Softpanorama

Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
May the source be with you, but remember the KISS principle ;-)


The image reproduced from the paper "Cheating nature?"by Economist

Science, PseudoScience and Society

Advance of Zombie ideas in XX and XXI centuries

News Recommended books Recommended Links Neoliberalism as a New Form of Corporatism Groupthink Financial_skeptic Political skeptic
Lysenkoism and politization of science Harvard Mafia Cargo Cult Science Cargo cult programming IT offshoring Skeptic Deception Deception as an art form
Obscurantism and Mayberry Machiavelli Mayberry Machiavellians Leo Strauss and the Neocons Pseudoscience and Scientific Press Pollyanna creep Belief coercion within religious groups  
Casino Capitalism Corruption of Regulators Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy Rational Fools vs. Efficient Crooks: The efficient markets hypothesis Friedman --founder of Chicago school of deification of market Supply Side or Trickle down economics Invisible Hand Hypothesys: The Theory of Self-regulation of the Markets
Neoliberal Brainwashing -- Journalism in the Service of the Powerful Few In Foreign Events Coverage The Guardian Presstitutes Slip Beyond the Reach of Embarrassment Neo-theocracy as a False Drive to a Simpler Society Dumbing down america Information Technology Wonderland Pseudoscience and Scientific Press Scientific Fraud
Skeptical view on Programmers Health Secular Humanism Anti-intellectualism Skeptical quotes Humor Financial Humor Etc
  Programmers have a very precise understanding of truth. You can’t lie to a compiler. Try it sometime. Garbage in, garbage out. Booleans, the ones and zeros, trues and falses, make up the world programmers live in. That’s all there is! I think programming is deep, it teaches us about the non-cyber universe we live in. There’s something spiritual about computers, and I want to understand it.

Nick Geoghegan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

But it was too late...

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

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

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

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

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

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

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

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

Dr. Nikolai Bezroukov


Top Visited
Switchboard
Latest
Past week
Past month

NEWS CONTENTS

Old News ;-)

Home 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 1999

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

George Bernard Shaw

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

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

[May 18, 2018] For Economic Truth Turn To Michael Hudson by Paul Craig Roberts

Notable quotes:
"... Another defect of neoliberal economics is the doctrine's denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly. ..."
May 09, 2018 | www.paulcraigroberts.org

Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson's books. It is not an easy task. You will need a glossary of terms. In some of Hudson's books, if memory serves, he provides a glossary, and his recent book "J Is for Junk Economics" defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don't know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family's monthly income. That left 75% of the family's income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country's entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine's denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. https://www.paulcraigroberts.org/2018/04/26/capitalism-works-capitalists/ Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, "The Failure of Laissez Faire Capitalsim." This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson's books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. "J is for Junk Economics" is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. "Killing the Host" and "The Bubble and Beyond" will explain how an economy run to maximize debt is an economy that is self-destructing. "Super Imperialism" and "Trade, Development and Foreign Debt" will show you how dominant countries concentrate world economic power in their hands. "Debt and Economic Renewal in the Ancient Near East" is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world's reigning economics. Russia is suffering much more from neoliberal economics than from Washington's economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin's. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the "banks too big to fail" that financial deregulation created. A handful of banks has been provided with free money -- in addition to the money that the Federal Reserve created in order to take the banks' bad derivative investments off their hands -- to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current "recovery" are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China's love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.

[Apr 24, 2018] How neoliberal economics in universities achieve tenure

They achieve it by serving the financial oligarchy...
Few things are as dangerous as economists with physics envy [aeon.co].
Notable quotes:
"... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning. ..."
Apr 24, 2018 | www.nakedcapitalism.com

marku52 , April 20, 2018 at 3:57 pm

Stumbling and Mumbling has a good riff on this topic:
". Economics, for me, is not about armchair theorizing. It should begin with the facts, and especially the big ones. The facts are that share buy-backs do usually matter, so thought experiments that say otherwise are wrong from the off. Similarly, the fact that wage inflation has been low for years (pdf) is much more significant than any theorizing about Phillips curves."

The comments are good as well:
"That's a category error: you don't define "Economics", tenure committees define it, and they award tenure to people who have a long record of publishing "internally consistent" ("armchair theorizing") papers."
"I found myself sitting next to a very likable young middle-aged academic tenured at an elite British university, whom henceforth I will refer to as Doctor X and whose field is closely associated with this blog. Every year I publish papers in the top journals and they're pure shit." Doctor X, who by now had had a glass or two, felt bad about this, not least because "students these days are so idealistic and eager to learn; they're really wonderful." Furthermore Doctor X could and would like "to write serious papers but what would be the point?" "
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2018/04/facts-vs-hand-waving-in-economics.html#comments

hemeantwell , April 20, 2018 at 4:59 pm

Yeah. I'm inclined to think the author needs to curb his enthusiasms and take up dejected drinking.

The nub of his presentation was a model in which consumers, due to cognitive limitations, were unable to fully examine every single product they purchased. The result was that regulations guaranteeing a certain standard of safety, quality and the like could improve competition by giving people more time to shop around instead of having to devote so much time to investigate specific products. Thus, regulation would improve markets and competition

This is Nobel-level work? It amounts to finding a way to pitch a product to anti-regulation dogmatists. I'm sure that you could find similar arguments being made during the Progressive era regulatory push. Only they would have been framed more as "people will have more time to shop around if they're not killed by previous ingestion of the product."

Ape , April 22, 2018 at 3:32 am

Dude – they aren't actually doing fancy math. Linear regression – like it's 1850!

Most of their important proofs are irrelevant crap with wholes. The math is mostly undergraduate math! The emperor has no clothes!

The problem isn't just math trickery – it's not even proper ingenuity.

Just read a Summer or Krugman paper – it's 70 pages of words, 3 graphs of imaginary numbers and stats 2 equations. That's not mathematization.

Larry Motuz , April 22, 2018 at 4:34 pm

What I mean by 'mathemagics' is the misuse of mathematics –even simple mathematics -- to create the illusion that 'utility' or 'indifference curves' actually pertain to real concepts. In reality, they 'mathematize' gobbledygook passed off as coherent concepts. There is nothing so conceptually barren as 'utility' or 'indifference curve' analytics. The notion that one can derive any coherent 'demand' analysis for any one consumer that is individual human being (or life form of any kind) for any product, or that one can aggregate these up is mathematical junk.

Sound of the Suburbs , April 22, 2018 at 9:08 am

The Classical Economists used the broader political economy rather than today's narrow economics.

The Washington Consensus dreamed of a world run by the laws of economics.

The laws of economics worked in China's favour and the Western economies got hollowed out.

Disposable income = wages – (taxes + the cost of living)

Maximising profit required minimising wages.

The minimum wage is set when disposable income equals zero.

The minimum wage = taxes + the cost of living

China had it made and the West had tilted the playing field against itself.

The US eventually woke up the geopolitical consequences of a world governed by the laws of economics that had worked in China's favour.

Trump has just made things worse with his tax cuts.

Theory:
If we reduce taxes on the wealthy they will create more jobs and wages.

Reality:
If we reduce taxes on the wealthy they will create more jobs and wages in Asia where they can make more profit. They can then ship the stuff back here increasing Western trade deficits.

Sound of the Suburbs , April 22, 2018 at 9:09 am

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning. " Warren Buffet, 25 May 2005

Did your class think about the geopolitics?
I don't think so.

Sound of the Suburbs , April 22, 2018 at 9:17 am

William White (BIS, OECD) is on board for the benefits of the broader political economy.

https://www.youtube.com/watch?v=g6iXBQ33pBo&t=2485s

[Apr 24, 2018] Constant and persistent nudging generally results in an angry backlash. Somewhere around when a person realizes "This is not where I wanted to be." That's now very true for neoclassic economy courses. Many students understand the game and hate it

Notable quotes:
"... cognitive infiltration ..."
Apr 24, 2018 | www.nakedcapitalism.com

Yves Smith, April 21, 2018 at 12:26 pm

Nudge was the title of a book by Richard Thaler and Cass Sunstein on how to manipulate people in their supposed best interest, like in cafeteria lines, to put whole fruit before desserts made with sugar.

See here for more detail:

blennylips , April 21, 2018 at 1:49 pm

If you liked Nudge , you'll love " cognitive infiltration ":

Conspiracy Theories
Harvard Public Law Working Paper No. 08-03

Because those who hold conspiracy theories typically suffer from a crippled epistemology, in accordance with which it is rational to hold such theories, the best response consists in cognitive infiltration of extremist groups. Various policy dilemmas, such as the question whether it is better for government to rebut conspiracy theories or to ignore them, are explored in this light.
Keywords: conspiracy theories, social networks, informational cascades, group polarization
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1084585

Is not this what discerning MIC's all do these days, via FBI FB?

Synoia , April 21, 2018 at 11:25 am

A nudge too far?

Constant and persistent nudging generally results in an angry backlash. Somewhere around when a person realizes "This is not where I wanted to be."

JTMcPhee , April 21, 2018 at 12:40 pm

And of course we mopes have been "nudged" into pretty much that blind serfdom alluded to. Back in the Cave, with not much chance of dispelling the belief in and subjection to the shadows projected on the wall we are forced to face

oaf , April 21, 2018 at 1:52 pm

manipulation is the sowing of a Karmic garden

Tom_Doak , April 21, 2018 at 6:09 pm

The classic nudge example is opting you into a 401(k) unless you opt out.

That's supposedly better for you but it is DEFINITELY better for the brokerage handling your account.

none , April 21, 2018 at 10:01 pm

I had to look it up: https://en.wikipedia.org/wiki/Nudge_theory

I hadn't heard of it before.

Tyronius , April 22, 2018 at 12:21 am

I rather detest the notion of someone or entity 'nudging' me in the direction of some behavior, especially in a paternalistic mode where the assumption is that they know better than I what I 'should' be doing or thinking.

On one level, isn't that a working definition of advertising? On another, it smacks of authoritarianism. Don't we have enough of this kind of thing already? Worse, what's the first reaction one naturally has when they realize they're being manipulated? Seems to be a strategy fraught with risk of getting exactly the wrong response.

If I'm to be encouraged to behave in a given way, show me the respect of offering a conscious, intelligent argument to do so on the merits, or kindly go (family blog) yourself!

Anti-Schmoo , April 23, 2018 at 4:18 am

In economics, the single most important thing to understand is debt.
If you understand debt; you won't have any debt.
Debt and freedom are the antithisis of each other.
Without debt; nudges have no influence.

Anti-Schmoo , April 23, 2018 at 4:24 am

A follow up:
https://www.esquire.com/lifestyle/money/a19181300/nassim-nicholas-taleb-money-advice/
A very frank discussion of debt and freedom.

[Apr 24, 2018] The term scientism generally points to the facile application of science in unwarranted situations not amenable to application of the scientific method.

Apr 24, 2018 | www.nakedcapitalism.com

skippy , April 21, 2018 at 10:28 pm

The term scientism generally points to the facile application of science in unwarranted situations not amenable to application of the scientific method.

Soddy's attempts at linking the physical world via a quasi scientific approach without doing a thorough heterodox examination of our species wrt monies is my point i.e.

"Being scientist/technologists, Fuller and Soddy felt the need to define wealth, to quantify it in an equation. They knew the components of wealth were physical resources – matter and energy – and the level of knowledge available to most effectively employ these resources. Simplistically stated:

WEALTH = (MATTER + ENERGY) x HUMAN KNOWLEDGE

Energy stored in fossil fuels – Earth's energy savings account – is, of course, unavailable after the fuels are burned. But both Fuller and Soddy understood that expanding human knowledge would eventually make it possible for humanity to operate on Earth's energy income using solar, wind, tidal, biofuels, etc. (but for lack of political will and resistance from the fossil fuel industry, we have reached this potential today). Additionally, the First Law of Thermodynamics says the total amount of matter and energy in the universe is constant and can be neither created nor destroyed, only interchanged. Since knowledge can only grow, wealth can only grow.

It is critical to understand that wealth is governed by the laws of physics and is incorruptible, whereas money is governed by the laws of man and is infinitely corruptible."

I could start with models and applications of theory between interdisciplinary modes of inquire – chalk and cheese. Was Soddy an accountant, deal with issues like sound finance vs functional, or have any depth wrt international systems – no. Worse bit in my book is it moralizes the money question without dealing with the broader social ethos and how that is forwarded via dominate ideology.

To that quandary I brought up atomistic individualism on this blog some time ago, Syll has recently mentioned it. Its in these things that proceed baked in human tool user problems like money.

drumlin woodchuckles , April 22, 2018 at 5:37 pm

Thank you skippy and the follow-on commenters for a serious genuine reply-to-and discussion-of my question.

It has been years since I read " Wealth, Virtual Wealth and Debt – – The Solution of the Economic Paradox". In light of this subthread I will have to dig it back out of my bookpile and read it again . . . and slower next time . . . to see what I end up thinking.

Why would I even bother to do that? Because it still seems to me that Soddy was at least trying to understand "economics" in terms of the biophysical world in which we all live and in which we do everything we do, including trying to understand "economics". He was at least trying to see how matter-and-energy harvesting in order to do thing-making and stuff-doing could actually be reality-based understood in terms of the best actual knowledge of matter-and-energy reality
existing in his day. If that fails to take account of all the cultural/psychomental/etc. things that humans will do within the picture frame of nature's biophysical constraints, that is a problem we will have to try taking account of in our own extremely troubled day.

But his scientism was at least an effort to ground "economic" understanding within real scientific knowledge. His scientism is still better than the cardboard replica scientism practiced by today's mainstream economists who are merely spray-painting a bunch of scientism onto the paper-mache' sewage-filled pig which is all that their mainstream discipline of mainstream economics ever even is.

Or ever even will be.

[Apr 16, 2018] The Incoherence of the Philosophers The Horror of Postmodernism by The Liberal Moonbat

Notable quotes:
"... The rundown is that a pseudo-intellectual retreat from rationalism invited its well-deserved ridicule too late, and may have been responsible for the needless and terrible demise of a great world civilization's halcyon era, for which the whole world suffers to this day. We need to learn from that. ..."
"... The Incoherence ..."
"... @Cassiodorus ..."
"... @The Liberal Moonbat ..."
"... @The Liberal Moonbat ..."
"... @Cassiodorus ..."
"... @The Liberal Moonbat ..."
"... @Cassiodorus ..."
"... it's really all just a game ..."
Apr 15, 2018 | caucus99percent.com

The Liberal Moonbat on Sun, 04/15/2018 - 7:20am

The title of this bit here refers to an 11th-Century work of Islamic theology, explained here: https://existentialcomics.com/comic/126

The rundown is that a pseudo-intellectual retreat from rationalism invited its well-deserved ridicule too late, and may have been responsible for the needless and terrible demise of a great world civilization's halcyon era, for which the whole world suffers to this day. We need to learn from that.

Everyone here needs to be aware of this, I'm afraid: The modern Western equivalent of The Incoherence . It explains so, so much. If you're wondering why you're suddenly being barraged with Orwellian jargon, charged with crimethink, seeing the issues you've been harping on for years suddenly turned against you as though you've never even heard of them, get aggressively assigned identities you've never had in your life and told that the person you've always been can't possibly exist, and that the consensus, however flawed and incomplete, of the past 50 years on many hard-fought issues is quite suddenly being treated as though it was all a nefarious lie (a la 9/11-flashback), here's the root of who and what to blame:

https://areomagazine.com/2017/03/27/how-french-intellectuals-ruined-the-...

The fact that institutions of higher learning have been coddling this for so long, despite the special treatment it could not survive without, and despite the fact that it bears the mantle and exploits the public clout of science, education, liberalism, and diversity, just to destroy all those things, is particularly shameful. They might as well allow Dianetics as a legitimate alternative to psychology.

Below is what I personally maintain is the Greatest Political Cartoon In American History. Though it refers to only one issue, it elegantly explains nearly everything wrong with American political thought.

arendt on Sun, 04/15/2018 - 9:29am
Good topic...

I'm going to post what I wrote ten years ago in a separate thread, giving you full credit for bringing up the subject.

Cassiodorus on Sun, 04/15/2018 - 1:31pm
That Helen Pluckrose piece is pretty funny.

Postmodernism presents a threat not only to liberal democracy but to modernity itself .

When in doubt, scream and shout, run around in circles, and panic! Uh-huh. Postmodernism was the solution to an academic problem which arose in the Eighties with the proliferation of Ph.D. and M.A. degrees in the humanities. Nobody wanted to read another thesis or dissertation on Shakespeare, and all of the academic work had to be strictly original and pass increasingly onerous originality tests of the type employed by turnitin.com . Meanwhile the authors had to write these damn things if they were to receive diplomas and move on to teaching jobs. Postmodernism to the rescue! Postmodernism as such was an aesthetic movement, revealing with drab uniformity the juxtaposition of everything in an era in which everything was a commodity. Postmodernism is the Hamburger Helper of the academic humanities, a solution to a purely practical matter.

But Pluckrose continues to panic. Here she is characterizing the postmodern perspective:

Therefore the author of a text is not the authority on its meaning.

So? Perhaps Pluckrose needs to read more undergraduate papers, in which their authors evoke an eternal authorial struggle. "Say what you mean!" my teacherly red ink continually shouts at these undergraduates. Of course this is a problem when one's undergraduates write run-on sentences or sentence fragments. But does anyone really say what they mean? I suppose we can at least try harder. Meanwhile original meanings get lost in the procession of history. A prima facie example of this is "originalism" in Constitutional jurisprudence, which claims ultimate reliance on an "original meaning" of the Constitution -- you know, that one and only one original meaning the Founders intended. Never mind that said Founders were walking contradictions. Take for instance Thomas Jefferson, that eloquent waxer upon the virtues of freedom. Now ask Sally Hemings about him.

Let's skip to Pluckrose's conclusion:

In order to regain credibility, the Left needs to recover a strong, coherent and reasonable liberalism.

I don't see why. How about if we figure out what sort of utopian dream would be appropriate for our world in our day and age, and then decide afterward if we want to call it "liberalism"? Isn't the point of the "science" which Pluckrose regards so highly to put the conclusion at the end of one's research, rather than at the beginning?

I could go on, but this is long enough for a comment in a diary.

The Liberal Moonbat on Sun, 04/15/2018 - 12:49pm
"Postmodernism" may not be the ideal term

@Cassiodorus

Postmodernism to the rescue! Postmodernism as such was an aesthetic movement, revealing with drab uniformity the juxtaposition of everything in an era in which everything was a commodity.

That's a different kind of "Postmodernism" altogether, the kind associated with (if I'm not mistaken) such Chaotic gems as MAD Magazine, Monty Python, The Far Side , and the vibrant, innovative weirdness of a wide array of 1990s art, literature, and pop culture. My very bones are built on such things.

There's also "postmodern architecture", best known for being boring (my mother has been known to call it "post-architecture").

This, though? This is something entirely anathema. The aesthetic we call "postmodern" is liberating and innovative (at least as long as it stays in the hands of people who "get it"); it teaches that there are no rules, that life is a strange and beautiful carnival, that we can be whatever we want to be, and the world can be whatever we want it to be.

"Postmodernism" as sociology, on the other hand, with its denial of the very existence of the individual, and obscene redefinitions of such sacred words as "Justice", is just all but explicitly totalitarian, and would have us believe that the entire 20th Century, with all its hard-fought, bitter-bought victories and miracles, was all for nothing.

Postmodernism presents a threat not only to liberal democracy but to modernity itself .

When in doubt, scream and shout, run around in circles, and panic! Uh-huh. Postmodernism was the solution to an academic problem which arose in the Eighties with the proliferation of Ph.D. and M.A. degrees in the humanities. Nobody wanted to read another thesis or dissertation on Shakespeare, and all of the academic work had to be strictly original and pass increasingly onerous originality tests of the type employed by turnitin.com . Meanwhile the authors had to write these damn things if they were to receive diplomas and move on to teaching jobs. Postmodernism to the rescue! Postmodernism as such was an aesthetic movement, revealing with drab uniformity the juxtaposition of everything in an era in which everything was a commodity. Postmodernism is the Hamburger Helper of the academic humanities, a solution to a purely practical matter.

But Pluckrose continues to panic. Here she is characterizing the postmodern perspective:

Therefore the author of a text is not the authority on its meaning.

So? Perhaps Pluckrose needs to read more undergraduate papers, in which their authors evoke an eternal authorial struggle. "Say what you mean!" my teacherly red ink continually shouts at these undergraduates. Of course this is a problem when one's undergraduates write run-on sentences or sentence fragments. But does anyone really say what they mean? I suppose we can at least try harder. Meanwhile original meanings get lost in the procession of history. A prima facie example of this is "originalism" in Constitutional jurisprudence, which claims ultimate reliance on an "original meaning" of the Constitution -- you know, that one and only one original meaning the Founders intended. Never mind that said Founders were walking contradictions. Take for instance Thomas Jefferson, that eloquent waxer upon the virtues of freedom. Now ask Sally Hemings about him.

Let's skip to Pluckrose's conclusion:

In order to regain credibility, the Left needs to recover a strong, coherent and reasonable liberalism.

I don't see why. How about if we figure out what sort of utopian dream would be appropriate for our world in our day and age, and then decide afterward if we want to call it "liberalism"? Isn't the point of the "science" which Pluckrose regards so highly to put the conclusion at the end of one's research, rather than at the beginning?

I could go on, but this is long enough for a comment in a diary.

Cassiodorus on Sun, 04/15/2018 - 6:26pm
Let me briefly suggest here --

@The Liberal Moonbat @The Liberal Moonbat that it is "liberalism" itself that has run out of gas.

At any rate, to deal with the objections to postmodernism: it's a performative contradiction to be an academic writing against the idea of the individual, for higher-level academia exists to adorn the resumes of self-proclaimed individuals. I just don't see postmodernism, of whatever kind you care to distinguish, as anything but harmless, useless, and pointless outside of its obvious role in contributing to the resume-building efforts of professors in the humanities, and I haven't seen anything here to change my mind about that.

Rather, the problem is that the liberals have run out of new mechanisms whereby the liberal utopia might bear fruit. The liberal trend peaked a long time ago. And, in the meantime, liberal objections to the neoliberal utopia, the utopia of total market existence for everyone as enforced by government diktat, have become toothless. In the US context the liberals appear either blind to or despairing of the fact that the best they had for politics was Barack Obama and Hillary Rodham Clinton, and that their hero Bernie Sanders nullified himself by endorsing Hillary Rodham Clinton. In the French contest the best they had was Macron. I suppose that there are a few islands of sanity elsewhere. But liberalism does not contribute substantially to the longevity of such islands.

#2

Postmodernism to the rescue! Postmodernism as such was an aesthetic movement, revealing with drab uniformity the juxtaposition of everything in an era in which everything was a commodity.

That's a different kind of "Postmodernism" altogether, the kind associated with (if I'm not mistaken) such Chaotic gems as MAD Magazine, Monty Python, The Far Side , and the vibrant, innovative weirdness of a wide array of 1990s art, literature, and pop culture. My very bones are built on such things.

There's also "postmodern architecture", best known for being boring (my mother has been known to call it "post-architecture").

This, though? This is something entirely anathema. The aesthetic we call "postmodern" is liberating and innovative (at least as long as it stays in the hands of people who "get it"); it teaches that there are no rules, that life is a strange and beautiful carnival, that we can be whatever we want to be, and the world can be whatever we want it to be. "Postmodernism" as sociology, on the other hand, with its denial of the very existence of the individual, and obscene redefinitions of such sacred words as "Justice", is just all but explicitly totalitarian, and would have us believe that the entire 20th Century, with all its hard-fought, bitter-bought victories and miracles, was all for nothing.

The Liberal Moonbat on Sun, 04/15/2018 - 4:42pm
That turns us to the definition of "liberalism", then

@Cassiodorus To me it just means...well, kind of just being a good, intelligent, and independent-minded person who learns from history and builds on it. If, as I've read the claim, "conservatism is the negation of ideology", I'd venture to describe liberalism as the absence of externally-derived ideology.

I don't think the establishment Democrats - spineless, capitalist, militarist, insular, and ultimately authoritarian - deserve to be let anywhere near the label "liberal".

#2.1 #2.1 that it is "liberalism" itself that has run out of gas.

At any rate, to deal with the objections to postmodernism: it's a performative contradiction to be an academic writing against the idea of the individual, for higher-level academia exists to adorn the resumes of self-proclaimed individuals. I just don't see postmodernism, of whatever kind you care to distinguish, as anything but harmless, useless, and pointless outside of its obvious role in contributing to the resume-building efforts of professors in the humanities, and I haven't seen anything here to change my mind about that.

Rather, the problem is that the liberals have run out of new mechanisms whereby the liberal utopia might bear fruit. The liberal trend peaked a long time ago. And, in the meantime, liberal objections to the neoliberal utopia, the utopia of total market existence for everyone as enforced by government diktat, have become toothless. In the US context the liberals appear either blind to or despairing of the fact that the best they had for politics was Barack Obama and Hillary Rodham Clinton, and that their hero Bernie Sanders nullified himself by endorsing Hillary Rodham Clinton. In the French contest the best they had was Macron. I suppose that there are a few islands of sanity elsewhere. But liberalism does not contribute substantially to the longevity of such islands.

Cassiodorus on Sun, 04/15/2018 - 6:57pm
Well the postcapitalists

@The Liberal Moonbat are "good, intelligent, and independent-minded" people who "learn from history and build on it." The difference, of course, is that the postcapitalists want to jettison capitalism whereas most of the liberals want to "build on it." "A well-regulated capitalism," they tell us, is the way to go, because history declares "Communism" anathema. Now perhaps not all liberals agree with this well-recited dogma, but its primary problem is that it does not touch capitalism's commodification of everything including governments. Thus liberals who believe in this dogma claim that they seek the best-possible accommodation with capitalism, and "well-regulated" means "regulated enough to look good." Politicians with the endorsement of liberals must keep the air and water clean in areas where the residents are rich enough to buy politicians.

Now of course the liberals will protest this characterization of them, proclaiming once again that they are "good, intelligent, and independent-minded." But where can they be seen imagining the world after capitalism? Kim Stanley Robinson at least tries:

https://player.vimeo.com/video/164911428?title=0&byline=0&portrait=0

Kim Stanley Robinson, Keynote from Environmental Humanities Center on Vimeo .

#2.1.1 To me it just means...well, kind of just being a good, intelligent, and independent-minded person who learns from history and builds on it. If, as I've read the claim, "conservatism is the negation of ideology", I'd venture to describe liberalism as the absence of externally-derived ideology.

I don't think the establishment Democrats - spineless, capitalist, militarist, insular, and ultimately authoritarian - deserve to be let anywhere near the label "liberal".

The Liberal Moonbat on Mon, 04/16/2018 - 11:41am
Having formally studied economics...

@Cassiodorus I've come away with the conclusion that the very concept is, at best, nothing more than a kind of subtopic of history, and at worst, outright pseudoscience, if not religion. My attitude has since spread to much of the rest of that which bills itself as "social science" - sociology's one thing, of course, and so is modern psychology, having dumped Freud, but I think the notion of "social science" is finally revealing itself to mostly be just another disastrous 19th-Century conceit. Free will is kryptonite to science. "The economy", "society", "culture", people labor under these things because they believe they're unavoidably real, but it's really all just a game , and the rules can be almost whatever we want them to be.

You can try to make anything into a "science" - but not everything can or should. Case in point: After World War II, the Soviet Union decided that military strategy and tactics were a science, and that it had natural laws or whatever that could be honed to the same degree of precision as the laws of physics; with time, they believed, they'd be able to predict the outcome of a battle before a single shot had been fired. This "science" crashed and burned when they invaded Afghanistan.

As to the question of "what do we replace capitalism with?", my honest answer is: Nothing. Stop believing in "economics", and just do what makes sense based on situational necessity and a long-term vision of what we want. A "mixed economy" like those of Norway, 1970s Britain, or (arguably) New Deal America is really just an economy that has broken free of the religion of "economics," and plays by its own, common sense/common morality rules. The best economic policy MO I've ever heard of is Finland's: "Let's do what makes our people HAPPY!" (I read a dandy article about that a while back, but I can't seem to find it now).

#2.1.1.1 are "good, intelligent, and independent-minded" people who "learn from history and build on it." The difference, of course, is that the postcapitalists want to jettison capitalism whereas most of the liberals want to "build on it." "A well-regulated capitalism," they tell us, is the way to go, because history declares "Communism" anathema. Now perhaps not all liberals agree with this well-recited dogma, but its primary problem is that it does not touch capitalism's commodification of everything including governments. Thus liberals who believe in this dogma claim that they seek the best-possible accommodation with capitalism, and "well-regulated" means "regulated enough to look good." Politicians with the endorsement of liberals must keep the air and water clean in areas where the residents are rich enough to buy politicians.

Now of course the liberals will protest this characterization of them, proclaiming once again that they are "good, intelligent, and independent-minded." But where can they be seen imagining the world after capitalism? Kim Stanley Robinson at least tries:

https://player.vimeo.com/video/164911428?title=0&byline=0&portrait=0

Kim Stanley Robinson, Keynote from Environmental Humanities Center on Vimeo .

on the cusp on Sun, 04/15/2018 - 11:32am
I recently visited UAE.

I enjoyed a museum visit in Sharza, where one section of the complex had displays of incredible scientific contributions I had never associated with this part of the world.

When I left that section, everything became examples and displays of Islam. Korans, proper clothing, a few weapons. Thinking back, the science section pre-dated this philosopher. I saw his influence, just didn't know it until today.

Very interesting essay.

Azazello on Sun, 04/15/2018 - 2:21pm
Former philosophy major here.

I never could understand Postmodernism. Is this because I am a white male or because I find Enlightenment concepts more coherent and more useful in my everyday life and politics ? Whatever, I remain happily stuck in the late 18th century. Good to see a mention of Alan Sokal in the linked article.

MrWebster on Mon, 04/16/2018 - 12:05pm
What I remember about Shakespeare in college

And other literature courses was that the classes were about the schools of literary criticism on Shakespeare, rather than about the students doing a close reading of Shakespeare. And then of course, critiques on the schools of literary criticism.

[Apr 16, 2018] >The Incoherence of the Philosophers The Horror of Postmodernism

Apr 16, 2018 | caucus99percent.com

The Liberal Moonbat on Sun, 04/15/2018 - 7:20am

[Apr 04, 2018] Elite universities are selling themselves – and look who s buying by Grif Peterson and Yarden Katz

Notable quotes:
"... Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace". ..."
Mar 30, 2018 | www.theguardian.com

Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace".

This market rationality extends even to the way research is evaluated – which the Saudi government has been gaming. To give one example, it paid highly cited mathematicians at universities around the world to list King Abdulaziz University as an affiliation, thereby making it the seventh "best" mathematics department worldwide in the 2014 US News and World Report university rankings .

Here, the Saudi government is only playing by the rules of a game designed by western elites. This is the same logic that has been used to allow corporations, nonprofits and the military to steadily buy out chunks of academia to the point where it makes little sense to presume clear boundaries exist between these entities. As a result, numerous partnerships entangle MIT researchers with Bin Salman. On his Boston tour, he also visited IBM's Cambridge research facility, which recently partnered with MIT to form an artificial intelligence research laboratory in exchange for a $240m commitment to the university. Boston Dynamics , an MIT partner that builds robots for the US military, also offered a demonstration. Such alliances ought to cast doubt on MIT's promise to understand the "societal and ethical" implications of AI and build socially beneficial technologies.

The terms of all of these partnerships are essentially opaque, while the secrecy that surrounds them denies the community the chance to deliberate and take action. The growth of unaccountable university partnerships, like other crises facing educational institutions, stems from the absence of democratic engagement. When universities decide to sell themselves to the highest bidder, they become deaf to the interests of their students and the wider societies in which they operate. Subservience to war criminals and corporate overlords tends to follow.

[Apr 04, 2018] Elite universities are selling themselves and look who's buying

Apr 04, 2018 | www.theguardian.com

Bin Salman's affair with academia isn't a fluke – it's a result of the neoliberal logic by which universities increasingly operate. As the journalist David Dickson noted in 1984, American universities and corporations have "teamed up to challenge the democratic control of knowledge" by delegating control over academic research to "the marketplace".

This market rationality extends even to the way research is evaluated – which the Saudi government has been gaming. To give one example, it paid highly cited mathematicians at universities around the world to list King Abdulaziz University as an affiliation, thereby making it the seventh "best" mathematics department worldwide in the 2014 US News and World Report university rankings .

Here, the Saudi government is only playing by the rules of a game designed by western elites. This is the same logic that has been used to allow corporations, nonprofits and the military to steadily buy out chunks of academia to the point where it makes little sense to presume clear boundaries exist between these entities. As a result, numerous partnerships entangle MIT researchers with Bin Salman. On his Boston tour, he also visited IBM's Cambridge research facility, which recently partnered with MIT to form an artificial intelligence research laboratory in exchange for a $240m commitment to the university. Boston Dynamics , an MIT partner that builds robots for the US military, also offered a demonstration. Such alliances ought to cast doubt on MIT's promise to understand the "societal and ethical" implications of AI and build socially beneficial technologies.

The terms of all of these partnerships are essentially opaque, while the secrecy that surrounds them denies the community the chance to deliberate and take action. The growth of unaccountable university partnerships, like other crises facing educational institutions, stems from the absence of democratic engagement. When universities decide to sell themselves to the highest bidder, they become deaf to the interests of their students and the wider societies in which they operate. Subservience to war criminals and corporate overlords tends to follow.

[Mar 25, 2018] Surveillance is the DNA of the Platform Economy

Creating a malware application which masks itself as some kind of pseudo scientific test and serves as the backdoor to your personal data is a very dirty trick...
Especially dirty it it used by academic researchers, who in reality are academic scum... An additional type of academic gangsters, in addition to Harvard Mafia
Notable quotes:
"... By Ivan Manokha, a departmental lecturer in the Oxford Department of International Development. He is currently working on power and obedience in the late-modern political economy, particularly in the context of the development of new technologies of surveillance. Originally published at openDemocracy ..."
"... The current social mobilization against Facebook resembles the actions of activists who, in opposition to neoliberal globalization, smash a McDonald's window during a demonstration. ..."
"... But as Christopher Wylie, a twenty-eight-year-old Canadian coder and data scientist and a former employee of Cambridge Analytica, stated in a video interview , the app could also collect all kinds of personal data from users, such as the content that they consulted, the information that they liked, and even the messages that they posted. ..."
"... All this is done in order to use data to create value in some way another (to monetize it by selling to advertisers or other firms, to increase sales, or to increase productivity). Data has become 'the new oil' of global economy, a new commodity to be bought and sold at a massive scale, and with this development, as a former Harvard Business School professor Shoshana Zuboff has argued , global capitalism has become 'surveillance capitalism'. ..."
"... What this means is that platform economy is a model of value creation which is completely dependant on continuous privacy invasions and, what is alarming is that we are gradually becoming used to this. ..."
"... In other instances, as in the case of Kogan's app, the extent of the data collected exceeds what was stated in the agreement. ..."
"... What we need is a total redefinition of the right to privacy (which was codified as a universal human right in 1948, long before the Internet), to guarantee its respect, both offline and online. ..."
"... I saw this video back in 2007. It was originally put together by a Sarah Lawrence student who was working on her paper on social media. The ties of all the original investors to IN-Q-Tel scared me off and I decided to stay away from Facebook. ..."
"... But it isn't just FB. Amazon, Twitter, Google, LinkedIn, Apple, Microsoft and many others do the same, and we are all caught up in it whether we agree to participate or not. ..."
"... Platform Capitalism is a mild description, it is manipulation based on Surveillance Capitalism, pure and simple. The Macro pattern of Corporate Power subsuming the State across every area is fascinating to watch, but a little scary. ..."
"... For his part, Aleksandr Kogan established a company, Global Science Research, that contracted with SCL, using Facebook data to map personality traits for its work in elections (Kosinski claims that Kogan essentially reverse-engineered the app that he and Stillwell had developed). Kogan's app harvested data on Facebook users who agreed to take a personality test for the purposes of academic research (though it was, in fact, to be used by SCL for non-academic ends). But according to Wylie, the app also collected data on their entire -- and nonconsenting -- network of friends. Once Cambridge Analytica and SCL had won contracts with the State Department and were pitching to the Pentagon, Wylie became alarmed that this illegally-obtained data had ended up at the heart of government, along with the contractors who might abuse it. ..."
"... This apparently bizarre intersection of research on topics like love and kindness with defense and intelligence interests is not, in fact, particularly unusual. It is typical of the kind of dual-use research that has shaped the field of social psychology in the US since World War II. ..."
"... Much of the classic, foundational research on personality, conformity, obedience, group polarization, and other such determinants of social dynamics -- while ostensibly civilian -- was funded during the cold war by the military and the CIA. ..."
"... The pioneering figures from this era -- for example, Gordon Allport on personality and Solomon Asch on belief conformity -- are still cited in NATO psy-ops literature to this day ..."
"... This is an issue which has frustrated me greatly. In spite of the fact that the country's leading psychologist (at the very least one of them -- ex-APA president Seligman) has been documented taking consulting fees from Guantanamo and Black Sites goon squads, my social science pals refuse to recognize any corruption at the core of their so-called replicated quantitative research. ..."
Mar 24, 2018 | www.nakedcapitalism.com
Yves here. Not new to anyone who has been paying attention, but a useful recap with some good observations at the end, despite deploying the cringe-making trope of businesses having DNA. That legitimates the notion that corporations are people.

By Ivan Manokha, a departmental lecturer in the Oxford Department of International Development. He is currently working on power and obedience in the late-modern political economy, particularly in the context of the development of new technologies of surveillance. Originally published at openDemocracy

The current social mobilization against Facebook resembles the actions of activists who, in opposition to neoliberal globalization, smash a McDonald's window during a demonstration.

On March 17, The Observer of London and The New York Times announced that Cambridge Analytica, the London-based political and corporate consulting group, had harvested private data from the Facebook profiles of more than 50 million users without their consent. The data was collected through a Facebook-based quiz app called thisisyourdigitallife, created by Aleksandr Kogan, a University of Cambridge psychologist who had requested and gained access to information from 270,000 Facebook members after they had agreed to use the app to undergo a personality test, for which they were paid through Kogan's company, Global Science Research.

But as Christopher Wylie, a twenty-eight-year-old Canadian coder and data scientist and a former employee of Cambridge Analytica, stated in a video interview , the app could also collect all kinds of personal data from users, such as the content that they consulted, the information that they liked, and even the messages that they posted.

In addition, the app provided access to information on the profiles of the friends of each of those users who agreed to take the test, which enabled the collection of data from more than 50 million.

All this data was then shared by Kogan with Cambridge Analytica, which was working with Donald Trump's election team and which allegedly used this data to target US voters with personalised political messages during the presidential campaign. As Wylie, told The Observer, "we built models to exploit what we knew about them and target their inner demons."

'Unacceptable Violation'

Following these revelations the Internet has been engulfed in outrage and government officials have been quick to react. On March 19, Antonio Tajani President of the European Parliament Antonio Tajani, stated in a twitter message that misuse of Facebook user data "is an unacceptable violation of our citizens' privacy rights" and promised an EU investigation. On March 22, Wylie communicated in a tweet that he accepted an invitation to testify before the US House Intelligence Committee, the US House Judiciary Committee and UK Parliament Digital Committee. On the same day Israel's Justice Ministry informed Facebook that it was opening an investigation into possible violations of Israelis' personal information by Facebook.

While such widespread condemnation of Facebook and Cambridge Analytica is totally justified, what remains largely absent from the discussion are broader questions about the role of data collection, processing and monetization that have become central in the current phase of capitalism, which may be described as 'platform capitalism', as suggested by the Canadian writer and academic Nick Srnicek in his recent book .

Over the last decade the growth of platforms has been spectacular: today, the top 4 enterprises in Forbes's list of most valuable brands are platforms, as are eleven of the top twenty. Most recent IPOs and acquisitions have involved platforms, as have most of the major successful startups. The list includes Apple, Google, Microsoft, Facebook, Twitter, Amazon, eBay, Instagram, YouTube, Twitch, Snapchat, WhatsApp, Waze, Uber, Lyft, Handy, Airbnb, Pinterest, Square, Social Finance, Kickstarter, etc. Although most platforms are US-based, they are a really global phenomenon and in fact are now playing an even more important role in developing countries which did not have developed commercial infrastructures at the time of the rise of the Internet and seized the opportunity that it presented to structure their industries around it. Thus, in China, for example, many of the most valuable enterprises are platforms such as Tencent (owner of the WeChat and QQ messaging platforms) and Baidu (China's search engine); Alibaba controls 80 percent of China's e-commerce market through its Taobao and Tmall platforms, with its Alipay platform being the largest payments platform in China.

The importance of platforms is also attested by the range of sectors in which they are now dominant and the number of users (often numbered in millions and, in some cases, even billions) regularly connecting to their various cloud-based services. Thus, to name the key industries, platforms are now central in Internet search (Google, Yahoo, Bing); social networking (Facebook, LinkedIn, Instagram, Snapchat); Internet auctions and retail (eBay, Taobao, Amazon, Alibaba); on-line financial and human resource functions (Workday, Upwork, Elance, TaskRabbit), urban transportation (Uber, Lyft, Zipcar, BlaBlaCar), tourism (Kayak, Trivago, Airbnb), mobile payment (Square Order, PayPal, Apple Pay, Google Wallet); and software development (Apple's App Store, Google Play Store, Windows App store). Platform-based solutions are also currently being adopted in more traditional sectors, such as industrial production (GE, Siemens), agriculture (John Deere, Monsanto) and even clean energy (Sungevity, SolarCity, EnerNOC).

User Profiling -- Good-Bye to Privacy

These platforms differ significantly in terms of the services that they offer: some, like eBay or Taobao simply allow exchange of products between buyers and sellers; others, like Uber or TaskRabbit, allow independent service providers to find customers; yet others, like Apple or Google allow developers to create and market apps.

However, what is common to all these platforms is the central role played by data, and not just continuous data collection, but its ever more refined analysis in order to create detailed user profiles and rankings in order to better match customers and suppliers or increase efficiency.

All this is done in order to use data to create value in some way another (to monetize it by selling to advertisers or other firms, to increase sales, or to increase productivity). Data has become 'the new oil' of global economy, a new commodity to be bought and sold at a massive scale, and with this development, as a former Harvard Business School professor Shoshana Zuboff has argued , global capitalism has become 'surveillance capitalism'.

What this means is that platform economy is a model of value creation which is completely dependant on continuous privacy invasions and, what is alarming is that we are gradually becoming used to this.

Most of the time platform providers keep track of our purchases, travels, interest, likes, etc. and use this data for targeted advertising to which we have become accustomed. We are equally not that surprised when we find out that, for example, robotic vacuum cleaners collect data about types of furniture that we have and share it with the likes of Amazon so that they can send us advertisements for pieces of furniture that we do not yet possess.

There is little public outcry when we discover that Google's ads are racially biased as, for instance, a Harvard professor Latanya Sweeney found by accident performing a search. We are equally hardly astonished that companies such as Lenddo buy access to people's social media and browsing history in exchange for a credit score. And, at least in the US, people are becoming accustomed to the use of algorithms, developed by private contractors, by the justice system to take decisions on sentencing, which often result in equally unfair and racially biased decisions .

The outrage provoked by the Cambridge Analytica is targeting only the tip of the iceberg. The problem is infinitely larger as there are countless equally significant instances of privacy invasions and data collection performed by corporations, but they have become normalized and do not lead to much public outcry.

DNA

Today surveillance is the DNA of the platform economy; its model is simply based on the possibility of continuous privacy invasions using whatever means possible. In most cases users agree, by signing the terms and conditions of service providers, so that their data may be collected, analyzed and even shared with third parties (although it is hardly possible to see this as express consent given the size and complexity of these agreements -- for instance, it took 8 hours and 59 minutes for an actor hired by the consumer group Choice to read Amazon Kindle's terms and conditions). In other instances, as in the case of Kogan's app, the extent of the data collected exceeds what was stated in the agreement.

But what is important is to understand that to prevent such scandals in the future it is not enough to force Facebook to better monitor the use of users' data in order to prevent such leaks as in the case of Cambridge Analytica. The current social mobilization against Facebook resembles the actions of activists who, in opposition to neoliberal globalization, smash a McDonald's window during a demonstration.

What we need is a total redefinition of the right to privacy (which was codified as a universal human right in 1948, long before the Internet), to guarantee its respect, both offline and online.

What we need is a body of international law that will provide regulations and oversight for the collection and use of data.

What is required is an explicit and concise formulation of terms and conditions which, in a few sentences, will specify how users' data will be used.

It is important to seize the opportunity presented by the Cambridge Analytica scandal to push for these more fundamental changes.



Arizona Slim , , March 24, 2018 at 7:38 am

I am grateful for my spidey sense. Thanks, spidey sense, for ringing the alarm bells whenever I saw one of those personality tests on Facebook. I never took one.

Steve H. , , March 24, 2018 at 8:05 am

First they came for

The most efficient strategy is to be non-viable . They may come for you eventually, but someone else gets to be the canary, and you haven't wasted energy in the meantime. TOR users didn't get that figured out.

Annieb , , March 24, 2018 at 2:02 pm

Never took the personality test either, but now I now that all of my friends who did unknowingly gave up my personal information too. I read an article somewhere about this over a year ago so it's really old news. Sent the link to a few people who didn't care. But now that they all know that Cambridge Analytical used FB data in support of the Trump campaign it's all over the mainstream and people are upset.

ChrisPacific , , March 25, 2018 at 4:07 pm

You can disable that (i.e., prevent friends from sharing your info with third parties) in the privacy options. But the controls are not easy to find and everything is enabled by default.

HotFlash , , March 24, 2018 at 3:13 pm

I haven't FB'd in years and certainly never took any such test, but if any of my friends, real or FB, did, and my info was shared, can I sue? If not, why not?

Octopii , , March 24, 2018 at 8:06 am

Everyone thought I was paranoid as I discouraged them from moving backups to the cloud, using trackers, signing up for grocery store clubs, using real names and addresses for online anything, etc. They thought I was overreacting when I said we need European-style privacy laws in this country. People at work thought my questions about privacy for our new location-based IoT plans were not team-based thinking.

And it turns out after all this that they still think I'm extreme. I guess it will have to get worse.

Samuel Conner , , March 24, 2018 at 8:16 am

In a first for me, there are surface-mount resistors in the advert at the top of today's NC links page. That is way out of the ordinary; what I usually see are books or bicycle parts; things I have recently purchased or searched.

But a couple of days ago I had a SKYPE conversation with a sibling about a PC I was scavenging for parts, and surface mount resistors (unscavengable) came up. I suspect I have been observed without my consent and am not too happy about it. As marketing, it's a bust; in the conversation I explicitly expressed no interest in such components as I can't install them. I suppose I should be glad for this indication of something I wasn't aware was happening.

Collins , , March 24, 2018 at 9:14 am

Had you used your computer keyboard previously to search for 'surface mount resistors', or was the trail linking you & resistors entirely verbal?

Samuel Conner , , March 24, 2018 at 10:15 am

No keyboard search. I never so much as think about surface mount components; the inquiry was raised by my sibling and I responded. Maybe its coincidental, but it seems quite odd.

I decided to click through to the site to generate a few pennies for NC and at least feel like I was punishing someone for snooping on me.

Abi , , March 25, 2018 at 3:24 pm

Its been happening to me a lot recently on my Instagram, I don't like pictures or anything, but whenever I have a conversation with someone on my phone, I start seeing ads of what I spoke about

ChiGal in Carolina , , March 25, 2018 at 10:12 am

I thought it came out a while ago that Skype captures and retains all the dialogue and video of convos using it.

Eureka Springs , , March 24, 2018 at 8:44 am

What we need is a total redefinition of the right to privacy (which was codified as a universal human right in 1948, long before the Internet), to guarantee its respect, both offline and online.

Are we, readers of this post, or citizens of the USA supposed to think there is anything binding in declarations? Or anything from the UN if at all inconvenient for that matter?

https://www.un.org/en/universal-declaration-human-rights/
Article 12.

No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honour and reputation. Everyone has the right to the protection of the law against such interference or attacks.

Platforms like facebook allow individuals to 'spy' on each other and people love it. When I was a kid i always marveled at how some households would leave a police scanner on 24/7. With the net we have this writ large with baby, puppy and tv dinner photos. Not to forget it's a narcissist paradise. I have friends who I've tried to gently over time inject tidbits of info like this article provides for many years and they still just refuse to try and get it. If they looked over their shoulder and saw how many people/entities are literally following them everywhere they go, they would become rabid gun owners (don't tread on me!) overnight, but the invisible hand/eye registers not at all.

Pelham , , March 24, 2018 at 9:13 am

A side note: If Facebook and other social media were to assume ANY degree of responsibility for content appearing on their platforms, they would be acknowledging their legal liability for ALL content.

Hence they would be legally responsible just as newspapers are. And major newspapers have on-staff lawyers and editors exquisitely attuned to the possibility of libelous content so they can avoid ruinous lawsuits.

If the law were applied as it should be, Facebook and its brethren wouldn't last five minutes before being sued into oblivion.

albert , , March 24, 2018 at 6:27 pm

" being sued into oblivion ." If only.

Non-liability is a product of the computer age. I remember having to agree with Microsofts policy to absolve them of -any- liability when using their software. If they had their druthers, -no- company would be liable for -anything-. It's called a 'perfect world'.

Companies that host 'social media' should not have to bear any responsibility for their users content. Newspapers employ writers and fact checkers. They are set up to monitor their staff for accuracy (Okay, in theory). So you can sue them and even their journalist employees. Being liable (and not sued) allows them to brag about how truthful they are. Reputations are a valuable commodity these days.

In the case of 'social media' providers, liability falls on the authors of their own comments, which is only fair, in my view. However, I would argue that those 'providers' should -not- be considered 'media' like newspapers, and their members should not be considered 'journalists'.

Also, those providers are private companies, and are free to edit, censor, or delete anything on their site. And of course it's automated. Some conservative Facebook members were complaining about being banned. Apparently, there a certain things you can't say on Facebook.

AFAIC, the bottom line is this: Many folks tend to believe everything they read online. They need to learn the skill of critical thinking. And realize that the Internet can be a vast wasteland; a digital garbage dump.

Why are our leaders so concerned with election meddling? Isn't our propaganda better than the Russians? We certainly pay a lot for it.
. .. . .. -- .

PlutoniumKun , , March 24, 2018 at 9:52 am

It seems even Elon Musk is now rebelling against Facebook.

Musk Takes Down the Tesla and SpaceX Facebook Pages.

Today, Musk also made fun of Sonos for not being as committed as he was to the anti-Facebook cause after the connected-speaker maker said it would pull ads from the platform -- but only for a week.

"Wow, a whole week. Risky " Musk tweeted.

saurabh , , March 24, 2018 at 11:43 am

Musk, like Trump, knows he does not need to advertise because a fawning press will dutifully report on everything he does and says, no matter how dumb.

Jim Thomson , , March 25, 2018 at 9:39 am

This is rich.

I can't resist: It takes a con to know a con.
(not the most insightful comment)

Daniel Mongan , , March 24, 2018 at 10:14 am

A thoughtful post, thanks for that. May I recommend you take a look at "All You Can Pay" (NationBooks 2015) for a more thorough treatment of the subject, together with a proposal on how to re-balance the equation. Full disclosure, I am a co-author.

JimTan , , March 24, 2018 at 11:12 am

People are starting to download copies of their Facebook data to get an understanding of how much information is being collected from them.

JCC , , March 24, 2018 at 11:29 am

A reminder: https://www.youtube.com/watch?v=iRT9On7qie8

I saw this video back in 2007. It was originally put together by a Sarah Lawrence student who was working on her paper on social media. The ties of all the original investors to IN-Q-Tel scared me off and I decided to stay away from Facebook.

But it isn't just FB. Amazon, Twitter, Google, LinkedIn, Apple, Microsoft and many others do the same, and we are all caught up in it whether we agree to participate or not.

Anyone watch the NCAA Finals and see all the ads from Google about being "The Official Cloud of the NCAA"? They were flat out bragging, more or less, about surveillance of players. for the NCAA.

Platform Capitalism is a mild description, it is manipulation based on Surveillance Capitalism, pure and simple. The Macro pattern of Corporate Power subsuming the State across every area is fascinating to watch, but a little scary.

oh , , March 24, 2018 at 1:44 pm

Caveat Emptor: If you watch YouTube, they'll only add to the information that they already have on you!

HotFlash , , March 24, 2018 at 3:27 pm

Just substitute "hook" for 'you" in the URL, you get the same video, no ads, and they claim not to track you. YMMV

Craig H. , , March 24, 2018 at 12:21 pm

Privacy no longer a social norm, says Facebook founder; Guardian; 10 January 2010

The Right to Privacy; Warren & Brandeis; Harvard Law Review; 15 December 1890

It was amusing that the top Google hit for the Brandeis article was JSTOR which requires us to surrender personal detail to access their site. To hell with that.

The part I like about the Brandeis privacy story is the motivation was some Manhattan rich dicks thought the gossip writers snooping around their wedding party should mind their own business. (Apparently whether this is actually true or just some story made up by somebody being catty at Brandeis has been the topic of gigabytes of internet flame wars but I can't ever recall seeing any of those.)

Ed , , March 24, 2018 at 2:50 pm

https://www.zerohedge.com/news/2018-03-23/digital-military-industrial-complex-exposed

" Two young psychologists are central to the Cambridge Analytica story. One is Michal Kosinski, who devised an app with a Cambridge University colleague, David Stillwell, that measures personality traits by analyzing Facebook "likes." It was then used in collaboration with the World Well-Being Project, a group at the University of Pennsylvania's Positive Psychology Center that specializes in the use of big data to measure health and happiness in order to improve well-being. The other is Aleksandr Kogan, who also works in the field of positive psychology and has written papers on happiness, kindness, and love (according to his résumé, an early paper was called "Down the Rabbit Hole: A Unified Theory of Love"). He ran the Prosociality and Well-being Laboratory, under the auspices of Cambridge University's Well-Being Institute.

Despite its prominence in research on well-being, Kosinski's work, Cadwalladr points out, drew a great deal of interest from British and American intelligence agencies and defense contractors, including overtures from the private company running an intelligence project nicknamed "Operation KitKat" because a correlation had been found between anti-Israeli sentiments and liking Nikes and KitKats. Several of Kosinski's co-authored papers list the US government's Defense Advanced Research Projects Agency, or DARPA, as a funding source. His résumé boasts of meetings with senior figures at two of the world's largest defense contractors, Boeing and Microsoft, both companies that have sponsored his research. He ran a workshop on digital footprints and psychological assessment for the Singaporean Ministry of Defense.

For his part, Aleksandr Kogan established a company, Global Science Research, that contracted with SCL, using Facebook data to map personality traits for its work in elections (Kosinski claims that Kogan essentially reverse-engineered the app that he and Stillwell had developed). Kogan's app harvested data on Facebook users who agreed to take a personality test for the purposes of academic research (though it was, in fact, to be used by SCL for non-academic ends). But according to Wylie, the app also collected data on their entire -- and nonconsenting -- network of friends. Once Cambridge Analytica and SCL had won contracts with the State Department and were pitching to the Pentagon, Wylie became alarmed that this illegally-obtained data had ended up at the heart of government, along with the contractors who might abuse it.

This apparently bizarre intersection of research on topics like love and kindness with defense and intelligence interests is not, in fact, particularly unusual. It is typical of the kind of dual-use research that has shaped the field of social psychology in the US since World War II.

Much of the classic, foundational research on personality, conformity, obedience, group polarization, and other such determinants of social dynamics -- while ostensibly civilian -- was funded during the cold war by the military and the CIA. The cold war was an ideological battle, so, naturally, research on techniques for controlling belief was considered a national security priority. This psychological research laid the groundwork for propaganda wars and for experiments in individual "mind control."

The pioneering figures from this era -- for example, Gordon Allport on personality and Solomon Asch on belief conformity -- are still cited in NATO psy-ops literature to this day .."

Craig H. , , March 24, 2018 at 3:42 pm

This is an issue which has frustrated me greatly. In spite of the fact that the country's leading psychologist (at the very least one of them -- ex-APA president Seligman) has been documented taking consulting fees from Guantanamo and Black Sites goon squads, my social science pals refuse to recognize any corruption at the core of their so-called replicated quantitative research.

I have asked more than five people to point at the best critical work on the Big 5 Personality theory and they all have told me some variant of "it is the only way to get consistent numbers". Not one has ever retreated one step or been receptive to the suggestion that this might indicate some fallacy in trying to assign numbers to these properties.

They eat their own dog food all the way and they seem to be suffering from a terrible malnutrition. At least the anthropologists have Price . (Most of that book can be read for free in installments at Counterpunch.)

[Mar 14, 2018] Washington policies as the result of a monumental unconscious group-think based on individual self interest

Individual are highly rewarded i f they "accept the party-line" that masquerades as US interests".
Rebels, individual thinkers tend to get fired, not promoted, snubbed
Notable quotes:
"... The individuals who work in our State Dept., CIA, DOD, corporate defense contractors, lobbyists, politicians, media......these individuals appear to benefit on an indivdual level (promotions, high paying jobs, social acceptance, nice neighborhoods and schools for their kids) when they "accept the party-line" that masquerades as US interests". ..."
Mar 14, 2018 | turcopolier.typepad.com

walter, March 2018 at 03:03 PM

Jack, in my opinion, there is no "US". The "US" doesn't have an interest.

There are individuals who behave in their own individual self interest.

The individuals who work in our State Dept., CIA, DOD, corporate defense contractors, lobbyists, politicians, media......these individuals appear to benefit on an indivdual level (promotions, high paying jobs, social acceptance, nice neighborhoods and schools for their kids) when they "accept the party-line" that masquerades as US interests".

Its a monumental unconscious group-think based on individual self interest.

This is my understanding of "the Borg" and "US interests", "US foreign policy goals"....they are actually individual interests shaped by what individuals who work in this realm believe they should believe and espouse to achieve their own goals. Rebels, individual thinkers tend to get fired, not promoted, snubbed

[Mar 12, 2018] There is no democracy without economic democracy by Jason Hirthler

Highly recommended!
Like many high demand cults neoliberalism is a trap, from which it is very difficult to escape...
Notable quotes:
"... A large, open-border global free market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism. ..."
"... Globalists, as neoliberal capitalists are often called, also understood that democracy, defined by a smattering of individual rights and a voting booth, was the ideal vehicle to usher neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes no demands in the economic sphere. Socialism does. Communism does. These models directly address ownership of the means of production. Not so democratic capitalism. This permits the globalists to continue to own the means of production while proclaiming human rights triumphant in nations where interventions are staged. ..."
"... The enduring lie is that there is no democracy without economic democracy. ..."
turcopolier.typepad.com

Part 3 - A False Promise

This 'Washington Consensus' is the false promise promoted by the West. The reality is quite different. The crux of neoliberalism is to eliminate democratic government by downsizing, privatizing, and deregulating it. Proponents of neoliberalism recognize that the state is the last bulwark of protection for the common people against the predations of capital. Remove the state and they'll be left defenseless .

Think about it. Deregulation eliminates the laws. Downsizing eliminates departments and their funding. Privatizing eliminates the very purpose of the state by having the private sector take over its traditional responsibilities.

Ultimately, nation-states would dissolve except perhaps for armies and tax systems. A large, open-border global free market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism.

Globalists, as neoliberal capitalists are often called, also understood that democracy, defined by a smattering of individual rights and a voting booth, was the ideal vehicle to usher neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes no demands in the economic sphere. Socialism does. Communism does. These models directly address ownership of the means of production. Not so democratic capitalism. This permits the globalists to continue to own the means of production while proclaiming human rights triumphant in nations where interventions are staged.

The enduring lie is that there is no democracy without economic democracy.

What matters to the one percent and the media conglomerates that disseminate their worldview is that the official definitions are accepted by the masses. The real effects need never be known. The neoliberal ideology (theory) thus conceals the neoliberal reality (practice). And for the masses to accept it, it must be mass produced. Then it becomes more or less invisible by virtue of its universality.

Source, links:

https://www.counterpunch.org/2018/03/02/colonizing-the-western-mind/
[ 1 ] [ 2 ]

[Mar 12, 2018] Colonizing the Western Mind using think tanks

Highly recommended!
Notable quotes:
"... In a short span of time in the 1970s, dozens of think tanks were established across the western world and billions of dollars were spent proselytizing the tenets of the Powell Memo in 1971, which galvanized a counter-revolution to the liberal upswing of the Sixties. The neoliberal economic model of deregulation, downsizing, and privatization was preached by the Reagan-Thatcher junta, liberalized by the Clinton regime, temporarily given a bad name by the unhinged Bush administration, and saved by telegenic restoration of the Obama years. ..."
"... Today think tanks like the Heritage Foundation, the Brookings Institute, Stratfor, Cato Institute, American Enterprise Institute, Council on Foreign Relations, Carnegie Endowment, the Open Society Foundation, and the Atlantic Council, among many others, funnel millions of dollars in donations into cementing neoliberal attitudes in the American mind. ..."
"... The ideological assumptions, which serve to justify what you could call neocolonial tactics, are relatively clear: the rights of the individual to be free of overreach from monolithic institutions like the state. Activist governments are inherently inefficient and lead directly to totalitarianism. Markets must be free and individuals must be free to act in those markets. People must be free to choose, both politically and commercially, in the voting booth and at the cash register. ..."
"... This conception of markets and individuals is most often formulated as "free-market democracy," a misleading conceit that conflates individual freedom with the economic freedom of capital to exploit labor. So when it comes to foreign relations, American and western aid would only be given on the condition that the borrowers accepted the tenets of an (highly manipulable) electoral system and vowed to establish the institutions and legal structures required to fully realize a western market economy. ..."
Mar 12, 2018 | www.counterpunch.org

In Christopher Nolan's captivating and visually dazzling film Inception, a practitioner of psychic corporate espionage must plant and idea inside a CEO's head. The process is called inception, and it represents the frontier of corporate influence, in which mind spies no longer just "extract" ideas from the dreams of others, but seed useful ideas in a target's subconscious.

Inception is a well-crafted piece of futuristic sci-fi drama, but some of the ideas it imparts are already deeply embedded in the American subconscious.

The notion of inception, of hatching an idea in the mind of a man or woman without his or her knowledge, is the kernel of propaganda, a black art practiced in the States since the First World War. Today we live beneath an invisible cultural hegemony, a set of ideas implanted in the mass mind by the U.S. state and its corporate media over decades. Invisibility seems to happen when something is either obscure or ubiquitous. In a propaganda system, an overarching objective is to render the messaging invisible by universalizing it within the culture. Difference is known by contrast. If there are no contrasting views in your field of vision, it's easier to accept the ubiquitous explanation. The good news is that the ideology is well-known to some who have, for one lucky reason or another, found themselves outside the hegemonic field and are thus able to contrast the dominant worldview with alternative opinions. On the left, the ruling ideology might be described as neoliberalism, a particularly vicious form of imperial capitalism that, as would be expected, is camouflaged in the lineaments of humanitarian aid and succor.

Inception 1971

In a short span of time in the 1970s, dozens of think tanks were established across the western world and billions of dollars were spent proselytizing the tenets of the Powell Memo in 1971, which galvanized a counter-revolution to the liberal upswing of the Sixties. The neoliberal economic model of deregulation, downsizing, and privatization was preached by the Reagan-Thatcher junta, liberalized by the Clinton regime, temporarily given a bad name by the unhinged Bush administration, and saved by telegenic restoration of the Obama years.

The ideology that underlay the model saturated academia, notably at the University of Chicago, and the mainstream media, principally at The New York Times. Since then it has trickled down to the general populace, to whom it now feels second nature.

Today think tanks like the Heritage Foundation, the Brookings Institute, Stratfor, Cato Institute, American Enterprise Institute, Council on Foreign Relations, Carnegie Endowment, the Open Society Foundation, and the Atlantic Council, among many others, funnel millions of dollars in donations into cementing neoliberal attitudes in the American mind.

The ideological assumptions, which serve to justify what you could call neocolonial tactics, are relatively clear: the rights of the individual to be free of overreach from monolithic institutions like the state. Activist governments are inherently inefficient and lead directly to totalitarianism. Markets must be free and individuals must be free to act in those markets. People must be free to choose, both politically and commercially, in the voting booth and at the cash register.

This conception of markets and individuals is most often formulated as "free-market democracy," a misleading conceit that conflates individual freedom with the economic freedom of capital to exploit labor. So when it comes to foreign relations, American and western aid would only be given on the condition that the borrowers accepted the tenets of an (highly manipulable) electoral system and vowed to establish the institutions and legal structures required to fully realize a western market economy.

These demands were supplemented with notions of the individual right to be free of oppression, some fine rhetoric about women and minorities, and somewhat more quietly, a judicial understanding that corporations were people, too. Together, an unshackled economy and an unfettered populace, newly equipped with individual rights, would produce the same flourishing and nourishing demos of mid-century America that had been the envy of humanity.

[Mar 03, 2018] Strange science, economics. Judging from the titles, much of it consists of neoliberal cheerleading

Neoliberal economists are a new type of clergy. As simple as this. Neoliberal God is great that's what they are preaching to students.
Notable quotes:
"... Bronze Age: Greatest Age EVAH! ..."
"... It's surprising economists feel the need to engage in happy talk, considering that markets are supposed to be natural, just, and efficient. Like clergy preaching to a perpetually backsliding laity about the one true God, Whom only a fool would doubt. If God were so great, there'd be no need to harp on it. In any case, this goes some way toward accounting for Bennet's statement. ..."
"... It takes a half-educated person to say something like that. First you get the ideas by way of a certain education, and then you don't think about them, in part because the educators discourage that kind of thing. ..."
Mar 03, 2018 | www.nakedcapitalism.com

Paul Cardan , March 2, 2018 at 3:12 pm

"[Capitalism] has been the greatest engine of, it's been the greatest anti-poverty program and engine of progress that we've seen."

I can almost smell the economics section of my local bookstore. Strange science, economics. Judging from the titles, much of it consists of cheerleading. Very different from history, anthropology, or sociology.

I never see history titles like Bronze Age: Greatest Age EVAH! It's surprising economists feel the need to engage in happy talk, considering that markets are supposed to be natural, just, and efficient. Like clergy preaching to a perpetually backsliding laity about the one true God, Whom only a fool would doubt. If God were so great, there'd be no need to harp on it. In any case, this goes some way toward accounting for Bennet's statement.

It takes a half-educated person to say something like that. First you get the ideas by way of a certain education, and then you don't think about them, in part because the educators discourage that kind of thing.

If America Wasn't America, The United States Would Be Bombing It". Posted by: john | Feb 13, 2018 6:07:37 AM | 43

[Feb 14, 2018] "The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary." - H. L. Mencken, 1880-1956. american writer

[Feb 11, 2018] Social psychologists have long talked about how emotional manipulation can work effectively to snooker a large percentage of the population, to get them, at least temporarily, to believe the exact opposite of the facts

Notable quotes:
"... These techniques are known in the intelligence community as "perception management," and have been refined since the 1980s "to keep the American people compliant and confused," as the late Robert Parry has reported . ..."
"... Population in the country was very poorly informed any how. And now, they, The Ruling Establishment which includes Media, have completely messed the people up -- making them compliant and confused. ..."
"... Does any body have idea how they are going to bring an end to this completely concocted bizarre drama? ..."
Feb 09, 2018 | consortiumnews.com

Originally from: 'This is Nuts' Liberals Launch 'Largest Mobilization in History' in Defense of Russiagate Probe – Consortiumnews By Coleen Rowley and Nat Parry

... ... ...

Social psychologists have long talked about how emotional manipulation can work effectively to snooker a large percentage of the population, to get them, at least temporarily, to believe the exact opposite of the facts.

These techniques are known in the intelligence community as "perception management," and have been refined since the 1980s "to keep the American people compliant and confused," as the late Robert Parry has reported .

We saw this in action last decade, when after months of disinformation, about 70% of Americans came to falsely believe that Saddam Hussein was behind 9/11 when the truth was the opposite – Saddam was actually an enemy of the Al Qaeda perpetrators.

... ... ...

Coleen Rowley, a retired FBI special agent and division legal counsel whose May 2002 memo to then-FBI Director Robert Mueller exposed some of the FBI's pre-9/11 failures, was named one of TIME magazine's "Persons of the Year" in 2002.

Nat Parry is co-author of Neck Deep: The Disastrous Presidency of George W. Bush . weilunion , February 9, 2018 at 5:35 pm

"Social psychologists have long talked about how emotional manipulation can work effectively to snooker a large percentage of the population, to get them, at least temporarily, to believe the exact opposite of the facts. These techniques are known in the intelligence community as "perception management," and have been refined since the 1980s "to keep the American people compliant and confused," as the late Robert Parry has reported. We saw this in action last decade, when after months of disinformation, about 70% of Americans came to falsely believe that Saddam Hussein was behind 9/11 when the truth was the opposite -- Saddam was actually an enemy of the Al Qaeda perpetrators."

Cognitive dissonance, lack of critical thinking, reliance on authority, in this case a former head of a criminal organization called the FBI.

People have no class consciousness. They have no idea who their enemies ar or how to organize.

This is the sad case of liberalism melting like warm butter while the fascists congeal.

Joe Tedesky , February 9, 2018 at 7:27 pm

Nicely put.

Dave P. , February 10, 2018 at 2:51 am

"Social psychologists have long talked about how emotional manipulation can work effectively to snooker a large percentage of the population, to get them, at least temporarily, to believe the exact opposite of the facts. . ."

Yes. On any bar counter, just start some conversation with the person sitting to you. With all this bizarre drama -- Russia-Gate, Iran, memos, dossier . . . going on TV, and in Washington being enacted knowingly by the the Powers who rule -- both, so called Liberals and Conservatives -- one can see how this emotional manipulation has worked to snooker just about most of the population. I just had the experience today during lunch at a bar counter. In our conversation, the person sitting next to me was ready to nuke Iran, N. Korea, and go after Russia; and go after Hillary too.

Population in the country was very poorly informed any how. And now, they, The Ruling Establishment which includes Media, have completely messed the people up -- making them compliant and confused.

Does any body have idea how they are going to bring an end to this completely concocted bizarre drama?

[Feb 10, 2018] The generals are not Borgists. They are something worse ...

Highly recommended!
Notable quotes:
"... The post WW2 promotion process in the armed forces has produced a group at the top with a mentality that typically thinks rigorously but not imaginatively or creatively. ..."
"... These men got to their present ranks and positions by being conformist group thinkers who do not stray outside the "box" of their guidance from on high. They actually have scheduled conference calls among themselves to make sure everyone is "on board." ..."
"... If asked at the top, where military command and political interaction intersect, what policy should be they always ask for more money and to be allowed to pursue outcomes that they can understand as victory and self fulfilling with regard to their collective self image as warrior chieftains. ..."
"... In Trump's time his essential disinterest in foreign policy has led to a massive delegation of authority to Mattis and the leadership of the empire's forces. Their reaction to that is to look at their dimwitted guidance from on high (defeat IS, depose Assad and the SAG, triumph in Afghanistan) and to seek to impose their considerable available force to seek accomplishment as they see fit of this guidance in the absence of the kind of restrictions that Obama placed on them. ..."
"... Like the brass, I, too, am a graduate of all those service schools that attend success from the Basic Course to the Army War College. I will tell you again that the people at the top are not good at "the vision thing." They are not stupid at all but they are a collective of narrow thinkers ..."
"... Academia reinforces the groupthink. The mavericks are shunned or ostracized. The only ones I have seen with some degree of going against the grain are technology entrepreneurs. ..."
"... "They are not stupid at all but they are a collective of narrow thinkers." I have found this to be the case with 80 to 90% of most professions. A good memory and able to perform meticulously what they have been taught, but little thinking outside that narrow box. Often annoying, but very dangerous in this case. ..."
"... Since Afghanistan and the brass were mentioned in the editorial statement, here is an immodest question -- Where the brass have been while the opium production has been risen dramatically in Afghanistan under the US occupation? "Heroin Addiction in America Spearheaded by the US-led War on Afghanistan" by Paul Craig Roberts: https://www.paulcraigroberts.org/2018/02/06/heroin-addiction-america-spearheaded-us-led-war-afghanistan/ ..."
"... A simple Q: What has been the role of the CENTCOM re the racket? Who has arranged the protection for the opium production and for drug dealers? Roberts suggests that the production of opium in Afghanistan "finances the black operations of the CIA and Western intelligence agencies." -- All while Awan brothers, Alperovitch and such tinker with the US national security? ..."
"... God help the poor people of Syria. ..."
"... thanks pat... it seems like the usa has had a steady group of leaders that have no interest in the world outside of the usa, or only in so far as they can exploit it for their own interest... maybe that sums up the foreign policy of the usa at this point... you say trump is disinterested.. so all the blather from trump about 'why are we even in syria?', or 'why can't we be friends with the russia?' is just smoke up everyone's ass... ..."
"... Predictably there is always someone who says that this group is not different from all others. Unfortunately the military function demands more than the level of mediocrity found in most groups ..."
"... A lot of technology entrepreneurs--especially those active today--are stuck in their own groupthink, inflated by their sense that they are born for greatness and can do no wrong. ..."
"... The kind of grand schemes that the top people at Google, Uber, and Facebook think up to remake the universe in their own idea of "good society" are frightening. That they are cleverer (but not necessarily wiser) than the academics, borgists, or generals, I think, makes them even more dangerous. ..."
"... They [the generals] seem to have deliberately completely ignored the issues and policy positions Trump ran on as President. It isn't a case of ignorance but of wilful disregard. ..."
"... So true and as others commented this is a sad feature of the human race and all human organizations. Herd mentality ties into social learning ..."
"... Our massive cultural heritages are learned by observing and taken in as a whole. This process works within organizations as well. ..."
"... I suspect a small percentage of the human race functions differently than the majority and retains creative thinking and openness along with more emphasis on cognitive thinking than social learning but generally they always face a battle when working to change the group "consensus", i.e. Fulton's folly, scepticism on whether man would ever fly, etc. ..."
"... This is an interesting discussion. The top in organisations (civil and military) are increasingly technocrats and thinking like systems managers. They are unable to innovate because they lack the ability to think out of the box. Usually there is a leader who depends on specialists. Others (including laymen) are often excluding from the decision-making-proces. John Ralston Saul's Voltaires Bastards describes this very well. ..."
"... Because of natural selection (conformist people tend to choose similar people who resemble their own values and ways-of-thinking) organizations have a tendency to become homogeneous (especially the higher management/ranks). ..."
"... In combination with the "dumbing" of people (also of people who have a so-called good education (as described in Richard Sale's Sterile Chit-Chat ) this is a disastrous mix. ..."
"... That's true not only of the US military but of US elites in general across all of the spectra. And because that reality is at odds with the group-think of those within the various elements that make up the spectra it doesn't a hearing. Anyone who tries to bring it up risks being ejected from the group. ..."
"... "The United States spent at least $12 billion in Syria-related military and civilian expenses in the four years from 2014 through 2017, according to the former U.S. ambassador to the country. This $12 billion is in addition to the billions more spent to pursue regime change in Syria in the previous three years, after war broke out in 2011." https://goo.gl/8pj5cD ..."
"... "They are not stupid at all but they are a collective of narrow thinkers." I've often pondered that concept. Notice how many of radical extremist leaders were doctors, engineers and such? Narrow and deep. ..."
"... Long ago when I was a professor, I advised my students that "the law is like a pencil sharpener, it sharpens the mind by narrowing it." I tried to encourage them to "think backwards". ..."
"... Col, I think it might help people to think of "the Borg" - as you have defined & applied it - in a broader context. It struck me particularly as you ID'd the launching of our modern military group-think / careerism behavior coming from the watershed of industrialized scale & processes that came out of WWII. ..."
"... We note parallel themes in all significant sectors of our civilization. The ever-expanding security state, the many men in Gray Flannel Suits that inhabit corporate culture, Finance & Banking & Big Health scaling ever larger - all processes aimed to slice the salami thinner & quicker, to the point where meat is moot ... and so it goes. ..."
"... I just finished reading Command & Control (about nuclear weapons policy, systems design & accidents). I am amazed we've made it this far. ..."
Feb 10, 2018 | turcopolier.typepad.com

(Editorial Statement)

The Borgist foreign policy of the administration has little to do with the generals. To comprehend the generals one must understand their collective mentality and the process that raised them on high as a collective of their own. The post WW2 promotion process in the armed forces has produced a group at the top with a mentality that typically thinks rigorously but not imaginatively or creatively.

These men got to their present ranks and positions by being conformist group thinkers who do not stray outside the "box" of their guidance from on high. They actually have scheduled conference calls among themselves to make sure everyone is "on board."

If asked at the top, where military command and political interaction intersect, what policy should be they always ask for more money and to be allowed to pursue outcomes that they can understand as victory and self fulfilling with regard to their collective self image as warrior chieftains.

In Obama's time they were asked what policy should be in Afghanistan and persuaded him to reinforce their dreams in Afghanistan no matter how unlikely it always was that a unified Western oriented nation could be made out of a collection of disparate mutually alien peoples.

In Trump's time his essential disinterest in foreign policy has led to a massive delegation of authority to Mattis and the leadership of the empire's forces. Their reaction to that is to look at their dimwitted guidance from on high (defeat IS, depose Assad and the SAG, triumph in Afghanistan) and to seek to impose their considerable available force to seek accomplishment as they see fit of this guidance in the absence of the kind of restrictions that Obama placed on them.

Like the brass, I, too, am a graduate of all those service schools that attend success from the Basic Course to the Army War College. I will tell you again that the people at the top are not good at "the vision thing." They are not stupid at all but they are a collective of narrow thinkers. pl


Jack , 09 February 2018 at 05:42 PM

Sir

IMO, this conformism pervades all institutions. I saw when I worked in banking and finance many moons ago how moving up the ranks in any large organization meant you didn't rock the boat and you conformed to the prevailing groupthink. Even nutty ideas became respectable because they were expedient.

Academia reinforces the groupthink. The mavericks are shunned or ostracized. The only ones I have seen with some degree of going against the grain are technology entrepreneurs.

Fredw , 09 February 2018 at 06:26 PM
You remind me of an old rumination by Thomas Ricks:

Take the example of General George Casey. According to David Cloud and Greg Jaffe's book Four Stars, General Casey, upon learning of his assignment to command U.S. forces in Iraq, received a book from the Army Chief of Staff. The book Counterinsurgency Lessons Learned from Malaya and Vietnam was the first book he ever read about guerilla warfare." This is a damning indictment of the degree of mental preparation for combat by a general. The Army's reward for such lack of preparation: two more four star assignments.

http://foreignpolicy.com/2012/02/07/cmon-man-meathead-generals-and-some-other-things-that-are-driving-me-crazy-about-life-in-this-mans-post-911-army/

Peter AU , 09 February 2018 at 06:37 PM
"They are not stupid at all but they are a collective of narrow thinkers." I have found this to be the case with 80 to 90% of most professions. A good memory and able to perform meticulously what they have been taught, but little thinking outside that narrow box. Often annoying, but very dangerous in this case.
Anna , 09 February 2018 at 06:48 PM
Since Afghanistan and the brass were mentioned in the editorial statement, here is an immodest question -- Where the brass have been while the opium production has been risen dramatically in Afghanistan under the US occupation? "Heroin Addiction in America Spearheaded by the US-led War on Afghanistan" by Paul Craig Roberts: https://www.paulcraigroberts.org/2018/02/06/heroin-addiction-america-spearheaded-us-led-war-afghanistan/

" in 2000-2001 the Taliban government –with the support of the United Nations (UNODC) – implemented a successful ban on poppy cultivation. Opium production which is used to produce grade 4 heroin and its derivatives declined by more than 90 per cent in 2001. The production of opium in 2001 was of the order of a meager 185 tons. It is worth noting that the UNODC congratulated the Taliban Government for its successful opium eradication program. The Taliban government had contributed to literally destabilizing the multibillion dollar Worldwide trade in heroin.

In 2017, the production of opium in Afghanistan under US military occupation reached 9000 metric tons. The production of opium in Afghanistan registered a 49 fold increase since Washington's invasion. Afghanistan under US military occupation produces approximately 90% of the World's illegal supply of opium which is used to produce heroin. Who owns the airplanes and ships that transport heroin from Afghanistan to the US? Who gets the profits?"

---A simple Q: What has been the role of the CENTCOM re the racket? Who has arranged the protection for the opium production and for drug dealers? Roberts suggests that the production of opium in Afghanistan "finances the black operations of the CIA and Western intelligence agencies." -- All while Awan brothers, Alperovitch and such tinker with the US national security?

J , 09 February 2018 at 07:05 PM
Colonel,

There needs to be a 're-education' of the top, all of them need to be required to attend Green Beret think-school, in other words they need to be forced to think outside the box, and to to think on their feet. They need to understand fluid situations where things change at the drop of a hat, be able to dance the two-step and waltz at the same time. In other words they need to be able to walk and chew gum and not trip over their shoe-laces.

By no means are they stupid, but you hit the nail on the head when you said 'narrow thinkers'. Their collective hive mentality that has developed is not a good thing.

divadab , 09 February 2018 at 07:16 PM
God help the poor people of Syria.
james , 09 February 2018 at 07:30 PM
thanks pat... it seems like the usa has had a steady group of leaders that have no interest in the world outside of the usa, or only in so far as they can exploit it for their own interest... maybe that sums up the foreign policy of the usa at this point... you say trump is disinterested.. so all the blather from trump about 'why are we even in syria?', or 'why can't we be friends with the russia?' is just smoke up everyone's ass...

i like what you said here "conformist group thinkers who do not stray outside the "box" of their guidance from on high. They actually have scheduled conference calls among themselves to make sure everyone is "on board." - that strikes me as very true - conformist group thinkers... the world needs less of these types and more actual leaders who have a vision for something out of the box and not always on board... i thought for a while trump might fill this bill, but no such luck by the looks of it now..

David E. Solomon , 09 February 2018 at 07:50 PM
Colonel Lang,

Your description of these guys sounds like what we have heard about Soviet era planners. Am I correct in my understanding, or am I missing something?

Regards,

David

DianaLC , 09 February 2018 at 07:56 PM
As a young person in eighth grade, I learned about the "domino theory" in regard to attempts to slow the spread of communism. Then my generation was, in a sense, fractured around the raging battles for and against our involvement in Vietnam.

I won't express my own opinion on that. But I mention it because it seems to be a type of "vision thing."

So, now I ask, what would be your vision for the Syrian situation?

Bill Herschel , 09 February 2018 at 09:11 PM
This has been going on for a long time has it not? Westmoreland? MacArthur?

How did this happen?

turcopolier , 09 February 2018 at 09:40 PM
Bill Herschel

Westmoreland certainly, Macarthur certainly not. This all started with the "industrialization" of the armed forces in WW2. we never recovered the sense of profession as opposed to occupation after the massive expansion and retention of so many placeholders. a whole new race of Walmart manager arose and persists. pl

turcopolier , 09 February 2018 at 09:48 PM
DianaC

The idea of the Domino Theory came from academia, not the generals of that time. They resisted the idea of a war in east Asia until simply ordered into it by LBJ. After that their instinct for acting according to guidance kicked in and they became committed to the task. Syria? Do you think I should write you an essay on that? SST has a large archive and a search machine. pl

turcopolier , 09 February 2018 at 09:55 PM
David E. Solomon

I am talking about flag officers at present, not those beneath them from the mass of whom they emerge. There are exceptions. Martin Dempsey may have been one such. The system creates such people at the top. pl

turcopolier , 09 February 2018 at 10:08 PM
elaine,

Your usual animosity for non-left wing authority is showing. A commander like the CENTCOM theater commander (look it up) operates within guidance from Washington, broad guidance. Normally this is the president's guidance as developed in the NSC process. Some presidents like Obama and LBJ intervene selectively and directly in the execution of that guidance. Obama had a "kill list" of jihadis suggested by the IC and condemned by him to die in the GWOT. He approved individual missions against them. LBJ picked individual air targets in NVN. Commanders in the field do not like that . They think that freedom of action within their guidance should be accorded them. This CinC has not been interested thus far in the details and have given the whole military chain of command wide discretion to carry out their guidance. pl

turcopolier , 09 February 2018 at 10:12 PM
J

Thank you, but it is real GBs that you like, not the Delta and SEAL door kickers. pl

turcopolier , 09 February 2018 at 10:24 PM
Gaikomainaku

"I am not sure that I understand what makes a Borgist different from a military conformist." The Borg and the military leaders are not of the same tribe. they are two different collectives who in the main dislike and distrust each other. pl

turcopolier , 09 February 2018 at 10:27 PM
Anna. Their guidance does not include a high priority for eradicating the opium trade. Their guidance has to do with defeating the jihadis and building up the central government. pl
turcopolier , 09 February 2018 at 10:30 PM
Peter AU

Predictably there is always someone who says that this group is not different from all others. Unfortunately the military function demands more than the level of mediocrity found in most groups. pl

turcopolier , 09 February 2018 at 10:44 PM
james

Trump would like to better relations with Russia but that is pretty much the limit of his attention to foreign affairs at any level more sophisticated than expecting deference. He is firmly focused on the economy and base solidifying issues like immigration. pl

Peter AU , 09 February 2018 at 11:01 PM
The medical profession comes to mind. GP's and specialists. Many of those working at the leading edge of research seem much wider thinking and are not locked into the small box of what they have been taught.
turcopolier , 09 February 2018 at 11:16 PM
Peter AU

The GPs do not rule over a hierarchy of doctors. pl

J -> turcopolier ... , 09 February 2018 at 11:22 PM
Combat Applications Group and SEALS don't even begin to compare, they're not in the same league as 'real deal' GBs. The GBs are thinkers as well as doers, whereas Combat Applications Group and SEALs all they know is breach and clear, breach and clear.

There is more to life than breach and clear. Having worked with all in one manner or another, I'll take GBs any day hands down. It makes a difference when the brain is engaged instead of just the heel.

kao_hsien_chih -> Jack... , 09 February 2018 at 11:22 PM
A lot of technology entrepreneurs--especially those active today--are stuck in their own groupthink, inflated by their sense that they are born for greatness and can do no wrong.

The kind of grand schemes that the top people at Google, Uber, and Facebook think up to remake the universe in their own idea of "good society" are frightening. That they are cleverer (but not necessarily wiser) than the academics, borgists, or generals, I think, makes them even more dangerous.

FB Ali , 09 February 2018 at 11:23 PM
Col Lang,

They are indeed "narrow thinkers", but I think the problem runs deeper. They seem to be stuck in the rut of a past era. When the US was indeed the paramount military power on the globe, and the US military reigned supreme. They can't seem to accept the reality of the world as it is now.

Of course, these policies ensure that they continue to be well-funded, even if the US is bankrupting itself in the process.

turcopolier , 10 February 2018 at 01:03 AM
dogear

He is still the Saudi Mukhtar for the US and most of the generals are still narrow minded. pl

LondonBob , 10 February 2018 at 06:59 AM
They [the generals] seem to have deliberately completely ignored the issues and policy positions Trump ran on as President. It isn't a case of ignorance but of wilful disregard.
turcopolier , 10 February 2018 at 07:55 AM
LondonBob

I think that is true but, they were able to talk him into that, thus far. pl

DianaLC said in reply to turcopolier ... , 10 February 2018 at 09:23 AM
I've been reading this blog for some time. My question was facetious and written with the understanding of your statement about the generals not having a good grasp of "the vision thing" on their own.
Terry , 10 February 2018 at 09:25 AM
So true and as others commented this is a sad feature of the human race and all human organizations. Herd mentality ties into social learning. Chimps are on average more creative and have better short term memory than humans. We gave up some short term memory in order to be able to learn quickly by mimicking. If shown how to open a puzzle box but also shown unnecessary extra steps a chimp will ignore the empty steps and open the box with only the required steps. A human will copy what they saw exactly performing the extra steps as if they have some unknown value to the process. Our massive cultural heritages are learned by observing and taken in as a whole. This process works within organizations as well.

I suspect a small percentage of the human race functions differently than the majority and retains creative thinking and openness along with more emphasis on cognitive thinking than social learning but generally they always face a battle when working to change the group "consensus", i.e. Fulton's folly, scepticism on whether man would ever fly, etc.

One nice feature of the internet allows creative thinkers to connect and watch the idiocy of the world unfold around us.

"A natural desire to be part of the 'in crowd' could damage our ability to make the right decisions, a new study has shown."

https://www.sciencedaily.com/releases/2014/12/141216212049.htm

TV , 10 February 2018 at 10:18 AM
The military by definition is a rigid hierarchical structure. It could not function as a collection of individuals. This society can only breed conforming narrow leaders as an "individual" would leave or be forced out.
Barbara Ann , 10 February 2018 at 10:22 AM
That part of our brain responsible for the desire to be part of the 'in crowd' may affect our decision-making process, but it is also the reason we keep chimps in zoos and not the other way around. Or, to put it another way; if chimps had invented Facebook, I might consider them more creative than us.
Babak Makkinejad -> Terry... , 10 February 2018 at 10:30 AM
Do you think chimps are, per the Christian Docrine, in a State of Fall or in a State of Grace?
Adrestia , 10 February 2018 at 10:32 AM
This is an interesting discussion. The top in organisations (civil and military) are increasingly technocrats and thinking like systems managers. They are unable to innovate because they lack the ability to think out of the box. Usually there is a leader who depends on specialists. Others (including laymen) are often excluding from the decision-making-proces. John Ralston Saul's Voltaires Bastards describes this very well.

Because of natural selection (conformist people tend to choose similar people who resemble their own values and ways-of-thinking) organizations have a tendency to become homogeneous (especially the higher management/ranks).

In combination with the "dumbing" of people (also of people who have a so-called good education (as described in Richard Sale's Sterile Chit-Chat ) this is a disastrous mix.

Homogeneity is the main culprit. A specialists tends to try to solve problems with the same knowledge-set that created these.

Not all (parts of) organizations and people suffer this fate. Innovations are usually done by laymen and not by specialists. The organizations are often heterogeneous and the people a-typical and/or eccentric.

(mainly the analytical parts of ) intelligence organizations and investment banks are like that if they are worth anything. Very heterogeneous with a lot of a-typical people. I think Green Berets are also like that. An open mind and genuine interest in others (cultures, way of thinking, religion etc) is essential to understand and to perform and also to prevent costly mistakes (in silver and/or blood).

It is possible to create firewalls against tunnel-vision. The Jester performed such a role. Also think of the Emperors New Clothes . The current trend of people with limited vision and creativity prevents this. Criticism is punished with a lack of promotion, job-loss or even jail (whistle-blowers)

IMO this is why up to a certain rank (colonel or middle management) a certain amount of creativity or alternative thinking is allowed, but conformity is essential to rise higher.

I was very interested in the Colonel's remark on the foreign background of the GB in Vietnam. If you would like to expand on this I would be much obliged? IMO GB are an example of a smart, learning, organization (in deed and not only in word as so many say of themselves, but who usually are at best mediocre)

Generalfeldmarschall von Hindenburg -> gaikokumaniakku... , 10 February 2018 at 11:58 AM
Isn't the "Borg" really The Atlantic Council?
ISL , 10 February 2018 at 12:58 PM
Dear Colonel,

Would you then say that a rising military officer who does have the vision thing faces career impediments? If so, would you say that the vision thing is lost (if it ever was there) at the highest ranks? In any case, the existence of even a few at the top, like Matthis or Shinseki is a blessing.

ex-PFC Chuck said in reply to FB Ali ... , 10 February 2018 at 01:08 PM
FB Ali:
"When the US was indeed the paramount military power on the globe, and the US military reigned supreme. They can't seem to accept the reality of the world as it is now."
That's true not only of the US military but of US elites in general across all of the spectra. And because that reality is at odds with the group-think of those within the various elements that make up the spectra it doesn't a hearing. Anyone who tries to bring it up risks being ejected from the group.
Adrestia , 10 February 2018 at 02:03 PM
I forget an important part. I really miss an edit-button. Comment-boxes are like looking at something through a straw. Its easy to miss the overview.

Innovations and significant new developments are usually made by laymen. IMO mainly because they have a fresh perspective without being bothered by the (mainstream) knowledge that dominates an area of expertise.

By excluding the laymen errors will continue to be repeated. This can be avoided by using development/decision-making frameworks, but these tend to become dogma (and thus become part of the problem)

Much better is allowing laymen and allowing a-typical people. Then listen to them carefully. Less rigid flexible and very valuable.

kooshy , 10 February 2018 at 02:19 PM
Apparently, according to the last US ambassador to Syria Mr. Ford, from 2014-17 US has spent 12 Billion on Regime change in Syria. IMO, combinedly Iran and Russia so far, have spent far less in Syria than 12 billion by US alone, not considering the rest of her so called coalition. This is a war of attrition, and US operations in wars, are usually far more expensive and longer than anybody else's.

"The United States spent at least $12 billion in Syria-related military and civilian expenses in the four years from 2014 through 2017, according to the former U.S. ambassador to the country. This $12 billion is in addition to the billions more spent to pursue regime change in Syria in the previous three years, after war broke out in 2011." https://goo.gl/8pj5cD

J , 10 February 2018 at 02:49 PM
Colonel, TTG, PT,

FYI regarding Syria

https://www.nbcnews.com/politics/donald-trump/sen-tim-kaine-demands-release-secret-trump-war-powers-memo-n846176

Richardstevenhack -> turcopolier ... , 10 February 2018 at 02:56 PM
It may "demand" it - but does it get it? Soldiers are just as human as everyone else.

I'm reminded of the staff sergeant with the sagging beer belly who informed me, "Stand up straight and look like a soldier..." Or the First Sergeant who was so hung over one morning at inspection that he couldn't remember which direction he was going down the hall to the next room to be inspected. I'm sure you have your own stories of less than competence.

It's a question of intelligence and imagination. And frankly, I don't see the military in any country receiving the "best and brightest" of that country's population, by definition. The fact that someone is patriotic enough to enter the military over a civilian occupation doesn't make them more intelligent or imaginative than the people who decided on the civilian occupation.

Granted, if you fail at accounting, you don't usually die. Death tends to focus the mind, as they say. Nonetheless, we're not talking about the grunts at the level who actually die, still less the relatively limited number of Special Forces. We're talking about the officers and staff at the levels who don't usually die in war - except maybe at their defeat - i.e., most officers over the level of captain.

One can hardly look at this officer crowd in the Pentagon and CENTCOM and say that their personal death concentrates their mind. They are in virtually no danger of that. Only career death faces them - with a nice transition to the board of General Dynamics at ten times the salary.

All in all, I'd have to agree that the military isn't much better at being competent - at many levels above the obvious group of hyper-trained Special Forces - any more than any other profession.

dogear said in reply to Terry... , 10 February 2018 at 02:59 PM
That is well put.most important is the grading system that is designed to fix a person to a particular slot thereby limiting his ability to think "outside the box" and consider the many variables that exist in one particular instant.

Creative thinking allows you to see beyond the storm clouds ahead and realize that the connectedness of different realities both the visible and invisible. For instance the picture of the 2 pairs of korean skaters in the news tells an interesting story on many levels. Some will judge them on their grade of proffiency, while others will see a dance of strategy between 2 foes and a few will know the results in advance and plan accordingly

https://www.google.com.au/amp/www.nbcolympics.com/news/north-south-korean-figure-skating-teams-practice-side-side%3famp?espv=1

Mark Logan said in reply to Peter AU... , 10 February 2018 at 03:30 PM
Peter AU

"They are not stupid at all but they are a collective of narrow thinkers." I've often pondered that concept. Notice how many of radical extremist leaders were doctors, engineers and such? Narrow and deep. STEM is enormously useful to us but seems to be a risky when implanted in shallow earth.

turcopolier , 10 February 2018 at 05:03 PM
Mark Logan

These narrow "but deep" thinkers were unable to grasp the nature of the Iraq War for the first couple of years. They thought of it as a rear area security problem, a combat in cities problem, anything but a popular rebellion based on xenophobia and anti-colonialism The IED problem? They spent several billion dollars on trying to find a technology fix and never succeeded. I know because they kept asking me to explain the war to them and then could not understand the answers which were outside their narrow thought. pl

turcopolier , 10 February 2018 at 05:13 PM
ISL

War College selectees, the national board selected creme de la creme test out as 50% SJs (conformists lacking vision) in Myers-Briggs terms and about 15% NTs (intellectuals). To survive and move upward in a system dominated by SJs, the NTs must pretend to be what they are not. A few succeed. I do not think Mattis is an intellectual merely because he has read a lot. pl

outthere , 10 February 2018 at 05:19 PM
Long ago when I was a professor, I advised my students that "the law is like a pencil sharpener, it sharpens the mind by narrowing it." I tried to encourage them to "think backwards".

My favorite example was a Japanese fisherman who recovered valuable ancient Chinese pottery. Everyone knew where an ancient ship had sunk, but the water was too deep to dive down to the wreck. And everyone knew the cargo included these valuable vases. And the fisherman was the first to figure out how to recover them. He attached a line to an octopus, and lowered it in the area, waited awhile, and pulled it up. Low and behold, the octopus had hidden in an ancient Chinese vase. The fisherman was familiar with trapping octopuses, by lowering a ceramic pot (called "takosubo") into the ocean, waiting awhile, then raising the vase with octopus inside. His brilliance was to think backwards, and use an octopus to catch a vase.

turcopolier , 10 February 2018 at 05:24 PM
TV

By your calculation people like Joe Stilwell and George Patton should not have existed. pl

turcopolier , 10 February 2018 at 05:31 PM
Adrestia

the original GBS were recruited in the 50s to serve in the OSS role with foreign guerrillas behind Soviet lines in th event of war in Europe. Aaron Bank, the founder, recruited several hundred experienced foreign soldiers from the likely countries who wanted to become American. By the time we were in VN these men were a small fraction of GBs but important for their expertise and professionalism. pl

ked , 10 February 2018 at 05:56 PM
Col, I think it might help people to think of "the Borg" - as you have defined & applied it - in a broader context. It struck me particularly as you ID'd the launching of our modern military group-think / careerism behavior coming from the watershed of industrialized scale & processes that came out of WWII.

We note parallel themes in all significant sectors of our civilization. The ever-expanding security state, the many men in Gray Flannel Suits that inhabit corporate culture, Finance & Banking & Big Health scaling ever larger - all processes aimed to slice the salami thinner & quicker, to the point where meat is moot ... and so it goes.

I note many Borgs... Borgism if you will. An organizational behavior that has emerged out of human nature having difficulty adapting to rapidly accelerating complexity that is just too hard to apprehend in a few generations. If (as many commenters on STT seem to...) one wishes to view this in an ideological or spiritual framework only, they may overlook an important truth - that what we are experiencing is a Battle Among Borgs for control over their own space & domination over the other Borgs. How else would we expect any competitive, powerful interest group to act?

In gov & industry these days, we observe some pretty wild outliers... attached to some wild outcomes. Thus the boring behavior of our political industries bringing forth Trump, our promethean technology sector yielding a Musk (& yes, a Zuckerberg).

I find it hard to take very seriously analysts that define their perspective based primarily upon their superior ideals & opposition to others. Isn't every person, every tribe, team or enterprise a borglet-in-becoming? Everybody Wants to Rule the World ... & Everybody Must Get Stoned... messages about how we are grappling with complexity in our times. I just finished reading Command & Control (about nuclear weapons policy, systems design & accidents). I am amazed we've made it this far.

Unfortunately, I would not be amazed if reckless, feckless leaders changed the status quo. I was particularly alarmed hearing Trump in his projection mode; "I would love to be able to bring back our country into a great form of unity, without a major event where people pull together, that's hard to do.

But I would like to do it without that major event because usually that major event is not a good thing." It strikes me that he could be exceptionally willing to risk a Major Event if he felt a form of unity, or self-preservation, was in the offing. I pray (& I do not pray often or easily) that the Generals you have described have enough heart & guts to honor their oath at its most profound level in the event of an Event.

turcopolier , 10 February 2018 at 06:00 PM
babak

As a time traveler from another age, I can only say that for me it means devotion to a set of mores peculiar to a particular profession as opposed to an occupation. pl

Barbara Ann -> outthere... , 10 February 2018 at 06:00 PM
Great example outthere.

Another springs to mind: James Lovelock (of Gaia hypothesis fame) was once part of the NASA team building the first probe to go to Mars to look for signs of life. Lovelock didn't make any friends when he told NASA they were wasting their time, there was none. When asked how he could be so sure, he explained that the composition of the Martian atmosphere made it impossible. "But Martian life may be able to survive under different conditions" was the retort. Lovelock then went on to explain his view that the evolution of microbial life determined the atmospheric composition on Earth, so should be expected to do the same if life had evolved on Mars. Brilliant backwards thinking which ought to have earned him the Nobel prize IMHO (for Gaia). Lovelock, a classic cross-disciplinary scientist, can't be rewarded with such a box-categorized honor, as his idea doesn't fit well into any one.

Another example of cross-disciplinary brilliance was Bitcoin, which has as much to do with its creator's deep knowledge of Anthropology (why people invented & use money) as his expertise in both Economics and Computer Science.

This is they key to creative thinking in my view - familiarity with different fields yields deeper insights.

[Feb 09, 2018] Economists data and models are so unreliable that they should be viewed more of a religious studies than natural science

Feb 09, 2018 | economistsview.typepad.com

llisa2u2 , February 06, 2018 at 11:01 AM

I am posting this info. to this site, as part of personal approach as a US citizen to try to get some REAL FACTS out into the supposedly professional platforms of economists. This platforms are woefully lacking in good, factual information to communicate to anyone, even amongst themselves, and especially to Joe living on an street, or hopefully any house on any street in the US.

Now, what am I posting? The information that I am posting is an example of confusing information that is extremely invalid and should NOT be posted by so-called reliable sources, of professional, or "expertise" information. The reason I am posting an article that is confusing is because this article by Krugman is also confusing, and just as unreliable as the "confusing article" that was written by Alan Harkin at INVESTOPEDIA.


http://bit.ly/2Eof6eM

If you can't believe Investopedia's information, then who can you believe? I am posting the article as an article that the reader can NOT believe. The linked article is absolutely mis-stating IRS facts. This article is one of many that confuse the message about corporate taxation.

Personally, I think it is deliberate. The title of the article: http://bit.ly/2Eof6eM
basically leads the reader "to believe" the article is about how much US corporations such as APPLE, GOOGLE etc. "actually" bottomline- deliver to IRS. BUT, wait, when the reader "really reads" the reader then notes, that the "charts" ONLY reflect the "tax rate". Now, that's a whole different story. Tax rate is not bottomline taxes paid.

So, now if my "logic" and conclusion is "faulty", please enlighten me. The IRS data and this article don't jive in the real world of statistical data. Here is link to STATISTA that is THE data base that is used by top researchers worldwide.

This link shows the REAL data and percentage of corporate TAX PAID, AND FUTURE projections for US etc. etc. I have selected the most obvious and easy to read chart.
The following link presents reliable fact VS The article from INVESTOPEDIA as garbage.

http://bit.ly/2Eof7iQ

I am writing that the article in Investopedia by Aaron Hankin is BS. The content of the article also attempts to establish correlations to S/P action that has absolutely NO plausible fact to make any correlation about anything. I am also writing that most of the media reports about "corporate tax" is BS. I also am writing that this article by Krugman is a fluff, nonsense piece that is also BS. If Krugman were an economist that had any concern about the US economy, he would have, and would be posting this link everywhere on earth.

All that I definitely am trying to do is to get "reasonable data" out there to influence the public mindset to counter BS and try to present FACTS, just like a lot of other intelligent readers are trying to do.

llisa2u2 said in reply to llisa2u2... , February 06, 2018 at 11:08 AM
Please ignore the "typos", I did not hit preview first in this posted version on economists view.
llisa2u2 said in reply to llisa2u2... , February 06, 2018 at 11:15 AM
Basically, I am saying that the political posturing, and propaganda strategies of so many different monied groups is demanding that any "serf" needs to present any comment as if the "serf" is writing some sort of thesis. Really, all the "Talking Faces" are the ones who should be doing that as they present messages to the public"serfs". Otherwise, there should be public disclaimers as to who is paying the "Talking Faces" for delivering their "propaganda". The "sponsored message" dynamics is so convoluted, that any viewer sure can't presume anything. Basically, It just looks like a lot of "Talking Faces" are just making themselves into asses, based on their assumption, and presumptions.
mulp said in reply to llisa2u2... , February 06, 2018 at 01:26 PM
Why do you think anyone associated with investors is an economist rather than a snake oil salesman in the medicine show that is extremely boring?

What to understand economics? Pay attention to Elon Musk, Jeff Bezos.

They pay US workers to build productive assets like factories, transportation products, energy harvesting products, information you want products, all of which can be matched only by competitors paying hundreds of billions to millions of US workers just to catch up in a decade.

Or you can read Keynes.

[Dec 31, 2017] Brainwashing as a key component of the US social system by Paul Craig Roberts

Highly recommended!
Notable quotes:
"... Whitehead documents how hard a not guilty verdict is to come by for an innocent defendant. Even if the falsely accused defendant and his attorney survive the prosecutor's pressure to negotiate a plea bargain and arrive at a trial, they are confronted with jurors who are unable to doubt prosecutors, police, or witnesses paid to lie against the innocent defendant. ..."
"... The question is: why do Americans not only sit silently while the lives of innocents are destroyed, but also actually support the destruction of the lives of innocents? Why do Americans believe "official sources" despite the proven fact that "official sources" lie repeatedly and never tell the truth? ..."
"... The only conclusion that one can come to is that the American people have failed. We have failed Justice. We have failed Mercy. We have failed the US Constitution. We have failed Truth. We have failed Democracy and representative government. We have failed ourselves and humanity. We have failed the confidence that our Founding Fathers put in us. We have failed God. If we ever had the character that we are told we had, we have obviously lost it. Little, if anything, remains of the "American character." ..."
"... The failure of the American character has had tremendous and disastrous consequences for ourselves and for the world. At home Americans have a police state in which all Constitutional protections have vanished. Abroad, Iraq and Libya, two formerly prosperous countries, have been destroyed. Libya no longer exists as a country. One million dead Iraqis, four million displaced abroad, hundreds of thousands of orphans and birth defects from the American ordnance, and continuing ongoing violence from factions fighting over the remains. These facts are incontestable. Yet the United States Government claims to have brought "freedom and democracy" to Iraq. "Mission accomplished," declared one of the mass murderers of the 21st century, George W. Bush. ..."
"... The question is: how can the US government make such an obviously false outrageous claim without being shouted down by the rest of the world and by its own population? Is the answer that good character has disappeared from the world? ..."
"... Or is the rest of the world too afraid to protest? Washington can force supposedly sovereign countries to acquiesce to its will or be cut off from the international payments mechanism that Washington controls, and/or be sanctioned, and/or be bombed, droned, or invaded, and/or be assassinated or overthrown in a coup. On the entire planet Earth there are only two countries capable of standing up to Washington, Russia and China, and neither wants to stand up if they can avoid it. ..."
"... For whatever the reasons, not only Americans but most of the world as well accommodate Washington's evil and are thereby complicit in the evil. Those humans with a moral conscience are gradually being positioned by Washington and London as "domestic extremists" who might have to be rounded up and placed in detention centers. Examine the recent statements by General Wesley Clark and British Prime Minister Cameron and remember Janet Napolitano's statement that the Department of Homeland Security has shifted its focus from terrorists to domestic extremists, an undefined and open-ended term. ..."
"... Americans with good character are being maneuvered into a position of helplessness. ..."
"... When Clinton's Secretary of State, Madeleine Albright, was asked if the Clinton's regime's sanctions, which had claimed the lives of 500,000 Iraqi children, were justified, she obviously expected no outrage from the American people when she replied in the affirmative. ..."
"... ... Americans are "intentionally ignorant" of other countries' rights and sovereignty while other countries had been well-informed of America's malicious intents of destroying other countries' rights and sovereignty ... ..."
"... No, I don't think Americans are intentionally ignorant, any more than other nationalities. What they are tribal. Tribal peoples don't care whether their policies are right or wrong; they are instinctively loyal to them and to those who formulate them. ..."
"... "The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. ...We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. ...In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons...who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind." -- Edward L. Bernays, Propaganda ..."
"... "Americans need to face the facts. The loss of character means the loss of liberty and the transformation of government into a criminal enterprise." ..."
"... "When a population becomes distracted by trivia, when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby-talk, when, in short, a people become an audience and their public business a vaudeville act, then a nation finds itself at risk; a culture-death is a clear possibility." ..."
"... Look at the demographics of the Western Hemisphere. If you have a shred of honesty you just can't hang the blame on 'whites', put it on a bumper sticker or a #shittyhashtagmeme and go back to fucking off. The disgusting fraud of Manifest Destiny was a fig leaf to hide the enormity of these crimes; but, they are most obviously European crimes....& has Europe changed since the West was settled? Did Europeans even stop their warring amongst themselves? ..."
"... "The loss of character means the loss of liberty and the transformation of government into a criminal enterprise." ..."
"... I agree with Paul Craig Roberts. He asks "Why" and "How." Well, Paul, here is my answer. Decades of Public Education and over 50 years of mass media monopoly. In an age where FOX is the top rated News station and CNN is considered liberal? Where kids in Public school are offered Chocolate milk and frozen pizza for school breakfast before going to class rooms with 30-40 kids. When Texas political appointees chose school text book content for the nation? A nation where service has ended, replaced with volunteer soldiers signing up for pay and benefits, instead of just serving as service, like we did in the 70's? ..."
"... There is a difference between IGNORANCE and STUPIDITY. As Ron White said, "YOU CAN'T FIX STUPID". In todays information age, ignorance is a choice. ..."
"... The problem is that we have no "Constitution." That is a fable. The constitution of the separation of powers has been undermined from almost day one. Witness the Alien and Sedition Acts of 1798. ..."
"... Yes sir. Globalization has failed us. The infinite growth paradigm has failed us, as we knew it would. Castro's Cuba, based in a localized agrarian economy, is looking pretty good about now. Localization is the only way back to sustainability. ..."
"... Books? Who said books? You mean reading books? Let me throw a couple out there: I read 'The Image: A Guide To Pseudo-Events In America' last year, it was published 50+ years ago by a very recommended writer and accomplished historian. Boorstin's observations are truer today and even more concerning thanks to our modern, ubiquitous "connectivity". http://www.goodreads.com/book/show/159979.The_Image ..."
"... Adorno famously pointed out in 1940 that the "Mass culture is psychoanalysis in reverse." ..."
"... He doesn't blame the masses because he simply points out the fact that Americans are completely ignorant and blindly believe anything MSM spoon-fed to them. ..."
"... Paul Craig Roberts believe that the people are capable of creating a better and more just society. Instead the people have voted against their own best interest and overwhelmingly believe the propaganda. ..."
"... "... the transformation of government into a criminal enterprise ..." ..."
"... Governments were created by the history of warfare, which was always organized crime developing on larger and larger scales. In the context, the greater problem is that people like Paul Craig Roberts are reactionary revolutionaries, who provide relatively good analysis, followed by bogus "solutions" based upon impossible ideals. ..."
"... The "American People" are the victims of the best scientific brainwashing that money could buy. As Cognitive Dissonance has previously stated on Zero Hedge: "The absolute best controlled opposition is one that doesn't know they are controlled." ..."
"... The article above was another illustration of the ways that the typical reactionary revolutionaries, Black Sheeple, or controlled opposition groups, respond to recognizing the more and more blatant degrees to which there has been an accelerating "transformation of government into a criminal enterprise." THE PROBLEM IS THAT THEY CONTINUE TO STAY WITHIN THE SAME OLD-FASHIONED BULLSHIT-BASED FRAME OF REFERENCE, INSTEAD, AROUND AND AROUND WE GO, STUCK IN THE SAME DEEPENING RUTS, since they do NOT more fully "face the facts" regarding how and why the only realistic solutions to the real problems would require developing better organized crime. INSTEAD, they continue to promote the same dualities based upon false fundamental dichotomies, and the associate bogus "solutions" based upon impossible ideals ... ..."
Jul 25, 2015 | Zero Hedge

Original title: The Eroding Character Of The American People

Paul Craig Roberts

How can the life of such a man
Be in the palm of some fool's hand?
To see him obviously framed
Couldn't help but make me feel ashamed to live in a land
Where justice is a game.-Bob Dylan, "Hurricane"

Attorney John W. Whitehead opens a recent posting on his Rutherford Institute website with these words from a song by Bob Dylan. Why don't all of us feel ashamed? Why only Bob Dylan?

I wonder how many of Bob Dylan's fans understand what he is telling them. American justice has nothing to do with innocence or guilt. It only has to do with the prosecutor's conviction rate, which builds his political career. Considering the gullibility of the American people, American jurors are the last people to whom an innocent defendant should trust his fate. The jury will betray the innocent almost every time.

As Lawrence Stratton and I show in our book (2000, 2008) there is no justice in America. We titled our book, "How the Law Was Lost." It is a description of how the protective features in law that made law a shield of the innocent was transformed over time into a weapon in the hands of the government, a weapon used against the people. The loss of law as a shield occurred prior to 9/11, which "our representative government" used to construct a police state.

The marketing department of our publisher did not appreciate our title and instead came up with "The Tyranny of Good Intentions." We asked what this title meant. The marketing department answered that we showed that the war on crime, which gave us the abuses of RICO, the war on child abusers, which gave us show trials of total innocents that bested Joseph Stalin's show trials of the heroes of the Bolshevik Revolution, and the war on drugs, which gave "Freedom and Democracy America" broken families and by far the highest incarceration rate in the world all resulted from good intentions to combat crime, to combat drugs, and to combat child abuse. The publisher's title apparently succeeded, because 15 years later the book is still in print. It has sold enough copies over these years that, had the sales occurred upon publication would have made the book a "best seller." The book, had it been a best seller, would have gained more attention, and perhaps law schools and bar associations could have used it to hold the police state at bay.

Whitehead documents how hard a not guilty verdict is to come by for an innocent defendant. Even if the falsely accused defendant and his attorney survive the prosecutor's pressure to negotiate a plea bargain and arrive at a trial, they are confronted with jurors who are unable to doubt prosecutors, police, or witnesses paid to lie against the innocent defendant. Jurors even convicted the few survivors of the Clinton regime's assault on the Branch Davidians of Waco, the few who were not gassed, shot, or burned to death by US federal forces. This religious sect was demonized by Washington and the presstitute media as child abusers who were manufacturing automatic weapons while they raped children. The charges proved to be false, like Saddam Hussein's "weapons of mass destruction," and so forth, but only after all of the innocents were dead or in prison.

The question is: why do Americans not only sit silently while the lives of innocents are destroyed, but also actually support the destruction of the lives of innocents? Why do Americans believe "official sources" despite the proven fact that "official sources" lie repeatedly and never tell the truth?

The only conclusion that one can come to is that the American people have failed. We have failed Justice. We have failed Mercy. We have failed the US Constitution. We have failed Truth. We have failed Democracy and representative government. We have failed ourselves and humanity. We have failed the confidence that our Founding Fathers put in us. We have failed God. If we ever had the character that we are told we had, we have obviously lost it. Little, if anything, remains of the "American character."

Was the American character present in the torture prisons of Abu Ghraib, Guantanamo Bay, and hidden CIA torture dungeons where US military and CIA personnel provided photographic evidence of their delight in torturing and abusing prisoners? Official reports have concluded that along with torture went rape, sodomy, and murder. All of this was presided over by American psychologists with Ph.D. degrees.

We see the same inhumanity in the American police who respond to women children, the elderly, the physically and mentally handicapped, with gratuitous violence. For no reason whatsoever, police murder, taser, beat, and abuse US citizens. Every day there are more reports, and despite the reports the violence goes on and on and on. Clearly, the police enjoy inflicting pain and death on citizens whom the police are supposed to serve and protect. There have always been bullies in the police force, but the wanton police violence of our time indicates a complete collapse of the American character.

The failure of the American character has had tremendous and disastrous consequences for ourselves and for the world. At home Americans have a police state in which all Constitutional protections have vanished. Abroad, Iraq and Libya, two formerly prosperous countries, have been destroyed. Libya no longer exists as a country. One million dead Iraqis, four million displaced abroad, hundreds of thousands of orphans and birth defects from the American ordnance, and continuing ongoing violence from factions fighting over the remains. These facts are incontestable. Yet the United States Government claims to have brought "freedom and democracy" to Iraq. "Mission accomplished," declared one of the mass murderers of the 21st century, George W. Bush.

The question is: how can the US government make such an obviously false outrageous claim without being shouted down by the rest of the world and by its own population? Is the answer that good character has disappeared from the world?

Or is the rest of the world too afraid to protest? Washington can force supposedly sovereign countries to acquiesce to its will or be cut off from the international payments mechanism that Washington controls, and/or be sanctioned, and/or be bombed, droned, or invaded, and/or be assassinated or overthrown in a coup. On the entire planet Earth there are only two countries capable of standing up to Washington, Russia and China, and neither wants to stand up if they can avoid it.

For whatever the reasons, not only Americans but most of the world as well accommodate Washington's evil and are thereby complicit in the evil. Those humans with a moral conscience are gradually being positioned by Washington and London as "domestic extremists" who might have to be rounded up and placed in detention centers. Examine the recent statements by General Wesley Clark and British Prime Minister Cameron and remember Janet Napolitano's statement that the Department of Homeland Security has shifted its focus from terrorists to domestic extremists, an undefined and open-ended term.

Americans with good character are being maneuvered into a position of helplessness. As John Whitehead makes clear, the American people cannot even prevent "their police," paid by their tax payments, from murdering 3 Americans each day, and this is only the officially reported murders. The actual account is likely higher.

What Whitehead describes and what I have noticed for many years is that the American people have lost, in addition to their own sense of truth and falsity, any sense of mercy and justice for other peoples. Americans accept no sense of responsibility for the millions of peoples that Washington has exterminated over the past two decades dating back to the second term of Clinton. Every one of the millions of deaths is based on a Washington lie.

When Clinton's Secretary of State, Madeleine Albright, was asked if the Clinton's regime's sanctions, which had claimed the lives of 500,000 Iraqi children, were justified, she obviously expected no outrage from the American people when she replied in the affirmative.

Americans need to face the facts. The loss of character means the loss of liberty and the transformation of government into a criminal enterprise.

benb

The American people have been scientifically mis-educated, propagandized, and beaten down. A disproportionate number of the under 30's are societal DOAs thanks to ... weaponized TV. But I am being too optimistic...

PrayingMantis

... Americans are "intentionally ignorant" of other countries' rights and sovereignty while other countries had been well-informed of America's malicious intents of destroying other countries' rights and sovereignty ...

BarnacleBill

No, I don't think Americans are intentionally ignorant, any more than other nationalities. What they are tribal. Tribal peoples don't care whether their policies are right or wrong; they are instinctively loyal to them and to those who formulate them.

Also, I have to say that I believe the US empire is a long, long, way from collapse. It is still expanding, for goodness sake. Empires collapse only when the shrinking process is well under way. (The recent Soviet Empire was exceptional, in this regard.) It will take several more generations before the darkness lifts, I'm afraid.

macholatte

The only conclusion that one can come to is that the American people have failed.

It's now official, PCR is a complete dipshit.

Hey Paul, how about you get your head out of the clouds and stop looking down your nose at everyone long enough to read a couple of books about brainwashing and then get back to us. Maybe you start with this: http://edward-bernays.soup.io/post/19658768/Edward-Bernays-Propaganda-19...

"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. ...We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. ...In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons...who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind."
-- Edward L. Bernays, Propaganda

OldPhart

"Americans need to face the facts. The loss of character means the loss of liberty and the transformation of government into a criminal enterprise."

I think that happened August 13, 1971, but didn't get fully organized (as in Mafia) until 2000.

PT

The majority have their nose to the grind stone and as such can not see past the grind stone. They rely on "official sources" to put the rest of the world in order for them, but have no time to audit the "official sources". Would public education suffer if mothers and fathers were monitoring what the children were learning? But who has got time for that when both parents are working? How many non-work organizations were your parents and grand-parents involved in (both the wage-earner and the housekeeper)? How many organizations are you involved in?

Do you constantly hassle your local politicians or do you just say, "I'll vote 'em out in four years time"? (Yes, I know, you just don't vote. Fair enough, this question is for the voters.)

Yes, some of us are guilty of not fighting back. We had "Shut up and do as you're told" and "Well, if you're not happy with what you've got then work harder" beaten into us. Some of us are a little awake because, despite all our efforts, the grind stone was removed from us and then we got to see the larger picture of what lies behind the grind stone. Others are still busy, nose to the wheel, and all they see is the wheel.

And that is before we even consider HypnoToad on the Idiot Box. Some "need" the idiot box to help them wind down. Some can no longer enjoy the silence. (Remember Brave New World? It's true. Many people can no longer stand to be around silence, with nothing but their own thoughts.) I tell everyone that TV is crap. Radio is crap. Newspapers are crap. Turn that shit off for six months to a year, then go back to it and see what you really think of it. But they can't handle the thought of being away from "the background noise".

Ever spoken to grandparents who remember wars and depressions? And even amongst the rations and the hardships they still find positive memories? Time to talk to them again. Or not. I guess we'll get first-hand experience soon enough.

AlaricBalth

Allow me for a moment to share a brief anecdote about the new "American Character".

Last Sunday I was at the local supermarket. I was at the bakery counter, when suddenly a nicely dressed, Sunday best, non-Caucasian woman barrels into my cart riding a fat scooter. She rudely demands from the counter person a single cinnamon bun and then wheels off towards the front. Curious, I follow her up the aisle as she scarfs down the pastry in three bites. She then proceeds to stuff the empty bag between some soda bottles and scooters through the checkout without paying for her item. In the parking lot she then disembarks from her scooter, easily lifts it into the trunk of her Cadillac and walks to the drivers side, gets in and speeds off with her kids, who were in the back seat.

Amazed at what I had just witnessed, I went back into the store, retrieved the empty bag, included it in my few items at checkout and then went to the manager to share this story with him. He laughed and said there was nothing he could do.

The new "American Character" is that of a sense of entitlement and apathy.
I weep for the future.

Headbanger

Having character is not politically correct. Plus there's no need to develop character anymore because there's no jobs requiring any!

Consumption is the ONLY value of the inDUHvidual today.

And the less character they have, the more shit they'll consume to feel fulfilled cause they can't get that from themselves.

clymer Sat, 07/25/2015 - 07:34

Macholatte, i don't think PCR is writing from a point of view that is haughty and contemptful of the American people, per se, but rather from a perspective that is hopeless and thoroughly depressed after contemplating what the American people of many generations ago has taken for themselves as natural rights from a tyrranical government, only to see the nation slowly morph into something even worse than what was rejected by the founders.

"A nation can survive its fools and even the ambitious. But it cannot survive treason from within...
He rots the soul of a nation; he works secretly and unknown in the night to undermine the pillars of a city; he infects the body politic so that it can no longer resist."

ThroxxOfVron

"The loss of character means the loss of liberty and the transformation of government into a criminal enterprise. "

"I think that happened August 13, 1971 "

The entirety of the Western Hemisphere, not just 'The United States', was seized by invaders from Europe.

It is not an 'American' disease: it is a European disease and always was.

The indiginous populations of the Western Hemisphere were suystemaically and with forethought expropriated, ensalved, and slaughtered. The indiginous persons that dwelled within the geographical domain that presently comprise the USA were still being margialized, forcibly relocated, and murdered, long after the so-called 'American Civil War' had been decided.

...& As much as it is fashionable and/or politically expedient to vilify and blame the 'white' Europeans both for this history and extenuate that history to inform the present state of affairs, the Dutch, the French, the Portuguese, and the Spanish ( most eggregiously IMHO) were brutal and savage.

Look at the demographics of the Western Hemisphere.

If you have a shred of honesty you just can't hang the blame on 'whites', put it on a bumper sticker or a #shittyhashtagmeme and go back to fucking off.

The disgusting fraud of Manifest Destiny was a fig leaf to hide the enormity of these crimes; but, they are most obviously European crimes.

...& has Europe changed since the West was settled? Did Europeans even stop their warring amonsgst themselves?

See for yourself: https://en.wikipedia.org/wiki/List_of_conflicts_in_Europe

That would be: Hell NO.

Neither in Europe itself, nor in the settled West.

The Pacific Ocean wasn't named for calm waters.

It was named thusly because it is the natural geographic boundary where the mayhem and brutality and genocide ceased, if only because the greedy and ruthless Europeans had run out of land in the Western Hemisphere with people upon it to plunder and murder...

El Vaquero

The US will collapse within the next decade if some serious new technology is not developed and the infrastructure to use it is put in. There is too much debt and not enough material resources to continue growing the ponzi scheme that is our monetary system at an exponential rate without something breaking. The question is, will it be at the end of this boom-bust cycle, or the next? And if you look at what is being done on the financial front, which is the backbone of our neo-empire, that is shrinking.

The USD is slowly falling out of favor. There will come a point where that rapidly accelerates. We've been in a state of collapse for 15 years.


Abitdodgie

ignorance is choice these days and Americans love it.

AetosAeros

Not only a choice, but the ONLY choice they are prepared to accept. Cognitive Dissonance at it's finest. And to make matters worse, in only the best American fashion, we've asked if if it can be Supersized to go along with the Freedom Lies we feed ourselves.

I've seen the enemy, and....

But only if I'm willing to look in the mirror. Today's American doesn't look for what's right there in front of him/her, we look for all the new 'Social Norms' that we aren't living up to. This article is completely on target, and I hope Roberts hasn't decided to do any remodeling, cause too many idle nails guns make for a great Evening News sidebar mention.

Damnit all to hell.

Fun Facts

Fun Facts's picture

Rubicon727

We educators began seeing this shift towards "me-ism" around 1995-6. Students from low to middle income families became either apathetic towards "education" or followed their parent's sense of "entitlement." Simultaneously, the tech age captured both population's attention. Respecting "an education" dwindled.

Fast forward to the present: following the 2007-8 crash, we noted clear divisions between low income vs middle/upper class students based on their school behavior. Low to slightly middle income students brought to school family tensions and the turmoil of parents losing their jobs. A rise in non-functioning students increase for teachers while the few well performing students decline significantly.

Significant societal, financial shifts in America can always be observed in the student population.

reader2010

Mission Accomplished.

"When a population becomes distracted by trivia, when cultural life is redefined as a perpetual round of entertainments, when serious public conversation becomes a form of baby-talk, when, in short, a people become an audience and their public business a vaudeville act, then a nation finds itself at risk; a culture-death is a clear possibility."

- Neil Postman, Amusing Ourselves to Death: Public Discourse in the Age of Show Business, 1985

Lea

"The American people have been scientifically mis-educated".

You've got the answer there. The education system is the root cause of the problem. I'm from Europe, but if I've understood correctly, the US education policy is to teach as little as possible to children, and expect them to fill in the gaps in the Universities, past a certain age.

Only, it can't work. Children WILL learn, as childhood is the time when most informations are stored. If the schools don't provide the knowledge, they will get it from the television, movies or games, with the consequences we can see: ignorance, obsession with TV and movies stars, inability to differentiate life from movies, and over-simplistic reasoning (if any).

In Europe, we knew full well children learn fast and a lot, and that was why the schools focused on teaching them as much general knowldge as possible before 18 years old, which is when - it is scientifically proved - the human brain learns best.

Recently, the EU leading countries have understood that having educated masses doesn't pay if you want to lead them like sheep, so they are perfidiously trying to lower the standards... to the dismay of parents.

My advice, if I may presume to give any, would be to you USA people: teach your children what they won't learn at school, history, geography, literature (US, European and even Asian, why not), a foreign language if you can, arts, music, etc; and keep them away from the TV, movies and games.

And please adapt what you teach them to their age.

Refuse-Resist

Bang on! One anecdotal example: insisting that all 3rd graders use calculators "to learn" their multiplication tables. If I didn't do flashcards at home with my kids they wouldn't know them. As somebody who majored in engineering and took many many advanced math courses, I always felt that knowing your 'times tables' was essential to being successful in math.

What better way to dumb down otherwise intelligent children by creating a situation where the kid can't divide 32 by 4 without a calculator. Trigonometry? Calculus? Linear Algebra? Fuggedaboudit.

doctor10

The CB's and MIC have Americans right where they want them. the consequences of 3-4 generations of force feeding Santa Claus and the Easter Bunny

ThroxxOfVron

Some of US were never fucking asleep. Some of us were born with our eyes and minds open. We were, and are: hated, and reviled, and marginalized, and disowned for it. The intellectual repression was, and is, fucking insane and brutal. Words such as ethics and logic exist for what purpose? What are these expressions of? A bygone time? Abstractions?

Those that have tried to preserve their self awareness, empathy, and rationality have been ruthlessly systematically demeaned and condemed for confronting our families, our culture and institutions. We all have a right to be angry and disgusted and distrustful of the people and institutions around us. I am very fucking angry, and disgusted, and distrustful of the people and institutions around me.

But I still have hope. Nothing lasts forever.. This self-righteous nation called The United States, this twisted fraud of a culture called America, is most dangerously overdue for receipt of chastisment and retribution. It would be best if the citizenry of the United States taught themselves a lesson in stead of inviting Other nations and cultures to educate them.

A serious self education may be tedious and imperfect; but, it would be far far cheaper than forcing someone to come all the way over those oceans to educate Americans at the price they will be demanding for those lessons...

I do not require representation. I will speak my own mind and act of my own accord.

Every time other so-called Americans take a shit on me for thinking and speaking and acting differently it is a badge of honor and a confirmation of my spiritual and intellectual liberty. They don't know it but they are all gonna run out of shit before I run out of being free.

ThroxxOfVron

"The loss of character means the loss of liberty and the transformation of government into a criminal enterprise. "

"I think that happened August 13, 1971 "

The entirety of the Western Hemisphere, not just 'The United States', was seized by invaders from Europe. It is not an 'American' disease: it is a European disease and always was.

The indiginous populations of the Western Hemisphere were suystemaically and with forethought expropriated, ensalved, and slaughtered. The indiginous persons that dwelled within the geographical domain that presently comprise the USA were still being margialized, forcibly relocated, and murdered, long after the so-called 'American Civil War' had been decided.

...& As much as it is fashionable and/or politically expedient to vilify and blame the 'white' Europeans both for this history and extenuate that history to inform the present state of affairs, the Dutch, the French, the Portuguese, and the Spanish ( most eggregiously IMHO) were brutal and savage.

Look at the demographics of the Western Hemisphere. If you have a shred of honesty you just can't hang the blame on 'whites', put it on a bumper sticker or a #shittyhashtagmeme and go back to fucking off. The disgusting fraud of Manifest Destiny was a fig leaf to hide the enormity of these crimes; but, they are most obviously European crimes....& has Europe changed since the West was settled? Did Europeans even stop their warring amongst themselves?

See for yourself: https://en.wikipedia.org/wiki/List_of_conflicts_in_Europe

That would be: Hell NO. Neither in Europe itself, nor in the settled West. The Pacific Ocean wasn't named for calm waters. It was named thusly because it is the natural geographic boundary where the mayhem and brutality and genocide ceased, if only because the greedy and ruthless Europeans had run out of land in the Western Hemisphere with people upon it to plunder and murder...

Mini-Me

"The loss of character means the loss of liberty and the transformation of government into a criminal enterprise."

I agree with the first part. As for the latter, "government," by definition, is a criminal enterprise. It doesn't start out pure as the driven snow and then change into something nefarious over time. Its very essence requires the initiation of violence or its threat. Government without the gun in the ribs is a contradiction.

The fact that those in power got more votes than the losing criminals does not magically morph these people into paragons of virtue. They are almost without exception thoroughly deranged human beings. Lying is second nature to them. Looting is part of the job description. Killing is an end to their means: the acquisition and aggrandizement of power over others, no matter how much death and destruction results.

These people are sick bastards. To expect something virtuous from them after an endless string of wanton slaughter, theft and abuse, is simply wishful thinking.

Jack Burton

I agree with Paul Craig Roberts. He asks "Why" and "How." Well, Paul, here is my answer. Decades of Public Education and over 50 years of mass media monopoly. In an age where FOX is the top rated News station and CNN is considered liberal? Where kids in Public school are offered Chocolate milk and frozen pizza for school breakfast before going to class rooms with 30-40 kids. When Texas political appointees chose school text book content for the nation? A nation where service has ended, replaced with volunteer soldiers signing up for pay and benefits, instead of just serving as service, like we did in the 70's?

Paul Craig Roberts points out the police war against the people. That comes right from the very top, orders filter down to street cops. Street Cops are recruited from groups of young men our fathers generation would have labeled mental! But now they are hired across the board, shaved heads, tatoos, and a code of silence and Cops Above Justice.

The people have allowed the elites to rule in their place, never bothering to question the two fake candidates we are allowed to vote for.

Jtrillian

There is a difference between IGNORANCE and STUPIDITY. As Ron White said, "YOU CAN'T FIX STUPID". In todays information age, ignorance is a choice.

Part of the problem that no one is talking about or addressing is the population explosion. And it's not linear. Those who are the least educated, fully dependent others for their survival (welfare), the most complacent, and often with violent criminal records are breeding the fastest.

Evolution is not guaranteed. It can be argued that the apathy we experience today is a sign of the human race de-evolving. It takes a certain amount of cognitive ability to observe and question what is going on.

Further, the society we have created where "60 is the new 40" creates very little time to pay attention to what is going on in the world. Many people rely on mainstream media which is not really news any more. When six corporations control more than 90% of the news, it's the message of the corporate elite that we are fed. This becomes painfully obvious when you start turning to other sources for information like social media and independent news. Mainstream media today is full of opinion bias - injecting opinion as though it were fact. They also appeal to the lowest commmon denominator by focusing on emotionally charged topics and words rather than boring facts. Finally, the mainstream media is extremely guilty of propaganda by omission, ignoring important events altogether or only presenting one side of the story as is being done with regard to ISIS, Syria, and Ukraine today. People who watch the mainstream media have no idea that the US played a significant role in arming ISIS and aided in their rise to power. They have no idea that it was likely ISIS that used chemical weapons in Syria. They have no idea that the US has propped up real life neo nazis in high government positions in Ukraine. And they have ignored the continuing Fukushima disaster that is STILL dumping millions of gallons of radioactive water into the ocean every single day.

To sum up, democracies only work when people pay attention and participate. People are either too stupid, too overworked, are are looking to the wrong sources for information.

Until we break up mainstream media, remove incentives for those who cannot even care for themselves to stop breeding, and make fundamental changes to our society that affords people the time to focus on what is happening in the world, it will only get worse.

Much worse.

serotonindumptruck

A dying empire is like a wounded, cornered animal.

It will lash out uncontrollably and without remorse in a futile effort to save itself from certain death.

Enough Already

The problem is that we have no "Constitution." That is a fable. The constitution of the separation of powers has been undermined from almost day one. Witness the Alien and Sedition Acts of 1798.

In the centuries since then, there has been no "separation of powers." Marbury v Madison (1803) gave the Supreme Court the right to "decide" what the "law" was. Although, only in the 20th century did the "Supreme" court really start "legislating" from the bench.

We're just peons to the Overall Federal Power; the three "separate" parts of the federal government have been in collusion from the first. But like all empires, this one is in the final stage of collapse; it has just gotten too big.

gswifty

Yes sir. Globalization has failed us. The infinite growth paradigm has failed us, as we knew it would. Castro's Cuba, based in a localized agrarian economy, is looking pretty good about now. Localization is the only way back to sustainability.

napples

Books? Who said books? You mean reading books? Let me throw a couple out there: I read 'The Image: A Guide To Pseudo-Events In America' last year, it was published 50+ years ago by a very recommended writer and accomplished historian. Boorstin's observations are truer today and even more concerning thanks to our modern, ubiquitous "connectivity". http://www.goodreads.com/book/show/159979.The_Image

Another by Boorstin, The Discoverers was my fav, like Bryson's 'Short History' on steroids:

https://en.wikipedia.org/wiki/Daniel_J._Boorstin

I'm currently trying to fathom all of the historical implications of the claims Menzies is making in his book '1434', where apparently everything I learned about history is a lie. While he's making a lot of claims(hoping some sticks?) I'm not truly convinced. It is a very good, believable thought experiment. It almost makes perfect sense given the anglo/euro history of deceit & dishonesty, but I digress:
https://en.wikipedia.org/wiki/Gavin_Menzies

This one took a long time to grok, Dr Mandelbrot tried to warn us:
http://www.goodreads.com/book/show/665134.The_Mis_Behavior_of_Markets#

Benoit's friend & protege tried to warn us too:
https://en.wikipedia.org/wiki/The_Black_Swan_%282007_book%29

Put them together and you get the financial meltdown's 'Don't say we didn't warn you' manifesto from 2006(not a book, but a compelling read):
http://www.ft.com/cms/s/2/5372968a-ba82-11da-980d-0000779e2340.html

OK, I'm tired. Time to unplug.

reader2010

Adorno famously pointed out in 1940 that the "Mass culture is psychoanalysis in reverse." It takes 75 years for someone such as PCR to reiterate. He doesn't blame the masses because he simply points out the fact that Americans are completely ignorant and blindly believe anything MSM spoon-fed to them.

George Orwell once remarked that the average person today is about as naive as was the average person in the Middle Ages. In the Middle Ages people believed in the authority of their religion, no matter what. Today, we believe in the authority of what Adorno called Culture Industry and MSM, no matter what. Today we are indeed in another Dark Age

PoasterToaster

"Americans" are not one person. Individuals are not fungible. Reasoning from the "average American" leads to false conclusions.

reader2010

Jacques Derrida says, "The individualism of technological civilization relies precisely on a misunderstanding of the unique self. It is the individualism of a role and not of a person. In other words it might be called the individualism of a masque or persona, a character [personnage] and not a person." There are many Americans but they all play the same role in the Pursuit of Happiness, aka wage slaves, career slaves, debt slaves, information junkies, and passive consumers.

Moccasin

Paul Craig Roberts believe that the people are capable of creating a better and more just society. Instead the people have voted against their own best interest and overwhelmingly believe the propaganda.

When do the people or the society take responsibility for its greater good or own the crimes of those they put into power?

Blaming the aristocracy or the oligarchs seems like a scapegoat when the people have never stood up to the corruption in a cohesive or concerted way. imho, After a few generations of abuse and corruption the people need to take responsibility for their future. I expect that most will just buy into the charade and live the lie, on that basis as a society we are doomed to live in a corporatocracy fascist state.

Aldous Huxley called it a scientific dictatorship, Edward Bernays referred to us as a herd.

Moccasin

In the USA being white, monied and having the capacity to afford a good education is privileged. To his credit he speaks to the greater population, the 'average citizen' and not the plutocratic class.

MSorciere

What we have is the result of conditioning and commoditizing a population. The country is filled with consumers, not citizens. Teach the acquisition of money and goods as the main goal and individualism as the only acceptable social unit. We end up with a nation of insatiable sociopaths, ruled by power-hungry psychopaths.

Divisive politics, jackbooted authority from the DC scumpond down to the cop on the beat, the constant preaching of the cult of the individual as a sustitute for true liberty... all of these have served to destroy a sense of community and decentness between Americans.

The ONLY thing that could threaten the ruling class is a banding together of the people - in large numbers. 'They' have purposefully and effectively quashed that.

TrulyStupid

Shifting responsibility to the usual suspects is simply a manifestation of the American moral collapse. Man up and do some self evaluation.

T-NUTZ

"what I have noticed for many years is that the American people have lost, in addition to their own sense of truth and falsity, any sense of mercy and justice for other peoples"

Unfortunately, Paul, the American people have lost any sense of mercy and justice for their own people.

https://www.youtube.com/watch?v=DXRDq9nKJ0U

Phillyguy

Painful as it may be, we need to rationally look at US history/society. The nascent US was formed by stealing land from the native population and using human capital (read African Slaves) to generate wealth (it took a civil war with circa 500K casualties to stop this- one could argue the US "civil war" never ended). More recently, the US has been almost continuously at war since 1940, we dropped atomic bombs on Japan. Currently, the US/NATO war theater extends from the Levant, to Caspian Basin, Persian Gulf, China Sea, Indian Ocean, Horn of Africa (Saudi/US war on Yemen), the Maghreb and E Europe and Russian Border.

Radical Marijuana

"... the transformation of government into a criminal enterprise ..."

Governments were created by the history of warfare, which was always organized crime developing on larger and larger scales. In the context, the greater problem is that people like Paul Craig Roberts are reactionary revolutionaries, who provide relatively good analysis, followed by bogus "solutions" based upon impossible ideals.

The "American People" are the victims of the best scientific brainwashing that money could buy. As Cognitive Dissonance has previously stated on Zero Hedge: "The absolute best controlled opposition is one that doesn't know they are controlled."

It is practically impossible to exaggerate the degree to which that is so, on such profound levels, because of the ways that most people want to continue to believe that false fundamental dichotomies and impossible ideals are valid, and should be applied to their problems, despite that those mistaken ideas cause the opposite to happen in the real world, because those who promote those kinds of false fundamental dichotomies and their related impossible ideals, ARE "controlled opposition."

Rather, the place to begin would be by recognizing that all human beings and civilizations must necessarily operate as entropic pumps of energy flows, which necessarily are systems of organized lies operating robberies. Everyone has some power to rob, and power to kill to back that up. Governments assembled and channeled those powers. There was never a time when governments were not organized crime. There could never be any time when governments were not organized crime. The only things that exist are the dynamic equilibria between different systems of organized lies operating robberies. Those dynamic equilibria have become extremely unbalanced due the degree that the best organized gangs of criminals were able to control their opposition.

Paul Craig Roberts, as well as pretty well all of the rest of the content published on Zero Hedge, are presentations of various kinds of controlled opposition groups, most of which do not recognize that they are being controlled by the language that they use, and the philosophy of science that they take for granted. THAT is the greatest failure of the American People, as well as most of the rest of the people everywhere else. They believe in false fundamental dichotomies, and the related impossible ideals, and therefore, their bogus "solutions" always necessarily backfire badly, and cause the opposite to happen in the real world.

After all, the overwhelming vast majority of the American People operate as the controlled opposition to the best organized gangs of criminals that most control the government of the USA. Therefore, the FAILURES of the American People are far more profound and problematic than what is superficially presented by guys like Paul Craig Roberts, and also, of course, his suggested bogus "solutions" are similarly superficial.

The ONLY things which can actually exist are the dynamic equilibrium between different systems of organized lies operating robberies. The degree to which the American People, as well as most of the rest of the people in the world, FAIL to understand that is the degree to which they enable the best organized gangs of criminals to control them, due to the vast majority of people being members of various controlled opposition groups. Controlled opposition always presents relatively superficial analysis of the political problems, which are superficially correct. However, they then follow that up with similarly superficial "solutions." Therefore, magical words are bandied about, that express their dualities, through false fundamental dichotomies, and the related impossible ideals.

Governments must exist because organized crime must exist. Better governments could be achieved through better organized crime. However, mostly what get presented in the public places are the utter bullshit of the biggest bullies, who dominate the society because they were the best organized gangs of criminals, who were also able to dominate their apparent opposition. Therefore, instead of more realistic, better balancing of the dynamic equilibria between different systems of organized lies operating robberies, we get runaway developments of the best organized gangs of criminals being able to control governments, whose only apparent opposition is controlled to stay within the same bullshit frame of reference regarding everything that was actually happening.

The mainline of the FAILURES of the American People have been the ways that the international bankers were able to recapture control over the American public "money" supply. After that, everything else was leveraged up, through the funding of the political processes, schools, and mass media, etc., being more and more dominated by that fundamentally fraudulent financial accounting system. Of course, that FAILURE has now become more than 99% ... Therefore, no political possible ways appear to exist to pull out of that flaming spiral nose dive, since we have already gone beyond the event horizon into that social black hole.

Most of the content on Zero Hedge which is based upon recognizing that set of problems still acts as controlled opposition in that regard too. Therefore, the bogus "solutions" here continue to deliberately ignore that money is necessarily measurement backed by murder. Instead of accepting that, the controlled opposition groups like to promote various kinds of "monetary reforms." However, meanwhile, we are actually already headed towards the established debt slavery systems having generated debt insanities, which are going to provoke death insanities.

In that context, the only realistic resolutions to the real problems would necessarily have to be monetary revolutions, that may emerge out of the future situations, after the runaway debt insanities have provoked death insanities. Indeed, the only genuine solutions to the problems are to develop different death control systems, to back up different debt control systems, which must necessarily be done within the context that governments are the biggest forms of organized crime, controlled by the best organized gangs of criminals.

The various controlled opposition groups do not want to face those social facts. Rather, they continue to want to believe in the dualities expressed as false fundamental dichotomies and the related impossible ideals, which is their greatest overall FAILURE. In my view, the article above by Roberts contained a lot of nostalgic nonsense. There was never a time when there were any governments which were not based on the applications of the principles and methods of organized crime, and there could never be any time in the future when that could be stopped from being the case.

The greatest FAILURE of the American People, as well as most of the rest of the world's people, has been to become so brainwashed to believe in the biggest bullies' bullshit world view, that there is no significant opposition that is not controlled by thinking inside of the box of that bullshit. The government did NOT transform into a criminal enterprise. The government was necessarily ALWAYS a criminal enterprise. That criminal enterprise has become more and more severely UNBALANCED due to the FAILURE of the people to understand that they were actually members of an organized crime gang, called their country. Instead, they were more and more scientifically brainwashed to believe in bullshit about everything, including their country.

The ONLY connection between human laws and the laws of nature is the ability to back up lies with violence. The development of the government of the USA has been the developed of integrated systems of legalized lies, backed by legalized violence. Those systems of ENFORCED FRAUDS have been able to become more extremely unbalanced because there is almost nothing which is publicly significant surrounding that core of organized crime but various controlled opposition groups.

Of course, it seems politically impossible for my recommendations to actually happen within the foreseeable future, as the current systems of debt slavery drive through debt insanities to become death insanities, but nevertheless, the only theoretically valid ideas to raise to respond to the real problems would have to based upon a series of intellectual scientific revolutions. However, since we have apparently run out of time to go through those sorts of paradigm shifts sufficiently, we are stuck in the deepening ruts of political problems which guys like Roberts correctly present to be the case

... HOWEVER, ROBERTS, LIKE ALMOST EVERYONE ELSE, CONTINUE TO PRESUME UPON DUALITIES, AND THEREFORE, HAVE THEIR MECHANISMS REGARDING "SOLUTIONS" ABSURDLY BACKWARDS.

Rather, we should start with the concept of SUBTRACTION, which then leads to robbery. We should start with the recognition that governments are necessarily, by definition, the biggest forms of organized crime. Governments did NOT transform into being that. Governments were always that. The political problems we have now are due to the best organized gangs of criminals, which currently are primarily the biggest gangsters, which can rightly be referred to as the banksters, having dominated all aspects of the funding of politics, enough to capture control over all sociopolitical institutions, so that the American People would more and more be subjected to the best scientific brainwashing that money could buy, which was built on top of thousands of years of previous history of Neolithic Civilizations being based on backing up lies with violence.

The runaway systems of ENFORCED FRAUDS, or the integrated systems of legalized lies, backed by legalized violence, that more and more dominate the lives of the American People are due to the applications of the methods of organized crime, and could not be effectively counter-balanced in any other ways. However, the standing social situation is that there is no publicly significant opposition that is not controlled to stay within the same frame of reference of the biggest bullies, which is now primarily the frame of reference of the banksters. Indeed, to the degree to which people's lives are controlled by the monetary system, they are debt slaves. Moreover, the degree to which they do not understand, and do not want to understand, that money is necessarily measurement backed by murder, then they think like controlled opposition groups, who have their mechanisms absurdly backwards, when they turn from their superficial analysis of what the political problems, to then promote their superficial solutions of those problems.

I AGREE that "Americans need to face the facts." However, those facts are that citizens are members of an organized crime gang, called their country. "Their" country is currently controlled by the best organized gangs of criminals. However, there are no genuine resolutions for those problems other than to develop better organized crime. Since the controlled opposition groups that are publicly significant do not admit any of the deeper levels of the scientific facts regarding human beings and civilizations operating as entropic pumps of energy flows, but rather, continue to perceive all of that in the most absurdly backward ways possible, the current dynamic equilibria between the different systems of organized lies operating robberies continue to become more and more extremely UNBALANCED.

In the case of the article above, Roberts does NOT "face the facts" that governments were always forms of organized crime, and must necessarily be so, because human beings must live as entropic pumps of energy flows. Rather, Roberts tends to illustrate how the controlled opposition takes for granted certain magical words and phrases, such as "Liberty" or "Constitution," that have no adequate operational definitions to connect them to the material world.

We are living inside of an oxymoronic scientific dictatorship, which has applied the progress in science primarily to become better at backing up lies with violence, while refusing to allow scientific methods to admit and address how and why that has been what has actually happened. Therefore, almost all of the language that we use to communicate, as well as almost all of the philosophy of science that we take for granted, was based on the biggest bullies' bullshit, which is now primarily manifested as the banksters' bullshit, as that bullshit developed in America to become ENFORCED FRAUDS.

ALL of the various churches, corporations, and countries are necessarily various systems of organized lies operating robberies. Those which are the biggest now were historically the ones that were the best at doing that. The INTENSE PARADOXES are due to human systems necessarily being organized lies operating robberies, wherein the greatest social successfulness has been achieved by those who were the best professional liars and immaculate hypocrites. That flows throughout ALL of the established systems, which are a core of organized crime, surrounded by controlled opposition groups.

The degree to which the American People, as well as the rest of the world's people, have been more and more scientifically brainwashed to believe in bullshit about governments in particular, and human beings and civilizations in general, is the degree to which the established systems based upon ENFORCED FRAUDS are headed towards some series of psychotic breakdowns. For all practical purposes, it is politically impossible to get enough people to stop acting like incompetent political idiots, and instead start acting more like competent citizens, because they do not understand, and moreover have been conditioned to not want to understand that governments are necessarily organized crime.

Roberts ironically illustrated the deeper nature of the political problems that he also shares, when he perceives that governments have somehow transformed into being criminal enterprise, when governments were always necessarily criminal enterprises. Similarly, with those who recognize that, but then promote the impossible solutions based upon somehow stopping that from being the case, which is as absurdly backwards as stopping human beings from operating as entropic pumps of energy flows, which then also presumes that it would be possible to stop human civilizations from being entropic pumps of energy flows.

Rather, the deeper sorts of intellectual scientific revolutions that we should go through require becoming much more critical of the language that we use to communicate with, and more critical about the philosophy of science that we presumed was correct. Actually, we were collectively brainwashed to believe in the biggest bullies' bullshit, which is as absurdly backwards as it could possibly be. However, due to the collective FAILURES of people to understand that, as reflected by the ways that the core of organized crime is surrounded by nothing which is publicly significant than layers of controlled opposition, there are no reasonable ways to doubt that the established debt slavery systems will continue to drive even worse debt insanities, which will provoke much worse death insanities. Therefore, to be more realistic about the foreseeable future, the development of new death control systems will emerge out of the context of crazy collapses into chaos, wherein the runaway death insanities provide the possible opportunities for new death controls to emerge out of that situation.

Of course, the about 99% FAILURE of the American People to want to understand anything that I have outlined above indicates that the foreseeable future for subsequent generations shall not too likely be catalyzed transformations towards enough people better understanding their political problems, in order to better resolve those problems. Rather, what I mostly expect is for the psychotic breakdowns of the previous systems of ENFORCED FRAUDS to give opportunities to some possible groups of controlled opposition to take advantage of that, to perhaps emerge as the new version of professional liars and immaculate hypocrites, who will be able to operate some new version of organized lies, operating robberies, who may mostly still get away with being some modified versions of still oxymoronic scientific dictatorship, due to social success still being based upon the best available professional liars and immaculate hypocrites, who were able to survive through those transformations, so that the new systems arise from some of the seeds of the old systems.

At the present time, it is extremely difficult to imagine how the human species could possibly reconcile progress in physical science by surpassing that with progress in political science. Rather, what mostly exists now is the core of organized crime, which gets away with spouting the bullshit about itself, such as how the banksters dominate the mass media, and the lives of everyone else who depend upon the established monetary system (which is dominated by the current ways that governments ENFORCE FRAUDS by privately controlled banks), while that core of organized crime has no publicly significant opposition that is not controlled by the ways that they think, which ways stay within the basic bullshit world view, as promoted by the biggest bullies for thousands of years, and as more and more scientifically promoted to brainwash the vast majority of people to believe in that kind of bullshit so completely that it mostly does not occur to them that they are doing that, and certainly almost never occurs to them that they are doing that in the most profoundly absurd and backward ways possible.

That is how and why it is possible for an author like Roberts to correctly point out the ways in which the government of the USA is transforming into being more blatantly based on organized crime ... HOWEVER, Roberts is not willing and able to go through deeper levels of intellectual scientific revolutions, in order to recognize how and why governments were always necessarily manifestations of organized crime. Therefore, as is typically the case, Roberts does not recognize how ironically he recommends that Americans should "face the facts," while he himself does not fully do so.

The whole history of Neolithic Civilizations was social pyramid systems based on being able to back up lies with violence, becoming more sophisticated systems of legalized lies, backed by legalized violence, which currently manifest as the globalized electronic frauds of the banksters, were are backed up by the governments (that those banksters effectively control) having atomic bombs. Those are the astronomically amplified magnitudes of the currently existing combined money/murder systems. Therefore, it appears to be politically impossible at the present time to develop better governments, due to the degree that almost everyone is either a member of the core groups of organized crime, or members of the surrounding layers of groups of controlled opposition, both of which want to stay within the same overall bullshit frame of reference, because, so far, their lives have been socially successful by being professional liars and immaculate hypocrites.

Ironically, I doubt that someone like Roberts, or pretty well everyone else whose material is published on Zero Hedge is able and willing to recognize the degree to which they are actually controlled opposition. Indeed, even more ironically, as I have repeated before, even Cognitive Dissonance, when he previously stated on Zero Hedge: "The absolute best controlled opposition is one that doesn't know they are controlled." DOES NOT "GET IT" regarding the degree to which he too is controlled opposition, even while superficially attempting to recognize and struggle with that situation. (Indeed, of course, that includes me too, since I am still communicating using the English language, which was the natural language that most developed to express the biggest bullies' bullshit world view.)

Overall, I REPEAT, the deeper problems are due to progress in physical science, NOT being surpassed by progress in political science. Instead, while there EXIST globalized electronic frauds, backed by atomic bombs, practically nothing regarding the ways of thinking that made that science and those technologies possible has found any significant expression through political science, because political science would have to go through even more profound paradigm shifts within itself in order to do that.

The INTENSE PARADOXES continue to be the manifestation of the oxymoronic scientific dictatorship, that deliberately refuses to become any more genuinely scientific about itself. Therefore, the banksters have been able to pay for the best scientific brainwashing that money could buy, for generation after generation, in order to more and more brainwash most of the American People to believe in the banksters' bullshit world view. While there exist electronic frauds, backed by atomic bombs, practically nothing regarding the physical science paradigm shifts that made that possible have even the slightest degree of public appreciation within the realms of politics today, which are almost totally dominated by the biggest bullies' bullshit world view, despite that being as absurdly backwards as possible, while the controlled opposition groups, mostly in the form of old-fashioned religions and ideologies, continue to stay within that same bullshit world view, and adamantly refuse to change their perceptual paradigms regarding political problems.

However, I REPEAT, the issues we face are NOT that governments have transformed to become criminal enterprises, but that governments were always necessarily criminal enterprises, which had the power to legalized their own lies, and then back those lies up with legalized violence. Thereby, the best organized criminals, the international bankers, as the biggest gangsters, or the banksters, were able to apply the methods of organized crime through the political processes. Meanwhile, the only "opposition" that was allowed to be publicly significant was controlled, to basically stay within the same bullshit world view, which is what Roberts has done in his series of articles, as well as what is almost always presented in the content published on Zero Hedge.

The NEXT LEVEL of "the need to face the facts" is to recognize that the political economy is based upon ENFORCED FRAUDS, or systems of debt slavery backed by wars based on deceits. However, the NEXT LEVEL "the need to face the facts" is the that the only possible changes are to change the dynamic equilibria between the different systems of organized lies operating robberies, i.e., change those ENFORCED FRAUDS, in ways which CAN NOT STOP THOSE FROM STILL BEING ENFORCED FRAUDS, because of the degree to which money is necessarily measurement backed by murder.

For the American People, as well as the rest of the world's people, to stop being such dismal FAILURES would require them to become more competent citizens. However, at the present time they appear to be totally unable to do that, because they are unwilling to go through the profound paradigm shifts that it would take them to become more competent citizens inside of world where there exist globalized electronic frauds, backed by atomic bombs. The vast majority of the American People would not like to go through the severe cognitive dissonance that would be required, to not only recognize that "their" government was a criminal enterprise, but that it also must be, and that they too must necessarily be members of that organized crime gang. However, without that degree of perceptual paradigm shifts of the political problems, then enough of the American People could not become more competent citizens.

Somehow, most people continue to count on themselves never having to think about how and why progress was achieved in physical science, by going through series of profound paradigm shifts in the ways that we perceived the world. Most people continue to presume that it is not necessary for their perception of politics to go through profound paradigm shifts, that surpass those which have already been achieved in physical science. We continue to live in an oxymoronic scientific dictatorship, that employs science and technology to become better at being dishonest and violent, but does not apply science and technology to "face the facts" about that scientific dictatorship as a whole.

At the present time, technologies which have become trillions of times more capable and powerful are primarily used as special effects within the context of repeating the same old-fashioned, stupid social stories, such as promoted by the biggest bullies, and their surrounding controlled opposition groups. Ironically, especially when it comes to politics, that tends to manifest the most atavistic throwbacks to old-fashioned religions and ideologies being relied upon to propose bogus "solutions," despite that those kinds of social stories adamantly refuse to change their paradigms in light of the profound paradigms shifts which have been achieved in physical science.

The article above was another illustration of the ways that the typical reactionary revolutionaries, Black Sheeple, or controlled opposition groups, respond to recognizing the more and more blatant degrees to which there has been an accelerating "transformation of government into a criminal enterprise." THE PROBLEM IS THAT THEY CONTINUE TO STAY WITHIN THE SAME OLD-FASHIONED BULLSHIT-BASED FRAME OF REFERENCE, INSTEAD, AROUND AND AROUND WE GO, STUCK IN THE SAME DEEPENING RUTS, since they do NOT more fully "face the facts" regarding how and why the only realistic solutions to the real problems would require developing better organized crime. INSTEAD, they continue to promote the same dualities based upon false fundamental dichotomies, and the associate bogus "solutions" based upon impossible ideals ...

Given that overall situation, that there there almost nothing which is publicly significant than the core of organized crime, surrounded by controlled opposition groups, I see no reasonable hopes for the foreseeable material future of a civilization controlled by ENFORCED FRAUDS, since there is no publicly possible ways to develop better dynamic equilibria between the different systems of organized lies operating robberies, since the biggest forms of doing that were most able to get away with pretending that they are not doing that, which was facilitated by their controlled opposition promoting the opinions that nobody should do that, while actually everyone must be doing that.

Roberts' article above, to me, was another typical example of superficially correct analysis, which implies some bogus "solutions" because those are based upon the same superficiality. It is NOT good enough to recognize "transformation of government into a criminal enterprise," unless one goes through deeper levels of analysis regarding how and why that is what actually exists, and then, one should continue to be consistent with that deeper analysis when one turns to proposing genuine solutions to those problems, namely, I REPEAT THAT the only realistic resolutions to the real political problems requires the transformation of government into a better organized criminal enterprise, which ideally should be based upon enough citizens who are competent enough to understand that they are members of an organized crime gang, which should assert themselves to make sure that their country becomes better organized crime.

[Dec 20, 2017] Bill Black DSGE Dilettantes v. ADM God Devotees

Notable quotes:
"... By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Originally published at New Economic Perspectives ..."
"... A dilettante is a person who cultivates an area of interest, such as the arts, without real commitment or knowledge. The Dilettante Doctrine takes modern macro's arrogance to a new pinnacle. Only their model is legitimate, and it is illegitimate to criticize their DSGE models, even though they repeatedly fail. Instead, we must all "like" their models. We cannot make any statements about macroeconomics unless we "like [DSGE] models." The Dilettante Doctrine is a sure-fire means of winning academic disputes. You demand that your critics endorse your views, or you dismiss them as dilettantes unworthy of respect. ..."
"... Readers may recall that the scientific method works in the opposite direction of the Dilettante Doctrine. Modern macro proposes a theory (DSGE) and tests its predictive ability. The DSGE models fail recurrently, on the most important macro events, and the failures are massive. The scientific method requires the theorist of the failed model to declare it falsified. Economists who "like" repeatedly falsified DSGE models are, as Paul Romer famously declared, engaged in "pseudoscience." ..."
"... BTW, one of the best takes of macroeconomics I've encountered is Steve Keen's work, which I gratefully acknowledge I first read here on NC. Keen's critique of DSGE models is utterly spot-on and mathematically sophisticated. Part of the problem with economics is that it has been afflicted with 'math envy' since its earliest days, and the ADM results were proved with Banach Space methods, so they just *had* to be right. Google the phrase "spherical cow" for more on this mindset, not to mention one of the few really funny math jokes I know. ..."
Dec 20, 2017 | www.nakedcapitalism.com

By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Originally published at New Economic Perspectives

The truly exceptional thing about 'modern macroeconomics' devotees is not that they are so consistently and horrifically wrong or that they persist in their errors – but their exceptional combination of arrogance and disdain for those who have dramatically better records and broader and more relevant expertise. Kartik Athreya, the Richmond Fed's Research Director, led the modern macro parade on June 17, 2010 with his blog (which he later withdrew in embarrassment) when he announced the Athreya Axiom of Absolute Arrogance.

So far, I've claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy. Taken literally, I am almost certainly wrong. Some of them have great ideas, for sure. But this is irrelevant. The real issue is that there is extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.

Modern macro devotees suffered far worse substantive embarrassment than Athreya's personal embarrassment. After Athreya (briefly) published his Axiom, a flurry of the world's top economists issued devastating critiques of modern macro's foundational myths in their dynamic stochastic general equilibrium (DSGE) models. The takedowns enraged and humiliated modern macro devotees, and because they are incapable of staying embarrassed, they doubled-down on Athreya's Axiom by announcing the Dilettante Doctrine .

People who don't like dynamic stochastic general equilibrium (DSGE) models are dilettantes. By this we mean they aren't serious about policy analysis.

Lawrence J. Christiano, Martin S. Eichenbaum, and Mathias Trabandt, authored "On DSGE Models on November 9, 2017. Christiano and Eichenbaum are freshwater modern macro devotees trained largely at the University of Minnesota, and now holding prominent positions at Northwestern. Trabandt is a German modern macro devotee.

A dilettante is a person who cultivates an area of interest, such as the arts, without real commitment or knowledge. The Dilettante Doctrine takes modern macro's arrogance to a new pinnacle. Only their model is legitimate, and it is illegitimate to criticize their DSGE models, even though they repeatedly fail. Instead, we must all "like" their models. We cannot make any statements about macroeconomics unless we "like [DSGE] models." The Dilettante Doctrine is a sure-fire means of winning academic disputes. You demand that your critics endorse your views, or you dismiss them as dilettantes unworthy of respect.

Readers may recall that the scientific method works in the opposite direction of the Dilettante Doctrine. Modern macro proposes a theory (DSGE) and tests its predictive ability. The DSGE models fail recurrently, on the most important macro events, and the failures are massive. The scientific method requires the theorist of the failed model to declare it falsified. Economists who "like" repeatedly falsified DSGE models are, as Paul Romer famously declared, engaged in "pseudoscience."

Athreya then inadvertently compounded modern macro's failures by putting in writing a bit too many of modern macro's darker secrets in his 2013 book about macroeconomics. Athreya confirmed many of the most fundamental criticisms of modern macro devotees, revealed additional failures that were even more devastating, and illustrated perfectly the blindness of modern macro's devotees to their dogmas and logic. Athreya did recognize clearly one dogma that made modern macro devotees unable to spot even the world's largest bubble – but treated that failure as if it were a virtue. Modern macro devotees train macroeconomists to be unable to identify warn against, or take action to end even the most destructive bubbles. This is like training surgeons to believe that shock cannot occur and they should ignore shock in treating patients.

I will return to these errors in subsequent columns, but in this initial column, I introduce Athreya's most embarrassing and devastating admission. Athreya goes on for over 100 pages on how wondrous his fellow modern macro devotees are. They are brilliant specialists who are the world's top practitioners of ultra-rigorous logic and ultra-sophisticated mathematics skills that make it impossible for them to be anything other than transparent and scrupulously honest. In particular, Athreya tells the reader that the paramount problem in macro and microeconomics is recognizing, understanding, and countering deceit, the defining element at law of fraud. (Actually, he does that only in an exceptionally opaque manner.) On p.103, however, Athreya admits that modern macro devotees know that their vaunted DSGE models rest on a fatal premise that is so preposterous and embarrassing that they dare not state it. "A silent assumption of the ADM model" is that "the ADM God" perfectly prevents all crimes, predation, and deceit – at no cost. Note that this means that modern macro devotees (silently) designed their DSGE models to be incapable of recognizing, understanding, measuring, or countering deceit, which they admit is their paramount and fatal failure.

It is never good to be arrogant. It is always dangerous and limiting to be (proudly) ignorant of fields that are likely to have superior understanding of issues such as deceit, fraud, and predation. Athreya's book displays his pride in both of these faults.

The authors of the Dilettante Doctrine inadvertently revealed another embarrassing modern macro failure of great importance. It is the combination of repeated, devastating failure and unfailing arrogance that defines (and dooms) modern macro as pseudoscientists. In fairness to the authors, they announced their Dilettante Doctrine in the context of an article admitting catastrophic errors in modern macro. They also unintentionally admit the non-scientific nature of their enterprise. Consider this passage:

For [IMF's leader] to take DSGE model-based recommendations seriously, the economic intuition underlying those recommendations has to be made in compelling and intuitive ways.

Yes, they actually wrote that for anyone to take DSGE models "seriously" their "economic intuition" must "be made intuitive." Wow, who knew science could be so 'intuitive?' Not satisfied with announcing their new "intuitive method" as a substitute for the scientific method, the authors double-down on the concept that 'intuition' is the secret sauce of economics declaring that the super-secret is to keep that 'intuition' "simple."

To be convincing, it is critical for a DSGE modeler to understand and convey the economic intuition behind the model's implications in simple and intuitive terms.

Notice that the authors are not stating the conditions required to make the DSGE models 'correct.' They are only interested in what practices will make the models' results "convincing" to the bosses.

The bosses decide "actual policymaking." The Dilettante Doctrine authors declare policymaking to be even less scientific than relying on 'simple' 'intuition' to convey DSGE model results. It turns out that DSGE models are the 'canvas' on which modern macro devotees "see the combined effect of the different colors" of their "art."

Inevitably, actual policymaking will always be to some extent an art. But even an artist needs a canvas to see the combined effect of the different colors. A DSGE model is that canvas.

These passages are not simply embarrassing, they are revealing. DSGE is a substantive farce that repeatedly fails because modern macro devotees shaped their models from the beginning to embrace laissez faire dogmas. The 'simple' 'intuitions' underlying DSGE models are the most destructive laissez faire dogmas. Narayana Kocherlakota's sly use of the word "almost" reveals his agreement with this point.

[A]lmost coincidentally -- in these [early DSGE] models, all government interventions (including all forms of stabilization policy) are undesirable.

The authors of the Dilettante Doctrine agree with Kocherlakota's observation about the original DSGE models.

The associated policy implications are clear: there was no need for any form of government intervention. In fact, government policies aimed at stabilizing the business cycle are welfare-reducing.

Modern macro is proud that its 'freshwater' and 'saltwater' factions have achieved a grand fusion. The saltwater types agreed to use DSGE models and the freshwater types agreed that the freshwater types could add 'frictions' to the DSGE models that would allow the models to at least purport to address some of the actual macroeconomic problems. There is a misleading view that because the 'saltwater' types often call themselves "New Keynesians" they must have views sympathetic to Keynesian thought. The Dilettante Doctrine authors make the useful point that "New Keynesian" dogma is actually Milton Friedman's core laissez faire dogmas.

Prototypical pre-crisis DSGE models built upon the chassis of the RBC model to allow for nominal frictions, both in labor and goods markets. These models are often referred to as New Keynesian (NK) DSGE models. But, it would be just as appropriate to refer to them as Friedmanite DSGE models. The reason is that they embody the fundamental world view articulated in Friedman's seminal Presidential Address .

The Dilettante Doctrine authors admit that DSGE models failed at the most fundamental level – they could not even spot that the economy was becoming progressively more dangerous and harmful.

Pre-crisis DSGE models didn't predict the increasing vulnerability of the US economy to a financial crisis.

The authors go badly wrong in multiple ways when they attempt to explain the DSGE models failures and their implications for economic theory and policy.

There is still an ongoing debate about the causes of the financial crisis. Our view, shared by Bernanke (2009) and many others, is that the financial crisis was precipitated by a rollover crisis in a very large and highly levered shadow-banking sector that relied on short-term debt to fund long-term assets.19

The trigger for the rollover crisis was developments in the housing sector. U.S. housing prices had risen rapidly in the 1990's with the S&P/Case-Shiller U.S. National Home Price Index rising by a factor of roughly 2.5 between 1991 and 2006. The precise role played by expectations, the subprime market, declining lending standards in mortgage markets, and overly-loose monetary policy is not critical for our purposes. What is critical is that housing prices began to decline in mid-2006, causing a fall in the value of the assets of shadow banks that had heavily invested in mortgage-backed securities. The Fed's willingness to provide a safety net for the shadow banking system was at best implicit, creating the conditions under which a roll-over crisis was possible. In fact a rollover crisis did occur and shadow banks had to sell their asset-backed securities at fire-sale prices, precipitating the Great Recession.

In sum, the pre-crisis mainstream DSGE models failed to forecast the financial crisis because they did not integrate the shadow banking system into their analysis.

I begin with the most fundamental failure – the failure to ask the right questions. Two prominent examples are why didn't the DSGE models warn us decades ago that the economy was systematically misallocating assets and creating the largest bubble in world history and what should we do to change the perverse incentives harming the economy and economic stability? Kocherlakota, in the same article from which I quoted above, emphasized that modern macro failed to warn about the coming financial crisis and the Great Recession and failed to provide effective policies to respond to them.

The dilettante article only uses the word 'bubble' once – to describe the tech bubble. It never labels the vastly larger housing bubble a 'bubble.' The dilettante article's authors claim it is not relevant for their purposes to know how the bubble arose, why it continued to inflate for over a decade, why it burst, or why it triggered the global financial crisis and the Great Recession. Only a dilettante could make or believe that claim.

Recall that Athreya emphasizes that deceit is the key factor that screws up economies – and that DSGE models "silently" assume "the ADM God" makes deceit impossible. I have explained in scores of columns why deceit, fraud, and predation were the central causes of the housing bubble hyper-inflating, the financial crisis, and the creation of the Great Recession. The dilettante authors refusal to call the housing bubble a bubble does not change the fact that they claim that the dramatic fall in housing values after 2005 was the paramount "trigger" of the financial crisis and the Great Recession.

The dilettante authors create a fiction about what "precipitat[ed] the Great Recession.

In fact a rollover crisis did occur and shadow banks had to sell their asset-backed securities at fire-sale prices, precipitating the Great Recession.

The dilettante authors then make their twin ' mea culpa ' on behalf of modern macro.

Against this background, we turn to the first of the two criticisms of DSGE models mentioned above, namely their failure to signal the increasing vulnerability of the U.S. economy to a financial crisis. This criticism is correct. The failure reflected a broader failure of the economics community.

The failure was to allow a small shadow-banking system to metastasize into a massive, poorly-regulated wild west-like sector that was not protected by deposit insurance or lender-of-last-resort backstops.

We now turn to the second criticism of DSGE models, namely that they did not sufficiently emphasize financial frictions. One reason why modelers did not emphasize financial frictions in DSGE models is that until the recent crisis, post-war recessions in the U.S. and Western Europe did not seem closely tied to disturbances in financial markets. The Savings and Loans crisis in the US was a localized affair that did not grow into anything like the Great Recession. Similarly, the stock market meltdown in the late 1980's and the bursting of the tech-bubble in 2001 only had minor effects on aggregate economic activity.

At the same time, the financial frictions that were included in DSGE models did not seem to have very big effects.

The dilettante authors have no idea how important their concessions are. Their premise is that it was government regulation, deposit insurance, and the central bank's 'lender of last resort' function that prevented prior epidemics of accounting control fraud from causing anything worse than "minor effects on aggregate economic activity." The obvious problem is that since its inception 30 years ago modern macro ideologues have claimed the opposite is true – that governmental action is unnecessary and harmful. They constructed their DSGE models to valorize their Friedmanite dogmas.

The less obvious problem is that freshwater modern macro has claimed that the lesson of the financial crisis is the opposite. Athreya and the Richmond Fed have preached for years that the federal safety net caused the housing problem, the financial crisis, and the Great Recession. The Richmond Fed claims that the key policy response to future financial crises is allowing the shadow sector to collapse in an orgy of "rollover cris[e]s."

The broader problem is why the dilettante authors are so wedded to their failed models, which at their core assume out of existence the institutions and events they say are most critical to explaining the catastrophic failures of their models. Why, for example, start with a general equilibrium model based on absurdly utopian assumptions (stated and unstated) that invariably produces equilibrium when the things we most need to study involve the failure of markets to function? It is nonsensical to make contradictory assumptions in different parts of your model about human behavior. Modern macro models keep failing and their devotees' response is to add (over time) dozens of fudges that posit that humans typically act in a manner that contradicts to the explicit and unstated assumptions of the DSGE model about human behavior. DSGE models increasingly resemble Borg constructs. The Borg also claim that there is no alternative to assimilation into their collective.

Aaron Layman , December 20, 2017 at 10:23 am

Excellent points. Helps to explain how you get a supposedly serious site covering real estate falling for ridiculous tripe about the root cause of the housing crisis (aka Great Recession). Take a careful look at the bombshell "working paper" and the new "narrative" cited, and you can see the groupstink of the Fed written all over it
https://betterdwelling.com/forget-subprime-canadian-real-estate-buyers-investors-crashed-the-us-market/

diptherio , December 20, 2017 at 11:07 am

Great article.

Modern mainstream macro is like a police detective whose model of the world states that people are nice and the body heals itself, and that therefore we will all live happily ever after. When confronted by a murder victim lying in a pool of their own blood, and that fact's apparent incompatibility with their model of the world, they respond, "My model is correct only, you see, it failed to account for sudden massive blood loss. How that loss of blood happened is beyond the scope of my investigation, the important thing is that I've now incorporated that knowledge in my new improved model, which proves that we will all live happily ever after -- except in cases of a sudden, massive loss of blood ."

Altandmain , December 20, 2017 at 12:01 pm

There has not been a big mea-culpa from neoliberal economists after the 2008 Financial Crisis. I don't think there will be. Many are essentially the equal of religious fundamentalists.

However, we should also remember that the very wealthy have backed the neoliberal economists against the general public. Neolibe3ralism provides a pseudoscientific economic excuse for what amounts to turning society into a plutocracy, which is precisely what the rich want.

shinola , December 20, 2017 at 2:10 pm

" essentially the equal of religious fundamentalists."

Yes – nailed it!

flora , December 20, 2017 at 3:26 pm

aka: The divine right of markets. /s

Skip Intro , December 20, 2017 at 3:12 pm

The GFC worked out very well for the neoliberal agenda. What you can't predict, you don't need to prevent or protect against. If the result happens to be a massive transfer of funds from states to speculators that eases the path to austerity and asset stripping, what's to apologize for?

Matthew G. Saroff , December 20, 2017 at 12:16 pm

What is ADM, aside from the agribusiness?

Robert Denne , December 20, 2017 at 12:50 pm

ADM is the Arrow-Debreu-McKenzie (ADM) model, as revealed in the blurb for the Athreya book on Amazon.

Jean , December 20, 2017 at 12:31 pm

Lack of higher math skills precludes citizen involvement in economics.
Blame it on the math card in PCs that makes doing it by hand and thus learning and understanding how numbers work.

voislav , December 20, 2017 at 1:28 pm

Most economists lack higher math skills too, but that doesn't seem to be obstacle for them. It's spherical chickens in a vacuum, models that are supposedly related to real world but are simplified beyond recognition because most economists are ignorant of even rudimentary statistics.

djrichard , December 20, 2017 at 1:31 pm

You don't need math to follow the money.

Amfortas the Hippie , December 20, 2017 at 3:59 pm

and you don't need math to discover that the holy Models rely on downright silly assumptions about Human Beings.
"rational actors with perfect information".
lol.
Most of the economic actors I know do not even remotely resemble that.
and whomever said that modern econ is akin to fundamentalist religion is right on.
I can't read "Money" or watch CNBC without thinking about Pat Robertson or Billy Graham.
It's just a different god they worship.
With this in mind, I think it's hilarious that the current hyperventilation about "cryptocurrency" could possibly be the bubble that, in popping, brings the whole mess down.
"Masters of the Universe", indeed.

Know Thy Farmer.

Synoia , December 20, 2017 at 12:48 pm

Personally I believe economic as practiced is an example of telling the boss (the King) what they want to hear.

Economist appear descended form a long line of Court Magicians, telling the futures from the entrails of an animal, consulting the spirits for guidance, or using a Chrystal ball.

Of more pointedly Bullshit, baffles brains.

Prof Black make the point that he DSGE models assume away fraud. They also assume people are "rational actors, driven only by logic," that is: we are all Vulcans from Star Trek.

A simple view of women's fashions (high heels) with regard to comfort or safety would demolish any theory of people as "rational actors." Or men's behavior over their "sports teams."

To assume away human behavior and emotion, and thus chaos or catastrophe theory, would put economists at odds with their masters, and cut their income, by the nearly always fatal, or career limiting "telling truth to power."

It's interesting to speculate what would be the scope or size of common ground in a dialog between anthropologists and economists. Null set perhaps?

PB , December 20, 2017 at 1:28 pm

Hi all,

Just a quick note for those who were initially confused by Bill Black's use of "modern macroeconomic theory" and thought "modern monetary theory". (I know I did, and was initially really confused by his take, and had to re-read the first three paragraphs a few times to re-set my mental pointers). As far as I know (and I did a year of Ph.D economics at Stanford, so I pass Arthreya's first test) I haven't heard of "modern" applied to DSGE macro but that probably reflects my choice of reading material more than anything else. In short, "modern macro" is bad, "modern monetary" is good.

BTW, one of the best takes of macroeconomics I've encountered is Steve Keen's work, which I gratefully acknowledge I first read here on NC. Keen's critique of DSGE models is utterly spot-on and mathematically sophisticated. Part of the problem with economics is that it has been afflicted with 'math envy' since its earliest days, and the ADM results were proved with Banach Space methods, so they just *had* to be right. Google the phrase "spherical cow" for more on this mindset, not to mention one of the few really funny math jokes I know.

Cheers,

P

[Dec 20, 2017] Diletantism: A dilettante is a person who cultivates an area of interest, such as the arts, without real commitment or knowledge

Adj. 1. dilettantish - showing frivolous or superficial interest; amateurish; "his dilettantish efforts at painting" -- superficial - concerned with or comprehending only what is apparent or obvious; not deep or penetrating emotionally or intellectually; "superficial similarities"; "a superficial mind"; "his thinking was superficial and fuzzy"; "superficial knowledge"; "the superficial report didn't give the true picture"; "only superficial differences"
Notable quotes:
"... A dilettante is a person who cultivates an area of interest, such as the arts, without real commitment or knowledge. The Dilettante Doctrine takes modern macro's arrogance to a new pinnacle. Only their model is legitimate, and it is illegitimate to criticize their DSGE models, even though they repeatedly fail. Instead, we must all "like" their models. We cannot make any statements about macroeconomics unless we "like [DSGE] models." The Dilettante Doctrine is a sure-fire means of winning academic disputes. You demand that your critics endorse your views, or you dismiss them as dilettantes unworthy of respect. ..."
"... Readers may recall that the scientific method works in the opposite direction of the Dilettante Doctrine. Modern macro proposes a theory (DSGE) and tests its predictive ability. The DSGE models fail recurrently, on the most important macro events, and the failures are massive. The scientific method requires the theorist of the failed model to declare it falsified. Economists who "like" repeatedly falsified DSGE models are, as Paul Romer famously declared, engaged in "pseudoscience." ..."
"... There has not been a big mea-culpa from neoliberal economists after the 2008 Financial Crisis. I don't think there will be. Many are essentially the equal of religious fundamentalists. ..."
"... Personally I believe economic as practiced is an example of telling the boss (the King) what they want to hear. Economist appear descended form a long line of Court Magicians, telling the futures from the entrails of an animal, consulting the spirits for guidance, or using a Chrystal ball. Of more pointedly Bullshit, baffles brains. ..."
"... A simple view of women's fashions (high heels) with regard to comfort or safety would demolish any theory of people as "rational actors." Or men's behavior over their "sports teams." ..."
Dec 20, 2017 | www.nakedcapitalism.com

A dilettante is a person who cultivates an area of interest, such as the arts, without real commitment or knowledge. The Dilettante Doctrine takes modern macro's arrogance to a new pinnacle. Only their model is legitimate, and it is illegitimate to criticize their DSGE models, even though they repeatedly fail. Instead, we must all "like" their models. We cannot make any statements about macroeconomics unless we "like [DSGE] models." The Dilettante Doctrine is a sure-fire means of winning academic disputes. You demand that your critics endorse your views, or you dismiss them as dilettantes unworthy of respect.

Readers may recall that the scientific method works in the opposite direction of the Dilettante Doctrine. Modern macro proposes a theory (DSGE) and tests its predictive ability. The DSGE models fail recurrently, on the most important macro events, and the failures are massive. The scientific method requires the theorist of the failed model to declare it falsified. Economists who "like" repeatedly falsified DSGE models are, as Paul Romer famously declared, engaged in "pseudoscience."

Athreya then inadvertently compounded modern macro's failures by putting in writing a bit too many of modern macro's darker secrets in his 2013 book about macroeconomics. Athreya confirmed many of the most fundamental criticisms of modern macro devotees, revealed additional failures that were even more devastating, and illustrated perfectly the blindness of modern macro's devotees to their dogmas and logic. Athreya did recognize clearly one dogma that made modern macro devotees unable to spot even the world's largest bubble – but treated that failure as if it were a virtue. Modern macro devotees train macroeconomists to be unable to identify warn against, or take action to end even the most destructive bubbles. This is like training surgeons to believe that shock cannot occur and they should ignore shock in treating patients.

Altandmain , December 20, 2017 at 12:01 pm

There has not been a big mea-culpa from neoliberal economists after the 2008 Financial Crisis. I don't think there will be. Many are essentially the equal of religious fundamentalists.

However, we should also remember that the very wealthy have backed the neoliberal economists against the general public. Neolibe3ralism provides a pseudoscientific economic excuse for what amounts to turning society into a plutocracy, which is precisely what the rich want.

shinola , December 20, 2017 at 2:10 pm

" essentially the equal of religious fundamentalists."

Yes – nailed it!

Synoia , December 20, 2017 at 12:48 pm

Personally I believe economic as practiced is an example of telling the boss (the King) what they want to hear. Economist appear descended form a long line of Court Magicians, telling the futures from the entrails of an animal, consulting the spirits for guidance, or using a Chrystal ball. Of more pointedly Bullshit, baffles brains.

Prof Black make the point that he DSGE models assume away fraud. They also assume people are "rational actors, driven only by logic," that is: we are all Vulcans from Star Trek.

A simple view of women's fashions (high heels) with regard to comfort or safety would demolish any theory of people as "rational actors." Or men's behavior over their "sports teams."

To assume away human behavior and emotion, and thus chaos or catastrophe theory, would put economists at odds with their masters, and cut their income, by the nearly always fatal, or career limiting "telling truth to power."

It's interesting to speculate what would be the scope or size of common ground in a dialog between anthropologists and economists. Null set perhaps?

[Dec 19, 2017] Do not Underestimate the Power of Microfoundations

Highly recommended!
Nice illustration of ideologically based ostrakism as practiced in Academia: "Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."
Notable quotes:
"... A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned. ..."
"... The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for ..."
"... Mathematical masturbations are just a smoke screen used to conceal a simple fact that those "economists" are simply banking oligarchy stooges. Hired for the specific purpose to provide a theoretical foundation for revanschism of financial oligarchy after New Deal run into problems. Revanschism that occurred in a form of installing neoliberal ideology in the USA in exactly the same role which Marxism was installed in the USSR. With "iron hand in velvet gloves" type of repressive apparatus to enforce it on each and every university student and thus to ensure the continues, recurrent brainwashing much like with Marxism on the USSR universities. ..."
"... To ensure continuation of power of "nomenklatura" in the first case and banking oligarchy in the second. Connections with reality be damned. Money does not smell. ..."
"... Economic departments fifth column of neoliberal stooges is paid very good money for their service of promoting and sustaining this edifice of neoliberal propaganda. Just look at Greg Mankiw and Rubin's boys. ..."
"... "Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders." ..."
Apr 04, 2015 | Economist's View

Darryl FKA Ron -> pgl...

At the risk of oversimplifying might it not be as simple as stronger leanings towards IS-LM and kind are indicative of a bias towards full employment and stronger leanings towards DSGE, microfoundations, and kind are indicative of a bias towards low inflation?

IN general I consider over-simplification a fault, if and only if, it is a rigidly adhered to final position. This is to say that over-simplification is always a good starting point and never a good ending point. If in the end your problem was simple to begin with, then the simplified answer would not be OVER-simplified anyway. It is just as bad to over-complicate a simple problem as it is to over-simplify a complex problem. It is easier to build complexity on top of a simple foundation than it is to extract simplicity from a complex foundation.

A lot of the Chicago School initiative into microfoundations and DSGE may have been motivated by a desire to bind Keynes in a NAIRU straight-jacket. Even though economic policy making is largely done just one step at a time then that is still one step too much if it might violate rentier interests.

Darryl FKA Ron -> Barry...

There are two possible (but unlikely) schools of (generously attributed to as) thought for which internal consistency might take precedence over external consistency. One such school wants to consider what would be best in a perfect world full of perfect people and then just assume that is best for the real world just to let the chips fall where they may according to the faults and imperfections of the real world. The second such school is the one whose eyes just glaze over mesmerized by how over their heads they are and remain affraid to ask any question lest they appear stupid.

A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned.

Richard H. Serlin

Consistency sounds so good, Oh, of course we want consistency, who wouldn't?! But consistent in what way? What exactly do you mean? Consistent with reality, or consistent with people all being superhumans? Which concept is usually more useful, or more useful for the task at hand?

Essentially, they want models that are consistent with only certain things, and often because this makes their preferred ideology look far better. They want models, typically, that are consistent with everyone in the world having perfect expertise in every subject there is, from finance to medicine to engineering, perfect public information, and perfect self-discipline, and usually on top, frictionless and perfectly complete markets, often perfectly competitive too.

But a big thing to note is that perfectly consistent people means a level of perfection in expertise, public information, self-discipline, and "rationality", that's extremely at odds with how people actually are. And as a result, this can make the model extremely misleading if it's interpreted very literally (as so often it is, especially by freshwater economists), or taken as The Truth, as Paul Krugman puts it.

You get things like the equity premium "puzzle", which involves why people don't invest more in stocks when the risk-adjusted return appears to usually be so abnormally good, and this "puzzle" can only be answered with "consistency", that people are all perfectly expert in finance, with perfect information, so they must have some mysterious hidden good reason. It can't be at all that it's because 65% of people answered incorrectly when asked how many reindeer would remain if Santa had to lay off 25% of his eight reindeer ( http://richardhserlin.blogspot.com/2013/12/surveys-showing-massive-ignorance-and.html ).

Yes, these perfect optimizer consistency models can give useful insights, and help to see what is best, what we can do better, and they can, in some cases, be good as approximations. But to say they should be used only, and interpreted literally, is, well, inconsistent with optimal, rational behavior -- of the economist using them.

Richard H. Serlin -> Richard H. Serlin...
Of course, unless the economist using them is doing so to mislead people into supporting his libertarian/plutocratic ideology.

dilbert dogbert

As an old broken down mech engineer, I wonder why all the pissing and moaning about micro foundations vs aggregation. In strength of materials equations that aggregate properties work quite well within the boundaries of the questions to be answered. We all know that at the level of crystals, materials have much complexity. Even within crystals there is deeper complexities down to the molecular levels. However, the addition of quantum mechanics adds no usable information about what materials to build a bridge with.

But, when working at the scale of the most advanced computer chips quantum mechanics is required. WTF! I guess in economics there is no quantum mechanics theories or even reliable aggregation theories.

Poor economists, doomed to argue, forever, over how many micro foundations can dance on the head of a pin.

RGC -> dilbert dogbert...

Endless discussions about how quantum effects aggregate to produce a material suitable for bridge building crowd out discussions about where and when to build bridges. And if plutocrats fund the endless discussions, we get the prominent economists we have today.

Darryl FKA Ron -> dilbert dogbert...

"...I guess in economics there is no quantum mechanics theories or even reliable aggregation theories..."

[I guess it depends upon what your acceptable confidence interval on reliability is. Most important difference that controls all the domain differences between physical science and economics is that underlying physical sciences there is a deterministic methodology for which probable error is merely a function of the inaccuracy in input metrics WHEREAS economics models are incomplete probabilistic estimating models with no ability to provide a complete system model in a full range of circumstances.

YOu can design and build a bridge to your load and span requirements with alternative models for various designs with confidence and highly effective accuracy repeatedly. No ecomomic theory, model, or combination of models and theories was ever intended to be used as the blueprint for building an economy from the foundation up.

With all the formal trappings of economics the only effective usage is to decide what should be done in a given set of predetermined circumstance to reach some modest desired effect. Even that modest goal is exposed to all kinds of risks inherent in assumptions, incomplete information, externalities, and so on that can produce errors of uncertain potential bounds.

Nonetheless, well done economics can greatly reduce the risks encountered in the random walk of economics policy making. So much so is this true, that the bigger questions in macro-economics policy making is what one is willing to risk and for whom.

The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for.]

Darryl FKA Ron -> Peter K....

unless you have a model which maps the real world fairly closely like quantum mechanics.

[You set a bar too high. Macro models at best will tell you what to do to move the economy in the direction that you seek to go. They do not even ocme close to the notion of a theory of everything that you have in physics, even the theory of every little thing that is provided by quantum mechanics. Physics is an empty metaphor for economics. Step one is to forgo physics envy in pursuit of understanding suitable applications and domain constraints for economics models.

THe point is to reach a decision and to understand cause and effect directions. All precision is in the past and present. The future is both imprecise and all that there is that is available to change.

For the most part an ounce of common sense and some simple narrative models are all that are essential for making those policy decisions in and of themselves. HOWEVER, nation states are not ruled by economist philosopher kings and in the process of concensus decision making by (little r)republican governments then human language is a very imprecise vehicle for communicating logic and reason with respect to the management of complex systems. OTOH, mathematics has given us a universal language for communicating logic and reason that is understood the same by everyone that really understands that language at all. Hence mathematical models were born for the economists to write down their own thinking in clear precise terms and check their own work first and then share it with others so equipped to understand the language of mathematics. Krugman has said as much many times and so has any and every economist worth their salt.]

likbez -> Syaloch...

I agree with Pgl and PeterK. Certain commenters like Darryl seem convinced that the Chicago School (if not all of econ) is driven by sinister, class-based motives to come up justifications for favoring the power elite over the masses. But based on what I've read, it seems pretty obvious that the microfoundation guys just got caught up in their fancy math and their desire to produce more elegant, internally consistent models and lost sight of the fact that their models didn't track reality.

That's completely wrong line of thinking, IMHO.

Mathematical masturbations are just a smoke screen used to conceal a simple fact that those "economists" are simply banking oligarchy stooges. Hired for the specific purpose to provide a theoretical foundation for revanschism of financial oligarchy after New Deal run into problems. Revanschism that occurred in a form of installing neoliberal ideology in the USA in exactly the same role which Marxism was installed in the USSR.
With "iron hand in velvet gloves" type of repressive apparatus to enforce it on each and every university student and thus to ensure the continues, recurrent brainwashing much like with Marxism on the USSR universities.

To ensure continuation of power of "nomenklatura" in the first case and banking oligarchy in the second. Connections with reality be damned. Money does not smell.

Economic departments fifth column of neoliberal stooges is paid very good money for their service of promoting and sustaining this edifice of neoliberal propaganda. Just look at Greg Mankiw and Rubin's boys.

But the key problem with neoliberalism is that the cure is worse then disease. And here mathematical masturbations are very handy as a smoke screen to hide this simple fact.

likbez -> likbez...

Here is how Rubin's neoliberal boy Larry explained the situation to Elizabeth Warren:

"Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People - powerful people - listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."

Elizabeth Warren, A Fighting Chance

Syaloch -> likbez...

Yeah, case in point.

[Dec 14, 2017] In defence of the labour theory of value

Actually Marx's "labor theory of value" should be properly called the "theory of surplus value".
Notable quotes:
"... For Marx, value was socially-necessary labour time: David Harvey is good on this. From this perspective, exploitation and alienation are linked. Workers are exploited because they must work longer than necessary to get their consumption bundle. And they are alienated because this work is unsatisfying and a source of unfreedom. Now, I'll concede that many people hate the labour theory of value. One reason for this is that many discussions of it quickly become obscurantist – as if "value" is some mystical entity embodied in commodities. ..."
"... This, though, certainly was not Marx's intention. Quite the opposite. He intended his theory to be a demystification. He wanted to show how what looked like relations between things – the exchange of money for goods or labour-time – were in fact relations between people. And unequal ones at that. ..."
"... I suspect that some of the animosity to Marx's use of LTV arises because of a resistance to the inference that Marx drew from it – that workers are exploited. This issue, however, is independent of the validity of not of the LTV. For example, Roemer thinks workers are exploited without believing in the LTV, and Smith believed the LTV without arguing that workers were exploited. ..."
"... * He seems to be recovering now. The vet is also expected to make a full recovery eventually. ..."
"... Further understanding, which evolved after Marx, is that the LTV is just special case of the principle that what produces a surplus of usefulness is not labour per se, but the energy used in the transformation of a larger quantity of something into a smaller quantity of something else, and muscle power is just one way, even if it was the main one for a very long time, to obtain energy to transform a large quantity of less useful commodities into a smaller quantity of more useful commodities. ..."
"... And this follows into the impression that I have derived from various authors that our high standards of living depend not on the high "productivity" of labour, but on the high "productivity" of fossil fuels, which are the product of the fertility of land ..."
"... the complex process of differentiation in the economy (aka the division of labor) obscures the relationship between the creation of the surplus (work time above that necessary to reproduce consumption bundle) and its utilization by capitalists via investment. Investment is not possible without exploitation of workers, but that relationship is occluded by the mechanics of employment, markets, and property. ..."
"... My impression is that your bearded friend Karl does not use "alienation" in that sense at all, in an economic sense, but in a humanist sense: that by being separated from the means of production proletarians are alienated from the meaning of their work, from work as a human activity, as distinct from an economic activity ..."
"... Practically every "Dilbert" strip is about "alienation". This is my favourite ..."
"... Placing a high value on the frivolous and "useless" has always been the hallmark of those most able to decide the value of anything, because they have no use for economic use (so to speak), but rather social signaling. Broad social respect is an extremely expensive thing to buy with money alone. ..."
Dec 11, 2017 | stumblingandmumbling.typepad.com

Lucius has been poorly recently, which has required some trips to the vet and therefore a bill of a size that only David Davis could negotiate*. This has made me wonder: is there more to be said for the labour theory of value than we like to think?

For a long time, I've not really cared about this theory one way or the other. This is partly because I've not bothered much with questions of value; partly because, as John Roemer has shown, we don't need (pdf) a labour theory of value to suggest workers are exploited; and partly because the main Marxian charges against capitalism – for example that it entails relationships of domination – hold true (or not!) independently of the theory.

As I approach retirement, however, I've begun to change my mind. I think of major expenses in terms of labour-time because they mean I have to work longer. A trip to the vet is an extra fortnight of work; a good guitar an extra month, a car an extra year, and so on.

When I consider my spending, I ask: what must I give up in order to get that? And the answer is my time and freedom. My labour-time is the measure of value.

This is a reasonable basis for the claim that workers are exploited. To buy a bundle of goods and services, we must work a number of hours a week. But taking all workers together, the hours we work are greater than the hours needed to produce those bundles because we must also work to provide a profit for the capitalist. As Marx put it:

We have seen that the labourer, during one portion of the labour-process, produces only the value of his labour-power, that is, the value of his means of subsistence During the second period of the labour-process, that in which his labour is no longer necessary labour, the workman, it is true, labours, expends labour-power; but his labour, being no longer necessary labour, he creates no value for himself. He creates surplus-value which, for the capitalist, has all the charms of a creation out of nothing. This portion of the working-day, I name surplus labour-time.

For Marx, value was socially-necessary labour time: David Harvey is good on this. From this perspective, exploitation and alienation are linked. Workers are exploited because they must work longer than necessary to get their consumption bundle. And they are alienated because this work is unsatisfying and a source of unfreedom. Now, I'll concede that many people hate the labour theory of value. One reason for this is that many discussions of it quickly become obscurantist – as if "value" is some mystical entity embodied in commodities.

This, though, certainly was not Marx's intention. Quite the opposite. He intended his theory to be a demystification. He wanted to show how what looked like relations between things – the exchange of money for goods or labour-time – were in fact relations between people. And unequal ones at that.

What's more, the charge of obscurantism against Marx is an especially weak one when it comes from orthodox economics. Much of this invokes unobservable concepts such as the natural rate of unemployment, marginal productivity, utility, the marginal product of capital and natural rate of interest – ideas which, in the last two cases, might not even be theoretically coherent.

In fact, the LTV is reasonably successful by the standards of conventional economics: we have empirical evidence to suggest that it does (pdf) a decent (pdf) job of explaining (pdf) relative prices – not that this was how Marx intended it to be used.

You can of course, think of counter-examples to the theory. But so what? in the social sciences, no substantial theory is 100% true.

I suspect that some of the animosity to Marx's use of LTV arises because of a resistance to the inference that Marx drew from it – that workers are exploited. This issue, however, is independent of the validity of not of the LTV. For example, Roemer thinks workers are exploited without believing in the LTV, and Smith believed the LTV without arguing that workers were exploited.

By the (low) standards of economic theories, perhaps the LTV isn't so bad.

* He seems to be recovering now. The vet is also expected to make a full recovery eventually.

December 11, 2017 Permalink

Comments

Luis Enrique , December 11, 2017 at 02:09 PM

But the LTV says more than the output of the economy is divided between the workers and the (suppliers and) owners of capital goods, doesn't it? I mean, mainstream econ says that too. And unless ownership of capital inputs to production is distributed equally across society, then some people consume things that other's labour has produced, which means workers must produce more than they consume. But again, that's basic mainstream stuff, not LVT. You end by saying you can believe in exploitation but not LVT, and vice versa, but the main body of this blog seems to be connecting the two. I am confused.

Of course if you have the ability to vary your labour supply, and labour is how you earn your money, then you ask yourself how much you need to work to purchase whatever. But again that's mainstream not LVT.

David Friedman , December 11, 2017 at 06:14 PM

Your version of the labor theory of value is one of Adam Smith's versions. I don't think it is Marx's, but I know Smith better than Marx.

And definitely not Ricardo's.

ConfusedNeoLiberal , December 11, 2017 at 08:51 PM

What about value, in terms of risk among others, that the employers put in starting a new business?

Blissex , December 12, 2017 at 12:23 AM

"Smith believed the LTV without arguing that workers were exploited."

The Marxian approach was interested in, as other commenters have said, in the specific capitalist case, where "capitalism" for him means strictly "labour for hire" by workers alienated from the means of production by their ownership by capitalists.

But the labour theory of value, as understood by what Marx called "classicals", applies also to all labour, and he used it in that sense.

My understanding of the classicals and the LTV is reduced to a minimum this:

Further understanding, which evolved after Marx, is that the LTV is just special case of the principle that what produces a surplus of usefulness is not labour per se, but the energy used in the transformation of a larger quantity of something into a smaller quantity of something else, and muscle power is just one way, even if it was the main one for a very long time, to obtain energy to transform a large quantity of less useful commodities into a smaller quantity of more useful commodities.

And this follows into the impression that I have derived from various authors that our high standards of living depend not on the high "productivity" of labour, but on the high "productivity" of fossil fuels, which are the product of the fertility of land.

Blissex , December 12, 2017 at 12:29 AM

"value, in terms of risk among others, that the employers put in starting a new business?"

If the business produces a surplus, that is value added, than the surplus is the product of the energy/labour expended by all participants

How it is accounted for is one issue, especially over multiple time periods, and how it is shared out is a social relationship.

As to risk, everybody in the business runs the risk of not getting paid at the end of the month, and the opportunity cost of not doing something else, whichever labour they put in.

How risk and opportunity cost are accounted for, especially over multiple time periods, is another issue, and how they are shared is another social relationship.

Blissex , December 12, 2017 at 01:14 AM

"the surplus is the product of the energy/labour expended by all participants"

I'll perhaps further diminish the reputation of my "contributions" this way: perhaps all social relationships of production (at least among males) map closely onto (cursorial) group hunts.

https://78.media.tumblr.com/d4db6631d383cbfc9bd135c799a06e7f/tumblr_n3u8r0eJu01sohvpko1_500.jpg

:-)

Luis Enrique , December 12, 2017 at 08:40 AM

That's a very long winded way of saying that making stuff requires labour.

Blissex , December 12, 2017 at 01:50 PM

"a very long winded way of saying that making stuff requires labour"

Well, that's obvious, but what the classicals thought of as the LTV was not entirely obvious: that "surplus" (rather than "stuff") comes from the fertility of land and the transformation achieved with labour, and that nothing else is needed to achieve "surplus". Because for example capital goods are themselves surplus from fertility or labour, again back to the first blades made from chipping lumps of obsidian.

That's quite a bit more insightful, never mind also controversial, than "making stuff requires labour".

Rich Clayton , December 12, 2017 at 03:35 PM

Love this post. But, being a fellow marxist, I can't help but to disagree with this bit: "And they are alienated because this work is unsatisfying and a source of unfreedom." This is a colloquial use of alienation, and its not wrong.

But Marx is getting at something else: the complex process of differentiation in the economy (aka the division of labor) obscures the relationship between the creation of the surplus (work time above that necessary to reproduce consumption bundle) and its utilization by capitalists via investment. Investment is not possible without exploitation of workers, but that relationship is occluded by the mechanics of employment, markets, and property.

That's the sense in which workers are alienated under capitalism. Socialism could still have boring work, but, in so far as the investment function is brought under collective democratic control, workers would not be alienated in the special sense Marx is using.

Lukas , December 12, 2017 at 03:41 PM

@Luis Enrique

"Where else could stuff come from?" Well, assuming by "stuff" we mean objects of value, nowhere. But the reasons for which we value them are not dependent upon their natural origins or the labor required for their production. I don't value a computer because it's made of plastic and silicon and so forth, nor because of the labor required to produce it. It's useful because of what it does, not what it is; it's sort of Kant's definition of art versus the general conception of tools.

As for the relationship between production functions and the LTV, that seems (at least prima facie) pretty straightforward. If there is a high olefimity ascribed to the surplus provided by the product created by X, Y, then those production functions will, themselves, be assigned greater value, i.e., be worthy of more labor-time to attain. E.g., even if I'm not very good at fishing, if I really like the flavor of fish over other protein sources, I'll spend more time increasing my labor efficiency (be a better fisherman).

Blissex , December 12, 2017 at 05:36 PM

"Everything ultimately derives from nature and the labour of humans. Where else could stuff come from? That's all there is."

Then in theory the cost (not the price) of everything can be measured in terms of physical quantities of primary inputs and of hours of work.

"What's controversial about it?"

What is controversial is that written like that you sound like a Marxist: the alternative approach is to say that *property* creates surplus.
In the standard neoclassical approach "property" is the often forgotten "initial endowments" of the single representative agent.

Anyhow the "narrative" is: as Mr. Moneybags owns the iron mine and the coal mine and the smelter and the ingot roller and spoon press, then he is entitled to the surplus because without his property it is impossible to make spoons. Labour on its own is worthless, wastes away, while property is "valuable" capital.

"And how one gets from a production function (stuff is made from X, Y and Z) to LTV"

Production functions are just not very elaborate scams to pretend that property is the factor of production, rather then the fertility of land and the energy of labour, and land does not exist (after JB Clark "disappeared" it) and labour is just an accessory. Part of the scam is that "X, Y and Z" are denominated in money, not physical quantities.

As I wrote in another answer accounting for the output of land fertility and labour energy and how it is shared are the difficult bits. Welcome to the institutional approach to the political economy. :-)

Blissex , December 12, 2017 at 05:41 PM

"the reasons for which we value them are not dependent upon their natural origins or the labor required for their production"

And here be dragons. Your old bearded acquaintance Karl has something to say about this :-).

"It's useful because of what it does, not what it is"

So cleaning floors which is very useful should have a high value, while Leonardo paintings, that are merely scarce, should have a low value :-).

I though that most people reckoned that "value" depends on scarcity: so there is a scarcity of even not very good promoters of torysm, so G Osborne is entitled to £600,000 a year to edit the "Evening Standard", but there is no scarcity of excellent cleaners, so cleaners gets minimum wage if they are lucky.

:-)

Luis Enrique , December 12, 2017 at 05:43 PM

counting hours of worked is not a measure of cost, it is a tally of hours worked. In mainstream econ, production functions describe a physical production process (to make 1 unit of Y, you combine inputs like so) and are not not denominated in money. e.g. You multiply L by w to get cost.

mulp , December 12, 2017 at 05:46 PM

Economies are zero sum. GDP must be paid for, otherwise it won't be produced. The only source of money comes from labor costs, the money paid to workers to work producing GDP. As conservatives note, all taxes fall on workers by directly taking their pay, or by hiking the prices of what workers buy.

Taxes pay workers, e.g. teachers, and doctors with Medicare and Medicaid, weapons makers and warriors, or pay people to pay workers, Social Security benefits and SNAP.

Capital has value because it is built by paying workers. It gets a cut to repay the payers of workers.

Monopoly rent seeking is unsustainable. If a monoplists takes more from workers than they pay workers, he eventually takes so much money workers can no longer pay for GDP and it falls to zero as workers produce what they consume without buying from the monopolist capital.

Tanstaafl

As Keynes put it:

"I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision.

"Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital. An intrinsic reason for such scarcity, in the sense of a genuine sacrifice which could only be called forth by the offer of a reward in the shape of interest, would not exist, in the long run, except in the event of the individual propensity to consume proving to be of such a character that net saving in conditions of full employment comes to an end before capital has become sufficiently abundant. But even so, it will still be possible for communal saving through the agency of the State to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce."


Economies are zero sum. The value of goods and services must equal the labor costs in the long run. Tanstaaafl

Blissex , December 12, 2017 at 06:01 PM

"Socialism could still have boring work, but, in so far as the investment function is brought under collective democratic control, workers would not be alienated in the special sense Marx is using."

My impression is that your bearded friend Karl does not use "alienation" in that sense at all, in an economic sense, but in a humanist sense: that by being separated from the means of production proletarians are alienated from the meaning of their work, from work as a human activity, as distinct from an economic activity.

Collective ownership does not change at all that kind of alienation: being a cog in the capitalist machinery is no less alienating than being a cog in the collectivist machinery.

I think that our blogger when he talks about distributing control of the production process to workers is far closer to the marxian ideal than a collectivist approach.

Practically every "Dilbert" strip is about "alienation". This is my favourite:

http://dilbert.com/strip/2002-03-09

But these are also good:

http://dilbert.com/strip/1991-12-26
http://dilbert.com/strip/1993-01-05
http://dilbert.com/strip/1993-04-26
http://dilbert.com/strip/1994-11-07
http://dilbert.com/strip/1996-03-03
http://dilbert.com/strip/1996-07-24
http://dilbert.com/strip/1996-10-10
http://dilbert.com/strip/2002-08-10

Luis Enrique , December 12, 2017 at 06:26 PM

That is not what zero sum means

Blissex , December 12, 2017 at 06:53 PM

"counting hours of worked is not a measure of cost"

For a definition of "cost" that is made-up disregarding P Sraffa's work and in general the classics.

"multiply L by w to get cost."

As J Robinson and others pointed out that "w" depends on the distribution of income, on the interest rate, etc., so is an institutional matter.
As I was saying, accounting for the surplus and how to share it is not so easily handwavable.

Luis Enrique , December 12, 2017 at 08:55 PM

sorry, I meant for a money definition of cost that is not just counting inputs, but which is inputs multiplied by their prices.

nobody is hand waving. I think the mainstream view is that 'value' and 'surplus' are not meaningful terms, only prices and profits and subjective value. A production function says nothing about prices, you have to explain them with other stuff, and as you say, institutions and all manner of things could come in the play there.

You can say that that workers produce more in money terms than than they are paid, which is trivial (the wages paid by an employer are less than its gross profits so long as there are non-zero returns to capital, interest on a loan or dividends or whatever) and to my mind it's silly to define that as exploitation because it would apply in situations where the 'capitalist' is getting a small return and workers rewarded handsomely by any standard. Better imo to define exploitation as when capitalists are earning excess returns (and I'd fudge that by differentiating between workers' wages and salaries of top execs). Otherwise you lay yourself open to "the only thing worse than being exploited by capitlists is not beingn exploited by capitalists" which is J Robinson too I believe.

Luis Enrique , December 12, 2017 at 08:57 PM

and i think you only have to look at the income distribution to infer workers are being expoloited

B.L. Zebub , December 13, 2017 at 04:02 AM

@Blissex,

This is a genuine question: what you exposed above is related to or influenced by Steve Keen's ideas, yes? If so, I'd be interested in reading about that in more detail.

Lukas , December 13, 2017 at 04:28 AM

@Blissex

I've always thought that defining value by scarcity was an absurd misdirection, in part because there is no reason that the two should correlate at all. At any point in socioeconomic development beyond subsistence, value is to some extent socially defined, not economically defined. Status ends up being the most "useful" resource, as we see among all those who've never had to worry about their material conditions.

Placing a high value on the frivolous and "useless" has always been the hallmark of those most able to decide the value of anything, because they have no use for economic use (so to speak), but rather social signaling. Broad social respect is an extremely expensive thing to buy with money alone.

@Luis Enrique

Ah, but name for me a production process that doesn't take place over time. There's an infinite amount of time for all of us, but for each of us only so much, and those who fail to value it die full of regret. Surely someone somewhere must have something to say about this.

Luis Enrique , December 13, 2017 at 08:34 AM

I don't know why I wrote the above. Surplus is also a mainstream term. See wages set by bargaing over a surplus. Presume it's based on prices of outputs compared to inputs or if in model with real quantities not prices, then in subjective values.

Lukas production functions are defined over a period of time.

Blissex , December 13, 2017 at 11:43 AM

Ahem, I am trying to explain my understanding of Marx, who wrote both as economist and a philosopher, and a politial theorist.

Alienation, exploitation and inequality are technically distinct concepts, even if in the marxist (view (and that of every business school, that are faithful to marxist political economy) capitalist control of the means of production leads to alienation which leads to exploitation which leads to inequality. In the marxian political economy inequality can exist even with exploitation, for example, and that makes it less objectionable.

"Surplus is also a mainstream term. See wages set by bargaing over a surplus."

Some Economists have not forgotten at least some terminology of political economy and some Departments of Business still have surviving "history of economic thought" courses that some postgrads may still accidentally occasionally wander into and pick up some terms from...

"are not meaningful terms, only prices and profits and subjective value."

But the mainstream focus on prices and profits etc. is the purest handwaving, because it begs the question...

"A production function says nothing about prices"

Ha! This is one of the best examples where mainstream theory handwaves furiously: mainstream production functions switch effortlessly from "capital" as phusical quantities to aggregating "capital" by reckoning it in "numeraire". That is all about prices, and even about future expected prices and future expected rates of discount. Therefore rational expectations, a grand feat of handwaving.

Blissex , December 13, 2017 at 11:51 AM

"defining value by scarcity was an absurd misdirection, in part because there is no reason that the two should correlate at all."

Ahhhhhhh but this is a very political point and not quite agreeable because:

One of the conceits of "microfoundations" is to show that there are "laws" of Economics that are precise, so everybody get exactly their just compensation, so for example demand-supply schedules are always presented, cleverly, as lines and static.

The view of political economists is that instead "everything" lies within boundaries of feasibility, which are dynamic, so for example demand-supply schedules are ribbons that change over time and circumstances, and transactions happens not at uniquely determined points of intersections, but in regions of feasibility, the precise point dependent on institutional arrangements.

So the LTV determines one boundary for "price" and desirability another boundary.

Blissex , December 13, 2017 at 12:03 PM

"exposed above is related to or influenced by Steve Keen's ideas"

Related and independently derived, but also a bit influenced. I had always suspected that the "classicals" used "labour" as a synonym for "muscle power", but various later readings persuaded me that was indeed the case. Later post will have some hopefully interesting detail. Then I looked into the literature and found that obviously this had been figured out before (centuries ago in some cases, like B de Mandeville).

Anyhow for similar approaches some references:

Luis Enrique , December 13, 2017 at 04:33 PM

Blissex if you can come up with a better way of trying to describe total quantities of highly heterogeneous things (i.e. capital) you have a Nobel awaiting. Everybody know that attempts to put a number on the real quantity of capital is always going to be a rough and ready endeavour.

I don't see how working with prices and profits is 'handwaving'. What question does it beg? Much of economics is about trying to explain these things. I would not say economics focuses on prices and profits because many economics models work with real quantities that are high abstract and in theory are made commensurate using subjective value (utility) as the unit of account.

And I don't think this lot
https://www.theguardian.com/business/2010/oct/11/nobel-prize-for-economics-three-winners
picked up the term surplus by accidentally wandering in to the wrong seminar

[Dec 04, 2017] The Phillips Curve, Again

Dec 04, 2017 | everydayecon.wordpress.com

The Phillips Curve is back. In saying so, I do not mean to imply that being "back" refers to a sudden reappearance of a stable empirical relationship between unemployment (or the output gap) and inflation. The Phillips Curve is back in the same way that conspiracy theories about the assassination of JFK are back after the recent release of government documents. In other words, the Phillips Curve is something that people desperately want to believe in, despite the lack of evidence.

The Phillips Curve is all the rage among central bankers. Since the Federal Reserve embarked on quantitative easing, they have been ensuring the public that QE would not be inflationary because of the slack in the economy. Until labor market conditions tighten, there would be little threat of inflation. Then, as the labor market tightened, the Federal Reserve warned that they might have to start raising interest rates to prevent these tightening conditions from creating inflation.

What is remarkable about this period is that the Federal Reserve has undershot its target rate of inflation throughout this entire period -- and continues to do so today. So what does this tell us about the Phillips Curve and what can we learn about monetary policy?

If one looks at the data on unemployment and inflation (or even the output gap and inflation), you could more easily draw Orion the Hunter as you could a stable Phillips Curve. Fear not, sophisticated advocates of the Phillips Curve will say. This is simply the Lucas Critique at play here. If a Phillips Curve exists, and if the central bank tries to exploit it, then it will not be evident in the data. In fact, if you take a really basic 3-equation-version of the New Keynesian model, there is a New Keynesian Phillips Curve in the model. However, when you solve for the equilibrium conditions, you find that inflation is a function of demand shocks, technology shocks, and unexpected changes in interest rates. The output gap doesn't appear in the solution. But fear not, this simply means that monetary policy is working properly. The Phillips Curve is apparently like the observer effect in quantum mechanics in that when we try to observe the Phillips Curve, we change the actual result (this is a joke, please do not leave comments about why I've misunderstood the observer effect).

... ... ...

What all of this means is that even given the fact that the New Keynesian model features an equation that resembles the Phillips curve, this does not imply that there is some predictive power that comes from thinking about this equation in isolation. In addition, it certainly does not imply that changes in the output gap cause changes in the rate of inflation. There is no direction of causation implied by this one equilibrium condition.

[Nov 29, 2017] Economics is a Belief System - and We are Ruled by Fundamentalists

Highly recommended!
Notable quotes:
"... During the two decades following the neoliberal economists' take-over of Western governments in the 1980s, many felt that the almost mystical terms of economics - such as derivatives, hedging, leverage, contangos, etc - were beyond the understanding of most ordinary people. ..."
"... They pursued them as a matter of faith in the market and its processes, despite the apparent warning signs of their imminent failure. ..."
"... as within many custom or belief systems, what economics enshrines is a social order. One where a dominant minority are able to take a small quantity of wealth from each member of the majority in order to maintain their higher status. ..."
"... idea of economics as an exploitative mechanism is echoed in the cover picture of the book, Bosch's The Conjurer ..."
"... Within its exposition of economics as a quasi-religious theory, Brian Davey's book helps us to understand why economic theory is driving us toward a global system failure - and why politics and economics are incapable of responding to the pressing ecological crisis which the pursuit of economic growth has spawned. ..."
Nov 09, 2015 | resilience.org

by Paul Mobbs, originally published by The Ecologist |

Brian Davey's new book, Credo: Economic Beliefs in a World in Crisis, is an analysis of economic theory as if it were a system of religious belief.

It's a timely book. The simplistic, perhaps 'supernatural' assumptions which underpin key parts of economic theory demand far more attention. It's a debate we've failed to have as a society.

... ... ...

During the two decades following the neoliberal economists' take-over of Western governments in the 1980s, many felt that the almost mystical terms of economics - such as derivatives, hedging, leverage, contangos, etc - were beyond the understanding of most ordinary people.

And without understanding those terms, irrespective of our gut feeling that there was something wrong, how could we challenge the political lobby those theories had put into power? In the end it took the financial crash of 2007/8 to demonstrate that those in charge of this system didn't understand the complexity and risk of those practices either.

They pursued them as a matter of faith in the market and its processes, despite the apparent warning signs of their imminent failure. Those outside 'orthodox' economics could already see where the economy was heading in the longer-term.

Question is, did economists learn anything from that failure? Or, through austerity, have they once again committed us to their dogmatic belief system, unchanged by that experience?

... ... ...

However, through simple hubris or optimism bias, the political class has been convinced that 'fracking' is a solution to our economic woes - even though there is a paucity of verifiable evidence to demonstrate those claims, and it has already lost billions of investors money.

Economics is a reflection of power

Ultimately though, as within many custom or belief systems, what economics enshrines is a social order. One where a dominant minority are able to take a small quantity of wealth from each member of the majority in order to maintain their higher status.

This idea of economics as an exploitative mechanism is echoed in the cover picture of the book, Bosch's The Conjurer - where a magician distracts the public with a sleight of hand trick so that they can be more easily robbed by his associate.

Again, in a world where we're hitting the limits to human material growth, political models of well-being based upon wealth and consumption are damaging to human society in the long-term. The evidence that we're heading for a longer-term failure is there, as was the case with the warning signs before the 2007 crash. The problem is that those in positions of power do not wish to see it.

... ... ...

Within its exposition of economics as a quasi-religious theory, Brian Davey's book helps us to understand why economic theory is driving us toward a global system failure - and why politics and economics are incapable of responding to the pressing ecological crisis which the pursuit of economic growth has spawned.

Contrary to the economic hubris of many world leaders, set alongside the reality of ecological limits humanity is not 'too big to fail'.

[Nov 29, 2017] Michael Hudson: The Wall Street Economy is Draining the Real Economy

Highly recommended!
Notable quotes:
"... An interview by Gordon T. Long of the Financial Repression Authority. Originally published at his website ..."
"... One of the most important distinctions that investors have to understand is the difference between secular and cyclical trends Let us begin with definitions from the Encarta® World English Dictionary: ..."
"... Secular – occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period of time ..."
"... Cycle – a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions of an event or phenomenon that occurs regularly ..."
"... Secular stagnation is when the predators of finance have eaten too many sheeple. ..."
"... Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to have happened yet consistently. ..."
"... Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal, which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt with Nike gear. ..."
"... . . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit . It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system and raise the cost of living and doing business . ..."
www.nakedcapitalism.com
April 29, 2016 by Yves Smith An interview by Gordon T. Long of the Financial Repression Authority. Originally published at his website

GORDON LONG: Thank you for joining us. I'm Gordon Long with the Financial Repression Authority. It's my pleasure to have with me today Dr. Michael Hudson Professor Hudson's very well known in terms of the FIRE economy to-I think, to a lot of our listeners, or at least he's recognized by many as fostering that concept. A well known author, he has published many, many books. Welcome, Professor Hudson.

MICHAEL HUDSON: Yes.

LONG: Let's just jump into the subject. I mentioned the FIRE economy cause I know that I have always heard it coming from yourself-or, indirectly, not directly, from yourself. Could you explain to our listeners what's meant by that terminology?

HUDSON: Well it's more than just people getting fired. FIRE is an acronym for Finance, Insurance and Real Estate. Basically that sector is about assets, not production and consumption. And most people think of the economy as being producers making goods and services and paying labor to produce them – and then, labour is going to buy these goods and services. But this production and consumption economy is surrounded by the asset economy: the web of Finance, Insurance, and Real Estate of who owns assets, and who owes the debts, and to whom.

LONG: How would you differentiate it (or would you) with what's often referred to as financialization, or the financialization of our economy? Are they one and the same?

HUDSON: Pretty much. The Finance, Insurance, and Real Estate sector is dominated by finance. 70 to 80% of bank loans in North America and Europe are mortgage loans against real estate. So instead of a landowner class owning property clean and clear, as they did in the 19 th century, now you have a democratization of real estate. 2/3 or more of the population owns their own home. But the only way to buy a home, or commercial real estate, is on credit. So the loan-to-value ratio goes up steadily. Banks lend more and more money to the real estate sector. A home or piece of real estate, or a stock or bond, is worth whatever banks are willing to lend against it

As banks loosen their credit terms, as they lower their interest rates, take lower down payments, and lower amortization rates – by making interest-only loans – they are going to lend more and more against property. So real estate is bid up on credit. All this rise in price is debt leverage. So a financialized economy is a debt-leveraged economy, whether it's real estate or insurance, or buying an education, or just living. And debt leveraging means that a larger proportion of assets are represented by debt. So debt equity ratios rise. But financialization also means that more and more of people's income and corporate and government tax revenue is paid to creditors. There's a flow of revenue from the production-and-consumption economy to the financial sector.

LONG: I don't know if you know Richard Duncan. He was with the IMF, etc, and lives in Thailand. He argues right now that capitalism is no longer functioning, and really what he refers to what we have now is "creditism." Because in capitalism we have savings that are reinvested into productive assets that create productivity, which leads to a higher level of living. We're not doing that. We have no savings and investments. Credit is high in the financial sector, but it's not being applied to productive assets. Is he valid in that thinking?

HUDSON: Not as in your statement. It's confused.

LONG: Okay.

HUDSON: There's an enormous amount of savings. Gross savings. The savings we have that are mounting up are just about as large as they've ever been – about, 18-19% of the US economy. They're counterpart is debt. Most savings are lent out to borrowers se debt. Basically, you have savers at the top of the pyramid, the 1% lending out their savings to the 99%. The overall net savings may be zero, and that's what your stupid person from the IMF meant. But gross savings are much higher. Now, the person, Mr. Duncan, obviously-I don't know what to say when I hear this nonsense. Every economy is a credit economy.

Let's start in Ancient Mesopotamia. The group that I organized out of Harvard has done a 20-study of the origins of economic structuring in the Bronze Age, even the Neolithic, and the Bronze Age economy – 3200 BC going back to about 1200 BC. Suppose you're a Babylonian in the time of Hammurabi, about 1750 BC, and you're a cultivator. How do you buy things during the year? Well, if you go to the bar, to an ale woman, what she'd do is write down the debt that you owe. It was to be paid on the threshing floor. The debts were basically paid basically once a year when the income was there, on the threshing floor when the harvest was in. If the palace or the temples would advance animals or inputs or other public services, this would be as a debt. It was all paid in grain, which was monetized for paying debts to the palace, temples and other creditors.

The IMF has this Austrian theory that pretends that money began as barter and that capitalism basically operates on barter. This always is a disinformation campaign. Nobody believed this in times past, and it is a very modern theory that basically is used to say, "Oh, debt is bad." What they really mean is that public debt is bad. The government shouldn't create money, the government shouldn't run budget deficits but should leave the economy to rely on the banks. So the banks should run and indebt the economy.

You're dealing with a public relations mythology that's used as a means of deception for most people. You can usually ignore just about everything the IMF says. If you understand money you're not going to be hired by the IMF. The precondition for being hired by the IMF is not to understand finance. If you do understand finance, you're fired and blacklisted. That's why they impose austerity programs that they call "stabilization programs" that actually are destabilization programs almost wherever they're imposed.

LONG: Is this a lack of understanding and adherence to the wrong philosophy, or how did we get into this trap?

HUDSON: We have an actively erroneous view, not just a lack of understanding. This is not by accident. When you have an error repeated year after year after year, decade after decade after decade, it's not really insanity doing the same thing thinking it'll be different. It's sanity. It's doing the same thing thinking the result will be the same again and again and again. The result will indeed be austerity programs, making budget deficits even worse, driving governments further into debt, further into reliance on the IMF. So then the IMF turns them to the knuckle breakers of the World Bank and says, "Oh, now you have to pay your debts by privatization". It's the success. The successful error of monetarism is to force countries to have such self-defeating policies that they end up having to privatize their natural resources, their public domain, their public enterprises, their communications and transportation, like you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane. It's part of the program, not a bug.

LONG: Where does this lead us? What's the roadmap ahead of us here?

HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural resources and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads us into a realm where everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual cost of production – that's all rejected in favor of a rentier class evolving into an oligarchy. Basically, financiers – the 1% – are going to pry away the public domain from the government. Pry away and privatize the public enterprises, land, natural resources, so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the top of the pyramid, impoverishing the 99%.

LONG: Well I think most people, without understanding economics, would instinctively tell you they think that's what's happening right now, in some way.

HUDSON: Right. As long as you can avoid studying economics you know what's happened. Once you take an economics course you step into brainwashing. It's an Orwellian world.

LONG: I think you said it perfectly well there. Exactly. It gets you locked into the wrong way of thinking as opposed to just basic common sense. Your book is Killing the Host . What was the essence of its message? Was it describing exactly what we're talking about here?

HUDSON: Finance has taken over the industrial economy, so that instead of finance becoming what it was expected to be in the 19 th century, instead of the banks evolving from usurious organizations that leant to governments, mainly to wage war, finance was going to be industrialized. They were going to mobilize savings and recycle it to finance the means of production, starting with heavy industry. This was actually happening in Germany in the late 19 th century. You had the big banks working with government and industry in a triangular process. But that's not what's happening now. After WW1 and especially after WW2, finance reverted to its pre-industrial form. Instead of allying themselves with industry, as banks were expected to do, banks allied themselves with real estate and monopolies, realizing that they can make more money off real estate.

The bank spokesman David Ricardo argued against the landed interest in 1817, against land rent. Now the banks are all in favor of supporting land rent, knowing that today, when people buy and sell property, they need credit and pay interest for it. The banks are going to get all the rent. So you have the banks merge with real estate against industry, against the economy as a whole. The result is that they're part of the overhead process, not part of the production process.

LONG: There's a sense that there's a crisis lying ahead in the next year, two years, or three years. The mainstream economy's so disconnected from Wall Street economy. What's your view on that?

HUDSON: It's not disconnected at all. The Wall Street economy has taken over the economy and is draining it. Under what economics students are taught as Say's Law, the economy's workers are supposed to use their income to buy what they produce. That's why Henry Ford paid them $5 a day, so that they could afford to buy the automobiles they were producing.

LONG: Exactly.

HUDSON: But Wall Street is interjecting itself into the economy, so that instead of the circular flow between producers and consumers, you have more and more of the flow diverted to pay interest, insurance and rent. In other words, to pay the FIRE sector. It all ends up with the financial sector, most of which is owned by the 1%. So, their way of formulating it is to distract attention from today's debt quandary by saying it's just a cycle, or it's "secular stagnation." That removes the element of agency – active politicking by the financial interests and Wall Street lobbyists to obtain all the growth of income and wealth for themselves. That's what happened in America and Canada since the late 1970s.

LONG: What does an investor do today, or somebody who's looking for retirement, trying to save for the future, and they see some of these things occurring. What should they be thinking about? Or how should they be protecting themselves?

HUDSON: What all the billionaires and the heavy investors do is simply try to preserve their wealth. They're not trying to make money, they're not trying to speculate. If you're an investor, you're not going to outsmart Wall Street billionaires, because the markets are basically fixed. It's the George Soros principle. If you have so much money, billions of dollars, you can break the Bank of England. You don't follow the market, you don't anticipate it, you actually make the market and push it up, like the Plunge Protection Team is doing with the stock market these days. You have to be able to control the prices. Insiders make money, but small investors are not going to make money.

Since you're in Canada, I remember the beginning of the 1960s. I used to look at the Treasury Bulletin and Federal Reserve Bulletin figures on foreign investment in the US stock market. We all used to laugh at Canada especially. The Canadians don't buy stocks until they're up to the very top, and then they lose all the money by holding these stocks on the downturn. Finally, when the market's all the way at the bottom, Canadians decide to begin selling because they finally can see a trend. So they miss the upswing until they decide to buy at the top once again. It's hilarious to look at how Canada has performed in the US bond market, and they did the same in the silver market. I remember when silver was going up to $50. The Canadians said, "Yes, we can see the trend now!" and they began to buy it. They lost their shirts. So, basically, if you're a Canadian investor, move.

LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.

HUDSON: I'd think so. Once they get in, you know the bubble's over.

LONG: Absolutely on that one. What are you currently writing? What is your current focus now?

HUDSON: Well, I just finished a book. You mentioned Killing the Host . My next book will be out in about three months: J is for Junk Economics . It began as a dictionary of terms, so I can provide people with a vocabulary. As we got in the argument at the beginning of your program today, our argument is about the vocabulary we're using and the words you're using. The vocabulary taught to students today in economics – and used by the mass media and by government spokesmen – is basically a set of euphemisms. If you look at the television reports on the market, they say that any loss in the stock market isn't a loss, it's "profit taking". And when they talk about money. the stock market rises – "Oh that's good news." But it's awful news for the short sellers it wipes out. Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are happening. For instance, "secular stagnation" means it's all a cycle. Even the idea of "business cycles": Nobody in the 19 th century used the word "business cycle". They spoke about "crashes". They knew that things go up slowly and then they plunge very quickly. It was a crash. It's not the sine curve that you have in Josef Schumpeter's book on Business Cycles . It's a ratchet effect: slow up, quick down. A cycle is something that is automatic, and if it's a cycle and you have leading and lagging indicators as the National Bureau of Economic Research has. Then you'd think "Oh, okay, everything that goes up will come down, and everything that goes down will come up, just wait your turn." And that means governments should be passive.

Well, that is the opposite of everything that's said in classical economics and the Progressive Era, when they realized that economies don't recover by themselves. You need a-the government to step in, you need something "exogenous," as economist say. You need something from outside the system to revive it. The covert idea of this business cycle analysis is to leave out the role of government. If you look at neoliberal and Austrian theory, there's no role for government spending, and no role of public investment. The whole argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19 th century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit. It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions. Obviously these financialized charges are factored into the price system and raise the cost of living and doing business.

LONG: Well, Michael, we're-I thank you for the time, and we're up against our hard line. I know we didn't have as much time as we always like, so we have to break. Any overall comments you'd like to leave with our listeners who might be interested this school of economics?

HUDSON: Regarding the downturn we're in, we're going into a debt deflation. The key of understanding the economy is to look at debt. The economy has to spend more and more money on debt service. The reason the economy is not recovering isn't simply because this is a normal cycle. And It's not because labour is paid too much. It's because people are diverting more and more of their income to paying their debts, so they can't afford to buy goods. Markets are shrinking – and if markets are shrinking, then real estate rents are shrinking, profits are shrinking. Instead of using their earnings to reinvest and hire more labour to increase production, companies are using their earnings for stock buybacks and dividend payouts to raise the share price so that the managers can take their revenue in the form of bonuses and stocks and live in the short run. They're leaving their companies as bankrupt shells, which is pretty much what hedge funds do when they take over companies.

So the financialization of companies is the reverse of everything Adam Smith, John Stuart Mill, and everyone you think of as a classical economist was saying. Banks wrap themselves in a cloak of classical economics by dropping history of economic thought from the curriculum, which is pretty much what's happened. And Canada-I know since you're from Canada, my experience there was that the banks have a huge lobbying power over government. In 1979, I wrote for the IRPP Institute there on Canada In the New Monetary Order . At that time the provinces of Canada were borrowing money from Switzerland and Germany because they could borrow it at much lower interest rates. I said that this was going to be a disaster, and one that was completely unnecessary. If Canadian provinces borrow in Francs or any other foreign currency, this money goes into the central bank, which then creates Canadian dollars to spend. Why not have the central bank simply create these dollars without having Swiss francs, without having German marks? It's unnecessary to have an intermediary. But the more thuggish banks, like the Bank of Nova Scotia, said, "Oh, that way's the road to serfdom." It's not. Following the banks and the Austrian School of the banks' philosophy, that's the road to serfdom. That's the road to debt serfdom. It should not be taken now. It lets universities and the government be run by neoliberals. They're a travesty of what real economics is all about.

LONG: Michael, thank you very much. I learned a lot, appreciate it; certainly appreciate how important it is for us to use the right words on the right subject when we're talking about economics. Absolutely agree with you. Talk to you again?

HUDSON: Going to be here.

LONG: Thank you for the time.

Donald , April 29, 2016 at 7:33 am

Interesting, but after insulting Duncan, Hudson says the banks stopped partnering with industry and went into real estate, which sounded like what Duncan said.

I mention this because for a non- expert like myself it is sometimes difficult to tell when an expert is disagreeing with someone for good reasons or just going off half- cocked. I followed what Hudson said about the evils of the IMF, but didn't see where Duncan had defended any of that, unless it was implicit in saying that capitalism used to function better.

Alejandro , April 29, 2016 at 9:06 am

Michael Hudson from the interview;

"As we got in the argument at the beginning of your program today, our argument is about the vocabulary we're using and the words you're using. The vocabulary taught to students today in economics – and used by the mass media and by government spokesmen – is basically a set of euphemisms ."Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are happening."

May consider it's about recognizing and deciphering the "doublespeak", "newspeak", "fedspeak", "greenspeak" etc, whether willing or unwitting using words for understanding and clarifying as opposed to misleading and confusing dialectic as opposed to sophistry.

Michael Hudson , April 29, 2016 at 9:54 am

What I objected to was the characterization of today's situation as "financialization." I explained that financialization is the FIRST stage - when finance WORKS. We are now in the BREAKDOWN of financialization - toward the "barter" stage.
Treating "finance" as an end stage rather than as a beginning stage overlooks the dynamics of breakdown. It is debt deflation. First profits fall, and as that occurs, rents on commercial property decline. This is already widespread here in New York, from Manhattan (8th St. near NYU is half empty) to Queens (Austin St. in Forest Hills.).

Leonard C.Tekaat , April 29, 2016 at 12:19 pm

I wrote an article you might be interested in reading. It outlines a tax policy which would help prevent what you are discussing in your article. The abuse of credit to receive rents and long term capital gains.

The title is "Congress Financialized Our Economy And Created Financial Crisis & More Poverty" Go to http://www.taxpolicyusa.wordpress.com

SomeCallMeTim , April 29, 2016 at 5:23 pm

Thank you for another eye-opening exposition. My political economy education was negative (counting a year of Monetarism and Austrian Economics around 1980), so I appreciate your interviews as correctives.

From your interview answer to the question about what we, the 99+% should do,I gathered only that we should not try to beat the market. Anything more than that?

Skippy , April 29, 2016 at 8:33 pm

From my understanding, post Plaza banking lost most of its traditional market to the shadow sector, as a result, expanded off into C/RE and increasingly to Financialization of everything sundry.

Disheveled Marsupial interesting to note Mr. Hudson's statement about barter, risk factors – ?????

Eduardo Quince , April 29, 2016 at 7:41 am

"secular stagnation" means it's all a cycle

Actually not.

One of the most important distinctions that investors have to understand is the difference between secular and cyclical trends Let us begin with definitions from the Encarta® World English Dictionary:

Secular – occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period of time

Cycle – a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions of an event or phenomenon that occurs regularly

Excerpted from: http://contrarianinvestorsjournal.com/?p=405#

cnchal , April 29, 2016 at 8:30 am

Secular stagnation from http://lexicon.ft.com/Term?term=secular-stagnation

Secular stagnation is a condition of negligible or no economic growth in a market-based economy . When per capita income stays at relatively high levels, the percentage of savings is likely to start exceeding the percentage of longer-term investments in, for example, infrastructure and education, that are necessary to sustain future economic growth. The absence of such investments (and consequently of the economic growth) leads to declining levels of per capita income (and consequently of per capita savings). With the reduced percentage savings rate converging with the reduced investment rate, economic growth comes to a standstill – ie, it stagnates. In a free economy, consumers anticipating secular stagnation, might transfer their savings to more attractive-looking foreign countries. This would lead to a devaluation of their domestic currency, which would potentially boost their exports, assuming that the country did have goods or services that could be exported.

Persistent low growth, especially in Europe, has been attributed by some to secular stagnation initiated by stronger European economies, such as Germany, in the past few years.

Words. What they mean depends on who's talking.

Secular stagnation is when the predators of finance have eaten too many sheeple.

MikeNY , April 29, 2016 at 9:57 am

Secular stagnation is when the predators of finance have eaten too many sheeple.

This.

digi_owl , April 29, 2016 at 7:44 am

Sad to see Hudson parroting the line about banks lending out savings

Alejandro , April 29, 2016 at 9:18 am

That's not what he said. Re-read or re-listen, please.

Enquiring Mind , April 29, 2016 at 9:02 am

Hudson says

Markets are shrinking – and if markets are shrinking, then real estate rents are shrinking, profits are shrinking.

Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to have happened yet consistently.

Perhaps he meant to say that markets are going to shrink as the debt deflation becomes more evident?

tegnost , April 29, 2016 at 9:52 am

I think what it means is it's getting harder to squeeze the blood out of the turnip

Synoia , April 29, 2016 at 10:06 am

What Turnip? Its become a stone, fossilized..

rfdawn , April 29, 2016 at 10:52 am

Yes, I think we are into turnip country now. Figure 1 in this prior article looks clear enough – even if you don't like the analysis that went with it. Wealth inequality still climbs but income inequality has plateaued since Clinton I. Whatever the reasons for that, the 1% should be concerned – where is the ROI?

ke , April 29, 2016 at 10:22 am

Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal, which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt with Nike gear.

ke , April 29, 2016 at 12:49 pm

Labor has no problem with multiwhatever presidents, geneticists, psychologists, or economists, trying to hunt down and replace labor, in or out of turn, but none are going to be any more successful than the others. Trump is being employed to bypass the middle class and cut a deal. There is no deal. Labor is always going to pay males to work and their wives to raise children. Obviously, the majority will vote for a competing economy, and it is welcome to do so, but if debt works so well, why is the majority voting to kidnap our kids with public healthcare and education policies.

meeps , April 29, 2016 at 5:36 pm

I'm not sure I heard an answer to the question of what people, who might be trying to save for the future or plan for retirement, can do? Is the point that there isn't anything? Because I'm definitely between rocks and hard places

Robert Coutinho , April 29, 2016 at 9:29 pm

Yeah, he basically said there is no good savings plan. Big-money interests have rigged the rules and are now manipulating the market (this used to be the definition of what was NOT allowed). Thus, they use computer algorithms to squeeze small amounts out of the market millions of times. This means that the "investments" are nothing of the sort. You don't "invest" in something for milliseconds. He said that the 1% are mostly just trying to hold on to what they have. Very few trust the rigged markets.

ke , April 29, 2016 at 7:22 pm

If Big G can print to infinity, print, but then why book it as debt to future generations?

The future is already becoming the present, because the millenials aren't paying.

Russell , April 29, 2016 at 10:00 pm

Low rent & cheap energy are key to the arts & innovations. My model has to work for airports, starts at the fuel farm as the CIA & MI6 Front Page Avjet did. Well before that was Air America. I wonder if now American Airlines itself is a Front.

All of America is a Front far as I can about tell. Hadn't heard that Manhattan rents were coming down. Come in from out of town, how you going to know? Not supposed to I guess.

I got that textbook and I liked that guy John Commons. He says capitalism is great, but it always leads to Socialism because of unbridled greed.

The frenzy to find another stable cash currency showing in Bit Coin and the discussion of Future Tax Credits while the Euro is controlled by the rent takers demands change on both sides of the Atlantic.

We got shot dead protesting the war, and civil rights backlash is the gift that keeps giving to the Southerners looking up every day in every courthouse town, County seat is all about spreading fear and desperation.

How to change it all without violence is going to be really tricky.

cnchal , April 30, 2016 at 4:36 am

Many thanks for the shout out to Canada.

. . . So, basically, if you're a Canadian investor, move.

LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.

HUDSON: I'd think so. Once they get in, you know the bubble's over.

When one reads the financial press in Canada, every dollar extracted by the lords of finance is a glorious taking by brilliant people at the top of the financial food chain from the stupid little people at the bottom, but when it counts, there was silence, in cooperation with Canada's one percent.

The story starts about five years ago, with smart meters. Everyone knows what they are, a method by which electrical power use can be priced depending on the time of day, and day of the week.

To make this tasty, Ontario's local utilities at first kept the price the same for all the time, and then after all the meters were installed, came the changes, phased in over time. Prices were increased substantially, but there was an out. If you changed your living arrangements to live like a nocturnal rodent and washed your clothes in the middle of the night, had supper later in the evening or waited for weekend power rates you could still get low power rates, from the three tier price structure.

The local utilities bought the power from the government of Ontario power generation utility, renamed to Hydro One, and this is where Michael Hudson's talk becomes relevant.

The successful error of monetarism is to force countries to have such self-defeating policies that they end up having to privatize their natural resources, their public domain, their public enterprises, their communications and transportation, like you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane. It's part of the program, not a bug .

LONG: Where does this lead us? What's the roadmap ahead of us here?

HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural resources and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads us into a realm where everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual cost of production – that's all rejected in favor of a rentier class evolving into an oligarchy. Basically, financiers – the 1% – are going to pry away the public domain from the government. Pry away and privatize the public enterprises, land, natural resources, so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the top of the pyramid, impoverishing the 99% .

Eighteen months ago, there was an election in Ontario, and the press was on radio silence during the whole time leading up to the election about the plans to "privatize" Hydro One. I cannot recall one instance of any mention that the new Premier, Kathleen Wynne was planning on selling Hydro One to "investors".

Where did this come from? Did the little people rise up and say to the politicians "you should privatize Hydro One" for whatever reason? No. This push came from the 1% and Hydro One was sold so fast it made my head spin, and is now trading on the Toronto Stock exchange.

At first I though the premier was an economic ignoramus, because Hydro One was generating income for the province and there was no other power supplier, so one couldn't even fire them if they raised their prices too high.

One of the arguments put forward by the 1% to privatize Hydro One was a classic divide and conquer strategy. They argued that too many people at Hydro One were making too much money, and by privatizing, the employees wages would be beat down, and the resultant savings would be passed on to customers.

Back to Michael Hudson

. . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit . It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system and raise the cost of living and doing business .

Power prices have increased yet again in Ontario since privatization, and Canada's 1% are "making a killing" on it. There has been another change as well. Instead of a three tier price structure, there are now two, really expensive and super expensive. There is no longer a price break to living like a nocturnal rodent. The 1% took that for themselves.

Procopius , April 30, 2016 at 8:10 am

I am so tired of seeing that old lie about Old Henry and the $5 a day. I realize it was just a tossed off reference to something most people believe for the purpose of describing a discarded policy, but the fact is very, very few of Old Henry's employees ever got that pay. See, there were strings attached.

Old Henry hired a lot of spies, too. He sent them around to the neighborhoods where his workers lived (it was convenient having them all in Detroit). If the neighbors saw your kid bringing a bucket of beer home from the corner tavern for the family, you didn't get the $5.

If your lawn wasn't mowed to their satisfaction, you didn't get the $5. If you were thought not to bathe as often as they liked, you didn't get the $5. If you didn't go to a church on Sundays, you didn't get the $5. If you were an immigrant and not taking English classes at night school, you didn't get the $5. There were quite a lot of strings attached. The whole story was a public relations stunt, and Old Henry never intended to live up to it; he hated his workers.

[Nov 16, 2017] Natural Rate Hypothesid is junk science. There is nothing natural in natural rate of empoyment

Notable quotes:
"... Controlling inflation solely by focusing on workers wages since 1980 but allowing monopoly power and economic rents to skyrocket since 1980 is the main reason for the extreme inequality that has developed ..."
"... Prima facie evidence of distorted labor market where buyers of labor have control. At the very least, the next democratic President should use their weekly address to point out the metrics relating economic gains, net wealth gains, productivity gains, to wage gains. The Presudent should remind employers to fairly share the gains. Once the metrics indicate distortion in the labor markets the President will then introduce corrective legislation using the public communications weight behind this free market notion of a fair labor market, using these metrics. Let us try this bully pulpit, public communications effort with the idea of building public momentum for correctives, and maybe we will return to the 1960s future when gains were more proportionally shared. Perhaps we wont need much legislation at all, afterall we had one generation comport with fairness, you know, rational expectations. ..."
"... if demand cannot be kept up by wages, then the only option is loans and we have seen in 2008 the catastrophic results of that ..."
Nov 16, 2017 | economistsview.typepad.com

djb , November 16, 2017 at 01:46 AM

non accelerating inflation rate of unemployment is a better term

there is nothing "natural" about that rate

there are many factors that play a role, but the most important are

1. monopoly power is the most important, without monopoly power, in a perfectly competitive market, excessive inflation is not possible

2. factors that affect bargaining power OF workers

Controlling inflation solely by focusing on workers wages since 1980 but allowing monopoly power and economic rents to skyrocket since 1980 is the main reason for the extreme inequality that has developed

Paine -> djb... , November 16, 2017 at 05:18 AM
These are important conjectures

We may indeed have chosen to repress wage rates while allowing Firms market power over output prices and wages.

And firms share of total Economic rents and E rent rates themselves and thus total gross profits to rise.

Largely unchecked by policy moves

JF -> djb... , November 16, 2017 at 08:26 AM
Prima facie evidence of distorted labor market where buyers of labor have control.

At the very least, the next democratic President should use their weekly address to point out the metrics relating economic gains, net wealth gains, productivity gains, to wage gains. The Presudent should remind employers to fairly share the gains.

Once the metrics indicate distortion in the labor markets the President will then introduce corrective legislation using the public communications weight behind this free market notion of a fair labor market, using these metrics.

Let us try this bully pulpit, public communications effort with the idea of building public momentum for correctives, and maybe we will return to the 1960s future when gains were more proportionally shared. Perhaps we wont need much legislation at all, afterall we had one generation comport with fairness, you know, rational expectations.

We can expect to do that again, especially as all new economists will be trained on the why and on how to accomplish this metric of shared gains. One can only hope.

djb -> JF... , November 16, 2017 at 01:59 PM
I know this may not exactly fit your MMT model

if we don't allow median wages to go up to match production/productivity

and if economic rents continue to go up disproportionally then we need to do a redistribution, ideally by taxes, to get the median wage to keep pace with production/productivity

otherwise demand for products will eventually falter, making us all poorer for it

if demand cannot be kept up by wages, then the only option is loans and we have seen in 2008 the catastrophic results of that

[Nov 16, 2017] Should We Reject the Natural Rate Hypothesis

Nov 16, 2017 | economistsview.typepad.com

15, 2017 Should We Reject the Natural Rate Hypothesis? Olivier Blanchard:

Should We Reject the Natural Rate Hypothesis?, by Olivier Blanchard, PIIE : Fifty years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run tradeoff between the deviation of unemployment from the natural rate and inflation. Both propositions have been challenged. Blanchard reviews the arguments and the macro and micro evidence against each and concludes that, in each case, the evidence is suggestive but not conclusive. Policymakers should keep the natural rate hypothesis as their null hypothesis but keep an open mind and put some weight on the alternatives. [ paper ]

Posted by Mark Thoma on Wednesday, November 15, 2017 at 10:22 AM in Academic Papers , Economics , Macroeconomics | Permalink Comments (9)


Comments Feed You can follow this conversation by subscribing to the comment feed for this post.

Paine , November 15, 2017 at 03:44 PM

"there is a strong case, although not an overwhelming case, to allow U.S. output to exceed potential for some time, so as to reintegrate some of the workers who left the labor force during the last ten years."

Blanchard calls for exploring the unknown regions
of lower and lower unemployment

Lower UE rates
Instead of accelerating output price inflation
Or even wage inflation
Given possible productivity pick ups
We may discover
We get a return to higher and higher participation
Not an unhappy result after all

Paine -> Paine ... , November 15, 2017 at 03:49 PM
The parting of the ways with the likes of Blanchard and krugman might come
When at long last wage rates do begin to rise faster then
Say
labor productivity plus three percent

But if the acceleration of the expected rate of change
of the rate of output price change
accelerates slowly

We'll have plenty of policy means and time to moderate the expansion of demand
Given the political will

Paine -> Paine ... , November 15, 2017 at 03:51 PM
Or better consider the imposition of a mark up warrant system
On selected firms and sectors
Paine -> Paine ... , November 15, 2017 at 03:58 PM
What is completely missed by looking at the impact of a slump on long run output capacity
Is the actual lost output out of existing capacity
And the misery this inflicts now
for many too many


Ten years of sub possible output
Contain How many weeks upon weeks
of reduced Welfare for too many souls ?

Paine -> Paine ... , November 15, 2017 at 04:01 PM
If average slack is now 7%
And could
with aggressive macro nautics
be reduced to 2%

We
each of us only live in the now
and for only a single all too brief life time

anne -> Paine ... , November 15, 2017 at 03:58 PM
This is arguing well, I agree and am grateful.
Paine -> anne... , November 15, 2017 at 04:08 PM
Blanchards uses the definition of potential output
That suggests over production has to be off set by under production

I.e. Potential output is not technical maximum output by any means

PO
Is more like a rate of output and consequent rate of existing factor utilization
That does not unduly
stress
the various institutional arrangements and practices
Or overly tax
the stability of existing social norms
Considered necessary
to sustaining the good of society
thru
It's gradual development over time

Paine -> Paine ... , November 15, 2017 at 04:11 PM
There is another set of conflicting visions
One of which
That any class pov might hatch

A vision
Perhaps too Faustian for most souls of that class
That is restless
to push faster
To Venture more
Face uncertainty with boldness even audacity

anne -> Paine ... , November 15, 2017 at 04:11 PM
Nice, nice.

[Nov 04, 2017] Who's Afraid of Corporate COINTELPRO by C. J. Hopkins

Highly recommended!
These tactics do not just suppress information. They enforce conformity at much deeper level.
Notable quotes:
"... I am using the Orwellian verb "unperson" playfully, but I'm also trying to be precise. What's happening isn't censorship, technically, at least not in the majority of cases. While there are examples of classic censorship (e.g., in the UK, France, and Germany), apart from so-called "terrorist content," most governments aren't formally banning expressions of anti-corporatist dissent. This isn't Czechoslovakia, after all. This is global capitalism, where the repression of dissent is a little more subtle. The point of Google unpersoning CounterPunch (and probably many other publications) and Pulitzer Prize-winning journalists like Hedges is not to prevent them from publishing their work or otherwise render them invisible to readers. The goal is to delegitmize them, and thus decrease traffic to their websites and articles, and ultimately drive them out of business, if possible. ..."
"... Another objective of this non-censorship censorship is discouraging writers like myself from contributing to publications like CounterPunch, Truthdig, Alternet, Global Research, and any other publications the corporatocracy deems "illegitimate." Google unpersoning a writer like Hedges is a message to other non-ball-playing writers. The message is, "this could happen to you." This message is meant for other journalists, primarily, but it's also aimed at writers like myself who are making a living (to whatever degree) writing and selling what we think of as "literature." ..."
"... These tactics do not just suppress information. They enforce conformity at much deeper level. ..."
"... Chomsky explains how this system operates in What Makes Mainstream Media Mainstream . It isn't a question of censorship the system operates on rewards and punishments, financial and emotional coercion, and subtler forms of intimidation. Making examples of non-cooperators is a particularly effective tactic. Ask any one of the countless women whose careers have been destroyed by Harvey Weinstein, or anyone who's been to graduate school, or worked at a major corporation. ..."
"... C. J. Hopkins is an award-winning American playwright, novelist and satirist based in Berlin. His plays are published by Bloomsbury Publishing (UK) and Broadway Play Publishing (USA). His debut novel, ZONE 23 , is published by Snoggsworthy, Swaine & Cormorant. He can reached at cjhopkins.com or consentfactory.org . ..."
Nov 04, 2017 | www.unz.com

On November 30, 2016, presumably right at the stroke of midnight, Google Inc. unpersoned CounterPunch. They didn't send out a press release or anything. They just quietly removed it from the Google News aggregator. Not very many people noticed. This happened just as the "fake news" hysteria was being unleashed by the corporate media, right around the time The Washington Post ran this neo-McCarthyite smear piece vicariously accusing CounterPunch, and a number of other publications, of being "peddlers of Russian propaganda." As I'm sure you'll recall, that astounding piece of "journalism" (which The Post was promptly forced to disavow with an absurd disclaimer but has refused to retract) was based on the claims of an anonymous website apparently staffed by a couple of teenagers and a formerly rabidly anti-Communist, now rabidly anti-Putin think tank. Little did most people know at the time that these were just the opening salvos in what has turned out to be an all-out crackdown on any and all forms of vocal opposition to the global corporate ruling classes and their attempts to quash the ongoing nationalist backlash against their neoliberal agenda.

Almost a year later, things are much clearer. If you haven't been following this story closely, and you care at all about freedom of the press, freedom of speech, and that kind of stuff, you may want to take an hour or two and catch up a bit on what's been happening. I offered a few examples of some of the measures governments and corporations have been taking to stifle expressions of dissent in my latest piece in CounterPunch , and there are many more detailed articles online, like this one by Andre Damon from July, and this follow-up he published last week (which reports that Pulitzer Prize-winning journalist and author Chris Hedges has also been unpersoned). Or, if you're the type of soul who only believes what corporations tell you, and who automatically dismisses anything published by a Trotskyist website, here's one from last December in The Guardian , and an op-ed in The New York Times , both of which at least report what Google, Twitter, and Facebook are up to. Or you could read this piece by Robert Parry , who also has "legitimate" (i.e., corporate) credentials, and who hasn't been unpersoned just yet, although I'm sure they'll get around to him eventually.

I am using the Orwellian verb "unperson" playfully, but I'm also trying to be precise. What's happening isn't censorship, technically, at least not in the majority of cases. While there are examples of classic censorship (e.g., in the UK, France, and Germany), apart from so-called "terrorist content," most governments aren't formally banning expressions of anti-corporatist dissent. This isn't Czechoslovakia, after all. This is global capitalism, where the repression of dissent is a little more subtle. The point of Google unpersoning CounterPunch (and probably many other publications) and Pulitzer Prize-winning journalists like Hedges is not to prevent them from publishing their work or otherwise render them invisible to readers. The goal is to delegitmize them, and thus decrease traffic to their websites and articles, and ultimately drive them out of business, if possible.

Another objective of this non-censorship censorship is discouraging writers like myself from contributing to publications like CounterPunch, Truthdig, Alternet, Global Research, and any other publications the corporatocracy deems "illegitimate." Google unpersoning a writer like Hedges is a message to other non-ball-playing writers. The message is, "this could happen to you." This message is meant for other journalists, primarily, but it's also aimed at writers like myself who are making a living (to whatever degree) writing and selling what we think of as "literature."

Yes, as you've probably guessed by now, in addition to writing political satire, I am, as rogue journalist Caitlin Johnstone so aptly put it once, an "elitist wanker." I've spent the majority of my adult life writing stage plays and working in the theater, and it doesn't get any more elitist than that. My plays are published by "establishment" publishers, have won a few awards, and have been produced internationally. I recently published my "debut novel" (which is what you call it if you're an elitist wanker) and am currently trying to promote and sell it. I mention this, not to blow my little horn, but to the set the stage to try to illustrate how these post-Orwellian intimidation tactics (i.e., unpersoning people from the Internet) work. These tactics do not just suppress information. They enforce conformity at much deeper level.

The depressing fact of the matter is, in our brave new Internet-dominated world, corporations like Google, Twitter, and Facebook (not to mention Amazon), are, for elitist wankers like me, in the immortal words of Colonel Kurz, "either friends or they are truly enemies to be feared." If you are in the elitist wanker business, regardless of whether you're Jonathan Franzen, Garth Risk Hallberg, Margaret Atwood, or some "mid-list" or "emerging" author, there is no getting around these corporations. So it's kind of foolish, professionally speaking, to write a bunch of essays that will piss them off, and then publish these essays in CounterPunch. Literary agents advise against this. Other elitist literary wankers, once they discover what you've been doing, will avoid you like the bubonic plague. Although it's perfectly fine to write books and movies about fictional evil corporations, writing about how real corporations are using their power to mold societies into self-policing virtual prisons of politically-correct, authoritarian consumers is well, it's something that is just not done in professional elitist wanker circles.

Normally, all this goes without saying, as these days most elitist wankers are trained how to write, and read, and think, in MFA conformity factories, where they screen out any unstable weirdos with unhealthy interests in political matters. This is to avoid embarrassing episodes like Harold Pinter's Nobel Prize lecture (which, if you haven't read it, you probably should), and is why so much of contemporary literature is so well-behaved and instantly forgettable. This institutionalized screening system is also why the majority of journalists employed by mainstream media outlets understand, without having to be told, what they are, and are not, allowed to report. Chomsky explains how this system operates in What Makes Mainstream Media Mainstream . It isn't a question of censorship the system operates on rewards and punishments, financial and emotional coercion, and subtler forms of intimidation. Making examples of non-cooperators is a particularly effective tactic. Ask any one of the countless women whose careers have been destroyed by Harvey Weinstein, or anyone who's been to graduate school, or worked at a major corporation.

Or let me provide you with a personal example.

A couple weeks ago, I googled myself (which we elitist wankers are wont to do), and noticed that two of my published books had disappeared from the "Knowledge Panel" that appears in the upper right of the search results. I also noticed that the people "People Also Search For" in the panel had changed. For years, consistently, the people you saw there had been a variety of other elitist literary wankers and leftist types. Suddenly, they were all rather right-wing types, people like Ilana Mercer and John Derbyshire, and other VDARE writers. So that was a little disconcerting.

I set out to contact the Google Search specialists to inquire about this mysterious development, and was directed to a series of unhelpful web pages directing me to other unhelpful pages with little boxes where you can write and submit a complaint to Google, which they will completely ignore. Being an elitist literary wanker, I also wrote to Google Books, and exchanged a number of cordial emails with an entity (let's call her Ms. O'Brien) who explained that, for "a variety of reasons," the "visibility" of my books (which had been consistently visible for many years) was subject to change from day to day, and that, regrettably, she couldn't assist me further, and that sending her additional cordial emails was probably a pointless waste of time. Ms. O'Brien was also pleased to report that my books had been restored to "visibility," which, of course, when I checked, they hadn't.

"Whatever," I told myself, "this is silly. It's probably just some IT thing, maybe Google Books updating its records, or something." However, I was still perplexed by the "People Also Search For" switcheroo, because it's kind of misleading to link my writing to that of a bunch of serious right-wingers. Imagine, if you were a dystopian sci-fi fan, and you googled me to check out my book and see what else I had written, and so on, and my Google "Knowledge Panel" popped up and displayed all these far-right VDARE folks. Unless you're a far-right VDARE type yourself, that might be a little bit of a turn-off.

At that point, I wondered if I was getting paranoid. Because Google Search runs on algorithms, right? And my political satire and commentary is published, not only in CounterPunch, but also in The Unz Review, where these far-right-wing types are also published. Moreover, my pieces are often reposted by what appear to be "Russia-linked" websites, and everyone knows that the Russians are all a bunch of white supremacists, right? On top of which, it's not like I'm Stephen King here. I am hardly famous enough to warrant the attention of any post-Orwellian corporate conspiracy to stigmatize anti-establishment dissent by manipulating how authors are displayed on Google (i.e., subtly linking them to white supremacists, anti-Semites, and others of that ilk).

So, okay, I reasoned, what probably happened was over the course of twenty-four hours, for no logical reason whatsoever, all the folks who had been googling me (along with other leftist and literary figures) suddenly stopped googling me, all at once, while, more or less at the exact same time, hundreds of right-wingers started googling me (along with those white supremacist types they had, theoretically, already been googling). That kind of makes sense when you think about it, right? I mean, Google couldn't be doing this intentionally. It must have been some sort of algorithm that detected this sudden, seismic shift in the demographic of people googling me.

Or, I don't know, does that possibly sound like a desperate attempt to rationalize the malicious behavior of an unaccountable, more or less god-like, global corporation that wields the power of life and death over my book sales and profile on the Internet (a more or less god-like global corporation that could do a lot of additional damage to my sales and reputation with complete impunity once the piece you're reading is published)? Or am I simply getting paranoid, and, in fact, I've developed a secret white supremacist fan base without my knowledge? Only Google knows for sure.

Such are the conundrums elitist literary wankers have to face these days that is, those of us wankers who haven't learned to keep our fucking mouths shut yet. Probably the safest course of action, regardless of whether I'm being paranoid or Google does have me on some kind of list, is to lay off the anti-corporatist essays, and definitely stop contributing to CounterPunch, not to mention The Unz Review, and probably also give up the whole dystopian satire novel thing, and ensure that my second novel conforms to the "normal" elitist wanker rules (which every literary wanker knows, but which, technically, do not exist). Who knows, if I play my cards right, maybe I can even sell the rights to Miramax, or okay, some other corporation.

Once that happens, I assume that Google will want to restore me to normal personhood, and return my books to visibility, and I will ride off into the Hollywood sunset with the Clintons, Clooneys, and Pichais, and maybe even Barack Obama himself, if he isn't off jet skiing with Richard Branson, or having dinner with Jeff and MacKenzie Bezos, who just happen to live right down the street, or hawking the TPP on television. By that time, CounterPunch and all those other "illegitimate" publications will have been forced onto the dark web anyway, so I won't be giving up all that much. I know, that sounds pretty cold and cynical, but my liberal friends will understand I just hope all my new white supremacist fans will find it in their hearts to forgive me.

C. J. Hopkins is an award-winning American playwright, novelist and satirist based in Berlin. His plays are published by Bloomsbury Publishing (UK) and Broadway Play Publishing (USA). His debut novel, ZONE 23 , is published by Snoggsworthy, Swaine & Cormorant. He can reached at cjhopkins.com or consentfactory.org .

anonymous , • Disclaimer November 3, 2017 at 12:15 pm GMT

Thank you for mustering the courage and then taking the time to spell out these outrages in a straightforward, unemotional way. I've appreciated the humor that centers your other essays, but there's not a damned thing funny about this.

But why are things as they are? With billions aplenty, our rulers must be driven by their libido dominandi. We're left to wonder only whether they get off more on ostracizing the Hopkinses, on buying the politicians, or on herding the sheep from bathrooms to statues to flags.

[Nov 01, 2017] The Political Organization Men

Notable quotes:
"... The Organization Man ..."
"... What Whyte ran across was the sub-culture of the workplace as followed by those who set themselves upon a "career path" within a specific organization. The stereotypical examples are those, to quote Whyte , "who have left home spiritually as well as physically, to take the vows of organization life. [They adopt an ethic that] rationalizes the organization's demand for fealty and gives those who offer it wholeheartedly a sense of dedication." ..."
"... Today, some private-sector organizations have moved away from the most extreme demands of such conformity, but some other career lines have not, two examples being the military and career party politics. ..."
"... The Power Elite ..."
"... The Organization Man. ..."
"... hose who make their careers within these entities, especially the military and the government, are ideologically conditioned to identify their well-being with the specific goals of their chosen organizations. That means they must bind themselves not only to the goals, but also to the ethics of their workplace. ..."
"... Those who balk are eventually punished and cast out of the organizations. Those who guide these organizations, and essentially decide how rules and ethics will be interpreted and applied, are Mills's "power elite." ..."
"... It may come as a surprise to the reader that party politics as practiced by many of the Western democracies is quite similar. The "power elites" who reside at the top of the so-called greasy pole, holding positions as the head of ruling and contesting parties, are likely to demand the same sort of obedience to orders as any military officer. ..."
"... Rafe explained it this way ..."
"... Leaders of political parties can control their organizations in dictatorial fashion. They have power to reward or punish their party's cohorts in a fashion that can make or break careers. For instance, they control the dispersal of party funds from monies for elections right down to one's office budget; they determine whether a candidate will have to face a primary challenge; they make all committee assignments; they can promote and demote within the party ranks. ..."
"... As Rafe Mair observed, the possibilities for both reward and punishment are almost endless. In this way elected officials become bound to the diktats of their party's leaders. They cannot normally vote their conscience or reliably represent their constituency unless doing so coincides with the desires of their party's leadership. ..."
"... Foreign Policy Inc.: Privatizing America's National Interest ..."
"... America's Palestine: Popular and Official Perceptions from Balfour to Israeli Statehood ..."
"... This is an excellent summary of the basis in mentality of what is factually a 21st century version of a fascist regime. Even though two political parties and the shell forms of republican government may exist, the reality is that the parties are factions and the way things operate is via conformity and loyalty to an authoritarian power structure. ..."
Nov 01, 2017 | consortiumnews.com

Many working-class Americans voted for Donald Trump believing he would address their needs, not those of rich Republicans. But all pols, it seems, end up conforming to their political group's priorities, as Lawrence Davidson explains.

By Lawrence Davidson

In 1956, William H. Whyte published a book entitled The Organization Man about America's societal changes in the post-World War II economy. Basing his findings on a large number of interviews with CEOs of major American corporations, Whyte concluded that, within the context of modern organizational structure, American "rugged individualism" had given way to a "collectivist ethic." Economic success and individual recognition were now pursued within an institutional structure – that is, by "serving the organization."

Whyte's book was widely read and praised, yet his thesis was not as novel as it seemed. "Rugged individualism," to the extent that it existed, was (and is) the exception for human behavior and not the rule. We have evolved to be group-oriented animals and not lone wolves. This means that the vast majority of us (and certainly not just Americans) live our lives according to established cultural conventions. These operate on many levels – not just national patriotism or the customs of family life.

What Whyte ran across was the sub-culture of the workplace as followed by those who set themselves upon a "career path" within a specific organization. The stereotypical examples are those, to quote Whyte , "who have left home spiritually as well as physically, to take the vows of organization life. [They adopt an ethic that] rationalizes the organization's demand for fealty and gives those who offer it wholeheartedly a sense of dedication."

Today, some private-sector organizations have moved away from the most extreme demands of such conformity, but some other career lines have not, two examples being the military and career party politics.

For insight in this we can turn to the sociologist C. Wright Mills , whose famous book The Power Elite was published the same year as Whyte's The Organization Man. Mills's work narrows the world's ruling bureaucracies to government, military and top economic corporations. T hose who make their careers within these entities, especially the military and the government, are ideologically conditioned to identify their well-being with the specific goals of their chosen organizations. That means they must bind themselves not only to the goals, but also to the ethics of their workplace.

Those who balk are eventually punished and cast out of the organizations. Those who guide these organizations, and essentially decide how rules and ethics will be interpreted and applied, are Mills's "power elite."

How this works out in the military is pretty obvious. There is a long tradition of dedication to duty. At the core of this dedication is a rigid following of orders given by superiors. This tradition is upheld even if it is suspected that one's superior is incompetent.

It may come as a surprise to the reader that party politics as practiced by many of the Western democracies is quite similar. The "power elites" who reside at the top of the so-called greasy pole, holding positions as the head of ruling and contesting parties, are likely to demand the same sort of obedience to orders as any military officer.

The Organization Man or Woman in Politics

Running for and holding office in countries like the United States and Canada often requires one to "take the vows of organization life." Does this support democracy or erode it? Here is one prescient answer: the way we have structured our party politics has given us "an appalling political system which is a step-by-step denial of democracy and a solid foundation for a 'soft' dictatorship."

One of the elegant rooms at President Trump's Mar-a-Lago club. (Photo from maralagoclub.com)

Those are the words of the late Rafe Mair , a Canadian politician, broadcaster, author and a good friend of this writer. Rafe spent years in Canadian politics, particularly in his home province of British Columbia, and his experience led him to the conclusion expressed above. How does this translate into practice?

Rafe explained it this way : "In a parliamentary [or other form of representative] democracy the voter transfers his rights to his member of parliament [congressperson, senator or state legislator] to exercise on his behalf – the trouble is, by running for his political party the [elected person, in turn, is led to] assign your [the voter's] rights to the [party] leader for his exclusive use!"

There is no law that makes the elected official do this. However, the inducements to do so are very powerful.

Leaders of political parties can control their organizations in dictatorial fashion. They have power to reward or punish their party's cohorts in a fashion that can make or break careers. For instance, they control the dispersal of party funds from monies for elections right down to one's office budget; they determine whether a candidate will have to face a primary challenge; they make all committee assignments; they can promote and demote within the party ranks.

As Rafe Mair observed, the possibilities for both reward and punishment are almost endless. In this way elected officials become bound to the diktats of their party's leaders. They cannot normally vote their conscience or reliably represent their constituency unless doing so coincides with the desires of their party's leadership.

... ... ...

Lawrence Davidson is a history professor at West Chester University in Pennsylvania. He is the author of Foreign Policy Inc.: Privatizing America's National Interest ; America's Palestine: Popular and Official Perceptions from Balfour to Israeli Statehood ; and Islamic Fundamentalism . He blogs at www.tothepointanalyses.com .

Stephen J. , October 30, 2017 at 9:19 am

I believe we are prisoners of a corrupted "democracy."
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- –
July 13, 2017
The Prisoners of "Democracy"

Screwing the masses was the forte of the political establishment. It did not really matter which political party was in power, or what name it went under, they all had one ruling instinct, tax, tax, and more taxes. These rapacious politicians had an endless appetite for taxes, and also an appetite for giving themselves huge raises, pension plans, expenses, and all kinds of entitlements. In fact one of them famously said, "He was entitled to his entitlements." Public office was a path to more, and more largesse all paid for by the compulsory taxes of the masses that were the prisoners of "democracy."
[more info on this at link below]
http://graysinfo.blogspot.ca/2017/07/the-prisoners-of-democracy.html

Sam F , October 30, 2017 at 11:42 am

Yes, our ertswhile democracy has been completely corrupted. Thanks to Lawrence Davidson, William Whyte, C. Wright Mills, and Rafe Mair for this consideration of the systemic corruption of political parties. The diseases of conformity within party organizations are a nearly inherent problem of democracy.

The improper influence which determines the policies conformed to by parties is the central problem, and stems largely from influence of the economic Power Elite, directing the policies to which the Organization Man must be obedient to be chosen. This distortion can be eliminated by Amendments to the Constitution to restrict funding of mass media and elections to limited individual contributions.

Our problem is that we cannot make such reforms because those tools of democracy are already controlled by oligarchy, which never yields power but to superior force. Talk of justice and peace is not in their language of might makes right, and has no effect whatsoever. They yielded to the 1964 Civil Rights Act only because their fear of riots in the streets led them to pretend that MLK et al had been persuasive.

The foreign wars may be stopped by the defeat, isolation, and embargo of the US by foreign powers. But within the US, the full price of democracy must again be paid the People of the US. The oligarchy must be defeated by superior force: only those who deny enforcement to oligarchy and terrify the rich will bring them to yield any power. That is likely to await more severe recessions and inequities caused by the selfish and irresponsible rich.

mike k , October 30, 2017 at 3:42 pm

You are exactly right Sam F. Unfortunately time is quickly running out for our corrupt "civilization." The time to cultivate and practice wisdom has passed. The sad truth is that our goose is cooked; there will be no cavalry showing up to save us. We are now "eating our karma" and will reap our just deserts. Not because I or anyone say so, but because implacable laws of nature will now play out. Dominant intellectual species occupy a precarious position in planetary evolution, and we are on the verge of a great fall – and all the King's horses and all the King's men will not be able to put our extincting species together again ..

Sam F , October 30, 2017 at 4:11 pm

Your reply touches a responsive chord, in that humanity seems to have made so little permanent progress in its million years or so, mostly in its last few hundred years, an insignificant fraction of planetary history. But the history and literature of temporary progress lost is significant as the repository of ideas for future democracies, at those rare moments when they are designed.

Our diseased society is but one tree in the forest of democracies. The US is or will be like the apparently healthy tree that took down my power lines last night, a pretty red oak with brilliant autumn leaves, but sideways now and blocking the road. But like the leaves on that tree, we can see the problem and still hope to be as happy as this year's leaves on healthier trees.

As in what I like to call the universal mind of humanity, individuals may have foresight and thoughts beyond their apparent functions, which survive in that greater mind of their thoughts recorded or just passed along, and in that way their learning is not in vain.

Drew Hunkins , October 30, 2017 at 10:34 am

Trump did nix out the TPP and did desire a rapprochement of sorts with Moscow. He also regularly asserted that he wanted to re-build American manufacturing in the heartland and wanted to rein in Washington's footprint across the globe. Of course Trump ultimately capitulated to the militarist Russophobes. One can only put so much stock in campaign pronouncements, but he did come off as less bellicose than Killary, that was clear to any fair minded observer.

Trump's also been a nightmare as it comes to workers' rights in general, consumer and environmental protections and fair taxation as it relates to regressive vs progressive rates. He was also an Islamophobe when it comes to Iran and fell right in line with Adelson and the other ZIonist psychopaths.

The most welcoming aspect of Trump was his desire to make peace with Russia, this has been completely sabotaged by the deep state militarists. This is the reason the Corkers, Flakes and much of the establishment mass media browbeat and attack him relentlessly. Most of them ignore what he actually should be admonished for opting for nuclear brinkmanship instead.

exiled off mainstreet , October 30, 2017 at 11:25 am

This is the best description I have seen about Trump's role.

Bob Van Noy , October 30, 2017 at 10:37 am

Thank you CN and Lawrence Davidson for what I think is a accurate explanation of the failure of our Democracy. I especially like the reference to C. Wright Mills who is a heroic character for me. I think Mr. Mill's book on the Power Elite was prescient, as was his thinking in general. He published a little known book "Listen, Yankee" (1960) that was very insightful about the then current Cuban Revolution. It seems in retrospect that there was plenty of warning at the time for America to wake up to the goals of Big Government and Big Business but it was either successfully repressed or ignored by those who might have made a difference, like Labor. At any rate, C. Wright Mills died too early, because he seemed uniquely suited to make a difference. His writing remains current, I'll add a link.

http://www.cwrightmills.org

mike k , October 30, 2017 at 3:47 pm

I am a big CW Mills fan too. We have had many warnings – now we are going to experience the fate of those who ignore wisdom.

tina , October 30, 2017 at 10:31 pm

Hey, college UWM 1984- 1987 Mass Comm, I did not graduate , but we studied Mills, Lewis Mumford, and my favorite, Marshall McLuhan. Also, first time I was introduced to Todd Gitlin and IF Stone. While I did not pursue a life in journalism, I so appreciate all those who did the hard work. I still have all my college required reading books from these people, it is like a set of encyclopedias, only better. And better than the internet. Keep up the work CN , I am not that talented, but what you do is important.

BobH , October 30, 2017 at 12:04 pm

First, let me commend Lawrence Davidson for his selection of two of the most insightful writers of the sixties to use as a springboard for his perceptive essay. A third(John Kenneth Galbraith) would complete a trilogy of the brilliant academic social analysis of that time. Galbraith's masterpiece(The Affluent Society) examined the influence of the heavy emphasis corporate advertising had on American culture and concluded that the economic/social structure was disproportionately skewed toward GDP(gross domestic product) at the expense of educational investment. This was in direct contrast with the popular novels and essays of Ayn Rand, the goddess of greed whose spurious philosophy had come to epitomize the mindset that continues to plague the globe with the neoliberal ideals that have been reinvented under many names over time; i.e. laissez faire, trickle down,the Laffer curve, free market economics and monetarism.

Zachary Smith , October 30, 2017 at 12:17 pm

Usually such claims are themselves no more than campaign hot air. However, in their ignorance, voters may well respond to such hot air, and the result can be a jump from the proverbial frying pan into the fire. U.S. voters seem to have taken just such a leap when they elected Donald Trump president.

Nowhere in this essay are either of the terms "Hillary" or "Clinton" mentioned. U.S. voters had the choice of a known evil on the "D" side of the ballot, or another person well understood to be a shallow, self-centered, rich *****. They were going to end up with an unqualified person either way the voting went. Quite possibly the nod went to Trump because 1) his promises were surely more believable than those of Clinton and 2) Trump wasn't yet the known destroyer of entire nations.

Describing the predicament of the voters as "ignorance" just isn't fair when looking at the overall picture.

mike k , October 30, 2017 at 3:50 pm

Yes. Voters were put in a no win situation. That's why I did not participate in the "show" election.

Realist , October 31, 2017 at 4:33 am

What were Obama's reasons for failing to take a stand, once elected, on all the promises he made during his campaigns? He mostly gave away the store to the other side, and insulted his supporters while doing so. Talk about progressives not getting a "win" even after carrying the elections. Two terms earlier, the media called the contest one of two "moderates" between Bush and Gore. If that was "moderation" practiced by Dubya, I need a new dictionary. Most recent elections have been pointless, especially when the Supreme Court doesn't allow a complete recount of the votes. In a field of 13(!) primary candidates last year, the GOP could not provide one quality individual. The Dems cheated to make sure the worst possible of theirs would get the nomination. I see nothing but mental and moral midgets again on the horizon for 2020. I don't expect Trump to seek re-election. He will have had a bellyful should he even survive.

Stephen J. , October 30, 2017 at 12:23 pm

I believe what has happened to all of us is: "The Imposition of a New World Order." This plan has been helped by puppet politicians. Therefore the question must be asked: "Is There An Open Conspiracy to Control the World'?
[More info on this at link below]
http://graysinfo.blogspot.ca/2014/12/is-there-open-conspiracy-to-control.html

john wilson , October 30, 2017 at 1:00 pm

Stephen: why do you ask the question to which you already know the answer? Yes, we're all screwed and have been for years. The bankers already control the world and the military make sure its stays that way.

Stephen J. , October 30, 2017 at 1:44 pm

Very true john wilson. Questions beget answers and information.
cheers Stephen J.

mike k , October 30, 2017 at 3:52 pm

It's like the Purloined Letter by Poe – the truth of our enslavement is so obvious, that only the deeply brainwashed can fail to see it.

Zachary Smith , October 30, 2017 at 12:48 pm

The parts of The Organization Man I found most interesting were the chapters about "Testing The Organization Man". The companies were deliberately selecting for people we currently label Corporate Psychopaths. Whyte suggested memorizing some "attitudes" before taking one of the tests. Among them:

I loved my father and my mother, but my father a little bit more
I like things pretty much the way they are
I never worry much about anything
I don't care for books or music much
I love my wife and children
I don't let them get in the way of company work

You can substitute any number of things that you won't allow to get in the way of company work .

Ecology. Laws. Regulations. Integrity. Religion.

"Screw planet Earth. Exxon comes first!" Or "screw Jesus and the horse he rode in on. We need to cut taxes and balance the budget. People are poor because they're too lazy to get a job."

mike k , October 30, 2017 at 3:53 pm

Good points. Brainwashing in action revealed.

john wilson , October 30, 2017 at 12:55 pm

Democracy is another word for consensual slavery. In a communist system or a dictatorship etc you are told you are a slave because you have no voice or choice. In a democracy you do have a choice and its between one salve master and another. If you vote Democrat you are just as much a slave to the system as you are if you vote Republican. The possibility of a third choice which might just free you from your chains, is a fantasy and only there as window dressing to give democracy some credibility. The term for this dilemma is called being TOTALLY SCREWED!!

mike k , October 30, 2017 at 3:55 pm

Amen John. You got it right brother.

exiled off mainstreet , October 31, 2017 at 11:01 am

This is an excellent summary of the basis in mentality of what is factually a 21st century version of a fascist regime. Even though two political parties and the shell forms of republican government may exist, the reality is that the parties are factions and the way things operate is via conformity and loyalty to an authoritarian power structure.

[Oct 27, 2017] The Rise and Fall of the Phillips Curve by Ed Walker

Notable quotes:
"... The History of the Phillips Curve: Consensus and Bifurcation ..."
"... The Fed Has a Theory. Trouble is the Proof is Patchy ..."
"... Do Phillips Curves Conditionally Help to Forecast Inflation? ..."
"... Declining Labor and Capital Shaes ..."
"... I am constantly baffled by economists trying to explain very complex non-linear system with simple two variable models. I have been dealing with a couple of engineering problems today where the publication I am using has over 50 design charts just for gravity pipe flow. Each chart has about five variables accommodated while holding a number of others constant. ..."
"... So I think we see the Philips curve predictably happening in the short-term in fields like technology where there is big demand and not enough people. However, as a general rule across the economy, I simply don't see why the relationship between inflation and unemployment should be the same today as it was in 2007, 1997, 1987, or 1977. ..."
"... Economics is infected with too much ideology and not enough scientific method. That is more the definition of a religion than a science. ..."
"... If neoliberals were intellectually honest, they wouldn't call it supply side economics, they'd call it philo-capital economics ..."
"... 80's Poly-Sci defined, "neo-feudalism" (or, as "Shock Doctrine", privatization of all "resource" + government capacity, subject financial sector capture) ..."
"... As far as I can tell, the whole idea of NAIRU is strictly an artifact of economic modeling, not something that's actually ever been observed in the wild. And doesn't it seem odd that making sure we don't drop below NAIRU is something the Fed feels like it needs to intervene to ensure rather than letting the market sort it out. Even if NAIRU was a real thing, you would assume that low unemployment –> increased wages –> increased prices –> reduced consumption –> lay-offs and higher unemployment. Which is to say, if there were such a thing as a natural rate of unemployment, wouldn't markets naturally produce it, obviating any need for the Fed to, say, jack up interest rates to keep the economy from "heating up" (I guess because people have so much money burning holes in their pockets?). It almost like, when it suits the capitalists, they stop believing in this whole "invisible hand" thing .strange ..."
"... "Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that "the market" delivers benefits that could never be achieved by planning. ..."
Oct 27, 2017 | www.nakedcapitalism.com

The Rise and Fall of the Phillips Curve Posted on October 27, 2017 The Phillips Curve says that there is an inverse relation between unemployment and inflation. Low unemployment is correlated with a rise in inflation. It's an article of faith to economists of all stripes. It's listed in the popular introductory economics textbook by N. Gregory Mankiw as one of the Ten Things All Economists agree on . It's especially loved by the Fed, which raises or lowers interest rates depending in part on its predictions. Its critics point out that its predictions are poor.

In this post, I discuss the derivation of the Phillips Curve, its adaption by Samuleson and Solow to manage the economy, its breakdown in the 1970s, exploitation by neoliberals of that breakdown to replace Keynesian demand-based economics with monetarism and supply-side economics, its rejuvenation, and the evidence that it doesn't make accurate predictions.

I conclude with some observations based on an important paper by Simcha Barkai that challenges the core beliefs of neoliberalism. It suggests we can raise wages substantially without causing inflation by lowering corporate profits.

History

This part is based on Sections I-III of Robert Gordon's article, The History of the Phillips Curve: Consensus and Bifurcation , Economica (2011) 78, 10–50 (behind paywall, but you can find it online at your local library). Gordon is an economics professor at Northwestern and has worked on the Phillips Curve for decades.

William Phillips published a paper in 1958 showing a correlation between wage growth and inflation in the UK between 1861 and 1913. He fitted a curve to the data, and then compared that curve to UK data from two later periods. There was a remarkable similarity for most of the two periods, with exceptions Phillips explains away. Here is the curve Phillips derived:

1. w t = -.90 + 9.64U -1.39

Gordon says that " the inflation rate would be expected to equal the growth rate of wages minus the long-term growth rate of productivity." P. 12.

1a. p = w – k

Here p is inflation, w is wage growth, and k is productivity growth. Generally in these equations, lower case letters are rates of change and upper case letters are levels. We can substitute Equation 1a into Equation 1 to get the original Phillips Curve.

2. p = -.90 + 9.64U -1.39 – k.

Paul Samuelson and Robert Solow picked up on the Phillips paper with a paper of their own in 1960. Gordon says much of their paper is a discussion of pre-Phillips theory. They can't find data on the US economy similar to that found by Phillips for the UK economy, so they work up some of their own data and make some calculations showing a result similar to that of Phillips. Whereas Phillips does not mention the possibility that the curve might shift, Samuelson and Solow find such shifts and offer possible explanations, such as strong labor unions.

Here's a schematic drawing of the Phillips Curve from Wikipedia :

The standard curve might be the one on the left. It shows very high inflation at very low unemployment, but falls quickly as unemployment rises. That suggested to Samuelson and Solow that there is a trade-off if the economy is in specific parts of the Phillips Curve: by allowing a slightly higher level of inflation, you could get a big drop in unemployment. The US tried this idea in the 1960s. This policy was tied to Keynesianism, which was the predominate theory in the Kennedy and Johnson era, and into the Nixon Presidency.

When OPEC massively increased the price of oil in the early 70s, inflation soared far past the level suggested by the Phillips Curve. The neoliberals at the University of Chicago argued that the failure of the Phillips Curve proved that Keynesian economics was worthless, and pushed their solution: monetarism. They also had a formula to replace the Phillips Curve as a predictor of inflation.

Their explanation for the failure of the trade-off was something like this. Suppose the beginning rates of inflation and unemployment are at Point A on the above chart. The Fed lowers interest rates resulting in a small increase of inflation, so that the economy moves to Point B with lower unemployment. People believe that is unsustainable, and that the economy will revert to the natural rate of unemployment, the vertical line. As a result, the Phillips Curve shifts up and to the right over time, so that the economy moves to Point C, with the beginning unemployment rate but higher inflation.

The neoliberals won. Keynesianism lost out and was replaced by monetarism. This was probably not deserved, according to Gordon. He says that Samuelson and Solow were not talking about the situation that came about in the 70s, but rather the situation in the early 1960s. He also spends a good part of his paper showing that the formulas offered by Friedman and the neoliberals for predicting inflation were a total failure both on factual and theoretical grounds.

Gordon himself proposed a version of the Phillips Curve designed to deal with the problem of supply and demand shocks like the Oil Shock:

3. p = Ep t + b(U t – U t N ) + z t + e t

In Equation 3, the second U term is the natural rate of unemployment, z t represents cost-push pressure, and e t is apparently a constant. The natural rate of unemployment and the z term vary over time, and for some reason so does the e term. There is nothing left of the wage term. The Phillips Curve is now free from the bonds of factual data that gave Phillips his interesting result. It's a curve-fitting exercise, using economic theories put together in a way that fits the data. It's a complicated formula in which every term needs to be calculated from some other theory or data.

Gordon says that Equation 3 is the canonical version of the Phillips Curve. It is incorporated in most econometric models, modified by some other variables and terms, including levels of taxation, expectations of inflation, inflation inertia, which relates to price and wage rigidity in the short run, and a host of other terms. But as we shall see, it doesn't work as a predictor.

Criticism of the Phillips Curve

The Phillips Curve has been controversial for a long time, as Mankiw admits in his introductory textbook. Ben Leubsdorf wrote a very readable criticism for the Wall Street Journal on August 14, 2014, just before the Fed started raising interest rates. His title is The Fed Has a Theory. Trouble is the Proof is Patchy (sadly behind a paywall; it's available online at your local library).

Leubsdorf confirms that most economists believe that there is a short run trade-off between inflation and unemployment and also agree that this trade-off doesn't hold in the long term, meaning that we can't get permanently lower unemployment by accepting a bit more inflation. But the problem is that there is also no apparent connection in the short run either. Here's a chart originally in Leubsdorf's article and reprinted in a post discussing the article by Jared Bernstein .


Source: Wall Street Journal

To read this chart, select an expansion period from the list on the upper right, find the line that color, and locate the circle at one end of the line; that's the starting point. Then follow the line to see how the relationship between unemployment (x-axis) and inflation (y-axis) changes over time. As you can see there is no apparent connection in any except the first expansion. The lack of connection to theory is especially obvious in the current expansion.

The Leubsdorf article has several quotes from Very Serious People to the effect we think there's a relationship and we're going to act like there is a relationship, and we can fine-tune the economy with our gut instincts.

It doesn't look like the latest study will change minds either. That one comes from the Philadelphia Fed in August 2017, Do Phillips Curves Conditionally Help to Forecast Inflation? The conclusion is that the Phillips Curve does worse than something called a univariate model which I won't discuss.

In this September 26 New York Times article there are more Very Serious People explaining they need to follow their instincts about the economy in deciding on interest rates and they are sure inflation is coming. Meanwhile, the economy continues to add jobs with no obvious increase in inflation as shown by the blue line on the above chart. Inflation is currently running at 1.3% .

Damage From the Phillips Curve

We have already seen that the first notable failure of the Phillips Curve was used to undermine Keynesian economics in favor of monetarism. As a result, working people of all classes were doubly harmed, first by the abandonment of the Fed of any significant role in cutting unemployment, and second by the savage use of high rates to control inflation.

Here's a chart showing the labor share in gross national product on the left axis (blue line) and the prime rate on the right axis (red line).

The grey bars are recessions. This chart shows that up to 2000 every time workers start to get a bigger share of the GDP, the Fed raises interest rates. The Phillips Curve was the justification for those rate hikes. There is some evidence wages are firming up today, and maybe even rising a fraction faster than inflation. Following tradition but not evidence, the Fed is raising rates. If that hurts workers, also in accordance with tradition, that's just too bad.

Observations

Take another look at Equation 1a. If we set inflation at zero, Equation 1 says that wage growth equals productivity growth. That's not true. Here's a chart from the Economic Policy Institute .

The wage line is for production and non-supervisory personnel, which the EPI says is about 80% of employed people. The average wage for all workers has grown somewhat faster, but is still well under the rate of increase of productivity over the long term.

Money produced in the economy goes either to capital or labor. So, the excess gains from productivity must be going to capital.

Actually, it seems strange to suggest that none of the gains from increased productivity go to capital, as Equation 1a does. Consider a company like Google. It can buy a few more computer blades and serve more customers with little or no increase in total wages. The gains from the productivity of the new capital all go to the company. Or consider a company that outsources its labor. Some of the gains might be used to cut prices, I suppose, but surely most of the gain stays with the company.

The following chart shows the sudden growth in top wealth. It demonstrates that the growth began at the same time as the productivity-wages gap began, more support for the idea that the gains from productivity are going to capital.

Capital can take many forms. It could be plant and equipment, commercial or agricultural land, personal residences, art, gold, and many other things believed to store value, whether or not they are actually producing anything, or even whether they actually store value. We know that top wealth is rising, the stock market is up, and the value of residential real property in all major cities is rising. All these and more suggest that the total amount of capital is increasing. All that increase is funded by the gains from productivity.

A recent paper by Simcha Barkai, Declining Labor and Capital Shaes , provides a convincing explanation. The labor share is declining he says. But so is what he calls the "capital share", a defined term, calculated by multiplying the "required rate of return" by the capital stock deployed in the non-financial business sector. Capital stock includes plant and equipment, land, and intangibles such as patents and software, less depreciation. The required return on capital is approximately and sensibly defined as the cost of obtaining capital in the financial markets. He shows that the cost of capital has declined by 7% over the period of his study, 1984-2014. If the amount of capital deployed had increased as might be expected with this large drop in cost, the capital share might have remained the same. Instead, businesses did not deploy additional capital, and the capital share declined by some 30% over the period. During that period the labor share declined 10% from a larger starting point.

The combined losses were more than made up by increases in the profits share. Profits add to the value of the firm, and are distributed by the owners of firms as they see fit, which isn't to lowly workers. This is from Barkai's paper:

Across specifications, the profit share (equal to the ratio of profits to gross value added) has increased by more than 12 percentage points. To offer a sense of magnitude, the value of this increase in profits amounts to over $1.1 trillion in 2014, or $14 thousand for each of the approximately 81 million employees of the non-financial corporate sector. P. 3.

Barkai attributes this almost entirely to increased concentration of US industries, and most of the paper is devoted to proof of that conclusion. He links that increase in concentration to changes in anti-trust law and policy engineered by Robert Bork when he was at the University of Chicago.

Conclusion

Following Barkai, we should rewrite Equation 1a like this:

1b. p = w + γ + c t – k

where γ is the rate of growth of the profits share, c t is the rate of growth of the capital share, w is the rate of growth of wages, p is inflation, and k is productivity. Substituting the original Phillips equation, Equation 1 into Equation 1b gives us

4. p = -.90 + 9.64U -1.39 + γ + c t – k.

This equation calls attention to the role that profits play in the economy, something economists generally generally ignore. When people do discuss profits, it's always in the context of the importance of capital and the need to coddle it. That view lies at the heart of neoliberalism, and at the heart of Fed policy. It is also at the heart of the Law and Economics movement also spawned at the University of Chicago, a movement that has changed the legal system to favor capital. If neoliberals were intellectually honest, they wouldn't call it supply side economics, they'd call it philo-capital economics.

Equation 1 has been replaced by Equation 3 in the standard model of the Phillips Curve.

3. p = Ep t + b(U t – U t N ) + z t + e t

Making this work with Barkai's analysis is harder. We get a clue from Gordon's explanation of the z term: he call it cost push, meaning price shocks caused by labor unions and "bauxite barons". This is where capital growth fits in. The ability to control markets gives firms the ability to cause price shocks, as when pharmaceutical companies drive up the price of epi-pens or other drugs, but also the ability to gradually increase prices above the rate of inflation. Therefore, I'd rewrite Equation 3 this way:

5. 3. p = Ep t + b(U t – U t N ) + γ + c t + e t

Gordon doesn't explain the e term, so we'll just let that pick up anything that used to be in the z term that is somehow missed by my addition. It would, for example, include demand-pull inflation, which hasn't been a problem for some time.

In the current situation, with profits at very high levels, we can easily increase wages without increasing inflation if the rich were willing to accept lower profits, subject to the availability of sufficient resources to meet the new levels of demand substantially higher wages might cause.

Barkai says just distributing the historically high profits to workers would give every working person (other than those in the financial sector) a $14K raise. That dwarfs the make-believe $4K-9K per household the Republicans promise from their proposed tax cuts.

Unfortunately, the Phillips Curve isn't the only thing blocking action to help the average citizen.

Synoia , October 27, 2017 at 10:16 am

Economists will tell whatever story, with whatever rationale that fits their story, to please their pay-masters.

Just like court magicians or priests divining augers for their emperors

They try to predict the future of a chaotic system, which is impossible.

Telling the rich and powerful what they want to hear is both possible and profitable.

rd , October 27, 2017 at 1:21 pm

I am constantly baffled by economists trying to explain very complex non-linear system with simple two variable models. I have been dealing with a couple of engineering problems today where the publication I am using has over 50 design charts just for gravity pipe flow. Each chart has about five variables accommodated while holding a number of others constant.

So I believe the Philips curve is valid but it is in a different place in multi-variable space each decade or so based on fundamental changes in the economy. Over the past thirty years, I can think of four major changes off the top of my head that lead me to expect the Philips curve to translate in multi-variable space:

1. Free trade agreements (NAFTA etc.)
2. Technology displacing workers
3. Baby boomer demographic moving from entering peak productivity to retirement age
4. Women and minorities are becoming more widespread throughout most or all jobs.

So workers to day are now competing more with Second and Third World workers while technology is dramatically changing the workplace (e.g. secretarial positions dramatically reduced), and inexperienced 25 year old white men, women, minorities are being hired to replace experienced 60 year old white men. Why would we expect to have a nice linear relationship between unemployment and wages across this period?

So I think we see the Philips curve predictably happening in the short-term in fields like technology where there is big demand and not enough people. However, as a general rule across the economy, I simply don't see why the relationship between inflation and unemployment should be the same today as it was in 2007, 1997, 1987, or 1977.

Economics is infected with too much ideology and not enough scientific method. That is more the definition of a religion than a science.

diptherio , October 27, 2017 at 10:42 am

Good article. In my econ undergrad, I remember my intermediate macro professor pointing out that reality didn't match the theoretical Philips curve very well and then we continued assuming that it did, for the remainder of the course. {facepalm}

If neoliberals were intellectually honest, they wouldn't call it supply side economics, they'd call it philo-capital economics

Might I suggest "capitalphilic economics"? Seems to roll off the tongue a little better.

nonclassical , October 27, 2017 at 11:17 am

80's Poly-Sci defined, "neo-feudalism" (or, as "Shock Doctrine", privatization of all "resource" + government capacity, subject financial sector capture)

tegnost , October 27, 2017 at 11:22 am

I'll just leave this here along with a little deep thinking by diptherio
https://www.nakedcapitalism.com/2016/05/naked-capitalisms-diptherio-discusses-flaws-in-unemployment-reporting.html

diptherio

Doncha just love how it's defined, in practice, as whatever the unemployment rate seems to settle around. If I'm not mistaken, in the 70's NAIRU was considered to be 6 or 7 %. Then unemployment fell and inflation didn't accelerate so they changed NAIRU to 5%.

What I want to know is if there has ever been a documented case where it can be shown that low unemployment levels actually led to accelerating-inflation. The inflationary periods in US history that I'm familiar with seem to have all been caused by supply shocks (i.e. oil embargo) or financial shenanigans (the housing market of the early aughties). Ditto for other countries, so far as I know.

As far as I can tell, the whole idea of NAIRU is strictly an artifact of economic modeling, not something that's actually ever been observed in the wild. And doesn't it seem odd that making sure we don't drop below NAIRU is something the Fed feels like it needs to intervene to ensure rather than letting the market sort it out. Even if NAIRU was a real thing, you would assume that low unemployment –> increased wages –> increased prices –> reduced consumption –> lay-offs and higher unemployment. Which is to say, if there were such a thing as a natural rate of unemployment, wouldn't markets naturally produce it, obviating any need for the Fed to, say, jack up interest rates to keep the economy from "heating up" (I guess because people have so much money burning holes in their pockets?). It almost like, when it suits the capitalists, they stop believing in this whole "invisible hand" thing .strange

diptherio , October 27, 2017 at 3:07 pm

*blushes* Applying simple logic to mainsteam economics is always entertaining when it's not maddening

vlade , October 27, 2017 at 10:48 am

If I remember right, Phillips published this paper because LSE was pushing him to publish something so that they could justify awarding him professorship and tenure, and he could go to tinkering with his MONIAC. I was told he just wanted to get something out, and this was the first idea he had so he wrote it up, but wasn't really persuaded..

The damage to the real world the academia demands does..

JTMcPhee , October 27, 2017 at 3:31 pm

"Real world" powers can riffle through the files of academia, hard and soft sciences or the various humanities or whatever, even languages and linguistics, and, because "freedom," can always come up with something published that "proves" whatever line of BS the looters are pushing at any given moment to increase their "take."

But then ever since humans discovered ratiocination, thus it has always been. SOMEone or SOMEthing always has to be "the authority," or at least "authoritative "

Samuel Conner , October 27, 2017 at 4:11 pm

That story puts a new spin on "publish or perish", something like "(you) publish and (a lot of other people will) perish (sooner)".

Ned , October 27, 2017 at 11:07 am

This is one reason why America is being parasitized by finance -- - Math. That and the math card in computers that allows the instantaneous creation of speculation and playing of the numbers with hypothetical money that later translates into real productivity or more likely misery.

The average American's eyes glaze over as soon as you put up a math formula. He of course, will memorize all manner of arcane sports trivia and statistics, but when it comes time to quantify his own economic doom, or to think about his or her own economic travails with numbers and curves, it's mind shutdown time.

This is why we love Yves. She has allowed us to get an insight into, become informed and learn about economics through high quality reporting. Thank you for this reminder of the hocus pocus and the witch-doctory that is casting our spell into economic hell.

nonclassical , October 27, 2017 at 11:24 am

not just "math": Rand-Friedman-libertarian ideological definition:

"Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that "the market" delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

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

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

https://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-problem-george-monbiot

Synoia , October 27, 2017 at 11:49 am

That you suffer from parasites is your fault, but God help you if you try to eradicate them.

Summer , October 27, 2017 at 2:01 pm

Your link dances around calling it out: neoliberalism is a rebranding of social darwinism.

Not much "neo" about it. But for all the alleged "progress," it seems we're trapped in a culture that really finds it hard to let go of the 19th Century. And mot just economically, but socially as well.

"natural hierarchy of winners and losers " – does not exist. They rebranded to try to get around all the artificial selection in the global economy.

Ed Walker Post author , October 27, 2017 at 1:50 pm

In an early draft of this article, I had a reference to Econned, where Yves discusses the use of the Gaussian Copula in the organization of RMBSs. So, yes, it's largely the math that Samuelson and Solow and the people who came later loved.

You'll note that I only use very simple math, mostly because it's a nice shorthand, like Equations 1a and 1b

flora , October 27, 2017 at 2:09 pm

an aside: For readers who do not 'read math' you provide understandable English translations of the equations. Thanks.

Quanka , October 27, 2017 at 11:56 am

vlade hit on a key point, IMO. I was an undergrad at prestigious Midwestern school during the period where they split the Econ department in 2 -- a econometrics-esque degree from the Math/Science school, vs. 'Economics' which they kept in the College of Arts and Letters. They've been strangling the latter department since while ensuring steady flow of grants to the math-based department, a la the Phillips story alluded to above.

Seconding diptherio – I remember the introductory statistics and econometric courses I was required to take, where we'd routinely dissect econ reporting in the press based on flawed mathematics or poor statistical methods, and yet carry as though these were meaningful and useful figures (e.g. unemployment, inflation).

So what to do -- do you try to change the way economics is practiced? Or do you try to take away the influence that neoliberalism and/or industrial capitalism have on the education fields? And how exactly do you do that (reform education) given how instrumental it is for neoliberalism to continue.

I see an analogy here, maybe I am wrong. Picture bull-fighting, an appropriate concept,I think. I see neoliberalism as the Matador, education as the cape, and the public as the bull. So the questions above might be rephrased as from the bull's perspective, do you chase the cape or gore the matador?

The stakes are high for the matador -- although as a spectator that fact is hidden in plain sight.

flora , October 27, 2017 at 11:58 am

Thanks for this very readable and important post. Demystify the Phillips Curve and other economic "truths" being used against Main Street is significant.

" This equation calls attention to the role that profits play in the economy, something economists generally generally ignore. When people do discuss profits, it's always in the context of the importance of capital and the need to coddle it. That view lies at the heart of neoliberalism, and at the heart of Fed policy."

Travis Bickle , October 27, 2017 at 12:53 pm

When you think about it, the PC supports the argument of how Supply & Demand explains pretty much everything about economics. It you need to explain economics in a nutshell to a working guy who thinks nothing is really all that complicated (were it not for intellectuals over-thinking things), it fills the bill rather nicely. A matter of rhetorical Supply & Demand, come to think of it.

Thuto , October 27, 2017 at 1:08 pm

For most people, being confronted with "scientific evidence" is enough to lay to rest any and all doubt about the claims being made in a proposition. Scientific evidence hardens claims into hard facts, and does so quickly. What better way to make something appear scientific than to riddle its academic literature with curves and formulas, and give it its own pride of place at the nobles side by side with real sciences. That real sciences have laws that are universally applicable or can at least be reconciled across levels of reality with the consistency you'd expect of something labelled a science (e.g. how quantum electrodynamics reconciles classical electrodynamics at the atomic and subatomic levels) seems to be a minor inconvenience to those with vested interests in having economics accepted by the public as a hard science (precisely, I say again, because presenting "scientific evidence" with formulas and curves disarms most people, among them the political ruling class, of their critical thinking faculties). Add living in an age of credentialism to the mix and the general ineptitude of our ruling politicians and one can see how economists can wreak so much havoc with their ex-cathedra pronouncements on what makes the economy work

Ed Walker Post author , October 27, 2017 at 1:59 pm

The material about Simcha Barkai's paper is the most interesting part of this to me. That paper strikes a serious blow at the heart of neoliberal antitrust law, but it also explains the wage-productivity gap and shows the way to social changes that would benefit most of us.

Also, the billionaires of the world now control $6 Trillion. https://www.theguardian.com/business/2017/oct/26/worlds-witnessing-a-new-gilded-age-as-billionaires-wealth-swells-to-6tn

So naturally Republicans want tax cuts for the pig rich.

whateverhelps , October 27, 2017 at 2:21 pm

Phillips Curve has ever been ideological nonsense. Sad to see it alive 30 years later

EoH , October 27, 2017 at 3:49 pm

The Philips Curve exemplifies the dysfunction created by separating mathematical/quantitative descriptions of an economy from that same lived economy and its history. The PC was originally developed on British data covering a period roughly from ten years after the Crystal Palace Exhibition of 1851 to WWI, and then extended to WWII. Over the same period, literature met Oliver Twist and Alice and her rabbit hole, was jostled by Hardy and Lawrence, and jolted by Joyce, Woolf and Eliot, not least because a woman writer demanded a room of her own. The changes in social, economic and political life were comparable.

The British statistics cover a period when power shifted as dramatically as literature. A suffrage limited to propertied men became universal. The agency, the organization, persistence and determination necessary to create that change was considerable. So, too, a landowning aristocracy, once at the apex of all social, political, legal and economic life, saw its monopoly shrink, or rather found itself joined by large business owners, financiers, traders and press lords, and for a time, trades union leaders.

Parliament expressed that power shift, for example, by ending tariffs protecting domestic grain production, substituting, instead, subsidies for imported food stuffs, in order more cheaply to keep workers fed and at their machines. (A hard-fought concession to a new, competing power block of manufacturers, their financiers and traders,) A major constitutional crisis in 1910-11 presaged adoption of Bismarckian welfare programs, which America did not see until FDR and LBJ. These were a modest but viciously fought concession in order to avoid the kind of extra-constitutional change experienced by Russia a few years later.

Workers over this period witnessed the final stage of enclosures (privatizing of common lands), the end of cottage industries, and the rise, dominance and decline of heavy industry. The Crystal Palace's startling iron pillars and acres of glass yielded to curtain walls and structural steel. Technology, as today, raced headlong. Stage coaches gave way to steam railroads; the telegraph to the telephone and wireless; lances, swords and muzzle loaders to dreadnoughts, flying machines, automatic weapons and poison gas – all with vastly different supply chains, need for capital and levels of employment.

The empire added half of Africa, notably South Africa and its ores, diamonds and gold, and de facto control of Egypt and its canal at Suez. De jure imperial relations existed with India and the "white commonwealth" countries of Canada, Australia, New Zealand and South Africa (post-Boer War). De facto imperial relations existed with much of Latin America, the Caribbean and East Asia. The pound was a global currency and the Royal Navy was admonished to "rule the waves", an aspiration that has since given way to following and buying from the stars and stripes. The ebb and flow of imperial power affected raw material prices coming in and export prices going out.

By what logic would the statistics of economic relations, of changing notions of acceptable levels of employment and inflation (capital's nemesis), not be affected by dramatic changes in social, political and economic conditions? Demonstrating sufficient continuity to establish a "law" for those relations for a single country, let alone one valid across time and national boundaries, would seem to be a sisyphean task.

Wisdom Seeker , October 27, 2017 at 5:13 pm

There's a persuasive interpretation of Phillips' original work and application to US data by John Hussman, which argues :

1) Phillips' original paper is right but most of the work since is garbage which missed the point.

2) Phillips' correct result is a relationship between unemployment and real wage growth ("wage inflation"), not consumer prices.

3) Most modern interpretations have either incompetently lost the point about real wages, or deliberately obfuscated. (Modern econ exists to serve capital more than labor, so this is not surprising.)

Hussman followed up the original piece with some others in recent years:
2013 / 11/ 04
2014 / 08 / 25

And from January 19, 2010 (emphasis added) :

"When labor is scarce (low unemployment), the price of labor tends to rise relative to the price of other things (thus we observe real wage inflation ). In contrast, when labor is plentiful (high unemployment), the price of labor tends to stagnate relative to the price of other things (real wages stagnate)."

Whether real wage inflation translates into consumer price inflation depends on the supply and demand of consumer goods, repayment of debts, workers' need to save for retirements etc.

I believe real wage growth, at the expense of corporate profits, is exactly what has been missing from the health of the economy for the past 20-40 years.

I also suspect the true reason why central banks fear low unemployment is because those increases in workers' wages will come at the expense of corporate profitability. (Especially in an economy with high corporate profit levels and inadequate price competition.)

I also suspect most modern recessions have not been caused by the low unemployment, but rather by the credit tightening applied to prevent low unemployment – to prevent workers from enjoying higher wages at the owners' expense.

[Oct 21, 2017] John Brennan's Police State objective was to push new administration into the corner from which it could not improve relations with Russia

Notable quotes:
"... Again Mike Whitney does not get it. Though in the first part of the article I thought he would. He was almost getting there. The objective was to push new administration into the corner from which it could not improve relations with Russia as Trump indicated that he wanted to during the campaign. Convincing Americans in Russia's influence or Russia collusion with Trump was only a tool that would create pressure on Trump that together with the fear of paralysis of his administration and impeachment would push Trump into the corner from which the only thing he could do was to worsen relations with Russia. What American people believe or not is really secondary. With firing of Gen. Flynn Trump acted exactly as they wanted him to act. This was the beginning of downward slope. ..."
"... The only part that is absurd is that Russia posed a bona fide threat to the US. I'm fine with the idea that he ruined Brennen's plans in Syria. But thats just ego we shouldn't have been there anyway. ..."
"... I am reading Howard Zinn, A Peoples History of the USA, 1492 to the Present. A sad story, how the USA always was a police state, where the two percent rich manipulated the 98% poor, to stay rich. When there were insurrections federal troops restored order. Also FDR put down strikes with troops. ..."
"... America wants to see Jewish oligarchs and their pet 'reformers' e.g. Garry Kasparov in charge of Russia. In the middle east they want endless war until all threats to Israel have been removed. ..."
"... "Brennan had a strong motive to strike back at Moscow. He had "a dog in the fight", and his dog lost. And since he couldn't win on the battlefield, his only choice was to launch an asymmetrical attack via the media. Isn't this where the Russia hacking idea originated?" -- Whitney ..."
"... "The absence of evidence suggests that Russia hacking narrative is a sloppy and unprofessional disinformation campaign that was hastily slapped together by over confident Intelligence officials who believed that saturating the public airwaves with one absurd story after another would achieve the desired result " ..."
Oct 21, 2017 | www.unz.com

Fran Macadam , October 20, 2017 at 3:08 pm GMT

A credible reading of the diverse facts, Mike.
Kirk Elarbee , October 20, 2017 at 8:27 pm GMT
Sadly, Brennan's propaganda coup only works on what the Bell Curve crowd up there would call the dumbest and most technologically helpless 1.2σ. Here is how people with half a brain interpret the latest CIA whoppers.

http://www.moonofalabama.org/2017/10/everyone-hacked-everyone-hacked-everyone-spy-spin-fuels-anti-kaspersky-campaign.html

utu , Next New Comment October 21, 2017 at 5:18 am GMT
Again Mike Whitney does not get it. Though in the first part of the article I thought he would. He was almost getting there. The objective was to push new administration into the corner from which it could not improve relations with Russia as Trump indicated that he wanted to during the campaign. Convincing Americans in Russia's influence or Russia collusion with Trump was only a tool that would create pressure on Trump that together with the fear of paralysis of his administration and impeachment would push Trump into the corner from which the only thing he could do was to worsen relations with Russia. What American people believe or not is really secondary. With firing of Gen. Flynn Trump acted exactly as they wanted him to act. This was the beginning of downward slope.

Anyway, the mission was accomplished and the relations with Russia are worse now than during Obama administration. Trump can concentrate on Iran in which he will be supported by all sides and factions including the media. Even Larry David will approve not only the zionist harpies like Pam Geller, Rita Katz and Ilana Mercer.

Pamela Geller: Thank You, Larry David

http://www.breitbart.com/big-hollywood/2017/10/19/pamela-geller-thank-larry-david/

anon , Disclaimer Next New Comment October 21, 2017 at 5:54 am GMT
OK.

The only part that is absurd is that Russia posed a bona fide threat to the US. I'm fine with the idea that he ruined Brennen's plans in Syria. But thats just ego we shouldn't have been there anyway.

No one really cares about Ukraine. And the European/Russian trade zone? No one cares. The Eurozone has its hands full with Greece and the rest of the old EU. I have a feeling they have already gone way too far and are more likely to shrink than expand in any meaningful way

The one thing I am not positive about. If the elite really believe that Russia is a threat, then Americans have done psych ops on themselves.

The US was only interested in Ukraine because it was there. Next in line on a map. The rather shocking disinterest in investing money -- on both sides -- is inexplicable if it was really important. Most of it would be a waste -- but still. The US stupidly spent $5 billion on something -- getting duped by politicians and got theoretical regime change, but it was hell to pry even $1 billion for real economic aid.

ThereisaGod , Next New Comment October 21, 2017 at 6:37 am GMT
" ..factions within the state whose interests do not coincide with those of the American people."

All the more powerfully put because of its recognisably comical. understatement.

Thank you Mr Whitney. Brilliant article that would be all over the mainstream media were the US MSM an instrument of American rather than globalist interests.

Capn Mike , Next New Comment October 21, 2017 at 6:45 am GMT
Headline: " Trump / Russian Collusion: Questions Remain"

Body: blahblahyaddayadda Where's the evidence? (question) blahblahyaddayadda..Who's Responsible? (question) etc etc.

Takeaway: Uh. Trump Russian Collusion

jilles dykstra , Next New Comment October 21, 2017 at 6:46 am GMT
I am reading Howard Zinn, A Peoples History of the USA, 1492 to the Present. A sad story, how the USA always was a police state, where the two percent rich manipulated the 98% poor, to stay rich. When there were insurrections federal troops restored order. Also FDR put down strikes with troops.
anonymous , Disclaimer Next New Comment October 21, 2017 at 10:29 am GMT
@Fran Macadam

Yes. To have the best chance to change minds, though, the article should be edited one more time.

Errors like "Capital Hill," using "have" instead of "has" with "none" ("So far, none of the four investigations on Capital Hill have produced "), and even a missing word ("perception [of] Russia") are needless distractions that enable those who want to avoid or prevent others from thinking critically. People tend to overlook these things when they're sympathetic, and to seize upon them when they're not.

Logan , Next New Comment October 21, 2017 at 11:16 am GMT
@jilles dykstra

You should be aware that Zinn's book is not, IMO, an honest attempt at writing history. It is conscious propaganda intended to make Americans believe exactly what you are taking from it.

Anon , Disclaimer Next New Comment October 21, 2017 at 12:15 pm GMT
I distrust economic explanations because there are usually stronger forces in play, forces we are skittish about mentioning. America's interest, driven by AIPAC and the neocon policy brains trust, is less in the world than in the middle east and eastern Europe, two areas where Jews and nationalists have long engaged in bloody conflict. The interest in North Korea is that it could sell weapons to Iran.

Writing in 1920 Belloc speaks of the Jewish hatred for Russia. You could add the Jewish hatred for Ukraine, Poland, Lithuania, and other eastern countries where Jews and Christians have historically had an unpleasant relationship. Jews want to see a politically correct united Europe where nationalism and religion will be extinguished by laws against hate speech and cultural re-education. They much preferred the Slavic nations under Communism. They bent over backwards to make excuses for Stalin and his successors.

America wants to see Jewish oligarchs and their pet 'reformers' e.g. Garry Kasparov in charge of Russia. In the middle east they want endless war until all threats to Israel have been removed. While there are multiple factors at work, e.g. Hillary's wanting an excuse for losing, the effort of Jews to master their traditional Christian and Muslim enemies is probably the most powerful and simultaneously the one we can't discuss openly -- a perilous state of affairs.

Grandpa Charlie , Next New Comment October 21, 2017 at 1:09 pm GMT

"Brennan had a strong motive to strike back at Moscow. He had "a dog in the fight", and his dog lost. And since he couldn't win on the battlefield, his only choice was to launch an asymmetrical attack via the media. Isn't this where the Russia hacking idea originated?" -- Whitney

The pity of it is that many Americans now find Putin more credible than any American president! In such a mishmash, Whitney has cut through the identity politics and the personality cults to get almost to the root -- where it started in 2013 -- the real issue that no government wants citizens to recognize or understand, the issue of WMDs -- in this case, chemical warfare . Here's the story, told from the official USA side , complete with anti-Russian headline that hardly represents the story itself:

https://tcf.org/content/report/red-line-redux-putin-tore-obamas-2013-syria-deal/

Forget about official USA bias in this account by The Century Foundation, the history is accurate enough that we easily see that there is no consensus on any of it. For one brief moment – long enough that some horrible WMDs were destroyed – Russia and USA seemed to act sensibly together and then back to the never-ending fight. It reminds of a Tom-and-Jerry cartoon, where the action suddenly freezes due to some distraction, and then the cat and the mouse resume where they left off.

What is the best that we can hope for? That somehow we can untangle the Gordian knot of she-said-he-said -- about supposed Russian hacking in election 2016 (?) -- before one Last Superpower or another resorts to the sword of nuclear Armageddon?

How about this as our goal -- maybe, just maybe, we can somehow return to pre-9-11 levels of cooperation between USA and Russia.

Without having to relive 9-11 either metaphorically or virtually?

TG , Next New Comment October 21, 2017 at 2:03 pm GMT
"The absence of evidence suggests that Russia hacking narrative is a sloppy and unprofessional disinformation campaign that was hastily slapped together by over confident Intelligence officials who believed that saturating the public airwaves with one absurd story after another would achieve the desired result "

But it DID achieve the desired result! Trump folded under the pressure, and went full out neoliberal. Starting with his missile attack on Syria, he is now OK with spending trillions fighting pointless endless foreign wars on the other side of the world.

I think maybe half the US population does believe the Russian hacking thing, but that's not really the issue. I think that the pre-Syrian attack media blitz was more a statement of brute power to Trump: WE are in charge here, and WE can take you down and impeach you, and facts don't matter!

Sometimes propaganda is about persuading people. And sometimes, I think, it is about intimidating them.

Anonymous , Disclaimer Next New Comment October 21, 2017 at 2:05 pm GMT
Whitney is another author who declares the "Russians did it" narrative a psyop. He then devotes entire columns to the psyop, "naww Russia didn't do it".

There could be plenty to write about – recent laws that do undercut liberty, but no, the Washington Post needs fake opposition to its fake news so you have guys like Whitney in the less-mainstream fake news media.

So Brennan wanted revenge? Well that's simple enough to understand, without being too stupid. But Whitney's whopper of a lie is what you're supposed to unquestionably believe. The US has "rival political parties". Did you miss it?

Jake , Next New Comment October 21, 2017 at 2:32 pm GMT
The US is doing nothing more than acting as the British Empire 2.0.

WASP culture was born of a Judaizing heresy: Anglo-Saxon Puritanism. That meant that the WASP Elites of every are pro-Jewish, especially in order to wage war, physical and/or cultural, against the vast majority of white Christians they rule.

By the early 19th century, The Brit Empire's Elites also had a strong, and growing, dose of pro-Arabic/pro-Islamic philoSemitism. Most of that group became ardently pro-Sunni, and most of the pro-Sunni ones eventually coalescing around promotion of the House of Saud, which means being pro-Wahhabi and permanently desirous of killing or enslaving virtually all Shiite Mohammedans.

So, by the time of Victoria's high reign, the Brit WASP Elites were a strange brew of hardcoree pro-Jewish and hardcore pro-Arabic/islamic. The US foreign policy of today is an attempt to put those two together and force it on everyone and make it work.

The Brit secret service, in effect, created and trained not merely the CIA but also the Mossad and Saudi Arabia's General Intelligence Presidency. All four are defined by endless lies, endless acts of utterly amoral savagery. All 4 are at least as bad as the KGB ever was, and that means as bad as Hell itself.

Logan , Next New Comment October 21, 2017 at 3:04 pm GMT
@Grandpa Charlie

Fair enough. I didn't know that about the foreword. If accurate, that's a reasonable approach for a book.

Here's the problem.

Back when O. Cromwell was the dictator of England, he retained an artist to paint him. The custom of the time was for artists to "clean up" their subjects, in a primitive form of photoshopping.

OC being a religious fanatic, he informed the artist he wished to be portrayed as God had made him, "warts and all." (Ollie had a bunch of unattractive facial warts.) Or the artist wouldn't be paid.

https://www.theguardian.com/artanddesign/2013/nov/08/cromwell-portraitist-samuel-cooper-exhibition

Traditional triumphalist American narrative history, as taught in schools up through the 60s or so, portrayed America as "wart-free." Since then, with Zinn's book playing a major role, it has increasingly been portrayed as "warts-only," which is of course at least equally flawed. I would say more so.

All I am asking is that American (and other) history be written "warts and all." The triumphalist version is true, largely, and so is the Zinn version. Gone With the Wind and Roots both portray certain aspects of the pre-war south fairly accurately..

America has been, and is, both evil and good. As is/was true of every human institution and government in history. Personally, I believe America, net/net, has been one of the greatest forces for human good ever. But nobody will realize that if only the negative side of American history is taught.

Wally , Next New Comment October 21, 2017 at 3:16 pm GMT
@Michael Kenny

Hasbarist 'Kenny', you said:

"There must be something really dirty in Russigate that hasn't yet come out to generate this level of panic."

You continue to claim what you cannot prove.

But then you are a Jews First Zionist.

Russia-Gate Jumps the Shark
Russia-gate has jumped the shark with laughable new claims about a tiny number of "Russia-linked" social media ads, but the US mainstream media is determined to keep a straight face

https://www.lewrockwell.com/2017/10/robert-parry/jumping-the-shark/

Yet Another Major Russia Story Falls Apart. Is Skepticism Permissible Yet?

https://theintercept.com/2017/09/28/yet-another-major-russia-story-falls-apart-is-skepticism-permissible-yet/

+ review of other frauds

Logan , Next New Comment October 21, 2017 at 3:20 pm GMT
@Jake

Most of that group became ardently pro-Sunni, and most of the pro-Sunni ones eventually coalescing around promotion of the House of Saud, which means being pro-Wahhabi and permanently desirous of killing or enslaving virtually all Shiite Mohammedans.

Thanks for the laugh. During the 19th century, the Sauds were toothless, dirt-poor hicks from the deep desert of zero importance on the world stage.

The Brits were not Saudi proponents, in fact promoting the Husseins of Hejaz, the guys Lawrence of Arabia worked with. The Husseins, the Sharifs of Mecca and rulers of Hejaz, were the hereditary enemies of the Sauds of Nejd.

After WWI, the Brits installed Husseins as rulers of both Transjordan and Iraq, which with the Hejaz meant the Sauds were pretty much surrounded. The Sauds conquered the Hejaz in 1924, despite lukewarm British support for the Hejaz.

Nobody in the world cared much about the Saudis one way or another until massive oil fields were discovered, by Americans not Brits, starting in 1938. There was no reason they should. Prior to that Saudi prominence in world affairs was about equal to that of Chad today, and for much the same reason. Chad (and Saudi Arabia) had nothing anybody else wanted.

Grandpa Charlie , Next New Comment October 21, 2017 at 3:25 pm GMT
@Michael Kenny

'Putin stopped talking about the "Lisbon to Vladivostok" free trade area long ago" -- Michael Kenney

Putin was simply trying to sell Russia's application for EU membership with the catch-phrase "Lisbon to Vladivostok". He continued that until the issue was triply mooted (1) by implosion of EU growth and boosterism, (2) by NATO's aggressive stance, in effect taken by NATO in Ukraine events and in the Baltics, and, (3) Russia's alliance with China.

It is surely still true that Russians think of themselves, categorically, as Europeans. OTOH, we can easily imagine that Russians in Vladivostok look at things differently than do Russians in St. Petersburg. Then again, Vladivostok only goes back about a century and a half.

Wally , Next New Comment October 21, 2017 at 3:26 pm GMT
@Jake

Jake has no proof whatsoever for any of his threadbare 'blame the gentiles' tactics.

Jake just makes things up to suit his supremacist Jew, aren't we special, 'Chosen Ones' agenda.

The tide is turning.

http://www.codoh.com

Seamus Padraig , Next New Comment October 21, 2017 at 3:39 pm GMT
@utu

Anyway, the mission was accomplished and the relations with Russia are worse now than during Obama administration.

I generally agree with your comment, but that part strikes me as a bit of an exaggeration. While relations with Russia certainly haven't improved, how have they really worsened? The second round of sanctions that Trump reluctantly approved have yet to be implemented by Europe, which was the goal. And apart from that, what of substance has changed?

Seamus Padraig , Next New Comment October 21, 2017 at 3:45 pm GMT
@Grandpa Charlie

That pre-9/11 "cooperation" nearly destroyed Russia. Nobody in Russia (except, perhaps, for Pussy Riot) wants a return to the Yeltsin era.

Ludwig Watzal , Website Next New Comment October 21, 2017 at 3:46 pm GMT
It's not surprising that 57 percent of the American people believe in Russian meddling. Didn't two-thirds of the same crowd believe that Saddam was behind 9/11, too? The American public is being brainwashed 24 hours a day all year long.

The CIA is the world largest criminal and terrorist organization. With Brennan the worst has come to the worst. The whole Russian meddling affair was initiated by the Obama/Clinton gang in cooperation with 95 percent of the media. Nothing will come out of it.

This disinformation campaign might be the prelude to an upcoming war.
Right now, the US is run by jerks and idiots. Watch the video.

anonymous , Disclaimer Next New Comment October 21, 2017 at 3:50 pm GMT
Only dumb people does not know that TRUMP IS NETANYAHU'S PUPPET.

The fifth column zionist jews are running the albino stooge and foreign policy in the Middle East to expand Israel's interest against American interest that is TREASON. One of these FIFTH COLUMNISTS is Jared Kushner. He should be arrested.

https://www.globalresearch.ca/donald-trumps-likudist-campaign-against-iran/5614264

[The key figures who had primary influence on both Trump's and Bush's Iran policies held views close to those of Israel's right-wing Likud Party. The main conduit for the Likudist line in the Trump White House is Jared Kushner, the president's son-in-law, primary foreign policy advisor, and longtime friend and supporter of Netanyahu. Kushner's parents are also long-time supporters of Israeli settlements on the occupied West Bank.

Another figure to whom the Trump White House has turned is John Bolton, undersecretary of state and a key policymaker on Iran in the Bush administration. Although Bolton was not appointed Trump's secretary of state, as he'd hoped, he suddenly reemerged as a player on Iran policy thanks to his relationship with Kushner. Politico reports that Bolton met with Kushner a few days before the final policy statement was released and urged a complete withdrawal from the deal in favor of his own plan for containing Iran.

Bolton spoke with Trump by phone on Thursday about the paragraph in the deal that vowed it would be "terminated" if there was any renegotiation, according toPolitico. He was calling Trump from Las Vegas, where he'd been meeting with casino magnate Sheldon Adelson, the third major figure behind Trump's shift towards Israeli issues. Adelson is a Likud supporter who has long been a close friend of Netanyahu's and has used his Israeli tabloid newspaper Israel Hayomto support Netanyahu's campaigns. He was Trump's main campaign contributor in 2016, donating $100 million. Adelson's real interest has been in supporting Israel's interests in Washington -- especially with regard to Iran.]

Miro23 , Next New Comment October 21, 2017 at 4:56 pm GMT
A great article with some excellent points:

Putin's dream of Greater Europe is the death knell for the unipolar world order. It means the economic center of the world will shift to Central Asia where abundant resources and cheap labor of the east will be linked to the technological advances and the Capital the of the west eliminating the need to trade in dollars or recycle profits into US debt. The US economy will slip into irreversible decline, and the global hegemon will steadily lose its grip on power. That's why it is imperative for the US prevail in Ukraine– a critical land bridge connecting the two continents– and to topple Assad in Syria in order to control vital resources and pipeline corridors. Washington must be in a position where it can continue to force its trading partners to denominate their resources in dollars and recycle the proceeds into US Treasuries if it is to maintain its global primacy. The main problem is that Russia is blocking Uncle Sam's path to success which is roiling the political establishment in Washington.

American dominance is very much tied to the dollar's role as the world's reserve currency, and the rest of the world no longer want to fund this bankrupt, warlike state – particularly the Chinese.

First, it confirms that the US did not want to see the jihadist extremists defeated by Russia. These mainly-Sunni militias served as Washington's proxy-army conducting an ambitious regime change operation which coincided with US strategic ambitions.

The CIA run US/Israeli/ISIS alliance.

Second, Zakharova confirms that the western media is not an independent news gathering organization, but a propaganda organ for the foreign policy establishment who dictates what they can and can't say.

They are given the political line and they broadcast it.

The loosening of rules governing the dissemination of domestic propaganda coupled with the extraordinary advances in surveillance technology, create the perfect conditions for the full implementation of an American police state. But what is more concerning, is that the primary levers of state power are no longer controlled by elected officials but by factions within the state whose interests do not coincide with those of the American people. That can only lead to trouble.

At some point Americans are going to get a "War on Domestic Terror" cheered along by the media. More or less the arrest and incarceration of any opposition following the Soviet Bolshevik model.

CanSpeccy , Website Next New Comment October 21, 2017 at 5:11 pm GMT
@utu

On the plus side, everyone now knows that the Anglo-US media from the NY Times to the Economist, from WaPo to the Gruniard, and from the BBC to CNN, the CBC and Weinstein's Hollywood are a worthless bunch of depraved lying bastards.

Thales the Milesian , Next New Comment October 21, 2017 at 5:53 pm GMT
Brennan did this, CIA did that .

So what are you going to do about all this?

Continue to whine?

Continue to keep your head stuck in your ass?

So then continue with your blah, blah, blah, and eat sh*t.

You, disgusting self-elected democratic people/institutions!!!

AB_Anonymous , Next New Comment October 21, 2017 at 5:59 pm GMT
Such a truthful portrait of reality ! The ruling elite is indeed massively corrupt, compromised, and controlled by dark forces. And the police state is already here. For most people, so far, in the form of massive collection of personal data and increasing number of mandatory regulations. But just one or two big false-flags away from progressing into something much worse.

The thing is, no matter how thick the mental cages are, and how carefully they are maintained by the daily massive injections of "certified" truth (via MSM), along with neutralizing or compromising of "troublemakers", the presence of multiple alternative sources in the age of Internet makes people to slip out of these cages one by one, and as the last events show – with acceleration.

It means that there's a fast approaching tipping point after which it'd be impossible for those in power both to keep a nice "civilized" face and to control the "cage-free" population. So, no matter how the next war will be called, it will be the war against the free Internet and free people. That's probably why N. Korean leader has no fear to start one.

Art , Next New Comment October 21, 2017 at 6:18 pm GMT
An aside:

All government secrecy is a curse on mankind.

Trump is releasing the JFK murder files to the public. Kudos!

Let us hope he will follow up with a full 9/11 investigation.

Think Peace -- Art

Ben10 , Next New Comment October 21, 2017 at 6:28 pm GMT

Ben10 , Next New Comment October 21, 2017 at 6:42 pm GMT

Rurik , Next New Comment October 21, 2017 at 7:01 pm GMT

@Miro23

American dominance is very much tied to the dollar's role as the world's reserve currency, and the rest of the world no longer want to fund this bankrupt, warlike state – particularly the Chinese.

indeed, there are many Americans like myself that pray the world will find a way to end the Federal Reserve Note as the world's reserve currency.

As long as this state of affairs persists, the Fiend will reign supreme.

At some point Americans are going to get a "War on Domestic Terror" cheered along by the media. More or less the arrest and incarceration of any opposition following the Soviet Bolshevik model.

under Hillary I would say that would have been a dead certainty

Under Trump, I'm not so sure..

as long as the American people are armed to the teeth, (and we are ; ), then I feel reasonably assured that a full-scale, gulag type of Soviet system is far off, false flag or no false flag, (so long as we have our guns)

Mr. Anon , Next New Comment October 21, 2017 at 7:07 pm GMT
@utu

The objective was to push new administration into the corner from which it could not improve relations with Russia as Trump indicated that he wanted to during the campaign.

Good point. That was probably one of the objectives (and from the point of view of the deep-state, perhaps the most important objective) of the "Russia hacked our democracy" narrative, in addition to the general deligitimization of the Trump administration.

Art , Next New Comment October 21, 2017 at 7:11 pm GMT
And, keep in mind, Washington's Sunni proxies were not a division of the Pentagon; they were entirely a CIA confection: CIA recruited, CIA-armed, CIA-funded and CIA-trained.

Clearly the CIA was making war on Syria. Is secret coercive covert action against sovereign nations Ok? Is it legal?

When was the CIA designated a war making entity – what part of the constitution OK's that? Isn't the congress obliged by constitutional law to declare war? (These are NOT six month actions – they go on and on.)

Are committees of six congressman and six senators, who meet in secret, just avoiding the grave constitutional questions of war? We the People cannot even interrogate these politicians. (These politicians make big money in the secrecy swamp when they leave office.)

Syria is only one of many nations that the CIA is attacking – how many countries are we attacking with drones? Where is congress?

Spying is one thing – covert action is another – covert is wrong – it goes against world order. Every year after 9/11 they say things are worse – give them more money more power and they will make things safe. That is BS!

9/11 has opened the flood gates to the US government attacking at will, the various peoples of this Earth. That is NOT our prerogative.

We are being exceptionally arrogant.

Close the CIA – give the spying to the 16 other agencies.

Think Peace -- Art

Rurik , Next New Comment October 21, 2017 at 7:12 pm GMT
@Ben10

right at 1:47

when he says 'we can't move on as a country'

his butt hurt is so ruefully obvious, that I couldn't help notice a wry smile on my face

that bitch spent millions on the war sow, and now all that mullah won't even wipe his butt hurt

when I see ((guys)) like this raging their inner crybaby angst, I feel really, really good about President Trump

MAGA bitches!

Mr. Anon , Next New Comment October 21, 2017 at 7:15 pm GMT
@jilles dykstra

I am reading Howard Zinn, A Peoples History of the USA

A Peoples History of the USA? Which Peoples?

Tradecraft46 , Next New Comment October 21, 2017 at 8:04 pm GMT
I am SAIS 70 so know the drill and the article is on point.

Here is the dealio. Most reporters are dim and have no experience, and it is real easy to lead them by the nose with promises of better in the future.

Horace J , October 21, 2017 at 8:52 pm GMT
@Grandpa Charlie

Origins of the Korean war are quite complex. There is no simple answer. You may wan to consult the article at this link:

http://original.antiwar.com/justin/2013/07/28/who-really-started-the-korean-war/

And consult the links within. A rich and fascinating history awaits.

See this for why the North Korean invasion, though alarming in D.C. was considered a god-send by many in Washington:

https://www.shmoop.com/korean-war/politics.html

[Oct 11, 2017] The elite schools, and I have taught as a visiting professor at a few of them, such as Princeton and Columbia, replicate the structure and goals of corporations

Notable quotes:
"... The elite schools, and I have taught as a visiting professor at a few of them, such as Princeton and Columbia, replicate the structure and goals of corporations. If you want to even get through a doctoral committee, much less a tenure committee, you must play it really, really safe. You must not challenge the corporate-friendly stance that permeates the institution and is imposed through corporate donations and the dictates of wealthy alumni. Half of the members of most of these trustee boards should be in prison! ..."
"... Speculation in the 17th century in Britain was a crime. Speculators were hanged. And today they run the economy and the country. They have used the capturing of wealth to destroy the intellectual, cultural and artistic life in the country and snuff out our democracy. There is a word for these people: traitors. ..."
Oct 11, 2017 | www.unz.com

Originally from: The elites "have no credibility left" by Chris Hedges

...The elite schools, and I have taught as a visiting professor at a few of them, such as Princeton and Columbia, replicate the structure and goals of corporations. If you want to even get through a doctoral committee, much less a tenure committee, you must play it really, really safe. You must not challenge the corporate-friendly stance that permeates the institution and is imposed through corporate donations and the dictates of wealthy alumni. Half of the members of most of these trustee boards should be in prison!

Speculation in the 17th century in Britain was a crime. Speculators were hanged. And today they run the economy and the country. They have used the capturing of wealth to destroy the intellectual, cultural and artistic life in the country and snuff out our democracy. There is a word for these people: traitors.

[Oct 10, 2017] The US Economy: Explaining Stagnation and Why It Will Persist by Thomas I. Palley

Highly recommended!
The paper is two years old. Looks how his prediction fared. Stagnation is still with us althouth low oil prices lifted all the boats. But this period is coming to the end.
Notable quotes:
"... The financial crisis that erupted in 2008 challenged the foundations of orthodox economic theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by their inability to answer the Queen of England's simple question (November 5th, 2008) to the faculty of the London School of Economics as to why no one foresaw the crisis. ..."
"... Six years later, orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The result has been economic stagnation ..."
"... Perspective # 3 is the progressive position which is rooted in Keynesian economics and can be labeled the "destruction of shared prosperity hypothesis" ..."
"... It is identified with the New Deal wing of the Democratic Party and the labor movement, but it has no standing within major economics departments owing to their suppression of alternatives to economic orthodoxy. ..."
"... However, financial excess is just an element of the crisis and the full explanation is far deeper than just financial market regulatory failure According to the Keynesian destruction of shared prosperity hypothesis, the deep cause is generalized economic policy failure rooted in the flawed neoliberal economic paradigm that was adopted in the late 1970s and early 1980s. ..."
"... globalization reconfigured global production by transferring manufacturing from the U.S. and Europe to emerging market economies. This new global division of labor was then supported by having U.S. consumers serve as the global economy's buyer of first and last resort, which explains the U.S. trade deficit and the global imbalances problem. ..."
"... This new global division of labor inevitably created large trade deficits that also contributed to weakening the aggregate demand (AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015) ..."
"... Finance does this through three channels. First, financial markets have captured control of corporations via enforcement of the shareholder value maximization paradigm of corporate governance. Consequently, corporations now serve financial market interests along with the interests of top management. Second, financial markets in combination with corporations lobby politically for the neoliberal policy mix. ..."
"... Third, financial innovation has facilitated and promoted financial market control of corporations via hostile take-overs, leveraged buyouts and reverse capital distributions. Financial innovation has therefore been key for enforcing Wall Street's construction of the shareholder value maximization paradigm. ..."
"... The second vital role of finance is the support of AD. The neoliberal model gradually undermined the income and demand generation process, creating a growing structural demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation, financial innovation, speculation, and mortgage lending fraud enabled finance to fill the demand gap by lending to consumers and by spurring asset price inflation ..."
"... this AD generation role of finance was an unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did not realize they were creating a demand gap, but their laissez-faire economic ideology triggered financial market developments that coincidentally filled the demand gap. ..."
"... the financial process they unleashed was inevitably unstable and was always destined to hit the wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes eventually fall apart. ..."
"... the long duration of financial excess made the collapse far deeper when it eventually happened. It has also made escaping the after-effects of the financial crisis far more difficult as the economy is now burdened by debts and destroyed credit worthiness. That has deepened the proclivity to economic stagnation. ..."
"... The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift income to wealthier households. ..."
"... That model inevitably produces stagnation because it produces a structural demand shortage via (i) its impact on income distribution, and (ii) via its design of globalization which generates massive trade deficits, wage competition and off-shoring of jobs and investment. In terms of the three-way contest between the government failure hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis, the economic policy debate during the Great Recession was cast as exclusively between government failure and market failure. ..."
"... This attitude to fiscal policy reflects the dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real interest rates and thereby lower growth. According to that view, the US needs long-term fiscal austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the economy, the Obama administration also pushed for major overhaul and tightening of financial sector regulation via the Dodd- Frank Act (2010). ..."
"... The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has been further strengthened by Republicans. ..."
"... The Obama administration was to provide fiscal stimulus to jump start the economy; the Fed would use QE to blow air back into the asset price bubble; the Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by further NAFTA-styled international agreements. This is a near-identical model to that which failed so disastrously. Consequently, stagnation is the logical prognosis. ..."
"... Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However, the US economy has also experienced almost twenty more years of neoliberalism which has left its economic body in worse health than the 1990s. That means the likelihood of delivering another bubble-based boom is low and stagnation tendencies will likely reassert themselves after a shorter and weaker period of expansion ..."
Apr 10, 2015 | www.thomaspalley.com

Abstract

This paper examines the major competing interpretations of the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize and save the economy, but failed to change the underlying neoliberal economic policy model. That failure explains the emergence of stagnation, which is likely to endure

Current economic conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion. However, this time it is unlikely to be followed by financial crisis because of the balance sheet cleaning that took place during the last crisis

Revised 1: This paper has been prepared for inclusion in Gallas, Herr, Hoffer and Scherrer (eds.), Combatting Inequality: The Global North and South , Rouledge, forthcoming in 2015.

The crisis and the resilience of neoliberal economic orthodoxy

The financial crisis that erupted in 2008 challenged the foundations of orthodox economic theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by their inability to answer the Queen of England's simple question (November 5th, 2008) to the faculty of the London School of Economics as to why no one foresaw the crisis.

Six years later, orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The result has been economic stagnation

This paper examines the major competing interpretations of the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize and save the economy, but failed to change the underlying neoliberal economic policy model.

That failure explains the emergence of stagnation in the US economy and stagnation is likely to endure.

Current economic conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion. However, this time it is unlikely to be followed by financial crisis because of the balance sheet cleaning that took place during the last crisis.

Competing explanations of the crisis

The Great Recession, which began in December 2007 and includes the financial crisis of 2008, is the deepest economic downturn in the US since the World War II. The depth of the downturn is captured in Table 1 which shows the decline in GDP and the peak unemployment rate. The recession has the longest duration and the decline in GDP is the largest. The peak unemployment rate was slightly below the peak rate of the recession of 1981-82. However, this ignores the fact that the labor force participation rate fell in the Great Recession (i.e. people left the labor force and were not counted as unemployed) whereas it increased in the recession of 1981-82 (i.e. people entered the labor force and were counted as unemployed).

Table 1. Alternative measures of the depth of US recessions.

... ... ...

Table 2 provides data on the percent change in private sector employment from business cycle peak to trough. The 7.6 percent loss of private sector jobs in the Great Recession dwarfs other recessions, providing another measure of its depth and confirming it extreme nature. 2 Over the course of the 1981-82 labor force participation rose from 63.8 percent to 64.2 percent, thereby likely increasing the unemployment rate. In contrast, over the course of the Great Recession the labor force participation rate fell from 66.0 percent to 65.7 percent, thereby likely decreasing the unemployment. The decrease in the labor force participation rate was even sharper for prime age (25 – 54 years old) workers, indicating that the decrease in the overall participation rate was not due to demographic factors such as an aging population. Instead, it was due to lack of job opportunities, which supports the claim that labor force exit lowered the unemployment rate. Table 2. U.S. private employment cycles, peak to trough. Source: Bureau of labor statistics and author's calculations.

... ... ...

Broadly speaking there exist three competing perspectives on the crisis (Palley, 2012).

For the period 1945 - 1975 the U.S. economy was characterized by a "virtuous circle" Keynesian growth model built on full employment and wage growth tied to productivity growth. This model is illustrated in Figure 1 and its logic was as follows. Productivity growth drove wage growth, which in turn fuelled demand growth and created full employment. That provided an incentive for investment, which drove further productivity growth and supported higher wages. This model held in the U.S. and, subject to local modifications, it also held throughout the global economy - in Western Europe, Canada, Japan, Mexico, Brazil and Argentina.

Figure 1. The 1945 – 75 virtuous circle Keynesian growth model. Wage growth Demand growth Full employment Productivity growth Investment

After 1980 the virtuous circle Keynesian growth model was replaced by a neoliberal growth model. The reasons for the change are a complex mix of economic, political and sociological reasons that are beyond the scope of the current paper. The key changes wrought by the new model were:

  1. Abandonment of the commitment to full employment and the adoption of commitment to very low inflation;
  2. Severing of the link between wages and productivity growth.

Together, these changes created a new economic dynamic. Before 1980, wages were the engine of U.S. demand growth. After 1980, debt and asset price inflation became the engine The new economic model was rooted in neoliberal economic thought. Its principal effects were to weaken the position of workers; strengthen the position of corporations; and unleash financial markets to serve the interests of financial and business elites.

As illustrated in figure 2, the new model can be described as a neoliberal policy box that fences workers in and pressures them from all sides. On the left hand side, the corporate model of globalization put workers in international competition via global production networks that are supported by free trade agreements and capital mobility.

On the right hand side, the "small" government agenda attacked the legitimacy of government and pushed persistently for deregulation regardless of dangers. From below, the labor market flexibility agenda attacked unions and labor market supports such as the minimum wage, unemployment benefits, employment protections, and employee rights. From above, policymakers abandoned the commitment of full employment, a development that was reflected in the rise of inflation targeting and the move toward independent central banks influenced by financial interests.

Figure 2. The neoliberal policy box. Globalization WORKERS Abandonment of full employment Small Government Labor Market Flexibility

Corporate globalization is an especially key feature. Not only did it exert downward inward pressures on economies via import competition and the threat of job off-shoring, it also provided the architecture binding economies together. Thus, globalization reconfigured global production by transferring manufacturing from the U.S. and Europe to emerging market economies. This new global division of labor was then supported by having U.S. consumers serve as the global economy's buyer of first and last resort, which explains the U.S. trade deficit and the global imbalances problem.

This new global division of labor inevitably created large trade deficits that also contributed to weakening the aggregate demand (AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015)

An important feature of the Keynesian hypothesis is that the neoliberal policy box was implemented on a global basis, in both the North and the South. As in the U.S., there was also a structural break in policy regime in both Europe and Latin America. In Latin America , the International Monetary Fund and World Bank played an important role as they used the economic distress created by the 1980s debt crisis to push neoliberal policy

They did so by making financial assistance conditional on adopting such policies. This global diffusion multiplied the impact of the turn to neoliberal economic policy and it explains why the Washington Consensus enforced by the International Monetary Fund and World Bank has been so significant. It also explains why stagnation has taken on a global dimension.

III The role of finance in the neoliberal model

Owing to the extraordinarily deep and damaging nature of the financial crisis of 2008, financial market excess has been a dominant focus of explanations of the Great Recession. Within the neoliberal government failure hypothesis the excess is attributed to ill-advised government intervention and Federal Reserve interest rate policy. Within the neoliberal market failure hypothesis it is attributed to ill-advised deregulation and failure to modernize regulation.

According to the Keynesian destruction of shared prosperity hypothesis neither of those interpretations grasps the true significance of finance. The government failure hypothesis is empirically unsupportable (Palley, 2012a, chapter 6), while the market failure hypothesis has some truth but also misses the true role of finance That role is illustrated in Figure 3 which shows that finance performed two roles in the neoliberal model. The first was to structurally support the neoliberal policy box. The second was to support the AD generation process. These dual roles are central to the process of increasing financial domination of the economy which has been termed financialization (Epstein, 2004, p.3; Krippner, 2004, 2005; Palley, 2013). Figure 3. The role of finance in the neoliberal model. The role of finance: "financialization" Supporting the neoliberal policy box Aggregate demand generation Corporate behavior Economic policy Financial innovation The policy box shown in Figure 2 has four sides.

A true box has six sides and a four sided structure would be prone to structural weakness.

Metaphorically speaking, one role of finance is to provide support on two sides of the neoliberal policy box, as illustrated in Figure 4.

Finance does this through three channels. First, financial markets have captured control of corporations via enforcement of the shareholder value maximization paradigm of corporate governance. Consequently, corporations now serve financial market interests along with the interests of top management. Second, financial markets in combination with corporations lobby politically for the neoliberal policy mix.

The combination of changed corporate behavior and economic policy produces an economic matrix that puts wages under continuous pressure and raises income inequality.

Third, financial innovation has facilitated and promoted financial market control of corporations via hostile take-overs, leveraged buyouts and reverse capital distributions. Financial innovation has therefore been key for enforcing Wall Street's construction of the shareholder value maximization paradigm.

Figure 4. Lifting the lid on the neoliberal policy box. The neoliberal box Corporations Financial markets

The second vital role of finance is the support of AD. The neoliberal model gradually undermined the income and demand generation process, creating a growing structural demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation, financial innovation, speculation, and mortgage lending fraud enabled finance to fill the demand gap by lending to consumers and by spurring asset price inflation

Financialization assisted with this process by changing credit market practices and introducing new credit instruments that made credit more easily and widely available to corporations and households. U.S. consumers in turn filled the global demand gap, along with help from U.S. and European corporations who were shifting manufacturing facilities and investment to the emerging market economies.

Three things should be emphasized.

  1. First, this AD generation role of finance was an unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did not realize they were creating a demand gap, but their laissez-faire economic ideology triggered financial market developments that coincidentally filled the demand gap.
  2. Second, the financial process they unleashed was inevitably unstable and was always destined to hit the wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes eventually fall apart. The problem is it is impossible to predict when they will fail. All that can be known with confidence is that it will eventually fail.
  3. Third, the process went on far longer than anyone expected, which explains why critics of neoliberalism sounded like Cassandras (Palley, 1998, Chapter 12). However, the long duration of financial excess made the collapse far deeper when it eventually happened. It has also made escaping the after-effects of the financial crisis far more difficult as the economy is now burdened by debts and destroyed credit worthiness. That has deepened the proclivity to economic stagnation.
IV Evidence

Evidence regarding the economic effects of the neoliberal model is plentiful and clear Figure 5 shows productivity and average hourly compensation of non-supervisory workers (that is non-managerial employees who are about 80 percent of the workforce). The link with productivity growth was severed almost 40 years ago and hourly compensation has been essentially stagnant since then.

Figure 5.

... ... ...

Table 3 shows data on the distribution of income growth by business cycle expansion across the wealthiest top 10 percent and bottom 90 percent of households. Over the past sixty years there has been a persistent decline in the share of income gains going to the bottom 90 percent of households ranked by wealth. However, in the period 1948 – 1979 the decline was gradual. After 1980 there is a massive structural break and the share of income gains going to the bottom 90 percent collapses. Before 1980, on average the bottom 90 percent received 66 percent of business cycle expansion income gains. After 1980, on average they receive just 8 percent.

Table 3. Distribution of income growth by business cycle expansion across the wealthiest top 10 percent and bottom 90 percent of households. Source: Tcherneva (2014), published in The New York Times , September 26, 2014. '49- '53 '54- '57 '59- '60 '61- '69 '70- '73 '75- '79 '82- '90 '91- '00 '01- '07 '09- '12 Average Pre-1908 Average Post-1980 Top 10% 20% 28 32 33 43 45 80 73 98 116 34% 92% Bottom 90% 80% 72 68 67 57 55 20 27 2 -16 66% 8%

Figure 6 shows the share of total pre-tax income of the top one percent of households ranked by wealth. From the mid-1930s, with the implementation of the New Deal social contract, that share fell from a high of 23.94 percent in 1928 to a low of 8.95 percent in 1978. Thereafter it has steadily risen, reaching 23.5 percent in 2007 which marked the beginning of the Great Recession. It then fell during the Great Recession owing to a recession-induced fall in profits, but has since recovered most of that decline as income distribution has worsened again during the economic recovery. In effect, during the neoliberal era the US economy has retraced its steps, reversing the improvements achieved by the New Deal and post-World War II prosperity, so that the top one percent's share of pre-tax income has returned to pre-Great Depression levels.

Figure 6. US pre-tax income share of top 1 percent. Source: http://inequality.org/income-inequality/. Original source: Thomas Piketty and Emanuel Saez (2003), updated at http://emlab.edu/users/saez.

As argued in Palley (2012a, p. 150-151) there is close relationship between union membership density (i.e. percent of employed workers that are unionized) and income distribution. This is clearly shown in Figure 7 which shows union density and the share of pre-tax income going to the top ten percent of wealthiest households. The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift income to wealthier households.

Share of income going to the top 10 percent 2013: 47.0% Union membership density 11.2% 0% 10% 20% 30% 40% 50% 60% 1917 1923 1929 1935 1941 1947 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 2013 Source: Data on union density follows the composite series found in Historical Statistics of the United States; updated to 2013 from unionstats.com. Income inequality (share of income to top 10%) from Piketty and Saez,

"Income Inequality in the United States, 1913-1998, Quarterly Journal of Economics , 118(1), 2003, 1-39. Updated Figure 7. Union membership and the share of income going to the top ten percent of wealthiest households, 1917 – 2013. Source: Mishel, Gould and Bivens (2015). Table 4 provides data on the evolution of the U.S. goods and services trade balance as a share of GDP by business cycle peak. Comparison across peaks controls for the effect of the business cycle. The data show through to the late 1970s U.S. trade was roughly in balance, but after 1980 it swung to massive deficit and the deficits increased each business cycle. These deficits were the inevitable product of the neoliberal model of globalization (Palley, 2015) and they undermined the AD generation process in accordance with the Keynesian hypothesis.

Table 4. The U.S. goods & services trade deficit/surplus by business cycle peaks, 1960 – 2007. Sources: Economic Report of the President, 2009 and author's calculations. Business cycle peak year Trade balance ($ millions) GDP ($ billions) Trade balance/ GDP (%) 1960 3,508 526.4 0.7 1969 91 984.6 0.0 1973 1,900 1,382.7 0.1 1980 -25,500 2,789.5 -0.9 1981 -28,023 3,128.4 -0.9 1990 -111,037 5,803.1 -1.9 2001 -429,519 10,128.0 -4.2 2007 -819,373 13,807.5 -5.9

Finally, Figure 8 shows total domestic debt relative to GDP and growth. This Figure is highly supportive of the Keynesian interpretation of the role of finance. During the neoliberal era real GDP growth has actually slowed but debt growth has exploded. The reason is the neoliberal model did nothing to increase growth, but it needed faster debt growth to fill the demand gap created by the model's worsening of income distribution and creation of large trade deficits. Debt growth supported debt-financed consumer spending and it supported asset price inflation that enabled borrowing which filled the demand gap caused by the neoliberal model. Figure 8. Total domestic debt and growth (1952-2007). Source: Grantham, 2010.

V The debate about the causes of the crisis: why it matters

The importance of the debate about the causes of the crisis is that each perspective recommends its own different policy response. For hardcore neoliberal government failure proponents the recommended policy response is to double-down on the policies described by the neoliberal policy box and further deregulate markets; to deepen central bank independence and the commitment to low inflation via strict rules based monetary policy; and to further shrink government and impose fiscal austerity to deal with increased government debt produced by the crisis For softcore neoliberal market failure proponents the recommended policy response is to tighten financial regulation but continue with all other aspects of the existing neoliberal policy paradigm. That means continued support for corporate globalization, socalled labor market flexibility, low inflation targeting, and fiscal austerity in the long term. Additionally, there is need for temporary large-scale fiscal and monetary stimulus to combat the deep recession caused by the financial crisis.

However, once the economy has recovered, policy should continue with the neoliberal model For proponents of the destruction of shared prosperity hypothesis the policy response is fundamentally different. The fundamental need is to overthrow the neoliberal paradigm and replace it with a "structural Keynesian" paradigm. That involves repacking the policy box as illustrated in Figure 9.

The critical step is to take workers out of the box and put corporations and financial markets in so that they are made to serve a broader public interest. The key elements are to replace corporate globalization with managed globalization that blocks race to the bottom trade dynamics and stabilizes global financial markets; restore a commitment to full employment; replace the neoliberal anti-government agenda with a social democratic government agenda; and replace the neoliberal labor market flexibility with a solidarity based labor market agenda.

The goals are restoration of full employment and restoration of a solid link between wage and productivity growth.

Figure 9. The structural Keynesian box Corporations & Managed Financial Markets Globalization Full Employment Social Democratic Government Solidarity Labor Markets

Lastly, since the neoliberal model was adopted as part of a new global economic order, there is also need to recalibrate the global economy. This is where the issue of "global rebalancing" enters and emerging market economies need to shift away from export-led growth strategies to domestic demand-led strategies. That poses huge challenges for many emerging market economies because they have configured their growth strategies around export-led growth whereby they sell to U.S. consumers.

VI From crisis to stagnation: the failure to change

Massive policy interventions, unequalled in the post-war era, stopped the Great Recession from spiraling into a second Great Depression. The domestic economic interventions included the 2008 Troubled Asset Relief Program (TARP) that bailed out the financial sector via government purchases of assets and equity from financial institutions; the 2009 American Recovery and Reinvestment Act (ARRA) that provided approximately $800 billion of fiscal stimulus, consisting of approximately $550 billion of government spending and $250 billion of tax cuts; the Federal Reserve lowering its interest target to near-zero (0 - 0.25 percent); and the Federal Reserve engaging in quantitative easing (QE) transactions that involve it purchasing government and private sector securities. At the international level, in 2008 the Federal Reserve established a temporary $620 billion foreign exchange (FX) swap facility with foreign central banks.

That facility provided the global economy with dollar balances, thereby preventing a dollar liquidity shortage from triggering a wave of global default on short-term dollar loans that the financial system was unwilling to roll-over because of panic.3

Additionally, there was unprecedented globally coordinated fiscal stimulus arranged via the G-20 mechanism. 3

The FX swaps with foreign central banks have been criticized as being a bail-out for foreign economies. In fact, they saved the US financial system which would have been pulled down by financial collapse outside

Despite their scale, these interventions did not stop the recession from being the deepest since 1945, and nor did they stop the onset of stagnation. Table 5 shows how GDP growth has failed to recover since the end of the Great Recession, averaging just 2.1 percent for the five year period from 2010 – 2014. Furthermore, that period includes the rebound year of 2010 when the economy rebounded from its massive slump owing to the extraordinary fiscal and monetary stimulus measures that were put in place

Table 5. U.S. GDP growth. Source: Statistical Annex of the European Union, Autumn 2014 and author's calculations.

The growth rate for 2014 is that estimated in October 2014.

1961 - 1970 1971 - 1980 1981 - 1990 1991 - 2000 2001 - 2007 2008 - 2009 2010 - 2014

4.2% 3.2% 3.3% 3.5% 2.5% -1.6% 2.1%

Table 6 shows employment creation in the five years after the end of recessions, which provides another window on stagnation. The job creation numbers show that the neoliberal model was already slowing in the 1990s with the first episode of "jobless the US.

Many foreign banks operating in the US had acquired US assets financed with short-term dollar borrowings. When the US money market froze in 2008 they could not roll-over these loans in accordance with normal practice. That threatened massive default by these banks within the US financial system, which would have pulled down the entire global financial system.

The Federal Reserve could not lend directly to these foreign banks and their governing central banks lacked adequate dollar liquidity to fill the financing gap. The solution was to lend dollars to foreign central banks, which then made dollar loans to foreign banks in need of dollar roll-over short-term financing. recovery".

It actually ground to stagnation in the 2001 – 2007 period, but this was masked by the house price bubble and the false prosperity it created. Stagnation has persisted after the Great Recession, but the economic distress caused by the recession has finally triggered awareness of stagnation among elites economists. In a sense, the Great Recession called out the obvious, just as did the little boy in the Hans Anderson story about the emperor's new suit

Table 6. U.S. private sector employment creation in the five year period after the end of recessions for six business cycles with extended expansions. Source: Bureau of labor statistics and author's calculations. * = January 1980 the beginning of the next recession Recession end date Employment at recession end date (millions) Employment five years later (millions) Percent growth in employment Feb 1961 45.0 52.2 16.0% Mar 1975 61.9 74.6* 20.5% Nov 1982 72.8 86.1 18.3% March 1991 90.1 99.5 10.4% Nov 2001 109.8 115.0 4.7% June 2009 108.4 117.1 8.0% The persistence of stagnation after the Great Recession raises the question "why"? The answer is policy has done nothing to change the structure of the underlying neoliberal economic model.

That model inevitably produces stagnation because it produces a structural demand shortage via (i) its impact on income distribution, and (ii) via its design of globalization which generates massive trade deficits, wage competition and off-shoring of jobs and investment. In terms of the three-way contest between the government failure hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis, the economic policy debate during the Great Recession was cast as exclusively between government failure and market failure.

With the Democrats controlling the Congress and Presidency after the 2008 election, the market failure hypothesis won out and has framed policy since then. According to the hypothesis, the financial crisis caused an exceptionally deep recession that required exceptionally large monetary and fiscal stimulus to counter it and restore normalcy. Additionally, the market failure hypothesis recommends restoring and renovating financial regulation, but other than that the neoliberal paradigm is appropriate and should be deepened In accordance with this thinking, the in-coming Obama administration affirmed existing efforts to save the system and prevent a downward spiral by supporting the Bush administration's TARP, the Federal Reserve's first round of QE (November/December 2008) that provided market liquidity, and the Federal Reserve's FX swap agreement with foreign central banks

Thereafter, the Obama administration worked to reflate the economy via passage of the ARRA (2009) which provided significant fiscal stimulus. With the failure to deliver a V-shaped recovery, candidate Obama became even more vocal about fiscal stimulus However, reflecting its softcore neoliberal inclinations, the Obama administration then became much less so when it took office. Thus, the winners of the internal debate about fiscal policy in the first days of the Obama administration were those wanting more modest fiscal stimulus.4 Furthermore, its analytical frame was one of temporary stimulus with the 4 Since 2009 there has been some evolution of policy positions characterized by a shift to stronger support for fiscal stimulus. This has been especially marked in Larry Summers, who was the Obama administration's goal of long-term fiscal consolidation, which is softcore neoliberal speak for fiscal austerity Seen in the above light, after the passage of ARRA (2009), the fiscal policy divide between the Obama administration and hardcore neoliberal Republicans was about the speed and conditions under which fiscal austerity should be restored.

This attitude to fiscal policy reflects the dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real interest rates and thereby lower growth. According to that view, the US needs long-term fiscal austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the economy, the Obama administration also pushed for major overhaul and tightening of financial sector regulation via the Dodd- Frank Act (2010).

That accorded with the market failure hypothesis's claim about the economic crisis and Great Recession being caused by financial excess permitted by the combination of excessive deregulation, lax regulation and failure to modernize regulation Finally, and again in accordance with the logic of the market failure hypothesis, the Obama administration has pushed ahead with doubling-down and further entrenching the neoliberal policy box. This is most visible in its approach to globalization. In 2010, free trade agreements modelled after NAFTA were signed with South Korea, Colombia and Panama. The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), two mega-agreements negotiated in secrecy and apparently bearing chief economic adviser when it took office. This shift has become a way of rewriting history by erasing the memory of initial positions. That is also true of the IMF which in 2010-2011 was a robust supporter of fiscal consolidation in Europe. similar hallmarks to prior trade agreements, are also being pushed by the Obama administration

The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has been further strengthened by Republicans.

Thus, in accordance with their point of view, Republicans have persistently pushed the government failure hypothesis by directing the policy conversation to excessive regulation and easy monetary policy as the causes of the crisis. Consequently, they have consistently opposed strengthened financial regulation and demands for fiscal stimulus.

At the same time, they have joined with softcore neoliberal Democrats regarding doubling-down on neoliberal box policies, particularly as regards trade and globalization Paradoxically, the failure to change the overall economic model becomes most visible by analyzing the policies of the Federal Reserve, which have changed the most dramatically via the introduction of QE. The initial round of QE (QE1) was followed by QE2 in November 2010 and QE3 in September 2012, with the Fed shifting from providing short-term emergency liquidity to buying private sector financial assets.

The goal was to bid up prices of longer term bonds and other securities, thereby lowering interest rates on longer-term financing and encouraging investors to buy equities and other riskier financial assets. The Fed's reasoning was lower long-term rates would stimulate the economy, and higher financial asset prices would trigger a positive wealth effect on consumption spending. This makes clear the architecture of policy.

The Obama administration was to provide fiscal stimulus to jump start the economy; the Fed would use QE to blow air back into the asset price bubble; the Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by further NAFTA-styled international agreements. This is a near-identical model to that which failed so disastrously. Consequently, stagnation is the logical prognosis.

VII Déjà vu all over again: back to the 1990s but with a weaker economy

The exclusion of the destruction of shared prosperity hypothesis, combined with the joint triumph of the market failure and government failure hypotheses, means the underlying economic model that produced the Great Recession remains essentially unchanged. That failure to change explains stagnation. It also explains why current conditions smack of "déjà vu all over again" with the US economy in 2014-15 appearing to have returned to conditions reminiscent of the mid-1990s.

Just as the 1990s failed to deliver durable prosperity, so too current optimistic conditions will prove unsustainable absent deeper change The déjà vu similarities are evident

All of these features mean both policy context and policy design look a lot like the mid-1990s. The Obama administration saved the system but did not change it

Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However, the US economy has also experienced almost twenty more years of neoliberalism which has left its economic body in worse health than the 1990s. That means the likelihood of delivering another bubble-based boom is low and stagnation tendencies will likely reassert themselves after a shorter and weaker period of expansion

This structurally weakened state of the US economy is evident in the further worsening of income inequality that has occurred during the Great Recession and subsequent slow recovery.

... ... ...

Thomas I. Palley, Senior Economic Policy Advisor, AFL-CIO Washington, D.C. mail@thomaspalley.com

[Oct 09, 2017] Instead of drawing the best and the brightest, or being a place where scholarship was valued, where students were taught critical thinking skills, the University I attended was nothing more than an expensive diploma mill for the children of the wealthy

Chris Hedges published this book eight years ago and the things he predicted have sadly been realized
Notable quotes:
"... his screed is a liberating tonic against the crazy-making double-speak and the lies Americans are sold by our country's elite in order to distract us from the true threat and nature of the Corporate State, from the cult of celebrity, to how our nation's Universities have been hijacked to serve the interests, not of the public, but of our corporate overlords. It explains the self-same conditions in all aspects of our society and culture that we now must face, the ever-shrinking flame of enlightenment being exchanged for the illusory shadows on a cave wall. ..."
"... He fearlessly and incisively calls us out on the obvious farce our democracy has become, how we got here, and highlights the rapidly closing window in which we have to do something to correct it. It is a revelation, and yet he merely states the obvious. The empire has no clothes. ..."
"... One of the most powerful aspects of this book was in regard to how our Universities are run these days. I may be in the minority, but I experienced a life-changing disillusionment when I gained entrance to a prestigious "elite" University. Instead of drawing the best and the brightest, or being a place where scholarship was valued, where students were taught critical thinking skills, the University I attended was nothing more than an expensive diploma mill for the children of the wealthy. In the eyes of the University, students were not minds to be empowered and developed, but walking dollar signs. ..."
"... Instead of critical thinking, students were taught to OBEY, not to question authority, and then handed a piece of paper admitting them to the ruling class that is destroying America without a moral compass. Selfishness, deceit, disregard for the common good, and a win-at-all-costs attitude were rewarded. Empathy, curiosity, dissent, and an honest, intellectually rigorous evaluation of ourselves and our world were punished. Obviously I am not the only one to whom this was cause to fear for the future of our country. ..."
Oct 09, 2017 | www.amazon.com

H. I. on May 13, 2011

This Book Explains EVERYTHING!!!!!

Hedges cogently and systematically dismantles the most pernicious cultural delusions of our era and lays bare the pitiful truths that they attempt to mask. This book is a deprogramming manual that trims away the folly and noise from our troubled society so that the reader can focus on the most pressing matters of our time.

Despite the dark reality Hedges excavates, his screed is a liberating tonic against the crazy-making double-speak and the lies Americans are sold by our country's elite in order to distract us from the true threat and nature of the Corporate State, from the cult of celebrity, to how our nation's Universities have been hijacked to serve the interests, not of the public, but of our corporate overlords. It explains the self-same conditions in all aspects of our society and culture that we now must face, the ever-shrinking flame of enlightenment being exchanged for the illusory shadows on a cave wall.

As a twenty-something caught in the death-throes of American Empire and culture, I have struggled to anticipate where our country and our world are heading, why, and what sort of life I can expect to build for myself. Hedges presents the reader with the depressing, yet undeniable truth of the forces that have coalesced to shape the world in which we now find ourselves. The light he casts is searing and relentless. He fearlessly and incisively calls us out on the obvious farce our democracy has become, how we got here, and highlights the rapidly closing window in which we have to do something to correct it. It is a revelation, and yet he merely states the obvious. The empire has no clothes.

One of the most powerful aspects of this book was in regard to how our Universities are run these days. I may be in the minority, but I experienced a life-changing disillusionment when I gained entrance to a prestigious "elite" University. Instead of drawing the best and the brightest, or being a place where scholarship was valued, where students were taught critical thinking skills, the University I attended was nothing more than an expensive diploma mill for the children of the wealthy. In the eyes of the University, students were not minds to be empowered and developed, but walking dollar signs.

Instead of critical thinking, students were taught to OBEY, not to question authority, and then handed a piece of paper admitting them to the ruling class that is destroying America without a moral compass. Selfishness, deceit, disregard for the common good, and a win-at-all-costs attitude were rewarded. Empathy, curiosity, dissent, and an honest, intellectually rigorous evaluation of ourselves and our world were punished. Obviously I am not the only one to whom this was cause to fear for the future of our country.

Five stars is not enough. Ever since I began reading Empire of Illusion, I have insisted friends and family pick up a copy, too. Everyone in America should read this incredibly important book.

The truth shall set us free.

[Oct 06, 2017] Prof. Philip Mirowski keynote for Life and Debt conference

Highly recommended!
Among interesting ideas that Mirkowski presented in this lecture are "privatization of science" -- when well paid intellectual prostitutes produce the reuslt which are expected by their handlers. the other is his thought on the difference between neoclassical economics and neoliberalism. Neoliberalism believes in state intervention and this intervention should take the form of enforcing market on all spheres of human society.
Another interesting idea that neoliberalism in many cases doe not need the success of its ideas. The failure can also be exploited for enforcing "more market" on the society.
In other words market fundamentalism has all features of civil religion and like in Middle Ages it is enforced from above. heretics are not burned at the stake but simply ostracized.
Notable quotes:
"... how it is that science came to be subordinate to economics and the very future of nature to be contingent upon the market. ..."
"... As a leading exponent of the Institutional school, he has published formal treatments of financial markets that update Minsky's 'financial instability hypothesis' for the world of computerised derivative trading. ..."
Aug 18, 2013 | www.youtube.com

Life and Debt: Living through the Financialisation of the Biosphere

How can it be that the climate crisis, the biodiversity crisis and the deepest financial crisis since 1930s have done so little to undermine the supremacy of orthodox economics?

The lecture will preview material from Mirowski's new book: Never Lt a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown (Verso, 2013).

In this lecture, Professor Mirowski responds to the question of how it is that science came to be subordinate to economics and the very future of nature to be contingent upon the market. Charting the contradictions of the contemporary political landscape, he notes that science denialism, markets for pollution permits and proposals for geo-engineering can all be understood as political strategies designed to neutralize the impact of environmentalism, as they all originated in the network of corporate-sponsored think-tanks that have made neoliberal accounts of society, politics and the economy so prevalent that even the most profound crises are unable to shake their grip on the political imagination.

For those of us who are still paying attention, the task of constructing an alternative politics of science and markets is a vital one.

Philip Mirowski is Carl E. Koch Professor at the University of Notre Dame, Indiana. His most famous book, More Heat Than Light: Economics as Social Physics (1989) established his reputation as a formidable critic of the scientific status of neoclassical economics. His Machine Dreams: Economics becomes a Cyborg Science (2002) presents a history of the Cold War consolidation of American economic orthodoxy in the same intellectual milieu that produced systems theory, the digital computer, the atomic bomb, the strategy of Mutually Assured Destruction, and the 'think tank'. The Road from Mont Pelerin: the Making of the Neoliberal Thought Collective (with Dieter Plewhe, 2009), drawn from the archives of the Mont Pelerin Society and the Chicago School, presents a scholarly history of neoliberalism: the political movement initiated by Friedrich Hayek and Milton Friedman in the 1940s, which has since become the world's dominant philosophy of government.

As a leading exponent of the Institutional school, he has published formal treatments of financial markets that update Minsky's 'financial instability hypothesis' for the world of computerised derivative trading.

This lecture is presented by the UTS Cosmopolitan Civil Societies Research Centre and the Australian Working Group on Financialisation at the University of Sydney.

[Oct 06, 2017] How Economists Turned Corporations into Predators

Highly recommended!
The idea the a scientist can be a gangster was probably first presented by Sir Arthur Conan Doyle in his famous Sherlock Holmes detective stories. Neoliberalism just made this a reality. Mass production of "scientific gangsters" is an immanent feature of neoliberalism.
Notable quotes:
"... By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website ..."
"... The Idea That Businesses Exist Solely to Enrich Shareholders Is Harmful Nonsense ..."
"... Neil Fligstein wrote a good book awhile back called The Transformation of Corporate Control that shows how most large manufacturing companies were initially run by engineers, then sales people, then finance people (as corporations came to be seen as bundles of assets as opposed to businesses). I think this transformation paralleled the rise of neoclassical economics. So, not so much "chicken-and-egg" as "class war." In Germany, at least until recently, I believe CEO's of manufacturing firms were still disproportionately engineers. ..."
"... a group of hedge fund activists can suck the value that you've created right out, driving your company down and making you worse off and the company financially fragile ..."
"... That means transforming business education, including the replacement of agency theory with innovation theory ..."
"... since gigantism is the norm, rather than family run farms in a mostly agrarian economy such failures are catastrophic. The linkage between these elephants tends to create systemic risk. Previously, failure was small and isolated. ..."
"... Welcome to our wonderful new world of infinite mutual vulnerability! Risk On! Nuclear weapons, Equifax, Googleamazon, NSApanopticon, FIRE, hacking, crapification The Soviet Union vanished as an entity, many starved, but the mopes there at least still knew how to raise up edible crops and live on "less" and maybe do better collective response to that sharp peak on the entropy curve. Wonder how things might play out exceptionally, here in the Empire? ..."
"... It should be noted that Michael Jensen of HBS, one of the originators of the `maximize shareholder value' of corporate governance, is on some short lists for this year's not-exactly-the-Nobel Prize in Economics. ..."
Oct 06, 2017 | www.nakedcapitalism.com

By Lynn Parramore, Senior Research Analyst at the Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website

The Idea That Businesses Exist Solely to Enrich Shareholders Is Harmful Nonsense

In a new INET paper featured in the Financial Times , economist William Lazonick lays out a theory about how corporations can work for everyone – not just a few executives and Wall Streeters. He challenges a set of controversial ideas that became gospel in business schools and the mainstream media starting in the 1980s. He sat down with INET's Lynn Parramore to discuss.

Lynn Parramore: Since the 1980s, business schools have touted "agency theory," a controversial set of ideas meant to explain how corporations best operate. Proponents say that you run a business with the goal of channeling money to shareholders instead of, say, creating great products or making any efforts at socially responsible actions such as taking account of climate change. Many now take this view as gospel, even though no less a business titan than Jack Welch, former CEO of GE, called the notion that a company should be run to maximize shareholder value "the dumbest idea in the world." Why did Welch say that?

William Lazonick: Welch made that statement in a 2009 interview , just ahead of the news that GE had lost its S&P Triple-A rating in the midst of the financial crisis. He explained that, "shareholder value is a result, not a strategy" and that a company's "main constituencies are your employees, your customers and your products." During his tenure as GE CEO from 1981 to 2001, Welch had an obsession with increasing the company's stock price and hitting quarterly earnings-per-share targets, but he also understood that revenues come when your company generates innovative products. He knew that the employees' skills and efforts enable the company to develop those products and sell them.

If a publicly-listed corporation succeeds in creating innovative goods or services, then shareholders stand to gain from dividend payments if they hold shares or if they sell at a higher price. But where does the company's value actually come from? It comes from employees who use their collective and cumulative learning to satisfy customers with great products. It follows that these employees are the ones who should be rewarded when the business is a success. We've become blinded to this simple, obvious logic.

LP: What have these academic theorists missed about how companies really operate and perform? How have their views impacted our economy and society?

WL: As I show in my new INET paper " Innovative Enterprise Solves the Agency Problem ," agency theorists don't have a theory of innovative enterprise. That's strange, since they are talking about how companies succeed.

They believe that to be efficient, business corporations should be run to "maximize shareholder value." But as I have argued in another recent INET paper , public shareholders at a company like GE are not investors in the company's productive capabilities.

LP: Wait, as a stockholder I'm not an investor in the company's capabilities?

WL: When you buy shares of a stock, you are not creating value for the company -- you're just a saver who buys shares outstanding on the stock market for the sake of a yield on your financial portfolio. Public shareholders are value extractors , not value creators.

By touting public shareholders as a corporation's value creators, agency theorists lay the groundwork for some very harmful activities. They legitimize "hedge fund activists," for example. These are aggressive corporate predators who buy shares of a company on the stock market and then use the power bestowed upon them by the ill-conceived U.S. proxy voting system, endorsed by the Securities and Exchange Commission (SEC), to demand that the corporation inflate profits by cutting costs. That often means mass layoffs and depressed incomes for anybody who remains. In an industry like pharmaceuticals , the activists also press for extortionate product price increases. The higher profits tend to boost stock prices for the activists and other shareholders if they sell their shares on the market.

LP: So the hedge fund activists are extracting value from a corporation instead of creating it, and yet they are the ones who get enriched.

WL: Right. Agency theory aids and abets this value extraction by advocating, in the name of "maximizing shareholder value," massive distributions to shareholders in the form of dividends for holding shares as well as stock buybacks that you hear about, which give manipulative boosts to stock prices. Activists get rich when they sell the shares. The people who created the value -- the employees -- often get poorer.

###p"downsize-and-distribute" -- something that corporations have been doing since the 1980s, which has resulted in extreme concentration of income among the richest households and the erosion of middle-class employment opportunities.

LP: You've called stock buybacks -- what happens when a company buys back its own shares from the marketplace, often to manipulate the stock price upwards -- the "legalized looting of the U.S. business corporation." What's the problem with this practice?

WL: If you buy shares in Apple, for example, you can get a dividend for holding shares and, possibly, a capital gain when you sell the shares. Since 2012, when Apple made its first dividend payment since 1996, the company has shelled out $57.4 billion as dividends, equivalent to over 22 percent of net income. That's fine. But the company has also spent $157.9 billion on stock buybacks, equal to 62 percent of net income.

Yet the only time in its history that Apple ever raised funds on the public stock market was in 1980, when it collected $97 million in its initial public offering. How can a corporation return capital to parties that never supplied it with capital? It's a very misleading concept.

The vast majority of people who hold Apple's publicly-listed shares have simply bought outstanding shares on the stock market. They have contributed nothing to Apple's value-creating capabilities. That includes veteran corporate raider Carl Icahn, who raked in $2 billion by holding $3.6 billion in Apple shares for about 32 months, while using his influence to encourage Apple to do $80.3 billion in buybacks in 2014-2015, the largest repurchases ever. Over this period, Apple, the most cash-rich company in history, increased its debt by $47.6 billion to do buybacks so that it would not have to repatriate its offshore profits, sheltered from U.S. corporate taxes.

There are many ways in which the company could have returned its profits to employees and taxpayers -- the real value creators -- that are consistent with an innovative business model. Instead, in doing massive buybacks, Apple's board (which includes former Vice President Al Gore) has endorsed legalized looting. The SEC bears a lot of blame. It's supposed to protect investors and make sure financial markets are free of manipulation. But back in 1982, the SEC bought into agency theory under Reagan and came up with a rule that gives corporate executives a "safe harbor" against charges of stock-price manipulation when they do billions of dollars of buybacks for the sole purpose of manipulating their company's stock price.

LP: But don't shareholders deserve some of the profits as part owners of the corporation?

WL: Let's say you buy stock in General Motors. You are just buying a share that is outstanding on the market. You are contributing nothing to the company. And you will only buy the shares because the stock market is highly liquid, enabling you to easily sell some or all of the shares at any moment that you so choose.

In contrast, people who work for General Motors supply skill and effort to generate the company's innovative products. They are making productive contributions with expectations that, if the innovative strategy is successful, they will share in the gains -- a bigger paycheck, employment security, a promotion. In providing their labor services, these employees are the real value creators whose economic futures are at risk.

LP: This is really different from what a lot of us have been taught to believe. An employee gets a paycheck for showing up at work -- there's your reward. When we take a job, we probably don't expect management to see us as risk-takers entitled to share in the profits unless we're pretty high up.

WL: If you work for a company, even if its innovative strategy is a big success, you run a big risk because under the current regime of "maximizing shareholder value" a group of hedge fund activists can suck the value that you've created right out, driving your company down and making you worse off and the company financially fragile. And they are not the only predators you have to deal with. Incentivized with huge amounts of stock-based pay, senior corporate executives will, and often do, extract value from the company for their own personal gain -- at your expense. As Professor Jang-Sup Shin and I argue in a forthcoming book, senior executives often become value-extracting insiders. And they open the corporate coffers to hedge fund activists, the value-extracting outsiders. Large institutional investors can use their proxy votes to support corporate raids, acting as value-extracting enablers.

You put in your ideas, knowledge, time, and effort to make the company a huge success, and still you may get laid off or find your paycheck shrinking. The losers are not only the mass of corporate employees -- if you're a taxpayer, your money provides the business corporation with physical infrastructure, like roads and bridges, and human knowledge, like scientific discoveries, that it needs to innovate and profit. Senior corporate executives are constantly complaining that they need lower corporate taxes in order to compete, when what they really want is more cash to distribute to shareholders and boost stock prices. In that system, they win but the rest of us lose .

LP: Some academics say that hedge fund activism is great because it makes a company run better and produce higher profits. Others say, "No, Wall Streeters shouldn't have more say than executives who know better how to run the company." You say that both of these camps have got it wrong. How so?

WL: A company has to be run by executive insiders, and in order to produce innovation these executives have got to do three things:

First you need a resource-allocation strategy that, in the face of uncertainty, seeks to generate high-quality, low-cost products. Second, you need to implement that strategy through training, retaining, motivating, and rewarding employees, upon whom the development and utilization of the organization's productive capabilities depend. Third, you have to mobilize and leverage the company's cash flow to support the innovative strategy. But under the sway of the "maximizing shareholder value" idea, many senior corporate executives have been unwilling, and often unable, to perform these value-creating functions. Agency theorists have got it so backwards that they actually celebrate the virtues of " the value extracting CEO ." How strange is that?

Massive stock buybacks is where the incentives of corporate executives who extract value align with the interests of hedge fund activists who also want to suck value from a corporation. When they promote this kind of alliance, agency theorists have in effect served as academic agents of activist aggression. Lacking a theory of the value-creating firm, or what I call a "theory of innovative enterprise," agency theorists cannot imagine what an executive who creates value actually does. They don't see that it's crucial to align executives' interests with the value-creating investment requirements of the organizations over which they exercise strategic control. This intellectual deficit is not unique to agency theorists; it is inherent in their training in neoclassical economics .

LP: So if shareholders and executives are too often just looting companies to enrich themselves – "value extraction," as you put it – and not caring about long-term success, who is in a better position to decide how to run them, where to allocate resources and so on?

WL: We need to redesign corporate-governance institutions to promote the interests of American households as workers and taxpayers. Because of technological, market, or competitive uncertainties, workers take the risk that the application of their skills and the expenditure of their efforts will be in vain. In financing investments in infrastructure and knowledge, taxpayers make productive capabilities available to business enterprises, but with no guaranteed return on those investments.

These stakeholders need to have representation on corporate boards of directors. Predators, including self-serving corporate executives and greed-driven shareholder activists, should certainly not have representation on corporate boards.

LP: Sounds like we've lost sight of what a business needs to do to be successful in the long run, and it's costing everybody except a handful of senior executives, hedge fund managers, and Wall Street bankers. How would your "innovation theory" help companies run better and make for a healthier economy and society?

WL: Major corporations are key to the operation and performance of the economy. So we need a revolution in corporate governance to get us back on track to stable and equitable economic growth. Besides changing board representation, I would change the incentives for top executives so that they are rewarded for allocating corporate resources to value creation. Senior executives should gain along with the rest of the organization when the corporation is successful in generating competitive products while sharing the gains with workers and taxpayers.

Innovation theory calls for changing the mindsets and skill sets of senior executives. That means transforming business education, including the replacement of agency theory with innovation theory. That also means changing the career paths through which corporate personnel can rise to positions of strategic control, so that leaders who create value get rewarded and those who extract it are disfavored. At the institutional level, it would be great to see the SEC, as the regulator of financial markets, take a giant step in supporting value creation by banning stock buybacks whose purpose it is to manipulate stock prices.

To get from here to there, we have to replace nonsense with common sense in our understanding of how business enterprises operate and perform.

Enquiring Mind , October 6, 2017 at 10:44 am

Owners come first!
That was the slogan of our former board chair. He didn't disclose to the employees that his compensation was influenced mightily by how big the net income was. He did tell the employees that they were well down the hierarchy, after Owners (capital O) and then vendors and then customers. His former employees deserted in droves.

RepubAnon , October 6, 2017 at 12:14 pm

I'd say that maximizing long-term shareholder value is a great idea the problem is, as is so often the case these days, short-term thinking.

Driving away a company's best employees makes that quarter's numbers look better, but destroys long-term value. Same thing for so many other short-term, "I'll be gone, you'll be gone" strategies.

One step to fixing things – change the definition of long-term capital gains from the current 1 year to, say, 5 years. This "one simple trick" would fix everything from the carried interest loophole to the abuses inherent in the current Wall Street gambling mentality.

It won't happen, of course, but it'd be nice.

Tim , October 6, 2017 at 2:21 pm

We can talk about what is best in theory, but reality is just that, shareholders come first.

They control the board and the CEO and the CEO institutes the will of the shareholders down into the business entities, determining the level of reinvestment in the business units and the level of employee compensation. That will continue to be the case until the company goes bankrupt at which point shareholders are entitled to nothing.

I agree with others that Jack Welch is saying what he is saying after the fact. Way too easy to do.

a different chris , October 6, 2017 at 10:47 am

>Welch had an obsession with increasing the company's stock price and hitting quarterly earnings-per-share targets, but he also understood

Yeah so he talks a good game but when he had the reins – one of the most powerful men in the world meekly (ok, that's a hilarious adjective when applied to Jack Welsh) followed the herd. Or more accurately, found out where the herd was heading and got out in front of it. The true sign of modern "leadership".

RepubAnon , October 6, 2017 at 12:20 pm

Folks at GE back in the day nicknamed him "Neutron Jack" – if he visited a site, all the employees disappeared, leaving only the buildings standing

digi_owl , October 6, 2017 at 1:06 pm

Or more accurately, found out where the herd was heading and got out in front of it. The true sign of modern "leadership".

Reminds me of something i have read, supposedly a quite from some politician or other, going to the tune of "i need to find out where the mob is going, so i can lead them there".

Left in Wisconsin , October 6, 2017 at 1:06 pm

Welch's primary business strategy at GE was to exit every product market in which GE's market share was not in the top two in the industry (selling them off or closing them down) and reallocate resources to industries where GE was market dominant, often buying up the competition rather than truly investing in innovation. A truly awful human being.

Synoia , October 6, 2017 at 11:18 am

As I personally have always believed, Employees have more invested in their employers than shareholders. Shareholders can sell quickly and have no loyalty. Employees do not enjoy such a liquid "jobs market."

There also seems to be a turning point in companies, where they change the perception of the customers form a group to be treasured, to a group who are to b exploited – change the relationship so the customers become "marks."

I also believe there should be an almost automatic "break -up" provision for companies who reach a certain market share.

Finally there should be one definition of income, and it should include Wages, Dividends, and Capital Gains.

Vatch , October 6, 2017 at 11:27 am

there should be an almost automatic "break -up" provision for companies who reach a certain market share.

Yes, anti-trust enforcement would be nice. Hypothetical President Sanders might actually do that. Real and hypothetical Presidents Bush, Obama, Romney, B. Clinton, H. Clinton, and Trump have other priorities.

readerOfTeaLeaves , October 6, 2017 at 12:15 pm

Sen Bernie Sanders sees right through the neoclassical fetters, blinders, and bullshit. He recognizes how intellectually and economically stagnant and dangerous it is. He has the most powerful conceptual, articulate grasp of economics that I've seen the past 40 years. He also, IIRC, had MMTer Stephanie Kelton as an advisor, and had her advise the Senate Finance Committee. Also notable: Sen Elizabeth Warren.

The other political operators that you mention are still in thrall to neoclassical assumptions. They mistake 'takers' for 'makers' and are economically bamboozled. And it has worked out well for all of them, on a personal basis, so it is not surprising that they don't see the problems.

Anyone actually trying to build an innovative business, OTOH, has to see through the bamboozlement or else you're out of business pronto.

JTMcPhee , October 6, 2017 at 12:05 pm

Chicken and egg question:

The class of humans that by inclination and opportunity become C-Suite and VC looters and "owners:" did they precede the imprimatur of "economists" with their notions of price, value, and crossing of curves, or did the "economists" do a Martin Luther, nail up a bunch of theses, and preach fire and brimstone to turn the greedheads loose?

And was/is any other outcome for the species and the planet even possible?

Left in Wisconsin , October 6, 2017 at 1:14 pm

Neil Fligstein wrote a good book awhile back called The Transformation of Corporate Control that shows how most large manufacturing companies were initially run by engineers, then sales people, then finance people (as corporations came to be seen as bundles of assets as opposed to businesses). I think this transformation paralleled the rise of neoclassical economics. So, not so much "chicken-and-egg" as "class war." In Germany, at least until recently, I believe CEO's of manufacturing firms were still disproportionately engineers.

Carla , October 6, 2017 at 3:05 pm

"most large manufacturing companies were initially run by engineers, then sales people, then finance people"

The Lincoln Electric Company, which became famous for its "Incentive Management" program of compensating employees, was a client of mine. Over three decades I saw it progress through precisely those stages, and gradually lose every characteristic that had made the company unique.

readerOfTeaLeaves , October 6, 2017 at 12:30 pm

This post was a genuine pleasure to read. Especially:

If you work for a company, even if its innovative strategy is a big success, you run a big risk because under the current regime of "maximizing shareholder value" a group of hedge fund activists can suck the value that you've created right out, driving your company down and making you worse off and the company financially fragile .

And we've had a government by and for hedge fund managers for about the same amount of time that we've had economic woes. One problem is that hedge funders like Romney, who actually don't think about consumer product development, actually don't have to test and deploy products, bring their bean-counter assumptions to business and make a hash of things. I mention Romney specifically, because he presents himself to the world as a paragon of economic wisdom.

Romney has a prestigious business school background. Which makes me want to highlight this:

Innovation theory calls for changing the mindsets and skill sets of senior executives. That means transforming business education, including the replacement of agency theory with innovation theory .

JTMcPhee , October 6, 2017 at 12:59 pm

Just a thought: "innovation theory," like MMT, is maybe just a tool set? "Innovation" includes "autonomous combat devices," and CRSP-R, and nuclear weapons, and the F-35, and fracking, and derivatives, and plastics, and charter schools, stuff and ideas that for some of us constitute "value" are corporations as the category has grown to be, any more likely to "innovate" in the areas of social improvements and possibilities, or stewardship of the planet, or close down the toll stations and all the other rent collection scams and extortions they have "innovated" to date? Or release their chokehold on "policy?"

Says the proponent: "Major corporations are key to the operation and performance of the economy. So we need a revolution in corporate governance to get us back on track to stable and equitable economic growth. Besides changing board representation, I would change the incentives for top executives so they are rewarded for allocating corporate resources to value creation. Senior executives should gain along with the rest of the organization when the corporation is successful in generating competitive products while sharing the gains with workers and taxpayers." There seems to be so much wrong and just more Biz-babble about this, one hardly knows where to start unpacking.

"Major corporations are key?" Really? Monsanto? GM? Bechtel? The Big Banks? And "back on track": When has the political economy, writ small or large, ever been "on track to stability and equitable growth," said "growth' itself seemingly one of the pathologies that's killing us? And who's going to write the entries for the corporate senior executives' dance cards that will measure their "success," in those feel-good categories?

But it's a good conversation piece, and maybe an opening into Something Better, however us inherently mostly self-interested, self-pleasing omnivorous predators might define "better "

Disturbed Voter , October 6, 2017 at 12:36 pm

Badly run companies, naturally extinguish themselves. Unfortunately they take down their customers, owners, vendors and employees in the process. But the government can step in and either save a company that otherwise would die, or act as a crony corruption partner on behalf of a well connected company. Same as it always was.

But since gigantism is the norm, rather than family run farms in a mostly agrarian economy such failures are catastrophic. The linkage between these elephants tends to create systemic risk. Previously, failure was small and isolated.

JTMcPhee , October 6, 2017 at 1:06 pm

Welcome to our wonderful new world of infinite mutual vulnerability! Risk On! Nuclear weapons, Equifax, Googleamazon, NSApanopticon, FIRE, hacking, crapification The Soviet Union vanished as an entity, many starved, but the mopes there at least still knew how to raise up edible crops and live on "less" and maybe do better collective response to that sharp peak on the entropy curve. Wonder how things might play out exceptionally, here in the Empire?

allan , October 6, 2017 at 12:48 pm

It should be noted that Michael Jensen of HBS, one of the originators of the `maximize shareholder value' of corporate governance, is on some short lists for this year's not-exactly-the-Nobel Prize in Economics.

[Oct 01, 2017] Bulletproof Neoliberalism by Paul Heideman

Highly recommended!
Notable quotes:
"... Mirowski identifies three basic aspects of neoliberalism that the Left has failed to understand: the movement's intellectual history, the way it has transformed everyday life, and what constitutes opposition to it. Until we come to terms with them, Mirowski suggests, right-wing movements such as the Tea Party (a prominent player in the book) will continue to reign triumphant. ..."
"... Joining a long line of thinkers, most famously Karl Polanyi, Mirowski insists that a key error of the Left has been its failure to see that markets are always embedded in other social institutions. Neoliberals, by contrast, grasp this point with both hands -- and therefore seek to reshape all of the institutions of society, including and especially the state, to promote markets. Neoliberal ascendancy has meant not the retreat of the state so much as its remaking. ..."
"... he also recognizes that the neoliberals themselves have been canny about keeping the real nature of their project hidden through a variety of means. Neoliberal institutions tend to have what he calls a "Russian doll" structure, with the most central ones well hidden from public eyes. Mirowski coins an ironic expression, "the Neoliberal Thought Collective," for the innermost entities that formulate the movement's doctrine. The venerable Mont Pelerin Society is an NTC institution. Its ideas are frequently disseminated through venues which, formally at least, are unconnected to the center, such as academic economics departments. Thus, neoclassical economists spread the gospel of the free market while the grand project of remaking the state falls to others. ..."
"... At the same time as neoliberal commonsense trickles down from above, Mirowski argues that it also wells up from below, reinforced by our daily patterns of life. Social networking sites like Facebook encourage people to view themselves as perpetual cultural entrepreneurs, striving to offer a newer and better version of themselves to the world. Sites like LinkedIn prod their users to present themselves as a fungible basket of skills, adjustable to the needs of any employer, without any essential characteristics beyond a requisite subservience. Classical liberalism always assumes the coherent individual self as its basic unit. Neoliberalism, by contrast, sees people as little more than variable bundles of human capital, with no permanent interests or even attributes that cannot be remade through the market. For Mirowski, the proliferation of these forms of everyday neoliberalism constitute a "major reason the neoliberals have emerged from the crisis triumphant." ..."
"... Finally, Mirowski argues that the Left has too often been sucked in by neoliberalism's loyal opposition. Figures like Joseph Stiglitz or Paul Krugman, while critical of austerity and supportive of the welfare state, accept the fundamental neoclassical economic precepts at the heart of neoliberal policy. Mirowski argues that we must ditch this tradition in its entirety. Even attempts to render its assumptions more realistic -- as in the case of behavioral economics, for example, which takes account of the ways real people diverge from the hyperrationality of homo economicus -- provide little succor for those seeking to overturn the neoliberals. ..."
"... Mirowski's insistence on the centrality of the state to the neoliberal project helps correct the unfortunate tendency of many leftists over the past decade to assent to neoliberal nostrums about the obsolescence of the state. Indeed, Mirowski goes further than many other critics who have challenged the supposed retreat of the state under neoliberalism. ..."
"... Loïc Wacquant, for instance, has described the "centaur state" of neoliberalism, in which a humanist liberalism reigns for the upper classes, while the lower classes face the punitive state apparatus in all its bestiality. ..."
"... Mirowski shows us that the world of the rich under neoliberalism in no way corresponds to the laissez-faire of classical liberalism. The state does not so much leave the rich alone as actively work to reshape the world in their interests, helping to create markets for the derivatives and securities that made (and then destroyed) so many of the fortunes of the recent past. The neoliberal state is an eminently interventionist one, and those mistaking it for the austere nightwatchman of libertarian utopianism have little hope of combating it. ..."
"... Mirowski's concern to disabuse his readers of the notion that the wing of neoliberal doctrine disseminated by neoclassical economists could ever be reformed produces some of the best sections of the book. His portrait of an economics profession in haggard disarray in the aftermath of the crisis is both comic and tragic, as the amusement value of the buffoonery on display diminishes quickly when one realizes the prestige still accorded to these figures. Reading his comprehensive examination of the discipline's response to the crisis, one is reminded of Freud's famous broken kettle. The professional economists' account of their role in the crisis went something like (a) there was no bubble and (b) bubbles are impossible to predict but (c) we knew it was a bubble all along. ..."
"... Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis (which holds that prices in a competitive financial market reflect all relevant economic information), Mirowski argues that their attempt to do so while retaining the basic theoretical architecture of neoclassicism has rendered them doubly ineffective. ..."
"... First, their adoption of the battery of assumptions that accompany most neoclassical theorizing -- about representative agents, treating information like any other commodity, and so on -- make it nearly impossible to conclusively rebut arguments like the efficient markets hypothesis. ..."
Oct 01, 2017 | www.jacobinmag.com

To understand how a body of thought became an era of capitalism requires more than intellectual history.

"What is going to come after neoliberalism?" It was the question on many radicals' lips, present writer included, after the financial crisis hit in 2008. Though few were so sanguine about our prospects as to repeat the suicidal optimism of previous radical movements ("After Hitler, Our Turn!"), the feeling of the day was that the era of unfettered marketization was coming to a close. A new period of what was loosely referred to as Keynesianism would be the inevitable result of a crisis caused by markets run amok.

Five years later, little has changed. What comes after neoliberalism? More neoliberalism, apparently. The prospects for a revived Left capable of confronting it appear grim.

Enter Philip Mirowski's Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown . Mirowski maintains that the true nature of neoliberalism has gone unrecognized by its would-be critics, allowing the doctrine to flourish even in conditions, such as a massive financial crisis, that would seem to be inimical to its survival. Leftists keep busy tilting at the windmill of deregulation as the giants of neoliberalism go on pillaging unmolested.

Mirowski identifies three basic aspects of neoliberalism that the Left has failed to understand: the movement's intellectual history, the way it has transformed everyday life, and what constitutes opposition to it. Until we come to terms with them, Mirowski suggests, right-wing movements such as the Tea Party (a prominent player in the book) will continue to reign triumphant.

The book begins with the war of ideas -- a conflict in which, Mirowski argues, the Left has been far too generous in taking neoliberals at their word, or at least their best-publicized word. We have, in effect, been suckered by kindly old Milton Friedman telling us how much better off we'd all be if the government simply left us "free to choose." But neoliberals have at times been forthright about their appreciation for the uses of state power. Markets, after all, do not simply create themselves. Joining a long line of thinkers, most famously Karl Polanyi, Mirowski insists that a key error of the Left has been its failure to see that markets are always embedded in other social institutions. Neoliberals, by contrast, grasp this point with both hands -- and therefore seek to reshape all of the institutions of society, including and especially the state, to promote markets. Neoliberal ascendancy has meant not the retreat of the state so much as its remaking.

If Mirowski is often acidic about the Left's failure to understand this point, he also recognizes that the neoliberals themselves have been canny about keeping the real nature of their project hidden through a variety of means. Neoliberal institutions tend to have what he calls a "Russian doll" structure, with the most central ones well hidden from public eyes. Mirowski coins an ironic expression, "the Neoliberal Thought Collective," for the innermost entities that formulate the movement's doctrine. The venerable Mont Pelerin Society is an NTC institution. Its ideas are frequently disseminated through venues which, formally at least, are unconnected to the center, such as academic economics departments. Thus, neoclassical economists spread the gospel of the free market while the grand project of remaking the state falls to others.

At the same time as neoliberal commonsense trickles down from above, Mirowski argues that it also wells up from below, reinforced by our daily patterns of life. Social networking sites like Facebook encourage people to view themselves as perpetual cultural entrepreneurs, striving to offer a newer and better version of themselves to the world. Sites like LinkedIn prod their users to present themselves as a fungible basket of skills, adjustable to the needs of any employer, without any essential characteristics beyond a requisite subservience. Classical liberalism always assumes the coherent individual self as its basic unit. Neoliberalism, by contrast, sees people as little more than variable bundles of human capital, with no permanent interests or even attributes that cannot be remade through the market. For Mirowski, the proliferation of these forms of everyday neoliberalism constitute a "major reason the neoliberals have emerged from the crisis triumphant."

Finally, Mirowski argues that the Left has too often been sucked in by neoliberalism's loyal opposition. Figures like Joseph Stiglitz or Paul Krugman, while critical of austerity and supportive of the welfare state, accept the fundamental neoclassical economic precepts at the heart of neoliberal policy. Mirowski argues that we must ditch this tradition in its entirety. Even attempts to render its assumptions more realistic -- as in the case of behavioral economics, for example, which takes account of the ways real people diverge from the hyperrationality of homo economicus -- provide little succor for those seeking to overturn the neoliberals.

For Mirowski, these three failures of the Left go a long way toward explaining how neoliberals have largely escaped blame for a crisis they created. The Left persistently goes after phantoms like deregulation or smaller government, which neoliberals easily parry by pointing out that the regulatory apparatus has never been bigger. At the same time, we ignore the deep roots of neoliberal ideology in everyday life, deceiving ourselves as to the scale of the task in front of us.

Whatever criticisms of Mirowski's analysis are in order, much of it is compelling, particularly in regard to the intellectual history of the NTC. Mirowski's insistence on the centrality of the state to the neoliberal project helps correct the unfortunate tendency of many leftists over the past decade to assent to neoliberal nostrums about the obsolescence of the state. Indeed, Mirowski goes further than many other critics who have challenged the supposed retreat of the state under neoliberalism.

Loïc Wacquant, for instance, has described the "centaur state" of neoliberalism, in which a humanist liberalism reigns for the upper classes, while the lower classes face the punitive state apparatus in all its bestiality. But Mirowski shows us that the world of the rich under neoliberalism in no way corresponds to the laissez-faire of classical liberalism. The state does not so much leave the rich alone as actively work to reshape the world in their interests, helping to create markets for the derivatives and securities that made (and then destroyed) so many of the fortunes of the recent past. The neoliberal state is an eminently interventionist one, and those mistaking it for the austere nightwatchman of libertarian utopianism have little hope of combating it.

It's here that we begin to see the strategic genius of neoliberal infrastructure, with its teams of college economics professors teaching the wondrous efficacy of supply and demand on the one hand, and the think tanks and policy shops engaged in the relentless pursuit of state power on the other. The Left too often sees inconsistency where in fact there is a division of labor.

Mirowski's concern to disabuse his readers of the notion that the wing of neoliberal doctrine disseminated by neoclassical economists could ever be reformed produces some of the best sections of the book. His portrait of an economics profession in haggard disarray in the aftermath of the crisis is both comic and tragic, as the amusement value of the buffoonery on display diminishes quickly when one realizes the prestige still accorded to these figures. Reading his comprehensive examination of the discipline's response to the crisis, one is reminded of Freud's famous broken kettle. The professional economists' account of their role in the crisis went something like (a) there was no bubble and (b) bubbles are impossible to predict but (c) we knew it was a bubble all along.

Incoherence notwithstanding, however, little in the discipline has changed in the wake of the crisis. Mirowski thinks that this is at least in part a result of the impotence of the loyal opposition -- those economists such as Joseph Stiglitz or Paul Krugman who attempt to oppose the more viciously neoliberal articulations of economic theory from within the camp of neoclassical economics. Though Krugman and Stiglitz have attacked concepts like the efficient markets hypothesis (which holds that prices in a competitive financial market reflect all relevant economic information), Mirowski argues that their attempt to do so while retaining the basic theoretical architecture of neoclassicism has rendered them doubly ineffective.

First, their adoption of the battery of assumptions that accompany most neoclassical theorizing -- about representative agents, treating information like any other commodity, and so on -- make it nearly impossible to conclusively rebut arguments like the efficient markets hypothesis. Instead, they end up tinkering with it, introducing a nuance here or a qualification there. This tinkering causes their arguments to be more or less ignored in neoclassical pedagogy, as economists more favorably inclined toward hard neoliberal arguments can easily ignore such revisions and hold that the basic thrust of the theory is still correct. Stiglitz's and Krugman's arguments, while receiving circulation through the popular press, utterly fail to transform the discipline.

Mirowski also heaps scorn on the suggestion, sometimes made in leftist circles, that the problem at the heart of neoclassical economics is its assumption of a hyperrational homo economicus , relentlessly comparing equilibrium states and maximizing utility. Though such a revision may be appealing to a certain radical romanticism, Mirowski shows that a good deal of work going on under the label of behavioral economics has performed just this revision, and has come up with results that don't differ substantively from those of the mainstream. The main problem with neoclassicism isn't its theory of the human agent but rather its the theory of the market -- which is precisely what behavioral economics isn't interested in contesting.

In all, Mirowski's indictment of the state of economic theory and its imbrication with the neoliberal project is devastating. Unfortunately, he proves much less successful in explaining why things have turned out as they have. The book ascribes tremendous power to the Neoliberal Thought Collective, which somehow manages to do everything from controlling the economics profession to reshaping the state to forging a new sense of the human self. The reader is left wondering how the NTC came to acquire such power. This leads to the book's central flaw: a lack of any theory of the structure of modern capitalism. Indeed, the NTC seems to operate in something of a vacuum, without ever confronting other institutions or groups, such as the state or popular movements, with interests and agendas of their own.

To be fair, Mirowski does offer an explanation for the failure of popular movements to challenge neoliberalism, largely through his account of "everyday" neoliberalism. At its strongest, the book identifies important strategic failures, such as Occupy's embrace of "a mimicry of media technologies as opposed to concerted political mobilization." However, Mirowski extends the argument well beyond a specific failure of the Occupy movement to propose a general thesis that developments like Facebook and reality TV have transmitted neoliberal ideology to people who have never read Friedman and Hayek. In claiming that this embodied or embedded ideology plays an important role in the failure of the Left, he places far more explanatory weight on the concept of everyday neoliberalism than it is capable of bearing.

At the simplest level, it's just not clear that everyday neoliberalism constitutes the kind of block to political action that Mirowski thinks it does. No doubt, many people reading this article right now simultaneously have another browser tab open to monster.com or LinkedIn, where they are striving to present themselves as a fungible basket of skills to any employer that will have them. In this economy, everyone has to hustle, and that means using all available means. That many of these same readers have probably also done things like organize against foreclosures should give pause to any blurring of the distinction between using various media technologies and embracing the ideology Mirowski sees embodied in them.

Indeed, the ubiquity of participation in such technologies by people who support, oppose, or are apathetic about neoliberalism points to a larger phenomenon on which Mirowski is silent: the labor market. Put bluntly, it is difficult to imagine anyone engaging in the painfully strained self-advertisement facilitated by LinkedIn in a labor market with, say, 2-percent unemployment. In such a market, in which employers were competing for comparatively scarce workers, there would be very little need for those workers to go through the self-abasing ritual of converting themselves into fungible baskets of skills. In our current situation, by contrast, where secure and remunerative employment is comparatively scarce, it is no surprise that people turn to whatever technologies are available to attempt to sell themselves. As Joan Robinson put it, the only thing worse than being exploited by capitalism is not being exploited by it.

In evaluating the role of everyday neoliberalism, it is also helpful to move, for the moment, beyond the perspective of the United States, where the NTC has clearly had great success, and adopt that of countries where resistance is significantly more developed, such as Venezuela or South Africa. Especially in the former, popular movements have been notably successful in combating neoliberal efforts to take over the state and reshape the economy, and have instead pushed the country in the opposite direction. Is it really plausible that a main reason for this difference is that everyday neoliberalism is more intense in the United States? I doubt it. For one thing, the strength of Venezuela's radical movements, in comparison with the US, clearly antedates the developments (social media, Here Comes Honey Boo Boo , and so on) that Mirowski discusses.

Moreover, it is just as plausible that the entrepreneurial culture he describes is even more extensive in the slums of the global South, where neoliberal devastation has forced many poor households to rely on at least one family member engaging in semi-legal arbitrage in goods salvaged from garbage or made at home. Surely such activities provide a firmer foundation for commercial subjectivity than having a 401(k). That resistance has grown in such circumstances suggests that looking to malignant subjectivities to explain popular passivity is an analytic dead-end.

If everyday neoliberalism doesn't explain the comparative weakness of the US left, what does? This is, of course, the key question, and I can do no more than gesture at an answer here. But I would suggest that the specific histories of the institutions of the American left, from the Communist Party to Students for a Democratic Society to labor unions, and the histories of the situations they confronted, provide us with a more solid foundation for understanding our current weakness than the hegemony of neoliberal culture does. Moreover, with a theory of capitalism that emphasizes the way the structure of the system makes it both necessary and very difficult for most people to organize to advance their interests, it becomes very easy to explain the persistence of a low level of popular mobilization against neoliberalism in the context of a weakened left.

If Mirowski's account doesn't give us a good basis for explaining why popular resistance has been so lacking in the US, it nonetheless suggests why he is so concerned with explaining the supposed dominance of neoliberal ideology among the general population. From the beginning, he raises the specter of right-wing resurgence, whether in the form of Scott Walker surviving the recall campaign in Wisconsin, the Tea Party mania of 2010, or the success of right-wing parties in Europe. However, much of this seems overstated, especially from a contemporary perspective. The Tea Party has, for all intents and purposes, disappeared from the front lines of American politics, and the Republican Party, while capable of enacting all kinds of sadistic policies on the state level, has remained in a state of disarray on the national level since the 2006 congressional elections.

More fundamentally, the argument that the voting public embraces neoliberalism doesn't square well with recent research by political scientists like Larry Bartels and Martin Gilens emphasizing the profound disconnect between the policy preferences of the poor and what transpires in Washington. What appears to be happening is less the general populace's incorporation into neoliberalism than their exclusion from any institutions that would allow them to change it. Importantly, this alternative explanation does not rely on the Left conceit that rebellion lurks perpetually just below the placid social surface, ready to explode into radical insurgency at any moment. It simply contends that the political passivity of neoliberalism's victims reflects a real diminution of their political options.

Mirowski's failure to address these larger institutional and structural dynamics vitiates much of the explanatory power of his book. On a purely descriptive level, the sections on the intellectual history of neoliberalism and the non-crisis of neoclassical economics illuminate many of the hidden corners of neoliberal ideology. However, if Mirowski is right to suggest that we need to understand neoliberalism better to be successful in fighting it -- and he surely is -- then much more is needed to explain neoliberal success and Left failure.

To understand how a body of thought became an era of capitalism requires more than intellectual history. It demands an account of how capitalism actually works in the period in question, and how the ideas of a small group of intellectuals came to be the policy preferences of the rich. Mirowski has given us an excellent foundation for understanding the doctrine, but it will remain for others to explain its actual development.

https://staticxx.facebook.com/connect/xd_arbiter/r/Z2duorNoYeF.js?version=42#channel=f1c0e2812ec10f6&origin=https%3A%2F%2Fwww.jacobinmag.com

[Sep 27, 2017] Restating the case against trickle down

Notable quotes:
"... Claim 1 is a restatement of the marginal productivity theory which is at the heart of neoclassical economics. In a general equilibrium model of a perfectly competitive economy with full employment, it can be deduced as a theorem. With constant returns to scale, ..."
"... The two propositions seem at odds. If people earn their marginal productivity (by #1), there should not be the externalities (in #2). The presence of the externalities suggests that incomes are not set according to marginal contributions to the economy. In turn, that calls into question the general equilibrium model. ..."
"... If, I repeat, If capital is invested, it is much more likely to be in automation. Which maintains or increases productivity while lowering labor costs. Demand is the only thing that can increase employment. But, that employment could be anywhere in the world. ..."
"... Alongside these two points I would add the (in econ-blogospheric terms, Sumnerian) point that Central Banks switched from targeting unemployment to targeting inflation; the result has been much longer periods of unemployment and underemployment, (arguably) artificially depressing wages, especially at the low end. (Hence wage stagnation). ..."
Sep 27, 2017 | crookedtimber.org

Restating the case against trickle down (updated in response to comments)

by John Quiggin on September 2, 2017 I've just given a couple of talks focusing on inequality, one for the Global Change Institute at UQ, following a presentation by Wayne Swan and the second at a conference organized by the TJ Ryan Foundation (including great talks by Peter Saunders, Sally McManus, and others), where I was responding to a paper by Jim Stanford from the Centre for Future Work. Because I was speaking second in both cases, I didn't prepare a paper or slides, but tailored my talk to complement the one before. That can be a high risk strategy, but in this case, I think it worked very well.

It led me to a new, and I hope improved, statement of the case against 'trickle down' theory. As always, the most important part of a refutation is a clear statement of the theory you propose to refute, so that it can be shown where it falls down. After the talks I wrote this up, and it's over the fold. Comments and constructive criticism much appreciated.

The case against trickle down, restated

The trickle down theory relies on the following claims*

  1. In the absence of taxes and other government interventions, high market incomes reflect, and elicit, high productivity, investment and effort.
  2. More effort from highly productive workers and investors increases the productivity of workers in general.

The trickle down argument then starts with the claim that reducing tax on high income earners will lead them to work harder and invest more. Since they are (by claim 1) the most productive members of the community, their efforts will (by claim 2) make everyone else more productive, and will benefit consumers. So, reducing taxes on high income groups will make everyone better off.

Claim 1 is a restatement of the marginal productivity theory which is at the heart of neoclassical economics. In a general equilibrium model of a perfectly competitive economy with full employment, it can be deduced as a theorem. With constant returns to scale,

Claim 2 is generally assumed to be true, although it's not usually spelt out. It is true either if there are external economies of scale such as information externalities (the most productive provide a model for others to copy) or complementarity in production (working with highly productive colleagues and managers makes people in general more productive). With economies of scale, Claim 1 needs to be interpreted carefully, The implication is not that everyone receives a payment equal to their marginal product, but that market incomes are (roughly) proportional to average and marginal productivity.

If Claim 2 doesn't hold then all the benefits of increased effort from highly productive workers and investors is captured by the workers and investors themselves. This means that the there is no 'trickle down' except through the tax system. The policy implication is that tax rates for high income earners should be set at or near the top of the 'Laffer curve' where revenue is maximized, estimated by Piketty, Saez and Stantcheva at around 80 per cent.

The neoclassical model that gives rise to Claim 1 has never been a fully accurate representation of the economy. But it is even less accurate now than in the past. The crucial recent developments, likely to continue in the absence of radical policy change, are:

These developments mean that cuts in the top rate of income tax will primarily reward ownership of capital, unproductive activity, or luck in choosing ones parents, rather than increasing productivity. They also undermine the second proposition underlying trickle down theory. The pursuit of monopoly profits ('rent-seeking' in the jargon of free-market economics) reduces rather than increases the productivity of the economy as a whole.

That's the theory. The empirical evidence, which was in dispute for a long time, is now clear-cut, at least for the United States. Decades of pro-rich policies have, unsurprisingly, made the rich much richer. Contrary to the predictions trickle down theory, the result has been to reduce, rather than increase, the productivity and dynamism of the economy. The combination of slower growth and increased inequality implies, as a matter of arithmetic, that the majority of the population must be worse off.

*There are some other versions of trickle down that can be dismissed more easily. Most notably, there's the idea that the spending of the rich will create employment. That's true, but more employment would be generated if income were redistributed to the poor, who save less of their income and consume more.

BruceJ 09.02.17 at 1:51 am ( 1 )

Claim 1 is a restatement of the marginal productivity theory which is at the heart of neoclassical economics. In a general equilibrium model of a perfectly competitive economy with full employment, it can be deduced as a theorem.

Honestly, this makes 'neoclassical economics' sound suspiciously like yet another perpetual motion scheme.

mclaren 09.02.17 at 2:02 am ( 3 )
We can also cite the exponential growth of share buybacks to boost stock prices and thus enrich CEOs + corporate officials with stock options. This now seems to be the main corporate use for profits, as opposed to investment. This trend would seem to short-circuit the whole argument in claim 1, since if businesses use profits to buy back shares instead of investing to increase productivity, claim 1 is entirely moot.

See "Profits Without Prosperity" by William Lazonick, Harvard Business Review, 2014.

https://hbr.org/2014/09/profits-without-prosperity

Wally 09.02.17 at 2:13 am ( 4 )
"2. More effort from highly productive workers and investors increases the productivity of workers in general."

What, people claim this? With a straight face? I work in a factory. I'd say the opposite is true, the harder I work, the more everyone else slacks off!

OldClark 09.02.17 at 2:48 am ( 5 )
Tinkle down theory: We must coddle the rich, because if we don't, then they will have a sad and won't work hard. But the poor? Anything they get makes them work less hard.

But maybe: Tax the rich harder and they work harder, because they still want more, more, more. And the poor? Anything they get empowers them, and further motivates them to escape poverty.

Ian Maitland 09.02.17 at 2:48 am
"The empirical evidence [against trickle down theory], which was in dispute for a long time, is now clear-cut, at least for the United States."

I wonder if the clause tacked on to that sentence -- "at least for the United States" -- isn't a dead giveway?

What about the rest of the world? True, globalization enriched corporations and created Third World billionaires, but the most striking development of the two or three decades up to 2007 was the transformation of the situation and prospects of the world's poor. 2015 economics Nobelist Angus Deaton has said: "Life is better now than at almost any time in history. More people are richer and fewer people live in dire poverty. Lives are longer and parents no longer routinely watch a quarter of their children die."

Between 1970 and 2006, the percentage of the world population in poverty has fallen by 80 percent from 27% to 5%. The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. At the same time, various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145% (Pinkovskiy.& Sala-i-Martin 2009; see also Kinley, 2009: 14-15).

It is amazing how we take for granted what in retrospect will be seen as a golden age. How quickly we have forgotten how, before globalization, much of the Third World had been written off by experts. In the 1960s and 1970s, for example, Peter Singer placed Bangladesh in the "hopeless" category. "We have no obligation to assist countries whose government make our aid ineffective," Singer wrote. Paul Ehrlich wrote in The Population Bomb that, "India couldn't possibly feed two hundred million more people by 1980." He endorsed a system of "triage" that would end food aid to "hopeless" countries such as India and Egypt. (India has gone from being an economic basket case to a bread basket). Garrett Hardin used the lifeboat earth metaphor to argue against helping the world's poorest. That help would lead to unsustainable population growth that would capsize the lifeboat, so they had to be thrown overboard.

Globalization was mostly about the lifting of barriers to trade and investment and liberalizing domestic economies. The era has been called "the age of Milton Friedman" by Andrei Shleifer (2009) because it marked a stride toward a global free market. The miracle of globalization was, accidentally or on purpose, the result of the unleashing of market forces. Instead of planners, foreign aid, high tariffs and import substitution, it was greater market openness that drove this transformation.

I don't know if this qualifies as "trickle down," but I think we should all give thanks for what has been accomplished. Sadly, the Great Recession and the populist revolt have put the brakes on the process.

John Quiggin 09.02.17 at 3:53 am ( 7 )
@6 I've responded to this point before, as follows:

In the wake of the GFC, some advocates of economic liberalism have sought to shift the ground of debate, arguing that, whatever the impact of financial globalisation on developed countries, it has been hugely beneficial for India and China which, between them, account for a third of the world's population.
There are all sorts of problems with this argument.

The relatively disappointing economic performance of China and India in the postwar decades certainly provides strong grounds for criticising the economic policies of Mao Zedong and Nehru. But even in the days when some observers saw these policies as providing an appropriate development path for the countries that adopted them, no one seriously proposed their adoption by developed countries. And as more attention has been focused on the irrational aspects of these policies (such as the Great Leap Forward, in which people were made to melt down their cooking pots to provide scrap for backyard smelters, which presumably produced new cooking pots, or the dozens of licenses required to undertake the simplest economic activity in India) it has become easier to understand why their removal or relaxation

At the same time, neither of these rapidly-growing economies come anywhere near meeting the standard description of a free-market economy. China still has a huge state-owned enterprise sector, a tightly restricted financial system and a closely managed exchange rate. India began its growth spurt before the main period of market liberalisation and also retains a large state sector. In both countries, as earlier in Japan and South-East Asia, the state has played a major role in promoting particular directions of development.

In summary, while the development success stories of China and India, and, before them of Japan and the East Asian tigers, may have some useful lessons for countries struggling to escape the poverty trap, they can tell us nothing about the relative merits of economic liberalism and social democracy.

Alex SL 09.02.17 at 4:43 am ( 8 )
I am not an economist (is IANAE a thing?), but it always seemed to me that the two main problems with trickle-down are the second to last paragraph – empirical disproof – and the idea that, say, lowering taxes from 35% to 25% is some kind of huge incentive that will make people who are affected by that change work harder. I do not find it a priori plausible that somebody would ever say:

"Hey, if I work harder to earn another $10,000 I will only actually get to take $6,500 home. If that is the case, then I will not work harder and rather lose out on the $6,500, even if I could really do with another $6,500. So there. But if you lower the tax rate so that I get to keep $7,500, now we are talking! Those 10% are so much more relevant than the other 65%." (Add zeroes at the end of those numbers as required.)

This is just not a reasoning that will ever make sense or occur to anybody in real life, i.e. outside of a libertarian think tank, unless we are indeed talking a tax rate of 95%.

Matt 09.02.17 at 5:56 am ( 9 )
I do not find it a priori plausible that somebody would ever say:

"Hey, if I work harder to earn another $10,000 I will only actually get to take $6,500 home. If that is the case, then I will not work harder and rather lose out on the $6,500, even if I could really do with another $6,500. So there. But if you lower the tax rate so that I get to keep $7,500, now we are talking! Those 10% are so much more relevant than the other 65%."

for what it's worth, I have thought things at least very similar to that several times, and even acted on them, when, for example, I was already teaching several classes, and I was asked if I'd like to teach one more. At that point, teaching one more would start to have significant impact on my quality of life and ability to do writing. I'd be unhappy. But, I could use the extra money. But each dollar cut off made a bit difference, considering that it would actually be a pretty significant impact on my happiness at that point to teach another class. Even if I could use the money, it had to be a fair amount of money before I'd take the class on. Now, I don't mean to draw any sort of general conclusion from this, or to suggest that it's a problem with the post, or to suggest that my situation suggests anything important about tax policy or whatnot. But, that things like this happens seems pretty clear to me, because they have happened to me.

Bill 09.02.17 at 9:47 am (
The two propositions seem at odds. If people earn their marginal productivity (by #1), there should not be the externalities (in #2). The presence of the externalities suggests that incomes are not set according to marginal contributions to the economy. In turn, that calls into question the general equilibrium model.
ccc 09.02.17 at 9:54 am ( 11 )
"So, reducing taxes on high income groups will make everyone better off."

Even if 1 and 2 hold that "better off" conclusion still does not follow. Or at minimum "better off" must be defined and qualified. How well off social animals like us are arguably depend on both absolute and relative factors. Even if 1 and 2 raise the economic floor for literally everyone they may also increase economic inequality, which can cause health worsening (spirit level type argument) and worse equality of opportunity for the children of those not earning most. Seeing one's child strive but not succeed because of a system of economic inequality is arguably a "being worse off" factor.

nastywoman 09.02.17 at 10:08 am ( 12 )
"Trickle down" never works if you don't have Rich dudes who don't trickle down enough. But it kind of works if you have a German Mittelstands-dude who has such a high social conscious with an empathetic responsibility for his workers and his community that he pays his workers excellent – insists on NOT firing -(or outsourcing) them and is in economical crisis even willing to sacrifice his own well being for the well being of his community and workers.

And this simple Kindergarten-wisdom (philosophy?) just doesn't apply (anymore?) in THE homeland – even supposedly – and to a certain extend applied when a dude called Ford made sure that his workers could afford the cars they build.

Collin Street 09.02.17 at 11:21 am ( 13 )
"Trickle down" never works if you don't have Rich dudes who don't trickle down enough.

It's better than that: even if trickle-down actually works the way it's supposed to the way it's supposed to work it'll make problems of equality worse, not better, long-term. See, you're giving the money to people with the expectation that they will use it to make "profitable investments". But a profitable investment -- definitionally -- returns more money to its maker than they spend: the result of "trickle down" is profitable investments made by the currently-rich that make them even richer .

Tim Worstall 09.02.17 at 11:23 am ( 14 )
"Claim 2 is generally assumed to be true, although it's not usually spelt out. It is true either if there are information externalities (the most productive provide a model for others to copy) or complementarily in production (working with highly productive colleagues and managers makes people in general more productive).

If Claim 2 doesn't hold then all the benefits of increased effort from highly productive workers and investors is captured by the workers and investors themselves. This means that the there is no 'trickle down' except through the tax system. The policy implication is that tax rates for high income earners should be set at or near the top of the 'Laffer curve' where revenue is maximized, estimated by Piketty, Saez and Stantcheva at around 80 per cent."

Well, no, not really. Imagine, just imagine for a moment, that the harder work and greater investment in pursuit of those higher incomes leads to something like that new leukemia drug just approved. $500k a treatment today, that being cheaper than the other treatment, bone marrow transplant. And in 10 or so years time the patent expires and it drops in price again. No, this is not an argument that drug patents are super, rather, do we think that people are incentivised to create new things by the prospects of gaining gazillions?

Are those 600 Americans likely to get this treatment each year made richer by its existence?

We're made richer by being able to consume the greater production of those more highly motivated high productivity people, aren't we?

As to the 80% peak, that suffers from the same problem that the very similar Diamond and Saez one does. It assumes that we've already closed off all avenues of avoidance (D&S using "allowances" to mean this). A residence based tax system, rather than a passport one, is just such an allowance. For you can avoid by leaving the country and we've even got a name for when this happened, the brain drain.

Further, the Staggers gets the NI situation wrong. D&S, certainly, talk about "taxes on income", not "income taxes". They specifically include employer paid taxes on employment income. Meaning adding employers' NI for the UK, not just the residual 2% employees'. At which point, with allowances like residence based, D&S give us something like 54% as the Peak. Or, given NI, somewhere around where we are with income tax alone right now, 45% or so.

bob mcmanus 09.02.17 at 12:03 pm ( 15 )
IANAE, and no longer reading as much economics as I used to, and this may belong to JQ's last paragraph about trivial trickle-down theories, but I was inspired to visit the Marx-Kalecki three-sector model. (Investment goods, wage goods, luxury goods/capitalist consumption.) Which as usual, approaches the problem from the production side. "Trickle-down" in this case depends on how capitalist spend their increased income, whether on investment or luxury goods.

John Bellamy Foster Monthly Review, 2013. One point here is to refute the "profit-squeeze" theory, which still endures in some Marxian economics. This may be a "what next after refuting trickle-down."

Only for those interested, I am not capable or enthused to defend the whole thing.

"For Kalecki, the power of labor to increase money wages!although present to a minor extent in the normal business upswing!was not a significant economic threat to capital even at full employment due primarily to the pricing power of firms. Hence, if the system neglected consistently to promote full-employment through the stimulation of government spending this was not to be attributed to economic reasons per se, but rather to the political threat that permanent full employment would represent to the capitalist class."

I buy this completely, and the "pricing power of firms" is the main reason I oppose any UBI job guarantee/ELR is much better. But state infrastructure is best. The taxes on capital and capitalists must go to government spending ( socialized worker consumption ) and investment (workers capital?) or it is counterproductive.

bob mcmanus 09.02.17 at 12:22 pm ( 16 )
Sorry. Two more things

1) The Meidner Plan is back in the news, see Jacobin.

2) Increased taxes on capitalists for redistribution will upset capitalists. You want to drive almost every economist nuts, start talking about state control of pricing . That can done indirectly in ways like gov't housing or Medicare-for-all. The problems with redistribution without socialized pricing are evident in the PPACA.

Alex SL 09.02.17 at 1:11 pm ( 17 )
Matt @9,

I may misunderstand, but the way you describe it it seems as if the concern to become overworked would have been the main factor. I must say that if the question is whether we want to lower top tax rates by 10% so that more people work themselves to death and get a heart attack in their 40s I'd say thanks but no thanks.

Maybe even phrasing it as "working harder", as I did in my first comment, is the wrong way of looking at trickle-down economics; the main argument seems to be that an investor or company owner would rather let their money sit around useless and earn a mere 1% in interest than invest in some 'job creating' activity that earns a return of 20% if they only get to keep 13%. Phrased like that I think it would be hard to argue that any even half-rational investor would ever reject the 13% ROI.

The problem might be that there just is no additional, unused opportunity for productive activity that earns a return of 20% on investment if the masses have seen stagnant wages for the last few decades. How would they afford to buy the new product that the investment would be in, except in the sense of a zero sum game where another investment elsewhere becomes less attractive to make up the difference? So if the investor's tax rate is lowered their choices are still money sitting around uselessly or inflating a bubble.

steven t johnson 09.02.17 at 1:38 pm
A man digging a ditch with a shovel is working much harder than the dude with a backhoe. It is not clear the guy working harder gets paid more. It's not clear the guy on the backhoe is getting more than minimum wage. The amount of profit expected from the ditch seems to me to depend on a lot more than how hard or productive either worker is. And the last I looked, economics doesn't have an agreed upon theory on the dynamics of the general rate of profit.

All that stuff about marginal revenue productivity etc. seems to me to be unlikely to be much more than ideology.

bob mcmanus 09.02.17 at 2:40 pm ( 19 )
Last one, because I would like this to be clearer. I am inverting is a little bit from "decreased taxes with increase growth" to "will increased taxes inhibit growth" using a 3-department model because:

Krugman on Taxing Rents yesterday

Krugzilla: "much corporate taxation probably doesn't fall on returns to physical capital, but rather on monopoly rents."

So question for Quiggin, leaving aside finance and rents

Are increased taxes on physical/fixed capital a good thing, growth and welfare enhancing?
Are increased taxes on corporate returns, profits, good?
Should we end all depreciation allowances?
De we want to tax productive investment?

It is about the framing. Too often this is argued as about capitalist income and capitalist consumption, as in Obama taxing private jets.

nastywoman 09.02.17 at 5:35 pm ( 20 )
@13
"See, you're giving the money to people with the expectation that they will use it to make "profitable investments".

Or to spend it for a really great watch? – as I happen to know -(and love) these great Swiss Watchmakers who love to have the dough of Rich US-dudes redistributed towards some real cool Craftsmen. -(wherever they are) – as I'm right now spending some time with some really cool US carpenter -(in Iceland) – who loves it too – when he get's flown to Iceland to do some "real cool" work here too.

And isn't that really "fascinating" that so many "Rich Dudes" -(of all nations) seem to have this "thing" about (only) making "profitable investments" in order to return more money to themselves – than they spend – in order to make them even richer BUT when it comes to pay for a "Craftsman" who manufactures a nice well done cabinet -(or a well working golden watch) a "Real Rich Dude" is even willing to throw in a first class airline ticket to Geneve?

Whassup?

John Quiggin 09.02.17 at 11:17 pm ( 21 )
Bill @10 This is a good point. I think (1) needs to be modified to say that incomes are proportional to marginal product. Then point (2) requires generalized external economies of scale, which is the central idea in endogenous growth theory. I'll work on this.

Tim @14 The example you give is precisely covered by point 2.

Ebenezer Scrooge 09.03.17 at 12:27 am ( 22 )
Trickle-down is popular because many people are happy to tug their forelock if they can look down on somebody else. This is more an American disease than a European one.
Collin Street 09.03.17 at 1:07 am ( 23 )
Phrased like that I think it would be hard to argue that any even half-rational investor would ever reject the 13% ROI.

You think other people are like you. Other people think other other people are like them. What this says about advocates of trickle-down economics is left as an exercise.

Gareth Wilson 09.03.17 at 7:00 am ( 24 )
There is a problem which is referred to in New Zealand as the three B's. Once people own a boat, a BMW, and a bach (holiday home), there's a tendancy to work less hard, maybe even retire early and sit around doing nothing. Margaret Thatcher herself harshly criticised the British equivalent of this. I share your skepticism that tax rates will help with this, but it is a problem.
nastywoman 09.03.17 at 7:45 am ( 25 )
– or let's blame it all on the "fashionable American-Anglo culture of "Disruption"?
While in sane and reasonable economical environments the words "trickle down" just don't exist BUT a culture of "Cooperation and Compromises or how do the Germans call it "Mitbestimmung" – and there is no need for "trickle down" in Mitbestimmung as everybody agrees that everybody should get her or his faire share of the "winnings".
bob mcmanus 09.03.17 at 10:19 am ( 26 )
Okay fine

"Capitalist income when directed by policy into productive actually job-creating investment is of general benefit and should be taxed at a lower marginal rate."

is the big trickle-down, the primal, universal trickle-down that enables all the others.

Not capitalist income vs labour income, not capital income share vs labour share, the problem is capital vs labour, " good to increase capital cause jobs " is an assumption so basic I don't even know how to quantify its adversary or opposition. Raw Number of workers? Capital's opposition is made invisible by mainstream economics. And looking at capitalist income or capitalist share of income or marginal productivity etc I think are means to ensure that capital quantity keeps increasing ("cause we can tax the profits or outflow") and capitalist political power (cause we don't want to lose the factory or sports stadium cause jobs) keeps increasing.

No, Marx didn't go here, but then Marx believed that increasing capital quantity would inevitably lead to proletarian revolution. We no longer have that excuse.

Tax not consumption, tax not income, tax capital directly so that we have less of it. The govt can use the income to create socialized investment and production.

CarlD 09.03.17 at 11:10 am ( 27 )
"In the absence of taxes and other government interventions,"

This is always the weasel out. There are always at least some taxes and government interventions on which to blame the failure of markets to work their magic.

bob mcmanus 09.03.17 at 12:25 pm (
Last one again. I may not respond if anyone bothers, because this is at least orthogonal to the OP.

How to tax capital? Simple, an example. Declare face value of equities at closing bell on April 15 and tax it. 50%, 10%, 0.1%. Forget realized capital gains or transaction taxes, tax face values. Yes indeed I understand what will happen to face values the day before and the day after. I want to drive NASDAQ to zero, how about Krugman? Why not? (Also bonds and bank assets, of course)

Yes, I know we do tax property at a local level and I spent some time looking for the tax incidence between business wealth and housing values but I suspect it varies wildly along with a maze of capital-protecting laws. I did notice that non- profits are taxed differently if at all, in other words, still looking at property under the lens of income. So the Clinton Foundation provides Chelsea economic security and political power in perpetuity.

Capital is a power relation that shows up in de-facto segregated communities and unequal education spending and outcomes and I would possibly tax houses as I would equities.

And of course all this can be incremental and marginal, we don't need to go fullbore expropriation from the start.

But private property is a socialized power relation, and we want to discourage private investment as much as possible. Otherwise, its still a trickle down economy.

faustusnotes 09.03.17 at 12:27 pm ( 29 )
I think it's important to take issue with comment 6, by Ian Maitland, which is a collection of despicable lies. I know it makes no difference to Ian Maitland, who is a lying shill, but it is important for people reading.

First Maitland says (contradictorily) that the proportion of the world population in poverty has fallen to 5%, and that only 152 million people live in poverty. This is untrue. The World Bank estimates that 10.7% of the world's population, or about 790 million people, live in poverty, and that the majority of poverty reduction has only occurred due to China and India (i.e. no change in Africa). Maitland is using dubious numbers from a single shonky 2009 analysis published in that dumpster for shit papers, the NBER.

Second, Peter Singer never wrote the phrase Maitland accuses him of, with respect to the Bangladesh famine. Singer's paper on the famine can be found here and is a discussion of the urgent need to increase aid to "East Bengal", as well as whether people in developed countries are justified in impoverishing themselves in support of starving people in East Bengal (he concludes that they should not impoverish themselves so much that their utility is lower than that of the Bangladeshis they want to help). He discusses and dismisses the idea that people in rich countries should not give aid to East Bengal because the real cause of its famine is population control, and aid without population control won't work: He recommends aid now, and then further aid for population control. He says people should be "working full time" to push both issues with their government, and sneers at the UK government for valuing concorde more than starving Bangladeshis.

The nearest quote to that which Maitland attributes to Singer comes from a later book, Practical Ethics , and is part of a discussion about whether rich people should give money to aid poor countries, and how to judge the best way to do this. Practical Ethics was written in 1979, about the time that now-independent Bangladesh was becoming a success story in health, population control and nutrition despite being much poorer than India. In the sentence before the sentence closest to that which Maitland cites, Singer states that we have an obligation to assist poor countries, but not to waste our money on ways that don't help. This sentence has nothing to do with Bangladesh, and nothing to do with abandoning poor countries to starve – in fact it concerns the best way to do precisely the opposite.

In short, what Maitland wrote here is entirely false, deliberately misleading, and malicious. I know most people on here are aware that Maitland is a lying liar, but just in case anyone is new here and thinks that the failure to challenge his lies is a sign that they're accepted by others as fact, here is the rebuttal: everything at comment 6 is a vicious lie, and people like Maitland should be deeply ashamed of themselves for the deliberate and mendacious lies they tell.

Layman 09.03.17 at 12:50 pm (
Garett Wilson: "There is a problem which is referred to in New Zealand as the three B's. Once people own a boat, a BMW, and a bach (holiday home), there's a tendancy to work less hard, maybe even retire early and sit around doing nothing. Margaret Thatcher herself harshly criticised the British equivalent of this. I share your skepticism that tax rates will help with this, but it is a problem."

Why is this a problem? Sure, it's an affront to Puritanism, but besides that?

Cranky Observer 09.03.17 at 1:03 pm ( 31 )

= = = Once people own a boat, a BMW, and a bach (holiday home), there's a tendancy to work less hard, maybe even retire early and sit around doing nothing. [ ] I share your skepticism that tax rates will help with this, but it is a problem. = = =

Why? Why is it a problem, that is?

I realize that many global cultures based on English, Scots, and closely-related Northern European cultures have adopted the neo-Puritan attitude that mankind deserves to be punished and that 60-100 hours/week of grinding labor from age 16 to 80 is a necessary part of that punishment. I'm less sure why the rest of us should accept that, particularly given the trend toward automation of production of the necessities of life.

some lurker 09.03.17 at 2:55 pm ( 32 )
The devil is, as always, in the details. These arguments always ignore the inconvenient facts of tax brackets (you mean the 90% tax rate for high earners doesn't apply to the first dollar earned?) or deductions/exemptions. My rule of thumb is that top earners pay an effective tax rate of around a third of the actual rate. George Romney was assessed a 70-90% rate in the 60s and paid something in the 30s: his son Willard would have been assessed a 39.6% rate and paid something in the teens, probably not too far off what most of the CT commentariat pay.

Economics is theoretical politics just as politics is applied economics: it all made more sense when it was called "political economy." Then you knew that economists were trying to write policy and that politicians were trying to hide their schemes behind some academic fig leaf.

And +1 to the "tinkle-down" variant I'll be sure to use that.

Tim Worstall 09.03.17 at 5:11 pm ( 33 )
"Tim @14 The example you give is precisely covered by point 2."

Umm, how? If there's a consumer surplus then the workers and inventors and capitalists etc simply aren't gaining all of he value. I don't we generally think that there is usually a consumer surplus?

RD 09.03.17 at 5:18 pm ( 34 )
GW @ 24

A rich guy on holiday at the beach notices a local fisherman sitting on the beach strumming a guitar and sipping a beer at 1400 hours. He inquires as to why he is not still at work.

Local; "I've caught enough fish for today!"

Rich Guy; "But if you work harder and longer, 6 or 7 days a week, 12 hours a day, you will be able to buy another fishing boat, employ more fisherman, buy 2 more boats, then 4 boats."

Local:" What for?"

Rich Guy: " So you can retire and sit on the beach strumming your guitar and drinking beer!"

bruce wilder 09.03.17 at 6:07 pm ( 35 )
. . . the marginal productivity theory . . . is at the heart of neoclassical economics. In a general equilibrium model of a perfectly competitive economy with full employment, it can be deduced as a theorem. . . . The neoclassical model . . . has never been a fully accurate representation of the economy.

Way to go out on a limb with classic understatement. Never a " fully accurate representation"!

It seems to me we are back in Lesson 1 / Lesson 2 economics, wondering whether Lesson 2 is going to be an explanation of how Lesson 1 is wrong and wrong in every conceivable respect and implication, . . . or an explanation of how Lesson 1 is right, but not quite right.

In some respects, you seem to want to turn the claims for trickle-down economics topsy-turvy and show how pretty much the opposite of what the advocates of trickle-down predicted and recommended has turned out to be true and ought to be recommended.

But, in other respects, you seem to want to defend neoclassical economics, as a merely imperfect representation, which has, perhaps become less accurate as the further development of the economic system has unfolded.

The rhetorical turn, "it is even less accurate now than in the past" leads to a narrative in which epiphenomena are transformed into their own causal forces, perhaps to avoid the contradiction in your analysis. Wage stagnation is an outcome that disproves the neoclassical economics that recommended the policies that created wage stagnation, but some instinct holds you back from saying that, so now wage stagnation is itself a reason to believe that neoclassical economics is "less accurate" a representation. Did wage stagnation cause itself? Did the recommendations or expectations of orthodox neoclassical economics have anything to do with it?

I guess we do not need to answer and we should not wonder if the recommendations themselves were innocent misunderstandings of the economy or a fraudulent apology for policy that in fact targeted the consequent upward redistribution of income and wealth.

Is neoclassical economics simply a rhetoric engine for generating these frauds or did neoclassical economists know what the powers-that-be were doing as well as how to sell what the powers-that-be were doing? It is a classic conundrum in economics. The doctrines of economics provide the styling for the outward apology and (importantly false) rationale (see the discussion of the allegedly Machiavellian roles of James M Buchanan and Milton Friedman in the other thread) for policy, but also the operating manual for policy. Somewhere, someone has to have some idea of what they are doing, in pulling the levers and operating the machinery of the economic system. Even granted that there might be important limits -- the serious people have been known to run the economy off the edge of a cliff. It is just hard to know even then -- when we are enveloped in a crisis of crisis capitalism -- if the powers-that-be are doing it by mistake (1930) or on purpose (2008).

I cannot tell from the OP whether you think economic theory and the intuitions it cultivates, for better and worse, should matter or not. Is neoclassical economics wrong? Or misused?

Howard Frant 09.03.17 at 7:55 pm ( 36 )
I sort of question whether it's even worth engaging with trickle-down at this level, as opposed to just saying "Well, it doesn't work." Are there still serious ecenomists who are saying it does?

JQ@7

The dramatic increase in income and reduction in poverty in the Third World go far beyond China and India. China is the most extreme, but it's pretty much everywhere, except Africa.

Alex SL@8

People are always tempted to respond to economists' assertions by saying,"Well, *I* wouldn't do that!" Unfortunately, introspection generally doesn't work, because the assertions usually are not about what a typical person would do, but about what people on the margin would do, i.e., people who are close to indifferent beween doing it and not doing it.

steven t johnson@18

Two things you can be sure of (both in line with neoclassical theory): 1) The guy operating the backhoe will be making more than the guy wielding the shovel 2) The guy operating the backhoe will be making (a lot) more than the minimum wage.

J-D 09.03.17 at 8:48 pm ( 37 )
Gareth Wilson
How is it a problem? a problem for whom?
F 09.03.17 at 9:30 pm ( 38 )
14 is also addressed quite well and in detail by Michael Pettis' latest .
Peter T 09.04.17 at 12:05 am ( 40 )
1) The guy operating the backhoe will be making more than the guy wielding the shovel 2) The guy operating the backhoe will be making (a lot) more than the minimum wage.

At the level of: a lot of guys wielding shovels will move less dirt than a lot of guys driving back-hoes, and so be less productive and have less to share, this is true.

At the level of the work-crew digging ditches it's not. Three guys dig a ditch – one marks the line, one drives the back-hoe, one shovels the odd bits that the back-hoe can't do. Every so often they change places, because they all know all the jobs, and shovelling is hard work. Or old Joe drives the back-how while young Dave does the shovel, because that's fairer given Joe's got a bad back. Joe gets paid a bit more because he's senior. And Ramjit gets paid most because he's in charge and is responsible for seeing that the ditch goes where it's supposed to.

You can't devolve cooperative production down to individual productivity.

Tabasco 09.04.17 at 12:20 am ( 41 )
"The dramatic increase in income and reduction in poverty in the Third World go far beyond China and India."

No one talks much about South Korea, but a generation ago they were very poor. Now they are as rich as Japan, with income distribution like the Scandinavians. Of course this all happened with a great deal of heavy handed government intervention, to the disapproval of free market fundamentalists in the West, but it was still capitalism.

Gareth Wilson 09.04.17 at 12:24 am ( 42 )
It's a problem because the man with the three B's could be producing more wealth and improving everyone's standard of living, but he isn't.
J-D 09.04.17 at 5:49 am ( 43 )
Gareth Wilson
Well, hypothetically he could be; but then again, hypothetically he could be hard at work grinding the faces of the poor, and it's a good thing, and not a problem, that he isn't. What he is actually doing is indulging himself with leisure, which at least contributes to his own standard of living. If everybody works less, everybody has more leisure, which is a contribution to everybody's standard of living.
Scott V 09.04.17 at 1:46 pm ( 44 )
"If Claim 2 doesn't hold then all the benefits of increased effort from highly productive workers and investors is captured by the workers and investors themselves. "

This statement does not seem accurate.

My restatement would be:

If Claim 2 doesn't hold then all the benefits of increased effort from highly productive workers and investors is captured by the workers, investors and their customers.

Encouraging a popular actor to take on another role, replacing someone less skilled, will not in and of itself increase anyone's productivity. It will however benefit those that consume the actors output.

Equally encouraging a highly paid person working to abandon their secure position and take the risk of starting a firm or joining a risky start-up, may in the short run only benefit those that consume the new product.

SMV

Jake Gibson 09.04.17 at 2:34 pm ( 45 )
If, I repeat, If capital is invested, it is much more likely to be in automation. Which maintains or increases productivity while lowering labor costs.
Demand is the only thing that can increase employment. But, that employment could be anywhere in the world.
otpup 09.04.17 at 6:01 pm ( 46 )
The old myth that acquisitiveness always and everywhere falls into the neat little channels that happen to make it socially productive rather than the opposite.
bruce wilder 09.04.17 at 9:47 pm ( 47 )
Howard Frant @ 69 (re: backhoe)
Peter T @ 40 (re: workcrew)

Yes to both of you.

Like Howard, I do not see what is gained here by linking the intuitions of "trickle-down" to marginal product theory of allocative efficiency. I have even used the "big shovel" theory myself to explain the concept of marginal product and its application to wages.

But, marginal product theory is an analysis arrested at a very early stage, with no uncertainty or strategic behavior, let alone such pre-requisites of practical production organization as science, engineering, energy and management -- all of them touched on in Peter T's sketch.

It seems particularly remarkable that JQ makes no mention of what I would take to be the biggest betrayal of "trickle-down": that lowering the marginal rates of income tax on super-high wage earners "incentivizes" (horrible word used here ironically) CEOs to direct the affairs of large enterprises in ways that transfer income upward, including but not limited to, control frauds.

If the economic system is organized primarily in hierarchical organization, then allowing those in charge to do well by predation and looting is probably a formula for increasing inequality. A wild and crazy idea I know, but there it is.

John Quiggin 09.05.17 at 12:30 am ( 48 )
BW @47 "It seems particularly remarkable that JQ makes no mention of what I would take to be the biggest betrayal of "trickle-down": that lowering the marginal rates of income tax on super-high wage earners "incentivizes" (horrible word used here ironically) CEOs to direct the affairs of large enterprises in ways that transfer income upward, including but not limited to, control frauds. "

That was the central point of the post (incentives reward unproductive rent-seeking), so either I've been very unclear or BW is reading uncharitably/with poor comprehension. If anyone is still reading the thread, could they help me work out which it is.

J-D 09.05.17 at 2:44 am ( 49 )
John Quiggin

That was the central point of the post (incentives reward unproductive rent-seeking), so either I've been very unclear or BW is reading uncharitably/with poor comprehension. If anyone is still reading the thread, could they help me work out which it is.

'I/you/they could have written that more clearly' is like a fortune-teller's cold reading, the kind of thing that is always or nearly always true, but in this case it seems to me you were clear enough (and as a cold reading obviously it applies to bruce wilder as much as it does to you; and to me as well, of course). It seems as if there was some reason (although I can't think of one) that it was important to bruce wilder to signal disagreement with you instead of, as could so easily have been done, signalling agreement, making the same point not as a correction of an omission on your part but as an amplification: 'One particularly important/striking example of what you're discussing is the behaviour of CEOs of large corporations transferring income upwards including, but not limited to, control frauds' (or something like that).

RD 09.05.17 at 2:44 am ( 50 )
No one ever said on their death bed, "I wish I had spent more time at the office."
bob mcmanus 09.05.17 at 11:46 am ( 51 )
(incentives reward unproductive rent-seeking)

Kodak vs Apple Janitors

"The smaller reminders can be just as telling. One former Apple contractor recalled spending months testing a new version of Apple's operating system. To celebrate the release, the Apple employees they'd worked closely with on the project were invited to a splashy party in San Francisco, while the contractors had beers among themselves in a neighborhood pub."

A large part of the Stormfront and Breitbart funding comes from Silicon Valley.

To tell the truth, I am not that interested in Tim Cook. I am not even interested in the Apple janitors.

I am interested in those employees that benefit from ultimate rent-seeking company Apple who went to the San Francisco party, and support either the libertarian right or the neoliberal center (and probably TPP). Whatever economic theory we come up with has to reach those folk and not threaten their livelihoods or it is politically as useless as Georgism.

CaptFamous 09.05.17 at 4:18 pm ( 52 )
Has anyone done a critique of trickle-down from the perspective of supply chain optimization? I'm a bit rusty on it, but a lot of the work that's been done on creating incentives for supply chain partners shows why just giving people money in the hopes that they spend it never pays back as well as just keeping the money (they reoptimize at a level that involves them just pocketing a higher percentage of the money than they otherwise would have), and that effective incentives demand the desired behavior before they pay out.
RD 09.05.17 at 4:41 pm ( 53 )
The air in Shanghai was breathable when everyone rode a bicycle. Plus exercise.
Procopius 09.06.17 at 9:21 am (