Imbecilization is a normal historical process where intellectual declines follows the
economic decline of a given empire. There's growing evidence the West is going through the
same process.
A with any composite, complex historical process, imbecilization doesn't happen in a
uniform and linear way. Economics was the first science that descended into pseudo-science in
the capitalist world (after Marx dismantled Classic Economics). Philosophy followed. Erudite
art degenerated after the fall of Modernism somewhere in the 1950s. Human sciences in general
became fragmented and little more than a constelation of esoterism and pseudo-sciences - a
condition they still enjoy today (e.g. the dismembering of History into Sociology, Behavioral
Economics and others).
Meanwhile, the so-called STEM or "Hard Sciences" continued to prosper for some decades,
until they also hit a ceiling in the 1990s. The fall of the profitability of the capitalist
world led it to resort to "financialization" to keep the system going, which resulted in the
most brilliant capitalist mathematicians to be hosed to Wall Street instead to the likes of
NASA. Those MIT mathematicians and rocket scientists created the algorithms Wall Street still
uses today, but they did not stop the 2008 meltdown.
Nowadays, those brilliant STEM minds are nothing more than fraudsters who keep their
careers going by creating meaningless experiments (because they need the funding) only to
publish articles and keep their production quotas or self-censuring bootlickers for Wall
Street and Big Pharma. When they get to work for a big corporation, they are mere architects
of planned obsolescence or patent renewing. There's a new book I strongly recommend all of
you to read:
Does productivity explain income? I asked this question in a
previous
post
. My answer was a bombastic
no
. In this post, I'll dig deeper into the reasons that
productivity doesn't explain income. I'll focus on wages.
The Evidence
Let's start with the evidence trumpeted as proof that productivity explains wages. Looking across firms, we
find that sales per worker correlates with average wages. Figure 1 shows this correlation for about 50,000 US
firms over the years 1950 to 2015.
Figure 1: The correlation between a firm's average wages and
its sales per worker.
Data comes from Compustat. To adjust for inflation, I've divided wages and sales
per worker by their respective averages (in the firm sample) in each year. I've shown stock tickers for select
firms.
Mainstream economists take this correlation as evidence that productivity explains wages. Sales, they say,
measure firms' output. So sales per worker indicates firms' labor productivity. Thus the evidence in Figure 1
indicates that productivity explains (much of) workers' income. Case closed.
The Problem
Yes, sales per worker correlates with average wages. No one disputes this fact. What I dispute is that this
correlation says anything about productivity. The problem is simple. Sales per worker
doesn't measure
productivity
.
To understand the problem, let's do some basic accounting. A firm's sales equal the unit price of the firm's
product times the quantity of this product:
Sales = Unit Price × Unit Quantity
Dividing both sides by the number of workers gives:
Sales per Worker = Unit Price × Unit Quantity per Worker
Let's unpack this equation. The 'unit quantity per worker' measures labor productivity. It tells us the
firm's output per worker. For instance, a farm might grow 10 tons of potatoes per worker. If another farm grows
15 tons of potatoes per worker, it unambiguously produces more potatoes per worker (assuming the potatoes are
the same).
The problem with using sales to measure productivity is that
prices
get in the way. Imagine that
two farms, Old McDonald's and Spuds-R-Us, both produce 10 tons of potatoes per worker. Next, imagine that Old
McDonald's sells their potatoes for $100 per ton. Spuds-R-Us, however, sells their potatoes for $200 per ton.
The result is that Spuds-R-Us has double the sales per worker as Old McDonald's. When we equate sales with
productivity, it appears that workers at Spuds-R-Us are twice as productive as workers at Old McDonald's. But
they're not. We've been fooled by prices.
The solution to this problem seems simple. Rather than use sales to measure output, we should measure a
firm's output
directly
. Count up what the firm produces, and that's its output. Problem solved.
So why don't economists measure output directly? Because the restrictions needed to do so are severe. In
fact, they're so severe that they're almost never met in the real world. Let's go through these restriction.
1: Firms must produce identical commodities
To objectively compare productivity, you have to find firms that produce the same commodity. You could, for
instance, compare the productivity of two farms that produce (the same) potatoes. But if the farms produce
different things, you're out of luck.
Here's why. When firms produce different commodities, we need a common dimension to compare their outputs.
The problem is that the choice of dimension affects our measure of output.
To see the problem, let's return to our two farms, Old McDonald's and Spuds-R-Us. Suppose that Spuds-R-Us
produces 10 tons of potatoes per worker. Tired of growing potatoes, Old McDonald's instead grows 5 tons of corn
per worker. Which workers are more productive?
The answer depends on our dimension of analysis.
Suppose we compare potatoes and corn using mass. We find that Spuds-R-Us workers (who produce 10 tons per
worker) are more productive than Old McDonald's workers (who produce 5 tons per worker).
Now suppose we compare potatoes and corn using energy. Furthermore, imagine that corn has twice the caloric
density of potatoes. Now we find that workers at Spuds-R-Us (who produce half the mass of food at twice the
caloric density) have the same labor productivity as Old McDonald's workers.
The lesson? Unless two firms produce the same commodity, productivity comparisons are subjective. They
depend on the choice of dimension.
Restriction 2: Firm output must be countable
When you read economic textbooks, it's clear that the discipline of economics is stuck in the 19th century.
Firms, the textbooks say, produce
stuff
.
But what about all those other firms that don't produce stuff? What is their output? What, for instance, is
the output of Goldman Sacks? What is the output of a high school? What is the output of a hospital? What is the
output of a legal firm?
Yes, these institutions do things. But it defies reason to give these activities a 'unit quantity'. In other
words, it defies reason to quantify the output of these institutions.
Restriction 3: Firms must produce a single commodity
Complicating things further, we can objectively measure output only when firms produce a single commodity.
If a firm produces two (or more) commodities, its output is affected by how we add the commodities together.
To see the problem, let's return to Old McDonald's and Spuds-R-Us. Suppose that both farms have diversified
their production. Spuds-R-Us produces 5 tons of potatoes and 1 ton of corn per worker. Old McDonald's produces
1 ton of potatoes and 5 tons of corn. Which workers are more productive?
The answer depends on our dimension of analysis. In terms of mass, both farms produce 6 tons of food per
worker. So labor productivity appears the same. But suppose we measure the output of energy. Again, we'll
assume that corn has double the caloric density of potatoes. Suppose corn contains 2 GJ (gigajoule) per ton,
while potatoes contain 1 GJ per ton. Now we find that Old McDonald's workers are about 60% more productive than
workers at Spuds-R-Us. Here's the calculation:
Spuds-R-Us:
5 tons potato × 1 GJ / ton + 1 ton corn × 2 GJ / ton = 7 GJ
Old McDonald's:
1 ton potato × 1 GJ / ton + 5 ton corn × 2 GJ / ton = 11 GJ
This 'aggregation problem' is why the neoclassical theory of income distribution assumes a single-commodity
world -- a world in which everyone produces and consumes the same thing. In this one-commodity world, we can
measure productivity unambiguously. In the real world (with many commodities) productivity depends on our
choice of dimension.
The Severity of the Problem
Let's take stock. If we want to measure productivity objectively, the restrictions are severe:
Firms must produce the same commodity
This commodity must be countable
Firms must produce only one commodity
These conditions are so stringent that they're rarely met in the real world. This is a bit of a problem for
neoclassical theory. It proposes that everyone's income is explained by their productivity. But only in the
rarest of circumstances can we measure productivity objectively.
It's hard not to laugh at this predicament. It's like Newton proclaiming that gravitational force is
proportional to mass. But in the next sentence he realizes that mass can be measured only in the rarest of
circumstances.
The Neoclassical Sleight of hand
Neoclassical economists don't think of themselves as Newtons who can't measure mass. Instead, economics
textbooks don't even mention the problems with measuring productivity. In these textbooks, all seems well in
neoclassical land.
But all is not well. Neoclassical economists perpetuate their fantasy by relying on a sleight of hand.
Here's what they do.
First, economists argue that the purpose of all economic activity is to give consumers
utility
. Buy
a potato and you get utility. Buy a cigarette and you get utility. Utility, economists say, is the universal
dimension of output. By measuring utility, we can compare the output of any and all firms (no matter what they
produce).
After proclaiming that utility is the universal dimension of output, economists pull their trick. Utility,
they say, is
revealed through prices
. So a painting worth $1000 gives the buyer 1000 times the utility
as a $1 potato.
With this thinking in hand, economists see that a firm's sales measure its output of utility:
Sales = Unit Price × Unit Quantity
Sales = Unit Utility × Unit Quantity = Gross Utility
So sales become a universal measure of utility, and utility is the universal measure of output. Now, when we
compare sales per worker to wages (as in Figure 1), economists proclaim that we're comparing productivity to
wages.
Except we're not.
The problem is that this whole operation is circular. The idea that prices reveal utility is a
hypothesis
.
And as every good scientist knows, you can't use your hypothesis to test your hypothesis. But that's what
neoclassical economists do. They assume that one aspect of their theory is true (the link between prices and
utility) to test another aspect of their theory (the link between productivity and income). This is a big no
no.
Why do economists use this circular reasoning? Probably because they don't know they're doing it. Economists
take as received wisdom the idea that prices reveal utility. But this is just a hypothesis. In fact, it's a bad
hypothesis. Why? Because we can never measure utility independently of prices.
Why are Sales Related to Wages
Whenever I go through the logic above, mainstream economists will retort: "But look at the correlation
between wages and sales! How can this not show that productivity explains wages?" Their reasoning seems to be
that, absent an alternative explanation, this correlation must support their hypothesis.
In
No,
Productivity Does Not Explain Income
, I gave an alternative explanation. The correlation between wages and
sales per worker, I argued, follows from accounting principles.
Sales isn't a measure of output. It's an
income
stream. Once earned, this income gets split by the
firm into different categories. Some of it goes to workers. Some of it goes to other firms (as non-labor
costs). And some of it goes to the firm's owners as profit.
Figure 2: Dividing a firm's income stream.
Accounting
principles dictate that a firm's sales get divided into profits and wages.
By
definition, the terms on the left must sum to the terms on the right. So it's not surprising that we find a
correlation between wages and sales. They're related by an accounting identity.
In comments on
No,
Productivity Does Not Explain Income
(and on other sites), some economists pounced on this argument, saying
it was fatally flawed. And in hindsight, I admit that I wasn't clear enough about my reasoning. I was thinking
about the real world. But the economists who critiqued my reasoning were thinking in terms of pure mathematics.
To frame the debate, let's think about something more concrete than income. Let's think about volume. In
rough terms, the volume of an object is the product of its length, width and height:
V = L × W × H
Now, let's pick a dimension -- say length. Will the length of an object correlate with its volume? In general
terms, no. I can make an object with any volume using any length. I just have to adjust the other dimensions
appropriately. By doing so, I can make a cube have the same volume as a box that is long and thin.
So in pure mathematical terms, the accounting definition of volume doesn't lead to a correlation between
length and volume.
But when we look at real-world objects -- like animals -- we
will
find a correlation. If we took all
the species on earth and plotted their length against their volume, we'd expect a tight correlation. A bacteria
has a small length and a small volume. A blue whale has a big length and a big volume. Fill in the gaps between
and we should get a nice tight line.
The reason for this correlation is that animals cannot take any shape. You'll never find an animal that is a
mile long and a few micrometers wide. Such a beast doesn't exist. Yes, the shapes of animals vary. But in the
grand scheme, this varation is small. As a first approximation, animals are roughly cubes. Or, if you're a
physicist,
they're
spheres
.
With this shape restriction, it follows from the definition of volume that animal length should correlate
with animal volume. We'd be astonished if it didn't.
So too with the correlation between sales per worker and wages. True, this correlation doesn't follow purely
from accounting principles. It follows jointly from accounting principles, and the fact that firms can't take
any form. We don't find firms that pay their workers nothing. That's slavery and its illegal. Similarly, we
don't find (many) firms that pay their workers the entirety of sales. That leaves no room for profit.
So in the real world, there are restrictions on how firms can divide their income stream. Here's what these
restrictions look like. In Figure 3, I've plotted the distribution of firms' payroll as a portion of sales.
This is the portion of sales that goes to workers. Across all firms, it's a pretty tight distribution,
clustered around 25%.
Figure 3: The distribution of firm payrolls as a fraction of
sales.
Data is for US firms in the Compustat database over the years 1950–2015.
Yes, it's theoretically possible for a firm to give any portion of its sales to workers. But this isn't what
happens in reality. In the real world, most firms give between 10% and 50% of their sales to workers. Just like
with the shape of animals, there are real-world restrictions on the 'shape' that firms can take.
Given these restrictions, it's not surprising that we find a correlation between sales per worker and wages.
When a firm's income stream grows, so does the amount going to workers.
None of this has anything to do with productivity. It's all about income. Sales are the firm's income. And
wages are the portion of this income given to workers.
Prices The Elephant in the Room
Let's conclude this foray into neoclassical thinking. The reason that sales don't measure firm output is
because they mix unit prices with unit quantities. Yes, sales per worker correlates with wages. But the
elephant in the room is prices. Greater sales may be due to greater output. But it can also be due to greater
unit prices.
In many cases, price differences are
everything
.
Imagine that a lawyer and a janitor both work 40 hours a week as self-employed contractors. The lawyer
charges $1000 per hour, while the janitor charges $20. At the end of the week, the lawyer has 50 times the
sales as the janitor. This difference comes down solely to price. The lawyer charges 50 times more for their
hourly services than the janitor.
The question is
why
?
Neoclassical economists proclaim they have the answer. The lawyer, they say, produces 50 times the utility
as the janitor. Ask economists how they know this, and they'll answer with a straight face: "Prices revealed
it."
It's time to recognize this sleight of hand for what it is: a farce. The reality is that we know virtually
nothing about what causes prices. And we will continue to know nothing as long as researchers believe the
neoclassical farce.
Further Reading
The Aggregation Problem: Implications for Ecological and Biophysical Economics.
BioPhysical Economics
and Resource Quality
. 4(1), 1-15.
SocArxiv
Preprint
.
Economists are always prepared for yesterday's problems.
Inflation was a big problem in the Keynesian era and every effort has been made to ensure that it doesn't
return.
Exceptionally intelligent Chinese economists have been looking at today's problems.
Davos 2018 – They know financial crises come from the private debt-to-GDP ratio and inflated asset prices
https://www.youtube.com/watch?v=1WOs6S0VrlA
The PBoC know how to spot a Minsky Moment coming, unlike the FED, BoE, ECB and BoJ.
The black swan flies in under our policymaker's radar.
Our policymakers are always looking in the wrong direction.
They fixate on public debt, and so don't see the problems emerging in private debt
The central banks look at consumer price inflation, while the problems are emerging in asset price inflation.
Your salesperson might negotiate higher prices on every deal, and that might correlate with their higher
productivity in a regulated and truly competitive market.
What does sales at higher prices in a (de facto) deregulated and increasingly monopolist market space
point to? Not to greater productivity, imo, but to deregulated monopoly. It too oftern points to unregulated
rentier-ism, or price gouging. Why has the cost of, say, insulin
tripled
over
the past decade? Not because of greater productivity. How can these price increases in this deregulated
market environment possibly point to real productivity? It points to price gouging. Since there is more
rentier-ism in the market, the old idea that prices/wages can be reliably equated with productivity becomes
meaningless, imo.
Do your other employees building widgets become "less productive" suddenly when your salesman catches a
cold? (You can come up with a bunch of these showing that productive can not be precisely equal to money
earned, because they exist on different time scales measuring different firm aggregates).
Is the salesman "more productive" if he kidnaps the children of a client and blackmails him into buying
more product? What would "productive" mean in any useful sense if there's no independent definition of
utility? Not every dollar earned is a measure of "productive" -- unless you redefine productive to mean
"every dollar earned by any measure".
When the US invaded Santo Domingo to extract debts, was that "productive" in any meaningful sense? That
would seem to be an abuse of language, rather than saying what you mean.
The problem here is that "productive" is a
moral
justification -- and so it must continue to mean
something more than simply money earned in order to morally justify the order. That's the goal of the use of
the word productive -- that thus the results are
just
.
"It's time to recognize this sleight of hand for what it is: a farce. The reality is that we know
virtually nothing about what causes prices. And we will continue to know nothing as long as researchers believe
the neoclassical farce."
This is what I don't understand, I think its obvious why there are prices. The whole idea of business, and
capitalism generally, is to charge as much as possible while spending as little as possible.
Beyond a certain point I do believe greed drives inflation -- companies will charge whatever they think they
can get away with long before there is wage pressure. Wage pressure in my experience is a reaction to
inflation, not a driver of it. For some reason many people of the conservative persuasion seem to get this
backwards.
Absolutely. The use of "we" here is problematic. What needs to be made clear is the fundamental
distinction between those who study capitalism, where the fundamental driver is the search for profit, and
those who study "the economy," for whom profit either doesn't exist or is the "marginal productivity of
capital," a concept which has been shown over and over to be nonsensical, and the fundamental drivers are
things we can't explain – individual wants and preferences and various completely unpredictable "shocks."
There is no collective "we." It's them against us.
It is obvious that prices are seriously out of kilter with actual value of products & services but is this a
result of all that extra money that was created to save the banks after 2008? And what about the vital function
of price discovery then. How does that work out? I do believe that there is something missing from this article
and that is a break-out of "wages". I suppose you could break it down to wages, salary & management which may
be more instructive. How does productivity relate to management then, both internally and externally? By
externally I mean when consultants are called into a company to do management's job. If you think that this
cannot be a serious concern, then reflect that the UK's NHS paid out between $350 million and $600 million
worth of taxpayer money on management consultancy in 2014 alone. What effect did that have on the NHS's
productivity then?
It sounds like the sure path to higher productivity is to encourage monopolies and oligopolies that can
raise prices pretty much at will while reducing the number of workers. The question becomes: why hasn't US
productivity surged as its markets became increasingly concentrated?
Blair Fix touches on an important issue behind the layers of terminology, concepts and policies that have so
impacted our everyday lives. So if labor productivity doesn't explain wages, income or prices, then what are
the true factors influencing prices and stagnant real wages?
Pricing power, labor cost, and profit margins of large transnational corporations have benefitted from their
increasingly monopolistic control of markets to suppress competition, use of global labor arbitrage, enjoyment
of very low and even negative real interest rates, tax policies and use of tax havens, hidden subsidies,
automation, neutering of organized labor, and purchased political influence. The productivity of labor in the
West has essentially been made irrelevant in many cases. Important stuff in so many ways.
Still appreciate the famous EPI chart that shows how the wealthy have captured the entire differential
between stagnant real wages and the rising productivity of labor since neoliberal capitalism made its
appearance on the world stage four decades ago. Trillions:
Hence 'private equity' is a euphemism for cannibalizing any source of equity for a quick profit. We have
an entire paradigm that is a farce. Based on value (equity) which in turn is based subjectively on whatever
you can snooker. It is one step forward and two steps backwards at this point. The Chinese have a beautiful
view of our debacle. No wonder they can tease out the contradictions. But it's not like we, places like NC,
haven't been screaming about all this loud and clear. (Steve Keen for starters.) The thing the aptly named
Mr. Fix is saying resides beneath the surface: If we are ever in so desperate a position to raise prices too
much nobody will buy and the system will collapse. And because of our horror-at-the-thought we have avoided
pricing oil where it belongs. Instead we have burned it with abandon, devastating the environment while we
were at it. A very expensive abandonment. It was an unrecognized consequence; an unavoidable one for the
sake of profit – whereas the other accounting anomalies are more "discretionary". When you are desperate
nothing is discretionary. If price ever comes to equal "utility" aka value, then there will be very little
commerce. It makes Richard Murphy's advocacy for Oil Bankruptcy a very rational suggestion. Mitigate the
devastation – that's about all we'll be able to do.
Even Adam Smith admitted that the economic value of something has no relation to its intrinsic utility, but
only to the relative balance of supply and demand for it.
If there are more workers than jobs, wages will be driven down and productivity gains will decouple from
wages – although with low wages, there will be little incentive to invest in making workers more productivity
so productivity may decline as a second-order effect.
If there are more jobs than workers, wages will be bid up, and productivity gains will be largely captured
by workers because it is the limiting factor in any economy that captures the profits. At the same time, high
wages will tend to spur higher productivity because there will be strong incentive to make efficient use of
relatively expensive labor.
At the base of Niagara Falls, water is cheap and it is not used efficiently. Using water efficiently in
Niagara Falls will not increase its price. In the Gobi desert, water is expensive and it is used efficiently.
Not using water efficiently in the Gobi desert will not make it cheaper.
The core of modern macroeconomics is to take what is fundamentally simple and confuse the heck out of it.
then what are the true factors influencing prices and stagnant real wages?
That would be the human factor. Greed, honesty, and desires and conscious acts. Economics cannot capture the
human factor.
Every human on Earth is capable of affecting markets dramatically by one act. Humans making multiple
decisions every day. All 7.5 billion. One person can change markets and history with one act. Gavrilo Princip,
for instance. Or by using an Internet post to affect markets.
To accurately model economics? All decisions made by each and every person on the planet would have to be an
input into any model. Each person's actions would have to have a solid, predictable outcome with no deviations.
A person becomes depressed, then A and B and C can ONLY happen.
Which would rule out occurrences such as Malaysia Flight 370 and quite a few other possibilities.
Economics and economists are in no way, shape, or form capable of accounting for the human factor. Which is
why there should be no laws of economics. More like, guesswork and observing trends in a general and gross
manner. Only to pray for accuracy.
LTCM was an example of economics and economists over-stepping their intellect. LTCM employed the
observations from John Nash (the subject of the move, A Beautiful Mind) and his Nobel prize winning work. Their
system worked until it didn't. Other humans made decisions that trashed.
People chose not to play the game. For LTCM? Such decisions by others outside of LTCM's control were fatal.
The issue with game theory, etc? For it to work, one has to have enforcers or project power to force people to
play by a set of rules. One could call this, the basis of American foreign policy – financial in nature.
The "Law of Supply and Demand"? Routinely violated. A person can decide arbitrarily to put items on sale.
The Human Factor.
Trends in economics are like trends on Twitter. You just never know. Economists are trend chasers. Having
more in common with Internet "influencers" trying to convince people that a $5 pair of shoes is actually worth
$400, than with actual science. THAT being an example of how prices are determined, in part.
Neoliberal economics is a case study of a select group (economists) influencing politicians and others, to
support their version of economics.
Economics and economists are in no way, shape, or form capable of accounting for the human factor.
Which is why there should be no laws of economics.
+1000
Great post DF! This whole discussion reminds me of the shortest job I ever had – selling crappy stereo
speakers out of the back of a white van for a day.
I'd answered an ad not knowing what I'd be getting into. The people who were "training" me would drive up
to an unsuspecting person in a mall parking lot and try to sell these speakers. They had a set dollar amount
per day there were supposed to sell to get a bonus, so if they could sell a speaker for $200 they would and
if at the end of the day they needed $25 to meet their sales quota, the last speaker would go for $25. The
whole thing depended on two very big human factors – greed and gullibility.
I'm sure an economist could come up with productivity figures for this operation, but what it really was
was a scam.
The job you describe reminds me of Eastern European bazaars back in the day where items being sold
"fell off" the back of a truck. Or Hoboken, NJ market on a certain block. :)
Thank you NC for yet another article exposing the sham of neoclassical economics. Here's a paragraph from a
book I happen to be reading yesterday
"..the neoclassical economic perspective is
the
ideology par excellence of capitalist political
economy. It is a theory that explains nothing more than how to assure that capitalism remains capitalism. That
is, neoclassical economics demonstrates how wealth and resources may continue to function to the advantage of
the minority that controls wealth and the immediate access to political power. It is an ideology because it
depicts as "rational" only economic behavior that seeks the "utility maximization" characteristic of market
exchange. That other motives and values might deserve priority in our action as economic agents is either
unthinkable (ruled out by definition) or, worse, held to be economically "irrational." Neoclassical economic
theory is itself a system of morality- and theology and ethics – masquerading as "science." Yet those who
dissent from this hidden morality have a difficult task before them. For this debate concerning the ethics of
economics is consistently suppressed in public discourse. Reigning economic theory makes calls for the
substantive realignment of existing economic power appear as madness. Dissenters are
by definition
"unrealistic," "utopian," or "irresponsible.""
And
this was written almost 30 years ago
in the book 'God and Capitalism – A Prophetic
Critique of Market Economy'. The excerpt is from chapter three – 'The "Fate" of the Middle Class in Late
Capitalism' by Beverly W. Harrison.
Can we please get an SEC or FASB ruling requiring the explicit breakout of salary payroll on the income
statement of EVERY public listed company?
Capitalism has ALL manner of enumeration of uses of capital, but nowhere is labor listed! I don't care for
labor hidden inside direct/indirect "costs of goods sold", "SG&A", "R&D" etc. Just put a payroll expense (minus
payroll taxes, minus the healthcare and whatnot, straight payroll) line item somewhere in the 10-k. Is it a
crime to ask?
Forgive me if this has been discussed previously. It's from a September Atlantic article on
economics I happened upon, a review of a book by Applebaum written by Sebastian Mallaby:
"...Applebaum opens his book with the observation that economics was not always the
imperial discipline. Roosevelt was delighted to consult lawyers such as Berle, but he
dismissed John Maynard Keynes as an impractical 'mathematician'. Regulatory agencies were
headed by lawyers, and courts dismissed economic evidence as irrelevant. In 1963, President
John F. Kennedy's Treasury secretary made a point of excluding academic economists from a
review of the international monetary order, deeming their advice useless. William McChesney
Martin, who presided over the Federal Reserve in the 1950s and '60s, confined economists to
the basement.
Starting in the l970s, however, economists began to wield extraordinary influence..."
I know all who are discussing financial matters here know this - it was just good for me
to see it spelled out. I see, however, the rest of the review is very economist oriented and
no mention of Michael Hudson whatsoever; it is, after all, the Atlantic. Yay for Roosevelt
and Kennedy though!
The
Economics Debate, again and again The debate on the economics profession – its
alleged ills and failings -- abates at times, but never ends. A recent
piece in The Guardian taking the profession to task for its lack of reform has prompted a
response from a group of economists. I thought it was time to re-up my own views on this
debate, in the form of two sets of ten commandments. The first set is directed at economists,
and the second to non-economists.
Ten commandments for economists
1. Economics is a collection of models; cherish their diversity.
2. It's a model, not the model.
3. Make your model simple enough to isolate specific causes and how they
work, but not so simple that it leaves out key interactions among causes.
4. Unrealistic assumptions are OK; unrealistic critical assumptions
are not OK.
5. The world is (almost) always second-best.
6. To map a model to the real world you need explicit empirical
diagnostics, which is more craft than science.
7. Do not confuse agreement among economists for certainty about how the
world works.
8. It's OK to say "I don't know" when asked about the economy or
policy.
9. Efficiency is not everything.
10. Substituting your values for the public's is an abuse of your
expertise.
Ten commandments for non-economists
1. Economics is a collection of models with no predetermined conclusions;
reject any arguments otherwise.
2. Do not criticize an economist's model because of its assumptions; ask
how the results would change if certain problematic assumptions were more realistic.
3. Analysis requires simplicity; beware of incoherence that passes itself
off as complexity.
4. Do not let math scare you; economists use math not because they are
smart, but because they are not smart enough.
5. When an economist makes a recommendation, ask what makes him/her sure
the underlying model applies to the case at hand.
6. When an economist uses the term "economic welfare," ask what s/he means
by it.
7. Beware that an economist may speak differently in public than in the
seminar room.
8. Economists don't (all) worship markets, but they know better how they
work than you do.
9. If you think all economists think alike, attend one of their
seminars.
10. If you think economists are especially rude to non-economists, attend
one of their seminars.
I have spent enough time around non-economists to know that their criticism often misses the
mark. In particular, many non-economists tend not to understand the value of parsimonious
modeling (especially of the mathematical kind). Their typical riposte is: "but it is more
complicated than that." It is of course. But without abstraction from detail, there cannot be
any useful analysis.
Economists, on the other hand, are very good at modeling but not so good at navigating among
their models. In particular, they often confuse a model, for the model. A big
part of the problem is that the implicit scientific method to which they subscribe is one in
which they are constantly striving to achieve the "best" model.
Macroeconomists are particularly bad at this, which accounts in part for their dismal
performance. In macroeconomics, there is too much of "is the right model the classical or the
Keynesian one" (and their variants), and too little of "how do we know whether it is the
Keynesian or the classical model that is the most relevant and applicable at this point in time
in this particular context."
By Anat R. Admati, the George G.C. Parker Professor of Finance and Economics at Stanford University Graduate School of Business
(GSB), a Director of the GSB Corporations and Society Initiative, and a senior fellow at Stanford Institute for Economic Policy Research.
Originally published at
ProMarket
Author's note: This essay is based on a speech I gave at the
Stigler Center 2019 Conference on Political Economy of Finance. Whereas the content refers to my experiences as an academic with
expertise in finance and economics, the key ideas apply to other areas in business schools and beyond. I hope colleagues will reflect
on the harm from silos and on our opportunities as academics to benefit society.
In the real world, it turned out, important economic outcomes are often the consequences of political forces. During 2010, people
within regulatory bodies told me privately that false and misleading claims were affecting key policy decisions. They urged me to
help clarify the issues and I felt compelled to become involved. Despite years of
research and advocacy , however, flawed
claims persist and still have an impact. (A recently
updated document lists and debunks 34 such claims.)
Many of my experiences in the last decade, which involved extensive interactions outside as well as within academia, were sobering.
I saw confusion, willful blindness , political
forces, various and sometimes subtle forms of corruption, and
moral disengagement
, first hand. The harm from economists ignoring political economy became increasingly evident. There was no way for me to return
to ignoring the issues.
It was also impossible to explain my experiences using economics alone. In writing an essay in 2016 for a book on Finance in
a Just Society edited by a philosopher, I went beyond economics and finance and drew from scholarship in political science, law,
sociology, and social psychology. My essay was entitled " It
Takes a Village to Maintain a Dangerous Financial System ."
Sadly, among the enablers of our inefficient and distorted financial system are economists and academics. Perhaps most shocking,
a fallacious claim about the impact and "cost" of more equity funding, which contradicts basic teachings in corporate finance, has
been included in many versions and editions of banking textbooks authored by prominent academic and former Federal Reserve governor
Frederic Mishkin. (See Section 3.3
here or Chapter 8 of The Bankers' New Clothes .)A risk manager
in one of the largest banks, whom I met in 2016 at a conference attended almost exclusively by practitioners and regulators and who
had dropped out of a top doctoral program in finance, quipped in an email after quoting from an academic paper: "with such friends
[as academics], who needs lobbyists?"
Lobbyists, who engage in "marketing" ideas to policymakers and to the public, are actually influential. They know how to work
the system and can dismiss, take out of context, misquote, misuse, or promote research as needed. If policymakers or the public are
unable or unwilling to evaluate the claims people make, lobbyists and others can create confusion and promote misleading narratives
if it benefits them. In the real political economy, good ideas and worthy research can fail to gain traction while bad ideas and
flawed research can succeed and have an impact.
Luigi Zingales highlighted political economy issues within our profession in a 2013 essay entitled "
Preventing
Economists' Capture " and in his 2015
AFA presidential address entitled "
Does Finance Benefit Society
?" Zingales notes and laments a pro-business and pro-finance bias within economics and finance and the pervasive blindness to
issues such as corporate fraud and political forces. "Awareness of the risk of [economists'] capture is the first line of defense,"
he writes in his 2013 essay. I agree that the issues are real yet often denied or ignored, and that recognizing problems is essential
for addressing them.
Governance and political economy challenges are pervasive beyond banking, where I encountered them so clearly. For example, corporate
governance research, including my own coauthored papers (in
1994 and
2009 ) on shareholder activism, has focused almost exclusively on conflicts between shareholders and managers, effectively assuming
that competitive markets, contracts, and laws protect everyone except for the narrowly-defined "shareholder" -- who is implicitly
assumed to own only one corporation's shares and to care only about the price of those shares.
Having observed governance and policy failures in banking, I realized that the focus on shareholder-manager conflicts is far too
narrow and often misses the most important problems. We must also worry about the governance of the institutions that create and
enforce the rules for all. How power structures and information asymmetries play out within and between institutions in the private
and public sectors is critical.
A 2017 Journal of Economic Perspectives Symposium on the modern corporation includes
an essay I wrote on the distortions that arise
as a result of the focus in corporate governance on financialized targets that purport to capture "shareholder value" when combined
with political economy forces that can lead to governments failing to set and enforce proper rules. The symposium also includes
an essay by Luigi Zingales on how political
and market power feed off each other. We both noted that more public awareness and understanding of these problems is essential for
addressing them.
Economists and academics have numerous opportunities to be helpful by looking more frequently out of their windows, expanding
their domain beyond "solved political problems," collaborating across disciplines, and bringing back a more holistic approach to
their work. Small changes in this direction are starting to happen, as the Stigler Center's conferences on the political economy
of finance show, but we can and should do much more.
Numerous research topics are ripe for more study by theorists and empiricists. Within the following long list of topics (still
a partial one) there are low-hanging fruits and more challenging problems that may require interdisciplinary reach and which tenured
academics are in a particularly privileged position to take on: whistleblower policies, the impact of consumers, employees, and politicians
on corporate actions, accounting rules for derivatives, the effectiveness of boards, audits and auditors regulation, the design of
bankruptcy laws, money laundering, corporate fraud, the organization and pricing of deposit insurance, debt subsidies, the role of
financial literacy and ideology in policy discussions, the structure and governance of regulatory agencies and central banks, lobbying
of multinational corporations, the governance of international bodies such as Financial Stability Board, Basel Committee, and IMF,
and the political economy of corporate enforcement.
Anat Admati. Photo by Nancy Rothstein
Engaging with policy issues in our research and teaching, and even engaging in
advocacy when appropriate and effectively lobbying on behalf
of the public (for example by writing
comment letters or
opinion pieces ) can be valuable and important. Policy
involvement, however, requires not only disclosing
potential conflicts of interest but, most importantly, scrutinizing research carefully to ensure it is adequate for guiding policy.
A problem I have become acutely aware of is that economists and others can be cavalier in claiming that research is relevant for
real-world application without such scrutiny.
As a theorist, I know models have unrealistic and sometimes stylized assumptions, yet models can bring important insights, and
theoretical and empirical papers that capture key features of the real world can be useful for policy. It takes a big leap of faith,
however, and can actually do more harm than good, to claim that models whose assumptions greatly distort the real world are adequate
for real-world applications. Specific examples are discussed in the
first paper I wrote with Peter DeMarzo,
Martin Hellwig, and Paul Pfleiderer (Sections 5-7), the
omitted chapter from the book I wrote with Martin Hellwig, Paul Pfleiderer's
paper on the misuse of models in finance
and economics (which starts with the old joke about the economist assuming a can opener on a deserted island and, among other things,
compares economics and physics) and a recent
presentation by Paul Pfleiderer that discusses the role of assumptions in theoretical and empirical research and which includes
great visuals.
The key takeaways if research is claimed to be relevant for the real world are:
Just because a model claims to "explain" something in the real world does not give it logical or actual validity . Even if
we may never have the data to be able to reject a model, there are ways to apply casual empiricism ("if this model was true, we would
observe x and we don't"), and we must be especially careful if a model contradicts other plausible explanations for what we see.
(Consider: "cigarette smoking improves people's health" as an "explanation" of why people smoke.) Just because a model can be
"calibrated" does not give it logical or actual validity .
Applying inadequate economic models to policy in the real world is akin to building bridges using flawed engineering models. Serious
harm may follow.
We can also enrich our teaching and connect more dots for our students by
developing interdisciplinary courses and by bringing out
the bigger picture, at least occasionally, in teaching standard courses. For example, basic corporate finance courses show how to
calculate the debt tax shield, and we should point out that there is no good reason for the tax code to subsidize debt relative to
equity and that this tax code can create distortions. We can also ask whether shareholders as individuals actually want a company
in which they hold shares to pursue "
positive Net Present Value
" projects that involve pollution or deceptive marketing of harmful products.
Many students are anxious to have such discussions. There is a broad sense today that standard business practices and dysfunctional
governments have exacerbated economic, social, and political problems. We must find ways to broaden the discussion beyond our narrow
lanes. Academic silos are part of the problem, and we should break them to be part of the solution.
Finally, we can and should engage in trying to ensure that governments and other institutions serve society. If only conflicted
experts engage in the process of creating rules, especially on important issues that appear technical and confusing such as accounting
standards or financial regulation, we get what Karthik Ramanna calls "
thin political markets " and
our assumptions about markets are more likely to be false. Academics may be in the best position to inform policy, expose flawed
or poorly enforced rules, and help hold power to account. We cannot assume others will be able or willing to do it without our help.
Governance and politics are key to outcomes everywhere. Related issues about power and control and about the respective roles
of governments and private sector institutions are playing out prominently today in the technology sector. A course I
taught recently about
the internet allowed me to compare and contrast the finance and internet sectors. The Stigler Center has laudably been informing
policy related to digital platforms .
In a recent Harvard
Business Review piece, I argue that business schools should practice and promote "civic-minded leadership" much more than
they currently do. (The text is also available
here .) I hope more academics and academic institutions recognize and embrace the great opportunities we have to try to make
the world a better place.
Does anyone know of a good book (or series of books) that discusses the history and evolution of economics. Ideally, I'm looking
for something that discusses particular political philosophers (e.g Adam Smith, Marx, Keynes, Mises, etc.) in sequence. What I'm
interested in is not only their ideas, but also their histories–what were the circumstances of their lives that lead to their
ideas and how did the political environment they found themselves in contribute. Also, how were the philosophies adopted or corrupted
by followers (e.g. Marx and Russian communism, Adam Smith and neoliberalism). I have yet to find a truly comprehensive book that
has this info. I would expect a title something like "History of Political Economy." Any suggestions from the NC commentariate?
So far I haven't found one book that covers it all. And most books I do find try to describe all economic thought in terms
of the author's particular belief system, which to me isn't all that helpful. So I read a lot of books on history, economics,
and archeology to try and piece together an accurate story. And I still have not read nearly enough to have a complete picture.
If I was much smarter I'd try to do it on my own. Sadly, I'm only mildly intelligent and a crappy writer. Somebody get Michael
Hudson on this so I can read it. I'll start the Kickstarter campaign.
It's much like religion in that introspection and study is generally confined to the walled-garden-containing-all-that-is-true-in-this-world
of choice.
This question intrigued me enough to explore what the Library of Congress catalog has to offer in response to it. The short
answer, based on a good deal of rather fancy searching, is not much -- in English. The subject heading, "Economics–History," is
the one that LC applies to the history of economics as a discipline. However, it retrieves so many citations as to be all but
useless, even when those results are sorted chronologically, because it has been applied to so many works that treat narrow rather
than broad sub-topics. LC has numerous books sharing the straightforward title, History of Economic Thought; they range in date
from 1911 on. The oldest is by Lewis F. Haney. The latest of them seems to be the 2nd "updated" edition of History of Economic
Thought, by E. K. Hunt (2002).
The Library of Congress has also established the subject heading "Political economy–history." However,
it is attached to only one title that covers the topic broadly: Histoire de la pensée économique : abrégé des analyses et
des théories économiques des origines au XXe siècle / Alain Redslob (2011). Despite characterizing itself as a 'summary' the
book comes in at a hefty 355 pages. LC classifies this work at HB75. A title search on "Political Economy" yields, to my eye,
only one somewhat recent work that seems to offer a general treatment: Political economy / Dan Usher (2003). Coming in at 427
pages, it is classified as "Economics" and classed at HB171.5. LC applies the heading 'Economics–Historiography" to eleven works
of which the most relevant here may be: History and historians of political economy / Werner Stark ; edited by Charles M.A. Clark
(1994). As a check of those results a bit of googling turned up a set of essays edited by Maxine Berg under the title, Political
Economy in the Twentieth Century (1990), which set out to represent thinking outside the 'mainstream' of neoclassical or Keynesian
traditions. LC classes it at HB87.
For books titled "History of Political Economy" it looks like one would have to go back into
the 19th century, to discover works bearing just such a title by John K. Ingram (1888; reprinted 2013 by Cambridge UP) and Gustav
Cohn (1894), thus apparently from the point where the Berg essays begin. I have read nothing by any of the authors I've mentioned
here; am just posting the outcome of my searching fwiw.
I have, but haven't yet finished, "An Economist's Guide to Economic History" by Blum and Colvin. If the text itself is insufficient,
the bibliography ought to be pretty comprehensive.
Yes Galbraith Sr was the last classical that pointed out the failings of the payed for PR merchants that some have called economists
and to rub salt in that wound claim dominate economics has no value based biases.
Richard Wolff (of Democracy at Work) has one but I'm not able to search for the title. Just google/qwant his name and a title
that you will recognize as what you are looking for will appear.
I've skimmed that book and it seemed accessible and neatly putting together timelines and major inflection points in the development
or economics.
"In the real world, it turned out, important economic outcomes are often the consequences of political forces."
Sorry to sound mean, but, duh.
"The key takeaways if research is claimed to be relevant for the real world are:
Just because a model claims to "explain" something in the real world does not give it logical or actual validity. Even if we
may never have the data to be able to reject a model, there are ways to apply casual empiricism ("if this model was true, we would
observe x and we don't"), and we must be especially careful if a model contradicts other plausible explanations for what we see.
(Consider: "cigarette smoking improves people's health" as an "explanation" of why people smoke.)"
Did the individuals she is addressing ever take a required undergraduate course in research methods?
Not understanding that is like believing that money does actually grow on trees. I don't understand how this could be
a revelation to supposedly intelligent people with advanced degrees.
You've got Evonomic's newsletter sign-up text box, copy-pasted in here, along with the article text. Guessing that wasn't intentional.
Mentioning it just in case.
This has "Academics may be in the best position to inform policy, expose flawed or poorly enforced rules, and help hold power
to account. We cannot assume others will be able or willing to do it without our help."
Given the funding method for much of academics (wealthy patrons, wealthy think tanks, wealthy companies and wealthy parents)
is it reasonable to expect that academics will truly speak truth to power?
In my view, the article implies a more vigilant economic profession COULD be important in influencing policy.
But I have doubts this could occur.
Economics and economists may be used in the same way that an insurance company executive told me that outside consultants were
sometimes chosen at his firm.
He suggested that consultants were sometimes selected because they were expected to agree with what management wanted to do.
One could suggest that similar dynamics exist for newspaper editorial writers.
If editorial writers were to go counter to their expected editorial content (right or left), they could well be expecting their
future paychecks would be at risk.
Western economics has evolved to serve TPTB, not the common good.
One can see that outside voices, such as Steve Keen and Michael Hudson, are relegated to outside the mainstream.
And on top of that, as Nassim Nicholas Taleb and others have regularly pointed out, achieving a high degree of efficiency
typically comes at the expense of safety.
An old Star Trek episode titled The Trouble With Tribbles is about Star Fleet and Klingons disputing ownership of a planet
which can grow vast amounts of food grains. In one short scene the Klingons claim ownership based on their more efficient exploitation
of resources (more efficient than the Federation) which, they claim, gives them 'rights' to own the planet. To which either McCoy
or Kirk say to themselves, "Oh yes, they're efficient all right. Ruthless, but efficient."
And on top of that, as Nassim Nicholas Taleb and others have regularly pointed out, achieving a high degree of efficiency
typically comes at the expense of safety.
No system ever operates at a greater efficiency than at the moment before its collapse.
Just something to think about, Capitalism rewarding efficiency rather than sustainability or robustness. Both of these require
the expenditure of resources, costs, which subtract from potential profits.
Yes, exactly. I liked this piece, long overdue for me. But what exactly is "efficiency"? I agree that there is no good reason
for the tax code to subsidize debt if, if, adequate financing is otherwise available. Hence the question: Why is there no alternative?
I dunno about small changes but I'm pretty sure we need to be able to downshift, as opposed to spinning out disastrously. There's
this too: finance itself (because financial time is much faster than ordinary time) is more desperate, even frantic, to maintain
its survival in a competitive "economy" so that as finance turns into financialization it achieves critical mass. And in order
just to hang on and not explode requires massive infusions of new money just so finance can stay on top of their own monster.
Some rodeo. The first good regulation for economic security might be to extend financial time – reducing the necessity for huge
turnover profits. But doing so in a way that preserves finance in a tame and domestic manner. Like preventing all the animals
in the barn from eating exponential volumes of alfalfa and producing mud slides of manure in order that the noble farmer doesn't
lose his tennies whilst mucking . Thereby reducing the risks inherent in equity finding – which for a sole proprietor (should
any still exist) is also known as crushing debt.
> The first good regulation for economic security might be to extend financial time – reducing the necessity for huge turnover
profits.
In ecology there is a tau function, the delay time. Predator population lags prey variation and can stabilize systems. And
Theo Compernelle gives details about delaying response time, as the productivity of a work session drops with the number of interruptions.
The Oct 28 Links included the article "Asynchronous Communication: The Real Reason Remote Workers Are More Productive", along
similar lines.
This seems to go against instant messaging, hi frequency trading, and OODA loops. But those seem to operate best in disregulated
situations. To extend financial time – what would that do to speculation?
Edit: Also, Taleb had something on taking data points too often leading to noisy results.
tau function seems to apply here. so as not to eat the seed corn. by extending financial time I meant slow it way down, in
my mind that means extending obligations over a much longer period. That might also mean many fewer financings, less opportunity
to speculate. tau is interesting; nice to know nature has this one figured out.
speculation is the "money" in financial markets. lenghten time=0 opportunity=0liquidity
on the other hand maybe another LTCM can be avoided.
pet theory, financial markets and all their attendend complexity exist to abosrb blasting high energy, innovation to assure survival,nutjob
i know
I'm thinking that one possibility would be money that expires after a set amount of time. Say one year. Money could not then
be used as an asset. It would have to be continuously and reliably spent. All assets would be physical. For one thing, we would
know what society really possessed, as opposed to the imaginary stuff/asset money is.
When I was a little boy, obsessing over Christmas presents, it seemed to me that politics was economics and that economics
was about the extraction of resources from the earth, and from human beings, with all kinds of shenanigans about timing.
No matter how much I learn, it seems that not much has changed.
Thank you for this post! Political economics is a much better name for this pseudo science. If aerospace engineers were wrong
as often as theses clowns airplanes would routinely fall out of the air.
And as Boeing so aptly demonstrates, putting the MBA PMC types in charge of the engineers, also results in airplanes falling
out of the air.
But huge props to Steve Keen for calling this out!
Paul Samuelson and Milton Friedman took the "animal spirits" out of economics and turned it into a mathematical model. However,
the behavioral economics and psychological research has shown that people are hard-wired in ways that make the mathematical models
flawed and erroneous.
As a design engineer, we use lots of complex modeling but ultimately our design blueprints and specifications are not rigidly
based on these models because people and/or robots have to build and operate the things. So there is a fair amount of simplification
and clarification that has to happen to have something built without major errors and then operated without major errors, as well
as maintained with varying levels of attention and funding. These require a fair amount of understanding about how humans process
and execute things and/or the limitations on what can be programmed into robots and computers.
I point out to junior engineers that the people who will build and operate the systems did not necessarily graduate in the
top 25% of their high school class unlike the designers. However, many of them have different skill sets that the designers don't
have, such as how to operate heavy equipment and do physical trade activities. So we need to design systems to a common denominator
that work from design and operations viewpoints.
In economics, we are seeing the systems being biased by focusing on theoretical models that don't actually work in practice
because they don't account for what people actually do compared to what a "rational" model says they should do. Hence the crap
about "trickle-down" that never actually works in practice in tax cut plans for the wealthy. Similarly, complex private healthcare
systems in the US don't remotely follow a "perfect information" model that would allow the "invisible hand" to produce efficiency.
so we get massive bloat and rentiere models that prey on consumers. However, that has become a feature, not a bug, on K-street.
Thank you X 10. Samuelson and Friedman claimed they could take the "animal spirits", aka human nature however defined, out
of economics. The claim amounts to saying they could measure, quantify, model, and manipulate human responses to changing situations,
which amounts to a claim of god-like understanding of human mental capacities. How do they measure a human? Reason and logic and
measurable outputs are only a part – and how large a part is as yet undetermined – in human awareness and decision making. Logic
is a good servant but a bad master, as the saying goes. Samuelson and Friedman construct a 'rational man' without ever questioning
the epistemology of their construct. (Mary Shelly might recognize the conceit.)
Michael Hudson is perhaps the best place to start. (Bill Black is a close second. Author of "The Best Way to Rob a Bank is
to Own One.")
Really, if one's education includes a healthy dose of history, anthropology, sociology, politics, and social theory, it's tempting
to suggest that economics is a self-important and smug discipline. Wow, politics affects markets, property relations, and conflict
over economic surplus! Wow. Good to know. And someone just told me that human beings aren't as rational as economists assume.
Wow again. Thanks.
"... "There's a whole neoliberal agenda," she said, referencing the received free-market wisdom that cutting public budgets spurs economic growth. "And then the way that traditional theory has fomented it or not contested it -- there's been kind of a strange symbiosis between mainstream economic thinking and stupid policies." ..."
"... Dr. Mazzucato takes issue with many of the tenets of the neoclassical economic theory taught in most academic departments: its assumption that the forces of supply and demand lead to market equilibrium, its equation of price with value and -- perhaps most of all -- its relegation of the state to the investor of last resort, tasked with fixing market failure. She has originated and popularized the description of the state as an "investor of first resort," envisioning new markets and providing long-term, or "patient," capital at early stages of development. ..."
"... Emphasizing to policymakers not only the importance of investment, but also the direction of that investment -- "What are we investing in?" she often asks -- Dr. Mazzucato has influenced the way American politicians speak about the state's potential as an economic engine. In her vision, governments would do what so many traditional economists have long told them to avoid: create and shape new markets, embrace uncertainty and take big risks. ..."
Meet the Leftish Economist With a New Story About Capitalism
Mariana Mazzucato wants liberals to talk less about the redistribution of wealth and more
about its creation. Politicians around the world are listening.
By Katy Lederer
Mariana Mazzucato was freezing. Outside, it was a humid late-September day in Manhattan,
but inside -- in a Columbia University conference space full of scientists, academics and
businesspeople advising the United Nations on sustainability -- the air conditioning was on
full blast.
For a room full of experts discussing the world's most urgent social and environmental
problems, this was not just uncomfortable but off-message. Whatever their dress -- suit,
sari, head scarf -- people looked huddled and hunkered down. At a break, Dr. Mazzucato
dispatched an assistant to get the A.C. turned off. How will we change anything, she wondered
aloud, "if we don't rebel in the everyday?"
Dr. Mazzucato, an economist based at University College London, is trying to change
something fundamental: the way society thinks about economic value. While many of her
colleagues have been scolding capitalism lately, she has been reimagining its basic premises.
Where does growth come from? What is the source of innovation? How can the state and private
sector work together to create the dynamic economies we want? She asks questions about
capitalism we long ago stopped asking. Her answers might rise to the most difficult
challenges of our time.
In two books of modern political economic theory -- "The Entrepreneurial State" (2013) and
"The Value of Everything" (2018) -- Dr. Mazzucato argues against the long-accepted binary of
an agile private sector and a lumbering, inefficient state. Citing markets and technologies
like the internet, the iPhone and clean energy -- all of which were funded at crucial stages
by public dollars -- she says the state has been an underappreciated driver of growth and
innovation. "Personally, I think the left is losing around the world," she said in an
interview, "because they focus too much on redistribution and not enough on the creation of
wealth."
Her message has appealed to an array of American politicians. Senator Elizabeth Warren,
Democrat of Massachusetts and a presidential contender, has incorporated Dr. Mazzucato's
thinking into several policy rollouts, including one that would use "federal R & D to
create domestic jobs and sustainable investments in the future" and another that would
authorize the government to receive a return on its investments in the pharmaceutical
industry. Dr. Mazzucato has also consulted with Representative Alexandria Ocasio-Cortez,
Democrat of New York, and her team on the ways a more active industrial policy might catalyze
a Green New Deal.
Even Republicans have found something to like. In May, Senator Marco Rubio of Florida
credited Dr. Mazzucato's work several times in "American Investment in the 21st Century," his
proposal to jump-start economic growth. "We need to build an economy that can see past the
pressure to understand value-creation in narrow and short-run financial terms," he wrote in
the introduction, "and instead envision a future worth investing in for the long-term."
Formally, the United Nations event in September was a meeting of the leadership council of
the Sustainable Development Solutions Network, or S.D.S.N. It's a body of about 90 experts
who advise on topics like gender equality, poverty and global warming. Most of the attendees
had specific technical expertise -- Dr. Mazzucato greeted a contact at one point with,
"You're the ocean guy!" -- but she offers something both broad and scarce: a compelling new
story about how to create a desirable future.
'Investor of first resort'
Originally from Italy -- her family left when she was 5 -- Dr. Mazzucato is the daughter
of a Princeton nuclear physicist and a stay-at-home mother who couldn't speak English when
she moved to the United States. She got her Ph.D. in 1999 from the New School for Social
Research and began working on "The Entrepreneurial State" after the 2008 financial crisis.
Governments across Europe began to institute austerity policies in the name of fostering
innovation -- a rationale she found not only dubious but economically destructive.
"There's a whole neoliberal agenda," she said, referencing the received free-market
wisdom that cutting public budgets spurs economic growth. "And then the way that traditional
theory has fomented it or not contested it -- there's been kind of a strange symbiosis
between mainstream economic thinking and stupid policies."
Dr. Mazzucato takes issue with many of the tenets of the neoclassical economic theory
taught in most academic departments: its assumption that the forces of supply and demand lead
to market equilibrium, its equation of price with value and -- perhaps most of all -- its
relegation of the state to the investor of last resort, tasked with fixing market failure.
She has originated and popularized the description of the state as an "investor of first
resort," envisioning new markets and providing long-term, or "patient," capital at early
stages of development.
In important ways, Dr. Mazzucato's work resembles that of a literary critic or rhetorician
as much as an economist. She has written of waging what the historian Tony Judt called a
"discursive battle," and scrutinizes descriptive terms -- words like "fix" or "spend" as
opposed to "create" and "invest" -- that have been used to undermine the state's appeal as a
dynamic economic actor. "If we continue to depict the state as only a facilitator and
administrator, and tell it to stop dreaming," she writes, "in the end that is what we
get."
As a charismatic figure in a contentious field that does not generate many stars -- she
was recently profiled in Wired magazine's United Kingdom edition -- Dr. Mazzucato has her
critics. She is a regular guest on nightly news shows in Britain, where she is pitted against
proponents of Brexit or skeptics of a market-savvy state.
Alberto Mingardi, an adjunct scholar at the libertarian Cato Institute and director
general of Istituto Bruno Leoni, a free-market think tank, has repeatedly criticized Dr.
Mazzucato for, in his view, cherry-picking her case studies, underestimating economic
trade-offs and defining industrial policy too broadly. In January, in an academic piece
written with one of his Cato colleagues, Terence Kealey, he called her "the world's greatest
exponent today of public prodigality."
Her ideas, though, are finding a receptive audience around the world. In the United
Kingdom, Dr. Mazzucato's work has influenced Jeremy Corbyn, leader of the Labour Party, and
Theresa May, a former Prime Minister, and she has counseled the Scottish leader Nicola
Sturgeon on designing and putting in place a national investment bank. She also advises
government entities in Germany, South Africa and elsewhere. "In getting my hands dirty," she
said, "I learn and I bring it back to the theory."
The 'Mission Muse'
During a break at the United Nations gathering, Dr. Mazzucato escaped the air conditioning
to confer with two colleagues in Italian on a patio. Tall, with a muscular physique, she wore
a brightly colored glass necklace that has become something of a trademark on the economics
circuit. Having traveled to five countries in eight days, she was fighting off a cough.
"In theory, I'm the 'Mission Muse,'" she joked, lapsing into English. Her signature
reference is to the original mission to the moon -- a state-spurred technological revolution
consisting of hundreds of individual feeder projects, many of them collaborations between the
public and private sectors. Some were successes, some failures, but the sum of them
contributed to economic growth and explosive innovation.
Dr. Mazzucato's platform is more complex -- and for some, controversial -- than simply
encouraging government investment, however. She has written that governments and state-backed
investment entities should "socialize both the risks and rewards." She has suggested the
state obtain a return on public investments through royalties or equity stakes, or by
including conditions on reinvestment -- for example, a mandate to limit share buybacks.
Emphasizing to policymakers not only the importance of investment, but also the
direction of that investment -- "What are we investing in?" she often asks -- Dr. Mazzucato
has influenced the way American politicians speak about the state's potential as an economic
engine. In her vision, governments would do what so many traditional economists have long
told them to avoid: create and shape new markets, embrace uncertainty and take big
risks.
... ... ...
Earlier in the day, she pointed at an announcement on her laptop. She had been nominated
for the first Not the Nobel Prize, a commendation intended to promote "fresh economic
thinking." "Governments have woken up to the fact the mainstream way of thinking isn't
helping them," she said, explaining her appeal to politicians and policymakers. A few days
later, she won.
Then she would advocate free banking, like Selgin. Better more efficient banking is a huge
and profitable investment for government.
So before the leftwards jump on her idea of investment, start here and explain why
suddenly, making finance more efficient for everyone is a bad idea.
Or ask our knee jerkers, before they jump on her ideas with all their delusions, why not
invest in dumping the primary dealer system? That is obviously inefficient and generates the
ATM costs we pay. Why not remove that with a sound investment f some sort?
Everything is through the eye of the beholder, for lelftwards it is the wonder of central
planning, for the libertariaturds it is about efficiency via decentralization.
Then comes meetup, and waddya know, each side brings a 200 page insurance contract they
want guaranteed before any efficiency changes are made. The meeting selects business as
normal. We will select business as normal, our economists will approve.
I am thrilled / s at the feeling of fulfillment I, well, feel, that an academic deems the
obvious. It definitely, indicates that we are approaching, wokeness !
Economists are beginning to evolve, again, almost, but not quite capturing the curl of the
real time world.
" There's a whole neoliberal agenda," she said, referencing the received free-market wisdom
that cutting public budgets spurs economic growth. "And then the way that traditional theory
has fomented it or not contested it -- there's been kind of a strange symbiosis between
mainstream economic thinking and stupid policies."
That is a deep vision that needs to be unpacked. My impression of traditional theory is
that it discourages the neoliberal, market deism.
"... "There's a whole neoliberal agenda," she said, referencing the received free-market wisdom that cutting public budgets spurs economic growth. "And then the way that traditional theory has fomented it or not contested it -- there's been kind of a strange symbiosis between mainstream economic thinking and stupid policies." ..."
"... Dr. Mazzucato takes issue with many of the tenets of the neoclassical economic theory taught in most academic departments: its assumption that the forces of supply and demand lead to market equilibrium, its equation of price with value and -- perhaps most of all -- its relegation of the state to the investor of last resort, tasked with fixing market failure. She has originated and popularized the description of the state as an "investor of first resort," envisioning new markets and providing long-term, or "patient," capital at early stages of development. ..."
Meet the Leftish Economist With a New Story About Capitalism
Mariana Mazzucato wants liberals to talk less about the redistribution of wealth and more about
its creation. Politicians around the world are listening.
By Katy Lederer
Mariana Mazzucato was freezing. Outside, it was a humid late-September day in Manhattan, but
inside -- in a Columbia University conference space full of scientists, academics and
businesspeople advising the United Nations on sustainability -- the air conditioning was on
full blast.
For a room full of experts discussing the world's most urgent social and environmental
problems, this was not just uncomfortable but off-message. Whatever their dress -- suit, sari,
head scarf -- people looked huddled and hunkered down. At a break, Dr. Mazzucato dispatched an
assistant to get the A.C. turned off. How will we change anything, she wondered aloud, "if we
don't rebel in the everyday?"
Dr. Mazzucato, an economist based at University College London, is trying to change
something fundamental: the way society thinks about economic value. While many of her
colleagues have been scolding capitalism lately, she has been reimagining its basic premises.
Where does growth come from? What is the source of innovation? How can the state and private
sector work together to create the dynamic economies we want? She asks questions about
capitalism we long ago stopped asking. Her answers might rise to the most difficult challenges
of our time.
In two books of modern political economic theory -- "The Entrepreneurial State" (2013) and
"The Value of Everything" (2018) -- Dr. Mazzucato argues against the long-accepted binary of an
agile private sector and a lumbering, inefficient state. Citing markets and technologies like
the internet, the iPhone and clean energy -- all of which were funded at crucial stages by
public dollars -- she says the state has been an underappreciated driver of growth and
innovation. "Personally, I think the left is losing around the world," she said in an
interview, "because they focus too much on redistribution and not enough on the creation of
wealth."
Her message has appealed to an array of American politicians. Senator Elizabeth Warren,
Democrat of Massachusetts and a presidential contender, has incorporated Dr. Mazzucato's
thinking into several policy rollouts, including one that would use "federal R & D to
create domestic jobs and sustainable investments in the future" and another that would
authorize the government to receive a return on its investments in the pharmaceutical industry.
Dr. Mazzucato has also consulted with Representative Alexandria Ocasio-Cortez, Democrat of New
York, and her team on the ways a more active industrial policy might catalyze a Green New
Deal.
Even Republicans have found something to like. In May, Senator Marco Rubio of Florida
credited Dr. Mazzucato's work several times in "American Investment in the 21st Century," his
proposal to jump-start economic growth. "We need to build an economy that can see past the
pressure to understand value-creation in narrow and short-run financial terms," he wrote in the
introduction, "and instead envision a future worth investing in for the long-term."
Formally, the United Nations event in September was a meeting of the leadership council of
the Sustainable Development Solutions Network, or S.D.S.N. It's a body of about 90 experts who
advise on topics like gender equality, poverty and global warming. Most of the attendees had
specific technical expertise -- Dr. Mazzucato greeted a contact at one point with, "You're the
ocean guy!" -- but she offers something both broad and scarce: a compelling new story about how
to create a desirable future.
'Investor of first resort'
Originally from Italy -- her family left when she was 5 -- Dr. Mazzucato is the daughter of
a Princeton nuclear physicist and a stay-at-home mother who couldn't speak English when she
moved to the United States. She got her Ph.D. in 1999 from the New School for Social Research
and began working on "The Entrepreneurial State" after the 2008 financial crisis. Governments
across Europe began to institute austerity policies in the name of fostering innovation -- a
rationale she found not only dubious but economically destructive.
"There's a whole neoliberal agenda," she said, referencing the received free-market
wisdom that cutting public budgets spurs economic growth. "And then the way that traditional
theory has fomented it or not contested it -- there's been kind of a strange symbiosis between
mainstream economic thinking and stupid policies."
Dr. Mazzucato takes issue with many of the tenets of the neoclassical economic theory
taught in most academic departments: its assumption that the forces of supply and demand lead
to market equilibrium, its equation of price with value and -- perhaps most of all -- its
relegation of the state to the investor of last resort, tasked with fixing market failure. She
has originated and popularized the description of the state as an "investor of first resort,"
envisioning new markets and providing long-term, or "patient," capital at early stages of
development.
In important ways, Dr. Mazzucato's work resembles that of a literary critic or rhetorician
as much as an economist. She has written of waging what the historian Tony Judt called a
"discursive battle," and scrutinizes descriptive terms -- words like "fix" or "spend" as
opposed to "create" and "invest" -- that have been used to undermine the state's appeal as a
dynamic economic actor. "If we continue to depict the state as only a facilitator and
administrator, and tell it to stop dreaming," she writes, "in the end that is what we get."
As a charismatic figure in a contentious field that does not generate many stars -- she was
recently profiled in Wired magazine's United Kingdom edition -- Dr. Mazzucato has her critics.
She is a regular guest on nightly news shows in Britain, where she is pitted against proponents
of Brexit or skeptics of a market-savvy state.
Alberto Mingardi, an adjunct scholar at the libertarian Cato Institute and director general
of Istituto Bruno Leoni, a free-market think tank, has repeatedly criticized Dr. Mazzucato for,
in his view, cherry-picking her case studies, underestimating economic trade-offs and defining
industrial policy too broadly. In January, in an academic piece written with one of his Cato
colleagues, Terence Kealey, he called her "the world's greatest exponent today of public
prodigality."
Her ideas, though, are finding a receptive audience around the world. In the United Kingdom,
Dr. Mazzucato's work has influenced Jeremy Corbyn, leader of the Labour Party, and Theresa May,
a former Prime Minister, and she has counseled the Scottish leader Nicola Sturgeon on designing
and putting in place a national investment bank. She also advises government entities in
Germany, South Africa and elsewhere. "In getting my hands dirty," she said, "I learn and I
bring it back to the theory."
The 'Mission Muse'
During a break at the United Nations gathering, Dr. Mazzucato escaped the air conditioning
to confer with two colleagues in Italian on a patio. Tall, with a muscular physique, she wore a
brightly colored glass necklace that has become something of a trademark on the economics
circuit. Having traveled to five countries in eight days, she was fighting off a cough.
"In theory, I'm the 'Mission Muse,'" she joked, lapsing into English. Her signature
reference is to the original mission to the moon -- a state-spurred technological revolution
consisting of hundreds of individual feeder projects, many of them collaborations between the
public and private sectors. Some were successes, some failures, but the sum of them contributed
to economic growth and explosive innovation.
Dr. Mazzucato's platform is more complex -- and for some, controversial -- than simply
encouraging government investment, however. She has written that governments and state-backed
investment entities should "socialize both the risks and rewards." She has suggested the state
obtain a return on public investments through royalties or equity stakes, or by including
conditions on reinvestment -- for example, a mandate to limit share buybacks.
Emphasizing to policymakers not only the importance of investment, but also the direction of
that investment -- "What are we investing in?" she often asks -- Dr. Mazzucato has influenced
the way American politicians speak about the state's potential as an economic engine. In her
vision, governments would do what so many traditional economists have long told them to avoid:
create and shape new markets, embrace uncertainty and take big risks.
Inside the conference, the news was uniformly bleak. Pavel Kabat, the chief scientist of the
World Meteorological Organization, lamented the breaking of global temperature records and said
that countries would have to triple their current Paris-accord commitments by 2030 to have any
hope of staying below a critical warming threshold. A panel on land use and food waste noted
that nine species account for two-thirds of the world's crop production, a dangerous lack of
agricultural diversity. All the experts appeared dismayed by what Jeffrey Sachs, the S.D.S.N.'s
director, described as the "crude nationalism" and "aggressive anti-globalization" ascendant
around the world.
"We absolutely need to change both the narrative, but also the theory and the practice on
the ground," Dr. Mazzucato told the crowd when she spoke on the final expert panel of the day.
"What does it mean, actually, to create markets where you create the demand, and really start
directing the investment and the innovation in ways that can help us achieve these goals?"
Earlier in the day, she pointed at an announcement on her laptop. She had been nominated for
the first Not the Nobel Prize, a commendation intended to promote "fresh economic thinking."
"Governments have woken up to the fact the mainstream way of thinking isn't helping them," she
said, explaining her appeal to politicians and policymakers. A few days later, she won.
Reply Thursday, November 28, 2019 at 12:05 PM
"... The existence of the bubble and the fact that it was driving the economy could both be easily determined from regularly published government data, yet the vast majority of economists were surprised when the bubble burst and it gave us the Great Recession. This history should lead us to ask what other simple things economists are missing. ..."
Simple Economics that Most Economists Don't Know
By Dean Baker
Economists are continually developing new statistical techniques, at least some of which
are useful for analyzing data in ways that allow us to learn new things about the world.
While developing these new techniques can often be complicated, there are many simple things
about the world that economists tend to overlook.
The most important example here is the housing bubble in the last decade. It didn't
require any complicated statistical techniques to recognize that house prices had sharply
diverged from their long-term pattern, with no plausible explanation in the fundamentals of
the housing market.
It also didn't require sophisticated statistical analysis to see the housing market was
driving the economy. At its peak in 2005 residential construction accounted for 6.8 percent
of GDP. This compares to a long-run average that is close to 4.0 percent. Consumption was
also booming, as people spent based on the bubble generated equity in their homes, pushing
the savings rate to a record low.
The existence of the bubble and the fact that it was driving the economy could both be
easily determined from regularly published government data, yet the vast majority of
economists were surprised when the bubble burst and it gave us the Great Recession. This
history should lead us to ask what other simple things economists are missing.
For this holiday season, I will give three big items that are apparently too simple for
economists to understand.
1) Profit shares have not increased much -- While there has been some redistribution in
before-tax income shares from labor to capital, it at most explains a small portion of the
upward redistribution of the last four decades. Furthermore, shares have been shifting back
towards labor in the last four years.
2) Returns to shareholders have been low by historical standards -- It is often asserted
that is an era of shareholder capitalism in which companies are being run to maximize returns
to shareholders. In fact, returns to shareholders have been considerably lower on average
than they were in the long Golden Age from 1947 to 1973.
3) Patent and copyright rents are equivalent to government debt as a future burden –
The burden that we are placing on our children through the debt of the government is a
frequent theme in economic reporting. However, we impose a far larger burden with
government-granted patent and copyright monopolies, although this literally never gets any
attention in the media.
To be clear, none of these points are contestable. All three can all be shown with widely
available data and/or basic economic logic. The fact that they are not widely recognized by
people in policy debates reflects the laziness of economists and people who write about
economic policy.
Profit Shares
It is common to see discussions where it is assumed that there has been a large shift from
wages to profits, and then a lot of head-scratching about why this occurred. In fact, the
shift from wages to profits has been relatively modest and all of it occurred after 2000,
after the bulk of the upward redistribution of income had already taken place.
If we just compare end points, the labor share of net domestic product was 64.0 percent in
2019, a reduction of 1.6 percentage points from its 65.6 percent share in 1979, before the
upward redistribution began. If, as a counter-factual, we assume that the labor share was
still at its 1979 level it would mean that wages would be 2.5 percent higher than they are
now. That is not a trivial effect, but it only explains a relatively small portion of the
upward redistribution over the last four decades.
It is also worth noting the timing of this shift in shares. There was no change in shares
from 1979 to 2000, the point at which most of the upward redistribution to the richest one
percent had already taken place. The shift begins in the recovery from the 2001
recession.
This was the period of the housing bubble. The reason why this matters is that banks and
other financial institutions were recording large profits on the issuance of mortgages that
subsequently went bad, leading to large losses in the years 2008-09. This means that a
substantial portion of the profits that were being booked in the years prior to the Great
Recession were not real profits.
It would be as though companies reported profits based on huge sales to a country that
didn't exist. Such reporting would make profits look good when the sales were being booked,
but then would produce large losses when the payments for the sales did not materialize,
since the buyer did not exist. It's not clear that when the financial industry books phony
profits it means there was a redistribution from labor to capital.[1]
There clearly was a redistribution from labor to capital in the weak labor market
following the Great Recession. Workers did not have enough bargaining power to capture any of
the gains from productivity growth in those years. That has been partially reversed in the
last four years as the labor share of net domestic income has risen by 2.4 percentage
points.[2] This still leaves some room for further increases to make up for the drop in labor
share from the Great Recession, but it does look as though the labor market is operating as
we would expect.
Returns to Shareholders Lag in the Period of Shareholder Capitalism
It is common for people writing on economics, including economists, to say that companies
have been focused on returns to shareholders in the last four decades in a way that was not
previously true. The biggest problem with this story is that returns to shareholders have
actually been relatively low in the last two decades.
If we take the average real rate of return over the last two decades, it has been 3.9
percent. That compares to rates of more than 8.0 percent in the fifties and sixties. Even
this 3.9 percent return required a big helping hand from the government in the form a
reduction in the corporate income tax rate from 35 percent to 21 percent.
The figure for the last two decades is somewhat distorted by the fact that we were
reaching the peak of the stock bubble in the late 1990s, but the story is little changed if
we adjust for this fact. If we take the average real return from July of 1997, when the price
to earnings ratio was roughly the same as it is now, it is still just 5.7 percent, well below
the Golden Age average when companies were supposedly not being run to maximize shareholder
value.
It is striking that this drop in stock returns is so little noticed and basically does not
feature at all in discussions of the economy. Back in the late 1990s, it was nearly
universally accepted in public debates that stocks would provide a 7.0 percent real return on
average in public debates.
This was most evident in debates on Social Security, where both conservatives and liberals
assumed that the stock market would provide 7.0 percent real returns. Conservatives, like
Martin Feldstein, made this assumption as part of their privatization plans. Liberal
economists made the same assumption in plans put forward by the Clinton administration and
others to shore up the Social Security trust fund by putting a portion of it in the stock
market. The Congressional Budget Office even adopted the 7.0 percent real stock returns
assumption in its analysis of various Social Security reform proposals that called for
putting funds in the stock market.
Given the past history on stock returns and the widely held view that returns would
continue to average close to 7.0 percent over the long-term, the actual performance of stock
returns over the last two decades looks pretty disappointing from shareholders' perspective.
It certainly does not look like corporations are being run for their benefit, or if so, top
executives are doing a poor job.
One of the obvious factors depressing returns has been the extraordinary run up in price
to earnings ratios. A high price to earnings ratio (PE) effectively means that shareholders
have to pay a lot of money for a dollar in corporate profits. When PEs were lower, in the
1950s and 1960s, dividends yields were in the range of 3.0 -5.0 percent. In the recent years
they have been hovering near 2.0 percent. When the PE is over 30, as is now the case, paying
out a dividend of even 3.0 percent would essentially mean paying out all the company's
profits as dividends. Clearly that cannot happen, or at least not on a sustained basis.
While shareholders have not done well by historical standards in recent decades, CEO pay
has soared, with the ratio of the pay of CEOs to ordinary workers going from 20 or 30 to 1 in
the 1960s and 1970s, to 200 or 300 to 1 at present. There is a story that could reconcile
soaring CEO pay with historically low stock returns.
Corporations have increasingly turned to share buybacks as an alternative to dividends for
paying out money to shareholders. The process of buying back shares would drive up share
prices. Part of this is almost definitional, with fewer shares outstanding, the price per
share should go up. If buybacks push up share prices enough to raise the price to earnings
ratio, then in principle other investors should sell stock to bring the PE back to its prior
level. But if this doesn't happen, then buybacks could increase PEs.
That would of course imply huge irrationality in the stock market, but anyone who lived
through the 1990s stock bubble and the housing bubble in the last decade knows that large
investors can be exceedingly irrational for long periods of time. Anyhow, if share buybacks
do raise PEs there would be a clear story whereby CEOs could drive up their own pay, which
typically is largely in stock options, to the detriment of future shareholders, which would
explain both soaring CEO pay and declining returns to shareholders.
Whether this story of share buybacks raising PE is accurate would require some serious
research (I'd welcome references, if anyone has them), but what is beyond dispute is that the
last two decades have provided shareholders with relatively low returns. That seems hard to
reconcile with the often repeated story about this being a period of shareholder
capitalism.
Patents and Copyright Monopolies Are Implicit Government Debt
There is a whole industry dedicated to highlighting the size and growth of the government
debt, largely funded by the late private equity billionaire Peter Peterson. The leading news
outlets feel a need to regularly turn to the Peterson funded outfits to give us updates on
the size of the debt.
When presenting the horror story of a $20 trillion debt and the burden it will impose on
our children, there is never any mention of the burden created by patent and copyright
monopolies. This is an inexcusable inconsistency.
Patent and copyright monopolies are mechanisms that the government uses to pay for
services that are alternatives to direct spending. For example, instead of granting drug
companies patent monopolies and software developers copyright monopolies, the government
could just pay directly for the research and creative work that was the basis for these
monopolies. There are arguments as to why these monopolies might be better mechanisms than
direct funding, but these arguments don't change the fact they are mechanisms the government
uses for paying for services.
While we keep careful accounting of the direct spending, we pretend the implicit spending
by granting patent and copyright monopolies does not exist. This makes zero sense, especially
given the size of the rents being created by these monopolies.
In the case of prescription drugs alone, we will spend close to $400 billion (1.8 percent
of GDP) this year above the free market price, due to patent protections and other monopolies
granted by the federal government. This is considerably more than the $330 billion in
interest that the Congressional Budget Office projected we would spend on the $16.6 trillion
in publicly held debt in 2019.[3]
And this figure is just a fraction of the total rents from patent and copyright
monopolies, which would include most of the payments for medical equipment, computer software
and hardware, and recorded music and video material. Since these payments dwarf the size of
interest payments on the debt, it is difficult to understand how anyone concerned about the
burdens the government was creating could ignore patents and copyrights, while harping on
interest on the debt.
As I have often argued there are good reasons, especially in the case of prescription
drugs, for thinking that direct funding would be a more efficient mechanism than patent
monopolies. In the case of prescription drugs, direct funding would mean that all findings
would be immediately available to all researchers worldwide. If drugs were sold at free
market prices, it would no longer be a struggle to find ways to pay for them. And, we would
take away the incentive to push drugs in contexts where they are not appropriate, as happened
with the opioid crisis. (See "Rigged: How Globalization and the Rules of the Modern Economy
Were Structured to Make the Rich Richer," for a fuller discussion - it's free. * )
While the relative merits of patent/copyright monopolies and direct funding can be
debated, the logical point, that these monopolies are an implicit form of government debt,
cannot be. It shows the incredibly low quality of economic debate that this fact is not
widely recognized.
The Prospect for Simple Facts and Logic Entering Economic Debate in the Next Decade
The three issues noted here are already pretty huge in terms of our understanding of the
economy. The people who write in a wide range of areas should be aware of them, but with few
exceptions, they are not.
Unfortunately, that situation is not likely to change any time soon for a simple economic
reason, there is no incentive for people who write on economic issues to give these points
serious attention. They can continue to draw paychecks and get grants for doing what they are
doing. Why should they spend time addressing facts and logic that require they think
differently about the world?
As has been noted many times, there is no real consequence to economists and people
writing about the economy for being wrong. A custodian who doesn't clean the toilet gets
fired, but an economist who missed the housing bubble whose collapse led to the Great
Recession gets the "who could have known?" amnesty.
Given this structure of incentives, we should assume that economists and others who write
on economics will continue to ignore some of the most basic facts about the economy. That is
what economics tells us.
[1] Since income is supposed to be matched by output in the GDP accounts, the
corresponding phony entry on the output side would be the loans that subsequently went bad.
These loans were counted as a service when they were issued. Arguably, this was not accurate
accounting.
[2] This rise in labor share appears in the net domestic income calculation, but not in
the net domestic product figure. The reason is that there has been a sharp drop in the size
of the statistical discrepancy over the last four years, as output side GDP now exceeds the
income side measure. It is common to assume that the true figure lies somewhere in the
middle, which would mean the increase in labor share is likely less the 2.4 percentage points
calculated on the income side.
[3] This subtracts out the $50 billion in interest payments remitted from the Federal
Reserve Board.
This simple conception generalized deans
Bean hunt for rents
How might one do this
Well first make up a rate of interest
And take a system wide wage snap shot
From mines oceans forests and fields
Thru factories warehouses ultilities
boats and trains
To barber shops malt shops and convenience stores
Mark up the wage cells of your matrix
By your invented rate of interest
Now compare this vector to the 've tor of actual prices
You get a vector of rents aka profits of enterprise and residuals
The world is filled with conformism and groupthink. Most people do not wish to think for
themselves. Thinking for oneself is dangerous, requires effort and often leads to rejection by
the herd of one's peers.
The profession of arms, the intelligence business, the civil service bureaucracy, the
wondrous world of groups like the League of Women Voters, Rotary Club as well as the empire of
the thinktanks are all rotten with this sickness, an illness which leads inevitably to
stereotyped and unrealistic thinking, thinking that does not reflect reality.
The worst locus of this mentally crippling phenomenon is the world of the academics. I have
served on a number of boards that awarded Ph.D and post doctoral grants. I was on the Fulbright
Fellowship federal board. I was on the HF Guggenheim program and executive boards for a long
time. Those are two examples of my exposure to the individual and collective academic
minds.
As a class of people I find them unimpressive. The credentialing exercise in acquiring a
doctorate is basically a nepotistic process of sucking up to elders and a crutch for ego
support as well as an entrance ticket for various hierarchies, among them the world of the
academy. The process of degree acquisition itself requires sponsorship by esteemed academics
who recommend candidates who do not stray very far from the corpus of known work in whichever
narrow field is involved. The endorsements from RESPECTED academics are often decisive in the
award of grants.
This process is continued throughout a career in academic research. PEER REVIEW is the
sine qua non for acceptance of a "paper," invitation to career making conferences, or
to the Holy of Holies, TENURE.
This life experience forms and creates CONFORMISTS, people who instinctively boot-lick their
fellows in a search for the "Good Doggy" moments that make up their lives. These people are for
sale. Their price may not be money, but they are still for sale. They want to be accepted as
members of their group. Dissent leads to expulsion or effective rejection from the group.
This mentality renders doubtful any assertion that a large group of academics supports any
stated conclusion. As a species academics will say or do anything to be included in their
caste.
This makes them inherently dangerous. They will support any party or parties, of any
political inclination if that group has the money, and the potential or actual power to
maintain the academics as a tribe. pl
That is the nature of tribes and humans are very tribal. At least most of them.
Fortunately, there are outliers. I was recently reading "Political Tribes" which was written
by a couple who are both law professors that examines this.
Take global warming (aka the rebranded climate change). Good luck getting grants to do any
skeptical research. This highly complex subject which posits human impact is a perfect
example of tribal bias.
My success in the private sector comes from consistent questioning what I wanted to be
true to prevent suboptimal design decisions.
I also instinctively dislike groups that have some idealized view of "What is to be
done?"
As Groucho said: "I refuse to join any club that would have me as a member"
The 'isms' had it, be it Nazism, Fascism, Communism, Totalitarianism, Elitism all demand
conformity and adherence to group think. If one does not co-tow to whichever 'ism' is at
play, those outside their group think are persecuted, ostracized, jailed, and executed all
because they defy their conformity demands, and defy allegiance to them.
One world, one religion, one government, one Borg. all lead down the same road to --
Orwell's 1984.
David Halberstam: The Best and the Brightest. (Reminder how the heck we got into Vietnam,
when the best and the brightest were serving as presidential advisors.)
Also good Halberstam re-read: The Powers that Be - when the conservative media controlled
the levers of power; not the uber-liberal one we experience today.
"... As the Gramscian theorists Chantal Mouffe and Ernesto Laclau observed, our political identities are not a 'given' – something that emerges directly from the objective facts of our situation. We all occupy a series of overlapping identities in our day-to-day lives – as workers or bosses, renters or home-owners, debtors or creditors. Which of these define our politics depends on political struggles for meaning and power. ..."
"... The architects of neoliberalism understood this process of identity creation. By treating people as selfish, rational utility maximisers, they actively encouraged them to become selfish, rational utility maximisers. As the opening article points out, this is not a side effect of neoliberal policy, but a central part of its intention. As Michael Sandel pointed out in his 2012 book 'What Money Can't Buy: The Moral Limits of Markets' , it squeezes out competing values that previously governed non-market spheres of life, such as ethics of public service in the public sector, or mutual care within local communities. But these values remain latent: neoliberalism does not have the power to erase them completely. This is where the hope for the left lies, the crack of light through the doorway that needs to be prised open. ..."
"... More generally, there is some evidence that neoliberalism didn't really succeed in making us see ourselves as selfish rational maximisers – just in making us believe that everybody else was . For example, a 2016 survey found that UK citizens are on average more oriented towards compassionate values than selfish values, but that they perceive others to be significantly more selfish (both than themselves and the actual UK average). Strikingly, those with a high 'self-society gap' were found to be less likely to vote and engage in civic activity, and highly likely to experience feelings of cultural estrangement. ..."
"... Perhaps a rational system is one that accepts selfishness but keeps it within limits. Movements like the Chicago school that pretend to reinvent the wheel with new thinking are by this view a scam. As J.K. Galbraith said: "the problem with their ideas is that they have been tried." ..."
"... They tried running an economy on debt in the 1920s. The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn't look at private debt, neoclassical economics. ..."
"... Keynes looked at the problems of the debt based economy and came up with redistribution through taxation to keep the system running in a sustainable way and he dealt with the inherent inequality capitalism produced. ..."
"... Neoliberalism, which has influenced so much of the conventional thinking about money, is adamant that the public sector must not create ('print') money, and so public expenditure must be limited to what the market can 'afford.' Money, in this view, is a limited resource that the market ensures will be used efficiently. Is public money, then, a pipe dream? No, for the financial crisis and the response to it undermined this neoliberal dogma. ..."
"... The financial sector mismanaged its role as a source of money so badly that the state had to step in and provide unlimited monetary backing to rescue it. The creation of money out of thin air by public authorities revealed the inherently political nature of money. But why, then, was the power to create money ceded to the private sector in the first place -- and with so little public accountability? ..."
Lambert here: Not sure the soul is an identity, but authors don't write the headlines. Read
on!
By Christine Berry, a freelance researcher and writer and was previously Director of
Policy and Government for the New Economics Foundation. She has also worked at ShareAction and
in the House of Commons.
Originally published at Open Democracy .
"Economics is the method: the object is to change the soul." Understanding why Thatcher said
this is central to understanding the neoliberal project, and how we might move beyond it.
Carys Hughes and Jim Cranshaw's opening article poses a crucial challenge to the left in
this respect. It is too easy to tell ourselves a story about the long reign of neoliberalism
that is peopled solely with all-powerful elites imposing their will on the oppressed masses. It
is much harder to confront seriously the ways in which neoliberalism has manufactured popular
consent for its policies.
The left needs to acknowledge that aspects of the neoliberal agenda have been overwhelmingly
popular: it has successfully tapped into people's instincts about the kind of life they want to
lead, and wrapped these instincts up in a compelling narrative about how we should see
ourselves and other people. We need a coherent strategy for replacing this narrative with one
that actively reconstructs our collective self-image – turning us into empowered citizens
participating in communities of mutual care, rather than selfish property-owning individuals
competing in markets.
As the Gramscian theorists Chantal Mouffe and Ernesto Laclau observed, our political
identities are not a 'given' – something that emerges directly from the objective facts
of our situation. We all occupy a series of overlapping identities in our day-to-day lives
– as workers or bosses, renters or home-owners, debtors or creditors. Which of these
define our politics depends on political struggles for meaning and power.
Part of the job of politics – whether within political parties or social movements
– is to show how our individual problems are rooted in systemic issues that can be
confronted collectively if we organise around these identities. Thus, debt becomes not a source
of shame but an injustice that debtors can organise against. Struggles with childcare are not a
source of individual parental guilt but a shared societal problem that we have a shared
responsibility to tackle. Podemos were deeply influenced by this thinking when they sought to
redefine Spanish politics as 'La Casta' ('the elite') versus the people, cutting across many of
the traditional boundaries between right and left.
The architects of neoliberalism understood this process of identity creation. By treating
people as selfish, rational utility maximisers, they actively encouraged them to become
selfish, rational utility maximisers. As the opening article points out, this is not a side
effect of neoliberal policy, but a central part of its intention. As Michael Sandel pointed out
in his 2012 book 'What Money Can't Buy: The Moral Limits of Markets' , it squeezes out
competing values that previously governed non-market spheres of life, such as ethics of public
service in the public sector, or mutual care within local communities. But these values remain
latent: neoliberalism does not have the power to erase them completely. This is where the hope
for the left lies, the crack of light through the doorway that needs to be prised open.
The Limits of Neoliberal Consciousness
In thinking about how we do this, it's instructive to look at the ways in which neoliberal
attempts to reshape our identities have succeeded – and the ways they have failed. While
Right to Buy might have been successful in identifying people as home-owners and stigmatising
social housing, this has not bled through into wider support for private ownership. Although
public ownership did become taboo among the political classes for a generation – far
outside the political 'common sense' – polls consistently showed that this was not
matched by a fall in public support for the idea. On some level – perhaps because of the
poor performance of privatised entities – people continued to identify as citizens with a
right to public services, rather than as consumers of privatised services. The continued
overwhelming attachment to a public NHS is the epitome of this tendency. This is partly what
made it possible for Corbyn's Labour to rehabilitate the concept of public ownership, as the
2017 Labour manifesto's proposals for public ownership of railways and water – dismissed
as ludicrous by the political establishment – proved overwhelmingly popular.
More generally, there is some evidence that neoliberalism didn't really succeed in making us
see ourselves as selfish rational maximisers – just in making us believe that
everybody else was . For example, a 2016 survey found that UK citizens
are on average more oriented towards compassionate values than selfish values, but that they
perceive others to be significantly more selfish (both than themselves and the actual UK
average). Strikingly, those with a high 'self-society gap' were found to be less likely to vote
and engage in civic activity, and highly likely to experience feelings of cultural
estrangement.
This finding points towards both the great conjuring trick of neoliberal subjectivity and
its Achilles heel: it has successfully popularised an idea of what human beings are like that
most of us don't actually identify with ourselves. This research suggests that our political
crisis is caused not only by people's material conditions of disempowerment, but by four
decades of being told that we can't trust our fellow citizens. But it also suggests that deep
down, we know this pessimistic account of human nature just isn't who we really are – or
who we aspire to be.
An example of how this plays out can be seen in academic studies showing that, in game
scenarios presenting the opportunity to free-ride on the efforts of others, only economics
students behaved as economic models predicted: all other groups were much more likely to pool
their resources. Having been trained to believe that others are likely to be selfish,
economists believe that their best course of action is to be selfish as well. The rest of us
still have the instinct to cooperate. Perhaps this shouldn't be surprising: after all, as
George Monbiot argues in 'Out of the Wreckage' , cooperation is our species' main
survival strategy.
What's Our 'Right to Buy?'
The challenge for the left is to find policies and stories that tap into this latent sense
of what makes us human – what Gramsci called 'good sense' – and use it to overturn
the neoliberal 'common sense'. In doing so, we must be aware that we are competing not only
with a neoliberal identity but also with a new far-right that seeks to promote a white British
ethno-nationalist group identity, conflating 'elites' with outsiders. How we compete with this
is the million dollar question, and it's one we have not yet answered.
Thatcher's use of flagship policies like the Right to Buy was a masterclass in this respect.
Deceptively simple, tangible and easy to grasp, the Right to Buy also communicated a much
deeper story about the kind of nation we wanted to be – one of private, property-owning
individuals – cementing home-ownership as a cultural symbol of aspiration (the right to
paint your own front door) whilst giving millions an immediate financial stake in her new
order. So what might be the equivalent flagship policies for the left today?
Perhaps one of the strongest efforts to date has been the proposal for ' Inclusive Ownership
Funds ', first developed by Mathew Lawrence in a report for the New Economics Foundation,
and announced as
Labour policy by John McDonnell in 2018. This would require companies to transfer shares
into a fund giving their workers a collective stake that rises over time and pays out employee
dividends. Like the Right to Buy, as well as shifting the material distribution of wealth and
power, this aims to build our identity as part of a community of workers taking more collective
control over our working lives.
But this idea only takes us so far. While it may tap into people's desire for more security
and empowerment at work, more of a stake in what they do, it offers a fairly abstract benefit
that only cashes out over time, as workers acquire enough of a stake to have a meaningful say
over company strategy. It may not mean much to those at the sharpest end of our oppressive and
precarious labour market, at least not unless we also tackle the more pressing concerns they
face – such as the exploitative practices of behemoths like Amazon or the stress caused
by zero-hours contracts. We have not yet hit on an idea that can compete with the
transformative change to people's lives offered by the Right to Buy.
So what else is on the table? Perhaps, when it comes to the cutting edge of new left
thinking on these issues, the workplace isn't really where the action is – at least not
directly. Perhaps we need to be tapping into people's desire to escape the 'rat race'
altogether and have more freedom to pursue the things that really make us happy – time
with our families, access to nature, the space to look after ourselves, connection with our
communities. The four day working week (crucially with no loss of pay) has real potential as a
flagship policy in this respect. The Conservatives and the right-wing press may be laughing it
down with jokes about Labour being lazy and feckless, but perhaps this is because they are
rattled. Ultimately, they can't escape the fact that most people would like to spend less time
at work.
Skilfully communicated, this has the potential to be a profoundly anti-neoliberal policy
that conveys a new story about what we aspire to, individually and as a society. Where
neoliberalism tapped into people's desire for more personal freedom and hooked this to the
acquisition of wealth, property and consumer choice, we can refocus on the freedom to live the
lives we truly want. Instead of offering freedom through the market, we can offer
freedom from the market.
Proponents of Universal Basic Income often argue that it fulfils a similar function of
liberating people from work and detaching our ability to provide for ourselves from the
marketplace for labour. But in material terms, it's unlikely that a UBI could be set at a level
that would genuinely offer people this freedom, at least in the short term. And in narrative
terms, UBI is actually a highly malleable policy that is equally susceptible to being co-opted
by a libertarian agenda. Even at its best, it is really a policy about redistribution of
already existing wealth (albeit on a bigger scale than the welfare state as it stands). To
truly overturn neoliberalism, we need to go beyond this and talk about collective
ownership and creation of wealth.
Policies that focus on collective control of assets may do a better job of replacing
a narrative about individual property ownership with one that highlights the actual
concentration of property wealth in the hands of elites – and the need to reclaim these
assets for the common good. As well as Inclusive Ownership Funds, another way of doing this is
through Citizens' Wealth Funds, which socialise profitable assets (be it natural resources or
intangible ones such as data) and use the proceeds to pay dividends to individuals or
communities. Universal Basic Services – for instance, policies such as free publicly
owned buses – may be another.
Finally, I'd like to make a plea for care work as a critical area that merits further
attention to develop convincing flagship policies – be it on universal childcare, elderly
care or support for unpaid carers. The instinctive attachment that many of us feel to a public
NHS needs to be widened to promote a broader right to care and be cared for, whilst firmly
resisting the marketisation of care. Although care is often marginalised in political debate,
as a new mum, I'm acutely aware that it is fundamental to millions of people's ability to live
the lives they want. In an ageing population, most people now have lived experience of the
pressures of caring for someone – whether a parent or a child. By talking about these
issues, we move the terrain of political contestation away from the work valued by the market
and onto the work we all know really matters; away from the competition for scarce resources
and onto our ability to look after each other. And surely, that's exactly where the left wants
it to be.
The problem is that people are selfish–me included–and so what is needed is
not better ideas about ourselves but better laws. And for that we will need a higher level of
political engagement and a refusal to accept candidates who sell themselves as a "lesser
evil." It's the decline of democracy that brought on the rise of Reagan and Thatcher and
Neoliberalism and not some change in public consciousness (except insofar as the general
public became wealthier and more complacent). In America incumbents are almost universally
likely to be re-elected to Congress and so they have no reason to reject Neoliberal
ideas.
So here's suggesting that a functioning political process is the key to reform and not
some change in the PR.
Carolinian, like you, I try to include myself in statements about "the problem with
people." I believe one of the things preventing progress is our tendency to believe it's only
those people that are the problem.
Human nature people are selfish. It's like the Christian marriage vow – which I understand is a Medieval invention
and not something from 2,000 years ago – for better or worse, meaning, we share (and
are not to be selfish) the good and the bad.
"Not neoliberals, but all of us." "Not the right, but the left as well." "Not just Russia, but America," or "Not just America, but Russia too."
Perhaps a rational system is one that accepts selfishness but keeps it within limits.
Movements like the Chicago school that pretend to reinvent the wheel with new thinking are by
this view a scam. As J.K. Galbraith said: "the problem with their ideas is that they have
been tried."
My small brain got stuck on your reference to a 'Christian marriage vow'. I was just
sitting back and conceiving what a Neoliberal marriage vow would sound like. Probably a cross
between a no-liabilities contract and an open-marriage agreement.
"people are selfish"?; or "people can sometimes act selfishly"? I think the latter is the
more accurate statement. Appeal to the better side, and more of it will be forthcoming.
Neolib propaganda appeals to trivial, bleak individualism..
I'm not sure historic left attempts to appeal to "the better angels of our nature" have
really moved the ball much. It took the Great Depression to give us a New Deal and WW2 to
give Britain the NHS and the India its freedom. I'd say events are in the saddle far more
than ideas.
I rather look at it as a "both and" rather than an "either or." If the political
groundwork is not done beforehand and during, the opportunity events afford will more likely
be squandered.
And borrowing from evolutionary science, this also holds with the "punctuated equilibrium"
theory of social/political change. The strain of a changed environment (caused by both events
and intentionally created political activity) for a long time creates no visible change to
the system, and so appears to fail. But then some combination of events and conscious
political work suddenly "punctuates the equilibrium" with the resulting significant if not
radical changes.
Chile today can be seen as a great example of this: "Its not 30 Pesos, its 30 Years."
Carolinian, you provide a good illustration of the power of the dominant paradigm to make
people believe exactly what the article said–something I've observed more than enough
to confirm is true. People act in a wide variety of ways; but many people deny that altruism
and compassion are equally "human nature". Both parts of the belief pointed out
here–believing other people are selfish and that we're not–are explained by
projection acting in concert with the other parts of this phenomenon. Even though it's flawed
because it's only a political and not a psychological explanation, It's a good start toward
understanding.
"You and I are so deeply acculturated to the idea of "self" and organization and species
that it is hard to believe that man [sic] might view his [sic] relations with the environment
in any other way than the way which I have rather unfairly blamed upon the nineteenth-century
evolutionists."
Gregory Bateson, Steps to an Ecology of Mind, p 483-4
This is part of a longer quote that's been important to me my whole life. Worth looking up.
Bateson called this a mistake in epistemology–also, informally, his definition of
evil. http://anomalogue.com/blog/category/systems-thinking/
"When plunder becomes a way of life for a group of men in a society, over the course of
time they create for themselves a legal system that authorizes it and a moral code that
glorifies it."
― Frédéric Bastiat
Doesn't mean it's genetic. In fact, I'm pretty sure it means it's not.
The Iron Lady once proclaimed, slightly sinisterly: "Economics is the method. The object
is to change the soul." She meant that British people had to rediscover the virtue of
traditional values such as hard work and thrift. The "something for nothing" society was
over.
But the idea that the Thatcher era re-established the link between virtuous effort and
just reward has been effectively destroyed by the spectacle of bankers driving their
institutions into bankruptcy while being rewarded with million-pound bonuses and munificent
pensions.
The dual-truth approach of the Neoliberal Thought Collective (thanks, Mirowski) has been
more adept at manipulating narratives so the masses are still outraged by individuals getting
undeserved social benefits rather than elites vacuuming up common resources. Thanks to the
Thatcher-Reagan revolution, we have ended up with socialism for the rich, and everyone else
at the mercy of 'markets'.
Pretending that there are not problems with free riders is naive and it goes against
people's concern with justice. Acknowledging free riders on all levels with institutions that
can constantly pursue equity is the solution.
At some points in life, everyone is a free rider. As for the hard workers, many of them
are doing destructive things which the less hard-working people will have to suffer under and
compensate for. (Neo)liberalism and capitalism are a coherent system of illusions of virtue
which rest on domination, exploitation, extraction, and propaganda. Stoking of resentment (as
of free riders, the poor, the losers, foreigners, and so on) is one of the ways those who
enjoy it keep it going.
The Iron Lady once proclaimed, slightly sinisterly: "Economics is the method. The object
is to change the soul." She meant that British people had to rediscover the virtue of
traditional values such as hard work and thrift. The "something for nothing" society was
over.
But the idea that the Thatcher era re-established the link between virtuous effort and
just reward has been effectively destroyed by the spectacle of bankers driving their
institutions into bankruptcy while being rewarded with million-pound bonuses and munificent
pensions.
The dual-truth approach of the Neoliberal Thought Collective (thanks, Mirowski) has been
more adept at manipulating narratives so the masses are still outraged by individuals getting
undeserved social benefits rather than elites vacuuming up common resources. Thanks to the
Thatcher-Reagan revolution, we have ended up with socialism for the rich, and everyone else
at the mercy of 'markets'.
Pretending that there are not problems with free riders is naive and it goes against
people's concern with justice. Acknowledging free riders on all levels with institutions that
can constantly pursue equity is the solution.
The Iron Lady had a agenda to break the labor movement in the UK.
What she did not understand is Management gets the Union (Behavior) it deserves. If there
is strife in the workplace, as there was in abundance in the UK at that time, the problem is
the Management, (and the UK class structure) not the workers.
As I found out when I left University.
Thatcher set out to break the solidarity of the Labor movement, and used the neo-liberal
tool of selfishness to achieve success, unfortunately,
The UK's poor management practices, (The Working Class can kiss my arse) and complete
inability to form teams of "Management and Workers" was, IMHO, is the foundation of today's
Brexit nightmare, a foundation based on the British Class Structure.
And exploited, as it ever was, to achieve ends which do not benefit workers in any
manner.
The left needs to acknowledge that aspects of the neoliberal agenda have been
overwhelmingly popular: it has successfully tapped into people's instincts about the kind
of life they want to lead, and wrapped these instincts up in a compelling narrative about
how we should see ourselves and other people.
Sigh, no this is not true. This author is making the mistake that everyone is like the top
5% and that just is not so. Perhaps she should get out of her personal echo chamber and talk
to common people.
In my travels I have been to every state and every major city, and I have worked with just
about every class of people, except of course the ultra wealthy and ultra powerful –
they have people to protect them from the great unwashed like me – and it didn't take
me long to notice that the elite are different from the rest of us but I could never explain
exactly why. After I retired, I started studying and I've examined everything from Adam
Smith, to Hobbes, to Kant, to Durkheim, to Marx, to Ayn Rand, to tons of histories and
anthropologies of various peoples, to you name it and I've come to the conclusion that most
of us are not neoliberal and do not want what the top 5% want.
Most people are not overly competitive and most do not seek self-interest only. That is
what allows us to live in cities, to drive on our roadways, to form groups that seek to
improve conditions for the least of us. It is what allows soldiers to protect each other on
the battlefield when it would be in their self interest to protect themselves. It is what
allowed people in Europe to risk their own lives to save Jews. And it is also what allows
people to live under the worst dictators without rebelling. Of course we all want more but we
have limits on what we will do to get that more – the wealthy and powerful seem to have
no limits. For instance, most of us won't screw over our co-workers to make ourselves look
better, although some will. Most of us won't turn on our best friends even when it would be
to our advantage to do so, although some will. Most of us won't abandon those we care about,
even when it means severe financial damage to us, although some will.
For lack of a better description, I call what the 5% have the greed gene – a gene
that allows them to give up empathy and compassion and basic morality – what some of us
call fairness – in the search for personal gain. I don't think it is necessarily
genetic but there is something in their makeup that cause them to have more than the average
self interest. And because most humans are more cooperative than they are competitive, most
humans just allow these people to go after what they want and don't stand in their way, even
though by stopping them, they could make their own lives better.
Most history and economics are theories and stories told by the rich and powerful to
justify their behavior. I think it is a big mistake to attribute that behavior to the mass of
humanity. Archeology is beginning to look more at how average people lived instead of seeking
out only the riches deposited by the elite, and historians are starting to look at the other
side of history – average people – to see what life was really like for them, and
I think we are seeing that what the rulers wanted was never what their people wanted. It is
beginning to appear obvious that 95% of the people just wanted to live in their communities
safely, to have about what everyone else around them had, and to enjoy the simple pleasures
of shelter, enough food, and warm companionship.
I'm also wondering why the 5% think that all of us want exactly what they want. Do they
really think that they are somehow being smarter or more competent got them there while 95%
of the population – the rest of us – failed?
At this point, I know my theory is half-baked – I definitely need to do more
research, but nothing I have found yet convinces me that there isn't some real basic
difference between those who aspire to power and wealth and the rest of us.
" ..and I've come to the conclusion that most of us are not neoliberal and do not want
what the top 5% want. Most people are not overly competitive and most do not seek
self-interest only. That is what allows us to live in cities, to drive on our roadways, to
form groups that seek to improve conditions for the least of us. It is what allows soldiers
to protect each other on the battlefield when it would be in their self interest to protect
themselves. "
I really liked your comment Historian. Thanks for posting. That's what I've felt in my gut
for a while, that the top 5% and the establishment are operating under a different mindset,
that the majority of people don't want a competitive, dog eat dog, self interest world.
I agree with Foy Johnson. I've been reading up on Ancient Greece and realizing all the
time that 'teh Greeks' are maybe only about thirty percent of the people in Greece. Most of
that history is how Greeks were taking advantage of each other with little mention of the
majority of the population. Pelasgians? Yeah, they came from serpents teeth, the end.
I think this is a problem from the Bronze Age that we have not properly addressed.
Mystery Cycles are a nice reminder that people were having fun on their own.
I have more or less the same view. I think the author's statement about neoliberalism
tapping into what type of life people want to lead is untenable. Besides instinct (are we all
4-year olds?), what people want is also very much socially constructed. And what people do is
also very much socially coerced.
One anecdote: years ago, during a volunteer drive at work, I worked side by side with the
company's CEO (company was ~1200 headcount, ~.5bn revenue) sorting canned goods. The guy was
doing it like he was in a competition. So much so that he often blocked me when I had to
place something on the shelves, and took a lot of space in the lineup around himself while
swinging his large-ish body and arms, and wouldn't stop talking. To me, this was very rude
and inconsiderate, and showed a repulsive level of disregard to others. This kind of behavior
at such an event, besides being unpleasant to be around, was likely also making work for the
others in the lineup less efficient. Had I or anyone else behaved like him, we would have had
a good amount of awkwardness or even a conflict.
What I don't get is, how does he and others get away with it? My guess is, people don't
want a conflict. I didn't want a conflict and said nothing to that CEO. Not because I am not
competitive, but because I didn't want an ugly social situation (we said 'excuse me' and
'sorry' enough, I just didn't think it would go over well to ask him to stop being obnoxious
and dominant for no reason). He obviously didn't care or was unaware – or actually, I
think he was behaving that way as a tactical habit. And I didn't feel I had the authority to
impose a different order.
So, in the end, it's about power – power relations and knowing what to do about
it.
Yep, I think you've nailed it there deplorado, types like your CEO don't care at all
and/or are socially unaware, and is a tactical habit that they have found has worked for them
in the past and is now ingrained. It is a power relation and our current world unfortunately
is now designed and made to suit people like that. And each day the world incrementally moves
a little bit more in their direction with inertia like a glacier. Its going to take something
big to turn it around
I too believe "most of us are not neoliberal". But if so, how did we end up with the kind
of Corporate Cartels, Government Agencies and Organizations that currently prey upon
Humankind? This post greatly oversimplifies the mechanisms and dynamics of Neoliberalism, and
other varieties of exploitation of the many by the few. This post risks a mocking tie to
Identity Politics. What traits of Humankind give truth to Goebbels' claims?
There definitely is "some real basic difference between those who aspire to power and
wealth and the rest of us" -- but the question you should ask next is why the rest of us
Hobbits blindly follow and help the Saurons among us. Why do so many of us do exactly what
we're told? How is it that constant repetition of the Neoliberal identity concepts over our
media can so effectively ensnare the thinking of so many?
Maybe it's something similar to Milgram's Experiment (the movie the Experimenter about
Milgram was on last night – worth watching and good acting by Peter Sarsgaard, my kind
of indie film), the outcome is just not what would normally be expected, people bow to
authority, against their own beliefs and interests, and others interests, even though they
have choice. The Hobbits followed blindly in that experiment, the exact opposite outcome as
to what was predicted by the all the psychology experts beforehand.
people bow to authority , against their own beliefs and interests, and others
interests, even though they have choice
'Don't Make Waves' is a fundamentally useful value that lets us all swim along. This can
be manipulated. If everyone is worried about Reds Under the Beds or recycling, you go along
to get along.
Some people somersault to Authority is how I'd put it.
Yep, don't mind how you put that Mo, good word somersault.
One of the amusing tests Milgram did was to have people go into the lift but all face the
back of the lift instead of the doors and see what happens when the next person got in. Sure
enough, with the next person would get in, face the front, look around with some confusion at
everyone else and then slowly turn and face the back. Don't Make Waves its instinctive to let
us all swim along as you said.
And 'some people' is correct. It was actually the majority, 65%, who followed directions
against their own will and preferred choice in his original experiment.
That's a pretty damn good comment that, Historian. Lots to unpick. It reminded me too of
something that John Wyndham once said. He wrote how about 95% of us wanted to live in peace
and comfort but that the other 5% were always considering their chances if they started
something. He went on to say that it was the introduction of nuclear weapons that made
nobody's chances of looking good which explains why the lack of a new major war since
WW2.
Good comment. My view is that it all boils down to the sociopathic personality disorder.
Sociopathy runs on a continuum, and we all exhibit some of its tendencies. At the highest end
you get serial killers and titans of industry, like the guy sorting cans in another comment.
I believe all religions and theories of ethical behavior began as attempts to reign in the
sociopaths by those of us much lower on the continuum. Neoliberalism starts by saying the
sociopaths are the norm, turning the usual moral and ethical universe upside down.
Your theory is not half-baked; it's spot-on. If you're not the whatever it takes, end
justifies the means type, you are not likely to rise to the top in the corporate world. The
cream rises to the top happens only in the dairy.
Your 5% would correspond to Altemeyer's "social dominators". Unfortunately only
75% want a simple, peaceful life. 20% are looking for a social dominator to follow. It's
psychological.
Excellent comment. Take into consideration the probability that the majority of the top 5%
have come from a privileged background, ensconced in a culture of entitlement. This "greed"
gene is as natural to them as breathing. Consider also that many wealthy families have
maintained their status through centuries of calculated loveless marriages, empathy and other
human traits gene-pooled out of existence. The cruel paradox is that for the sake of riches,
they have lost their richness in character.
This really chimes with me. Thanks so much for putting it down in words.
I often encounter people insisting humans are selfish. It is quite frustrating that this
more predominant side of our human nature seems to become invisible against the
propaganda.
I'm barely into Jeremy Lent's The Patterning Instinct: A Cultural History of Humanity's
Search for Meaning , but he's already laid down his central thesis in fairly complete
form. Humans are both competitive and cooperative, he says, which should surprise no one.
What I found interesting is that the competitive side comes from primates who are more
intensely competitive than humans. The cooperation developed after the human/primate split
and was enabled by "mimetic culture," communication skills that importantly presuppose that
the object(s) of communication are intentional creatures like oneself but with a somewhat
different perspective. Example: Human #1 gestures to Human #2 to come take a closer look at
whatever Human #1 is examining. This ability to cooperate even came with strategies to
prevent a would-be dominant male from taking over a hunter-gatherer band:
[I]n virtually all hunter-gatherer societies, people join together to prevent powerful
males from taking too much control, using collective behaviors such as ridicule, group
disobedience, and, ultimately, extreme sanctions such as assassination [This kind of
society is called] a "reverse dominant hierarchy because rather than being dominated, the
rank and file manages to dominate.
yes, this chimes in with what I`ve been thinking for years after puzzling about why
society everywhere ends up as it does – ie the fact that in small groups as we evolved
to live in, we would keep a check on extreme selfish behaviour of dominant individuals. In
complex societies (modern) most of us become "the masses" visible in some way to the system
but the top echelons are not visible to us and are able to amass power and wealth out of all
control by the rest of us. And yes, you do have to have a very strange drive (relatively
rare, ?pathological) to want power and wealth at everyone else`s expense – to live in a
cruel world many of whose problems could be solved (or not arise in the first place) by
redistributing some of your wealth to little palpable cost to you
Africa over a few million years of Ice Ages seems to have presented our ancestors with the
possibility of reproducing only if you can get along in close proximity to other Hominids
without killing each other. I find that a compelling explanation for our stupidly big brains;
it's one thing to be a smart monkey, it's a whole different solution needed to model what is
going on in the brain of another smart monkey.
And communications: How could spoken language have developed without levels of trust and
interdependence that maybe we can not appreciate today? We have a word for 'Blue' nowadays,
we take it for granted.
There is a theory that language originated between mothers and their immediate progeny,
between whom either trust and benevolence exist, or the weaker dies. The mother's chances for
survival and reproduction are enhanced if she can get her progeny to, so to speak, help out
around the house; how to do that is extended by symbolism and syntax as well as example.
I recall the first day of Econ 102 when the Prof. (damned few adjuncts in those days)
said, "Everything we discuss hereafter will be built on the concept of scarcity." Being a
contrary buggah' I thought, "The air I'm breathing isn't scarce." I soon got with the program
supply and demand upward sloping, downward sloping, horizontal, vertical and who could forget
kinked. My personal favorite was the Giffen Good a high priced inferior product. Kind of like
Micro Economics.
Maybe we could begin our new Neo-Economics 102 with the proviso, "Everything we discuss
hereafter will be based on abundance." I'm gonna' like this class!
Neo-lib Econ does a great job at framing issues so that people don't notice what is
excluded. Think of them as proto-Dark Patternists.
If you are bored and slightly mischievous, ask an economist how theory addresses
cooperation, then assume a can opener and crack open a twist-top beer.
Isn't one of the problems that it's NOT really built on the concept of scarcity? Most
natural resources run into scarcity eventually. I don't know about the air one breaths,
certainly fish species are finding reduced oxygen in the oceans due to climate change.
If you would like that class on abundance you would love the Church of Abundant Life which
pushes Jesus as the way to Abundant Life and they mean that literally. Abundant as in Jesus
wants you to have lots of stuff -- so believe.
I believe Neoliberalism is a much more complex animal than an economic theory. Mirowski
builds a plausible argument that Neoliberalism is a theory of epistemology. The Market
discovers Truth.
Had a lovely Physics class where the first homework problem boiled down to "How often do
you inhale a atom (O or N) from Julius Caesar's last breath". Great little introduction to
the power and pratfalls of 'estimations by Physicists' that xkcd likes to poke at. Back then
we used the CRC Handbook to figure it out.
Anyway, every second breath you can be sure you have shared an atom with Caesar.
I don't think Maggie T. or uncle Milty were thinking about the future at all. Neither one
would have openly promoted turfing quadriplegic 70-year-olds out of the rest home. That's how
short sighted they both were. And stupid. We really need to call a spade a spade here. Milty
doesn't even qualify as an economist – unless economics is the study of the destruction
of society. But neoliberalism had been in the wings already, by the 80s, for 40 years. Nobody
took into account that utility-maximizing capitalism always kills the goose (except Lenin
maybe) – because it's too expensive to feed her. The neoliberals were just plain dumb.
The question really is why should we stand for another day of neoliberal nonsense? Albeit
Macht Frei Light? No thanks. I think they've got the question backwards – it shouldn't
be how should "we" reconstruct our image now – but what is the obligation of all the
failed neoliberal extractors to right society now? I'd just as soon stand back and watch the
dam burst as help the neolibs out with a little here and a little there. They'll just keep
taking as long as we give. This isn't as annoying as Macron's "cake" comment, but it's close.
I did like the last 2 paragraphs however.
Here's a sidebar. A universal one. There is an anomaly in the universe – there is
not enough accumulated entropy. It screws up theoretical physics because the missing entropy
needs to be accounted for for their theories to work to their satisfaction. It seems to be a
phenomenon of evolution. Thus it was recently discovered by a physics grad student that
entropy by heat dissipation is the "creator" of life. Life almost spontaneously erupts where
it can take advantage of an energy source. And, we are assuming, life thereby slows entropy
down. There has to be another similar process among the stars and the planets as well, an
evolutionary conservation of energy. So evolution takes on more serious meaning. From the
quantum to the infinite. And society – it's right in the middle. So it isn't too
unreasonable to think that society is extremely adaptable, taking advantage of any energy
input, and it seems true to think that. Which means that society can go long for its goal
before it breaks down. But in the end it will be enervated by lack of "resources" unless it
can self perpetuate in an evolving manner. That's one good reason to say goodbye to looney
ideologies.
For a view of humanity that is not as selfish, recommend "The Gift" by Marcel Mauss.
Basically an anthropological study of reciprocal gift giving in the oceanic potlatch
societies. My take is that the idea was to re-visit relationships, as giving a gift basically
forces a response in the receiver, "Am I going to respond in kind, perhaps even upping what
is required? Or am I going to find that this relationship simply isn't worth it and walk
away?"
Kind of like being in a marriage. The idea isn't to walk away, the idea is you constantly
need to re-enforce it. Except with the potlatch it was like extending that concept to the
clan at large, so that all the relationships within the clan were being re-enforced.
"Kind of like being in a marriage. The idea isn't to walk away, the idea is you constantly
need to re-enforce it. "
amen.
we, the people, abdicated.
as for humans being selfish by default i used to believe this, due to my own experiences
as an outlaw and pariah.
until wife's cancer and the overwhelming response of this little town,in the "reddest"
congressional district in texas.
locally, the most selfish people i know are the one's who own everything buying up their
neighbor's businesses when things get tough.
they are also the most smug and pretentious(local dems, in their hillforts come a close
second in this regard) and most likely to be gop true believers.
small town and all everybody literally knows everybody, and their extended family and those
connections are intertwined beyond belief.
wife's related, in some way, to maybe half the town.
that matters and explains my experience as an outcast: i never belonged to anything like that
and such fellowfeeling and support is hard for people to extend to a stranger.
That's what's gonna be the hard sell, here, in undoing the hyperindividualist, "there is no
such thing as society" nonsense.
I grew up until Junior High in a fishing village on the Maine coast that had been around
for well over a hundred years and had a population of under 1000. By the time I was 8 I
realized there was no point in being extreme with anyone, because they were likely to be
around for the rest of your life.
I fell in love with sun and warmth when we moved away and unfortunately it's all
gentrified now, by the 90s even a tar paper shack could be sold for a few acres up in
Lamoine.
Yep, small towns are about as close as we get to clans nowadays. And just like clans, you
don't want to be on the outside. Still when you marry in, it would be nice if the town would
make you feel more a member like a clan should / would. ;-)
But outside of the small town and extended families I think that's it. We've been atomized
into our nuclear families. Except for the ruling class – I think they have this quid
pro quo gift giving relationship building figured out quite nicely. Basically they've formed
their own small town – at the top.
By the way, I understand Mauss was an influence on Baudrillard. I could almost imagine
Baudrillard thinking how the reality of the potlatch societies was so different than the
reality of western societies.
That's the big problem I see in this discussion. We know, or at least think we know,
what's wrong, and what would be better; but we can't get other people to want to do something
about it, even those who nominally agree with us. And I sure don't have the answer.
Neoliberalism, in its early guise at least, was popular because politicians like Thatcher
effectively promised something for nothing. Low taxes but still decent public services. The
right to buy your council house without putting your parents' council house house in
jeopardy. Enjoying private medical care as a perk of your job whilst still finding the NHS
there when you were old and sick. And so on. By the time the penny dropped it was too
late.
If the Left is serious about challenging neoliberalism, it has to return to championing the
virtues of community, which it abandoned decades ago in favour of extreme liberal
individualism Unfortunately, community is an idea which has either been appropriated by
various identity warriors (thus fracturing society further) or dismissed (as this author
does) because it's been taken up by the Right. A Left which explained that when everybody
cooperates everybody benefits, but that when everybody fights everybody loses, would sweep
the board.
If the Left is serious about challenging neoliberalism, it has to return to championing
the virtues of community
I agree. The tenuous suggestions offered by the article are top down. But top-down
universal solutions can remove the impetus for local organization. Which enervates the power
of communities. And then you can't do anything about austerity, because your Rep loves the
PowerPoints and has so much money from the Real Estate community.
Before one experiences the virtue, or power, of a community, one has to go through the
pain in the ass of contributing to a community. It has to be rewarding process or it won't
happen.
"An example of how this plays out can be seen in academic studies showing that, in game
scenarios presenting the opportunity to free-ride on the efforts of others, only economics
students behaved as economic models predicted: all other groups were much more likely to pool
their resources. Having been trained to believe that others are likely to be selfish,
economists believe that their best course of action is to be selfish as well. The rest of us
still have the instinct to cooperate. Perhaps this shouldn't be surprising: after all, as
George Monbiot argues in 'Out of the Wreckage', cooperation is our species' main survival
strategy."
Since so many people believe their job is their identity, would be interssting to know
what the job training or jobs were of the "others."
>so many people believe their job is their identity
Only because the social sphere, which in the medium and long term we *all depend
on* to survive, has been debased by 24/7/365 neolib talking points, and their purposeful
economic constrictions..
How many people have spent their lives working for the "greater good"? How many work
building some transcendental edifice from which the only satisfaction they could take away
was knowing they performed a part of its construction? The idea that Humankind is selfish and
greedy is a projection promoted by the small part of Humankind that really is selfish and
greedy.
Where does wealth creation actually occur in the capitalist system?
Nations can do well with the trade, as we have seen with China and Germany, but this comes
at other nation's expense.
In a successful global economy, trade should be balanced over the long term.
Keynes was aware of this in the past, and realised surplus nations were just as much of a
problem as deficit nations in a successful global economy with a long term future.
Zimababwe has lots of money and it's not doing them any favours. Too much money causes
hyper-inflation.
You can just print money, the real wealth in the economy lies somewhere else.
Alan Greenspan tells Paul Ryan the Government can create all the money it wants and there is
no need to save for pensions. https://www.youtube.com/watch?v=DNCZHAQnfGU
What matters is whether the goods and services are there for them to buy with that money.
That's where the real wealth in the economy lies.
Money has no intrinsic value; its value comes from what it can buy.
Zimbabwe has too much money in the economy relative to the goods and services available in
that economy. You need wheelbarrows full of money to buy anything.
It's that GDP thing that measures real wealth creation.
GDP does not include the transfer of existing assets like stocks and real estate.
Inflated asset prices are just inflated asset prices and this can disappear all too easily as
we keep seeing in real estate.
1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan
2000s – Iceland, Dubai, US (2008)
2010s – Ireland, Spain, Greece
Get ready to put Australia, Canada, Norway, Sweden and Hong Kong on the list.
They invented the GDP measure in the 1930s, to track real wealth creation in the economy
after they had seen all that apparent wealth in the US stock market disappear in 1929.
There was nothing really there.
How can banks create wealth with bank credit?
The UK used to know before 1980.
https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png
Before 1980 – banks lending into the right places that result in GDP growth (business
and industry, creating new products and services in the economy)
After 1980 – banks lending into the wrong places that don't result in GDP growth (real
estate and financial speculation)
What happened in 1979?
The UK eliminated corset controls on banking in 1979 and the banks invaded the mortgage
market and this is where the problem starts.
Real estate does make the economy boom, but there is no real wealth creation in inflating
asset prices.
What is really happening?
When you use bank credit to inflate asset prices, the debt rises much faster than GDP.
https://www.housepricecrash.co.uk/forum/uploads/monthly_2018_02/Screen-Shot-2017-04-21-at-13_53_09.png.e32e8fee4ffd68b566ed5235dc1266c2.png
The bank credit of mortgages is bringing future spending power into today.
Bank loans create money and the repayment of debt to banks destroys money.
https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf
In the real estate boom, new money pours into the economy from mortgage lending, fuelling a
boom in the real economy, which feeds back into the real estate boom.
The Japanese real estate boom of the 1980s was so excessive the people even commented on the
"excess money", and everyone enjoyed spending that excess money in the economy.
In the real estate bust, debt repayments to banks destroy money and push the economy towards
debt deflation (a shrinking money supply).
Japan has been like this for thirty years as they pay back the debts from their 1980s
excesses, it's called a balance sheet recession. https://www.youtube.com/watch?v=8YTyJzmiHGk
Bank loans effectively take future spending and bring it in today.
Jam today, penury tomorrow.
Using future spending power to inflate asset prices today is a mistake that comes from
thinking inflating asset prices creates real wealth.
GDP measures real wealth creation.
Did you know capitalism works best with low housing costs and a low cost of living?
Probably not, you are in the parallel universe of neoliberalism.
William White (BIS, OECD) talks about how economics really changed over one hundred years
ago as classical economics was replaced by neoclassical economics.
He thinks we have been on the wrong path for one hundred years.
Some very important things got lost 100 years ago.
The Mont Pelerin society developed the parallel universe of neoliberalism from
neoclassical economics.
The CBI (Confederation of British Industry) saw the light once they discovered my equation
(Michael Hudson condensed)
Disposable income = wages – (taxes + the cost of living)
"Wait a minute, employees get their money from wages and businesses have to cover high
housing costs in wages reducing profit" the CBI
It's all about the economy, and UK businesses will benefit from low housing costs. High housing costs push up wages and reduce profits. Off-shore to make more profit, you can pay lower wages where the cost of living is lower,
e.g. China; the US and UK are rubbish.
What was Keynes really doing?
Creating a low cost, internationally competitive economy. Keynes's ideas were a solution to the problems of the Great Depression, but we forgot why
he did, what he did.
They tried running an economy on debt in the 1920s. The 1920s roared with debt based consumption and speculation until it all tipped over into
the debt deflation of the Great Depression. No one realised the problems that were building
up in the economy as they used an economics that doesn't look at private debt, neoclassical
economics.
Keynes looked at the problems of the debt based economy and came up with redistribution
through taxation to keep the system running in a sustainable way and he dealt with the
inherent inequality capitalism produced.
The cost of living = housing costs + healthcare costs + student loan costs + food + other
costs of living
Disposable income = wages - (taxes + the cost of living)
High progressive taxation funded a low cost economy with subsidised housing, healthcare,
education and other services to give more disposable income on lower wages.
Employers and employees both win with a low cost of living.
Keynesian ideas went wrong in the 1970s and everyone had forgotten the problems of
neoclassical economics that he originally solved.
Classical economics – observations and deductions from the world of small state,
unregulated capitalism around them
Neoclassical economics – Where did that come from?
Keynesian economics – observations, deductions and fixes for the problems of
neoclassical economics
Neoclassical economics – Why is that back?
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, by
which time it had already demonstrated its flaws.
Ultimately, neoliberalism is about privatization and ownership of everything. This is why
it's so important to preserve the Common Good, the vital resources and services that support
earthly existence. The past 40 years has shown what happens when this falls out of balance.
Our value system turns upside down – the sick become more valuable than the healthy, a
violent society provides for the prisons-for-profit system and so on. The biggest upset has
been the privatization of money creation.
This latest secret bank bailout (not really secret as Dodd-Frank has allowed banks to
siphon newly created money from the Fed without Congressional approval. No more public
embarrassment that Hank Paulson had to endure.) They are now up to $690 billion PER WEEK
while the media snoozes. PPPs enjoy the benefits of public money to seed projects for private
gain. The rest of us have to rely on predatory lenders, sinking us to the point of Peak Debt,
where private debt can never be paid off and must be cancelled, as it should be because it
never should've happened in the first place.
"Neoliberalism, which has influenced so much of the conventional thinking about money,
is adamant that the public sector must not create ('print') money, and so public
expenditure must be limited to what the market can 'afford.' Money, in this view, is a
limited resource that the market ensures will be used efficiently. Is public money, then, a
pipe dream? No, for the financial crisis and the response to it undermined this neoliberal
dogma.
The financial sector mismanaged its role as a source of money so badly that the
state had to step in and provide unlimited monetary backing to rescue it. The creation of
money out of thin air by public authorities revealed the inherently political nature of
money. But why, then, was the power to create money ceded to the private sector in the
first place -- and with so little public accountability?And
if money can be created to serve the banks, why not to benefit people and the
environment? "
The Commons should have a shot at revival as the upcoming generation's desires are
outstripped by their incomes and savings. The conflict between desires and reality may give a
boost to alternate notions of what's desirable. Add to this the submersion of cities under
the waves of our expanding oceans, and one gets yet another concrete reason to think that
individual ownership isn't up to the job of inspiring young people.
A Commons of some sort
will be needed to undo the cost of generations of unpaid negative externalities. Fossil
fuels, constant warfare, income inequality, stupendous idiocy of kleptocratic government
these baked in qualities of neo-liberalism are creating a very large, dissatisfied, and
educated population just about anywhere one looks. Suburbia will be on fire, as well as
underwater. Farmlands will be parched, drenched, and exhausted. Where will Larry Summers dump
the garbage?
"... We should also note in passing that the Nobel Prize in Economics is not actually a Nobel Prize. ..."
"... You are right that the Nobel Prize in Economics is not a Nobel Prize and it is awarded by a bank. Plus, Milton Friedman won in 1976: that tells you a lot about why neoclassical economists are mainly chosen. ..."
"... many of the neoclassical models are pseudoscience, unreflective of the real world. ..."
"... Both awards pander to the rentier class. ..."
"... What? Not even a breath about the insane system called globalization, where raw material from all over the world is shipped to China to be processed into finished goods in the most polluting way possible, to have those goods then shipped and trucked to the Amazon horrorhouses and Walmart stores to be bought and then thrown in the trash a few months later. ..."
There is a quote from The Wolf (Harvey Keitel, Pulp Fiction) not apt for a family blog,
but very apt to describe what a Nobel Prize is, and most prizes indeed are. It is about
sucking
Nordhaus reinforces the conservatism of Sveriges Riksbank so he deserves the prize. I
wouldn't ever expect the prize being given to cutting edge studies that question the validity
of day-by-day assumptions embedded in institutions like S.R.
You are right that the Nobel Prize in Economics is not a Nobel Prize and it is awarded
by a bank. Plus, Milton Friedman won in 1976: that tells you a lot about why neoclassical
economists are mainly chosen.
In February 1995, following acrimony within the selection committee pertaining to the
awarding of the 1994 Prize in Economics to John Forbes Nash, the Prize in Economics was
redefined as a prize in social sciences. This made it available to researchers in such
topics as political science, psychology, and sociology.[29][30] Moreover, the composition
of the Economics Prize Committee changed to include two non-economists. This has not been
confirmed by the Economics Prize Committee. The members of the 2007 Economics Prize
Committee are still dominated by economists, as the secretary and four of the five members
are professors of economics.[31] In 1978, Herbert A. Simon, whose PhD was in political
science, became the first non-economist to win the prize,[citation needed] while Daniel
Kahneman, a professor of psychology and international relations at Princeton University is
the first non-economist by profession to win the prize.
It seems strange to me that non-economists would be awarded a prize for the economy. The
bank certainly knows who to select though!
Milton Friedman was monetarist who taught at the premier neoclassical school, the
University of Chicago. Karl Marx was the premier classical (political) economist. The
neoclassical school gradually came to deny land as a distinct factor of production, John
Bates Clark (whom there is an award named after) solidified the conflation of land and
capital.
This is why many of the neoclassical models are pseudoscience, unreflective of the
real world.
What? Not even a breath about the insane system called globalization, where raw
material from all over the world is shipped to China to be processed into finished goods in
the most polluting way possible, to have those goods then shipped and trucked to the Amazon
horrorhouses and Walmart stores to be bought and then thrown in the trash a few months
later.
Cognative dissonanace much? Lots of economic activity there, with nothing to show for it
except a growing heap of trash and Bezos and the Waltons getting richer by hundreds of
millions per day. What a phucking world.
Her premise, that neoliberal economics is past its sell-by date, is almost too little too
late. It was past its sell-by date by 1950 when it was just getting its second foul wind. We
are in this fix because it was so easy to get here. By using oil for energy. Nobody has used
the butterfly metaphor for oil fed climate change, but it describes the mess. Every
individual use of oil/natgas for our modern lifestyle puts a whole series of requirements for
the very maintenance of that lifestyle – which (like her comment that more work hours
propagate not just more emissions but more manufacturing and more consumption is a vicious
circle) expand exponentially. And what she says point blank, "the thing about a sufficiently
high carbon tax is that it is so disruptive of the market that it has to be accompanied by a
robust and comprehensive role for the state" is just pure poetic justice.
We believe this is due to two factors -- the very high carbon footprints of people at
the top and a political economy effect, in which the wealthy have outsized political impact
and are able to forestall effective climate responses.
I have my suspicions about general carbon footprints based on income levels. I suspect
that many less affluent people end up commuting more because of housing usually being more
costly in cities and immediately nearby cities. Think about it for a moment, are all the
affluent neighborhoods close or far from local centers of employment? In my view the
implication is that carbon footprint from driving around is a necessity for large part of
lower income population while car use comes out more as a luxury, a free choice, for more
affluent people – they have the financial means to find housing relatively close to the
work, while lower income people don't have this choice.
Extrapolating more, I would suspect that most of carbon footprint is at least partially a
necessity for lower income people, while the for higher income people the larger carbon
footprint represents free choice and conspicuous consumption – they do it because they
can .
There are really easy ways to decrease carbon footprint: Dense and functional cities to
enable anyone make the climate friendly choices of not driving car around. But there is
extreme opposition to these kind of dense affordable cities, even in my seemingly progressive
nordic home country. Most of all, housing is seen as a open market business instead of
personal right. This is important, as this prevents the EU countries of more forcible
interventions in to the housing markets but this whole situation is just insane right now as
most EU countries get loans at negative rates, they could easily build and rent out housing
at 'market' prices with really low margins and still at profit for the state. In my view
states should intervene forcibly to urban housing markets to push out new quality housing to
disrupt and drop the general market prices at the moment. Many people, and especially working
people, are staying out of larger cities because the general prices are too high for them.
State intervention would enable anyone to make the 'right' choices and then heavier carbon
taxes could be enacted and people would still have free choice to live where they want and
drive car if they want. But this isn't possible because the free market principles are
applied to housing markets by EU antitrust officials and this prevents state
interventions.
The most ridiculous part of this whole thing that ideology of free market capitalism and
how it's applied prevents this, it's more important to preserve the wealth and rights of
owners in the cities instead of doing the right things. Meanwhile neoliberals and european
ordoliberals are shouting with their heads red that debt is bad and demanding that all the
member countries must work hard to reduce their debt levels no matter what happens. These
people say they agree that climate change is real, but his acknowledgement is just cynical
gaslighting from them, as the only actions they will approve are debt reduction, tax
reduction and privatization of public goods. For them, the state is the problem, not the
solution.
Rich and affluent people have hijacked the whole economic discussion and most important is
ideology of protecting property rights and 'individual' freedoms, to the detriment of our
planet and all of us living on it.
Ultimately it's all about population growth, and in particular, government policies aimed
at maximizing population growth, and top-down pressure from the rich to censure any
discussion of this topic.
That's why they recently gave a Nobel Prize to some economists pushing 'solutions' to
poverty in places like India that have been demonstrated over and over not to work: because
the policy that does work is to limit fertility rates (example: China post-Mao), and the the
rich don't want that, because they love cheap labor.
The problem is compounded by the lousy reputation Economics has acquired among proponents of
an inclusive economy. Too often the discipline is viewed as the source of the policies that
have produced the excesses and fragilities of our time. Mainstream economics and neoliberalism
are viewed as one and the same.
We beg to differ:
Many of the dominant policy ideas of the last few decades are supported neither by sound
economics nor by good evidence. Neoliberalism – or market fundamentalism, market
fetishism, etc. -- is a perversion of mainstream economics, rather than an application
thereof. And contemporary economics research is rife with new ideas for creating a more
inclusive society. But it is up to us economists to convince their audience about the merits
of these claims.
As important as specific policy prescriptions in different domains of economics are, we also
have a bigger claim: our essays produce overarching themes that taken together provide a
coherent overall vision for economic policy that stands as a genuine alternative to market
fundamentalism. This is a vision that rejects the reliance on competitive equilibrium as a
realistic benchmark, understands that the world is always second-best, highlights the role of
power imbalances in shaping existing institutional arrangements, and emphasizes the need for
imagination in devising alternatives that are both more inclusive and more conducive to
prosperity. We strive for a whole that is greater than the sum of the parts.
We do not intend to duplicate the excellent work being done in policy think tanks in
Washington, D.C. and elsewhere. Many economists engage with these think tanks and their ideas
get airing through them. Our initiative is different in that it is a network of academic
economists. We are committed to policy proposals based on sound scholarship. But we also care
about what these policy ideas imply in turn for the way in which we should practice Economics
in the class room and in the seminar room. And we are less influenced by immediate political
constraints or opportunities of the policy scene in Washington, D.C.
We believe Economics can be an ally of inclusive prosperity. That is why we have embarked on
this project. The initial set of policy briefs on the EfIP website is our first step. We hope
they will stimulate and accelerate academic economists' sustained engagement with creative
ideas for inclusive prosperity and that we will be able to follow up soon with an even richer
set of policy discussions.
Political theorist Wendy Brown's latest book, In the Ruins of
Neoliberalism: The Rise of Antidemocratic Politics in the West , traces the intellectual
roots of neoliberalism and reveals how an anti-democratic project unleashed monsters –
from plutocrats to neo-fascists – that its mid-20 th century visionaries
failed to anticipate. She joins the Institute for New Economic Thinking to discuss how the
flawed blueprint for markets and the less-discussed focus on morality gave rise to threats to
democracy and society that are distinct from what has come before.
Lynn Parramore: To many people, neoliberalism is about economic agendas. But your book
explores what you describe as the moral aspect of the neoliberal project. Why is this
significant?
Wendy Brown: Most critical engagement with neoliberalism focuses on economic policy
– deregulation, privatization, regressive taxation, union busting and the extreme
inequality and instability these generate. However, there is another aspect to neoliberalism,
apparent both in its intellectual foundations and its actual roll-out, that mirrors these moves
in the sphere of traditional morality. All the early schools of neoliberalism (Chicago,
Austrian, Freiburg, Virginia) affirmed markets and the importance of states supporting without
intervening in them.
But they also all affirmed the importance of traditional morality (centered in the
patriarchal family and private property) and the importance of states supporting without
intervening in it. They all supported expanding its reach from the private into the civic
sphere and rolling back social justice previsions that conflict with it. Neoliberalism thus
aims to de-regulate the social sphere in a way that parallels the de-regulation of markets.
Concretely this means challenging, in the name of freedom, not only regulatory and
redistributive economic policy but policies aimed at gender, sexual and racial equality. It
means legitimating assertions of personal freedom against equality mandates (and when
corporations are identified as persons, they too are empowered to assert such freedom). Because
neoliberalism has everywhere carried this moral project in addition to its economic one, and
because it has everywhere opposed freedom to state imposed social justice or social protection
of the vulnerable, the meaning of liberalism has been fundamentally altered in the past four
decades.
That's how it is possible to be simultaneously libertarian, ethnonationalist and patriarchal
today: The right's contemporary attack on "social justice warriors" is straight out of
Hayek.
LP: You discuss economist and philosopher Friedrich von Hayek at length in your book.
How would you distribute responsibility to him compared to other champions of conservative
formulations for how neoliberalism has played out? What were his blind spots, which seem
evidenced today in the rise of right-wing forces and angry populations around the world?
WB: Margaret Thatcher thumped Hayek's The Constitution of
Liberty and declared it the bible of her project. She studied it, believed it, and
sought to realize it. Reagan imbibed a lot of Thatcherism. Both aimed to implement the Hayekian
view of markets, morals and undemocratic statism. Both accepted his demonization of society
(Thatcher famously quotes him, "there's no such thing") and his view that state policies aimed
at the good for society are already on the road to totalitarianism. Both affirmed traditional
morality in combination with deregulated markets and attacks on organized labor.
I am not arguing that Hayek is the dominant influence for all times and places of
neoliberalization over the past four decades -- obviously the Chicago Boys [Chilean economists of the '70s
and '80s trained at the University of Chicago] were key in Latin America while Ordoliberalism [a German
approach to liberalism] has been a major influence in the European Union's management of the
post-2008 crises. "Progressive neoliberals" and neoliberalized institutions hauled the project
in their own direction. But Hayek's influence is critical to governing rationality of
neoliberalism in the North and he also happens to be a rich and complex thinker with a fairly
comprehensive worldview, one comprising law, family, morality, state, economy, liberty,
equality, democracy and more.
The limitations? Hayek really believed that markets and traditional morality were both
spontaneous orders of action and cooperation, while political life would always overreach and
thus required tight constraints to prevent its interventions in morality or markets. It also
needed to be insulated from instrumentalism by concentrated economic interests, from aspiring
plutocrats to the masses. The solution, for him, was de-democratizing the state itself. He was,
more generally, opposed to robust democracy and indeed to a democratic state. A thriving order
in his understanding would feature substantial hierarchy and inequality, and it could tolerate
authoritarian uses of political power if they respected liberalism, free markets and
individual freedom.
We face an ugly, bowdlerized version of this today on the right. It is not exactly what
Hayek had in mind, and he would have loathed the plutocrats, demagogues and neo-fascist masses,
but his fingerprints are on it.
LP: You argue that there is now arising something distinct from past forms of fascism,
authoritarianism, plutocracy, and conservatism. We see things like images of Italian right groups giving Fascist
salutes that have been widely published. Is that merely atavism? What is different?
WB: Of course, the hard right traffics in prior fascist and ultra-racist iconography,
including Nazism and the Klan. However, the distinctiveness of the present is better read from
the quotidian right than the alt-right.
We need to understand why reaction to the neoliberal economic sinking of the middle and
working class has taken such a profoundly anti-democratic form. Why so much rage against
democracy and in favor of authoritarian statism while continuing to demand individual freedom?
What is the unique blend of ethno-nationalism and libertarianism afoot today? Why the
resentment of social welfare policy but not the plutocrats? Why the uproar over [American
football player and political activist] Colin Kaepernick but not the Panama Papers [a massive
document leak pointing to fraud and tax evasion among the wealthy]? Why don't bankrupt workers
want national healthcare or controls on the pharmaceutical industry? Why are those sickened
from industrial effluent in their water and soil supporting a regime that wants to roll back
environmental and health regulations?
Answers to these questions are mostly found within the frame of neoliberal reason, though
they also pertain to racialized rancor (fanned by opportunistic demagogues and our mess of an
unaccountable media), the dethronement of white masculinity from absolute rather than relative
entitlement, and an intensification of nihilism itself amplified by neoliberal
economization.
These contributing factors do not run along separate tracks. Rather, neoliberalism's aim to
displace democracy with markets, morals and liberal authoritarian statism legitimates a white
masculinist backlash against equality and inclusion mandates. Privatization of the nation
legitimates "nativist" exclusions. Individual freedom in a world of winners and losers assaults
the place of equality, access and inclusion in understandings of justice.
LP: Despite your view of democratized capitalism as an "oxymoron," you also observe that
capitalism can be modulated in order to promote equality among citizens. How is this feasible
given the influence of money in politics? What can we do to mitigate the corruption of
wealth?
WB: Citizens United certainly set
back the project of achieving the political equality required by and for democracy. I
wrote about this in a previous book, Undoing the Demos , and Timothy
Kuhner offers a superb account of the significance of wealth in politics in Capitalism V. Democracy: Money in Politics
and the Free Market Constitution. Both of us argue that the Citizens
United decision, and the several important campaign finance and campaign speech decisions
that preceded it, are themselves the result of a neoliberalized jurisprudence. That is,
corporate dominance of elections becomes possible when political life as a whole is cast as a
marketplace rather than a distinctive sphere in which humans attempt to set the values and
possibilities of common life. Identifying elections as political marketplaces is at the heart
of Citizens United.
So does a future for democracy in the United States depend on overturning that decision?
Hardly. Democracy is a practice, an ideal, an imaginary, a struggle, not an achieved state.
It is always incomplete, or better, always aspirational. There is plenty of that aspiration
afoot these days -- in social movements and in statehouses big and small. This doesn't make the
future of democracy rosy. It is challenged from a dozen directions – divestment
from public higher education, the trashing of truth and facticity, the unaccountability of
media platforms, both corporate and social, external influence and trolling, active voter
suppression and gerrymandering, and the neoliberal assault on the very value of democracy we've
been discussing. So the winds are hardly at democracy's back.
I think Milton Friedman was vastly more important than Hayek is shaping the worldview of
American conservatives on economic policy. Until Hayek won the Nobel he was virtually
forgotten in the US. Don't know about the UK, but his leaving the London School of Economics
undoubtedly reduced his influence there. Hayek was very isolated at the University of Chicago
even from the libertarians at the Department of Economics, largely due to methodological
issues. The Chicago economists thought was really more of as philosopher, not a real
economist like them.
Friedman was working for Hayek, in the sense that Hayek instigated the program that
Friedman fronted.
I was amused by a BBC radio piece a couple of years ago in which some City economist was
trying to convince us that Hayek was a forgotten genius who we ought to dig up and worship,
as if he doesn't already rule the World from his seat at God's right hand.
Citizens United: The conservative originalists keep whining about activist judges making
up rights, like the "right to privacy" in Roe v. Wade. Yet they were able to come up with
Citizens United that gave a whole new class of rights to corporations to effectively give
them the rights of individuals (the People that show up regularly in the Constitution,
including the opening phrase). If you search the Constitution, "company", "corporation" etc.
don't even show up as included in the Constitution. "Commerce" shows up a couple of times,
specifically as something regulated by Congress. Citizens United effectively flips the script
of the Constitution in giving the companies doing Commerce the ability to regulate Congress.
I think Citizen's United is the least conservative ruling that the conservative court could
have come up with, bordering on fascism instead of the principles clearly enunciated
throughout the Constitution. It is likely to be the "Dred Scott" decision of the 21st
century.
2. Neo-liberalism is like Marxism and a bunch of other isms, where the principles look
fine on paper until you apply them to real-world people and societies. This is the difference
between Thaler's "econs" vs "humans". It works in theory, but not in practice because people
are not purely rational and the behavioral aspects of the people and societies throw things
out of kilter very quickly. That is a primary purpose of regulation, to be a rational
fly-wheel keeping things from spinning out of control to the right or left. Marxism quickly
turned into Stalinism in Russia while Friedman quickly turned into massive inequality and
Donald Trump in the US. The word "regulate" shows up more frequently in the Constitution than
"commerce", or "freedom" (only shows up in First Amendment), or "liberty" (deprivation of
liberty has to follow due process of law which is a form of regulation). So the Constitution
never conceived of a self-regulating society in the way Hayek and Friedman think things
should naturally work – writing court rulings on the neo-liberal approach is a radical
activist departure from the Constitution.
The foundation was laid for Citizens United long before, I think, when the Supreme
Court decided that corporations were essentially people, and that money was essentially
speech. It would be nice if some justice started hacking away at those erroneous decisions
(along with what they did with the 2nd Amendment in D.C. v Heller .)
I honestly think the corporations are people was good and the money is speech is terrible.
If most of the big corporations were actually treated like people those people would be in
jail. They are treated better than people are now. Poor people, anyway. When your corporation
is too big not to commit crimes, it's too big and should go in time out at least.
My understanding is that corporate personhood arose as a convenience to allow a
corporation to be named as a single entity in legal actions, rather than having to name every
last stockholder, officer, employee etc. Unfortunately the concept was gradually expanded far
past its usefulness for the rest of us.
"If most of the big corporations were actually treated like people those people would be
in jail."
Thats part of the problem: Corporations CANNOT be put in jail because they are
organizations, not people, but they are given the same 'rights' as people. That is
fundamentally part of the problem.
True, but corporations are directed by people who *can* be jailed. Often they are
compensated as if they were taking full liability when in fact they face none. I think its
long past time to revisit the concept of limited liability.
"Limited Liability" is basic to the concept of the corporation. How about some "limited
liability" for individuals? The whole point of neo-liberalism is "lawlessness" or the "Law of
the Jungle" in unfettered markets. The idea is to rationalize raw power, both over society
and the family, the last stand of male dominance, the patriarchy. The women who succeed in
this eco-system, eschew the nurturing feminine and espouse the predatory masculine. "We came,
we saw, he died." Psychopaths all!
The executives need to go to jail. Until then, corporate fines are just a cost of doing
business and white collar lawbreaking will continue. Blowing up the world's financial system
has less legal consequence than doing 80 in a 65 mph zone. Even if they just did civil asset
forfeiture on executives based on them having likely committed a crime while in their house
and using their money would go along ways to cleaning things up.
The whittling away of white collar crime by need to demonstrate intent beyond reasonable
doubt means the executives can just plead incompetence or inattention (while collecting their
$20 million after acquittal). Meanwhile, a poor person with a baggie of marijuana in the
trunk of their car goes to jail for "possession" where intent does not need to be shown, mere
presence of the substance. If they used the same standard of the mere presence of a fraud to
be sufficient to jail white collar criminals, there wouldn't be room in the prisons for poor
people picked up for little baggies of weed.
Actually, if you research the history, the court DID NOT decide that corporations are
people. The decision was made by the secretary to the court, who included the ruling in the
headnote to Santa Clara County v. Southern Pacific Railroad, 1886. The concept was not
considered in the case itself nor in the ruling the judges made. However, it was so
convenient for making money that judges and even at least one justice on the supreme court
publicized the ruling as if it were an actual legal precedent and have followed it ever
since. I am not a lawyer, but I think that ruling could be changed by a statute, whereas
Citizens United is going to require an amendment to the constitution. On the other hand, who
knows? Maybe the five old, rich, Republican, Catholic Men will rule that it is embedded in
the constitution after all. I think it would be worth a try.
"Neo-liberalism is like Marxism and a bunch of other isms, where the principles look fine
on paper until you apply them to real-world people and societies."
Marx analysed 19th Century capitalism; he wrote very little on what type of system should
succeed capitalism. This is in distinct contrast to neo-liberalism which had a well plotted
path to follow (Mirowski covers this very well). Marxism did not turn into Stalinism; Tsarism
turned into Leninism which turned into Stalinism. Marx had an awful lot less to do with it
than Tsar Nicholas II.
+1000. I think it was Tsar Nicholas II who said, L'etat, c'est moi"./s; Lenin just
appropriated this concept to implement his idea of "the dictatorship of the proletariat."
"Neo-liberalism is like Marxism and a bunch of other isms, where the principles look fine
on paper until you apply them to real-world people and societies."
I'm sorry, but this is fundamentally intellectually lazy. Marxism isn't so much a way to
structure the world, like Neoliberalism is, but a method of understanding Capitalism and
class relations to capitalism.
Edit: I wrote this before I saw New Wafer Army's post since I hadnt refreshed the page
since I opened it. They said pretty much what I wanted to say, so kudos to them.
These critiques of neoliberalism are always welcome, but they inevitably leave me with
irritated and dissatisfied with their failure or unwillingness to mention the political
philosophy of republicanism as an alternative, or even a contrast.
The key is found in Brown's statement " It also needed to be insulated from
instrumentalism by concentrated economic interests, from aspiring plutocrats to the masses.
The solution, for him [von Hayek], was de-democratizing the state itself. He was, more
generally, opposed to robust democracy and indeed to a democratic state."
Contrast this to Federalist Paper No. 10, Madison's famous discourse on factions.
Madison writes that 1) factions always arise from economic interests ["But the most common
and durable source of factions has been the various and unequal distribution of property."],
and 2) therefore the most important function of government is to REGULATE the clash of these
factions ["The regulation of these various and interfering interests forms the principal task
of modern legislation, and involves the spirit of party and faction in the necessary and
ordinary operations of the government."
In a very real sense, neoliberalism is an assault on the founding principles of the
American republic.
Which should not really surprise anyone, since von Hayek was trained as a functionary of
the Austro-Hungarian empire. And who was the first secretary of the Mont Pelerin Society that
von Hayen founded to promote neoliberalist doctrine and propaganda? Non other than Max Thurn,
of the reactionary Bavarian Thurn und Taxis royal family.
Madison's Federalist 10 is much like Aristotle's Politics and the better Roman historians
in correctly tracing back the fundamental tensions in any political community to questions of
property and class.
And, much like Aristotle's "mixed regime," Madison proposes that the best way of
overcoming these tensions is to institutionalize organs of government broadly representative
of the two basic contesting political classes–democratic and oligarchic–and let
them hash things out in a way that both are forced to deal with the other. This is a
simplification but not a terribly inaccurate one.
The problem though so far as I can tell is that it almost always happens that the
arrangement is set up in a way that structurally privileges existing property rights
(oligarchy) over social freedoms (democracy) such that the oligarchic class quickly comes to
dominate even those governmental organs designed to be "democratic". In other words, I have
never seen a theorized republic that upon closer inspection was not an oligarchy in
practice.
1) Support welfare for the banks (e.g. deposit guarantees) and the rich (e.g. non-negative
yields and interest on the inherently risk-free debt of monetary sovereigns).
2) Seek to regulate the thievery inherent in 1).
3) Bemoan the inevitable rat-race to the bottom when 2) inevitably fails because of
unenforceable laws, such as bans on insider trading, red-lining, etc.
Shorter: Progressives ENABLE the injustice they profess, no doubt sincerely at least in
some cases, to oppose.
Rather stupid from an engineering perspective, I'd say. Or more kindly, blind.
I'm fine with the federal government providing basic banking services (which would
inherently protect depositors) but your initial post didn't say anything about that. If we
continue with a private banking system I want deposit guarantees even if they somehow
privilege the banks better than nothing
I have read that originally conservatives (including many bankers) opposed deposit
insurance because it would lead people to be less careful when they evaluated the banking
institution they would entrust with their money. They did not seem to notice that however
much diligence depositors used, they ended up losing their life's savings over and over. Just
as they do not seem to notice that despite having employer-provided insurance tens of
thousands of people every year go bankrupt because of medical bills. Funny how that
works.
Adding that rather than deposit guarantees, the US government could have expanded the
Postal Savings Service to provide the population with what private banks had so miserably
failed to provide – the safe storage of their fiat.
The banking system was failing in 1932, as was the financial system in 2008, not
necessarily because of any lack of solvency of an individual business although some were, but
because of the lack of faith in the whole system; bank panics meant that every depositor was
trying to get their money out at the same time. People lost everything. It is only the faith
in the system that enables the use of bits of paper and plastic to work. So having a
guarantee in big, bold letters of people's savings is a good idea.
Personally, I see little distance between the Neo Liberal treatment of Market and Naked
Greed, coupled with a complete rejection of Rule of Law for the Common Good.
" It means legitimating assertions of personal freedom against equality mandates (and when
corporations are identified as persons, they too are empowered to assert such freedom)."
"We need to understand why reaction to the neoliberal economic sinking of the middle and
working class has taken such a profoundly anti-democratic form." Really? Does anybody here
believe that? This reads like another clumsy attempt to dismiss actual popular anger against
neoliberalism in favour of pearl-clutching progressive angst, by associating this anger with
the latest target for liberal hate, in this case blah blah patriarchy blah blah. The reality
is that liberalism has always been about promoting the freedom of the rich and the strong to
do whatever they feel like, whilst keeping the ordinary people divided and under control.
That's why Liberals have always hated socialists, who think of the good of the community
rather than of the "freedom" of the rich, powerful and well connected.
The "democracy" that is being defended here is traditional elite liberal democracy, full of
abstract "rights" that only the powerful can exert, dominated by elite political parties with
little to choose between them, and indifferent or hostile to actual freedoms that ordinary
people want in their daily lives. Neoliberalism is simply a label for its economic views
(that haven't changed much over the centuries) whereas social justice is the label for its
social wing (ditto).
I think of this every time I wall home through the local high street, where within thirty
metres I pass two elderly eastern European men aggressively begging. (It varies in France,
but this is slightly closer than the average for a city). I reflect that twenty years of
neoliberal policies in France have given these people freedom of movement, and the freedom to
sit there in the rain with no home, no job and no prospects. Oh, and now of course they are
free to marry each other.
I agree with your analysis and assessment of Wendy Brown, as she is portrayed in her
statements in this post. However I quibble your assertion: "Neoliberalism is simply a label
for its economic views (that haven't changed much over the centuries) whereas social justice
is the label for its social wing (ditto)." The word "Neoliberalism" is indeed commonly used
as a label as you assert but Neoliberalism as a philosophy is obscured in that common
usage.
At its heart I believe Neoliberalism might best be characterized as an epistemology based
on the Market operating as the all knowing arbiter of Truth. Hayek exercises notions of
'freedom' in his writing but I believe freedom is a secondary concern once it is defined in
terms of its relation to the decisions of the Market. This notion of the Market as
epistemology is completely absent from Wendy Brown's discussion of her work in this post.
Her assertion that "neoliberalism's aim [is] to displace democracy with markets, morals
and liberal authoritarian statism legitimates a white masculinist backlash against equality
and inclusion mandates" collapses once the Market is introduced as epistemology.
Neoliberalism does not care one way or another about any of Wendy Brown's concerns. Once the
Market decides -- Truth is known. As a political theorist I am surprised there is no analysis
of Neoliberalism as a tool the Elite have used to work their will on society. I am surprised
there is no analysis of how the Elites have allowed themselves to be controlled within and
even displaced by the Corporate Entities they created and empowered using their tool. I am
surprised there is no analysis of the way the Corporate Entities and their Elite have worked
to use Neoliberalism to subordinate nation states under a hierarchy driven by the decisions
of the World Market.
[I admit I lack the stomach to read Hayek -- so I am basing my opinions on what I
understand of Phillip Mirowski's analysis of Neoliberalism.]
I don't disagree with you: I suppose that having been involved in practical politics
rather than being a political theorist (which I have no pretensions to being) I am more
interested of the reality of some of these ideas than their theoretical underpinnings. I have
managed to slog my way through Slobodian's book, and I think your presentation of Hayek's
writing is quite fair: I simply wonder how far it is actually at the origin of the
destruction we see around us. I would suggest in fact that, once you have a political
philosophy based on the value-maximising individual, rather than traditional considerations
of the good of society as a whole, you eventually wind up where we are now, once the
constraints of religious belief, fear of popular uprisings , fear of Communism etc. have been
progressively removed. It's for that reason that I argue that neoliberalism isn't really new:
it represents the essential form of liberalism unconstrained by outside forces – almost
a teleological phenomenon which, as its first critics feared, has wound up destroying
community, family, industries, social bonds and even – as you suggest – entire
nation states.
Your response to my comment, in particular your assertion "neoliberalism isn't really new"
coupled with your assertion apparently equating Neoliberalism with just another general
purpose label for a "political philosophy based on the value-maximizing individual, rather
than traditional ", is troubling. When I put your assertions with Jerry B's assertion at 6:58
pm:
" many people over focus on a word or the use of a word and ascribe way to literal view of a
word. I tend to view words more symbolically and contextually."
I am left wondering what is left to debate or discuss. If Neoliberalism has no particular
meaning then perhaps we should discuss the properties of political philosophies based on the
value-maximizing-individual, and even that construct only has meaning symbolically and
contextually, which is somehow different than the usual notion of meaning as a denotation
coupled with a connotation which is shared by those using a term in their discussion -- and
there I become lost from the discussion. I suppose I am too pedantic to deviate from the
common usages of words, especially technical words like Neoliberalism.
Considering how elites throughout history have used religion as a bulwark to guard their
privileges, it should be of no surprise that they are building a new one, only this time they
are building one that appeals to the religious and secular alike. Neoliberalism will be very
difficult to dismantle.
But what ironies we create. Citizens United effectively gave political control to the big
corporations. In a time when society has already evolved lots of legislation to limit the
power and control of any group and especially in commercial/monopoly cases. So that what CU
created was a new kind of "means of production" because what gets "produced" these days is at
least 75% imported. The means of production is coming to indicate the means of political
control. And that is fitting because ordinary people have become the commodity. Like
livestock. So in that sense Marx's view of power relationships is accurate although
civilization has morphed. Politics is, more and more, the means of production. The means of
finance. Just another reason why we would achieve nothing in this world trying to take over
the factories. What society must have now is fiscal control. It will be the new means of
production. I'm a dummy. I knew fiscal control was the most important thing, but I didn't
quite see the twists and turns that keep the fundamental idea right where it started.
Exactly. The writer seems determined to tie in neoliberalism with a broader conservative
opposition to modern social justice movements, when in reality neoliberalism (the 'neo' part
anyway) was more than happy to co-opt feminism, anti-racism, etc., into its narrative. The
more the merrier, as 'rights' became associated entirely with social issues, and not economic
rights.
The co-optation neoliberalism has exacted on rights movements has dovetailed nicely with
postmodernism's social-constructivism, an anti-materialist stance that posits discourse as
shaping the world and one that therefore privileges subjectivity over material reality.
What this means in practice is that "identity" is now a marketplace too, in which
individuals are naming their identities as a form of personal corporate branding. That's why
we have people labeling themselves like this: demisexual queer femme, on the spectrum, saying
hell no to my tradcath roots, into light BDSM, pronouns they/them.
And to prove this identity, the person must purchase various consumer products to garb and
decorate themselves accordingly.
So the idea of civil rights has now become utterly consumerist and about awarding those
rights based on subjective feelings rather than anything to do with actual material
exploitation.
The clue is in the way the words "oppression" and "privilege" are used. Under those words,
exploitation, discrimination, disadvantage, and simple dislike are conflated, though they're
very different and involve very different remedies.
The law in its majestic equality forbids the rich as well as the poor from sleeping under
bridges and stealing bread = classical Liberalism.
The bizarre thing is to meet younger neoliberal middle class people whom neoliberalism has
priced out of major cities, who have hardly any real savings, and who still are on board with
the project. The dream dies hard.
David – I enjoy reading your comments on NC as they are well reasoned and develop an
argument or counter argument. The above comment reads more like a rant. I do not disagree
with most of your comment. From my experience with Wendy Brown's writing your statement below
is not off base.:
This reads like another clumsy attempt to dismiss actual popular anger against
neoliberalism in favour of pearl-clutching progressive angst, by associating this anger with
the latest target for liberal hate, in this case blah blah patriarchy blah blah
However, in reading Wendy Brown's comments I did not have the same emotional reaction that
comes across in your comment. I have read the post twice to make sure I understand the points
Wendy Brown is trying to make and IMO she is "not wrong" either. . I would advise you to not
"throw out the baby with the bathwater".
As KLG mentions below, WB is a very successful academic at Berkeley who worked with
Sheldon Wolin as a graduate student IIRC (Sheldon Wolin wrote a terrific book entitled
Democracy Incorporated), so she is not just some random journalist.
Much of WB's writing has gender themes in it and there are times I think she goes over the
top, BUT, IMO there is also some truth to what she is saying. Much of the political power and
economic power in the US and the world is held by men so that may be where WB's reference to
patriarchy comes in.
How could there be patriarchy with men begging in the streets is a valid point. And that
is where I divert with WB, in that the term patriarchy paints with too broad a brush. But
speaking specifically to neo-liberalism and not liberalism as you refer to it, that is where
WB's reference to patriarchy may have some merit. Yes, there are many exceptions to the
neoliberalism and patriarchy connection such as Hillary Clinton, Margaret Thatcher, etc., so
again maybe painting with too broad a brush, but it would be wise not to give some value.
The sociologist Raewyn Connell has written about the connection between neoliberalism and
version of a certain type of masculinity embedded with neoliberalism. Like Wendy Brown,
Connell seems to gloss over the examples of Hillary Clinton, Margaret Thatcher, and the class
based elite bourgeois feminism as counterpoints to neoliberal patriarchy. There are
exceptions to every rule.
Women have made enormous strides in politics and the boardroom. But in the halls of political
and economic power the majority of the power is still held by men, and until women become
close to 50% or more of the seats of power, to ignore the influence of patriarchy/oligarch
version of masculinity(or whatever term a person is comfortable with) on neoliberalism would
be foolish.
Neoliberalism is simply a label for its economic views (that haven't changed much over
the centuries) whereas social justice is the label for its social wing (ditto).
I disagree. IMO, neoliberalism is a different animal than the "traditional elite liberal
democracy", and neoliberalism is much darker and as WB mentions "Neoliberalism thus aims to
de-regulate the social sphere in a way that parallels the de-regulation of markets".
If you have not I would highly recommend reading Sheldon Wolin's Democracy Incorporated:
Managed Democracy and the Specter of Inverted Totalitarianism It is an excellent book.
I haven't read that book by Wolin, though his Politics and Vision is in the bookcase next
to me. I'll try to get hold of it. I didn't know she was his student either.
I think the issues she raises about gender are a different question from neoliberalism
itself, and that it's not helpful to believe that you can fight neoliberalism by
"legitimating assertions of personal freedom against equality mandates" whatever that means.
Likewise, it's misleading to suggest that "Privatization of the nation legitimates "nativist"
exclusions", since the actual result is the opposite, as you will realise when you see that
London buses have the same logo as the ones in Paris, and electricity in the UK is often
supplied by a French company, EDF. Indeed, to the extent that there is a connection with
"nativism" it is that privatisation has enabled an international network of distant and
unaccountable private companies to take away management of national resources and assets from
the people. Likewise, neoliberalism is entirely happy to trample over traditional gender
roles in the name of efficiency and increasing the number of workers chasing the same
job.
In other words, I was irritated (and sorry if I ranted a bit, I try not to) with what I saw
as someone who already knows what the answer is, independent of what the question may be. I
suspect her analysis of, say, Brexit, would be very similar. I think that kind of person is
potentially dangerous.
==I think the issues she raises about gender are a different question from neoliberalism
itself==
Again as I said in my comment I would agree in a theoretical sense that gender and
neoliberalism are different issues but again I believe there is a thread of gender, i.e.
oligarchic patriarchy, of the type of neoliberalism that WB talks about.
===not helpful to believe that you can fight neoliberalism by "legitimating assertions of
personal freedom against equality mandates" whatever that means===
What I think that means is the more libertarian version of neoliberalism. That maybe where
our differences lie, in that my sense is WB is talking about a specific form of neoliberalism
and your view is broader.
===it's misleading to suggest that "Privatization of the nation legitimates "nativist"
exclusions"===
On this I see your disagreement with WB and understand your reference to "that
privatisation has enabled an international network of distant and unaccountable private
companies to take away management of national resources and assets from the people".
Where I think WB is coming from is the more nationalistic, Anglosphere that the Trump
administration is pushing with his border wall, etc. In this WB does expose her far left
priors but again there is some value in her points. From her far left view my sense it Wendy
Brown is reacting to the sense that Trump wants to turn the US into the US of the 1950's and
60's and on many fronts that ship has sailed.
=== Indeed, to the extent that there is a connection with "nativism" it is that
privatisation has enabled an international network of distant and unaccountable private
companies to take away management of national resources and assets from the people. Likewise,
neoliberalism is entirely happy to trample over traditional gender roles in the name of
efficiency and increasing the number of workers chasing the same job. ===
Excellent point and having read some of Wendy Brown's books and paper is a point she would
agree with while still seeing some patriarchial themes running through neoliberalism. To your
point above I would recommend reading some of Cynthia Enloe's work specifically Bananas,
Beaches and Bases.
====I think that kind of person is potentially dangerous====
Wow. Dangerous??? Clearly the post has hit a nerve. Many people in our current society are
dangerous but IMO Wendy Brown is not one of them. A bit hyperbolic in her focus on gender?
Maybe but not wrong. A bit too far left (of the bleeding heart kind)? Maybe. But to call
someone who worked for Sheldon Wolin dangerous. C'mon man.
I have gotten into disputes on NC as IMO many people over focus on a word or the use of a
word and ascribe way to literal view of a word. I tend to view words more symbolically and
contextually. I do not overreact to the use a word and instead try to step back and glean a
message or the word in context of what is the person trying to say? So for instance when WB
uses the phrase "Privatization of the nation" I am not going to react because my own
interpretation is WB is reacting to Trump's nationalism and not to the type of privatization
that your example of London shows.
I am disappointed that most of the comments to this post seem to take a critical view of
Wendy Brown's comments. Is she a bit too far left and gender focused (identity political) for
my tastes? Yes and that somewhat hurts her overall message and the arguments she is trying to
discuss which are not unlike her mentor Sheldon Wolin.
Thanks for the reply David. My sense is we have what I call a "positional" debate (i.e.
Tastes Great! Less Filling!). And positional debates tend to go nowhere.
When WB speaks of gender, note that she then mentions sex, followed by race. By "gender"
she is NOT talking about the rights and power of female people under neoliberalism.
She is speaking of the rights of people to claim, that they are the opposite sex and
therefore entitled to the rights, set-asides and affirmative discrimination permitted that
sex -- for instance, to compete athletically on that sex's sports teams, to be imprisoned if
convicted in that sex's prisons, to be considered that sex in instances where sex matters in
employment such as a job as a rape counselor or a health care position performing intimate
exams where one is entitled to request a same-sex provider, and to apply for scholarships,
awards, business loans etc. set aside for that sex.
WB, in addition to being a professor at Berkeley, is also the partner of Judith Butler,
whose book "Gender Trouble" essentially launched the postmodern idea that subjective sense of
one's sex and how one enacts that is more meaningful than the lived reality people experience
in biologically sexed bodies.
By this reasoning, a male weightlifter can become a woman, can declare that he's in fact
always been a woman -- and so we arrive at the farce of a male weightlifter (who, granted,
must under IOC policy reduce his testosterone for one year to a low-normal male range that is
5 standard deviations away from the female mean) winning a gold medal in women's
weightlifting in the Pan-Pacific games and likely to win gold again in the 2020 Olympics.
If that's not privileging individual freedom over collective rights, I don't know what
is.
>That's how it is possible to be simultaneously libertarian, ethnonationalist and
patriarchal today: The right's contemporary attack on "social justice warriors" is straight
out of Hayek.
Anyone who could write such a statement understands neither libertarianism nor
ethnonationalism. The last half-decade has seen a constant intellectual attack by
ethnonationalists against libertarianism. An hour's examination of the now-defunct Alt
Right's would confirm this.
Similarly, the contemporary attack on SJW's comes not out of Hayek, but from Gamergate. If
you do not know what Gamergate is, you do not understand where the current rightwing and
not-so-rightwing thrust of contemporary white identity politics is coming from. My guess is
Brown has never heard of it.
Far from trying to uphold patriarchy, Contemporary neoliberalism seeks a total atomization
of society into nothing but individual consumers of product. Thus what passes for
liberalization of a society today consists in little more than staging sham elections,
opening McDonalds, and holding a gay pride parade.
This is why ethnonationalism and even simple nationalism poses a mortal threat to
neoliberalism, in a way that so-called progressives never will: both are a threat to
globalization, while the rainbow left has shown itself to be little more than the useful
idiots of capital.
Brown strikes me as someone who has a worldview and will distort the world to fit that
view, no matter how this jibes with facts or logic. The point is simply to array her bugbears
into a coalition, regardless of how ridiculous it seems to anyone who knows anything about
it.
Actually, maybe not "Bingo," if by that you mean Wendy Brown is a typical representative
of "pearl clutching progressive angst." Yes, WB is a very successful academic at Berkeley who
worked with Sheldon Wolin as a graduate student IIRC (who was atypical in just about every
important way), but this book along with its predecessor Undoing the Demos are much
stronger than the normative "why are the natives so restless?" bullshit coming from my
erstwhile tribe of "liberals," most of whom are incapacitated by a not unrelated case of
Trump Derangement Syndrome.
Hayek was eloquent. Too bad he didn't establish some end goals. Think of all the misery
that would have been avoided. I mean, how can you rationalize some economic ideology to
"deregulate the social sphere" – that's just the snake eating its tail. That's what
people do who don't have boundaries. Right now it looks like there's a strange bedfellowship,
a threesome of neoliberal nazis, globalists, and old communists. Everybody and their dog
wants the world to work – for everyone. But nobody knows how to do it. And we are
experiencing multiple degrees of freedom to express our own personal version of Stockholm
syndrome. Because identity politics. What a joke. Maybe we need to come together over
something rational. Something fairly real. Instead of overturning Citizens United (which is
absurd already), we should do Creatures United – rights for actual living things on
this planet. And then we'd have a cause for the duration.
Well stated. The -isms seem like distractions, almost red herrings leading us down the
primrose path to a ceaseless is/ought problem. Rather than discuss the way the world is, we
argue how it ought to be.
Not to say theory, study, and introspection aren't important. More that we appear
paralyzed into inaction since everyone doesn't agree on the One True Way yet.
Let us not get to simplistic here. It helps to understand the origins of political,
economic, and even social ideals. The origin of modern capitalism, for there were
different and more limited earlier forms, was in the Dutch Republic and was part of the
efforts of removing and replacing feudalism; liberalism arose from the Enlightenment, which
itself was partly the creation of the Wars of Religion, which devastated Europe. The Thirty
Years War, which killed ½ of the male population of the Germanies, and is considered
more devastating to the Germans than both world wars combined had much of its energy from
religious disagreements.
The Age of Enlightenment, along with much of political thought in the Eighteenth Century,
was a attempt to allow differences in belief, and the often violent passions that they can
cause, to be fought by words instead of murder. The American Constitution, the Bill of
Rights, the whole political worldview, that most Americans unconsciously have, comes from
from those those times.
Democracy, Liberalism, even Adam Smith's work in the Wealth of Nations were
attempts to escape the dictatorship of kings, feudalism, serfdom, violence. Unfortunately,
they have all been usurped. Adam Smith's life's work has been perverted, liberalism has been
used to weaken the social bonds by making work and money central to society. Their evil child
Neoliberalism, a creation of people like Hayek, was supposed to reduce wars (most of the
founders were survivors of the world wars) and was supposed to be be partly
antidemocratic.
Modern Neoliberalism mutates and combines the partly inadvertent atomizing effects of the
ideas of the Enlightenment, Liberalism, Dutch and British Capitalism, the Free Markets of
Adam Smith, adds earlier mid twentieth century Neoliberalism as a fuel additive, and creates
this twisted flaming Napalm of social atomizing; it also clears out any challenges to money
is the worth of all things. Forget philosophy, religion, family, government, society. Money
determines worth. Even speech is only worth the money spent on it and not any inherent worth.
Or the vote.
"liberalism has been used to weaken the social bonds by making work and money central to
society"
I think you may have swapped the cart and the horse.
Money evolved as a way of aiding and organizing useful interactions within groups larger
than isolated villages of a hundred people.
It also enabled an overall increase in wealth through specialization.
Were it not for money, there would be a difficult mismatch between goods of vastly
differing value. A farmer growing wheat and carrots has an almost completely divisible supply
of goods with which to trade. Someone building a farm wagon a month, or making an iron plough
every two weeks has a problem exchanging that for items orders of magnitude less
valuable.
Specialization is a vital step in improving resources and capabilities within societies.
I've hung out with enough friends who are blacksmiths to know that every farmer hammering out
their own plough is a non-starter, for many reasons.
And I've followed enough history to know that iron ploughs mean a lot more food, which
allows someone to specialize in making ploughs rather than growing food for personal
consumption.
The obvious need is for a way of dividing the value of the plough into many smaller
amounts that can be used to obtain grain, cloth, pottery, and so on.
While the exact form of money is not rigidly fixed, at lower technological levels one
really needs something that is portable, doesn't spontaneously self destruct, and has a
clearly definable value . and exists in different concentrations of worth, to allow
flexibility in transport and use.
Various societies have come up with various tokens of value, from agricultural products to
bank drafts, each with different advantages and disadvantages, but for most of history,
precious metals, base metals, and coinage have been the most practical representation of
exchangeable value.
Money is almost certainly an inevitable and necessary consequence of the invention of
agriculture, and the corresponding increase in population density.
Agreed, but as I've suggested elsewhere liberalism always had the capacity within it to
destroy social bonds, societies and even nations, it's just that, at the time, this was
hidden behind the belief that a just God would not allow it to happen. I see liberalism less
as mutating or being usurped than finally being freed of controls. Paradoxically, of course,
this "freedom" requires servitude for others, so that no outside forces (trades unions for
example) can pollute the purity of the market. It's the same thing with social justice:
freedom for identity group comes through legal controls over the behaviour of others, which
is why the contemporary definition of a civil rights activist is someone who wants to
introduce lots of new laws to prevent people from doing things.
frankly, I don't believe the "monsters" neoliberalism has helped create are an unwanted
side effect of their approach, on the contrary, neoliberalism needs those "monsters", like
the authoritarian state, to impose itself on society (ask the mutilated gilets jaunes).
Repression, inequality, poverty, abuse, dispossession, disfranchisement, enviromental
degradation are certainly "monstrous" to those who have to endure them, but not to those who
profit the most from the system and sit on the most powerful positions. Of course, the degree
of exposure to those monstrosities is dependent on the relative position in the pyramid
shaped neoliberal society, the bottom has to endure the most. On the other side, the middle
classes tend to support the neoliberal model as long as it ensures them a power position
relative to the under classes, and the moment those middle classes feel ttheir position
relative to the under classes threatened, the switch to open fascism is not far, we can see
this in Bolivia.
"neoliberalism needs those "monsters", like the authoritarian state, to impose itself on
society"
If I understood Quinn Slobodian's "Globalists" correctly it was precisely this -- that the
neoliberal project while professing that markets were somehow "natural" spent an inordinate
amount of time working to ensure that legal structures be created to insulate them from the
dirty demos.
Their actions in this respect don't square with a serious belief that markets are natural
at all -- if they were, they wouldn't need so damned much hothousing, right?
I think the argument was that markets were "natural", but vulnerable to interference, and
so had to be protected by these legal structures. There's a metaphor there, but it's too late
here for me to find it.
===spent an inordinate amount of time working to ensure that legal structures be created
to insulate them from the dirty demos===
I enjoyed Slobodian's book as well. Interestingly, there is a new book out called The Code
of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor that discusses
those "legal structures".
If you check out Katharina Pistor on Twitter, you can also find good commentaries and even
videos of talks discussing the book and the matter – it is very edifying to open your
eyes to the fundamental role of law in creating such natural phenomena as markets and, among
other things, billionaires.
Thanks deplorado. I do not frequent Pistor's twitter page as much as I would like.
In reading Pistor's book and some of the interviews with Pistor and some of her papers
discussing the themes in the book, I had the same reaction as when I read some of Susan
Strange's books such as The Retreat of the State: complete removal of any strand of
naïveté I may have had as to how the world works. And how hard it will be to undo
the destruction.
As you mention the "dirty demos" above, one of Wendy Brown's recent books was Undoing the
Demos: Neoliberalism's Stealth Revolution.
Never having read any of Susan Strange's writings, I decided to find a book review of The
Retreat of the State. I found this one and found it very interesting, enough so that I'll go
to abebooks.com and get a copy to read.
Hmm. Definitely Monsters from the Id at work here. I am going with the theory that the
wealthier class pushed this whole project all along. In the US, Roosevelt had cracked down
and imposed regulations that stopped, for example, the stock market from being turned into a
casino using ordinary people's saving. He also pushed taxes on them that exceeded 90% which
tended to help keep them defanged.
So lo and behold, after casting about, a bunch of isolated rat-bag economic radicals was
found that support getting rid of regulations, reducing taxes on the wealthy and anything
else that they wanted to do. So money was pumped into this project, think tanks were taken
over or built up, universities were taken over to teach this new theories, lawyers and future
judges were 'educated' to support their fight and that is what we have today.
If WW2 had not discredited fascism, the wealthy would have use this instead as both Mussolini
and Hitler were very friendly to the wealthy industrialists. But they were so instead they
turned to neoliberalism instead. Yes, definitely Monsters from the Id.
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 is why we think small state, unregulated capitalism is something it never was when it
existed before.
We don't understand the monetary system or how banks work because:
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
This is why we come up with crazy ideas like "financial liberalisation".
If corporations are to be people, then they, like the extremely wealthy, need to be reined
in politically. One step we could take is to only allow money donations to political
campaigns to take place when the person is subject or going to be subject to the politicians
decisions. I live in Illinois, I should be able to donate money to the campaigns of those
running for the U.S> Senate from Illinois, but Utah? If I donate money to a Utah candidate
for the Senate, I am practicing influence peddling because that Senator does not represent
me.
If corporations are to be people, they need a primary residence. The location of their
corporate headquarters should suffice to "place" them, and donations to candidates outside of
their set of districts would be forbidden.
Of course, we do have free speech, so people are completely free to speak over the
Internet, TV, hire halls in the district involved and go speak in person. They just couldn't
pay to have someone else do that for them.
To allow unfettered political donations violates the one ma, one vote principle and also
encourages influence peddling. In fact, it seems as if our Congress and Executive operates
only through influence peddling.
"... Finally, the Thought Police were also inspired by the human struggle for self-honesty and the pressure to conform. "The individual has always had to struggle to keep from being overwhelmed by the tribe," Rudyard Kipling once observed. ..."
"... The struggle to remain true to one's self was also felt by Orwell, who wrote about "the smelly little orthodoxies" that contend for the human soul. Orwell prided himself with a "power of facing unpleasant facts" -- something of a rarity in humans -- even though it often hurt him in British society. ..."
"... In a sense, 1984 is largely a book about the human capacity to maintain a grip on the truth in the face of propaganda and power. ..."
"... The new Thought Police may be less sinister than the ThinkPol in 1984 , but the next generation will have to decide if seeking conformity of thought or language through public shaming is healthy or suffocating. FEE's Dan Sanchez recently observed that many people today feel like they're "walking on eggshells" and live in fear of making a verbal mistake that could draw condemnation. ..."
"... When the Berlin Wall came down in November 1989, it was revealed that the Stasi , East Germany's secret police, had a full-time staff of 91,000. That sounds like a lot, and it is, but what's frightening is that the organization had almost double that in informants, including children. And it wasn't just children reporting on parents; sometimes it was the other way around." ..."
"... Movies like the Matrix actually helped people to question everything. What is real and not. Who is the enemy, and can we be sure. And when Conspiracy theories become fact, people learn. The problem is in later generations who get indoctrinated at school and college to not think, not question. Rational examination is forbidden. ..."
There are a lot of unpleasant things in George Orwell's dystopian novel 1984 . Spying screens. Torture and propaganda. Victory
Gin and Victory Coffee always sounded particularly dreadful. And there is Winston Smith's varicose ulcer,
apparently a symbol of his humanity (or something),
which always seems to be "throbbing." Gross.
None of this sounds very enjoyable, but it's not the worst thing in 1984 . To me, the most terrifying part was that you couldn't
keep Big Brother out of your head.
Unlike other 20th-century totalitarians, the authoritarians in 1984 aren't that interested in controlling behavior or speech.
They do, of course, but it's only as a means to an end. Their real goal is to control the gray matter between the ears.
"When finally you surrender to us, it must be of your own free will," O'Brien (the bad guy) tells the protagonist Winston Smith
near the end of the book.
We do not destroy the heretic because he resists us: so long as he resists us we never destroy him. We convert him, we capture
his inner mind, we reshape him.
Big Brother's tool for doing this is the Thought Police, aka the ThinkPol, who are assigned to root out and punish unapproved
thoughts. We see how this works when Winston's neighbor Parsons, an obnoxious Party sycophant, is reported to the Thought Police
by his own child, who heard him commit a thought crime while talking in his sleep.
"It was my little daughter," Parsons tells Winston when asked who it was who denounced him.
"She listened at the keyhole. Heard what I was saying, and nipped off to the patrols the very next day. Pretty smart for a
nipper of seven, eh?"
Who Are These Thought Police?
We don't know a lot about the Thought Police, and some of what we think we know may actually not be true since some of what Winston
learns comes from the Inner Party, and they lie.
What we know is this: The Thought Police are secret police of
Oceania -- the fictional land
of 1984 that probably consists of the UK, the Americas, and parts of Africa -- who use surveillance and informants to monitor the
thoughts of citizens. The Thought Police also use psychological warfare and false-flag operations to entrap free thinkers or nonconformists.
Those who stray from Party orthodoxy are punished but not killed. The Thought Police don't want to kill nonconformists so much
as break them. This happens in Room 101 of the Ministry of Love, where prisoners are re-educated through degradation and torture.
(Funny sidebar: the name Room 101
apparently was inspired by a conference room at the BBC in which Orwell was forced to endure tediously long meetings.)
The Origins of the Thought Police
Orwell didn't create the Thought Police out of thin air. They were inspired to at least some degree by
his experiences in
the Spanish Civil War (1936-1939), a complicated and
confusing affair. What you really need to know is that there were no good guys, and it ended with left-leaning anarchists and Republicans
in Spain crushed by their Communist overlords, which helped the fascists win.
Orwell, an idealistic 33-year-old socialist when the conflict started, supported the anarchists and loyalists fighting for the
left-leaning Second Spanish Republic, which received most of its support from the Soviet Union and Josef Stalin. (That might sound
bad, but keep in mind that the Nazis were on the other side.) Orwell described the atmosphere in Barcelona in December 1936 when
everything seemed to be going well for his side.
The anarchists were still in virtual control of Catalonia and the revolution was still in full swing ... It was the first time
that I had ever been in a town where the working class was in the saddle,
he wrote in Homage to Catalonia.
[E]very wall was scrawled with the hammer and sickle ... every shop and café had an inscription saying that it had been collectivized.
That all changed pretty fast. Stalin, a rather paranoid fellow, was bent on making Republican Spain loyal to him . Factions and
leaders perceived as loyal to his exiled Communist rival, Leon
Trotsky , were liquidated. Loyal Communists found themselves denounced as fascists. Nonconformists and "uncontrollables" were
disappeared.
Orwell never forgot the
purges or the steady stream of lies and propaganda churned out from Communist papers during the conflict. (To be fair, their Nationalist
opponents also used propaganda
and lies .) Stalin's NKVD was not exactly like the Thought Police
-- the NKVD showed less patience with its victims --
but they certainly helped inspire Orwell's secret police.
The Thought Police were not all propaganda and torture, though. They also stem from Orwell's ideas on truth. During his time in
Spain, he saw how power could corrupt truth, and he shared these reflections in his work
George Orwell: My Country Right or Left, 1940-1943 .
...I saw newspaper reports which did not bear any relation to the facts, not even the relationship which is implied in an ordinary
lie. I saw great battles reported where there had been no fighting, and complete silence where hundreds of men had been killed.
I saw troops who had fought bravely denounced as cowards and traitors, and others who had never seen a shot fired hailed as the
heroes of imaginary victories; and I saw newspapers in London retailing these lies and eager intellectuals building emotional
superstructures over events that had never happened.
In short, Orwell's brush with totalitarianism left him
worried that "the very concept of objective truth is fading out of the world."
This scared him. A lot. He actually wrote, "This kind of thing is frightening to me."
Finally, the Thought Police were also inspired by the human struggle for self-honesty and the pressure to conform. "The individual
has always had to struggle to keep from being overwhelmed by the tribe," Rudyard Kipling once observed.
The struggle to remain true to one's self was also felt by Orwell, who
wrote about "the smelly little orthodoxies" that contend for the human soul. Orwell prided himself with a "power of facing unpleasant
facts" -- something of a rarity in humans -- even though it often hurt him in British society.
In a sense, 1984 is largely a book about the human capacity to maintain a grip on the truth in the face of propaganda and power.
It might be tempting to dismiss Orwell's book as a figment of dystopian literature. Unfortunately, that's not as easy as it sounds.
Modern history shows he was onto something.
When the Berlin Wall came down in November 1989, it was revealed that the Stasi, East Germany's secret police, had a full-time
staff of 91,000.
When the Berlin Wall came down in November 1989, it was revealed that
the Stasi , East Germany's secret police, had a full-time staff
of 91,000. That sounds like a lot, and it is, but what's frightening is that the organization had almost double that in informants,
including children. And it wasn't just children reporting on parents;
sometimes
it was the other way around.
Nor did the use of state spies to prosecute thoughtcrimes end with the fall of the Soviet Union. Believe it or not, it's still
happening today. The New York Times recently ran
a report featuring one Peng
Wei, a 21-year-old Chinese chemistry major. He is one of the thousands of "student information officers" China uses to root out professors
who show signs of disloyalty to President Xi Jinping or the Communist Party.
The New Thought Police?
The First Amendment of the US Constitution, fortunately, largely protects Americans from the creepy authoritarian systems found
in 1984 , East Germany, and China; but the rise of "cancel culture" shows the pressure to conform to all sorts of orthodoxies (smelly
or not) remains strong.
The new Thought Police may be less sinister than the ThinkPol in 1984 , but the next generation will have to decide if seeking
conformity of thought or language through public shaming is healthy or suffocating. FEE's Dan Sanchez
recently observed
that many people today feel like they're "walking on eggshells" and live in fear of making a verbal mistake that could draw condemnation.
That's a lot of pressure, especially for people still learning the acceptable boundaries of a new moral code that is constantly
evolving. Most people, if the pressure is sufficient, will eventually say "2+2=5" just to escape punishment. That's exactly what
Winston Smith does at the end of 1984 , after all. Yet Orwell also leaves readers with a glimmer of hope.
"Being in a minority, even a minority of one, did not make you mad," Orwell wrote.
"There was truth and there was untruth, and if you clung to the truth even against the whole world, you were not mad."
In other words, the world may be mad, but that doesn't mean you have to be.
" When the Berlin Wall came down in November 1989, it was revealed that the Stasi, East Germany's secret police, had a full-time
staff of 91,000.
When the Berlin Wall came down in November 1989, it was revealed that
the Stasi , East Germany's secret police, had a full-time staff
of 91,000. That sounds like a lot, and it is, but what's frightening is that the organization had almost double that in
informants,
including children. And it wasn't just children reporting on parents;
sometimes
it was the other way around."
Confidential informants should be illegal.
How many people are employed by the various Federal intelligence agencies, of which there are 17 the last time I heard. Hundreds
of thousands of Federal employees, protected by strong government employee unions.
When this shitshow goes live, it will only take a small team to shut off the water that is necessary to keep the NSA servers
cool in Utah.
Movies like the Matrix actually helped people to question everything. What is real and not. Who is the enemy, and can we be sure. And when Conspiracy theories become fact, people learn. The problem is in later generations who get indoctrinated at school and college to not think, not question.
Rational examination
is forbidden.
"... 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. ..."
"... 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. ..."
"... "..'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. ..."
"... '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. ..."
"... 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)? ..."
"... 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. ..."
"... 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. ..."
"... 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? ..."
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.
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 to 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.
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.
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
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.
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.
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.
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.
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
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
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'.
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.
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
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.
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.
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." ..."
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.
The 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.
1The Treason of the Intellectuals, by Julien Benda, translated by Richard Aldington, was first published in 1928.
This translation is still in print from Norton.
2La 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)
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.
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.
(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.
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.
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. ..."
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."
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.
Image removed
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.
"... 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. ..."
"... 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. ..."
"... 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. ..."
"... 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. ..."
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.
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.
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.
[ ] 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 [ ]
>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.
>>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.
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.
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.
"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.
"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 | [ ]
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.
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?
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.
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.
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.
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.
"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)
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.
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.
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.
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.
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.
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".
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.
(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.
[ ] 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 [ ]
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.
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.
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.
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.
"... 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. ..."
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.
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. ..."
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 .
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.
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.
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.
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.
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....
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.
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.
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).
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!
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'.
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. ..."
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.
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.
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.
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.
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.
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.
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. ..."
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.
Samuel Berrick Saul, Studies in British Overseas Trade, 1870–1914
(Liverpool: Liverpool University Press, 1960).
Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York:
Monthly Review Press, 1966).
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).
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.
Federal Reserve Board of Saint Louis Economic Research, FRED, "Capacity Utilization:
Manufacturing," February 2019 (updated March 27, 2019), http://fred.stlouisfed.org .
This issue is discussed by Charles P. Kindleberger in The World in Depression,
1929–1939 , 40th anniversary ed. (Oakland: University of California Press,
2013).
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).
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.
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.
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.
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
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.
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.
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.
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.
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.
"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."
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.
"... To say "we will never know" is the mantra of a postmodern culture created to keep people running in circles. (Note the commentaries about the Jeffrey Epstein case.) Elusive and allusive indeterminacy characterizes everything in the culture of postmodernity. ..."
"... 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. ..."
"... Money buys souls, and the number of those who have sold theirs is numerous, including those leftists who have been bought by the CIA, as Cord Meyer, the CIA official phrased it so sexually in the 1950s: we need to "court the compatible left." He knew that drawing leftists into the CIA's orbit was the key to efficient propaganda. ..."
"... For so many of the compatible left, those making a lot of money posing as opponents of the ruling elites but taking the money of the super-rich, the JFK assassination and the truth of September 11, 2001 are inconsequential, never to be broached, as if they never happened, except as the authorities say they did. ..."
"... By ignoring these most in-your-face events with their eyes wide shut, a coterie of influential leftists has done the work of Orwell's crime-stop and has effectively succeeded in situating current events in an ahistorical and therefore misleading context that abets U.S. propaganda. ..."
People hunger for these stories, not for the real truth that impacts their lives, but for
the titillation that gives a frisson to their humdrum lives. It is why post-modern detective
stories are so popular, as if never solving the crime is the point.
To say "we will never know" is the mantra of a postmodern culture created to keep people
running in circles. (Note the commentaries about the Jeffrey Epstein case.) Elusive and
allusive indeterminacy characterizes everything in the culture of postmodernity.
Robert Pfaller, a professor at the University of Art and Industrial Design in Linz, Austria
and a founding member of the Viennese psychoanalytic research group "stuzzicandenti,"
put it clearly in a recent interview :
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 propagandists know this; they created it. They are psychologically astute, having hijacked many intelligent but soul-less people of
the right and left to do their handiwork.
Money buys souls, and the number of those who have sold theirs is numerous, including those
leftists who have been bought by the CIA, as Cord Meyer, the CIA official phrased it so
sexually in the 1950s: we need to "court the compatible left." He knew that drawing
leftists into the CIA's orbit was the key to efficient propaganda.
For so many of the compatible left, those making a lot of money posing as opponents of the
ruling elites but taking the money of the super-rich, the JFK assassination and the truth of
September 11, 2001 are inconsequential, never to be broached, as if they never happened, except
as the authorities say they did.
By ignoring these most in-your-face events with their eyes wide shut, a coterie of
influential leftists has done the work of Orwell's crime-stop and has effectively succeeded in
situating current events in an ahistorical and therefore misleading context that abets U.S.
propaganda.
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.
He thinks we have been on the wrong path for one hundred years.
This was the old switcheroo.
Economics, the time line:
Classical economics – observations and deductions from the world of small state,
unregulated capitalism around them
Neoclassical economics – Where did that come from?
Keynesian economics – observations, deductions and fixes for the problems of
neoclassical economics
Neoclassical economics – Why is that back?
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.
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.
"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
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.
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."
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.
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.
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?
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).
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).
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.
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.
"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.
@ 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!
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.
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?
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.
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.
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.
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.
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.
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.
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.
" 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
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.
" .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.
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.
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.
"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?
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.
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.
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.
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.
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
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.
"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.
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.
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?
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.
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 .
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"
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.
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.
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.
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?
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.
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.
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"
"... 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. ..."
>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.
"... 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. ..."
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.
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
"... "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. ..."
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.
"... 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. ..."
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?
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.
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.
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.
"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."
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?
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
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.
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.
" 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.
@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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
"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"
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.
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.
"[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.
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."
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.
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.
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.
"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.
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.
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.
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
"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.
' 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.
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.
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. ..."
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.
"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.
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.
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.
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 .
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.
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.
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.
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.
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.
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?
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?
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.
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.
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.
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.
" 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.
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.
"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.
>. . . 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.
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.
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.
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.
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)
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.
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.
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.
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.
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.
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.
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.
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 )
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?
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)
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.
"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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
" 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.
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.
"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."
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,
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.
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.
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.
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.
"... To borrow Henry Ford's quote: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning." ..."
"... Note to Larry, please follow this logic: Money is Fiat; Fiat is cooperation; Cooperation is fiscal control; and fiscal control is civilization. Nowhere in this chain of thought does debt; interest; austerity; or any of your other little techniques even exist. Those bizarre ideas exist in more primitive thinking about power and slavery and savage exploitation. You know the routine. ..."
Lawrence Summers, according to Lawrence Summers, is a "serious economist." He has just written an op-ed in the
Washington Post in which he seriously explains why Modern Money Theory -- as proposed by "fringe economists," as he calls them
-- is a recipe for disaster. I am going to leave it to the "fringe economists" to rebut Mr. Summers; (I'm confident that professors
Wray, Kelton, Tcherneva, Tymoigne, and Fullwiler can take care of that job quite easily). What I want to consider is something even
more fundamental: How is it that someone who presents himself as a "serious economist" can get away with speaking incoherently while
expecting us -- the everyday citizens of America -- to take what he is saying as true?
Here is Summers' first point about why MMT is a recipe for disaster: "Modern monetary theory holds out the prospect that somehow
by printing money, the government can finance its deficits at zero cost. In fact, in today's economy, the government pays interest
on any new money it creates, which takes the form of its reserves held by banks at the Federal Reserve. Yes, there is outstanding
currency in circulation, but because that can always be deposited in a bank, its quantity is not controlled by the government. Even
money-financed deficits cause the government to incur debt."
Yes, that's very clear and logical, isn't it? The government "prints" money and then pays interest on it? The interest it pays
become the "reserves" in the Federal Reserve system? And what exactly does that have to do with "outstanding currency in circulation"?
And what is it exactly that happens when that "outstanding currency" gets deposited in a bank? And if "money-financed" deficits cause
the government to incur debt, maybe we should think about financing our deficits with something other than money? These are all serious
economic questions.
Summers' incoherent rambling reminds me of another case of incoherent ramblings reported, coincidentally, in the same edition
of the Washington Post: Donald Trump's CPAC speech as evaluated by columnist
Eugene Robinson . Here are a few instances of Trump apparently giving his best impersonation of Lawrence Summers:
"When the wind stops blowing, that's the end of your electric. Let's hurry up. 'Darling -- Darling, is the wind blowing today?
I'd like to watch television, Darling.' No, but it's true . Now Robert Mueller never received a vote, and neither did the person
that appointed him. And as you know, the attorney general says, 'I'm going to recuse myself. I'm going to recuse.' And I said, why
the hell didn't he tell me that before I put him in? How do you recuse yourself?"
Lawrence Summers' second point about the fallacy of MMT goes like this: "Contrary to the claims of modern monetary theorists,
it is not true that governments can simply create new money to pay all liabilities coming due and avoid default. As the experience
of any number of emerging markets demonstrates, past a certain point, this approach leads to hyperinflation. Indeed, in emerging
markets that have practiced modern monetary theory, situations could arise where people could buy two drinks at bars at once to avoid
the hourly price increases. As with any tax, there is a limit to the amount of revenue that can be raised via such an inflation tax.
If this limit is exceeded, hyperinflation will result."
Really, that all must be true, because Summers is a serious economist. Didn't really know there were third world countries that
have been practicing Modern Money Theory for a long time -- but obviously it didn't work out well for them. And, clearly, you can't
tax people more than they possess, so that proves it: hyperinflation!
Donald Trump had more to ramble about as well: "And they showed -- they showed from the White House all the way down There were
people. Nobody has ever seen it. The Capitol down to the Washington Monument -- people. But I saw pictures that there were no people.
Those pictures were taken hours before . They had to walk with high-heels, in many cases. They had to walk all the way down to the
Washington Monument and then back. And I looked, and I made a speech, and I said, before I got on -- I said to the people who were
sitting next to me, 'I've never seen anything like this.'"
Lawrence Summers' third denunciation of MMT is as follows: "Modern monetary theorists typically reason in terms of a closed economy.
But a policy of relying on central bank finance of government deficits, as suggested by modern monetary theorists, would likely result
in a collapsing exchange rate. This would in turn lead to increased inflation, increased long-term interest rates (because of inflation),
risk premiums, capital fleeing the country, and lower real wages as the exchange rate collapsed and the price of imports soared."
But of course! That's all obvious, isn't it? Mr. Summers is just pointing it out. Exchange rates would collapse. It's the most
obvious thing any reader of his argument can easily grasp and understand -- and that means "risk premiums" too (which clearly nobody
wants).
At one point in his CPAC speech Donald Trump says this: "You know I'm totally off-script right now. And this is how I got elected,
by being off-script. True. And if we don't go off-script, our country is in big trouble, folks. Because we have to get it back."
What strikes me is that our country is, indeed, in big trouble -- but it's because the "script" that's being read to us by our
political leaders, commentators, and "serious economists" is nothing more than an incoherent babbling.
"somehow by printing money" is a significant tell -- the stupider the clichéd metaphor, the more incoherent the economics.
Summers in using that cliche is confusing currency with money, which error really ought to embarrass him, but obviously does not.
Summers' Op-Ed is bafflegab of the highest order. It's sad that that's what passes for informed commentary these days, but
I think for monetary issues that's always been the case. Any school that dares to teach monetary economics is defunded, exiled
to 2nd or 3rd tier status.
There has been a lot of pushback on this Op-Ed and Krugman's from unexpected sources (Forbes, Bloomberg). This response is
especially good:
Also, demonstrating what a careerist Krugman is: Paul Krugman to Bernard Lietaer: "Never touch the money system"
https://www.youtube.com/watch?v=Q6nL9elK0EY . (short – 44 sec.)
Krugman has been a member of the lobbyist group for the central bankers, the Group of Thirty (www.group30.org) ever since it
was founded by the Rockefeller Foundation back in 1978.
I read it 2 days ago and felt no compulsion to praise. Harvey includes some Summersian bullshit of his own. For example:
"Just as the President's daughter said days ago, people like to work. Quite right."
Harvey clearly does not live on the beach where the slacker-surfer lifestyle dominates. Likewise, it seems likely that he has
never had to manage human resources in a large organization where more than just a few workers are obviously not liking what they
are doing.
The biggest barrier to full-employment is that not everybody wants to work or at least work very hard. That causes co-worker
resentment, an unproductive workplace climate, and if ignored long enough, it can impair productivity to the extent that everybody
becomes out of work.
So, you don't consider surfing work? Perhaps you're right, but I don't consider lack of enthusiasm for bullshit jobs evidence
that people don't want to work.
The biggest barrier to full-employment is that not everybody wants to work or at least work very hard.
Thank God for those people, it makes my life so much easier. You wouldn't like working in a world where everyone and anyone
could replace you.
I've never worked in an environment where everyone pulled their own weight, but it's also true that we tend to hold others
to a higher standard than we hold ourselves.
wetsuits cost hundreds of dollars, my cheapest new board was an ellington for $400 like 15 years ago (no, it can't really be
that long ago?) My brothers quiver is easily worth $10,000, which is lucky for me because he can't ride them all at once. Not
to say there isn't a large transient population, beaches have bathrooms and showers, but the surfer/slacker may not be a real
thing?
also https://brandongaille.com/22-surfing-industry-statistics-trends/
FTL
#12. In a survey about surfing in the United Kingdom, surfers were disproportionally represented in managerial, professional,
or business-owning employment classes. Nearly 80% of surfers fit into these employment categories, compared to just 54% of the
general population. (Surfers Against Sewage)
#13. Surfers also have a higher level of education attainment compared to the general population. In the UK, 64% of surfers
reported having a higher education, compared to just 27% of the general population. (Surfers Against Sewage)
I thought it was notably good too, and clearly written. Agree or not, what he was saying was not in question, unlike Summers's/
Krugman's slippery stuff.
Larry Summers is on a list of people I've created where if I read or hear something they write or say and agree with it, I
go back and check my premise on said topic.
Have never had to do so with Summers. This entire editorial reeks of Upton Sinclair's famous quote "it's impossible to get
someone to understand something when his paycheck depends on him not understanding it."
John Harvey in Forbes takes Summers, Rogoff, and clown prince Krugman down point by point as well.
Because I have only a single college course in Macro (taken 40 years ago), I am hardly any kind of economist, certainly not
a serious one. But I do have some ability to parse a sentence and figure out the meaning–usually. Thanks for pointing out that
the garble I can make no sense of is just garble. I thought I was just one of the uninitiated and ignorant masses.
I am curious about the audience Summers had in mind when he wrote or uttered this. Who are they?
I think the important information is conveyed to his intended audience via the title – the rest of it is filler, to justify
printing it.
You're not alone in your interpretation of his column. I have enough confidence in my reading comprehension abilities to state
affirmatively that his column is full of Thomas Friedman-like gibberish.
In the UK, we have a what you may call reverse Churchill problem, i.e. Churchill provokes mixed emotions in the UK, but is
revered in the US. In the US, Summers provokes mixed emotions, but is revered in the UK, at least by the usual neo-liberal suspects.
God Forbid. The family blogger has even been floated as a potential successor to Carney, probably a ploy by his vermin acolytes
at the FT.
You will be delighted to hear that Summers' vicar on earth, or at least in the UK, New Labour family blogger Ed Balls was ousted
from the Commons and some of public life by Andrea Jenkins. Jenkins is an Ultra Brexiteer, but History will be kind to her for
sparing the long-suffering UK public from more of Balls. Oh, yes, she will be elevated to the Pantheon for that ouster alone.
Larry Summers, famous for stating that there is a "good economic case" to be made for exporting all our toxic waste to Africa.
Larry Summers, famous for claiming that there aren't more women in STEM fields because "girls are bad at math." Larry Summers,
beloved of neo-liberals everywhere.
Abstract: In OECD countries over the period 1980–2017, countries with lower debt-to-GDP ratios responded to financial distress
with much more expansionary fiscal policy and suffered much less severe aftermaths. Two lines of evidence together suggest
that the relationship between the debt ratio and the policy response is driven partly by problems with sovereign market access,
but even more so by the choices of domestic and international policymakers. First, although there is some relationship between
more direct measures of market access and the fiscal response to distress, incorporating the direct measures attenuates the
link between the debt ratio and the policy response only slightly. Second, contemporaneous accounts of the policymaking process
in episodes of major financial distress show a number of cases where shifts to austerity were driven by problems with market
access, but at least as many where the shifts resulted from policymakers' choices despite an absence of difficulties with market
access. These results point to a twofold message: conducting policy in normal times to maintain fiscal space provides valuable
insurance in the event of financial crises, and domestic and international policymakers should not let debt ratios determine
the response to crises unnecessarily. [emphasis added]
If only one of the authors had been in a position to shape the administration's response in early 2009
Not to mention the article published here on NC back in 2013:
The very thing that the former endowment chiefs had worried about and warned of for so long then came to pass. Amid plunging
global markets, Harvard would lose not only 27 percent of its $37 billion endowment in 2008, but $1.8 billion of the general
operating cash – or 27 percent of some $6 billion invested. Harvard also would pay $500 million to get out of the interest-rate
swaps Summers had entered into, which imploded when rates fell instead of rising. The university would have to issue $1.5 billion
in bonds to shore up its cash position, on top of another $1 billion debt sale. And there were layoffs, pay freezes, and deep,
university-wide budget cuts.
Churchill is revered in America by people whose memory only goes back to 1941 and even then, only plays the highlights.
This American thinks he was a war criminal many times over and in a just world would have died in a prison cell, but I recognize
I'm the minority in my country
I don't believe anyone is completely useless. Al Gore made a follow-up film "An Inconvenient Sequel" which mentioned, inter
alia, the likely failure of COP21 because India needed hundreds of gigawatts of new energy and the banks would dun them 13% on
loans plus 2% for the exchange if they opted for green energy. Gore got onto Summers and a deal was thrashed out that was satisfactory
to India. The country then signed the agreement along with the rest of the world. A man with that kind of clout with the hooligans
in banking as valuable.
I have considered Larry's presence in any political campaign the kiss of death, since Obama first ran for president. Fair warning,
contenders for 2020! You do not want to be seen so much as shaking Larry's hand in public!
MMT is what we do. We cycle like MMT says we should, we tax and sequester like MMT says we should, we devalue once a generation
as MMT says we should. We are MMT, Larry SUmmers is simply faking it to protect the Keynesian form of MMT. The difference between
Keynes and MMT? MMTers have no assumption about smooth trajectories.
This is all the most useless debate among economists I have seen, and I have watched a ton of useless debates in the ten years
of the last 'MMT' cycle. So, let us get on with the next MMT cycle, starting with a period of extraordinary means, followed by
Tax and sequester, then if we are lucky, we get a devaluation, in proper MMT order.
Bingo this guy gets it, we already print off a bunch of money to finance spending, lower interest rates to prop up spending
and decrease debt costs, etc. Except the way we do it now benefits the rich by forcing the rest of us to spend spend spend because
our money does nothing in the savings account. Meantime, the money gets pushed into stocks and bonds which benefits only a certain
class.
This essentially paves the way for MMT, which is just to reallocate who gets the benefit of this money printing from the rich
to the rest of us.
The current system clearly doesn't work, however, and the idea that we can just spend money we make up out of thin air as a
stable plan is nonsense. Just like it was in 2008, and just like it is now with a 23 trilliion national debt.
We want medicare for all, increase the payroll tax and a small income tax, and that will do it. Charge everyone a "premium"
for health coverage in their pay check that is far cheaper than what it is now, or let employers pay for it and get a tax deduction.
No need to print monopoly money for anyone–rich or poor. We are wealthy enough to afford this stuff.
This is really no different from the dust big tobacco kicked up for 30 years to deny cancer, or big oil and climate denialism:
there are a bunch of greedy b******s out there who have been making a killing off of looting, asset stripping and environmental
and social market externalities doing all they can to milk the last dollar from a completely rotten system.
Summers is pitching in to obscure perceptions of the rot that serves him so well.
Stop any significant % of the war machine spending $1T+ per year and spend it at home in the US on crushing the price of housing
and providing a jobs guarantee; you wouldn't be able to run from the economic boom anywhere
Look at what he did to Harvard! Wrecked its endowment by a stupid interest rate swaps bet. Harvard had to get rid of hot breakfasts
and an expansion in Alford as a result.
Disclaimer: I'm no economist as my degree is in electrical engineering.
I prefer to look at MMT as somewhat similar to a company issuing additional common and preferred stock.
The company, in this case is a government.
In this view, common stock issuance (that pays no dividend) is new currency issued and preferred stock issuance = US treasury
certificates that pay interest ( similar to a preferred stock dividend ).
One can argue that "the market" will not penalize a company (or government) when it raises funds via new stock issuance, IF
the proceeds are perceived will be invested wisely.
But if the new stock issuance proceeds are perceived to be used foolishly than one would expect the issuing "company" will
see the value of their preferred and common stock drop (as inflation decreases the value of its currency).
For example, if MMT minded US government issues new monetary "common/preferred stock" (creates new currency and issues treasury
securities) and uses this purchasing power to improve US infrastructure, improve the bloated USA healthcare/financial industries
or educates its people more cost effectively, then the global market could be completely happy with this use of the world's resources.
And the relative value of the US currency might be stable or even increase.
On the other hand, if the MMT minded US government issues more currency/securities and funds a destructive war, one might expect
the existing global holders of the USA's currency and securities to be disappointed and push the relative value down.
Just as a corporation has to have some sort of resources (IP, customer list, inventories, market dominance, new products in
development) that are valued for it to issue stock, a MMT minded government must be viewed as having resources and power.
For example, Haiti is a sovereign nation with its own currency, the Haitian gourde.
But I suspect Haiti will have a very difficult time using MMT (issuing gourde denominated securities) to improve its economy
as it is perceived has having few resources and a prior history of resource squandering corruption (Papa/Baby Doc Duvalier) .
I betcha that Haiti's debts are not in Gourdes but in Euros, Pounds, and Dollars. Most US debit to itself and foreign countries
in our own currency. As Mosler points out, inflation often hurts our trading partners worse than it does us.
I share your analogy 100% and I think this is the right way to present monetary theory (I don't want to say "modern" because
it is more than a century that it works like this already). Although, I would add a twist : the government also distributes dividends
in non monetary terms, by providing, say, free roads, free education or free healthcare ( In the preceding century, there were
actually railroads issuing bonds that paid interest with free tickets !)
Of course, the amount of "paid in kind" dividend is similar whether one holds one dollar in the pocket or a million, so it is
not popular with the wealthy class.
I think it is an important component to point out because one frequently encounters people who frequently complain that a dollar
today is worth less than a dollar yesterday, but forget that between yesterday and today, the government provided services to
the dollar holder regardless of him/her earning an income and paying taxes.
I was going to ask the serious question 'how did Larry Summers get to his esteemed position in the first place ?' Nothing
I've ever read by or about him over the years has indicated that he is anything but a second rate bluffer with a talent for impressing
other bluffers, and yet in many quarters he seems to be held in significant awe.
But mindful of the rules here about 'setting homework' I looked up his career in Wikipedia. It seems he was quite influential
in developmental economics, which no doubt led to his gig in the World Bank. So someone who is considered a Harvard expert in
development economics writes:
Lawrence Summers' second point about the fallacy of MMT goes like this: "Contrary to the claims of modern monetary theorists,
it is not true that governments can simply create new money to pay all liabilities coming due and avoid default. As the experience
of any number of emerging markets demonstrates, past a certain point, this approach leads to hyperinflation. Indeed, in emerging
markets that have practiced modern monetary theory, situations could arise where people could buy two drinks at bars at once
to avoid the hourly price increases. As with any tax, there is a limit to the amount of revenue that can be raised via such
an inflation tax. If this limit is exceeded, hyperinflation will result."
If someone talking in a bar said that, you'd consider him an idiot, or at best, someone who just hasn't read very much. And
yet a Harvard professor can, without embarrassment, write such nonsense. And still be taken seriously. It really is unbelievable.
The argument, shorn of the beebling and handwaving, does make some sense. A Haitian government, say, that tries to issue more
gourdes (HTG) to pay off a US$ (or ECU, or anything foreign) debt is going to find out that no number of gourdes will be enough.
It will have to be US$, and they will only be acquired on the terms the US$ creditor specifies. This has been true ever since
independence, when the whole world insisted that the Haitians buy themselves back from France.
They can used gourdes to mobilize their own efforts and their own resources, and hope to achieve something with those.
"A Haitian government, say, that tries to issue more gourdes (HTG) to pay off a US$"
That is a government creating its own currency, which it then has to exchange for another currency. That is roughly what Germany
was forced to do with after the massive WWI debts were forced on it and it went through hyperinflation. The issue is owing money
in another currency. MMT economists have said again and again that countries should try to avoid, if they can, owing money in
a foreign currency. Obviously, many poor countries have no option. Different than a government issuing bonds in its own currency.
If the Haitian government injected its own currency into the economy, then issued bonds in its own currency as a means of reaching
its central bank's targeted interest rate, and Haiti owed money in its own currency, that would be a good comparison to our situation.
Summers doesn't understand (or pretends not to) the problem of bringing up hyperinflation in places like Peru and Venezuela, or
the problems poor countries face in regards to external debt, versus what the situation is in the US. We are in no way comparable
to those countries or situations. It's absurd, and he knows better, or he should.
In regards to the debt of developing and underdeveloped countries; the big issue is the need for a massive debt write down
(among a host of other things). On that, Éric Toussaint's work is hugely important.
Even in this case -- the point is how much of your own currency can you create? The runaway debt inflation is just getting
the information the hard way. And it is irreversible, unless you can send out assassins to kill your off-shore debt holders.
If you can come up with a good idea of how much you can safely print, why borrow it? If there was just some academic profession
that could come up with useful answers to that question
"Even in this case -- the point is how much of your own currency can you create? "
This has been discussed many times. The broad limit is the productive capacity of the economy. Are we at full employment, are
we at full productive capacity? If the change in the money stock is proportionally larger than the value of the goods and services
created with that money, then you could have inflation. Could, because inflation is more complex than that. If the government
were to create a bunch of money (forget private credit creation for a second since we can't control that much right now), but
that money went to rich people that hoarded it, if it was used by companies to buy up their own shares, if it was used to buy
goods from other countries, if it was put in a tax shelter, among countless other things, that money wouldn't circulate around
the economy and wouldn't cause much inflation. It is possible for the government to create lots of money and for deflation to
set it. Happened after the crash in 1929, that was Friedman's argument as to why the Great Depression happened. He said that even
though the Fed was creating lots of money, the economy was contracting at a greater rate and so in real terms the money supply
was shrinking. Steve Keen responded to that and showed the problems with that argument, but this dynamic is well known. Private
banks creating credit money are a part of this and the crash in 1929 too. After the crash in 2007/2008, it is pretty well established
that while the government did create a lot of money, it didn't create enough and it didn't channel to the parts of the economy
that could have led to a recovery for working people. So, not only how much money is created, but where that money goes in the
economy, whether or not more stuff can be produced, expectations of the future, among other things, will determine inflation.
"If you can come up with a good idea of how much you can safely print, why borrow it? If there was just some academic profession
that could come up with useful answers to that question "
Not trying to be rude, but have you actually read MMT literature? Cause all this stuff is addressed. We don't borrow money
in the way you think. The government, the US government, doesn't need to borrow or tax in order to spend. The particular way we
have chosen to create money was developed decades ago, when we were on the gold standard and had either the value of dollars fixed
to an ounce of gold, or later all currencies fixed to the dollar which could be exchanged in a given amount for gold. We aren't
on gold anymore. We could just have the government spend the money into the economy and use taxes to manage inflation. We don't
have to issue bonds, and Wray I believe has said that states that have control over their own currencies shouldn't issue bonds
in this way anymore. But those bonds come with no risk at all (the government will not default on the bonds unless forced to by
politicians) and they accrue interest, so investors like them, especially when there is uncertainty. But we don't have to issue
bonds AFTER the government spends to manage inflation. My understanding is that the Fed is the buyer of last resort on the secondary
market for bonds, and those that take part in bond auctions are required to actually bid. I don't see why investors would all
of a sudden not like US bonds (it would have to be something with geopolitical implications) but even if they did, the situations
could be dealt with, and again, we don't need to even issue bonds in order to spend anyway. That is a radically different situation
than Haiti owing money in another currency and being massively in debt to other countries in other currencies, with little ability
to export value added goods that have strong terms of trade. Read up on the amount of debt owed by Haiti to France since the Haitian
revolution, and the amount of debt paid but still owed by developing and underdeveloped countries in the post-WWII era. You think
Summers cares? How in the world is that comparable to the US in 2019? It is ridiculous, and Summers knows it.
That is true and it's one of the key factors that can lead to hyperinflation. However, Summers isn't talking about that scenario.
Nothing in his argument mentions foreign currency denominated debt. He's simply claiming that there is some upper limit on deficit
spending beyond which the economy will automatically tip over into hyperinflation. I'd love to see him point out one instance
in history where that's happened without external factors like foreign currency debt playing a role. The closest thing I can think
of is credit bubbles, but those are self-correcting in the long run and can't spiral out of control like hyperinflation.
Wow, I'd no idea of that. Whatever about Samuelson (yes, I suffered through his textbook), Arrow did some very interesting
and incisive work. I guess Summers was, as the Vietnamese would say 'second rice crop'.
"I remember the fall night in 1972, after Kenneth was awarded the Nobel Prize. The other American Nobel Prize winner at that moment,
Paul Samuelson, also my uncle, hosted a party for Kenneth and the Cambridge economics community. I was a sophomore economics major
at MIT, so I was hardly appropriate company for such an august gathering, but I was a little unique in being related to both the
host and the honoree, so I was invited and I participated as best I could in the conversation."
Reminds me a scene in John Carpenter's Christine: "There's no smoking in this garage!" the owner says having gotten up from a card game where all his buddies are sitting around
a table waiting for him to rejoin them, as they all smoke." "Sir, those men over there are smoking. You better them them to stop."
"The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of
us have been, into every corner of our minds."
And this from the author of the article:
"Those prominent economists aren't even so much rejecting MMT as holding tight to their own orthodox views. This is not necessarily
on purpose, but it's extremely difficult for anyone to make a paradigm shift. MMT, aka macroeconomics done properly, is, as Keynes
says, "extremely simple and should be obvious." The problem we have here is the difficulty in escaping from antiquated notions
of macro modeling (Krugman), inflation (Summers), and debt financing (Rogoff)."
I think one of the problems we have in this country and the world is that what we think of as the mainstream educational model
is actually socialization, indoctrination, brainwashing, and or ideological training. And then "jobs" are based on how well you
bought in to that brainwashing.
Various education reformers over the past decades such as Ivan Illich and John Taylor Gatto have mentioned similar critiques
of education in the US and the world in that our educational system does not foster problem solving and critical thinking.
It is my belief that our educational system creates a type of false self in people. In order to get the "right" answers and
do well on tests, etc, you have to compromise your truth, your experience, and your true self and allow yourself to be programmed
in the particular models of your profession.
Maybe in Summers, Hillary, and Trump's case, as they have gotten older that "programming memory/false self" is starting to
become fractured due to cognitive decline, physical issues, stress, fatigue, etc. and as they desperately try to regurgitate their
brainwashing it is coming out in an incoherent mess.
As Summers is only 64, before Yves jumps on me for equating cognitive decline with being older or in one's 60's I think it
is specific to each individual. I just turned 60 and my brain is as sharp as ever, it is my body that is slowing the train down!!
To illustrate my point, a while back I read Anthony Atkinson's book, Inequality: What Can Be Done? He mentions in the book
that Greg Mankiw's Principle of Micro/Macro economics textbooks have very little on the subject of inequality. How could a mainstream
textbook on economics not have a significant portion on inequality?? IMO because in Mankiw's case inequality does not fit his
ideology.
NC has a way of posting articles the same day that can be connected. I think this post can be related to the " Is a Harvard
MBA Bad for You?" post. The MBA becomes brainwashing. Instead of trying to solve a problem MBA'ers and other professions try to
fit the ideology of what they were taught in school to the problem.
To use an analogy: there are usually multiple routes to get from one town to the other. It does not always have to be the "main
road". Sometimes the main road is not always the fastest, shortest, etc. And sometimes by taking the same road all the time, one's
perspective becomes narrow and hinders thinking outside of the box.
To borrow Henry Ford's quote: "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe
there would be a revolution before tomorrow morning."
After decades of allowing ourselves to be brainwashed, I think we are starting to, as J.D. Alt mentions above, "question the
scripts" and are finding them to be a house of cards.
Well you are just a kid. I'm 72 and I think I'm a family blogging genius but it could be just the first symptom. Whatever I'm
going to tell you guys what I think about this stuff until I get politely censored. I never studied economics – but I studied
languages until words were falling out of my ears. And in my lexicon Larry doesn't even have the integrity of an idiot. Sometimes
an idiot is spot on. Larry is a deceptive, self-serving power tripper dedicated to a time gone by and never to return. Too bad.
Thanks Susan! Recently I went to my doctor and he asked me how I was feeling. I said physiological (my term for non-skeletal)
I am 40. Structurally (arthritis, herniated discs, etc. etc.) I feel like I am 70!
===but I studied languages until words were falling out of my ears===
I have always had an intuitive sense for language. Verbal and non verbal language. The words used, tone, inflections, etc.
Andrew Carnegie once said that the older he became the less he paid attention to what people said and the more he paid attention
to their behavior. And I think that is partly true but language is important.
And as you mention language can be used to convey power. Pierre Bourdieu wrote Language and Symbolic Power which I have been
wanting to read. I have also skimmed through some of Michel Foucault's work on discourse analysis.
Also I have read some of Kenneth Burke's work such as A Grammar of Motive's and A Rhetoric of Motives. After reading Burke's
books I became more curious about people's motives behind their language and behavior, and also the idea of rhetoric. IMO Obama
is a master at rhetoric and hence could fool a lot of people, while Trump sucks at it.
If you have not done so already I suggest looking up the Logical Fallacies links on NC's policies page. I believe a lot of
language uses for power are in snowing the public in using arguments or propaganda that contain logical fallacies and heuristics.
I have learned a lot in examining what people say and their arguments from NC.
Yeah, I found what he said to be absolutely absurd. He seems to believe that MMT describes something we might do, as opposed
to explaining how things are, at least in countries like the US. If he can't understand, or pretends to not understand, the difference
between a country owing money in a foreign currency versus issuing bonds in a country's own currency, and the actual role of bonds
in the US system or how money is actually created, then he isn't trying. Cause, whatever we want to say about Summers and all
he represents, he isn't a stupid man. I haven't seen a single critique of MMT from the likes of Krugman or Summers that demonstrates
that they understand the thing they think they are critiquing, or that they understand how things actually work. In response to
MMT, they either respond with some models that they were taught that aren't based in reality, or they just lie about MMT. It is
the economic version of people like Pelosi lying about single payer in the political sphere using ridiculous logic.
That, to me, is frightening, given how much power he has and who he has been hired to give advice to. People like Summers seem
to freak out, really when you look at it, by the fact that we are questioning a fantasy account of how things are. They want to
continue to make policies on the assumption that things are in reality what they say they are in their models, and there is a
huge gap between the assumptions in their models and reality. If he were to acknowledge the insights from MMT about how things
work, many of the excuses those in power have for doing nothing as the country falls apart would crumble, and those doing nothing
are then more directly responsible for the impact of their policies. Once you realize that they are not investing in communities
being neglected by private interests, they aren't investing in things needed to deal with the environmental crisis, they aren't
helping to fund programs to get people healthcare or things like clean water (communities like Flint say hello) because they are
paid by interests to do those things, and for ideological and class reasons, they can no longer pretend that the government "can't
afford" those things. The debate switches to a place they don't want to be in, and they are then more responsible for the decisions
they make. It is no longer about circumstances forcing themselves on these worthless politicians.
I also think some need to observe that Keynes was not a Keynesian in the manner that mainstream use the IS-LM. One is the use
of econometrics and the other is the IS-LM was a – starting point – of observation that needed more fleshing out and not some
"economic law [tm] carried down the mount.
Would additionally point out good old Ralph Musgrave over at TJN proclaiming his long support for MMT with caveats, sadly anyone
with with a functional memory would know key MMT'ers stance with Musgrave does not support those claims.
PS. great start to the day 50kg black German Sheppard just bound up on the bed – all wet – and wanted to share his eagerness
for the day .
Keynes believed in governments planning more investment, especially during down times. This is the blunder modern day "sheep"
don't understand. It isn't deficits that matter, but pushing the investment into usage/production. Deficits like we have now are
nothing more than public debt underwriting private debt expansion via financial engineering. Of course market statists would hate
the government with a bigger % of total investment, as they would lose control of the economic system and bow to the will of another.
Its amazing how dopamine release and other "feel good" consumption based games and circuses so rules the people. All they live
for is the fix. The bourgeois sells it them as "their fix", "their ownership" of said fix while they rake in profits and destroy
the environment. Truly like the Roman end times. No wonder the Christians are so worried. They see themselves replaced like the
old rituals and traditions that proceeded it.
Yves, I'm not a MMT fan, but you're spot-on about Summers. Didn't he lose the Harvard Endowment over $1 Billion with his "sage
management"? He's an idiot.
One would think after the Chicago boys foray with Born and its after math people would question the use of such people as PR
tools – well must be running dry.
Suggest you look into the groundings of MMT and not emotive processes – see link above. Keynes started a process to refute
orthodox thinking, seems some post morte folded parts [tm] into orthodox thinking so they could own – manage that perspective.
Hence when needed mainstream will utilize Keynes to say money is not a problem and then completely reverse azimuth and say Keynes
said money is a problem ..
Can't wait till they take Marx out of context to support some elitist social views ..
I am curious, just want to know. When you say you aren't a fan of MMT, what is the reason? I am interested in good critiques
of its insights, just hard to come by, since it does seem to describe present really pretty well.
As with most "serious economists" he's really an overpaid fraud. The man professes to understand government deficits, yet he
has no idea how the accounting works.
From Warren Mosler
"Several years ago I had a meeting with Senator Tom Daschle and then Asst. Treasury Secretary Lawrence Summers. I had been discussing
these innocent frauds with the Senator, and explaining how they were working against the well being of those who voted for him.
So he set up this meeting with the Asst. Treasury Secretary who was also a former Harvard economics professor and had two uncles
who had won Nobel prizes in economics, to get his response and hopefully confirm what I was saying.
I opened with a question: "Larry, what's wrong with the budget deficit?"
To which he replied: "It takes away savings that could be used for investment".
To which I replied: "No it doesn't, all Treasury securities do is offset operating factors at the Fed. It has nothing to do
with savings and investment".
To which he replied: "Well, I really don't understand reserve accounting so I can't discuss it at that level".
Senator Daschle was looking at all this in disbelief. The Harvard professor of economics Asst. Treasury Secretary Lawrence
Summers didn't understand reserve accounting? Sad but true."
Note to Larry, please follow this logic: Money is Fiat; Fiat is cooperation; Cooperation is fiscal control; and fiscal control
is civilization. Nowhere in this chain of thought does debt; interest; austerity; or any of your other little techniques even
exist. Those bizarre ideas exist in more primitive thinking about power and slavery and savage exploitation. You know the routine.
Maybe, but debt expansion is debt expansion. Globally debt exhaustion looks to have been reached and we are at the top of the
mountain. We are at the first stage, the next stage is what triggers the recession. The last stage, the Minsky moment.
Summers is a cluck, but a useful one in this case. The move from a mixed economy to financial engineering is very addictive
to the "people". Moving back to a mixed economy won't be all giggles for everybody as consumption is naturally cut.
Like all junkies, the detox won't be easy and in some cases, fatal.
Yes, it is what is so frightening about our current breakdown. Debt is the whole system. It was necessary to maintain that
system. But there's no reason why debt can't be put in what banksters call a "bad bank" and just let it run off the books. It
can all be done in some resolution that forgives some and allows some to linger without interfering in the economy anymore. There
will always be private debt, so caveat friends and neighbors. But there's no reason to suffer an impossible debt burden as a sovereign
nation. And from here on in we should not buy anything unless it can be purchased in US dollars/treasuries. The debt to ourselves
doesn't matter. The thing that matters is how we spend our money, do we waste time on bad projects or do we create a more valuable
civilization with good ones? Debt is just a monkeywrench, useful to gamblers and middlemen. We could configure a completely different
economics with very little pain if we put our minds to it.
Another good link to Larry Summers, Serious Economist. I remembered this passage from Herman Daly's book, and the magic of
DuckDuckGo found this. Long but worth the few minutes. NB, I don't know anything about this blogger: https://sallywengrover.wordpress.com/tag/herman-daly/
Not much love for Larry Summers here – and rightly so. I remember reading a conversation that he was in where he explained
how things worked. I'll see if I can summarize it-
Larry Summers is a serious person.
Important people listen to serious people.
This is how serious people express power – by having important people listen to them.
Golden rule is that serious people never criticize each other in public – ever.
I'm sure that people here can pick out the flaw in this arrangement – as in Garbage In, Garbage Out as far as important people
are concerned and the information & opinions that they receive.
Seriously, what would you expect from a person who writes this at the first paragraph for
his biography (emphasis mine) :
"Dr. Summers' tenure at the U.S. Treasury coincided with the longest period of sustained economic growth in U.S. history. He is
the only Treasury Secretary in the last half century to have left office with the national budget in surplus . Dr. Summers has
played a key role in addressing every major financial crisis for the last two decades."
Change "addressing" by "participating in the genesis of", and you are quite close to the truth
Mmmm, and all that treasury surplus was accrued by Larry's Austerity which exponentiated the private debt and turned into the
2008 tsunami. Heck of a job, Larry.
Larry Summers is useful as a canary. The day Obama appointed him as an adviser (before his inauguration) was the day I understood
Obama would do diddly squat about fixing the root causes of the Great Recession.
The part I don't understand is how he gained his prominence, other than literal nepotism. You'd think the fact he lost Harvard's
endowment a cool billion would have killed his career given how prominent Harvard grads are in the US' power structure.
We were flying blind during globalisation and policymakers didn't understand the monetary system.
The FT revealed the Chinese were undertaking a major study of the West.
I think they must have worked out things are fundamentally wrong as they have made all the classic mistakes everyone else has
made since 2008.
They have already worked out inflated asset prices and the private debt-to-GDP ratio are indicators of coming financial crises
and these were the indicators that showed 1929 and 2008 were coming.
By the time they understood what was going on the Minsky Moment was dead ahead, and they could no longer use the debt fuelled
growth model they had used before.
When US policymakers understand the monetary system they may be able to make some valid comments.
"There ain't no such thing as a free lunch" (alternatively, "There is no such thing as a free lunch" or other variants)
is a popular adage communicating the idea that it is impossible to get something for nothing.
The acronyms TANSTAAFL, TINSTAAFL, and TNSTAAFL, are also used. Uses of the phrase dating back to the 1930s and 1940s have
been found, but the phrase's first appearance is unknown.[1]
The "free lunch" in the saying refers to the nineteenth-century practice in American bars of offering a "free lunch" in
order to entice drinking customers.
The phrase and the acronym are central to Robert Heinlein's 1966 science-fiction novel The Moon Is a Harsh Mistress, which
helped popularize it.[2][3]
The free-market economist Milton Friedman also popularized the phrase[1] by using it as the title of a 1975 book,[4] and
it is used in economics literature to describe opportunity cost.[5]
Campbell McConnell writes that the idea is "at the core of economics".
[I was a bigger fan of Robert Heinlein's than I was of Milton Friedman and even then it was "Stranger in a Strange Land" and
"The Unpleasant Profession of Jonathan Hoag" rather than later works that appealed to me.]
Just as an aside. It is worth remembering where the current globalization came from
historically.
It started with the 1970s inflation, (caused partly by the oil crisis) and the coincident
abuse of monopoly power by a number of unions (please those on the outer left don't try to
pretend it didn't happen, it did).
Uncle Milton came along with plausible sounding solutions (monetarism and increasing
foreign competition). Increasing foreign competition worked for a while – until the
mergers starting being international and industry concentration increased on an international
scale (and so was harder to combat).
Uncle Milton has since been proved wrong about almost everything. His one big idea that
never got tried (negative income tax – which could implemented more simply and
effectively as a universal basic income) ironically is the only one I think was good.
After more than a decade at the helm of one of Harvard's largest courses, Economics
Professor N. Gregory Mankiw announced in an email to graduate students Monday that he will step
down from teaching Economics 10: "Principles of Economics" at the end of this semester.
The use of mathematics to model human reality; one of the more bizarre offshoots
that followed the mathematization of economic thought in the 20th century.
Game theory focuses on strategies used by competing actors to make rational decisions.
What should I do given my opponent may subsequently decide A, B, C, or D? It was pioneered by
John von Neumann, John Nash, and Oskar Morgenstern. The assumption that social life is a game
of logic between conniving actors is foundational to this view of economics. But do we really
behave in such a "me versus you" manner?
Game Theory's rational individualism closely resonates with neoliberal capitalism because
it reconceptualizes everyone as mini corporations who are totally selfish.
Individuals compete rather than share; seek to outsmart the next person rather than
empathize. Proponents of the approach often use the "as if" defense. The model might not
perfectly match reality, but we can approximate how someone behaves in the real world by
assuming they act "as if" they're Nashian plotters.
It's the normative assumptions underlying this "as if" that are problematic that at bottom
we're all greedy and impatient bankers. One could just as well argue that people act "as if"
they're trusting and altruistic socialists, but Game Theory won't have any of that.
This is a classic, textbook example of financial astrology... You probably should read it in full to appreciate the depth of junk
science here. But this is financial casino my friends, and they try to entice you with naked girls and drinks...
A gain in January has foretold an annual gain 87 percent of the time with only 9 major errors going back to 1950, according
to the Stock Trader's Almanac.
The S&P 500 was up 7.9 percent in January, its best performance for the first month of the year since 1987.
Some market pros are skeptical of the January barometer, but Jeff Hirsch, editor-in-chief of the Stock Trader's Almanac, says
it makes sense because that's when Wall Street expectations are reset for the year.
Stocks had their best January gains in more than 30 years, and that should mean 2019 will be a pretty good year for the
market.
That's what the widely watched January barometer tells you - as goes January, so goes the year. According to Stock Trader's Almanac,
going back to 1950, that metric of January's performance predicting the year has worked 87 percent of the time with only nine major
errors, through 2017. In the years January was positive, going back to 1945, the market ended higher 83 percent of the time, according
to CFRA.
But the indicator also signaled a positive year last year, and the market suffered an unusual late-year sell-off, wiping out all
of the gains. The S&P 500 ended 2018 down 6.6 percent, despite rising 5.6 percent in January. But the S&P also defied history with
a terrible December decline of 9.6 percent , the biggest loss for the final month of the year since 1931.
This January, the S&P 500 was up 7.9 percent. The best January performance since 1987, when it rose 13.2 percent. It was its best
overall month since October 2015.
Some market pros worry the sharp snapback in stocks since the late December low means January could be stealing the gains from the
rest of the year. Some also believe there could be another test at lower levels in the not too distant future. Yet, Wall Street forecasters
have a median target of 2,950 for the S&P 500 at year end, a big leap from the current 2,704.
"I'm still struck between the contrast of a year ago and now," said James Paulsen, chief investment strategist at Leuthhold Group.
"We came in last year with nothing but optimism. At this point last year, we had synchronized global growth, confidence had spiked
to record post-war highs, and everyone knew we had this steroid-induced earnings boost coming. The thought was how could stocks lose,
and of course they did."
The market has sprung back from December's low, with the S&P gaining 15 percent since Dec. 26.
"This year, we came in with nothing but bad news - the economy was slowing down. ... The rest of the world is slowing. We have trade
wars. We have the shutdown, and analysts are revising earnings lower," Paulsen added. "We're worried about a recession and a bear
market. It's strikingly different, and yet it's kind of like how can stocks win, but they are and I think they will."
Strategists also point to the differences in the way the market traded in each January. This January has been full of volatile swings,
with ultimately larger gains than losses. Last year, the market was at the end of a long smooth glide path higher.
Last year didn't work
Stocks did well through most of January 2018, but by the end of the month, a correction started. "On January 30, in 2018, it was
the first 1 percent decline in 112 days. That was basically the start of the fall off the cliff. In terms of percent gains, this
January is similar to last, but in terms of where we've come from, it's very different. That was one of the calmest advances in history,"
said Frank Cappelleri, executive director at Instinet.
Cappelleri said it's important to put this year's market move in context, when considering the January barometer. "You have one of
the biggest snapbacks after a very bad December, so the odds were in the market's favor to do better than that. I think maybe you
have to look where we are now. You're up 15, 20 percent from the low depending on where you look. Are we going to go up that much
more for the rest of the year?" he said.
Paulsen sees the gains continuing, after a possible pause. "I think it's going to continue to be a fairly good year, and I think
we probably go up and get close to the highs or 3,000 on the S&P, and I'm not expecting hardly anything on the economy, and earnings
are going to be weak, if not flat or maybe down," Paulsen said.
He said the slowing economy and a potential U.S.-China trade deal could push the dollar down and that would be a positive for stocks.
At the same time, the Fed has paused in interest rate hikes and may even stop its balance sheet unwind.
Jeff Hirsch, editor-in-chief of the Stock Trader's Almanac, said there's another set of statistics that are in the market's favor
for a positive 2019, though they also failed last year. He said for the years when the S&P 500 was positive in the first five days
of the year, plus gained during the Santa rally period, and was up for the month of January, the S&P 500 had a positive year 27 out
of 30 times. It also had an average gain of 17.1 percent in those years, since 1950.
Nick 29 minutes ago
Job growth is solid. Unemployment remains near all time lows even while labor force participation increases. Wage growth outpaced
inflation last year. The economy is humming right along...its just the liberal media wants to bombard us with articles claiming
the Trump recession is imminent.
I'm surprised they actually published an article sayings its going to be a good year.
"... By Enrico Sergio Levrero, Associate Professor of Economics, Roma Tre University. Originally published at the Institute for New Economic Thinking website ..."
In contrast to Keynes's emphasis on the monetary nature of interest rates, the modern theory
of central banking focuses on a benchmark rate for monetary policy that reflect "fundamental
forces" supposedly unaffected by monetary factors. Its theoretical underpinning stems from
Wicksell's analysis of the relationship between market and natural interest rates as restated
in the so-called New Keynesian theory which combines real-business-cycle general equilibrium
models with imperfect competition and nominal rigidities.
Here, at least in the short run, discrepancies between the actual and natural interest rate
are deemed to lead to a rate of price inflation different from the desired and expected one. If
some kind of price rigidity is present, the interest rate difference will also lead to a
discrepancy between actual and potential output. The resulting rule for monetary policy is that
authorities should credibly commit themselves to following the natural rate of interest (NRI).
They must therefore forecast this "neutral" rate, namely, the real rate that, if maintained,
would keep the economy at its production potential over time.
Despite the mainstream consensus on this approach,
determining the "equilibrium interest rate" is a murky business . A first problem is that,
while the "benchmark rate" ought to be based on sound theoretical foundations that allow a
meaningful interpretation of its behaviour, all sorts of definitions of it appear in the
literature when assuming real shocks away from balanced growth. They reflect the theory's
reliance on notions of perfect or imperfect competition in commodities and factor markets as
well as the possible influence of transitory or only permanent components of the natural
rate.
The result is usually a view in which we have a "short-run" natural rate of interest that
varies (usually pro-cyclically) during the cycle, resembling Dennis Robertson's old
prescription that monetary policies should follow temporary shifts of the demand for and supply
of loanable funds, along with a long – run natural rate that corresponds to
potential output for a given degree of market imperfections when both causal shocks
and lags of adjustment are averaged out.
The two approaches lead to divergent monetary policies. If you try to conduct policy by
reference to the long run notion of the natural rate determined by the steady state IS
curve when all the lags and random shocks disappear, you will not favour sharp changes in the
short-term interest rate during the cycle. By contrast, if you rely on a "short run" natural
rate that could fall during a crisis, you would see a slow decrease in the policy rates as too
little to stimulate economic activity.
Compounding these difficulties is the variability induced by the estimation methods of the
natural rate of interest. The benchmark rate of the monetary policy should in fact be readily
computable from observable economic data, but its counterfactual nature inevitably leads to a
variety of estimation methods with results that recall the early criticism by Myrdal and
Lindahl that Wicksell's natural rate is not an operational notion in the sense that it was
incapable of practical application. With each the econometric method raising special problems
of its own, the resulting variety and uncertainty of the value of the natural rate cannot but
pose significant challenges for practical monetary policy.
The divergent estimates of the NRI advanced during the recent 2008 crisis are a case in
point. The estimates vary hugely, with model-based and filtering methods producing higher
volatility than semi-structural approaches or peak-to-peak averages. Some estimates of the NRI
provided negative values on average and not only as a possible (short-lived) effect of
temporary shocks, whereas others suggested that the NRI remained close to but higher than zero.
These differences imply drastically different evaluations of the stance of monetary policy as
policymakers weighed whether it made sense to drive the nominal policy rates towards their zero
lower bound.
But the limits of the NRI as a benchmark for monetary policy are not only statistical or
related to the difficulty of distinguishing among the kind and persistency of economic shocks.
They pertain to the theory itself, specifically to model specification and the alleged
independence of the average or normal interest rate from monetary policy.
Firstly, New-Classical and New-Keynesian models focus on the volatility of output, that is,
its variance, on the assumption that the output gap will be closed by market forces. This hides
the fact that potential output may fall during the crisis due to the destruction of productive
capacity stemming from a fall in effective demand. This would break down the distinction
between short-lived demand shocks on the one hand and supply shocks on the other, thus
complicating any estimate of the NRI and raising questions about its theoretical relevance.
Secondly, in both the theoretical models and estimate procedures, an inverse relation
between the interest rates and components of aggregate demand is postulated as well as between
the former and the price level, although such relations are acknowledged as being weak and
doubtful. In practice, output elasticity with respect to interest rates appears low and
asymmetric, and investments in fixed capital are determined mainly by expected changes in
aggregate demand. Moreover, the Gibson paradox and its modern restatement in the price puzzle
suggest that a direct relation between prices and the interest rate may exist due to prices
adjusting to the monetary costs of production which include the pure remuneration of capital,
that is interest costs. All this implies that, if, after a fall in the interest rate, we
observe a fall in prices (or una tantum a lower rate of inflation), this would not
signal that the NRI should be lower. Nor should a low elasticity of output to the interest rate
be interpreted as a reliable sign that the natural rate of interest has fallen.
But a more fundamental criticism can be advanced concerning the sheer existence of a natural
rate of interest determined by "productivity and thrift" independent of the monetary policy.
New-Keynesian models restate the loanable funds theory, viewing the market rate of interest as
determined by the supply of and demand for credit, with the natural rate of interest set by the
supply of and demand for savings when output is at its potential level. This theory was already
criticised by Keynes, who questioned whether investments adjust to savings through changes in
interest rates. On the grounds of the principle of effective demand, Keynes argued that savings
equalise investments by means of income changes and considered the notion of the NRI as not
useful. He instead viewed the rate of interest as a monetary phenomenon to which capital
profitability would adjust. He also argued that credit is not an alternative to savings but the
necessary preparation for them and that until potential output is achieved, investments are
financed by the finance process and income changes rather than by any previous saving
supply.
This criticism of Keynes and his idea that there is no mechanical tendency to full
employment was strengthened later by the Cambridge capital controversy which showed that it was
impossible to derive a decreasing demand curve for investments with regard to the interest rate
-- a decreasing curve which is at the root of the neoclassical mechanism guaranteeing the
tendency of actual output toward potential output. Unless a single commodity economy is
assumed, a surrogate production function cannot in fact be derived due to the phenomena of
re-switching and reverse capital deepening. Moreover, in the market for savings and investment,
there may be multiple equilibria, the capital-labour ratio is not necessarily higher for a
lower interest rate, and changes in the rate of interest out of equilibrium may be so strong
that they question the validity of the theory.
If we put aside the loanable funds theory, due prominence can be given to Keynes's idea that
the rate of interest is a highly conventional phenomenon. It opens the way for levels of rates
of interest that are shaped by monetary authorities that affect income distribution, and this
possibility casts a different light on the purposes and channels of transmission of the
monetary policies. Of course, monetary policy is not advanced in a vacuum but takes into
account the course of money wages and, more generally, the economic and financial conditions of
the country involved. Yet, the benchmark rate to which monetary authorities anchor their
decisions does not appear to reflect "fundamental forces" acting independently of monetary
factors, and therefore those decisions cannot be conceived simply as a technical device used to
find out the "true" natural interest rate.
Summing up, estimates of the NRI are misleading both on empirical and theoretical grounds
and monetary policy is not neutral, primarily because it may influence the division of the
surplus product among different classes and social groups. Quite paradoxically, however, the
tricky nature of those estimates, with their consequent downward revision during the crisis due
to their sensitivity to current economic conditions, has been used by Central Banks to pursue a
regime of low interest rates that was required by the macroeconomic situation of industrialized
countries after the 2008 crisis. The cost of doing this has been to hide the asymmetric effects
and delay in the transmission of monetary policy, since the scant reactivity of output to the
fall in interest rates has been explained precisely by appeals to an alleged fall in the
natural rate of interest even to negative values due to reaching the zero-lower bound for
policy nominal interest rates. This makes a murky business even more opaque.
"A first problem is that, while the "benchmark rate" ought to be based on sound
theoretical foundations that allow a meaningful interpretation of its behaviour, all sorts of
definitions of it appear in the literature when assuming real shocks away from balanced
growth."
Has anyone ever shown that in fact the diff eqs being used actually are insensitive to
small perturbations? That the solutions are actually numerically stable? If they're not --
and in general, this is something that has to be shown for the constrained parameters -- the
rest is a waste.
If it's not a concave system, but the solutions are saddle points, for example given the
number of parameters and the equations steady state solutions don't require "shocks" at all
to be unstable but are inherently unstable. And most systems are unstable
All systems with non-linear feedback (eg: Fear and Greed), are Chaotic, not Unstable. A
system with Unstable but not Chaotic behavior falls to a predictable state.
It is arguable that Greed is feed-forward, possibly in all cases. Fear is both, feed
forward and feedback. For example fear of the unknown is feed forward, fear of loss generally
feedback.
A classic fear which is both, feed forward and feedback, is fear of unwanted pregnancy. It
is well know that fears of unwanted pregnancy are always handled rationally. /s.
Chaotic would mean no discernible pattern. Unstable would mean it has patterns that lurch
from some state to some other state, but which are discernible.
I'm very rusty, but I do believe that money, or capital, is itself a good, so it follows
that an interest rate is little more than the price of money. And which rate is the natural
rate, the inter bank rate, mortgage rates, brokers call, maybe the whatever a payday lender
charges? All those rates just reflect different markets, or am I really wrong?
This article is implying that there is no natural rate of interest.
That would imply that money is not subject to the laws of supply and demand so is not a
good.
Accepting that would kick away one of the pillars of Liberalism and neoclassical
economics. It would also reveal that money and capital are not equivalent, except to a
banker.
He gets close to saying that the idea is sheer ideology, serving a normalizing function
kind of like the "state of nature" in classical political theory, e.g. Rousseau or Locke,
that would be used to justify a set of political institutions. But he won't allow himself a
paragraph to step away from econospeak long enough for the point to become fully salient.
Amen. The fundamental flaw is the concept of perpetual growth. Lots of fancy words for a
pseudo science. At least meteorological predictions get judged, not fudged.
To anyone who thinks that the Republican Party knows a thing about economics or business:
you're delusional. Republicans know a tremendous amount about greed, theft and selfishness.
Arthur Laffer is the idiotic tax-cut patron saint economist of the Grand Old Phonies who
helped Ronnie Reagan raid the US Treasury for the uber-wealthy.
George W Bush re-implemented Laffer-economics and drove the nation into a Depression.
Trump and the GOP are in the process of driving America over another bankrupting 0.1%
welfare tax-cut cliff -- remember it took Bush-Cheney a good seven years to do it.
And guess who recently helped drive Kansas bankrupt with tax cuts for the rich ?
GOP tax-cut saint Arthur Laffer. He helped former Kansas Gov. Sam Brownback (R) pass tax
cuts through the Kansas legislature. In August 2012, Laffer promised a crowd at a small
business forum in Kansas that the cuts would produce "enormous prosperity," adding that
they'll "make a big difference in a decade." They did make a big difference.
Kansas employment and the Kansas state economy both grew slower than the national rates,
and the drastic decline in tax revenue coming into the state's treasury blew a gigantic hole
in its budget.
Kansas reversed the destructive tax cuts in order save Kansas. The lesson is plain and
simple and happens over and over again. Republicans are economic wrecking balls hellbent on
destroying society for corrupt billionaires. D to go forward. R for nationally-assisted
suicide.
"... By Michal Bauer, Associate Professor of Economics, CERGE-EI and Charles University; Jana Cahlíková, Senior Research Fellow, Max Planck Institute for Tax Law and Public Finance; Dagmara Celik Katreniak, Assistant Professor, National Research University Higher School of Economics, Moscow; Julie Chytilová, Associate Professor of Economics, Charles University; Researcher, CERGE-EI; Lubomír Cingl, Assistant Professor, University of Economics, Prague; and Tomáš Želinský, Associate Professor, Technical University of Košice. Originally published at VoxEU ..."
"... The economic consensus is that groups behave in a more self-regarding way than individuals, which affects their members' decision-making. This column describes new evidence from experiments in Slovakia and Uganda that supports an alternative hypothesis from social psychology that simply being a member of a group makes us more anti-social to outsiders. Within-group cohesion in organisations may also have a dark side, fostering hostility to outsiders. ..."
Joining
a Group Makes Us Nastier to Outsiders Posted on January
5, 2019 by Yves
SmithBy Michal Bauer, Associate Professor of Economics, CERGE-EI and Charles
University; Jana Cahlíková, Senior Research Fellow, Max Planck Institute for Tax Law
and Public Finance; Dagmara Celik Katreniak, Assistant Professor, National Research University
Higher School of Economics, Moscow; Julie Chytilová, Associate Professor of Economics,
Charles University; Researcher, CERGE-EI; Lubomír Cingl, Assistant Professor, University
of Economics, Prague; and Tomáš Želinský, Associate Professor, Technical
University of Košice. Originally published at VoxEU
The economic consensus is that groups behave in a more self-regarding way than
individuals, which affects their members' decision-making. This column describes new evidence
from experiments in Slovakia and Uganda that supports an alternative hypothesis from social
psychology that simply being a member of a group makes us more anti-social to outsiders.
Within-group cohesion in organisations may also have a dark side, fostering hostility to
outsiders.
Plato wrote about the limits of democracy, as did the founding fathers of the American
constitution. More recently, social scientists have also worried about the dynamics of group
decision-making, speculating that being part of a group may increase the motivation to harm
outsiders and destroy social welfare. The causal effect of group membership on decision-making
has been prominent on the research agenda in behavioural economics in the past 20 years, partly
because so many political, military, and business decisions are made by groups rather than
individuals.
Across many laboratory experiments, a pattern has emerged. Group decisions are less
pro-social and cooperative than individual decisions. Groups are less willing to sacrifice
their resources to increase social welfare, or to achieve a fair allocation. The consensus
interpretation is that groups behave in a more self-regarding way. They are more likely to
maximise a group payoff, and disregard the welfare of others (Charness and Sutter 2012, Kugler
et al. 2012).
It is usually assumed that group members communicate among themselves, helping them to
recognise a profit-maximising strategy. This interpretation suggests that group decisions can
be modelled as more rational and less 'behavioural' than individual decisions, an important
implication for economic theory.
Why Are Groups Less Cooperative Than Individuals?
Our recent paper (Bauer et al. 2018) uses an alternative explanation for the difference in
cooperative behaviour of groups, compared to individuals. Social psychologists have a
long-standing hypothesis that simply being a member of a group may inspire aggressively
competitive anti-social behaviour (Durlauf 1999, Hewstone et al. 2002, Sambanis et al.
2012).
This hypothesis implies that groups do not cooperate less because they are self-regarding,
but because they are more inclined to cause harm to outsiders – even at a cost to
themselves. We define anti-social behaviour as non-strategic destructive behaviour that is
costly for the decision maker, reduces welfare of others, and is not a response to inequality
or a hostile behaviour of a counterpart. Experiments in previous research, including the
Prisoners' Dilemma game, Trust game, and Dictator game, were designed to measure the positive
side of human social behaviour. They do not, however, distinguish whether a lack of willingness
to cooperate or share has been caused by greater selfishness, or by this anti-social
behaviour.
These distinctions matter if one wants to predict willingness to engage in self-destructive
conflict:
Being anti-social is very different from being self-regarding. Economic agents
motivated purely by self-interest will destroy the resources of others only when they stand to
gain. But there is much more scope for harming others if they also derive utility from relative
status or feel pleasure from beating an opponent. It is also important to understand whether
simply being placed into a group creates an 'us versus them' psychology that influences
behaviour of group members, or whether the behavioural difference is an outcome of
deliberation. If the mere fact of deciding in a group makes an individual more willing to cause
harm, a broad range of situations may create an increased tendency to behave anti-socially.
Measuring Anti-Social Behaviour
Our experiments were conducted among large and diverse samples of adolescents in two very
different settings – Uganda (N=1,679) and Slovakia (N=630) – using a comparable
design. We compare the (anti-)social behaviour of individuals, and the team decision of groups
made up of three randomly selected individuals.
The experiment is designed to distinguish self-regarding from anti-social motivations, and
also to decompose the overall group effect into the effect of group decision-making, and the
effect of the group context on individual behaviour.
To do so, we complement the prisoners' dilemma game, a standard experiment to measure
willingness to cooperate, with the joy of destruction game, an experiment that uncovers
anti-social behaviour.
Also, to separate the effects of group context on individual behaviour and the effect of
group deliberation and decision-making, we elicit individual choices made in isolation,
preferences of individual group members for group decisions before a group deliberation, and
the ultimate group decisions.
Groups Behave More Anti-Socially Than Individual Decision-Makers
Groups are less likely than individuals to cooperate in the prisoners' dilemma game, in line
with findings in previous experiments. Importantly, however, they are also more likely to harm
opponents in the joy of destruction game, in which the dominant strategy for self-regarding
agents is not to engage in destructive behaviour. This is primarily due to a greater prevalence
of anti-social behaviour among groups.
The stronger anti-social behaviour of groups as compared to individuals cannot be explained
by differences in beliefs, reciprocal motives, inequality aversion or diffusion of individual
responsibility. Groups are more willing than individuals to pay to cause harm even when they
respond to a kind act from an experimental counterpart, and when destroying resources increases
inequality.
Furthermore, anti-social behaviour in a group setting is elevated simultaneously with
willingness to enter competition with outsiders, as measured in the competitiveness game in
Uganda (Niederle and Vesterlund 2007). Together, these findings indicate that individuals in
groups are more aggressively competitive.
Decomposing the overall group effects shows that both the group context as well as
deliberation among group members matter. Group context makes individuals more willing to engage
in anti-social behaviour and to compete, whereas the group decision-making slightly increases
the prevalence of self-regarding choices.
All these effects are strikingly similar across the Slovak (Figure 1) and Ugandan (Figure 2)
samples, suggesting that the preference for competing aggressively when deciding in a group is
a deeply rooted response.
Figure 1 Slovakia: The effect of group decision-making on choices in the joy of destruction
game and the prisoners' dilemma game
Source : Bauer et al. (2018).
Figure 2 Uganda: The effect of group decision-making on choices in the joy of destruction
game and the prisoners' dilemma game
Source : Bauer et al. (2018).
Concluding Remarks
Earlier research on identity has shown that creating coherent teams fosters efficiency in
military and business-oriented organisations (Akerlof and Kranton 2005, Goette et al. 2006,
Costa and Kahn 2001), by making in-group cooperation easier. Our results suggest that this may
come at the expense of aggressive competitiveness against members of other groups.
This may help to explain the ubiquity of inter-group violence (Blattman and Miguel 2014) or
mutually destructive competition within and across firms. It also strengthens the case for
policies to counteract narrow group identities.
Competitiveness also has an import role when determining individual career choices.
Economists are attempting to identify factors which may foster competitiveness in individuals
(Gneezy et al. 2009, Andersen et al. 2013, Almås et al. 2015) and design institutions that
help to close gender gaps in willingness to compete (Sutter et al. 2016, Niederle et al. 2013,
Balafoutas and Sutter 2012). Our findings show that the factor that increases willingness to
enter competitive environment also raises anti-social behaviour, and thus suggests there is a
potential trade-off. Competitive environments may lead to efficiency gains in some settings,
but also to more socially harmful behaviour.
When I want good advice on brickwork, I would ask for advice from a bricklayer. I would
certainly not go looking for advice on bricks from an upholsterer. In the same vein, if I was
looking for solid information on a sociological issue, I would not necessarily go believing
people with a background in economics or tax law & finance as is the case here. The
general point of this article seems to be either the justification of the atomization of
individuals or an anti-democratic diatribe showing how certain individuals are better
qualified than others.
They may try to use the prisoners' dilemma game or the the joy of destruction game as proof
of their thoughts but sociologists have shown the falsehood of applying western standard
games to other countries when these standards were found to be entirely based in ( http://hci.ucsd.edu/102b/readings/WeirdestPeople.pdf
) Western, Educated, Industrialized, Rich, and Democratic (WEIRD) people.
Humans are social animals which is why they do not generally cope well when put alone. That
is why solitary confinement is regarded as a punishment. Groups may be more likely to
maximize a group payoff and disregard the welfare of others but that is a flexible concept
and not set in cement. In fact, it is scalable. As an example, take a look at Afghanistan
which is normally full of infighting. There, they say me against my brother, my brother and I
against our cousin, my brother and I and our cousin against the outsider. See? These groups
are scalable.
They do mention cohesive groups with the military but miss the significance. Military
organization is based on the squad which is the basic building block and as akin to a hunting
band. Back in Roman times it was called a Contubernium which shows how long this basic
organizational principle has been working. Next up is the company which is an analogue to an
extended family. Above that is the battalion which is an analogue to the maximum number of
people that you can know i.e. a tribe. The Romans had the Cohort here and the British had the
Regiment. All these organizations are built on the foundations of basic human psychology and
cannot be ignored or refuted as the authors do here.
Trouble is introduced when sociopathic individuals gain control of the organizational
structures that you describe. My experience is that most people are reasonable, but can be
easily manipulated to perform questionable tasks. It is a question of leadership and social
goals.
During a crisis, there are individuals dedicated to turning towards the direction of
crisis, while the majority can be seen running in the opposite direction due to raw
self-preservation. Fire, police, medical, and military services are just some examples.
Economists in a neoliberal era are the last people to turn to for answers to social ills.
Their worldview and sentiment created the problems in the first place and perpetuate the
continuance of suffering on many levels.
Gambling and speculating must be relegated to a much lower level of social acceptance then
what is tolerated today. It truly is madness.
:-) If it was news you wanted, would you go to a reporter or anchor (Rachel Maddow comes
to mind) first or would you go instead to a financial analyst and economist that has started
her own blog with a name that might even be considered racy by some? (thinking NC here).
:-)
Couldn't resist, though I agree with your conclusions. Whether it's the substance of an
argument first and source credibility second or visa-versa would seem to depend on context at
the very least.
Amen, Rev! On the provenance of horsessh!t, tho, as in that post about NYC sidewalks, who
better than an economist to ask? This economist's assumptions about human nature just
reek.
In social psychology, Baiting Crowd and Bystander Apathy research looked into this, too.
Leon Festinger et al described Deindividuaion beginning in the mid 50s. Robert Wicklund
delved into Objective vs Subjective Self-Awareness.
Kitty Genovese was murdered in her NYC apartment, while many witnesses heard her screams.
The Group failed her. Crowds often egg on people signifying suicide. We do things, when
masked, we don't dare do when known.
It was thought that, the more one felt as a singular, individuated, objectively
defineable, person-in-society, the more pro-social would be ones behavior. When we're knowing
ourselves subjectively, especially if we "lose ourself" in a crowd, we're more selfish and
willing to "go off the reservation."
I went down the Empathic Altruism Hypothesis rabbit hole. Turns out, it meets up with
sociobiology's Reciprocal Altruism.
Back to basics: how do groups work? First, you can't draw a one-sided distinction; for
every inside, there's an outside. Ingroup/outgroup arise mutually. As soon as you think, "I
am!", in that same moment, there They are.
Us "versus" them is fundamentally flawed: it's Us&Them. The proper basis for being
human, in ones self and in society, is compassion. Naturally, amirite?
Humans are social animals which is why they do not generally cope well when put
alone.
On top of meaning humans don't cope well alone, being social animals means we are evolved
to be parts of groups. A corollary to that is that we know how to be part of the group; how
to process group interests as well as personal interests. This includes not only an
adjustment of the prioritization of options but an awareness of who is in-group and who is
out-group.
Any model of political economy that denies this or posits that it is a problem to be
overcome is starting from false premises that will lead to false conclusions.
But pushing individualism on the world makes perfect sense to me as a ploy by a very
powerful in-group (e.g. the Kochtopus) to dissipate the power and threat of other groups
(governments, communities, unions ).
Yeah, me too. Though I really do think this group is less bad than others. The
commentariat at The American Conservative is the best commentariat anywhere, because the
ideological range is very wide and the best commenters there have some respect for each other
despite their differences. They become smarter, able to see common ground where it
exists.
But most blog comment sections are extremely tribal. Step even slightly outside the local
consensus and you will be mobbed.
I've found that, too. I'm atheist and over several years I've tried commenting in various
atheist blogs and forums. They seem to be highly sensitive to even small criticisms, such as
my suggesting that not all believers are evil. Usually, they instantly block me.
Yeah! Now who wants to go beat the tar out of some those Marginal Revolution commenters?
Some may say that it will make us look bad, but I say they've got it coming!
Funny, I have always said to my spouse and kids I am skeptical and not fond of our species
on a global scale. On an individual basis I am quite good at being accepting and open to
dialogue and interaction.
I'm not impressed, because this provides us with absolutely no insights into how groups
behave in real life. And Plato thought that democracy led to tyranny, not to bad behaviour to
outsiders.
There's a huge anthropological and historical literature to do with how groups actually
function, and their functioning depends on the surrounding circumstances, the nature of the
group and the way in which it came together. The authors could have started by reading some
of it.
The fundamental distinction is between groups which arise naturally (usually based on
territory, ethnicity, family relations), groups which arise by affiliation (religious,
political, trades unions etc) and groups which are thrown together in response to some threat
or difficult circumstances. There's obviously some overlap. In general, groups set up in
opposition to others, or to protect against others will be, by their very nature, hostile. So
various sorts of Marxist groups, feminists, religious factions etc. who take as a point of
departure that they are right and others are wrong, and that they are threatened and must
stick together, will almost by definition be hostile to outsiders. A reading circle, a
charitable association, or even just a traditional community will be much less so.
In addition, groups cooperate with each other according to rules. The Arabic proverb cited by
the Rev is a case in point, and the organisation of tribal life in the Middle East and South
Asia (including Afghanistan) is highly complex and goes well beyond the simple dichotomies
proposed here. In fact, it's hardly worth continuing to pick holes on this study – go
and research something where you are qualified, guys.
"There's a huge anthropological and historical literature to do with how groups actually
function "
That's one of the key problems. Experimental research like this, even with a
cross-cultural sample of subjects, is supposedly designed to filter out such messy
anthropological, historical, or sociological (Rev Kev) factors. Such social psychological
research can be informative if the limits are recognized. But when artificial lab games are
projected as objective reality without social context, you have problems similar to those in
the economics Yves and NC so effectively criticize.
Whew, this is sure a horse that's been around the track a few times.
Back in the Studies in Prejudice days in the mid-20th c, the idea was that tendencies of
this sort can be weakened if individuals, or the group itself, is aware of the tendency.
Social science isn't about describing our fate, it's about helping us to liberate ourselves
from it.
Leaders play a role and influence their groups. If notions of good faith and fair play are
deemed important, for example, then they stand a better chance of being communicated and
enforced through a type of group ethic. History has shown that people individually and in
groups are quite capable of rising above their worst tendencies. That takes work. It may be
instructive to identify the malign influences and influencers that undermine human
dignity.
"Social science isn't about describing our fate, it's about helping us to liberate
ourselves from it."
"History has shown that people individually and in groups are quite capable of rising
above their worst tendencies. That takes work. It may be instructive to identify the malign
influences and influencers that undermine human dignity."
Thanks for these statements. In my opinion, the best social scientists always recognize
this. The worst ones claim to have discovered the "fundamental" causes of human behavior,
social organization, history, etc. and derive their theories accordingly.
Some of this is just common sense and depends on such things as whether or not the group
in question perceives the interaction with outsiders to be beneficial or harmful. When
tourists first started going to Spain after it's civil war, they were largely accepted quite
well since they were bringing desperately needed money with them and since they were not all
that obtrusive. As the numbers swelled by the 70's, and particularly as the tourists
themselves became more obnoxious; USA, USA, nasty-fat-and-drunk-all-day, the sentiment of the
general population changed quite a bit and might even have been considered, anti
social .
American tourists to Spain are vastly outnumbered by European tourists. 2.7 million US
while 18.8 million UK, 11.9 million German, 11.3 million France, and millions more from other
countries.
The objections to tourism everywhere are locals being priced out of housing and other
markets, and the dubious economic value of all these low-wage and highly seasonal jobs.
Not to mention, between the Spanish Civil war and the 1970s, the country was ruled by a
fascist dictatorship, which might have had something to do with blunting criticism of tourism
or anything else, if what you said were true.
Oh please. While not all Americans were obnoxious, those who were had such a knack for it
that they tended to color people's perception of them in general. The obnoxious ones were
truly odious; they certainly didn't need me to bash them. They did a magnificent job of that
all by themselves. In close to a decade of living abroad, I never once saw any other
nationality pull off what an obnoxious American could do in 5 minutes flat (and back then I
could have produced at least two – and probably more – European tour guides that
would have corroborated that point without a heart beat of hesitation – but with
endless stories).
As to numbers, I didn't in any way limit them to national origin in my comment; my
reference to Americans was hardly exclusive except for the obnoxious ones (and I stick by
that). That said, 1) at a certain point, sheer numbers of ALL tourists did indeed have a
highly negative effect and were often perceived as the cause of the points you made as well
as a host of others – such as making the Spanish feel inferior, like servants 2) the
obnoxious foreigners always stood out even when they were not the majority and yes they were
more often than not of North American origin. My point was that groups react to externals
depending on what benefit or harm they perceive the outsiders bring, and my experience in
Spain tended to support the claim that sufficiently large numbers was a significant marker
and either caused or exacerbated negative issues (such as resource inflation). Such inflation
won't occur without the numbers.
I lived in Spain in 1969 and spoke fluently enough, back then alas, to have all night
discussions with friends who pulled no punches in describing a general attitude towards
Americans that went well beyond the general discomfort they felt with the general hordes of
tourists (of all nationalities).
These people were terrified of Franco – they literally wouldn't talk about him,
often even among themselves. But about tourists, and Americans in particular? They loved to
talk about them – and they had an almost affectionate, if frustrated, way of
characterizing Americans with a broad brush – because of the few – even while
they understood perfectly – and usually with a healthy sense of humor – that such
stereotypes were just that. But again, more generally, it was simply a numbers game.
I wonder whether it might be that groups are more likely to have antisocial
decision-makers. Roughly 4% of the population is reckoned to have sociopathic traits. I read
somewhere (maybe in Martha Stout's "The Sociopath Next Door") that the upper reaches of
hierarchies tend to have more sociopaths than the population at large. Cooperators in a group
led by antisocial leaders might tend to cooperate with antisocial group behavior when they
would behave more pro-socially on their own.
Um from a purely instinctive level having been part of groups throughout my life (armed
forces, faculty, political party, youth groups (formal and informal)) in different countries
(continental Europe and NA) my first thought on reading the study was – of course. As
is my second, third and fourth thought.
After all why do groups always form internal cultures, be that a uniform, ranks, language,
behavioural patterns, or simple things such as greetings.
And if one really would like to see the ugliness of a group – be part of one and
raise questions about the behaviour of the group while part of it. Fun times.
Human nature may impact our desire to form a group or be part of one but we should never
loose sight of the individual. The study reinforces that notion.
I don't get the impression from this that the authors are advocating atomization. They are
merely saying that previous economic assumptions are incorrect, and it's worse than they
thought.
Joining a group puts one in a better position to decline to interact with unreliable
people.
The cohesion of a group demonstrates and consolidates trust within the group. If the group
cannot collectively establish and maintain trust, it will collapse.
Outsiders have not participated in the group's trust-building, and are granted less
initial trust. This is simple precaution.
So the article is pretty much an argument against verification of trust. It is not, as the
authors assert, anti-social to evaluate trustworthiness, it normal and appropriate social
behavior. Violation of trust, and bad faith activity generally, are anti-social behaviors,
and groups form in part to recognize and discourage such activity.
Social behaviors take time, they are not instantaneous transactions and their resolutions
generally remain dynamic (despite complaint of formalists). Thus, examinations of narrowly
limited sets of events are without context, insufficient for the development of reliable
conclusion about human behavior.
The Rev Kev is correct about the insights from anthropology and some interpretive
research, which throw into sharp relief the biases inherent in mainstream group and
organizational studies, their bedrock theory of social identity theory (SIT), and SIT's
primary investigative tool of the zero-history group.
At the center of SIT is the not necessarily true assumption that participants in
experimental groups identify with a group, and that the "group" need be little more than a
symbol (i.e., group A, team Red) the experimenter places upon test subjects ("participants"
in today's language). Furthermore, in SIT experiments researchers "know" participants
identify with a group by their decisions for or against an out-group, not as a result of any
tangible observed relations and/or identification to the in-group. Those choices, meanwhile,
occur in an artificial context where the status of "we" is under threat from a "them" in a
zero-sum struggle for the group's perceived social value compared to others.
SIT is a powerful theory, in that it captures/creates simple situations, defined by
intra-group conflict requiring either-or choices among individuals which collectively stand
in place of actual collective decisions. It is a narrowly defined perspective, useful in
limited cases. Despite those readily available facts, SIT has somehow grown to define how
academic group/org research (and virtually all group/org research that get's funding)
understand ALL groups.
SIT cannot measure the "group-ness" of the individuals it tests, much less any feature of
the complex socio-cultural-political conditions that shape group membership, history, and
relations. Studies such as the one reported here have little value outside of the laboratory,
and zero relevance in the infinitely complex world of actually existing intra- and
inter-group relations. Throw in a few economists from "The Church of Rational-Choice" and
you've got a brew that fills the room with a fog of toxic speculation about how groups act in
the world; a mist that, over the years, has escaped the learned journals and left a dirty
film upon the minds of other specializations and general populations.
Kevin McDonald the far-rights's favorite intellectual. He thinks Jews as a group are
undermining and destroying western civilization from within by disempowering the European
Christian majority while empowering ethnic and social minorities. This is an evolutionary
survival strategy, he says, designed to protect Jews from the deadly waves of antisemitism
that culminated with the Nazi Holocaust.
When neo Nazis/the alt-right blame "the Jew" for gay marriage, non-white immigration and
everything else they despise, McDonald's writing is what they reach for when they need
intellectual cover.
McDonald, for his part, is an enthusiastic supporter of the antisemites and far righters
who revere his work.
(I've been noticing an increase in posters popping up in various forums and casually
dropping couched hard-right talking points into the conversation or "helpfully" recommending
facsistic/antisemitic ideologues for further reading.)
Interestingly I had never heard of this Kevin McDonald, googling him seems to get zero
hits of anyone that would seem to be the character who you allude to, however he is the first
hit on Bing , whatever his message is it would seem google want to uninvent him .
"... Then there's the zombified/ catatonic segment of society that won't change its mind no matter how much truth it's drowned in. ..."
"... It is as if they have (willingly or unwillingly perhaps) joined a religious cult that has promised them false riches if they cut themselves off from reality and believe and do as they are tol ..."
"... This is the creepy part: our propagandists actually do believe in what they create and disseminate ..."
As Caitlin notes in her essay I linked to, if people don't/won't believe the truth they're
being told -- particularly truth that undermines long-held expectations/narratives -- than
telling the truth is essentially worthless as those people are unwilling/incapable of
changing their minds so they then do the right thing in promoting their interests instead of
the 1%'s.
Then there's the zombified/ catatonic segment of society that won't change its mind no
matter how much truth it's drowned in. I'm not suggesting we cease truth telling;
rather, I'm just saying that truth telling isn't as all powerful as it ought to be thanks to
centuries of indoctrination and self-censorship.
I don't think it is the general public so much who needs to hear our ridicule - it seems
to me that the less university or college education people have had, or the less exposure to
so-called "quality news media" they have had, the more skeptical and cynical they are of what
they are told to believe - as it is those whose business and livelihoods revolve around
creating and delivering the propaganda and the false narratives that are part and parcel of
it.
It is as if they have (willingly or unwillingly perhaps) joined a religious cult that
has promised them false riches if they cut themselves off from reality and believe and do as
they are tol d.
This is the creepy part: our propagandists actually do believe in what they create and
disseminate .
Top 5 professional journals (T5) serve as gatekeepers for professional advancement of
academic economists: "strong evidence for the influence of the T5. Without doubt, publication
in the T5 is a powerful determinant of tenure and promotion in academic economics." https://www.ineteconomics.org/perspectives/blog/the-tyranny-of-the-top-five-journals
When this happens, acceptable research and discourse tend to get established and limited
… Chinese economists probably need not apply...as well as unorthodox views in the
US.
Michael Hudson describes the Orwellian approach of today's mainstream economics: "Viewing
the economic vocabulary as propaganda, I saw that we can understand how the words you hear as
largely propaganda words. They’ve changed the meaning to the opposite of what the
classical economists meant. But if you untangle the reversal of meaning and juxtapose a more
functional vocabulary you can better understand what ís actually happening." https://michael-hudson.com/2018/12/guns-butter-the-vocabulary-of-economic-deception/
"... Hard core neoliberals say Social Security is a ponzi scheme because too few workers can't pay too many retirees, it should have bought stocks and bonds. Ok, if all the boomers had bought stocks and bonds instead of paying FICA, would too many boomers selling stocks relative to the younger workers saving for retirement buying stocks magically keep share prices rising? Was the crash the day before Chriistmas caused by too many buyers of stocks and bonds, or too many sellers? ..."
"... Hard core neoliberals have been pushing free lunch economics for several decades by erasing the connection between labor and money and real value. ..."
Why oh why can't Krugman explain economics, and especially how "voodoo" conservative free
lunch economics is.
First, why has Krugman self lobotomized and remove the economic basic axiom that
everything is about labor, especially money.
Money is labor, labor in the past or labor in the future. Eliminate work, ie, robots
completely replace all workers, then someone will tell their robot to build more robots and
tell those robots to do the same until everyone can be given as many robots as they want for
free to produce as much as the new own want, whether to consume or not, so no one will be
willing to pay anything for any thing.
So, until someone can explain how money has value without human labor, and "property" is
not the reason because I will order my robots to build an army to kill you if you refuse to
vacate the land I want as my own. And I'll build the biggest robot army to fight off any
"government" that tries to take the liberty I have gained with my robots eliminating any
requirement for me to work for what I consume or desire.
So, again, money is past or future labor, just as goods and capital are past labor, the
Fed merely ensures liquidity of labor IOUs, but if no one will pay workers to work with these
IOUs, no one will get a job no matter how many labor IOUs the Fed prints.
And it i give you labor IOUs, but no one will produce anything by work in exchange for
those labor IOUs, they are worthless. Like in Venezuela where you buy stuff paying in eggs or
fuel or other things produced by workers with capital, ie, labor.
And Trump never sees any value in money because he never works. He'll promise you money,
but if you believe he'll do any work to make his promise honest, you are a fool. And thats
true for pretty muchh all Hard core neoliberals these days.
Hard core neoliberals tell you to work more than the money paid in exchange for other working to
produce stuff for you in the future. First it was by pensions. But now they refuse. Then is
was by government IOUs, but now they are saying "nope" to redeeming the bonds.
Anyone think the businesses with skyhigh share prices are going to pay dividends, or buy
back shares at sky high prices when sellers exceed buyers?
Hard core neoliberals say Social Security is a ponzi scheme because too few workers can't pay too
many retirees, it should have bought stocks and bonds. Ok, if all the boomers had bought
stocks and bonds instead of paying FICA, would too many boomers selling stocks relative to
the younger workers saving for retirement buying stocks magically keep share prices rising?
Was the crash the day before Chriistmas caused by too many buyers of stocks and bonds, or too
many sellers?
Hard core neoliberals have been pushing free lunch economics for several decades by erasing the
connection between labor and money and real value.
Hard core neoliberals see work as too costly, and paying workers to crushingly costly, but they
want others to give them both stuff and money. A free lunch.
And they cleverly created clever lines like, "cutting taxes puts money in yoour pockets"
and "costly givernment regulations kills jobs" and "we must cut costs to create jobs".
So, voters who just got told GM is cutting costs by eliminating 10,000 jobs and closing 5
factories listen to Trump promise to cut costs to bring back factories and jobs end up voting
for Trump???
So genious Krugman can't point out the lie Trump and the GOP are telling by simply
pointing outt to those workers they lost their job because of cost cutting.
Why can't workers understand that anytime a politician says "cut" he means "fire" or
"impoverish"???
Bad Faith, Pathos and G.O.P. Economics: On professionals who sold their integrity, and got
nothing in return.
By Paul Krugman
As 2018 draws to an end, we're seeing many articles about the state of the economy. What
I'd like to do, however, is talk about something different -- the state of economics, at
least as it relates to the political situation. And that state is not good: The bad faith
that dominates conservative politics at every level is infecting right-leaning economists,
too.
This is sad, but it's also pathetic. For even as once-respected economists abase
themselves in the face of Trumpism, the G.O.P. is making it ever clearer that their services
aren't wanted, that only hacks need apply.
What you need to know when talking about economics and politics is that there are three
kinds of economist in modern America: liberal professional economists, conservative
professional economists and professional conservative economists.
By "liberal professional economists" I mean researchers who try to understand the economy
as best they can, but who, being human, also have political preferences, which in their case
puts them on the left side of the U.S. political spectrum, although usually only modestly
left of center. Conservative professional economists are their counterparts on the center
right.
Professional conservative economists are something quite different. They're people who
even center-right professionals consider charlatans and cranks; they make a living by
pretending to do actual economics -- often incompetently -- but are actually just
propagandists. And no, there isn't really a corresponding category on the other side, in part
because the billionaires who finance such propaganda are much more likely to be on the right
than on the left.
But let me leave the pure hacks on one side for a moment, and talk about the people who at
least used to seem to be trying to do real economics.
Do economists' political preferences shape their research? They surely affect the choice
of subject: Liberals are more likely to be interested in rising inequality or the economics
of climate change than conservatives. And human nature being what it is, some of them --
O.K., of us -- occasionally engage in motivated reasoning, reaching conclusions that cater to
their politics.
I used to believe, however, that such lapses were the exception, not the rule, and the
liberal economists I know try hard to avoid falling into that trap, and apologize when they
do.
But do conservative economists do the same? Increasingly, the answer seems to be no, at
least for those who play a prominent role in public discourse.
Even during the Obama years, it was striking how many well-known Republican-leaning
economists followed the party line on economic policy, even when that party line was in
conflict with the nonpolitical professional consensus.
Thus, when a Democrat was in the White House, G.O.P. politicians opposed anything that
might mitigate the costs of the 2008 financial crisis and its aftermath; so did many
economists. Most famously, in 2010 a who's who of Republican economists denounced the efforts
of the Federal Reserve to fight unemployment, warning that they risked "currency debasement
and inflation."
Were these economists arguing in good faith? Even at the time, there were good reasons to
suspect otherwise. For one thing, those terrible, irresponsible Fed actions were pretty much
exactly what Milton Friedman prescribed for depressed economies. For another, some of those
Fed critics engaged in Donald Trump-like conspiracy theorizing, accusing the Fed of printing
money, not to help the economy, but to "bail out fiscal policy," i.e., to help Barack
Obama.
It was also telling that none of the economists who warned, wrongly, about looming
inflation were willing to admit their error after the fact.
But the real test came after 2016. A complete cynic might have expected economists who
denounced budget deficits and easy money under a Democrat to suddenly reverse position under
a Republican president.
And that total cynic would have been exactly right. After years of hysteria about the
evils of debt, establishment Republican economists enthusiastically endorsed a budget-busting
tax cut. After denouncing easy-money policies when unemployment was sky-high, some echoed
Trump's demands for low interest rates with unemployment under 4 percent -- and the rest
remained conspicuously silent.
What explains this epidemic of bad faith? Some of it is clearly ambition on the part of
conservative economists still hoping for high-profile appointments. Some of it, I suspect,
may be just the desire to stay on the inside with powerful people.
But there's something pathetic about this professional self-abasement, because the rewards
center-right economists long for haven't come, and never will.
It's not just that Trump has assembled an administration of the worst and the dimmest. The
truth is that the modern G.O.P. doesn't want to hear from serious economists, whatever their
politics. It prefers charlatans and cranks, who are its kind of people.
So what we've learned about economics these past two years is that many conservative
economists were, in fact, willing to compromise their professional ethics for political ends
-- and that they sold their integrity for nothing.
"... Some years ago, I noticed the American media and politicians were sort of going soft (actually mushy) in the brain department, but I was told not to be so judgemental. As the months went by, I saw more and more people saying "they have gone nuts". So, it turns out I am not alone after all. ..."
"... That madness comes from having no behavioural limits, no references outside of your own opinion but groupthink, and manipulating the language to suit your ambitions (the Orwellism of the US media has been repeatedly pointed at). Simply put, you don't know anymore what's what outside of the narrative your group pushes, you go nuts. The manipulators ends up caught in their lies. All the more when they makes money out of it, which would be the case of all those think tanks and media. ..."
"... War or the threat of war is needed to distract attention from rapidly devolving societal bonds and immense economic inequality. ..."
Some years ago, I noticed the American media and politicians were sort of going soft
(actually mushy) in the brain department, but I was told not to be so judgemental. As the
months went by, I saw more and more people saying "they have gone nuts". So, it turns out I
am not alone after all.
That madness comes from having no behavioural limits, no references outside of your
own opinion but groupthink, and manipulating the language to suit your ambitions (the
Orwellism of the US media has been repeatedly pointed at). Simply put, you don't know anymore
what's what outside of the narrative your group pushes, you go nuts. The manipulators ends up
caught in their lies. All the more when they makes money out of it, which would be the case
of all those think tanks and media.
One could argue that they are not going mad, that they know full well they are lying, but
I beg to differ: they don't see anymore how ridiculous or how dumb or smart their arguments
are. That would be congruent with a real loss of touch with reality.
One wonders what
they see when they look at themselves in a mirror, a garden variety propagandist or a
fearless anti-Putin crusader?
It is partially tied direct to the economy of the warmongers as trillions of dollars of
new cold war slop is laying on the ground awaiting the MICC hogs. American hegemony is
primarily about stealing the natural resources of helpless countries. Now in control of all
the weak ones, it is time to move to the really big prize: The massive resources of Russia.
They (US and their European Lackeys) thought this was a slam dunk when Yeltsin, in his
drunken stupors, was literally giving Russia to invading capitalist. Enter Putin, stopped the
looting .........connect the dots.
Watching the USA these days is like watching a loved one with progressive dementia. I've reached the stage where I think the
sooner it's over the better for everyone.
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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