Home > Uncategorized > After the crisis — business as usual

After the crisis — business as usual

from Lars Syll

3monkeys6In contrast to the experience of the Great Depression, which led to the emergence and acceptance of novel theoretical concepts on a large scale, the financial crisis and its consequences have, by and large, been rationalized with reference to existing theoretical concepts. Although we do observe a slight shift away from the idea that financial markets are efficient by default and prices only follow random walks, the basic conceptualization of (financial) markets as being efficient and equilibrating in principle seems unquestioned. On the contrary, the rising prominence of the concept of “liquidity” – understood as the availability of funds to absorb financial assets to be sold – in the aftermath of the crisis indicates that the financial crisis is seen by economists as a major external shock, unforeseen because of the limits imposed on rational behavior by asymmetric information, and not as something intrinsic to the economic process. Similarly, our analysis of the reception of major crisis-related books shows an only temporary increase of interest in classic contributions dealing with financial and economic instability, which was even weaker for more distinguished journals. These observations signify a key difference in terms of the ‘lessons learned’ from past crises when compared to the Great Depression, which gave rise to a broad consensus that capitalist economies are not self-sustaining, a consensus that eventually helped to forge the mixed economies dominating the richer parts of the planet.

E Aigler, M Aistleitner, F Glötzl & J Kapeller

  1. Craig
    September 3, 2018 at 8:34 pm

    Tweaking like the reforms that came out of the great depression leave virtually no more room for changes….without considering the new paradigm of Direct and Reciprocal Monetary Gifting…so why would we expect any changes when Finance’s monopoly powers must yield if the new paradigm is to implemented and economists are still stuck in the paradigm of Debt Only for the form and vehicle for the distribution of income? Economists have been ruminating over the problems of the current paradigm when mentally stepping out of the old paradigm is what is required. Einstein said this, R. Buckminster Fuller said this, Thomas Aquinas said this, Aristarchus of Samos/Copernicus said this…but economists don’t seem to get the point. They’re stuck. They NEED to get unstuck.

  2. Paul Davidson
    September 3, 2018 at 8:56 pm

    in order for a financial asset to be liquid,as I emphasize in my new book entitled WHO’S AFRAID OF JOHN MAYNARD KEYNES? , The asset must be readily resalable in a market
    that is well organized and is ORDERLY!

    Orderliness requires a market maker and the central banker as the market maker of last resort!. Thus QE by the Federal Reserve was the central banker becoming the market maker in derivatives and government bonds. You can read why in my book that has a whole chapter on the requirements for liquidity in the market for financial assets– and why, therefore Bitcoins are not money!

    Paul Davidson

  3. richardbelldc@hotmail.com
    September 3, 2018 at 11:53 pm

    As someone who has worked as a professional editor, I would encourage you to use more paragraphs in your posts. What I see is one giant blob of text, without a single paragraph. I usually find it worth the effort to unpack such pieces. But I wish you would use paragraphs and make it easier for all of your readers to follow you.

  4. tyillc
    September 4, 2018 at 1:23 am

    First, the fact the Economics profession only experienced a slight shift reflects the imperviousness of the profession to new ideas.

    Second, Paul, “orderliness” requires transparency. In the absence of transparency, when doubt arises about Wall Street’s valuation story for an asset, there is no way to dispel this doubt. Doubt about the valuation story also gives rise to the question: is the asset worth anything?. Hence, no buyers.

    You might find the following post of interest as it addresses both of these issues: http://instituteforfinancialtransparency.com/2018/08/30/capitalisms-near-death-experience-is-still-a-golden-opportunity/

  5. Prof Dr James Beckman, Germany
    September 4, 2018 at 5:49 pm

    Good points all. More buffering assets is the way the EU & US, at least, have prepared for the next downdraft. “Risk Classes” which lead to a calculation of those buffers are a very slippery slope, meaning they are open to interpretation. As long as finance can be bailed again out of its occasional miseries, who’s to care…except perhaps the public & serious economists? On “transparency” we are subject to current salespersons’ analyses, left in the final moment to “Who would have known?” uttered by a famous Fed chief.

  6. Helen Sakho
    September 5, 2018 at 3:08 am

    One wishes one could understand what did ever amount to seriousness, transparency, fear of being right or wrong in the world of mainstream economists and their followers.

    Their world and their thoughts and formulations appear to belong to NOWHERE, but be present EVERYWHERE. Their refusal to even accept Economics as a SOCIAL SCIENCE is nothing new at all. Their expectations that this will be an ahistorical continuum is, therefore, thoroughly justified…

    Tragically, they have become more deadly, more catastrophic and cruel. Disregard for the many civilisations they had managed to help erase was one thing, but going back to erase more traces is another. We need to humanise Economics. It really can be a crucial and increasingly important science.

    • Prof Dr James Beckman, Germany
      September 5, 2018 at 7:57 am

      Helen, isn’t another way to examine contemporary economics, since it seems unable to consider itself a science of observation, to ask about its ethics. Adam Smith himself commented: https://www.iep.utm.edu/smith/

      “Adam Smith is often identified as the father of modern capitalism. … Smith was not an economist; he was a philosopher. His first book, The Theory of Moral Sentiments, sought to describe the natural principles that govern morality and the ways in which human beings come to know them.” So perhaps Smith is not an economist to mainline economists today, just because he used his eyes to observe economic processes, just as did Greek & other early thinkers who observed & measured the world around them. While it may be irreligious, isn’t academic economics much like the Catholic Church today with its continuing revelations of priests’ sexual misbehavior. Colloquially, both are a mess–which however is an incentive for reformers to clean up both, is it not?

  7. September 11, 2018 at 10:34 am

    There is one and only one way to create an understanding of the associations that make up the life of any group of Sapiens, large or small. That way is direct observation. And even this way is filled with pitfalls. The observations can be poorly performed. The observer(s) can fail to be diligent. What’s observed can be misunderstood or lied about by those being observed. Observers can be hostile to the subjects of observation. And many others. If done with care and honesty, however, observations will provide not only a representation of the group’s actions but also of what they mean for the group and how the group explains the actions. In terms of this way theories from the observer(s) are irrelevant. The only theories reported and examined should be those of the observed. In the physical sciences observer theories are important, but not so in the social sciences where it’s the observed’s associations we’re seeking to describe and understand. Too many social scientists, including economists operate with the reverse understanding of their job. Which, of course reduces most of their work to parody and triviality.

    • Craig
      September 11, 2018 at 4:37 pm

      Very true. Ultimately how accurate theorist’s assessment is, most often depends upon what the hierarchy of their values is and their willingness and ability to consider and mine truth from apparent opposites.

      • September 12, 2018 at 7:06 am

        Craig, correct. But the mining isn’t about truth. Rather, it’s about fairly representing the associations through which the group observed has created itself. And the meanings and explanations attached to that work. And as you suggest some of this work is not easy to observe or to understand. Sometimes anthropologists spend years on an ethnography just to learn the basics of relationships and vocabulary. And most agree it’s impossible and ill-advised for an anthropologist to know the life of a group as well as native members.

        And then there are historians who are always working with the disadvantage of no direct observation. Of observing only, the results of work done in the past. Decisions made, and constructions completed. As the soccer play-by-play announcer says, action in “real time” is always preferable.

      • Prof Dr James Beckman, Germany
        September 15, 2018 at 11:47 am

        Another good discussion, Ken. What behavioral economics has noted is that we stick to our behavioral patterns, wherever we might say. The fact that holding an asset is an important personal value to most persons is in line with this. What we don’t as often discuss is the continuance of personal liabilities–non-assets–just as tenaciously. Once conditioned in almost anythings, change is tough!

      • September 16, 2018 at 8:46 am

        Humans are conditioned but not like its described in “Popular Psychology.” Sapiens is a communal species. Its evolution is called second level. Human evolution is by group, not individual. Evolution has never been “survival of the fittest.” And for humans it’s never been survival of the fittest individuals. That’s a wholly spurious belief created by Hebert Spencer and his followers. And used to its full potential by the rich to subjugate the non-rich for 200 years. This biology lie is also used to stymie cultural changes that could alleviate the suffering of many of the non-rich and to create greater economic equality between the rich and non-rich. Economists are not the only social scientists complicit in this massive lying campaign. In that group we find also psychologists, social psychologists, anthropologists (till about 1955), and till 1960 sociologists. One of the biggest failures of the social sciences. So big sometimes I think the notion of social sciences should be abandoned.

      • Prof Dr James Beckman, Germany
        September 16, 2018 at 9:25 am

        Ken, if you study animal behavior you quickly observe that in any group there are leaders, perhaps anointed by age, size or parental status (eg, oldest female in a big cat assemblage). Over time ethologists have noticed that individuals play an enormous role, although of course the effects on the group are paramount. Think Woodrow Wilson, FDR, Donald Trump & PM May, for starters.

      • September 16, 2018 at 11:38 am

        James, here I must disagree with your comment. Field experiments have shown repeatedly that in challenging physical and mental tasks facing humans cooperating groups not only perform better than any individual member of the group but also receive more enjoyment from the work. In solving problems, mental or physical it’s group cooperation, not leadership that matters most.

      • Prof Dr James Beckman, Germany
        September 16, 2018 at 3:24 pm

        Ken, you seem to deny the role of leadership, which was my point & which I learned through sports & the Marine Corps. Most academic studies lack the immediacy of such situations: we have fifteen minutes to cross the river before the enemy annihilates us. There is no bridge but odds & ends on our side. The prize goes to the first team of any five who get across, with others to follow. We were given that at Quantico after commissioning but while in Basic School.
        In fact, in academic studies the profs should disappear & random groups of participants organize under some quickly formed leadership in each. Just like all our ancestors did, I expect.

      • September 17, 2018 at 5:42 am

        James, I’ve never rejected the notion that there are members of a group that in one way or another have the title leader attached to themselves. It’s the impacts on group success of those labeled such with which I disagree. Like you I was a Marine. First a platoon commander and then a company commander in Vietnam. That’s where I first realized that cooperation and coordination in groups always creates greater accomplishment than achievable by following the directions of the so-called leader(s), such as a platoon or company commander. I reject “great man” history for the same reasons. As do most historians today. But in the 18th and 19th centuries great men were the whole of human history. This view is also consistent with all we know about Sapiens’ genetic and cultural evolution. Human groups are more creative and resilient than leaders. This makes groups the better tool for resolving problems confronting humans. No leader required.

      • Craig
        September 17, 2018 at 6:13 am

        Paradigm changes are penultimate cultural events, and long over due paradigm changes like the monetary and economic paradigm of Debt Only which has been in force for at least the 5000 year old course of human civilization have the potential for effecting multi-disciplinary leaps of human cultural evolution including that of consciousness studies.

      • September 17, 2018 at 6:50 am

        Craig, before we go listing the “penultimate” cultural changes in human history, perhaps we need to look closely for what some of these might be. For example, Sapiens invention of religion, of government, of economics. Are these penultimate? Or what about the invention of monotheistic religions. Or maybe the invention of atomic energy? Some ideas about distinguishing penultimate from everyday would be useful.

      • Craig
        September 17, 2018 at 8:44 am

        Cultures are patterns…and so are paradigm changes. That’s evident by definition. I’m referring to the known classical paradigm changes like from Hunting and Gathering/Nomadism to Agriculture-Homesteading, Hand written communication to mechanical with the invention of the Guttenberg Press, the Copernican Cosmological paradigm change from terra-centrism to helio-centrism which was in many ways responsible for the rise of the scientific viewpoint, the change from analogue to digital/cybernetic.

        I probably misused the word penultimate as it refers to second to last, although the paradigm change from Debt Only to Monetary Gifting being such an integrated part of human existence and so long overdue may actually be penultimate in that it could possibly lift the so called curse of Adam (only by the sweat of thy brow shalt ye eat your bread) and enable the ushering in of an age of leisure (self chosen constructive activities) and enable the first technologically advanced contemplative society which in turn could eventually enable what I would consider an ultimate paradigm change from religiosity/dogmatism to spirituality (focus on the self actualization of the beneficial experiences behind such dogmas).

      • Robert Locke
        September 17, 2018 at 9:29 am

        True, Craig, but how do we assess the pertinene of leadersship to sucess as opposed to group coordination and cooperation. If one lives in the United States, which is besotted with leadership, CEOs, military elites, etc, it is almost impossible to get people to apprediate the superiority of group, leadership that is group rooted,which is considered to be farsuperiorty to uUS leadership concepts, of MBA, military academy training.Each side argues relative strengths of weaknesses, the superiority of strategic theory and instrumental implementation in the US system, the superiority of the German, on the operational level.

      • September 17, 2018 at 10:58 am

        Robert, excellent comment. I concur in full. Craig, you present some interesting notions. But aside from Robert’s arguments, you should keep in mind that most cultural changes are not planned and certainly not planned in the detail you describe. But more importantly cultural changes develop via group consensus. Achieving such consensus is difficult. Wars have been fought over consensus.

      • Craig
        September 17, 2018 at 7:08 pm

        Robert, yes that is a good point. I would say that cultures take on the character of their paradigms, and since the nature and the way that the policies of the new paradigm of Monetary Gifting would be best integrated into our culture is the utterly integrated/integrative/decentralized tool of double entry bookkeeping that would help influence the mindset of the group toward the wisdom of enlightened leisurely anarchy which I would define as the individual freed into what he/she thought was their own ideal scene/utopia combined with and guided by a hierarchy of human needs like Maslow’s pyramid including his final level that he added after the first pyramid was introduced…self transcendence.

        It’s just another example of Wisdom’s process of the integration of opposites.

        Ken, IMO lack of conscious planning is part of the problem. However, having the leisure time, the relative guaranteed security of great technological productivity provided by the new paradigm of Monetary Gifting and the valid psychological guidance of a Maslow or any of the world’s wisdom traditions thoughtfully acculturated is undoubtedly the direction to move.
        Wisdom is integration/integrating.

        And finally, there is no end to history and not everyone has to be or can be wise (as part of wisdom is the positive and constructive integration of one’s experiences youth will inevitably be lacking it to one degree or another), but if the dominant ethic of a culture is wisdom rather than by definition any other lesser consideration…I trust we’ll be progressing.

      • September 18, 2018 at 11:38 am

        Craig, Sapiens history shows it to be a pernicious and creative species. The changes you suggest would need to not just blunt but eliminate for all time both these aspects of Sapiens. That seems impossible, not to mention futile. As to “conscious” planning I’m not certain I know what that is. Neither does anyone else I know of.

      • Craig
        September 18, 2018 at 2:47 pm

        Well, as you might have noticed I’m not into counsels of despair. Wisdom isn’t just airy-fairy nonsense it’s the positive integration of the practical and the ideal. I would only say that one of the cures for cynicism is getting a new hobby that breaks up one’s intellectual fallow ground and hopefully brings them into closer contact with the glories of present time that they may not have experienced since they were a child.

      • September 19, 2018 at 7:26 am

        Craig, William James and St. Augustine are proud of your commitment. But others might say you’re being “unrealistic.” Excuse my language.

  8. Prof Dr James Beckman, Germany
    September 19, 2018 at 8:29 am

    Ken & Craig, this is really interesting, but however we personally feel the world moves on. Point 1) The US imports only about 14% of China’s exports, but China depends for the time-being upon US electronic components. Most of the components these days are licensed & paid for in the normal commercial way. Trump has just added $200 billion worth of Chinese imports subject to tariffs. China has retaliated with $60 billion worth of US imports subject to tariffs. Point 2) Huge fires & more intense storms as tokens of global warming. Point 3) More refugees from Africa & the Middle East. Put these together: Capitalism will remain stronger than ever, working on all sides of national borders being shuttered to the free movement of people & products/services. If you take aside the US Military & China (both artifacts of government) only Capitalism has the human resources, experience & capital to deal with these at the moment. Fact, it seems to me. But five years down the road?

    • September 19, 2018 at 9:57 am

      James, all good points. 1) Any financial clash between China and the US, China is likely to win. As we say in poker, China has the bigger bank. China has already pirated most technology, including Intel chips. If all else fails, China can simply purchase the US. 2) You got it. 3) If China’s plans work out many of the potential refugees will stay home. As a result, Chinese capitalism may emerge dominant. I don’t particularly like this scenario, but I believe it’s possible.

    • Craig
      September 19, 2018 at 6:15 pm

      With the strategically insightful implementation of the policies and regulations of the new paradigm of Direct and Reciprocal Monetary Gifting, Direct Distributism will become the economic reality. Then, because we would not have to worry about the effects of unemployment thwarting economic profitability and our rational self interests, we could swiftly re-industrialize in the most productive, efficient and ecologically sane way possible, therefore reducing trade imbalances and withdrawing from the coalescing wet dream of economic and financial globalists unconsciously advocated by the terminally orthodox in both parties and disintegratively pursued by non-planning merchants of chaos/populist idiots like Trump and Bannon. The resulting domestic prosperity, stability and economically clarifying cognition on the new paradigm’s efficacy would undoubtedly stun elites in other countries and elicit demands for similar changes by their citizenry there.

      Ah, applying the natural philosophical aspects of grace to economics, anthropology etc. is such a solid path toward a discerning integrative thirdness greater oneness…..that everyone not yet entirely aware of its temporal universe and self actualizing effects….claim they’d like to see.

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