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

Contents Bulletin Scripting in shell and Perl Network troubleshooting History Humor


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 Financial_skeptic Political skeptic Groupthink Neoliberalism as a New Form of Corporatism
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 updates

Softpanorama Switchboard
Softpanorama Search


NEWS CONTENTS

Old News ;-)

2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 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).

[Jun 18, 2016] Greenspan Shocked Disbelief

Greenspan phony "Shocked disbelief" reminds classic "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca. Compare with "... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said. ..."
Notable quotes:
"... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," ..."
"... Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. ..."
"... Private greed, not public good, caused this catastrophe: "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities. ..."
"... But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime." ..."
"... The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar. ..."
"... There are no free markets in America, any more than there is free lunch. ..."
"... So it wasn't the military-industrial complex that did us in after all . . . ..."
"... It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. ..."
"... If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly. ..."
"... it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. ..."
"... Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. ..."
"... Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse? ..."
"... Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway. ..."
"... Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues ..."
"... What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored? ..."
"... "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca ..."
October 24, 2008 | truthout.org

by: Robert Borosage, The Campaign for America's Future

On October 23, former Federal Reserve Chairman Alan Greenspan testified before a House Oversight and Government Reform Committee hearing on the role of federal regulators in the current financial crisis.

It marks the end of an era. Alan Greenspan, the maestro, defender of the market fundamentalist faith, champion of deregulation, celebrator of exotic banking inventions, admitted Thursday in a hearing before Rep. Henry Waxman's House Committee and Oversight and Government Reform that he got it wrong.

"Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," he said.

As to the fantasy that banks could regulate themselves, that markets self-correct, that modern risk management enforced prudence: "The whole intellectual edifice, however, collapsed in the summer of last year."

Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. Greenspan dismissed that goofiness in response to a question from one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis only as the unregulated shadow financial system securitized mortgages, marketed them across the world, and pressured brokers to lower standards to generate a larger supply to meet the demand. Private greed, not public good, caused this catastrophe:

"The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities.

But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime."

Now hung over from their bender, the banks could be depended upon to remain sober "for the indefinite future." Or until taxpayers' money relieves their headaches, and they are free to party once more.


IN ACCORDANCE WITH TITLE 17 U.S.C. SECTION 107, THIS MATERIAL IS DISTRIBUTED WITHOUT PROFIT TO THOSE WHO HAVE EXPRESSED A PRIOR INTEREST IN RECEIVING THE INCLUDED INFORMATION FOR RESEARCH AND EDUCATIONAL PURPOSES. TRUTHOUT HAS NO AFFILIATION WHATSOEVER WITH THE ORIGINATOR OF THIS ARTICLE NOR IS TRUTHOUT ENDORSED OR SPONSORED BY THE ORIGINATOR.

"VIEW SOURCE ARTICLE" LINKS ARE PROVIDED AS A CONVENIENCE TO OUR READERS AND ALLOW FOR VERIFICATION OF AUTHENTICITY. HOWEVER, AS ORIGINATING PAGES ARE OFTEN UPDATED BY THEIR ORIGINATING HOST SITES, THE VERSIONS POSTED ON TO MAY NOT MATCH THE VERSIONS OUR READERS VIEW WHEN CLICKING THE "VIEW SOURCE ARTICLE" LINKS.

Comments

This is a moderated forum. It may take a little while for comments to go live.

The only Guantanamo that the

Sun, 10/26/2008 - 23:37 - Captain America (not verified)

The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar.

What they did dwarfs the damage caused to this country by 911, (no disrespect for the many innocents who died). However, here, every single citizen is a victim of fraud and corruption on a scale that was heretofore inconceivable. Greenspan, Bush and now Paulson have done more than Bin Laden and his hordes could do in a 100 years.

By the way, if you protest YOU wind up locked up for being un-American. What happened America ?

There are no free markets in

Sun, 10/26/2008 - 19:27 - pink elephant (not verified)

There are no free markets in America, any more than there is free lunch. The game was always fixed and Greenspan was the ultimate shill for the fixers. The past thirty years have been an orgy of greed with common sense shoved aside for the sake of uncommon expediency. Americans became infatuated by arcane formulas and dense incomprehensible mathematics to the point that they forget simple arithmetic. America wake up it was only a dream, and a bad one at that.

So it wasn't the

Sun, 10/26/2008 - 19:07 - Anonymous (not verified)

So it wasn't the military-industrial complex that did us in after all . . .

It's clear from comments on

Sun, 10/26/2008 - 15:40 - afrothethics (not verified)

It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. The truth is as plain as the nose on your face: Greenspan, the Federal Reserve, the investment banks, the Bush administration and several members of Congress unobtrusively acted to consciously and knowingly to rob the national treasury for the sake of capitalism's sacred cow: capital accumulation on behalf of the nation's political and economic elite. If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly.

We have heard statements

Sun, 10/26/2008 - 10:11 - DJK (not verified)

We have heard statements like "the mathematical models used for knowing the behavior of derivatives based on subprime mortgages were too difficult to understand", etc. But it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. And this is why they turned a blind eye to many of the rating agencies giving many of these instruments AAA ratings. I am sure that a real investigation will reveal numerous instances of fraudulent activity in conjunction with this debacle. Those perpetrators must be identified and brought to justice. While this will not fix our current problem, it hopefully should serve as a deterrent to those who would in the future attempt to again engage in such activities.

Well here you have it a

Sun, 10/26/2008 - 08:13 - Robert Iserbyt (not verified)

Well here you have it a confessional lie from the biggest fraud perpetrator in the history of American finance Why the markets ever listened to this criminal in the first place is evidence that our entire nation should be required to take a full year of real unfettered economics just in case they don't understand what is going on now. All the pundits on MSNBC and all the talking heads should be removed from the airwaves. The Bailout what will that do? the answer lies before you.

Sounds like the "maestro"

Sun, 10/26/2008 - 02:02 - Anonymous (not verified)

Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. Come on, do you really think we are all so stupid to buy into the story that you couldn't predict a melt down knowing that those writing the subprimes held no responsibility for their actions? That's like giving a "get out of jail card" to someone who just created a felony! Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse?

I'm a former real estate

Sun, 10/26/2008 - 00:24 - two7five7one (not verified)

I'm a former real estate broker and my son is a mortgage broker. From about 2004 through the beginning of this "greatest financial crisis since '29", we frequently talked on the phone about the disaster which would ensue when the real estate value appreciation stopped, and people were no longer fueling the economy with money borrowed against their equity, and the sub-prime loan fiasco would end. We knew it would be disastrous, and both of us were astonished that neither the FED nor congress was willing to say or do anything about it. Anyone who has witnessed over the years the cycle of boom/bust/boom/bust in the real estate market knew that after eleven years of unprecedented "boom" -- '96 through '2007 -- the "bust" would be like an earthquake. Paulson and Greenspan and their ilk now denying that they suspected this is just is just their lying to protect the GOP which was benefitting from the booming economy. They should both end up in prison, with all of the GOP members of congress who have had their hands in the cash register.

Dance clown, dance. First

Sat, 10/25/2008 - 23:48 - mysterioso (not verified)

Dance clown, dance. First you were against the FED until you became head of the FED. Then you were for trickle down economics and letting the "system" regulate itself until you saw the inevitable destruction it caused. Dance clown, dance. You should be the first one sent to prison under the "Un-American activities act". The arrogance of your testimony before the committee was appalling. You honestly couldn't believe you were wrong !!!

Shocked disbelief, my foot.

Sat, 10/25/2008 - 23:35 - slw (not verified)

Shocked disbelief, my foot. Many of us predicted EXACTLY this outcome.

This is like telling the Fox

Sat, 10/25/2008 - 22:43 - topview (not verified)

This is like telling the Fox to watch the Hens and then walking away and trusting him to do the right thing. Government has to return to regulation and see that there is no hanky, Banky going on anymore. Monopolies have to be busted up, like the Communication industry's, the Drug industries and any other Corporations that control to much of the way the Country operates. No more Outsourcing any Government duties.

Shocked Disbelief is a ploy.

Sat, 10/25/2008 - 22:00 - radline9 (not verified)

Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway.

Where's Ayn Rand when you

Sat, 10/25/2008 - 20:53 - anglohistorian (not verified)

Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues. We can spend trillions on war and corporate bailouts, but we can't have a single payer health system? We can't rebuild our infrastructure? Say it again- give me a break!

What about the 1994 Act of

Sat, 10/25/2008 - 20:41 - Jtmonrow (not verified)

What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored?

"...I am shocked - shocked,

Sat, 10/25/2008 - 20:29 - Anonymous (not verified)

"...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca

This would be the same

Sat, 10/25/2008 - 19:50 - dtroutma (not verified)

This would be the same "shocked disbelief" expressed by Willie Sutton's mother?

shouldn't Greenspan give his

Sat, 10/25/2008 - 18:06 - Anonymous (not verified)

shouldn't Greenspan give his salary and bonus back to taxpayers?

[May 20, 2016] Gerald Friedman: How the Dogmatic Despair of Mainstream Economists Brought You Donald Trump

Notable quotes:
"... By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. A version of this post first appeared at the Institute for New Economic Thinking website ..."
"... Lesser Depression ..."
"... The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals was that it disrupted a consensus that nothing can be done by government to improve the performance of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky to even suggest to the general public that we can do better. Instead, the task of economists and other policy elites becomes to explain to the general public why they should accept stagnant incomes and rising inequality, and applaud the anemic growth of recent years as the best possible outcome. But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed "responsible" elite economists see their role as to persuade the public that nothing can be done, in the hope of heading off the challenge of those who would capitalize on the electorate's appetite for change. They have to slap down critics. "Responsible" elite economists have to keep the party of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those whose living standards have suffered most from stagnant growth are more inclined to believe politicians promising change. ..."
"... John Maynard Keynes showed how active government policy can raise employment and output; his followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further investments and leads businesses to find ways to raise labor productivity to match increasing product demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how active government policy can raise growth rates with investments in infrastructure, in public services, in human capital development, and in research and development. By listening to these ideas, economists associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth and rising inequality, culminating in the current Lesser Depression. ..."
"... I had dinner last night with two excellent people who happen to be doing well at this time. They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic. They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote for Clinton in the Fall. What I view as the credible case against Clinton has not reached them with any strength or registered at all. I was asked (because I had said nothing while they talked–I hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that. ..."
"... HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything demonstrates a continuity of imperialist strategy across administrations, that's it. ..."
"... " I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that." ..."
"... I run into this all the time. Utter and complete foreign policy illiteracy, particularly from otherwise politically correct millennials who know so little that Hillary gets a complete pass. ..."
"... This is a common story and illustrates that our current detachment from the world around us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles. Modern corporations have supplied the populations of the world with abundance of goods, but in order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will, that holds society together. ..."
"... TINA will be maintained by propaganda and physical force. We see that the propaganda is starting to weaken because the contradictions of the message can no longer be hidden. The destruction is too widespread and the inequality can no longer be hidden. You can hollow out a social system only so much before it collapses. The collapses we are witnessing is the promise of democracy. A collapse of the ideals of moderation and compromise. ..."
"... We are entering a phase of civil war. It is still carried out in a polite manner and intellectually, the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite are becoming more straightforward and more people are waking up to the fact that the system is rigged against them. ..."
"... This civil war is a battle over leadership. It is a battle to demand good government instead of no government. It is a battle to demand a government for and by the people. A battle for the common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support and action. The hearts and minds of the population was won over long ago to wholeheartedly support capitalism and private ownership of the world's resources. This is proving to be a disaster. ..."
"... Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds resources and potential. They showed their hand in 2008 with the bailouts and implementation of austerity policies. In their minds, there is no turning back. To compromise means failure. For them, TINA is real and logical. This is the perspective of owners of capital. They gain strength and advantage from seeming to compromise, but in the end know they can always reverse course and regain private control. Subterfuge and force allows the resilience of capitalism as the reigning social order. ..."
"... Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently believes the capability of people to be convinced by reasoned argument is not strong. From my limited reading of his work, he suggests that humans are instinctive beings who, when they have strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about these beliefs. ..."
"... For example, I believe HRC is little more than a well-connected and well traveled mediocrity, with a record of few positives and many egregious negatives that justifies this assessment. I view her as potentially more damaging to the USA, as President, than Trump. ..."
"... Successful big ideas and big projects require cheap abundant energy, resources and intelligent design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing is almost certainly the best that the lobotomized Keynesian planners will be able to think up and do. ..."
"... A truly innovative program to get the economy moving in a positive direction would be to outlaw personal vehicles and rebuild the nation's railway network. ..."
"... I share your antipathy toward freeways. I remember the big Freeway they built in Fresno when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving an existing surface street. Jobs were part of the rationale. ..."
"... "Sorry, nothing more can be done for you." TINA. ..."
"... "How can I help you today?" ..."
May 19, 2016 | nakedcapitalism.com

By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. A version of this post first appeared at the Institute for New Economic Thinking website

The ferocious reaction to my assessment that Senator Bernie Sanders' economic and health care proposals could create long-term economic growth shows how mainstream economists who view themselves as politically liberal in America have abandoned progressive politics to embrace a political economy of despair. Rationalizing personal disappointment and embracing market-centric economic theories according to which government can do little more than fuss around the edges, their conclusions - and the political leadership that embraces them - have little to offer millions of angry ordinary people for whom the economy simply isn't working.

It has certainly been a rough seven years for the economists in the Obama Administration. While avoiding a Great Depression, the Administration has presided over what Paul Krugman and Brad DeLong call a " Lesser Depression ." One might almost forgive them for a certain defeatism after seven years of painfully slow economic recovery, and the dismay of seeing urgently needed programs blocked by the Republican congressional majority. After so many compromises and let-downs, perhaps it is easier to tell those who expect more that it just can't happen. There is comfort in the Thatcherite phrase, "There Is No Alternative" (TINA).

Combined with orthodox neoclassical microeconomics, however, rationalization has produced a toxic political economy that abandons progressive ideals and surrenders political space to xenophobes and the populist rightwing (see: Donald Trump). The mainstream economists who have attacked my embrace of Keynesian economics have abandoned, in practice, the notion that government can effectively intervene in the economy to raise levels of employment, and to promote economic growth and equity. Instead, they have returned to pre-Keynesian Classical thinking, where the very suggestion that government action can raise growth rates or wages is taken to be obviously wrong. Criticisms of the orthodox model and its conservative policies are deemed worthy of scorn, to be dismissed tout court because they are obviously at variance not only with textbook economics, but with what we need to believe in order to accept failure .

The mechanism of economic policy paralysis among the liberals who espouse market-centric economics works like this: If we accept the (flawed) premise that the total supply of goods and services equals total demand, then we can agree with the Congressional Budget Office (CBO) that potential output is best measured by observing actual output. And, with that - presto! - unemployment magically disappears, and we no longer suffer from slow growth. Conveniently align growth projections with the otherwise-disappointing performance during the Lesser Depression, and, as the CBO has done, estimates of potential growth now equal actual growth: Instead of the 3 percent average annual growth of the 1959-2007 period, not to mention the 4 percent growth 1947-73, we are now told to accept 2 percent growth not as a disappointment, but as recognition of an unfortunate necessity. Such reevaluations say to policy elites, "Hey, we are doing as well as can be expected." To the general public, the message is: "Sorry, nothing more can be done for you." TINA.

The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals was that it disrupted a consensus that nothing can be done by government to improve the performance of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky to even suggest to the general public that we can do better. Instead, the task of economists and other policy elites becomes to explain to the general public why they should accept stagnant incomes and rising inequality, and applaud the anemic growth of recent years as the best possible outcome. But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed "responsible" elite economists see their role as to persuade the public that nothing can be done, in the hope of heading off the challenge of those who would capitalize on the electorate's appetite for change. They have to slap down critics. "Responsible" elite economists have to keep the party of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those whose living standards have suffered most from stagnant growth are more inclined to believe politicians promising change.

It was only by rejecting classical economics that Franklin Roosevelt was able to save the American economy and bring about a revolution in social policy. And only by rejecting the new classical economics and the policy of so-called responsible elite economists can Clinton meet our current economic crisis.

John Maynard Keynes showed how active government policy can raise employment and output; his followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further investments and leads businesses to find ways to raise labor productivity to match increasing product demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how active government policy can raise growth rates with investments in infrastructure, in public services, in human capital development, and in research and development. By listening to these ideas, economists associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth and rising inequality, culminating in the current Lesser Depression.

The debate over my little report showed how mainstream economics has left us with a smugly certain macroeconomics lacking in imagination, and offering no effective policies to move beyond economic stagnation and escalating inequality. If these economists cannot do better, then we risk more than personal disappointment; we gamble our liberal political economy against the likes of Donald Trump and Ted Cruz. Hillary Clinton can do better. And Americans deserve better.

James Levy , May 19, 2016 at 6:31 am

A very bold thing for a man like this to say. I know he will be criticized (vilified?) for his misplaced belief that Clinton can "do better", but considering who this man is and where he is coming from, condemning him at this stage of the game would be churlish. He's taken on The Bigs and the stifling orthodoxy they embody and for that we owe him.

I had dinner last night with two excellent people who happen to be doing well at this time. They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic. They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote for Clinton in the Fall. What I view as the credible case against Clinton has not reached them with any strength or registered at all. I was asked (because I had said nothing while they talked–I hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that.

so , May 19, 2016 at 7:10 am

Sad. There is them and there are us. Empathy. Hard to have when your busy all the time.

jsn , May 19, 2016 at 7:16 am

I've had many similar recent encounters. I find that if I ask for a positive reason to vote Clinton, the first three or four reasons they raise can be dismissed by single phrase references to past betrayals, Sister Solja, End of Welfare, Nafta etc. and the next few by scandals, Lewensky or what should be scandals as you mentioned. As a rule after four or five tries I get to watch them self censor before each subsequent try and don't have to make any negative claims myself.

I doubt I've changed minds, but they no longer doubt mine.

Torsten , May 19, 2016 at 7:54 am

I would have first pointed to Honduras. And Haiti:

https://www.washingtonpost.com/blogs/post-partisan/wp/2016/03/10/hillary-clinton-needs-to-answer-for-her-actions-in-honduras-and-haiti/

What did she do in Nicaragua?

hemeantwell , May 19, 2016 at 8:01 am

I think that was a slip, but an historically correct one I can completely sympathize with.

HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything demonstrates a continuity of imperialist strategy across administrations, that's it.

bowserhead , May 19, 2016 at 8:46 am

" I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that."

I run into this all the time. Utter and complete foreign policy illiteracy, particularly from otherwise politically correct millennials who know so little that Hillary gets a complete pass.

Norb , May 19, 2016 at 9:01 am

This is a common story and illustrates that our current detachment from the world around us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles. Modern corporations have supplied the populations of the world with abundance of goods, but in order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will, that holds society together.

TINA will be maintained by propaganda and physical force. We see that the propaganda is starting to weaken because the contradictions of the message can no longer be hidden. The destruction is too widespread and the inequality can no longer be hidden. You can hollow out a social system only so much before it collapses. The collapses we are witnessing is the promise of democracy. A collapse of the ideals of moderation and compromise.

We are entering a phase of civil war. It is still carried out in a polite manner and intellectually, the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite are becoming more straightforward and more people are waking up to the fact that the system is rigged against them.

This civil war is a battle over leadership. It is a battle to demand good government instead of no government. It is a battle to demand a government for and by the people. A battle for the common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support and action. The hearts and minds of the population was won over long ago to wholeheartedly support capitalism and private ownership of the world's resources. This is proving to be a disaster.

Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds resources and potential. They showed their hand in 2008 with the bailouts and implementation of austerity policies. In their minds, there is no turning back. To compromise means failure. For them, TINA is real and logical. This is the perspective of owners of capital. They gain strength and advantage from seeming to compromise, but in the end know they can always reverse course and regain private control. Subterfuge and force allows the resilience of capitalism as the reigning social order.

I bring up the notion of a civil war because these ideas are too important to be left to chance. In America, the citizenry has been complacent with their lot in life and so have lost control over their fate. As the world changes around them, they desperately attempt to hold onto their position while not realizing they are supporting their own impoverishment. Speaking ideas of the common good -for ALL- and notions of public ownership of land, natural resources, citizens natural rights to jobs, basic income, and healthcare divide family and friends. Those who are comfortable don't want to cause trouble and those feeling the pressures brought down upon them by an unrelenting system are too weak and fearful to act.

In a sense, the revolution has already begun. It is the revolution to convince people that there is a better and different way to live our lives.

John Wright , May 19, 2016 at 10:11 am

Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently believes the capability of people to be convinced by reasoned argument is not strong. From my limited reading of his work, he suggests that humans are instinctive beings who, when they have strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about these beliefs.

This can explain why attempting to convince someone to change their political/religious beliefs is fated to be largely futile.

For example, I believe HRC is little more than a well-connected and well traveled mediocrity, with a record of few positives and many egregious negatives that justifies this assessment. I view her as potentially more damaging to the USA, as President, than Trump.

Per Haidt, maybe my beliefs are instinctive and I am willfully blind to all of Clinton's accomplishments over the last 40 years.

human , May 19, 2016 at 10:48 am

ROTFLMAO

david s , May 19, 2016 at 6:51 am

I think that if there are to be any Keynesian big ideas and projects that will help lift us out of this stagnation, they will much more likely come from a Trump Administration than a Clinton one.

jgordon , May 19, 2016 at 7:47 am

Successful big ideas and big projects require cheap abundant energy, resources and intelligent design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing is almost certainly the best that the lobotomized Keynesian planners will be able to think up and do.

A truly innovative program to get the economy moving in a positive direction would be to outlaw personal vehicles and rebuild the nation's railway network. But this society isn't even anywhere close to having something so useful on its agenda. So we'll do some Keynesian program, funnel the few remaining resources we have left down into some stupid dead end rathole, and then in a couple of years we'll be envious here in America of the extravagant lifestyles that the Mexicans are leading. Hell Trump's wall will be a lot more useful keeping the Mexicans in who are trying to flee. That is the end result of Keynesian programs in a delusional society with bass-ackward priorities. Way more harm than good.

fresno dan , May 19, 2016 at 10:11 am

I share your antipathy toward freeways. I remember the big Freeway they built in Fresno when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving an existing surface street. Jobs were part of the rationale.

I have been gone 20 years, and they had gone on a real freeway building tear while I was gone. The whole city crisscrossed with freeways laid out as if someone had thrown a bowl of spaghetti on a map – apparently so every neighborhood can enjoy the sound of traffic.

Really, Fresno is just not that physically big to justify all these freeways. And with its high unemployment and no real "center" there aren't any places with traffic congestion anyway – but you get these dubious justifications that millions of dollars are wasted because an implausible auto trip is 4 minutes longer without the freeway….

david s , May 19, 2016 at 6:55 am

There seems to be a developing narrative that the Obama Administration has just been brimming with big ideas that have been thwarted by evil Republicans.

I don't remember it this way. I do remember an Obama Administration that turned to austerity shortly after the 2009 stimulus, and one that has been patting itself on the back all along about what a great job it has done.

"All across America, families are tightening their belts and making hard choices. Now, Washington must show that same sense of responsibility."
President Obama, April 2009(!)

Akronite , May 19, 2016 at 7:56 am

Now that the pictures we snapped of Obama are finally beginning to develop, where we thought we had photographed his lush jungle, we're now seeing just a single thin sapling planted for "the future." And Clinton will soon have a picture of her snapped at this sad tree, with her big lying smile.

hemeantwell , May 19, 2016 at 8:09 am

I don't think Friedman is saying this, unless Rex Tugwell has been secretly disinterred and is serving under Obama. The capitalist ideological counteroffensive that got going in the 70s has been hegemonically successful. Friedman doesn't acknowledge that enough, he instead focuses on what sounds more like disciplinary politics.

flora , May 19, 2016 at 8:22 am

Great post. Thanks.

JLCG , May 19, 2016 at 8:26 am

This type of article or perhaps, all articles about the Economy, deal with the Economy as a substance to which people are appended as accidents. The economy is the sum total of the effort of the people and if the people think that enjoying this very present is preferable to an effort to build a future nothing can be done about it. It is the mind of the people that has to be changed. Wars are very good mechanisms for that.

Carla , May 19, 2016 at 9:14 am

I can't remember if I got this link from an NC comment, or elsewhere. In any case, it's a scary read: "The 14 Defining Characteristics of Facism," augmented by a selection from "They Thought They Were Free." http://rense.com/general37/fascism.htm

Brings Obama and HRC to mind just as much as Trump, if not more.

sinbad66 , May 19, 2016 at 10:05 am

Read "Democracy, Incorporated" by Sheldon Wolin: http://www.amazon.com/Democracy-Incorporated-Managed-Inverted-Totalitarianism/dp/069114589X/ref=sr_1_1?ie=UTF8&qid=1463666525&sr=8-1&keywords=democracy+incorporated

Explains it all….

fresno dan , May 19, 2016 at 9:57 am

"The ferocious reaction to my assessment that Senator Bernie Sanders' economic and health care proposals could create long-term economic growth shows how mainstream economists who view themselves as politically liberal in America have abandoned progressive politics to embrace a political economy of despair."
==========================

Here is the problem: "a political economy of despair" – accepting that economists are a real objective academic discipline is a BIG mistake – the idea that these technocrats, who never seem to recognize how much fraud, rent seeking, and capture of the political system
((because the people paying them don't WANT THEM TO)),
decides things like how much inequality there is, which than decides how much demand there is, and NOT knowing, and apparently NOT WANTING TO KNOW, that it is a POLITICAL economy, and politics decides how resources are often allocated.
We can have single payer heath care if we choose it and free college education (it wasn't all that long ago that I went to a CA college essentially for free). HOW is it college used to be free when GDP was less than 1/6 of what it is now??????
It just doesn't make sense that we used to be able to afford free college and we can't now. It is a POLITICAL decision – when Krugman says Sanders plan is "too expensive" Krugman is making a political decision – not some objective scientific assessment. And if he is not even smart enough to ponder why it used to be free and it is not free now – well, theres your problem right there!

Punxsutawney , May 19, 2016 at 10:22 am

Nice to see this article. When I talk about economics, most people who know anything, only know what someone on TV tells them, so they often question, well who agrees with you? Nice to have another name to list.

And then…

"Sorry, nothing more can be done for you." TINA.

Of course for those at the tippy-top, "How can I help you today?"

[May 20, 2016] Economic Models Must Account for Power Relationships

economistsview.typepad.com
I have a new column:
Economic Models Must Account for Who Has the Power'' : Nobel Prize winning economist Joseph Stiglitz recently highlighted two schools of thought on how income is distributed to different groups of people in the economy. Which school is correct has important implications for our understanding of the forces that have caused the rise in inequality, and for the policies needed to reverse this trend. It also relates to another controversy that has flamed up recently, how economics should be taught in principles of economics courses. ...

Posted by Mark Thoma on Tuesday, May 17, 2016 at 06:09 AM in Economics , Market Failure | Permalink Comments (22)

!-- View blog reactions

--> !-- -->

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post. anne : , Tuesday, May 17, 2016 at 06:27 AM
Excellent approach, incisive writing.
kthomas -> anne... , Tuesday, May 17, 2016 at 10:55 AM
Im suprised you are so enamoured of Stiglitz. He does not put up with BS.

Still, you are right. As usual.

DrDick : , Tuesday, May 17, 2016 at 06:50 AM
Awesome. Thanks for this.
Adamski : , Tuesday, May 17, 2016 at 07:22 AM
Good one from the Stig, also.

And according to Sraffa's side in the Cambridge capital controversy labour and capital do not receive their marginal products, which leaves the distribution of income to some extent socially or politically determined.

Now please make a donation to Project Syndicate, and check out Robert Skidelsky at the same site.

New Deal democrat : , Tuesday, May 17, 2016 at 08:21 AM
Excellent. It will be taught in graduate school, long after the little ones have been indoctrinated in reactionary thought be Econ 101.

P.S. The school of thought that accepts inequality as a Teh Awesome result of merit cannot explain why inherited wealth should be allowed to accumulate - another aspect of how power writes the economic rules.

pgl -> New Deal democrat... , Tuesday, May 17, 2016 at 09:33 AM
"It will be taught in graduate school, long after the little ones have been indoctrinated in reactionary thought be Econ 101."

Joan Robinson's writing on market power was required reading when I was in graduate school. My undergrad profs touched on this issue but not as much. I wonder if Greg Mankiw teaches market imperfections to his undergrad students at Harvard.

two beers -> pgl... , Tuesday, May 17, 2016 at 09:42 AM
"I wonder if Greg Mankiw teaches market imperfections to his "undergrad students at Harvard."

According to theoclassical doctrine, all market imperfections are the result of gummint innerference. Left to themselves, markets hum with music of the perfect spheres.

pgl -> two beers... , Tuesday, May 17, 2016 at 11:52 AM
"theoclassical doctrine". My new favorite term. Excellent and thanks.
RC AKA Darryl, Ron : , Tuesday, May 17, 2016 at 08:25 AM
We are way past just one or the other of those explanations being true. Opportunities come in many forms, but just not for many people. Competition becomes limited in the womb and then they go from there. Better schools across all zip codes and public day care with universal pre-K would be a start. Even that is doomed to the catch-22 of making a better informed public requires a better informed public to demand being better informed. Down east they say "You can't get thar from here."

I was fortunate enough to grow up in Prince William County VA in the late sixties just as it was beginning to boom from growth proximate to the DC Beltway. We had a new and progressive school system even relative to NoVA. Still by the 7th grade it was evident to me that the pedagogy related to reality in dogmatic POVs that were only relevant to the next generation of yuppie kids that had gotten a half step advantage in some various way from their parents.

My half step came from an unusual source though. My dad was illiterate and my mom only finished the 8th grade, but they were stoics with exceedingly powerful work ethics transferred more by their example of excellence in every menial thing that they did rather than by belittling and cajoling me. My dad was the best hunter, the most successful fisherman, grew the most beautiful and bountiful garden, and was self-sufficient in caring for his car and home. His position with the state highway department was limited by his illiteracy to maintenance superintendent, but due to his ability he still got to supervise the construction of roads and bridges without the benefit of commensurate pay.

My mom was the best cook, kept the cleanest house, and as at home day care for a few friends was the best a dealing with troubled children from potty training to outbursts of anger. It was a tough act to follow. Furthermore it did not fit the status quo mold that public schools were designed to reinforce. My half step freed me to reject the intellectual authority of my instructors even though their administrative authority was still sacrosanct in my home. I did well in school and even better on tests eking by to enter the Honor Society and passing the SAT test well enough to qualify for Mensa, but I dropped out of college first semester mostly just to relocate away from home to find a job in the city. So, I got drafted and went to Viet Name, but was lucky enough to survive and develop a successful career in IT systems management large systems capacity planning and performance management. The best break that I got was being laid off in June 2015 with a severance package good enough to afford me a retirement income equal after the change in expenses from leaving the professional world behind to what I had been making while working.

The moral to my story is that one can despise our education system and still do very well by themselves with it. One can reject our higher education and still do very well by themselves without it. One can despise our corporate "meritocracy" system and still have a successful career and maybe even a comfortable retirement, but the ladder has been raised for the latter. How anyone can be successful in school and/or in career without recognizing their own half step advantage or recognizing the intellectually and morally vacant institutions that they traversed in their journey is deeply puzzling to me.

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:35 AM
P.S. I had the good fortune to relocate from Prince William County to Orange County VA in summer 1966 before my senior year in high school when my dad cashed out his state retirement fund saving to start an electric motor/ john boat livery and concession stand at Lake Orange, a VA Game and Fisheries Commission state fishing lake.
The high school teachers were probably just as intelligent as in Manassas Park, but far more socially challenged at least in the academic curriculum. Still, the kids with that half step from their successful parents did well enough to attend decent colleges, but academic performance overall was much lower than it had been in Manassas Park back in Prince William County. The kids in Orange with really successful parents all attended private prep schools.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:47 AM
P.P.S. Relative to the thread topic then we have a fairly rigid establishment that favors the haves and keeps the have-nots at bay. Monopoly rents are just one of the luxurious rent extracting tools of an aristocracy of social exclusion. Bankers, proto-industrialists, and slave owners established the meme of republicanism as the conservative power that protects us all from tyranny of the majority, but perhaps a little too well. More importantly they established the US Constitution as a nearly inviolable foundation for preserving their world view of well-deserved elite privilege. And they did it all in the name of democracy while showing Thomas Paine the door.
anne -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 08:54 AM
Interesting and really nicely described.
RC AKA Darryl, Ron -> anne... , Tuesday, May 17, 2016 at 10:06 AM
It's a cool rainy day in central VA. Being retired and primarily a person of outdoor interests then today I have an abundance of time to waste. And commenting on the EV blog sure beats a colonoscopy, which is what I will be getting this time next week :<)

TMI? Yeah, tell me about it.

BigBozat -> RC AKA Darryl, Ron... , Tuesday, May 17, 2016 at 12:00 PM
"Down east they say "You can't get thar from here."

Actually, they say "Ya cain't get thay-uh frum he-yah." And they usually pre-pend a big, fullsome "Ayuh".

RC AKA Darryl, Ron -> BigBozat... , Thursday, May 19, 2016 at 05:09 AM
THANKS! In any case, they are often correct :<)
Dan Kervick : , Tuesday, May 17, 2016 at 08:50 AM
Jonathan Nitzan and Shimshon Bichler have developed an account of capitalism over sever years summarized by the slogan "Capital as Power."

http://www.capitalaspower.com/

two beers : , Tuesday, May 17, 2016 at 09:58 AM
There is no Nobel Prize in economics.
JohnH : , Tuesday, May 17, 2016 at 10:16 AM
John Kenneth Galbraith used to write about countervailing power. Unfortunately Galbraith has been pretty much consigned to the dustbin. Even when he was writing, economics courses did not talk about his ideas much...I guess he did not use enough math symbols.

Business has long understood the concept of what I'll call leverage points...critical intellectual property, experience, and know how. Control of these critical factors is a key to pricing power and profitability. As one example, Symbol Technologies dominated the handheld bar code scanner market for years, not because they had superior technology or marketing, but because they held the patent on the trigger, which was critical to activating the scanner for reading. Their market power affected not only competitors but suppliers and customers as well.

Leverage points like this are commonplace in business today. Yet I'm not aware that economics, with its orientation towards competitive markets, has ever tried to model this common behavior or even dealt with it.

Likewise, businesses have also understood the importance of market and marketing channel domination to their long term survival and profitability. Firms who fail to dominate must specialize. These concepts are considered elementary in business schools. Yet I don't know that economists have ever managed (or even tried) to incorporate them into their models.

It might help if more economists took business courses to understand how the game is played...

Denis Drew : , Tuesday, May 17, 2016 at 11:16 AM
Re-organize labor -- make union busting a MARKET WARPING (not job firing) felony ...

... re-make America into one big Costco.

Longtooth : , Tuesday, May 17, 2016 at 12:36 PM
I still say that until economists can reach consensus on the objective of an economy, they remain divided on the objective. Simply defining it as "for the general good" is a cop-out --- and economists and everybody else know this full well. Define what "general good means"....then see if consensus can be reached. I seriously conclude this cannot be done, since only by compromises can they reach consensus, and this means defining the objective in subjective, vague terms... just like "the general good" is vague and subjective.

The cop-out used by economists is at the heart of what Thomas' blog subject is about: Policy makers .. i.e. gov't decides the objectives of an economy, which is to say that economic power defines it. And of course economic power will define it to maintain and extend their economic power.... and at the very least to minimize any erosion thereof.

So one must wonder how, if gov't is controlled by economic power, that gov't will NOT insure the maintenance and extension of that economic power? Is it possible in a democracy defined by the U.S. constitution to significantly reduce the economic power of those who have it? The constitution in fact makes it impossible.

Even when congress occasionally finds a large enough majority to make law to erode or reduce economic power in gov't, the constitution enables 5 people in robes to deem it unconstitutional OR the next congress, or the next will make law that erode or reduce the effect of prior congress's law(s) that reduced or eroded economic power.

If this were not the case we'd long since have had universal single payer health care, strong labor unions, tax policies that don't give unearned income a huge break, and don't give offshore income an out by not taxing it until its "repatriated", welfare systems that don't keep people in poverty, and an educational system that provide free & equal education to all (not one that gives communities, county's, and States with the highest incomes & property values the best education and everybody else with a lesser one.

Nor, will I add would it be possible to rape the nation's environment by contaminating the nation's rivers, soils, and the air with green-house gases .. not just "paying" fines after the fact for doing so or putting low cost "caps" on green-house gas emissions.

So what does "the general good" actually mean? Economists can't agree on it, nor the means of achieving it of course nor can policy makers.... and this is the fundamental problem not being addressed.

Denis Drew : , Tuesday, May 17, 2016 at 02:32 PM
Make America one big Costco -- re-unionize.
Chris G : , -1
Nice column.

One comment: You wrote "...individuals are rewarded according to their contributions to the economic well being of society. Those who contribute the most to the production of the goods and services we all enjoy receive the highest rewards and climb to the top of the income distribution." I would add that having power includes being able to dictate that rewards are allotted according to economic contributions as opposed to other contributions. Cue my go-to Chris Lasch quote: "... individuals cannot learn to speak for themselves at all, much less come to an intelligent understanding of their happiness and well-being, in a world in which there are no values except those of the market.... the market tends to universalize itself. It does not easily coexist with institutions that operate according to principles that are antithetical to itself: schools and universities, newspapers and magazines, charities, families. Sooner or later the market tends to absorb them all. It puts an almost irresistible pressure on every activity to justify itself in the only terms it recognizes: to become a business proposition, to pay its own way, to show black ink on the bottom line. It turns news into entertainment, scholarship into professional careerism, social work into the scientific management of poverty. Inexorably it remodels every institution in its own image."

[Apr 30, 2016] Michael Hudson The Wall Street Economy is Draining the Real Economy naked capitalism

Notable quotes:
"... An interview by Gordon T. Long of the Financial Repression Authority. Originally published at his website ..."
"... Treasury Bulletin ..."
"... Federal Reserve Bulletin ..."
"... Business Cycles ..."
"... Canada In the New Monetary Order ..."
"... "secular stagnation" means it's all a cycle ..."
"... 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. ..."
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.

[Apr 29, 2016] A Conversation With Joseph Stiglitz

Notable quotes:
"... Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand. ..."
"... ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view... ..."
"... Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses. ..."
"... policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society ..."
"... "The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent." ..."
"... Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz. ..."
"... How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth." ..."
April 28, 2016 | economistsview.typepad.com
From an interview of Joe Stiglitz :
...White: ... To what extent do you feel economist and economic theory is culpable for the crisis? What is the role of an economist going forward?
Stiglitz: The prevalent ideology-when I say prevalent it's not all economists- held that markets were basically efficient, that they were stable. You had people like Greenspan and Bernanke saying things like "markets don't generate bubbles." They had precise models that were precisely wrong and gave them confidence in theories that led to the policies that were responsible for the crisis, and responsible for the growth in inequality. Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand.
What can we do about it? We've had this very strong strand that is focused on the limitations and market imperfections. A very large fraction of the younger people, this is what they want to work on. It's very hard to persuade a young person who has seen the Great Recession, who has seen all the problems with inequality, to tell them inequality is not important and that markets are always efficient. They'd think you're crazy. ...

When I first started blogging, I used to do posts with the title "Market Failure in Everything." as a counter to "the prevalent ideology." Maybe I should revive something similar.

teve Bannister : , Thursday, April 28, 2016 at 07:03 AM

Agreed.
rjs -> Steve Bannister... , Thursday, April 28, 2016 at 02:14 PM
ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view...
Paul Mathis, Thursday, April 28, 2016 at 07:11 AM
Nothing about Ricardian Equivalence or RBC fallacies.

While inequality is certainly important for consumption demand, PCE has not been a significant problem in the recovery. OTOH, reduction of the federal budget deficit explains virtually all of the deficient demand we have experienced. Obama and the Dems bought into RE and are paying the price now.

JohnH, Thursday, April 28, 2016 at 07:31 AM
Another interview with Stiglitz:

"Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses.

In a Bloomberg Television interview Tuesday with Francine Lacqua and Michael McKee in New York, he said policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society.

"The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent."

Stiglitz's comments come as some central banks around the world are being forced to delve deeper into their policy tools to help support their economies. As policy makers struggle to find a way out of the economic malaise, some have even raised the idea of helicopter money, which aims to direct cash straight to consumers.

The Columbia University professor, who said the Federal Reserve can do more to "channel" money to small companies and the economy, was also critical of negative rates. This is partly because of their potential impact on lending.

"The dangers of negative interest rates -- if you don't manage it extraordinarily well; some countries are doing it reasonably well, some are not -- is that it actually weakens the banking system," he said. "If it weakens the banking system, the banks are going to provide even less credit. While it might have some effect on financial markets, in terms of what we really should be concerned about, which is the flow of credit to businesses, that's not working."
http://www.bloomberg.com/news/articles/2016-04-26/stiglitz-says-misdirected-monetary-policies-increased-inequality

What's the point of low interest rates, if they only serve the interests of Wall Street banks and their wealthy clientele? Oh, right! That IS the point. And most economists are just fine with that.

BenIsNotYoda, Thursday, April 28, 2016 at 07:59 AM
Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz.
anne, Thursday, April 28, 2016 at 08:17 AM
http://cepr.net/data-bytes/gdp-bytes/gdp-2016-04

April 28, 2016

Falling Investment and Rising Trade Deficit Lead to Weak First Quarter
By Dean Baker

Health care costs remain well-contained, barely growing as a share of GDP.

GDP grew at just a 0.5 percent annual rate in the first quarter. This weak quarter, combined with the 1.4 percent growth rate in the 4th quarter, gave the weakest two quarter performance since the 3rd and 4th quarters of 2012 when the economy grew at just a 0.3 percent annual rate.

Growth was held down by both a sharp drop in non-residential investment and a further rise in the trade deficit. Equipment investment fell at an 8.6 percent annual rate, while construction investment dropped at a 10.7 percent annual rate. The latter is not a surprise, given the overbuilding in many areas of the country. The drop in equipment investment was undoubtedly in part driven by the worsening trade situation, as many factories curtailed investment plans as U.S.-made products lost out to foreign competition, weakening demand growth. There was also a drop in information processing equipment, indicating that those who are expecting that robots will replace us all will have to wait a bit longer.

The rise in the trade deficit was due to a 2.6 percent drop in exports, as imports were nearly flat for the quarter. Trade subtracted 0.34 percentage points from growth for the quarter.

Consumption continued to grow at a modest 1.9 percent annual rate, adding 1.27 percentage points to growth. Consumption growth was held down in part by weaker demand for new cars, which subtracted 0.33 percentage points from growth for the quarter. This was the second consecutive decline in the sector. It is likely that car purchases will be up somewhat in future quarters.

The savings rate for the quarter was 5.2 percent, which is up slightly from the 5.0 percent from the prior three quarters and the 4.8 percent rates from 2013 and 2014, before people started saving their oil dividends. But seriously, there may be some modest room for this rate to decline, but for the most part consumption growth will depend on income growth going forward.

Health care services added 0.26 percentage points to growth, its smallest contribution since a reported decline in the first quarter of 2014. Spending in the sector remains well contained, growing at just a 3.8 percent annual rate over the last quarter and by 4.4 percent over the last year in nominal spending.

Housing grew at a 14.8 percent annual rate, adding 0.49 percentage points to growth. Housing has being growing at a double digit rate since the fourth quarter of 2014. While the sector is likely to continue to grow in subsequent quarters, the pace is almost certain to slow.

The government sector was a modest positive in the quarter, growing at a 1.2 percent rate. State and local spending increased at a 2.9 percent annual rate, more than offsetting a 1.6 percent drop in federal spending, all of it on the military side. Future quarters are likely to show comparable growth, although the composition may be somewhat different.

A slower rate of inventory accumulation reduced growth by 0.33 percentage points, as final sales of domestic product grew at a 0.9 percent rate. This is the third consecutive quarter in which the pace of inventory accumulation slowed, although the current pace is not especially low. It is likely that inventories will grow somewhat more quickly in the rest of the year, being at least a small positive in the growth story.

The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth.

[Graph]

On the whole this is a weak report. The headline 0.5 percent figure probably overstates the weakness somewhat, but it is not a good sign when two consecutive quarters have an average growth rate of less than 1.0 percent. Inflation remains well under control, although there was a modest uptick in the rate of inflation shown by the core personal consumption expenditure deflator to 1.7 percent over the last year. Nonetheless, with an economy barely growing and an inflation rate that remains below target, it is difficult to envision the Federal Reserve raising interest rates further any time soon.

JohnH, Thursday, April 28, 2016 at 08:48 AM
How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth."
rayward, Thursday, April 28, 2016 at 09:11 AM
Market failures aren't really market failures but market responses to market conditions. They are failures only in the sense that something deemed bad (e.g., falling home prices) is the market response. An extreme example is what's being called secular stagnation, which is just the market response to the shift of an enormous volume of production and income from the U.S. and Europe to China and other like places with much higher levels of inequality and savings. It's a market failure only in the sense that something bad (wage stagnation, slow economic growth) happened in the U.S. and Europe. Those responsible for the shift in production and income to China et al. (i.e., U.S. and European business executives) were either ignorant of the likely market response or didn't care as long as it increased profits (via lower costs). But that's not a market failure, it's an executive failure.
Peter, -1
"I think almost surely both Hillary and Bernie Sanders are very very committed to a pro-equality agenda, and the differences are more in details, more in one's confidence in their ability to execute this in a political context."

Disappointing. I guess we'll find out if he's right. Also his suggestion that the economy would have done just as well with no QEs is very disappointing.

"Stiglitz: I think they were right. They originally said, "When we hit 6 percent that's full employment." Now they know that 4.9 isn't full employment, there's weak labor market. They should have focused more on improving the channel of credit to make sure that money was going to small and medium-sized enterprises They should have said to the bank-like some other countries have done-if you want access to the Fed window you have to be lending to SMEs. "

Which was Bernie's suggestion. Hillary has said nothing.

[Apr 07, 2016] How Cults Manipulate People

www.aibi.ph

Many people now agree that cults frequently psychologically manipulate their membership to ensure conformity and control. Steve Hassan's excellent book "Combating Cult Mind-Control" is a great starting point. The following points come from numerous sources. Not all of these are found in every cult but enough of them are found in most cults to make them very frightening places that inflict deep psychological damage on their membership.

1. Submission to Leadership - Leaders tend to be absolute, prophets of God, God Himself, specially anointed apostle, or just a strong, controlling, manipulative person who demands submission even if changes or conflicts occur in ideology or behavior.

2. Polarized World View - The group is all that is good; everything outside is bad.

3. Feeling Over Thought - Emotions, intuitions, mystical insights are promoted as more important than rational conclusions.

4. Manipulation of Feelings - Techniques designed to stimulate emotions, usually employing group dynamics to influence responses.

5. Denigration of Critical Thinking - Can go so far as to characterize any independent thought as selfish, and rational use of intellect as evil.

6. Salvation or Fulfillment can only be realized in the group.

7. End Justifies the Means - Any action or behavior is justifiable as long as it furthers the group's goals. The group (leader) becomes absolute truth and is above all man-made laws.

8. Group Over Individual - The group's concerns supersede an individual's goals, needs, aspirations, and concerns. Conformity is the key.

9. Warnings of severe or supernatural sanctions for defection or even criticism of the cult - This can go so far as to apply to negative or critical thought about the group or its leaders.

10. Severing of Ties with Past, Family, Friends, Goals, and Interests - Especially if they are negative towards or impede the goals of the group.

11. Barratrous Abuse - Some cults use "cult lawyers' to sue ex-cult members and critics often using fabricated evidence and causing financial stress by repeated trivial law suits. The cult's aim is not so much to win the lawsuit (though they often do) as to harass and intimidate their critics into silence.

Cult Conversion Techniques

Conversion into a cult is usually the result of two interacting dynamics. The first is the personal vulnerability of the potential recruit. This vulnerability may be enhanced by, but not limited to, transitional situations such as divorce, abuse, job or career change, moving away from home or leaving college, an illness, or death of a loved one.

The second dynamic are the tactics used to convert, indoctrinate (brainwash) and hold the members. Some groups attempt a radical and rapid conversion over an intensive week-end or week, such as The Forum or Scientology. Others have a more subtle approach which may take weeks or months, such as the Jehovah's Witnesses. The following are techniques of unethical thought reform and mind control:

The importance of cognitive dissonance

Any person will act so as to reduce conflict between their thoughts, their emotions and their behavior. When these things are at odds with each other a person experiences 'dissonance" (the opposite of harmony). Cognitive dissonance is when what a person knows is right is at odds with either what they feel is right or what they are doing. Cults quickly move to control four key areas of a person's life during the conversion process -

Behavior - by intense involvement in activity and isolation from others. Behavior is closely prescribed and carefully supervised.

Emotions - a new recruit is often "love bombed" and greeted enthusiastically and told they are very special. They are made to feel that everyone in the cult loves them and that "nothing could be wrong with such a loving group of people". However this does not last. Emotions are sent on a roller coaster and the only hope of emotional stability is total conformity and pleasing the cult leadership.

Thought - indoctrination, extended "teaching sessions", memorization of cult dogma, "auditing sessions" where inner secrets are revealed and thought processes exposed - all are a part of attempts at thought control so that the thought life of the convert is taken up entirely with the group.

Information - isolation from peers, TV, radio, newspapers, (often labeled as "Satanic") and careful control of associations ensures that little or no material critical of the cult reaches the new recruit during the conversion process.

The combination of all these factors make it very likely that if the new recruit stays in the cult for any length of time they will come to believe in it utterly. We are not as objective as we like to think and when all these powerful forces combine then very intelligent people will be "converted" but not by God.

A Quick List of Nasty Practices

1. A Focus on felt needs, defects, with exaggerated promises of fulfillment.

2. Rigid Control of Time and Activities - Often physically and emotionally draining activities leaving little time for reflection, questioning and privacy.

3. Information Control - Cutting off or denigrating outside sources of information especially if it is critical of the group. This can also include misrepresentation and information overload.

4. Language Manipulation - Ascribing new "inside" meanings in ordinary words or the use of an exclusive vocabulary subtly moving a person to want to become an insider.

5. Discouraging Critical, Rational Thought and Questions - For instance, comments like, "Satan is the cause of all doubt; he wants to keep you from the Truth", or, "one must move beyond the cognitive left-brain and get in touch with one's higher self, his right-brain, intuitive self for true knowledge".

6. Instruction and Repetition in Trance Induction Techniques - These include progressive relaxation, chanting, hypnosis, meditation, trance states, guided imagery or visualization, deep breathing exercises, all of which make a person highly suggestible, often unable to distinguish between fantasy and reality, and can cause psychopathology such as relaxation induced anxiety.

7. Confession Sessions - Promoting full disclosure of all secret sins, thoughts, temptations which can become a powerful tool to manipulate, blackmail, and emotionally bond people to the leader or group. It is actually a depersonalization or stripping of the inner self , a forced submission to the group.

8. Guilt, Fear - Weapons used to maintain group loyalty, suppress questions and defections.

9. Control of Sexuality and Intimacy within the Cult - This may extend to marriage decisions (Moonies), sexual relations, promiscuity (Children of God), group sex (New Age Therapy groups), child sex, adultery, and polygamy (Branch-Davidians).

10. Excessive Financial Obligations - More and more money is needed to attain higher degrees of spirituality (Scientology), or complete submission to God requires one to give up everything to the group or leader (pp. 26-29).

The more points of ideology and conversion methodology that are in place, and the degree of intensity of their application is proportionate to the effect and damage of mind control.

These factors tend to make normal evangelism, or even dialogue, much more difficult. Therefore, some people have looked to deprogrammers or exit-counselors to help break the mental head-locks of their loved ones in an attempt to rescue them from the cult.

Can an Orthodox Christian Group Get Like This ?

Yes they can!!! Just because the theology is straight down the line does not mean the behavior will be. I was in a mission society that in a particular place under the influence of a leader with a great deal of charisma and authority became "cultic" for a year or so. That has been corrected but much damage was done.

Some Christian groups start off great -like the "children of God' and end up utterly wrong and evil. The church needs strong leaders, but they must always be accountable to Scripture and to other wise Christians.

We must allow people to be critical, to think for themselves and to understand scripture freely apart from the dictates of any leader. we must allow a great deal of emotional and intellectual freedom and renounce our desires to control others if we are to have healthy churches where people rejoice in the Truth.

This article may be freely reproduced for non-profit ministry purposes but may not be sold in any way. For permission to use articles in your ministry, e-mail the editor, John Edmiston at johned@aibi.ph.

[Feb 05, 2016] When was the last time you heard anyone in academia publicly criticize a funding agency, no matter how outrageous their behavior

American Lysenkoism in full force...
Notable quotes:
"... In Flint the agencies paid to protect these people weren't solving the problem. They were the problem. What faculty person out there is going to take on their state, the Michigan Department of Environmental Quality, and the U.S. Environmental Protection Agency? ..."
"... I don't blame anyone, because I know the culture of academia. You are your funding network as a professor. You can destroy that network that took you 25 years to build with one word. I've done it. When was the last time you heard anyone in academia publicly criticize a funding agency, no matter how outrageous their behavior? We just don't do these things. ..."
"... If an environmental injustice is occurring, someone in a government agency is not doing their job. Everyone we wanted to partner said, Well, this sounds really cool, but we want to work with the government. We want to work with the city. And I'm like, You're living in a fantasy land, because these people are the problem. ..."
peakoilbarrel.com
aws., 02/04/2016 at 10:50 pm
The Water Next Time: Professor Who Helped Expose Crisis in Flint Says Public Science Is Broken

The Chronicle of Higher Education, By Steve Kolowich February 02, 2016

Q. Do you have any sense that perverse incentive structures prevented scientists from exposing the problem in Flint sooner?

A. Yes, I do. In Flint the agencies paid to protect these people weren't solving the problem. They were the problem. What faculty person out there is going to take on their state, the Michigan Department of Environmental Quality, and the U.S. Environmental Protection Agency?

I don't blame anyone, because I know the culture of academia. You are your funding network as a professor. You can destroy that network that took you 25 years to build with one word. I've done it. When was the last time you heard anyone in academia publicly criticize a funding agency, no matter how outrageous their behavior? We just don't do these things.

If an environmental injustice is occurring, someone in a government agency is not doing their job. Everyone we wanted to partner said, Well, this sounds really cool, but we want to work with the government. We want to work with the city. And I'm like, You're living in a fantasy land, because these people are the problem.

[Feb 02, 2016] Denialism and the Scientific Consensus Naomi Oreskes Attacks on Nuclear Energy and GMOs Expose Deep Divide Among Environmentalists

www.huffingtonpost.com
In recent years, Yale University's Dan Kahan has lead an interdisciplinary team of scholars in what they call the Cultural Cognition Project, exploring why individuals often abandon logic when it comes to forming beliefs about contentious social, political and science issues: gun control, vaccine safety, climate change, fracking, biotechnology--there is a long list.

Kahan and his fellow researchers suggest that many of our most strongly held positions, while dressed in the garb of independent critical thinking, rationality and science, are actually rooted, irrationally, in the tribal-like beliefs of our fellow ideological travelers, our extended families who give form to our cultural identities.

[Jan 26, 2016] Public Investment: has George Started listening to Economists?

Notable quotes:
"... The case for additional public investment is as strong in the UK (and Germany ) as it is in the US. Yet since 2010 it appeared the government thought otherwise. ..."
"... However since the election George Osborne seems to have had a change of heart. ... ..."
economistsview.typepad.com

Simon Wren-Lewis:

Public investment: has George started listening to economists?: I have in the past wondered just how large the majority among academic economists would be for additional public investment right now.

The economic case for investing when the cost of borrowing is so cheap (particularly when the government can issue 30 year fixed interest debt) is overwhelming. I had guessed the majority would be pretty large just by personal observation. Economists who are not known for their anti-austerity views, like Ken Rogoff, tend to support additional public investment.

Thanks to a piece by Mark Thoma I now have some evidence. His article is actually about ideological bias in economics, and is well worth reading on that account, but it uses results from the ChicagoBooth survey of leading US economists. I have used this survey's results on the impact of fiscal policy before, but they have asked a similar question about public investment. It is
"Because the US has underspent on new projects, maintenance, or both, the federal government has an opportunity to increase average incomes by spending more on roads, railways, bridges and airports."
Not one of the nearly 50 economists surveyed disagreed with this statement. What was interesting was that the economists were under no illusions that the political process in the US would be such that some bad projects would be undertaken as a result (see the follow-up question). Despite this, they still thought increasing investment would raise incomes.
The case for additional public investment is as strong in the UK (and Germany) as it is in the US. Yet since 2010 it appeared the government thought otherwise. ...
However since the election George Osborne seems to have had a change of heart. ...

[Jan 14, 2016] Neoliberalism was also economics departments orthodoxy for decades

Notable quotes:
"... It should never be forgotten that the conservative orthodoxy -- of low taxes on the wealthiest, deregulation of finance, small govt deficits, and the need for inequality to spur individual initiative -- was also economics departments orthodoxy for decades. Economists put their imprimatur on this whole mess, with VERY few exceptions. ..."
"... 70% of the population STILL believes that federal deficits are a big problem, and also believes that this is standard economic orthodoxy. Until the crash, most people were ready to accept some degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with no counterargument from the economics departments. The Clinton economic team was instrumental in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy. Even the worst nonsense in Friedmans Capitalism and Freedom and Free to Choose barely saw any push-back from other economists in the op-ed pages. ..."
"... Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence. That 70% currently includes college graduates who took economics classes and traders on Wall Street. ..."
"... Nonsense. Polls of profession economists opinions abound. Reaganomics/neoliberalism has predominated in economics until recently. On a few big issues (notably, on whether the size of federal deficits as % of GDP should be reduced) the split remained even. ..."
economistsview.typepad.com

Lee A. Arnold :

It should never be forgotten that the "conservative orthodoxy" -- of low taxes on the wealthiest, deregulation of finance, small gov't deficits, and the need for inequality to spur individual initiative -- was also "economics departments orthodoxy" for decades. Economists put their imprimatur on this whole mess, with VERY few exceptions.

It's been a first-rate intellectual scandal, perpetrated by some of the biggest names in the economics racket, and with most of the lesser lights tagging along, for fear of ostracism.

And most of them STILL don't have a clear view of what the real problems are.

Lee A. Arnold -> anne...
70% of the population STILL believes that federal deficits are a big problem, and also believes that this is standard economic orthodoxy. Until the crash, most people were ready to accept some degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with no counterargument from the economics departments. The Clinton economic team was instrumental in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy. Even the worst nonsense in Friedman's "Capitalism and Freedom" and "Free to Choose" barely saw any push-back from other economists in the op-ed pages.

"Conservative orthodoxy" can be laid squarely at the feet of the economics departments, up until the crash. If the ones who are supposed to know better, don't make a concerted effort to refute the tons of nonsense spouted in the name of economics, then they should resign their tenure.

Lee A. Arnold -> pgl...
It most certainly WAS taken as the orthodoxy. Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence. That 70% currently includes college graduates who took economics classes and traders on Wall Street.
pgl -> Lee A. Arnold ...
"Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence."

Not even remotely true. Criticized by liberal economists. Blasted by the conservative economists who refused to work for the Reagan White House. Even blasted by a young Greg Mankiw but that is before he drank the Bush Kool Aid.

Lee - your claim here is just wrong. And the more you defend it, the worse it gets.

Lee A. Arnold -> pgl...
Nonsense. Polls of profession economists' opinions abound. Reaganomics/neoliberalism has predominated in economics until recently. On a few big issues (notably, on whether the size of federal deficits as % of GDP should be reduced) the split remained even.

(1992 -- responses from 464 US economists):

[Jan 06, 2016] Another Slow Year for the Global Economy

Notable quotes:
"... Sometimes … demand is restricted by the fact that nobody has any money in their pocket. ..."
"... the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged. ..."
"... Modern neoliberal economics is just an ideology not a science. It exists to justify the current distribution of wealth with pseudoscientific nonsense written in abstruse mathematical language. Milton Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience in service to the ruling class. ..."
"... [Economists are] clueless about the real world because their fat paycheck magically appears in their bank account, while producing nothing. ..."
Jan 06, 2016 | naked capitalism

By Ashoka Mody, Professor of Economics at Princeton. Originally published at Project Syndicate

For starters, world trade is growing at an anemic annual rate of 2%, compared to 8% from 2003 to 2007. Whereas trade growth during those heady years far exceeded that of world GDP, which averaged 4.5%, lately, trade and GDP growth rates have been about the same. Even if GDP growth outstrips growth in trade this year, it will likely amount to no more than 2.7%.

The question is why. According to Christina and David Romer of the University of California, Berkeley, the aftershocks of modern financial crises – that is, since World War II – fade after 2-3 years . The Harvard economists Carmen Reinhart and Kenneth Rogoff say that it takes five years for a country to dig itself out of a financial crisis. And, indeed, the financial dislocations of 2007-2008 have largely receded. So what accounts for the sluggish economic recovery?

One popular explanation lies in the fuzzy notion of "secular stagnation": long-term depressed demand for goods and services is undermining incentives to invest and hire. But demand would remain weak only if people lacked confidence in the future. The only logical explanation for this enduring lack of confidence, as Northwestern University's Robert Gordon has painstakingly documented and argued , is slow productivity growth.

Before the crisis – and especially from 2003 to 2007 – slow productivity growth was being obscured by an illusory sense of prosperity in much of the world. In some countries – notably, the United States, Spain, and Ireland – rising real-estate prices, speculative construction, and financial risk-taking were mutually reinforcing. At the same time, countries were amplifying one another's growth through trade.

Central to the global boom was China, the rising giant that flooded the world with cheap exports, putting a lid on global inflation. Equally important, China imported a huge volume of commodities, thereby bolstering many African and Latin American economies, and purchased German cars and machines, enabling Europe's largest economy to keep its regional supply chains humming.

This dynamic reversed around March 2008, when the US rescued its fifth-largest investment bank, Bear Sterns, from collapse. With the eurozone banks also deeply implicated in the subprime mortgage mess and desperately short of US dollars, America and much of Europe began a remorseless slide into recession. Whereas in the boom years, world trade had spread the bounty, it was now spreading the malaise. As each country's GDP growth slowed, so did its imports, causing its trading partners' growth to slow as well.

The US economy began to emerge from its recession in the second half of 2009, thanks largely to aggressive monetary policy and steps to stabilize the financial system. Eurozone policymakers, by contrast, rejected monetary stimulus and implemented fiscal austerity measures , while ignoring the deepening distress of their banks. The eurozone thus pushed the world into a second global recession.

Just when that recession seemed to have run its course, emerging economies began to unravel. For years, observers had been touting the governance and growth-enhancing reforms that these countries' leaders had supposedly introduced. In October 2012, the IMF celebrated emerging economies' "resilience." As if on cue, that facade began to crumble, revealing an inconvenient truth: factors like high commodity prices and massive capital inflows had been concealing serious economic weaknesses, while legitimizing a culture of garish inequality and rampant corruption .

These problems are now being compounded by the growth slowdown in China, the fulcrum of global trade. And the worst is yet to come. China's huge industrial overcapacity and property glut needs to be wound down; the hubris driving its global acquisitions must be reined in; and its corruption networks have to be dismantled.

In short, the factors that dragged down the global economy in 2015 will persist – and in some cases even intensify – in the new year. Emerging economies will remain weak. The eurozone, having enjoyed a temporary reprieve from austerity, will be constrained by listless global trade. Rising interest rates on corporate bonds portend slower growth in the US. China's collapsing asset values could trigger financial turbulence. And policymakers are adrift, with little political leverage to stem these trends.

The IMF should stop forecasting renewed growth and issue a warning that the global economy will remain weak and vulnerable unless world leaders act energetically to spur innovation and growth. Such an effort is long overdue.


ArkansasAngie , January 6, 2016 at 6:17 am

"But demand would remain weak only if people lacked confidence in the future"

Sometimes … demand is restricted by the fact that nobody has any money in their pocket.


James Levy, January 6, 2016 at 6:45 am

Is he kidding:

The only logical explanation for this enduring lack of confidence, as Northwestern University's Robert Gordon has painstakingly documented and argued, is slow productivity growth.

Real wages for a hefty percentage of the population haven't risen since 1971. Most people are treading water or losing ground. Over 90% of the modest gains since the 2008 crash have gone to 1% or less of the population. But the problem is productivity! And this guy has a tenured job at Princeton. Standards for employment there must include smug self-assurance, ideological blinders, and the inability to assimilate any facts not cogent to people richer than you are.


Jim Haygood, January 6, 2016 at 11:37 am

If Princeton's most illustrious alumnus can finally make some serious loot in the private sector, soon the author will be toiling at the Bernanke School of Economics.

Skippy, January 6, 2016 at 8:18 am

Productivity is the cocaine of the labour pool, like the old cocaine ad of the 80s in Calif [during the epidemic].

White square room about 6M X 6M, top shelf sale executive sort doing laps like a con and the verse goes like…. I do cocaine because I'm more productive… so I make more money… so I can do more cocaine… over and over and with each litany increases his speed until a blur….

Skippy…. the end is a wrung out wretch sitting on the step of some low socioeconomic apt talking about losing, wife, kids, job, everything…. w burnt out dopamine receptors as a lullaby till morte'

efschumacher, January 6, 2016 at 8:50 am

Here in the US:it's not like there's a shortage of work to be done to fix the massively inappropriate national infrastructure – to make it human sustainable – I mean for the 'little people'. There is of course the perennial lack of congressional vision and long term planning. There lies a huge root of the problem.

RabidGandhi, January 6, 2016 at 9:12 am

Is this meant as a good cop/bad cop contrast piece with the Ann Pettifor post?

Here, I gave up any hope of Mody being at all earnest when he cited Rogoff and Reinhart (!!!). Then the rest of the article completely self-destructs: weak productivity and insufficient innovation are the issue?

When combined with yesterday's NYT article on inequality, the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged.

Stephen Gardner, January 6, 2016 at 9:33 am

Modern neoliberal economics is just an ideology not a science. It exists to justify the current distribution of wealth with pseudoscientific nonsense written in abstruse mathematical language. Milton Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience in service to the ruling class.

cnchal, January 6, 2016 at 9:43 am

. . . the only takeaway is that most economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged.

They are the useless eaters. [Economists are] clueless about the real world because their fat paycheck magically appears in their bank account, while producing nothing.

Here is Mody

The US economy began to emerge from its recession in the second half of 2009, thanks largely to aggressive monetary policy and steps to stabilize the financial system.

Totally clueless.

susan the other, January 6, 2016 at 2:02 pm

"Lack of confidence" – let me count the ways. This is a phrase to match every vacuous denial of human economic chaos ever pontificated. Yuck.

[Jan 01, 2016] Economics Joke Time

Notable quotes:
"... GDP. Great deposits of poo. ..."
"... [The financial crisis is worse than thought …] ..."
"... – Yes Prime Minister, A Real Partnership ..."
"... Economists: purveyors of fictions upon which the superstructure of organized robbery is raised. ..."
"... "Market Failure" is the name that economists who believe that the market cannot ever fail use when the market fails. ..."
"... "Economists put decimal points in their forecasts to show that they have a sense of humour" ..."
"... "Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." ..."
December 30, 2015 | naked capitalism
Posted on by

... ... ...

The Standup Economist has a routine that has become a classic:

And of course, there are the economist variants of the lightbulb joke, originating in a 1994 Wharton Journal, as later recapped in Forbes:

Q: How many economists does it take to change a light bulb?

A1: None. The darkness will cause the light bulb to change by itself.

A2: None. If it really needed changing, market forces would have caused it to happen.

A3: None. If the government would just leave it alone, it would screw itself in.

A4: None. There is no need to change the light bulb. All the conditions for illumination are in place.

A5: None. Because, look! It's getting brighter! It's definitely getting brighter!!!

A6: None. They're all waiting for the unseen hand of the market to correct the lighting disequilibrium.

tony, December 30, 2015 at 6:12 am

Q: What do you call an economist that makes a prediction?

A: Wrong.

ben, December 30, 2015 at 3:28 pm

Two economists are walking on the street. They notice a pile of horseshit, and the older one says to the younger one: "I'll pay you twenty thousand if you eat that." The younger one ponders for a moment, then agrees and eats it. They walk a bit more and run into another pile of horse feces. So the younger one tells the elder: "I'll pay you twenty thousand if you eat that!". The older economist considers the offer and starts eating. After a while the younger economists stops and asks: "What was the point of this? We both ate a pile shit and neither of us got richer." The older one answers: "What are you talking about? We both produced and received twenty thousand worth in income and services."

GDP. Great deposits of poo.

Clive, December 31, 2015 at 5:41 am

"This economy is really terrible."

"How bad is the economy?"

"The economy is so bad, this year oysters are making fake pearls…"

"The economy is so bad, organised crime just laid off 10 judges…"

(and so on)


Paul Jonker-Hoffrén, December 30, 2015 at 7:27 am

"Knock Knock!"

"Who's there?"

"It's Return to Growth!"

Two years later…

"Knock Knock!"

"Who's there?"

"It's Return to Growth!"

And ad finitum…

Clive, December 30, 2015 at 6:21 am

"Knock Knock"

"Who's there?"

"Janet Yellen"

"Well there's no need to shout, I heard you knocking"

Joaquin Closet, December 30, 2015 at 7:42 am

The number of economists is the only thing that contradicts the Law of Supply and Demand.

craazyboy, December 30, 2015 at 9:00 am

Q: How many economists does it take to change a light bulb?

A: Three. A micro-economist to hold the ladder, a macro-economist to rotate the room, and a university economist to develop the math model and forecast how long it will take.

Ulysses, December 30, 2015 at 9:56 am

A mathematician, an accountant and an economist apply for the same job at an oil company.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer hard and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four – give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?

Paul Tioxon, December 30, 2015 at 10:02 am

What do you call a cruise ship sinking with 500 PhD economists chained below deck?

A good start.

allan, December 30, 2015 at 10:03 am

Frederic Mishkin.

Yves Smith, December 30, 2015 at 4:32 pm

Oh, that is good!

Paul

An economist is someone who will tell you tomorrow why what they predicted yesterday didn't happen today.

An economist, a physicist, and an engineer are stranded on an island with a can of food, and no opener.

The engineer says, "Let's smash the can open with a rock and eat".
The physicist replies, "Naw, that's going to splatter the food all over the place. Let's light a fire, the expanding gases will force the can to pop open and presto: warm food!"
The economist says, "Bad idea: the can will explode and the food will be all over the place. Now… let's assume we have a can opener…."

Blue Meme

A physician, an engineer, and an economist were discussing who among them belonged to the oldest profession. The physician said, "Remember, on the sixth day God took a rib from Adam and fashioned Eve, making him the first surgeon. Therefore, medicine is the oldest profession."

The engineer replied, "But, before that, God created the heavens and earth from chaos, thus he was the first engineer. Therefore, engineering is an older profession than medicine."

Then, the economist spoke up. "Yes," he said, "But who do you think created the chaos?"

aj

The First Law of Economists: For every economist, there exists an equal and opposite economist.
The Second Law of Economists: They're both wrong.

fresno dan

Pareto's law of optimal economic theory:
an economic theory has reached an optimal state when no other economist can make it wronger

pat b

The Third Law of Economists : The two economists theories don't add up.

twonine

"Economics is extremely useful as a form of employment for economists."
― John Kenneth Galbraith

gordon

JKG has some excellent one-liners. My favourite:

"The trouble with competition is that in the end somebody wins."

Joe Hill

"Again, since I'm not an economist I really have no idea what the wrong solution is."

~ @RudyHavenstein

Ramanan

[The financial crisis is worse than thought …]

James Hacker: Bernard, Humphrey should have seen this coming and warned me.

Bernard Woolley: I don't think Sir Humphrey understands economics, Prime Minister; he did read Classics, you know.

James Hacker: What about Sir Frank? He's head of the Treasury!

Bernard Woolley: Well I'm afraid he's at an even greater disadvantage in understanding economics: he's an economist.

– Yes Prime Minister, A Real Partnership

JEHR

More economist jokes here: http://www3.nd.edu/~jstiver/jokes.htm

flora

Economists: purveyors of fictions upon which the superstructure of organized robbery is raised.
(apologies to Ambrose Bierce)

Synoia

Q: What do you call an Economist who tells the truth?

A: Unemployed.

Ivy

If you laid all the economists end to end,

it would probably be a good thing.

They still wouldn't reach a conclusion.

ben

A farmer and two bankers are shipwrecked on an island. Two weeks later help finally arrives. The bankers greet their rescuer who remarks how well they look.

BankerA: "we realised the potential of the natural resources on this island were tremendous".

BankerB: "I created some fiat money, we divided it up. I lent BankerA ten times my share for a coconut farm startup, he invested ten times his share in an accountancy startup."

Rescuer: "well that's amazing, only where is it all, I don't see any produce – how did you actually survive?"

BankerA: "We each used our debt to invest in futures given the fertile land it was clear the land could generate wealth once labour was applied. We both realised significant paper profits. Oh and we ate the farmer"

--

Bankers live off our backs.

Nortino

What did the supply curve say to the demand curve?

If you shift a little to the right, I'll give you some more of what you want.

_________

Why did the economist cross the road?

Because his models predicted he would.

TG

"Market Failure" is the name that economists who believe that the market cannot ever fail use when the market fails.

Synoia

Hmm, it seems you should take your own advice to heart. :-)

What is a person called who claims to predict the future and has a history of 100% failure in predictions?

a) A Charlatan
b) An Economist
c) A prophet

afreeman

In the same vein:
econ entropy: money invented from hot air evaporates, what do you expect?

Warren

"Economists put decimal points in their forecasts to show that they have a sense of humour"
- William Gilmore Simms (https://twitter.com/TheBrowser/status/680887672890589184?s=17)

TG

How many economists does it take to screw in a lightbulb?

Only one, but the lightbulb has to be hanging from the ceiling. Because economists can only screw things up.

Minnie Mouse

It takes one economist to change a light bulb and take the entire power grid down.

James McFadden

"Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." Lyndon Johnson

[Dec 30, 2015] On Pareto Optimality

Notable quotes:
"... the ideal markets that would produce Pareto Optimal allocations dont actually exist ..."
"... moving from actually existing non-ideal markets to ideal markets WOULD NOT BE Pareto Optimal even if it was possible to do so, which it isnt. ..."
"... In short, Pareto Optiimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bullshit. ..."
"... The next step in graduate students indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a principle of compensation. The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest. Funny how that happens. ..."
Dec 30, 2015 | Economist's View
Sandwichman, December 30, 2015 at 10:06 AM
"Graduate students of economics learn, early in their careers, that markets allocations are Pareto Optimal."

What they don't learn is that

1. the ideal markets that would produce Pareto Optimal allocations don't actually exist and

2. moving from actually existing non-ideal markets to ideal markets WOULD NOT BE Pareto Optimal even if it was possible to do so, which it isn't.

In short, Pareto Optimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bullshit.

The next step in graduate students' indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a "principle of compensation." The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest. Funny how that happens.

anne said in reply to Sandwichman

Pareto Optimality is a just so story that has absolutely no bearing on the real world other than as an ideological justification for tons of bull----.

[ Agreed completely and I think this an important conclusion. ]

Paine said in reply to anne

Yes

Sandy gets the guts of it

Though

The compensation principle is precisely what Pareto rule is all about

Yes we can scramble the goods all we want so long as in the end everyone is at least as well off as before the scramble

In a pure exchange model this is less exciting then in a one period production model

Going on to an inter temporal model with an infinite horizon gets into real juicy Wonderlands

The academy makes it's living as much by distracting fine minds as training them

anne said in reply to Sandwichman

The next step in graduate students' indoctrination is to teach them that although Pareto Optimal reallocations are implausible, you can get around that with a "principle of compensation." The principle, too is based on a same yardstick fallacy. But never mind the Pareto Optimality smokescreen and the compensation smokescreen have constrained economists to think in terms of doing what is best for the wealthiest....

http://www.nytimes.com/2015/12/30/business/economy/for-the-wealthiest-private-tax-system-saves-them-billions.html

December 29, 2015

Richest in U.S. Shape Private Tax System to Save Billions
By NOAM SCHEIBER and PATRICIA COHEN

The very wealthiest families are able to quietly shape tax policy that will allow them to shield millions, if not billions, of their income using maneuvers available only to several thousand Americans.

anne said in reply to Sandwichman...

Supposing I understand the essay, Roger Farmer is just writing the logical justification to Herbert Spencer's (never Charles Darwin's) "survival of the fittest" rationale that Spencer made wildly popular after Darwin published "On the Origin of Species."

Spencer was the successful ultimate justifier of British "sun-never-setting-on-the-Empire" capitalism. Spencer sold a biological justification, Farmer is selling a logical justification of Empire.

Sandwichman said in reply to anne

No, I think Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed.

The bottom line is that NO ONE would have ever paid any attention to the not just "weak" but nonsensical concept if it didn't serve the function of justifying and ultimately glorifying great inequalities of wealth and income.
;

anne said in reply to Sandwichman

I understand the argument and I am entirely right:

Roger Farmer is just writing the logical justification to Herbert Spencer's (never Charles Darwin's) "survival of the fittest" rationale that Spencer made wildly popular after Darwin published "On the Origin of Species."

Spencer was the successful ultimate justifier of British "sun-never-setting-on-the-Empire" capitalism. Spencer sold a biological justification, Farmer is selling a logical justification of Empire capitalism.

anne said in reply to Sandwichman

I needed to be sure the argument was as empty morally as I supposed initially, but I supposed correctly. The Roger Farmer essay is an amoral logical justification of imperial capitalism. Plato's "Republic" conceived amorally. ;

anne said in reply to Sandwichman

A mean little essay, carefully subtle and mean.

Paine said in reply to anne

But Anne as sandy points out Roger blows up the use of Pareto by his future generations argument

Those unable to establish their preferences are unaccounted for in the scrum

He uses this to draw a bold distinction between securities markets and fish catch of the day markets

Paine said in reply to Paine

It's not the way I'd make his point

But his distinction is important

Some are impacted that are not participating

Third party effects that can not be resolved even with repeated " games "
Because the players are not yet present

anne said in reply to Sandwichman

Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed.

The bottom line is that NO ONE would have ever paid any attention to the not just "weak" but nonsensical concept if it didn't serve the function of justifying and ultimately glorifying great inequalities of wealth and income.

[ Agreed completely, but this argument runs with mine. ]

anne said in reply to Sandwichman

Farmer is dissing Pareto Optimality and using "sunspots" as sarcasm. He seems to do it in a way that opens up space for countless side arguments that leave Pareto Optimality unscathed....

[ The issue is that Roger Farmer leaves Pareto Optimality unscathed, and this is an essential point. The essay is beyond the morality of now, but there is no beyond. ]

[Dec 21, 2015] Monetalism is dead but remains of monetarist thinking are still lingering

Notable quotes:
"... Summers is right that bubbles are usually accompanied by some kind of financial euphoria. ..."
"... There will be massive pushback because so many have wasted many years and resources building mathematically elegant but fatally flawed models that do not make accurate predictions on even represent the fundamentals of any economy. ..."
economistsview.typepad.com
Peter K. said in reply to pgl... December 16, 2015 at 10:07 AM
"It seems to me looking at a year when the stock market has gone down a bit, credit spreads have widened substantially and the dollar has been very strong it is hard to say that now is the time to fire a shot across the bow of financial euphoria. Looking especially at emerging markets I would judge that under-confidence and excessive risk aversion are a greater threat over the next several years than some kind of financial euphoria."

Summers is right that bubbles are usually accompanied by some kind of financial euphoria.

... ... ...

Peter K. said in reply to Benedict@Large...

I disagree with your assessment. People (elite?) are talking about unusual solutions because fiscal policy is being blocked politically.

MMT doesn't seem that different from Keynesianism, except proponents have very big chips on their shoulders for some reason.

Right now the Keynesians are arguing that the Fed shouldn't raise rates. Are the MMTers arguing any differently? Or are they merely giving us the blue prints for utopia. Blue prints don't help much if the politics are against you.

Syaloch said in reply to Peter K....

Great question.

If I have two black boxes that always produce exactly the same outputs, does it matter whether their internal mechanisms are different?

Dan Kervick said in reply to Syaloch...
"Or maybe they would be effective because people believe they ought to be effective."

Possibly. I think back in the 80's when monetarism was the super-sexy new view, there were a lot of people who thought inflation was mainly a function of the monetary base, so if the Fed made a big public stink about pumping up the monetary base, that could be counted on the boost inflation expectations, at least in some quarters, and the high expectations would in turn help to boost actual inflation. That doesn't seem to be the case any longer.

Dan Kervick said in reply to pgl...
The heyday of monetarism was the late 70's and early 80's. That's when Friedman's monetary theory of inflation caught the public imagination, and it's the only time the Fed ever attempted (briefly) to target the money supply.

Conservative spear-carrier Niall Ferguson knows how important monetarism was to the neoliberal movement, and how big a deal it was during the Thatcher-Reagan era.

http://www.niallferguson.com/journalism/finance-economics/friedman-is-dead-monetarism-is-dead-but-what-about-inflation

Other references to the heyday of monetarism abound:

http://www.voxeu.org/article/nominal-gdp-targeting-developing-nations

Dan Kervick said in reply to pgl...
The heyday of monetarism was the late 70's and early 80's. That's when Friedman's monetary theory of inflation caught the public imagination, and it's the only time the Fed ever attempted (briefly) to target the money supply.

Conservative spear-carrier Niall Ferguson knows how important monetarism was to the neoliberal movement, and how big a deal it was during the Thatcher-Reagan era.

http://www.niallferguson.com/journalism/finance-economics/friedman-is-dead-monetarism-is-dead-but-what-about-inflation

Other references to the heyday of monetarism abound:

http://www.voxeu.org/article/nominal-gdp-targeting-developing-nations

bakho said... December 16, 2015 at 05:45 AM
Kevin Hoover, The emperor has no clothes!

"Given what we know about representative-agent models…there is not the slightest reason for us to think that the conditions under which they should work are fulfilled. The claim that representative-agent models provide microfundations succeeds only when we steadfastly avoid the fact that representative-agent models are just as aggregative as old-fashioned Keynesian macroeconometric models. They do not solve the problem of aggregation; rather they assume that it can be ignored."

This the reason Macro needs to move into more data driven empirics.

There will be massive pushback because so many have wasted many years and resources building mathematically elegant but fatally flawed models that do not make accurate predictions on even represent the fundamentals of any economy.

Syaloch said... December 16, 2015 at 05:50 AM

The Advantages of Higher Inflation - The New York Times

From the article:

"A critical problem with aiming for higher inflation is how to get from here to there. The Fed has spent enormous effort anchoring people's expectations to 2 percent. Even economists sympathetic to a higher target are wary of what such a shift might do to its credibility.

"'A perfect world, where you could commit to 4 percent and everybody believed it, would be great,' Mr. Mishkin told me. 'We are not in a perfect world. Moving much higher than 2 percent raises the risk that expectations become unanchored.'

"So here is an alternative proposal. If the Fed is too cautious to risk unhinging inflationary expectations, how about just delivering what it has promised? Among economists and investors, the problem with the Fed's 2 percent target is that just about everybody believes it is really a ceiling. That makes it even harder for inflation to rise to that level. The market expects the Fed to act pre-emptively to ensure it never goes over that line - which is what it seems to be doing now.

"If the Fed is not going to aim for higher inflation, the least it could do is re-anchor expectations to the goal it established, allowing inflation to fluctuate above and below a 2 percent average. That alone might help deal with the next economic crisis.

"'We haven't fully tested whether we can deal with this kind of crisis with a 2 percent inflation target,' said David H. Romer of the University of California, Berkeley. 'Central banks have lots of tools. If they say they are willing to keep using them until they get where they want, they can eventually do it.'"

This highlights a confusing aspect of inflation targets. If the Fed simply announces a higher inflation target without taking any other action, have they really done anything? What's more, they not only need to announce the new target, they need to convince markets that they are willing to do whatever it takes to hit that target -- it's all about credibility and re-anchoring expectations. And while engaging in QE to push down longer-term rates might help make that statement more convincing, it doesn't seem to be strictly necessary for the new target to be effective.

Thus inflation targets seem in at least some cases to operate purely through psychological manipulation, as a sort of placebo effect: inflation rises not because the Fed has injected money into the economy today or changed the cost of lending today, but rather because the Fed is able to "trick" markets into believing it will rise in the future.

Peter K. said in reply to Syaloch...

And the reverse is true. The markets are skeptical that the Fed will hit its 2 percent ceiling target any time soon.

Inflation expectations are becoming un-anchored on the downside but nobody cares because .... oil.

Dan Kervick said in reply to Peter K....
I guess we'll all have to wait for Yellen's future memoirs to know the thinking that was going on inside the Fed during 2015. But it's interesting that both Yellen and Stanley Fischer, both formerly held in gigantic respect by the more prominent liberal economists, are now the targets of ire for apparently not seeing eye-to-eye with their opinionated friends on the outside. Despite the fact that BoG members have access to mountains of internal research and policy input that people on the outside can only guess at, the default position of the outsiders is that the insiders have been corrupted by power and fast-talking bankers or something.

Here's my conjecture about what the Fed's thinking is: The Fed recognizes that keeping policy interest rates down at an unprecedentedly low basement level for years on end sends this message to the global economy: the US economy is a sick basket case. It needs the permanent life support of extraordinary monetary policy intervention to be kept from flat-lining.

I think the people who actually work inside the Fed think that is total bunk, and that as they gradually wean the financial sector off of the monetary ventilator, nothing bad is going to happen at all. The patient is going to get up, walk around and breathe normally. And when that happens, it will say, "Wow, maybe I should have tried that earlier!" Business confidence will spurt; people will think, "Hey, I guess we're not in that gloomy post-2008 depression any more!", and the country will get on with its business more cheerfully.

The Fed has had a devil of a time getting back to normal, because despite its best intentions it has inadvertently re-defined a condition of zero rates and excess reserves bleeding from bankers's ears as the new normal, and created an out-of-control public fixation on monetary policy intervention. Fed communications strategies aimed at guiding the market have turned back on them in a reflexive and self-defeating cycle. They got themselves into a terrible pattern for a while where every time there was good economic news, the markets would respond negatively because they interpreted the good news as evidence that the Fed would "taper" - which they regarded as bad news! And if there was bad news, the markets would respond favorably because they saw the bad news as evidence that the fed would "remain aggressive" - which is good news! Obviously that's a pretty pathological cycle to be in: it's a mechanism fro economic self-stultification. Indicating a move toward normalization too suddenly in 2013 caused the irrational "taper tantrum", so they have had to go more slowly this time around with the hand-holding and by building a longer "guidance" runway.

Their chief need now is to push back against the monetary maniacs and hyperventilators who keep trying to convince impressionable business people and consumers that the Fed has somehow been "keeping the economy" afloat, and that when interest rates go up - from 1/4 to 1/2 of a percent! - we're all going to drown. If you have enough ambulance chasers convincing people they are sick and damaged, they will act sick and damaged.

[Dec 16, 2015] Study: Elite scientists can hold back science

December 15, 2015 | www.vox.com

Max Planck - the Nobel Prize–winning physicist who pioneered quantum theory - once said the following about scientific progress:

"A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it."

Shorter: Science is not immune to interpersonal bullshit. Scientists can be stubborn. They can use their gravitas to steamroll new ideas. Which means those new ideas often only prevail when older scientists die.

Recently, researchers at the National Bureau of Economic Research (NBER) released a working paper - titled, "Does Science Advance One Funeral at a Time?" - that puts Planck's principle to the test.

Sifting through citations in the PubMed database, they found evidence that when a prominent researcher suddenly dies in an academic subfield, a period of new ideas and innovation follow.

The NBER team identified 12,935 "elite" scientists - based on the amount of funding they receive, how many times they've published, how many patents they invented, or whether they were members of the National Academies of Sciences or the Institute of Medicine. Searching through obituaries, they found 452 of these elite researchers died before retirement. Because science leaves a dense paper trail of citations, publish dates, and author bylines, it's (relatively) easy to track changes in publishing patterns after a prominent death.

Here's the pattern: After the unexpected death of a rock-star scientist, their frequent collaborators - the junior researchers who authored papers with them - suddenly see a drop in publication. At the same time, there is a marked increase in published work by other newcomers to the field:

[image]

Unlike the collaborators, presumably, these newcomers are less beholden to the dead luminaries. They were "less likely to cite the deceased star's work at all," the report states. And they seemed to be making novel advances in science:

The new articles represent substantial contributions, at least as measured by long-run citation impact. Together, these results paint a picture of scientific fields as scholarly guilds to which elite scientists can regulate access, providing them with outsized opportunities to shape the direction of scientific advance in that space.

All this suggest there's a "goliath's shadow" effect. People are either prevented from or afraid of challenging a leading thinker in a field. That or scientific subfields are like grown-up versions of high school cafeteria tables. New people just can't sit there until the queen bee dies.

What's interesting is that the deaths seemed to hurt the careers of the luminaries' junior collaborators, the ones who frequently co-authored papers with them but not in a senior role. "The death of an elite scientist has a negative and seemingly permanent impact on the productivity of their coauthors," the study reports. They published less, while outsiders flooded the void.

(The authors caution that gatekeeping by elite researchers isn't always a bad thing. "Gatekeeping activities could have beneficial properties when [a] field is in its inception," granting scientists more room to take risks.)

All of this is another example of how progress in science is confounded by human behavior. We see this in so many ways. Scientists lie about results. Or they discount insights derived from failures. Science is so obsessed with the rewards of solving complicated problems that it forgets about the simple ones. The field overwhelmingly is biased toward males (experiments have shown "John" gets more accolades than "Jennifer" with the identical résumé).

It's worth remembering: Science may be a noble discipline based on cold logic and rational observation; but humans are animals fueled by emotion and bias. As the NBER researchers conclude: "[T]he idiosyncratic stances of individual scientists can do much to alter, or at least delay, the course of scientific advance."

[Dec 15, 2015] Noahpinion Academic B.S. as artificial barriers to entry

Notable quotes:
"... And of course, some folks accuse the economics profession of being a front for laissez-faire ideology. ..."
"... Or an entire field, which labored mightily to understand why they missed the second worse crisis in 80 years, only to discover it was for the same reason they missed the worst crisis 80 years ago. ..."
"... It is that economics matter and the nonsense that dominates the discourse, and therefore policy, affects everyones life. ..."
"... So console yourself that as bad of writers most economist are, their obscurantism is couched in equations so its harder for the unschooled to ridicule heir papers. ..."
"... A cynical advantage to the increased use or mathematics and mathiness is that the economics field gets to use university math departments to thin the herd just like the engineering field does. Better still, the filter imposed by requiring calculus, statistics and differential equations is not always anticipated: while prospective engineers take AP Calculus and end up in a class where they already know half the material, prospective economists enter Calculus I and flunk out. ..."
"... General Equilibrium, Rational Expectations, Microfoundations, The parculiar definitions of Rationality and Efficiency , Utility Optimization, etc. are all very ideologically driven, and if you do not conform to these standards, you are not accepted within the discipline. Ive been told just how completely unreadable Econ papers are, not even talking about the math component, thanks to all of the Jargon. ..."
noahpinionblog.blogspot.com

Paul Romer complains of "mathiness" in macroeconomics. Paul Pfleiderer talks about "chameleon" models. Ricardo Caballero says macroeconomists encourage the "pretense of knowledge". Everywhere, people complain about economists' fetish for pointless model-making.

And of course, some folks accuse the economics profession of being a front for laissez-faire ideology.

...A commenter points out that, as usual, Feynman did this snark way before I did.

Jammer812 10:00 PM

Does it really matter if its obscurantism or tendentious cant that a certain type of of economist engages in (cough, neo Fisherism, cough), and then declare victory, when another prominent economist spend 70 pages to find out that if everyone can do algebra in their heads, it might, just might possibly be true. So lets assume a can opener.. sorry I mean that people can, when experience teaches us that most people can't calculate a 20% tip.

Or on the other side, we have the economist who knows that because they are now accounting for the financial sector their DSGE model is just going to nail it.

Or how about a Noble committee that gives a prize to one economist, whose work is disproved by another economist who shared the prize.

Or an entire field, which labored mightily to understand why they missed the second worse crisis in 80 years, only to discover it was for the same reason they missed the worst crisis 80 years ago.

The difference between critical urban theory, or litcrit, or pomo philosophy or popomo art theory and economics isn't that it is easier for people to make fun . It is that economics matter and the nonsense that dominates the discourse, and therefore policy, affects everyone's life.

So console yourself that as bad of writers most economist are, their obscurantism is couched in equations so it's harder for the unschooled to ridicule heir papers.

Anonymous 1:56 PM

Presumably, no one here would expect a humanities PhD to determine whether an economic theory paper is accurate or useful. Why should the reverse be true?

There may well be advantages to this "obscure" language, in the same way that Bourbaki-esque notation and abstraction is useful in economics. This is communication between experts; the notion that you should be able to understand it most likely reflects a disrespect for the given field itself.

I don't envy any theorist whose primary tool of communication is verbal, but if I were put in that position, you may well expect a complex vocabulary to accompany complex ideas (or even simple ideas, rigorously stated). There may well be problems in the humanities, but we're not qualified to recognize them.

Graham Peterson 4:52 PM

Agree about cartels, but I don't think they're that schematic or conspiratorial. Professors across disciplines really do believe they are contributing to something beyond themselves, to knowledge or truth, and grabbing territory and raising salaries is just a means toward those altruistic ends.

Raising (or guaranteeing) salaries looks to me like an unintended consequence of what is proudly and loudly intended by economists and professors of humanities -- increasing the rigor of analysis. There is just about nobody who disagrees that increasing the rigor of analysis is a bad thing. But how do we do that? By opening up intellectual competition among disciplines, political ideologies, etc., or by constructing evermore elaborate apprentice programs designed to hone already-existing intellectual traditions *within* disciplines, ideologies, etc.?

I can't really see any qualitative difference between increasing the complexity of grammar using any symbolic system, bourbakian notation in mathematics or latinate phrases in English. What's most dangerous for economics is its disregard for empirical observation outside of econometrics. Econometrics, just like theory itself, becomes a theoretical exercise and is subject to all of the same self referential signaling games as high theory is.

Admiring each other's screw drivers isn't any more empirical than admiring each other's theories of how screws secure materials. The point is to turn some screws.

Yamaneko 11:37 PM

A cynical advantage to the increased use or mathematics and mathiness is that the economics field gets to use university math departments to thin the herd just like the engineering field does. Better still, the filter imposed by requiring calculus, statistics and differential equations is not always anticipated: while prospective engineers take AP Calculus and end up in a class where they already know half the material, prospective economists enter Calculus I and flunk out.

... ... ...

Øystein 6:07 PM

You might be interested to learn that the philosopher Jon Elster has drawn an analogy between "hard and soft obscurantism" (econ and critical theory).

Anonymous 9:38 AM

He devotes the last chapter of his book Explaining Social Behavior to this distinction. The whole book is very much worth a read: http://www.amazon.com/Explaining-Social-Behavior-Bolts-Sciences/dp/0521777445

Kain 7:12 PM

I generally agree with your point, except the part where you don't think of Economics as ideologically driven.

http://blog.supplysideliberal.com/post/128894764282/what-is-indoctrination-and-how-is-it-different

"What is indoctrination and how is it different from regular instruction? Indoctrination, suggests Christina Hoff Summers, is characterized by three features, the major conclusions are assumed beforehand, rather than being open to question in the classroom; the conclusions are presented as part of a "unified set of beliefs" that form a comprehensive worldview; and the system is "closed," committed to interpreting all new data in the light of the theory being affirmed.
Whether this account gives us sufficient conditions for indoctrination, and whether, so defined, all indoctrination is bad college pedagogy, may certainly be debated. According to these criteria, for example, all but the most philosophical and adventurous courses in neoclassical economics will count as indoctrination, since undergraduate students certainly are taught the major conclusions of that field as established truths which they are not to criticize from the perspective of any other theory or worldview; they are taught that these truths form a unitary way of seeing the world; and, especially where microeconomics is concerned, the data of human behavior are presented as seen through the lens of that theory. It is probably good that these conditions obtain at the undergraduate level, where one cannot simultaneously learn the ropes and criticize them–although one might hope that the undergraduate will pick up in other courses, for example courses in moral philosophy, the theoretical apparatus needed to raise critical questions about these foundations."

General Equilibrium, Rational Expectations, Microfoundations, The parculiar definitions of "Rationality" and "Efficiency", Utility Optimization, etc. are all very ideologically driven, and if you do not conform to these standards, you are not accepted within the discipline. I've been told just how completely unreadable Econ papers are, not even talking about the math component, thanks to all of the Jargon.

Might be less politically-motivated, but it doesn't necessarily require a particular political viewpoint to be ideologically-motivated.

Dulimbai 7:48 PM

Yo do understand that this is exactly the point? Thomas Kuhn, which knew something about science, basically said that science requires barriers to entry to get amateurs out.

A good explanation can be found here http://lesswrong.com/lw/lr/evaporative_cooling_of_group_beliefs/

Ghyl Tarvoke 8:29 PM

I think here you are giving too much importance to the gatekeeping/economic aspect of the most vacuous outpourings of Critical Theory. My experience as a history MA is that such academics give so little thought to economics and their economic situation that such thoughts rarely enter their minds. However, it probably has had the effect of reducing the intellectual diversity of many subjects, which in the humanities at least is a major shame and a problem.

My theory is more straightforward and it's simple. Don't underestimate people's, even academics (perhaps especially academics), intellectual laziness and the desire to dress up their priors in language that looks 'intellectual' thus making your priors look smart and those who don't share your priors not so smart. In short the popularity of most of Critical Theory is due to the lazy man's guide to enlightenment, making something look intellectually difficult while not really challenging people at all. After all, it is not as if many of the core beliefs of large parts of critical theory once you remove the verbiage are not widespread among certain elements of society. And those elements are massively over represented among people liking to do a BA in literature or anthropology. Why are such beliefs so popular? Well, that's a different and difficult question.

However, I do feel liking pointing out, as others have already alluded to, critical theory and postmodernism have had their day. It peaked in the 90s and belongs to the era of Seinfeld, Grunge, and Triangulation. Now there is a trend towards another ideology, bland progressivism and the fear of giving anything that looks like a controversial opinion. This, at least, is notable in History (I can't speak for literature, in Anthropology pomo is more prevalent but is certainly declining). Some have justified this as 'empiricism', and perhaps it is a needed reaction to what went before, but it is frequently driven by the same intellectual forces I've described above. The difference between Generation Y and the Boomers perhaps. Either way, the gatekeeping aspect is barely part of it.

Tom Warner 2:00 PM

Seems to me anon you are agreeing with the complaint about academic obscurantism: it's the use of an artificial dialect, which only practitioners would invest in learning how to read, to create a false impression of sophistication. The only oddity is you seem inexplicably proud of your fluency in said dialect.

Anonymous 7:55 PM

"Mathematical theory, of the type economists do, is hard to do..."

Such barriers to entry should be erected so as to keep out the math and physics nerds that have destroyed economics.

[Dec 06, 2015] Beware Economics 101 -- this is a neoclassical junk

Notable quotes:
"... "The problem for early would ­- be neoclassical macroeconomists was that, strictly speaking, there was no microeconomic model of macroeconomics when they began their campaign. So they developed a neoclassical macro model from the foundation of the neoclassical growth model developed by Nobel laureate Robert Solow (Solow 1956) and Trevor Swan (Swan 2002). They interpreted the equilibrium growth path of the economy as being determined by the consumption and leisure preferences of a representative consumer, and explained deviations from equilibrium – which the rest of us know as the business cycle – by unpredictable 'shocks' to technology and consumer preferences. ..."
"... This resulted in a model of the macroeconomy as consisting of a single consumer, who lives for ever, consuming the output of the economy. Which is a single good produced in a single firm, which he owns and in which he is the only employee, which pays him both profits equivalent to the marginal product of capital and a wage equivalent to the marginal product of labor. To which he decides how much labor to supply by solving a utility function that maximizes his utility over an infinite time horizon, which he rationally expects and therefore correctly predicts. ..."
"... Paul Krugman is a quintessential neoclassical economist. Neoclassical economists threw the notion that economics should deal with empirical or factual reality overboard quite some time ago. ..."
"... Economists often invoke a strange argument by Milton Friedman that states that models do not have to have realistic assumptions to be acceptable - giving them license to produce severely defective mathematical representations of reality. ..."
"... Economists as a rule do not deny that their assumptions about human nature are highly unrealistic, but instead claim, following Friedman (1962, 1982), that the absence of realism does not diminish the value of their theory because it "works," in the sense that it generates valid predictions…. ..."
"... Most important, philosophers of science have almost universally rejected Friedman's position (Boland, 1979). It is very widely agreed that the purpose of a theory is to explain. Otherwise, [predictions] are unable to foretell under what conditions they will continue to hold or fail. ..."
"... With the advent of the Great Financial Crisis, which began in 2007 and continues to this day, the neoclassical models did fail. And they failed in the most spectacular way. ..."
"... Nevertheless, for those like Krugman who are in love with orthodox economic theory, when facts don't conform to theory, so much worse for the facts. ..."
"... It should be added that not everyone who rejects the orthodox, neoclassical theory of exogenous money creation and its "available funds" theory of banking, as Keen calls it, believes that debt matters. ..."
"... A very good example of this is the MMT school, which even though it rejects the orthodox theory of money creation, nevertheless discounts the importance of debt, or at least public debt. ..."
"... The distinction between private debt and public debt, however, is not a clear one. We all saw, for instance, the ease with which private debt was converted into public debt in the cases of Ireland and Spain in the wake of the GFC. ..."
"... The piece that VK posted by Keen was essentially a rejection of the macroeconomic theory that was formulated to replace Keynesian theory. ..."
"... The debate between these two economists on the role of banking and specifically the creation of credit is of fundamental importance in understanding the shortcomings of orthodox economic thinking – and why it was so ill-equipped to handle, let alone predict, the crash of 2008. ..."
"... However, because he has such an important platform, it matters more to many monetary economists (including the editor of this series) that he appears to lack a proper understanding of the nature of credit, and the role of banks in the economy. ..."
"... So yes debt is a big problem with a poorly regulated banking industry (financial industry really because of shadow banking). ..."
peakoilbarrel.com
VK, 12/04/2015 at 2:57 pm
Beware Economics 101. The peer review mechanism has horribly failed.

When you read Krugman, this is what he and our central bankers believe.

"The problem for early would ­- be neoclassical macroeconomists was that, strictly speaking, there was no microeconomic model of macroeconomics when they began their campaign. So they developed a neoclassical macro model from the foundation of the neoclassical growth model developed by Nobel laureate Robert Solow (Solow 1956) and Trevor Swan (Swan 2002). They interpreted the equilibrium growth path of the economy as being determined by the consumption and leisure preferences of a representative consumer, and explained deviations from equilibrium – which the rest of us know as the business cycle – by unpredictable 'shocks' to technology and consumer preferences.

This resulted in a model of the macroeconomy as consisting of a single consumer, who lives for ever, consuming the output of the economy. Which is a single good produced in a single firm, which he owns and in which he is the only employee, which pays him both profits equivalent to the marginal product of capital and a wage equivalent to the marginal product of labor. To which he decides how much labor to supply by solving a utility function that maximizes his utility over an infinite time horizon, which he rationally expects and therefore correctly predicts.

The economy would always be in equilibrium except for the impact of unexpected 'technology shocks' that change the firm's productive capabilities (or his consumption preferences) and thus temporarily cause the single capitalist/worker/consumer to alter his working hours.

Any reduction in working hours is a voluntary act, so the representative agent is never involuntarily unemployed, he's just taking more leisure. And there are no banks, no debt, and indeed no money in this model."

Prof. Steve Keen, Debunking Economics.

Dennis Coyne, 12/04/2015 at 6:11 pm
Hi VK,

No this is not what Krugman believes at all. There are some economists that think in these terms, in the US it is primarily in the interior of the country, the economists on the east and west coast, (this includes Krugman and many others) would not think in these terms at all.

Have you ever read anything by Krugman?

VK, 12/05/2015 at 1:41 am
Read Krugman for years. The basic neoclassical models are founded on the representative agent model with the above assumptions as core. Look up the PhD text book on economics – http://www.amazon.com/Microeconomic-Theory-Andreu-Mas-Colell/dp/0195073401

Krugman gives assessments based on the representative agent models, with its no money, no debt, no banks assumptions. Very linear models, no dynamic modeling.

Economic theory and modeling is stuck in the 19th century. Rest of the hard sciences, physics, chemistry, atmospherics moved on with Poincare and later Lorenz to dynamic simulations.

VK, 12/04/2015 at 3:04 pm
To Dennis Coyne, debt levels matter because "loans create deposits" and not vice versa. Bank of England published a paper last year on modern money creation http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf

The fractional reserve banking model taught in economics is absolutely empirically wrong. Because banks have the power to create credit money, they can issue in excess.

Under the empirically correct credit money creation model, there can be an excessive build up of debt. Hence the more than 250 sovereign and domestic govt debt crises since 1850.

Dennis Coyne, 12/04/2015 at 6:24 pm
Hi VK,

Rune Likvern posted the link and I read the paper. US textbooks through 1990 covered this exactly as in that paper, so it was a good refresher, but not different from what I had learned in the past.

There can be excessive debt and banks can fail due to poor lending practices combined with a severe recession. Nations can also default. The question is how much debt is too much debt. In economics there are different opinions on this question. When I was studying economics the focus was on public debt crowding out private debt when an economy was close to full employment.

Now there seems to be more focus on private debt, which nobody in economics used to worry about.

It may be that the lack of banking regulation and the rise of shadow banking has made this more of a problem, I am out of date on the latest research.

http://www.economist.com/blogs/freeexchange/2015/06/public-debt

The article at the link above suggests up to about a 150% debt to GDP ratio is a safe level for public debt.

VK, 12/05/2015 at 1:56 am
U.S. Textbooks don't cover this at all. The assumption that Paul Samuelson used in his seminal undergraduate textbook that millions have studied was the fractional reserve lending model which is empirically false.

The whole of economics is empirically false, it would be a laughing stock if people looked under the hood with its assumptions that are meant to preserve straight line thinking rather than dealing with reality, which is highly non-linear and dynamic.

Private debt wasn't a concern in economics because they assumed away the role of banks to preserve the equilibrium models. Once you incorporate reality into the models, which is what a true science would do, you find that private debt levels matter.

What economists think: Saver lends to borrower. Saver loses purchasing power, borrower gains purchasing power. Purchasing power hasn't changed in the economy. Just a shift

What really happens: Saver puts money in a bank, has access to his money anytime. Borrower wants money, bank issues a credit and writes loan amount as asset. Purchasing power as a whole increases across the economy as both saver and borrower now have money to buy goods and services with.
That's how the economy grows – bank issuance of credit. And it can easily be in excess.

https://unlearningeconomics.wordpress.com/2012/04/03/the-keenkrugman-debate-a-summary/

Jef, 12/05/2015 at 9:12 am
Thanks for hanging in there VK.

I tried to explain this to my father in law who is an attorney specializing in finance and accounting. He simply could not accept it or even wrap his head around it even after reading the Bank of England piece.

It is fraud plain and simple and the cost to humanity in both financial terms and lives lost is huge.

Glenn Stehle, 12/05/2015 at 9:34 am
Paul Krugman is a quintessential neoclassical economist. Neoclassical economists threw the notion that economics should deal with empirical or factual reality overboard quite some time ago.

Perhaps no one was more explicit in articulating this notion that science should discard factual reality than Milton Friedman.

Any number of critics have pointed this out. For instance,

Economists often invoke a strange argument by Milton Friedman that states that models do not have to have realistic assumptions to be acceptable - giving them license to produce severely defective mathematical representations of reality.

–NASSIM NICHOLAS TALEB, The Black Swan

and

Economists as a rule do not deny that their assumptions about human nature are highly unrealistic, but instead claim, following Friedman (1962, 1982), that the absence of realism does not diminish the value of their theory because it "works," in the sense that it generates valid predictions….

Most important, philosophers of science have almost universally rejected Friedman's position (Boland, 1979). It is very widely agreed that the purpose of a theory is to explain. Otherwise, [predictions] are unable to foretell under what conditions they will continue to hold or fail.

AMITAI ETZIONI, The Moral Dimension

With the advent of the Great Financial Crisis, which began in 2007 and continues to this day, the neoclassical models did fail. And they failed in the most spectacular way.

Nevertheless, for those like Krugman who are in love with orthodox economic theory, when facts don't conform to theory, so much worse for the facts.

Glenn Stehle, 12/05/2015 at 9:55 am
It should be added that not everyone who rejects the orthodox, neoclassical theory of exogenous money creation and its "available funds" theory of banking, as Keen calls it, believes that debt matters.

A very good example of this is the MMT school, which even though it rejects the orthodox theory of money creation, nevertheless discounts the importance of debt, or at least public debt.

The distinction between private debt and public debt, however, is not a clear one. We all saw, for instance, the ease with which private debt was converted into public debt in the cases of Ireland and Spain in the wake of the GFC.

Dennis Coyne, 12/05/2015 at 12:38 pm
Hi Glenn,

Krugman does hold relatively mainstream views, but there are significant differences of opinion within economics. Many economists reject Keynesian theory, Krugman does not. The piece that VK posted by Keen was essentially a rejection of the macroeconomic theory that was formulated to replace Keynesian theory. Krugman would make many of the exact same criticisms.

The "debt doesn't matter" theme is carried a little too far, nobody really argues this. The argument is that when the economy is doing poorly due to low aggregate demand (during a severe recession) and monetary policy is not effective because interest rates are near zero (so that the federal funds rate cannot be lowered any further), cutting fiscal deficits is poor public policy.

Perhaps you disagree?

Glenn Stehle, 12/05/2015 at 1:57 pm
Dennis,

Are you unaware of the famous debate between Krugman and Keen, and what it is all about?

Perhaps this article by Ann Pettifor will help:

The debate between these two economists on the role of banking and specifically the creation of credit is of fundamental importance in understanding the shortcomings of orthodox economic thinking – and why it was so ill-equipped to handle, let alone predict, the crash of 2008.

Many rightly applaud Paul Krugman for using his platform at the New York Times to defend further fiscal stimulus in the US–against a hostile political crowd, not to mention the downright opposition of neo-liberal economists –- and we commend him for that.

However, because he has such an important platform, it matters more to many monetary economists (including the editor of this series) that he appears to lack a proper understanding of the nature of credit, and the role of banks in the economy.

https://www.opendemocracy.net/ourkingdom/steve-keen/keen-krugman-debate

I very much recommend reading the entire article, and much more can be found by Googling "Keen vs Krugman debate."

Dennis Coyne, 12/05/2015 at 12:15 pm
Hi Vk,

There are many of us who have studied beyond the introductory level. In my introductory courses, I believe we were taught this correctly, but that was long ago, I know when I instructed the introductory students as a grad student what I was teaching was essentially what I read in the paper you cited. Perhaps the "textbooks" have improved over time, I haven't read an economics textbook for many years.

Have you read any economics papers lately, perhaps there has been more progress than you think. A fundamental problem with economics is that how we understand the workings of the economy can affect the way people behave. People will always try to game the system and this then effects the system. It is a difficult modelling problem not faced by chemists and physicists.

If you solve it you should publish a paper.

Dennis Coyne, 12/05/2015 at 1:41 pm
Hi VK,

You said:

What economists think: Saver lends to borrower. Saver loses purchasing power, borrower gains purchasing power. Purchasing power hasn't changed in the economy. Just a shift

Economists don't think this way at all. These kinds of lessons are often presented in introductory economics courses to show how economists once thought things worked in 1803 when Say introduced "Say's Law".

Then the economics professor goes on to explain how a modern economy actually works (which we don't understand all that well.)

Generally speaking economic growth is considered a good thing, and banks lending to borrowers that are likely to be able to repay the loan (not true leading up to the financial crisis due to poor regulation and lending practices), is not a problem in a well regulated banking sector (in the US this went away in the 1980s).

So yes debt is a big problem with a poorly regulated banking industry (financial industry really because of shadow banking).

Debt is like a lot of things in life, too much or too little can be a bad thing.

The central bank can certainly influence the amount of lending by raising interest rates, as long as inflation is moderate, there is not much reason to do so.

Rune Likvern, 12/05/2015 at 1:43 pm
"US textbooks through 1990 covered this exactly as in that paper, so it was a good refresher, but not different from what I had learned in the past."

And what is the title of those textbooks?

"Now there seems to be more focus on private debt, which nobody in economics used to worry about."

Was it US public or private debt that started the GFC in 2007/2008?

[Dec 02, 2015] Larry Summers and the Subversion of Economics

Notable quotes:
"... As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws. ..."
"... Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.) ..."
"... In 2005, at the annual Jackson Hole, Wyo., conference of the worlds leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other peoples money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a full-blown financial crisis and a catastrophic meltdown. When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a Luddite, dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.) ..."
"... Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And its due not just to ideology; its also about straightforward, old-fashioned money. ..."
"... Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Departments Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates. ..."
"... I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics. ..."
"... It is difficult to get a man to understand something when his salary depends upon his not understanding it. ..."
economistsview.typepad.com

RGC, December 02, 2015 at 06:09 AM

Larry Summers and the Subversion of Economics

By Charles Ferguson October 03, 2010

The Obama administration recently announced that Larry Summers is resigning as director of the National Economic Council and will return to Harvard early next year. His imminent departure raises several questions: Who will replace him? What will he do next? But more important, it's a chance to consider the hugely damaging conflicts of interest of the senior academic economists who move among universities, government, and banking.

Summers is unquestionably brilliant, as all who have dealt with him, including myself, quickly realize. And yet rarely has one individual embodied so much of what is wrong with economics, with academe, and indeed with the American economy. For the past two years, I have immersed myself in those worlds in order to make a film, Inside Job, that takes a sweeping look at the financial crisis. And I found Summers everywhere I turned.

Consider: As a rising economist at Harvard and at the World Bank, Summers argued for privatization and deregulation in many domains, including finance. Later, as deputy secretary of the treasury and then treasury secretary in the Clinton administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation in the financial sector. He also successfully fought attempts by Brooksley Born, chair of the Commodity Futures Trading Commission in the Clinton administration, to regulate the financial derivatives that would cause so much damage in the housing bubble and the 2008 economic crisis. He then oversaw passage of the Commodity Futures Modernization Act, which banned all regulation of derivatives, including exempting them from state antigambling laws.

After Summers left the Clinton administration, his candidacy for president of Harvard was championed by his mentor Robert Rubin, a former CEO of Goldman Sachs, who was his boss and predecessor as treasury secretary. Rubin, after leaving the Treasury Department-where he championed the law that made Citigroup's creation legal-became both vice chairman of Citigroup and a powerful member of Harvard's governing board.

Over the past decade, Summers continued to advocate financial deregulation, both as president of Harvard and as a University Professor after being forced out of the presidency. During this time, Summers became wealthy through consulting and speaking engagements with financial firms. Between 2001 and his entry into the Obama administration, he made more than $20-million from the financial-services industry. (His 2009 federal financial-disclosure form listed his net worth as $17-million to $39-million.)

Summers remained close to Rubin and to Alan Greenspan, a former chairman of the Federal Reserve. When other economists began warning of abuses and systemic risk in the financial system deriving from the environment that Summers, Greenspan, and Rubin had created, Summers mocked and dismissed those warnings. In 2005, at the annual Jackson Hole, Wyo., conference of the world's leading central bankers, the chief economist of the International Monetary Fund, Raghuram Rajan, presented a brilliant paper that constituted the first prominent warning of the coming crisis. Rajan pointed out that the structure of financial-sector compensation, in combination with complex financial products, gave bankers huge cash incentives to take risks with other people's money, while imposing no penalties for any subsequent losses. Rajan warned that this bonus culture rewarded bankers for actions that could destroy their own institutions, or even the entire system, and that this could generate a "full-blown financial crisis" and a "catastrophic meltdown."

When Rajan finished speaking, Summers rose up from the audience and attacked him, calling him a "Luddite," dismissing his concerns, and warning that increased regulation would reduce the productivity of the financial sector. (Ben Bernanke, Tim Geithner, and Alan Greenspan were also in the audience.)

Soon after that, Summers lost his job as president of Harvard after suggesting that women might be innately inferior to men at scientific work. In another part of the same speech, he had used laissez-faire economic theory to argue that discrimination was unlikely to be a major cause of women's underrepresentation in either science or business. After all, he argued, if discrimination existed, then others, seeking a competitive advantage, would have access to a superior work force, causing those who discriminate to fail in the marketplace. It appeared that Summers had denied even the possibility of decades, indeed centuries, of racial, gender, and other discrimination in America and other societies. After the resulting outcry forced him to resign, Summers remained at Harvard as a faculty member, and he accelerated his financial-sector activities, receiving $135,000 for one speech at Goldman Sachs.

Then, after the 2008 financial crisis and its consequent recession, Summers was placed in charge of coordinating U.S. economic policy, deftly marginalizing others who challenged him. Under the stewardship of Summers, Geithner, and Bernanke, the Obama administration adopted policies as favorable toward the financial sector as those of the Clinton and Bush administrations-quite a feat. Never once has Summers publicly apologized or admitted any responsibility for causing the crisis. And now Harvard is welcoming him back.

Summers is unique but not alone. By now we are all familiar with the role of lobbying and campaign contributions, and with the revolving door between industry and government. What few Americans realize is that the revolving door is now a three-way intersection. Summers's career is the result of an extraordinary and underappreciated scandal in American society: the convergence of academic economics, Wall Street, and political power.

Starting in the 1980s, and heavily influenced by laissez-faire economics, the United States began deregulating financial services. Shortly thereafter, America began to experience financial crises for the first time since the Great Depression. The first one arose from the savings-and-loan and junk-bond scandals of the 1980s; then came the dot-com bubble of the late 1990s, the Asian financial crisis; the collapse of Long Term Capital Management, in 1998; Enron; and then the housing bubble, which led to the global financial crisis. Yet through the entire period, the U.S. financial sector grew larger, more powerful, and enormously more profitable. By 2006, financial services accounted for 40 percent of total American corporate profits. In large part, this was because the financial sector was corrupting the political system. But it was also subverting economics.

Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money.

Prominent academic economists (and sometimes also professors of law and public policy) are paid by companies and interest groups to testify before Congress, to write papers, to give speeches, to participate in conferences, to serve on boards of directors, to write briefs in regulatory proceedings, to defend companies in antitrust cases, and, of course, to lobby. This is now, literally, a billion-dollar industry. The Law and Economics Consulting Group, started 22 years ago by professors at the University of California at Berkeley (David Teece in the business school, Thomas Jorde in the law school, and the economists Richard Gilbert and Gordon Rausser), is now a $300-million publicly held company. Others specializing in the sale (or rental) of academic expertise include Competition Policy (now Compass Lexecon), started by Richard Gilbert and Daniel Rubinfeld, both of whom served as chief economist of the Justice Department's Antitrust Division in the Clinton administration; the Analysis Group; and Charles River Associates.

In my film you will see many famous economists looking very uncomfortable when confronted with their financial-sector activities; others appear only on archival video, because they declined to be interviewed. You'll hear from:

  • Martin Feldstein, a Harvard professor, a major architect of deregulation in the Reagan administration, president for 30 years of the National Bureau of Economic Research, and for 20 years on the boards of directors of both AIG, which paid him more than $6-million, and AIG Financial Products, whose derivatives deals destroyed the company. Feldstein has written several hundred papers, on many subjects; none of them address the dangers of unregulated financial derivatives or financial-industry compensation.
  • Glenn Hubbard, chairman of the Council of Economic Advisers in the first George W. Bush administration, dean of Columbia Business School, adviser to many financial firms, on the board of Metropolitan Life ($250,000 per year), and formerly on the board of Capmark, a major commercial mortgage lender, from which he resigned shortly before its bankruptcy, in 2009. In 2004, Hubbard wrote a paper with William C. Dudley, then chief economist of Goldman Sachs, praising securitization and derivatives as improving the stability of both financial markets and the wider economy.
  • Frederic Mishkin, a professor at the Columbia Business School, and a member of the Federal Reserve Board from 2006 to 2008. He was paid $124,000 by the Icelandic Chamber of Commerce to write a paper praising its regulatory and banking systems, two years before the Icelandic banks' Ponzi scheme collapsed, causing $100-billion in losses. His 2006 federal financial-disclosure form listed his net worth as $6-million to $17-million.
  • Laura Tyson, a professor at Berkeley, director of the National Economic Council in the Clinton administration, and also on the Board of Directors of Morgan Stanley, which pays her $350,000 per year.
  • Richard Portes, a professor at London Business School and founding director of the British Centre for Economic Policy Research, paid by the Icelandic Chamber of Commerce to write a report praising Iceland's financial system in 2007, only one year before it collapsed.
  • And John Campbell, chairman of Harvard's economics department, who finds it very difficult to explain why conflicts of interest in economics should not concern us.

But could he be right? Are these professors simply being paid to say what they would otherwise say anyway? Unlikely. Mishkin and Portes showed no interest whatever in Iceland until they were paid to do so, and they got it totally wrong. Nor do all these professors seem to make policy statements contrary to the financial interests of their clients. Even more telling, they uniformly oppose disclosure of their financial relationships.

The universities avert their eyes and deliberately don't require faculty members either to disclose their conflicts of interest or to report their outside income. As you can imagine, when Larry Summers was president of Harvard, he didn't work too hard to change this.

Now, however, as the national recovery is faltering, Summers is being eased out while Harvard is welcoming him back. How will the academic world receive him? The simple answer: Better than he deserves.

While making my film, we wrote to the presidents and provosts of Harvard, Columbia, and other universities with detailed questions about their conflict-of-interest policies, requesting interviews about the subject. None of them replied, except to refer us to their Web sites.

Academe, heal thyself.

http://chronicle.com/article/Larry-Summersthe/124790/

EMichael said in reply to RGC...
Yeah, after an economist has had one job in the government; one job in the banking system; and one teaching job he should be required to stop working as an economist.
RGC said in reply to EMichael...
I think it is interesting that Summers led the financial deregulation efforts of the Clinton administration and then made a bundle on Wall Street. I think that should be taken into account when evaluating his discussions of economics.
EMichael said in reply to RGC...
Of course it should.

At the same time this is not taking anything into account, this is about "subverting" economics.

Can you make a case that the only reason Summers made a "bundle" working on Wall Street is because of the financial deregulation efforts he made? Last time I looked he did not have a vote on the legislation.

RGC said in reply to EMichael...
I think this is especially troubling for the economics profession:

"Over the past 30 years, the economics profession-in economics departments, and in business, public policy, and law schools-has become so compromised by conflicts of interest that it now functions almost as a support group for financial services and other industries whose profits depend heavily on government policy. The route to the 2008 financial crisis, and the economic problems that still plague us, runs straight through the economics discipline. And it's due not just to ideology; it's also about straightforward, old-fashioned money."

EMichael said in reply to RGC...
Cause no economists actually believed in any of the policies that caused all of those things nor did any economist fail to vote for the policies adopted.
RGC said in reply to EMichael...
Upton Sinclair:

"It is difficult to get a man to understand something when his salary depends upon his not understanding it."

Tom aka Rusty said in reply to RGC...

As Hemingway and F. SCott Fitzgerald exchanged in their writings (the reputed face-to-face conversation may not have happened):

The rich are different.

Yes, they have more money.

Combine elite and rich and you get a toxic combination.

[Dec 01, 2015] The New Supply-Side Economics

Economist's View
reason: December 01, 2015 at 07:27 AM

Sanjait

I think it is perfectly clear that a secular policy of increasing private indebtedness is not indefinitely extendable. Sure, if we had printed money in the past and kept monetary policy relatively tight (or otherwise managed the international financial system so that large persistent balance of payments deficits were not tolerated) we wouldn't have got in the mess we are in. But once we are there just trying to get over-indebted people to take on more debt doesn't seem like a winning strategy.

http://crookedtimber.org/2015/11/29/secular-stagnation-and-the-financial-sector/comment-page-3/#comment-650710

EMichael said in reply to reason... December 01, 2015 at 07:34 AM

I see no real increase in private indebtedness.

The problem with the financial system is what lies behind lending.

reason: December 01, 2015 at 07:36 AM

Avraam Jack Dectis
Not bad.
But

1. asset taxes are tricky things to run (many assets aren't traded and the prices of other assets are very volatile). And there is the problem of offshore ownership and offshore assets, so it requires international co-operation.

2. This takes a very closed economy view of things - the trade deficit might end up affecting the trade balance and hence the flow of assets into and out of the country, and eventually also the terms of trade. You should think through how such a policy would work in say - Luxembourg.

reason:

EMichael

You see no increase in private indebtedness - when do you mean? If you mean now - then yes - that is exactly why the economy is so sluggish. Where is the increase in demand going to come from if the country is running a trade deficit, is not increasing its borrowing and is committed to reducing its government deficit?

[Nov 30, 2015] Is Balanced Growth Really the Answer

Notable quotes:
"... Reich would also, in a less orthodox move, seek legislative and other changes that might move corporations back toward what they were a half-century ago: organizations that saw themselves as answering not just to stockholders but to a broader set of stakeholders, including workers and customers. ..."
Nov 30, 2015 | Economist's View

Dan Kervick, November 30, 2015 at 11:12 AM

Just as was the case with his work on financial instability, Hyman Minsky's analysis of the problems of poverty and inequality in a capitalist economy, as well as his understanding of the political dysfunctions that would result from treating these problems in the wrong way, were prophetic. See this piece by Minksy's student L. Randall Wray, especially Section 2:

http://www.levyinstitute.org/pubs/wp_515.pdf

The centerpiece of Minsky's preferred approach was based on a government commitment to "tight full employment". He believed that neither human capital investment, economic growth, nor redistribution would be sufficient on their own to address the problem.

As part of the critique of the human capital approach, Minsky argued that:

"it is unjust to tell the poor that they must change before they will be entitled to work-whether it is their skills set or their character that is the barrier to work... Minsky always argued that it is preferable to "take workers as they are," providing jobs tailored to the characteristics of workers, rather than trying to tailor workers to the jobs available before they are allowed to work (Minsky 1965, 1968, 1973)."

Minsky accurately foresaw the way in which a welfare approach to poverty, as opposed to a full employment approach, would politically divide working people among themselves:

"Further, NIT (and other welfare programs) would create a dependent class, which is not conducive to social cohesion (Minsky 1968). Most importantly, Minsky argued that any antipoverty program must be consistent with the underlying behavioral rules of a capitalist economy (Minsky no date, 1968, 1975a). One of those rules is that earned income is in some sense deserved."

"With the perspective of the 1980s and 1990s now behind us, it is hard to deny Minsky's arguments-President Reagan successfully turned most Americans against welfare programs and President Clinton finally "eliminated welfare as we know it." According to Minsky, a successful antipoverty program will need to provide visible benefits to the average taxpayer."

We can note that this political problem has only gotten worse, as can be seen from the deepening ugliness of our domestic politics, and the poll results that MacGillis cites.

Minsky also understood the unhealthy political and economic dynamics of an undirected aggregate demand approach to poverty, and promoted, following ideas of Keynes, a measure of socialized investment and direct job creation:

"Minsky feared that using demand stimulus to reduce poverty would necessarily lead to "stop-go" policy. Expansion would fuel inflation, causing policy makers to reverse course to slow growth in order to fight inflation (Minsky 1965, 1968). Because wages (and prices) in leading sectors would rise in expansion, but could resist deflationary pressures in recession, there would be an upward bias to rising wages in those sectors. However, in the lagging sectors, wage increases would come slowly-only with adequate tightening of labor markets-and could be reversed in recession. Hence, Minsky argued that a directed demand policy would be required-to raise demand in the lagging sectors and for low wage and unemployed workers. For this reason, he concluded
that a direct job creation program would be required."

All this adds up to a more activist role for the government sector.

likbez ->Dan Kervick...

My impression is that "human capital" is one of the most fundamental neoliberal myths. See, for example What Exactly Is Neoliberalism by Wendy Brown https://www.dissentmagazine.org/blog/booked-3-what-exactly-is-neoliberalism-wendy-brown-undoing-the-demos

As for people betraying their own economic interests, this phenomenon was aptly described in "What's the matter with Kansas" which can actually be reformulated as "What's the matter with the USA?". And the answer he gave is that neoliberalism converted the USA into a bizarre high demand cult. There are several characteristics of a high demand cult that are applicable. Among them:

  • "The group is preoccupied with making money."
  • "Questioning, doubt, and dissent are discouraged or even punished."
  • "Mind-numbing techniques (for example: meditation, chanting, speaking in tongues, debilitating work routines) are used to suppress doubts about the group or its leader(s)." Entertainment and, especially sport events in the US society serves the same role.
  • "The group's leadership dictates – sometimes in great detail – how members should think, act, and feel." Looks like this part of brainwashing is outsourced to economy departments ;-)
  • "The group is elitist, claiming a special, exalted status for itself, its leader(s), and members (for example the group and/or the leader has a special mission to save humanity)."
  • "The group has a polarized, "we-they" mentality that causes conflict with the wider society."
  • "The group's leader is not accountable to any authorities (as are, for example, clergy with mainstream denominations)."
  • "The group teaches or implies that its supposedly exalted ends justify means (for example: collecting money for bogus charities) that members would have considered unethical before joining."
  • "The group's leadership induces guilt feelings in lower members for the lack of achievement in order to control them."
  • "Members are expected to devote inordinate amounts of time to the group."
  • "Members are encouraged or required to live and/or socialize only with other group members."

It is very difficult to get rid of this neoliberal sect mentality like is the case with other high demand cults.

kthomas,

"...it's driven be resentment..."

No, its driven by racism. White trash will take with one hand, then walk right into a voting both and screw themselves because they think they sticking it to blacks, mexicans, gays, etc.

Syaloch -> kthomas...

Racism is certainly part of it, but it's really more fundamental than that.

"This disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition, though necessary both to establish and to maintain the distinction of ranks and the order of society, is, at the same time, the great and most universal cause of the corruption of our moral sentiments. That wealth and greatness are often regarded with the respect and admiration which are due only to wisdom and virtue; and that the contempt, of which vice and folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has been the complaint of moralists in all ages."

Adam Smith, The Theory of Moral Sentiments

http://knarf.english.upenn.edu/Smith/tms133.html

bakho

This misreads the politics. People who are disconnected from the job market very easily get disconnected from the political process. They don't vote. The people who do have jobs and are worried about keeping them and being paid too little are voting against the "losers" who they see as parasites. Never mind that the Malefactors of Great Wealth are the true parasites. Elections in the US are won or lost on voter turnout.

Syaloch

Mark: "If the distribution of income is determined by something other than productivity, as it appears to be -- if income that was not earned through higher productivity flows to those at the top of firms due to unequal bargaining power or other forces -- then returning that income to those who did earn it is not taking something unjustly..., instead it is restoring justice. The trick is to get people to understand that."

That's what Reich is attempting to do in Saving Capitalism. I like his coinage of "predistribution" and his focus on changing the allocation of market income so that it truly reflects what is "earned" rather than settling for redistribution after the fact, which allows the simple-minded to argue that you're taking what's "mine" and giving it to anonymous others who it's easy to cast as undeserving.

From Krugman's review:

"These [predistribution] changes would include fairly standard liberal ideas like raising the minimum wage, reversing the anti-union bias of labor law and its enforcement, and changing contract law to empower workers to take action against employers and debtors to assert their interests against creditors. Reich would also, in a less orthodox move, seek legislative and other changes that might move corporations back toward what they were a half-century ago: organizations that saw themselves as answering not just to stockholders but to a broader set of 'stakeholders,' including workers and customers."

While I fully support all of the above I think we need to go further. For one thing I would like to see more benefits without means testing; ideally this would amount to a guaranteed minimum income, since I think that's what we're going to need anyway to cope with increasing automation.

I also think the direct job creation approach described by Dan above is worth considering. The challenge there is that for an increasing percentage of jobs it is no longer possible to "take workers as they are" given the specialized skills required. Subsidized retraining and re-credentialing can help to some degree, but there will always be some portion of the population incapable of acquiring the needed skills.

[Nov 29, 2015] neoclassical economics is involved in circular reasoning, and without a meaningful concept of capital, the rest of the system collapses.

Notable quotes:
"... neoclassical economics cannot establish the definition/measurement of "capital" without first knowing marginal productivity of capital; but they cannot establish the definition/measurement of marginal productivity of capital without first establishing "capital". ..."
"... ironically, it is conceivable that the entire neoclassical case for invisible hand can be reconstructed based on labor theory of value; after all, Ricardo did that ..."
"... But since then there has been lots of development among the more enlightened mainstream economists that have basically established that market failures are both devastating and universal. This is serious, because this means, in fact, in their heart, they know the invisible hand argument is invalid. Stiglitz came close to admit it in some interviews. ..."
"... Whatever is/was their internal system, both the Soviet Union and China are a part of the capitalist world system and therefore both of them are obligated to pursue economic growth. ..."
"... What you are saying/suggesting presents a profound misunderstanding of open, dissipative complex systems/structures – which we (our society, our economy – indeed our entire world ) are. ..."
"... Such systems cannot be in a permanent thermodynamic equilibrium – controlled plateau, or "sustainability" if we will (which you seem to be wishing/suggesting). They are utterly and totally dependent on ever-expanding energy/resource "consumption" and they ALWAYS and without exception collapse (hint: A.Bartlet)! Indeed, if physics and mathematics is to be trusted, they must collapse! ..."
peakoilbarrel.com
Political Economist, 11/13/2015 at 3:55 pm
Hi Dennis, I wrote a long reply to your question on labor theory of value. But somehow after I posted it, it appears to have disappeared. I am trying to re-post it here

Dennis:

Hi Dennis, thanks for bringing this up. This is definitely not about energy. But since you mentioned this here, let me give you some of my thought.

First, regarding neoclassical economics, the debate between two Cambridges pretty much destroyed the logical foundation of neoclassical economics. Because neoclassical economics cannot establish the definition/measurement of "capital" without first knowing marginal productivity of capital; but they cannot establish the definition/measurement of marginal productivity of capital without first establishing "capital".

So neoclassical economics is involved in circular reasoning, and without a meaningful concept of capital, the rest of the system collapses.

The above is mostly theoretical. It does not necessarily undermine one's faith in the efficiency of a market economy (ironically, it is conceivable that the entire neoclassical case for invisible hand can be reconstructed based on labor theory of value; after all, Ricardo did that)

But since then there has been lots of development among the more enlightened mainstream economists that have basically established that market failures are both devastating and universal. This is serious, because this means, in fact, in their heart, they know the invisible hand argument is invalid. Stiglitz came close to admit it in some interviews.

Why does it matter? Consider the current environmental crisis. It is conceivable that we will fail to stop climate change and the emerging climate catastrophes will bring down human civilization. From the neoclassical perspective, this is because the market prices for fossil fuels are wrong. Can this be corrected by government intervention? From the neoclassical perspective, to do this, the government needs to know the correct prices and even if the government does know the correct prices, there is still the implementation problem (principal-agent problem, people will find ways to outmaneuver government, etc). If the government does not know the correct prices or cannot implement, then we cannot correct market failures. If, on the other hand, the government does know the correct prices and can implement, why not have socialist planning?

Compare this to socialism. Of course one needs to be reminded of the Soviet environmental disasters. But the Soviet environmental failures were almost nothing compared to the contemporary Chinese environmental crisis (and I need to remind people that China's current environmental crisis has happened after China's capitalist transition). Whatever is/was their internal system, both the Soviet Union and China are a part of the capitalist world system and therefore both of them are obligated to pursue economic growth.

Although this has not happened in history, but it is definitely conceivable that a socialist economy can be structured to be based on zero or negative growth. But this cannot be said of capitalism.

In fact the strongest economic argument against socialism is that the socialist economies did not grow rapidly enough (even though Cuba succeeded in delivering higher life expectancy than the United States and for some years Cuba was considered the only country that met the principle of sustainable development by the living planet report). Therefore, the question is, if it turns out that capitalism cannot provide sustainability for human civilization, what social system can deliver sustainability while meeting population's basic needs?

Now, about labor theory of value. There are two different questions here. One has to do with the labor theory of value as a theory to explain the long-term equilibrium prices in a competitive market economy and the other has to do with what Marx called the theory of surplus value.

About the theory of surplus value, it needs to be reminded that Marx's theory of surplus value or exploitation is not moralistic but based on observed economic facts (although it could be used for moralistic purposes). All it says is no more than this: in a capitalist economy, a workers has to work longer than the social labor time embodied in the commodities consumed by the worker himself (or the worker's family) and in this sense, the capitalist profit (surplus value) derives from the worker's surplus labor. This is factually true.

Of course, as you said, a similar quantitative relationship can be established for other production inputs. Say, the total energy consumed in a society will have to be greater than the energy input used for energy production (people here are of course familiar with EROEI, which has to be greater than 1 for society to function). Based on this, one could argue that not only the workers are exploited but energy is also "exploited".

But if one really wants to extend the concept of "exploitation" here (which I don't think makes sense), what is being "exploited" is energy BUT NOT energy owners (even less the owners of capital goods consuming energy).

In any case, the concept of "exploitation" or surplus value has to be used in a context of social relations. It makes sense that the workers can take over the means of production and appropriate their own surplus value (or products of their surplus labor). But it is obviously nonsense to say that the energy input can somehow appropriate the "surplus energy" consumed in other energy consumption processes.

Finally, about the long-term equilibrium prices. It can be easily established that in "simple commodity production" (pre-capitalist market economy, where the producers own their means of production), market prices tend to fluctuate around ratios that are in proportion to the total labor embodied in commodities (including both direct labor and indirect labor embodied in means of production).

The problem has to do with "prices of production" or the equilibrium prices in capitalism (you are probably aware that this is known as the "transformation problem" in the Marxist literature). All the difficulty comes from the fact that in capitalism, the direct labor time ("live labor") is further divided into necessary labor (the labor time it takes for the worker to replace his value of labor power) and surplus labor. In fact, knowing the production coefficients, a unique set of equilibrium prices and the equilibrium profit rate can be solved from a set of past labor (indirect labor), necessary labor, and surplus labor for each commodity. Thus, a definite set of mathematical relations can be established between the prices and the labor variables (although it's no longer simple proportionality; but I think it does not matter)

Of course the Neo-Sraffians would like to emphasize that you can take any other important input (say, energy) and establish a similar set of relationship between prices and say, past energy, necessary energy, and surplus energy. But, as I said, energy cannot be a player in social relations.

In any case, labor theory of value plays an insignificant role in modern Marxist economics (I personally still think labor theory of value is valid but it no longer provides important insights).

You will not find labor theory of value in my book. But I hope you will still find it intellectually interesting (and a little provocative).

Minqi Li, 11/13/2015 at 4:02 pm
Hi Ron, I prepared a long reply to Dennis's question. But each time when I posted it, it was marked as SPAM.

I saved the response to Dennis here:

http://redchinacn.net/portal.php?mod=view&aid=28599#comment

Can you help me to post it? Thank you

Fred Magyar, 11/13/2015 at 5:24 pm
Hi Minqi Li,
I read your reply to Dennis and found it cogent, however I do have a problem with the standard neoclassical economic viewpoint and as I have stated many times I find the standard capitalist and communist economic models to be less than useful systems with which to address our current global dilemmas. I am of the school of thought that we have to invent completely new ways of thinking and acting. There are some people who have embarked on this journey. I think this group best embodies my current thinking about what kinds of systems we need to develop. Some of these ideas are already taking hold in China too.

循环经济

http://www.ellenmacarthurfoundation.org/

Cheers!

Political Economist, 11/13/2015 at 8:07 pm
Fred, thanks for commenting.

The concept of 循环经济 or recycling economy is actually what China borrowed from the West. Chinese economists started talking about it in the 1990s. The practice is not as radical as it sounds. The primary intention has not been so much about saving the environment as accelerating capital accumulation by saving costs.

Although in some cases it has had some beneficial "side effects"

I agree that we need completely new thinking and practice that go beyond the 20th century. I am of the school that zero (if not negative) economic growth is necessary for sustainability. The question is what kind of economic system can deliver it.

Petro, 11/14/2015 at 1:15 am
"…I am of the school that zero (if not negative) economic growth is necessary for sustainability. The question is what kind of economic system can deliver it…."

What you are saying/suggesting presents a profound misunderstanding of open, dissipative complex systems/structures – which we (our society, our economy – indeed our entire world ) are.

Such systems cannot be in a permanent thermodynamic equilibrium – controlled plateau, or "sustainability" if we will (which you seem to be wishing/suggesting).
They are utterly and totally dependent on ever-expanding energy/resource "consumption" and they ALWAYS and without exception collapse (hint: A.Bartlet)!
Indeed, if physics and mathematics is to be trusted, they must collapse!

-So, when you say:
"…The question is what kind of economic system can deliver it…", you are looking for the wrong, non-existing thing.

Consider that before your book is published…

Be well,

Petro

Political Economist, 11/14/2015 at 2:56 am
Unfortuantely, the book is already published.

Keynes said: "In the long run, we are all dead"

Petro, 11/14/2015 at 9:17 pm
"Unfortunately, the book is already published"

Unfortunately indeed!

Be well.

Petro

Javier, 11/14/2015 at 10:36 am
Hi Petro,

I agree in principle, but it is clear that societies can be built that are stable for hundreds to thousands of years until conditions diverge too much from those that allowed their formation. Hunter-gatherer societies were economically and socially stable in many parts of the world for most of the Holocene, so in principle it is theoretically possible to build a stable society that takes from the environment not much more than what can be renewed or recycled or last for a very long time. Animals and plants do it all the time, but of course their numbers are checked by the environment. And of course it would have little to do with current industrial civilization that is completely unsustainable.

Petro, 11/14/2015 at 9:24 pm
Hunter-Gatherers were stable ONLY for nature kept a "big stick" over their head every time they multiplied more than they should have…but as Ron has said multiple times: we are clever and have bypassed that (or so we think…).

Theoretically- as you say- yes!
Practically: NO!

"…We will kill them all…"
~ Ron Patterson

-And lastly, all this is mute for we ALREADY have passed the tipping point, or the point of no return- if you will.

Be well,

Petro

Fred Magyar, 11/14/2015 at 4:23 am
I agree with the idea that trying to achieve a zero growth economy is the only path towards sustainability.

Two points:

First the concept of the 'Circular Economy' goes far beyond simple recycling.

It incorporates systems and design thinking at a fundamental level in all aspects of the economy, government,and social systems. It thinks of the economy as an ecosystem. It borrows heavily from how nature builds sustainable systems. It is also very important to understand that it is not just a greenwashing. It is about a deep and fundamental process change.

Second: At our current juncture 'Perfect' is the enemy of good enough!
We need to move forward with all aspects of the 'Circular Economy' We don't have time to design and build a perfect system, We are in a situation where we know that our current ways of doing things are not sustainable so we have to push ahead with imperfect solutions and learn as we go.

Best Hopes!

BTW, Petro is only technically correct here:

-What you are saying/suggesting presents a profound misunderstanding of open, dissipative complex systems/structures – which we (our society, our economy – indeed our entire world ) are.

Without throwing the baby of ecosystem thermodynamics 101 out with the bath water, I repeat my point 'Perfect' is the enemy of good enough. Ecosystems are relatively speaking stable and have been for long periods of time. Nature has been tweaking them for 3.8 billion years. We on the other hand have managed to really screw things up in just a few thousand years.

We need to go back and learn how nature does design
https://goo.gl/tu3kPj

Ron Patterson, 11/14/2015 at 5:57 am
We need to go back and learn how nature does design

If we went back to when nature was in balance, to the point to where we were no longer destroying the ecosystem, then we would be back to only a few million Homo sapiens on earth.

While it is true that humans are a part of nature, it is also true that cancer is a part of nature.

Fred Magyar, 11/14/2015 at 7:30 am
We need to go back and learn how nature does design

If we went back to when nature was in balance,

Ron, that totally misses the point!

Yes, the ultimate goal would be to have sustainable systems in place. However, we are not in a position to go back to anything. We need to go forward. The point I was making is that we can learn from the way nature creates sustainable ecosystems and apply those lessons to our own systems. This is why I wanted to make crystal clear that I'm not talking about greenwashing or anything 'Green' in the old hippie commune model.

Basically nature uses multiple interconnected circular systems simultaneously on various scales from the microscopic to gigantic. Think of the multiple ecosystems on a single tree in a rainforest. The mosses and lichens fungi living on the bark of the tree. All the insect communities, ants, beetles, arachnids, etc, that depend on that. The tree itself using sunlight through photosynthesis, breathing, producing O2,transporting water and recycling nutrients, the carbon and nitrogen cycles and so on. The top of the tree is colonized with with completely different specialized ecosystems covered with epiphytes. Tree frogs and lizards living in the water filled pools created in the base of bromeliads. The birds and snakes living in the canopy. The large and small mammals living in various niches within all those ecosystems, the detrivores and bacteria and fungi that recycle all the nutrients from the organisms that die, etc… etc… and we are talking just one tree in a forest. This is the kind of integrated systems design that we need to emulate in our cities and businesses.

We humans, on the other hand, have built linear consumptive nonintegrated systems. These systems are extremely wasteful. Linear systems only work when resources limits are nonexistent. We no longer have the luxury of continuing with such systems. We need to learn how nature practically eliminates waste by emulating a model where waste streams are resource inputs and everything is reused there is practically no waste in a functioning stable ecosystem.

Ron Patterson, 11/14/2015 at 8:00 am
We need to learn how nature practically eliminates waste by emulating a model where waste streams are resource inputs and everything is reused there is practically no waste in a functioning stable ecosystem.

I totally understand your point Fred, but you are simply missing the big picture. When you say "we" just who are you talking about? Obviously if you are talking about fixing the terrible mess we find ourselves in, then "we" has to mean "we humans", all of us. And when you do that you are talking absolute nonsense.

Individuals can change but human nature cannot change. "We" will go on behaving in the future exactly as we have behaved in the past. The mass of humanity is consuming the natural resources like a drunken sailor going through his rich uncle's inheritance. And I don't mean just fossil resources, I mean all resources, all nature's bounty. And we are taking it from all the other creatures who are less clever than we are.

And "we" will continue to do so until it is gone, and all the other creatures are gone also.

wimbi, 11/13/2015 at 10:50 pm

A simple engineer's suggestion for basis of new economics, based on conversation with wiser ones elsewhere.

Proper economic structure is that which maximizes the number of options available for future choices.

Same as, minimize irreversibility; same as second law of thermo. Or, don't mess things up for the next guy.

Examples of violations of basic rule- kill the coral, next guy has less fish ; burn the oil, next guy has a smaller hunk of planet at bearable temps.

Example of application of basic rule – go to solar for energy, and stick within bounds of activity thereby set.

NB- another fundamental flaw of capitalism– like stars growing in a dust cloud where more massive ones grab mass faster than littler ones, ending up with big one gobbling it all. Bigger capitalists grab more resources faster than smaller ones, ending up with big ones getting it all.
And, very serious consequence – gross maldistribution of resource relative to individual ability to use resource wisely.

Above observations not to be attributed to me.

[Nov 28, 2015] Most of What You Learned in Econ 101 Is Wrong

Greg Mankiw is not a scientist in any meaningful sense. As a member of "Harvard mafia" he is hired propagandist that camouflages as an economist and works for financial oligarchy which promotes neoliberalism. And under neoliberalism like in Marxism the economics serves as a tool to justify social theory.
Notable quotes:
"... Mankiws book, like every introductory econ textbook I know of, has a big problem. Most of whats in it is probably wrong. ..."
"... But for Econ 101 classes, explaining only a small slice of reality isnt good enough. If economics majors leave their classes thinking that the theories they learned are mostly correct, they will make bad decisions in both business and politics. We shouldnt train tomorrows business elite to have faith in theories that have only a small amount of empirical success. ..."
"... Current textbooks, including Mankiws, almost all play down the role of data and evidence. ..."
"... so basically all the supply siders and libertarians and the like are preaching the same sort of economics theories that were taught prior to Keynes ..."
"... yea maybe we should call the supply siders the flat earthers ..."
"... Not every economic class is taught using Mankiw. Thankfully. ..."
"... but there is also the issue of whether in reality the employee could survive on the given wage if the pay does not allow the worker to survive, then him/her agreeing to work for the less than living wage doesnt help ..."
"... It is not a viable situation. The workers will not be able to perform their duties. It will not work anyway. We didnt treat horses this way, as if their cost could approach zero without consequences, why do we treat people as if they could survive on less and less resources with no limit. ..."
"... Then if they dont accept that impossible situation and ask for help from the government or form unions, then they are the ones causing all the problems ..."
"... How about this? A $15 minimum raise hike is more likely to close down jobs in the mid wage category than in the low wage. A hike probably means income will come from the mid overall to the low overall because low wage produced goods were relatively under priced (not marked to market because of prior monopsony). ..."
Bloomberg View

Harvard's Greg Mankiw, author of the most popular college introductory economics textbook, is often regarded as America's econ teacher. He famously refers to his "Principles of Economics" as "my favorite textbook," and I must admit that it's also my favorite. It's written in a clear, explanatory style and covers the basics of most important theories in modern economics.

But Mankiw's book, like every introductory econ textbook I know of, has a big problem. Most of what's in it is probably wrong.

In the last three decades, the economics profession has undergone a profound shift. The rise of information technology and new statistical methods has dramatically increased the importance of data and empirics. This means that many professional economists are no longer, as empirical pioneer David Card put it, "mathematical philosophers." Instead, they are more like scientists, digging through mountains of evidence to find precious grains of truth.

And what they have found has often been revolutionary. The simple theories we teach in Econ 101 classes work once in a while, but in many important cases they fail.

For example, Econ 101 theory tells us that minimum wage policies should have a harmful impact on employment. Basic supply and demand analysis says that in a free market, wages adjust so that everyone who wants a job has a job -- supply matches demand. Less productive workers earn less, but they are still employed. If you set a price floor -- a lower limit on what employers are allowed to pay -- then it will suddenly become un-economical for companies to retain all the workers whose productivity is lower than that price floor. In other words, minimum wage hikes should quickly put a bunch of low-wage workers out of a job.

That's theory. Reality, it turns out, is very different. In the last two decades, empirical economists have looked at a large number of minimum wage hikes, and concluded that in most cases, the immediate effect on employment is very small. It's only in the long run that minimum wages might start to make a big difference.

That doesn't mean the theory is wrong, of course. It probably only describes a small piece of what is really going on in the labor market. In reality, employment probably depends on a lot more than just today's wage level -- it depends on predictions of future wages, on long-standing employment relationships and on a host of other things too complicated to fit into the tidy little world of Econ 101.

For academic economists, that's no problem. If existing theories explain only a sliver of reality, they simply roll up their sleeves and get to work. Many labor economists are now working on complex theories that model the process of employees looking for work and employers looking for people to hire. For professional theorists, empirical failures simply mean more work to do.

But for Econ 101 classes, explaining only a small slice of reality isn't good enough. If economics majors leave their classes thinking that the theories they learned are mostly correct, they will make bad decisions in both business and politics. We shouldn't train tomorrow's business elite to have faith in theories that have only a small amount of empirical success.

Another example is welfare. Econ 101 theory tells us that welfare gives people an incentive not to work. If you subsidize leisure, simple theory says you will get more of it.

But recent empirical studies have shown that such effects are usually very small. Occasionally, welfare programs even make people work more. For example, a study in Uganda found that grants for poor people looking to improve their skills resulted in people working much more than before.

This has big political implications. If we train tomorrow's business elites to think that welfare encourages laziness, they may block support for policies that really improve the lives of the poor -- and the economic productivity of the whole nation. But this is precisely what Econ 101 is now doing.

So what's the solution? Complex theories sometimes do a better job of explaining reality than simple ones, but these theories are way beyond the mathematical skill of most undergrad econ majors. A better alternative is to start teaching empirics in 101.

Current textbooks, including Mankiw's, almost all play down the role of data and evidence. They sometimes refer to the results of empirical studies, but they don't give students an in-depth understanding of how those studies worked. Yet this wouldn't be very hard to do. The kind of empirical analysis now taking over the econ profession -- often called the "quasi-experimental" approach -- isn't that hard to understand. Simple examples could even be done in the classroom, or as homework assignments.

In other words, the economics profession has gotten real, and it's time for Econ 101 to do the same. We now have an academic economics profession focused on examining evidence and an Econ 101 curriculum that focuses on telling pleasant but often useless fables. Econ education needs to get with the times.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:

Noah Smith at nsmith150@bloomberg.net

Selected Skeptical Comments (Economist View, November 25, 2015)

Anonymous said... Wednesday, November 25, 2015 at 05:34 AM

"Most of What You Learned in Econ 101 Is Wrong"

To this crowd, it should be - Most of what we taught you in Econ 101 is Wrong.

djb -> Peter K....

from the smith article

"For example, Econ 101 theory tells us that minimum wage policies should have a harmful impact on employment. Basic supply and demand analysis says that in a free market, wages adjust so that everyone who wants a job has a job -- supply matches demand."

if this is what they are teaching in econ 101 then of course it is wrong and I would not be surprised if mankiws book is teaching this

as Keynes showed 80 years ago

so basically all the supply siders and libertarians and the like are preaching the same sort of economics theories that were taught prior to Keynes

Say's law, invisible hand, always at full employment, no such thing as involuntary unemployment, no possibility of inadequate aggregate demand

amazing

Peter K. -> djb...

Agreed. I would divide the world into the Keynesians and supply siders. Mankiw is a strange hack in that he gets the "new Keynesian" view but often puts out propaganda on behalf of the supply siders.

Anonymous, Kervick and their ilk argue that some Keynesians are just as bad as the supply siders.

But they have no grounds.

pgl -> Peter K....

It is more than the macroeconomic debates. The minimum wage debate comes down to whether all markets are perfectly competitive. Any economist worth his salt realizes that they are not.

Dan Kervick -> Peter K:

Not sure what that means exactly - since I don't know what kinds of supply siders you are talking about. But since Mankiw is one of the leading figures of New Keynesianism, and is pretty bad, then yeah .. I guess it follows that some Keynesians are as bad as supply siders.

Keynes suggested a social philosophy that followed from his economic analysis. The social philosophy was based on the idea that the lack of full employment and arbitrary and inequitable distributions of income were "faults" of our economic society - bad things. But if someone doesn't think those are bad things, then I suppose they could completely accept Keynes's analysis of how the economy works, but not go in for the Keynesian social philosophy and the policy choices it leads to.

anne said in reply to Dan Kervick...

Keynes suggested a social philosophy that followed from his economic analysis. The social philosophy was based on the idea that the lack of full employment and arbitrary and inequitable distributions of income were "faults" of our economic society...

[ Nice passage. ]

William said in reply to djb...

Imagine if other courses were taught like econ.

History would start with reading Herodotus as fact, flat earth, giant ants and all.

Psychology 101 would teach you only the ideas of Freud. Sure none of his ideas are taken seriously anymore, but he is easy to understand and the foundation of modern, complex theories, so it's all good right?

djb said in reply to William...

yea maybe we should call the supply siders the flat earthers

pgl said in reply to William...


Not every economic class is taught using Mankiw. Thankfully.

pgl said in reply to djb...

Noah really wrote this? "That doesn't mean the theory is wrong, of course. It probably only describes a small piece of what is really going on in the labor market. "

Noah needs to take a time out from blogging until he reads Dani Rodrik's Economist Rules. Dani notes we have lots of theories but the real trick is to figure out which one to use for a particular situation.

I have not looked at a Mankiw text for a long time (overpriced from an arrogant Harvard Republican homeboy) so I don't know if he only presents the perfectly competitive model of employment. If he does - no wonder his book is so clueless on the minimum wage debate.

When I took undergraduate principles, I read Paul Samuelson's excellent book and it did talk about things like monopsony power. Put a wage floor on a monopsonist and employment rises.

So the real issue is are we presenting students with the full array of models and then having them read Dani's excellent book.

djb said in reply to pgl...

one issue regarding minimum wages issues. The classical school says if only the person would work for less we would have full employment

(Keynes proved this false)

but there is also the issue of whether in reality the employee could survive on the given wage if the pay does not allow the worker to survive, then him/her agreeing to work for the less than living wage doesn't help

It is not a viable situation. The workers will not be able to perform their duties. It will not work anyway. We didn't treat horses this way, as if their cost could approach zero without consequences, why do we treat people as if they could survive on less and less resources with no limit.

Then if they don't accept that impossible situation and ask for help from the government or form unions, then they are the ones "causing all the problems"

but seriously, that is what the theoretical idea that workers should take less and less and less with no limit gives us in reality

Denis Drew, November 25, 2015 at 07:14 AM

Re: Most of What You Learned in Econ 101 Is Wrong - Noah Smith

How about this? A $15 minimum raise hike is more likely to close down jobs in the mid wage category than in the low wage. A hike probably means income will come from the mid overall to the low overall because low wage produced goods were relatively under priced (not marked to market because of prior monopsony).

Consumers tend to purchase more of goods produced by employees at their own wage level. Ergo, when income flows overall from the mid to the low -- the low may spend that new money disproportionately among themselves. While some mid wage producers will lose out on business gone south and be forced to lay off workers.

Easy way to make this loss from mid to low painless as possible: hybrid redistribution via tax hikes for the (really) top with matching tax cuts for the mids.

I am thinking (just to throw something out) 90% taxes on all income over $2 million dollars. Maybe 50% over $650,000 (the entry to the top 1%?).

Under the theory that people will enthusiastically work for $200 a week if that is the best their economic place and time can do -- but the same people will not work for $400 a week if their era could and should be paying $800.

I'm thinking grossly underpaid Chicago retail clerk ($800 a week by collective bargaining marked to market) and Chicago gangs which now have 100,000 out of my guesstimate 200,000 gang-age, minority males. I'm also thinking old American born taxi drivers like myself who wont work 60 grueling hours for $500 a week (I did for $750). I'm thinking family raising adults who no longer show up for two-tier (thanks to Walmart) contract supermarket work.

Today's time and US place CEOs, professional athletes (who basically just retain feral animal skills), TV news anchors and movie stars earn 20 times what their 50s and 60s predecessors did -- they can certainly pay similarly high tax rates (though not from as low a starting point -- double per capita income in this era). They will work just as hard once they get used to the new (hybrid) redistribution regime representing the most anybody can squeeze out of their era.

PPaine said in reply to PPaine ...

Brad Delong is the iconic merit elite culprit. Why? Larry S and Stan fish cake are handsomely rewarded. Plutonian über hacks . Brad is flying solely on merit fumes

Peter K. said in reply to PPaine ...

If DeLong has been listened to the recovery would have been much better.

Both he and Summers argue policymakers have squandered one year's worth of GDP. That's a damning statement. They're on the job class side more than not. Same with Krugman and Thoma.

"As well they should. U.S. output is now about 10 percent below a trend estimated through 2007. If one attributes even half of this figure to the effects of recession and assumes no catch up on this component until 2030, the cost of the financial crisis in the U.S. is about one year's gross domestic product. And matters are worse in the rest of the industrial world.

As macroeconomics was transformed in response to the Depression of the 1930s and the inflation of the 1970s, another 40 years later it should again be transformed in response to stagnation in the industrial world.

Maybe we can call it the Keynesian New Economics."

https://www.washingtonpost.com/news/wonk/wp/2015/11/03/larry-summers-advanced-economies-are-so-sick-we-need-a-new-way-to-think-about-them/

They're not like Varoufakis and Zizek but so what there will be a broad coalition.

http://yanisvaroufakis.eu/2015/11/24/europe-is-kaputt-long-live-europe-royal-festival-hall-woth-slavoj-zizek-julian-assange/

[Nov 23, 2015] An Unforgiving Musical-Chairs Economy

Notable quotes:
"... Every year, in the backwaters of America, that economy seems to put out fewer and fewer chairs. ..."
"... Not pull the wool over our eyes. But they both do defend and rely on a mainstream neoliberal, New Keynesian models of the economy which I think paint a very inadequate picture of the way our economy actually functions and is woefully inadequate as a guide for policy action - especially of the kinds that are urgently needed in 2015. ..."
"... I dont think Krugman and DeLong are the forces of evil. I just think the United States is in much worse shape then they seem prepared to come to grips with, and is in need of much more radical social and economic change then they seem willing to propose or entertain. They are stuck in the past and weighed down by defunct orthodoxies and theoretical abstractions. ..."
"... Most of my general criticisms of economists, by the way, are aimed at macroeconomists. I listened to a lecture by Robert Schiller the other day about his new book, and thought it sounded like great stuff. I think there is lots of great empirical work going on based on nuanced and up-to-date theories of human behavior. The macro guys often claim - on the basis of some kind of anti-reductionist credo - that their grand uniform economic theories of everything can float free of any foundation in theories of the actual behavior of actual human beings. But the theories are in practice based on analogies from individual or firm behavior to macro behavior, and the behavioral models on which they are based are extremely crude. ..."
"... But basically, I think my main axe to grind is that these economists are just not sufficiently appalled by the moral horrors of the social world we live in. There is a general lack of zeal. ..."
"... Sadly, it is also the case that the Democrats have backed way off economic issues since the late 1970s. At the time they suffered a massive fundraising disadvantage and wanted to attract big money donors (still Hillarys position). ..."
November 22, 2015 | Economist's View '

Harold Pollack (the beginning of the post talks about a recent column in the NY Times noting that "The people who most rely on the safety-net programs secured by Democrats are, by and large, not voting against their own interests by electing Republicans. Rather, they are not voting, period," and how that has turned blues states red):

What's the matter with Kentucky?: ...Viewed from afar, one might think that categories such as "deserving poor" or "disabled" are reasonably clear-cut. Viewed up-close, things seem much more fuzzy. Many people who rely on public aid straddle the boundaries between deserving and undeserving, disabled and able-bodied. Many of us know people who receive various public benefits, and who might not need to rely on these programs if they made better choices, if they learned how to not talk back at work, if they had a better handle on various self-destructive behaviors, if they were more willing to take that crappy job and forego disability benefits, etc.

It's easy, even viewing our own friends and relatives, to confuse cause and effect regarding more intimate barriers. A sad reality of psychiatric disorders is that the very symptoms which inflict mental pain on the sufferer can make themselves felt to others in ways that undermine empathy and personal relationships.

Across the Thanksgiving dinner table, you see these human frailties and failures more intensely and with greater granularity than the labor economist could possibly see running cold data at the Census Bureau. But operating at high altitude, the labor economist sees structural issues you can't see from eye level.

There have always been vulnerable people, whose troubles arise from an impossible-to-untangle mixture of bad luck, destructive behaviors, and difficult personal circumstance. That economist can't see why your imperfect cousin can't seem to get it together to hold a basic job. She can see that your cousin is being squeezed out by an unforgiving musical-chairs economy. Every year, in the backwaters of America, that economy seems to put out fewer and fewer chairs.

Posted by Mark Thoma on Sunday, November 22, 2015 at 12:10 PM in Economics | Permalink Comments (26)

pgl said...

"Supporters of expanded social provision must find better ways to engage poor people, to get out their votes."

Of course Republicans are doing everything they can to keep poor people from voting.

cm -> pgl...
Also in the US, elections seem to always (?) take place on work days, whereas e.g. in Germany the happen on Sundays as a rule. Of course one can vote by mail, but that requires a pretty stable and reliable mailing address ...
pgl -> cm...
In the South the Republicans loathe the idea that voting might occur on Sundays. Seems they fear those black mega churches turning out the vote.
cm -> pgl...
I was thinking more of people being unable to (or "preferring" not to) miss work, and not being able to show up for work as well as vote on the same day.

Do you think that people don't have enough willpower to sustain their decision to vote from Sunday to Tuesday? Or that they would vote only under the social pressure from the church group?

pgl -> cm...

I'm just saying let them vote when they can. As in your first sentence here.

Number 6 said...

The US is a militarist-imperialist, rentier-socialist, friendly fascist (for now) corporate-state for the top 0.001-1% to ~10% (the best gov't the money of the top 0.001-1% can buy) and a moronocracy for the rest of us, i.e., "no representation without taxation".

What is needed is 'Merikans for Moronocracy (or Morons for a New 'Merika) for us morons in red AND blue states to write in our own names for CEO of the fascist corporate-state. Imagine tens of millions of us unaffiliated morons writing in Joe Moron for POTUS and Jane Moron for Veep (or switch for your gender-specific or non-specific preference, or not).

Surely, none of us could do any worse for the bottom 90%+ than the Establishmet top 0.001%'s "choices" over the past 30-40+ years, or the current lot of Dame Hilbillary, The Donald, Crazy Carson, et al. (Of course, Bernie Sanders speaks to the values and objectives of the vast majority of 'Merikans who are actually democratic socialists but have been propagandized for at least a century or more not to know it.)

Morons of the world unite!!!

anne said...

http://krugman.blogs.nytimes.com/2015/11/22/thinking-about-the-trumpthinkable/

November 22, 2015

Thinking About the Trumpthinkable
By Paul Krugman

Alan Abramowitz * reads the latest Washington Post poll and emails:

"Read these results ** and tell me how Trump doesn't win the Republican nomination? I've been very skeptical about this all along, but I'm starting to change my mind. I think there's at least a pretty decent chance that Trump will be the nominee.

"Here's why I think Trump could very well end up as the nominee:

"1. He's way ahead of every other candidate now and has been in the lead or tied for the lead for a long time.

"2. The only one even giving him any competition right now is Carson who is even less plausible and whose support is heavily concentrated among one (large) segment of the base-evangelicals.

"3. Rubio, the great establishment hope now, is deep in third place, barely in double digits and nowhere close to Trump or Carson.

"4. By far the most important thing GOP voters are looking for in a candidate is someone to 'bring needed change to Washington.'

"5. He is favored on almost every major issue by Republican voters including immigration and terrorism by wide margins. The current terrorism scare only helps him with Republicans. They want someone who will "bomb the shit" out of the Muslim terrorists.

"6. There is clearly strong support among Republicans for deporting 11 million illegal immigrants. They don't provide party breakdown here, but support for this is at about 40 percent among all voters so it's got to be a lot higher than that, maybe 60 percent, among Republicans.

"7. If none of the totally crazy things he's said up until now have hurt him among Republican voters, why would any crazy things he says in the next few months hurt him?

"8. He's very strong in several of the early states right now including NH, NV and SC. And he could do very well on 'Super Tuesday' with all those southern states voting. I can't see anyone but Trump or Carson winning in Georgia right now, for example, most likely Trump.

"9. And as for the idea of the GOP establishment ganging up on him and/or uniting behind another candidate like Rubio, that's at least as likely to backfire as to work. And even if it works, what's to stop Trump from then running as an independent?"

Indeed. You have a party whose domestic policy agenda consists of shouting "death panels!," whose foreign policy agenda consists of shouting "Benghazi!," and which now expects its base to realize that Trump isn't serious. Or to put it a bit differently, the definition of a GOP establishment candidate these days is someone who is in on the con, and knows that his colleagues have been talking nonsense. Primary voters are expected to respect that?

* http://polisci.emory.edu/home/people/faculty/abramowitz-alan.html

** http://apps.washingtonpost.com/g/page/politics/washington-post-abc-news-poll-nov-15-19-2015/1880/

gunste -> anne...
The reason may well be that there is a vast group of voters who consistently vote against their better interests, because their mindset is conservative, though they are actually middle class or lower. - Kansas appears to be a great example. These people do not think things through but vote on their gut (conservative they think) instincts. Education has a great deal to do with that voting decision. Thus we seem to see a blue collar worker with a median income take positions similar to that of the 1%. Curious but educational level is the likely answer. Such voters are also much more susceptible to propaganda based on tainted or false information which is circulated freely by many of the talking heads on radio and TV. Note that the Republicans work assiduously to discourage and restrict voting by gerrymandering, rules, voting days and sometimes requiting ID. - Democracy in America is a theoretical concept now.
cm said...
The Musical Chairs happens not only in the backwaters. It happens in and around the major job centers too. Nor is it only a matter of no job vs. some job, also how well the job is paid, working conditions, full time vs. part time, predictable work hours or on call (and only on-premises hours paid), etc.

It also doesn't just affect people with various "problems". There is the meme that when you are good you will always find a job, but that only works when employers are actually hiring. And the unstated part is that the job will be at your level of skill/ability. In "tech", and probably most "high skilled" fields, employers have a rather strong preference for an unbroken career in the field, you are basically defined by the "lowest" work you have done recently.

Dan Kervick -> Peter K....
"Kervick on the other hand tells us everyday that Krugman and DeLong are trying to pull the wool over our eyes on behalf of an evil neoliberal consensus."

Not pull the wool over our eyes. But they both do defend and rely on a mainstream neoliberal, New Keynesian models of the economy which I think paint a very inadequate picture of the way our economy actually functions and is woefully inadequate as a guide for policy action - especially of the kinds that are urgently needed in 2015.

I don't think Krugman and DeLong are the forces of evil. I just think the United States is in much worse shape then they seem prepared to come to grips with, and is in need of much more radical social and economic change then they seem willing to propose or entertain. They are stuck in the past and weighed down by defunct orthodoxies and theoretical abstractions.

Maybe in their hearts they really do grasp the magnitude of the problems, but just think the political environment is not hospitable to an honest airing of the alternatives. Maybe they are scared like everyone else.

But until prominent, established intellectuals with high profiles begin to come forward with bolder alternatives to late 20th century thinking, the America that is being crushed underfoot by an out-of-control capitalist leviathan is going to have to face a lot of unwelcome headwinds in their drive for liberating progressive change.

Syaloc -> Dan Kervick...
So basically you're calling for a return to a more institutional form of economics led by figures like John Kenneth Galbraith?
Dan Kervick -> Syaloc...
Yes, a more concrete, detailed, institution-based picture of the economic world, with more attention to history, other branches of social science, moral philosophy, cultural criticism, etc. - as well as just a bit more street smarts. Macroeconomists seem to have siloed themselves in self-contained theoretical world, where engagement with the human sciences of power and control, and the moral implications of those fields of study, are ignored.

Most of my general criticisms of economists, by the way, are aimed at macroeconomists. I listened to a lecture by Robert Schiller the other day about his new book, and thought it sounded like great stuff. I think there is lot's of great empirical work going on based on nuanced and up-to-date theories of human behavior. The macro guys often claim - on the basis of some kind of anti-reductionist credo - that their grand uniform economic theories of everything can float free of any foundation in theories of the actual behavior of actual human beings. But the theories are in practice based on analogies from individual or firm behavior to macro behavior, and the behavioral models on which they are based are extremely crude.

But basically, I think my main axe to grind is that these economists are just not sufficiently appalled by the moral horrors of the social world we live in. There is a general lack of zeal.

djb said...
a lot of it , I am sure, has to do with the "there is no difference between democrats and republicans" constant brainwashing

which helps the republicans big time

DrDick -> djb...
Sadly, it is also the case that the Democrats have backed way off economic issues since the late 1970s. At the time they suffered a massive fundraising disadvantage and wanted to attract big money donors (still Hillary's position).
djb -> DrDick...
still republicans are way worse especially now

DrDick said in reply to djb...

True, but for the poor, it is quite obvious that no one really gives a damn about them. Why should they vote when all they get is bailouts for banksters and the TPP? Right now, Sanders is the only one talking about programs that would really help them and he is a long shot (and I am a Sanders supporter).

Avraam Jack Dectis said...
.
A good economy compensates for much social dysfunction.

A bad economy moves people toward the margins, afflicts those near the margins and kills those at the margins.

This is what policy makers should consider as they pursue policies that do not put the citizen above all else.

cm -> Avraam Jack Dectis...
"A good economy compensates for much social dysfunction."

More than that, it prevents the worst of behaviors that are considered an expression of dysfunction from occurring, as people across all social strata have other things to worry about or keep them busy. Happy people don't bear grudges, or at least they are not on top of their consciousness as long as things are going well.

This could be seen time and again in societies with deep and sometimes violent divisions between ethnic groups where in times of relative prosperity (or at least a broadly shared vision for a better future) the conflicts are not removed but put on a backburner, or there is even "finally" reconciliation, and then when the economy turns south, the old grudges and conflicts come back (often not on their own, but fanned by groups who stand to gain from the divisions, or as a way of scapegoating).

[Nov 21, 2015] O'Malley best debate line: I think it may be time for us to quit taking advice from economists

Notable quotes:
"... I loved that Bernie Sanders was willing to drop the "F-bomb" (fraud) on Wall Street but he needs to swing much harder at Clinton. Clinton was quick to zing O'Malley as a hypocrite by noting he appointed a former hedge-fund manager to some state regulatory position when given the chance, but yet neither Sanders or O'Malley hit back with the fact that her only child and Clinton Foundation board member, Chelsea Clinton, worked for the hedge fund of a Clinton family pal and mega-donor in 2006. ..."
"... I thought O'Malley had one of the best lines of the night when he said "I think it may be time for us to quit taking advice from economists" but it seemed to go mostly unnoticed and unappreciated. ..."
"... Sanders did a relatively good job of deflecting and not getting zinged by the 'gotcha' question but a full-frontal assault would have been much better. Stronger, more Presidential and with the added bonus of giving neo-liberal economists under the pay of plutocrats a black eye. Another missed opportunity. The questioner set it up perfectly for him. I would have loved to see the expression on her corn-fed face when Bernie turned her 'gotcha' question that she had spent so much time and thought crafting into the home-run answer of the evening. Perhaps it could happen in a debate in the near future. ..."
November 16, 2015 | naked capitalism

Hillary Clinton Appeal to 9-11 to Defend Wall Street Donations Was Bad, But This Was Worse

Jerry Denim, November 16, 2015 at 11:46 am

I couldn't believe my eyes and ears during the debate when Sanders impugned Clinton's integrity for taking Wall Street super PAC money and she seemed to successfully deflect the accusation by going full-bore star-spangled sparkle eagle. She played the vagina card then quickly blurted out "9/11 New York" for applause while attempting conflate aiding and abetting Wall Street with the 9/11 attacks and patriotism. I couldn't believe people were clapping and I couldn't believe Clinton had the audacity to pull such a illogical and juvenile stunt on live television, but yet CBS reported her highest approval scores of the debate were registered during her confusing but emotionally rousing (for some people apparently) "vagina, 9/11" defense.

I loved that Bernie Sanders was willing to drop the "F-bomb" (fraud) on Wall Street but he needs to swing much harder at Clinton. Clinton was quick to zing O'Malley as a hypocrite by noting he appointed a former hedge-fund manager to some state regulatory position when given the chance, but yet neither Sanders or O'Malley hit back with the fact that her only child and Clinton Foundation board member, Chelsea Clinton, worked for the hedge fund of a Clinton family pal and mega-donor in 2006. Neither candidate mentioned that her son-in-law and the father of her grandchild who she is so fond of mentioning, just so happens to be an extremely rich hedge fund manager who benefits handsomely from the Clinton's political connections and prestige. This isn't mud, this is extremely germane, factual material already on the public record. It gets to the core of who Hillary is and where her loyalties lie. Hillary herself chose to identify unregulated derivatives and the repeal of Glass-Steagall as the primary causes of the financial crisis. She either claimed directly or insinuated that she would address these issues as President, but surprisingly no one pointed out that it was her husband's administration that blocked Brooksley Born from regulating derivatives in the 1990's and it was her husband's administration that effectively repealed Glass-Steagal with the signing of Gramm-Leach-Billey act in 1999. It's not a stretch to say the Clinton's deregulation of Wall Street paved the way for the crisis of 2008 and the extreme income inequality of today. Wall Street is deeply unpopular and Bernie Sanders has built a candidacy on two main issues: attacking Wall Street and addressing income inequality. These are punches he can't afford not to throw at his rival when she holds a commanding lead in the polls plus the support of the DNC and media establishment. Clinton is deeply corrupt and beholden to Wall Street. She needs to be beaten with this stick hard and often. Attempting to deflect this very accurate, very damaging criticism by wrapping herself in the flag and invoking feminism is a cheap stunt that will only work so many times before people notice what she is doing. Bernie needs to swing harder and keep at it, he already has the right message and Clinton is highly vulnerable on his pet topics.

I thought O'Malley had one of the best lines of the night when he said "I think it may be time for us to quit taking advice from economists" but it seemed to go mostly unnoticed and unappreciated. I would have loved a frontal assault on the validity and integrity of economists when the bespectacled lady in blue attempted to nail down Sanders with a 'gotcha' question implying raising the minimum wage would be catastrophic for the economy because "such-and-such economist" said so. There is so much disdain for science and academic credentials in the heartland right now, it seems crazy not to harness this anti-academic populist energy and redirect it to a deserving target like neo-liberal economists instead of climate scientists. " How's that Laffer curve working out for ya Iowa? Are you feeling the prosperity 'trickle down' yet?" Sanders did a relatively good job of deflecting and not getting zinged by the 'gotcha' question but a full-frontal assault would have been much better. Stronger, more Presidential and with the added bonus of giving neo-liberal economists under the pay of plutocrats a black eye. Another missed opportunity. The questioner set it up perfectly for him. I would have loved to see the expression on her corn-fed face when Bernie turned her 'gotcha' question that she had spent so much time and thought crafting into the home-run answer of the evening. Perhaps it could happen in a debate in the near future.

[Nov 17, 2015] Chicagonomics and Economics Rules

It's not about Adam Smith, it's about well paid intellectual prostitutes hired to restore the rule of financial oligarchy. The books discussed are Chicagoedonomics: The Evolution of Chicago Free Market Economics by By Lanny Ebenstein (278pp) and ECONOMICS RULES The Rights and Wrongs of the Dismal Science By Dani Rodrik (253pp)
Notable quotes:
"... He believed that government had a crucial role to play in a well-functioning economy. It should finance and run good schools, as well as build roads, bridges and parks, he argued. It should tax alcohol, sugar and tobacco, all of which impose costs on society. It should regulate businesses to protect workers. And it should tax the rich - who suffer from "indolence and vanity" - to help the poor. ..."
"... Which leftist economist was this? None other than Adam Smith, the inventor of the "invisible hand" and the icon of ­laissez-faire economics today. Smith's modern reputation is a caricature. ... ..."
Nov 17, 2015 | Economist's View

David Leonhardt reviews 'Chicagonomics' and 'Economics Rules':

'Chicagonomics' and 'Economics Rules': He believed that government had a crucial role to play in a well-functioning economy. It should finance and run good schools, as well as build roads, bridges and parks, he argued. It should tax alcohol, sugar and tobacco, all of which impose costs on society. It should regulate businesses to protect workers. And it should tax the rich - who suffer from "indolence and vanity" - to help the poor.

Which leftist economist was this? None other than Adam Smith, the inventor of the "invisible hand" and the icon of ­laissez-faire economics today. Smith's modern reputation is a caricature. ...

pgl
"Dani Rodrik, a Harvard economics professor, has written a much less political book than Ebenstein has, titled "Economics Rules," in which he sets out to explain the discipline to outsiders (and does a nice job). Yet in surveying the larger "rights and wrongs" of economics, to quote his subtitle, Rodrik has diagnosed the central mistake that contemporary libertarians have made: They have conflated ideas that often make sense with those that always make sense."

Dani is often under looked in these discussions which is a shame. His writings on how different societies have dealt with their local issues is some of the most informed economics out there.

likbez -> pgl...

I think we need to distinguish between Friedman the academic economist before writing Capitalism and Freedom (1962) and Friedman the public intellectual after.

"After" Friedman was a dismal intellectual prostitute that promoted neoliberalism for money paid by financial oligarchy. The level of dishonesty and intellectual degradation that he displays in his public appearances that now are available in YouTube videos is simply astonishing.

Actually Professor Wendy Brown touched the mechanics of this slick propaganda campaign in her book "Undoing the Demos". From Amazon:

=== Start of quote ===
Neoliberal rationality -- ubiquitous today in statecraft and the workplace, in jurisprudence, education, and culture -- remakes everything and everyone in the image of homo oeconomicus. What happens when this rationality transposes the constituent elements of democracy into an economic register? In Undoing the Demos, Wendy Brown explains how democracy itself is imperiled. The demos disintegrates into bits of human capital; concerns with justice bow to the mandates of growth rates, credit ratings, and investment climates; liberty submits to the imperative of human capital appreciation; equality dissolves into market competition; and popular sovereignty grows incoherent. Liberal democratic practices may not survive these transformations. Radical democratic dreams may not either.

In an original and compelling argument, Brown explains how and why neoliberal reason undoes the political form and political imaginary it falsely promises to secure and reinvigorate. Through meticulous analyses of neoliberalized law, political practices, governance, and education, she charts the new common sense. Undoing the Demos makes clear that for democracy to have a future, it must become an object of struggle and rethinking.

[Nov 13, 2015] Credo: Economics is a Belief System - and We are Ruled by Fundamentalists

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, Boschs The Conjurer ..."
"... Within its exposition of economics as a quasi-religious theory, Brian Daveys 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 9, 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 13, 2015] When Economics Works and When it Doesn't

Notable quotes:
"... model one under which the efficient markets hypothesis is correct-and that's a model where there are a number of critical assumptions: one is rationality (we rule out behavioral aspects like bandwagons, excessive optimism and so on); second, we rule out externalities and agency problems ..."
"... to liberalize as many markets as possible and to make regulation as light as possible. In the run-up to the financial crisis, if you'd looked at the steady increase in house prices or the growth of the shadow banking system from the perspective of the efficient markets hypothesis, they wouldn't have bothered you at all. You'd tell a story about how wonderful financial liberalization and innovation are-so many people, who didn't have access before to mortgages, were now able to afford houses; here was a supreme example of free markets providing social benefits. ..."
"... But if you took the same [set of] facts, and applied the kind of models that people who had been looking at sovereign debt crises in emerging markets had been developing-boom and bust cycles, behavioral biases, agency problems, externalities, too-big-to-fail problems-if you applied those tools to the same facts, you'd get a very different kind of story. ..."
"... "efficient markets hypothesis": ..."
"... tendency in the policy world to liberalise as many markets as possible and to make regulation as light as possible ..."
Economist's View

Part of an interview of Dani Rodrik:

Q. You give a couple of examples in the book of the way theoretical errors can lead to policy errors. The first example you give concerns the "efficient markets hypothesis". What role did an overestimation of the scope and explanatory power of that hypothesis play in the run-up to the global financial crisis of 2007-08?

A. If we take as our central model one under which the efficient markets hypothesis is correct-and that's a model where there are a number of critical assumptions: one is rationality (we rule out behavioral aspects like bandwagons, excessive optimism and so on); second, we rule out externalities and agency problems-there's a natural tendency in the policy world to liberalize as many markets as possible and to make regulation as light as possible. In the run-up to the financial crisis, if you'd looked at the steady increase in house prices or the growth of the shadow banking system from the perspective of the efficient markets hypothesis, they wouldn't have bothered you at all. You'd tell a story about how wonderful financial liberalization and innovation are-so many people, who didn't have access before to mortgages, were now able to afford houses; here was a supreme example of free markets providing social benefits.

But if you took the same [set of] facts, and applied the kind of models that people who had been looking at sovereign debt crises in emerging markets had been developing-boom and bust cycles, behavioral biases, agency problems, externalities, too-big-to-fail problems-if you applied those tools to the same facts, you'd get a very different kind of story. I wish we'd put greater weight on stories of the second kind rather than the first. We'd have been better off if we'd done so.

djb said...

"efficient markets hypothesis": magical thinking

Jerry Brown said...

I can't get that link to open. Dani Rodrik says "there is a natural tendency in the policy world to liberalise as many markets as possible and to make regulation as light as possible". Is that in general? Or is that a part of the efficient market hypothesis?

[Nov 13, 2015] Dani Rodrik when economics works and when it doesn't

Notable quotes:
"... There's a certain fetishism that comes along with the use of math. And that shows up in two ways: one is that arguments which are relatively straightforward, that can be put in a directly literary form, we feel we have mathematise them. Sometimes, there's undue mathematisation or formalisation. We get so enamoured of the math that the mathematical structure of models becomes an object of analysis. And that's one of the problems with economic theory-that it often becomes applied mathematics, where the point is the mathematical properties of the models. And so it becomes more and more peripheral to what economics should be about, which is to look at social phenomena. But there's a much better appreciation today of the role and also the limits of math in economics than there was 30 years ago. ..."
"... it has squeezed out the space for mindless, abstract theorising or modelling for the sake of modelling. ..."
"... Models are stylised abstractions that lay bare the relationship between cause and effect. I liken [models] to lab experiments. When you conduct an experiment in a lab, you're trying to isolate the thing you're looking at. ..."
"... As long as we don't forget that [the model we're using] is a model, not the model. An immediate implication of what I just said, of the way I defined the usefulness of the model, is that the model captures only one of many different causal effects. And it's going to be most useful when we apply it to a real world setting where, in some sense, that causal effect is the dominant one. But [we should not] forget that there will be other settings where other causal effects or other models are more relevant. ..."
"... model one under which the efficient markets hypothesis is correct-and that's a model where there are a number of critical assumptions: one is rationality (we rule out behavioural aspects like bandwagons, excessive optimism and so on); second, we rule out externalities and agency problems-there's a natural tendency in the policy world to liberalise as many markets as possible and to make regulation as light as possible. In the run-up to the financial crisis, if you'd looked at the steady increase in house prices or the growth of the shadow banking system from the perspective of the efficient markets hypothesis, they wouldn't have bothered you at all. You'd tell a story about how wonderful financial liberalisation and innovation are-so many people, who didn't have access before to mortgages, were now able to afford houses; here was a supreme example of free markets providing social benefits. ..."
Nov 13, 2015 | Prospect Magazine
The economist Dani Rodrik, a professor at Harvard, recently spent a couple of years at Princeton's Institute for Advanced Study. In his new book, "Economics Rules: Why Economics Works, When it Fails, and How to Tell the Difference," he recalls just what a "mind-stretching experience" that sojourn was. He found that many of the visitors to the Institute's School of Social Sciences, prominent academics from other disciplines, harboured a deep "suspicion toward economists." Those visitors seemed to believe, he writes, that "economists either stated the obvious or greatly overreached by applying simple frameworks to complex social phenomena." It felt, Rodrik says, as if economists were being cast as the "idiots savants of social science: good with math and statistics, but not much use otherwise."

Part of the problem, Rodrik thinks, is "misinformation" about what it is economists do, exactly. "Economics Rules" is in part, therefore, an attempt to set the record straight-and to rebut some fairly widespread criticisms of economics in the process. But it's also aimed at his colleagues in the economics profession, who he thinks have made a sorry fist of "presenting their science to the world." When I spoke to him on the phone from the United States this week, I asked about that assumption he'd encountered at Princeton-that economists are "good with math and statistics" and not much else.

DR: Often we take it [mathematics] too far. There's a certain fetishism that comes along with the use of math. And that shows up in two ways: one is that arguments which are relatively straightforward, that can be put in a directly literary form, we feel we have mathematise them. Sometimes, there's undue mathematisation or formalisation. We get so enamoured of the math that the mathematical structure of models becomes an object of analysis. And that's one of the problems with economic theory-that it often becomes applied mathematics, where the point is the mathematical properties of the models. And so it becomes more and more peripheral to what economics should be about, which is to look at social phenomena. But there's a much better appreciation today of the role and also the limits of math in economics than there was 30 years ago.

JD: Right. You say in the book that one of the most significant developments in economics over the past three decades or so has been the increasingly widespread use of empirical methods.

Yes, that has definitely been a [sign of] great progress and has forced us to be much more grounded. And it has squeezed out the space for mindless, abstract theorising or modelling for the sake of modelling. But there's a tendency in parts of the profession [today] to believe that if you're just doing empirical work, then you can do away with theory or with thinking about the models that lie behind the particular empirical application. The point that is important to realise-and I'm not sure if I make this sufficiently strongly in the book itself-is that it's impossible to interpret any empirical evidence without either an implicit or, better still, an explicit model behind it. So every time we make a causal assertion about the real world using data we are implicitly using a model.

The idea of the economic model is one of the central concepts in the book. Where does the explanatory power of economic models come from?

Models are stylised abstractions that lay bare the relationship between cause and effect. I liken [models] to lab experiments. When you conduct an experiment in a lab, you're trying to isolate the thing you're looking at.

You draw an interesting comparison between models and fables. You say that models, like fables, leave out or abstract from certain aspects of the world as it is. And that, in your view, is a strength, a feature, as you put it, rather than a bug.

As long as we don't forget that [the model we're using] is a model, not the model. An immediate implication of what I just said, of the way I defined the usefulness of the model, is that the model captures only one of many different causal effects. And it's going to be most useful when we apply it to a real world setting where, in some sense, that causal effect is the dominant one. But [we should not] forget that there will be other settings where other causal effects or other models are more relevant.

A charge often made against economics, and which you try to rebut in the book, is that many of its assumptions, particularly about the rationality of economic actors, are unrealistic. To what extent does behavioural economics, which injects the insights of psychology into formal economic modelling, take that kind of criticism for granted? Or, to put it another way, does behavioural economics overturn or invalidate what you call the "garden-variety perfectly competitive market model"?

Yes, but it's only the latest a stream of models that have all had the effect of overturning the central implication of the perfectly competitive model. We've known since the 19th century that a market with a few firms would not produce the efficiency consequences of the perfectly competitive model. Then, of course, in the 1970s there was the imperfect competition revolution, where it turns out that, in the presence of asymmetric information, all kinds of consequences follow. So the behavioural revolution isn't new in the sense of generating results that overturn the basic implications of the perfectly competitive model. It's new in that it directly removes an assumption that had been at the core of neoclassical theorising-the notion of individual rationality.

There's a tendency now to interpret the behavioural models as implying that we can now forget about "rational man," that we can forget about all these optimising frameworks. And again I think that's wrong. There are going to be settings in which the behavioural model provides important insights. But it would be wrong to discard models in which rational behaviour plays an important role. The trick is to know when to apply a behavioural approach and when to apply a rational approach.

You have a chapter entitled "When Economists Go Wrong" in which you argue that economists' biggest mistake concerns the claims they often make for the general validity of certain assumptions and models. The danger, in other words, is that of confusing a model with the model.

Right. In policy, that's where we fall on our faces repeatedly. When we are called on for policy advice our biggest mistake is not drawing the links between the critical assumptions of a model and the real world context with the same kind of rigour and systematic thinking that we exercise when we're operating within a model.

You give a couple of examples in the book of the way theoretical errors can lead to policy errors. The first example you give concerns the "efficient markets hypothesis". What role did an overestimation of the scope and explanatory power of that hypothesis play in the run-up to the global financial crisis of 2007-08?

If we take as our central model one under which the efficient markets hypothesis is correct-and that's a model where there are a number of critical assumptions: one is rationality (we rule out behavioural aspects like bandwagons, excessive optimism and so on); second, we rule out externalities and agency problems-there's a natural tendency in the policy world to liberalise as many markets as possible and to make regulation as light as possible. In the run-up to the financial crisis, if you'd looked at the steady increase in house prices or the growth of the shadow banking system from the perspective of the efficient markets hypothesis, they wouldn't have bothered you at all. You'd tell a story about how wonderful financial liberalisation and innovation are-so many people, who didn't have access before to mortgages, were now able to afford houses; here was a supreme example of free markets providing social benefits.

But if you took the same [set of] facts, and applied the kind of models that people who had been looking at sovereign debt crises in emerging markets had been developing-boom and bust cycles, behavioural biases, agency problems, externalities, too-big-to-fail problems-if you applied those tools to the same facts, you'd get a very different kind of story. I wish we'd put greater weight on stories of the second kind rather than the first. We'd have been better off if we'd done so.

You also have a chapter on "Economics and Its Critics". To what extent does your point about economists' tendency to overestimate the scope and power of their models neutralise some fairly common criticisms of the discipline made by non-economists? Your point being, as I understand it, that the problem is not so much with the models themselves as with economists' expectations of what those models will yield.

What I'm claiming is that if economists were actually truer to their discipline and were to project their discipline to the rest of the world as a collection of models, to a large extent it would help neutralise the criticism that economists are [wedded to] one model in particular. You don't get a reputation as a successful researcher by demonstrating that Adam Smith was right! You get a reputation by showing that there are very circumstances in which he might have been wrong. But this richness, this willingness to countenance non-free-market outcomes, is somehow rarely revealed to the outside world.

Dani Rodrik's "Economics Rules: Why Economics Works, When It Fails, And How to Tell the Difference" is published by Oxford University Press (£16.99)

[Nov 12, 2015] Trickle Down, Starve the Beast, Supply-Side, and Sound Money Fantasies

Notable quotes:
"... STUDY: During the past three years, members of the Standard Poor's 500 Index have spent more than $1.5 trillion buying back stock ... US companies issued stock equal to $1.2 trillion last year. All told the new issues in 2014 exceeded share buybacks ... The conclusion is that what looks like buybacks are actually thinly veiled management-compensation plans. ..."
"... Looser monetary policy increases the value of existing assets but reduces the return on assets. So the impact it has on inequality is to increase it in the short run, but in the long run the first order* impact is zero. ..."
"... I doubt that trickle down, starve the beast, supply-side, sound money fantasies are really economics at all. They look now more like the supportive myths of a new, much more hierarchical social order. As such, they should be seen as modern equivalents of the Divine Right royal myth of the Ancien Regime, or even the claim of Dark Age warlords to be descendants of Woden. ..."
Economist's View

JohnH said in reply to djb...

Tim Canova on trickle down monetary policy:

"Ben Bernanke, the Federal Reserve chairman when the QE programs were first launched, claimed that asset purchases would have a "wealth effect": by the Fed purchasing bonds in such large amounts, bond prices would rise, yields would fall, and investors would shift into riskier securities, driving up the price of corporate shares and stock markets. Everyone would feel richer, businesses would invest and consumers would spend more. This seems much like the theory of "trickle-down" fiscal policy: that tax cuts for those with high incomes would be invested, thereby leading to the hiring of additional workers and spreading the benefits to the rest of the economy. But like the Bush administration's tax cuts, the Fed's monetary trickle-down has not worked so well. The Fed's lending and asset purchase programs have effectively propped up Wall Street interests -- big banks and financial markets -- but they have also neglected the needs of Main Street, including the small community banks, small and moderate sized and family-owned businesses, unemployed and underemployed workers, and state and local governments."
https://www.dissentmagazine.org/article/who-runs-federal-reserve-2008-crash

Canova is one of the nationally renowned economists who advised Bernie Sanders on the Fed, and actually got the Fed audited, exposing apparent conflicts of interest with Wall Street.
http://www.sanders.senate.gov/newsroom/press-releases/top-economists-to-advise-sanders-on-fed-reform

What's amazing: 'liberals' can see trickle down when it comes to tax cuts but not in monetary policy. They march in lock step with Wall Street when it comes to monetary policy...which has barely trickled down at all after seven years.

Bud Meyers said...

Bloomberg (November 2015)

STUDY: "During the past three years, members of the Standard & Poor's 500 Index have spent more than $1.5 trillion buying back stock ... US companies issued stock equal to $1.2 trillion last year. All told the new issues in 2014 exceeded share buybacks ... The conclusion is that what looks like buybacks are actually thinly veiled management-compensation plans."

http://www.bloombergview.com/articles/2015-11-11/why-corporate-management-loves-share-buybacks

Bernie! Bernie! Bernie!
https://www.youtube.com/watch?v=6_L5e0fIkQ8

sanjait said...

It's apparently impossible for most to understand this ... but the most accurate way to describe the first order distributional impact of looser monetary policy would be to say:

Looser monetary policy increases the value of existing assets but reduces the return on assets. So the impact it has on inequality is to increase it in the short run, but in the long run the first order* impact is zero.

*Of course, second order impacts are important here. But if we're counting those, we should probably keep in mind the dynamics of the given situation, and the fact that workers in no way benefit from letting the economy slide into depression.

Peter K. said...

WSJ:

"It's also notable that nearly all of the GOP candidates identify the Federal Reserve's post-crisis monetary policy as a source of rising inequality "

I find it hard to believe that the Wall Street Journal or the GOP candidates actually think rising inequality is a bad thing.

gordon said...

I doubt that "trickle down, starve the beast, supply-side, sound money fantasies" are really economics at all. They look now more like the supportive myths of a new, much more hierarchical social order. As such, they should be seen as modern equivalents of the Divine Right royal myth of the Ancien Regime, or even the claim of Dark Age warlords to be descendants of Woden.

[Nov 08, 2015] The Wisdom of Pessimism « Nick Geoghegan

[Nov 04, 2015] Do Economists Promote Ideology as Science?

Notable quotes:
"... Is economics, as some assert, little more than a means of dressing up ideological arguments in scientific clothing? ..."
"... This certainly happens, especially among economists connected to politically driven think tanks – places like the Heritage Foundation come to mind. Economists who work for businesses also have a tendency to present evidence more like a lawyer advocating a particular position than a scientist trying to find out how the economy really works. ..."
"... No - we dont allow MDs to prescribe or treat on the basis of theory alone. Its unethical for any professional practitioner to give advice that is not supported by compelling evidence demonstrating that the advise is both safe and effective - First, do no harm. ..."
"... To a man, professional economists shill for the view that they are morally free to treat real economies and real people as their personal lab rats. As a group, economists are an ethically challenged bunch in this respect, and probably in other respects too. ..."
"... The rich plutocrats have a major stake in advocating very specific narratives, so they will throw large sums behind those narratives (and the fight against anything conflicting with them). ..."
"... What sort of opinions are economists allowed to have if they want tenure, want to be published in the major journals or want to make a living? ..."
"... Keynes concluded that government direction was necessary for a viable economy. Keynes interpreters in the US buried that idea, and thus became very important economists - guys like Paul Samuelson. The first ( and only) US book to faithfully represent Keynes ideas faded away soon after publication: http://news.stanford.edu/pr/93/931011Arc3112.html ..."
"... It is impossible to talk about economics without making essentially ideological distinctions. Private property and wage labor are not natural categories. Their adequacy as human practices therefore needs to be either defended or criticized. To simply take them as given is an ideological waffle that begs THE question. ..."
"... Economists thus SHOULD have, acknowledge and fully disclose their ideological biases. When evaluating evidence they should make every effort to set aside and overcome their biases. And they need to stay humble about how Sisyphean, incongruous and incomplete their attempts at objectivity are. ..."
"... And so - though we proceed slowly because of our ideologies, we might not proceed at all without them. - Joseph Schumpeter ..."
Nov 03, 2015 | Economist's View

My latest column:

Do Economists Promote Ideology as Science?: Which is more important in determining the policy positions of economists, ideology or evidence? Is economics, as some assert, little more than a means of dressing up ideological arguments in scientific clothing?
This certainly happens, especially among economists connected to politically driven think tanks – places like the Heritage Foundation come to mind. Economists who work for businesses also have a tendency to present evidence more like a lawyer advocating a particular position than a scientist trying to find out how the economy really works.

But what about academic economists who are supposed to be searching for the truth no matter the political implications? Can we detect the same degree of bias in their research and policy positions? ...

rayward said...

Thoma's assessment seems fair enough. I'd make the point that, for some academic economists, no amount of evidence is sufficient to overcome their bias. "Where's the proof" is the refrain one hears often. And then there's the question: what is evidence? The availability of lots of data is often used to "prove" this or that theory, even when the "proof" is contrary to the historical evidence one can see with her own eyes. Data used as obfuscation rather than clarification. I appreciate that one historical event following another historical event does not prove causation, but what's better proof than history.

RogerFox said...

"Shouldn't theory be a guide when the empirical evidence is unconvincing one way or the other?"

No - we don't allow MDs to prescribe or treat on the basis of theory alone. It's unethical for any professional practitioner to give advice that is not supported by compelling evidence demonstrating that the advise is both safe and effective - 'First, do no harm.'

To a man, professional economists shill for the view that they are morally free to treat real economies and real people as their personal lab rats. As a group, economists are an ethically challenged bunch in this respect, and probably in other respects too.

DeDude said...

Economics as a science is mainly hurt by two things.

  1. The rich plutocrats have a major stake in advocating very specific narratives, so they will throw large sums behind those narratives (and the fight against anything conflicting with them).
  2. Economics does not have anything resembling the double blind placebo controlled trials that help medicine fight off the narratives of those with money and power.
RGC said...

What sort of opinions are economists allowed to have if they want tenure, want to be published in the major journals or want to make a living?

Keynes concluded that government direction was necessary for a viable economy. Keynes' "interpreters" in the US buried that idea, and thus became very important economists - guys like Paul Samuelson. The first ( and only) US book to faithfully represent Keynes' ideas faded away soon after publication: http://news.stanford.edu/pr/93/931011Arc3112.html

pete said...

I did not know there was a debate. Krugman summed it all up in Peddling Prosperity. Folks know who pays the rent, and opine accordingly.

Syaloch said...

I think problems arise when economists are called upon by politicians or the media to give expert advice.

Within the sciences, "We don't know the answer to that" is a perfectly acceptable response, and in scientific fields where the stakes are low that response is generally accepted by the public as well. "What is dark matter made of?" "We don't know yet, but we're working on it." But in politics, where the stakes are higher, not having a definitive answer is viewed as a sign of weakness. How often do you hear a politician responding to a "gotcha" question admit that they don't know the answer rather than trying to BS their way through?

Given the timeliness of news coverage the media prefer to consult experts who offer definitive answers, especially given their preference for pro/con type interviews which require experts on both sides of an issue. Economists who are put on the spot this way feel pressured to ditch the error bars and give unambiguous answers, even answers based purely on theory with little to no empirical backing, and the more often they do this the more often they're invited back.

Sandwichman said...

It is impossible to talk about economics without making essentially ideological distinctions. Private property and wage labor are not "natural" categories. Their adequacy as human practices therefore needs to be either defended or criticized. To simply take them "as given" is an ideological waffle that begs THE question.

Economists thus SHOULD have, acknowledge and fully disclose their ideological biases. When evaluating evidence they should make every effort to set aside and overcome their biases. And they need to stay humble about how Sisyphean, incongruous and incomplete their attempts at objectivity are.

Let's not forget that "The End of Ideology" was a polemical tract aimed at designating the ideology of the managers and symbol manipulators "above" and beyond ideology. Similarly, Marx's brilliant critique of ideology degenerated into polemic as its practitioners adopted the mantle of "science."

anne said in reply to Sandwichman...

Really excellent, and why I am immediately wary of self-described "technocrats."

anne said in reply to Sandwichman...

https://en.wikipedia.org/wiki/The_End_of_Ideology

The End of Ideology: On the Exhaustion of Political Ideas in the Fifties is a collection of essays published in 1960 by Daniel Bell, who described himself as a "socialist in economics, a liberal in politics, and a conservative in culture". He suggests that the older, grand-humanistic ideologies derived from the nineteenth and early twentieth centuries had been exhausted, and that new, more parochial ideologies would soon arise. He argues that political ideology has become irrelevant among "sensible" people, and that the polity of the future would be driven by piecemeal technological adjustments of the extant system.

anne said in reply to Sandwichman...

What precisely is "Marx's critique of ideology ?"

Sandwichman said in reply to anne...

A very big question! Like "what is the meaning of life?" At least a semester-long upper division seminar course. ;-)

In a nutshell (to put it crudely), Marx labelled as ideologists a cohort of German followers of Hegel's philosophy who envisioned historical progress as the result of the progressive refinement of intellectual ideas. Marx argued instead that historical change resulted from struggle between social classes over the material conditions of life, fundamental to which was the transformation of nature through human intervention into means of subsistence.

anne said in reply to Sandwichman...

Marx labelled as ideologists a cohort of German followers of Hegel's philosophy who envisioned historical progress as the result of the progressive refinement of intellectual ideas. Marx argued instead that historical change resulted from struggle between social classes over the material conditions of life, fundamental to which was the transformation of nature through human intervention into means of subsistence.

[ What a superb introductory or summary explanation. I could not be more impressed or grateful. ]

DrDick said in reply to Sandwichman...

Well said. I would add "markets" to that list of relatively recent cultural constructs that needs greater scrutiny.

Chuck said...

"And so - though we proceed slowly because of our ideologies, we might not proceed at all without them." - Joseph Schumpeter, "Science and Ideology," The American Economic Review 39:2 (March 1949), at 359
http://www.jstor.org/stable/1812737

Sandwichman said in reply to Chuck...

Indeed.

Ignacio said...

Many guys are not driven by ideology, rather than evidence. The problem with this article is that we cannot compare with other professions and say "economists are more/less prone to promote ideology than the average".

DrDick said in reply to Ignacio...

All human endeavors are shaped by "ideology" in many different ways. What is important is to be aware of and explicit about their influences on our thought and action.

RC AKA Darryl, Ron said in reply to RC AKA Darryl, Ron...

If there are two sides to an argument that radically disagree then it is possible that both sides may be ideology, but both sides cannot be science. Only the correct argument can be science. Of course ideology is a bit too kind of a word since the incorrect argument is actually just a con game by people out to lay claim on greater unearned wealth.

ken melvin said...

Economists seem content with trying to figure out how to make 'it' work. Far better, I think, to try and figure out how it should be.

It was philosophers such as Hume, Locke, Marx, Smith, Rawls, ... who asked the right questions. Laws and economics come down to us according to how we think about such things; they change when we change the way we think. Seems we're in a bit of a philosophical dry patch, here. Someday, we will have to develop a better economic system, might be now. Likewise, there are laws rooted in antiquity that were wrong then and are wrong still.

RC AKA Darryl, Ron said in reply to ken melvin...

Exactly! They all know what they are doing. Some of them are just trying to do the wrong thing.

Arne said...

"Ideology certainly influences which questions academic researchers believe are the most important, but there is nothing wrong with that."

No "experiment" in economics comes with the degree of control that experiments in physical sciences take for granted, so there is tremendous room for ideology to come into the discussion of whether a data set really represents the conditions the model is supposed to consider. Since reviewing another economist's study entails asking questions those questions...

DrDick said in reply to Arne...

Please describe the "experimentation" which takes place in astronomy and geology. Ideologies also play important roles in experimental sciences, such as biology (for which we have a lot of evidence.

[Oct 19, 2015] Is Money Corrupting Research?

Notable quotes:
"... Of course, the Cato Institute, Heritage, and Team Republican economists are proud that their opinions are bought and paid for. ..."
"... Most (all?) academic types are keenly aware of the importance of grantsmanship as a basic skill. Knowing the appropriate funding sources and, in some cases, the interests and biases of funding sources, is stock in trade. Scientific research has become so capital intensive that large grants from government and large foundations are necessary to carry it out. For the most part, the biases of the granting institutions are known and discounted. ..."
economistsview.typepad.com
Luigi Zingales:
Is Money Corrupting Research?: The integrity of research and expert opinions in Washington came into question last week, prompting the resignation of Robert Litan ... from his position as a nonresident fellow at the Brookings Institution.

Senator Elizabeth Warren raised the issue of a conflict of interest in Mr. Litan's testimony before a Senate committee... Senator Warren was herself criticized by economists and pundits, on the left and right. ... But at stake is the integrity of the research process and the trust the nation puts in experts, who advise governments and testify in Congress. Our opinions shape government policy and judicial decisions. Even when we are paid to testify..., integrity is expected from us. ...

Yet it is disingenuous for anybody (especially an economist) to believe that reputational incentives do not matter. Had the conclusions not pleased the Capital Group, it would probably have found a more compliant expert. And the reputation of not being "cooperative" would have haunted Mr. Litan's career as a consultant. ...

Reputational ... concerns do not work as well with sealed expert-witness testimony or paid-for policy papers that circulate only in small policy groups. ... A scarier possibility is that reputational incentives do not work because the practice of bending an opinion for money is so widespread as to be the norm. ...

He goes on to suggest some steps to strengthen the reputational incentive.

pgl said in reply to Larry...

"Businesses sometimes finance policy research much as advocacy groups or other interests do," the economists wrote. "A reader can question the source of the financing on all sides, but ultimately the quality of the work and the integrity of the author are paramount." They praised Litan's quality and integrity as having been "impeccable over a career of four decades."

The fact of the matter is that funding comes from all sorts of places. One should always disclose the sourcing of funding and then let one's writings stand scrutiny.

Of course, the Cato Institute, Heritage, and Team Republican economists are proud that their "opinions" are bought and paid for.

anne said in reply to Larry...
http://www.reuters.com/article/2015/09/30/us-brookings-warren-resignation-idUSKCN0RU00B20150930

September 29, 2015

Brookings fellow resigns after Senator Warren accuses him of conflicts
By SARAH N. LYNCH - Reuters

WASHINGTON

A prominent Brookings Institution fellow resigned on Tuesday, after Massachusetts Senator Elizabeth Warren accused him of failing to fully disclose industry funding tied to a study that criticized the U.S. Labor Department's plan to regulate brokerages.

The resignation of Robert Litan came just one day after Warren, a Democrat, sent Brookings' president a letter demanding to know more about the think tank's policies on financial conflicts and details about the communications between Litan and Capital Group, an investment firm that funded his research paper.

"He has acknowledged that he made a mistake in not following Brookings regulations designed to uphold the independence of the institution," Brookings President Strobe Talbott said in a statement provided to Reuters.

Warren's concerns center a study that Litan and researcher Hal Singer jointly conducted which examined a controversial plan by the Labor Department to try and rein in conflicts posed by brokers who offer retirement advice.

The proposal has garnered fierce opposition from Wall Street, and Litan's study concluded that the plan could harm consumers.

Litan testified about the study's findings in a July hearing before a U.S. Senate panel, in which he represented himself as a fellow at Brookings.

The study was conducted by Litan and Singer in their capacity as staffers for Economists, Inc., a consulting firm.

Although his testimony and his study did disclose that Capital Group provided funding, Warren said that she later learned this was not the full story.

In a series of follow-up questions Warren sent to Litan after the hearing, she said he disclosed that Capital Group also provided feedback and editorial comments on a draft.

This, she said, ran counter to his claim at the hearing that he and Singer were "solely responsible" for the study's conclusions.

In addition, he disclosed that Capital Group had paid Economists Inc $85,000 for the study, and his share was $38,800.

In her letter to Brookings, Warren said the lack of disclosure raises "significant questions about the impartiality of the study and its conclusions."

Litan, a former top official in the Clinton administration, did not respond to an email seeking comment.

He is a well-known economics expert in Washington who has authored or co-authored over 25 books.

"We greatly appreciate all the good work Bob has done for Brookings over the 40-plus years he has been connected to this institution," Talbott said.

mulp said in reply to Larry...
What did Brookings do to Litan???

According to Reuters, he failed to disclose his relationships when presenting his report and when testifying, and seems to have lied:

"Although his testimony and his study did disclose that Capital Group provided funding, Warren said that she later learned this was not the full story.

"In a series of follow-up questions Warren sent to Litan after the hearing, she said he disclosed that Capital Group also provided feedback and editorial comments on a draft.

"This, she said, ran counter to his claim at the hearing that he and Singer were "solely responsible" for the study's conclusions."

Can I edit anything you write and claim as solely your own work? I want to have my point of view endorsed by a much larger group of writers, and the best way is for me to fix their writings.

It was not Litan being paid that was the problem, but the fact he claimed the words written for him were his own as an "independent" authority.

Second Best said...
Money corrupts research as sure as the Pope is Catholic...
greg said in reply to anne...
Rumors of Thomas Malthus' irrelevance to humanity's future are greatly exaggerated.

Consider instead: "Human and nature dynamics (HANDY): Modeling inequality and use of resources in the collapse or sustainability of societies"
http://www.sciencedirect.com/science/article/pii/S0921800914000615

Authors: Safa Motesharreia, Jorge Rivasb, Eugenia Kalnayc

This is the actual paper of the model, but do not be afraid. Here are the highlights:

" HANDY is a 4-variable thought-experiment model for interaction of humans and nature.
The focus is on predicting long-term behavior rather than short-term forecasting.
Carrying Capacity is developed as a practical measure for forecasting collapses.
A sustainable steady state is shown to be possible in different types of societies.
But over-exploitation of either Labor or Nature results in a societal collapse."

There are equations. And graphs. The concluding paragraph of the abstract:

"The measure "Carrying Capacity" is developed and its estimation is shown to be a practical means for early detection of a collapse. Mechanisms leading to two types of collapses are discussed. The new dynamics of this model can also reproduce the irreversible collapses found in history. Collapse can be avoided, and population can reach a steady state at maximum carrying capacity if the rate of depletion of nature is reduced to a sustainable level and if resources are distributed equitably."

This made the press about a year and a half ago, was commented on, but has since been ignored. Google "Handy Model" for popular presentations and critiques.

You decide whether it should continue to be ignored, given the remarkable progress the world has made towards remedying inequality, conserving resources, and controlling population growth. (That's sarcasm.)

reason said...

There is another solution to this issue. Financing should never be direct to the researcher. That way there is a funding body (say a university) that decides who researches what, and the funding is channeled through them (through a public application process). If a firm is really interested in disinterested research, no problem.

If it wants to control the research, they have a problem. Of course the whole funding body could be corrupted but if there is a public review process that can be minimised.

cm said in reply to reason...

It is more subtle than asking for or implying a preference for specific results. Regardless how the funding is distributed, except perhaps by lottery, there is the issue of "repeat business" or expert shopping (cherry-picking research organizations that are known to fall in a particular camp).

Then there is the issue of fads - even in relatively apolitical tech science, funding and research flocks to certain hot topics, as people hunt for funding by trying to tie their proposal to the current hot topics. But then this is perhaps more a consequence of an already corrupted funding process that only supports R&D that conforms to current preconceived notions and business interests.


bakho said...

Money supports bias.

RC AKA Darryl, Ron said...

Money is power. Power corrupts.

mrrunangun said...

Most (all?) academic types are keenly aware of the importance of grantsmanship as a basic skill. Knowing the appropriate funding sources and, in some cases, the interests and biases of funding sources, is stock in trade. Scientific research has become so capital intensive that large grants from government and large foundations are necessary to carry it out. For the most part, the biases of the granting institutions are known and discounted.

Even in science, when research into a controversial area has been ambiguous enough for sustained disagreement, it is common to find that a given research shop's work consistently comes down on one side of the controversy and another shop's work consistently on the opposing side of the controversy. In such cases, only people who follow the research in the area closely are likely to be aware of this. Usually time and technical improvements in measuring equipment puts controversies to rest, but the time is often measured in years. In these cases, the biases come from the leaders of the research shops rather than the grantors.

There are politics among granting institutions as well. These are less often political biases and more often they are of a personal nature, and since the people on a granting committee are necessarily expert in the field that the grantee will be working in, they will often be personally acquainted with the grant applicants. Not uncommonly, former students of the members of the committee.

Economics and long range climate science are necessarily model-based. Their short-term predictions are often proven wrong which casts doubt on the reliability of their long-term predictions. As a result, there may be legitimate differences of opinion as to the applicability of a particular model to a particular situation.

In the case of Mr Litan, the fact that he acknowledged that his study was funded by Capital and that he was testifying on behalf of the industry announce his bias.

GeorgeK said...

Tainted research is the norm in most industries, research dollar come from corporations that expect their interest to be served. Currently Monsanto emails show how heavy handed this pay for research problem has become. ...""Professors/researchers/scientists have a big white hat in this debate and support in their states, from politicians to producers," Bill Mashek, a vice president at Ketchum, a public relations firm hired by the biotechnology industry, said in an email to a University of Florida professor. "Keep it up!"...

http://www.nytimes.com/2015/09/06/us/food-industry-enlisted-academics-in-gmo-lobbying-war-emails-show.html

DeDude said...

The antidote to this kind of crap is the public funded University with tenured professors and sufficient resources (endowed Chairs) to conduct research without need to go out and get external funding for a study. As the public funding is reduced in order to give tax cuts to the rich plutocrats such truly independent research become more rare -and the plutocrats increasingly manage to own the facts.

[Oct 18, 2015] Everything You Need to Know about Laissez-Faire Economics -- Economist View discussion

Alan Kirman is a great economist. Amazingly clear exposition of complex subjects.
Notable quotes:
"... I think what happened was on the one hand people became obsessed with proving there was some sort of socially satisfactory situation that corresponded to markets in equilibrium, and on the other hand, there was a lot of effort made, right up to the 1950s, to try to show that a market or an economy would converge on that. But we gave up on that in the 70s when there were results that showed that essentially we couldnt prove it. So the theoreticians gave up but the underlying economic content and all of the ideology behind it has just kept going. We are in a strange situation where on the one hand we say we should leave markets to themselves because if they operate correctly and we get to an equilibrium this will be a socially satisfactory state. ..."
"... Nowadays, you hear all the time about how neoliberal ideology and thought is invading European countries and is undoing forms of governance that are actually working quite well. I work a lot in Norway and Scandinavia and there you hear all the time that Nordic model works and at the same time it is being corrupted by the neoliberal ideology, which is being spread in some sort of cancerous fashion. Please comment on that-Current neoliberalism. What justifies it? Is it spreading? Is that a good thing or a bad thing? Anything you would like to say on that topic. ..."
"... The idea that anything even close to laissez faire ever exisited is silly ..."
"... Laissez faire has never existed; it is code for when the govt allows the rich to trample the poor, and the govt actively sides with the rich ..."
"... Too often, efficiency is modeled too simply, failing to capture important benefits. You may make widgets with fewer workers and more unemployed but at the loss of workforce training, most of which is on the job. ..."
"... You can reduce unit labor costs, which usually means reducing wages. But that has all sorts of consequences, which are not perceived. ..."
"... If industry is freed by reducing their investment in human capital, replacement investment in human capital must come from elsewhere in higher taxes on business to pay for training that may be less effective. Else workforce quality declines and becomes a drag on overall economic efficiency. ..."
economistsview.typepad.com

A few excerpts from a much longer interview of Alan Kirman (it was in yesterday's links)

Everything You Need to Know about Laissez-Faire Economics: ... DSW: I'm so happy to talk with you about the concept of laissez faire, all the way back to its origin, which as I understand it is during the Enlightenment. ...

AK: I think the basic story that really interests us is that with the Enlightenment and with people like Adam Smith and David Hume, people had this idea that somehow intrinsically people should be left to their own devices and this would lead society to a state that was satisfactory in some sense for everybody, with some limits of course–law and order and so on. That's the idea that is underlying our whole social and philosophical position ever since. ... I think what happened was on the one hand people became obsessed with proving there was some sort of socially satisfactory situation that corresponded to markets in equilibrium, and on the other hand, there was a lot of effort made, right up to the 1950's, to try to show that a market or an economy would converge on that. But we gave up on that in the 70's when there were results that showed that essentially we couldn't prove it. So the theoreticians gave up but the underlying economic content and all of the ideology behind it has just kept going. We are in a strange situation where on the one hand we say we should leave markets to themselves because if they operate correctly and we get to an equilibrium this will be a socially satisfactory state. On the other hand, since we can't show that it gets there, we talk about economies that are in equilibrium but that's a contradiction because the invisible hand suggests that there is a mechanism that gets us there. And that's what we're lacking–a mechanism. ...

DSW: ...This has been a wonderful conversation, by the way. Nowadays, you hear all the time about how neoliberal ideology and thought is invading European countries and is undoing forms of governance that are actually working quite well. I work a lot in Norway and Scandinavia and there you hear all the time that Nordic model works and at the same time it is being corrupted by the neoliberal ideology, which is being spread in some sort of cancerous fashion. Please comment on that-Current neoliberalism. What justifies it? Is it spreading? Is that a good thing or a bad thing? Anything you would like to say on that topic.

AK: I think that one obsession that economists have is with efficiency. We're always, always, worrying about efficiency. People like to say that this is efficient or not efficient. The argument is, we know that if you free up markets you get a more efficient allocation of resources. That obsession with efficiency has led us to say that we must remove some of these restraints and restrictions and this sort of social aid that is built into the Scandinavian model. I think that's without thinking carefully about the consequences. ...

I think what has happened is, because of this mythology about totally free markets being efficient, we push for that all the time and in so doing, we started to do things like-for example, we hear all the time that we have to reform labor markets in Europe. Why do we want to reform them? Because then they'll be more competitive. You can reduce unit labor costs, which usually means reducing wages. But that has all sorts of consequences, which are not perceived. In model that is more complex, that sort of arrangement wouldn't necessarily be one that in your terms would be selected for. When you do that, you make many people temporary workers. You have complete ease in hiring and firing so that people are shifting jobs all the time. When they do that, we know that employers then invest nothing in their human capital. ... We're reducing the overall human capital in society by having an arrangement like that. ... Again, the idea that people who are out of work have chosen to be out of work and by giving them a social cushion you induce them to be out of work-that simply doesn't fit with the facts. I think that all the ramification of these measures-the side effects and external effects-all of that gets left out and we have this very simple framework that says "to be competitive, you just have to free everything up." That's what undermining the European system. European and Scandinavian systems work pretty well. ... The last remark I would make is that to say "you've got to get rid of all those rules and regulations you have"-in general, those rules and regulations are there for a reason. Again, to use an evolutionary argument, they didn't just appear, they got selected for. We put them in place because there was some problem, so just to remove them without thinking about why they are there doesn't make a lot of sense. ...

DSW: There's no invisible hand to save the day.

AK: (laughs). Joe Stiglitz used to say that we also need a visible hand. The visible hand is sometimes pretty useful. For example in the financial sector I think you really need a visible hand and not an invisible hand. ...

e abrams said...

The idea that anything even close to laissez faire ever exisited is silly

at all stages, the gov't actively intervened in the economy; eg, look at the rules for labor unions....

Laissez faire has never existed; it is code for when the gov't allows the rich to trample the poor, and the gov't actively sides with the rich

bakho said...

I enjoyed the interview with Kirman. Thanks for posting.

Too often, efficiency is modeled too simply, failing to capture important benefits. You may make widgets with fewer workers and more unemployed but at the loss of workforce training, most of which is on the job. This is important:

You can reduce unit labor costs, which usually means reducing wages. But that has all sorts of consequences, which are not perceived. In model that is more complex, that sort of arrangement wouldn't necessarily be one that in your terms would be selected for. When ... you make many people temporary workers.... so that people are shifting jobs all the time. ..employers then invest nothing in their human capital. ... We're reducing the overall human capital in society .. If you're working for ... all your lifetime, they probably invest quite a lot in you. ... it is a much more stable arrangement. .. the ramification of these measures-the side effects and external effects... gets left out and we have this very simple framework that says "to be competitive, you just have to free everything up."

If industry is freed by reducing their investment in human capital, replacement investment in human capital must come from elsewhere in higher taxes on business to pay for training that may be less effective. Else workforce quality declines and becomes a drag on overall economic efficiency.

[Oct 18, 2015] Alan Kirman interview: everything You Need to Know about Laissez-Faire Economics

Notable quotes:
"... That's the idea that is underlying our whole social and philosophical position ever since. Economics is trying to run along side that. Initially the idea was to let everybody do what they want and this would somehow self-organize. But nobody said what the mechanism was that would do the self-organization. John Stewart Mill advanced the same position. He had the idea that people had to be given, as far as their role would permit, the possibility of doing their own thing, and this would be in the interests of everybody. And gradually we came up against this difficulty that we couldn't show economically, in a market for example, how we would ever get to such a position. I think what happened was on the one hand people became obsessed with proving there was some sort of socially satisfactory situation that corresponded to markets in equilibrium, and on the other hand, there was a lot of effort made, right up to the 1950's, to try to show that a market or an economy would converge on that. But we gave up on that in the 70's when there were results that showed that essentially we couldn't prove it. So the theoreticians gave up but the underlying economic content and all of the ideology behind it has just kept going. We are in a strange situation where on the one hand we say we should leave markets to themselves because if they operate correctly and we get to an equilibrium this will be a socially satisfactory state. On the other hand, since we can't show that it gets there, we talk about economies that are in equilibrium but that's a contradiction because the invisible hand suggests that there is a mechanism that gets us there. And that's what we're lacking–a mechanism. Is that clear more or less? ..."
"... Theory of Moral Sentiments ..."
"... Nowadays, if you take a very primitive version of the invisible hand, people say something like "greed is good". Somehow, if everyone is greedy and tries to serve their own interest, it will get to a good position socially. Adam Smith didn't have that view at all. He had the view that people have other things in mind. For example he said that one of the strongest motivations men have is to be seen to be a good citizen and therefore would do things that would appear to other people to be good. If you have motivations like that then you can be altruistic and you're not behaving like the strict Homo economicus ..."
"... Walras wasn't someone who pushed hard for laissez faire, but he started to build the weapons for trying to understand whether all markets could get into equilibrium. He wasn't so interested, himself, on whether the equilibrium was good for society; in other words, Adam Smith's original position. I would say that Walras was more a person who was worried about the very existence of equilibrium and he tried desperately at various points to show how we might get there. I don't think he was arguing in favor of laissez faire. I wouldn't regard Walras as being strictly in that tradition. ..."
"... Pareto was concerned about the idea of the invisible hand himself. He said: "Look, what I want to show you is that the competitive equilibrium is a social optimum. He was the person to define what we now call a Pareto optimum, a situation in which you cannot make one person better off without making somebody else worse off-which is a pretty weak criterion, but still is a criterion for some sort of social efficiency. He was interested in the relationship between the two, so he brought us back on track to what I interpret as the invisible hand. Then, we can make a huge jump it you want to the first theorem of welfare of economics. That, mistakenly, is often referred to as the invisible hand theorem. But it is nothing about the invisible hand. It just says that if you are in a competitive equilibrium, then that will be a Pareto optimum, in the sense that I have just mentioned. You couldn't make someone better off without making someone else worse off. That's all it says. It does not say that if you leave a society alone it will get there, but thousands of people have interpreted it in that way. ..."
"... He had a different position from Walras company and he wasn't very consistent in his views. According to Hayek, Walras said that nobody influences prices but take prices as given, and then somebody, not specified, adjusts them until they get to equilibrium. There is some mechanism out there. ..."
"... The Road to Serfdom ..."
"... He believed that people with little information of their own, like ants, would somehow collectively get it right. It was a very different view of the world than Walras. ..."
"... he was a pioneer in two respects. First of all, he grasped the idea of self-organizing and decentralized processes-that the intelligence is in the system, not in any individual, and secondly cultural group selection, that the reason economic systems were like this is because of some past history of better systems replacing worse systems. The wisdom of the system was the product of cultural group selection, as we would put it today, and that we shouldn't question its wisdom by tampering with it. Is that a fair thing to say? ..."
"... Yes, that's a fair thing to say and I think it is what Hayek believed. He didn't actually show how it would happen but you're absolutely right-I think that's what he believed and he thought tampering with this system would make it less perfect and work less well, so just leave it alone. I don't think he had in mind, strictly speaking, group-level selection, but that's clearly his idea. A system that works well will eventually come to outstrip other systems. That's why he was advising Thatcher. ..."
"... He was much less naïve than Friedman. Friedman has a primitive natural selection argument that if firms aren't doing better than other firms they'll go bust and just die. That's a summary of Friedman's evolutionary argument! But Hayek is much more sophisticated-you're absolutely right. ..."
"... Friedman and Hayek didn't see eye to eye at all, as I understand it. Hayek was actually very concerned that Friedman and other mathematical economists took over the Mont Pelerin Society, if I understand it correctly, but now let's put Friedman on center stage, and also the society as a whole and the creation of all the think tanks, which caused the society to become politically influential. ..."
"... "Greed is Good" sounds so simplistic, but what all of this seems to do is to provide some moral justification for individuals or corporations to pursue their own interests with a clear conscience. It's a moral justification for "Greed is Good", despite all of the complexities and all of the mathematics-that's what it seems to come down to. Am I wrong about that? ..."
"... Macroeconomic models are still all about equilibria, don't worry about how we got them, and their nice efficient properties, and so forth. They are nothing to do with distribution and nothing to do with disequilibrium. Two big strands of thought-Keynes and all the people who work on disequilibrium-they're just out of it. We're still working as if underlying all of this, greed-we don't want to call it greed, but something like greed-is good. ..."
"... Nowadays, you hear all the time about how neoliberal ideology and thought is invading European countries and is undoing forms of governance that are actually working quite well. I work a lot in Norway and Scandinavia and there you hear all the time that Nordic model works and at the same time it is being corrupted by the neoliberal ideology, which is being spread in some sort of cancerous fashion. Please comment on that-Current neoliberalism. ..."
"... We're always, always, worrying about efficiency. People like to say that this is efficient or not efficient. The argument is, we know that if you free up markets you get a more efficient allocation of resources. That obsession with efficiency has led us to say that we must remove some of these restraints and restrictions and this sort of social aid that is built into the Scandinavian model. I think that's without thinking carefully about the consequences. ..."
"... just to make my position clear, the idea of no regulations is absurd. For a system that is basically well adapted to its environment, then most of its regulations are there for a reason, as you say, but one of the things that everyone needs to know about evolution is that a lot of junk accumulates. There is junk DNA and there is junk regulations. Not every regulation has a purpose just because it's there, and when it comes to adapting to the future, that's a matter of new regulations and picking the right one out of many that are wrong. The question would be, how do you create smart regulations? Knowing that you need regulations, how do you create smart ones? That's our challenge and the challenge of someone who appreciates complexity, as you do. How would you respond to that? ..."
evonomics.com

What you always wanted to know about the "let it be" philosophy

I'll bet money that Alan Kirman is the only economist with animated ants running around his email signature. Highly regarded by mainstream economists, he is also a critic of equilibrium theory and proponent of new economic thinking that takes complex systems theory into account. It was my privilege to work with Alan and Germany's Ernst Strungmann Forum to organize a conference titled "Complexity and Evolution: A New Synthesis for Economics" that was held in February 2015 and will result in a volume published by the MIT press in 2016.

After the conference was over, I sought Alan out to help me understand the complex history of laissez faire, the "let it be" philosophy that underlies mainstream economic theory and public policy.

DSW: I'm so happy to talk with you about the concept of laissez faire, all the way back to its origin, which as I understand it is during the Enlightenment. Then we can bring it up to date with some of its formalized versions in economic theory. Tell me what you know about the early history of laissez faire.

AK: I think the basic story that really interests us is that with the Enlightenment and with people like Adam Smith and David Hume, people had this idea that somehow intrinsically people should be left to their own devices and this would lead society to a state that was satisfactory in some sense for everybody, with some limits of course–law and order and so on. That's the idea that is underlying our whole social and philosophical position ever since. Economics is trying to run along side that. Initially the idea was to let everybody do what they want and this would somehow self-organize. But nobody said what the mechanism was that would do the self-organization. John Stewart Mill advanced the same position. He had the idea that people had to be given, as far as their role would permit, the possibility of doing their own thing, and this would be in the interests of everybody. And gradually we came up against this difficulty that we couldn't show economically, in a market for example, how we would ever get to such a position. I think what happened was on the one hand people became obsessed with proving there was some sort of socially satisfactory situation that corresponded to markets in equilibrium, and on the other hand, there was a lot of effort made, right up to the 1950's, to try to show that a market or an economy would converge on that. But we gave up on that in the 70's when there were results that showed that essentially we couldn't prove it. So the theoreticians gave up but the underlying economic content and all of the ideology behind it has just kept going. We are in a strange situation where on the one hand we say we should leave markets to themselves because if they operate correctly and we get to an equilibrium this will be a socially satisfactory state. On the other hand, since we can't show that it gets there, we talk about economies that are in equilibrium but that's a contradiction because the invisible hand suggests that there is a mechanism that gets us there. And that's what we're lacking–a mechanism. Is that clear more or less?

DSW: Yes, but it was very fast! I want to pull us back to the early times and make a couple of observations. First of all, that the first thinking about laissez faire came at a time when government was monarchy and absolutist rule. The whole struggle of the Enlightenment, to have a more egalitarian and inclusive society, was part of this. Am I right about that?

AK: Absolutely right. There was a social and philosophical revolution, precisely because of that. Men were trying to liberate themselves from a very hierarchical and monarchical organization. And economics tried to go along with that. There were good reasons and I think that even now there is no reason to say that there is anything wrong with the liberal position. On the other hand, what we can't show is that there is anything that would enable a liberal approach like that to get things under control. So you're right. It was a reaction to very autocratic systems that led the whole of the laissez faire and liberal position to develop.

DSW: Right. So laissez faire made a lot of sense against the background of monarchy and controlling church and so on. Now I know that Adam Smith invoked the invisible hand metaphor only three times in the entire corpus of his work and it is said that his first book on moral sentiments is much more nuanced than the popular notion of the invisible hand. Could you speak a little more on Adam Smith? On the one hand he's an advocate of laissez faire but on the other hand he is very nuanced in both of his books but especially in his Theory of Moral Sentiments. What do you have to say about that?

AK: Right. Adam Smith was fully cognizant of the fact that man is motivated by many things. Nowadays, if you take a very primitive version of the invisible hand, people say something like "greed is good". Somehow, if everyone is greedy and tries to serve their own interest, it will get to a good position socially. Adam Smith didn't have that view at all. He had the view that people have other things in mind. For example he said that one of the strongest motivations men have is to be seen to be a good citizen and therefore would do things that would appear to other people to be good. If you have motivations like that then you can be altruistic and you're not behaving like the strict Homo economicus. Adam Smith didn't take the strong position that people left entirely to their own selfish devices will make things OK. He had the view that man is much more complicated and governed by his emotions. He talks a lot about sympathy, which we would now call empathy.

DSW: That's great! Now let's talk about Walras and what his ambitions were to come up with the first mathematical justification for laissez faire, as I understand it.

AK: Actually, Walras himself didn't talk so much about laissez faire. He at that time had a very simple idea, that the amount of goods that people wanted to supply at a given price would be the amount that people would want to buy; i.e, demand at that price, so if those two were equal then that was the equilibrium price. Then he said that if we have many markets, how can we be sure that they will simultaneously be cleared, because after all if you raise the price in one market then that will effect the price in other markets. If you raise the price of bananas then the price of oranges will be effected, and so forth. He said "my problem is to solve the market clearing for all goods", but he was not so interested in the underlying philosophical context. Walras wasn't someone who pushed hard for laissez faire, but he started to build the weapons for trying to understand whether all markets could get into equilibrium. He wasn't so interested, himself, on whether the equilibrium was good for society; in other words, Adam Smith's original position. I would say that Walras was more a person who was worried about the very existence of equilibrium and he tried desperately at various points to show how we might get there. I don't think he was arguing in favor of laissez faire. I wouldn't regard Walras as being strictly in that tradition.

DSW: OK, that's new for me. So what about the rise of so-called neoclassical economics. At what point did it become toward demonstrating what I understand is the first fundamental theorem of economics-laissez faire leads to the common good and that being justified by some mathematical apparatus. Where does that come from, if not from Walras?

AK: We missed a very important step, which is [Vilfredo] Pareto. Pareto was concerned about the idea of the invisible hand himself. He said: "Look, what I want to show you is that the competitive equilibrium is a social optimum. He was the person to define what we now call a Pareto optimum, a situation in which you cannot make one person better off without making somebody else worse off-which is a pretty weak criterion, but still is a criterion for some sort of social efficiency. He was interested in the relationship between the two, so he brought us back on track to what I interpret as the invisible hand. Then, we can make a huge jump it you want to the first theorem of welfare of economics. That, mistakenly, is often referred to as the invisible hand theorem. But it is nothing about the invisible hand. It just says that if you are in a competitive equilibrium, then that will be a Pareto optimum, in the sense that I have just mentioned. You couldn't make someone better off without making someone else worse off. That's all it says. It does not say that if you leave a society alone it will get there, but thousands of people have interpreted it in that way.

DSW: OK. So where do we go from here? Tell me a little about agency theory, which is also something that seems to imply, if I understand it, that the only responsibility of corporations is to maximize their profits. The economy will work well if that's their only obligation.

AK: That's not exactly a sideline but a development where people are worrying about firms in addition to individuals. When you are just dealing with individuals in a simple economy, when they are exchanging goods there is no problem. When you get firms in there you need to ask "What's the objectives of these firms?" The objective, the argument is, is if they maximize profit then they are maximizing their shareholders' benefits and so therefore we get to the idea of increasing the welfare of society as a whole. But there is a huge leap there, because we haven't specified closely in our models who owns these firms and how ownership is transferred between these people. So I think there is a fuzzy area there, which is not completely included in the theory.

DSW: Please give me a thumbnail history of the Mont Pelerin Society and the role it played in advancing economic theory and policy. So this would be Hayek, Friedman and all that.

AK: The great hero of that society was Hayek. He had a different position from Walras & company and he wasn't very consistent in his views. According to Hayek, Walras said that nobody influences prices but take prices as given, and then somebody, not specified, adjusts them until they get to equilibrium. There is some mechanism out there. That was Walras. Hayek said "Not at all!" He said - actually he was a horrid man.

DSW: Wait a minute! Why was he a horrid man? You can't just glide over that!

AK: The reason I say that is-he had very clever ideas-but he was extremely bigoted, he was racist. There is a wonderful interview with him that you can find on You Tube, where he says (imitating Hayek's accent) "I am not a racist! People accuse me of being a racist. Now it's true that some of the Indian students at the London School of Economics behave in a very nasty way, typical of Indian people…" and he carries on like this. So that's one reason he is horrid. A second thing is that if you don't believe he is horrid, David, I will send you his book The Road to Serfdom, which said that if there is any planning going on in the economy, it will inevitably lead you to a fascist situation. When he produced that book it had a big success, particularly in the United States, and what is more, he authorized a comic book version of it, which is absolutely dreadful. One Nobel Prize winner, [Ronald] Coase, said "you are carrying on so much against central planning, you forget that a large part of our economy is actually governed by centrally planned institutions, i.e., big firms, and these big firms are doing exactly what you say they can't do. Hayek shrugged that off, but what he did in his book was say that if any planning goes on then eventually you are all going to wind up in a fascist state where you'll be shot if you don't do what you're told to do. At the end of the book there is some poor guy who's being shot because he wants to be a carpenter or a plumber, or something like that. It's terrible! And the irony of the whole situation is that comic book was issued and financed by General Motors, and GM of course is one of those corporations that Hayek didn't see were centrally planned institutions. That's way I say that Hayek was a dreadful person.

Hayek's idea was, there is no way that people could know what was going on and could know what the prices of goods are. Everyone has a little piece of information of their own, and in acting upon it, this news gets out into the market. So, for example I buy something such as a share, and you say "Oh, Kirman bought a share, so something must be going on there, based on information that he had that I didn't have", and so forth. Hayek's idea was that this mechanism-people watching each other and getting information from their acts, would lead you to the equilibrium that would be a socially optimal state. But again, he never specified closely what the mechanism was. He has little examples, such as one about shortage of tin and how people would adjust, but never really specified the mechanism. He believed that people with little information of their own, like ants, would somehow collectively get it right. It was a very different view of the world than Walras.

DSW: So he was a pioneer in two respects. First of all, he grasped the idea of self-organizing and decentralized processes-that the intelligence is in the system, not in any individual, and secondly cultural group selection, that the reason economic systems were like this is because of some past history of better systems replacing worse systems. The wisdom of the system was the product of cultural group selection, as we would put it today, and that we shouldn't question its wisdom by tampering with it. Is that a fair thing to say?

AK: Yes, that's a fair thing to say and I think it is what Hayek believed. He didn't actually show how it would happen but you're absolutely right-I think that's what he believed and he thought tampering with this system would make it less perfect and work less well, so just leave it alone. I don't think he had in mind, strictly speaking, group-level selection, but that's clearly his idea. A system that works well will eventually come to outstrip other systems. That's why he was advising Thatcher. Just trust the markets and let things go. Get rid of the unions, and so forth. So it's clearly he had in mind that interfering with that system would just lead you to a worse social situation. He was much less naïve than Friedman. Friedman has a primitive natural selection argument that if firms aren't doing better than other firms they'll go bust and just die. That's a summary of Friedman's evolutionary argument! But Hayek is much more sophisticated-you're absolutely right.

DSW: I think Hayek was explicit about cultural group selection, and Friedman-I've paid quite a bit of attention to his 1953 article on positive economics, in which he makes a very naïve evolutionary argument. Friedman and Hayek didn't see eye to eye at all, as I understand it. Hayek was actually very concerned that Friedman and other mathematical economists took over the Mont Pelerin Society, if I understand it correctly, but now let's put Friedman on center stage, and also the society as a whole and the creation of all the think tanks, which caused the society to become politically influential.

AK: Yes, I think that it coincided very nicely with conservative ideology and people who had really strongly liberal-not in the Mills sense (you have to make this distinction particularly in the United States where these words have different meanings), but really completely free market leave-everybody-to-their own-thing libertarian point of view. Those people found it a wonderful place to gather and reinforce themselves. And Hayek was a strong member of that. Another was Gary Becker, but I don't know how directly. Becker had the economics of everything-divorce, whatever. You'd have these simple arguments, but not necessarily selection arguments, often some sort of justification in terms of a superior arrangement. The marginal utility of the woman getting divorced just has to equal the marginal utility of not getting divorced and that would be the price of getting divorced, and that sort of stuff. Adam Smith would have rolled over in this grave because he believed emotions played a strong role in all of this and the emotions that you have during divorce don't tie into these strict calculations.

DSW: This is a tailor-made ideology for powerful interests, powerful people and corporations who simply do want to have their way. Is that a false statement to make?

AK: No, I think that's absolutely right. They can benefit from using that argument to advance their own ends. As someone once said, if you think of saying to firms, we're going to diminish their taxes, no firm in its right mind would argue with that. Even though they might think deep down that there are other things that could be done for society. There are some things which are part of this philosophy which is perfect for firms and powerful interest groups. You're absolutely right. And so they lobby for this all the time, pushing for these positions that are in fact in their own interest.

DSW: So, at the end of the day, "Greed is Good" sounds so simplistic, but what all of this seems to do is to provide some moral justification for individuals or corporations to pursue their own interests with a clear conscience. It's a moral justification for "Greed is Good", despite all of the complexities and all of the mathematics-that's what it seems to come down to. Am I wrong about that?

AK: I think you're absolutely right. What's interesting is that if you look at various economic situations, like today the first thing that people tell you about the Greeks is that they are horrid ideological people. But the people on the other side have an equally strong ideology, which is being justified by the sort of economic models that we are building. Remember that even though we had this discussion about how this became a real difficulty in theoretical economics, in macroeconomics they simply carried on as if these theoretical difficulties hadn't happened. Macroeconomic models are still all about equilibria, don't worry about how we got them, and their nice efficient properties, and so forth. They are nothing to do with distribution and nothing to do with disequilibrium. Two big strands of thought-Keynes and all the people who work on disequilibrium-they're just out of it. We're still working as if underlying all of this, greed-we don't want to call it greed, but something like greed-is good.

DSW: Could I ask about Ayn Rand and what role she played, if any? On the one hand she was not an economist, she was just a philosopher and novelist. On the other hand, she is right up there in the pantheon of free market deities alone with Smith, Hayek and Friedman. Do you ever think about Ayn Rand. Does any economist think about Ayn Rand?

AK: That's an example of my narrowness that I never read Ayn Rand, I just read about her. I think it would be unfair now to make any comments about that because I'd be as uninformed as some people who talk about Adam Smith. What I should do at some point is read some of her work, because she is constantly being cited on both sides as a dark bad figure or as a heroine in the pantheon as you said, with Hayek and everybody else. I just admit my ignorance and I don't know if Rand had a serious position on her own or whether she is being cited as a more popular and easily accessible figure.

DSW: Fine! I'd like to wrap this up with two questions. This has been a wonderful conversation, by the way. Nowadays, you hear all the time about how neoliberal ideology and thought is invading European countries and is undoing forms of governance that are actually working quite well. I work a lot in Norway and Scandinavia and there you hear all the time that Nordic model works and at the same time it is being corrupted by the neoliberal ideology, which is being spread in some sort of cancerous fashion. Please comment on that-Current neoliberalism. What justifies it? Is it spreading? Is that a good thing or a bad thing? Anything you would like to say on that topic.

AK: I think that one obsession that economists have is with efficiency. We're always, always, worrying about efficiency. People like to say that this is efficient or not efficient. The argument is, we know that if you free up markets you get a more efficient allocation of resources. That obsession with efficiency has led us to say that we must remove some of these restraints and restrictions and this sort of social aid that is built into the Scandinavian model. I think that's without thinking carefully about the consequences. Let me tell you my favorite and probably not very funny story about how economists are obsessed with efficiency. There were three people playing golf; a priest, a psychoanalyst, and an economist. The got very upset because the guy in front was playing extremely slowly and he had a caddy to help him. So these guys get very upset and they start to shout and say "Come on, can we play through please! You can't waste all of our afternoon!" They sent the priest up to find out what was going on and he came back absolutely crestfallen and said "You know why that poor guy is laying so slowly? It's because he's blind. I'm so upset because every Sunday I'm preaching to people to be nice to others." He turns to his psychoanalyst friend and say's "Joe, what do you think?" Joe says "I have these guys on my coach every week. I'm trying to help them live with this problem and here I am screaming at this guy. It's horrible!" Then they turn to the economist and say "Fred, what do you think?" Fred says "I think that this situation is totally inefficient. This guy should play at night!" As you can see, this is a very different attitude to how the world works.

I think what has happened is, because of this mythology about totally free markets being efficient, we push for that all the time and in so doing, we started to do things like-for example, we hear all the time that we have to reform labor markets in Europe. Why do we want to reform them? Because then they'll be more competitive. You can reduce unit labor costs, which usually means reducing wages. But that has all sorts of consequences, which are not perceived. In model that is more complex, that sort of arrangement wouldn't necessarily be one that in your terms would be selected for. When you do that, you make many people temporary workers. You have complete ease in hiring and firing so that people are shifting jobs all the time. When they do that, we know that employers then invest nothing in their human capital. When you have a guy who may disappear tomorrow-and we have a lot of these temporary agencies now in Europe–which send you people when you need them and take away people when you don't. Employers don't spend anything on human capital. We're reducing the overall human capital in society by having an arrangement like that. If you're working for Toyota, Toyota knows pretty much that you'll be working all your lifetime, so they probably invest quite a lot in you. They make you work hard for that, but nevertheless it is a much more stable arrangement. Again, the idea that people who are out of work have chosen to be out of work and by giving them a social cushion you induce them to be out of work-that simply doesn't fit with the facts. I think that all the ramification of these measures-the side effects and external effects-all of that gets left out and we have this very simple framework that says "to be competitive, you just have to free everything up." That's what undermining the European system. European and Scandinavian systems work pretty well. Unemployment is not that high in the Scandinavian system. It may be a little bit less efficient but it may also be a society where people are a little bit more at ease with themselves, than they are in a society where they are constantly worrying about what will happen to them next. The last remark I would make is that to say "you've got to get rid of all those rules and regulations you have"-in general, those rules and regulations are there for a reason. Again, to use an evolutionary argument, they didn't just appear, they got selected for. We put them in place because there was some problem, so just to remove them without thinking about why they are there doesn't make a lot of sense.

DSW: Right, but at the same time, a regulation is a like a mutation: for every one that's beneficial there are a hundred that are deleterious. So…

AK: You are an American, deep at heart! You believe that all these regulations are dreadful. Think of regulations about not allowing people to work too near a chain saw that's going full blast, or not being allowed to work with asbestos and so forth. Those rules, I think, have a reason to be there.

DSW: Well of course, but just to make my position clear, the idea of no regulations is absurd. For a system that is basically well adapted to its environment, then most of its regulations are there for a reason, as you say, but one of the things that everyone needs to know about evolution is that a lot of junk accumulates. There is junk DNA and there is junk regulations. Not every regulation has a purpose just because it's there, and when it comes to adapting to the future, that's a matter of new regulations and picking the right one out of many that are wrong. The question would be, how do you create smart regulations? Knowing that you need regulations, how do you create smart ones? That's our challenge and the challenge of someone who appreciates complexity, as you do. How would you respond to that?

AK: I think you're absolutely right. It's absolutely clear that as these regulations accumulate, they weren't developed in harmony with each other, so you often get even contradictory regulations. Every now and then, simplifying them is hugely beneficial. But that doesn't mean getting rid of regulations in general. It means somehow managing to choose between them, and that's not necessarily a natural process. For example, in France when I arrived here it used to take about a day and a half to make my tax return. Now it takes around about 20 minutes, because some sensible guy realized that you could simplify this whole thing and you could put a lot of stuff already into the form which they have received. They have a lot of information from your employer and so forth. They've simplified it to a point where it takes me about 20 minutes a year to do my tax return. It used to take a huge amount of time.

DSW: Nice!

AK: What's interesting is that you have some intelligent person saying "let's look at this and see if we can't make these rules much simpler, and they did. I have conflicting views, like you. These things are usually there for a reason, so you shouldn't just throw them away, but how do you select between them. I don't think that they necessarily select themselves out.

DSW: I would amend what you said. You said that some intelligent person figured out how to make the tax system work better in France. Probably not just a single intelligent person. Probably it was an intelligent process, which included intelligent people, but I think that gets us back to the idea that we need systemic processes to evaluate and select so that we become adaptable systems. But that will be systemic thing, not a smart individual.

AK: You're absolutely right. I shouldn't have said smart individual because what surely happened was that there was a lot of pressure on the people who handle all of these things, and gradually together they realized that this situation was becoming one where their work was becoming almost impossible to achieve in the time available. So there was some collective pressure that led them to form committees and things that thought about this and got it together. So it was a natural process of a system, but it wasn't the rules themselves that selected themselves out, as it were. It was the collectivity that evolved in that way to make it simpler.

DSW: There's no invisible hand to save the day.

AK: (laughs). Joe Stiglitz used to say that we also need a visible hand. The visible hand is sometimes pretty useful. For example in the financial sector I think you really need a visible hand and not an invisible hand.

DSW. That's great and a perfect way to end. I'm so happy to have had this conversation, Alan, and to be working with you at the conference we just staged and into the future.

AK: A pleasure. Always good to talk with you.

Alan Kirman is professor emeritus of Economics at the University of Aix-Marseille III and at the Ecole des Hautes Etudes en Sciences Sociales and is a member of the Institut Universitaire de France. His Ph.D. is from Princeton and he has been professor of economics at Johns Hopkins University, the Universite Libre de Bruxelles, Warwick University, and the European University Institute in Florence, Italy. He was elected a fellow of the Econometric Society and of the European Economic Association and was awarded the Humboldt Prize in Germany. He is member of the Institute for Advanced Study in Princeton. He has published 150 articles in international scientific journals. He also is the author and editor of twelve books, most recently Complex Economics: Individual and Collective Rationality, which was published by Routledge in July 2010.

[Oct 13, 2015] Steve Keen Mainstream Economics and Its Deadly Equilibrium Assumption

"... The biggest lie is money and the notion that issuers of fiat currencies, sovereign governments, are like households and need to balance deficit spending by borrowing the shortfall in tax revenues. ..."
Jun 16, 2003 | naked capitalism

Chris Williams, October 12, 2015 at 5:24 pm

As an economist who was taught at the Australian National University in the 1980s, I know, now, that the profession has more in common with PolSci than it has to do with math. Yet, we had all those demand and supply graphs, ISLM, Phillips curves and so on. Very mathy, we even did Economic Stats, Accounting and Comp Sci just to round off the notion that Economic theories were like, say Physics, full of 'laws' that were immutable.

Non economists, most of the rest of you, I hope, can only imagine what it feels like to know that much of what you read and thought about during those years of study was complete crap as the syllabus failed to account for fraud, corruption, how money and debt works in reality etc….

The biggest lie is money and the notion that issuers of fiat currencies, sovereign governments, are like households and need to balance deficit spending by borrowing the shortfall in tax revenues.

Hopefully, the new thinkers in the profession like Steve, can continue to spread their message

Knute Rife, October 13, 2015 at 12:05 am

When I was an undergrad, I took macro and micro in very classical courses. It didn't take long to see the "math" on the board was more conjuring than calculating. In law school I took Law and Economics from an econ prof. There were about three of us in the class who had any decent math. The prof's "calculations" had us constantly looking at one another. One day she finally hit the limit. We pointed out to her that she had the central fraction reversed. She stood back and said (I kid you not), "Oh well, it doesn't matter." I turned down the sound on economic "calculations" in general after that.

Furzy Mouse, October 12, 2015 at 12:42 pm

Keen's talk….cannot read the subtitles….the screen is too small, even when I go to YouTube…

Arthur Wilke,

October 12, 2015 at 1:33 pm


This link may be an aid: https://www.youtube.com/watch?v=x7uITEBqQvM

Vatch, October 12, 2015 at 1:44 pm

Have you tried your browser's zoom function? This is often CTRL-Plus. CTRL-Minus reduces the size, and CTRL-Zero restores the default size.

low_integer, October 12, 2015 at 2:00 pm

If you put your cursor on the bottom right corner of the video and click, the video will expand into full screen. It is one of the options in the bar that is only visible when your cursor is at the bottom of the video area, from which you can also turn the subtitles on and off. Also, press escape to exit full screen mode. Hope that makes sense


Arthur Wilke, October 12, 2015 at 2:32 pm

The embedded video is selected from this encounter and
is easy to expand to full-screen:
https://www.youtube.com/watch?v=x7uITEBqQvM

[Jun 15, 2015] Academics Who Defend Wall St. Reap Reward

"... What Mr. Pirrong has routinely left out of most of his public pronouncements in favor of speculation is that he has reaped financial benefits from speculators and some of the largest players in the commodities business, The New York Times has found. ..."
"... The efforts by the financial players, the interviews show, are part of a sweeping campaign to beat back regulation and shape policies that affect the prices that people around the world pay for essentials like food, fuel and cotton. ..."
December 27, 2013 | NYTimes.com

Signs of the energy business are inescapable in and around Houston — the pipelines, refineries and tankers that crowd the harbor, and the gleaming office towers where oil companies and energy traders have transformed the skyline.

And in a squat glass building on the University of Houston campus, a measure of the industry's pre-eminence can also be found in the person of Craig Pirrong, a professor of finance, who sits at the nexus of commerce and academia.

As energy companies and traders have reaped fortunes by buying and selling oil and other commodities during the recent boom in the commodity markets, Mr. Pirrong has positioned himself as the hard-nosed defender of financial speculators — the combative, occasionally acerbic academic authority to call upon when difficult questions arise in Congress and elsewhere about the multitrillion-dollar global commodities trade.

Do financial speculators and commodity index funds drive up prices of oil and other essentials, ultimately costing consumers? Since 2006, Mr. Pirrong has written a flurry of influential letters to federal agencies arguing that the answer to that question is an emphatic no. He has testified before Congress to that effect, hosted seminars with traders and government regulators, and given countless interviews for financial publications absolving Wall Street speculation of any appreciable role in the price spikes.

What Mr. Pirrong has routinely left out of most of his public pronouncements in favor of speculation is that he has reaped financial benefits from speculators and some of the largest players in the commodities business, The New York Times has found.

While his university's financial ties to speculators have been the subject of scrutiny by the news media and others, it was not until last month, after repeated requests by The Times under the Freedom of Information Act, that the University of Houston, a public institution, insisted that Mr. Pirrong submit disclosure forms that shed some light on those financial ties.

Governments and regulatory agencies in the United States and Europe have been gradually moving to restrict speculation by major banks. The Federal Reserve, concerned about the risks, is reviewing whether it should tighten regulations and limit the activities of banks in the commodities world.

But interviews with dozens of academics and traders, and a review of hundreds of emails and other documents involving two highly visible professors in the commodities field — Mr. Pirrong and Professor Scott H. Irwin at the University of Illinois — show how major players on Wall Street and elsewhere have been aggressive in underwriting and promoting academic work.

The efforts by the financial players, the interviews show, are part of a sweeping campaign to beat back regulation and shape policies that affect the prices that people around the world pay for essentials like food, fuel and cotton.

Professors Pirrong and Irwin say that industry backing did not color their opinions.

Mr. Pirrong's research was cited extensively by the plaintiffs in a lawsuit filed by Wall Street interests in 2011 that for two years has blocked the limits on speculation that had been approved by Congress as part of the Dodd-Frank financial reform law. During that same time period, Mr. Pirrong has worked as a paid research consultant for one of the lead plaintiffs in the case, the International Swaps and Derivatives Association, according to his disclosure form.

While he customarily identifies himself solely as an academic, Mr. Pirrong has been compensated in the last several years by the Chicago Mercantile Exchange, the commodities trading house Trafigura, the Royal Bank of Scotland, and a handful of companies that speculate in energy, according to the disclosure forms.

The disclosure forms do not require Mr. Pirrong to reveal how much money he made from his consulting work, and a university spokesman said that the university believed it was strengthened by the financial support it received from the business community. When asked about the financial benefits of his outside activities, Mr. Pirrong replied, "That's between me and the I.R.S."

Debating to a Stalemate

No one disputes that a substantial portion of price increases in oil and food over the last decade were caused by fundamental market factors: increased demand from China and other industrializing countries, extreme weather, currency fluctuations and the diversion of grain to biofuel.

But so much speculative money poured into markets — from $13 billion in 2003 to $317 billion at a peak in 2008 — that many economists, and even some commodities traders and investment banks, say the flood became a factor of its own in distorting prices.

Others assert that commodities markets have historically gone through intermittent price bubbles and that the most recent gyrations were not caused by the influx of speculative money. Mr. Pirrong has also argued that the huge inflow of Wall Street money may actually lower costs by decreasing what commodities producers pay to manage their risk.

Mr. Pirrong and the University of Houston are not alone in publicly defending speculation while accepting financial help from speculators. Other researchers have received funding or paid consulting jobs courtesy of major commodities traders including AIG Financial Products, banks including the Royal Bank of Canada or financial industry groups like the Futures Industry Association.

One of the most widely quoted defenders of speculation in agricultural markets, Mr. Irwin of the University of Illinois, Urbana-Champaign, consults for a business that serves hedge funds, investment banks and other commodities speculators, according to information received by The Times under the Freedom of Information Act. The business school at the University of Illinois has received more than a million dollars in donations from the Chicago Mercantile Exchange and several major commodities traders, to pay for scholarships and classes and to build a laboratory that resembles a trading floor at the commodities market.

Mr. Irwin, the University of Illinois and the Chicago exchange all say that his research is not related to the financial support.

Underwriting researchers and academic institutions is one part of Wall Street's efforts to fend off regulation.

The industry has also spent millions on lobbyists and lawyers to promote its views in Congress and with government regulators. Major financial companies have also funded magazines and websites to promote academics with friendly points of view. When two studies commissioned by the Commodity Futures Trading Commission, the financial regulatory agency, raised questions about the possible drawbacks of speculation and of high-frequency trading, lawyers for the Chicago exchange wrote a letter of complaint, saying that its members' proprietary trading information was at risk of disclosure, and the research program was shut down.

The result of the various Wall Street efforts has been a policy stalemate that has allowed intensive speculation in commodities to continue despite growing concern that it may harm consumers and, for example, worsen food shortages. After a two-year legal delay, the futures trading commission this month introduced plans for new limits on speculation. Some European banks have stopped speculating in food, fearing it might contribute to worldwide hunger.

Mr. Pirrong, Mr. Irwin and other scholars say that financial considerations have not influenced their work. In some cases they have gone against the industry's interests. They also say that other researchers with no known financial ties to the industry have also raised doubts about any link involving speculation and soaring prices.

But ethics experts say that when academics fail to disclose financial ties, they do a disservice to the public and undermine the perception of impartiality.

"If those that are creating the culture around financial regulation also have a significant, if hidden, conflict of interest, our public is not likely to be well served," said Gerald Epstein, an economics professor at the University of Massachusetts, Amherst, who in 2010 released a study about conflicts of interest among academics who advised the federal government after the financial crisis.

Speculation in the Market

Financial ties among professors promoting speculation and the banks and trading firms that profit from it date back to the beginning of the recent commodities boom, which got an intellectual kick-start from academia.

After Congress and the Clinton administration deregulated the commodities markets in 2000, and the Securities and Exchange Commission lowered capital requirements on investment banks in 2004, the financial giants began developing new funds to capitalize on the opportunity.

AIG Financial Products commissioned two highly respected Yale University professors in 2004 to analyze the performance of commodities markets over a half-century. The professors — who prominently acknowledged the financial support — concluded that commodities markets "work well when they are needed most," namely when the stock and bond markets falter.

Money flowed into the commodities markets, and although the markets have cooled in the last two years, the price of oil is now four times what it was a decade ago, and corn, wheat and soybeans are all more than twice as expensive.

A public uproar about the rising prices became heated in the spring of 2008, as oil soared and gas prices became an issue in the presidential campaign. Congress scheduled public hearings to explore whether speculation had become so excessive it was distorting prices.

Financial speculators are investors who bet on price swings without any intention of taking delivery of the physical commodity. They can help smooth the volatility of the market by adding capital, spreading risk and offering buyers and sellers a kind of price insurance. But an assortment of studies by academics, congressional committees and consumer advocate groups had found evidence suggesting that the wave of speculation that accelerated in 2003 had at times overwhelmed the market.

Financial speculators accounted for 30 percent of commodities markets in 2002, and 70 percent in 2008. As gasoline topped $4 a gallon in the summer of 2008, Congress tried to soothe angry motorists by pushing for restrictions on oil speculation.

Mr. Pirrong jumped into the fray. He wrote papers, blog posts and opinion pieces for publications like The Wall Street Journal, calling the concern about speculation "a witch hunt."

Mr. Pirrong also testified before the House of Representatives in 2008 and, identifying himself as an academic who had worked for commodities exchanges a decade earlier, he warned that congressional plans to rein in speculators would only make matters worse.

"Indeed, such policies are likely to harm U.S. consumers and producers," he said. When oil company executives, traders and investment banks cited speculation as a major cause of surging prices which, by some estimates, was costing American consumers more than $300 billion a year, Mr. Pirrong dutifully contradicted them.

Mr. Pirrong's profile grew as he sat on advisory panels and hosted conferences with senior executives from the trading world as well as top federal regulators. Last year, Blythe Masters, head of commodity trading at JPMorgan Chase, approached him to write a report for a global bank lobbying group, the Global Financial Markets Association.

The report was completed in July 2012, but the association declined to release it. Mr. Pirrong said it was because he had reached the conclusion that banks should be regulated more heavily than other commodity traders. "I wouldn't change the call, so they sat on the report," he wrote on his blog, The Streetwise Professor.

What Mr. Pirrong did not reveal in his public statements about the report is that he had financial ties to both sides of that debate: the commodities traders as well as the banks. Ms. Masters declined to comment. Over the years, Mr. Pirrong has resisted releasing details of his own financial dealings with speculators, and when The Times first requested his disclosure forms in March, the University of Houston said that none were required of him. The disclosure forms Mr. Pirrong ultimately filed in November indicate that since 2011, he has been paid for outside work involving 11 different clients. Some fees are for his work as an expert witness, testifying in court cases on behalf of the Chicago Mercantile Exchange and a bank and a company that makes futures-trading software. The commodities firm Trafigura contracted him to conduct a research project.

Mr. Pirrong is also a member of the advisory board for TruMarx Partners, a company that sells software to energy traders, a position that entitles him to a stock option package.

It was reported in The Nation magazine in November that the University of Houston's Global Energy Management Institute, where Mr. Pirrong serves as a director, has also received funding from the Chicago exchange, as well as financial institutions that profit from speculation, including Citibank and Bank of America.

On his blog, Mr. Pirrong has dismissed suggestions that his work for a school that trains future oil industry executives creates a conflict of interest.

"Uhm, no, dipstick," he wrote in 2011, replying to a reader who had questioned his objectivity. "I call 'em like I see 'em." In a telephone interview last week, Mr. Pirrong said that his consulting work gave him insight into the kind of real-world case studies that improve his research and teaching. "My compensation doesn't depend on my conclusions," he said.

When asked about Mr. Pirrong's disclosure, Richard Bonnin, a university spokesman said only that all employees were given annual training on the school's policy, which requires researchers to report paid outside consultant work.

Professors as Pitchmen

Concerns about academic conflicts of interest have become a major issue among business professors and economists since the financial crisis. In 2010, the documentary "Inside Job" blasted a handful of prominent academic economists who did not reveal Wall Street's financial backing of studies which, in some cases, extolled the virtues of financially unsound assets. Two years later, the American Economic Association adopted tougher disclosure rules.

Even with the guidelines, however, financial firms have been able to use the resources and credibility of academia to shape the political debate.

The Chicago Mercantile Exchange and the University of Illinois at Urbana-Champaign, for example, at times blur the line between research and public relations.

The exchange's public relations staff has helped Mr. Irwin shop his pro-speculation essays to newspaper op-ed pages, according to emails reviewed by The Times. His studies, writings, videotaped speeches and interviews have been displayed on the exchange's website and its online magazine.

In June 2009, when a Senate subcommittee released a report about speculation in the wheat market that raised concerns about new regulations, executives at the Chicago exchange turned to Mr. Irwin and his University of Illinois colleagues to come up with a response.

Dr. Paul Ellinger, department head of agriculture and consumer economics, said, "The interactions that have occurred here are common among researchers."

A spokesman for the exchange said that Mr. Irwin was just one of a "large and growing pool of esteemed academics, governmental editors and editors in the mainstream press" whose work it follows and posts on its various publications. While the C.M.E. has given more than $1.4 million to the University of Illinois since 2008, most has gone to the business school and none to the School of Agriculture and Consumer Economics, where Mr. Irwin teaches. And when Mr. Irwin asked the exchange's foundation for $25,000 several years ago to sponsor a website he runs to inform farmers about agricultural conditions and regulations, his request was denied.

Still, some of Mr. Irwin's recent research has been funded by major players in the commodities world. Last year, he was paid $50,000 as a consultant for Gresham Investment Management in Chicago, which manages $16 billion and runs its own commodities index fund. He noted Gresham's sponsorship in the paper and on his disclosure form, and said it gave him the opportunity to use new data and test new hypotheses.

Mr. Irwin also works for a business called Yieldcast that caters to agricultural producers, investments banks and other speculators, selling them predictions of corn and soybean yields. Mr. Irwin has said he does not consider it a conflict because he works only with the mathematical forecasting models and never consults with clients.

"The debate about financialization is primarily about the large index funds, none of whom are clients," he said.

Mr. Irwin declined to provide a list of his clients, and the university said its disclosure requirements did not compel him to do so.

This article has been revised to reflect the following correction:

Correction: December 31, 2013

An article on Saturday about financial rewards from Wall Street to academic experts whose research supports the financial community's views on commodity trading misidentified a Canadian bank and commodities trader that financed the work of academic researchers or paid consultants. It is the Royal Bank of Canada, not the Bank of Canada, which is that nation's central bank. The article also rendered incorrectly the university affiliation of Scott H. Irwin, a prominent defender of speculation in agricultural markets. He is a professor at the University of Illinois at Urbana-Champaign — not Champaign-Urbana. And a picture caption with the continuation of the article misidentified the subject of one of several pictures. The lower right photograph showed the atrium of the University of Illinois's business school — not its Market Information Lab, which was shown behind Professor Irwin in the photograph at the left.

Response from the academic criminal: Streetwise Professor

Related

Read All Comments (440)

[Oct 09, 2015] Economist's View 'Faith in an Unregulated Free Market Don't Fall for It'

Oct 09, 2015 | economistsview.typepad.com
Robert Shiller continues to phish for book sales:
Faith in an Unregulated Free Market? Don't Fall for It: Perhaps the most widely admired of all the economic theories taught in our universities is the notion that an unregulated competitive economy is optimal for everyone. ...
The problem is that these ideas are flawed. Along with George A. Akerlof ... I have used behavioral economics to plumb the soundness of these notions. ...
Don't get us wrong: George and I are certainly free-market advocates. In fact, I have argued for years that we need more such markets, like futures markets for single-family home prices or occupational incomes, or markets that would enable us to trade claims on gross domestic product. I've written about these things in this column.
But, at the same time, we both believe that standard economic theory is typically overenthusiastic about unregulated free markets. It usually ignores the fact that, given normal human weaknesses, an unregulated competitive economy will inevitably spawn an immense amount of manipulation and deception. ...
Current economic theory does recognize that if there is an "externality" — say, a business polluting the air in the course of producing the goods it sells — the outcome won't be optimal, and most economists would agree that in such cases we need government intervention.
But the problem of market-incentivized professional manipulation and deception is fundamental, not an externality...

david said...

"But the problem of market-incentivized professional manipulation and deception is fundamental, not an externality..."

Glad to see Shiller pushing this line.

But that's true of loads of what gets called externality -- that's the trouble with the term, it presumes some idyllic unregulated market with just a few troubling side effects to regulate away. The markets are made so that certain actors gain rewards and others bear costs, fundamentally. Externality suggests tweaks, but to go back to the Stavins bit from a few days ago, we need to be thinking structure and power.

JohnH said...

An unregulated free market is a recipe for oligopoly and monopoly, the very antithesis of a free market.

pgl said in reply to JohnH...

"The problem of market-incentivized professional manipulation and deception is fundamental, not an externality" goes well beyond anti-trust concerns."

Paul Mathis said...

Unregulated Free Markets Never Existed

Nearly 4,000 years ago the Babylonian King Hammurabi carved onto a large stone a code of laws regulating contracts: the wages to be paid to an ox driver or a surgeon, the liability of a builder for a house that collapses, property that is damaged while left in the care of another, etc. – Wikipedia.

Governments have been regulating and enforcing contracts ever since because no economy can function without such regulation and enforcement. And whenever government regulation is absent, businesses collude to fix prices, divide up markets and drive out competitors thereby nullifying any illusion of "free market" competition.

GeorgeNYC said...

Just ask any "free market" advocate if they believe that the stock market is a good example of their vision for a "free market". They will invariably say "yes" as the stock market is the cathedral of religious capitalism.

Point out to them that the "stock market" is actually one of the most highly regulated "markets" with strict disclosure requirements (enforced by the government) and insider trading prohibitions (also enforced by the government), to name but a few, without which much of our faith in the "market" would be completely eliminated (and whose weak enforcement invariably lead to concerns about fraud). Of course, there are also a huge number of "private" regulations that ultimately have the force of the government behind them in that they allow for exchanges to "self-regulate".

Most people do not understand that force is required to maintain the type of transparency needed to allow the proper information flow necessary to actually have a market work with true efficiency. "Free" is a complete misnomer. "Open" would probably be better term although that does not really fully capture the requirements.

likbez said in reply to GeorgeNYC...

That's brilliant: "the stock market is the cathedral of religious capitalism".

The term "free market" became symbol of faith for neoliberalism and obtained distinct religious overtones. Because neoliberalism is in reality a secular religion. That's why neoliberalism is often called casino capitalism.

And at the same time it is powerful instrument of propaganda of neoliberalism, a very skillful deception that masks what is in practice the advocacy of the law of jungle.

Advocates of "free market" (note that they never use the term "fair market") are lavishly paid by Wall Street for one specific purpose: first to restore and now to maintain the absolute dominance of financial oligarchy which now successfully positioned itself above the law. Kind of return to feudalism on a new level.

Bud Meyers said...

Great posts on this topic:

Free Markets are Fraudulent Markets (by Eric L. Prentis)

http://www.economicpopulist.org/content/free-markets-are-fraudulent-markets-5360

Capitalism Requires Government (7 pages: click through the page links near the bottom of each page):

http://www.governmentisgood.com/articles.php?aid=13

[Oct 09, 2015] Free Markets are Fraudulent Markets

Oct 09, 2015 | www.economicpopulist.org
September 7, 2013 | The Economic Populist
How the Financial Elite Con Us into Wanting the Wrong Thing

Competitive or self-regulating market economies promote dynamic creative destruction and rebirth—led by people's needs, wants and desires, thus properly directing economic progress. Historically, competitive market economies are a relatively new economic system, and while very productive, they are not self-sustaining, are unstable and require significant state support and regulation to function properly.

Nevertheless, self-regulating market economies are superior to other political-economic systems—such as dictatorial fascism or autocratic communism—however, the state can mismanage them.

History of Market Economies

Market economies are nonexistent during primitive times, and even during feudal times, markets trade local goods and remain small, with no tendency to grow. External foreign markets carry only specialty items—such as spices, salted fish and wine. Foreign trade does not begin in feudal societies, between individuals, but is only sanctioned by civic leaders—between whole communities.

During feudal times, markets for local community goods do not mix with markets for goods that come from afar. Local and external foreign markets differ in size, origin and function—are strictly segregated, and neither market is permitted to enter the countryside.

Feudal society transitions into the mercantile society of the 16th to late 18th centuries, where the state monopolizes the economic system, for the state's benefit. Colonies are forbidden to trade with other countries, and workers' wages are restricted. However, mercantilism proves divisive; fostering imperialism, colonialism and many wars between the Great Powers. Market economies have yet to arrive, and would not do so until after 1790.

During the Industrial Revolution, production processes transition from hand crafting methods that supply only the local community, into mechanized manufacturing; thereby vastly increasing production, driving down costs and increasing wealth. The source of a person's income is now the result of product sales to far-off, unknown customers. Private business entrepreneurs are the driving force pushing the state to institute the market economy, thereby protecting the sale of their goods in far-off lands.

Unfortunately, in practice, market economies result in corporate monopolies. Corporations may use a product dumping predatory pricing strategy, by charging less than their cost to produce, in a specific market, in order to drive weaker, smaller competitors out of business, and then significantly raise prices at a later date, in order to gouge the consumer. If the monopoly is in a vital economic area and the company institutes monopoly pricing to overcharge the consumer, only the state has the power to protect the market economy from monopolistic inefficiencies and break up the offending company; thus reinstituting competitive pricing. As a result, government regulations and market economies develop simultaneously.

Laws & Regulations Are Necessary

Leaving business a free hand, especially when dealing with far off customers, leads to misrepresentations, shoddy practices and fraud. The food industry is an example.

Upton Sinclair writes The Jungle (1906), exposing the disgusting unsanitary conditions in the Chicago meatpacking industry, during the early 20th century. Public uproar prompts President Theodore Roosevelt to pass the Pure Food and Drug Act of 1906 and the Meat Inspection Act. Roosevelt says that government laws and regulations are the only way to restrain the arrogant and selfish greed of the capitalist system.

Shocking examples of food fraud in 2013 highlight the need for enforcing government regulations. Inspectors uncover corporations selling horse meat as beef, and routinely mislabeling about 40% of the fish served in U.S. restaurants. Cheap rockfish and tilapia are substituted and sold as expensive snapper, and restaurateurs frequently switch escolar for white tuna, causing diners to suffer indigestion.

Over 70% of the tilapia sold in the U.S. is imported from Asia, and only 2% is inspected by the Food and Drug Administration. Much of this Asian farm raised tilapia is "filthy fish," where pesticides and manure run off into the tilapia raising ponds, causing infections. Or the tilapia is raised in polluted Asian rivers. Americans are impairing their health by unknowingly eating filthy Asian tilapia, fraudulently substituted in U.S. restaurants for the healthy fish ordered.

Other fraudulently mislabeled foods include sausage, organic foods, energy drinks, milk and eggs. Without sanitary food preparation standards, set and fairly enforced by the government—Americans will soon return to naively eating rat droppings—so, unknown to them, CEOs can meet Wall Street earnings expectations.

Departments of Weights and Measures (DWMs) at the state and federal level develop "uniform laws, regulations and methods of practice" that impact about 50% of U.S. GDP—to ensure there is equity between buyers and sellers in commercial transactions.

Because gasoline stations routinely pumped less gas then charged for, DWMs now ensure the accuracy of gasoline pumps, octane levels, labeling and restricting water in gasoline. Butchers used to add lead weights to the chest cavity of the poultry sold, prior to weighing, then noiselessly dumped the weights out into an unseen padded draw before the bird was held up for the customer's inspection, thereby swindling their trusting patrons.

Without the state to step in to punish fraudulent wrongdoers, dishonest business practices would be widespread. Consumer trust, in everyday market transactions, is paramount for market economies to function effectively and efficiently—making government regulations vitally important.

Without regulation and transparency, bad businesses drive out good businesses, following Gresham's Law. The economic system then atrophies, with a loss of trust in the marketplace. What is lost is not just the money on an inferior product or service, in the short run, but more importantly, the bad businesses may use their outsized profits to buy political protection and start changing laws, to make new laws favorable only for them—thereby damaging the market economy and reducing the state's economic growth and welfare.

Competitive Market Economies

An economic market system capable of directing the whole of economic life, without out-side help or interference, is called self-regulating. Once the self-regulating or competitive market economy is designed and implemented by the state, to give all participants an equal opportunity for success, the self-regulating market is to be let alone by the state and allowed to function according to laws and regulations, without after-the-fact government intrusions—regardless of the expected consequences.

Those in Western societies are told that competitive market economies, which have self-regulated prices for land, labor and money, set solely by the market, are normal, and that human beings develop market economies on their own, without help from the state, which is the proof of human progress. Also, that market institutions will arise naturally and spontaneously, if only persons are left alone to pursue their economic interests, free from government control. This is incorrect.

Throughout most of human history, self-regulating markets are unnatural and exceptional. Human beings are forced into the self-regulating market economy, by the state. Look at the following false competitive market economy assumptions.

We are told people naturally bartered goods. Actually, human beings, down through history, have no predilection to barter. Social anthropology says that assuming tribal and feudal men and women bartered are rationalist constructs, with no basis in fact. Market economies are the result of often violent government directives, implemented for society's eventual improvement.

The assumption is man is a trader by nature, and that any different human behavior is an artificial economic construct. By not interfering in human behavior, markets will spring up spontaneously. Social anthropology disproves this.

Neoliberal Economic Theory

Originally, neoliberal economic theory means, "free enterprise, competitive markets, the priority of the market price setting mechanism, and a strong and impartial state—to ensure it all functions properly."

The Mont Pelerin Society, led by Dr. Milton Friedman, supports Hayek's economic theories, based on "free market" ideology and help change neoliberal economic theory by rejecting government regulation—calling it inefficient. In addition, financial economists at the University of Chicago School of Business promote the efficient market hypothesis or theory (EMT), supporting the Mont Pelerin Society's conjecture. Thus, the primacy of deregulated or "free markets" becomes mainstream within academe in the 1970s. Large corporations then use "free market fundamentalism" to their advantage, by lobbying the U.S. Congress to pass legislation beneficial to them.

Some think that "free markets" are a matter of degree, and the practical issues of implementation are paramount. This is incorrect, and will not resolve the current "free market fundamentalism" debate. Instead, the real issue is semantics. Notice how quickly those with a political agenda change the debate from "competitive markets," which require state regulations and are highly productive—to "free markets," which result in fraudulent marketplace behavior, crony capitalism and weak economic growth.

Using the term "free markets" is an Orwellian ruse, designed to change the focus in the public's mind from, "those in authority have to do better" to "those in authority know best, therefore, let them have their way."

Today, neoliberal economic dogma promotes "free market fundamentalism" of reducing the size of government through the privatization of government services, deregulation and globalization. Privatization professes to reduce the state's authority over the economy, but state money is used by private companies to lobby legislators, to change laws, which will increase the government's demand for these same private corporation services. Privatization of government services by corporations does not promote the common good, only corporations' private profits.

Neoliberal "free market" economists have doubled down on the failed liberal economic theory, with the ongoing 2008 credit crisis as the result.

Free Markets Are Impractical

"Free markets" are free from state intervention, i.e., unfettered capitalism. Those who understand how markets function realize this is an impractical view—simply a rhetorical device—using the popular word "freedom" to mask its real purpose.

"Free markets" are a fantasy, far outside the realm of practicality, used by wealthy international corporations to bully governments and labor, to get their way. The reality is a competitive market economy requires powerful complex opposing interests, mediated by government, to produce an efficient and effective economy that supplies the most to the many, which includes the common good.

Free Market Fundamentalism Leads To Economic Disaster

Nowhere is "free market fundamentalism" more highly trumpeted by neoliberal economists than in the financial markets. The foundation of neoliberalism is, "a deregulated financial sector will regulate itself efficiently, making better use of capital, thus ushering in a new age of prosperity."

Tragically, the massive deregulation of the financial markets during the Clinton and Bush presidencies, results in the ongoing 2008 credit crisis—which the U.S. Government Accountability Office reports has cost the U.S. economy about $13 trillion dollars in lost GDP output.

"Free market" apologists ingenuously explain the 2008 credit crisis is not caused by "free markets," but because government regulations are not loose enough. All "free market" failures are dismissed by the financial elite, because of cognitive dissonance. Bankers and neoliberal economists want to believe in what is making them richer and more important. This is the same logic used by those in charge in the USSR, when communism failed, "it wasn't being applied purely enough."

Free Market Ideology in Practice

"Free market," ideology, as practiced today, is the opposite of what is stated. Instead, governments step in to save insolvent banks and large international corporations, when they make bankrupting mistakes, and give the bill to the taxpayer. This transforms the difficult but manageable ongoing 2008 credit crisis, into a much larger and dangerous sovereign bankruptcy crisis, with potentially calamitous political consequences.

"Free markets" usher in unfettered capitalism, unleashing the "law of the jungle" and a "dog-eat-dog world" that fosters fraud and corruption. Human beings, no matter their station in life, cannot be trusted to always do the right thing, especially in a competitive situation. Doing away with laws or regulations so those in power know it is impossible to be caught or penalized does not stop them from acting improperly. Only criminal punishment and public disgrace accomplish that.

The resulting "free market" business jungle includes monopolies, coercion, fraud, theft, parasitism, crony cabals and racketeering. Ironically, unfettered "free markets" are not free, but increase injustice, making the economic system inefficient. Only government laws and regulations can keep markets competitive.

The EMT Supporting Free Markets Is Wrong

New scientific evidence on the efficient market hypothesis or theory (EMT), shows University of Chicago School of Business researchers ask the wrong questions, use erroneous data and an incorrect research method to analyze the data, and then jump to false conclusions, based on half-truths—please read further in my journal articles: link, link and link.

The EMT and "free market fundamentalism" are false gods.

Conclusion

Markets are not efficient, based on the data. Consequently, "free markets" have no theoretical foundation. Therefore, reject the incorrect theory of "free market fundamentalism" It is impractical and dangerous, leading us into the ongoing 2008 credit crisis.

Competitive market economies only function properly by having fair laws and regulations, set up and impartially enforced, by a strong state. Dr. Robert M. Solow, 1987 Nobel Prize Winner in Economics and MIT Institute Professor Emeritus says, "The switch to talk about "free" markets diverts attention from these deficiencies and suggests that any attempts at corrective regulation are instead limitations on freedom."

Neoliberal" free market fundamentalists" in business use "free market" ideology as a negotiation ploy. Do not succumb to this ruse. The U.S. requires "competitive markets for economic growth," not "free markets for fraud."

[Oct 02, 2015] Critical Realism Mathematics versus Mythematics in Economics

"... I argue here that it's the abuse of mathematics by Neoclassical economists -- who practice what I have dubbed "Mythematics" rather than Mathematics--and that some phenomena are uncovered by mathematical logic that can't be discovered by verbal logic alone. ..."
"... A lady in the audi­ence named Barb Jacobson suggested that using the name Neo-Classical gives it a cer­tain degree of cache and wants you guys to start call­ing it for what it is: "Scorched Earth Economics." What a great name to use and doesn't it ring true? ..."
Oct 02, 2015 | www.debtdeflation.com

Debtwatch

This is the brief talk I gave at a conference celebrating 25 years of the Critical Realist seminar series at Cambridge University. Critical realists argue against the use of mathematics in economics; I argue here that it's the abuse of mathematics by Neoclassical economists -- who practice what I have dubbed "Mythematics" rather than Mathematics--and that some phenomena are uncovered by mathematical logic that can't be discovered by verbal logic alone.

I give the example of my own model of Minsky's Financial Instability Hypothesis, which revealed the possibility of a "Great Moderation" preceding a "Great Recession" before either event had happened.

David Milburn, September 12, 2015 at 9:38 am

Steve,

Last week Prof Bill Mitchell was in London where he gave a talk on re-framing the language used in the media that carried on the myth of the main­stream groupthink. A lady in the audi­ence named Barb Jacobson suggested that using the name Neo-Classical gives it a cer­tain degree of cache and wants you guys to start call­ing it for what it is: "Scorched Earth Economics." What a great name to use and doesn't it ring true? Barb Jacobson is spot on!

Sue Madden, September 13, 2015 at 8:28 am

Hi Steve,
I was really amused to see an inter­view a while back in the New Sci­en­tist, with the "research chief" (!!) at the B of E. If you haven't seen it, you really must:

Opinion Interview with Andy Haldane: "Sackcloth and Ashes on Thread needle Street" New Scientist 25 March 2015

Corbyn was elected leader!!!! Now the sparks will fly. At least a pub­lic debate wor­thy of the name might at last be heard in our sad country.…

Thanks for your work in trying to enlighten us!!
Sue.

[Sep 27, 2015] A Few Less Obvious Answers on What is Wrong with Macroeconomics

"... ...IMF Survey ..."
"... there ..."
"... There is no and never has been "economics". Only political economy. That means that neoliberal "Flat Earth Theories" will be enforced, by force if necessary. ..."
"... Blanchard is a pro system guy. A maintainer not a disrupter. When he lauds the thousand schools cacophony, it's simply to spread caution about government macro engineering ..."
Sep 27, 2015 | economistsview.typepad.com
Sep 26, 2015 | Economist's View

From an interview with Olivier Blanchard:

...IMF Survey: In pushing the envelope, you also hosted three major Rethinking Macroeconomics conferences. What were the key insights and what are the key concerns on the macroeconomic front?

Blanchard:

Let me start with the obvious answer: That mainstream macroeconomics had taken the financial system for granted. The typical macro treatment of finance was a set of arbitrage equations, under the assumption that we did not need to look at who was doing what on Wall Street. That turned out to be badly wrong.

But let me give you a few less obvious answers:

The financial crisis raises a potentially existential crisis for macroeconomics. Practical macro is based on the assumption that there are fairly stable aggregate relations, so we do not need to keep track of each individual, firm, or financial institution—that we do not need to understand the details of the micro plumbing. We have learned that the plumbing, especially the financial plumbing, matters: the same aggregates can hide serious macro problems. How do we do macro then?

As a result of the crisis, a hundred intellectual flowers are blooming. Some are very old flowers: Hyman Minsky's financial instability hypothesis. Kaldorian models of growth and inequality. Some propositions that would have been considered anathema in the past are being proposed by "serious" economists: For example, monetary financing of the fiscal deficit. Some fundamental assumptions are being challenged, for example the clean separation between cycles and trends: Hysteresis is making a comeback. Some of the econometric tools, based on a vision of the world as being stationary around a trend, are being challenged. This is all for the best.

Finally, there is a clear swing of the pendulum away from markets towards government intervention, be it macro prudential tools, capital controls, etc. Most macroeconomists are now solidly in a second best world. But this shift is happening with a twist—that is, with much skepticism about the efficiency of government intervention. ...

pgl said...

"That mainstream macroeconomics had taken the financial system for granted. The typical macro treatment of finance was a set of arbitrage equations, under the assumption that we did not need to look at who was doing what on Wall Street. That turned out to be badly wrong."

Ah yes - the Efficient Markets Hypothesis (EMH). Nice academic theory but Wall Street exists because they are deviations from EMH. And the scale of operations there - even the slightest deviation can generate huge profits for them. And when the rest of us are not careful - huge costs to the rest of the world.

It is not that these deviations are not known and how to address the downsides of them are that complicated. What is complicated is making sure Congress and not and paid for by the Wall Street crowd. Dodd-Frank was a nice start. It is a same that our expert on everything - Rusty - has joined in the chorus to get rid of Dodd-Frank.

RC AKA Darryl, Ron said in reply to djb...

"now its getting spooky"

[Welcome to my world. I have always been ahead of trend, but usually by several decades rather than just a few hours :<)

I would venture that you don't know the half of it yet. Let me elucidate.]

"...Olivier Blanchard will step down as Economic Counsellor and Director of the IMF's Research Department at the end of September.

He will join the Peterson Institute for International Economics in October as the first C. Fred Bergsten senior fellow, a post named for the founder of the influential 35-year-old, Washington-based think tank..."

[Now tell me how that you can imagine anyone to be more mainstream status quo establishment than that in the general spectrum of academic research and study economics? The plot thickens. Like I said earlier today, we have been solidly in a Second Best world practically since FDR died from the perspective of economics as a socio-political discipline exercised for the common good in any manner discernible by the wage class.

The social expression of our anxiety and grief post-2008 is being played out in compartmentalized parallel tracts organized by socio-economic class. We are experiencing denial, anger, bargaining, depression and acceptance all at once now. Since the crisis was caused by the conservative agenda of financial innovation and deregulation then they are expressing most of the denial. People that lost their jobs and homes are expressing much of the anger, but a threatened white male population deeply invested in the emotional capital of white supremacy and chauvinism is even louder in their anger (and they are having a Tea Party to get to know each other and celebrate being white men). Elites are doing the bargaining because they really don't want to lose establishment control to populists. Folk that still don't have a job or a home are expressing the depression. Finally most people that do have a home and a job that do not fall into any of the other groups are expressing the acceptance.

Me? I recently got laid off, but was lucky enough having just turned 66 that with six years service credit taken from my severance benefits added to my pension plus what little I had in 457 and 401 plans then I could retire and still pay my bills including four more years of mortgage and HELOC payments. So, I am a bit cash strapped presently but have time to work on some projects. I have been waiting to get the establishment on the ropes for nearly fifty years. So, I am not healing from grief. I have been released and am looking for an opportunity to get the establishment on its intellectual ropes.

I thought it was getting spooky when I first began to learn about mainstream economic thought regarding capital gains windfalls, corporate mergers, and financial "innovation" in the mid-sixties. For the first time in my life I am beginning to see a tiny glimmer of it starting to get real.]

JohnH said...

"Mainstream macroeconomics had taken the financial system for granted."

It's actually worse than that. Mainstream macroeconomics willfully ignores the impact of rising asset prices on inequality, democracy, and power dynamics between the 1% and the rest.

Cui bono from their willful negligence? The powerful and wealthy, of course!

Amateur said...

I'm a fan of Olivier.

The leaders of the IMF were in a unique position to see new insights into our macro problems because they are largely caused by the globalization of capital flows and labor.

I think he's getting there, but I suspect the old frameworks are still going to be an impediment to mainstream economic thinking.

I'm glad to hear there are more people that we might be aware of that are rethinking macro in this context.

Dan Kervick said...

"The plumbing matters."

Yes, that's it. I hope that is the main lesson the economics profession takes away from the current crisis. It would be nice if we get a new generation of practitioners who think a bit more like engineers and technicians, and less like mathematical physicists.

Paul Mathis

"Some propositions that would have been considered anathema in the past are being proposed by "serious" economists: For example, monetary financing of the fiscal deficit."

Wasn't Keynes a "serious" economist? Monetary financing of the fiscal deficit was his idea 80 years ago. Today's economists are just getting the message.

likbez said...

There is no and never has been "economics". Only political economy. That means that neoliberal "Flat Earth Theories" will be enforced, by force if necessary.

greg said...

Pathetic half measures. No need to question any of the fundamental assumptions underlying the whole sorry mess, eh? Like what is money, really? Or: How does the production of the various sectors actually combine to create value in the whole economy?

Matt Young said...

Macroeconomists are not up to speed? How long has this been going on? Ever since the Kanosian dandy from England. Sick, sick and fraudulent science.

RC AKA Darryl, Ron said in reply to djb...

That is a good start. You just need to get the context switch straight and then you may find yourself in an epiphany (metaphorically speaking). Likbez up thread touches another live wire, but lacks faith in democratic alternatives. Shocking!

Larry said...

No mention of the end of the ZLB? Of NGDP targeting? Of the missing trade-off between inflation and unemployment? Of the abject failures of governments/CBs to respond to the crisis and restore normal times? Of new levers such as reverse repos, QE and IoER? Maybe the excerpt was ill-chosen...

Davis X. Machina said in reply to Larry...

"Of the abject failures of governments/CBs to respond to the crisis and restore normal times?"

"Normal" for whom, and at whose expense?

Squint just right, and this *is* normal.

Paine said...

Blanchard is a pro system guy. A maintainer not a disrupter. When he lauds the thousand schools cacophony, it's simply to spread caution about government macro engineering

We've recently learned doing the right sorts of interventions but too cautiously.
Works more like " Let the markets correct themselves "

We need to isolate those who try by various means to minimize state intervention

... ... ...

[Sep 19, 2015] A Knee-Jerk Free Trader Response is Faith-Based

"...Many of the conditions under which free trade between nations is guaranteed to be desirable are unlikely to hold in practice."
.
"...All conservative economics is faith based (along with everything else they believe). Delusional is another good descriptor."
.
"...Fair trade might actually be a good thing, but that is not what "Free trade" generally means. Mostly it means freedom for capital, chains for labor, and devastation for the environment."
Dani Rodrik:
Trade within versus between nations: ...economics does not offer unconditional policy prescriptions. Every graduate student learns that depending on the background specifications, any policy x can be good or bad. A minimum wage can lower or raise employment (depending on whether employers have monopsony power); a natural resource discovery can raise or lower growth (depending on the likelihood of the Dutch disease); fiscal consolidation can expand or contract output (depending on the respective strengths of expectational versus Keynesian effects). And yes, the dictum that free trade benefits a nation depends on a long list of qualifying conditions.
So the proper response to the question "is free trade good?" is, as always, "it depends." When an economist says "I support free trade" s/he must mean that s/he judges the circumstances under which free trade would not be desirable to be very rare or unlikely to obtain in the context at hand.
Many of the conditions under which free trade between nations is guaranteed to be desirable are unlikely to hold in practice. Market imperfections, returns to scale, macro imbalances, absence of first-best policy instruments are ubiquitous in the real world, particularly in the developing world on which I spend most of my time. This does not guarantee that import restrictions will be necessarily desirable. There are many ways in which governments can screw up, even when they mean well. But it does mean that a knee-jerk free trader response is faith-based rather than science-based. ...

[He goes on to answer a question about differential support for trade within nations versus trade between nations.]

Posted by Mark Thoma on Friday, September 18, 2015 at 10:50 AM in Economics, International Trade, Market Failure | Permalink Comments (16)


pgl

"economics does not offer unconditional policy prescriptions. Every graduate student learns that depending on the background specifications, any policy x can be good or bad."

Thank you Dani! This statement holds in general but in particular on the issue of free trade. I've loved his old post where he admitted he had to endure a class taught by William Kristol and Kristol gave this brilliant man only a C.

DrDick

All conservative economics is faith based (along with everything else they believe). Delusional is another good descriptor.

DrDick -> Paine ...

Fair trade might actually be a good thing, but that is not what "Free trade" generally means. Mostly it means freedom for capital, chains for labor, and devastation for the environment.

Stubborn1:

About the fact that economists do not offer unconditional policy prescriptions, especially when it comes to free trade and "the dictum that free trade benefits a nation depends on a long list of qualifying conditions". One thing I have to strenuously say about that: BULLSHALONEY!

All I heard in my econ classes were the benefits of free trade. EVERYONE drank the kool aid! I even had a prof who had worked in the Council of Economic Advisors and his role was to review trade policies. He told us flat out he would ALWAYS ALWAYS ALWAYS support any and all free trade agreements that came up, without ANY regard to damage done to domestic firms and/or workers. Paul Krugman wrote one of our text books which, like many econ textbooks at the time, had WHOLE chapters dedicated to debunking free trade myths! Now you are going to tell me that economists never take a stand on a policy position as being good or bad?! ARE YOU KIDDING?

Pgl I have seen you post and have agreed with you many times, but not on this one, hell no!


MacAuley -> Stubborn1...

You are so right, Stubborn1. I have taken at least six international econ courses, and in every case the prof was strongly in favor of "free trade", usually the more the merrier. Last year, as a refresher I took an internet Int'l Econ course at "Marginal Revolution University", which was surprisingly good except for the relentless free-trade propaganda.

Kenneth said...

Friday, May 15th, 2015, "Details of President Barack Obama's proposed trade deal, the Trans Pacific Partnership, have been kept secret, and the deal itself is kept in a locked room guarded by men with guns, with members of Congress having to schedule an appointment and jump through hoops just to actually read the massive proposed treaty.
Let me tell you what you have to do to read this agreement. Follow this: You can only take a few of your staffers who happen to have a security clearance, because — God knows why — this is secure. This is classified. It's nothing to do with defense," said Boxer.

Boxer then described how she was forced to turn over her cell phone and was prevented from even taking notes while looking over the 800-plus page trade treaty.

"So I go down with my staff that I could get to go with me, and as soon as I get there, the guard says to me, 'Hand over your electronics. Okay. I give over my electronics. Then the guard says, 'You can't take notes.' I said, 'I cannot take notes?'" said Boxer.

Some have taken to calling the TPP treaty "Obamatrade," in reference to the secretive nature in which Obamacare was written and how then-House Majority Leader Nancy Pelosi infamously claimed, "We have to pass it to find out what's in it."
At the heart of the TPP is something referred to as a "living agreement provision," which means the treaty can be amended or changed at any time after it is ratified, without congressional approval, essentially handing over U.S. sovereignty and subjugating U.S. businesses and workers to international laws, according to CNS News.

While this treaty is being promoted as being about FREE TRADE, it is really just a massive corporatist agreement that gives increased authority to major international corporations, which will hurt both American labor unions and small businesses.

Conservatives need to look past the pleasant sounding platitudes put forward by the Establishment Republicans who are supporting this massive secret deal that only benefits major international corporations, and (gulp) team up with socialists like Sen. Elizabeth Warren to kill this deal, which will only hurt America in the long run.

It's sole purpose is to "level the playing field" — which means taking America down to the same level as everyone else."
http://conservativetribune.com/senator-reveals-obama-deal/

Second Best -> Kenneth...

'At the heart of the TPP is something referred to as a "living agreement provision," which means the treaty can be amended or changed at any time after it is ratified, without congressional approval, essentially handing over U.S. sovereignty and subjugating U.S. businesses and workers to international laws, according to CNS News.'

---

what's new, this is SOP in the U.S., don't bother to read the fine print, it's out of date before the ink is dry, like hospitals that don't accept same day payment on site, then submit individual bills showing up months later from every damn person within 50 ft of the patient and refuse to confirm if there's more

and Scott Walker is busting up unions with right to work laws so labor can have the same power under a 'living agreement' as hospitals to charge for services provided.

MacAuley -> Kenneth...

Kenneth,
It's not accurate to call TPP "Obamatrade" since the concept was developed and fleshed out in 2007 and 2008 under the Bush Administration. Most of the work was managed at the SES level, since the Bush Administration was pretty lame-duck by then and most of the political appointees were looking for jobs. But the Bush Administration at the cabinet level gave approval for the exploratory discussions and conceptual analysis of a TPP.

By the time Obama arrived in 2009 there was a coherent TPP initiative ready for the Obama Administration to consider. I doubt that Obama had heard of TPP before he came to Washington, but it wasn't long before the Obama Administration decided to go forward with it.

Paine said...

Dani is a source of wisdom and shrewdness
A combo rarely combined in one head

... ... ...

[Sep 19, 2015]The myth of Ronald Reagan: pragmatic moderate or radical conservative?

"...he changed American politics forever by demonstrating that style was more important than substance. In fact, he showed that style was everything and substance utterly unimportant. He was the figurehead while his handlers did the dirty work of Iran-Contra, ballooning deficits, and tanking unemployment."
.
"...Conservatives used "bracket creep" to convince the middle class that reducing marginal rates on the top tax brackets along with their own would be a good idea, then with the assistance of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest, little difference for the middle class, and a far greater burden for the working poor."
.
"...Any conversation about who the fantasy-projection "Reagan" was, misses an important reality: He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative" (destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have finally emerged from under their rocks at this year's "candidates.""
.
"...The article seems to present Reagan as an theatrical figure. I disagree. Reagan, President of the United States, was a criminal; as such, he was among the most corrupt and anti democratic person to hold the office POTUS. The fact that he tripled the national debt, raised taxes and skewed the tax schedules to benifit the wealthy, are comparitively minor. Reagan's crimes and anti democratic acts:
1. POTUS: CIA smuggling cocaine into the U.S., passing the drug to wholesalers, who then processed the drug and distributed crack to Black communities. At the same time Reagan's "War on Crime" insured that the Black youth who bought "Central Intelligenc Agencie's" cocaine were criminalized and handed lengthy prison sentences.
2. POTUS supported SOUTH AMERICAN terrorist, and the genocidal atrocities commited by terrorist in Chili, Guatamala, El Mazote, etc.
3. POTUS supported SOUTH AFRICAN apartheid, and the imprisonment of Nelson Mandela as well. Vetoing a bill that would express condemnation of South Africa.
4. POTUS sold Arms to Iran.
5. POTUS used taxpayer dollars to influence election outcomes.
6. POTUS rigged government grants to enrich his cronies.
7. POTUS thew mental patients onto the streets.
8. POTUS supported McCarthyism, witch hunts, etc.
9. POTUS created and supported Islamic terrorist--fore runners of al Queada, ISIS, etc."
The Guardian


cgoodwood 19 Sep 2015 11:40

Do not contradict the memories of all the old teabaggers who desperately need the myth of Saint Ronnie to justify their Greed is Good declining mentality and years.

When Reagan cut-and-ran on Lebanon he showed rare discretion. A lot of the puffery stuff was B-Movie grade, but there was a lot of cross-the-aisle ventures, too.

He was a politician. The current GOP is just a bunch of white Fundie bullies, actually and metaphorically (e.g., Carson).

Zepp -> thedono 19 Sep 2015 11:37

Well, compared to Cruz, or Santorum, or Huckabee, he's a moderate. Of course, compared to the right people, you can describe Mussolini or Khruschev as moderates...

mastermisanthrope 19 Sep 2015 11:37

Lifelong shill

LostintheUS -> William J Rood 19 Sep 2015 11:36

Reagan underwent a political conversion when Nancy broke up his marriage with Jane Wyman and married him.

LostintheUS 19 Sep 2015 11:33

Here is the Reagan administration in a five second video clip:
https://www.youtube.com/watch?v=NR3RqMMIwD4

LostintheUS -> inchoateruffian 19 Sep 2015 11:32

Here is the video clip where Don Regan (former CEO of Merrill Lynch) tells PRESIDENT Reagan to "speed it up".

https://www.youtube.com/watch?v=NR3RqMMIwD4

RightSaid -> ID3732233 19 Sep 2015 11:31

The cold war ended while Reagan was president, but he did not win the cold war. His rhetoric and strategy was wishful thinking - there's no way he could have had the definitive intelligence about the entire military-political-economic that would have justified the confidence he projected. He merely lucked out, significantly damaging the US economy by trying (and luckily succeeding) to out-militarize the soviets.

pretzelattack -> kattw 19 Sep 2015 11:31

both clinton and obama have showed a willingness to "reform social security". try naked capitalism, there are probably a number of articles in the archives.

LostintheUS -> piethein 19 Sep 2015 11:29

And that the emergency room federally funded program that saved his life was soon after defunded...by him.

LostintheUS -> pretzelattack 19 Sep 2015 11:28

Many of us saw through him...I noted the senility during his speeches during his first campaign...as did many people I knew.

pretzelattack -> 4Queeen4country 19 Sep 2015 11:27

thatcher said of reagan "bit of a dim bulb..."

Jim Loftus 19 Sep 2015 11:26

Dementia masquerading as politics.
But you can't say anything negative about Saint Ronald!

Peter Davis -> Peter Davis 19 Sep 2015 11:22

I believe Reagan also is responsible for creating the Hollywood notion in American politics and political thinking that life works just like a movie--with good guys and bad guys. And all one needs is a gun and you can save the world. That sort of delusional thinking has been at the heart of the modern GOP ever since.

loljahlol -> ID3732233 19 Sep 2015 11:21

Reagan did not end the Cold War. Brezhnev rule solidified the Soviet death. Their corrupt, inefficient form of capitalism could not compete with the globalization of Western capitalism.

John78745 19 Sep 2015 11:21

There's not much nuance to Reagan. He was a coward, a bully and a loser. He got hundreds of U.S. Marines killed then he ran from the terrorists in Beirut and on the Archille Lauro personally creating the seeds of the morass of terrorists we now live with. He fostered the republican traditions of sending U.S. jobs overseas at the expense of U.S. taxpayers and of invading helpless, hapless nations, a tradition so adeptly followed by Bush I & II. He also promised that there would never be a need for another amnesty.

I guess it's true that he talked mean to the Russians, broke unions, and helped make the military industrial complex into the insatiable war machine that it is today. Remember murderous Iran-Contra (a real) scandal where he and his minions worked in secret without congressional authorization to overthrow a democratically elected government while conspiring to supply arms to the dastardly Iranians!

We could also say that he bravely fought to save the U.S. from socialized medicine and to expunge the tradition of free tuition for California students. Whatta hero!

thankgodimanatheist 19 Sep 2015 11:19

Reagan, the acting President, was the worst President since WWII until the Cheney/Bush debacle.

Most of the problems we face today can be directly traced to his voodoo economics, huge deficit spending, deregulation, and in retrospect disastrous foreign policies.


LostintheUS 19 Sep 2015 11:17

"these days everyone seems to love Ronald."

Absolutely, not true. The farther along we go in time, the more Americans realize the damage this man and his backers did to America and the world. The inversion of the tax tables, the undoing of union laws, the polarization of Americans against each other so the plutocrats had no real opposition and on and on. His camp stole the election in 1980 through making a back door deal with the Iranian government to hold onto the American hostages until the election when Jimmy Carter had negotiated an end to the hostage crisis, which was the undoing of Jimmy Carter's administration.

"Behind Carter's back, the Reagan campaign worked out a deal with the leader of Iran's radical faction - Supreme Leader Ayatollah Khomeini - to keep the hostages in captivity until after the 1980 Presidential election." This is, unquestionably, treason. http://www.truth-out.org/opinion/item/20287-without-reagans-treason-iran-would-not-be-a-problem

No, Reagan marks the downward turn for our country and has resulted in the economic and social mess we still have not clawed our way back out of. No, Reagan is no hero, he is an American nemesis and a traitor. Reagan raised taxes three times while slashing the tax rate of the super rich...starting the downward spiral of the middle-class and the funneling of money toward the 1%. Thus his reputation as a "tax cutter", yeah, if you were a multi-millionaire.

Check this out for a synopsis of the damage: http://www.dailykos.com/story/2011/02/10/942453/-How-Ronald-Reagan-s-Policies-Destroyed-the-United-States#

namora -> nogapsallowed 19 Sep 2015 11:15

Never thought of Reagan as the first Shrub but it fits. I wonder if future pundits will sing the Dub's praises as well. I think I'm gonna be sick for a bit.

kattw -> namora 19 Sep 2015 11:10

Pretzel is maybe talking about the 'strengthen SS' bandwagon? Perhaps? Not entirely sure myself, but yeah - one of the major democrat platform planks is that SS should NOT be privatized, and that if people want to invest in stocks, they can do that on their own. The whole point of SS is to be a mattress full of cash that is NOT vulnerable to the vagaries of the market, and will always have some cash in it to be used as needed.

SS would be totally secure, too, if congress would stop robbing it for other projects, or pay back all they've borrowed. As it is, I wish *I* was as broke as republicans claim SS is - I wouldn't mind having a few billion in the bank.

William J Rood 19 Sep 2015 11:08

Reagan was former president of the Screen Actors' Guild. Obviously, he thought unions for highly educated workers were great. Meatpackers? Not so much.

RealSoothsayer 19 Sep 2015 11:04

This article does not mention the fact that in his last couple of years as President at least, his mental state had seriously deteriorated. He could not remember his own policies, names, etc. CBS' Leslie Stahl should be prosecuted for not being honest with her everyone when she found out.

Peter Davis 19 Sep 2015 11:04

Reagan was a failed president who nonetheless managed to convince people that he was great. He was a professional actor, after all. And he acted his way into the White House. Most importantly, he changed American politics forever by demonstrating that style was more important than substance. In fact, he showed that style was everything and substance utterly unimportant. He was the figurehead while his handlers did the dirty work of Iran-Contra, ballooning deficits, and tanking unemployment.

nishville 19 Sep 2015 11:03

For me, he was a pioneer. He was the first sock-puppet president, starting a noble tradition that reached its climax with W.

mbidding -> hackerkat 19 Sep 2015 11:03

In addition to:

Treasonous traitor when, as a presidential candidate, he negotiated with Khomeini to hold the hostages till after the election.

Subverter of the Constitution via the Iran-Contra scandal.

Destroyer of social cohesion by turning JFK's famous admonishment of "ask not what your country can do for you, ask what you can do for your country" on its head with his meme that all evil emanates from the government and taxation represents stealing rather than a social obligation for any civilized society that wishes to continue to develop in a sound fashion that lifts all boats.

Incarcerator in Chief through his tough on crime and war on drugs policies, not to mention defunding mental health care.

Pisser in Chief through his successful efforts to imbed trickle down economics as the economic thought du jour which even its original architects, notably Stockman, now confirm is a failed theory that we nonetheless cling to to this day.

Ignoramus in Chief by gutting real federal financial aid for higher education leading to the obscene amounts of student debt our college students now incur.

Terrorist creator extraordinaire not only with the creation of the Latin American death squads you note, but the creation, support, trading, and funding of the mujahedin and Bin Laden himself, now known as the Taliban, Al Qa'ida, and ISIS, only the most notable among others.

namora -> trholland1 19 Sep 2015 10:59

That is not taking into account his greatest role for which he was ignored for a much deserved Oscar, Golden Globe or any of the other awards passed out by the entertainment industry, President of The United States of America. He absolutely nailed that one.

William J Rood 19 Sep 2015 10:58

Conservatives used "bracket creep" to convince the middle class that reducing marginal rates on the top tax brackets along with their own would be a good idea, then with the assistance of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest, little difference for the middle class, and a far greater burden for the working poor.

Tax brackets could have been indexed to inflation, but that wouldn't have been so great for Reagans real supporters.

Doueman 19 Sep 2015 10:55

What sad comments by these armchair experts.

They don't gel with my experiences in North America during this period at all. When Reagan ran for the presidency he was generally ridiculed by much of the press in the US and just about all of the press in the UK for being a right wing fanatic, a lightweight, too old, uninformed and even worse an actor. I found this rather curious and watched him specifically on TV in unscripted scenarios to form my own impression as to how such a person, with supposedly limited abilities, could possibly run for President of the US. I get a bit suspicious when organisations and individuals protest and ridicule too much.

My reaction was that he handled himself well and gradually concluded that the mainly Eastern liberal press in the US couldn't really stomach a California actor since they themselves were meant to know everything. He actually was pretty well read ( visitors were later astonished to read his multiple annotations in heavy weight books in his library). He was a clever and astute union negotiator dealing with some of the toughest Hollywood moguls who would eat most negotiators for dinner. He had become Governor of California and had done a fine job. I thought it was unlikely he was the simpleton many portrayed. He couldn't be easily categorised as he embraced many good aspects of the Democrats and the Republicans. Life wasn't so polarised then.

The US had left leaning Republicans and right wing Democrats. A political party as Churchill noted was simply a charger to ride into action.

In my view, his presidential record was pretty remarkable. A charming, fair minded charismatic man without the advantage of a wealthy background or influential family. The world was lucky to have him.

raffine -> particle 19 Sep 2015 10:50

Reagan's second term was a disaster. But as someone below mentioned, conservative pundits and their financers engaged in a campaign to make Reagan into a right-wing FDR. The most effective, albeit bogus, claim on Reagan's behalf was that he had ended the Cold War.

jpsartreny 19 Sep 2015 14:22

Reagan is the shadow governments greatest triumph. After the adolescent Kennedy, egomaniacs Johnson and Nixon , they needed front guys who followed orders instead .

The experiment with the peanut farmer from Georgia provided disastrous to Zebrew Brzezinski and the liberals. The conservatives had better luck with a B- movie actor with an great talent to read of the teleprompter.

RealSoothsayer -> semper12 19 Sep 2015 14:19

How? By talking? Gobachev brought down the USSR with his 'Glasnost' and 'Perestroika' policies. His vision was what communist China later on achieved: mixed economy that flies a red flag. Reagan was just an observer, absolutely nothing more. Tito of Yugoslavia was even more instrumental.

Marc Herlands 19 Sep 2015 14:17

IMHO Reagan was the second most successful president, behind FDR and ahead of LBJ. Not that I liked anything about him, but he moved this country to the right and set the play book. He lowered taxes on the wealthy, the corporations, capital gains, and estate taxes. He reduced growth in programs for the poor, and made it impossible to increase their funding after his presidency because of he left huge federal deficits caused by lowering taxes and increasing outlays on the military. This Republican playbook still is their way of making sure that the Democrats can't give the poor more money after they lose power. Also, he enlarged the program for deregulating industries, doing away with antitrust laws, hindering labor laws, encouraged anti-union behavior, and did nothing for AIDS research. He was a scoundrel who did a deal with Iran to prevent Carter from being re-elected. He directly disobeyed Congressional laws not to intervene in Nicaragua. He set the tone for US interventions after him.


bloggod 19 Sep 2015 14:17

Obama, Clinton, and the Bushes all hope to be forgiven for their unpardonable crimes.

Popularity is created. It is not populism, or informed consent of the pubic as approval for more of the same collusion.

It is a One Party hoe down.

bloggod -> SigmetSue 19 Sep 2015 14:12

"they"

the indicted Sec of Defense Weinberger; the indicted head of the CIA Casey who "died" as he was due to testify: Mcfarlane, Abrams, Clair George, Oilyver North, Richard Secord, Albert Hakim

Reagan had no genius, he had Bush-CIA and the Jerry Falwell, Billy Graham, and the "immoral majority" of anti-abortion war profiteers.


Marios Antoniou Lattimore 19 Sep 2015 13:52

I agree with everything you mentioned, and I intensely dislike Reagan YET the point of the article wasn't that Reagan was good, it rather points to the fact that Republicans have shifted so far to the right that Reagan would appear moderate compared to the current batch.

Rainer Jansohn pretzelattack 19 Sep 2015 13:52

Interesting had been his speeches during the Cold War.Scientists have subsumed it under "Social Religion",a special form of political theology.Simple dialectical:UDSSR the incarnation of the evil/hell on the other side USA :the country of God himself.A tradition in USA working until now.There is no separation between government and church as in good old centuries sincetwo centuries resulting from enlightening per Philosophie/Voltaire/Kant/Hume/Descartes and so on.Look at Obamas speeches/God is always mixed in!

talenttruth 19 Sep 2015 13:49

Any conversation about who the fantasy-projection "Reagan" was, misses an important reality: He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative" (destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have finally emerged from under their rocks at this year's "candidates."

The fact that Reagan was going ga-ga – definitely in his second term, and likely for part of the first – was entirely convenient for his Non-Human-Based-Crackpot-Right-Holographers, since he had was not actually "driven" to vacuousness by a tragic mental condition (dementia) – THAT change was merely a "short putt" – from his entire previous life.

Regarding his Great Achievement, the collapse of the Soviet Union? After decades of monstrous over-spending by the USA's Military-Industrial-Complex, the bogus and equally insane USSR finally bankrupted itself trying to "compete" and fell. Reagan (and his puppeteer handlers), always excellent at Taking Credit for anything, showed up with exquisite cynical timing, and indeed Took Credit.

Lest anyone forget, Reagan got elected in 1980, via a totally illegal and stunningly immoral "side deal" with the Iranians, in which they agreed to not release our hostages to make Carter look like a feeble old man. Then we got Reagan who WAS a "feeble old man" (ESPECIALLY intellectually and morally). Reagan "won," the hostages were "released" and he of course took credit for that too.

So all these so-called "candidates" ARE the heirs of all the very worst of Ronald Reagan: they are all simpleminded, they are totally beholden to Hidden Sociopathic Billionaires hiding behind various curtains, and they all have NO CLUE what the word "ethics" means. Vacuous, anti-intellectual, scheming, appealing only to morons, and puppets all. Perfect "Reaganites."

Bill Ehrhorn -> semper12 19 Sep 2015 13:32

It seems that the teabaggers and their ilk give only Reagan credit.

SigmetSue 19 Sep 2015 13:16

They called him the Teflon President because nothing ever stuck. It still doesn't. That was his genius -- and I'm no fan.


Lattimore 19 Sep 2015 13:13

The article seems to present Reagan as an theatrical figure. I disagree. Reagan, President of the United States, was a criminal; as such, he was among the most corrupt and anti democratic person to hold the office POTUS. The fact that he tripled the national debt, raised taxes and skewed the tax schedules to benifit the wealthy, are comparitively minor.
,,,
Reagan's crimes and anti democratic acts:
1. POTUS: CIA smuggling cocaine into the U.S., passing the drug to wholesalers, who then processed the drug and distributed crack to Black communities. At the same time Reagan's "War on Crime" insured that the Black youth who bought "Central Intelligenc Agencie's" cocaine were criminalized and handed lengthy prison sentences.
2. POTUS supported SOUTH AMERICAN terrorist, and the genocidal atrocities commited by terrorist in Chili, Guatamala, El Mazote, etc.
3. POTUS supported SOUTH AFRICAN apartheid, and the imprisonment of Nelson Mandela as well. Vetoing a bill that would express condemnation of South Africa.
4. POTUS sold Arms to Iran.
5. POTUS used taxpayer dollars to influence election outcomes.
6. POTUS rigged government grants to enrich his cronies.
7. POTUS thew mental patients onto the streets.
8. POTUS supported McCarthyism, witch hunts, etc.
9. POTUS created and supported Islamic terrorist--fore runners of al Queada, ISIS, etc.

Niko2 LostintheUS 19 Sep 2015 13:12

I don't have much love for Nancy, but she did not break up this marriage, to be fair. And she actually got rid off the extreme right wingers in Reagan's administration, like Haig and Regan, whom she called "extra chromosome republicans". Surely she was a vain and greedy flotus with no empathy whatsoever for people not in her Bel Air circles (I can easily imagine her, "Do I really have to go and see these Aids-Babies, I'd rather shop at Rodeo Drive, lose the scheduler") but she realized at an early stage that hubbies shtick-it-to-the-commies policies would do him no favour. Maybe she's the unsung heroine of his presidency.

tommydog -> MtnClimber 19 Sep 2015 13:04

The principle subsidies to big oil are probably the strategic oil reserve and subsidies to low income people for winter heating oil. You can choose which of those you'd like to cut. After that you're arguing about whether exploration costs should be expensed in the year incurred or capitalized and amortized over time.

WilliamK 19 Sep 2015 13:03

He was one of J Edgar Hoover's red baiting fascist admiring boys along with Richard Nixon and Walt Disney used to destroy the labor unions, control the propaganda machine of Hollywood and used to knuckle under the television networks and undermine as much as possible the New Deal polices of Franklin Roosevelt. An actor groomed by the General Electric Corporation and their fellow travelers. "Living better through electricity" was his mantra and he played the role of President to push forward their right wing agenda. Now we are in new stage in our "political development" in America. The era of the "reality television star" with Hollywood in bed with the military industrial complex, selling guns, violence and sex to the fool hardy and their children and prime time television ads push pharmaceutical drugs, children hear warnings of four hour erections, pop-stars flash their tits and asses and a billionaire takes center stage as the media cashes in and goes along for the ride. Yeah Ronnie was a second tier film star and with his little starlet Nancy by his side become one of America's greatest salesman.


Backbutton 19 Sep 2015 12:57

LOL! Reagan was a walking script renderer, with lines written by others, and a phony because he was just acting the part of POTUS. His speeches were all crafted, and he had good writers.

He was no Abraham Lincoln.

And now these morons running for office all want to rub off his "great communicator" fix.

Good help America!

Milwaukee Broad 19 Sep 2015 12:49

Ronald Reagan was an actor whom the depressingly overwhelming majority of American voters thought was a messiah. They so believed in him that they re-elected him to a second term. Nothing positive whatsoever became of his administration, yet he is still worshiped by millions of lost souls (conservatives).

Have a nice day.


Michael Williams 19 Sep 2015 12:48

The US was the world's leading creditor when Reagan took office. The US was the world's leading debtor by the time Bush 1 was tossed out of office.

This is what Republicans cannot seem to remember.

All of the other scandals pale in comparison, even as we deal with the blowback from most of these original, idiotic policies.

Reagan was an actor, mouthing words he barely understood, especially as his dementia progressed.

This is the exact reason the history is so poorly taught in the US.
People might make connections....

Jessica Roth 19 Sep 2015 12:46

Oh, he had holes in his brain long before the dementia. "Facts are stupid things", trees cause pollution, and so on.

A pathetic turncoat who sold out his original party (the one that kept his dad in work throughout the Great Depression via a series of WPA jobs) because Nancy allegedly "gave the best head in Hollywood" and who believed that only 144,000 people were going to Heaven, presumably accounting for his uncaring treatment of the less-well-off.

His administration was full of corruption, from Richard Allen's $1000 in an envelope (and three wristwatches) that he claimed was an inappropriate gift for Mrs. Reagan he had "intercepted" and then "forgotten" to report to William Casey trading over $3,000,000 worth of stocks while CIA director. (Knowing about changes in the oil market ahead of time sure came in handy.) You had an attorney general who took a $50,000 "severance payment" (never done before) from the board of a corporation he resigned from to avoid conflict of interest charges…and this was William French Smith; his successor, Edwin Meese, was the one with real scandals (about the sale of his home).

Hell, Reagan himself put his ranch hand (Dennis LeBlanc) on the federal payroll as an "advisor" to the Commerce Department. I didn't know the Commerce Dept needed "advice" on clearing wood from St. Ronnie's ranch, but LeBlanc got a $58,500 salary out of the deal. (Roughly £98,000 at today's prices.) Nice work if you can get it.

Meanwhile, RR "talked tough" at the Soviets (resulting in the world nearly ending in 1983 due to a false alarm about a US nuclear attack) while propping up any rightwing dictator they could find, from the South African racists to Ferdinand and Imelda Marcos (after they had Aquino assassinated at the airport) to Roberto "Death Squad" D'Aubuisson in El Salvador (the man who masterminded the assassination of Archbishop Romero while he was performing Mass).

Oh, and while Carter did a nice job of shooting himself in the foot, Reagan benefited in the election not only from his treasonous dealings with the Iranian hostage-takers (shades of Nixon making a deal with North Viet Nam to stall the peace talks until after the 1968 elections, promising them better terms) but through more pedestrian means such as his campaign's stealing of Carter's briefing book for the campaign's only debate, Reagan being coached for the debate by a supposedly neutral journalist (George Will, of ABC and The Washington Post), who then went on television afterwards (in the days when there were only three commercial channels) and "analysed" how successful Reagan had been in executing his "game plan" and seeming "Presidential" without either Will or ABC bothering to mention that Will had coached Reagan and designed the "game plan" in question. The "liberal bias" in the media, no doubt.

Always a joke, only looking slightly better by the dross that has followed him. (Including Bill "Third Way" Clinton and his over-£50,000,000 in post-Presidential "speaking fees" graft, and Barack Obama, drone-murderer of children in over a dozen countries and serial-summary-executioner of U.S. citizens. When Gordon-effing-Brown is the best that's held office on either side of the Atlantic since 1979, you can see how this planet is in the state it's in.)

pretzelattack DukeofMelbourne 19 Sep 2015 12:45

his stand on russia was inconsistent, and he didn't cause it to collapse. his economic programs were a failure. his foreign policy generally a disaster. he set the blueprint for the current mess.


pretzelattack semper12 19 Sep 2015 12:38

a total crock. reagan let murdering thugs run rampant as long as they paid lip service to democracy, the world over from africa to central america. the ussr watched this coward put 240 marines to die in lebanon, and then cut and run, exactly the pattern he was so ready to condemn as treason in others, and was so ready to portray as showing weakness, and you think the ussr was terrified of him. he was a hollywood actor playing a role, and you bought it.


Tycho1961 19 Sep 2015 12:13

No President exists in a political vacuum. While he was in office, Reagan had a large Democrat majority in the House of Representatives and a small Republican majority in the Senate. The Supreme Court was firmly liberal. Whatever his political agenda Reagan knew he had to constructively engage with people of both parties that were in opposition to him. If he didn't he would suffer the same fate as Carter, marginalized by even his own party. His greatest strength was as a negotiator. Reagan's greatest failures were when he tried to be clever and he and his advisors were found to be rather ham handed about it.


RichardNYC 19 Sep 2015 11:57

The principal legacy of Ronald Reagan is the still prevalent view that corporate interests supersede individual interests.


Harry Haff 19 Sep 2015 11:45

Reagan did many horrible things while in office, committed felonies and supported murderous regimes in Central America that murdered tens of thousands of people with the blessing of the US chief executive. he sold arms to Iran and despoiled the natural environment whenever possible. But given those horrendous accomplishments, he could not now get a seat at the table with the current GOP. He would be considered a RINO, that most stupid and inaccurate term, at best, and a closet liberal somewhere down the line. The current GOP is more to the right than the politicians in the South after the Civil War.

[Sep 18, 2015] I would summarize the Keynesian view in terms of four points

I would summarize the Keynesian view in terms of four points:
1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn't enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.
2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.
3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by "printing money", using the central bank's power of currency creation to push interest rates down.
4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.
Is this a complicated, convoluted doctrine? ...
But strange things happen in the minds of critics. Again and again we see the following bogus claims about what Keynesians believe:
B1: Any economic recovery, no matter how slow and how delayed, proves Keynesian economics wrong. See [2] above for why that's illiterate.
B2: Keynesians believe that printing money solves all problems. See [3]: printing money can solve one specific problem, an economy operating far below capacity. Nobody said that it can conjure up higher productivity, or cure the common cold.
B3: Keynesians always favor deficit spending, under all conditions. See [4]: The case for fiscal stimulus is quite restrictive, requiring both a depressed economy and severe limits to monetary policy. That just happens to be the world we've been living in lately.
I have no illusions that saying this obvious stuff will stop the usual suspects from engaging in the usual bogosity. But maybe this will help others respond when they do.

I would add:

5. Keynesian are not opposed to supply-side, growth enhancing policy. They types of taxes that are imposed matters, entrepreneurial activity should be encouraged, and so on. But these arguments should not be used as cover for redistribution of income to the wealthy through tax cuts and other means, or as a means of arguing for cuts to important social service programs. Not should they be used only to support tax cuts. Infrastructure spending is important for growth, an educated, healthy workforce is more productive, etc., etc. Economic growth is about much more than tax cuts for wealthy political donors.

On the other side, I would have added a point to B3:

B3a: Keynesians do not favor large government. They believe that deficits should be used to stimulate the economy in severe recessions (when monetary policy alone is not enough), but they also believe that the deficits should be paid for during good times (shave the peaks to fill the troughs and stabilize the path of GDP and employment). We haven't been very good at the pay for it during good times part, but Democrats can hardly be blamed for that (see tax cuts for the wealthy for openers).

Anything else, e.g. perhaps something like "Keynesians do not believe that helping people in need undermines their desire to work"?

Axel Merk Warns Investors Are In For A Rude Awakening Zero Hedge


LawsofPhysics

LOL! Almost. You really think that growth can continue forever and ever in a biosphere with finite resources?

Tell us another fairytale and good luck with that!

But yes, let the truly insolvent fucks and worthless fucks go to the guillotine already!

Bro of the Sorrowful

using metrics in economics and applying mathamatical formulas to quantify all aspects of the economy has been a major and far reaching disaster. none worse, perhaps with the exception of unemployment and inflation, than the totally fraudulent metric "GDP". youll notice in von mises' magnum opus human action that there is not a single formula.

were it not for the measurement of the ambiguous "GDP", we would not be so concerned with growth.

pods

We sure as hell would be concerned with growth.

Expansion is what is required by our monetary system.

That is why inflation of 2% is "stable prices" and everyone and their mother talks about growth.

Fraction reserve currency requires expansion (exponential) to function.

No growth=no currency system.

That is why sustainability is a no go right out of the gate.

pods

Bro of the Sorrowful Figure's picture

i was speaking more of an ideal world in which we would be operating under a sound monetary system. my problem with using economic metrics for everything is that it takes the focus off of real problems and gives huge power to the international banking cartel by allowing them to manipulate the numbers without end. we start from a false monetary system, then apply a metric system based on false logic to justify that monetary system, while also making those metrics esoteric enough that the average person simply stops paying attention or freezes up when such metrics are mentioned. that way the economy can be absolute shit, with obvious signs to anyone with eyes, and yet your average person will still say, well GDP is up and unemployment is down so things must be good.

Harry Balzak

Are you implying that reality exists without accounting?

Blasphemy! Burn him!

[Sep 09, 2015] Neoclassical economic reforms were colossal failures

"...The reason the Friedmanian era turned out to be vastly different from the Keynesian era was because the neoclassical economic reforms were colossal failures."
"...Nothing in the history of the universe has failed more than neoclassical ideology. If one is to call that failure, one would have to redefined the word failure to include all other failures that pale by comparison. But according to the Medieval Barbers, their policies were a resounding success. Anyone who questions them is a philistine. Thankfully, these modern high priests aren't able to burn dissenters at the stake like their forebears. "
"..."Krugan's free-trade ideology rhetoric shows he's more New Keynesian (neoclassical synthesis) than Keynesian. More neoliberal than liberal.""
"...Modern Monetary Theology brought back pre-Keynesian boom-to-bust business cycles, drove down real incomes and the employment rate (now expect a decade before the economy can recover from a recession.) "
"...China is in hot water because neoclassical reforms have killed demand in the Western economy. Its economy is founded on importing more and more Western jobs and manufacturing, not to mention GHG emissions. "

EMichael said in reply to Ron Waller, September 07, 2015 at 09:52 AM

I see no purpose in comparing the present with a period of time so vastly different from the present.

Ron Waller said in reply to EMichael, September 07, 2015 at 10:27 AM

Yes the laws of physics change every 35 years too.

The reason the Friedmanian era turned out to be vastly different from the Keynesian era was because the neoclassical economic reforms were colossal failures.

Tax cuts did not pay for themselves or create prosperity, they created skyrocketing government debt. Deregulation didn't create prosperity, but produced numerous disasters including financial meltdowns. Free-trade exported wealth and jobs and killed real income growth. Modern Monetary Theology brought back pre-Keynesian boom-to-bust business cycles, drove down real incomes and the employment rate (now expect a decade before the economy can recover from a recession.)

Nothing in the history of the universe has failed more than neoclassical ideology. If one is to call that failure, one would have to redefined the word failure to include all other failures that pale by comparison.

But according to the Medieval Barbers, their policies were a resounding success. Anyone who questions them is a philistine. Thankfully, these modern high priests aren't able to burn dissenters at the stake like their forebears.

EMichael said in reply to Ron Waller, September 07, 2015 at 10:35 AM

No, the Laws of Physics do not change.

Economic facts do. Are you trying to state there has not been a sea change in the world economy since the post WWII era?

Sorry, but Japan, China and Europe are an awful lot different than they were in 1950. And that is not saying that I disagree with everything you say. Actually, I agree with a lot of it.

But thinking solutions lie in the policies of the 50s and 60s ignore that the problems that exist did not exist in the 50s and the 60s.

Bruce Webb said in reply to EMichael, September 07, 2015 at 11:02 AM

"But thinking solutions lie in the policies of the 50s and 60s ignore that the problems that exist did not exist in the 50s and the 60s."

EMichael there is a logical hole here. I am not sure I disagree with you on the substance but there is a coherent argument that the problems that exist NOW are precisely BECAUSE of changes away from the polices of the 50s and 60s. And that the reason we didn't have the same problems then is that the policies prevented them. And that a change back to those policies would serve to ameliorate them.

What you would need to do to rescue your argument is to prove that current problems could NOT have existed in the 50's and 60's, that there is something unique to today's problems that make them resistant to yesterday's solutions.

I am not saying you couldn't do that. Merely that you haven't attempted it. Instead you present a circular argument. What EXACTLY about today's problems make them incurable by yesterday's solutions?

EMichael said in reply to Bruce Webb, September 07, 2015 at 01:33 PM

The main thing that did not exist in the US was competition for labor. Free trade is a marvelous thing when you are the only one selling.

Take a look at trade balances from that period and the last couple of decades.

You can almost trace the trade balance changes to the changes(or lack of changes) to the income of the vast majority of Americans.

People in here(and myself) talk about the need for a tighter labor market. And we applaud the actions that create one. But I am almost totally committed to the idea that the only way to create a tight labor market is protectionism. We have to protect our workers.

Of course there is a price to be paid, but I think the increased costs of some goods will be overwhelmed by the benefits to be gained by a tight labor market.

Then again, we would be harming other countries trying to move into a industrialized state. But the last time I looked, none of them were helping me pay for SS; or Medicare; or education; or the keep the street lights working.

I know it is not politically correct, but charity begins at home. Especially in a home which has seen such decline in only three or four decades.

cm said in reply to Bruce Webb, September 08, 2015 at 09:51 AM

Economic policy doesn't happen in a vacuum. Before the 90's there was no internet. There were its precursors of a sort, e.g. fax and data transmission over the phone, and computer networks/links based on that (90's comms technology existed but only in the lab or at the high end). In the post-WW2 decades, there weren't built out telephone networks at the national and international level, only few high end players could arrange to make instant international calls. Even electrification wasn't completed.

This meant obviously more bottlenecks and more intermediation and control, barriers to globally distributed operations, and in addition everything happened at a slower speed.

In addition most of the world, including large parts of Europe and the US, was agricultural or sparsely populated and un"developed".

In the decades after, the "second" and "third" world invested big time in education and technological development. It really took off when international business logistics and global IT/telecom became ubiquitous, and "first world" companies eagerly "helped" build the offshore know-how.

Ron Waller said in reply to EMichael, September 07, 2015 at 11:14 AM

Generalizations don't identify any problems, provide any solutions, justify failed policies or rule out successful policies. Japan and Europe are in hot water because of bad economic policy. (Not demand-side Keynesian economic policy.)

China is in hot water because neoclassical reforms have killed demand in the Western economy. Its economy is founded on importing more and more Western jobs and manufacturing, not to mention GHG emissions.

It's only a matter of time before the entire house of cards collapses. Then people will be looking to the 1930s for policy solutions

Peter K. said in reply to EMichael, September 07, 2015 at 01:27 PM

I agree with the others. To say that the economy was different back then is to minimize the manner in which policy has changed for the worse.

I don't think fundamentally the laws of economics have changed that much because of technology or globalization or vague "productivity changes."

This is like being like Martin Feldstein who says we should be happy with what we got. No policy has changed much to the worse since the 1950s and 1960s. For one thing unions have been politically destroyed.

EMichael said in reply to Peter K

Not the laws of economics, the facts. Y'know the old Keynes thing(supposedly):

"When the facts change, I change my mind. What do you do, sir?"

I'll give you one change.

In the 70's China had almost no foreign exchange reserves. Now they have around $4 Trillion.

That is a real fact. And the reasons behind it are obvious.

Reply September 07, 2015 at 01:40 PM
likbez said in reply to Ron Waller

"Krugan's free-trade ideology rhetoric shows he's more New Keynesian (neoclassical synthesis) than Keynesian. More neoliberal than liberal."

Very true. Thank you

[Sep 07, 2015] The Thirty-Year Boom

September 06, 2015 | Economist's View

Part of an essay by David Warsh:

... For the old lions, Paul Samuelson and Milton Friedman, the '80s meant a bittersweet departure from the center stage of economics after forty years of dominating the scene. The two had entered their sixties; neither was out of steam. But the leaders of the next generation had become apparent: Lucas, in macroeconomics; Kenneth Arrow in nearly everything else.

The election of Ronald Reagan was a triumph for Friedman; they had known each other since Friedman spent a quarter at the University of California at Los Angeles, shortly after Reagan had been elected Governor of California.He was invited to lecture in China. And the international success of Free to Choose kept Friedman in the public eye.

But Paul Volcker took a different approach to monetary policy from the one Friedman advocated, and Friedman's forecasts became markedly worse. The editorial page of The Wall Street Journal adopted as its champion Friedman's long-time rival in currency matters, Robert Mundell, now teaching at Columbia University, and went all in for Mundell's young associate, consultant Arthur Laffer. A research appointment at the Federal Reserve Bank of San Francisco was not the same platform as the University of Chicago. Friedman still had his membership on the President's Economic Policy Board, but after he "savaged" Volcker to his face before the president in a meeting in 1983, both men lost influence. Pointing a finger at Volcker, Friedman said (according to Newsweek's account), "because of the policies of the Fed under that man we have had an inflationary surge in the money supply that is going to have to be corrected." Volcker was not reappointed. Edward Nelson, of the Federal Reserve Bank of St. Louis is writing a scientific biography of Friedman. It will make interesting reading when it is done.

In March 1981, Friedman wrote his Newsweek column in the form of a letter to Philip Handler, president of the National Academy of Sciences, advocating major cuts in the budget of the National Science Foundation, as a step towards the abolition of the NSF. The Reagan administration had proposed sharp cuts in the economics program. Friedman argued the government shouldn't pay for any scientific research. True, the NSF had funded much good science; but it had paid for much bad science, too, including, he wrote, overmuch mathematical economics. The great scientists of the past had done without NSF funding. Einstein did his work in a government patent office; general relativity might never have made it past a peer-review panel. "The innovative ideas that have stirred controversy in economics since NSF funding of economics began two decades ago owe little or nothing to NSF funding," he wrote.

Thus did Friedman dismiss the agency that Paul Samuelson had brought to life in 1945. Perhaps more important, by extension he dismissed the program of government fellowships, awarded by competitive exam, that had sent Samuelson to graduate school in 1935, all expenses paid – and countless others since, many of them as impecunious as Friedman had been in 1932. The NSF ran similar programs in mathematics and many ciences, and the principle had been extended, by Sen. Jacob Javits (R-NY) to humanities. NSF research grants funding had helped build the Massachusetts Institute of Technology into a powerhouse to rival Harvard, and played a similar role at many other public and private universities.

No Samuelson column followed Friedman's. Samuelson never wrote again for Newsweek . He resigned the column he written for fifteen years. When, many years later, I asked him about his timing, he firmly denied that it had anything to do with Friedman's column, and wrote me a letter for the file the next day repeating what he had said. I have always wondered if he sought to defuse the matter out of habit. That he and Friedman had remained on civil terms for seventy-five years was clearly a source of pride, though privately he grew less tolerant of his rival after 1980.

Samuelson, too, was in mild recession in the '80s. Keynesian economics hadn't yet rebounded from the biting criticism of the New Classicals in the '70s. Tensions were growing within the MIT department over appointments and the direction of future research. Samuelson formally retired in 1985, at 70, to make room for others. He had plenty to engage his professional attention. Commodities Corp., which had discovered such natural traders as Paul Tudor Jones and Bruce Kovner, was winding down, but Samuelson's interest in Warren Buffet's Berkshire Hathaway was gearing up. The Vanguard Group, whose godfather he had been ever since founder John Bogle introduced the first index fund, was thriving. Samuelson's friends and colleagues James Tobin, Franco Modigliani, and Robert Solow received Nobel Prizes.

Young Lions at Large

To the young lions of Keynesian economics in the '80s, rational- expectations macroeconomics and real business cycle theory posed a considerable bar. To work in the new traditions required a considerable investment in new tools and mathematical techniques, and, even fully teched-up, didn't seem to speak very directly to policy. A strong corps of economists went to work to fashion a "new Keynesian" version of the latest general equilibrium economics. But gradually one rising star of saltwater economics after another left academia for a policy job.

Martin Feldstein, of Harvard University, was the first. As something of an acolyte of Milton Friedman, Feldstein was never very high in salinity, but he demonstrated plenty of professional backbone as Chairman of the Council of Economic Advisers under Ronald Reagan for two years in the early days of the controversies over deficits before returning in 1984 to Harvard and his position as president of the National Bureau of Economic Research. Stanley Fischer, of MIT, was next, wrapping up a highly successful research career in order to serve as chief economist of the World Bank (a path that led to leadership positions in the International Monetary Fund, governor of the Bank of Israel and, currently, vice chairman of the Fed). Lawrence Summers, Feldstein's student, served as campaign economist to Democratic candidate Michael Dukakis in the 1988 presidential campaign and succeeded Fischer at the World Bank before joining the Clinton administration, where he advanced to Secretary of the Treasury.

Soon the flood was on: Jeffrey Sachs, Joseph Stiglitz, Olivier Blanchard, Kenneth Rogoff, Gregory Mankiw, Glen Hubbard, and Christina Romer were among those MIT- or Harvard-trained economists who served in government jobs or NGO positions. Paul Krugman retooled as a journalist. Lists of MIT and Harvard graduates in high positions in European, South American, and Asian governments were even longer. Did this differ in kind, and not degree, from the trajectory of academic economists dating back to to the New Frontier, if not the New Deal? I think so.

In 2006, Harvard's Mankiw, in an article for the Journal of Economic Perspectives argued, as I did in a book, that the differences in interests among economists were best understood as being similar to those between scientists and engineers. The early macroeconomists, led by Samuelson and Friedman, had resembled engineers seeking to solve practical problems, Mankiw wrote; macroeconomists of the past several decades, led by Tjalling Koopmans, Jacob Marschak, Kenneth Arrow, and others had been more interested in developing analytic tools and establishing theoretical principles. Their students the '80s had joined teams along similar lines. "Recently Paul Romer, of New York University, introduced a different distinction to elucidate some of the controversies in present-day macro – between bench science and clinical medicine. Both analogies will get plenty of elaboration in future years, for this is what changed in kind in the '80s: economics developed a clinical/engineering wing.

... ... ...

likbez said...

Due to his role in neoliberal transformation of Chile after Pinochet coup of 1973, Friedman can be viewed as a one of the first economic hitman for multinationals, member of organized crime disguised as an economist. According to the 1975 report of a United States Senate Intelligence Committee investigation, the Chilean economic plan was prepared in collaboration with the CIA. In 1987 45% of Chile's population was below poverty line. From Wikipedia:

==Start of quote ===
Milton Friedman gave some lectures advocating free market economic policies in Universidad Católica de Chile. In 1975, two years after the coup, he met with Pinochet for 45 minutes, where the general "indicated very little indeed about his own or the government's feeling" and the president asked Friedman to write him a letter laying out what he thought Chile's economic policies should be, which he also did.[26] To stop inflation, Friedman proposed reduction of government deficits that had increased in the past years and a flat commitment by government that after six months it will no longer finance government spending by creating money. He proposed relief of cases of real hardship among poorest classes.[2] In October 1975 the New York Times columnist Anthony Lewis declared that "the Chilean junta's economic policy is based on the ideas of Milton Friedman…and his Chicago School".[26]
=== End of quote ===

In her book The Shock Doctrine, Naomi Klein criticized Friedman's recipe for neoliberal scheme of the economic rape of the countries under disguise of transformation toward "free" market economics -- the neoliberal restructuring that followed the military coups in several countries using suspiciously similar schemes. She suggested that the primary role of neoliberalism was to be an ideological cover for capital accumulation by multinationals. Chilean economist Orlando Letelier considered that the main driving force behind Pinochet's dictatorship violence toward opponents was the level of opposition to Chicago School policies in Chile.

And Friedman himself was a coward who never personally acknowledged his role in the events. After a 1991 speech on drug legalization, Friedman answered a question on his involvement with the Pinochet regime, saying that he was never an advisor to Pinochet (also mentioned in his 1984 Iceland interview), but that only his students (Chicago boys) were involved.

He was followed by Harvard mafia with their economic rape of Russia in early 90th. Probably also prepared in collaboration with the CIA...

It is interesting that the paper does not mention Galbraith who was important opponent of Friedman (see "Friedman on Galbraith, and on curing the British disease", 1977) . In those two lectures Friedman disagrees with Galbraith's four most popular works: "Countervailing Power," "The Great Crash of 1929," "The Affluent Society," and "The New Industrial State". Friedman consistently repeats the neoliberal dogma that it is unfettered free market, with minimal rules and regulations, is the best economic system.

So it might be useful to distinguish between two instances of Friedman: the first is Friedman before "Capitalism and Freedom" and the second is after. Friedman after Capitalism and Freedom is a pitiful figure of a prostitute to power that be.

chris herbert said...

The best observation was the one by Wojnilower that the animals in the zoo were let out of their cages.. They are still roaming around, not yet put back in their regulatory cages. The list of financial crises beginning in the 1980s looks as bad and as frequent as those of the 1800s. Technology gives a sheen to the past 35 years or so, but underneath there's been immense intellectual damage. A degradation of morals and honesty. Today, greed is good. I'll be gone, you'll be gone (IBGUBG), rules politics and finance today. The animals are still lose, more trouble will visit the Kingdom.

bakho said...

Interesting history lesson.
Needs more links.
Friedman's spat with Volcker:

In Friedman's view, Volcker was too vulnerable to political pressures from Congress and the White House, Condemned by liberals and conservatives for plunging the country into recession and worried that continued high interest rates would cause massive default by Third World debtors, Volcker in mid-1982 shifted his sights away from the monetarist approach, loosening the Fed's targets for money growth and restoring interest-rate manipulation as a policy tool. In the five months before the November 1984 elections, the Fed increased the money supply to bring down interest rates and thus fuel the recovery to better Reagan's chances at re-election. After Reagan's reelection victor in November, the Fed again tightened the money supply, "This is not monetarist policy," Friedman says, "The key element of monetarism is to define what you are going to do and then stick with it."

For any Fed chairman, Friedman thinks, the temptation to linker with money-supply targets is probably irresistible. According to the monetarist doctrine, the Fed chairman's job is purely technical, "a matter of every month looking at the money base and making sure it increases by about a quarter of one percent," Friedman explains, "If the Fed chairman were to do a good job, he would become an unknown, a faceless bureaucrat."

Cooper, M. H. (1987). Economics after Reaganomics. Editorial research reports 1987 (Vol. II). Washington, DC: CQ Press. Retrieved from http://library.cqpress.com/cqresearcher/cqresrre1987082100

I wonder if so many of the young economist went into policy because the people involved: Volcker, Friedman, Laffer etc were pretty clueless and made bad predictions.

bakho said...

Just how wrong was Friedman?
DARPA turned the internet over to NSF and NSF spun it off into a large commercial engine.

NSF funds high risk investment, the kind that most corporations cannot. High risk research means many projects that don'r pan out, a small pool of winners and a handful that hit jackpot. It takes a large organization with very deep pockets to fund enough high risk research over long periods to have a good likelihood of getting a large hit. Industry cannot fund at that level, government can.

Another example: NSF funded obscure biochemistry into esoteric research on enzymes that could degrade DNA. That research became the foundation of genetic engineering. Who could have known?

pgl said in reply to Paine ...

Warsh did write an incredible amount of BS in this silly essay. I didn't think Mundell ever endorsed Laffer's stupid cocktail napkin.

Lafayette said...

REAGANOMICS

From WikiP: {According to Keynesian economists, a combination of deficit spending and the lowering of interest rates slowly led to economic recovery. However, conservatives insist that the significantly lower tax rates caused the recovery. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984.}

Even Reagan, a good friend of Friedman, when push-came-to-shove, indulged is stimulus spending to get his presidency out of the deep-doodoo.
Which the Replicants stonewalled in 2010 when a Great Recession was in full sway, but the PotUS was a Democrat ...

pgl said in reply to Lafayette...

Wikipedia gets another wrong. It was Reagan's 1981 tax cut (deficit spending) that led Volcker to do round 2 of his tight money. Volcker kept trying to make a deal withe White House - reverse the fiscal stimulus in exchange for lower interest rates. The White House did not even know what was going on. And Wikipedia does not either.

[Sep 05, 2015] Range of reactions to realism about the social world by Daniel Little

My recent post on realism in the social realm generated quite a bit of commentary, which I'd like to address here.

Brad Delong offered an incredulous response -- he seems to think that any form of scientific realism is ridiculous (link). He refers to the predictive success of Ptolemy's epicycles, and then says, "But just because your theory is good does not mean that the entities in your theory are "really there", whatever that might mean...." I responded on Twitter: "Delong doesn't like scientific realism -- really? Electrons, photons, curvature of space - all convenient fictions?" The position of instrumentalism is intellectually untenable, in my opinion -- the idea that scientific theories are just convenient computational devices for summarizing a range of observations. It is hard to see why we would have confidence in any complex technology depending on electricity, light, gravity, the properties of metals and semiconductors, if we didn't think that our scientific theories of these things were approximately true of real things in the world. So general rejection of scientific realism seems irrational to me. But the whole point of the post was that this reasoning doesn't extend over to the social sciences very easily; if we are to be realists about social entities, it needs to be on a different basis than the overall success of theories like Keynsianism, Marxism, or Parsonian sociology. They just aren't that successful!

There were quite a few comments (71) when Mark Thoma reposted this piece on economistsview. A number of the commentators were particularly interested in the question of the realism of economic knowledge. Daniel Hausman addresses the question of realism in economics in his article on the philosophy of economics in the Stanford Encyclopedia of Philosophy (link):

Economic methodologists have paid little attention to debates within philosophy of science between realists and anti-realists (van Fraassen 1980, Boyd 1984), because economic theories rarely postulate the existence of unobservable entities or properties, apart from variants of "everyday unobservables," such as beliefs and desires. Methodologists have, on the other hand, vigorously debated the goals of economics, but those who argue that the ultimate goals are predictive (such as Milton Friedman) do so because of their interest in policy, not because they seek to avoid or resolve epistemological and semantic puzzles concerning references to unobservables.

Examples of economic concepts that commentators seemed to think could be interpreted realistically include concepts such as "economic disparity". But this isn't a particularly arcane or unobservable theoretical concept. There is a lot of back-and-forth on the meaning of investment in Keynes's theory -- is it a well-defined concept? Is it a concept that can be understood realistically? The question of whether economics consists of a body of theory that might be interpreted realistically is a complicated one. Many technical economic concepts seem not to be referential; instead, they seem to be abstract concepts summarizing the results of large numbers of interactions by economic agents.

The most famous discussion of realism in economics is that offered by Milton Friedman in relation to the idea of economic rationality (Essays in Positive Economics); he doubts that economists need to assume that real economic actors do so on the basis of economic rationality. Rather, according to Friedman this is just a simplifying assumption to allow us to summarize a vast range of behavior. This is a hard position to accept, though; if agents are not making calculating choices about costs and benefits, then why should we expect a market to work in the ways our theories say it should? (Here is a good critique by Bruce Caldwell of Friedman's instrumentalism; link.)

And what about the concept of a market itself? Can we understand this concept realistically? Do markets really exist? Maybe the most we can say is something like this: there are many social settings where stuff is produced and exchanged. When exchange is solely or primarily governed by the individual self-interest of the buyers and sellers, we can say that a market exists. But we must also be careful to add that there are many different institutional and social settings where this condition is satisfied, so there is great variation across the particular "market settings" of different societies and communities. As a result, we need to be careful not to reify the concept of a market across all settings.

[Sep 05, 2015] Tribes

"...Personally, I think he senses that RE/New Classicalism is in decline, not comprehending why, struggling to understand, looking for scapegoats (Solow, tribal behaviour, mathiness) and is essentially mourning its demise."
"...read Kuhn famous book on The Structure of Scientific Revolutions, in which he argues persuasively (or shows definitively, for those who prefer), that "Competition between segments of the scientific community [tribes?] is the only historical process that ever actually results in the rejection of one previously accepted theory or in the adoption of another," though at the same time, most progress comes from working within an established paradigm. My own intuition is that economics if very much like physics in both those respects. "
Sep 04, 2015 | Stephen Williamson New Monetarist Economics

So, within economics, is macro unusual? Of course not. Indeed, the whole emphasis of post-1970 macroeconomics is to do it like everyone else. Before 1970, no one would have been discussing macro and Dixit-Stiglitz in the same sentence. Should economics work like physics? Of course not. We're studying very different problems requiring very different methods. Why would you expect economists to behave like physicists?

What's my bottom line? Romer is just leading us through an unproductive conversation - one that's not going to persuade anyone of anything.

Anonymous, September 4, 2015 at 4:42 PM

"Romer is just leading us through an unproductive conversation - one that's not going to persuade anyone of anything."

It's almost as if Romer is wandering around testing the waters seeing how far he can push things before he actually says what he wants to say coherently.

Anonymous September 4, 2015 at 5:38 PM

Personally, I think he senses that RE/New Classicalism is in decline, not comprehending why, struggling to understand, looking for scapegoats (Solow, tribal behaviour, mathiness) and is essentially mourning its demise.

Henry.

Constantine Alexandrakis, September 4, 2015 at 6:16 PM
Steve, Solow agrees with you on Romer's contribution.

https://www.minneapolisfed.org/publications/the-region/interview-with-robert-solow

Norman, September 5, 2015 at 4:45 AM

Actually, Romer doesn't argue that physicists are not tribalists – he just asserts it, on the basis of a thought experiment based on two particular statements. It may well be true that there is a lot of consensus on the particular physics statements in his post, but no doubt you could also find a couple of statements in economics that most economists agree about. For evidence of tribalism in physics, google "superstring controversy," or at a more personal level, Newton and Hooke, Einstein and Lenard.

Or read Kuhn famous book on The Structure of Scientific Revolutions, in which he argues persuasively (or shows definitively, for those who prefer), that "Competition between segments of the scientific community [tribes?] is the only historical process that ever actually results in the rejection of one previously accepted theory or in the adoption of another," though at the same time, most progress comes from working within an established paradigm. My own intuition is that economics if very much like physics in both those respects.

As to how tribalism has arisen in economics, the answer is easy: economists are people, and people are tribal. Search the psychology of "ingroup bias".

[Sep 04, 2015] Four-fifths of the Economy is a Complete Waste of Time

EconoSpeak

Four-fifths of the "Economy" is a Complete Waste of Time

There are really two questions we are dealing with here. First, do inputs to production earn their marginal product? Second, do the owners of non-rival ideas have market power or not? -- Dietz Vollrath "What Assumptions Matter for Growth Theory?"
Dietz Vollrath has a new post that goes a long way toward clarifying the battle lines in the fight over the foundations of growth theory. -- Paul Romer, "The Assumptions in Growth Theory"
Huh? These fellows omit the main assumption, the analogy -- "growth is a concept whose proper domicile is the study of organic units..." (Kuznets, 1947). Kuznets cited with approval Sidney Hook's discussion of the dangers of the use of this analogy.
As an argument it is formally worthless and never logically compelling. An argument from analogy can be countered usually with another argument from analogy which leads to a diametrically opposed conclusion.... The belief that society is an organism is an old but fanciful notion. It can only be seriously entertained by closing the eye to all the respects in which a group of separate individuals differs from a system of connected cells, and by violently redefining terms like 'birth,' 'reproduction,' and 'death.'
Growth "theory" gets around this objection to the uncritical use of analogy by ignoring it -- by 'closing the eye' to explicit caveats in the seminal contribution to the measurement of growth. Let's pretend that the economy really is an organism that grows perpetually but never dies.

Name one.

Carry on, growth theorists.

Young Economists Feel They Have to be Very Cautious'

August 23, 2015 |

From an interview of Paul Romer in the WSJ:

...Q: What kind of feedback have you received from colleagues in the profession?

A: I tried these ideas on a few people, and the reaction I basically got was "don't make waves." As people have had time to react, I've been hearing a bit more from people who appreciate me bringing these issues to the forefront. The most interesting feedback is from young economists who say that they feel that they have to be very cautious, and they don't want to get somebody cross at them. There's a concern by young economists that if they deviate from what's acceptable, they'll get in trouble. That also seemed to me to be a sign of something that is really wrong. Young people are the ones who often come in and say, "You all have been thinking about this the wrong way, here's a better way to think about it."

... ... ...

Posted by Mark Thoma on Sunday, August 23, 2015 at 12:27 AM in Economics, Macroeconomics, Methodology | Permalink Comments (7)

pgl said...

Very interesting interview on many fronts. What you highlighted - "The most interesting feedback is from young economists who say that they feel that they have to be very cautious, and they don't want to get somebody cross at them. There's a concern by young economists that if they deviate from what's acceptable, they'll get in trouble." - is itself troubling. Young scholars should dare to be different. Fama and Shiller viewed financial economics from very different perspectives and we are all the better for it as the Nobel Prize committee recognized.

djb said...

For young economists caution is a rational approach

Preferably get an advisor whose work you agree with or encourages your intellectual explorations

But the formula: Get on, get honored, get honest is probably the best approach

tom said...

The story is true for young academics in general. As in many areas, the rules don't apply to the superstars, or to those expressing the views held by the establishment....

Peter K. said in reply to tom...

"The story is true for young academics in general."

Or many jobs or careers in general? It's a nice by-product of loose labor markets where employers hold all of the cards.

Go along to get along. Don't make waves.

DeDude said...

This is one of the unfortunate side-effects of human tribalism. When you challenge the tribe you belong to (or say something in support of a competing tribe), you are viewed as "one of them" rather than "one of us". That will inevitably make you less likely to gain support from the tribe you belong to and in early stage careers that could be detrimental to your success. Tribalism is a basic human character flaw that we cannot get rid of no matter how much we would like. Maybe we could try to create a "tribe of truth" where the thing that will get you "one of them'ed" is a failure to seek the truths, regardless. I know -99% of scientist will claim that this is exactly what they are doing (just like they will claim they are above average). But how about holding their feet to the fire on that.

Benedict@Large said...

When I first heard the expression "dismal science", I thought, what is so dismal about economics? Now that I've learned economics however, whenever i hear the the expression "dismal economics", I think, what is so science about it?

Lafayette said...

{There's a concern by young economists that if they deviate from what's acceptable, they'll get in trouble.}

Sad, very sad. Whatever happened to Intellectual Freedom in the US?

It's hidden in a blog behind a pseudonym?

1984! Group Think!

I submit this trend started with the Rabid Right and Reckless Ronnie in the 1980s. Let's hope it is coming to its well-deserved end.

But, maybe not ...

[Aug 22, 2015] Scientists Do Not Demonize Dissenters. Nor Do They Worship Heroes.

Paul Romer's latest entry on "mathiness" in economics ends with:
Reactions to Solow's Choice: ...Politics maps directly onto our innate moral machinery. Faced with any disagreement, our moral systems respond by classifying people into our in-group and the out-group. They encourage us to be loyal to members of the in-group and hostile to members of the out-group. The leaders of an in-group demand deference and respect. In selecting leaders, we prize unwavering conviction.

Science can't function with the personalization of disagreement that these reactions encourage. The question of whether Joan Robinson is someone who is admired and respected as a scientist has to be separated from the question about whether she was right that economists could reason about rates of return in a model that does not have an explicit time dimension.

The only in-group versus out-group distinction that matters in science is the one that distinguishes people who can live by the norms of science from those who cannot. Feynman integrity is the marker of an insider.

In this group, it is flexibility that commands respect, not unwavering conviction. Clearly articulated disagreement is encouraged. Anyone's claim is subject to challenge. Someone who is right about A can be wrong about B.

Scientists do not demonize dissenters. Nor do they worship heroes.

[The reference to Joan Robinson is clarified in the full text.]

Adam Eran said...

Max Planck would disagree: "The truth never triumphs. Its opponents simply die out. Science advances one funeral at a time."

Friday, August 21, 2015 at 04:02 PM

anne said in reply to Adam Eran...

https://en.wikiquote.org/wiki/Max_Planck

1948

A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

-- Max Planck

[ Thomas Kuhn would later write of this. ]

likbez said...

Now science became highly political occupation. This is especially true about economics.

So dismal behavior of scientists and flourishing of pseudoscience are to be expected. Rewards offered to conformists are just too great not to seduce people.

Actually it looks like Lysenkoism is the mark of the present and the future, not so much of the past.

[Aug 19, 2015] Conspiracy Theories and Other Dangerous Ideas Cass R. Sunstein

"...the prospect of being subject to the conspiracy theorist smear remains a potent weapon for intimidating authors, journalists, and scholars from interrogating complex events, policies, and other potentially controversial subject matter.""

Amazon.com

Harold Saive "Hsaive" on May 22, 2014

Cracking The "Conspiracy Theories'" Psycholinguistic Code: The Witch Hunt against Independent Research and Analysis

Conspiracy theories not backed by credible evidence would ordinarily be ignored as harmless ramblings.

But when the government goes to extreme lengths to discredit an alternate (conspiracy) theory about how Global warming is not supported by the data or that the Twin Towers collapsed at near free-fall speed due to controlled demolition - suddenly these theories - backed by thousands of pages of forensic evidence - are too dangerous for Sunstein, Obama and Bush to laugh at.

Laugh, indeed.

The American people are waking up to being repeatedly punked by corpse media propaganda.

Professor, James Tracy has this to say:

"A new crusade appears to be underway to target independent research and analysis available via alternative news media. This March saw the release of "cognitive infiltration" advocate Cass Sunstein's new book, Conspiracy Theories and Other Dangerous Ideas. In April, the confirmed federal intelligence-gathering arm, Southern Poverty Law Center (SPLC), released a new report, "Agenda 21: The UN, Sustainability, and Right Wing Conspiracy Theory." Most recently, Newsweek magazine carried a cover story, titled, "The Plots to Destroy America: Conspiracy Theories Are a Clear and Present Danger."

As its discourse suggests, this propaganda campaign is using the now familiar "conspiracy theory" label, as outlined in Central Intelligence Agency Document 1035-960, the 1967 memo laying out a strategy for CIA "media assets" to counter criticism of the Warren Commission and attack independent investigators of President John F. Kennedy's assassination. At that time the targets included attorney Mark Lane and New Orleans District Attorney Jim Garrison, who were routinely defamed and lampooned in major US news outlets.

Declassified government documents have proven Lane and Garrison's allegations of CIA-involvement in the assassination largely accurate. Nevertheless, the prospect of being subject to the conspiracy theorist smear remains a potent weapon for intimidating authors, journalists, and scholars from interrogating complex events, policies, and other potentially controversial subject matter."

Archilochus on June 16, 2015

Cass Sunstein And This Little Book Are Downright Silly ... Read Who Really Owns Your Gold, Third Ed. By William Garner Instead

From the abstract of the original paper by Cass Sunstein and Adrian Vermeule:

"Many millions of people hold conspiracy theories; they believe that powerful people have worked together in order to withhold the truth about some important practice or some terrible event. A recent example is the belief, widespread in some parts of the world, that the attacks of 9/11 were carried out not by Al Qaeda, but by Israel or the United States. Those who subscribe to conspiracy theories may create serious risks, including risks of violence, and the existence of such theories raises significant challenges for policy and law . . . 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."

First, I find the title of the book and paper downright silly, just as I do the man himself. Sunstein is a Jesuit tool.

Second, threatening to infiltrate groups that seek to uncover and disclose the accurate truth about events in America tells us much about the powers who manipulate these very events. All despots, martinets and dictators over the centuries have done the same, even worse, to those who have spoken out against acts of tyranny and terror committed by those who govern the masses.

Conspiracy "THEORIES"? Are you serious?

After all, no good scientist or researcher would ever immediately elevate his hypothesis to the level of a "theory" without careful thought, experimentation and analysis.

The label "conspiracy theorist" makes the threat to the "powers that be" more immediately credible and elevates it to a very high and visible level, because it says that this "conspiracy guy" has some very plausible and perhaps damning evidence, and the powers should silence him.

If the guy were just stating some simple hypothesis, no one would even notice, let alone react to him or it.

But when someone comes along and states they have credible "theories" about certain significant events, that raises eyebrows and hackles among those in power. It also provides the powers that be with "legal authority" to silence that person and enact new laws that restrict, if not outlaw, further dissemination of so-called "conspiracy theories."

Or so guys like Cass Sunstein would like us to believe.

I recommend this silly book to all Americans as an example of disinformation from the powers that be. I do not, however, recommend spending any money on it. It is not worth the paper it is printed on.

robbie eisler on March 22, 2014

Irrational
This is a nonsensical approach to a subject that throws the baby out with the bathwater. It is a wholesale, hackneyed, down-the-line mainstream piece of propaganda that sophistically mixes clearly insane, paranoid conspiracy theories with certainly plausible ones. It's as if he keeps hoping the uninformed and the misinformed will continue to stay uninformed and misinformed--and manipulated. But, who, two years ago, would have thought the leader of Germany's conversations with her grandchildren were being recorded by an American governmental agency or that British intelligence would have tens of thousands of film frames of nude people on Yahoo webcams? We live in an age where the implausible and the outrageous unfortunately sometime turn out to be even more outrageous than one could have imagined. Sunstein, a Martha's Vineyard sycophant, has no time for these thoughts.

Plattsoon April 19, 2014

Dangerous To Whom?


Conspiracy Theories are not about a type of person,
that is, a person who "believes" in some theories.
Conspiracy Theories are about a type of crime.
The type which perpetrators plan beforehand to commit.

Typical of "debunkers" and propagandists, here all manner of Theories are
lumped together, and the Conspiratorial Type of Person is assumed.
This Person is flawed. Wrong. Incorrect. Crippled. Effed up.
We would like to figure out how these false ideas are spread among the Effed Up People.

This analysis is pathetic and inane.

As for some particular theory being "demonstrably false", I would very much like to see Mr. Sunstein
engage in a discussion with the major proponents of said theory and please, do demonstrate its falseness.

Incidentally, that the United States Government conspired to kill Martin Luther King Jr is not a conspiracy theory,
but a legal finding.

Ralph Yateson April 6, 2014

Disinformation As Policy

The American government has suffered a plague since the CIA's assassination of President Kennedy. While the CIA and powers that be managed to abuse their power and control the official story the American people would not lose their free thinking so quickly and soon knew something was rotten. Ever since the inception of the Central Intelligence Agency America has been battling a force that exists with a written charter to undermine and undo ever single fundamental principle of representational democracy in America and elsewhere replacing it with an ugly cold-skinned changeling covertly overseen by its CIA creators and their sponsors. We live in that nation now and Cass Sunstein is its ultimate evil spawn, sent here to convince the populace that its healthy sense of government corruption is due to some bizarre personal failing or psychological flaw on the behalf of those people.

A month to the day after the Kennedy assassination the creator of the CIA, Harry Truman, sent an editorial to the Washington Post saying he regretted signing the agency into being and that he had created a monster that had gone way beyond its original intended purpose and gotten out of control. The editorial was yanked from the second edition and quietly buried. The timing of Truman's editorial and its message exactly one month after Kennedy's assassination was not unintentional. The national security state had made its move and was now taking over. America was now becoming a safe place for the Cass Sunstein's and Allen Dulles's.

This book suggests the true facts about the Kennedy assassinations, TWA 800, and 9-11 were all nutty conspiracy theories all handily explained by Mr Sunstein who calmly attributes all those wicked events to perfectly reasonable explanations that all so happen to fit the government version. We owe thanks to the free speech we still have even though Mr Sunstein was actively trying to undo American free speech and make any accusations of conspiracy against the government illegal. Thank goodness for Amazon where we can still legally buy books that expose the truth behind these events without any Orwellian nightmare like Sunstein forcing us to accept the legal official version at threat of punishment. The only thing Sunstein was honest about was the Masonic eye of the pyramid staring back at you from his book and mocking you. Sort of like the eye of Sauron trying to convince you the tales people are telling you about it aren't true. The ultimate Orwellian oracle unashamedly unveiled.

[Aug 12, 2015]The Macroeconomic Divide

"...Too much of macro is ideologically driven conjecture, or worse. None of it rises to the level of demonstrated reliability necessary to ethically inform decision-making. Confronting that reality and the limits of the profession's knowledge and ability, and reining-in it's obsession to intervene in things it doesn't actually understand except at a political level - that will permit the profession to at long last begin to honor its highest ethical duty ... 'First, do no harm.'"
Economist's View
Paul Krugman:
Trash Talk and the Macroeconomic Divide: ... In Lucas and Sargent, much is made of stagflation; the coexistence of inflation and high unemployment is their main, indeed pretty much only, piece of evidence that all of Keynesian economics is useless. That was wrong, but never mind; how did they respond in the face of strong evidence that their own approach didn't work?
Such evidence wasn't long in coming. In the early 1980s the Federal Reserve sharply tightened monetary policy; it did so openly, with much public discussion, and anyone who opened a newspaper should have been aware of what was happening. The clear implication of Lucas-type models was that such an announced, well-understood monetary change should have had no real effect, being reflected only in the price level.
In fact, however, there was a very severe recession — and a dramatic recovery once the Fed, again quite openly, shifted toward monetary expansion.
These events definitely showed that Lucas-type models were wrong, and also that anticipated monetary shocks have real effects. But there was no reconsideration on the part of the freshwater economists; my guess is that they were in part trapped by their earlier trash-talking. Instead, they plunged into real business cycle theory (which had no explanation for the obvious real effects of Fed policy) and shut themselves off from outside ideas. ...

RogerFox said...

Both sides in this macro cat-fight have succeeded in demolishing the credibility of their opponents, at the expense of being demolished themselves - meaning none of them are left standing in the eyes of anyone except their own partisan groupies, who are well-represented on this site. That's nothing but good.

Too much of macro is ideologically driven conjecture, or worse. None of it rises to the level of demonstrated reliability necessary to ethically inform decision-making. Confronting that reality and the limits of the profession's knowledge and ability, and reining-in it's obsession to intervene in things it doesn't actually understand except at a political level - that will permit the profession to at long last begin to honor its highest ethical duty ... 'First, do no harm.'

RC AKA Darryl, Ron said in reply to RogerFox...

Confronting that reality and the limits of the profession's knowledge and ability, and reining-in it's obsession to intervene in things it doesn't actually understand except at a political level - that will permit the profession to at long last begin to honor its highest ethical duty ... 'First, do no harm.'

[That is some pretty ironic BS that you are totin' around. The profession does a very good job of NOT intervening in things that any one with half a brain should understand. How on earth do you think the 2008 financial crisis ever even happened? Economists could not intervene because they had black swans squatting on their hands, particularly those economist like Greenspan and Bernanke that were actually in a position to do something to prevent the crisis. Krugman wrote some articles warning about the risk, but undersold his case even to himself. Only Mike Stathis (an investments adviser and trader - not an economist) formally warned (in America's Financial Apocalypse: How to Profit from the Next Great Depression. 2006. ISBN 978-0-9755776-5-3) of the full scope of the coming disaster and that formal warning came a bit late and was almost entirely ignored. Nouriel Roubini (a.k.a. Doctor Doom), who is an economist, ran Stathis a close second on getting it correct. Dean Baker, also an economist, was in there too. It was entirely ignored by Greenspan and Bernanke, although I believe they knew what was going to happen but would rather clean up the mess than stop the party and get blamed for the fallout.

After the crisis several economists recognized the scale of the necessary stimulus to get the economy back on track, but a world of idiots, some of whom you may know, precluded an adequate response to prevent prolonged high unemployment.

Are you a market trader or just a rich man's tool? Anything else would make you just a plain ol' fool.]

DrDick said in reply to RogerFox...

"Both sides in this macro cat-fight have succeeded in demolishing the credibility of their opponents"

You, on the other hand. never had any credibility to begin with.

"Confronting that reality and the limits of the profession's knowledge and ability, and reining-in it's obsession to intervene in things it doesn't actually understand except at a political level"

You might take your own advice, as it is evident that you know nothing about economics or policy.

Peter K. said in reply to RogerFox...

Partisan groupies? Nope. We're the objective ones in this discussion.

Mr. Fox has no criteria upon which to judge and measure things, so of course he has no basis to criticize.

"First do no harm." How can you tell that harm has been done when you don't believe in anything?

You automatically believe that taking no action and the sin of omission is the better choice? But you have no basis on which to make that assumption.

"First do no harm" when it comes to government policy is conservative propaganda.

Paine said in reply to RogerFox...

If rog refuses to entertain any notion of macro nautic efficacy

He. Has taken his position
And perhaps he ought to be left to
sit on it
as long as he likes

However

If he has a test of say Lerner's
fiscal injections model he'd like to propose
A test that if past would change is mind

> Paine said in reply to Paine ...

Cockney takes over
when I sez his
it comes out is

RogerFox said in reply to Paine ...

I don't have a dog in this fight - but I do know that it's dangerously irresponsible and unprofessional to offer advice, or act on it, unless there is adequate evidence to justify the opinion that the advice will not plausibly make the situation worse than it is otherwise destined to be. The compiled track record of all theories of macro demonstrate that none of them yet meet that test - and this ongoing internecine cat-fight has done much to reinforce that view IMO.

Academics need to understand what real economy people who give advice professionally know very well - that an idea or theory could well be right and beneficial isn't enough to justify acting on it without proper consideration to the consequences should the approach prove to be wrong. Candidly assessing down-side risks seems to be anathema to all academics - almost as if they regard the entire matter as some sort of affront to their dignity.

The Crash of '08 and the Crash of '29 both happened, with academic macro-mavens leading us straight into both of them - eyes wide shut. Better for everyone if they'd just kept their mouths shut too.

pgl:

"In the early 1980s the Federal Reserve sharply tightened monetary policy; it did so openly, with much public discussion, and anyone who opened a newspaper should have been aware of what was happening. The clear implication of Lucas-type models was that such an announced, well-understood monetary change should have had no real effect, being reflected only in the price level.In fact, however, there was a very severe recession — and a dramatic recovery once the Fed, again quite openly, shifted toward monetary expansion. These events definitely showed that Lucas-type models were wrong, and also that anticipated monetary shocks have real effects."

Note Krugman is referring to the 2nd Volcker monetary restraint which happened under Reagan's watch. Rusty needs to get his calendar out as he thinks this was all Carter. Actually Volcker was following the advise of JohnH. How did the early 1980's work out for workers?

Back in 1982/3 I heard some economist seriously saying that this recession was due to some notion that people still had high expected inflation. When I asked them WTF - they response was the Reagan deficits.

Yes macroeconomics confuses some people terribly. Look at a lot of the comments here for how confused some people get.

Paine said in reply to pgl...

Confused or partisan ?

Egmont Kakarot-Handtke said...

No divide
Comment on 'The Macroeconomic Divide'

Keynes's employment function was indeed incomplete (2012). So far, Lucas/Sargent had a point. But the NAIRU expectation-wish-wash was even worse. So far, Krugman has a point. The deeper reason is that economics not only has no valid employment theory but that it is a failed science.

Neither the loudspeakers of the profession nor the representative economists of the various schools have a clue about how the actual economy works. What unites the camps is scientific incompetence.*

Egmont Kakarot-Handtke

References
Kakarot-Handtke, E. (2012). Keynes's Employment Function and the Gratuitous Phillips Curve Desaster. SSRN Working Paper Series, 2130421: 1–19. URL http://ssrn.com/abstract=2130421

*For details see the cross-references
http://axecorg.blogspot.com/2015/07/incompetence-cross-references.html

[Aug 12, 2015] Unwavering Fealty to a Failed Theory

"...Looking beyond the rhetoric and individual policies, however, lies the Republican Party's major problem: unwavering fealty to trickle-down economics. Virtually all Republicans since Ronald Reagan was elected president have run on a platform of supply-side policies, and the 2016 election will be no different. But it should be, because there is now a growing recognition that trickle-down economics has failed...."
.
"...Republican economic "thinking" is akin to a religion. No deviation from the gospel is allowed or you become an apostate.
Like Huckabee, who is running for president, believes that the world (universe?) is only 6500 years old. "

.
"...Just as FDR laid out the solution in 1935: you start by paying workers to build productive assets that will earn the money needed to pay the workers."
Aug 12, 2015 | Economist's View
Bad economic theory (but good if you are rich) has trickled down to this cycle's Republican presidential candidates:
Unwavering Fealty to a Failed Theory, by David Madland, US News and World Report: With their first debate set for tonight, Republican candidates have been trying mightily to claim they can help address the economic problems most Americans face. ...

While Jeb Bush declared in February that "the opportunity gap is the defining issue of our time," more recently he's been forced to backtrack from his statement that Americans "need to work longer hours" in order to boost their incomes. Sen. Marco Rubio's argument that if the United States is to "remain an exceptional nation, we must close this gap in opportunity," rings a bit hollow next to his tax plan that disproportionately benefits the wealthy. Gov. Scott Walker says he wants to help families achieve the "American Dream," but thinks the minimum wage is "lame," has stripped the words "living wage" from state laws, and has attacked workers' right to join together to collectively bargain for better wages.

Looking beyond the rhetoric and individual policies, however, lies the Republican Party's major problem: unwavering fealty to trickle-down economics. Virtually all Republicans since Ronald Reagan was elected president have run on a platform of supply-side policies, and the 2016 election will be no different. But it should be, because there is now a growing recognition that trickle-down economics has failed....

Posted by Mark Thoma on Thursday, August 6, 2015 at 10:16 AM in Economics, Politics, Taxes | Permalink Comments (21)

pgl :

The following is exactly right. We should note that a few pretend progressives around here are praising Jeb! for this 4% proposal even if what Jeb! is really proposing is the same old Art Laffer lies:

"Looking beyond the rhetoric and individual policies, however, lies the Republican Party's major problem: unwavering fealty to trickle-down economics. Virtually all Republicans since Ronald Reagan was elected president have run on a platform of supply-side policies, and the 2016 election will be no different. But it should be, because there is now a growing recognition that trickle-down economics has failed due to the fact that it rests on a fundamentally flawed premise. Trickle-down economics, the misguided theory that has controlled economic policymaking for more than three decades, is built on the idea that high levels of economic inequality are good. Tax cuts for the rich and less regulation of business supposedly provide incentives for the wealthy to invest and work more. Enabling "job creators" to get richer helps us all, the theory goes. So the fact that the top 1 percent now take home a greater share of the nation's income than they ever have, while incomes for the typical household are lower than they were in 1989, is not a problem in this way of thinking. In the trickle-down mindset, these facts are seen as good for the economy."

mulp said in reply to JohnH...

I see you, JohnH are equally brainwashed or brain damaged by the dominant free lunch economics principles that avoids the TANSTAAFL nature of the dismal science.

You stated absolutely nothing as an alternative that works because you do not want to pay anything, but just want a free lunch.

Just as FDR laid out the solution in 1935: you start by paying workers to build productive assets that will earn the money needed to pay the workers.

Given government is putting people to work who the private sector will not pay, the way they get paid is with taxes and fees associated with the things they build.

Conservatives call it tax and spend, but its really invest and tax.

Republicans totally oppose the bill that Reagan spoke of glowingly in 1983 which hiked taxes 125% to pay to create probably a million jobs building transportation capital assets.

Obama picked up the conservative free lunch alternative to invest and tax: public private partnerships. But conservatives expecting free lunch political solutions realized it was just dismal science: corporations would be collecting tolls that are higher than taxes would be to pay for monopoly profits.

Taxes and fees need to be higher on everyone.

Sorry Bernie, TANSTAAFL - taxing the rich is not the solution.

djb :

so much of this seems to come from the impact of Milton Friedman

his academic papers may have be somewhat restrained, but when you see him on tape talking, he sounds just like any supply sider or right wing politician talking today

especially negative on any possibility of fiscal interventions, and ridicules the concept that interventions can improve aggregate demand and thus the economy

according to Keynes, Ricardo did not believe that inadequate aggregate demand was even possible

David :

I don't think the appeal of trickle down is based on econ or empirical evidence, and as such whether it fails or not is completely irrelevant to the right.

It is a perversion of identity politics as a moral prejudice. Rich people by dint of their wealth are superior and poor people are inferior and deserve their lot. Race is key here. Poor Southern whites on Medicaid and food stamps vote against their interest bc they're not those people.

It's always divide and conquer with the right.

Fred C. Dobbs

(This ought to be a prominent Dem issue,
but it isn't. Why is that? The GOPsters
will pervert it, make it about turning
1%ers into .01%ers)

Why the New Research on Mobility Matters:
An Economist's View http://nyti.ms/1F0ZQQb
via @UpshotNYT - Justin Wolfers - May 4

Hundreds of studies have demonstrated that the odds of economic success vary across neighborhoods. The far more difficult question is whether that's because neighborhoods nurture success (or failure), or whether they just attract those who would succeed (or fail) anyway.

A new study by the Harvard economists Raj Chetty and Nathaniel Hendren, when read in combination with an important study they wrote with Lawrence Katz, makes the most compelling case to date that good neighborhoods nurture success. ...

http://www.equality-of-opportunity.org/

http://www.equality-of-opportunity.org/images/nbhds_exec_summary.pdf

reason :

How about an alternative, bubble up economics. Money doesn't flow down - it flows UP. Spread money around and it will spent on things that companies owned by the wealthy produce, instead of concentrating on cutting costs, those companies can concentrate instead on increasing productivity and expanding production. The trick is that the market will pick the best producers, but the best producers of WHAT. Goods for everyman or trinkets for the wealthy.

gunste :

Republican economic "thinking" is akin to a religion. No deviation from the gospel is allowed or you become an apostate.
Like Huckabee, who is running for president, believes that the world (universe?) is only 6500 years old.

[Aug 08, 2015] Quacks - Fakers & Charlatans in Medicine (Revealing History) Roy Porter

Aug 08, 2015 | Amazon.com

Paperback: 320 pages
Publisher: Tempus (September 1, 2003)
Language: English
ISBN-10: 0752425900
ISBN-13: 978-0752425900
Product Dimensions: 5.1 x 1.3 x 7.8 inches

By Amanda Chesworth on June 12, 2005

Enlightening & Entertaining

Format: Paperback
Surprisingly, this book is relatively unknown in medical circles, not to mention the public at large. And yet - the subject matter presented draws so many unmentioned parallels to the situation of "quacks" to be found in modern day.

Roy Porter is a brilliant historian. His form of writing is exceptional. Initially I noticed he would repeat certain information in subsequent chapters and though it was always written differently I wondered "doesn't he know he has already made reference to this?" But then I realized how beneficial this can be to learning. The important points that are repeated are far easier to digest, understand and remember and for those of us afflicted with poor memory, this is a welcome characteristic in a non-fiction book and it appears to be more of an intentional tool than an oversight. Regardless, the amount of original information to be found within this book is immense and as usual, Roy Porter fills his pages with powerful prose that afford such a sweeping field to be explored and grasped. Though I allude to the fact this book should be referenced more within the medical arena - the book is indeed written for the everyman (and woman) and few people will find it a difficult read. I do, however, think it should be mandatory reading for medical students.

_Quacks_ chronicles the highly lucrative occupation of nostrum mongers - traveling across Europe (most notably in Britain) selling potions, philosophies, herbs, and all manner of "cures" for the various ills of society. The tactics they use are rich and entertaining - the pulpit, the monkey, the jester, magic, on-the-spot dental repairs and laying on the hands healing. Some even operated booths outside the Bethlam asylum.

By Darryl R. Morris on August 27, 2010

A balanced and entertaining history of quackery in England

Format: Paperback
This was an entertaining history of the men and women who were labeled as quacks in Britain during the 17th to the early 19th centuries. The term "quack" was applied to men and women who were accused of practicing medicine (Physic) in bad faith, those who traveled from town to town and gave public performances and demonstrations, sold nostrums that proclaimed to cure numerous unrelated diseases from 'Rheumatick Defluctions' to 'Wind Cholick' to 'Ptisick or shortnesse of breath', advertised widely in newspapers, or made outrageous claims about their clientele (many claimed to be the personal physician to kings and queens throughout Europe), their cure rates and the efficacy of their medicines.

However, Porter shows us that several practitioners who were labeled as quacks received medical degrees from Oxford, Cambridge or other renowned schools, and nearly all subscribed to the same medical theories and treatments used by the regular physicians. Many of the standard medical providers also used the same techniques as the quacks, such as advertising, frequent use of nostrums to purge the body of toxins that were the cause of illness, and frequent self promotion. The success of quackery was also aided by the lack of regulation, as neither the courts nor town officials sought to enforce standards on practitioners until the early 19th century, and by the state of medical knowledge in the 17th and 18th centuries, which was dominated by theories beliefs rather than proven fact.

Quackery slowly fell out of fashion in the early and mid 19th century in England, as alternative medical movements such as homeopathy, naturopathy and medical botany took hold, and as allopathic (standard) medical practice became more regulated and restricted.

"Quacks" contains several detailed accounts of notable practitioners, along with detailed etchings and engravings of quacks as they beguile and entertain potential customers. The book was overly repetitive at times, especially in the sections about advertising and nostrums, but overall it was a well written and balanced look at quackery in Britain.

[Jul 25, 2015] Brainwashing as a key component of the US social system

"...Why do Americans believe "official sources" despite the proven fact that "official sources" lie repeatedly and never tell the truth?"
"...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."
"...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."
"...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."
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 brain washing 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

  • protocol #1 - Take control of the media and use it in propaganda for our plans
  • protocol #2 - Start fights between different races, classes and religions
  • ... ... ...
  • protocol #13 - Use our media to create entertaining distractions
  • protocol #14 - Corrupt minds with filth and perversion
  • protocol #15 - Encourage people to spy on one another

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 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...

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.

  • Schools
  • Media
  • Crazed Cops
  • And a corporate owned government.

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.

Chupacabra1977

When you let jews run your society this is what happens. Go Goy go!!!!!

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.

[Jun 08, 2015] The Attack on Truth By Lee McIntyre

Jun 08, 2015 | The Chronicle Review

We have entered an age of willful ignorance

To see how we treat the concept of truth these days, one might think we just don’t care anymore. ...many commentators in the media — and even some in our universities — have all but abandoned their responsibility to set the record straight...

... ... ...

Plato here teaches a central lesson about the philosopher’s search for knowledge, which has ramifications for any quest for true belief. The real enemy is not ignorance, doubt, or even disbelief. It is false knowledge. When we profess to know something even in the face of absent or contradicting evidence, that is when we stop looking for the truth. If we are ignorant, perhaps we will be motivated to learn. If we are skeptical, we can continue to search for answers. If we disbelieve, maybe others can convince us. And perhaps even if we are honestly wrong, and put forward a proposition that is open to refutation, we may learn something when our earlier belief is overthrown.

But when we choose to insulate ourselves from new ideas or evidence because we think that we already know what is true, that is when we are most likely to believe a falsehood. It is not mere disbelief that explains why truth is so often disrespected. It is one’s attitude.

In a recent paper, "Why Do Humans Reason?," Hugo Mercier and Dan Sperber, both of them philosophers and cognitive scientists, argue that the point of human reason is not and never has been to lead to truth, but is rather to win arguments. If that is correct, the discovery of truth is only a byproduct.

... ... ...

To fight back, we should remember the basic principles of evidence-based belief and true skepticism that got us out of the Dark Ages. Although behavioral economists, among other scholars, have amply shown that human reason is not perfect, that is no excuse for lazy thinking. Even if our brains are not wired to search for truth, we can still pursue a path that might lead to better answers than those supplied by Kahneman’s "fast" part of our brain.

Truth may not be automatic, but it is still an option. Socrates taught us as much long before we knew anything about cognitive science: Good reasoning is a skill that can be learned.

Reythia > lharasim

Facts alone do not equal truth. But factual evidence IS what allows us to determine what is "true" or "actual" or "real" and what is not. Which is the entire point of science in particular, and learning in general.

Secondly, seriously, you're either being immensely picky with your dictionary definitions, or making this author's point about the mindset difference between scientists and liberal arts people.

Basically, people are welcome to believe whatever they want. If someone wants to believe that trains are angels sent down by God in Heaven to communicate in corporeal form with us, they're welcome to. That's "belief", and if you want to have a philosophical argument about its "truth" to a sincere believer, go ahead. But as a scientist, I'm going to tell you that "truth" is that if that believer walks in front of a fast-moving train, his "belief" that the angel will commune harmlessly with him will be trumped by my "fact" that F = ma. Squish. That's "truth".

lairdwilcox > lharasim

...I am far more comfortable with a notion of "truth" that is subject to revision when new evidence appears or old evidence is successfully refuted. Dogma and ideology, both of which are attempts to simplify reality and to false certainty where this cannot be done, are the enemies of responsible education everywhere.

What we have done is so thoroughly moralize some points of view, like global warming, race and gender differences among others, to the point where any kind of honest discussion or debate is impossible. Even to suggest that current dogma may be biased or flawed can on savage attacks by people who cannot tolerate dissent.

C. E. M. Joad, in his The Recovery of Belief (1952) observed:

"There are those who feel an imperative need to believe, for whom the values of a belief are proportionate, not to its truth, but to its definiteness. Incapable of either admitting the existence of contrary judgments or of suspending their own, they supply the place of knowledge by turning other men's conjectures into dogmas."

When this kind of moralizing fanaticism occurs you are in a dangerous predicament -- even if you think you have honest criticism of a prevailing idea you become fearful of expressing it because of retaliation. The pages of CHE are full of cases where academics have paid a terrible price for this.

selfdeflection > lairdwilcox

There is a significant difference between one's point of view (deliberately not using truth, belief, fact, etc.) AFTER having carefully consumed, reviewed, evaluated and weighed all the relevant evidence for an issue and one's point of view absent that review and analysis. So many conflate those two types of "believers", but they could not be more different and the power of their perspectives should be regarded differently as well.

alsotps > lharasim

As I remember the story, someone responded to idealists with their idea that reality was only (note only) a human construct by suggesting they walk off the top floor of a tall building to see what would happen.

As for the issue here, read Camus, Ortega y Gassett and even better the symbolic interactionists who looked at how people create the meanings with which they make sense out of the world. For political science types, read Quincy Wright's Study Of War in which he looks at the symbolic roots of warring. For literary types, read Joan Dideon's The White Album's first page: "We tell ourselves stories in order to live."

The point: facts, like objects, are real; how they are interpreted and used is a construction, part individual and part social (and political).

A quote attributed to George Orwell seems to say it all: "In a time of universal deceit, telling the truth in a revolutionary Act."

Time we become revolutionaries.

Andrew Norman > kathden

Bruno Latour had the courage to critically examine the overall thrust of his work in science studies, and admit that it might have actually been a mistake to reflexively assume that any claim to objective knowledge is the real enemy. He now has the courage to admit that the postmodern relativism he long championed is (along with religious dogmatism) an enormous threat to genuine, accountable inquiry. That is the import of McIntyre's quote from Latour, and Kathden would do well to emulate Latour's courage. It is not McIntyre's treatment of the subject, but Kathden's dismissal of it, that is naive.

Thomas Edward Wictor > Andrew Norman

Why should we celebrate the "courage" of people who now admit that their incredibly stupid, destructive ideas are incredibly stupid and destructive?

... ... ...

[May 26, 2015] Scientific Collaboration, Then and Now

May 25, 2015 | NYTimes.com

To the Editor:

The Greatest Generation of Scientists,” by Joe Nocera (column, May 16), was a wonderful celebration of the life of Alexander Rich, one of the founders of molecular biology — and my colleague since I joined M.I.T.’s biology faculty 25 years ago. There was only one false note: Mr. Nocera’s assertion that today’s molecular biologists no longer collaborate and share information.

Many counterexamples show that collaboration is getting stronger, not weaker. In the 1990s, the Human Genome Project involved scientists across six countries making their data freely available to the world every day. More recently, scientists from 20 countries last year cracked open the genetic basis of schizophrenia by sharing DNA samples from 150,000 patients and controls.

With breathtaking advances in biomedical technology, young scientists know that they could be the generation that turns the tide against cancer, mental illness and other diseases — but only if they work together and share data. They are inspired by the beauty of biology and a sense of mission to transform human health; they’re not so different from Alex Rich.

ERIC S. LANDER

Cambridge, Mass.

The writer is director of the Broad Institute of M.I.T. and Harvard and co-chairman of the President’s Council of Advisers on Science and Technology.

To the Editor:

Joe Nocera describes biomedical research today as easy compared with the second half of the 20th century because of the handing out of grants by the government, but less collaborative and more competitive because of the push to become famous and rich instead of just enjoying the thrill of discovery.

But James Watson in “The Double Helix” portrays the cutthroat side of the “greatest generation” of scientists, whose world was far from idyllic. Today research funding is becoming more and more dependent upon the promise of short-term practical and financial returns.

Basic research is often labeled a little pejoratively as “curiosity-driven” research, which our society can no longer afford to indulge, and a career in basic research is becoming increasingly difficult to pull off. Our world is built upon the work of the scientists of the past, and this situation does not bode well for our future.

ROBERT B. CAMPENOT

Edmonton, Alberta

The writer is professor emeritus of cell biology at the University of Alberta.

To the Editor:

“The Greatest Generation of Scientists” recounts the passing of Alexander Rich, and with him a golden age of science. Dr. Rich and his colleagues made monumental discoveries about nucleic acid structure and function.

As we recognize that unique period of scientific exploration, two truths also deserve acknowledgment. One is that those highest echelons of science often excluded women, as well as international scientists not based in Britain or the United States.

The other truth is that funding for science remains challenging. Contrary to Mr. Nocera’s assertion, today our federal government does not freely “hand out grants to scientists.” Thanks to congressional budget stagnation, federal funding for basic scientific exploration is at an all-time low.

The low rates of grant success drive current and future generations of scientists away from academic science careers.

As we honor the contributions of Dr. Rich and his peers, idealization of scientific pursuit should extend neither to the past nor to the present. Fundamental science remains a hard row to hoe.

NANCY S. GREEN

New York

The writer is a professor of pediatrics at Columbia University Medical Center.

To the Editor:

Joe Nocera’s gallery of pioneering biologists should have included Rosalind Franklin, the scientist whom many consider having been deprived of credit along with Francis Crick and James Watson for the DNA discovery, for which they won the Nobel Prize in 1962 (Dr. Franklin died in 1958 and was therefore not eligible for the prize).

Dr. Franklin, who was patronized by many male colleagues throughout her career, provided advances in X-ray crystallography essential to the DNA discovery.

RICHARD MAGAT

New York

[May 15, 2015] Mathiness in the Theory of Economic Growth

May 15, 2015 | Economist's View

Paul Romer:

My Paper “Mathiness in the Theory of Economic Growth”: I have a new paper in the Papers and Proceedings Volume of the AER that is out in print and on the AER website. A short version of the supporting appendix is available here. It should eventually be available on the AER website but has not been posted yet. A longer version with more details behind the calculations is available here.

The point of the paper is that if we want economics to be a science, we have to recognize that it is not ok for macroeconomists to hole up in separate camps, one that supports its version of the geocentric model of the solar system and another that supports the heliocentric model. As scientists, we have to hold ourselves to a standard that requires us to reach a consensus about which model is right, and then to move on to other questions.

The alternative to science is academic politics, where persistent disagreement is encouraged as a way to create distinctive sub-group identities.

The usual way to protect a scientific discussion from the factionalism of academic politics is to exclude people who opt out of the norms of science. The challenge lies in knowing how to identify them.

From my paper:

The style that I am calling mathiness lets academic politics masquerade as science. Like mathematical theory, mathiness uses a mixture of words and symbols, but instead of making tight links, it leaves ample room for slippage between statements in natural versus formal language and between statements with theoretical as opposed to empirical content.

Persistent disagreement is a sign that some of the participants in a discussion are not committed to the norms of science. Mathiness is a symptom of this deeper problem, but one that is particularly damaging because it can generate a broad backlash against the genuine mathematical theory that it mimics. If the participants in a discussion are committed to science, mathematical theory can encourage a unique clarity and precision in both reasoning and communication. It would be a serious setback for our discipline if economists lose their commitment to careful mathematical reasoning.

I focus on mathiness in growth models because growth is the field I know best, one that gave me a chance to observe closely the behavior I describe. ...

The goal in starting this discussion is to ensure that economics is a science that makes progress toward truth. ... Science is the most important human accomplishment. An investment in science can offer a higher social rate of return than any other a person can make. It would be tragic if economists did not stay current on the periodic maintenance needed to protect our shared norms of science from infection by the norms of politics.

[I cut quite a bit -- see the full post for more.]

Sandwichman said...

Ceteris paribus, mathiness is only the symptom of a deeper, long-standing disconnect between ideology and pretense.

Sandwichman said in reply to anne...

Yep, Syaloch got my drift. When push comes to shove, economists' ideological priors trump. Not that there is anything wrong with having convictions. It's fine to have convictions.

The problem arises with the methodological bobbing and weaving that goes on when the evidence doesn't confirm those convictions. ANY evidence can be made to fit ANY theory if you're willing to play fast and loose enough with weasel words and cherry-picked evidence. Even if somebody proves you wrong, just stonewall and pretend nothing happened.

I'll have to take another look at just what Romer has to say lately about growth theory. Last time I looked, I objected to the absence of "land" [i.e., natural resources] in his canonical 1986 article, "Increasing Returns and Long-Run Growth."

http://ecologicalheadstand.blogspot.ca/2012/10/endogenous-growth-theory-and.html

In my book, one element of "land" is the capacity of the atmosphere to absorb greenhouse gases. They're not making any more atmosphere.

"Growth" is a stock/flow question. The standard analysis equates growing income with growth, which is wrong at a very fundamental systems conceptual level. See the work of Booth-Sweeney and Sterman. If the "outflow" of nature services exceeds the inflow of produced goods and services then there hasn't been growth.

Is Romer up to speed on bathtub dynamics?

mulp said in reply to Roger Gathmann...

Capitalism is required to explain economics just as matter is required to explain nature. And like nature now explains matter as just energy in another state, capital is labor in a different state, and one can produce energy from matter and produce work from capital.

Energy in matter gets locked up and "owned" by individual bits of matter, just as labor locked up in capital is "owned" by an agent of the economy.

Free lunch economists have tried to redefine nature (no human caused climate change) and capitalism: I own a gun which is capital which entitle me to take money from you: your money or your life! The Islamic State qualifies under free lunch economics as capitalists - they have capital they use to make money and take capital which they sell to pay gunman to take more capital. I don't see a fundamental difference between coal mine operators and Islamic State.

anne said...

http://www.counterpunch.org/2015/05/15/how-should-economics-be-taught/

May 15, 2015

Podemos and the Economic Future of Spain
How Should Economics be Taught?
By VINCENT NAVARRO

Interview by students at the Barcelona Graduate School of Economics:

Q. There is little doubt that neoclassical economics has contributed to a very large extent to the study of economics and social sciences. Nevertheless, it seems that this neoclassical school of thought has monopolized the economic syllabus in top Universities around the United States and Europe, leaving alternative economic perspectives ignored.

You suggest in a number of articles that many of the economic policies that are being implemented currently in Europe come from specific power relations within the Eurozone (European Central Bank and the IMF against antiausterity movements in Greece, Spain, etc.). In relation to the study of economics, how does the lack of teaching about institutions and politics in the economic curriculum, as well as the lack of debate against the foundations of neoclassical theories are limiting our understanding of today’s economic and political scene?

Navarro: One of the major problems we encounter in the production of economic knowledge is its excessive disciplinary approach. Actually, the academic institutions are usually divided by departments based on disciplines, one of them being economics. The reality that surrounds us, however, cannot be understood following the disciplinary approach. The understanding of our realities, including the economic ones, calls for a multidisciplinary analysis, with the understandings of the historical, political and social forces that shape and determine that reality. In order to understand the current Great Recession, for example, we have to understand how power—class power, race power, gender power, national power—is produced and reproduced through political institutions, as well as social and cultural ones. In other words, we have to comprehend how power relations shape the governance of our societies, including their economies.

The current economics, for the most part, do not do that. They specialize in branches of the tree without understanding, or even less, questioning, the nature of the forest. Moreover, they have given great emphasis to the methods, depoliticizing the realities of the economic phenomenon. Today, modern economics is used as a way of confusing and/or ignoring the political realities that shape the economy. Currently, most of the major economic problems we face are basically political.

You cannot understand, for example, the current crisis in Europe without understanding the decline of labor income, and, thus, of domestic demand; this is the result of the changing power relations—primarily class power relations—that have occurred in the last thirty years. You can also not explain the crisis without understanding the enormous influence of financial capital on the European Central Bank. To try to explain reality by referring to the working of the financial markets as a point of departure is profoundly wrong and naïve. Financial markets have very little to do with markets. It was enough for Mario Draghi, the President of the European Central Bank, to speak a sentence, to reduce the interest rates dramatically.

The absence of the study of the political and social context, determined historically, makes current economics an apologetic message for current power relations, mystifying, hiding, and/or confusing the understanding of the economic phenomena. It is not surprising, therefore, that the critical traditions within economies are completely ignored or marginalized. It is predictable that current economists did not perceive the arrival of the current recession, which is a Great Depression for millions of Europeans. Only analysts from critical traditions were able to predict it. And we did it....


Vincent Navarro is professor of Public and Social Policy in The John Hopkins University USA and the Pompeu Fabra University Catalonia, Spain and also the Director of the JHU-UPF Public Policy Center in Barcelona, Spain.

mulp said in reply to anne...

"You cannot understand, for example, the current crisis in Europe without understanding the decline of labor income, and, thus, of domestic demand; this is the result of the changing power relations—primarily class power relations—that have occurred in the last thirty years."

So, Navarro is saying that the class power struggle has been about reducing GDP.

Presumably the people with the power, the corporations, want lower and lower GDP.

And conversely, the masses are blindly seeking exponential growth in GDP.

For this to be false, the Navarro is a free lunch economist in believing that it is rational to believe that slashing wages will lead to higher GDP growth instead of sharp decline in GDP.

From "You cannot understand, for example, the current crisis in Europe without understanding the decline of labor income, and, thus, of domestic demand..." it is clear that profits are causing recession and economics must return to the 60s when economists called profits a sign the economy want inefficient, not working, reducing welfare.

[Mar 12, 2015] The Rape of the American Mind

jessescrossroadscafe.blogspot.com
"He who dictates and formulates the words and phrases we use, he who is master of the press and radio, is master of the mind. Repeat mechanically your assumptions and suggestions, diminish the opportunity for communicating dissent and opposition. This is the formula for political conditioning of the masses.

The big lie and monotonously repeated nonsense have more emotional appeal in a cold war than logic and reason.

The continual intrusion into our minds of the hammering noises of arguments and propaganda can lead to two kinds of reactions. It may lead to apathy and indifference, the I-dont-care reaction, or to a more intensified desire to study and to understand. Unfortunately, the first reaction is the more popular one. Confusing a targeted audience is one of the necessary ingredients for effective mind control."

Joost Meerloo, The Rape of the Mind

There is going to be another financial crisis within the next two years, and it will be global, and it may be much more consequential than the other two or three we have seen since the Fed embarked on this course of its long and checkered career.

It is also avoidable, and in their quiet, private moments the really good economists can see it coming. Why don't they say anything? Ennui of the bureaucrat, entropy of an inability to change, and the credibility trap of failed ideologies in a failing empire.

They did not get to where they are by 'rocking the boat.' And so they will be quiet, unless they see some advantage in it for them, most ordinarily in a pay for say.

Not so for the financiers and their minions. They will not be quiet, alas. The more badly they behave, the louder they seem to become.

They are short term, and almost infantile in the self-centered reasoning. Although a child is limited by lack of faculty and experience, the speculator is hampered by vanity, a self-imposed lack of human development, and an almost obsessive preoccupation with drinking, favorite objects, and teats.

They see something and they want it, they know only what they can feel in the desire of the moment, morally they are undeveloped, and when they make a mess they cry loudly, until an adult comes to clean it up for them. But unlike a child they have no gratitude, no sense of their own dependency, or natural affection for others.

Have a pleasant evening

[Feb 02, 2015] Postmodernism and the Assault on Truth

Sep 20, 2007 | Good Reason

Logic. I began with a look at the history of logic. The ancient Greek philosophers known as Sophists would argue for or against any case for money. Socrates questioned whether people really understood what they were saying, by asking them to define what they meant by a particular concept and then showing that their assumptions led to unwelcome conclusions. Aristotle was the first to develop definite principles of logic. They depend on words having definite meanings.

One of the great achievements of the ancient Greeks was Euclid's Elements which synthesised the geometrical know