Bankocracy

Via comes evidence thattThe Irish have all the good economists:
The good stuff starts after the weird song dealio.

History Remains a Discipline, Economics Remains a Bunch of Stuff People Assert

Over to Crooked Timber, Daniel Davis ends a long post with this claim: economics isn’t a morality tale. This is something Krugman likes to say as well. It is, of course, wrong. If we accept that modern economics starts with Smith, which we might not want to but many do, he was explicitly using Jansenist arguments about how God created greed to substitute for "real" charity and how this allowed society to continue despite humanity being depraved. Smith clearly thought that a market based system provided the greatest good for the greatest many. So did Hume. So, in fact, did all the early pro-market capitalism economists. Indeed, it is difficult to find, or to even imagine, an economist arguing that his or her preferred economic policy doesn't provide the greatest good for the greatest many.

In other words, economics is so a morality tale but contemporary economics is a morality tale told by a sociopath.

Market's Don't Exist

Paul Krugman wonders why the "markets went wild" on what he thinks is a "nonevent." The answer is that the markets didn't, because they don't exist. A bunch of people who, recent events have proved, ought not be allowed around sharp objects took the opportunity of a something or another happening to try and make more money actually took the opportunity of something or another happening to make more money. Economics isn't a science and, even more so, investment in stock markets isn't based on science; it's based on, let's call it, the Madoff principle of cheating someone else so that a smaller circle of people can make money by shuffling bits of paper around. Time for a change.

Now I Understand

Herman Cain, whose intellectual negligibility is as boundless as he ego, was fine corporate whatchamacallit; however, as has become abundantly clear  he knows next to nothing about everything other than making a buck. I was, consequently, shocked to find that he

joined the board of the Kansas City Federal Reserve Bank and became its chairman in 1995 and 1996—the most impressive item on his résumé.

I really do think that this fact explains the idiocy of creating an economic system in which failure is rewarded and hard work punished. A bunch of dunderheads took over the government and gave their dunderheaded pals a bunch of money so that they could all enjoy the dunderhead christmas.

?

I can't decide if this, despite being right, is annoying or if it is a clever way of making a complicated point.

Hunger Chancellor

Italy and Greece are set 

to replace elected leaders with respected, veteran officials known for their expertise rather than their political skills

 in order to enforce more austerity, which is now the neoliberal orthodoxy, despite the fact that it makes no sense.

It seems to me that Bruening's failure at the end of Weimar was less a failure of technocratisme as such but rather the limitations of technocratisme in a time crises, which undermine political legitimacy more generally. In the case of Weimar the Negative Majority created a situation in which governmental action was impossible. Increased reliance on unelected technocrats to resolve the serious economic problems through a doctrinaire neoliberalism will be a disaster. Why? The neoliberal global economy didn't fail because of some exogenous shocks combined with inflation; it failed because unregulated profit-maximization leads to this state of affairs.

1) Fewer people have more money and need to get some kind of a return on that money
2) They all begin investing in the same set of things
3) The "value" of those things rises
4) The Bubble Emerges
5) Nonregulation lets the bubble grow
5) The bubble bursts
6) Socialize the Losses

If you could get rid of 6, the problem of the bursted bubble would be the loss of some small number of rentiers' incomes.  But because of 1, the politics are such that 6 has to happen.

So if our technocrats are going to succeed, they are going to have to overcome 1 and 6, which at this stage of the game means abandoning neoliberalism and the notion of the market state. This strikes me as unlikely and, as a consequence, we might find the European periphery at the least in a crisis of political legitimacy that could end in a more democratic, which is to say authentically social democratic moment. Or not.

The point is if they are really technocrats and not zombie ideologues, they will realize that the failure to create a climate of democratic legitimacy will fatally undermine their attempt to "fix" the mess in which those seeking profit maximization led the world. This means, doesn't it?, either some kind of pr campaign explaining why austerity is necessary or shifting their preferred policies to a mix of austerity combined with tax increases in order to preserve public employment and/or public services.

Multipliers or Economics Still Not a Science

Why should 3rd world workers earn as much as 1st world workers, you ask. Well

irst of all, even if we could assure the workers in Third World export industries of higher wages and better working conditions, this would do nothing for the peasants, day laborers, scavengers, and so on who make up the bulk of these countries' populations. At best, forcing developing countries to adhere to our labor standards would create a privileged labor aristocracy, leaving the poor majority no better off.

But what, you wonder, about the multiplier effect. You know where jobs create other jobs. Some people like to explain, slowly for those who need extra help, that

Funny how [ government] spending can only move money around, not increase total spending, if it comes from the government, and how the multiplier is a nonsense concept when applied to government spending, but totally valid when it involves oil companies …

So, apparently, jobs only create jobs in the 1st world.  

Watching Will Put You in My Debt

Ha:

Money and How it Got That Way

I urge all interested in the history of money, debt, and nonsense of economics as a scientific discipline to read this, this, and this. While we're at it, I strongly urge reading this ignorant and hostile response and the comments in which hostility and ignorance vie against and lose to reason and evidence.

Substance Not Process

A fair reading of the new debt ceiling/spending cut "deal," as of right now unpassed, Is that it's not good for what ails us  and, more importantly, appears to be a pretty important abdication of the state's role in the post-WWII era. 

Take the threatened defense cuts, for example, the left has been calling for these ever since Reagan turned us into military-industrial complex with a state attached; however, the idea has always been to redirect the spending into productive or socially useful, infrastructure, research, etc, or necessary, e.g., education, welfare, medicine, acts and transactions. Across the board cuts in defense spending will lead to a  loss of jobs in both the explicit defense industry, factories, support services and other contractors[1], as well as those dependent on these  now unemployed people. How this can be anything other than bad is beyond me. What's worse is that lots of these workers make a decent wage, a janitor, for example, working in the Pentagon or for a military contractor is making more than a janitor at Macy, although both are underpaid.  So this is yet another blow against decent paying jobs and etc.

I have no idea what the people engaged in crafting this deal were thinking[2];  but I am leaning toward hypnotized by toads fed up with wetlands destruction striking a blow for their amphibian brothers.


[1] I know,  I know, but lots of people have jobs not only creating fighter planes and bombs and what not but also logistics and food.

[2] And I am sick of the ill-informed attempts to explain the negotiating process all of which proceed from zero actual information and rely on various forms of tea-leaf reading criticism, which, particularly on the left, which rely on some mixutre of: Obama got rolled, Obama's a coward, Obama's a neocon

Economics Still Not a Science Yet Again

Over to the NRO there is a report of a dust up betwixt the Donald and the Club for Growth. The CFG, which -- I am pretty sure -- didn't sell the Donald his weave, insists that

“One thing that all economists can agree on, regardless of their political leanings left or right, from Paul Krugman and Robert Reich on the left and Art Laffer on the right, is that free trade is beneficial, creates jobs, creates economic value and economic growth and increases the standard of living,” Chocola said.

But where are the jobs? According to ThinkProgress elsewhere where workers' lives are cheap and the living is uneasy:

It might be true that the freer the market the more jobs can be moved from high wage to low wage areas, it really doesn't seem to do much in the lifting all boats category of human improvement. Clearly this particular market has failed and must be regulated as it's invisible hand failed to synchronize the concupiscence and crapulance of the capitalists with the material needs of the workers. (See also)

Economics Still Not a Science

In response to someone or another, noted economist and all round great guy, Karl Smith

believe[s that] each one of these represents a prediction of the economics community that was at odds with the conventional wisdom at the time.

1. The price and quantity of objects sold are determined jointly by the desires of buyers and costs of sellers.

And has 13 more predictive claims that are "true" in the same sense. What's missing? The buyers' income is missing.  My desire for an Surly LHT isn't going to get me one.

Second, the sellers' desired profit, which isn't a "cost" in any meaningful sense of the word. As I understand profit, it's what's leftover after all the bills are paid. You could run a business that made exactly as much as it cost to run it and still stay in business or you tack on 10 percent or 2 or even 5. In a profiting seeking system, the prices of goods and services represent the maximum a seller can charge a buyer and, not surprisingly, the quantity represents the amount the producer thinks he or she can sell at a desired level of profit.

Or maybe not, maybe through the markets' magic people who never see one another send out brain waves in a complicated negotiation over prices paid relative to costs incurred. The obvious silliness of this version of market exchange is one of the residuals of letting 18th century thinking dominated 21st century exchanges.

Consider this one:

The wages of workers in a free market are determined by the amount the marginal worker produces not the average.

Workers' wages are determined by what the owner can be made to pay, unless, of course, he thinks that 19th century America wasn't a free market.

Neither of these claims are close to being lawlike scientific claims, which is what his interlocutor is calling for, and certainly neither holds up as a description of reality. And yet Karl Smith, whose name most likely determined that he would become an economist, want to insist that economic is so a science.

On the other hand, 1 of these sentences is true:

In short, Manzi’s true point shouldn’t be that economists falsely assert scientific knowledge were there is none. It should be that we are arrogant pricks. I think many economists would agree.

Guess which one.

Economics Still Not a Discipline

The other day I mentioned that there was a spirited round of debate about anxious to rescue a way to stop thinking Matthew Yglesias and others insisted that it was so because economists agree on so much that the disagreements are really just some form of noise or so. Not, as it turns out, so.

Paul Krugman writes of the Real Business Cycle, don't ask, that he

know[s] that RBC exists; I know how it works; I just think it’s wrong.

So he understands that other economists explain the economy in way that is wrong. They don't, in other words, agree about a fundamentally important aspect of their discipline's purpose, which -- I assume -- is explaining the way the economy works.  He goes on to argue that

is that it’s OK to consider other economists, even a whole school of thought, wrong; what’s not OK is to be so closed-minded that you aren’t even aware that there are not obviously stupid people who disagree with you.

In the post he mentions that Bradford DeLong, a really odious example of Neoliberalism, takes the same bunch to task and offers them remediation.  DeLong suggests that

[t]here were a lot of things that economists like Frederic Bastiat, Jean-Baptiste Say, and John Stuart Mill knew in 1830 about the origins of aggregate demand shortfalls and the usefulness of expansionary fiscal policy in a downturn that modern Chicago never bothered to read, never bothered to learn, or have long forgotten.

I don't know maybe the insights of folks who had no clue of what capitalism was going to become have useful insights into how to "manage" the economy; but it strikes me odd that in a debate about who is right in matters dogmatic the solution is to turn our attention to people dead lo these many years. It similar to arguing in a debate about, say, the Earth's age we need to go back and read Charles Lyell because he got it just right.

DeLong's quotes also make the point that none of the "freshwater" economists read Krugman because they think he is wrong about everything.

Eden

Joseph Steglitz discusses the art of the possible:

Suppose someone were to describe a small country that provided free education through university for all of its citizens, transportation for school children, and free health care – including heart surgery – for all. You might suspect that such a country is either phenomenally rich or on the fast track to fiscal crisis.

Oddly enough, the ideal future doesn't require wide-spread prostitution or bunion trimming.

Buyer's Remorse

The last cycling jacket I bought was an Adidas from PricePoint for 26 American plus shipping. I've had it for three years and it works great and is waterproof.  Like many cyclists, I sometimes think it would be nice to be bedecked in Rapha's high end gear. This is no longer the case. Here's a discussion of buyer's remorse, with pictures, and it cured me of the Rapha desire.

It's worth while noting that modern industrial capitalism thrives on the mind's infinite wants, about which the Stoics warned, while early observers of the Industrial Revolution made clear that should the former gain ascendancy over the latter, the jig was most assuredly up.

Dismal Science

Frequent commentator John Rove makes the point that economics has long been known as the "dismal science" following Carlye's characterization of Malthus' totally wrong prediction concerning food production and population growth. The inevitability of famine and death was, he argued, part of God's plan for humanity. Malthus decided that the best way to deal with the problem was to curb population growth and increase industry, which is to say less sex and more work.

In 1776 Smith published The Wealth of Nations in which, among other points, he argued that maldistribution led to a situation in which men of great wealth could exchange the "maintenance of a thousand men" for a pair of diamond buckles and in so doing out of concupiscence and wrongly directed amour propre destroy their own political power. Malthus could have, in other words, argued for a more just distribution of the things of this world in keeping with Christ's ethical teachings, Malthus was -- after all -- a curate.  He could also have taken a look around the "Low Countries" and elsewhere and seen the work scientists and states dedicated, for reasons both humane and not so much, to improve crop yields.

Although others disputed Malthus gloomy and anti-human views, his methods, relentlessly focusing on the wrong set of "facts," ignoring the innovation all around him, and trying to rob life of its sweetness, are an important part of the methods of economists who, you know, want to rob life of its sweetness, ignore reality, and, generally, argue that things have to get worse because the system that we now have is "natural" and fiddling with it to produce a more just outcome is to go against laws of nature.

I wonder what thesef laisser faire folks think of the law of gravity, which -- as I understand it -- shows that things in nature tend to fall down.  We shouldn't build skyscrapers or try to fly because, after all, it is a natural law that things fall down and to fiddle with that is to violate natural laws, to say nothing of improving crop yields and birth control.

I remain with Aristotle, at least on the zoon politikon thingy.