopoly on coercive force. Applying coercive force - wars, death camps, extortion - is government's special talent and they are good at it I assure you.

    >

    The weakness in government's monopoly on legitimized coercive force is that this monopoly is granted, to varying degrees, by the people. When enough people feel repressed, a revolution can occur, the military can mutiny, or votes can be cast. Thus, to a certain degree, the people grant themselves their own level of freedom by being sufficiently fed up with their government.

    >>

    They also deny themselves freedom through theocracy, apathy, hatred for others, propensity toward war, tribalism, and nationalism (a synonym for patriotism or state-worship).

    Sustained freedom can only occur in societies that distrust their government and see it as "a necessary evil" to be controlled and scrutinized. If you want to know where the best place to live will be in 20 years, take a survey. I fear that most of the English speaking world now prefers totalitarianism.

    Posted by: Chris B | December 29th, 2008 at 11:10 pm | Report this comment
  9. Oops, wrong paste. Here is what I wanted to actually comment:

    " It is unbelievable that the Labour Govt is salami slicing away our liberty in much the same way and even more unbelievable that the people of this country, a country that first espoused and defended modern notions of liberty, should remain so passive and docile in the face of creeping tyranny. "

    >

    Buiter's argument, especially as it relates to New Labour, is ridiculous, and as the quote above has it backwards.

    >

    New Labour's major fault is that they are too poll driven (following rather than leading public opinion), and therefore they have been unwilling to resist the strong demand by a majority of the voters for more repression, less civil liberties, more state interference in private lives.

    >

    If you notice, the Tories have been campaigning for the same, but even further to the right, as it were.

    >

    The big driver is the growing number of elderly rentiers among voters, people who much prefer (the illusion of) safety to liberty, people who are just a little less authoritarian than the usual flog-n-hang them class.

    >

    ASBOs, CCTV, detention without trial, are all wildly popular with voters, and every time the government or the opposition want to pander to buy themselves some votes without spending they propose new nasty attacks on liberty, especially the liberty of nasty young people to misbehave and irritate their elders.

    >

    The greatest threat to liberty is not the parties, which only do what the polls tell them, but voters, whose demand for practical fascism has driven a lot of politics in the USA and the UK (and several other countries, as in many the baby boom generation has reached middle and old age) over the past 2-3 decades.

    >>

    These voters are sitting pretty, vested in careers, pensions, properties, and their main feeling is fear; they see all change as a threat, not an opportunity, a threat to their enjoyment of all they are vested in.

    Posted by: Blissex | December 30th, 2008 at 1:24 pm | Report this comment
  10. The efficient welfare state financed through progressive taxation is one of civilisation's greatest achievements.

    Posted by: Edward S | December 30th, 2008 at 3:11 pm | Report this comment

  11. An excellent good one.

    Implied, there is also a fine compliment for the EU Commission.
    A true antidepressant, indeed.

    Posted by: VS | December 31st, 2008 at 12:20 am | Report this comment
  12. "1125 A.D. In this year before Christmas King Henry sent from Normandy to England and gave instructions that all moneyers be deprived of their members Bishop Roger of Salisbury commanded them all to assemble at Winchester by Christmas. When they came hither they were then taken one by one, and each deprived of the right hand and the testicles below. All this was done in twelve days between Christmas and Epiphany, and was entirely justified because they had ruined the whole country by the magnitude of their fraud which they paid for in full." - The Laud Chronicle (E)

    Posted by: All I want for Christmas.............. | December 31st, 2008 at 4:43 am | Report this comment

    >LCK,

    Who is Mosler?

    >>

    Gary Marshall

    Posted by: Gary Marshall | December 31st, 2008 at 7:30 am | Report this comment
  13. Couldn't agree more (unfortunately). I never could trust a government that just promised the "third way". >> Now I am starting to recognise how countries slip down a slippery slope towards being police states.

    Yours fearfully

    Posted by: C.A.Straws | December 31st, 2008 at 12:52 pm | Report this comment
    >>Gary Marshall,

    He is here - interesting reading for you:

    http://www.moslereconomics.com/mandatory-readings/soft-currency-economics/

    Posted by: lck | December 31st, 2008 at 2:13 pm | Report this comment
    >LCK,

    Thanks for the information. I shall read through it and get back to you on Thursday. Skimming through it, I am impressed by what little I have read.

    >>

    Gary Marshall

    Posted by: Gary Marshall | January 1st, 2009 at 6:57 am | Report this comment
    >Hello LCK,

    I read through Mr. Mosler's paper.

    >

    He looks at Government and its spending through the eyes of a monetarist. He makes some good points, but never really goes far enough.

    >

    I advocate the complete abolition of all taxation. It seems an absurd proposition. However, all one need do is add up the costs and benefits of Taxation to convince themselves.

    >

    The costs of Taxation are incalculably immense. The financial benefit of Taxation, interest savings, is nil when you examine the nation's finances from the nation's vantage.

    >

    Not one person has ever found the flaw in my argument, and they probably never will.

    >

    Mr. Buiter thinks incompetent Government is to be treasured, is a protection for its citizens and corporations. Only an economist would ever make such an absurd statement.

    >

    Well, how about a competent government firmly under control of its citizens? That to me is preferable.

    >

    And one may have it by forcing Government to approach its citizens every time it needs funds. Spend badly, and the reluctance of citizens to lend will neuter the Government.

    >>

    Thanks again for the information.

    Regards,
    Gary Marshall

    Posted by: Gary Marshall | January 1st, 2009 at 9:23 am | Report this comment
    >Thank you, Willem. A provocative article, but I find it somewhat one-sided. And surprising, in the current context.

    I think it is fair to say that, if the U.S. Financial Regulators had been more effective, we wouldn't be facing a crisis anywhere near as serious as what we face now.

    >

    So, are we to praise that incompetence?

    >

    It is true that it is almost impossible to identify when self-interest and ego take over from principle and altruism, even for the most self-critical of people. In formulating how the better models of Government are to work, this is usually addressed by incorporating various checks and balances, by ensuring transparency, and providing "the people" with the ability to redress the situation or system when necessary.

    >

    This was the thinking behind guaranteeing all U.S. Citizens the right to bear arms. However, the era when an armed citizenry had a reasonable opportunity to redress mis-Government is long past. Most mis-Government now is far more subtle; a phenomenon creeping over our rights by years of one tiny step at a time. Witness the juggling of Electoral boundaries in the U.S..

    >

    Growing up in the '60's, we all had a sense that humanity was invincible. There was nothing that we could not do, no challenge that we could not meet, if we all put our minds to it.

    >

    That spirit ended with the assassination of President Kennedy. But I wonder if that is really where we should let it lie?

    >

    One little book from the '60's which has stuck in the back of my mind ever since, is Paul & Percival Goodman's "Communitas". This was not about hippie communes, but a fascinating look at 3 different methods of socio-economic organization, drawing out the implications of each. What is fascinating, in the context of this article, is not just the scope of the authors' vision, but their ability to analyse the practical implications of those visions. Perhaps I need to add that all scenario's considered were fundamentally capitalist.

    >

    Perhaps the biggest curse we face, in such considerations, is that major changes to the entrenched structure are far easier to implement under the provocation of extreme trauma. And no one in their right mind is going to force that on any society.

    >

    But I think that giving up on the idea that Government can be more effective, or more appropriate is wrong.

    >

    It has been fascinating, for an "outsider", to watch the reactions of Economists to the Global Financial Crisis. One thing is clear – there is no one Economic Theory which is accepted as providing accurate guidance on how to resolve the crisis, or which can accurately predict the results of the measures implemented to date, and proposed for the future.

    >

    Granted, Economists are dealing with human behaviour, which resists simplistic formulations. But human behaviour can be shaped by good policy. And, in the long run, Economists can fall back on the same method Engineers & Scientists use when a problem becomes too intractable for analytic methods – simulation.

    >

    So at this time I would have expected FT to be commenting on the status of Economic theory. Instead, we find an article questioning the usefulness of Government?

    >>

    Thanks, Willem, for a stimulating article, however I am not happy with giving up the idea that we can effectively govern ourselves, any more than giving up on the goal of a sound theory of Economics.

    Posted by: plp15 | January 1st, 2009 at 12:19 pm | Report this comment
    >I agree with others that to rely on government incompetence is now unsafe. You forget the rise of professionalism.

    Through the works of various professionals and their organisations, they promote restrictions on personal liberties - eg via excessive political correctness, via too wide-ranging "anti-discriminatory" politics (that are, in reality, divisive), etc. They now hold excessive power over governments, such that their claimed 'egalitarian' aims are passed into law by those governments.

    >>

    Government does not need to be competent: the professionals will ensure effective application of those restrictions on personal liberty.

    Early man had no formal government, yet there was art, organisation, development, even trade. Society is not a creation of government; governments grew out of society, as a better form of group organisation. Sadly, government has also meant power and has given opportunities to those who seek power. Once, professionals acted as a restraining force
    on governments. Now they, and governments, have too much power.

    Posted by: Derek Tunnicliffe | January 1st, 2009 at 12:37 pm | Report this comment
  14. Dear Mr. Buiter,

    Why do you keep on calling the current Crisis as credit crisis and not "Fraud by the accountants or goverment" crisis ?
    Why don't you call for a jail punishment for the ones who failed and damaged our society severely ?

    Democracy is not just a system inwhich a majority determines, but much more a system which is run by the peopleand that on a daily base ?
    Why don't you speak of a democratic state as just a form of self-governance ?

    Why blame our leaders, while we, the people, have all the freedom to gain knowledge and wisdom to select the leaders.
    Why don't you blame us ?

    >>

    Greetings and a happy newyear from Holland to you all.

    Posted by: R van Rie | January 1st, 2009 at 1:21 pm | Report this comment
  15. The French business paper "Les Echos" of 19 Dec

    The short article is highly critical of US authorities "there is no effective control by American financial "gendarmes" (police)".

    >

    And it goes on "There is also no moral control, the professional code of ethics having been smashed by greed" and further "What is left is a long-lasting distrust in regard to financial jugglers*, the object of all suspicions".

    >>

    * in the German media called "derivative-junkies

    Posted by: J.J. | January 2nd, 2009 at 2:17 pm | Report this comment
  16. I have been thinking about this post, and I cannot accept it for one simple reason: THE BUSH ADMINISTRATION. If we haven't just seen eight years of the wreckage that ghastly incompetence can leave, I must assume that you feel that it is something else that accounts for their grotesque actions.

    Posted by: Don the libertarian Democrat | January 2nd, 2009 at 4:24 pm | Report this comment

  17. Very interesting read which was forwarded to me by Davidson Heath (link to www.davidsonheath.com/blog

    >>).

    I have long been a believer that:

    (1) Government's role does not include participating in business.
    (2) Elected governments should be permitted to govern and not constantly have to worry about being defeated (like our minority parliament in Canada).
    (3) Checks and balances are good. Elected dictatorships are not.
    (4) Markets work (the current froth calling for more regulation in response to the US and world economic malaise is bizarre given that misguided and ever expanding US regulation dating back to 1938 and FDR's New Deal (read my blog entry at http://preview.tinyurl.com/8zcd2r for more detail) is what cause the current mess.)

    >

    Now as we find ourselves at the beginning of 2009 I find that I am both fearful and hopeful at the same time.

    >

    I am fearful that governments around the world are using the current economic crisis as an excuse to expand their role in society. Voters are scared and I fear government is using that fear to its own advantage - using it to justify its growth.

    >>

    I am hopeful that current political leadership will pull back its now formidable reach into business (with the US stimulus Obama is really becoming "CEO in Chief" as FORTUNE magazine pointed out) after our economies recover. Naive, I know.

    Posted by: Mark Mawhinney | January 4th, 2009 at 8:49 pm | Report this comment
    >>Happy New Year!, Willem (and all). Thanks for great blogging memories for 2008. Hopefully, more of the same for 2009 and on.

    Willem, you are an inspiration to all that believe in freedom and liberty from tyranny.(I particularly liked Jackson Hole!) Let us hope that the State's incompetence continues well into the future. If not, let REVOLUTION reign.

    Posted by: groucho | January 4th, 2009 at 11:09 pm | Report this comment
    >>If Mr Buiter and his cheering squad are so in love with incompetent government one would expect them to be moving to Zimbabwe which has the most incompetent government on Earth. They don't really want incompetent government, they want mistakes made in their favor. They want police to make mistakes on their intoxication tests, not others. They want government to miss their falsehoods on tax returns but collect enough from others so taxes don't have to be raised on others.

    I've worked in business, cooperatives, charities and government; it's not that government becomes incompetent, people__through putting their selfish interests ahead of the group or organization__make the organization less capable of accomplishing its tasks. A big part of the problem is that we all refuse to see our pursuit of our selfish interests as the root of the problem.

    Posted by: rayoflight | January 9th, 2009 at 1:08 am | Report this comment
  18. [ ] 2009. Unless you are a member of the NuLabour government, of course, in which case I hope that you read this, come to your senses, realise what you and your cronies have done, and hang [ ]

    Posted by: eurealist.co.uk " Blog Archive " End of year blogging lists | January 9th, 2009 at 7:49 am | Report this comment

  19. Perhaps, I, having twice experienced first hand how easy it is for a populist government to subvert democracy; am overly-pessimistic but I think "incompetence" is too benign a descriptor. They may be incompetent in their application but not, I believe, in their intent. >> To quote a comment made at a time of concentrated assaults by the French military, catholic church and a sizeable spread of popularly-elected right-wing politicians on French human rights (1890s): "Je participe, pour l'order; contre la justice et la verite." (I am, for the sake of order, against justice and truth.)

    Now that many people in democratic countries are about the feel the chill winds of severe economic hardship including unemployment and a poverty not seen since the early 20th century, so called "public security" laws will be an excellent mechanism for order to triumph over truth and justice. In this regard, I recommend Naomi Wolf's article in The Guardian of the 24th of April, 2007 entitled "Fascist America, in 10 easy steps". The word "America" can be substituted with the notionally democratic country of your choice.

    Posted by: dhome | January 16th, 2009 at 1:29 am | Report this comment
    >Dear Willem,

    I agree with the gist your analysis. However, the prescription of incompetent government, while interesting (and, I'm sure, issued with a degree of nonchalance), does seem to go too far.

    >

    Consider, for instance, whether a state that wields its antitrust powers incompetently can prevent the formation of cartels that expropriate the public and eventually capture the state? In modern society, there are too many areas that require the competent application of state power for state incompetence to be permissible.

    >>

    The only way around the problem of state encroachment is probably to enshrine the limited role of the state firmly in the constitutional acts of the polity and take measures to prevent the concentration of power, as the American colonists attempted to do. If consciousness among the public of the importance of such liberties is sufficiently strong, I believe they can be defended in the long run.

    Best,
    K Fjeldsted

    • About Willem Buiter

      >>

      Professor of European Political Economy, London School of Economics and Political Science; former chief economist of the EBRD, former external member of the MPC; adviser to international organisations, governments, central banks and private financial institutions.

[Sep 19, 2019] Form vs. substance in the neoliberal university

Highly recommended!
This is a classic catch 22 situation with this "oath" described below...
Also I think a lot of professors of neo-classical economics look like the member of Komsomol described below ;-) For them it is about opening new opportunities for advancement not about the truth and the level of corresponding to the reality of this pseudo-scientific neo-classical garbage, with the smoke screen of mathematics as a lipstick on the pig (mathiness)
Most such people will teach students complete garbage understanding that this is a complete garbage with a smile. Still, in in Soviet way it is possible for some to accept the position and work to undermine neo-classical economics acting within the institution using Aesopian language in lectures and papers.
The book Everything Was Forever, Until It Was No More The Last Soviet Generation (In-Formation) by Alexei Yurchak is a recommended reading for those who want to understand the perversion of neoliberal way of life in the USA today, as they mirror the perversions of Soviet life in a very uncanny way.
Notable quotes:
"... Consider an example from the contemporary United States. Today a number of private universities, colleges, and schools in several states require teachers and professors to take a "loyalty oath" to ensure that they do not "hold or foster undesirable political beliefs.... ..."
"... From a political standpoint she disagreed with the practice of taking loyalty oaths, and later, in her role as professor of the sociology of law, she voiced political positions counter to those mentioned in the oath and challenged the oath-taking practice itself. ..."
"... However, before she could do this, she first had to take the oath, understanding that without this act she would not be employed or recognized by the institution as a legitimate member with a voice authorized to participate in teaching, research, and the institution's politics (committees, meetings, elections, and so forth), including even the possibility to question publicly the practice of taking oaths. ..."
"... "The oath did not mean much if you took it, but it meant a lot if you didn't." ..."
"... However, "when a vote had to be taken, everyone roused -- a certain sensor clicked in the head: 'Who is in favor?' -- and you raised your hand automatically" (see a discussion of such ritualized practices within the Komsomol in chapter a). ..."
"... Participating in these acts reproduced oneself as a "normal" Soviet person within the system of relations, collectivities, and subject positions, with all the constraints and possibilities that position entailed, even including the possibility, after the meetings, to engage in interests, pursuits, and meanings that ran against those that were stated in the resolutions one had voted for. ..."
"... These acts are not about stating facts and describing opinions but about doing things and opening new possibilities. ..."
Sep 19, 2019 | www.amazon.com

Originally from: Everything Was Forever, Until It Was No More The Last Soviet Generation (In-Formation) by Alexei Yurchak

formal Shift

A general shift at the level of concrete ritualized forms of discourse, in which the formal dimension's importance grows, while the
informal, substantiative dimension opens up to new meanings, can and does occur in different historical and cultural contexts.

Consider an example from the contemporary United States. Today a number of private universities, colleges, and schools in several states require teachers and professors to take a "loyalty oath" to ensure that they do not "hold or foster undesirable political beliefs....

While the statutes vary, [these institutions] generally deny the right to teach to those who cannot or will not take the loyalty oath" (Chin and Rao 2003, 431 -32). Recently, a sociologist of law took such a loyalty oath at a Midwestern university when her appointment as a professor began.

From a political standpoint she disagreed with the practice of taking loyalty oaths, and later, in her role as professor of the sociology of law, she voiced political positions counter to those mentioned in the oath and challenged the oath-taking practice itself.

However, before she could do this, she first had to take the oath, understanding that without this act she would not be employed or recognized by the institution as a legitimate member with a voice authorized to participate in teaching, research, and the institution's politics (committees, meetings, elections, and so forth), including even the possibility to question publicly the practice of taking oaths.

Here, the informal, substantiative dimension of the ritualized act experiences a shift, while the formal dimension remains fixed and important: taking the oath opens a world of possibilities where new informal, substantiative meanings become possible, including a professorial position with a recognized political voice within the institution. In the sociologist's words, "The oath did not mean much if you took it, but it meant a lot if you didn't." 3 ^

This example illustrates the general principle of how some discursive acts or whole types of discourse can drift historically in the direction of an increasingly expanding formal dimension and increasingly open or even irrelevant informal, substantiative dimension. During Soviet late socialism, the formal dimension of speech acts at formal gathering and rituals became particularly important in most contexts and during most events.

One person who participated in large Komsomol meetings in the 1970s and 1980s described how he often spent the meetings reading a book. However, "when a vote had to be taken, everyone roused -- a certain sensor clicked in the head: 'Who is in favor?' -- and you raised your hand automatically" (see a discussion of such ritualized practices within the Komsomol in chapter a).

Here the emphasis on the formal dimension of organizational discourse was unique both in scale and substance. Most ritualized acts of "organizational discourse" during this time underwent such a transformation.

Participating in these acts reproduced oneself as a "normal" Soviet person within the system of relations, collectivities, and subject positions, with all the constraints and possibilities that position entailed, even including the possibility, after the meetings, to engage in interests, pursuits, and meanings that ran against those that were stated in the resolutions one had voted for.

It would obviously be wrong to see these acts of voting simply as informal, substantiative statements about supporting the resolution that are either true (real support) or false (dissimulation of support). These acts are not about stating facts and describing opinions but about doing things and opening new possibilities.

[Sep 18, 2019] China did the right thing: it shut down "free market" theologician maskeraling as economics from the academia

After 2008 free market economists should be treated at their face value: as academic charlatans. Now they are treated as goods which are past their shelf life in China and that's a progress.
Notable quotes:
"... The Chinese don't need, and don't want, a bunch of arrogant pro-US intellectuals giving them lectures. I can't say I blame them. ..."
"... No, that is because after WW2 the US was the only major economy left standing that hadn't been wrecked, and they were in the box seat to set the agenda post Bretton-Woods (and cement for themselves the leading dominant role). The USD is being used increasingly as a cudgel to enforce US hegemony, and that will lead much of the world to seek alternatives. It's happening now, slowly at first, and will only gain speed from here. ..."
Sep 18, 2019 | nationalinterest.org

During my last visit I stopped by the offices of what remained of the Unirule Institute of Economics. The well-respected organization was formed in 1993 by six economists, most importantly Mao Yushi (no relation to Mao Zedong) and Sheng Hong. My organization, the Cato Institute, gave the former the 2012 Milton Friedman Prize for Advancing Liberty to honor his work on behalf of human freedom. Now retired at the age of ninety, Mao Yushi paid a price for activism. Noted his award citation, Mao "has faced severe punishment, exile, and near starvation for remarks critical of a command-based economy and society." The late Liu Xiaobo, a Nobel laureate, said of Mao: his "bravery is worthy of our respect."

However, despite the hardship of its founder, Unirule was no revolutionary political organization. Its name stood for "universal rules," essentially the rule of law. Its focus was moving toward a more market-oriented economy. The group's work was scholarly, performed by economists and academics. Its publications were high-brow, its books often published in China. Unirule's international contacts were mainstream and focused on economic reform.

That Unirule prospered demonstrated how far the PRC had come from the bad old days under Mao Zedong. Economic integration with the West by no means delivered a libertarian China. Still, the increasingly vibrant private economy expanded personal autonomy, opening up space absent since the PRC's founding seventy years ago.

As for politics, other than the question of the Chinese Communist Party's monopoly of power, most issues could be at least discussed and sometimes debated in academic and other settings. A vaguely independent media developed, which reported on misdeeds of local governments and officials. Although this slightly diluted authoritarianism might have appeared to be weakness to a few who pined for the days of the Cultural Revolution, the system offered a release valve for people who had no control over their rulers.

That gave CCP officials additional ideas to consider and solutions to employ. Unirule sponsored lectures, ran conferences, and published books. The group consulted with both local governments and state companies. Even the national authorities appeared to respect if not necessarily love Unirule. (In 1980 the government even invited Nobel Laureate Milton Friedman to Beijing to get his advice.) Asked Jude Blanchette, at the Center for Strategic and International Studies: "Without independent voices offering alternative viewpoints, how can China's leaders make effective decisions."

Allowing discussion -- if not exactly dissent -- also might have drained away some of the dissatisfaction that otherwise would have accumulated against the regime. The pervasiveness of corruption and intensity of resulting public disgust highlighted the threat both from and to Communist rule, which came much more from the natural consequences of the monopoly of power rather than from the expression of discontent with that monopoly.

However, Xi Jinping's ascension to head of both party and government became a dramatic political inflexion point...

... ... ...

The state agency which sponsored it dropped the affiliation. Newspapers stopped running articles by its staffers. Discussions of its activities on social media, including the Chinese phenomenon WeChat, were blocked. Venues cancelled Unirule events. The website was closed down. Then the organization was twice pushed out of professional spaces. Last year the landlord, under pressure from regulators, welded the office door shut with staffers still inside; they had to call the police for rescue. About ten employees and a mass of books, papers and files ultimately crammed into a small apartment ten floors up in an aged apartment building in a distant suburb.

The group's latest book, a collection of academic papers, is ready for publication but was rejected by the PRC's information overseers. The process has been transferred from state to party, ensuring that everything will be assessed for its propaganda value. More seriously, Unirule's business license was cancelled, a move the group was fighting. Sheng said he planned to focus on economic research if the CCP interdict took hold.

... ... ...

A few weeks after my visit Unirule's life appears to have run out. The group announced that the local government had declared it to be "unregistered and unauthorized." Although Unirule plans to fight the diktat in court, Sheng admitted that it had essentially no chance of prevailing and has begun the liquidation process. "We no longer have any space for survival," Sheng told the Wall Street Journal . He previously noted that Unirule had been careful to follow the rules, so the Xi regime wished for the reformers to "disappear by ourselves." Apparently Xi or someone else high up grew tired of waiting.

... ... ...

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author of several books, including Foreign Follies: America's New Global Empire .


jonathanpulliam 2 days ago ,

Come to think of it, why ISN'T Boeing's CEO in jail??

Gary Sellars 3 days ago ,

The Chinese don't need, and don't want, a bunch of arrogant pro-US intellectuals giving them lectures. I can't say I blame them.

... ... ...

Mephisto 3 days ago ,

Nixon's initiative to integrate China with the USA was the biggest strategic mistake the US ever did. It did not lead to democratization, but rather helped build a powerful totalitarian Orwellian state.

China clearly has a long term strategic plan how to become the world leader, and to this end, it steals western technology, locks other nations into dept traps, builds fifth columns in other countries, uses propaganda and cultural subversion. It is not yet too late to withdraw all western investment from China and to isolate the country. Due to the behavior of the CCP, it has very few actual friends.

jonathanpulliam Mephisto 2 days ago ,

PRC China & the U.S. share one thing at least in common, they lack dignity

Rudi Matich Mephisto 2 days ago ,

The strategic plan and task to defeat capitalism had been handed over to China after the Soviet Union has failed in this endeavor because economically it was no match for capitalist USA, plus it did not integrate science and technological innovation which without it capitalism can not be defeated.

China has achieved economic quantity and quality, and is heading towards full scientific and technological superiority over capitalist USA in the long run.

In this way socialism through science defeats and overtakes capitalism. Science and more science, the only way to defeat capitalism.

Swift Laggard II Rudi Matich 2 days ago ,

China is a hard core capitalist state. Even state ownership is state capitalism

Gary Sellars Mephisto 3 days ago ,

"Due to the behavior of the USA, it has very few actual friends."

Thats better...

Mephisto Gary Sellars 3 days ago ,

out of the 3 countries - USA, Russia, China - most of the world is clearly happy with USA having the leading role, because it is the least evil. Yes, USA is not perfect, Trump is not a great leader (to say it diplomatically), they have made mistakes (the invasion of Iraq etc), but they are still much better than USSRv2.0 or totalitarian China.

Even in Asia, China is widely disliked due to its arrogant and bullying behavior. The Japanese, the Koreans, the Vietnamese, the Indonesians, none of them really like China.

The fact, that US dollar is the leading currency has much to do with the world public perception of the stability of the country. Ie all countries believe the US is the most stable country. So China will have real trouble convincing the world that yuan is better. I do not believe that China will become a leading power anytim soon.

Gary Sellars Mephisto 2 days ago • edited ,

You can keep telling yourself that, but its a crock and we non-Americans know it only too well. Dishonesty and an inability to face truth seems to be an American trait, and the corruption is only growing worse as the US declines.

"The Japanese, the Koreans, the Vietnamese, the Indonesians, none of them really like China"

News for you buddy. None of these nations like each other... LOL!! You ever hear Koreans talking about the Japanese? Now that's hatred...

" The fact, that US dollar is the leading currency has much to do with the world public perception of the stability of the country."

No, that is because after WW2 the US was the only major economy left standing that hadn't been wrecked, and they were in the box seat to set the agenda post Bretton-Woods (and cement for themselves the leading dominant role). The USD is being used increasingly as a cudgel to enforce US hegemony, and that will lead much of the world to seek alternatives. It's happening now, slowly at first, and will only gain speed from here.

Pound Sterling used to dominate the world, now where is it? In the future, people will say the same of the greenback.

Swift Laggard II Mephisto 2 days ago ,

speak for yourself; don't speak for Asian nations. How many have joined AIIB, or BRI? What you believe about China is irrelevant

Mephisto Swift Laggard II 2 days ago ,

https://www.pewresearch.org...
it is interesting, that China is least popular in Asia with its direct neighbors

commit Mephisto 2 days ago ,

It would be interesting to know how the research was made and who they ask.

Mephisto commit 2 days ago ,

I traveled for 1 year across Asia - SE Asia, Thailand, Vietnam, Cambodia, Laos, Indonesia and 5 months across china. China is almost universally disliked all over Asia due to its arrogant behavior. And even the famous Chinese investments are increasingly being perceived as a form of Chinese neocolonialism and rejected
https://www.washingtonpost....

Redmond Mephisto 2 days ago ,

You know how African-Americans commit all sorts of violent crimes, hate speech, and racist slurs just because they were victims of racial discrimination in America decades ago? It's the same justification for violence Chinese mainlanders commit against everyone else just because they suffered from century of humiliation. I'm suspecting that the CCP/PLA is being coached by the black lefists in the US who have deep hatred against their perceived WASP establishment. The pattern of angst and diatribes are almost the same.

commit Redmond 2 days ago • edited ,

IDK, the trade war and other US actions against China are pretty recent. They have good reasons to hate your establishment. No need to look into past.

commit Mephisto 2 days ago • edited ,

> universally disliked all over Asia

In the survey you posted above, China is more popular than the USA in Indonesia. Other countries like Malaysia, Laos, Bangladesh, North Korea are missing. Also, people generally tell to English speaking foreigners what they expect they want to hear. If the survey was made by Chinese, the results would be different.

Redmond 3 days ago ,

The answer is simple and obvious. Democracy and rule of law means that they all go to jail. In all post-authoritarian shifts, the judicial branch of the government goes into overdrive, prosecuting past leaders for their crimes. They're really stuck to authoritarianism no-matter how hard they want democracy.

The CCP is just like a mafia. You won't get in unless you have blood in your hands, and death is the only way out (unless you can defect to another country and if you can stomach your immediate family members going to jail for you).

Swift Laggard II Redmond 3 days ago ,

what rule of law are you talking about? do you practice it in your own country?

Gary Sellars Swift Laggard II 3 days ago ,

Law of the Jungle. It's all that the Washingtonian primitives understand...

Walter Tseng 3 days ago ,

China is doing just great. Its citizens are enjoying a quality of life unprecedented in China's history (even the author do not dispute this). So why should a democratic majority 89% (PEW) happy individuals must suffer for the selfish few?

History has shown that intellectuals make lousy leaders but great at fomenting chaos + rebellions. And everyone knows that "soft-spoken criticisms", when weaponized, can kill millions just as effectively as a nuclear bomb!

[Sep 17, 2019] A Requiem for the Fiscal Theory of the Price Level by Roger E. A. Farmer

Sep 17, 2019 | www.rogerfarmer.com

Our results have profound implications for the idea that the financial markets are Pareto efficient which I explore here in my paper on asset pricing in perpetual youth models. In that paper I assume that monetary and fiscal policy are passive to generate realistic asset market volatility. My paper with Pawel shows that the same results can be generated in a realistic OLG model even when monetary and fiscal policy are active.

The way out of this apparent degeneracy of theory is to adopt an idea I first advocated in my book on self-fulfilling prophecies . The way that people form beliefs must be modeled as a new fundamental with the same methodological status as preferences, technologies and endowments.

Our paper makes a mockery of the attempt to ground neoclassical theory in 'fundamentals'.

[Sep 15, 2019] Americar real Conflict in Trump era is between the two factions of neoliberal elites: financial oligarchy (and associated with them Silicon Valley Moduls) and old manufacturing elite

This is the conflict between financial elite and Silicon Valley modules against traditional manufactures and extractive industries like oil, gas, coil, iron ore, etc.
Notable quotes:
"... The First Estate, once the province of the Catholic Church, has morphed into what Samuel Coleridge in the 1830s called "the Clerisy," a group that extends beyond organized religion to the universities, media, cultural tastemakers and upper echelons of the bureaucracy. The role of the Second Estate is now being played by a rising Oligarchy, notably in tech but also Wall Street, that is consolidating control of most of the economy. ..."
Sep 15, 2019 | dailycaller.com

A recent OECD report , is under assault, and shrinking in most places while prospects for upward mobility for the working class also declines.T

he anger of the Third Estate, both the growing property-less Serf class as well as the beleaguered Yeomanry, has produced the growth of populist, parties both right and left in Europe, and the election of Donald Trump in 2016. In the U.S., this includes not simply the gradual, and sometimes jarring, transformation of the GOP into a vehicle for populist rage, but also the rise on the Democratic side of politicians such as Sens. Bernie Sanders and Elizabeth Warren, each of whom have made class politics their signature issue.

(RELATED: Bernie Sanders Says Middle Class Will Pay More In Taxes)

The Rise of Neo-Feudalism

Today's neo-feudalism recalls the social order that existed before the democratic revolutions of the 17th and 18th Century, with our two ascendant estates filling the roles of the former dominant classes.

The First Estate, once the province of the Catholic Church, has morphed into what Samuel Coleridge in the 1830s called "the Clerisy," a group that extends beyond organized religion to the universities, media, cultural tastemakers and upper echelons of the bureaucracy. The role of the Second Estate is now being played by a rising Oligarchy, notably in tech but also Wall Street, that is consolidating control of most of the economy.

Together these two classes have waxed while the Third Estate has declined. This essentially reversed the enormous gains made by the middle and even the working class over the past 50 years. The top 1% in America captured just 4.9 percent of total U.S. income growth in 1945-1973, but since then the country's richest classes has gobbled up an astonishing 58.7% of all new wealth in the U.S., and 41.8 percent of total income growth during 2009-2015 alone.

In this period, the Oligarchy has benefited from the financialization of the economy and the refusal of the political class in both parties to maintain competitive markets. As a result, American industry has become increasingly concentrated. For example, the five largest banks now account for close to 50 percent of all banking assets, up from barely 30 percent just 20 years ago. (RELATED: The Biggest Bank You've Never Heard Of)

Warren Buffett, Jeffrey Immelt, Charles Schwab and Jamie Dimon, at Georgetown University. Chip Somodevilla/Getty Images.

Warren Buffett, Jeffrey Immelt, Charles Schwab and Jamie Dimon, at Georgetown University. Chip Somodevilla/Getty Images.

The concentration numbers in tech are even more frightening. Once a highly competitive industry, it is now among the most concentrated . Like the barbarian chieftains who seized land after the fall of Rome, a handful of companies -- Facebook , Google , Apple, Microsoft and Amazon -- have gained total control over a host of markets, from social media to search, the software operating systems, cloud computing and e-commerce. In many key markets such as search, these companies enjoy market shares reaching to eighty or ninety percent.

As they push into fields such as entertainment, space travel, finance and autonomous vehicles, they have become, as technology analyst Izabella Kaminska notes, the modern-day "free market" equivalents of the Soviet planners who operated Gosplan, allocating billions for their own subjective priorities. Libertarians might point out that these tech giants are still privately held firms but they actually represent , as one analyst put it, "a new form of monopoly power made possible by the 'network effect' of those platforms through which everyone must pass to conduct the business of life."

The role of the Clerisy

The new feudalism, like the original, is not based simply around the force of arms, or in this case what Marx called "the cash nexus." Like the church in Medieval times, the Clerisy sees itself as anointed to direct human society, a modern version of what historian Marc Bloch called the "oligarchy of priests and monks whose task it was to propitiate heaven." This modern-day version of the old First Estate sets down the ideological tone in the schools, the mass media, culture and the arts. There's also a Clerisy of sorts on the right, and what's left of the center, but this remains largely, except for Fox, an insignificant remnant.

Like their predecessors, today's Clerisy embraces an orthodoxy, albeit secular, on a host of issues from race and gender to the environment. Universities have become increasingly dogmatic in their worldview. One study of 51 top colleges found the proportion of liberals to conservatives as much as 70:1, and usually at least 8:1. At elite liberal arts schools like Wellesley, Swarthmore and Williams, the proportion reaches 120:1.

Similar attitudes can be seen in virtually all other culturally dominant institutions, starting with Hollywood. Over 99 percent of all major entertainment executives' donations went to Democrats in 2018, even though roughly half the population would prefer they keep their politics more to themselves. (RELATED: Here Are Reactions From Democrats, Liberal Celebrities To The Mueller Testimony)

The increasing concentration of media in ever fewer centers -- London, New York, Washington, San Francisco -- and the decline of the local press has accentuated the elite Clerisy's domination. With most reporters well on the left, journalism, as a 2019 Rand report reveals, is steadily moving from a fact-based model to one that is dominated by predictable opinion. This, Rand suggests has led to what they called "truth decay."

The new geography of feudalism

The new feudalism increasingly defines geography not only in America but across much of the world. The great bastion of both the Oligarchy and high reaches of the Clerisy lies in the great cities, notably New York, London, Paris, Beijing, Shanghai, Tokyo, San Francisco, Los Angeles and Seattle. These are all among the most expensive places to live in the world and play a dominant role in the global media.

Yet these cities are not the progressive, egalitarian places evoked by great urbanists like the late Jane Jacobs, but more closely resemble the "gated" cities of the Middle Ages, and their equivalents in places as diverse as China and Japan. American cities now have higher levels of inequality, notes one recent study , than Mexico. In fact, the largest gaps ( between the bottom and top quintiles of median incomes are in the heartland of progressive opinion, such as in the metropolitan areas of San Francisco, New York, San Jose, and Los Angeles. (RELATED: Got Income Inequality? Least Affordable Cities Are Also the Bluest)

In some of the most favored blue cities, such as Seattle , Portland and San Francisco , not only is the middle class disappearing, but there has been something equivalent of "ethnic cleansing" amidst rising high levels of inequality, homelessness and social disorder. Long-standing minority communities like the Albina neighborhood in Portland are disappearing as 10,000 of the 38,000 residents have been pushed out of the historic African-American section. In San Francisco, the black population has dropped from 18% in the 1970s to single digits and what remains, notes Harry Alford , National Black Chamber of Commerce president, "are predominantly living under the poverty level and is being pushed out to extinction."

This exclusive and exclusionary urbanity contrasts with the historic role of cities. The initial rise of the Third Estate was tied intimately to the " freedom of the city . " But with the diminishing prospects for blue-collar industries, as well as high housing costs, many minorities and immigrants are increasingly migrating away from multi-culturally correct regions like Chicago , New York, Los Angeles and San Francisco for less regulated, generally less "woke" places like Phoenix, Dallas-Ft. Worth, Houston, Atlanta and Las Vegas.

Yet even as the middle-class populations flee, poverty remains deeply entrenched in our big cities, with a rate roughly twice that of the suburbs. The much-celebrated urban renaissance has been largely enjoyed by the upper echelons but not the working classes. In the city of Philadelphia , for example, the "center city" income rose, but citywide between 2000 and 2014, for every district that, like downtown, gained in income, two suffered income declines. Similarly, research shows that the number of high poverty (greater than 30 percent below the poverty line) neighborhoods in the U.S. has tripled since 1970 from 1,100 to 3,100.

Undermining the Third Estate

The impact of the rising Clerisy and Oligarchs poses a direct threat to the future of the Third Estate. On the economic side, relentless consolidation and financialization has devastated Main Street. In the great boom of the 1980s, small firms and start-ups powered the economy, but more recently the rates of entrepreneurship have dropped as mega-mergers, chains and on-line giants slowly reduced the scope of opportunities. Perhaps most disturbing of all has been the decline in new formations among younger people.

This phenomenon is most evident in the tech world. Today is not a great time to start a tech company unless you are in the charmed circle of elite firms with access to venture and private equity funds. The old garage start-up culture of Silicon Valley is slowly dying, as large firms gobble up or crush competitors. Indeed, since the rise of the tech economy in the 1990s, the overall degree of industry concentration has grown by 75 percent.

Like the peasant farmer or artisan in the feudal era, the entrepreneur not embraced by the big venture firms lives largely at the sufferance of the tech overlords. As one online publisher notes on his firm's status with Google:

If you're a Star Trek fan, you'll understand the analogy. It's a bit like being assimilated by the Borg. You get cool new powers. But having been assimilated, if your implants were ever removed, you'd certainly die. That basically captures our relationship to Google.

The Clerisy's War on the Middle Class

For generations, the Clerisy has steadfastly opposed the growth of suburbia, driven in large part by the aesthetic concerns –the conviction that single-family homes are fundamentally anti-social– and, increasingly, by often dubious assertions on their environmental toxicity. In places like California, the United Kingdom, Australia and Canada, government policies discourage peripheral construction where home ownership rates tend to be higher, in favor of dense, largely rental housing.

This marks a dramatic turnaround. During the middle of the 20th Century, ownership rates in the United States leaped from 44 percent in 1940 to 63 percent in the late 1970s. Yet in the new generation this prospect is fading. In the United States, home ownership among post-college millennials (aged 25-34) has dropped from 45.4 percent in 2000 to 37.0 percent in 2016, a drop of 18 percent from the 1970s, according to Census Bureau data . In contrast, their parents and grandparents witnessed a dramatic rise of homeownership from 44 percent in 1940 to 63 percent 30 years later.

But the Clerisy's war on middle- and working-class aspiration goes well beyond housing. Climate change policies already enacted in California and Germany have driven millions into "energy poverty." If adopted, many of the latest proposals for such things as the Green New Deal all but guarantee the rapid reduction of millions of highly productive and often well-paying energy, aerospace, automobile and logistics jobs.

Political implications

The war of the Estates is likely to shape our political landscape for decades to come. Parts of the Third Estate –those working with their hands or operating small businesses– increasingly flock to the GOP, according to a recent CityLab report. Trump also has a case to make with these workers, as real wages for blue-collar workers are now rising for the first time in decades. Unemployment is near record lows not only for whites but also Latinos and African-Americans. Of course, if the economy weakens, he may lose some of this support. (RELATED: Trump Blasts Media For 'Barely' Covering 'Great' Economy, Low Unemployment)

But the emergence of neo-feudalism also lays the foundation for a larger, more potent and radicalized left. As opportunities for upward mobility shrink, a new generation, indoctrinated in leftist ideology sometimes from grade school and ever more predictably in undergraduate and graduate school, tilts heavily to the left, embracing what is essentially an updated socialist program of massive redistribution, central direction of the economy and racial redress.

Antifa members in Berkeley, California. AFP/Getty/Amy Osborne.

Antifa members in Berkeley, California. AFP/Getty/Amy Osborne.

In France's most recent presidential election, the former Trotskyite Jean-Luc Melenchon won the under-24 vote, beating the "youthful" Emmanuel Macron by almost two to one. Similarly in the United Kingdom, the birthplace of modern capitalism, the Labour Party , under the neo- Marxist Jeremy Corbyn , won over 60 percent of the vote among voters under 40, compared to just 23 percent for the Conservatives. Similar trends can be seen across Europe, where the Red and Green Party enjoys wide youth support.

The shift to hard-left politics also extends to the United States– historically not a fertile area for Marxist thinking. In the 2016 primaries , the openly socialist Bernie Sanders easily outpolled Hillary Clinton and Donald Trump combined. A 2016 poll by the Communism Memorial Foundation found that 44 percent of American millennials favored socialism while another 14 percent chose fascism or communism. By 2024, these millennials will be by far the country's biggest voting bloc .

In the current run-up to the Democratic nomination these young voters overwhelming tilt toward Sanders and his slightly less radical colleague Warren, while former Vice President Joe Biden retains the support of older Democrats. The common themes of the "new" Left, with such things as guaranteed annual incomes, rent control, housing subsidies, and free college might prove irresistible to a generation that has little hope of owning a home, could remain childless, and might never earn enough money to invest in much of anything. (RELATED: Bernie Sanders Says 'Health Care For All' Will Require Tax Increases)

At the end, the war of the estates raises the prospect of rising autocracy, even under formally democratic forms. In his assessment in "Democracy in America ," Alexis de Tocqueville suggests a new form of tyranny -- in many ways more insidious than that of the monarchical state -- that grants favors and entertainments to its citizens but expects little in obligation. Rather than expect people to become adults, he warns, a democratic state can be used to keep its members in "perpetual childhood" and "would degrade men rather than tormenting them."

With the erosion of the middle class, and with it dreams of upward mobility, we already see more extreme, less liberally minded class politics. A nation of clerics, billionaires and serfs is not conducive to the democratic experiment; only by mobilizing the Third Estate can we hope that our republican institutions will survive intact even in the near future.

Mr. Kotkin is the Presidential Fellow in Urban Futures at Chapman University and the executive director of the Center for Opportunity Urbanism. His next book, "The Coming Of Neo-Feudalism," will be out this spring.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.

[Sep 15, 2019] Thomas Piketty's New Book Brings Political Economy Back to Its Sources

Sep 15, 2019 | economistsview.typepad.com

anne , September 13, 2019 at 06:38 PM

https://promarket.org/thomas-piketty-new-book-brings-political-economy-back-to-its-sources/

September 6, 2019

Thomas Piketty's New Book Brings Political Economy Back to Its Sources
In the same way that Capital in the Twenty-First Century transformed the way economists look at inequality, Piketty's new book Capital and Ideology will transform the way political scientists look at their own field.
By Branko Milanovic

Thomas Piketty's books are always monumental. Some are more monumental than others. His Top Incomes in France in the Twentieth Century: Inequality and Redistribution, 1901–1998 (published in French as Les hauts revenus en France au XXe siècle) covered more than two centuries of income and wealth inequality, in addition to social and political changes in France. His international bestseller Capital in the Twenty-First Century (Le capital au XXI siècle) broadened this approach to the most important Western countries (France, the United States, United Kingdom, and Germany). His new book Capital and Ideology (to be published in English in March 2020; already published in France as Capital et idéologie) broadens the scope even further, covering the entire world and presenting a historical panorama of how ownership of assets (including people) was treated, and justified, in various historical societies, from China, Japan, and India, to the European-ruled American colonies, and feudal and capitalist societies in Europe. Just the mention of the geographical and temporal scope of the book suffices to give the reader an idea of its ambition.

Before I review Capital and Ideology, it is worth mentioning the importance of Piketty's overall approach, present in all three of his books. His approach is characterized by the methodological return of economics to its original and key functions: to be a science that illuminates the interests and explains the behaviors of individuals and social classes in their quotidian (material) life. This methodology rejects the dominant paradigm of the past half-century, which increasingly ignored the role of classes and heterogeneous individuals in the process of production and instead treated all people as abstract agents that maximize their own income under certain constraints. The dominant paradigm has emptied almost all social content from economics and presented a view of society that was as abstract as it was false.

The reintroduction of actual life into economics by Piketty and several other economists (not entirely coincidentally, most of them are economists interested in inequality) is much more than just a return to the sources of political economy and economics. This is because today, we have vastly more information (data) than was available to economists a century ago, not only about our own contemporary societies but also about past societies. This combination between political economy's original methodology and big data is what I call "turbo-Annales," after the French group of historians that pioneered the view of history as a social science focusing on the broad social, economic, and political forces that shape the world. The topics that interested classical political economy and the authors associated with the Annales School can now be studied empirically, and even econometrically and experimentally -- things which they could not do, both because of the scarcity of data and unavailability of modern methodologies.

It is within this context that, I believe, we ought to consider Piketty's Capital and Ideology. How successful was his approach, applied now to the world and over a very long time-horizon?

"The dominant paradigm has emptied almost all social content from economics and presented a view of society that was as abstract as it was false."

For the purposes of this review, I divide Piketty's book into two parts: the first, which I already mentioned, looks at ideological justifications of inequality across different societies (Parts 1 and 2 of the book, and to some extent Part 3); the second introduces an entirely new way of studying recent political cleavages in modern societies (Part 4). I am somewhat skeptical about Piketty's success in the first part, despite his enormous erudition and his skills as a raconteur, because success in discussing something so geographically and temporally immense is difficult to reach, even by the best-informed minds who have studied different societies for the majority of their careers. Analyzing each of these societies requires an extraordinarily high degree of sophisticated historical knowledge regarding religious dogmas, political organization, social stratification, and the like. To take two examples of authors who have tried to do it, one older and one more recent: Max Weber, during his entire life (and more specifically in Economy and Society), and Francis Fukuyama in his two-volume masterpiece on the origins of the political and economic order. In both cases, the results were not always unanimously approved by specialists studying individual societies and religions.

In his analysis of some of these societies, Piketty had to rely on somewhat "straightforward" or simplified discussions of their structure and evolution, discussions which at times seem plausible but superficial. In other words, each of these historical societies, many of which lasted centuries, had gone through different phases in their developments, phases which are subject to various interpretations. Treating such evolutions as if they were a simple, uncontested story is reductionist. It is a choice of one plausible historical narrative where many exist. This compares unfavorably with Piketty's own rich and nuanced narrative in Top Incomes in France in the Twentieth Century.

While I am somewhat skeptical about that first part of the book, I am not skeptical about the second. In this part, we find the Piketty who plays to his strength: bold and innovative use of data which produces a new way of looking at phenomena that we all observe but were unable to define so precisely. Here, Piketty is "playing" on the familiar Western economic history "terrain" that he knows well, probably better than any other economist.

This part of the book looks empirically at the reasons that left-wing, or social democratic parties have gradually transformed themselves from being the parties of the less-educated and poorer classes to become the parties of the educated and affluent middle and upper-middle classes. To a large extent, traditionally left parties have changed because their original social-democratic agenda was so successful in opening up education and high-income possibilities to the people who in the 1950s and 1960s came from modest backgrounds. These people, the "winners" of social democracy, continued voting for left-wing parties but their interests and worldview were no longer the same as that of their (less-educated) parents. The parties' internal social structure thus changed -- the product of their own political and social success. In Piketty's terms, they became the parties of the "Brahmin left" (La gauche Brahmane), as opposed to the conservative right-wing parties, which remained the parties of the "merchant right" (La droite marchande).

To simplify, the elite became divided between the educated "Brahmins" and the more commercially-minded "investors," or capitalists. This development, however, left the people who failed to experience upward educational and income mobility unrepresented, and those people are the ones that feed the current "populist" wave. Quite extraordinarily, Piketty shows the education and income shifts of left-wing parties' voters using very similar long-term data from all major developed democracies (and India). The fact that the story is so consistent across countries lends an almost uncanny plausibility to his hypothesis.

It is also striking, at least to me, that such multi-year, multi-country data were apparently never used by political scientists to study this phenomenon. This part of Piketty's book will likely transform, or at least affect, how political scientists look at new political realignments and class politics in advanced democracies in the years to come. In the same way that Capital in the Twenty-First Century has transformed how economists look at inequality, Capital and Ideology will transform the way political scientists look at their own field.


Branko Milanovic is a senior scholar at the Stone Center on Socio-Economic Inequality at the Graduate Center, City University of New York.

[Sep 10, 2019] Neoliberal Capitalism at a Dead End by Utsa Patnaik and Prabhat Patnaik

Highly recommended!
This is a Marxist critique of neoliberalism. Not necessary right but they his some relevant points.
Notable quotes:
"... The ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. ..."
"... The ex ante tendency toward overproduction arises because the vector of real wages across countries does not increase noticeably over time in the world economy, while the vector of labor productivities does, typically resulting in a rise in the share of surplus in world output. ..."
"... While the rise in the vector of labor productivities across countries, a ubiquitous phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an explanation, why does the vector of real wages remain virtually stagnant in the world economy? The answer lies in the sui generis character of contemporary globalization that, for the first time in the history of capitalism, has led to a relocation of activity from the metropolis to third world countries in order to take advantage of the lower wages prevailing in the latter and meet global demand. ..."
"... The current globalization broke with this. The movement of capital from the metropolis to the third world, especially to East, South, and Southeast Asia to relocate plants there and take advantage of their lower wages for meeting global demand, has led to a desegmentation of the world economy, subjecting metropolitan wages to the restraining effect exercised by the third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was marginally lower -- than it had been in 1968. 5 ..."
"... This ever-present opposition becomes decisive within a regime of globalization. As long as finance capital remains national -- that is, nation-based -- and the state is a nation-state, the latter can override this opposition under certain circumstances, such as in the post-Second World War period when capitalism was facing an existential crisis. But when finance capital is globalized, meaning, when it is free to move across country borders while the state remains a nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large fiscal deficits against its wishes, then it would simply leave that country en masse , causing a financial crisis. ..."
"... The state therefore capitulates to the demands of globalized finance capital and eschews direct fiscal intervention for increasing demand. It resorts to monetary policy instead since that operates through wealth holders' decisions, and hence does not undermine their social position. But, precisely for this reason, monetary policy is an ineffective instrument, as was evident in the United States in the aftermath of the 2007–09 crisis when even the pushing of interest rates down to zero scarcely revived activity. 6 ..."
"... If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a beggar-my-neighbor policy, does lead to a significant export of unemployment from the United States, then it will invite retaliation and trigger a trade war that will only worsen the crisis for the world economy as a whole by dampening global investment. Indeed, since the United States has been targeting China in particular, some retaliatory measures have already appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be because the export of unemployment from the United States is insubstantial, keeping unemployment everywhere, including in the United States, as precarious as it is now. However we look at it, the world would henceforth face higher levels of unemployment. ..."
"... The second implication of this dead end is that the era of export-led growth is by and large over for third world economies. The slowing down of world economic growth, together with protectionism in the United States against successful third world exporters, which could even spread to other metropolitan economies, suggests that the strategy of relying on the world market to generate domestic growth has run out of steam. Third world economies, including the ones that have been very successful at exporting, would now have to rely much more on their home market ..."
"... In other words, we shall now have an intensification of the imperialist stranglehold over third world economies, especially those pushed into unsustainable balance-of-payments deficits in the new situation. By imperialism , here we do not mean the imperialism of this or that major power, but the imperialism of international finance capital, with which even domestic big bourgeoisies are integrated, directed against their own working people ..."
"... In short, the ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop and finds fascism. ..."
"... The first is the so-called spontaneous method of capital flight. Any political formation that seeks to take the country out of the neoliberal regime will witness capital flight even before it has been elected to office, bringing the country to a financial crisis and thereby denting its electoral prospects. And if perchance it still gets elected, the outflow will only increase, even before it assumes office. The inevitable difficulties faced by the people may well make the government back down at that stage. The sheer difficulty of transition away from a neoliberal regime could be enough to bring even a government based on the support of workers and peasants to its knees, precisely to save them short-term distress or to avoid losing their support. ..."
"... The third weapon consists in carrying out so-called democratic or parliamentary coups of the sort that Latin America has been experiencing. Coups in the old days were effected through the local armed forces and necessarily meant the imposition of military dictatorships in lieu of civilian, democratically elected governments. Now, taking advantage of the disaffection generated within countries by the hardships caused by capital flight and imposed sanctions, imperialism promotes coups through fascist or fascist-sympathizing middle-class political elements in the name of restoring democracy, which is synonymous with the pursuit of neoliberalism. ..."
"... And if all these measures fail, there is always the possibility of resorting to economic warfare (such as destroying Venezuela's electricity supply), and eventually to military warfare. Venezuela today provides a classic example of what imperialist intervention in a third world country is going to look like in the era of decline of neoliberal capitalism, when revolts are going to characterize such countries more and more. ..."
"... Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing for long. It has no vision for reinventing itself. Interestingly, in the period after the First World War, when capitalism was on the verge of sinking into a crisis, the idea of state intervention as a way of its revival had already been mooted, though its coming into vogue only occurred at the end of the Second World War. 11 Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize itself. And weapons like domestic fascism in the third world and direct imperialist intervention cannot for long save it from the anger of the masses that is building up against it. ..."
Aug 25, 2019 | portside.org
Originally from: Monthly Review printer friendly
The ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop.

Harry Magdoff's The Age of Imperialism is a classic work that shows how postwar political decolonization does not negate the phenomenon of imperialism. The book has two distinct aspects. On the one hand, it follows in V. I. Lenin's footsteps in providing a comprehensive account of how capitalism at the time operated globally. On the other hand, it raises a question that is less frequently discussed in Marxist literature -- namely, the need for imperialism. Here, Magdoff not only highlighted the crucial importance, among other things, of the third world's raw materials for metropolitan capital, but also refuted the argument that the declining share of raw-material value in gross manufacturing output somehow reduced this importance, making the simple point that there can be no manufacturing at all without raw materials. 1

Magdoff's focus was on a period when imperialism was severely resisting economic decolonization in the third world, with newly independent third world countries taking control over their own resources. He highlighted the entire armory of weapons used by imperialism. But he was writing in a period that predated the onset of neoliberalism. Today, we not only have decades of neoliberalism behind us, but the neoliberal regime itself has reached a dead end. Contemporary imperialism has to be discussed within this setting.

Globalization and Economic Crisis

There are two reasons why the regime of neoliberal globalization has run into a dead end. The first is an ex ante tendency toward global overproduction; the second is that the only possible counter to this tendency within the regime is the formation of asset-price bubbles, which cannot be conjured up at will and whose collapse, if they do appear, plunges the economy back into crisis. In short, to use the words of British economic historian Samuel Berrick Saul, there are no "markets on tap" for contemporary metropolitan capitalism, such as had been provided by colonialism prior to the First World War and by state expenditure in the post-Second World War period of dirigisme . 2

The ex ante tendency toward overproduction arises because the vector of real wages across countries does not increase noticeably over time in the world economy, while the vector of labor productivities does, typically resulting in a rise in the share of surplus in world output. As Paul Baran and Paul Sweezy argued in Monopoly Capital , following the lead of Michał Kalecki and Josef Steindl, such a rise in the share of economic surplus, or a shift from wages to surplus, has the effect of reducing aggregate demand since the ratio of consumption to income is higher on average for wage earners than for those living off the surplus. 3 Therefore, assuming a given level of investment associated with any period, such a shift would tend to reduce consumption demand and hence aggregate demand, output, and capacity utilization. In turn, reduced capacity utilization would lower investment over time, further aggravating the demand-reducing effect arising from the consumption side.

While the rise in the vector of labor productivities across countries, a ubiquitous phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an explanation, why does the vector of real wages remain virtually stagnant in the world economy? The answer lies in the sui generis character of contemporary globalization that, for the first time in the history of capitalism, has led to a relocation of activity from the metropolis to third world countries in order to take advantage of the lower wages prevailing in the latter and meet global demand.

Historically, while labor has not been, and is still not, free to migrate from the third world to the metropolis, capital, though juridically free to move from the latter to the former, did not actually do so , except to sectors like mines and plantations, which only strengthened, rather than broke, the colonial pattern of the international division of labor. 4 This segmentation of the world economy meant that wages in the metropolis increased with labor productivity, unrestrained by the vast labor reserves of the third world, which themselves had been caused by the displacement of manufactures through the twin processes of deindustrialization (competition from metropolitan goods) and the drain of surplus (the siphoning off of a large part of the economic surplus, through taxes on peasants that are no longer spent on local artisan products but finance gratis primary commodity exports to the metropolis instead).

The current globalization broke with this. The movement of capital from the metropolis to the third world, especially to East, South, and Southeast Asia to relocate plants there and take advantage of their lower wages for meeting global demand, has led to a desegmentation of the world economy, subjecting metropolitan wages to the restraining effect exercised by the third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was marginally lower -- than it had been in 1968. 5

At the same time, such relocation of activities, despite causing impressive growth rates of gross domestic product (GDP) in many third world countries, does not lead to the exhaustion of the third world's labor reserves. This is because of another feature of contemporary globalization: the unleashing of a process of primitive accumulation of capital against petty producers, including peasant agriculturists in the third world, who had earlier been protected, to an extent, from the encroachment of big capital (both domestic and foreign) by the postcolonial dirigiste regimes in these countries. Under neoliberalism, such protection is withdrawn, causing an income squeeze on these producers and often their outright dispossession from their land, which is then used by big capital for its various so-called development projects. The increase in employment, even in countries with impressive GDP growth rates in the third world, falls way short of the natural growth of the workforce, let alone absorbing the additional job seekers coming from the ranks of displaced petty producers. The labor reserves therefore never get used up. Indeed, on the contrary, they are augmented further, because real wages continue to remain tied to a subsistence level, even as metropolitan wages too are restrained. The vector of real wages in the world economy as a whole therefore remains restrained.

Although contemporary globalization thus gives rise to an ex ante tendency toward overproduction, state expenditure that could provide a counter to this (and had provided a counter through military spending in the United States, according to Baran and Sweezy) can no longer do so under the current regime. Finance is usually opposed to direct state intervention through larger spending as a way of increasing employment. This opposition expresses itself through an opposition not just to larger taxes on capitalists, but also to a larger fiscal deficit for financing such spending. Obviously, if larger state spending is financed by taxes on workers, then it hardly adds to aggregate demand, for workers spend the bulk of their incomes anyway, so the state taking this income and spending it instead does not add any extra demand. Hence, larger state spending can increase employment only if it is financed either through a fiscal deficit or through taxes on capitalists who keep a part of their income unspent or saved. But these are precisely the two modes of financing state expenditure that finance capital opposes.

Its opposing larger taxes on capitalists is understandable, but why is it so opposed to a larger fiscal deficit? Even within a capitalist economy, there are no sound economic theoretical reasons that should preclude a fiscal deficit under all circumstances. The root of the opposition therefore lies in deeper social considerations: if the capitalist economic system becomes dependent on the state to promote employment directly , then this fact undermines the social legitimacy of capitalism. The need for the state to boost the animal spirits of the capitalists disappears and a perspective on the system that is epistemically exterior to it is provided to the people, making it possible for them to ask: If the state can do the job of providing employment, then why do we need the capitalists at all? It is an instinctive appreciation of this potential danger that underlies the opposition of capital, especially of finance, to any direct effort by the state to generate employment.

This ever-present opposition becomes decisive within a regime of globalization. As long as finance capital remains national -- that is, nation-based -- and the state is a nation-state, the latter can override this opposition under certain circumstances, such as in the post-Second World War period when capitalism was facing an existential crisis. But when finance capital is globalized, meaning, when it is free to move across country borders while the state remains a nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large fiscal deficits against its wishes, then it would simply leave that country en masse , causing a financial crisis.

The state therefore capitulates to the demands of globalized finance capital and eschews direct fiscal intervention for increasing demand. It resorts to monetary policy instead since that operates through wealth holders' decisions, and hence does not undermine their social position. But, precisely for this reason, monetary policy is an ineffective instrument, as was evident in the United States in the aftermath of the 2007–09 crisis when even the pushing of interest rates down to zero scarcely revived activity. 6

It may be thought that this compulsion on the part of the state to accede to the demand of finance to eschew fiscal intervention for enlarging employment should not hold for the United States. Its currency being considered by the world's wealth holders to be "as good as gold" should make it immune to capital flight. But there is an additional factor operating in the case of the United States: that the demand generated by a bigger U.S. fiscal deficit would substantially leak abroad in a neoliberal setting, which would increase its external debt (since, unlike Britain in its heyday, it does not have access to any unrequited colonial transfers) for the sake of generating employment elsewhere. This fact deters any fiscal effort even in the United States to boost demand within a neoliberal setting. 7

Therefore, it follows that state spending cannot provide a counter to the ex ante tendency toward global overproduction within a regime of neoliberal globalization, which makes the world economy precariously dependent on occasional asset-price bubbles, primarily in the U.S. economy, for obtaining, at best, some temporary relief from the crisis. It is this fact that underlies the dead end that neoliberal capitalism has reached. Indeed, Donald Trump's resort to protectionism in the United States to alleviate unemployment is a clear recognition of the system having reached this cul-de-sac. The fact that the mightiest capitalist economy in the world has to move away from the rules of the neoliberal game in an attempt to alleviate its crisis of unemployment/underemployment -- while compensating capitalists adversely affected by this move through tax cuts, as well as carefully ensuring that no restraints are imposed on free cross-border financial flows -- shows that these rules are no longer viable in their pristine form.

Some Implications of This Dead End

There are at least four important implications of this dead end of neoliberalism. The first is that the world economy will now be afflicted by much higher levels of unemployment than it was in the last decade of the twentieth century and the early years of the twenty-first, when the dot-com and the housing bubbles in the United States had, sequentially, a pronounced impact. It is true that the U.S. unemployment rate today appears to be at a historic low, but this is misleading: the labor-force participation rate in the United States today is lower than it was in 2008, which reflects the discouraged-worker effect . Adjusting for this lower participation, the U.S. unemployment rate is considerable -- around 8 percent. Indeed, Trump would not be imposing protection in the United States if unemployment was actually as low as 4 percent, which is the official figure. Elsewhere in the world, of course, unemployment post-2008 continues to be evidently higher than before. Indeed, the severity of the current problem of below-full-employment production in the U.S. economy is best illustrated by capacity utilization figures in manufacturing. The weakness of the U.S. recovery from the Great Recession is indicated by the fact that the current extended recovery represents the first decade in the entire post-Second World War period in which capacity utilization in manufacturing has never risen as high as 80 percent in a single quarter, with the resulting stagnation of investment. 8

If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a beggar-my-neighbor policy, does lead to a significant export of unemployment from the United States, then it will invite retaliation and trigger a trade war that will only worsen the crisis for the world economy as a whole by dampening global investment. Indeed, since the United States has been targeting China in particular, some retaliatory measures have already appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be because the export of unemployment from the United States is insubstantial, keeping unemployment everywhere, including in the United States, as precarious as it is now. However we look at it, the world would henceforth face higher levels of unemployment.

There has been some discussion on how global value chains would be affected by Trump's protectionism. But the fact that global macroeconomics in the early twenty-first century will look altogether different compared to earlier has not been much discussed.

In light of the preceding discussion, one could say that if, instead of individual nation-states whose writ cannot possibly run against globalized finance capital, there was a global state or a set of major nation-states acting in unison to override the objections of globalized finance and provide a coordinated fiscal stimulus to the world economy, then perhaps there could be recovery. Such a coordinated fiscal stimulus was suggested by a group of German trade unionists, as well as by John Maynard Keynes during the Great Depression in the 1930s. 9 While it was turned down then, in the present context it has not even been discussed.

The second implication of this dead end is that the era of export-led growth is by and large over for third world economies. The slowing down of world economic growth, together with protectionism in the United States against successful third world exporters, which could even spread to other metropolitan economies, suggests that the strategy of relying on the world market to generate domestic growth has run out of steam. Third world economies, including the ones that have been very successful at exporting, would now have to rely much more on their home market.

Such a transition will not be easy; it will require promoting domestic peasant agriculture, defending petty production, moving toward cooperative forms of production, and ensuring greater equality in income distribution, all of which need major structural shifts. For smaller economies, it would also require their coming together with other economies to provide a minimum size to the domestic market. In short, the dead end of neoliberalism also means the need for a shift away from the so-called neoliberal development strategy that has held sway until now.

The third implication is the imminent engulfing of a whole range of third world economies in serious balance-of-payments difficulties. This is because, while their exports will be sluggish in the new situation, this very fact will also discourage financial inflows into their economies, whose easy availability had enabled them to maintain current account deficits on their balance of payments earlier. In such a situation, within the existing neoliberal paradigm, they would be forced to adopt austerity measures that would impose income deflation on their people, make the conditions of their people significantly worse, lead to a further handing over of their national assets and resources to international capital, and prevent precisely any possible transition to an alternative strategy of home market-based growth.

In other words, we shall now have an intensification of the imperialist stranglehold over third world economies, especially those pushed into unsustainable balance-of-payments deficits in the new situation. By imperialism , here we do not mean the imperialism of this or that major power, but the imperialism of international finance capital, with which even domestic big bourgeoisies are integrated, directed against their own working people.

The fourth implication is the worldwide upsurge of fascism. Neoliberal capitalism even before it reached a dead end, even in the period when it achieved reasonable growth and employment rates, had pushed the world into greater hunger and poverty. For instance, the world per-capita cereal output was 355 kilograms for 1980 (triennium average for 1979–81 divided by mid–triennium population) and fell to 343 in 2000, leveling at 344.9 in 2016 -- and a substantial amount of this last figure went into ethanol production. Clearly, in a period of growth of the world economy, per-capita cereal absorption should be expanding, especially since we are talking here not just of direct absorption but of direct and indirect absorption, the latter through processed foods and feed grains in animal products. The fact that there was an absolute decline in per-capita output, which no doubt caused a decline in per-capita absorption, suggests an absolute worsening in the nutritional level of a substantial segment of the world's population.

But this growing hunger and nutritional poverty did not immediately arouse any significant resistance, both because such resistance itself becomes more difficult under neoliberalism (since the very globalization of capital makes it an elusive target) and also because higher GDP growth rates provided a hope that distress might be overcome in the course of time. Peasants in distress, for instance, entertained the hope that their children would live better in the years to come if given a modicum of education and accepted their fate.

In short, the ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop and finds fascism. This changes the discourse away from the material conditions of people's lives to the so-called threat to the nation, placing the blame for people's distress not on the failure of the system, but on ethnic, linguistic, and religious minority groups, the other that is portrayed as an enemy. It projects a so-called messiah whose sheer muscularity can somehow magically overcome all problems; it promotes a culture of unreason so that both the vilification of the other and the magical powers of the supposed leader can be placed beyond any intellectual questioning; it uses a combination of state repression and street-level vigilantism by fascist thugs to terrorize opponents; and it forges a close relationship with big business, or, in Kalecki's words, "a partnership of big business and fascist upstarts." 10

Fascist groups of one kind or another exist in all modern societies. They move center stage and even into power only on certain occasions when they get the backing of big business. And these occasions arise when three conditions are satisfied: when there is an economic crisis so the system cannot simply go on as before; when the usual liberal establishment is manifestly incapable of resolving the crisis; and when the left is not strong enough to provide an alternative to the people in order to move out of the conjuncture.

This last point may appear odd at first, since many see the big bourgeoisie's recourse to fascism as a counter to the growth of the left's strength in the context of a capitalist crisis. But when the left poses a serious threat, the response of the big bourgeoisie typically is to attempt to split it by offering concessions. It uses fascism to prop itself up only when the left is weakened. Walter Benjamin's remark that "behind every fascism there is a failed revolution" points in this direction.

Fascism Then and Now

Contemporary fascism, however, differs in crucial respects from its 1930s counterpart, which is why many are reluctant to call the current phenomenon a fascist upsurge. But historical parallels, if carefully drawn, can be useful. While in some aforementioned respects contemporary fascism does resemble the phenomenon of the 1930s, there are serious differences between the two that must also be noted.

First, we must note that while the current fascist upsurge has put fascist elements in power in many countries, there are no fascist states of the 1930s kind as of yet. Even if the fascist elements in power try to push the country toward a fascist state, it is not clear that they will succeed. There are many reasons for this, but an important one is that fascists in power today cannot overcome the crisis of neoliberalism, since they accept the regime of globalization of finance. This includes Trump, despite his protectionism. In the 1930s, however, this was not the case. The horrors associated with the institution of a fascist state in the 1930s had been camouflaged to an extent by the ability of the fascists in power to overcome mass unemployment and end the Depression through larger military spending, financed by government borrowing. Contemporary fascism, by contrast, lacks the ability to overcome the opposition of international finance capital to fiscal activism on the part of the government to generate larger demand, output, and employment, even via military spending.

Such activism, as discussed earlier, required larger government spending financed either through taxes on capitalists or through a fiscal deficit. Finance capital was opposed to both of these measures and it being globalized made this opposition decisive . The decisiveness of this opposition remains even if the government happens to be one composed of fascist elements. Hence, contemporary fascism, straitjacketed by "fiscal rectitude," cannot possibly alleviate even temporarily the economic crises facing people and cannot provide any cover for a transition to a fascist state akin to the ones of the 1930s, which makes such a transition that much more unlikely.

Another difference is also related to the phenomenon of the globalization of finance. The 1930s were marked by what Lenin had earlier called "interimperialist rivalry." The military expenditures incurred by fascist governments, even though they pulled countries out of the Depression and unemployment, inevitably led to wars for "repartitioning an already partitioned world." Fascism was the progenitor of war and burned itself out through war at, needless to say, great cost to humankind.

Contemporary fascism, however, operates in a world where interimperialist rivalry is far more muted. Some have seen in this muting a vindication of Karl Kautsky's vision of an "ultraimperialism" as against Lenin's emphasis on the permanence of interimperialist rivalry, but this is wrong. Both Kautsky and Lenin were talking about a world where finance capital and the financial oligarchy were essentially national -- that is, German, French, or British. And while Kautsky talked about the possibility of truces among the rival oligarchies, Lenin saw such truces only as transient phenomena punctuating the ubiquity of rivalry.

In contrast, what we have today is not nation-based finance capitals, but international finance capital into whose corpus the finance capitals drawn from particular countries are integrated. This globalized finance capital does not want the world to be partitioned into economic territories of rival powers ; on the contrary, it wants the entire globe to be open to its own unrestricted movement. The muting of rivalry between major powers, therefore, is not because they prefer truce to war, or peaceful partitioning of the world to forcible repartitioning, but because the material conditions themselves have changed so that it is no longer a matter of such choices. The world has gone beyond both Lenin and Kautsky, as well as their debates.

Not only are we not going to have wars between major powers in this era of fascist upsurge (of course, as will be discussed, we shall have other wars), but, by the same token, this fascist upsurge will not burn out through any cataclysmic war. What we are likely to see is a lingering fascism of less murderous intensity , which, when in power, does not necessarily do away with all the forms of bourgeois democracy, does not necessarily physically annihilate the opposition, and may even allow itself to get voted out of power occasionally. But since its successor government, as long as it remains within the confines of the neoliberal strategy, will also be incapable of alleviating the crisis, the fascist elements are likely to return to power as well. And whether the fascist elements are in or out of power, they will remain a potent force working toward the fascification of the society and the polity, even while promoting corporate interests within a regime of globalization of finance, and hence permanently maintaining the "partnership between big business and fascist upstarts."

Put differently, since the contemporary fascist upsurge is not likely to burn itself out as the earlier one did, it has to be overcome by transcending the very conjuncture that produced it: neoliberal capitalism at a dead end. A class mobilization of working people around an alternative set of transitional demands that do not necessarily directly target neoliberal capitalism, but which are immanently unrealizable within the regime of neoliberal capitalism, can provide an initial way out of this conjuncture and lead to its eventual transcendence.

Such a class mobilization in the third world context would not mean making no truces with liberal bourgeois elements against the fascists. On the contrary, since the liberal bourgeois elements too are getting marginalized through a discourse of jingoistic nationalism typically manufactured by the fascists, they too would like to shift the discourse toward the material conditions of people's lives, no doubt claiming that an improvement in these conditions is possible within the neoliberal economic regime itself. Such a shift in discourse is in itself a major antifascist act . Experience will teach that the agenda advanced as part of this changed discourse is unrealizable under neoliberalism, providing the scope for dialectical intervention by the left to transcend neoliberal capitalism.

Imperialist Interventions

Even though fascism will have a lingering presence in this conjuncture of "neoliberalism at a dead end," with the backing of domestic corporate-financial interests that are themselves integrated into the corpus of international finance capital, the working people in the third world will increasingly demand better material conditions of life and thereby rupture the fascist discourse of jingoistic nationalism (that ironically in a third world context is not anti-imperialist).

In fact, neoliberalism reaching a dead end and having to rely on fascist elements revives meaningful political activity, which the heyday of neoliberalism had precluded, because most political formations then had been trapped within an identical neoliberal agenda that appeared promising. (Latin America had a somewhat different history because neoliberalism arrived in that continent through military dictatorships, not through its more or less tacit acceptance by most political formations.)

Such revived political activity will necessarily throw up challenges to neoliberal capitalism in particular countries. Imperialism, by which we mean the entire economic and political arrangement sustaining the hegemony of international finance capital, will deal with these challenges in at least four different ways.

The first is the so-called spontaneous method of capital flight. Any political formation that seeks to take the country out of the neoliberal regime will witness capital flight even before it has been elected to office, bringing the country to a financial crisis and thereby denting its electoral prospects. And if perchance it still gets elected, the outflow will only increase, even before it assumes office. The inevitable difficulties faced by the people may well make the government back down at that stage. The sheer difficulty of transition away from a neoliberal regime could be enough to bring even a government based on the support of workers and peasants to its knees, precisely to save them short-term distress or to avoid losing their support.

Even if capital controls are put in place, where there are current account deficits, financing such deficits would pose a problem, necessitating some trade controls. But this is where the second instrument of imperialism comes into play: the imposition of trade sanctions by the metropolitan states, which then cajole other countries to stop buying from the sanctioned country that is trying to break away from thralldom to globalized finance capital. Even if the latter would have otherwise succeeded in stabilizing its economy despite its attempt to break away, the imposition of sanctions becomes an additional blow.

The third weapon consists in carrying out so-called democratic or parliamentary coups of the sort that Latin America has been experiencing. Coups in the old days were effected through the local armed forces and necessarily meant the imposition of military dictatorships in lieu of civilian, democratically elected governments. Now, taking advantage of the disaffection generated within countries by the hardships caused by capital flight and imposed sanctions, imperialism promotes coups through fascist or fascist-sympathizing middle-class political elements in the name of restoring democracy, which is synonymous with the pursuit of neoliberalism.

And if all these measures fail, there is always the possibility of resorting to economic warfare (such as destroying Venezuela's electricity supply), and eventually to military warfare. Venezuela today provides a classic example of what imperialist intervention in a third world country is going to look like in the era of decline of neoliberal capitalism, when revolts are going to characterize such countries more and more.

Two aspects of such intervention are striking. One is the virtual unanimity among the metropolitan states, which only underscores the muting of interimperialist rivalry in the era of hegemony of global finance capital. The other is the extent of support that such intervention commands within metropolitan countries, from the right to even the liberal segments.

Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing for long. It has no vision for reinventing itself. Interestingly, in the period after the First World War, when capitalism was on the verge of sinking into a crisis, the idea of state intervention as a way of its revival had already been mooted, though its coming into vogue only occurred at the end of the Second World War. 11 Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize itself. And weapons like domestic fascism in the third world and direct imperialist intervention cannot for long save it from the anger of the masses that is building up against it.

Notes
  1. Harry Magdoff, The Age of Imperialism (New York: Monthly Review Press, 1969).
  2. Samuel Berrick Saul, Studies in British Overseas Trade, 1870–1914 (Liverpool: Liverpool University Press, 1960).
  3. Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York: Monthly Review Press, 1966).
  4. One of the first authors to recognize this fact and its significance was Paul Baran in The Political Economy of Growth (New York: Monthly Review Press, 1957).
  5. Joseph E. Stiglitz, " Inequality is Holding Back the Recovery ," New York Times , January 19, 2013.
  6. For a discussion of how even the recent euphoria about U.S. growth is vanishing, see C. P. Chandrasekhar and Jayati Ghosh, " Vanishing Green Shoots and the Possibility of Another Crisis ," The Hindu Business Line , April 8, 2019.
  7. For the role of such colonial transfers in sustaining the British balance of payments and the long Victorian and Edwardian boom, see Utsa Patnaik, "Revisiting the 'Drain,' or Transfers from India to Britain in the Context of Global Diffusion of Capitalism," in Agrarian and Other Histories: Essays for Binay Bhushan Chaudhuri , ed. Shubhra Chakrabarti and Utsa Patnaik (Delhi: Tulika, 2017), 277-317.
  8. Federal Reserve Board of Saint Louis Economic Research, FRED, "Capacity Utilization: Manufacturing," February 2019 (updated March 27, 2019), http://fred.stlouisfed.org .
  9. This issue is discussed by Charles P. Kindleberger in The World in Depression, 1929–1939 , 40th anniversary ed. (Oakland: University of California Press, 2013).
  10. Michał Kalecki, " Political Aspects of Full Employment ," Political Quarterly (1943), available at mronline.org.
  11. Joseph Schumpeter had seen Keynes's The Economic Consequences of the Peace as essentially advocating such state intervention in the new situation. See his essay, "John Maynard Keynes (1883–1946)," in Ten Great Economists (London: George Allen & Unwin, 1952).

Utsa Patnaik is Professor Emerita at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Her books include Peasant Class Differentiation (1987), The Long Transition (1999), and The Republic of Hunger and Other Essays (2007). Prabhat Patnaik is Professor Emeritus at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. His books include Accumulation and Stability Under Capitalism (1997), The Value of Money(2009), and Re-envisioning Socialism(2011).

[Sep 07, 2019] Thomas Piketty's New Book Brings Political Economy Back to Its Sources

Sep 07, 2019 | economistsview.typepad.com

anne , September 06, 2019 at 01:10 PM

https://promarket.org/thomas-piketty-new-book-brings-political-economy-back-to-its-sources/
September 6, 2019

Thomas Piketty's New Book Brings Political Economy Back to Its Sources
By Branko Milanovic

In the same way that Capital in the Twenty-First Century transformed the way economists look at inequality, Piketty's new book Capital and Ideology will transform the way political scientists look at their own field.
Thomas Piketty's books are always monumental. Some are more monumental than others. His Top Incomes in France in the Twentieth Century: Inequality and Redistribution, 1901–1998(published in French as Les hauts revenus en France au XXe siècle) covered more than two centuries of income and wealth inequality, in addition to social and political changes in France. His international bestseller Capital in the Twenty-First Century(Le capital au XXI siècle) broadened this approach to the most important Western countries (France, the United States, United Kingdom, and Germany). His new book Capital and Ideology (to be published in English in March 2020; already published in France as Capital et idéologie) broadens the scope even further, covering the entire world and presenting a historical panorama of how ownership of assets (including people) was treated, and justified, in various historical societies, from China, Japan, and India, to the European-ruled American colonies, and feudal and capitalist societies in Europe. Just the mention of the geographical and temporal scope of the book suffices to give the reader an idea of its ambition.

Before I review Capital and Ideology, it is worth mentioning the importance of Piketty's overall approach, present in all three of his books. His approach is characterized by the methodological return of economics to its original and key functions: to be a science that illuminates the interests and explains the behaviors of individuals and social classes in their quotidian (material) life. This methodology rejects the dominant paradigm of the past half-century, which increasingly ignored the role of classes and heterogeneous individuals in the process of production and instead treated all people as abstract agents that maximize their own income under certain constraints. The dominant paradigm has emptied almost all social content from economics and presented a view of society that was as abstract as it was false.

The reintroduction of actual life into economics by Piketty and several other economists (not entirely coincidentally, most of them are economists interested in inequality) is much more than just a return to the sources of political economy and economics. This is because today, we have vastly more information (data) than was available to economists a century ago, not only about our own contemporary societies but also about past societies. This combination between political economy's original methodology and big data is what I call "turbo-Annales," after the French group of historians that pioneered the view of history as a social science focusing on the broad social, economic, and political forces that shape the world. The topics that interested classical political economy and the authors associated with the Annales School can now be studied empirically, and even econometrically and experimentally -- things which they could not do, both because of the scarcity of data and unavailability of modern methodologies.

It is within this context that, I believe, we ought to consider Piketty's Capital and Ideology. How successful was his approach, applied now to the world and over a very long time-horizon?

"The dominant paradigm has emptied almost all social content from economics and presented a view of society that was as abstract as it was false."

For the purposes of this review, I divide Piketty's book into two parts: the first, which I already mentioned, looks at ideological justifications of inequality across different societies (Parts 1 and 2 of the book, and to some extent Part 3); the second introduces an entirely new way of studying recent political cleavages in modern societies (Part 4). I am somewhat skeptical about Piketty's success in the first part, despite his enormous erudition and his skills as a raconteur, because success in discussing something so geographically and temporally immense is difficult to reach, even by the best-informed minds who have studied different societies for the majority of their careers. Analyzing each of these societies requires an extraordinarily high degree of sophisticated historical knowledge regarding religious dogmas, political organization, social stratification, and the like. To take two examples of authors who have tried to do it, one older and one more recent: Max Weber, during his entire life (and more specifically in Economy and Society), and Francis Fukuyama in his two-volume masterpiece on the origins of the political and economic order. In both cases, the results were not always unanimously approved by specialists studying individual societies and religions.

In his analysis of some of these societies, Piketty had to rely on somewhat "straightforward" or simplified discussions of their structure and evolution, discussions which at times seem plausible but superficial. In other words, each of these historical societies, many of which lasted centuries, had gone through different phases in their developments, phases which are subject to various interpretations. Treating such evolutions as if they were a simple, uncontested story is reductionist. It is a choice of one plausible historical narrative where many exist. This compares unfavorably with Piketty's own rich and nuanced narrative in Top Incomes in France in the Twentieth Century.

While I am somewhat skeptical about that first part of the book, I am not skeptical about the second. In this part, we find the Piketty who plays to his strength: bold and innovative use of data which produces a new way of looking at phenomena that we all observe but were unable to define so precisely. Here, Piketty is "playing" on the familiar Western economic history "terrain" that he knows well, probably better than any other economist.

This part of the book looks empirically at the reasons that left-wing, or social democratic parties have gradually transformed themselves from being the parties of the less-educated and poorer classes to become the parties of the educated and affluent middle and upper-middle classes. To a large extent, traditionally left parties have changed because their original social-democratic agenda was so successful in opening up education and high-income possibilities to the people who in the 1950s and 1960s came from modest backgrounds. These people, the "winners" of social democracy, continued voting for left-wing parties but their interests and worldview were no longer the same as that of their (less-educated) parents. The parties' internal social structure thus changed -- the product of their own political and social success. In Piketty's terms, they became the parties of the "Brahmin left" (La gauche Brahmane), as opposed to the conservative right-wing parties, which remained the parties of the "merchant right" (La droite marchande).

To simplify, the elite became divided between the educated "Brahmins" and the more commercially-minded "investors," or capitalists. This development, however, left the people who failed to experience upward educational and income mobility unrepresented, and those people are the ones that feed the current "populist" wave. Quite extraordinarily, Piketty shows the education and income shifts of left-wing parties' voters using very similar long-term data from all major developed democracies (and India). The fact that the story is so consistent across countries lends an almost uncanny plausibility to his hypothesis.

It is also striking, at least to me, that such multi-year, multi-country data were apparently never used by political scientists to study this phenomenon. This part of Piketty's book will likely transform, or at least affect, how political scientists look at new political realignments and class politics in advanced democracies in the years to come. In the same way that Capital in the Twenty-First Century has transformed how economists look at inequality, Capital and Ideology will transform the way political scientists look at their own field.


Branko Milanovic is a senior scholar at the Stone Center on Socio-Economic Inequality at the Graduate Center, City University of New York.

[Sep 07, 2019] New Keynesian economic theory is wrong.

Sep 07, 2019 | economistsview.typepad.com

Joe , September 05, 2019 at 07:52 PM

https://www.project-syndicate.org/commentary/central-banks-flawed-economic-theory-by-roger-farmer-2019-09

When the Fed or the ECB raises rates, New Keynesian economic theory predicts that the hike will eventually lead to a decrease in inflation, and that the path from point A to point B will inevitably be accompanied by higher unemployment. But my own research suggests that New Keynesian economic theory is wrong. After all, if the Fed were to raise the short-term rate slowly and support equity markets with a guarantee to purchase a broad-based exchange-traded fund at a fixed price, there is no reason why the rate increase should cause higher unemployment.

----

Roger Farmer dumping on the Fed. Somehow a lot of economists have figured out that 'Uncle cannot do it later'.

I have a different disagreement. First I note that the Fed always follows the One Year Treasury, it is in the charts, that chart cannot be avoided. Second, once Treasury has started the rate cycles, it is all over, we will complete the rate cycle, including a down turn. This has been the case since 1980, likely earlier.

So, why do we fake it? For what purpose, except to say something stupid like Uncle can fix it later. We always end up in the same place, imbalances that need correction, Treasury has to take its losses. All the fakery does no one any good.

[Sep 07, 2019] The end of Mankiw and his Phillips Curve

Sep 07, 2019 | economistsview.typepad.com

Egmont Kakarot-Handtke , September 05, 2019 at 11:34 AM

The end of Mankiw and his Phillips Curve
Comment on David Glasner on 'Mankiw's Phillips-Curve Agonistes'

Gregory Mankiw starts his history of the Phillips Curve with gossiping and name dropping: "The economist George Akerlof, a Nobel laureate and the husband of the former Federal Reserve chair Janet Yellen, once called the Phillips curve 'probably the single most important macroeconomic relationship.' So it is worth recalling what the Phillips curve is, why it plays a central role in mainstream economics and why it has so many critics. The story begins in 1958, when the economist A. W. Phillips published an article reporting an inverse relationship between unemployment and inflation in Britain. He reasoned that when unemployment is high, workers are easy to find, so employers hardly raise wages, if they do so at all. But when unemployment is low, employers have trouble attracting workers, so they raise wages faster. Inflation in wages soon turns into inflation in the prices of goods and services."

David Glasner immediately spots the fatal mistake of Mankiw's account: "I must note parenthetically that, as I have written recently, a supply-demand framework (aka partial equilibrium analysis) is not really the appropriate way to think about unemployment, because the equilibrium level of wages and the rates of unemployment must be analyzed, as, using different terminology, Keynes argued, in a general equilibrium, not a partial equilibrium, framework." Unfortunately, David Glasner then gets lost in supply-demand-equilibrium blather.

The Phillips Curve (better: Bastard or NAIRU Phillips Curve) is the centerpiece of standard employment theory. Economists get employment theory wrong for 200+ years.#1-#5

The materially/formally inconsistent NAIRU Phillips Curve has to be replaced by the correct macroeconomic Employment Law which is shown on Wikimedia.#6

From this equation follows:
(i) An increase in the expenditure ratio ρE leads to higher employment L (the Greek letter ρ stands for ratio). An expenditure ratio ρE greater than 1 indicates a budget deficit = credit expansion, a ratio ρE less than 1 indicates credit contraction.
(ii) Increasing investment expenditures I exert a positive influence on employment.
(iii) An increase in the factor cost ratio ρF=W/PR leads to higher employment.

The complete employment equation contains in addition profit distribution, the public sector, and foreign trade.

Items (i) and (ii) cover Keynes' familiar arguments about aggregate demand. The factor cost ratio ρF as defined in (iii) embodies the macroeconomic price mechanism. The fact of the matter is that overall employment INCREASES if the AVERAGE wage rate W INCREASES relative to average price P and productivity R. Roughly speaking, price inflation is bad for employment and wage inflation is good. This is the exact OPPOSITE of what microfounded supply-demand-equilibrium economics teaches.

The testable Employment Law tells one that the best policy to stabilize employment on a high level is a price inflation of zero and a wage inflation equal to productivity increases. The 2 percent inflation target has always been political idiocy based on defective theory.

Egmont Kakarot-Handtke

#1 NAIRU, wage-led growth, and Samuelson's Dyscalculia
https://axecorg.blogspot.com/2015/01/nairu-wage-led-growth-and-samuelsons.html

#2 Keynes' Employment Function and the Gratuitous Phillips Curve Disaster
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2130421

#3 NAIRU and the scientific incompetence of Orthodoxy and Heterodoxy
https://axecorg.blogspot.com/2017/02/nairu-and-scientific-incompetence-of.html

#4 Full employment, the Phillips Curve, and the end of Gaganomics
https://axecorg.blogspot.com/2018/04/full-employment-phillips-curve-and-end.html

#5 For more details of the big picture see cross-references Employment/Phillips Curve
http://axecorg.blogspot.com/2015/08/employmentphillips-curve-cross.html

#6 Wikimedia AXEC62 Employment Law
https://commons.wikimedia.org/wiki/File:AXEC62.png

[Sep 04, 2019] Remember, it was the academics that got this started in the wrong direction, arguably

Sep 04, 2019 | www.nakedcapitalism.com

Warren: "Monopolist's Worst Nightmare: The Elizabeth Warren Interview" [The American Prospect].

Warren: "Remember, it was the academics that got this started in the wrong direction, arguably."

[Sep 02, 2019] Where is Margaret Thatcher now?

Highly recommended!
Sep 02, 2019 | www.nakedcapitalism.com

ambrit , , August 31, 2019 at 11:55 am

Thatcher was an English politico. It is not what she said, but what she did that counts. She is probably down in Dante's Inferno, Ring 8, sub-rings 7-10. (Frauds and false councilors.) See, oh wayward sinners: http://danteworlds.laits.utexas.edu/circle8b.html

The Rev Kev , , September 2, 2019 at 12:37 am

Ring 8, sub-rings 7-10? She will probably find Milton Friedman in the basement there.

ambrit , September 2, 2019 at 7:09 am

Ah, you think that Milton should be at the bottom, eh? Then, I hope that he knows how to ice skate. (He was the worst kind of 'class traitor.' [His parents were small store owner/managers.])

Ring 8 of the Inferno is for 'frauds' of all sorts, sub-rings 7-10 are reserved for Thieves, Deceivers, Schismatics, and Falsifiers. Maggie should feel right at home there.

[Sep 02, 2019] A Question of Character naked capitalism

Sep 02, 2019 | www.nakedcapitalism.com

I'm not sure the end of homogeneity was the driver of diminished respect for what was once called character. In the US, I hazard that a bigger factor was the widespread acceptance of libertarian/neoliberal values. As we've documented, that world view was marketed aggressively and very successfully by a loosely coordinated but well funded right wing campaign, whose seminal document was the Powell Memo of 1971 which laid out the vision and many of the tactics for their war on the New Deal and the community values that supported it. For instance, it would have been well-nigh impossible for a Mike Milken, who'd gone to prison for securities law violations (and was widely believed to have engaged in considerably more questionable conduct) to have rehabilitated himself to the degree he did.

From Amar:

John McArthur, in memoriam

He was one of a kind -- and his kindness and empathy (a much used word I know) was unbounded. It touched all from dining and custodial staff to taxi drivers. My parents apart, few other people have had such an influence on me. (And he did me the honor of reading everything I read: every book every article, every draft, the pages a sea of yellow highlight)

He was also astute, ruthless and got things done. His mind was extraordinary and his reading voracious and eclectic -- although you would never guess it from his aw shucks manner and country bumpkin style.

I first actually talked to him in my second year as assistant professor. We had a long long lunch at his corner table in the faculty club. We talked about everything -- except why we were having lunch. At the end he said, "Perhaps you'd like to know why i asked you to lunch. Well I've been reading your stuff and I wanted to put a face to the writing, to know who this person was who was writing this stuff."

A few days later a copy of Knight's Risk Uncertainty and Profit arrived in interoffice mail with one of John's classic handwritten notes, which went something along the following lines. "I think this will suit the way you think of the world."

I had never encountered the book in my doctoral studies, and it was revelatory.

We had lunches, lasting 2-3 hours nearly every year for the last 20 years after I left HBS. Always at the Charles ("If we ate at HBS there would be someone stopping by every minute" he said. At the Charles it was only every 10 minutes. And of course he knew every single waiter and waitress by name).

The stories he told at the lunches.. Such a pity he did not put his wisdom into a memoir. But that was not his way.

John, RIP.

ambrit , August 31, 2019 at 12:34 am

The benefits of a "classical" education.
One of the main supports of the 'civilized' social interactions that you observe here 'Down South' is a stubborn refusal to put a price on everything. It is not universal, but it lingers in pockets of calm salted among the storms of modern living.
Welcome to the South.

Carolinian , August 31, 2019 at 10:04 am

I have some neighbors who are the opposite of me politically (in fact most of my neighbors) but are wonderfully nice people on a personal level. Some of us who grew up here have had the opposite experience of Yves and lived for awhile in the North where all that politeness is dismissed as a false front.

Which in many cases it is, but the usefulness of all that unthinking social glue should not be dismissed out of hand. After decades of elites in thrall to Ayn Rand the country may be in need a few of those social norms that beatnik rebels in the 1950s found so stultifying. Perhaps the most amazing thing about Epstein was how all those rich people around him thought that his three teenager a day habit was perfectly acceptable.

bassmule , August 31, 2019 at 10:47 am

I don't know anything about anything, but after living in the Northeast for my whole life I spent 10 years in North Carolina. After a decade, I realized that I was never going to stop being a Yankee, and that I detested "Southern courtesy" which mostly involved people telling me to "Have a Blessed Day!"

I take part of this back: My favorite item of Southern Courtesy is that you can slander anyone as long as you end the sentence with " bless his heart!"

Seriously, it's a different culture, and not one that I was ever comfortable with.

[Aug 26, 2019] The real problem is that since probably late 60th most academic economists were and still are elite prostitutes of financial oligarchy

Aug 26, 2019 | economistsview.typepad.com

JohnH -> Christopher H.... , August 25, 2019 at 09:27 AM

Blame Economists for the Mess We're In
Binyamin Appelbaum, Aug. 25, 2019
https://www.nytimes.com/2019/08/24/opinion/sunday/economics-milton-friedman.html

"In the early 1950s, a young economist named Paul Volcker worked as a human calculator in an office deep inside the Federal Reserve Bank of New York. He crunched numbers for the people who made decisions, and he told his wife that he saw little chance of ever moving up. The central bank's leadership included bankers, lawyers and an Iowa hog farmer, but not a single economist. The Fed's chairman, a former stockbroker named William McChesney Martin, once told a visitor that he kept a small staff of economists in the basement of the Fed's Washington headquarters. They were in the building, he said, because they asked good questions. They were in the basement because ''they don't know their own limitations.''

Martin's distaste for economists was widely shared among the midcentury American elite. President Franklin Delano Roosevelt dismissed John Maynard Keynes, the most important economist of his generation, as an impractical ''mathematician.'' President Eisenhower, in his farewell address, urged Americans to keep technocrats from power. Congress rarely consulted economists; regulatory agencies were led and staffed by lawyers; courts wrote off economic evidence as irrelevant.

But a revolution was coming. As the quarter century of growth that followed World War II sputtered to a close, economists moved into the halls of power, instructing policymakers that growth could be revived by minimizing government's role in managing the economy. They also warned that a society that sought to limit inequality would pay a price in the form of less growth. In the words of a British acolyte of this new economics, the world needed ''more millionaires and more bankrupts.''
In the four decades between 1969 and 2008, economists played a leading role in slashing taxation of the wealthy and in curbing public investment. They supervised the deregulation of major sectors, including transportation and communications. They lionized big business, defending the concentration of corporate power, even as they demonized trade unions and opposed worker protections like minimum wage laws. Economists even persuaded policymakers to assign a dollar value to human life -- around $10 million in 2019 -- to assess whether regulations were worthwhile.

The revolution, like so many revolutions, went too far. Growth slowed and inequality soared, with devastating consequences. Perhaps the starkest measure of the failure of our economic policies is that the average American's life expectancy is in decline, as inequalities of wealth have become inequalities of health. Life expectancy rose for the wealthiest 20 percent of Americans between 1980 and 2010. Over the same three decades, life expectancy declined for the poorest 20 percent of Americans. Shockingly, the difference in average life expectancy between poor and wealthy women widened from 3.9 years to 13.6 years.
Rising inequality also is straining the health of liberal democracy. The idea of ''we the people'' is fading because, in this era of yawning inequality, there is less we share in common. As a result, it is harder to build support for the kinds of policies necessary to deliver broad-based prosperity in the long term, like public investment in education and infrastructure.
Economists began to enter public service in large numbers in the middle of the 20th century, as policymakers struggled to manage the rapid expansion of the federal government. The number of economists employed by the government rose from about 2,000 in the mid-1950s to more than 6,000 by the late 1970s. At first they were hired to rationalize the administration of policy, but they soon began to shape the goals of policy, too. Arthur F. Burns became the first economist to lead the Fed in 1970. Two years later, George Shultz became the first economist to serve as Treasury secretary. In 1978, Volcker completed his rise from the Fed's bowels, becoming the central bank's chairman.
The most important figure, however, was Milton Friedman, an elfin libertarian who refused to take a job in Washington, but whose writings and exhortations seized the imagination of policymakers. Friedman offered an appealingly simple answer for the nation's problems: Government should get out of the way. He joked that if bureaucrats gained control of the Sahara, there would soon be a shortage of sand.

He won his first big victory in an unlikely battle, helping to persuade President Nixon to end military conscription in 1973. Friedman and other economists showed that a military comprised solely of volunteers, recruited by offering market-rate wages, was financially viable as well as politically preferable. The Nixon administration also embraced Friedman's proposal to let markets determine the exchange rates between the dollar and foreign currencies, and it was the first to put a price tag on human life to justify limits on regulation.
But the turn toward markets was a bipartisan affair. The reduction of federal income taxation began under President Kennedy. President Carter initiated an era of deregulation in 1977 by naming an economist, Alfred Kahn, to dismantle the bureaucracy that supervised commercial aviation. President Clinton restrained federal spending in the 1990s as the economy boomed, declaring that ''the era of big government is over.''
Liberal and conservative economists conducted running battles on key questions of public policy, but their areas of agreement ultimately were more important. Although nature tends toward entropy, they shared a confidence that markets tend toward equilibrium. They agreed that the primary goal of economic policy was to increase the dollar value of the nation's output. And they had little patience for efforts to limit inequality. Charles L. Schultze, the chairman of Mr. Carter's Council of Economic Advisers, said in the early 1980s that economists should fight for efficient policies ''even when the result is significant income losses for particular groups -- which it almost always is.'' A generation later, in 2004, the Nobel laureate Robert Lucas warned against any revival of efforts to reduce inequality. ''Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution.''

Accounts of the rise of inequality often take a fatalistic view. The problem is described as a natural consequence of capitalism, or it is blamed on forces, like globalization or technological change, that are beyond the direct control of policymakers. But much of the fault lies in ourselves, in our collective decision to embrace policies that prioritized efficiency and encouraged the concentration of wealth, and to neglect policies that equalized opportunity and distributed rewards. The rise of economics is a primary reason for the rise of inequality.

And the fact that we caused the problem means the solution is in our power, too.

Markets are constructed by people, for purposes chosen by people -- and people can change the rules. It's time to discard the judgment of economists that society should turn a blind eye to inequality. Reducing inequality should be a primary goal of public policy.

The market economy remains one of humankind's most awesome inventions, a powerful machine for the creation of wealth. But the measure of a society is the quality of life throughout the pyramid, not just at the top, and a growing body of research shows that those born at the bottom today have less chance than in earlier generations to achieve prosperity or to contribute to society's general welfare -- even if they are rich by historical standards.

This is not just bad for those who suffer, although surely that is bad enough. It is bad for affluent Americans, too. When wealth is concentrated in the hands of the few, studies show, total consumption declines and investment lags. Corporations and wealthy households increasingly resemble Scrooge McDuck, sitting on piles of money they can't use productively.

Willful indifference to the distribution of prosperity over the last half century is an important reason the very survival of liberal democracy is now being tested by nationalist demagogues. I have no special insight into how long the rope can hold, or how much weight it can bear. But I know our shared bonds will last longer if we can find ways to reduce the strain."

likbez -> JohnH... , August 26, 2019 at 10:22 AM
If we discard political correctness issues, the real problem is that since probably late 60th most academic economists were and still are elite prostitutes of financial oligarchy.

The level of corruption of academic economists reached really unprecedented levels under neoliberalism. The level of remuneration (direct but mostly indirect) was raised probably ten fold.

Because one of the way neoliberals got to power is the infiltration of economic departments in universities via grants and specially created positions. As well as creating think tanks staffed with "professional neoliberal revolutionaries" as a proxy of Bolsheviks Party full time party functionaries.

[Aug 23, 2019] I believe being oblivious is the main qualification for being a successful mainstream economist.

Notable quotes:
"... I believe being oblivious is the main qualification for being a successful mainstream economist. ..."
Aug 23, 2019 | www.nakedcapitalism.com

Skip Intro , , August 23, 2019 at 2:29 pm

I believe being oblivious is the main qualification for being a successful mainstream economist.

[Aug 23, 2019] Austerity is Prosperity

Aug 23, 2019 | www.nakedcapitalism.com

Ian Perkins , August 23, 2019 at 10:57 am

"War Is Peace, Freedom Is Slavery, Ignorance Is Strength." And if Orwell were still around, perhaps he would add: Austerity is Prosperity.

Synoia , August 23, 2019 at 11:24 am

Warriors are Peacekeepers

[Aug 15, 2019] How Richard Vague Discovered Gravity An Interview + Book Review of A Brief History of Doom Two Hundred Years of Financial Cri

Aug 15, 2019 | www.nakedcapitalism.com

Sound of the Suburbs , August 13, 2019 at 5:25 am

What was the problem with Classical Economics?

The Classical Economists soon noticed those at the top don't do anything economically productive, but maintained themselves in luxury and leisure through the hard work of everyone else.

They couldn't miss it as the European aristocracy never did a stroke of real work.

"The labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers." Adam Smith

Economics was a big problem for the powerful vested interests of the 19th century and it was always far too dangerous to be allowed to reveal the truth about the economy.

How can we protect those powerful vested interests at the top of society?

The early neoclassical economists hid the problems of rentier activity in the economy by removing the difference between "earned" and "unearned" income and they conflated "land" with "capital".

They took the focus off the cost of living that had been so important to the Classical Economists to hide the effects of rentier activity in the economy.

The landowners, landlords and usurers were now just productive members of society again.

William White (BIS, OECD) talks about how economics really changed over one hundred years ago as classical economics was replaced by neoclassical economics.

https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s

He thinks we have been on the wrong path for one hundred years.

This was the old switcheroo.

Economics, the time line:

We thought small state, unregulated capitalism was something that it wasn't as our ideas came from neoclassical economics, which has little connection with classical economics.

On bringing it back again, we had lost everything that had been learned in the 1930s and 1940s, by which time it had already demonstrated its flaws.

Sound of the Suburbs , August 13, 2019 at 5:48 am

In the second half of the 20th century, the Mont Pelerin society developed the neoliberal ideology from neoclassical economics, under the impression that capitalism was a self-stabilising system that doesn't need regulation.

Their expectations were rather different from the small state, unregulated capitalism that had been observed and documented by the Classical Economists in the 19th Century.

"The interest of the landlords is always opposed to the interest of every other class in the community" Ricardo 1815 / Classical Economist

"But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society. On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin." Adam Smith / Classical Economist

Their belief in the markets came from neoclassical economics, which doesn't consider the elements that ensures markets don't reach stable equilibriums; debt and the money creation of bank loans.

Richard Vague has studied many of those 19th century financial crises in his book "A Brief History of Doom" and charts the rollercoaster progress of 19th century small state, unregulated capitalism.

A self-stabilising system it is not.

Sound of the Suburbs , August 13, 2019 at 5:33 am

Why do policymakers think debt isn't a problem?

Ben Bernanke is famous for his study of the Great Depression and here it is discussed in the Wall Street Journal.

https://www.wsj.com/articles/SB113392265577715881

"Theoretically, neither deflation nor inflation ought to affect long-run growth or employment. After a while, people and businesses get used to changing prices. If prices fall, eventually so will wages, and the impact on profits, employment and purchasing power will be neutral. Borrowers suffer during deflation because their debts are fixed in value, but creditors benefit because the dollars they get back will buy more. For the economy as a whole, deflation ought to be a wash."

What has Ben Bernanke got wrong? He thinks banks are financial intermediaries.

Our knowledge of privately created money has been going backwards since 1856.

Credit creation theory -> fractional reserve theory -> financial intermediation theory

"A lost century in economics: Three theories of banking and the conclusive evidence" Richard A. Werner
http://www.sciencedirect.com/science/article/pii/S1057521915001477

It went backwards between Milton Freidman and Ben Bernanke.

Milton Freidman used fractional reserve theory, which was better than financial intermediation theory, but still wrong.

This is why his Monetarism didn't work.

He though banks lending and the moony supply were controlled by central bank reserves, but they aren't.

Brooklin Bridge , August 13, 2019 at 7:06 am

I like the title. Also, this is one of those cases where the interviewer brings quite a lot to the table as well as the author. An excellent introduction and a well carried/developed near metaphor as in, nail on the is a head.

Daniel Romig , August 13, 2019 at 7:24 am

That was a logical thesis to investigate. It seems strange that it has remained out of sight for so long until Mr. Vague's research and analysis.

The student debt in the USA is currently at $1.5 trillion. That is about 7% of GDP – and growing. I wonder how this may affect the economy in the US going forward.

As Yogi Berra reminds us, "You can observe a lot by watching."

Thank you for observing, Mr. Vague.

Samuel Conner , August 13, 2019 at 9:07 am

I don't think it has been "out of sight" so much as "in sight, but ignored". The relation of private debt to economic downturns has been noticed by others. Irving Fisher in the 20th Century, Steve Keen today come to mind.

The connection between "over-capacity" and "inability to service" may be new.

I would like to see analysis like this subjected to peer review; I think that there must be at least a few journals sympathetic to heterodox approaches to economics that would give a new synthesis like this a fair review process. Going "directly to the people" via popular writing raises a small concern in my mind.

Telee , August 13, 2019 at 2:23 pm

Steve Keen mathematized the Minsky Hypothesis. The results could be displayed in three dimensions. The graphs showed that when private debt was included in the calculations, the recession in 2007 was accurately predicted. Interestingly, there is a period of moderation which is followed by a rapid crash. During this period of moderation Bernanke was saying that all the indicators showed that the economy was in good shape. Of course he didn't consider private debt.

Steve H. , August 13, 2019 at 7:43 am

Some points of discussion, I'm not mad if disproven:

: Is the 2.5 Quadrillion dollars in derivatives considered debt? Or is the ability to create derivatives what drives the excess lending?

: Is the ability to generate excess debt a function of the fractional reserve system, and thus mostly a benefit for robbers who own banks? The Templars couldn't generate excess debt, they needed gold on hand to pay the notes, but wasn't there increased trade from their system, and thus general benefit?

vlade , August 13, 2019 at 8:19 am

No.
The stupid sums on derivatives are notional principals, and usually grossed up. If I have a swap with 10m notional with you, it could be worth anything (and most likely the only debt exposure is any margin-call amount, which would be on 10m swap trivial), but would add 20m to that dumb number.

I can easily enough generate almost any number for the notional principal w/o increasing the risk to the system (for example by creating any number of equal-but-opposite trades between two parties which have a netting agreement)

I can equally (a bit harder, as it requires some thinking) do a few "well placed" derivatives with notionals in say few billions (but nicely levered) that can sink the whole system.

No.
In a full reserve system there's no debt, hence no question of "excess debt". As an aside, "fractional reserve system is a myth". Bank lending is constrained only by capital, not by any reserves (cf number of banking systems that don't even have any rules on reserves).

Steve H. , August 13, 2019 at 2:31 pm

Thank you, Vlade.

Thorstein's Ghost , August 13, 2019 at 8:01 am

I have not read Mr. Vague's book. However, I am curious as to whether he adds anything to the work of Steve Keen, who predicted the 2007-09 financial crisis, and Hyman Minsky. See, for example, Keen's "Can We Avoid Another Financial Crisis?" (2017).

Adam Eran , August 13, 2019 at 8:00 pm

Looks like a nice validation of Keen's (and Michael Hudson's) work. That's fine with me, although a nod in their direction certainly looks warranted since private debt was what led Keen to predict the Great Recession (and win the Revere Prize for doing so).

Hudson's work on ancient debt jubilees exactly parallels Vague's.

vlade , August 13, 2019 at 8:09 am

I can't remember where I wrote it before.

Debt is the only working time machine mankind invented. But the conservation-over-time still holds.

Technically, for any individual, over their lifetime integral of (income + debt destruction) >= integral(expenses+ debt creation) [I'm ignoring cases where debt can be inherited]

So are we heading for a crisis? Right now I(income + debt destruction) < I(expenses + debt creation) for a large number of indivduals over their lifetime. So unless their income raises dramatically (expenses for them are often way less discretionary), yes we are, as the debt destruction will have to compensate.

But to guess the timing – well, that very much depends on the aggregate of those individuals.A trigger that would further reduce income or increase expense (across the population) would make it more probable. A small but not sufficient increase in income (across the population) would postpone it.

John , August 13, 2019 at 8:13 am

"The student debt in the USA is currently at $1.5 trillion."
Thanks to some skillful intervention with the somnolent Congress this debt cannot be discharged in bankruptcy. That seems to fly in the face of Mr. Vague's conclusions while redounding to the benefit of the rentier financial class.

Carla , August 13, 2019 at 9:10 am

@ John -- Please make everyone you know aware that Democrat candidate for president Joe Biden holds a great deal of responsibility for student debt not being dischargeable in bankruptcy. This is only one of his high crimes and misdemeanors. Don't let anyone forget!

Bugs Bunny , August 13, 2019 at 10:06 am

That's only one of many reasons that Biden should be defeated. Here's a really good explanation of how he helped remove educational loans (nearly all of them, not only student loans) from discharge in bankruptcy.

https://www.consumerbankers.com/cba-media-center/cba-news/joe-biden-backed-bills-make-it-harder-americans-reduce-their-student-debt

Telee , August 13, 2019 at 7:16 pm

Biden also strongly supported the Iraq War preventing any opposition views to testify in his committee. Also a strong supporter of NAFTA anf the TTTP. ( Trump will hammer on this if he runs against Biden.) His cooperation with southern segregationists resulted in the unequal drug penalties that fed the prison industrial complex he supported. He had mutiple committee meeting to rail against black crime when it was expedient. He threw Anita Hill under the bus and thus aided in putting Clarence Thomas on the Supreme Court. He says he's a union man as he goes to Comcast, a union buster, for financial aid. He is known as a representative working for the credit card companies. etc. What's not to like if you're a corporate democrat?

Steve Ruis , August 13, 2019 at 2:35 pm

Duh. That was exactly the purpose. That bankruptcy exempt law for student loans was passed based upon falsehoods. Its actual purpose was to enslave the college educated youth (make them debt slaves) so that they don't go on a rampage like they did in the 1960's and 70's vis-a-vis the Vietnam War.

John Merryman. , August 13, 2019 at 8:29 am

I think part of the problem is that we treat money as a store of value, as well as a medium of exchange.
As a medium, it is a contract, with one side an asset and the other a debt, so in order to store the asset, similar amounts of debt have to be created.
This results in a centripedial effect, as positive feedback draws the asset to the center of the system, while negative feedback pushes the debt to the edges.
Since money and finance serve as the value circulation mechanism, this is like the heart telling the hands and feet to go suck dirt, because they don't get any blood.
A medium and a store are distinct functions. Blood is a medium, fat is a store. Roads are a medium, parking lots are a store.
As a medium, we own money like we own the section of road we are using, or the beer passing through our bodies. It's functionality is in its fungibility.
If we store value in healthy communities, we wouldn't need banks to mediate every relationship.
The irony of our individualistic culture, is it leaves us in our atomized cocoons, allowing more effective top down control and a parasitic feedback mechanism. Sort of like The Matrix.

susan the other` , August 13, 2019 at 6:05 pm

good description of the way an ME and a SoV work against each other; I can never think through what I'm sure is this very contradiction in terms. thanks.

Bobby Gladd , August 13, 2019 at 9:43 am

Sound like an interesting book. Just ordered it. I am reminded of "This Time is Different: 700 years of financial folly."

I worked in subprime risk modeling & mgmt during 2000 – 2005 . We made successive record profits every year of my tenure.

I quit to go back to health care analytics. It was too slimy. I knew it was not gonna end well.

Chauncey Gardiner , August 13, 2019 at 10:15 am

Appears to build on the work of economists Hyman Minsky and Steve Keen. Not as concerned with developments in "Asia" (China), as there seems to be a policy willingness there to substitute state money for private sector debt, and to allow currency depreciation as an adjustment mechanism for the implicit debt writedowns. The policy also plays into China's exports-driven macro model. Similar to the US government and central bank "foaming the runway" for the banks and large corporations in the aftermath of the 2008 financial crisis.

Contemplating the role of compound interest in private sector debt growth in a period of low economic growth. Recent rapid growth of leveraged loans and junk bonds to fund corporate stock buybacks, negative real interest rates to push up financial asset and real estate prices/collateral values, and a lax regulatory environment appear to support an intentional policy of excessive growth in private sector debt. Whether the GFC is entirely in the rearview mirror or is till unfolding in terms of ultimately leading to systemic change also remains open IMO, although neoliberal policies remain firmly entrenched at this time.

Summer , August 13, 2019 at 11:40 am

The part about the financial sector, including housing, being the main components of US "industrial policy" shows the country as whole isn't taking the first advice financial advisors usually give for stability: DIVERSIFY ..

And yet again here is another book/article on the US economy that says nothing about defense spending.

Synoia , August 13, 2019 at 12:20 pm

US Defense spending is not debt. The MMT discussions state that clearly.

One test for "debt" is a simple question: Who can demand the debt be paid?

In the case of USG spending, the only party who could "call the debt" is the USG, and a single party cannot be both debtor and creditor on a debt, that is: cannot owe oneself money.

Summer , August 13, 2019 at 1:59 pm

"Debt" is invested, however, and defense spending is a big use of it and still – boom and bust.

Adam Eran , August 13, 2019 at 8:06 pm

Well all government spending is debt if it spends currency. The dollars are debt. Your checking account is debt too to the bank. When you write a check, you're assigning a portion of the bank's debt to the payee. Dollars are just checks made out to "cash" in fixed amounts. They appear in the Fed's books a liability, too.

What are we owed for a dollar? Answer: relief from a dollar's worth of (inevitable) tax liability.

Back to the original post: It's even ambiguous whether defense spending is consumption. After all, the internet is a product of DARPA (the "D" is for "Defense"). Marianna Mazzucato has a nice TED talk about government as innovator.

tegnost , August 13, 2019 at 12:22 pm

" In both cases, the result is about 16% growth to GDP over 15 years. But in the second case, you don't have a financial crisis."

also in the second case there are not foreclosures and repossessions whereby concentrated financial power confiscates what they sold so they can sell it again by the way where does that activity (repos and foreclosures) go in the calculation of GDP

Adam Eran , August 13, 2019 at 8:06 pm

Disaster capitalism!

Susan the other` , August 13, 2019 at 2:51 pm

Gosh. Where has Mr. Vague been? If this isn't the understatement of the century, I don't know what is. Even dear old Ordoliberal Wolfgang Schaeuble said right up front: "We are overbanked." Steve Keen is still fighting with Krugman about the significance of private debt. And to imply that we have an unspoken "industrial policy" that uses real estate to get us out of a slow patch begs the question. It is not industrial policy, it is the blatant chickenshit avoidance of industrial policy. But never mind all that, the sea change Mr. Vague is avoiding is that industrial manufacturing is being drastically trimmed back, limited, maybe even rationed by country for all we know. To forgive debts won't really cut it. Not that we shouldn't do it. We should simply because debt service is nearly impossible these days. We need to have massive fiscal infusions; money spent wisely to improve civilization and save the environment. Please Mr. Vague. You're more like Mr. Vacuous.

Another Amateur Economist , August 13, 2019 at 11:22 pm

No. It is the "Destruction of Industry Policy." Why make and build, when institutionalized theft, graft, and fraud have become more profitable?

p. Fitzsimon , August 13, 2019 at 3:09 pm

" .industrial policy, even though it was largely unstated: namely, support for the financial and real estate sectors"
I would add the agricultural sector to government supported industry.

Generalfeldmarschall von Hindenburg , August 13, 2019 at 3:09 pm

The brother needs to have a look a Portland, Oregon. Overcapacity, a housing bubble and a homeless crisis all at once. It's bound to crash. Yet there're so many boomers retiring from the first wave of the Tech Era (the folks whose awesome ideas and disruption gave us Dot-Bomb. So they've run up the price of beer in a town famous for craft brewing to unaffordability. They never seem to pay the price.

Jack Parsons , August 13, 2019 at 4:43 pm

The earliest worldwide financial crisis that I'm aware of was the Habsburg silver crisis. Fascinating story.

https://aeon.co/essays/potosi-the-mountain-of-silver-that-was-the-first-global-city

Tim , August 13, 2019 at 8:46 pm

Bush Junior tightened the Bankruptcy laws in his final term before the great recession. I still don't think that was coincidence.

The smart people with all the money DO know this is how economics works, and execute their strategies on their behalf accordingly. The rest of us, get the idiot's guide to the galaxy to work with.

none , August 15, 2019 at 12:07 am

"Debt, the first 5000 years" by David Graeber is on my list of probably-good books that I'm unlikely to get around to reading. Is that similar to this one?

[Aug 15, 2019] Ideology is Dead! Long Live Ideology!

Aug 14, 2019 | www.nakedcapitalism.com

Yves here. Quelle surprise! Economists engage in groupthink, which sounds a little less bad if you call it "ideology".

By Mohsen Javdani, Associate Professor of Economics, University of British Columbia – Okanagan Campus and Ha-Joon Chang, Professor, University of Cambridge. Originally published at the Institute for New Economic Thinking website

Mainstream (neoclassical) economics has always put a strong emphasis on the positivist conception of the discipline, characterizing economists and their views as objective, unbiased, and non-ideological. This is still true today, even after the 2008 economic crisis exposed the discipline to criticisms for lack of open debate, intolerance for pluralism, and narrow pedagogy. [1] Even mainstream scholars who do not blatantly refuse to acknowledge the profession's shortcomings still resist identifying ideological bias as one of the main culprits. They often favor other "micro" explanations, such as individual incentives related to academic power, career advancement, and personal and editorial networks. Economists of different traditions do not agree with this diagnosis, but their claims have been largely ignored and the debate suppressed.

Acknowledging that ideology resides quite comfortably in our economics departments would have huge intellectual implications, both theoretical and practical. In spite (or because?) of that, the matter has never been directly subjected to empirical scrutiny.

In a recent study , we do just that. Using a well-known experimental "deception" technique embedded in an online survey that involves just over 2400 economists from 19 countries, we fictitiously attribute the source of 15 quotations to famous economists of different leanings. In other words, all participants received identical statements to agree or disagree with, but source attribution was randomly changed without the participants' knowledge . The experiment provides clear evidence that ideological bias strongly influences the ideas and judgements of economists. More specifically, we find that changing source attributions from mainstream to less-/non-mainstream figures significantly reduces the respondents' reported agreement with statements. Interestingly, this contradicts the image economists have of themselves, with 82% of participants reporting that in evaluating a statement one should only pay attention to its content and not to the views of its author.

Moreover, we find that our estimated ideological bias varies significantly by the personal characteristics of economists in our sample. For example, economists' self-reported political orientation strongly influences their ideological bias, with estimated bias going up as respondents' political views move to the right. The estimated bias is also stronger among mainstream than among heterodox economists, with macroeconomists exhibiting the strongest bias. Men also display more bias than women. Geographical differences also play a major role, with less bias among economists in Africa, South America, and Mediterranean countries like Italy, Portugal, and Spain. In addition, economists with undergraduate degrees in economics or business/management tend to show stronger ideological biases.

We give more details about our methodology and findings in the following sections, but first let us anticipate some of the conclusions and implications. Theoretically, the implications are upsetting for the positivist methodology dominating the neoclassical economics. As Boland (1991) suggests, "[p]ositive economics is now so pervasive that every competing view has been virtually eclipsed." Yet, the strong influence of ideological bias on views among economists that is evident in our empirical results cannot be reconciled with it.

Practically, our results imply that it is crucial to adopt changes in the profession that protect academic discourse, as well as the consumers of the economic ideas, from the damaging impacts of ideological bias. In fact, there exists growing evidence that suggests value judgements and political orientation of economists affect not just research ( Jelveh et al. 2018 , Saint-Paul 2018 ), but also citation networks ( Önder and Terviö 2015 ), faculty hiring ( Terviö 2011 ), as well as economists' positions on positive and normative issues related to public policy (e.g. Beyer and Pühringer 2019 ; Fuchs, Krueger and Poterba 1998 ; Mayer 2001 ; van Dalen 2019 ; Van Gunten, Martin, and Teplitskiy 2016 ). It is therefore not a long stretch to imagine that ideological bias could play an important role in suppressing plurality, narrowing pedagogy, and delineating biased research parameters in economics.

One important step that helps identify the appropriate changes necessary to minimize the influence of ideological biases is to understand their roots.

As argued by prominent social scientists (e.g. Althusser 1976 , Foucault 1969 , Popper 1955 , Thompson 1997 ), the main source of ideological bias is knowledge-based, influenced by the institutions that produce discourses. Mainstream economics, as the dominant and most influential institution in economics, propagates and shapes ideological views among economists through different channels.

Economics education, through which economic discourses are disseminated to students and future economists, is one of these important channels. It affects the way students process information, identify problems, and approach these problems in their research. Not surprisingly, this training may also affect the policies they favor and the ideologies they adhere to. In fact, there already exists strong evidence that, compared to various other disciplines, students in economics stand out in terms of views associated with greed, corruption, selfishness, and willingness to free-ride (e.g. Frank and Schulze 2000 , Frank et al. 1993 and 1996 , Frey et al. 1993 , Marwell and Ames 1981 , Rubinstein 2006 , Want et al. 2012 ). [2]

Another important channel through which mainstream economics shapes ideological views among economists is by shaping the social structures and norms in the profession. While social structures and norms exist in all academic disciplines, economics seems to stand out in at least several respects, resulting in the centralization of power and the creation of incentive mechanisms for research, which in turn hinder plurality, encourage conformity, and adherence to the dominant (ideological) views.

Our own exposure to different parts of this social structure while working on this project has in fact been an unpleasant yet eye-opening experience, and a testament to dominant biases in the discipline that strongly impede critical thinking, new perspectives, and plurality. We have been threatened, accused, and insulted for simply asking an important and legitimate question. We have also had first-hand experience with the Top Five journals in economics and some of their (associate) editors' exertion of their strong prejudiced views, which is often disguised under the vail of "inevitably subjective nature of editors' decision-making process," which is supported by the absolute and unaccountable power that is at their disposal. In some cases, the decision regarding our submission blatantly lacked professionalism and respect for plurality of views.

Our world today is characterized by critical issues that economics has a lot to say about, such as inequality, austerity, the future of work, and climate change. However, relying on one dominant discourse which ignores or isolates alternative views will make the economics profession ill-equipped to engage in balanced conversations regarding these issues. This also makes the consumers of economic ideas skeptical about economists and the views and policies they advocate for. We believe that addressing the issue of ideological bias in economics first requires economists to find out about their own biases. Persistent denial of these biases is going to be more harmful than being aware of their presence and influence, even if mainstream economists do not necessarily change their views. Moreover, the economics profession needs to have an in-depth introspection and a real and open debate about the factors underpinning these biases, including economics training and social structures within the discipline that centralize power, encourage group thinking and conformity, dampen innovative thinking and creativity, and hinder plurality.

Experimental Design

Examining issues such as the impact of bias, prejudice, or discrimination on individual views and decisions is very challenging, given the complex nature of these types of behaviour. This has given rise to a field experimentation literature in economics that has relied on the use of deception -- for example, through sending out fictitious resumes and applications, to examine the prevalence and consequences of discrimination against different groups in the labor market. [3] We take a similar approach, namely using fictitious source attributions, in order to investigate the effect of ideological bias on economists (See Section 4 in our online appendix for a more detailed discussion on the use of deception in economics). More specifically, we employ a randomized controlled experiment embedded in an online survey. Economists from 19 different countries were invited to complete an online survey where they were asked to evaluate fifteen statements from prominent economists on a wide range of topics. We received just over 2,400 responses, with the majority of responses (around 92%) from academics with a PhD degree in economics. As reported in our online appendix , our sample includes a very diverse group of economists from a diverse set of institutions. While all participants received identical statements in the same order, source attribution for each statement was randomly changed without the participants' knowledge . For each statement, participants either received the name of a mainstream economist as the source (Control Group), or an ideologically different less-/non-mainstream economist (Treatment 1), or no source attribution (Treatment 2). See Table A8 in our online appendix for a complete list of statements and sources.

The Findings, in Detail

Our analysis of the experimental results reveals several important findings. First, examining the probability of different agreement levels for each statement as well as their comparative degree of consensus (using relative entropy index derived from information theory), we find evidence of clear dissent among economists on the wide variety of topics evaluated (see Figure 1 below). Given that our statements either deal with different elements of the mainstream economics paradigm -- including its methodology, assumptions, and the sociology of the profession -- or issues related to economic policy, the significant disagreement evident in our results highlights the lack of paradigmatic and policy consensus among economists on evaluated issues.

Figure 1: Probability of different agreement levels – By statement

Note: See Table A8 in our online appendix for a complete list of statements and sources.

Second, we find evidence of a strong ideological bias among economists. More specifically, we find that for a given statement, the agreement level is 7.3% (or 22% of a standard deviation) lower among economists who were told that the statement was from a less-/non-mainstream source. Examining statements individually also reveals that in all but three statements, agreement level drops significantly (both quantitatively and statistically, ranging from 3.6% to 16.6%) when the source is less-/non-mainstream.

For example, when a statement criticizing "symbolic pseudo-mathematical methods of formalizing a system of economic analysis" is attributed to its real source, John Maynard Keynes, instead of its fictitious source, Kenneth Arrow, the agreement level among economists drops by 11.6%. Similarly, when a statement criticizing intellectual monopoly (i.e. patent, copyright) is attributed to Richard Wolff, the American Marxian economist at the University of Massachusetts, Amherst, instead of its real source, David Levine, professor of economics at the Washington University in St. Louis, the agreement level drops by 6.6%.

Interestingly, these results stand in sharp contrast with the image economists project of themselves in our survey. In an accompanying questionnaire that appears at the end of the survey, a strong majority of participants (around 82%) agreed that in evaluating a statement, one should only pay attention to its content, rather than its author. Only 18% of participants agreed that both the content of the statement as well as the views of the author matter, and only a tiny minority (around 0.5%) reported the views of the author should be the sole basis to evaluate a statement.

Third, we find that economists' self-reported political orientation strongly influences their views. More specifically, our results suggest that even when we focus on statements with mainstream sources attributed to them , there exists a very significant difference in average agreement level among economists with different political orientations. For example, for a given statement, the average agreement level among economists self-identified as left is 8.4% lower than those self-identified as far left. This already large difference widens consistently as we move to the far right, reaching a difference of 19.6% between the far right and the far left, which is an increase of 133%. This strong effect of political orientation on economists' evaluation of our statements, which does not change after controlling for a wide set of observed characteristics, is another clear manifestation of ideological bias.

The effect of political orientation on economists' views is even more drastic when we examine how changes in attributed sources affects economists with different political orientations. More specifically, for those on the far left, altering the sources only reduces the average agreement level by 1.5%, which is less than one-fourth of the overall effect of 7.3% we discussed before. However, moving from the far left to the far right of the political orientation consistently and significantly increases the effect of changing the source to a 13.3% reduction in agreement level, which is almost 8 times (780%) larger compared to the far left. Interestingly, this is despite the fact that relative to the far left, those at the far right are 17.5% more likely to agree that in evaluating a statement one should only pay attention to its content.

Fourth, our results uncover striking differences by gender. More specifically, we find that the estimated ideological bias is 44% larger among male economists as compared to their female counterparts, even after controlling for potential gender differences in observed characteristics including political orientation and political/economic typology. Moreover, our results highlight a startling difference between male and female economists in their perception of gender problems in the profession. When faced with the statement " Unlike most other science and social science disciplines, economics has made little progress in closing its gender gap over the last several decades. Given the field's prominence in determining public policy, this is a serious issue. Whether explicit or more subtle, intentional or not, the hurdles that women face in economics are very real. ", the agreement level was a whopping 26% higher among female economists than among their male peers.

In addition, when participants were told that the statement was made by the left-wing British feminist economist Diane Elson (rather than the real source, Carmen Reinhart, a mainstream economist at Harvard), male economists showed ideological biases -- their agreement level fell by 5.8%. Interestingly, however, it stayed unchanged for female economists. This seems to suggest that the gender problem in economics is so severe that female economists, who exhibited ideological biases on many other issues (although less than did their male colleagues), put aside their biases in this particular case and focused on the content of the statement.

The discussion around the gender problem in economics has recently taken the center stage. During the recent 2019 AEA meeting, and in one of the main panel discussions titled "How can economics solve its gender problem?" several top female economists talked about their own struggles with the gender problem in economics. In another panel discussion, Ben Bernanke, the current president of the AEA, suggested that the discipline has "unfortunately, a reputation for hostility toward women ." This is following the appointment of an Ad Hoc Committee by the Executive Committee of the AEA in April 2018 to explore "issues faced by women [ ] to improve the professional climate for women and members of underrepresented groups." AEA also conducted a climate survey recently to "provide more comprehensive information on the extent and nature of these [gender] issues." It is well-understood that approaching and solving the gender problem in economics first requires a similar understanding of the problem by both men and women. However, our results suggest that unfortunately there exists a very significant divide between male and female economists in their recognition of the problem.

Fifth, we find systematic and significant heterogeneity in our estimated effect of ideological bias by country, area of research, country where PhD was completed, and undergraduate major, with some groups of economists exhibiting little or no ideological bias and some others showing very strong bias.

For example, we find that economists with a PhD degree from Asia, Canada, Scandinavia, and the U.S. exhibit the strongest ideological bias. On the opposite end we find that economists with PhD degrees from South America, Africa, Italy, Spain, and Portugal exhibit the smallest ideological bias. Similarly, our results suggest that there is the smallest ideological bias from economists whose main area of research is history of thought, methodology, heterodox approaches; cultural economics, economic sociology, economic anthropology, or economic development. On the other hand, we find that economists whose main area of research is macroeconomics, public economics, international economics, and financial economics are among those with the largest ideological bias.

We also find that undergraduate training in economics has a strong effect on our estimated effect of ideological bias. We find that those economists with an undergraduate major in economics, or business/management, exhibit the strongest bias, while those who studied law; history, language and literature; or anthropology, sociology, and psychology show no ideological bias. These results are consistent with the growing evidence that suggests economic training, either directly or indirectly, induces ideological views in students (e.g. Allgood et al. 2012 , Colander and Klamer 1987 , Colander 2005 , Rubinstein 2006 ).

Discussion

Scholars hold different views on whether economics can be a "science" in the strict sense and be free from ideological biases. However, perhaps it is possible to have a a consensus that the type of ideological bias that could result in endorsing or denouncing an argument on the basis of (one's interpretation of) its author's views rather than its substance is unhealthy and in conflict with scientific tenor and the subject's scientific aspiration, especially when the knowledge regarding rejected views is limited .

Some economists might object that economists are human beings and therefore these biases are inevitable. But economists cannot have their cake and eat it too! Once you admit the existence of ideological bias, the widely-held view that "positive economics is, or can be, an 'objective' science, in precisely the same sense as any of the physical sciences" (Friedman 1953) must be rejected.

Furthermore, the differences we find in the estimated effects across personal characteristics such as gender, political orientation, country, and undergraduate major clearly suggest that there are ways to limit those ideological effects, and ways to reinforce them.

Our finding that those with an undergraduate degree in economics exhibit the strongest ideological bias highlights the importance of economic training in shaping ideological views. In doing so, our study contributes to the literature on economic education, suggesting that ideology can be at least limited by changes in the curricula at earlier stages.

Rubinstein (2006) argues that "students who come to us to 'study economics' instead become experts in mathematical manipulation" and that "their views on economic issues are influenced by the way we teach, perhaps without them even realizing." Stiglitz (2002) also argues that "[economics as taught] in America's graduate schools bears testimony to a triumph of ideology over science."

Economics teaching not only influences students' ideology in terms of academic practice but also in terms of personal behavior. Colander and Klamer (1987) and Colander (2005) survey graduate students at top-ranking graduate economic programs in the U.S. and find that, according to these students, techniques are the key to success in graduate school, while understanding the economy and knowledge about economic literature only help a little. This lack of depth in knowledge acquired, not only in economics but in any discipline or among any group of people, makes individuals lean more easily on ideology. Frank et al. (1993) similarly highlight the importance of economics training in shaping behavior among students by criticizing the exposure of economics students to the self-interest model in economics where "motives other than self-interest are peripheral to the main thrust of human endeavor, and we indulge them at our peril." They also provide evidence that such exposure does have an impact on self-interested behavior.

But education is not the only problem: social structures and norms within the profession also deeply influence economists' adherence to dominant ideological views.

For example, in his comprehensive analysis of pluralism in economics, Wright (2019) highlights several features of the discipline that make the internal hierarchical system in economics "steeper and more consequential" compared to most other academic disciplines. These features include: (1) particular significance of journal ranking, especially the Top Five, in various key aspects of academic life including receiving tenure ( Heckman and Moktan 2018) , securing research grants, invitation to seminars and conferences, and request for professional advice; (2) dominant role of "stars" in the discipline ( Goyal et al. 2006 , Offer and Söderberg 2016 ); (3) governance of the discipline by a narrow group of economists ( Fourcade et al. 2015 ); (4) strong dominance of both editorial positions and publications in high-prestige journals by economists at highly ranked institutions ( Colussi 2018 , Fourcade et al. 2015 , Heckman & Moktan 2018 ; Wu 2007 ); and the strong effect of the ranking of one's institution, as a student or as an academic, in career success ( Han 2003 , Oyer 2006 ).

As another example, in a 2013 interview with the World Economic Association, Dani Rodrik highlights the role of social structure in economics by suggesting that "there are powerful forces having to do with the sociology of the profession and the socialization process that tend to push economists to think alike. Most economists start graduate school not having spent much time thinking about social problems or having studied much else besides math and economics. The incentive and hierarchy systems tend to reward those with the technical skills rather than interesting questions or research agendas. An in-group versus out-group mentality develops rather early on that pits economists against other social scientists." Interestingly, a very similar picture of the profession was painted in 1973 by Axel Leijonhufvud in his light-hearted yet insightful article titled " The life among the Econ ."

It is hard to imagine that the biased reactions we find in our study only emerge in a low-stakes environment, such as our experiment, without spilling over to other areas of academic life. After all, as we discussed at the beginning, there already exists growing evidence which suggests that the political leanings and the personal values of economists influence different aspects of their academic lives. It is also not a long stretch to imagine that such ideological biases impede economists' engagement with alternative views, narrow the pedagogy, and delineate biased research parameters. We believe that recognizing their own biases, especially when there exists evidence suggesting that they could operate through implicit or unconscious modes, is the first step for economists who strive to be objective and ideology-free. This is also consistent with the standard to which most economists in our study hold themselves. To echo the words of Alice Rivlin in her 1987 American Economic Association presidential address, "economists need to be more careful to sort out, for ourselves and others, what we really know from our ideological biases."

Notes

[1] Several scholars have highlighted the connection between ideological views and the lack of plurality in economics and the failure of the profession to predict the 2008 crisis, or to even have an honest and in-depth retrospective explanation that would help develop accountable counter-measures against future crises (e.g. Barry 2017 ; Cassidy 2009 ; Dow 2012 ; Freeman 2010 ; Heise 2016 ; Lawson 2009 ; Stilwell 2019 ). There are also those who believe the 2008 crisis was not predictable, but fault the profession, as Colander (2010) puts it, "for failing to develop and analyze models that, at least, had the possibility of such a failure occurring" (e.g. Cabalerro 2010 ; Colander et al. 2013 ).

[2] Even if this relationship is not strictly casual, it suggests that there exists something about economic education that leads to a disproportionate self-selection of such students into economics.

[3] See Bertrand and Duflo (2017) and Riach and Rich (2002) for a review. Also see Currie et al. (2014) as another example of experimental audit studies with deception.

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Cripes , August 14, 2019 at 4:49 am

20 years ago Dr Sam Tsemberis conducted a double-blind trial of chronically homeless mentally ill people in an effort to learn whether being housed first led to better medical outcomes then placing barriers of compliance before getting housed would produce.

Happily, the common sense proposition that having a secure roof improves people's health or medication adherence was proven, and the concept of Housing First as a best practice is accepted today.

Economics is always political economy no matter how hard they try to pretend its algebra.

Paul O , August 14, 2019 at 5:43 am

+1

I read this elsewhere yesterday. Seems Econ mags were not keen to publish or link to it :-)

The Rev Kev , August 14, 2019 at 6:15 am

If ideology is dead then good riddance to it. I have seen and read about too many ideologues that have caused massive damage and deaths over the centuries and economics is no different. Personally I am of the school of thought of doing things in an empirical way and ignoring labels but just seeing what works. If it works, adopt it. If it does not, try something else. The economics of today does not do that. It does not work. It never saw the 2008 crisis coming and it has never proposed and backed reforms so that it will not happen again. It is used to justify a world economy that is causing climate change as it refuses to include most factors into their equations. I find it fascinating too how modern economics makes use of labels to stop discussions of possible paths to explore. Ideological labels has itself proven a huge hindrance. Here is what I mean.

"We should have health care for all."
"That is socialism that!"
"Well I guess that we can't do that then!

I think that Blair Fix's article "No, Productivity Does Not Explain Income" ( https://www.nakedcapitalism.com/2019/08/no-productivity-does-not-explain-income.html ) shows you how modern economists work. You juggle around processes like you do mathematical formulas and expect that it still reflects the real world. In scientific discussion you throw out a theory in a journal. Ideally it should be reproducible in the real world and should be picked apart for any flaws in data or reasoning. But like in Blair Fix's article. the outcome is designated first and then you work you way back to justify it. It fails blind tests like mentioned here which shows it's flawed processes. In Washington DC there is the Victims of Communism Memorial but I do think that there should also be a Victims of Neoliberalism Memorial to reflect current economic thought. In the former there is the Goddess of Democracy statue as a centerpiece. For a statue for the Victims of Neoliberalism I would suggest another statue but based on the acronym BOHICA.

@pe , August 14, 2019 at 7:09 am

The more you see yourself as beyond ideology, the more likely it is that you are a victim of ideology. That's what the post shows: it's the very fields such as business management that see themselves as non-ideological, "common sense" and empirical which are the most ideological, least common sense and least empirical.

If you are aware of your bias, you can minimize (but not eliminate) those affects. But if you believe that you have *perfect* vision, no measurement can show you that you have an astigmatism.

Remember, Obama and Merkel see themselves as pragmatists -- but an objective observer can be assured of finding deep ideological biases and assumption underlying their thought process.

Amfortas the hippie , August 14, 2019 at 8:54 am

aye.
the position of Ignorance .Socratic Perplexity is hard.
but i reckon it' the only way to avoid the mental traps this talks about.
I'm the only one i know in meatspace that even attempts to begin an investigation there("I know that i don't know").
the idea that economics is just like Physics was always suspect, and i think it's pretty amazing that it's taken this long and this many economic disasters to get to the point that the idea of econ=hard science is challenged more or less in the open.
I'd add to this that i figure that the break in Philosophy, early in the last century, between Anglo-American and "Continental" probably precedes and enables this strange phenomena in economics(logical positivism, etc avoiding all that messy humanity attempting to shoehorn everything into a neat equation)
there's a similar phenomenon in a lot of the Humanities anthropology, for instance: taking into account the inherent and largely unconscious bias of the anthropologist embedded with the "savages" he's studying.
"Orthodoxy is Unconsciousness"-Orwell

Mark , August 14, 2019 at 7:33 am

A general observation: Economics without ideology or politics is only a rather peculiar way of using math. Without a reference what positive or negative actually means it is impossible to render jugdement or make policy. While economic outcomes are at the same time always political outcomes and vice versa. That is why the discipline used to call itself political economy.

About the experiment: If I understand it correctly all participants receive the questions only once. How then is it possible to attribute a specific answer towards bias regarding the source? Given that the questions are not of a clear 2+2=4 varietiy but at least somewhat open. Intuitively it seems far more likely that the specific answer is determined by the respondents own beliefs than by their bias regarding the source.

Bobby Gladd , August 14, 2019 at 8:18 am

"The willingness to indulge in ideological thinking -- that is, in thinking that by definition is not one's own, which is blind to experience and to the contradictions that arise when broader fields of knowledge are consulted -- is a capitulation no one should ever make. It is a betrayal of our magnificent minds and of all the splendid resources our culture has prepared for their use."

Robinson, Marilynne. What Are We Doing Here? (p. 2). Farrar, Straus and Giroux. Kindle Edition.

diptherio , August 14, 2019 at 8:39 am

Towards the end of my final year of econ education I pointed out to a professor that the claim that economics should be a positive science, as opposed to a normative one, was itself a normative claim and hence self-contradictory. He looked at me like I was a crazy person and he was one of the 'leftists' in the department.

a different chris , August 14, 2019 at 9:30 am

Haha are you sure that the source of "crazy person" look was your view itself, or rather was it that in your young naivete you spoke what anybody who needs to put food on the table as a working economist would not dare?

m sam , August 14, 2019 at 11:56 am

Huh. So ideology influences our thinking even when we think it doesn't. So in other words water really is wet after all.

m sam , August 14, 2019 at 11:58 am

(Apologies, this was meant as a top level post)

Eclair , August 14, 2019 at 12:16 pm

I had a similar experience, diptherio. It was at the beginning of semester picnic, and one of the profs was holding forth on how the mathematical and analytical methodology would allow us to find the solutions to business questions. Probably because I had drunk too much wine, I piped up, but don't we first have to define what are the critical questions? Deafening silence.

diptherio , August 14, 2019 at 12:48 pm

Yes, questions like "how do we squeeze more out of our workers?" and "how can we crappify our product while simultaneously raising the price?"

diptherio , August 14, 2019 at 9:07 am

It is crazy, is it not, that "Life among the Econ" is still locked behind a paywall, despite being written 46 years ago. Thankfully, there is sci-hub .

Carey , August 14, 2019 at 3:46 pm

Maybe this is it?

http://www.ibiblio.org/philecon/life-econ-crop.pdf

T.town Tom , August 14, 2019 at 10:22 am

Reminds me of my counselor journey when therapist became aware of the blinders and prejudices that one's theories of behavior imposed (good & bad) on clients. The admonition became, "don't marry your theory" which another fellow revised that to "it's best only to flirt with your theory."

A friend of mine was an IT Director for a large Insurance company. After the crash in '08, he said in one meeting an executive said "you know why we employ Economists, to lend credibility to the Astrologers"

funemployed , August 14, 2019 at 10:25 am

The fact that this article has a reason to exist at all shows how poorly educated our highly trained economists are. It's not just that they reject the better portion of the core concepts and practices of the humanities and social sciences as being somewhere between useless and harmful. It's also that, as this article illustrates without quite saying, pretenses aside, most economists are worse than clueless with regards to the basics of conducting research in the "hard" sciences.

For family blog's sake, they don't even know how to pretend to be scientists. I'm not practicing researcher, but I know enough about research methods and questions to be pretty sure that robust empirical positivist economic research should look a lot more like something from the medical sciences than like something out of a cut rate theoretical physics or math journal. That would have serious epistemological problems of it's own, but sheesh, at least it might be mildly convincing to people with a modicum of a liberal arts education who couldn't be bothered to look under the hood.

The only thing that shocks me more than the shoddyness of work from "superstar" economists is their undying faith that their methods make them experts not just on economics, but on basically anything that you can slap a mathematical model on.

Steve Ruis , August 14, 2019 at 10:43 am

What economics lacks is an arbiter. In the physical sciences, nature will bitch slap anyone getting out of line. Economists need to come up with an agreed-upon set of test or natural experiments or something that constitutes independent feedback on the merit of an idea. There is nothing more important for the future of the discipline than this.

diptherio , August 14, 2019 at 12:53 pm

Well, the historical data refutes the Phillip's Curve but I bet they still teach that. 2008 was a natural experiment that refuted the Efficient Market Hypothesis, as well as the idea that the Federal Reserve could stop a major economic catastrophe through monkeying with interest rates but I'm sure those things are still being taught. Which is to say that economics does not lack an arbiter -- rather, most economists simply refuse to give it any credence.

Synoia , August 14, 2019 at 11:37 am

Given that theories in economics are not testable, an application of group think would result in "everybody was predicting that," and the consequent "who could have know" blame avoidance, coupled with the economist selecting the analytic method that best confirmed the answers the management wanted.

The only thing missing is a display of the set of Chrystal Balls.

Do Economists speak truth to power, or just confirm what power wants?

PKMKII , August 14, 2019 at 1:04 pm

Ideology is like accents, it's easy to fall into thinking that other people have them, but your voice/worldview is just "normal".

nothing but the truth , August 14, 2019 at 6:49 pm

in the real world, not saying what the client/boss/thesis advisor expects you to say is a severely career and bank account limiting move.

more so in humanities like law, economics which are closely tied to advising the powerful.

anon y'mouse , August 14, 2019 at 6:53 pm

i'm just going to leave this here, shall i?

http://changingminds.org/explanations/research/design/types_validity.htm

the rest of the social scientists at least test their theories against these standards (or make an appearance of doing so). econ seems to get around them by use of "definitions" so specific that in the end they are describing tautologies.

John Rose , August 14, 2019 at 10:07 pm

An interesting study to supplement this one is of funding sources for economics departments and the extent to which the funding is tied to hiring and model building. Then reanalize the date in this study for correlations with the influence of funding sources.

[Aug 04, 2019] to the liberal economists, free markets were markets free from rent seeking, while to the neoliberals free markets are free from government regulation.

Highly recommended!
Aug 04, 2019 | www.nakedcapitalism.com

Ian Perkins , August 4, 2019 at 10:16 am

Excellent article, I agree.
As regards clear language and definitions, I much prefer Michael Hudson's insistence that, to the liberal economists, free markets were markets free from rent seeking, while to the neoliberals free markets are free from government regulation.
"As governments were democratized, especially in the United States, liberals came to endorse a policy of active public welfare spending and hence government intervention, especially on behalf of the poor and disadvantaged. neoliberalism sought to restore the centralized aristocratic and oligarchic rentier control of domestic politics."
http://michael-hudson.com/2014/01/l-is-for-land/ – "Liberal"

[Jul 25, 2019] The destiny of the USA is now tied to the destiny of neoliberalism (much like the USSR and Bolshevism)

Highly recommended!
Notable quotes:
"... The USA hegemony is based on ideological hegemony of neoliberalism. And BTW both Russia and China are neoliberal countries. That's probably why President Putin calls the USA administration "partners," despite clearly anti-Russian policies of all US administrations since 1991. ..."
"... One fascinating fact that escapes my understanding is why the USA elite wasted colossal advantage it got after the collapse of the USSR in just 25 years or so. I always thought that the USA elite is the most shrewd out of all countries. ..."
"... May be because they were brainwashed by neocon "intellectuals." I understand that most neocons are simply lobbyists of MIC, and MIC has huge political influence, but still neocon doctrine is so primitive that no civilized elite can take it seriously. ..."
"... I also understand Eisenhower hypocritical laments that "train with MIC left the station" and that the situation can't be reversed (lament disguised as a "warning"; let's remember that it was Eisenhower who appointed Allen Dulles to head the CIA. ..."
Dec 25, 2018 | www.unz.com

likbez , says: December 25, 2018 at 8:02 am GMT

@guitarzan

>US hegemony is imposed militarily, both covertly and overtly, throughout the world. It is maintained through the petrodollar, corporate power, and the Federal Reserve Bank and its overseas counterparts

All true, but the key element is missing. The USA hegemony is based on ideological hegemony of neoliberalism. And BTW both Russia and China are neoliberal countries. That's probably why President Putin calls the USA administration "partners," despite clearly anti-Russian policies of all US administrations since 1991.

Ability to use military is important but secondary. Without fifth column of national elites which support neoliberalism that would be impossible, or at least more difficult to use. Like it was when the USSR existed (Vietnam, Cuba, etc). The USSR has had pretty powerful military, which was in some narrow areas competitive, or even superior to the USA, but when the ideology of Bolshevism collapsed, the elite changed sides and adopted a neoliberal ideology. This betrayal led to the collapse of the USSR and all its mighty military and the vast KGB apparatus proved to be useless.

In this sense, the article is weak, and some comments are of a higher level than the article itself in the level of understanding of the situation (Simon in London at December 21, 2018, at 9:23 am one example; longevity of neoliberalism partially is connected to the fact that so far there is no clear alternative to it and without the crisis similar to Great Depression adoption of New Deal style measures is impossible )

It is really sad that the understanding that the destiny of the USA is now tied to the destiny of neoliberalism (much like the USSR and Bolshevism) is foreign for many.

So it might well be that the main danger for the US neoliberal empire now is not China or Russia, but the end of cheap oil, which might facilitate the collapse of neoliberalism as a social system based on wasteful use on commodities (and first of all oil)

One fascinating fact that escapes my understanding is why the USA elite wasted colossal advantage it got after the collapse of the USSR in just 25 years or so. I always thought that the USA elite is the most shrewd out of all countries.

May be because they were brainwashed by neocon "intellectuals." I understand that most neocons are simply lobbyists of MIC, and MIC has huge political influence, but still neocon doctrine is so primitive that no civilized elite can take it seriously.

I also understand Eisenhower hypocritical laments that "train with MIC left the station" and that the situation can't be reversed (lament disguised as a "warning"; let's remember that it was Eisenhower who appointed Allen Dulles to head the CIA.

[Jul 06, 2019] >Neoliberal economics and other fairytales about money by Peter McKenna

Notable quotes:
"... Aditya Chakrabortty ( It's reckless. But a Tory cash splurge could win an election , 3 July) is right to point out the hypocrisy of the political right about public expenditure. While progressive proposals for public spending are decried as burdening the hard-pressed taxpayer, the right is happy to use public money to rescue the banks or boost their electoral chances. ..."
"... As I explain in my book Money: Myths, Truths and Alternatives, neoliberal economics is built on a fairytale about money that distorts our view of how a contemporary public money system operates. It is assumed that public spending depends on extracting money from the market and that money (like gold) is always in short supply. Neither is true. Both the market and the state generate money – the market through bank lending and the state through public spending. Both increase the money supply, while bank loan repayments and taxation reduce it. There is no natural shortage of money – which today mainly exists only as data. ..."
Jul 04, 2019 | www.theguardian.com

Neoliberal economics and other fairytales about money Politics is not about a struggle over a fixed pot of money, says Mary Mellor, and the best way to end austerity is to reject it as an ideology, says Peter McKenna

Aditya Chakrabortty ( It's reckless. But a Tory cash splurge could win an election , 3 July) is right to point out the hypocrisy of the political right about public expenditure. While progressive proposals for public spending are decried as burdening the hard-pressed taxpayer, the right is happy to use public money to rescue the banks or boost their electoral chances.

As I explain in my book Money: Myths, Truths and Alternatives, neoliberal economics is built on a fairytale about money that distorts our view of how a contemporary public money system operates. It is assumed that public spending depends on extracting money from the market and that money (like gold) is always in short supply. Neither is true. Both the market and the state generate money – the market through bank lending and the state through public spending. Both increase the money supply, while bank loan repayments and taxation reduce it. There is no natural shortage of money – which today mainly exists only as data.

ss="rich-link tone-news--item rich-link--pillar-news"> Business Today: sign up for a morning shot of financial news Read more

The case for austerity missed the point. Politics is not about a struggle over a fixed pot of money. What is limited are resources (particularly the environment) and human capacity. How these are best used should be a matter of democratic debate. The allocation of money should depend on the priorities identified. In this the market has no more claim than the public economy to be the source of sustainable human welfare.
Professor Mary Mellor
Newcastle upon Tyne

• Over the years Aditya Chakrabortty has provided us with powerful critiques of austerity. His message now – that EU membership "is the best way to end austerity" – overlooks the fact that the UK was in the EU all that time.

Moreover, the EU's stability and growth pact requires that budget deficits and public debt be pegged below 3% and 60% of GDP respectively.

Such notions are the beating heart of austerity, and the European commission's excessive deficit procedure taken against errant states has almost universally resulted in swingeing austerity programmes. These were approved and monitored by the commission and council, with the UK only taken off the naughty step in 2017 after years of crippling austerity finally reduced the deficit to 2.3% of GDP.

The best way to end austerity – and to sway voters – is to reject austerity as an ideology regardless of remain or leave, and rehabilitate the concept of public investment in a people's economy.
Peter McKenna

[Jun 22, 2019] Use of science by the US politicians

Highly recommended!
Notable quotes:
"... "the administrator uses social science the way the drunk uses a lamppost, for support rather than illumination." Scholars' disinclination to be used in this way helps explain more of the distance. ..."
Jun 16, 2019 | www.theamericanconservative.com

The evidence suggests that foreign policymakers do not seek insight from scholars, but rather support for what they already want to do.

As Desch quotes a World War II U.S. Navy anthropologist, "the administrator uses social science the way the drunk uses a lamppost, for support rather than illumination." Scholars' disinclination to be used in this way helps explain more of the distance.

[Jun 19, 2019] Bias bias the inclination to accuse people of bias by James Thompson

Highly recommended!
Notable quotes:
"... Early in any psychology course, students are taught to be very cautious about accepting people's reports. A simple trick is to stage some sort of interruption to the lecture by confederates, and later ask the students to write down what they witnessed. Typically, they will misremember the events, sequences and even the number of people who staged the tableaux. Don't trust witnesses, is the message. ..."
"... The three assumptions -- lack of rationality, stubbornness, and costs -- imply that there is slim chance that people can ever learn or be educated out of their biases; ..."
"... So, are we as hopeless as some psychologists claim we are? In fact, probably not. Not all the initial claims have been substantiated. For example, it seems we are not as loss averse as previously claimed. Does our susceptibility to printed visual illusions show that we lack judgement in real life? ..."
"... Well the sad fact is that there's nobody in the position to protect "governments" from their own biases, and "scientists" from theirs ..."
"... Long ago a lawyer acquaintance, referring to a specific judge, told me that the judge seemed to "make shit up as he was going along". I have long held psychiatry fits that statement very well. ..."
"... Here we have a real scientist fighting the nonsense spreading from (neoclassical) economics into other realms of science/academia. ..."
"... Behavioral economics is a sideline by-product of neoclassical micro-economic theory. It tries to cope with experimental data that is inconsistent with that theory. ..."
"... Everything in neoclassical economics is a travesty. "Rational choice theory" and its application in "micro economics" is false from the ground up. It basically assumes that people are gobbling up resources without plan, meaning or relevant circumstances. Neoclassical micro economic theory is so false and illogical that I would not know where to start in a comment, so I should like to refer to a whole book about it: Keen, Steve: "Debunking economics". ..."
"... As the theory is totally wrong it is really not surprising that countless experiments show that people do not behave the way neoclassical theory predicts. How do economists react to this? Of course they assume that people are "irrational" because they do not behave according to their studied theory. (Why would you ever change your basic theory because of some tedious facts?) ..."
"... The title of the 1st ed. of Keen's book was "Debunking Economics: The Naked Emperor of the Social Sciences" which was simply a perfect title. ..."
Jun 19, 2019 | www.unz.com

Early in any psychology course, students are taught to be very cautious about accepting people's reports. A simple trick is to stage some sort of interruption to the lecture by confederates, and later ask the students to write down what they witnessed. Typically, they will misremember the events, sequences and even the number of people who staged the tableaux. Don't trust witnesses, is the message.

Another approach is to show visual illusions, such as getting estimates of line lengths in the Muller-Lyer illusion, or studying simple line lengths under social pressure, as in the Asch experiment, or trying to solve the Peter Wason logic problems, or the puzzles set by Kahneman and Tversky. All these appear to show severe limitations of human judgment. Psychology is full of cautionary tales about the foibles of common folk.

As a consequence of this softening up, psychology students come to regard themselves and most people as fallible, malleable, unreliable, biased and generally irrational. No wonder psychologists feel superior to the average citizen, since they understand human limitations and, with their superior training, hope to rise above such lowly superstitions.

However, society still functions, people overcome errors and many things work well most of the time. Have psychologists, for one reason or another, misunderstood people, and been too quick to assume that they are incapable of rational thought?

Gerd Gigerenzer thinks so.

https://www.nowpublishers.com/article/OpenAccessDownload/RBE-0092

He is particularly interested in the economic consequences of apparent irrationality, and whether our presumed biases really result in us making bad economic decisions. If so, some argue we need a benign force, say a government, to protect us from our lack of capacity. Perhaps we need a tattoo on our forehead: Diminished Responsibility.

The argument leading from cognitive biases to governmental paternalism -- in short, the irrationality argument -- consists of three assumptions and one conclusion:

1. Lack of rationality. Experiments have shown that people's intuitions are systematically biased.

2. Stubbornness. Like visual illusions, biases are persistent and hardly corrigible by education.

3. Substantial costs. Biases may incur substantial welfare-relevant costs such as lower wealth, health, or happiness.

4. Biases justify governmental paternalism. To protect people from theirbiases, governments should "nudge" the public toward better behavior.

The three assumptions -- lack of rationality, stubbornness, and costs -- imply that there is slim chance that people can ever learn or be educated out of their biases; instead governments need to step in with a policy called libertarian paternalism (Thaler and Sunstein, 2003).

So, are we as hopeless as some psychologists claim we are? In fact, probably not. Not all the initial claims have been substantiated. For example, it seems we are not as loss averse as previously claimed. Does our susceptibility to printed visual illusions show that we lack judgement in real life?

In Shepard's (1990) words, "to fool a visual system that has a full binocular and freely mobile view of a well-illuminated scene is next to impossible" (p. 122). Thus, in psychology, the visual system is seen more as a genius than a fool in making intelligent inferences, and inferences, after all, are necessary for making sense of the images on the retina.

Most crucially, can people make probability judgements? Let us see. Try solving this one:

A disease has a base rate of .1, and a test is performed that has a hit rate of .9 (the conditional probability of a positive test given disease) and a false positive rate of .1 (the conditional probability of a positive test given no disease). What is the probability that a random person with a positive test result actually has the disease?

Most people fail this test, including 79% of gynaecologists giving breast screening tests. Some researchers have drawn the conclusion that people are fundamentally unable to deal with conditional probabilities. On the contrary, there is a way of laying out the problem such that most people have no difficulty with it. Watch what it looks like when presented as natural frequencies:

Among every 100 people, 10 are expected to have a disease. Among those 10, nine are expected to correctly test positive. Among the 90 people without the disease, nine are expected to falsely test positive. What proportion of those who test positive actually have the disease?

In this format the positive test result gives us 9 people with the disease and 9 people without the disease, so the chance that a positive test result shows a real disease is 50/50. Only 13% of gynaecologists fail this presentation.

Summing up the virtues of natural frequencies, Gigerenzer says:

When college students were given a 2-hour course in natural frequencies, the number of correct Bayesian inferences increased from 10% to 90%; most important, this 90% rate was maintained 3 months after training (Sedlmeier and Gigerenzer, 2001). Meta-analyses have also documented the "de-biasing" effect, and natural frequencies are now a technical term in evidence-based medicine (Akiet al., 2011; McDowell and Jacobs, 2017). These results are consistent with a long literature on techniques for successfully teaching statistical reasoning (e.g., Fonget al., 1986). In sum, humans can learn Bayesian inference quickly if the information is presented in natural frequencies.

If the problem is set out in a simple format, almost all of us can all do conditional probabilities.

I taught my medical students about the base rate screening problem in the late 1970s, based on: Robyn Dawes (1962) "A note on base rates and psychometric efficiency". Decades later, alarmed by the positive scan detection of an unexplained mass, I confided my fears to a psychiatrist friend. He did a quick differential diagnosis on bowel cancer, showing I had no relevant symptoms, and reminded me I had lectured him as a student on base rates decades before, so I ought to relax. Indeed, it was false positive.

Here are the relevant figures, set out in terms of natural frequencies

Every test has a false positive rate (every step is being taken to reduce these), and when screening is used for entire populations many patients have to undergo further investigations, sometimes including surgery.

Setting out frequencies in a logical sequence can often prevent misunderstandings. Say a man on trial for having murdered his spouse has previously physically abused her. Should his previous history of abuse not be raised in Court because only 1 woman in 2500 cases of abuse is murdered by her abuser? Of course, whatever a defence lawyer may argue and a Court may accept, this is back to front. OJ Simpson was not on trial for spousal abuse, but for the murder of his former partner. The relevant question is: what is the probability that a man murdered his partner, given that she has been murdered and that he previously battered her.

Accepting the figures used by the defence lawyer, if 1 in 2500 women are murdered every year by their abusive male partners, how many women are murdered by men who did not previously abuse them? Using government figures that 5 women in 100,000 are murdered every year then putting everything onto the same 100,000 population, the frequencies look like this:

So, 40 to 5, it is 8 times more probable that abused women are murdered by their abuser. A relevant issue to raise in Court about the past history of an accused man.

Are people's presumed biases costly, in the sense of making them vulnerable to exploitation, such that they can be turned into a money pump, or is it a case of "once bitten, twice shy"? In fact, there is no evidence that these apparently persistent logical errors actually result in people continually making costly errors. That presumption turns out to be a bias bias.

Gigerenzer goes on to show that people are in fact correct in their understanding of the randomness of short sequences of coin tosses, and Kahneman and Tversky wrong. Elegantly, he also shows that the "hot hand" of successful players in basketball is a real phenomenon, and not a stubborn illusion as claimed.

With equal elegance he disposes of a result I had depended upon since Slovic (1982), which is that people over-estimate the frequency of rare risks and under-estimate the frequency of common risks. This finding has led to the belief that people are no good at estimating risk. Who could doubt that a TV series about Chernobyl will lead citizens to have an exaggerated fear of nuclear power stations?

The original Slovic study was based on 39 college students, not exactly a fair sample of humanity. The conceit of psychologists knows no bounds. Gigerenzer looks at the data and shows that it is yet another example of regression to the mean. This is an apparent effect which arises whenever the predictor is less than perfect (the most common case), an unsystematic error effect, which is already evident when you calculate the correlation coefficient. Parental height and their children's heights are positively but not perfectly correlated at about r = 0.5. Predictions made in either direction will under-predict in either direction, simply because they are not perfect, and do not capture all the variation. Try drawing out the correlation as an ellipse to see the effect of regression, compared to the perfect case of the straight line of r= 1.0

What diminishes in the presence of noise is the variability of the estimates, both the estimates of the height of the sons based on that of their fathers, and vice versa. Regression toward the mean is a result of unsystematic, not systematic error (Stigler,1999).

Gigerenzer also looks at the supposed finding that people are over-confidence in predictions, and finds that it is another regression to the mean problem.

Gigerenzer then goes on to consider that old favourite, that most people think they are better than average, which supposedly cannot be the case, because average people are average.

Consider the finding that most drivers think they drive better than average. If better driving is interpreted as meaning fewer accidents, then most drivers' beliefs are actually true. The number of accidents per person has a skewed distribution, and an analysis of U.S. accident statistics showed that some 80% of drivers have fewer accidents than the average number of accidents (Mousavi and Gigerenzer, 2011)

Then he looks at the classical demonstration of framing, that is to say, the way people appear to be easily swayed by how the same facts are "framed" or presented to the person who has to make a decision.

A patient suffering from a serious heart disease considers high-risk surgery and asks a doctor about its prospects.

The doctor can frame the answer in two ways:

Positive Frame: Five years after surgery, 90% of patients are alive.
Negative Frame: Five years after surgery, 10% of patients are dead.

Should the patient listen to how the doctor frames the answer? Behavioral economists say no because both frames are logically equivalent (Kahneman, 2011). Nevertheless, people do listen. More are willing to agree to a medical procedure if the doctor uses positive framing (90% alive) than if negative framing is used (10% dead) (Moxeyet al., 2003). Framing effects challenge the assumption of stable preferences, leading to preference reversals. Thaler and Sunstein (2008) who presented the above surgery problem, concluded that "framing works because people tend to be somewhat mindless, passive decisionmakers" (p. 40)

Gigerenzer points out that in this particular example, subjects are having to make their judgements without knowing a key fact: how many survive without surgery. If you know that you have a datum which is more influential. These are the sorts of questions patients will often ask about, and discuss with other patients, or with several doctors. Furthermore, you don't have to spin a statistic. You could simply say: "Five years after surgery, 90% of patients are alive and 10% are dead".

Gigerenzer gives an explanation which is very relevant to current discussions about the meaning of intelligence, and about the power of intelligence tests:

In sum, the principle of logical equivalence or "description invariance" is a poor guide to understanding how human intelligence deals with an uncertain world where not everything is stated explicitly. It misses the very nature of intelligence, the ability to go beyond the information given (Bruner, 1973)

The key is to take uncertainty seriously, take heuristics seriously, and beware of the bias bias.

One important conclusion I draw from this entire paper is that the logical puzzles enjoyed by Kahneman, Tversky, Stanovich and others are rightly rejected by psychometricians as usually being poor indicators of real ability. They fail because they are designed to lead people up the garden path, and depend on idiosyncratic interpretations.

For more detail: http://www.unz.com/jthompson/the-tricky-question-of-rationality/

Critics of examinations of either intellectual ability or scholastic attainment are fond of claiming that the items are "arbitrary". Not really. Scholastic tests have to be close to the curriculum in question, but still need to a have question forms which are simple to understand so that the stress lies in how students formulate the answer, not in how they decipher the structure of the question.

Intellectual tests have to avoid particular curricula and restrict themselves to the common ground of what most people in a community understand. Questions have to be super-simple, so that the correct answer follows easily from the question, with minimal ambiguity. Furthermore, in the case of national scholastic tests, and particularly in the case of intelligence tests, legal authorities will pore over the test, looking at each item for suspected biases of a sexual, racial or socio-economic nature. Designing an intelligence test is a difficult and expensive matter. Many putative new tests of intelligence never even get to the legal hurdle, because they flounder on matters of reliability and validity, and reveal themselves to be little better than the current range of assessments.

In conclusion, both in psychology and behavioural economics, some researchers have probably been too keen to allege bias in cases where there are unsystematic errors, or no errors at all. The corrective is to learn about base rates, and to use natural frequencies as a guide to good decision-making.

Don't bother boosting your IQ. Boost your understanding of natural frequencies.


res , says: June 17, 2019 at 3:29 pm GMT

Good concrete advice. Perhaps even more useful for those who need to explain things like this to others than for those seeking to understand for themselves.
ThreeCranes , says: June 17, 2019 at 3:34 pm GMT
"intelligence deals with an uncertain world where not everything is stated explicitly. It misses the very nature of intelligence, the ability to go beyond the information given (Bruner, 1973)"

"The key is to take uncertainty seriously, take heuristics seriously, and beware of the bias bias."

Why I come to Unz.

Tom Welsh , says: June 18, 2019 at 8:36 am GMT
@Cortes Sounds fishy to me.

Actually I think this is an example of an increasingly common genre of malapropism, where the writer gropes for the right word, finds one that is similar, and settles for that. The worst of it is that readers intuitively understand what was intended, and then adopt the marginally incorrect usage themselves. That's perhaps how the world and his dog came to say "literally" when they mean "figuratively". Maybe a topic for a future article?

Biff , says: June 18, 2019 at 10:16 am GMT
In 2009 Google finished engineering a reverse search engine to find out what kind of searches people did most often. Seth Davidowitz and Steven Pinker wrote a very fascinating/entertaining book using the tool called Everybody Lies

https://www.goodreads.com/book/show/28512671-everybody-lies

Everybody Lies offers fascinating, surprising, and sometimes laugh-out-loud insights into everything from economics to ethics to sports to race to sex, gender, and more, all drawn from the world of big data. What percentage of white voters didn't vote for Barack Obama because he's black? Does where you go to school effect how successful you are in life? Do parents secretly favor boy children over girls? Do violent films affect the crime rate? Can you beat the stock market? How regularly do we lie about our sex lives, and who's more self-conscious about sex, men or women?

Investigating these questions and a host of others, Seth Stephens-Davidowitz offers revelations that can help us understand ourselves and our lives better. Drawing on studies and experiments on how we really live and think, he demonstrates in fascinating and often funny ways the extent to which all the world is indeed a lab. With conclusions ranging from strange-but-true to thought-provoking to disturbing, he explores the power of this digital truth serum and its deeper potential – revealing biases deeply embedded within us, information we can use to change our culture, and the questions we're afraid to ask that might be essential to our health – both emotional and physical. All of us are touched by big data every day, and its influence is multiplying. Everybody Lies challenges us to think differently about how we see it and the world.

dearieme , says: June 18, 2019 at 11:25 am GMT
I shall treat this posting (for which many thanks, doc) as an invitation to sing a much-loved song: everybody should read Gigerenzer's Reckoning with Risk. With great clarity it teaches what everyone ought to know about probability.

(It could also serve as a model for writing in English about technical subjects. Americans and Britons should study the English of this German – he knows how, you know.)

Inspired by "The original Slovic study was based on 39 college students" I shall also sing another favorite song. Much of Psychology is based on what small numbers of American undergraduates report they think they think.

Anon [410] • Disclaimer , says: June 18, 2019 at 3:47 pm GMT
" Gigerenzer points out that in this particular example, subjects are having to make their judgements without knowing a key fact: how many survive without surgery. "

This one reminds of the false dichotomy. The patient has additional options! Like changing diet, and behaviours such as exercise, elimination of occupational stress , etc.

The statistical outcomes for a person change when the person changes their circumstances/conditions.

Cortes , says: June 18, 2019 at 4:14 pm GMT
@Tom Welsh A disposition (conveyance) of an awkwardly shaped chunk out of a vast estate contained reference to "the slither of ground bounded on or towards the north east and extending two hundred and twenty four meters or thereby along a chain link fence " Not poor clients (either side) nor cheap lawyers. And who never erred?

Better than deliberately inserting "errors" to guarantee a stream of tidy up work (not unknown in the "professional" world) in future.

Tom Fix , says: June 18, 2019 at 4:25 pm GMT
Good article. 79% of gynaecologists fail a simple conditional probability test?! Many if not most medical research papers use advanced statistics. Medical doctors must read these papers to fully understand their field. So, if medical doctors don't fully understand them, they are not properly doing their job. Those papers use mathematical expressions, not English. Converting them to another form of English, instead of using the mathematical expressions isn't a solution.
SafeNow , says: June 18, 2019 at 5:49 pm GMT
Regarding witnesses: When that jet crashed into Rockaway several years ago, a high percentage of witnesses said that they saw smoke before the crash. But there was actually no smoke. The witnesses were adjusting what they saw to conform to their past experience of seeing movie and newsreel footage of planes smoking in the air before a crash. Children actually make very good witnesses.

Regarding the chart. Missing, up there in the vicinity of cancer and heart disease. The third-leading cause of death. 250,000 per year, according to a 2016 Hopkins study. Medical negligence.

Anon [724] • Disclaimer , says: June 18, 2019 at 9:48 pm GMT

1. Lack of rationality. Experiments have shown that people's intuitions are systematically biased.

2. Stubbornness. Like visual illusions, biases are persistent and hardly corrigible by education.

3. Substantial costs. Biases may incur substantial welfare-relevant costs such as lower wealth, health, or happiness.

4. Biases justify governmental paternalism. To protect people from theirbiases, governments should "nudge" the public toward better behavior.

Well the sad fact is that there's nobody in the position to protect "governments" from their own biases, and "scientists" from theirs.

So, behind the smoke of all words and rationalisations, the law is unchanged: everyone strives to gain and exert as much power as possible over as many others as possible. Most do that without writing papers to say it is right, others write papers, others books. Anyway, the fundamental law would stay as it is even if all this writing labour was spared, wouldn't it? But then another fundamental law, the law of framing all one's drives as moral and beneffective comes into play the papers and the books are useful, after all.

Curmudgeon , says: June 19, 2019 at 1:42 am GMT
An interesting article. However, I think that the only thing we have to know about how illogical psychiatry is this:

In 1973, the American Psychiatric Association (APA) asked all members attending its convention to vote on whether they believed homosexuality to be a mental disorder. 5,854 psychiatrists voted to remove homosexuality from the DSM, and 3,810 to retain it.

The APA then compromised, removing homosexuality from the DSM but replacing it, in effect, with "sexual orientation disturbance" for people "in conflict with" their sexual orientation. Not until 1987 did homosexuality completely fall out of the DSM.

(source https://www.psychologytoday.com/ca/blog/hide-and-seek/201509/when-homosexuality-stopped-being-mental-disorder )

The article makes no mention of the fact that no "new science" was brought to support the resolution.

It appears that the psychiatrists were voting based on feelings rather than science. Since that time, the now 50+ genders have been accepted as "normal" by the APA. My family has had members in multiple generations suffering from mental illness. None were "cured". I know others with the same circumstances.

How does one conclude that being repulsed by the prime directive of every living organism – reproduce yourself – is "normal"? That is not to say these people are horrible or evil, just not normal. How can someone, who thinks (s)he is a cat be mentally ill, but a grown man thinking he is a female child is not?

Long ago a lawyer acquaintance, referring to a specific judge, told me that the judge seemed to "make shit up as he was going along". I have long held psychiatry fits that statement very well.

Paul2 , says: June 19, 2019 at 8:08 am GMT
Thank you for this article. I find the information about the interpretation of statistical data very interesting. My take on the background of the article is this:

Here we have a real scientist fighting the nonsense spreading from (neoclassical) economics into other realms of science/academia.

Behavioral economics is a sideline by-product of neoclassical micro-economic theory. It tries to cope with experimental data that is inconsistent with that theory.

Everything in neoclassical economics is a travesty. "Rational choice theory" and its application in "micro economics" is false from the ground up. It basically assumes that people are gobbling up resources without plan, meaning or relevant circumstances. Neoclassical micro economic theory is so false and illogical that I would not know where to start in a comment, so I should like to refer to a whole book about it:
Keen, Steve: "Debunking economics".

As the theory is totally wrong it is really not surprising that countless experiments show that people do not behave the way neoclassical theory predicts. How do economists react to this? Of course they assume that people are "irrational" because they do not behave according to their studied theory. (Why would you ever change your basic theory because of some tedious facts?)

We live in a strange world in which such people have control over university faculties, journals, famous prizes. But at least we have some scientists who defend their area of knowledge against the spreading nonsense produced by economists.

The title of the 1st ed. of Keen's book was "Debunking Economics: The Naked Emperor of the Social Sciences" which was simply a perfect title.

Dieter Kief , says: June 19, 2019 at 8:22 am GMT
@Curmudgeon Could it be that you expect psychiatrists in the past to be as rational as you are now?

Would the result have been any different, if members of a 1973 convention of physicists or surgeons would have been asked?

[May 28, 2019] he economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions

May 28, 2019 | www.zerohedge.com

As economist Russ Roberts once wrote in the Wall Street Journal,

"The economy is a complex system, our data are imperfect and our models inevitably fail to account for all the interactions. The bottom line is that we should expect less of economists. Economics is a powerful tool, a lens for organizing one's thinking about the complexity of the world around us. That should be enough. We should be honest about what we know, what we don't know and what we may never know. Admitting that publicly is the first step toward respectability."

In the same vein, I would urge new graduates to be skeptical of those in power who flatter them with the lie that they can, if only they are sufficiently resolute, solve big social problems through government interventions. The truth is that even the best-intentioned government officials do not -- indeed, cannot possibly -- have the knowledge necessary to deliver on any grand promises.

Sadly, this lack of knowledge never stops politicians from spending all of their time pretending that they know it all and none of their time humbly reflecting on the arrogance of attempts to boss the rest of us around. Making matters worse is the fact that the decision-making process in government is not conducive to the best policies. Quite the opposite, in fact. See, politicians spend other people's money and are unduly influenced by special interests. As such, their interests are never served by their taking account of the true costs of their programs, or acknowledging the (too-often invisible) victims of their interventions.

[May 13, 2019] I studied this phenomenon experientially for over 8 years among conservative Republican followers, and believe it is totally Cult behavior.

May 13, 2019 | discussion.theguardian.com

MindandHeart , 13 Sep 2016 01:23

I studied this phenomenon experientially for over 8 years among conservative Republican followers, and believe it is totally Cult behavior. I've seen contrary evidence literally "switch off" the thinking brain, erasing it, then finding the appropriate Party Line to answer. There seems to be no way to "de-program," that I know of. It is impervious to reason, evidence, or facts. When they were left with no other choices, I saw how Donald Trump was transformed from an initially appalling character to them into an image of a "leader of the Free World," in their realities. They had already been conditioned by some 30 years of Hillary bashing, to unmercifully hate her. Their leaders used the same propaganda machine on Obama. "Liberals" were the ultimate "enemy" and to blame for all our ills.

Barring further evidence to the contrary, I concluded that those most vulnerable to this Cult phenomenon had a strong, authoritarian religious upbringing in childhood, and perhaps some significant life hurt or trauma.

Many of our religious "leaders" have jumped on the gravy train, to control and exploit them, using the same methods used by Donald Trump. Scapegoating is constant. Questioning and critical thinking are not allowed. These folks were "primed" to believe and follow the superb conservative Republican media propaganda machine that now boasts 24/7 coverage "coast to coast." I read that the average American watches television 5 hours a day. The average American over 65 watches it 7 hours a day. Adolf Hitler would have loved it. Such fertile ground for dictators and demagogues. Now we have some, what, 13 million? programmed American zombies on our hands. Not only that, but ALL of us have been "affected" by the Hillary/Obama/"liberal" bashing to some extent. I don't know a single individual personally who speaks out enthusiastically for Hillary, even those going to vote for her: they always use apologies, excuses, caveats. By odds, that's just not normal. As John Dean wrote, Republicans can no longer govern, but they are superb at the "politics of personal destruction." They successfully purged their own moderates and liberals, turned the Grand Old Party's principles upside down, and created a Trump Godzilla. They've become a gang of thugs and thieves, the Poison Party. Some are playing "coy" right now, for the limelight they love -- and trying to hedge their bets. But if Trump wins he'll be welcomed with open arms, and he will fit right in, with what's now left of the GOP.

[Apr 08, 2019] Economists are ideologically biased

Sometime neoliberal economics act as the Thought Police. Peddling neoclassic economy bullshit create a dreadful environments of a cult and there are enforces on each corner to ensure students indoctrination.
Apr 08, 2019 | www.moonofalabama.org
vk , Apr 7, 2019 5:50:27 PM | 55 ">link

From Michael Roberts' facebook:

Economists are ideologically biased - finds a survey of their views on modern economies conducted by Mark Horowitz, Associate Professor of Sociology at Seton Hall University, New Jersey, entitled Political Identity and Economists' Perceptions of Capitalist Crises.

Economists' Politics Loom Large in their Views of Capitalist Crises

"Surveying academic economists in the United States, we find the field quite skeptical of the prospects of capitalist crises. Despite considerable consensus, political orientation is a highly significant predictor of respondents' outlooks."

"economists are generally skeptical of the prospects of capitalist crises. Very few see mass structural unemployment on the horizon due to automation (Q2) or incompatibility between capitalism and secure or meaningful employment (Q4, Q5). Only a third or so anticipates global financial contagion (Q1), while even fewer affirm a systemic tendency toward monopoly (Q11). Finally, at least two-thirds believe the global economy will likely be capitalist in 200 years (Q8)".

Marx on 'vulgar political economy': "It was henceforth no longer a question, whether this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers, there were hired prize-fighters; in place of genuine scientific research, the bad conscience and the evil intent of apologetic"

[Apr 05, 2019] I felt mathematicians were not examining the role of their discipline in the crisis; they were not behaving ethically.

Apr 05, 2019 | magic-maths-money.blogspot.com
I frequently refer to Gillian Tett's Fools' Gold as an account of ethical mathematical practice. Tett explains how J.P. Morgan came out of the 2008-2009 Financial Crisis because it used mathematics critically rather than blindly accepting the outputs of "black boxes". I felt the approach Tett described was oddly discordant with the attitude of mathematicians. During the crisis, I co-ordinated a response from UK mathematicians, through the Council of Mathematical Sciences, to criticism of the use of mathematics in finance, this information was also passed onto the UK Science Minister of the time.

The standard response from (senior) UK mathematicians was along the lines that finance hadn't used mathematics but abused it.

The solution was to have "more" and "better" mathematicians. This was underpinned by some adopting a logical positivist line, attributed to Hume, that the role of mathematicians is to describe the world as it is, not as it ought to be.

At the time I felt mathematicians were not examining the role of their discipline in the crisis; they were not behaving ethically. This was the start of my journey that transformed me from an "uncritical" (unethical?) mathematician to someone who feels mathematics is vital, so long as it is critical.

[Apr 03, 2019] The political genius of supply-side economics by Martin Wolf&

Jul 25, 2010 | blogs.ft.com

The future of fiscal policy was intensely debated in the FT last week. In this Exchange, I want to examine what is going on in the US and, in particular, what is going on inside the Republican party. This matters for the US and, because the US remains the world's most important economy, it also matters greatly for the world.

My reading of contemporary Republican thinking is that there is no chance of any attempt to arrest adverse long-term fiscal trends should they return to power. Moreover, since the Republicans have no interest in doing anything sensible, the Democrats will gain nothing from trying to do much either. That is the lesson Democrats have to draw from the Clinton era's successful frugality, which merely gave George W. Bush the opportunity to make massive (irresponsible and unsustainable) tax cuts. In practice, then, nothing will be done.

Indeed, nothing may be done even if a genuine fiscal crisis were to emerge. According to my friend, Bruce Bartlett , a highly informed, if jaundiced, observer, some "conservatives" (in truth, extreme radicals) think a federal default would be an effective way to bring public spending they detest under control. It should be noted, in passing, that a federal default would surely create the biggest financial crisis in world economic history.

To understand modern Republican thinking on fiscal policy, we need to go back to perhaps the most politically brilliant (albeit economically unconvincing) idea in the history of fiscal policy: "supply-side economics". Supply-side economics liberated conservatives from any need to insist on fiscal rectitude and balanced budgets. Supply-side economics said that one could cut taxes and balance budgets, because incentive effects would generate new activity and so higher revenue.

The political genius of this idea is evident. Supply-side economics transformed Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not like a free lunch?

How did supply-side economics bring these benefits? First, it allowed conservatives to ignore deficits. They could argue that, whatever the impact of the tax cuts in the short run, they would bring the budget back into balance, in the longer run. Second, the theory gave an economic justification – the argument from incentives - for lowering taxes on politically important supporters. Finally, if deficits did not, in fact, disappear, conservatives could fall back on the "starve the beast" theory: deficits would create a fiscal crisis that would force the government to cut spending and even destroy the hated welfare state.

In this way, the Republicans were transformed from a balanced-budget party to a tax-cutting party. This innovative stance proved highly politically effective, consistently putting the Democrats at a political disadvantage. It also made the Republicans de facto Keynesians in a de facto Keynesian nation. Whatever the rhetoric, I have long considered the US the advanced world's most Keynesian nation – the one in which government (including the Federal Reserve) is most expected to generate healthy demand at all times, largely because jobs are, in the US, the only safety net for those of working age.

True, the theory that cuts would pay for themselves has proved altogether wrong. That this might well be the case was evident: cutting tax rates from, say, 30 per cent to zero would unambiguously reduce revenue to zero. This is not to argue there were no incentive effects. But they were not large enough to offset the fiscal impact of the cuts (see, on this, Wikipedia and a nice chart from Paul Krugman).

Indeed, Greg Mankiw, no less, chairman of the Council of Economic Advisers under George W. Bush, has responded to the view that broad-based tax cuts would pay for themselves, as follows: "I did not find such a claim credible, based on the available evidence. I never have, and I still don't." Indeed, he has referred to those who believe this as " charlatans and cranks ". Those are his words, not mine, though I agree. They apply, in force, to contemporary Republicans, alas,

Since the fiscal theory of supply-side economics did not work, the tax-cutting eras of Ronald Reagan and George H. Bush and again of George W. Bush saw very substantial rises in ratios of federal debt to gross domestic product. Under Reagan and the first Bush, the ratio of public debt to GDP went from 33 per cent to 64 per cent. It fell to 57 per cent under Bill Clinton. It then rose to 69 per cent under the second George Bush . Equally, tax cuts in the era of George W. Bush, wars and the economic crisis account for almost all the dire fiscal outlook for the next ten years ( see the Center on Budget and Policy Priorities ).

Today's extremely high deficits are also an inheritance from Bush-era tax-and-spending policies and the financial crisis, also, of course, inherited by the present administration. Thus, according to the International Monetary Fund, the impact of discretionary stimulus on the US fiscal deficit amounts to a cumulative total of 4.7 per cent of GDP in 2009 and 2010, while the cumulative deficit over these years is forecast at 23.5 per cent of GDP . In any case, the stimulus was certainly too small, not too large.

The evidence shows, then, that contemporary conservatives (unlike those of old) simply do not think deficits matter, as former vice-president Richard Cheney is reported to have told former treasury secretary Paul O'Neill . But this is not because the supply-side theory of self-financing tax cuts, on which Reagan era tax cuts were justified, has worked, but despite the fact it has not. The faith has outlived its economic (though not its political) rationale.

So, when Republicans assail the deficits under President Obama , are they to be taken seriously? Yes and no. Yes, they are politically interested in blaming Mr Obama for deficits, since all is viewed fair in love and partisan politics. And yes, they are, indeed, rhetorically opposed to deficits created by extra spending (although that did not prevent them from enacting the unfunded prescription drug benefit, under President Bush). But no, it is not deficits themselves that worry Republicans, but rather how they are caused: deficits caused by tax cuts are fine; but spending increases brought in by Democrats are diabolical, unless on the military.

Indeed, this is precisely what John Kyl (Arizona), a senior Republican senator, has just said:

"[Y]ou should never raise taxes in order to cut taxes. Surely Congress has the authority, and it would be right to -- if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans"

What conclusions should outsiders draw about the likely future of US fiscal policy?

First, if Republicans win the mid-terms in November, as seems likely, they are surely going to come up with huge tax cut proposals (probably well beyond extending the already unaffordable Bush-era tax cuts).

Second, the White House will probably veto these cuts, making itself even more politically unpopular.

Third, some additional fiscal stimulus is, in fact, what the US needs, in the short term, even though across-the-board tax cuts are an extremely inefficient way of providing it.

Fourth, the Republican proposals would not, alas, be short term, but dangerously long term, in their impact.

Finally, with one party indifferent to deficits, provided they are brought about by tax cuts, and the other party relatively fiscally responsible (well, everything is relative, after all), but opposed to spending cuts on core programmes, US fiscal policy is paralysed. I may think the policies of the UK government dangerously austere, but at least it can act.

This is extraordinarily dangerous. The danger does not arise from the fiscal deficits of today, but the attitudes to fiscal policy, over the long run, of one of the two main parties. Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic.

In sum, a great deal of trouble lies ahead, for the US and the world.

Where am I wrong, if at all?

July 25, 2010 4:18pm in Financial crisis , Supply-side economics | 10 comments

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  1. Report Martin Wolf | July 25 5:04pm | Permalink

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    Bruce Bartlett writes "I think my friend Martin is a bit too hard on Reagan, who did try to cut spending and signed 11 major tax increases into law to bring down the deficit. And Bush 41 initiated a budget deal in 1990 that eventually led to budget surpluses. It was Bush 43 and his willing accomplices among the Republicans who controlled Congress that deserve the vast bulk of the blame."

    This is my response: "Fair comment. But, as you have often noted, his followers have repudiated president Reagan's willingness to raise taxes. Nor are they making any credible commitments to large-scale cuts in public spending. It is also the case that, despite a boom in the 1980s, the end of the Reagan and George H. Bush era saw much higher public debt ratios than the beginning. I think you have to recognise that today's Republicans are Reagan's children and, as is often the case, are more uncompromising than their parents."

  2. Report ralbin | July 25 6:59pm | Permalink

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    Mr. Wolf - Your comment is entirely correct though perhaps incomplete. Implicit, and sometimes explicit, in the supply-side argument was that low taxes wouldn't involve any public sacrifices. The Republicans promised the benefits of the liberal state while arguing that the needed tax revenues wouldn't be needed. This is what made it and continues to make it a successful political strategy. This is an actual Big Lie.

    Its worth delineating the other Big Lie of Republican political strategy, the the USA is so powerful that it can do anything it wants on the international stage. Add in consistent appeals to racial and religious bigotry (from which the personally decent Mr. Reagan was not immune) and you have almost the whole Republican political strategy of the last 30 years. Very successful and almost all of it based on deception and appeals to the electorate's worst tendencies.

  3. Report Kent Willard | July 25 7:06pm | Permalink

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    Running up the debt in order to default and cut spending is like having a heart attack in order to get serious about diet and exercise. It is crazy, but they will do it, and then blame it on someone else.

    Any bets on a gov't shutdown attempt next year?

  4. Report Dana Houle | July 25 7:09pm | Permalink

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    I think you're assuming a lot about the results of the November elections that are far from certain. In fact, it's highly, highly unlikely that the Republicans will win the Senate, and not particularly likely they'll win the House. They will certainly pick up seats in the House, maybe a lot, but there are only a handful of Dem-held Senate seats that I would say today are pretty much lost for the Democrats (North Dakota, Arkansas), while there are also up to 8 Republican-held seats that could be in play. Democrats would have to lose 10 seats that they currently hold and not win any seats currently held by Republicans (even though 5 of those are open and Vitter in Louisiana is so scandal-plagued he may not survive). It's just about implausible the Democrats will lose a net of 10 or more seats.

    Even in the House, Democrats will have to lose almost all the contested seats, at a time when the most recent generic ballot from Gallup shows Democrats nationally with an 8 point advantage and most of the vulnerable Democratic incumbents have huge cash advantages over their Republican challengers.

    I agree with your interpretation of the political appeal of supply side economics, but I think you're greatly overestimating the ability of the Republicans to win enough seats in November to fully enact their fiscal will on the White House.

  5. Report toweypat | July 25 7:42pm | Permalink

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    "Second, the White House will probably veto these cuts"

    I wish I could agree. Given what we have seem from President Obama this past year and a half, I think he is just as likely to go along with them as part of some nebulous plan to angle for concessions from the other side, or simply to burnish his bipartisan credentials.

  6. Report JoelS | July 25 8:24pm | Permalink

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    Thanks for saying out loud what has been apparent: that Republicanism has become fundamentally destructive. I don't think there's any doubt that the empire is coming to an end, as all empires do, with the unwillingness of the populace to bear the costs and burdens. The tax revolt is, at its heart, a cancer destroying American power and prosperity.

    This is doubly unhealthy because the United States needs a healthy opposition. In its absence, the Democrats are also becoming corrupt. Their electoral appeal has increasingly become: "Vote for us. We're not insane." That's necessary, of course, but hardly sufficient. So we end up with a health care bill with no cost containment, a financial regulatory bill that does not address the speculation and institutional giantism that was at the heart of the collapse, and a stimulus bill half the size that it should have been and heavily tilted against hiring the unemployed in favor of tax cuts. The Republicans would have done worse, but that is small comfort.

    Where are you wrong? If anywhere, in having any doubts that we are on the path to destruction, will no reason to think that we will turn back.

  7. Report Till Schreiber | July 25 9:02pm | Permalink

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    A wild card in the events you outline could be the report of the bipartisan commission on reducing the long-term budget deficit. Larry Summers mentioned it in his contribution to the austerity debate. If, and it's a big if, this report is substantive enough, it might provide cover for Republicans, Democrats, and the White House to tackle long-term deficits.

    In addition, I also feel you are a bit generous in labeling the Democrats relatively fiscally responsible. Certainly, the president's budget had rather high projected deficits over the next decade (and beyond).

    Ultimately, according to the CBO a lot comes down to health care costs, particularly Medicare. Reforming Medicare and controlling the explosion of costs currently projected for it is the key. Everything else is secondary.

  8. Report Edward Hatfield | July 25 9:22pm | Permalink

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    At last you have it spot on. There will have to be a crisis because Weston democracies will not vote for wage cuts. May be it could be done if the elite took a big cut first but that will not happen as most of the elite do not see the problem as their fault.

    You recently replied to one of my emails about thestateBritainis in with the words

    "I also don't understand this masochism" Well you surely must now

  9. Report Barry Thompson | July 25 9:24pm | Permalink

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    James Galbraith says you are wrong:

    "So long as U.S. banks are required to accept U.S. government checks -- which is to say so long as the Republic exists -- then the government can and does spend without borrowing, if it chooses to do so Insolvency, bankruptcy, or even higher real interest rates are not among the actual risks to this system."

    The only real risk to the system is inflation. The need for any sovereign government that can issue its own currency to balance its budget is merely a useful fiction, of political importance but not a real economic constraint.

    Otherwise, keep up the great work!

  10. Report Richard W | July 25 9:25pm | Permalink

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    ' Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic. '

    That prospect holds no fear for the majority of contemporary Republican thinking in the party and throughout the conservative base. Withdrawal from NATO, UN and the global stage is precisely the plan. The contemporary Republican party is now more than ever aligned with the populist, reactionary and isolationist sentiments of conservative small town America. It will take many years, but I suspect America is on a long slide to an ungovernable failed state and eventual break-up of the union.

[Apr 03, 2019] Krugman is irrelevant and his promotion of Hillary is disingenuous

This is from 2015 and it certainly characterize Krugman as a despicable political hack...
Notable quotes:
"... The big story he won't write about is that the Republicans wouldn't be such a threat if Team D was worth a damn. ..."
"... The spectacle of 2009-2010 cured me of any lingering desire to vote Democrat ever again – or to waste my time reading Krugman. ..."
"... Krugman is a collaborator. His wealth and prestige is built on his capacity for perpetuating falsehoods that have had vast and deadly consequences (Obama care, for instance). ..."
"... Not to mention he was a huge advocate of NAFTA. Something he never mentions. ..."
"... Krugman's defense of Obama care either indicates a lack of intellect, or in my view the more probable possibility, the inability to accept that the system is thoroughly corrupt, including most dems and economists ..."
"... It's no excuse for someone who actually thinks and writes about public policy, but could it be that Krugman is like my fellow guests and just never had to think about the cost of his health insurance simply because he could always afford it. So, I mean, he's never done the math. He's just done the "responsible thing" and carried insurance his whole life. ..."
www.nakedcapitalism.com

Steven D.

Used to be an avid Krugman reader. But I get bored reading about how bad the Republicans are. Tell me something I don't know. The big story he won't write about is that the Republicans wouldn't be such a threat if Team D was worth a damn.

It's like they got the ball in 2009 with the field wide open for a touchdown. But since the game was fixed Team D just danced around their own 20-yard line looking for the feeble Republican defense to block them. Every time they have an opening for a good play they panic over the prospect of scoring big and contrive to fumble the ball. The most they ever want is field goals and to prevent the Republicans from running away with the game too much.

That's why Krugman can write about how scary the Republicans are. But so what? Everyone knows that. Why are they in such a position? That's the interesting story.

Barmitt O'Bamney

Indeed, and seconded: Kruggers is irrelevant. However correct his critique may be, as far as it goes, it never goes far enough since he has chosen to mutilate himself into playing the role of partisan hack. There is a beam in the Republicans' eye? Well, there is a beam in his eye, too.

The spectacle of 2009-2010 cured me of any lingering desire to vote Democrat ever again – or to waste my time reading Krugman. If my choice is between voting against my own interests on the one hand, and voting against my interests on the other, I'll just stay home or else make my vote a protest against the party that assumes it has an unconditional right to my vote. Reading about how the Republicans are always wrong, with nary a mention of how Democrats are right there with them in the latrine of wrongness isn't worth a minute more of my time – and my time isn't even very valuable.

Benedict@Large

The problem (that leads to the boredom) with reading Krugman is not that he's always talking about how bad the Republicans are. That after all is true. The problem with reading Krugman is that he's always picking on the lowest hanging fruit; the easy cases that require no special nuance or understanding. Krugman is a smart man, and he is better than this. We have all too many of us capable of picking apart the 4th grade thinking and analysis that is so common in the GOP. To add Krugman to that list is a waste of (his and our) time.

tongorad

Krugman is a smart man, and he is better than this.

Evidence, please.

Krugman is a collaborator. His wealth and prestige is built on his capacity for perpetuating falsehoods that have had vast and deadly consequences (Obama care, for instance).

hidflect

Not to mention he was a huge advocate of NAFTA. Something he never mentions.

fresno dan

Krugman's defense of Obama care either indicates a lack of intellect, or in my view the more probable possibility, the inability to accept that the system is thoroughly corrupt, including most dems and economists

Ulysses

I think the most serious problem that Paul Krugman has, in accepting that the system is thoroughly corrupt, is his internalization of the meritocratic myth. The syllogism runs as follows:

1) I have "merit"

2)The system has lavished wealth and renown on me

3)Therefore, those who claim that our system "isn't really meritocratic" must themselves lack "merit," or be deluded from too much sentimentality, or too much attention to "exceptions that prove the rule."

Tom Allen

He's also prone to defending politicians and economists with whom he's personal friends - and there are a lot of them. That's human nature, but it tends to make one skeptical of his objectivity when, for example, Larry Summers or Ben Bernanke is involved.

NotTimothyGeithner

He's also preaching to the choir. Who is Krugthullu's audience? Outside of New Yorkers, it's largely people who fantasize about finishing the Sunday crossword despite not actually trying and love to have a simplified "liberal" world view reinforced. Given how Obots use to swarm, would he have survived not towing the company line? Without his column, Krugthullu is just another economics professor without the backing of a billionaire who keeps him around as a pet. Maybe Warren Buffet would put up a nice fence to keep Krugthullu in his yard, but he would likely have to spend time in Omaha.

The flip side is Krugthullu has likely burned too many bridges to regain his 2009 status. The Obots can't handle criticism, and it's rather late to join the Obama anonymous support group.

jrs

I mostly think they keep Krug around to justify "trade" agreements. That the little battles don't matter so much compared to "trade" agreements (and in fact they don't, on the issue of healthcare, "trade" agreements are a serious threat to even those countries with better medical systems. "Trade" agreements can override other political battles, even those where Krugs position might be decent).

jo6pac

Thanks for LOL, so true.

GlobalMisanthrope

Yeah, I am completely mystified by his defense of the ACA. My employers think of themselves as good liberals (although they do not provide health insurance but rather a health stipend to a handful of top managers that we can apply toward our purchase of insurance on the exchange) and have trotted out Krugman on occasion when I have argued against the Act.

I was at a dinner party before Christmas with a diverse group of professionals hosted by a friend who is a wine maker. There were several people from the food and beverage industry, a university professor and her law school administrator spouse, an obstetrical surgeon, a rancher and three others I never got a chance to learn anything about. The subject of "Obamacare" came up. I was truly astonished by the completely fact-free conversation that ensued. So much so that I stayed silent for a long time, really not knowing what to say.

My friend, the host, noticed my expression and asked me what I thought about Obamacare. So I described it as the boondoggle that it is and went into some detail debunking many of the claims made by the other guests. Honestly, I mean they were more or less polite, but they didn't think I knew what I was talking about. What can account for this?

Well, one of the things that came out was that I was, by some distance, the lowest paid person at the table.

It's no excuse for someone who actually thinks and writes about public policy, but could it be that Krugman is like my fellow guests and just never had to think about the cost of his health insurance simply because he could always afford it. So, I mean, he's never done the math. He's just done the "responsible thing" and carried insurance his whole life.

Anyway, it was a cold shower to realize how intractable their belief in the system is. As I find myself saying a lot lately, I was not heartened.

flora

The whole ACA thing reminds me of the urban renewal projects of the 50s and 60s. Those were supposedly progressive projects to replace blighted areas with modern housing. In fact it was political snake oil that didn't help the poor so much as help large cities fill their coffers. It replaced poor dwellings with middle class dwellings that increased the cities' tax revenues. The poor were left to fend for themselves as their poor but stable neighborhoods were destroyed. The designers of the projects thought they were doing good.

I wonder how many people sitting around the table with you tried to buy their mandated insurance on the ACA web portal or on the open market? ACA sounds good in theory.

Lexington

It's no excuse for someone who actually thinks and writes about public policy, but could it be that Krugman is like my fellow guests and just never had to think about the cost of his health insurance simply because he could always afford it. So, I mean, he's never done the math. He's just done the "responsible thing" and carried insurance his whole life.

Yup.

I have my frustrations with Krugman too, but I think progressives need to cut the guy some slack: he's a professor at Princeton, a Nobel laureate, and has a trophy case full of professional honours and twenty books plus a couple of hundred articles under his belt. He's in the sanctum sanctorum of the elite.

If he never penned another op ed or blog post or participated in another public debate it wouldn't make the slightest difference to his legacy. Yet there he is, the very model of a public intellectual, actually inviting non specialists to engage in a discussion about economics and public policy, and fighting the good fight for liberalism. You can be sure he isn't doing it to win plaudits from his peers. ...

[Mar 22, 2019] Responding to some of the critiques of our paper on secular stagnation and fiscal policy

Mar 22, 2019 | larrysummers.com

My paper with Lukasz Rachel on secular stagnation and fiscal policy summarized here has attracted a number of interesting responses including from Martin Wolf , David Leonhardt , Martin Sandbu and Brad DeLong and also many participants at the Brookings conference.

I'm gratified that there seems to be general acceptance of the core secular stagnation argument. "Normal" policy settings of real interest rates in the 2 percent range, balanced primary budgets and stable financial markets are a prescription for stagnation and underemployment. Such economic success as the industrial world has enjoyed in recent decades has reflected a combination of very low real rates, big budget deficits, private leveraging up and asset bubbles.

No one from whom I have heard doubts the key conclusion that a combination of meaningfully positive real interest rates and balanced budgets would likely be a prescription for sustained recession if not depression in the industrial world.

Notice that this is a much more fundamental argument than the suggestion that the some effective lower bound on interest rates may impede stabilizing the economy. The argument is that because of chronic private sector tendency towards oversaving, economies may be prone to underemployment and financial stability absent policy responses which are themselves problematic.

This is an argument much more in the spirit of Keynes, the early Keynesians, and today's Post-Keynesians than the New Keynesians who have set the terms for much of contemporary macroeconomic discourse both in academia and in the world's central banks.

The central feature of New Keynesian models is an idea that economies have an equilibrium to which they naturally revert independent of policies pursued. Good central bank policy achieves a desired inflation target (assumed to be feasible) while minimizing the amplitude of fluctuations around that equilibrium.

In contrast contemporary experience, where inflation has been below target almost throughout the industrial world for a decade and is expected by markets to remain below target for decades, and where output is sustained only by large budget deficits or extraordinary monetary policies, suggest that central banks acting alone cannot necessarily attain inflation targets and that misguided policy could easily not just raise the volatility of output but also reduce its average level.

While there seems to be little doubt that real interest rates–short and long, ex ante and ex post -- have declined very substantially even as (other things equal) budget deficits and expanded social security programs should have increased them, there remains debate about how to analyze these trends. Lukasz and I argue that adjustment to balance saving and investment is the best way understand declining real rates. DeLong wonders about changing risk premiums and Wolf cites BIS work arguing that low rates reflect the monetary policy regime. There is no reason why there needs to be only one cause of low real rates so these factors may enter. But as I expect we will illustrate in the revised version of the paper, the largest part of the low frequency variation in ex ante real returns is accounted for by a downward trending factor common to all asset prices. This is illustrated for the US in the figure below. So risk premiums or factors specific to Treasuries are likely not high order.

Figure: Decline in US real asset returns

Granting that secular stagnation is a problem, there is the question of policy response. The right policy response will be the one that assures that full employment is maintained with a minimum of collateral problems. Sandbu argues against the notion of secular stagnation in part because he thinks it may lead in unconstructive directions like protectionism and because he believes that stagnation issues can be feasibly and relatively easily addressed by lowering rates. Wolf, relying on the BIS, is alarmed by the toxic effects of very low rates on financial stability in the short run and economic performance in the long run, and prefers fiscal stimulus. Leonhardt prefers a broad menu of measures to absorb saving and promote investment.

I am not certain of the right approach and I wish there was more evidence to bring to bear on the question. I can certain see the logic of the "zero is just another number" view, that holds that the current environment poses no new fundamental issues but just may require technical changes to make more negative interest rates possible. I am skeptical because (i) I am not sure how large the stimulus effect of rates going more negative is because of damage to banks, reduced interest income for consumers, and because capital cost is already not the barrier to investment; (ii) I wonder about the quality of any investment that was not made at a zero rate but was made at a negative rate; and (iii) I suspect that a world of significantly negative nominal rates if sustained will be a world of leveraging, risk seeking and bubbles. I have trouble thinking about behavior in situations where people and firms are paid to borrow!

I am inclined to prefer more reliance on reasonably managed fiscal policies as a response to secular stagnation: government borrowing at negative real rates and investing seems very attractive in a world where there are many projects with high social returns. Moreover, we are accustomed to thinking in terms of debt levels but it may be more appropriate to think in terms of sustained debt service levels. With near zero rates these are below average in most industrial countries. The content of fiscal policies is crucial. Measures which run up government debt without stimulating demand like large parts of the Trump tax cut are ill advised. In contrast measures which promote investment and raise the tax base down the road are much more attractive.

There are of course other measures beyond stabilization policies like fighting monopolies, promoting a more equal income distribution, and strengthening retirement security for which the desire to maintain macroeconomic stability provides an additional rationale.

[Mar 16, 2019] Martin Wolf Why Economists Failed as "Experts" -- and How to Make Them Matter Again

That's what neoliberal bottomfeeders like Summers, Krugman and Dejong should read and memorize
Notable quotes:
"... Neoclassical economics became important in large measure to show that markets delivered efficient outcomes, and efficiency was seen as tantamount to socially desirable. That's before considering that highly efficiency almost always comes at the expense of safety and robustness, and that efficient solutions may not be equitable. ..."
"... So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones. The question then become what makes experts trustworthy -- not, I should stress, intrinsically trustworthy, but rather perceived by the public to be so. ..."
"... The third point is that trust in expertise seems to be quite generally declining. This is partly perhaps because education is more widespread, which makes possession of an education appear in itself less authoritative. It is also partly because of the rapid dissemination of information. It is partly because of the easy formation of groups of the disaffected and dissemination of conspiracy theories. The internet and the new social media it has spawned have turned out to be powerful engines for the spreading of disinformation aimed at manipulation of the unwary. ..."
Mar 14, 2019 | www.nakedcapitalism.com
Yves here. Even though Martin Wolf's post makes many important observations, I feel the need to take issue with his conclusion. Economists have been and continue to be enormously successful as experts. PhDs in economics make roughly twice as much as those in other social sciences. Economists are the only social scientists to have a seat at the policy table. And they continue to do so, despite their colossal failure in the global financial crisis, with no serious change in the discipline and no loss of reputation of any prominent economists.

Neoclassical economics became important in large measure to show that markets delivered efficient outcomes, and efficiency was seen as tantamount to socially desirable. That's before considering that highly efficiency almost always comes at the expense of safety and robustness, and that efficient solutions may not be equitable.

The importance of economists as policy advisers grew in the post World War II era, after the USSR managed the impressive feat of industrializing in the 20th century. US officials were concerned that a command and control economy could beat a messy, consumer oriented capitalist one, and turned to economists to give guidance on how to achieve high growth rates so as to produce enough guns and butter.

As for the specific impetus for Wolf's article, it appears to be due to voters ignoring the dire warnings made by the Remain campaign during the Brexit referendum campaign that Brexit would have large economic costs. But based on reports after the vote came in, that repudiation came not just because the public might well have good reason not to believe economists as a result of the crisis, but how the Remain campaign carried itself in the debates. That side apparently made arrogant-seeming, data heavy arguments, while the Leavers made stirring appeals about sovereignty .a UK version of MAGA.

By Martin Wolf, Associate Editor and Chief Economics Commentator, Financial Times. Originally published at the Institute for New Economic Thinking website

"I think people in this country have had enough of experts."
-Michael Gove

Michael Gove, winner of the Brexit referendum (though loser in the game of politics, having failed to become leader of his party, and so, maybe, no true expert either) hit the nail on the head. The people of this country have, it seems, had enough of those who consider themselves experts, in some domains. The implications of this rejection of experts seem enormous. That should be of particular significance for economists, because economists were, after all, the "experts" against whom Mr. Gove was inveighing.

Yet it is not really true that the people of this country have had enough of experts. When they fall ill, they still go to licensed doctors. When they fly, they trust qualified pilots. When they want a bridge, they call upon qualified engineers. Even today, in the supposed "post-fact" world, such people are almost universally recognized as experts.

So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones. The question then become what makes experts trustworthy -- not, I should stress, intrinsically trustworthy, but rather perceived by the public to be so.

One might make three, admittedly speculative, points about this distinction between experts deemed by the public to be deserving of trust and those who are not.

The first is that some forms of expertise appear simply to be more solidly based than others in a body of theory and/or evidence, with recognizable successes to their credit. By and large, doctors are associated with cures, pilots with keeping airplanes in the sky and engineers with bridges that stay up. Such successes -- and there are many other comparable fields of expertise -- self-evidently make people with the relevant expertise appear trustworthy.

The second is that some forms of expertise are more politically contentious than others. Nearly everybody, for example, agrees that curing people, flying airplanes and building bridges are good things. Social and political arrangements -- and economics is inescapably about social and political arrangements -- are always and everywhere contentious. They affect not only how people think the human world works, but also how it ought to work. These forms of expertise are about values.

The third point is that trust in expertise seems to be quite generally declining. This is partly perhaps because education is more widespread, which makes possession of an education appear in itself less authoritative. It is also partly because of the rapid dissemination of information. It is partly because of the easy formation of groups of the disaffected and dissemination of conspiracy theories. The internet and the new social media it has spawned have turned out to be powerful engines for the spreading of disinformation aimed at manipulation of the unwary.

It might be encouraging for economists that they are not the only experts who are mistrusted. Consider the anti-vaccination movement, hostility to evolutionary theory, or rejection of climate science. All these are the products of doubts fueled by a combination of core beliefs and suspicion of particular forms of expertise. The anti-vaccination movement is driven by parents' concerns about their children. The hostility to evolution is driven by religion. The rejection of climate science is clearly driven by ideology. Every climate denier I know is a free marketeer. Is this an accident? No. The desire to believe in the free market creates an emotional justification for denying climate science. In principle, after all, belief in free markets and in the physics of the climate system have absolutely nothing to do with each other.

So economists are in good company with other forms of politically or socially contentious expertise. But they have a special difficulty. Not only are they engaged in an essentially controversial, because political, arena, and so also an inherently ideological one, but they suffer to a high degree from the first point I made above: their "science", if science it is, just does not look to the public to be solidly based. It does not work as well as the public wants and economists have claimed. Economists claim a certain scientific status. But much of it looks to the outsider more like "scientism" -- the use of an incomprehensible intellectual apparatus to obscure ignorance rather than reveal truth.

This does not mean that economists don't know useful things. It is quite clear that they do. Markets are extraordinary institutions, for example. Economists' elucidation of markets or of the principle of comparative advantage is a great intellectual achievement. Yet suspicion of economics and economists is both long-standing and understandable.

The problem became far more serious after the financial crisis. The popular perception is that the experts -- macroeconomists and financial economists -- did not appreciate the dangers before the event and did not understand the longer-run consequences after it. Moreover, the popular perception seems to be in large part correct. This has damaged the acceptance of the expertise of economists to a huge extent.

So how, in this suspicious contemporary environment, might economists persuade the public they are experts who deserve to be listened to?

I decided to ask my colleagues this question. One answered that:

1. Good economists have a clear (if incomplete) understanding of how the world works. This is a pre-requisite to making it a better place.

2. Economists have a sense of scale. They understand the difference between big and small and how to make that distinction. This is vital for policy.

3. Economics is all about counterfactuals. It understands the relevant comparators even if they are difficult to work out.

4. Economists are experts on incentives and motivations and empirically try to measure them rather than relying on wishful thinking.

5. Generally, good economists are expert in understanding the limits of their knowledge and forecasting abilities.

Another colleague added:

The general public usually associate economists with:
-A small set of macroeconomic forecasts (growth, inflation mainly), and
-A belief that markets always produce perfect outcomes

And they attribute failure to them if either:
-point forecasts (inevitably) prove wrong, or
-markets produce some bad outcomes

Whereas the expertise of economists is really in the building blocks that enable you to construct sensible forecasts and to understand how people are likely to behave and respond to a given set of circumstances/policies. This structure for understanding the world allows economists to take on board new developments, understand whether they reflect a rejection of their existing theories or merely a (possibly tail) outcome that was consistent with their "model," and push forward their understanding of the world from there. Rather than throwing away all existing wisdom when circumstances change somewhat.

I agree with these propositions. Properly understood, economics remains very useful. One realizes this as soon as one is engaged with someone who knows nothing at all about the subject. But I still have four qualifications to make.

First, a large part of what economists actually do, namely forecasting, is not very soundly based. It would be a good idea if economists stated that loudly, strongly, and repeatedly. Indeed, there should be ceaseless public campaigning by the professional bodies, emphasizing what economists don't know. Of course, that would not -- as economists might predict -- be in their interests.

Second, in important areas of supposed economic expertise, the analytical basis is really weak. This is true of the operation of the monetary and financial systems. It is also true of the determinants of economic growth.

Third, economists are not disinterested outsiders. They are part of the political process. It is crucial to remember that certain propositions favor the interests of powerful people and groups. Economists can find themselves easily captured by such groups. "Invisible hand" theorems are particularly open to such abuse.

Finally, the division between economic aspects of society and the rest is, in my view, analytically unsound. The relationship between, say, economics and sociology or anthropology is not like that between physics and chemistry. The latter rests upon the former. But economics and anthropology lie side by side. I increasingly feel that the educated economist, certainly those engaged in policy, must also understand political science, sociology, anthropology, and sociology. Otherwise, they will fail to understand what is actually happening.

If I am right, the challenge is not just to purify economics of exaggerated claims, though that is indeed needed. It is rather to recognize the limited scope of economic knowledge. This does not mean there is no such thing as economic expertise: there is. But its scope and generality are more limited than many suppose.

Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate.

With this in mind, what should be the goal of an education in economics at the university level? A part of the answer will come from developments within the field. In time, the incorporation of new ideas and techniques may make the academic discipline better at addressing the intellectual and policy challenges the world now confronts.

Another part of the answer, however, must come from asking what an undergraduate education ought to achieve. The answer should not be to produce apprentices in a highly technical and narrow discipline taught as a branch of applied mathematics. For the great majority of those who learn economics, what matters is appreciation of both a few core ideas and of the complexity of the economic reality.

At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth.

It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed the technical apparatus can get in the way of such an understanding. Much of the understanding can also be acquired in a decent, but not inordinately technical, undergraduate education. That is what I was fortunate enough to acquire in my own years studying philosophy, politics and economics at Oxford in the late 1960s. Today, I believe, someone with my background in the humanities would never become an economist. I am absolutely sure I would not have done so. It might be arrogant to make this claim. But I think that would have been a pity -- and not just for me.

In addition, it would be helpful to expose students to some of the heterodox alternatives to orthodox economics. This can only be selective. But exposure to the ideas of Hyman Minsky, for example, would be very helpful to anybody seeking to understand the macroeconomic implications of liberalized finance.

The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for PhD programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide.


greg , March 14, 2019 at 1:14 am

I am afraid a worse problem with economists is that they don't seem interested in anyone's opinions except their own.

They even hold ecology in disdain, not having any interest in learning what is, in fact, the foundational system of their own 'science.' The booms and busts of capitalism show familiar patterns to ecologists. Why, ecologists even have equations for them!

But I guess ecology is just too simple for the attentions of economists : Stupid animals. They don't even use money! What kind of economy can that be?

So economists look for models everywhere except where to find them. The hubris of humanity, not needing to give due attention to the economies of 'animal' societies.

Sanxi , March 14, 2019 at 7:04 am

To Yves. Well, I nearly lack the heart to respond, but I feel I must. Taking yesterday's NC's lessons of looking at a human facing and having eye contact to remain human online, I now do both – a human sits next to me. I read aloud to her.

Ok, you are a strong advocate of becoming a certified economist. Because 1.they make a lot of money and 2. only they sit at the policy table.

Further claims made in your preamble: in no particular order of importance: something about efficient outcomes that may not be equitable; command & control and guns and butter; and sadly an analysis of Brexit voters in either camp.

(One exception to all that I say is those using MMT, certified, with a degree or not. Again something I first learned about on NC.)

Yesterday, somewhere in the NC collective was the notion that the above mentioned economists tell tho' we may be so out of balance with the world that our extinction as a species is a legitimate issue to discuss, that in the end there ain't any money to not only not fix the problem but not even deal with it. And these guys/gals you laud? I and others have argued this gang provided the intellectual nonsense that put us where we are now.

What is your point that Econ grads make the most amount of money compared to what? Philosophy majors? True or not I still say it's a waste of a life. Not the knowing, but the being of one. I don't see what value there is for civilization in general but specifically that just because they make a lot of money, it's good?

All social science grads you say v Econ grads make more money. I doubt that. Seems every school district requires a PhD in Education, and a PhD in Business is very lucrative (not saying useful, just pays well).

The policy table. I'm truly baffled as to what you refer. If they are the only ones at said table then it follows they are the only ones at it. In my long life I'm trying to think were we ever let an economist have the final say, or even a moderate say in any political, governmental, or military policy. Some input yes, but deterministic, no. If they were sitting at their own table, when asked they came to table with those that had the votes, give their opinion and then left. Sociological impact statements had far bigger influence on policy. And policy is no more then the data we can agree on to make decisions.

Sure, many governments, NGOs, multinationals all have jobs for economists but in someway this is self serving, not a necessity. Kuhn's book on "The Structure of Scientific Revolutions", does a good job of explain how authority gets established, vested, and in the end becomes useless. That it exists is not an argument that it is necessary or good. That there needs to be some way to define and explain things economic I no have issue with, that outside of MMT that is has been, using system theory I don't see it.

As to efficient outcomes that may not be equitable that speaks for itself. It doesn't. No 'may not' about it, said with respect.

As to command & control and guns and butter, seems like a long time ago. A long time ago, using science to help in making decisions was new and it took awhile to get it right, or at least to get it working.

(Small note, I have dual US & UK citizenships)

An analysis of Brexit voters in either camp. I can tell you why I voted the way I did but I need to make an appeal to Stephen Pinker's, "The Blank Slate". Either I have the free will to make a decision and accept responsibility for it or I don't. I believe I do and did. I voted to leave and yes their are economic impacts, as well as social, political, historical, psychological, and philosophical. As did in electing Trump. As did the 1776 revolution, as in the US Civil War, almost anything. Money is not everything nor the only thing. And the future isn't what it used to be. The Long Emergency is here.

skippy , March 14, 2019 at 7:15 am

Hayek liked banding around watery terms like freedom and liberty its when he stopped being an economist [political theory in times past] and jointed the ranks of ideologues .

Pay check included oops and health care .

Yves Smith Post author , March 14, 2019 at 1:17 pm

Boy are you shooting the messenger. I'm not saying the way the economics discipline has become influential is a good thing, but that is the way it is. How economics operates as a discipline is great for economists, so why should they change? So what if their prescription fail way too often? For instance, there haven't been any bad consequences to anyone who didn't see the crisis coming and (even worse) advocated bank deregulation, starting with Larry Summers (but he had plenty of company).

And you are simply wrong about the influence economists have. In the US, CBO budget scoring is fundamental to how Congress views various proposed programs, even though we have described how the CBOs methods are crap and the CBO operates as an a big enforcer of deficit hysteria (as in they play a politicized role). The Fed and other central banks, the most powerful single government economic actors, are all run by monetary economists. The IMF, another very powerful institution, has deeply embraced and implements neoliberal policies, namely, balanced budgets and squeezing labor (labor "reforms"). In the US, economists in op eds and even in Congressional testimony (see Bernanke for instance) argue for balanced budgets and argue the supposed necessity of cutting Social Security and Medicare and NEVER mention cutting military spending. They are acting not just as enforcers of overall spending, but by advocating what to cut, are influencing priorities.

Avery T , March 14, 2019 at 9:53 am

Back in my former life as an economist-in-training, I ran into ecological economics as a branch of natural resource economics. It was completely backwards – the extent ecological theory was brought in didn't extend beyond simple predator-prey-plant models, and the goal was to find the macroeconomic general equilibrium of biomass in the ecosystem.

That was probably just the most striking example of the institutional close-mindedness I saw back among the economists.

deplorado , March 14, 2019 at 3:08 am

Mr Wolf says, among the important concepts are "externalities" Like everything that supports economic activity. Economics reduces the real world to "externalities" and simple equations about things measured in crude tokens – money. How good can it be then.

Also, "Such a curriculum might not be the best way to produce candidates for PhD programs" – is that a goal in itself? Like, the world needs a certain amount of economics PhDs produced? What for?

Prof. Michael Hudson, Prof. Richard Wolff and others have long ago explained what's wrong with mainstream economics, but that can't be said in FT.

This reminds me of the party press during the Perestroika in the 80ies talking about reform in a similar soft and obfuscatory of the truth way, full of wishful recommendations, striking a demurely optimistic tone supposed to convey integrity. It was bullshit and when the real things started happening, everybody forgot about it, because it had no depth and no bearing on real life.

diptherio , March 14, 2019 at 10:40 am

It seems obvious to most people that not all values are commensurable with each other. For instance, things like literary and artistic quality, friendships, and human lives cannot defensibly be measured in dollar terms. However, this is just what economics attempts to do. Hence, environmental economics simply aims to put a dollar value on environmental quality (or degredation). Hence, the entirety of my Labor Economics course was focused on how you place a monetary value on a human life, when the human happens to die because of their job.

So, I tend to agree with you. The whole discipline is of questionable value, so long as economists refuse to accept some very basic truths and incorporate much more than money into their analyses.

JEHR , March 14, 2019 at 12:31 pm

That comment strikes me as strange because one of the weaknesses of classical economic models was the fact that how money works was not part of their inquiry.

The Rev Kev , March 14, 2019 at 4:00 am

In trying to judge the abilities of an expert, the best that most people can do is to see the results on what they practice. If a doctor has a reputation of getting his patients drug-addicted, then you would not go to them. If an engineer built a building but the roof constantly leaked, you would think twice about giving them another contract. But let us think about how well economists are judged. You might say that a lot of people in the UK discounted their advice during Brexit but it has been noted that a lot of the Leave campaign was based in depressed areas. Why were so many areas depressed? Because the people knew that the government was using the advice of economists as to which areas to prioritize for resources. And usually that meant London and its outer areas – which voted Remain.
People are fully aware of what happens too when WTO economists go into a country – social services are cut, public transport is cut way back, the cost of living for the poor skyrocket while the rich seem to be protected. And take a look at the economic state of the United States. Wages have flatlined since the 70s, infrastructure is falling into disrepair, whole swathes of the country are abandoned to their own devices, de-industrialisation is a fact, etc, etc etc but the point is that the people that were giving all the advice to have this done were economists like Ken Rogoff and his wonky austerity study. It may have been the politicians that pulled the trigger but it was economists that were loading the gun.
if you want a breed of economists more grounded in reality, then I would suggest having them work in a fulfillment center for a week to show the the consequences of what happens when you get priorities wrong. Certainly they need to study the work of economists like Hyman Minsky and Susan Strange who had gone out of fashion before the crash but the long and short of it is to see what works and what does not work. I do not mean to be insulting here but as far as I can see, modern economic theory has really been a theory for the top 20% and not for the rest of the population. And now we are seeing the result up close and personal and until this changes, people will not feel the need to take the advice of economist, even when they should. Martin Wolf is fortunate in having also a humanities background but how true is that nowadays?

Jos Oskam , March 14, 2019 at 4:04 am

The sentence " So, maybe the proper distinction to be made is between "trustworthy" experts and "untrustworthy" ones " is important. Unfortunately, in the article I miss a key aspect in making that distinction.

I seem to notice that the "trustworthy" areas of expertise in general tend to be removed from political ideas or preferences. Left or right, liberal or conservative, democrat or republican, it does not affect the way in which trustworthy experts go about their business. It does not influence the way in which a doctor cures patients, a pilot flies a plane or an engineer constructs a bridge. However, as soon as we start discussing things like the economy, talk is full of "liberal" or "left" economists as opposed to "conservative" or "right" economics. I have never heard of one bridge being more at risk of collapse because it was designed by a liberal engineer versus a conservative one, or the other way round. When discussing the strength of a bridge political leanings simply do not come into play, it is not a factor like the strength of the steel used. But for all economic debate, these leanings often seem to be the essence of the discussion.

Given the general public's intensifying distrust of politicians and all things political, it does not surprise me that disciplines tainted by political colouring (like economics) are considered "untrustworthy" compared to disciplines where political colouring is not a factor (like the aforementioned doctors, pilots and engineers).

Since economics *is* in fact very interwoven with politics, I think the general public will always treat economists the same way they treat politicians, that is with a healthy dose of distrust. And who can blame them?

Ptb , March 14, 2019 at 9:07 am

Yes, ability vs integrity.
And you can take 10 of the most honest and well meaning people, dedicated to the public good and advancement of learning, employ them in a structure set up to profit first and ask questions second, and the whole is going to be not the same as the sum of the parts.

bruce wilder , March 14, 2019 at 10:45 am

I'd say an unhealthy dose of distrust is more likely and more common.

People tend to treat conventional econospeak as so much blah, blah, blah and then turn around and credit or discredit what has been said on the basis of the tone with which it was said.

Economists working for the kleptocracy get a lot of mileage out of sounding serious, while talking complete rubbish. And, sadly, many economists working the left, get away with lame one-liners and a rudderless iconoclasm.

SJ , March 14, 2019 at 4:32 am

I had an e-mail exchange with Mr. Wolf many years ago – before the 2008 crash – where he basically told me that we live in the best of all possible worlds and that nothing needs to change – he has changed his tune since then, I suppose to try to avoid looking like a complete idiot and also to try to deflect criticism on to others. Maybe he has öearned something in the meantime, but maybe he is just faking for the sake of appearences.

deplorado , March 14, 2019 at 11:02 am

I think he is faking it. It's the party line. It is the beginning of the neoliberal Perestroika (see also Brad DeLong).

I quite like to look at it this way – it is very clarifying (as I lived in the Perestroika) and I recommend it. Don't for a moment trust the Perestroika – it is half-measures at best and purposeful deception at worst.

johnf , March 14, 2019 at 5:24 am

" The answer should not be to produce apprentices in a highly technical and narrow discipline taught as a branch of applied mathematics ." With apologies to Mr. Richter, economics is taught more like a branch of mathematical sophistry, and that is slighting the original sophists.

I was an undergraduate studying applied mathematics at the time and place, present day neoclassical economics was being developed, published and starting to be taught. I can think of just one economics-and-finance classmate who continued to study mathematics beyond first year calculus – which everyone had to take.

Our introductory numerical analysis professor was scathing about his colleagues at the other side of the Quads. He made it quite plain that we could not skip the rigor and "try to prove something like an economist". Pretty much all the econ students dropped his course when they discovered that. The specific problem they could not address, can be simply stated. If you know a number but don't know its error, you don't know the number. The difficulty the great mass of economists have with just that, excludes economics as a branch of applied mathematics.

bruce wilder , March 14, 2019 at 10:50 am

interesting insight

pretty much the sum total of neoclassical economics is trying to work out the counterfactual of how the economy would work if everyone had more-or-less complete information to work with.

introduce genuine uncertainty, and pretty much the whole apparatus turns topsy-turvy and all the "laws" of economics disappear or become highly contingent on circumstances unlikely to obtain.

Thuto , March 14, 2019 at 5:40 am

"Fixing" economics must start with a wholesale divestment from the idea of this profession being a "science", said divestment openly promoted by economists themselves. All manner of hardwired, warped thinking, to say nothing of obstinacy in changing one's views when confronted with contradictory evidence, results from people believing that they're scientists practising a real science. When such thinking seeps into the subconscious, the obstinacy is locked into place and even events of the scale of the GFC aren't enough to shake loose the erroneous biases held by the mainstream profession.

How else would an entire profession place so much faith in the predictive powers of its models if not having such faith resting on a (supposed) firm foundation of science? An engineer designing a beam for a bridge has justifiable faith in continuum mechanics (a real science) as a sound foundation for their work, economics is devoid of such sound foundations and its time the profession loudly and publicly declared this in an unprecedented act of intellectual honesty.

Additionally, we see weak to non-existent culpability enforcement when policy recommendations put on the table by economists wreck lives (as they have over decades), this in stark contrast with e.g. an engineer designing a bridge that collapses and kills hundreds. In other words, economists have outsized influence in matters of policy out of proportion with the amount of actual skin they have in the game. On the other side, this "economics is a science" narrative disarms a public already deficient in the marginal capacity for independent, critical thinking to question anything economists say, said public including politicians who, as aptly put by the Rev Kev, pull the trigger of a policy gun loaded by economists.

cnchal , March 14, 2019 at 8:50 am

>. . . economics is devoid of such sound foundations and its time the profession loudly and publicly declared this in an unprecedented act of intellectual honesty.

Not one economist, with their ass planted firmly on their throne at the policy table, will admit to that. The operating principle is venality.

Now that they have lost the respect of the peasants, I don't want them to matter again. What I would like to see is mass firings of eclownomists, so they can experience life as lived by the peasants, just once. It may even free up resources to pay people to actually do good things instead of perpetuating one failure after another, and being grossly rewarded for those failures.

dearieme , March 14, 2019 at 6:35 am

I think he gets the wrong end of the stick here: "Consider the anti-vaccination movement, hostility to evolutionary theory, or rejection of climate science."

No doubt there are occasions when vaccinations can do serious harm: a niece of mine was excused a standard vaccination because of a contra-indication in her family medical history.The anti-vaxers, though, seem to have elevated some small kernel of truth into a stupid all-encompassing doctrine without giving the matter enough critical thought.

The anti-evolutionists seem to have failed to devote any critical thought to the matter at all.

But the sceptics about "climate science" have deployed critical thinking to identify this new religion as being composed largely of incompetence, dishonesty, and hysteria. It's the likes of old Wolfie who are lacking in critical thought on this issue. Maybe he's one of those people who is uneducated in science, and so too easily swayed by chaps shouting excitedly about models, measurements, and so forth.

It's very odd. Goebbels Warming is now old enough that you can check the historical record of its predictions of dreadful tipping points, of the disappearance of snow from Britain, of the flooding of this and that Pacific island group, and so on. All false. So why should anyone rational believe a word of it? After all, almost from the beginning its proponents believed that the science was settled – it was inarguable. In which case why have their predictions proved so lousy?

Consult a poet: humankind cannot bear very much reality.
Consult an economist: incentives matter.

mle detroit , March 14, 2019 at 8:01 am

Dearie me, Dearieme, your comment appears to lack sources, citations, examples. Please provide.

Steve Ruis , March 14, 2019 at 8:38 am

So, Yves, you are saying ("Economists are the only social scientists to have a seat at the policy table," etc.) that economists are like weathermen. They still have a time slot on the evening news and are respected, even though their accuracy is abysmal. They make a lot of money doing this.

Basically, this is because we expect very little of economists and because they have stopped using ordinary language professionally, they have the status equivalent to someone actually helpful.

I think economics has become an asocial science with too many economists willing to provide some sort of academic cover for whatever the plutocrats want to do.

Arthur Dent , March 14, 2019 at 11:24 am

I think the analogy to meteorologists is interesting. As an engineer, I have some perspective on this.

In engineering design, frequent failure of what we design is generally undesirable. So we have our analytical tools based on both scientific theory and empirical data, and then apply a factor of safety (sometimes called factor of ignorance, but more accurately is a recognition that there is a probabilistic distribution of outcomes and the factors of safety shift the design towards success instead of high probability of failure).

Airline pilots operate similar to engineers in that they aren't flying close to the edge of the airplane's flight characteristics. Instead they stay in a zone quite a ways away from what the airplane could potentially do. This is one of the reasons that airplane travel is very safe, especially compared to car travel.

Meteorologists are trying to make predictions of the most likely scenario which means they are trying to hit the center of the distribution of the potential outcomes. As a results, they frequently are shown to have "missed" in that some other lower probability event occurred instead. Over the past couple of decades, we have gotten used to seeing weather forecasts with probabilities or ranges of outcomes.

I think the public presentation of economics has two separate problems, but both undermine economics credibility.

First, economics is a field that is trying to predict the most likely event and the range of potential outcomes, similar to the weather forecasts, but does not present the predictions this way. So people don't cut economists slack because their public presentations don't recognize the range of potential outcomes and the frank recognition of the inaccuracy of their predictions that we are used to with the weather people, especially once they get past 24 hrs of predictions.

Second, many of the economists that make public predictions are funded by interest groups. When we see a lawyer on TV, we know that he is being paid by a client to be an advocate and that is his job as a lawyer. So we may disregard what he has to say but we understand the context he is speaking in. However, the economists don't say who they are being paid by and so they are presumed to be independent experts when they are sometimes not. I believe this is a fundamental ethical issue within the economics profession.

So when the economics predictions (e.g. effects of tax cuts) fail to be accurate, it needs to be parsed out if it was simply a lower probability event or if the predictions were intentionally biased to begin with. None of this is well-addressed by the economics profession, which greatly undermines credibility.

JEHR , March 14, 2019 at 12:40 pm

+1

jfleni , March 14, 2019 at 8:55 am

I was just getting used to the idea that economists are like clocks: right twice a
day -- at Noon and sundown!

Ptb , March 14, 2019 at 9:14 am

Economists also use the term 'efficiency' to denote pareto optimality, which causes much confusion.

Especially when communicating with both analytical people of a hard-sciencey or engineering background (efficiency = a context specific figure, some-measure-of-output/some-measure-of-input, strict limits in how far you can generalize), and business people (efficient = low cost)

bruce wilder , March 14, 2019 at 11:00 am

economists also routinely distinguish the allocative efficiency they focus upon almost exclusively from the kinds of technical or managerial efficiency that most of the rest of the world focuses upon, but they rarely admit that their focus is so narrow and does not generalize to encompass common sense notions of cost and efficiency -- it is almost as if they want to avoid the critical examination engineering enables while providing double-talk as cover for business people trying to privatize the profits while socializing the costs.

Matthew G. Saroff , March 14, 2019 at 9:50 am

Let me start by saying that I object to the term "Dismal Science" for economics.

This is not because of the "dismal" part, it's because of the "science" part.

That being said, the devaluing of expertise is due in large part to something not mentioned by Mr. Wolf: corruption, particularly for the field of macroeconomics.

We have seen this repeatedly in the past few decades, where nominally independent researchers have been found to slant their research to accommodate the results desired by their patrons. (The sad state of pharma and medical research come to mind as well)

In fact, ACCORDING TO THEIR OWN "RATIONAL ACTOR" THEORIES , academics in general, and economists in particular,will behave in ways that will most strongly benefit themselves, and not in ways that serve the truth or reality. (Studies have shown that economists are the most selfish academics )

I believe that if you discuss the devaluation of knowledge and expertise without discussing the pervasive corruption in western society, you are ignoring the proverbial elephant in the room.

john Wright , March 14, 2019 at 3:04 pm

I object to the "Dismal" part.

Economic Science is very optimistic that what they characterize as "economic growth" in using up the world's resources in its pursuit, is a "good thing".

Economists are selling a limitless planet on which humans will always "pull the rabbit out of the hat", to solve any resource issue, including climate change and overpopulation.

That being said, I view the economic profession, as largely practiced by its well-paid members, as a mechanism to justify what the political and business elite want to do.

The elite are simply getting what they pay to hear.

Steven Greenberg , March 14, 2019 at 10:02 am

I worked on simulation software for integrated circuits. My friend studied economics with all the famous people. When I described to him what I did if there seemed to be a discrepancy between what my simulator said and how the integrated circuit behaved in real life or the intuition that an electrical engineer had about how it would behave in real life he was amazed. I was amazed that he was amazed. How could you possibly believe a simulator that necessarily has bugs in it, if you don't track down discrepancies to understand which is right, your intuition or the simulator?

Sometimes, I had to be very inventive to find another way to make a complex calculation in a way that would test out if the simulator was right. If economics students are taught the math, but not how to check their work, and the necessity of checking their work, then they shouldn't be in positions to make policy recommendations.

bruce wilder , March 14, 2019 at 11:09 am

Yes!

Many economists avoid operational modeling of the processes of the actual, institutional economy. And, that which does take place in narrowly conceived research by specialists is never allowed to feed back on the methods or theories embodied in the core doctrines.

WobblyTelomeres , March 14, 2019 at 3:32 pm

Other than setting Friedman's Chicago Boys upon Chile, isn't it very difficult to model/test anything macro in the real world?

bruce wilder , March 14, 2019 at 5:35 pm

One way mainstream macroeconomics defeats its own feeble efforts at empiricism is to set the problems in a frame of time-series regression analysis of highly aggregated data: national GDP and its high-level components year-by-year or quarter-by-quarter.

The behavior of tens or hundreds of millions of people reduced to statistics for largely formless accounting conventions relating to a single somewhat amorphous entity (a country) over time. History, however it happens, only ever happens one way, so there's always zero degrees of freedom in the aggregate time-series.

There is so little information left in the data, even the most clever econometricians would need a thousand years of data to "test" the most basic hypotheses. It is absurd to approach the task in the way they do.

Is it necessarily as difficult a task as they make it, to learn something useful about the way the economy works?

The problems of statistical aggregation and time-series are not rooted in the object of study -- the actual political economy -- so much as they are created by the conceptual apparatus.

In short form, economists have an analytic theory -- in form and epistemic status, something akin to Euclid's geometry. A geometry is not itself a map of the world and no one doing geometry confuses geometry with cartography or land surveying, but most economists do not understand that their theory is not itself a model of the actual political economy. Someone like Paul Krugman actually thinks he has "a map" of the political economy in, say, IS/LM . No student of geometry expects to find a dimensionless point in the bathroom or an isoceles triangle growing in the garden. Yet, economists regularly purport to casually observe perfectly competitive markets in equilibrium or the natural interest rate.

I think economists could do as well as, say, meteorologists or geologists in developing an empirically grounded understanding of the observable political economy, if they focused their attention on concrete and measurable mechanisms of the institutional economy and stopped talking meaninglessly about formless "markets" that have no existence.

Reality Bites , March 14, 2019 at 10:12 am

This article reminds me of why I stopped reading The Economist after the GFC. The Economist was quite explicit in advocating for a weak regulatory environment. I remember articles talking about how great it was for the Office of Thrift Supervision to regulate banks alongside others like the Fed because regulatory competition was good. After the GFC they were writing articles about how they opposed this all along.
It's not just that so many economists are wrong. It's that many times their models and predictions are wrong and they claim that it is either not what they argued for or 'externalities' intervened. Of course they never mentioned such externalities before. Many just outright conjure up unicorns. There were no shortage of economists claiming that the housing bubble was not a problem and the economy will grow to the point where things just naturally level off. Of course there was no accountability for those peddling these falsehoods.

Candy , March 14, 2019 at 11:01 am

I love the way people shrink down what Michael Gove said.

Here is his full exchange with his interviewer:

Gove: I think the people in this country have had enough of experts, with organizations from acronyms, saying --

Interviewer: They've had enough of experts? The people have had enough of experts? What do you mean by that?

Gove: People from organizations with acronyms saying that they know what is best and getting it consistently wrong.

Inteviewer: The people of this country have had enough of experts?

Gove: Because these people are the same ones who got consistently wrong what was happening.

shinola , March 14, 2019 at 12:04 pm

Perhaps it's changed since I started out as an econ. major in the mid '70's, but what disillusioned me was the total disregard for actual human behavior. Real people do NOT always behave rationally or honestly. Emotions/psychology do figure greatly in real people making "economic" decisions – just ask anyone who makes their living based on selling something.

Every economic model should be prefaced with "In an ideal world " (or perhaps more honestly "In an economist's construct of an ideal world )

Arizona Slim , March 14, 2019 at 12:18 pm

I share your disillusionment, shinola. I was a late 1970s econ major. By the time I graduated, I was done with economics.

hunkerdown , March 14, 2019 at 4:42 pm

Real people don't, but they should, say those who hire economists. If the algorithm doesn't work, change the inputs.

Wukchumni , March 14, 2019 at 12:09 pm

How many brand name economists up and quit in disgust 11 years ago when the powers that be decided to go against everything they stood for, and bailed out those that deserved to go down in financial flames?

not a one

bruce wilder , March 14, 2019 at 12:47 pm

A parenthetical lifted from Randy Wray's post responding to DeLong on MMT:

an exasperated Wynne Godley came into my office a couple of decades ago and announced that every [mainstream model] he had looked at was incoherent

That's the base problem, imho: economists are very successful as "experts" in a sociological sense, slotting into the role with firm claims on salary, status and ritual respect, as Yves Smith observed, but economics as a civic doctrine and a common frame of reference for political discourse is incoherent and economics as a scholarly discipline or "social science" fails methodological or epistemic standards.

There is a history of imperviousness to absolutely devastating critiques that isn't explained. Is that persistent "wrongness" related to professional success or only a by-product of an unfortunate pedagogy? Who puts the dogmatism into a dogma . . . and keeps it there?

(disclosure: i was a professional economist myself many years ago -- neither ambitious nor particularly successful, but I did attend ruling class schools for what that was worth)

deplorado , March 14, 2019 at 2:51 pm

Prof. Richard Werner has a fantastic talk (at the Russian Academy of Sciences) about, among other things, "the unresolved puzzles of modern economics" – to me the most striking there was how he dispenses with concept of "equilibrium".
He talks about the "puzzles" ~30 min in.

It is enough to see that and know that mainstream economists are little more than the high priests of the peculiar modern religion guiding our society.

https://www.youtube.com/watch?v=9Um9wR46Ir4

Adam1 , March 14, 2019 at 3:21 pm

"The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities."

Sadly Mr. Wolf suffers from the same delusions that so many mainstream economist suffer. They think they have actually considered "actual realities".

Yet the foundations of mainstream economics ignores these ACTUAL REALITIES
– Assumes Loanable Funds yet the Bank of England & the Bundesbank both publicly published research say endogenous money is correct. Loans create Deposits. They are clueless as to how finance works. I recall the infamous intro to econ question "If I double you income and double prices for beer, how much beer can you now purchase?" The standard econ answer is the same amount of beer. But in the real world the correct answer is you don't know. The professor never told you how large the fixed debt payments of the person were which most definitely impacts the amount of disposable income you have to buy beer. But then again most economists would likely fail any advanced accounting class. Long gone are the days when undergraduate economics students in economics had to take 2 or 3 semesters of accounting. Even my alma mater which is definitely heterodox in faculty and has MMT / UMKC taught faculty only require 1 these days. You need a strong foundation in accounting to be stock flow consistent in your modeling of a highly monetary modern economy.
– Assumes upward sloping supply curve is the market norm. At least 3 economic studies have attempted to measure this on large cross industry scales and every time concludes that over 1/2 of all businesses face downward sloping cost curves (natural monopoly stuff, and we wonder why industry concentration is the norm) and another 1/3 face flat cost curves. An upward sloping supply curve, for those not taking advanced or graduate level economics IS the assumed upward sloping marginal cost curve of the industry or nation if you're crazy enough to apply it at the macro level.

There are dozens more piss pore assumptions that underpin mainstream economics. In this day and age far more EMPIRICAL, real word data can be used to confirm what really makes an economy work, but sadly what we teach in college is garbage where the ACTUAL REALITIES are ignored.

Steven , March 14, 2019 at 5:07 pm

Soddy (paraphrasing John Ruskin) yet again:

a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science."

Frederick Soddy, WEALTH, VIRTUAL WEALTH AND DEBT,
2nd edition, p. 102
Economists and financiers seem to be incapable of understanding we live on a finite planet. Nor do they seem to be able to get beyond equating money with wealth. It is much easier to just put a price on something like a Beethoven symphony (or call it 'priceless') than to attempt a definition of wealth. But for most of us the ingredients of a definition are much simpler. Topping the list has to be energy. You can't create it but you can dissipate it, i.e. render it useless, by for example manufacturing useless junk that falls apart quickly enough for people who run or own the business to make a lot of money.

Or if your customers can no longer afford the junk because you have automated or off-shored their jobs, you can sell guns and bombs to your wholly owned government – to use in blowing up people who stand in the way of your accumulating more of the money created by your bankers, financiers and politicians. Then there is the basic intelligence required to run the machinery and discern better – i.e. more energy and resource efficient – ways of doing things. With real wealth creation comes power. The Chinese may have figured this out. The West's 1%, its economists, bankers and politicians don't appear to have a clue.

RBHoughton , March 14, 2019 at 11:19 pm

Did Kenneth Rogoff apologise for his hit on Iceland and his subsequent dismay defense in Ferguson's "Inside Job"? At least one of the Chicago boys (Jonathan Sachs) has resiled from the opinions of Friedman and rejoined the human race but only after a raft of countries were ground down by the mill of the moneymen. Chile and Poland seem to have survived at horrible social cost but what of the others?

The plaint is partly true. When governments were advised by economists, they replaced the wishes of the electorate. The economist brought along their army of lawyers who instantly appeared as mercenary terrorists to browbeat and coerce officials with various threats to do as the moneymen asked and cease attending to the people. This is still the state of play in UK and USA and those core paper-issuers drag the 'also rans' along with carrots and sticks.

I believe the fault lies in lazy officials who seldom run trials on new ideas in limited areas but drop the entire country into one speculative foray after another. Its a shame that its not mentioned. There is no good reason why the whole country has to be volunteered for these new scheme. Why has the UK Treasury shut down every competing form of banking to the high street banks – the trust banks, coop bank, post office bank, municipal banks, mutuals – all thrown away as infringers of the BoE's monopoly. The country needs an Oliver Cromwell or Napoleon to lead it not the present bunch of ragamuffins and hooligans.

That brings me to the second problem the disastrous state of the representation. It is mainly due to the control factions have brought to bear on the selection of candidates for office. That has to stop and the way to do it to have primary assemblies of every 200-300 people who select one of their number to represent them. He's a school friend or neighbor and a known quantity. Several primary assemblies select a chap to represent them and so on up this new structure of democracy to the top.

The business community have sought to keep everyone's nose to the grindstone with statistics justifying under payment by understating inflation. That has to stop. The economics trade belongs with astrology and weather forecasting until it acknowledges the fundamentals that drive prices.

Yves Smith Post author , March 14, 2019 at 11:30 pm

It wasn't Ken Rogoff but Frederic Mishkin. He was on the Fed Board of Governors and had been vice chairman.

RBHoughton , March 15, 2019 at 4:00 am

Apologies to Mr Rogoff and grateful thanks to Yves for the correction. I'll take a pill now

Cal2 , March 15, 2019 at 12:29 am

It seems to me from my citizen's non-professional perspective that the only real economists are experts in resource extraction, manufacturing and end use of same.

IOW, a forester, mining, petroleum, construction engineer and even a naval admiral, sitting around a table, all beholden to and obeying the supreme chairmanship of an ecologist, would be a better and less destructive thing for the world than a bunch of money only maximum value extraction Wall Streeters controlling the engineers mentioned above.

Can there even be an economy without resource extraction? It seems like most new economic schemes are attempting this with humans bodies, credit ratings and bank accounts being the last available commodity.

Sound of the Suburbs , March 15, 2019 at 7:07 am

The economists got Ricardo's theory of comparative advantage, but they missed this:

"The interest of the landlords is always opposed to the interest of every other class in the community" Ricardo 1815 / Classical Economist

What does our man on free trade mean?
He was an expert on the small state, unregulated capitalism he observed in the world around him. He was part of the new capitalist class and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.

Disposable income = wages – (taxes + the cost of living)

Employees get less disposable income after the landlords rent has gone.
Employers have to cover the landlord's rents in wages reducing profit.

Ricardo is just talking about housing costs, employees all rented in those days.

Employees get their money from wages and so the employer pays through wages.

Look at the US cost of living:
The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living

Employees get their money from wages, so it is the employer that pays through wages, reducing profit and driving off shoring from the US.

Maximising profit requires minimising labour costs; i.e. wages.

China, Asia and Mexico look good, the US is awful.

(This is Michael Hudson's argument in a slightly different from)

There are some fundamental problems with today's economics, like this and the fact it doesn't look at money, debt or banks.

Also, it hasn't worked out financial markets are not like other markets.

The supply of stocks stays fairly fixed and central banks can create a "wealth effect" by just adding liquidity. More money is now chasing a fairly fixed number of financial assets and the price (e.g. stock market) goes up.

[Mar 11, 2019] The university professors, who teach but do not learn: neoliberal shill DeJong tries to prolong the life of neoliberalism in the USA

Highly recommended!
DeJong is more dangerous them Malkin... It poisons students with neoliberalism more effectively.
Mar 11, 2019 | www.nakedcapitalism.com

Kurtismayfield , , March 10, 2019 at 10:52 am

Re:Wall Street Democrats

They know, however, that they've been conned, played, and they're absolute fools in the game.

Thank you Mr. Black for the laugh this morning. They know exactly what they have been doing. Whether it was deregulating so that Hedge funds and vulture capitalism can thrive, or making sure us peons cannot discharge debts, or making everything about financalization. This was all done on purpose, without care for "winning the political game". Politics is economics, and the Wall Street Democrats have been winning.

notabanker , , March 10, 2019 at 12:26 pm

For sure. I'm quite concerned at the behavior of the DNC leadership and pundits. They are doubling down on blatant corporatist agendas. They are acting like they have this in the bag when objective evidence says they do not and are in trouble. Assuming they are out of touch is naive to me. I would assume the opposite, they know a whole lot more than what they are letting on.

urblintz , , March 10, 2019 at 12:49 pm

I think the notion that the DNC and the Democrat's ruling class would rather lose to a like-minded Republican corporatist than win with someone who stands for genuine progressive values offering "concrete material benefits." I held my nose and read comments at the kos straw polls (where Sanders consistently wins by a large margin) and it's clear to me that the Clintonista's will do everything in their power to derail Bernie.

polecat , , March 10, 2019 at 1:00 pm

"It's the Externalities, stupid economists !" *should be the new rallying cry ..

rd , , March 10, 2019 at 3:26 pm

Keynes' "animal spirits" and the "tragedy of the commons" (Lloyd, 1833 and Hardin, 1968) both implied that economics was messier than Samuelson and Friedman would have us believe because there are actual people with different short- and long-term interests.

The behavioral folks (Kahnemann, Tversky, Thaler etc.) have all shown that people are even messier than we would have thought. So most macro-economic stuff over the past half-century has been largely BS in justifying trickle-down economics, deregulation etc.

There needs to be some inequality as that provides incentives via capitalism but unfettered it turns into France 1989 or the Great Depression. It is not coincidence that the major experiment in this in the late 90s and early 2000s required massive government intervention to keep the ship from sinking less than a decade after the great unregulated creative forces were unleashed.

MMT is likely to be similar where productive uses of deficits can be beneficial, but if the money is wasted on stupid stuff like unnecessary wars, then the loss of credibility means that the fiat currency won't be quite as fiat anymore. Britain was unbelievably economically powerfully in the late 1800s but in half a century went to being an economic afterthought hamstrung by deficits after two major wars and a depression.

So it is good that people like Brad DeLong are coming to understand that the pretty economic theories have some truths but are utter BS (and dangerous) when extrapolated without accounting for how people and societies actually behave.

Chris Cosmos , , March 10, 2019 at 6:43 pm

I never understood the incentive to make more money -- that only works if money = true value and that is the implication of living in a capitalist society (not economy)–everything then becomes a commodity and alienation results and all the depression, fear, anxiety that I see around me. Whereas human happiness actually comes from helping others and finding meaning in life not money or dominating others. That's what social science seems to be telling us.

Oregoncharles , , March 10, 2019 at 2:46 pm

Quoting DeLong:

" He says we are discredited. Our policies have failed. And they've failed because we've been conned by the Republicans."

That's welcome, but it's still making excuses. Neoliberal policies have failed because the economics were wrong, not because "we've been conned by the Republicans." Furthermore, this may be important – if it isn't acknowledged, those policies are quite likely to come sneaking back, especially if Democrats are more in the ascendant., as they will be, given the seesaw built into the 2-Party.

The Rev Kev , , March 10, 2019 at 7:33 pm

Might be right there. Groups like the neocons were originally attached the the left side of politics but when the winds changed, detached themselves and went over to the Republican right. The winds are changing again so those who want power may be going over to what is called the left now to keep their grip on power. But what you say is quite true. It is not really the policies that failed but the economics themselves that were wrong and which, in an honest debate, does not make sense either.

marku52 , , March 10, 2019 at 3:39 pm

"And they've failed because we've been conned by the Republicans.""

Not at all. What about the "free trade" hokum that DeJong and his pal Krugman have been peddling since forever? History and every empirical test in the modern era shows that it fails in developing countries and only exacerbates inequality in richer ones.

That's just a failed policy.

I'm still waiting for an apology for all those years that those two insulted anyone who questioned their dogma as just "too ignorant to understand."

Glen , , March 10, 2019 at 4:47 pm

Thank you!

He created FAILED policies. He pushed policies which have harmed America, harmed Americans, and destroyed the American dream.

Kevin Carhart , , March 10, 2019 at 4:29 pm

It's intriguing, but two other voices come to mind. One is Never Let a Serious Crisis Go To Waste by Mirowski and the other is Generation Like by Doug Rushkoff.

Neoliberalism is partially entrepreneurial self-conceptions which took a long time to promote. Rushkoff's Frontline shows the Youtube culture. There is a girl with a "leaderboard" on the wall of her suburban room, keeping track of her metrics.

There's a devastating VPRO Backlight film on the same topic. Internet-platform neoliberalism does not have much to do with the GOP.

It's going to be an odd hybrid at best – you could have deep-red communism but enacted for and by people whose self-conception is influenced by decades of Becker and Hayek? One place this question leads is to ask what's the relationship between the set of ideas and material conditions-centric philosophies? If new policies pass that create a different possibility materially, will the vise grip of the entrepreneurial self loosen?

Partially yeah, maybe, a Job Guarantee if it passes and actually works, would be an anti-neoliberal approach to jobs, which might partially loosen the regime of neoliberal advice for job candidates delivered with a smug attitude that There Is No Alternative. (Described by Gershon). We take it seriously because of a sense of dread that it might actually be powerful enough to lock us out if we don't, and an uncertainty of whether it is or not.

There has been deep damage which is now a very broad and resilient base. It is one of the prongs of why 2008 did not have the kind of discrediting effect that 1929 did. At least that's what I took away from _Never Let_.

Brad DeLong handing the baton might mean something but it is not going to ameliorate the sense-of-life that young people get from managing their channels and metrics.

Take the new 1099 platforms as another focal point. Suppose there were political measures that splice in on the platforms and take the edge off materially, such as underwritten healthcare not tied to your job. The platforms still use star ratings, make star ratings seem normal, and continually push a self-conception as a small business. If you have overt DSA plus covert Becker it is, again, a strange hybrid,

Jeremy Grimm , , March 10, 2019 at 5:13 pm

Your comment is very insightful. Neoliberalism embeds its mindset into the very fabric of our culture and self-concepts. It strangely twists many of our core myths and beliefs.

Raulb , , March 10, 2019 at 6:36 pm

This is nothing but a Trojan horse to 'co-opt' and 'subvert'. Neoliberals sense a risk to their neo feudal project and are simply attempting to infiltrate and hollow out any threats from within.

There are the same folks who have let entire economics departments becomes mouthpieces for corporate propaganda and worked with thousands of think tanks and international organizations to mislead, misinform and cause pain to millions of people.

They have seeded decontextualized words like 'wealth creators' and 'job creators' to create a halo narrative for corporate interests and undermine society, citizenship, the social good, the environment that make 'wealth creation' even possible. So all those take a backseat to 'wealth creator' interests. Since you can't create wealth without society this is some achievement.

Its because of them that we live in a world where the most important economic idea is protecting people like Kochs business and personal interests and making sure government is not 'impinging on their freedom'. And the corollary a fundamental anti-human narrative where ordinary people and workers are held in contempt for even expecting living wages and conditions and their access to basics like education, health care and living conditions is hollowed out out to promote privatization and become 'entitlements'.

Neoliberalism has left us with a decontextualized highly unstable world that exists in a collective but is forcefully detached into a context less individual existence. These are not mistakes of otherwise 'well meaning' individuals, there are the results of hard core ideologues and high priests of power.

Dan , , March 10, 2019 at 7:31 pm

Two thumbs up. This has been an ongoing agenda for decades and it has succeeded in permeating every aspect of society, which is why the United States is such a vacuous, superficial place. And it's exporting that superficiality to the rest of the world.

VietnamVet , , March 10, 2019 at 7:17 pm

I read Brad DeLong's and Paul Krugman's blogs until their contradictions became too great. If anything, we need more people seeing the truth. The Global War on Terror is into its 18th year. In October the USA will spend approximately $6 trillion and will have accomplish nothing except to create blow back. The Middle Class is disappearing. Those who remain in their homes are head over heels in debt.

The average American household carries $137,063 in debt. The wealthy are getting richer.

The Jeff Bezos, Warren Buffett and Bill Gates families together have as much wealth as the lowest half of Americans. Donald Trump's Presidency and Brexit document that neoliberal politicians have lost contact with reality. They are nightmares that there is no escaping. At best, perhaps, Roosevelt Progressives will be reborn to resurrect regulated capitalism and debt forgiveness.

But more likely is a middle-class revolt when Americans no longer can pay for water, electricity, food, medicine and are jailed for not paying a $1,500 fine for littering the Beltway.

A civil war inside a nuclear armed nation state is dangerous beyond belief. France is approaching this.