Decisions, Decisions, Decisions
Why an Economic Equilibrium is not Like a Physical Equilibrium
The first step of any political reform, I’ve always believed, is to figure out how to achieve the desired goal with the minimum number of changes to the existing legal structure. [Beowulf if a lawyer.] As I’ve written before, Obama’s healthcare plan should have simply been a universal plan similar to Medicare (if not Medicare itself) that covered every American from the day they were born instead of when they turned 65. It would have been faster, cheaper, more universal (as in 100%) and more popular. It was a mistake Obama didn’t take that route and unlike Bill Clinton, he didn’t have an excuse for it....
In the second chapter David Graeber explodes a foundational myth of economics. In textbooks all around the world the history of economics is summarized thusly: first came barter, then money, only later were credit and debt invented. The problem with this presentation is that “barter” economies pretty much never existed. We don’t find them either in anthropological study of any human cultures around the world, nor in historical records anywhere. In fact, the very first records of any kind are of credits and debits in Mesopotamian tablets.
But the story of barter is so ingrained in us we probably find the fact that it didn’t really happen dumbfounding. I mean, of course people barter. Don’t they? If I have wheat and you have ham and I want ham but I don’t have any money I just trade you my wheat for your ham, right?
Graeber shows how the idea of barter was created in exactly this way: as a thought experiment by economists trying to explain their discipline. But the myth of barter was never really compared against actual human societies. It was was simply assumed that barter must be what people do when they don’t have money and all sorts of imaginary scenarios were concocted, without reference to historical records, to explain the invention of money and gradually increasing complexity of this new thing they called “the economy”.
Economists imagine that complications arising from barter are what gave the impetus for creating money. For example they describe something called the double coincidence of needs: you and I both have to need what the other has for a direct trade to work. But the truth is much simpler. Barter doesn’t work in a small village or tribal setting because it presumes antagonism between the people involved in the exchange. If we live in a village where we see each other on a daily basis though, we can’t afford this kind of antagonism. I can’t seek my own gain at your loss because we are in a long-term relationship. Instead we will come up with a way of accounting for debts. When you need wheat I will give it to you with the understanding that when I need ham you will return the favour.
Here is what I think the take-away from this mistaken historiography should be: the foundational myth of economics establishes the entire system on the basis of antagonistic transactions of self-interest when in truth the story of debt is a story about human relationships. Debt was originally the answer to the question of how you and I can meet each others’ needs and remain friends.
Over the course of my academic career and even outside of that I have often been regaled with the claim (as if it is science) that capitalism is the ‘natural’ system for humans because our nature biases us to competitiveness and selfishness.
So Marx’s famous epithet in his Critique of the Gotha program (1875) – “from each according to their ability to each according to their need” – was dismissed as being against our natural tendencies – a denial of basic human nature.
It then followed that planned economies and economies where governments intervened strongly to ensure equitable distribution of opportunities and outcomes, was in some way contrived and would surely fail because our human nature would find ways to thwart such interference.
This has been a compelling and dominant narrative over the last several decades as neo-liberal think tanks, biased media outlets, and politicians from both sides of politics (homogenised into a common economic mantra) reinforced it continuously in print, spoken word and policy.
We shifted from living in societies where collective will and equity was deemed important organising principles to living in economies where every outcome was in the hands of the individual – including mass unemployment – and the concept of systemic failure that could be ameliorated by state intervention was rejected. State intervention was cast as the devil.
It is no surprise that economic outcomes for a rising proportion of the population deteriorated as we shifted from society to economy – from collectivism to individualism.
It turns out that the research into human nature, motivation, decision-making etc largely rejects the ‘competitive selfish individual’ narrative. We are intrinsically cooperative and care about equity. Our basic propensities appear to be collective and cooperative. Funny about that. [paragraphing added for ease of reading on this blog format]Bill Mitchell – billy blog
Many of us know we need to rethink economics, but Kate Raworth actually did it.|Envisioning the economy as a doughnut, two boundaries become clear. If we fall into the doughnut’s middle hole, human needs fail to be met. If we drop off of the outer edge, life is unsustainable.
You should always be weary of people who seek to get the “first lick” on a young impressionable brain. Paul Samuelson knew that by writing a successful economics textbook, he could influence how students frame the economy, and thus the world. From the 50’s to the 70’s, his textbook was the most widely used in introductory economics courses.
Today, that role has been given to Gregory Mankiw’s “Macroeconomics” (see the Open Syllabus Project). Both view the economy in the same narrow way, with the same simple pictures that don’t seem useful today. Raworth’s Doughnut Economics breaches the pattern and envisions a new economics, for a new generation with clearly defined challenges and scant tools to solve them....
If you’ve come here looking for a list, I’m afraid you’re going to be disappointed. The Job Guarantee isn’t a list of things to do, because, unsurprisingly, the people who designed it weren’t fans of central planning.
Instead we’ll go through the Job Guarantee in detail and explain that it is a process, not a destination. We’ll explain what it does and why it is there — using a slightly different viewpoint from normal....
The Job Guarantee is a mechanism for creating jobs of social value. It is a dynamic system that enables and supports the creation of jobs that provide public service to others and that others consider to be of public service.
Nobody has any idea what jobs the Job Guarantee will create or not create because that is left to the Social Entrepreneurs to decide based upon the forces they respond to.In this view of a JG, the currency issuing government doesn't create the jobs directly by employing people, but rather indirectly by providing the supporting institutional structure and funding for job creation by social value entrepreneurs operating on the basis of creating social value through innovation instead of market value like the private sector.
Forget all the claims and protestations about “families of nations” and a “new Europe” and “the European project.” The European Union, and especially the eurozone, is a German empire.And Germany is a pretty much a vassal of the US.
The new capital of Europe is not Brussels — let alone Strasbourg, the home of the European Parliament — but Berlin. The ultimate power of the EU is not the president of the European Commission, but the chancellor of Germany.…
In other words, the Greeks had to be punished in order to terrify the rest of the continent.
If you can think of any historical parallels for this German behavior in Europe, go right ahead.Just German leaders being German leaders.
On the positive side, it surely means the euro is the deutsche mark in drag, and a harder currency than outsiders credit. Achtung, baby.This is the point of the EZ in the eyes of Germany. The euro is the DM in disguise and Germany gets a discount on its currency.
The Human Development approach of Mahbubul Haq was carried further by Amartya Sen, who defined development as the freedom to develop human capabilities. This notion, closely aligned with Eastern thought, was so alien to orthodox economists that they rejected it. Consequently, a new human-centred field of development studies emerged, which combined many streams of dissent from orthodoxy.Freedom to develop human capabilities and human-centeredness are fundamental tenets of the Western liberal tradition that began in ancient Greece, as well as the philosophical raison d'être of the tradition.
It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied. And if the fool, or the pig, are of a different opinions, it is because they only know their side of the question. — Utilitarianism: Chapter 2: What Utilitarianism Is (Part 1)For Aristotle, happiness is a byproduct of living a good life in a good society, where a person progressively develops one's potential as both a human being and as an individual. All persons have the same potential as humans, that is, human excellence as a "spiritual" aspect, and all humans, being embodied and living in historical social circumstances, have a unique personality and individual potential both constitutionally (nature) and contingently (nurture). Human life is about living one's full individual potential socially and according to Aristotle, this can only be achieved by aiming for excellence as a human person.
The Human Development Index (HDI) is a composite statistic of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. A country scores higher HDI when the lifespan is higher, the education level is higher, and the GDP per capita is higher. The HDI was developed by the Pakistani economist Mahbub ul Haq, often framed in terms of whether people are able to "be" and "do" desirable things in their life, and was published by the United Nations Development Programme. — WikipediaReal-World Economics Review Blog
Steven Cohen, Professor of Russian studies at Princeton and NYU (an obvious Russian spy) was besides himself tonight, in sheer disbelief over the with hunt of gigantic nothing-burgers that are being used to assault the Presidency of Donald Trump.
He declared, "today, I would say (the greatest threat to national security) is this assault on President Trump. Let's be clear what he's being accused of is treason. This has never happened in America, that we had a Russian agent in the White House. Cohen believes Flynn did nothing wrong by talking to the Russian ambassador, describing it as 'his job' to do so.
He then illuminated the indelible fact that there is a 4th branch of government, the intelligence community, who have been meddling in American foreign affairs, obstructing the other 3 branches of government.
"In 2016, President Obama worked out a deal with Russian President Putin for military cooperation in Syria. He said he was gonna share intelligence with Russia, just like Trump and the Russians were supposed to do the other day. Our department of defense said it wouldn't share intelligence. And a few days later, they killed Syrian soldiers, violating the agreement, and that was the end of that. So, we can ask, who is making our foreign policy in Washington today?"
Professor Cohen added, "you and I have to ask a subversive question, are there really three branches of government, or is there a 4th branch of government? These intel services. What we know, as a fact, is that Obama tried, not very hard but he tried for a military alliance with Putin, in Syria, against terrorism and it was sabotaged by the department of defense and its allies in the intelligence services."
After so many run-ins with the bitter incompetence and bureaucratic indignity of the banking system, I decided once and for all that I would start my own bank.
The deeper I went, the more overwhelming my discoveries of how shockingly inept, obsolete, and out of touch the industry is.
It’s one thing to read about it in the headlines. It’s quite another to experience it first hand as an insider.
Here’s a great example: you know how it seems commonplace these days to hear about banks getting hacked? Well, there’s a very good reason for that.
Every bank runs on something called “core banking software”, which is sort of a central financial database that keeps track of all accounts and transactions.
Core banking software is the most critical component of any bank’s technological infrastructure.
Yet ironically, the software that many of the most established banks use was originally written in either Fortran or COBOL, both 60-year old programming languages that date back to the late 1950s.
SWIFT is a worldwide banking network that links allows financial institutions to send and receive messages about wire transfers and payments.
SWIFT is absolutely critical to global banking and handles billions of transactions and messages each year.
So you can imagine my surprise when I found out that SWIFT runs on Windows Vista an obsolete operating system that Microsoft no longer supports.
When my bank received its SWIFT code, we were told that we had to have a computer running Vista in the office in order to connect to SWIFT.
It was such an absurd exercise to find an obsolete computer running an obsolete operating system to connect to the supposedly most advanced and important international payment network in the world.
What has Russia done to deserve all the negative press and unsupported claims of criminal meddling?…Just look at a map. For the last 16 years, the US has been rampaging across North Africa, the Middle East and Central Asia. Washington intends to control critical oil and natural gas reserves in the ME, establish military bases across Central Asia, and remain the dominant player in an area of that is set to become the most populous and prosperous region of the world…"
“But one country has upset that plan, blocked that plan, derailed that plan. Russia. Russia has stopped Washington’s murderous marauding and genocidal depredations in Ukraine and Syria, which is why the US foreign policy establishment is so pissed-off. US elites aren’t used to obstacles.”
“For the last quarter of a century – since the fall of the Berlin Wall and the dissolution of the Soviet Union – the world had been Washington’s oyster. If the president of the United States wanted to invade a country in the Middle East, kill a million people, and leave the place in a smoldering pile of rubble, then who could stop him? …Nobody. Because Washington owns this fu**ing planet and everyone else is just a visitor…Capisce?.”
“But now all that’s changed. Now evil Putin has thrown up a roadblock to US hegemony in Syria and Ukraine. Now Washington’s land-bridge to Central Asia has been split in two, and its plan to control vital pipeline corridors from Qatar to the EU is no longer viable. Russia has stopped Washington dead-in-its tracks and Washington is furious.”
“The anti-Russia hysteria in the western media is equal to the pain the US foreign policy establishment is currently experiencing. And the reason the foreign policy establishment is in so much pain, is because they are not getting their way. It’s that simple. Their global strategy is in a shamble because Russia will not let them topple the Syrian government, install their own puppet regime, redraw the map of the Middle East, run roughshod over international law, and tighten their grip on another battered war-torn part of the world.”
“So now… Putin must be demonized and derided. The American people must be taught to hate Russia and all-things Russian…Russia must be blamed for anything and everything under the sun…”
The pervasive ‘hearts and minds’ theory guiding counterinsurgency doctrine contends that military-led reconstruction reduces violence in post-conflict settings.| Using rare data from Afghanistan, this column questions the theoretical and empirical basis of that perspective. Military-led projects in the health sector are found to successfully alleviate violence, whereas those in the education sector actually provoke conflict. The destabilising effects of education projects are strongest in conservative areas, where public opinion polls suggest education projects breed antipathy towards international forces.Imposing liberal values creates conflict in traditional areas. Another paradox of liberalism.
On Ann Pettifor’s The Production of Money: How to Break the Power of Bankers
Douglas Adams nailed it [The Hitch-hikers Guide to the Galaxy (Pan Books, 1979)]:Irrussianality
Behavioural economics has identified phenomena that standard models could not explain. But its critics warn that it is becoming little more than a ‘pile of quirks’. This column argues that the future development of behavioural economics should focus on a streamlining process that will clarify core issues, fill conceptual gaps, and create tractable models. Behavioural models will only become a coherent alternative to homo economicus if this process occurs.Vox.eu
Where Are We Exactly? The banks have ripped us off, screwed the economy, and taken billions in the taxpayers’ name. They are not lending to the productive sector of the economy, they are still paying themselves huge bonuses, and there is barely a flicker of political protest. None of the three major parties are even thinking of doing anything serious to restrain or reform them. (And the same is true in the United States: the Obama administration’s plans for the financial sector will not inhibit the global gambling.1) It’s not that the banks are too big to fail, to quote the title of one of the books about the events of 2007/8: they have already failed. Rather, they are perceived in this country to be too big to tackle. (In America they have simply bought the politicians.)
This essay tries to explain how we got here. By which I don’t mean the recent events leading up to the crash of 2008 – these are have been discussed in dozens of books. Instead I want to set out the older and specifically British back story, both economic and political. The crash of 2008 did not appear out of the blue. Yes, some of the key factors, notably the use of computers in the global gambling, are relatively recent. But many of the building blocks were in place long before the Internet enabled the global casino we now live in.
The story in outline is simple: we got here because we removed the controls placed on the financial sector. For sixty years the British banks struggled to escape the constraints imposed on them by the rest of society. And as they overcame each obstacle they proceeded to create and lend money on an ever larger scale. They lent money against property for the most part and left British industry to look after itself as best it could. The bankers in charge did this to make themselves rich. That’s all there is to it. What follows is a very short account of how this happened. And almost no economics knowledge is required to understand it.*********
Although he never explicitly said this, Heath wanted to convert Britain into a European-style social democracy, similar to that sought by the Labour government he had succeeded. ‘Heath had been very impressed, when visiting Germany, by Willy Brandt’s regular round-table consultations with the unions and the German system of co-partnership; his mind began moving towards establishing a similar relationship in Britain by which the unions should be given an acknowledged role in the running of the economy.’ 24
Heath also wanted the British bankers to become more like their German counterparts, taking direct stakes in British manufacturing.
Western critics continue to pour cold water on China’s Belt and Road Initiative (BRI), an ambitious and well-planned architecture connecting the massive Eurasian landmass through a system of roads, railways and ports. They complain that it lacks transparency, erodes trade standards set up by the West, is financially too huge for China to handle, is self-serving, and is a deceptive vehicle for China to dominate the world, just to name a few.
This is NOT a Constitutional crisis, contrary to press hype, but an attempted coup, as a senior Republican statesman told a private briefing this week.Asia Times
Canadians have a habit of copying Americans trends. Hopefully, a housing-fueled banking crisis is not one of them. https://t.co/5YnFW8vKjS— The Lex Column (@FTLex) May 12, 2017
The New York-based Jewish magazine Forward ran a lengthy piece examining my story forecasting a potential scenario of a major financial crash in or shortly after 2018 (the one that was picked up by the New York Observer). The article is authored by Andrew Eil, a coordinator of climate assistance programs for the US Department of State from 2010 to 2014. He now runs his own consultancy and his clients include the World Bank, the UN Environment Programme, Bloomberg LLP, among others.
The piece is worth reading for the profound insight it provides into the way some sectors of the establishment tend to view the prospect of a global convergence of systemic crises. Eil's basic argument is that, it doesn't matter if the entire world experiences a series of cascading synchronous failures because of a major convergence of oil, food and financial crises driven by fundamental systemic and structural processes. It doesn't matter because Israel, he thinks, will be largely insulated from the worst impacts of these crises, and therefore will potentially even benefit from the resulting chaos.
While the Middle East and other parts of the world become weaker, Eil suggests that if my worst-case scenario indeed transpires (and I hasten to add that it is only one potential scenario - there are others, and here's another I've outlined), Israel will be left standing. Eil points out some compelling facts that highlight how Israel could be relatively insulated from the worst impacts of a global crisis scenario. Unfortunately, his argument also highlights the sort of myopic, frankly, self-serving elitist thinking very much associated with the very paradigm that has made the global system so vulnerable to crisis:The Great Unravelling
A group within the labour movement had concluded that the key structural conflict in Britain wasn’t between the classes, the Marxist view, but between the interests of the domestic and overseas sections of the economy; which in shorthand boiled down to on the one hand the City and on the other manufacturing. People wrote essays with titles such as: the City versus industry. This group included Neil Kinnock, as his 1986 book, Making Our Way, shows; and Bryan Gould, who also thought like this, was appointed by Kinnock to chair the committee on economic policy. Gould’s committee duly produced a detailed analysis of why the bankers had too much power and how to reduce it.
But the Gould committee report was rejected by Neil Kinnock as soon as it appeared. Gould tells us that just before the report was due to be published a group of Labour MPs came to see him to try and get it stopped or modified. One of them was the then rising star of the back-benches, Tony Blair. This was 1988.
We still don’t know for sure why the Gould report was dumped: none of those principally involved have explained it. My guess would be simply that the group around Kinnock wanted to get elected more than they cared about the state of the British economy or the fate of its citizens; and having lost two general elections, decided that the bankers were too powerful to challenge. By this time – 1988/9 – the City had been largely sold off to American banks in the so-called ‘big bang’ of 1986 and was well on its way to being an extension of Wall Street; and thus to be anti-City of London increasingly meant being perceived as anti-American.
For whatever reason the policy review document on the economy was abandoned, and Labour began the long process of making itself acceptable to the City of London – even though the City then was only about 4% of the British economy.
Shadow Chancellor John Smith led what became derisively known as the prawn cocktail offensive, as he toured the City of London’s dining rooms in the years before the 1992 election, promising them that they would get no trouble from a
In some of these dining rooms John Smith was already known: at this point he was on the steering committee of the Bilderberg group, some of whose regular attenders are bankers.
But this ass-kissing was to no avail: Labour lost again in 1992. Neil Kinnock resigned and John Smith won the leadership election, defeating Bryan Gould, the leader of the anti-banker tendency within the parliamentary Labour Party. My branch of the Labour Party was one of the few which voted for Gould. Gould’s loss to Smith was the end of the anti-banker tendency in the Labour movement.
Under John Smith, Tony Blair and Gordon Brown became shadow front bench spokesmen and were widely seen as the coming men. When John Smith died in 1994, Blair took over and NuLab began to form.
The central fact remains: the party of Clement Attlee, Harold Wilson, Barbara Castle and Jack Jones, largely funded by the trade unions, chose as leader someone [Tony Blair], as well as being Mrs Thatcher in all but name, is the godfather to one of Rupert Murdoch’s children, never saw a powerful arse he couldn’t kiss, and, most striking of all, hated the Labour Party and everything it stood for.http://www.lobster-magazine.co.uk/free/lobster63/lob63-new-labour.pdf
I think it has a purposeful, studied effort and outcome, which is a coup. We are watching a silent coup here to oust a duly elected president, and this coup is being mounted by career government people who can traffic anonymously and who are protected by people in the media and within the Democrat Party. Stop and think of it, folks. A year. How many…?
Hasn’t the Washington Post at one time admitted that they have over 30 anonymous sources for all of this? That’s just one newspaper, 30 anonymous sources there.
How many anonymous people are talking New York Times? How much overlap? How many sources are talking to both places? All these deep state career government people, ex-Obama people that are civilians now? We don’t know. But it is a lot of people, and there isn’t any evidence....