Home > Uncategorized > The public economy in crisis

The public economy in crisis

from W. Milberg and the current issue of the RWER

With the Trump tax cuts of 2017, the disconnect in popular discourse between government spending and taxing became more or less complete. Rate (and revenue) cuts were considered politically appealing, independent of any imagined social goal that might require public financing. It constituted an end to the debate over the government spending required to attain social goals and the analysis of the tax rates and regulations needed to finance this spending. Whether or not the 2017 tax cuts were merited from a macroeconomic stimulus perspective (they were not), it is important to note that not once in the recent debate over tax cuts did the issue of social protection and public spending become part of the discussion. In the US at the moment, there is little possibility for meaningful discussion of the public good, and specifically of infrastructure needs, educational improvements, broadening access to health insurance, expanding retirement pensions, reducing poverty or even assisting those injured by the introduction of new technologies or foreign competition.

How could such an economically-advanced and financially-sophisticated culture be so completely clueless when it comes to knowing even how to talk about the role of government and the benefit of government programs?

A very compelling answer to this question – and an urgent appeal for change – comes from June Sekera, in her book The Public Economy in Crisis: A Call for a New Public Economics, which arrives at a crucial and opportune moment. Sekera argues that the reason the public does not connect taxes to expenditure and does not even know how to discuss the benefits of government spending, is that the economists themselves do not have the conceptual framework to deal with the issue.  read more 

  1. January 15, 2019 at 4:21 pm

    It seems to me that MMT describes the different roles for the public sector and the private sector in terms that could be used today with inventing a new economic ideology. Wikipedia lists the economists who have further developed and described the ideas re MMT: https://en.wikipedia.org/wiki/Modern_Monetary_Theory

  2. January 15, 2019 at 4:22 pm

    Sentence should be “could be used today without inventing a new economic ideology.”

  3. January 15, 2019 at 6:43 pm

    MMT gets a lot of it right but bottom line, MMT is basically apologists of the existing system, showing how, through policy, the most that can be derived from the existing system. Many are advocating for basic changes in the monetary system such as Ellen Brown (Public Banks), Joe Firestone (T$ coins) and there are those who still favor the Chicago Plan.

    • Craig
      January 16, 2019 at 4:11 am


      MMT’s main draw back is that it is mainly focused on government debt when the continuous build up of private debt is the bigger and more salient point.

      Yes, MMT has value because its anti-austerity which aligns with abundance and monetary gifting which are aspects of the new paradigm all of which align with the natural philosophical concept of grace. Steve Keen’s de-bunking of DSGE and disequilibrium theory and Minsky’s financial instability theory also align with the new paradigm, it’s just that he hasn’t cognited on the fact that policies strategically crafted around the new paradigm of abundantly direct and reciprocal monetary gifting and grace as in a dynamic, interactive, integrative free flowing state and process of “higher disequilibrium” is what will complete his theorizing.

      Michael Hudson’s theory identifying the key structural economic problem of financial parasitism and his historical research regarding debt jubilees which is a form of monetary gifting would be completed by the new paradigm as well.

      Some here mistakenly think that my focus on money is intellectually isolated, fragmentary and cranky. They miss the main thrust of my thinking which is the integrative ethic and its pinnacle concept. I’m continually pointing at the concept that defines the new monetary, economic and financial paradigm and even the concept behind that and every historical paradigm change, and identifying realities at that level and higher. I have posted this scale here several times. It is a scale of the levels of mental integration that one can approach problems and solutions from, and each level contains the thinking of the levels below it. Unfortunately but inevitably minds focused on whatever level they are habituated to are generally scantily conscious of the levels above and so have trouble self actualizing the realities that exist there. This is Maslow’s psychologically correct pyramid.

      Ascending from bottom to top it is:

      Zeitgeist/Ethic of the Age




      Research/Data Gathering

  4. Helen Sakho
    January 16, 2019 at 2:24 am

    One remains unsure as to what “an economically advanced and financially sophisticated culture” refers to. And must presume that it is a reference to America and Mr. Trump? Please correct me if I am wrong, but the MMT model matches both adjectives.

  5. John Hermann
    January 16, 2019 at 9:49 am

    Craig, you are mistaken in thinking that MMT is mainly focused on public debt and you are also mistaken in thinking that MMters are unaware of the the importance and significance of the gradual buildup of private debt, and your assumption that MMTers do not prioritize tackling the problem of excessive private debt is simply wrong. MMTers as a whole are well aware of the ideas and insights of Minsky..

    • Craig
      January 16, 2019 at 10:20 am

      John H,

      I didn’t say they were unaware of it. Whenever I hear them or read what many of them say that’s almost all they clamor on about. My point was actually that they don’t seem to be aware of what the concept of the new paradigm actually is and so they have at least one foot planted squarely in the current/old one, namely Debt/Burden/Additional Cost Only. They rail against a universal dividend in favor of a job guarantee which again shows that their remedies fall within the paradigm of Work For Pay Only, and like almost every economist other than social crediters have absolutely no awareness of the policy expression of the new paradigm itself of direct and reciprocal monetary gifting (and social crediters on the list I know you’re aware of can’t/won’t think innovative-ly with Douglas which means they’re happy to only come up with a superior theory instead of a paradigm change and there’s a helluva lot more benefit with the latter than the former.

      I’m not intending to slam anyone actually, I pointed out how MMT and other theorists align with the new paradigm, just trying to get others to think on that higher level of mental integration.

  6. January 17, 2019 at 4:24 am

    Hello all. I think we should agree that the new paradigm of ethical civilization has yet to be fully articulated and published. Hence, the new paradigm of cultural economy has yet to be fully articulated and, more importantly, adopted, globally. Also, re: MMTists, the situation reminds me of SM pop physics, where the True Believers all clearly think and act as if their most preposterous hypotheses & conjectures are undisputable, well-established truths. The homoscientisticuses among us say 1 thing when confronted with a critique, and another when spouting their effluvial bullgas about their SM phantasies. Also, Craig, I think your list of Maslow’s factors are upside down. Also, zeitgeist/ethic of the era seems intrinsically inseparable from the dominant paradigm (the commonly accepted model of consensual reality).

    • Craig
      January 17, 2019 at 8:45 am

      Yes, research/Data Gathering is the bottom, Ethic/Zeitgeist is the top. An ethic of the age is the purest expression of a paradigm and the acculturation of it. Grace is the next zeitgeist for not only economics, but everything from physics to spirituality. Grace being the ultimate integrative trinity-unity-oneness-process of everything….how can it not be so. The recognition of grace as the answer in and of each and everything/the cosmos is actually the holographic insight (every part is and has all of the essential aspects/parts of the whole…and vice versa)

  7. January 27, 2019 at 8:02 am

    Well, economists may not have the conceptual framework to deal with the issue of the public economy, but many members of the public have a framework, several frameworks in fact they use in dealing with public economics. I’ve talked with farmers, lawyers, short-order cooks, engineers, bankers, librarians, etc. With only a few exceptions they all understand the need for a public economy and understand it’s up to them to fund it. They differ on how large that economy is or needs to be but only in so far as what is necessary for the nation to survive. There’s great debate among them about these issues. Most of the members of the public see the public economy in terms specific topics, not general theories or rules of economics. The public wants protection from gun violence and supports background checks and other gun ownership rules by a wide margin. The public by a wide margin does not want schools, utilities, roads, airports, etc. privatized. Despite announcements by pundits and other “smart people,” there never was any ground swell of support for making public goods private. Just this week Davos attendees, and political and economic “elites,” pundits, and economists in the US expressed surprise that over 60% of Americans supported Rep. Alexandria Ocasio-Cortez (D-N.Y.)’s proposal for a 70 percent marginal tax rate on the richest Americans. A proposal that has had this level of public support for the last 20 years. In the minds of many, tax reform like this is clearly part of the public economy. That this has somehow escaped many so-called experts is distressing but is just one sign of the detachment of pundits, politicians, and other “leaders” from everyday life of most Americans, including the public economy. An alternative explanation is that these leaders know the views of most Americans but choose to ignore them because they are inconsistent with their own views and/or the needs of their donors.

    • Robert Locke
      January 27, 2019 at 11:07 am

      Why do our experts on this blog not write more about how change is managed, we get lists of re-distributive policies and programs, but very little about how societies have or can effectively change themselves. As an historian writing about how the Federal Republic of Germany changed itself in the immediate postWWII world, I had to look at the issues the German political public fought over and the outcomes reached. The roadblocks were largely political, mainly coming out of the United States, which objected to forms of capitalism, different from its own, and the consensus German political forces organized to oppose US style capitalism and arrive at a viable alternative, the installation of co-determination forms of firm governance, that Americans ngos and government fought tooth and nail, but Germans adopted anyway, and the development of a social market system of capitalism. I write about this in ch. 2. “German Obstinacy,” in (1996) The Collapse of the American Management Mystique, OUP, 55-103. I am starved for information from historically savvy analyists that explain how things get done.

      • January 27, 2019 at 9:00 pm

        Peter Radford’s article on shareholder value in RWER 86 got me looking at UK law on the subject, and it seems how ‘the other side’ got things done was to enshrine the theory into law, here Section 172 of the Companies Act, 2006. Appallingly, but not surprisingly, this was under Tony Blair.

        Click to access 15.pdf


      • January 28, 2019 at 7:46 am

        Robert, the story of the current mess in the US goes back to the founding of the USA. Plato warned that the rich want to keep getting richer, forcing the poor into debt, splitting society into two, and leading the poor to buy into a demagogue’s promises, thereby dooming democracy to turn into tyranny. This is a calamity at the very heart of democracy; that leads to tyranny and subjugation. It is, says Plato one of the stages of government, intolerable yet unavoidable. The founders of the USA knew Plato’s warning. All had been educated in classical philosophy and literature. In their view the most likely tyrant is a plutocrat. So, from the beginning of the USA every effort was made to stop the creation of plutocrats. The Federalist papers mention both the problem and its solution several times. After the end of the Civil War, plutocrats began to take charge. By 1890 America was a plutocracy. As Plato predicted the American people began to look for saviors. Luckily many Americans had not forgotten the founder’s fears and instructions. These Americans created the Progressive Movement. But they couldn’t stop plutocracy. By 1920 the economy is fianacialized; fortunes are made and lost betting on stock prices. And everybody bets. By 1925 plutocracy is in full bloom. Plutocrats have “saved” America. Then stock prices fail. The Great Depression devastates the American people and the American economy. Plutocrats did not save us after all. By the 1950s Americans once again felt the need for salvation. American plutocrats answered the call. They called it “scientific management,” “neoliberalism,” “libertarianism, etc. And they showed Americans the kindly faces of compassionate conservatives like Ronald Reagan (“the Gipper”) to prove they are America’s savior. But for all its dialog about liberty, its results are tyranny. Its supporters believe the private sector always does everything, or most everything better than the government ever possibly could. They want to privatize most every government job. Many times, even those jobs they admit government should be doing. And, wonderful of wonderful the private sector does the jobs easily, profit motive, y’know. The great god is profit, and they love it. So, the battle is joined. With these notions ascendant, there is no public economy. An economy that does not involve profit simply can’t exist. Public economics often focuses more on services than profit. Trump is positioning himself to be the protector of the public economy, or parts of it at least. Before he even took office, Trump promised to protect Social Security and Medicare, two programs Republicans have long sought to destroy. Now just today, Trump promises action to prevent patients from receiving massive unexpected medical bills, which often lead to bankruptcy. Straight out of the tyrant’s handbook. And once again contrary to positions of the Republican Party.

        Dave, check out the ‘‘Accountable Capitalism Act’’ submitted by Senator Warren. You can find the bill here, https://www.congress.gov/bill/115th-congress/senate-bill/3348 It is similar to the UK law you forwarded. Now the issue is enforcement in the UK and passage and signature in the USA.

      • Robert Locke
        January 28, 2019 at 8:19 am

        These are historically savvy points about the nature of the problem and some paths to reform. I’m worried if the paths of reform are sufficient, We don’t need the state to run things if the civil society operates to bring about re distributive justice. In West Germany civil society was affected by creative co-determination in firm governance, no need much for state regulation if the employees in the firm have a voice in its management, including compensation committees. But you said that Americans won’t give up the proprietary conception of the firm for an organic conception. That leaves us stuck with government to save us, which Americans dislike. It looks like the rich have the public mind in a vice of ineptitude. Germans had two advantages when they reformed their societies, 1) they accepted and created a partnership between government and business/industry to further social justice. 2) the “directing classes” in bureaucracy and in business/industry bought into the idea of sustainability of the economy and what needed to be done to achieve it. Americana won’t do either.

      • January 29, 2019 at 7:43 am

        Robert, the USA is a unique nation in many ways. First, the ancestors of a large share of its population settled in the USA either because they were thrown out of another country or left because their way of life, religion, or both were considered unacceptable. Second, the first and many subsequent settlers coming to the USA were among the poorest and most powerless people in the world. Many came as indentured servants and moved to frontier settlements because they could afford nothing more. This extreme poverty left a stigma on the entire nation. Third, the USA has been populated by a diverse mixture of ethnic, religious, and national groups. As well as groups of varying wealth and status. Each brings its own ways of life. It took years for these to merge. Even today many remain unincorporated into the mainstream. Many, in fact today still stand proudly and deliberately outside that mainstream. Finally, due to the above and other reasons, the USA has had difficulty since its beginning in dealing with the questions of slavery and racism. It’s not that other western nations have resolved the questions fully. Rather, it’s that many parts of the USA did not even acknowledge these were problems until just recently, and many remain unwilling to make such an acknowledgment. One of the results of all this is that it has been difficult for the USA to create and sustain a national culture. Making feelings of community and commitment to the nation difficult to find in some parts of the USA. For most of its history two potential cultures have competed. One of business and economic transactions. Everybody has the same options in economic deals. A second of democracy and voter choice. The latter has been shaky for the last 40 years, after sustained attacks by right-wing media, politicians, and lobbying groups. The first is now collapsing, as the certainty over equity in economic transactions fades in the face of the most severe economic inequality in the nation’s history. Right now, the USA is a lost soul. Set adrift without any sinews to bind it together. In “Personal Jesus” Depeche Mode sings about what’s not there in America today.
        Your own personal Jesus
        Someone to hear your prayers
        Someone who cares
        Your own personal Jesus
        Someone to hear your prayers
        Someone who’s there
        Social justice, public goods, organic community, and just “giving a damn” are in short supply in the USA today. Little wonder that when the plutocrats showed up to take over, few Americans even noticed they were losing everything so the rich could get richer. Most Americans today are pretending all is well. Which they will continue till it all falls down around their ears.

      • Robert Locke
        January 29, 2019 at 9:01 am

        Ken, you are saying that we live in a society where building a consensus to deal effectively with the big economic and social issues is impossible. I adopted this conclusion long ago. The problem is that a fascist run america a la Trump is interfering globally in order to prevent us from finding solutions elsewhere, so we cannot await events in order for solutions to appear.

      • January 29, 2019 at 11:41 am

        Robert, America is marked by occasional widespread consensus (sometimes in times of war for example), but usually by multiple consensuses competing with one another, and very commonly regional, economic, ethnic, or racial. America is a relatively young nation. Perhaps with more time a national culture can be created. Considering the problems that would need to be overcome to achieve this, in the short-term at least the prospects seem poor. Historian Richard Hofstadter noted over 50 years ago that historically speaking it is no surprise that the USA became a powerful and important nation, even with no common culture. The position of the USA on the planet, its great supply of natural resources, and its large and industrious population made its rise to power almost inevitable. The USA became leader of the world after World War 2 because it was the only undamaged nation left in the west. But to its credit for 50 years the USA performed this job beyond anyone’s expectations. With the rise of the paranoia and bigotry of the right in the 1980s, cracks began to show in this performance. Now with Trump, the USA is becoming a puppet state, unable to protect even itself. And certainly, no longer able, or as some wish, interested in protecting Europe or any other parts of the world.

      • January 29, 2019 at 11:45 am

        Ken, your respose to me on January 28, 2019 at 7:46 am struck me as perverse. First I was responding to Robert’s question on how to effect change, only to find my 8 line argument obscured and diverted by 58 lines of yours. Next, when I followed up your reference to an American bill, found it very interesting but not “similar to the UK law [I] forwarded”, being somewhat more explicit about public interests but less so about shareholder rights, which was the point at issue. Then you end up denigrating Trump’s protecting Social Security and Medicade rather than the Republican Party. I found that disgusting, but perhaps you are being sarcastic about Trump’s intention to deliver?

        In your subsequent essay on the non-unity of the United States, isn’t the problem simply that it shouldn’t be politically united in the sense of centrally governed? We’re back to Brexit and the desire for one-family unity rather than one-person rule (whether that “person” be a King or a corporate Party). Like Robert I long ago realised that concensus is impossible (in my view because of our interests and responsibilities changing as we grow up), so we need to give each other space. I respect Trump as an understandable reaction to global shareholder capitalism (much like Marx was to token money capitalism), even if we academics find his idiom childish and distasteful.

      • January 29, 2019 at 2:12 pm

        Dave let’s deal with the questions at hand. The USA finds it difficult to establish a public economy because of the history I describe. Shareholders have whatever rights laws give them. Right now, in the USA shareholder rights are virtually unlimited. But if what the corporation can do in terms of stakeholder rights and corporate actions is strictly government regulated, shareholder rights are protected, within those limits. My rule about sociopaths is believe nothing they say and watch their actions closely. In his entire life Trump has never helped anyone unless it helped him more. This is the case with his promises about Social Security, Medicare, and unexpected medical costs. It’s not Trump’s idiom that’s the problem. It’s his constant desire to dominate and control everyone and everything he encounters. Consensus is possible, but not always durable. Politically speaking the USA had it between 1940 and 1980. Until well-funded and aggressive right-wing groups destroyed it. Remember, almost the first action taken by Ronald Reagan as President was to “show” the nation that a public workers union was attacking the USA, when the union was only bargaining for a contract.

      • Carmen Basilovecchio
        January 29, 2019 at 4:12 pm

        “Why do our experts on this blog not write more about how change is managed, we get lists of re-distributive policies and programs, but very little about how societies have or can effectively change themselves.” Robert Locke.
        Because they do not know, We have legislated ‘unto Caesar what is Gods’. We have legislated ‘against the majority while in favor of a minority.’
        Because they do not know, We can CHANGE any of them at any time… “To form a more perfect union…”

      • Robert Locke
        January 29, 2019 at 6:09 pm

        “It is argued here that ESV does not represent any substantive change in the
        approach of UK company law to stakeholders, and as such that the model of the
        UK Companies Act it is of doubtful usefulness to other jurisdictions in seeking to
        enhance social responsibility in their company law”

        This is what I understand to be the law and it stands in stark contrast to German laws on co-determination (Mitbestimmung) in which co-management rights are spelled out in the legislation and taught in business courses to managment and employees alike.

      • January 30, 2019 at 11:07 am

        I agree with your quote, Robert, but I was trying to make the different point that codifying common law (which I take to be the gist of obscure judicial decisions) was the way in which the the shareholder lobby ensured maintaining shareholder value was the sole duty of companies, with concern for the claims and interests of other stakeholders merely appreciated as “enlightened”. Was it coincidental that 2006 was just before
        the Great Financial Crisis?

      • Robert Locke
        January 30, 2019 at 5:59 pm

        Dave, in the 1980s I watched more and more people take on private debt, through credit card expansion (every week cc companies were sending out their cards to me) and no-interest home loans, while management devised more and more schemes to increase payout to top managers, m&a and buyout experts and wondered how the economy could sustain such debt impoverishment of the middle classes to the benefit of the top .01%. The Great Financial Crisis, confirmed my suspicions at the time, but by then I was living in Goerlitz, Germany, where I benefited from low-interest loans from Sparkasse.

      • January 31, 2019 at 11:29 am

        Robert, this article gives some interesting insights on the history of “shareholder value” corporate management in the USA. This management approach has proven extremely destructive. The article is behind a paywall, but only $7.46 if you want to purchase it.

        Harvard University professors Joseph L. Bower and Lynn S. Paine declared in a June, 2017 article in the Harvard Business Review that maximizing shareholder value is “the error at the heart of corporate leadership.” It is “flawed in its assumptions, confused as a matter of law, and damaging in practice.” In 1970, Bower told NPR that maximizing shareholder value is “pernicious nonsense.” In the eyes of many, Jack Welch, former CEO of GE (1981 to 2001) was the great hero of maximizing shareholder value, but no longer. In 2009, he declared that shareholder value is “the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their principal goal… Short-term profits should be allied with an increase in the long-term value of a company.”
        But despite these denunciations, the “pernicious nonsense” of shareholder value has spread. Shareholder value thinking, say Bower and Paine, “is now pervasive in the financial community and much of the business world. It has led to a set of actions by many actors on a wide range of topics, from performance measurement and executive compensation to shareholder rights, the role of directors, and corporate responsibility.” And it has so corrupted politics and general discourse in the nation as to make governing virtually impossible.

        This “pernicious nonsense” was created during a time of change and uncertainty in American business. Moving into the 1960s the American corporation was unsure of its purpose. In the mid-20th Century, the conventional wisdom on running a corporation was called “managerial capitalism.” As developed in the 1932 management text, The Modern Corporation and Private Property by Adolf A. Berle and Gardiner C. Means, the idea was that public firms should have professional managers who would balance the claims of different stakeholders, considering public policy. This led to two problems. First, organizations became confused. Balancing claims by professional managers sounded good in concept. In practice, it often led to inconsistent and ill-defined priorities. Second, “managerial capitalism” was unable to cope with the forces of globalization, deregulation and new technology that were emerging. The careful weighing of competing stakeholder claims by professional managers was a poor fit with the faster pace of change, increased competition and the growing power of the customer.

        In 1954, Peter Drucker offered an answer to the question of the purpose of the corporation. In his book, The Practice of Management, Drucker states, “There is only one valid definition of business purpose, to create a customer.” It is the customer who determines what a business is. For it is the customer, and she alone, who through being willing to pay for a good or for a service, converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance—especially not to the future of the business and to its success. What the customer thinks he is buying, what he considers ‘value’, is decisive—it determines what a business is, what it produces and whether it will prosper.” Drucker’s solution was unlike any other thinking of the day, and, at the time, it generated little more than lip service. But changes in the marketplace steadily reinforced the validity of Drucker’s proposition. Deregulation, globalization, the emergence of knowledge work and new technology shifted the center of gravity in business from seller to buyer. Firms like Apple, Amazon and Google followed Drucker’s lead and embraced the primacy of the customer.

        But most public corporations in the U.S. headed in the opposite direction and gave primary attention to shareholders. Their initial champion was the Chicago economist, Milton Friedman. In his 1962 book Capitalism and Freedom, Friedman declared that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” For executives who were struggling to find their way through the ongoing “apocalypse of change,” Friedman’s proposal offered enticing clarity: managers need only focus on making profits and the rest would take care of itself. Friedman’s article was a godsend. Executives no longer had to worry about balancing the claims of employees, customers, the firm, and society. They could concentrate on making money for the shareholders. Adam Smith’s “invisible hand” would make everything else come out right.

        It is a bewitching message, and as Bower says, a pernicious one. It creates a mandate for finance to take charge of the corporate boardroom, namely, those who see the enterprise largely through the lens of the numbers—sales figures, costs, budgets and profits—and the shareholders. Now only one thing mattered: did it make money for the firm’s owners? Since the executives themselves now were also part-owners, the approach had a happy side-effect: they could become rich in the process. But many in business and even more of the public didn’t buy it. That is, till Ronald Reagan and Margaret Thatcher gave the idea political cover: business should get back to basics. Government was the problem, not the solution. The business of business is making money for shareholders, pure and simple. Corporate raiders like Carl Icahn, and many more like him to follow were happy to become the enforcers. We’re living with the results of the triumph of “shareholder value.” An economy on edge, massive inequality, corporations that have lost touch with customers, and members of government that have lost touch not only with their constituents but with the very notion of decent conduct.

      • January 31, 2019 at 10:01 am

        Robert, we are still discussing your question about how change is managed, so I’m seeing credit card and mortgage expansion as the modern equivalent of evicting cottagers so as to seize their property and force them into low-wage factory work. Legally codifying existing shareholding practice as normal is then equivalent to Adam Smith defending the factory system in terms of the advantage [to the factory owner] of specialisation. The practice had already to exist to be codified. Yes, what sort of innumerate experts could think this “sustainable” as against recyclable via financial crashes and wars? Have they really had the wool so pulled over their eyes that they can mistake for a real credit card a money hire purchase card? How much is the current dimness of the human race down to thieves who have stolen control its education? (See Alan Hutton, who has just come back again on “Economics is sick”).

      • Robert Locke
        January 31, 2019 at 1:53 pm

        Ken, when I last read about the subject, the big problem was not shareholder value but director primacy in corporate governance. Once directors acquired the power to select the board of directors and the directors gained control over voting rights to the shareholders, they could get almost anything they liked through the annual general assemblies of stockholders, including big pay for the directors.

        When the ceos of German firms had co-determination forced upon them, they had to live with it. The first laws under the German Federal Republic were adopted 1951-52, fifty years later the conservatives (CDU-CSU) in coalition with the FDP gained control over German government for more than a decade. They were in a good position to repeal the laws of co-determination. But fifty years of experience had taught German management that co-determination was very useful to them in firm governance. The co-determination laws were not repealed. Chancellor Merkel even made them a cornerstone of conservatism.

        The evolution of the legal framework in which American corporate governance operates, had stymied the sort of co-determination learning that occurred over a half-century in Germany.

      • January 31, 2019 at 2:37 pm

        Robert, Germany has clearly had the better of the history here. Bower and Paine explain (briefly) in their article that “shareholder value” began as a narrow concept, focused on only shareholder wealth. Over time, the wicked appeal of the relief granted to the corporation, its officers, and its directors by the notion of shareholder value spread from the shareholders to the officers and the directors. Till the corporation, its officers and directors felt only one need in operating the corporation: maximize profits. Bower and Paine state in the article’s final paragraph. “… the ‘pernicious nonsense’ of shareholder value has spread. Shareholder value thinking is now pervasive in the financial community and much of the business world. It has led to a set of behaviors by many actors on a wide range of topics, from performance measurement and executive compensation to shareholder rights, the role of directors, and corporate responsibility.” In this setting directors and officers skim off as much for themselves as they can get away with.

      • January 31, 2019 at 4:32 pm

        Robert and Ken, I don’t see anyone disagreeing with your reading of why the public economy is in crisis. What it shows is that “the public economy” is a much wider concept than that range of government activities paid for through taxation, and the narrower definition of “the private economy” as provided for via nominal shareholdings.

        My question is, why are we still discussing this? Are we to be defeatists simply bewailing it, or hopefuls looking for oblique strategies [like lobbying for an unambiguous scientific definition of money as a token of a credit limit] to redirect against itself the apparently overwhelming legal enforcement of entrenched habits?

      • Robert Locke
        January 31, 2019 at 5:08 pm

        Why are we still discussing this? We know what needs to be done, but how do we bring about change? I have suggested many times that we need co-determination regimes in corporations to find a balance in decision making in the interest of justice; you, Dave, suggest that we look for “oblique strategies [like lobbying for an unambiguous scientific definition of money as a token of a credit limit] to redirect against itself the apparently overwhelming legal enforcement of entrenched habits”
        But how do we leverage this into policy? In Germany it took a tradition of pursuit of ideas about co-determination beginning in the 19th century and the chaos of a defeated Germany in 1945, for business and industry leaders and leaders on the conservative political side, fearing the nationalization of their firms, to accept co-determination governance as a way to save capitalism, for the legislation to be accepted — along with a deep sense of guilt within the ranks of religious circles that the cooperative sins of the corporate hierarchies in Nazi crimes, had to be punished by requiring them to share power with their employees. We need this sort of reappraisal of our society to find the leverage for change. Octogenarians cannot, however, pull very hard on the leverages of change.

      • January 31, 2019 at 11:10 pm

        “Octogenarians cannot, however, pull very hard on the leverages of change”.

        Robert, don’t I know it! I have always been more for conversion rather than compulsion, whereby (it seems to me) compelling memories of recent events caused Germans to learn from their country’s appalling mistakes. Sadly, those memories are dying despite brave efforts to keep reminding ourselves of them, so the ‘memories of the reminders’ are tending to seem unreal, with the lessons learned kept alive only by their continued practice. If conscious memory cannot be relied upon to keep them alive, there remains the strategy of building the lessons into our subliminal interpretations of the language. As I said, our opponents are doing this all the time. A sore point with me is the way the word ‘marriage’ has recently been reinterpreted indirectly by legislative action, and the same happened under Henry VIII with the normalisation of usury. What the law is said to say quickly becomes taken for granted.

        However, what’s sauce for the goose is sauce for the gander. The greater clarity recently on how money is created provides at least as much leverage for lobbying for honest money as ‘gay rights’ provided for devaluing family responsibilities. The greater clarity about usury endangering the survival of life on earth provides leverage for an interpretation of money and its use which doesn’t devalue social and ecological responsibility, like it being given credit to be repaid not ‘with interest’ but with credit worthiness, earned by helping maintain and regenerate the face of the earth. The responsibilities of ownership and the structure of economies begin to look very different on that basis. One has to account not so much for prices paid as for what is sold, what is becoming scarce, what can be recycled, safeguarded or regenerated, and how problem developments can be quarantined or contained by localisation.

  8. February 1, 2019 at 7:58 am

    Dave and Robert, ask yourself this question. What is it and where is it I feel most comfortable? Is it in accumulating money, in cultivating a neighborhood garden, in working on committees to improve public services such as utility service, public schools, medical care, etc., bossing a company as CEO, teaching, working in politics, murdering derelicts, exploiting the helpless, etc. Now answer this question, which of these does society prohibit/discourage? So, the first question we must answer is what we want our culture to be. Current American culture is one in which the famous Upton Sinclair quote makes sense, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” Great private wealth can own the actions and thoughts of any person. We see that all around us. Also, the world is filled with individual humans demanding their rights and due access to freedom. Which leads inevitably to conflict and war. So, as a first step private wealth and individual rights must be tightly controlled, as they once were by the Medieval church. This would provide humans with the opportunity to develop human-scale, decentralized, and appropriate technologies situated within local, self-sufficient communities. E. F. Schumacher calls this “Buddhist Economics.” In this effort I recommend following the process described by Ivan Illich, de-institutionalization of specialized knowledge, overthrowing the dominant role of technocratic elites in industrial society, and developing new instruments for the average citizen to acquire and maintain the practical knowledge needed to give all peoples their right to work with independent efficiency. This is a complete inversion of how society is organized today. And even going that far may still not be enough to save our species. Efforts so far to create such changes have failed completely. If we can’t do it this time, I fear the time of Sapiens on earth is near to ending.

    • February 1, 2019 at 12:33 pm

      Ken, I refuse your first question. What I feel is insignificant, compared with the fact that other people have their own motivations, driven not by feelings – indeed stultified by these – but by responsibilities and instrumental aims. That fact is where I started when looking for an alternative to the adversarial legal system we have inherited, which is leading you to believe (and so fear) will inevitably lead to lawless war. I suppose what I myself experience: a war within myself between good and evil, and having to commit myself to work for good. If my way of doing that is as a scientist filled with what Rudyard Kipling called “insatiable curiosity”, so be it: it takes all sorts to make a world. The fact is that my approach to answering questions by solving problems has advanced my own knowledge, even if others refuse my answers self-centredly as “not invented here”, or from fear of the not yet understood. I try to put out of my mind your “fear the time of Sapiens on earth is near to ending” and focus on doing what little I see I can do about it.

      This from G K Chesterton’s appreciation of the work of the artist G F Watts. “Now let us suppose that instead of coming before [a] hypothetical picture of Hope in conventional flowers and conventional pink robes, the spectator came before another picture. Suppose he found himself in the presence of a dim canvas with a bowed and secretive figure cowering over a broken lyre in the twilight. What would he think? His first thought, of course, would be that the picture was called Despair; his second (when he discovered his error in the catalogue), that it had been entered under the wrong number; his third, that the painter was mad. But if we imagine he overcame all these preliminary feelings and that as he stared at that queer twilight picture a dim and powerful sense of meaning began to grow upon him – what would he see? He would see something for which there is neither speech nor language, which has been too vast for any eye to see and too secret for any religion to utter, even as esoteric doctrine. … Here, in this dim picture, its trick is almost betrayed. No one can name this picture properly, but Watts, who painted it, called it Hope. But the point is that this title is not (as those think who call it “literary”) the reality behind the symbol, but another symbol for the same thing; or to speak yet more strictly, another symbol describing another part or aspect of the same complex reality. Two men felt a swift, violent, invisible thing in the world: one said the word “hope”, the other painted a picture in blue and gree paint. The picture is inadequate; the word “hope” is inadequate; but between them, like two angles in the calculation of a distance, they almost locate a mystery, a mystery that for hundreds of ages has been hunted by men and evaded them. And the title is therefore not so much the substance of one of Watt’s pictures, it is rather an epigram upon it. It is merely an approximate attempt to convey, by snatching up the tool of another craftsman, the direction attempted in the painter’s own craft. He calls it Hope, and that is perhaps the best title. It reminds us among other things of a fact which is too little remembered, that faith, hope and charity, the three mystical virtues of Christianity, are also the gayest of virtues. Paganism, as I have suggested, is not gay, but rather, nobly sad”.

      In the phrase “complex reality” here, the word ‘complex’ is used in the minimalist sense of ‘complex number’, not that of the overwheming complexity we see, or model in chaos theory.
      With the one there is a possibility and therefore hope of understanding variation and so (among much else) the diversity of economic aims. With the other there is the probability of despairing of doing so and discounting real possibilities.

      Graphing the two points ‘supply’ and ‘demand’ creates a path down which ‘wealth’ can merely oscillate. Three points merely define a circuit, but that allows recycling. The four phases of complex number create six paths with four junctions representing choices and so decisions, including decisions on whether to supply or demand. In the picture I have painted of the economy, the public economy in crisis is not government finance, it is the paths connecting developers to all humanity at the point where it emerges, still part of and dependent on a similarly structured ecology and its spaceship’s resources. The developers having developed a “shadow” monetary economy, the crisis is that they are supplying that, having forgotten what it is for and where they come from. To grasp the significance of that they must be shown the whole picture persistently until (as Asad put it) they see the young lady in the face of the old. That means minimalist graphing rather than simulating the chaos we can already see.

      • February 2, 2019 at 11:24 am

        Dave, none of what you say is concerned with saving our species. That’s the focus of my comments. My proposals may oppress many members of that species and may make many members angry or sad. But I believe what I suggest has at least a chance of saving our species from itself. Sapiens is the most imaginative and most pernicious species on earth. Already on several occasions it has come near to destroying itself. And for the planet that would be a good thing. Left to its own devices one day our species will succeed in doing just that. If you can offer other alternatives for saving our species, I’m always open to listening.

      • February 2, 2019 at 4:23 pm

        Ken, on the contrary, everything I say is concerned with saving our species. The highly significant point where I disagree with you is your suggesting how we feel about things will enable us to realise what we both want to see. Feelings merely act locally in response to what one is seeing ‘now’. My belief is that one has to be able to see what an active economy IS before one can see what, why and where it has gone and is going wrong. In effect one needs a map of its evolving, which is what I have produced, and it shows the whole monetary economy parasitic on the real economy, which is a thoughtful extension of instinctive animal family care still rooted in natural ecology. The maps that other people have are what have been referred to here recently as framework theories. I recently quoted N R Hanson saying of an ambiguous picture that it was true in a verifiable way that it had four feathers, but only if it was true it was a bird and not an antelope. In the Chesterton quote above Hope was the best name only because the picture was about hope. (As Godel put it, ” ‘true’ iff true”). I have been able to use the pictorial language of electronics to provide a framework within which you can imaginatively visualise the dynamics. Reflect on the Soddy poem Roger Lewis quoted in the recent discussion of Critical Rationalism. (The linnk he provided puts it in context). The ‘gayer’ spherical interpretation has four touching regions bounded by earth’s latitude and longitude coordinates, with the fifth circuit touching all four regions being generated dynamically by the earth being on at an angle relative to its circulation of the sun. That’s a very simple model of a business cycle, if you like!

      • February 3, 2019 at 10:27 am

        So, Dave, what is a working economy? One that can help control and stop climate change, as well as the proclivity of Sapiens to create its own demise? I presented one possible answer to those questions. You seem not to have approved my example. There are many others. For example, many suggest a move towards Islamic economics. I find that promising. Others suggest the USA and UK, and rest of the west create a version of the Scandinavian economies. This also seems promising. Two things need to happen for either of these, or other options to move forward. First, we need to consider these in national, local, and international deliberative conferences. This requires that many of the senseless arguments that plague us today need to be settled as quickly as possible. Arguing over arms control or trade deals is pointless unless we can address the problems that threaten the entire species’ survival. The other option, it seems is for human tribes to go to war for the survival resources. With either the tribes killing one another or one tribe winning out, only to be destroyed by climate change. Second, we need to create field experiments to figure out which of these options is workable, and which not. I don’t know the dynamics of any of this, since its not happened for Sapiens in 25,000 years or more. That’s why I suggest the research, planning, and testing.

    • Robert , gr
      February 1, 2019 at 10:01 pm

      “de-institutionalization of specialized knowledge
      overthrowing the dominant role of technocratic elites in industrial society
      developing new instruments for the average citizen to acquire and maintain the practical knowledge needed to give all people their right to work with independent efficiency.

      These are guidelines, Ken, how we bring them about depends on the specific culture where the sought after change is being implemented.

      In America the de-institutionalization of specialized knowledge is an especially thorny problem in the business schools that have been taken over in their programs by financial investor capitalism to the detriment of industrial civilization (Veblen)

      I’m not sure what you mean by “overthrowing the technocratic elites of industrial society.” In the example just given the dominant role of technocratic elites were overthrown in America by the investor capitalist elites, and their system of financialization.

      As for “developing new instruments …”.– that sounds like the German system of apprenticeship training, where 60% of German students, grade 10, organized by city governments, trade unions, secondary schools, and firms coordinate programs.

      • February 2, 2019 at 11:55 am

        Robert, 100% agree, how these guidelines are put into action will vary according to local customs and broader cultural norms. Some of which will, of course be changed by applying the guidelines. Fixing the business schools may require lots of re-education of professors, or even bringing in new professors. I’m referring to two things with the phrase “overthrowing the technocratic elites of industrial society.” First, the ouster of the CEOs that control major technology companies, e.g., Zuckerberg, Tim Cook, Elon Musk. Second, the broad distribution of major technologies to all the public and the availability of education so the public can effectively use the technologies. Yes, what Illich proposes includes several forms of apprenticeship.

    • Robert Locke
      February 2, 2019 at 8:29 am

      “de-institutionalization of specialized knowledge
      overthrowing the dominant role of technocratic elites in industrial society
      developing new instruments for the average citizen to acquire and maintain the practical knowledge needed to give all people their right to work with independent efficiency.

      These are guidelines, Ken, how we bring them about depends on the specific culture where the sought after change is being implemented.

      In America the de-institutionalization of specialized knowledge is an especially thorny problem in the business schools that have been taken over in their programs by financial investor capitalism to the detriment of industrial civilization (Veblen)

      I’m not sure what you mean by “overthrowing the technocratic elites of industrial society.” In the example just given the dominant role of technocratic elites were overthrown in America by the investor capitalist elites, and their system of financialization.

      As for “developing new instruments …”.– that sounds like the German system of apprenticeship training, where 60% of German students, grade 10, organized by city governments, trade unions, secondary schools, and firms coordinate programs.

  9. Carmen Basilovecchio
    February 1, 2019 at 8:39 am

    “The poor people, it is true, have been much less successful than the great.
    They have seldom found either leisure or opportunity to form a union and exert their strength;
    ignorant as they were of arts and letters, they have seldom been able to frame and support a regular opposition.
    This, however, has been known by the great to be the temper of mankind;
    and they have accordingly labored, in all ages, to wrest from the populace,
    as they are contemptuously called, the knowledge of their rights and wrongs,
    and the power to assert the former or redress the latter.
    I say RIGHTS, for such they have, undoubtedly, antecedent to all earthly government,
    Rights, that cannot be repealed or restrained by human laws,
    Rights, derived from the great Legislator of the universe.”
    — John Adams
    (1735-1826) Founding Father, 2nd US President
    Source: A Dissertation on the Canon and Feudal Law, 1765

    Now, I must ask, “OMG, WHY Donald Trump”

    ‘One person with persistence and determination can change the world.’
    We need to show the way!
    Millions now realize;… the economy is rigged, …the justice system is rigged, …the healthcare system is rigged, …the employment system is rigged. They are all part of an economic system that is really just a rigged political system.
    We must correct the legislation of our own ‘inhumanities’ upon life itself.
    “The public is expected to believe that the misfortunes that beset us are acts of God and that, though we have the science and the necessary equipment and organization to produce wealth in abundance, it is beyond the wit of man to learn how to distribute it.“ Frederick Soddy.(The Role of Money. 1934)
    “…life itself and everything that meanwhile makes life worth living … depends first, last and always on the manner in which the production and distribution of wealth is regulated.” (Edward Bellamy, 1897.)
    We have legislated our own ‘inhumanities’ upon life. ”
    Simple solution… To Increase Wages, Infrastructure and Disaster Relief, Jobs, and Our Standard of Living.
    Simple solution… To Decrease Federal Debt, Poverty, and Inequality Gaps.

    • February 2, 2019 at 1:25 am

      Carmen, good stuff, but there will be no sustainable (real) solution without eliminating the Fed, its toxic national-debt-for-profit+power faux-money and fraudulent monetary policy. We need a globally viable, debt-free, tax-free reserve currency and a humane cultural credit system that serves communities instead of ruining them. There’s a brief introduction to the bio-ethical alternative, the prologue to my forthcoming book: @ michaellucasmonterey .com

      • Carmen Basilovecchio
        February 2, 2019 at 7:36 am

        Yes, ‘The FED’ is Where We Went Wrong.
        T.I.N.A. (There Is No Alternative ) to T.A.R.A. (There Are Realistic Alternatives). TIME TO PRODUCE SYSTEMIC CHANGE. https://wp.me/pGGgz-fT

        Legislate an honest Central Bank.
        We must correct the legislation of our own ‘inhumanities’ upon life itself.
        “The public is expected to believe that the misfortunes that beset us are acts of God and that, though we have the science and the necessary equipment and organization to produce wealth in abundance, it is beyond the wit of man to learn how to distribute it.“ Frederick Soddy.(The Role of Money. 1934)
        “…life itself and everything that meanwhile makes life worth living … depends first, last and always on the manner in which the production and distribution of wealth is regulated.” (Edward Bellamy, 1897.)
        We have legislated our own ‘inhumanities’ upon life. ”
        Simple solution… To Increase Wages, Infrastructure and Disaster Relief, Jobs, and Our Standard of Living.
        Simple solution… To Decrease Federal Debt, Poverty, and Inequality Gaps.
        “Universal American Capitalism to be administrated for the betterment of the common good of the INDIVIDUAL while at the same time for the common good of the ENTIRE GROUP. With equality and justice for all, this new Capitalism could be one of the greatest achievements of mankind. A government that would administer this system with an HONEST CENTRAL BANK that will distribute the nations wealth to “… form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity,…”

    • February 2, 2019 at 11:30 am

      Carmen. First, all the available evidence indicates that Adams is wrong. Human rights are created, given and taken by humans. It isn’t the inhumanities that is everyday threatening to destroy Sapiens. It is the humanities. When Sapiens imagined itself separate from and superior to the planet and all other species who live there it signed in own death warrant. The job now is to reintegrate Sapiens into the evolution of the planet so that Sapiens plays its roles within that evolution but no longer attempts to over ride and recreate that process.

      • Carmen Basilovecchio
        February 2, 2019 at 5:28 pm

        “The poor people, it is true, have been much less successful than the great.
        They have seldom found either leisure or opportunity to form a union and exert their strength;
        ignorant as they were of arts and letters, they have seldom been able to frame and support a regular opposition.
        This, however, has been known by the great to be the temper of mankind;
        and they have accordingly labored, in all ages, to wrest from the populace,
        as they are contemptuously called, the knowledge of their rights and wrongs,
        and the power to assert the former or redress the latter.
        I say RIGHTS, for such they have, undoubtedly, antecedent to all earthly government,
        Rights, that cannot be repealed or restrained by human laws,
        Rights, derived from the great Legislator of the universe.”
        — John Adams
        (1735-1826) Founding Father, 2nd US President
        Source: A Dissertation on the Canon and Feudal Law, 1765

        There exists in this world, this universe more wealth than mankind could possibly use. Man has been given dominion over this wealth. Mankind can not create new wealth and must distribute or change that which already exists.

        Wealth is SOMETHING of value.

        ALL wealth on earth and in the universe exists and is expanding.
        “As the worlds population has gone up, the total amount of product available per capita…has gone up.

        …exactly the opposite of what…predicted. Indeed, the correlation of increased population with increased

        per capita product is so strong that any scientist examining these data would immediately suspect causality..

        .(S)o the more people there are, the faster the rate of technological progress, which multiples product per capita,

        and whose are cumulative.

        So the more of us there are, the more there will be to go around.”(The Human Factor, Robert Zubrin…2015)

  10. February 2, 2019 at 10:00 pm

    Has any economist or RWER commentator (other than moi) ever considered factoring in the reality of organized crime, corruption, manipulation and war for the sake of exploitable social chaos and degeneracy, for the sake of sick enjoyment, status & ill gotten gains?

    Buffett admits that his class (the hyper-rich class) started and won their war against the rest of us. I would liken the behavior of the hyper-rich and the market makers & lesser takers to the strategy & tactics of a pod of orcas, or maybe to a feeding frenzy involving several species of sharks, but that would slander the orcas and sharks. A mo betta analogy would be the overkill hunting strategy where the herd is our whole species, driven over the cliff into a bottomless abyss, along with most other species.

    Hence, my interest in dealing with first things first: reality, ethics, axiology and the shoddy, fractured foundation of incomplete metatheory (of economics). As others have also pointed out or implied, until economics as a whole is a realistic social science–dealing with the actualities of personal and communal experience & interaction–there will be no majority of economists saying or doing anything to help us do the job of saving ourselves from ethicide & ecocide-for-profit.

    Then again, the nearly total lack of interest in discussing the horrific whole of our situation (all but 62 of us having lost the war) probably means that we’re long past the point of no return and no recourse. If so, that would make most of the papers & Comments here equivalent to debating the issues of The Mad Hatter’s Tea Party or rearranging the deck chairs after the HMS Titanic hit the iceberg.

    Sadly, I came to agree with the late Carl Sagan, who saw our worst problem being that “we are too easily bamboozled, and the longer and worse we’re bamboozled, the less we want to know about it.”

    The late, great Edward R. Murrow learned that the hard way. So, in accord with him, I wish us all, “Good night and good luck.”

    • Robert Locke
      February 3, 2019 at 9:00 am

      “As others have also pointed out or implied, until economics as a whole is a realistic social science–dealing with the actualities of personal and communal experience & interaction–there will be no majority of economists saying or doing anything to help us do the job of saving ourselves from ethicide & ecocide-for-profit.”

      OK, you are talking about what people do or experience as the base upon which economics should be built. What are the actualities of personal and communal experience? See how the work of economists (not their writings) lead to decayed industrial communities, or unemployable people, or manufacturing decline, etc and you will make the study of economics relevant.

      • February 3, 2019 at 11:18 am

        Robert, why is economics irrelevant and how can it be made relevant? First, economics is irrelevant because the sources of the questions or concerns studied by economists are theories made up by economists, mostly based on supposedly axiomatic principles and detailed mathematics. This makes economics relevant for economists, but few others. Second, economics can be made relevant by economists drawing the concerns or questions they study from events and actors outside the formal discipline of economics. This makes economics relevant for economists as a vocation and for non-economists as a source of data and research for everyday areas of concern.

      • Robert Locke
        February 3, 2019 at 3:44 pm

        D’accord! As to your first point, I never have understood why we discuss the principles enunciated in the works of great economists in this blog when we are seeking insights into the real world, which is your second point.

      • Craig
        February 3, 2019 at 5:39 pm

        Economics in other words requires a philosophy and set of policies based on wisdom and its pinnacle concept of grace/graciousness, no?

      • Robert Locke
        February 3, 2019 at 9:04 pm

        Craig, just to prove that there is nothing new under the sun, I started thinking about paradigms and wrote about one in particular in my 1989 book, Management and higher education since 1940 (Cambridge Univ Press), in which I called my first chapter The New Paradigm, defined “as an old Greek word which means pattern, model, example, exemplar — paradigm, which signifies a logical or conceptual structure serving as a form of scientific thought, within a given area of experience, that provides model problems and model solutions to a scientific community.” In the book “the subject matter is the new paradigm in management studies — the applications of science to the solution of managerial problems, which became a focus of higher education after the Second World War.” p. 1

        1989 was 30 years ago; I haven’t chosen your particular philosophy or pinnacle concept, but I have considered paradigms in economic sciences long enough to lose my naivete.

      • Craig
        February 3, 2019 at 9:29 pm

        Yes Robert, and you were correct to think paradigmatically about managerial problems. However, there are paradigms in a particular sector or aspect of the economy and then there is THE most important and influential paradigm of finance which dominates and controls the ENTIRETY of the economy. Again, the psycho-analytical insight applies. When the neurotic’s/economy’s most basic problem is confronted and re-integrated all of the directly related and many of the ancillary things the basic neurosis has glommed onto disappear and/or tend to dissipate as well.

      • Robert Locke
        February 4, 2019 at 9:26 am

        “THE most important and influential paradigm of finance which dominates and controls the ENTIRETY of the economy”

        Which economy? You are intellectually unaware. For years I have been concerned with how the economies of Japan, Central Europe, and the Nordic counties differ from finance dominated anglo-saxonia, and a lot has been written about it. For starters try Michel Albert’s Capitalism contre capitalism, 1992; it’s, as Ken says, a cultural matter. Most of my writing is about how important economies did not following the anglo-saxon paradigm of finance, and if one did not follow it one does’t have to “reintegrate” the economy through some dialectical process. I live in Germany, for one reason, because the culture does not let the paradigm of finance dominate the economy. That’s why Germany has strong manufacturing and nonfinancialed local banking — and does not have a system of higher education dominated by elite schools.

        Support economies that have not accepted the paradigm of finance which dominates and controls the ENTIRETY of the economy. I have for more than 40 years.

      • February 4, 2019 at 12:25 pm

        Robert, culture is complex, but it is not disintegrated. Like Robert, I have a special interest in economies unlike the financial capitalism of today. For example, the Viking (Scandinavian) economies and Islamic economics. For us in the US there’s one such economy that’s right next door, in the history of the US. I’ve testified before Congress, along side economists that outside major cities (of which there were few) the economy of the first 100 years of the US included many socialist elements. In fact, “in the west” such elements were often dominant. Both because many immigrants to the US were accustomed to communal economies and because the real dangers of living on developing frontiers inspired socialist solutions. Only with the invention and spread of industrial and later financial capitalism outside major cities after the American Civil War did this begin to change. But American socialism was still strong in the 1950s. The Texas in which I grew up was the home of thousands of cooperatives (farm, electric, water, food, etc.), credit unions, and a variety of community outreach groups. Can’t get much more socialist than that. The active opposition to such activities was for-profit businesses and their owners who decried the profit they were denied because of these activities. After 30 years of planning, opponents of Americans helping Americans (for no-profit) got their wish to attack all such activity with the election of Ronald Reagan. After Reagan a list of reprobates took over the attacks, up to the latest culprit, Donald Trump. In another 20 years Americans will be helpless louts, unable to help one another or even themselves. Dependent entirely on all-wise billionaires.

      • Craig
        February 4, 2019 at 4:06 pm

        “I live in Germany, for one reason, because the culture does not let the paradigm of finance dominate the economy.

        Oh c’mon Robert. Germany dominates the EU WITH THE SAME FINANCIAL PARADIGM THAT PRIVATE BANKING DOMINATES THE US AND VIRTUALLY EVERY OTHER COUNTRY WITH. Try gagging Greece with your claims. Get real, Finance doesn’t care about your little fish bowl “paradigm” of managerial capitalism. Why? BECAUSE IT ISN’T AN ACTUAL SYSTEMIC PARADIGM CHANGE, THAT’S WHY.
        It’s just another reform of capitalism like Keynesianism or Public Banking or MMT or Keen’s and Hudson’s excellent work that that STILL EXISTS WITHIN THE PARADIGM OF DEBT ONLY so finance can morph or replace them with their ACTUAL paradigm of Debt Only.

      • Robert Locke
        February 4, 2019 at 5:30 pm

        Craig, you view of German banking doesn’t follow mine. I wrote in the rwer:

        “When the Berlin Wall came down in 1989, European banking everywhere rested on three
        pillars: private commercial banks, public saving banks, and co-operative banks. Traditionally
        the big German private banks had operated in the “kingly merchant tradition,” where a firm
        retained a Hausbank and relations with it rested on trust, i.e., customers were not customers
        in the American sense but clients (Batiz-Lazo, Locke, & Mὔller, 2008). The new information
        technologies churning out of America allowed the flow of monies to increase dramatically and
        permitted investors everywhere to trade in rapidly created equity markets twenty-four hours a
        day. real-world economics review, issue no. 68

        Taking advantage of this technology and the expanding geographical opportunitiesaccompanying the collapse of communism, American and UK financial houses rooted in
        equity markets began to promote the financialization of enterprise in Europe by facilitating
        mergers and acquisitions, debt management, and capital acquisition.
        This British and American Drang nach Osten [push to the East] affected the investment
        business of major German private commercial banks in their own country; by 2004 they only
        transacted 38.3% of the German merger and acquisition business, 21.8% of the German
        equity market business, and 16.3% of the debt market business (The Economist 1.11. 2004,
        82). J.P Morgan, Morgan Stanley and Goldman Sachs beat the German banks in their own
        backyard because it was an American kind of capitalism. According to The Economist
        (27.03.2004, 75) the position of German banks became so bad that a German agency, the
        Kreditanstalt fὔr Wiederaufbau, thought it best in order to optimize results in the privatization
        of Deutsche Telekom to auction off large blocks of the company’s shares through foreign
        investment banks, rather than through the investment bank arms of Deutsche Bank, Dresdner
        Bank and other German banks.

        German private commercial banks decided that survival depended on the adoption of the new
        model. They moved onto the turf of American and British capitalism, began trading in
        securities and engaging in business consultancy. They also, following the UK and US banks,
        marketed new products and services. These included selling loan packages, credit cards,
        insurance, and organizing electronic banking through automated machines, and on-line
        services. Banks acted less as Hausbanken for large companies and held less of their clients
        stock in their portfolios (Lütz, 2000). They shifted from the kingly merchant tradition
        environment of trust in retail banking to one of persuasion, to letting impersonal market
        mechanisms set price and determine transactions.

        In 1990, the business model of the second pillar, the European public savings banks, had five
        features. First they were “public,” which meant they were “in a certain sense owned or
        sponsored and governed by some regional or local public body such as a city or a county or
        region.” Second, they were organized under a public law regime. Third, they had “a dual
        objective: They were expected to support the local economy and the local people, and at the
        same time to operate according to common business rules and thus to be financially
        sustainable enterprises.” Fourth, they had to adhere to the “so-called regional principle, which
        restricts the operations of a saving bank to the area for which the public body is responsible.”
        As they were firmly rooted in the local economy, they did not compete with each other;
        “savings banks in a county or region had reason to consider each other more as peers and
        colleagues than as competitors.” Fifth, they “were part of dense and closely cooperating
        networks of legally independent institutions that constituted a special banking group.”

        Germans use the term “Verbünde for these dense networks, a term, Bübül, Schmidt, and
        Schüwer point out, that is hard to translate into English, “since such networks of banks do not
        exist in Anglo-Saxon countries” (3).

        Cooperative banks, the third pillar, were also banks that adhered to the regional principle and
        were part of dense networks. Their “mandate was to support economic undertakings of their
        clients and to be cost-covering and profitable businesses. Cooperative banks were organized
        almost like clubs wherein the owners and providers of equity were not called shareholders but
        members. The difference between shareholders and cooperative bank members is that the
        latter could not “sell their shares if they wanted to exit, at some market price, but only hand
        them back to the cooperative and in return get back what they had originally paid for them
        plus their part of the cooperatives accumulated profits.” Accordingly, they could not “benefit
        from policies that would increase the value of their shares because they could not sell their
        shares at higher prices” (Bübül et al, 3).

        In Germany did the two pillars of banking (423 savings banks and 1,1The 423 savings banks have remained local and public and cooperative banks have not become essentially profit oriented institutions seeking to enhance
        shareholder value; nor has either been turned into centrally located stock-exchange listed

        Since each sector had a system of joint and several liability even before the
        financial crisis began, no individual member bank was allowed when it came to go bust. They
        came through the crisis with barely a scratch and, their spokesmen argue, their business
        model, working for the public or mutual good rather than for shareholders, has proved to be
        well-suited to the mixture of households and small companies (known as the Mittelstand) that
        they serve (Gerada & Netessine,1).

        This statement is borne out by their lending record since 2007. Private German commercial
        banks reduced their medium- and long-term lending to companies and households between
        2007 and 2012 in favor of short-term loans, while the German savings and cooperative banks
        did the reverse.

        The savings banks and cooperative banks currently provide about two-thirds
        of all lending to Mittelstand companies and 43% of lending to all companies and households.
        Most people now agree that “the amazing resilience of the German economy” can be
        attributed to its reliance on the small to medium size enterprises of Mittelstand companies:
        Seventy percent of Germans are employed by them in the private sector. Inasmuch as private
        and cooperative banks have financed these flourishing Mittelstand firms, judgments about
        these two pillars of German banking have changed from those of the pre-financial crisis era.
        Petra Dünhaupt notes that locally rooted banks “compared to private commercial banks,”
        performed well before and after the crises, (18) and that the modern view that “capital
        markets, in which banks are large, private, purely shareholder-oriented and exchange-listed
        corporations has been severely discredited by experience from the recent financial crisis.”

      • Craig
        February 4, 2019 at 6:32 pm

        Those are all good, wonderful, excellent REFORMS of banking….but NOT a new paradigm in finance, money systems and the economy.

        The Copernican Cosmological paradigm change was a genuine paradigm change because it was a DEEP AND PROFOUND CONCEPTUALLY OPPOSITIONAL IDEA AND BECAUSE IT COMPLETELY INVERTED TEMPORAL UNIVERSE REALITIES. Those two signatures are the litmus test for paradigm changes.

      • Robert Locke
        February 4, 2019 at 9:33 pm

        Craig, the description of German banking I gave are not REFORMS of new paradigm in finance, but a German cultural heritage that resisted them. You must develop an historical sense or no dialogue about human experience can take place. You don’t deal with counter-argument based on serious research, you just dismiss it.

      • Craig
        February 4, 2019 at 10:05 pm

        Genuine NEW paradigms are an integrative mental level or two above culture because cultures are guided consciously or unconsciously BY paradigms and are transformed by NEW ones. I NEVER dismiss any genuine scientific thought….instead I ALWAYS attempt to integrate such well considered “conclusions” with wisdom/paradigm perception…..and when one perceives a genuinely new paradigm there is no need to dismiss or invalidate…because the particles of truth(s) in the (generally obsessively held) opposing opinions are present WITHIN the new paradigm which is a genuine thirdness greater oneness….of the two.

    • February 3, 2019 at 10:30 am

      Michael, economists have studied organized crime. Not as much as sociologists or historians, and certainly not with the detail these other social scientists bring to the work. But the insights of many economists are sound. This is an excerpt from a 2008 paper by Vimal Kumar and Stergios Skaperdas of UC Irivine.

      Organized crime engages in much regular economic activity, the production and distribution of a wide variety of goods and services that are typically both legal and illegal – from construction and restaurant services to drugs, gambling, and prostitution. For that reason we might be tempted to think that mafias and gangs are just like any typical business firm and are therefore subject to the same economic analysis that ordinary firms are. However, the defining activity of an organized crime group — in the absence of which its other activities could not take place at all or their nature would drastically change – is the provision of protection. Protection is not an ordinary economic activity. It is supposed to protect the ownership of other goods and services and make their contractual exchange enforceable. And, that enforceability does not come from the laws and courts – to which an ordinary security firm and its clients have access – but ultimately from the barrel of a mafioso’s gun. The problem, of course, is that that gun can be turned not just against potential transgressors but also against those it is supposed to protect. That is the peculiarity of protection and it makes organized crime groups less akin to ordinary business firms and more similar to the traditional provider of protection and security, the state. However, the type of states that organized crime groups have similarities with are the early, proprietary, tribute-extracting, autocratic chiefdoms and states that are far removed from today’s modern states. That is, it would be better to think of mafiosi as feudal lords than anything close to bureaucrats.

      With the expansion of extreme inequality and the rapid movement of the US and UK toward political plutocracy, the conclusion above needs some adjustment. The state that organized crime resembles, “the early, proprietary, tribute-extracting, autocratic chiefdoms” is no longer “far removed” from modern states. In fact, the autocratic, feudal “criminal state” seems ascendant on both sides of the Atlantic.

    • Carmen Basilovecchio
      February 3, 2019 at 10:09 pm

      Once again I must ask, Do believe it is coincidence that within days of Trump becoming president :
      … Israel regained Jerusalem as its capital,

      … ISIS losing its caliphate,

      … TWO new Supreme court justices on the bench; “packing that court”.
      How does that ‘just by chance happen’ ?

      How much can ONE MAN CHANGE ?

      My hope and prayers, a paradigm shift…
      “We hold these truths to be self-evident; that all men are created equal, with certain inalienable rights; that among these are life, liberty, and the pursuit of happiness…”


      TAKE NOTE: “OMG, WHY Donald Trump”

      • Carmen Basilovecchio
        February 3, 2019 at 10:19 pm

        “In the confrontation between stream and rock, the stream always wins… not through strength, but through persistence.” ~The Buddha ✫*¨`*✶♪.¸¸.✻ღ “… and determination.”(Why Trump).

  11. February 2, 2019 at 10:12 pm

    BTW, I suppose it’s incorrect to think that economics ever had any unitive foundation of valid metatheory, unless opinions, contested assumptions, conjectures and fictions are good enough for a logically self-contradictory multipartate metatheory of economics.

    • Craig
      February 4, 2019 at 4:47 pm

      Try my trinity-unity-oneness-wholeness-process concept of grace…applied to economic thinking and policy….or any other aspect of life for that matter.

  12. Craig
    February 4, 2019 at 8:51 pm

    The Common Sense of Wisdomics-Gracenomics

    These are the times that try men’s souls: The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like Hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value. Heaven knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as freedom should not be highly rated.

    • Craig
      February 4, 2019 at 8:54 pm

      Pardon. Here is the paraphrase:

      These are the times that try men’s souls: The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their bretheren; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like Hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. The comfortability we obtain from the dominance of Debt, is the millstone that the non-perceivers of the new paradigm will unfortunately take to their deaths: it is the intellectual inclusiveness and ethical highness of the new paradigm of grace that gives every thing its value. Grace properly understood knows how to put a proper price upon its goods; and it would be strange indeed if so celestial an article as grace and its freedom giving aspects in economics, finance and the money system should not be highly rated.

  13. February 6, 2019 at 3:26 am

    Hmmm… Now, it seems to me, we really are getting somewhere, but where is still just over the horizon. Dave, it’s not that I fail to value your contributions and challenges, yet I concur more and more deeply appreciate the potent info & context provided by Ken, Robert and Carmen. I concur much more strongly with Kohr and, to a lesser extent Simmel (re: his The Theory of Money), Zarlenga et al.

    Now, Ken et al, it seems self-evident that we could succeed, as much as possible (re: achieving an ideally good life & death & hereafter) not by overthrowing anyone or anything but, as Bucky Fuller realized, by replacing them and/or making them irrelevant. That is why I work toward establishing a nongovernmental legal-financial-fiduciary infrastructure, using the best of all available principles, bioethics, values, policies and stratagems. For example, in the founding charter, articles of incorporation and by-laws of the Global Community Development Associates USA, Inc., I integrate the principles that enable the best potentials of co-determination, Islamic & Nordic banking and cooperative, member owned mutual benefit associations. I don’t need to incorporate the GCDA-USA as a “B” type corporation or a 501(c)3 nonprofit. The GCDA charter & ethical policy exceed the beneficial potentials of all previous paradigms.

    There are no obstacles in commercial contract law that prevent a C corporation from operating for the sake of optimal QOL and GDH (general domestic happiness). The establishment of a global alliance of such associations can accomplish what no lesser national or regionally multi-national organization can ever achieve.

    Likewise, there is no legal, logical reason preven ting a change of the rules so that producers pay consumers to take/use their products/services. In fact, the profit motive can be made obsolete by an ethical AI accounting system that awards producers & gifters & grantmakers with monetary units of value and/or nonmonetary cultural credits for positive contributions to the community or individual members.

    In other words, instead of wrangling with the histrionics, encrustations, fossils & fragmentary notions of the various factions & subfactions of economics, I propose a functional solution that can and will serve any community or culture. Naturally, it must be based on an optimal bioethical cultural paradigm, supporting a database and heuristic expert system informing a decentralized global AI-system management app.

    After all, human culture is the whole basis and scope of what economics should be, yet is not. Like Kohr, I see the need for a successor, without the fossilized factionally maintained logical self-contradictions that maintain the futilities of economics cum plutonomics as is. Thus, I choose to call the real science of cultural economy, cultural holonomics.

    For clearly, how can a scientific discipline be a valid science if it rejects and prevents the consideration of the whole of its subject or object of study?

    • February 6, 2019 at 8:04 am

      Michael, I concur with your comments, mostly. But you shouldn’t conclude that the basis of economics is not cultural just because you don’t like the culture upon which economics is based. Mainstream economics has a cultural lineage of extremist capitalism (Mises, Hayek), scientism, physics envy, and deification of mathematics. This makes economics a cult, not a science. Although this combination makes economics appear impressive, as a con game.

    • February 6, 2019 at 5:10 pm

      Michael, having outlined the topological basis of my map of the evolution of economics, I didn’t get round to answering Ken’s challenge as to what a working economy is, due to his (as usual) misrepresenting me. On the map (money and goods flowing round the topological equivalent of Soddy’s five touching circles like electricity round Wheatstone’s Bridge), the working economy is consumers being supplied via another such circuit, the ecology, by producers and distributors, with developers (who like the others are also consumers) trying to improve the methods of consumption, production, distribution.

      I don’t think you will be able to follow the implications of this without having a picture of Wheatstone’s Bridge or Leavitt’s communication diamond in front of you. Figuratively, this is everyone’s children being supplied by fathers and mothers, helped by the old folk contributing ideas from their experience. Each point in the network has alternative paths, so decision-making is involved. Each channel can be anything from one individual to the strings of companies and durable goods part-completing the production and distribution processes.

      In the working economy we have, Capitalism, there is a similar monetary distribution control network developed from the economy, overlapping but external to it in the same way as humans are to the ecology of life. This shadow-economy part-completes the decision process by predetermining how much expenditure is flowing to production and distribution or (via the governmental hierarchy supplying the system’s maintenance processes) directly to all consumers. These decisions are made by financiers in this shadow economy, but because of the time-lag in mass production processes large producers are most in need of credit and in representative democracies best situated to lobby for “austerity” in government channels. In the shadow economy, bankers are best situated to channel the revenue from supply away from economic system maintenance into shadow system maintenance, restocking those with sufficient surplus to supply credit with even more surplus than they promised to lend out, so cumulatively enriching the already money-rich at the expense of everyone else. Whereas the aim of the “real” working economy is the maintenance of life, the aim of this shadow economy was called by Aristotle chrematism, or money making, now legally enforced as a corporate duty to maintain the value of shareholdings.

      When one understands how money is no longer a tradeable valuable but a credit limit created out of nothing, there seems to be no point in the shadow economy: only for an automated financial system which already exists, but with costings and hence incomes in terms of work necessary to maintain the economy and regenerate the ecology. If that is accepted, the question remaining is not whether but how best to do it..

      Logically it can be done by using honest interest-free credit cards, with money reduced to small amounts accounted for in advance for convenience, with a generous credit limit and debts written off with a Citizen’s Income limited to what can be afforded given the economy’s rate of production and supply. The habitual motivation then has to become living economically and having the satisfaction of doing work which needs doing, rather than making money to spend thoughtlessly. We are where we are, urbanised by capitalist mass production, befouling the atmosphere with constant traffic and commuting, but in the long run change is possible. As of old we might live locally (my model is French village life), but timeshare work on ecological and infrastructure regeneration projects or lodging for short spells in linear cities (rail-connected for commuting and distribution), to share mass production of materials. For now, let me round off by saying there is more that needs saying about motivating, localising and controlling development, and about education through arts and crafts as well as literacy.

      • February 7, 2019 at 10:15 am

        Dave, in my view you have things confused. The bigger part of the economy is the public economy. There are no markets, no capitalism, no firms, etc. in this economy. The public economy’s ability to function on behalf of all the populace is seriously imperiled in many Western democracies and particularly jeopardized in the USA. Once you see the differences between the public economy and market economy, I think you’ll see why this is the case. The market-centric private economy consists of many profit-seeking firms. In the USA, as in all democracies, “The People” is the sovereign. Power emanates from the people through a constitution to the organization we call “government.” In effect, the theory of popular sovereignty creates a collective sovereign. To carry out the will of the collective sovereign, government must produce goods and services. An economic function which amazingly is largely ignored by most social scientists, including economists. Government produces its outputs in a non-market environment. Its resource inputs are supplied collectively: from the authority of the people (their votes for elected representatives) and from their aggregate financing (taxes). The intent and the result of government’s collective-choice, collective-financing system of production is that goods, services, benefits, and protection are supplied for the well-being of the entire society, accessible by any and all residents of the republic regardless of personal wealth because they are provided free or below cost at the point of usage. Economic theory today lacks any cogent theory of this non-market environment. To the contrary, a prejudiced market-centric view of the public economy prevails in textbooks, in university classrooms, in the documents and debates shaping public policy, and in the current practice of public administration. This was already the situation before Trump. And his actions have made the problem much worse. The fundamental question here, at least in the US is what portion and which services and resources the public economy ought to provide vs. the market-centric private economy? That question was not addressed in the US till the middle of the 20th century. Prior to Ronald Reagan and the 1980’s resurgence of private market-centrism, the answer was moving toward a large non-market public economy providing the means for self-sufficiency and a middle-class life style for all Americans. With private markets used as deemed appropriate to achieve these goals and to achieve life-styles beyond the middle-class. That’s been sabotaged. A corporate model of performance measurement has been imposed on the public domain, where market-mirroring values and purposes displace public purpose in measurement schemes. Public administration has been reformed, or better said, deformed by the so-called New Public Management (NPM), “a child of neoclassical economics.” NPM has wrecked or weakened every level of government. The “axioms” of market-centric economics are now the driving force behind the debasement and destruction—sometimes unintentional but often intentional—of the public governing capacity. Agencies originally created to meet a public need are being warped into entities whose purpose is to generate revenue and, in some cases, deliver private profits at public expense. Emptied of purpose and meaning by the purification of a “competition prescription,” the public sector begins to fail. Systems of performance measurement (based on markets, of course) are then put in place, ostensibly to improve results but often creating even more harm. While government “reinventors” boast about shrinking government, a shadow government is created, with an explosion of private contractors reaping taxpayer-funded profits. We find our most basic public services and rights in jeopardy, from clean air and water to unencumbered judicial due process, from effective public education to safe drugs and food, from fair police protection to free and fair elections. This makes efforts to restore vibrant democracy and effective government nearly impossible. In the early 20th century the effective operation of the public economy was a significant, active concern of economists. With the rise of market-centrism and rational choice economics, however, government was devalued, and its role circumscribed and seen from a perspective of “market failure.” As Backhouse (2005) points out, the transformation in economic thinking in the latter half of the twentieth century led to a “radical shift” in worldview regarding the role of the state. The very idea of a valid, valuable public non-market has been nearly pushed out of sight. Confined and constrained by an overbearing premise of market superiority, the state lacks basic conceptual tools to think differently. It is time to stop peering at the public sector through a market lens and to see public production as a distinct, valid economic process apart from markets. The need to seek and find an understanding of how the public non-market works has never been more pressing. With this understanding in hand, it will be possible to appreciate how fundamentally and critically different are the dynamics of the public non-market from those of the market. At that point, we can establish operational methods of governance that produce desired results in public non-markets.

      • February 7, 2019 at 5:24 pm

        “Dave, in my view you have things confused.”

        Well, you being Ken, you would say that, wouldn’t you! And you then try to divert attention from my comment with a load of gobble-de-gook spelling out what think you have now in the US, which is precisely what is needing to be changed because it is having such unjust, world-damaging and destabilising outcomes.

        I’ve presented a theory of ANY economy (what an economy IS), not presuming to tell you what you will see but suggesting what to look for and how to interpret what you are seeing. I’m not at all confused about the difference between market and public economies. At the global level all I need to point to is the non-market distribution channel sandwiched between producers lobbying government to marketise its functions and distributors unable to pay taxes because they are having to pay back loans increasingly burdened with compounded interest.

      • February 8, 2019 at 6:58 am

        Dave, I agree that public economics is a mess right now. And that it’s the result of imperialism by mainstream market-centric economists. The problem with a theory of ANY economy is that there is no such economy. Each economy has a unique history and evolution. That’s the main reason there are many possible versions of public economics and none is consistent with market-centric economics. The one example you provide is valid, but it’s only one example. I suggest we focus on the development of new conceptual tools that allow us to create new and better public economics.

      • February 8, 2019 at 3:24 pm

        Ken, I’m relieved you took my stark criticism so well! As I said to Michael, my aim has been to produce a map, showing not the content (what its cities look like) but the road structure of the cities in context. Remember too I am trying to increase the understanding of economics from outside the box. I’m writing with a lifetime of experience of electronics and most of one of information, communication and control systems focussed as a scientist on their reliability and how they go wrong.

        At 17 I shared a room with a practical radio enthusiast, this still being the pre-transistor era using what you call ‘tubes’ and we thermionic valves. The signal gain from the primitive types available outside the military produced so little amplification that what was called ‘reaction’ was sometimes used to increase it: part of the amplified signal was fed back in and amplified again. Radio transmissions in those days were AM (amplitude modulated), supplying signals whose bandwith was twice that of audible sound. What happened when reaction was used was that the bandwidth was narrowed: the high frequency sound disappeared. Use too much reaction and it all disappeared, reducing the programme to a single-note ‘howl’. Twenty years on and the term ‘negative feedback’ was being
        introduced to explain the achievement of ‘hi fi’ amplifiers. What had been reaction became ‘positive feedback’; the ‘reactivity’ discussed by economists since Soros is the same thing, and the denuding of our cities of small shops the same effect.

        What made it obvious to me, since Thatcher made it obvious that neo-classical economics has gone wrong and Keynes only partly cured it, was my understanding of how electronic control systems worked, with persistent errors left by simple corrective feedbacks (due to errors being needed to drive the correction) needing to be offset by a historical average of them (in Keynes case the unemployment rate). The half-baked monetarists went back to treating noticeable unemployment as normal, and indeed desirable as a way of driving the system harder. Worse, where Keynes had governments creating employment, they persuaded governments to do the opposite: to spend money buying from more efficient (i.e. automated) businesses. The net effect has been to turn Keynes’s negative feedback into positive feedback, swamping price signals and reducing trade to just acquiring money.

        Soon after encountering Keynes c.1970 I updated my training in communications engineering and learned that control theory had in 1948 been described as Cybernetics, i.e. steering. The three feedbacks in this were supplied by compass, sextant and a look-out giving advance warning of dangers (avoided by deviations following conventions on giving way). Such deviation takes one off-course. At sea the sextant enables this to be corrected at the next positional check. In economics, with intelligent government employment being prevented, a succession of deviations is leaving the real system in chaos, with compounded monetary interest, rents and profits king.

        So anyway, there are static and dynamic forms of control. The static form is enclosure: hence conventional logic: something is in a set or out it, and what is true of the set is true of any or all of its members. This is true whatever you are talking about.

        However, two sets may overlap, as when humans are both animals and (in maturity) thinkers. Also, the dynamic form of logic is cybernetics, of which static logic is a special case. By c.2000 this had been automated as an electronic PID servo, the three types of feedback correcting motion or change in the present, past and [near] future for direction, position and danger. My cybernetic logic map of the the economy thus comprises four circuits: one directing our energy towards our aim, and the other three supplying corrective feedbacks.

        This self-contained map of the economy overlaps at one end with a similar map of life-forms (unicellular, plant, animal and human) and the shadow economy (banks, shareholdings, insurance and derivatives). As logic this is again universal, its orthogonal coordinates and shared channels containing – so locating – everything that has been going on at the limits of the expanding universe in every era since the Big Bang.

        Our aims depend on our economic function. Whichever it is, the three others provide our corrective feedbacks. The same is true of the shadow economy, but the aim of that is chrematist and its derivative portfolios mix up the economic feedbacks.

        You ask for new conceptual tools. So far as economics is concerned, that’s what this is, and even in engineering it is post-Keynesian. Keynes needs to be reconsidered in light of it.

      • February 8, 2019 at 3:56 pm

        PS. A couple of small but perhaps significant omissions.

        My “self-contained map of the economy overlaps at one end … with life-forms” and at the other end with the shadow economy.

        “Our aims depend on our economic function.” What I don’t now feel I have clearly enough spelled out is that as consumers, producers, distributors and developers we have different aims, and need to listen to feedback from different people, who in turn need to listen to us.

      • February 9, 2019 at 11:21 am

        Dave, the way you have this set up, humans make no choices, exercise no judgement. It’s all just logic. One version of logic, that is. Yet, the one thing that is common to all humans is judgments and choices. Your description is fascinating. But until your “alternative” can include human judgement and choice, I don’t see it as useful.

      • February 9, 2019 at 10:38 pm

        On the contrary, the need for decision making is built in. See this from my original contribution to this thread on February 6, 2019 at 5:10 pm.

        ” Figuratively, this is everyone’s children being supplied by fathers and mothers, helped by the old folk contributing ideas from their experience. Each point in the network has alternative paths, so decision-making is involved”.

        I was spelling out the logic, but three types of necessary decision have been mentioned in passing: (1) at the logical level, decisions to divert needing to be followed by decisions to get back on course, this causing chaos when the need for the second decision isn’t understood and made (2) what amounts to the same thing in individual cases: allowing other people a bit of slack so they can choose to go in different directions to oneself. (3) choosing to follow conventions like driving on the right and giving way at roundabouts to traffic from the left.

      • February 10, 2019 at 7:23 am

        Dave, contrary to your contrary. Your entire presentation is about regulated systems. Human judgement and choice often are not regulated. They have histories, but these do not control them. Sometimes it’s difficult to understand how a choice was made or why one judgement was made rather than another. Even when the person making the choice or exercising the judgement is questioned. But more often the person can give reasons for a judgement but will have difficulty in explaining why these reasons were chosen over others. Or, at other times a person may just have a feeling that a judgement is the right one – they call this a hunch. Of course, the historian will say the judgments reflect the historical experiences of the person but find it difficult to identify a causal path from A (historical experiences) to B (judgement). The social scientist will attempt to find some behavioral tendency to explain judgments and choices. If you were to apply the model you propose to actual economic interactions many would slip past or beyond your model. To make it feasible you would have to expand and recreate your model. That’s okay. Every line of research must begin somewhere.

      • February 13, 2019 at 8:40 am

        Ken, this time you are not being contrary, but only presenting half the story! Perhaps I have too. Insofar as this is about regulated systems, it is about the difference between systems of physically contiguous causation like thermostats and pressure relief valves, and information based systems like government or PID servo systems or computers (essentially methods of directing energy) which can go wrong if misinformed or incompletely acted upon.

        Human systems are of the second type, so insofar as I am venturing into behavioural science I’m explaining tendencies and emphasising development and finding ways of righting wrongs and reconciling differences within populations. I’m not trying to model particular interactions causally from A to B but I am trying to model the logical types of interaction.

        I am modelling facts like one method of steering a ship – given our spherical world, a coordinate system, a few instruments and passing conventions – enabling us to map aiming points and repeatedly make journeys to any of them. A simple computer is able to run one program, but a computer with an operating system program may in effect be able to run many programs at the same time.

        OK, these computers and/or their programs may go wrong, and their operating systems may have to prioritise and schedule timings to prevent programs interfering with each other, but whereas the programs may be dealing with events in the world outside the computer, the operating system program is dealing with scheduling and error ‘prevention, detection and correction’ within it. Such operating systems are themselves programs, however, so they and hence the computer hardware/software systems as a whole can still go wrong.

        Translating that into human terms, our operating systems use language to select and run programs translating sensory inputs into outputs. That’s what I eventually got from Chesterton (1908, ch.2) seeing insanity in academics (like economists?) using only half of their brains. That’s what, much later, I found in Tony Lawson’s (1997, p.282) criticism of deductivism:

        “I do not wish to suggest that in accepting deductivism and/or the associated conception of science, mainstream economists are in agreement with the manner of its derivation from Humean philosophy. Indeed many have probably never given any thought to the question of how this conception of science is grounded. At the same time it is difficult to believe that many do not at some level accept the richer ontology of structures, change, emergence and internal relationality etc, that has been systematised under the heading of critical realism”.

        Where Hume went wrong was in assuming the outside world couldn’t get into our heads. Perhaps he was right, but what he was still innocent of was an understanding of information and its encoding, and the possibility of our brains adjusting our senses until what was inside was equivalent to what was outside, e.g. by focussing information from remote structures. By remembering the settings, we are able to regenerate that.

      • February 13, 2019 at 9:08 am

        PS. Just found this by Peter Radford in “Smith’s Curse” (2011):

        “In a deterministic system the outcome is orderly because the systems itself is precise. It plays out along known and predictable lines. Hence the theories of people like Walras who conceived of the economy as giant machine capable of arriving at a single best solution to the problem of allocating resources. Only his machine needed help. He wasn’t able to solve his equations without the assistance of an external “auctioneer” who directed the traffic to make sure everything resolved itself neatly”. The multi-user computer’s Operating System?

      • February 13, 2019 at 11:34 am

        PPS. This again from https://rwer.wordpress.com/2011/01/13/smith%E2%80%99s-curse/, (where Ken was already being contrary!):

        “This doesn’t mean that complex systems are not comprised of very simple components. It’s just that they are not deterministically thus constructed. Therein lies the big error of orthodox economics. It is still rooted in a mechanical vision where the economy is a vast machine playing out in an orderly fashion from a set of basic assumptions.”

        So I’m talking about complex systems, but not just mechanically complex where the outcome is determined by a quadrilateral of forces: an information system in which things can go wrong, like a compass needle simply aligning itself North-South and the steersman mistaking the South for the North, so that when he thinks he needs to direct himself more to the East he actually goes further West. That’s a pretty good analogy for what is happening in today’s austerity thinking, where the North is seen as money-making and South the common good.

        So we’re living with a mechanical vision of Government as an operating system, seen like we see Windows as a set of functions like word processing and mailing. Actually those functions are not the operating system, they are a library of programs which it is more convenient to standardise and make readily available, with Windows being the operating system which not only does make them readily available but also allows us to manage our own priorities and error problems. In this sense Government is constitutional law, and the functions neocon governments are trying to make money from are public services that should be provided for free (which insofar as they have already been developed they can be), and not necessarily in Windows-like packages bought via taxation. Running costs can be brought into the pricing system by the likes of standardised dental charging here in the UK, but what matters is that everyone has enough credit to pay for them and enough emotional and financial incentive to do good work in them. Which (rather than regulation by government of what we are allowed to do) is what is aspired to in my combination of Christian ethics, credit cards, prizes and subsidiarity.

      • February 14, 2019 at 10:22 am

        Dave, let me try again. Human existence is simply continual interactions with whatever confronts us. These interactions are the source of all the things, living and inanimate, humans create to fill their dictionaries, universities, and textbooks. There is an excellent book buy Andrea Wulf, ‘The Invention of Nature: Alexander von Humboldt’s New World.’ For the first time ever in human history nature was no longer separate from humans. Humboldt said the earth is one great living organism where everything is connected, including humans. This was as Wulf says, “a bold new vision of nature that still influences the way that we understand the natural world.” And the source of this bold new nature? Humboldt made it up. He invented it. That’s what Sapiens does. It invents things, animals, humans, science, mathematics, logic, etc. It even invents such strata as mind-body, natural-artificial, good-evil, etc. Sapiens invents systems, as well as the systems on which you focus, “the systems of physically contiguous causation like thermostats and pressure relief valves, and information-based systems like government or PID servo systems or computers (essentially methods of directing energy).” These inventions become shared and institutionalized, thus creating cultures and the societies that emerge from these cultures. Many of these inventions are explicit and known widely. Others are sometimes hidden from the view of some humans. Either because they have faded from memory or they have been pushed aside by competing inventions to maintain cultural control. Sapiens tends to hold onto the inventions that are useful in building and maintaining durable societies but puts others aside. Empiricism and religion are two foundations of societies in the west. In a struggle for control reconciling the two has been a Sapiens project for over 400 years.

        Since humans invent themselves and their cultures and societies, they also invent rationality and irrationality. This process of invention is thus not rational or irrational, till humans choose one, both, or neither. This makes revealing the history of the process difficult, since the invention process is the origin of everything that might be used to describe and explain the process. We use the term reflexive to refer to this indeterminacy.

        Beginning from Einstein’s basic understanding of science, “The whole of science is nothing more than a refinement of everyday thinking,” there are three commonly identified origins for science, and certainly others that haven’t been considered yet. First, there is philosophical. This approach focuses on demarcation. What is it that makes science distinctive? The answer till just recently was results. Now the answer is methodology. Philosophical attempts to characterize science have generated a variety of demarcation criteria, each of which is unsatisfactory. Seems one source of the problem is the way in which the quest for demarcation criteria is mixed up with the problems of trying to understand science in retrospect. The organization and conception of science has, at a general level, itself varied over time. In other words, the way in which science might be defined has itself varied in response to the organizational and social factors which bear upon its boundedness. Science is what it is because of who uses it and how they use it historically. Finally, science is also directed by turbulent or chaotic relationships in which it is involved. In other words, science is complex. Science began as the study of orderly relationships. A study of the predictable. To be complex is to be nonlinear, unpredictable, and stable and unstable depending on when the system is observed. In science that includes complexity, deterministic predictability is not possible.

      • February 15, 2019 at 8:15 pm

        Basically, Ken, I find your beliefs incoherent. What is the “you” which is having them? Before it existed, did you create that too? But I’m not interested in how you think people think. We are discussing the public economy in crisis and I am trying, by means of analogy and judging by consequences, to get at what has gone wrong (or not yet become right) with the way people do think about political economics, and to explore alternatives.

        You want a demarcation criterion for science? Mine is to enable mankind to see in future what it couldn’t see before.

      • Ken Zimmerman
        February 17, 2019 at 4:52 am

        Dave, yours is a tall request. Here are some authors you can read that would help you understand the roots of my position. Michel Serres (philosopher). Serres is interested in developing a philosophy of science which does not rely on a metalanguage in which a single account of science is privileged and regarded as accurate. Steven Connor (professor of English and Modern Literature). Author of Charles Dickens (1985) and Postmodernist Culture: An Introduction to Theories of the Contemporary (1989) 2nd, revised and enlarged edn (1996). Bruno Latour (anthropologist). Author of the first social studies of science study and book publication, Science in Action (1987). Michel Callon (Sociologist). A central figure in science and technology studies and advocate for Actor-Network Theory (ANT). Callon continues to spearhead the application of ANT to study economic life (notably economic markets). His work interrogates the interrelation between the economy and economics, highlighting the ways in which economics (and economics-inspired disciplines such as marketing) shapes the economy (Callon, 1998 and 2005). John Law (sociologist, Open University). Another proponent of ANT Law provides a succinct description of ANT, ruthless application of semiotics. Thomas P. Hughes (historian of technology). Author of Human-Built World: How to Think About Technology and Culture (2004) and The Social Construction of Technological Systems: New Directions in the Sociology and History of Technology (1987) and a dozen other books. Trevor Pinch (sociologist). Author of How users matter the co-construction of users and technology and The golem: what you should know about science (2nd ed.) (1993). Andrew Pickering (sociologist, philosopher and historian of science; holds a doctorate in physics from the University of London, and a doctorate in Science Studies from the University of Edinburgh). Author of a classic in the sociology of science, Constructing Quarks: A Sociological History of Particle Physics (1984).

        A few cites may help you understand better. Entities take their form and acquire their attributes as a result of their relations with other entities. Entities have no inherent qualities: essentialist divisions are thrown on the bonfire of the dualisms. Truth and falsehood. Large and small. Agency and structure. Human and nonhuman. Before and after. Knowledge and power. Context and content. Materiality and sociality. Activity and passivity. In one way or another all these divides are rubbished. Sacred divisions and distinctions are thrown away. Fixed points are pulled down and abandoned. Humanist and political attachments have been torn up. it is not my view that there are no divisions. It is rather that such divisions or distinctions are understood as effects or outcomes. They are not given in the order of things. On specifics relating to economics I offer the following. Per Callon, making economics simple and straight forward is a difficult task requiring much work which when completed fades from sight. In the usual description of the market, what needs to be explained is precisely that which we consider as obvious: the existence of calculative agents who sign contracts. This break is basic. What needs to be explained is not the fact that, despite the market and against it, person-to-person interaction must be developed in order to produce shared information. On the contrary, we need rather to explain the possibility of this rare, artificial latecomer composed of agents which are generally individual, calculating humans, foreign to one another and engaged in the negotiation of contracts. Similarly, with the public economy what we need to ask is how it is possible to have first a public and then an economy attached to it. And in this creation process what has disrupted this interrelationship.

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