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“Externalities”

In fact, externalities are “external” only in the language of conventional economics and conventional politics, for those who benefit from them.  They are external to the system of economic power and its intellectual representations, to the hierarchy that produces the dominant discourse and practices. They are gains (“positive externalities”) for hegemonic classes, groups, and countries, and often a condition of their prosperity, and are externalized by power practices and conventional accounting, which are power relations embedded in law and accepted business practices. But they are indeed negative for those groups (subaltern classes and groups, dominated regions, etc.) at the periphery of power formation. “Negative externalities” is econ-speak to avoid the much more damaging concept of “structural contradictions,” and serves to hide the fact that negative externalities trickle down the power ladder while the lion’s share of positive externalities moves up the power ladder. One example is how first-world corporations, consumers, and societies transform developing countries and poorly regulated countries with weaker civil societies, into pollution havens by exporting their polluting activities and dumping their industrial waste.

The notion of “lawful economic activity” provides yet another example of this cloaking strategy. Free-marketers argue that capitalism is essentially benevolent since it operates within the law, the highest authority in democratic nations and organized societies.  Yet the integrity of the law is increasingly corroded by regulatory capture; and the law’s social purpose – to serve the common good by allocating rights and responsibility and organizing accountability fairly – is systematically highjacked by economic forces. The powerful make the laws and break them with impunity; they institute one set of laws for the best and another set of laws for the rest. They set a public law for the dominated and a private law for themselves, a privus lex, a privilege. Examples of this corruption of law and democracy include banks that are too big to fail, the shielding of individual criminal executives from penal responsibility, and the mobilization of public resources for corporate welfare and bailouts of misbehaving finance institutions.  Michel Gueldry: “The double discipline of neoclassical economics”

 

  1. Rob Reno
    February 28, 2019 at 12:27 am

    Thank you. I share such with my daughters to the end they are part of the conceptual evolution of economics.

  2. February 28, 2019 at 12:41 am

    This analysis is exact, correct and salient. After the reading the words of Michel Gueldry above, I accept even more that reform of representative democracy designed to represent capital is impossible.

    My efforts to understand and present autonomous democracy as an alternative replacement has progressed and may be helpful to the awesome brainpower focused through thinking about real world economics. Evolution is accelerating at an accelerating rate and thus the idea of representation itself becomes a problematic to impossible concept.

    https://www.autonomousdemocracy.org/Contents/website-contents.html

  3. Helen Sakho
    February 28, 2019 at 2:46 am

    Technically “bankrupt” superpowers can afford to order bailouts for any country their want, or abandon others as they choose, depending on which society becomes their “friend or enemy”. Their leaders are now not even apologetic for doing this for their own very private gains.

    Such tactics are nothing new. History (very recent in comparative terms) is the best record of how this era of so called “globalisation” has meant periodic total u-turns in economic pacts and their dissolution according to the whims of the super-rich. The concept of the public has now become almost completely private globally, and in the face of almost total unaccountability of most governments, the real public have no-one to turn to for justice, representation, or compensation.

    Negative externalities are very likely to continue, while positive ones are likely to move increasingly towards positive, private “internalities” for the ruling few and their trusted clans.

  4. Mike Ryan
    February 28, 2019 at 4:03 pm

    Classical Economics is nothing more that propaganda from the wealthy. The term externality is newspeak for pollution or other damage corporations do at their convenience. By calling it an externality the propagandist removes moral responsibility for the action and absolves the corporation for damaging society.

    Will someone please suit a major university for teaching this crap? They call it a science – but Karl Popper would say no way. A jury would say no way. Universities are lying to their students while charging them billions of dollars to take the stupid class.

  5. MichaelLucasMonterey
    March 6, 2019 at 4:32 am

    OMG!!! Finally…I think the above post vindicates the nobility of the founders & editors of PAER-RWER…that their Hearts & minds are in the Rite place. Kudos & thanks to M Gueldry for so cogently, succinctly calling the spade a spade as is, in no uncertain terms, with zero equivocal, ambivalent bullgas. Yet, he further begs the question: What’s next? What’s beyond “conventional economics”? Do we need new, improved flavors of the foundationless factions of mainstream plutonomics–or do we need a new, truly effective, truly valid discipline, based on a truly viable ethical ecometrics & a holotrophic-holonomic metatheory of meta-economics, AKA cultural holonomics?

    Rob et al, Bravo! And infinite thanks for your sincerely compassionate concern for all generations of human being. Sincerely ~

  6. MichaelLucasMonterey
    March 6, 2019 at 4:43 am

    OMG!!! Just skimmed MG’s skewering of The Beast & Dragon of Biblical “Revelation” and realized that my prior kudos was accidental damning with faint praise. A more detailed forensic dissection & analysis of the pathology would be hard to imagine (for me) at this stage of the decline of the bureaucratic-kleptocratic military-industrial-financialist quasi-empire.

    My God/Goddess/Buddha–!!!—is this the turning point all humane meta-economists & holontologists have been waiting for?

    Will the tide now finally become a series of cleansing tsunamis of bio-ethically compassionate action that ends rule by ecocidal mania & corporate fascism (AKA globalist kleptocracy)?

  7. MichaelLucasMonterey
    March 9, 2019 at 8:45 pm

    After a final reading of Gueldry’s paper and a review of the first 4 comments above–and the absence of others by other contributors–it seems self-evident that the RWER blogsite is either an exercize of futility or like the sound of a whistle blowing on an ever more distant runaway train heading for an unfinished bridge over a dark & bottomless abyss.

    However, I am very grateful to Gueldry and the RWER editors’ posting of the excerpt above. I’m especially glad to know that, by early in the last century (if not before), Veblen recognized the importance of an interdisciplinary approach for effective study of human culture. His own beliefs (mentioned by Gueldry) preceded my realization:

    “Veblen disagreed with the neoclassical theories that emerged around him and his alternative vision of economics, which over time developed as institutional economics, shares with other heterodox and innovative schools of economics (notably evolutionary economics and behavioral economics) the belief that economics is embedded in history, psychology and ethics, anthropology and sociology, biology and neurosciences.”

    Yet, the wording of both Veblen and Gueldry still express the thinking which perpetuates the problem fully understood by Smith: the nature and scope of corruption can make economics a symptom of sociocultural & personal psychopathology (normative psychosis). For example, though Gueldry sees how the kleptocracy prevents positive social progress and cultural wellness, there is no mention or discussion of a real solution, nor of the impossibility of exorcising economics. Clearly, the many quotes and references used by Gueldry show that from Smith’s day to ours, many humane thinkers incisively critiqued the failings of every inhumane version of economics. Still, evidently none of them were able to think far enough outside The Box of sociolinguistic orthodoxy to propose a humanely scientific alternative to insanely inhumane economical pseudo-science. Yet, how could they? There was no basis of unitive metalogical metatheory upon which to build a real & realistic science of cultural economics.

    Gueldry’s inclusion of the rare realizations of the importance of understanding the history of mathematics for fully understanding economics as is and its history seems encouraging. On the other hand, mathematics suffers an auto-autistic crisis in stealth mode: There are at least 3 major flavors of unfinished metamathmatics (and metatheory). Never the less, as with other chaotic systems/processes, the future of humanistic economics may depend on seemingly insignificant changes. Comprehensive critiques of all defective theories and uses of economics and consideration of the causal factors, circumstances and potentially remedial ideas and bio-ethical fundamentals are clearly part of the solution.

    However, as in the maths & SM physics arenas, without serious, concerted efforts and interdisciplinary R&D of a well-grounded metatheory of meta-economics, the kleptocrats, predatory marketeers and executive psychopaths will be able to maintain their stratagems and systemic mechanisms that prevent healthy evolutionary progress toward systemic change for the better. Hence, as Einstein realized, perhaps too late, “the world will not be destroyed by those who do evil, but by those who stand by and do nothing about it.” So, to successfully accomplish The Mission of PAE-RWE, all nonpsychopathic economists must cooperate to establish and articulate an ecocentric bio-ethical Real-World Holonomics metaltheory.

    Logically, that necessity makes all discussion of the problem without effective progress toward a real solution worse than useless.

    Preemptive Rebuttal:

    O: Clearly, the most pressing objection to qualitative analysis of the non-quantitative factors is that there is no way to determine, measure, and integrate the value of qualitative and/or ethical motivators/demotivators.

    R: There is a way to effectively determine the, measure and integrate qualitative factors: Every bio-ethically positive and pathologically negative factor has measurable effects. The effects of harmful sociopathic and/or ecocidal motivations, intentions, decisions and actions are already measured. The absurd national debt of the USA to The Fed is a measure of its toxicity. For example, the ultimately ecocidal anti-ethical ignorance, greed, hostility, jealousy and hubris of the kleptocratic 1%ers and 10%ers can be measured with bogus micro-CDOs (collateralized debt obligations) AKA Fed dollars. Thus, instead of failing to distinguish the destructive components of GDP from the bio-ethically positive components, we can simply account for the actual damages and estimated costs of lost potentials & opportunities. I could go on, but the principle should now be self-evident. Clearly, without including ethical weighting and qualitative evaluation, there can be no realistic analysis of any community’s cultural interaction, much less of any nation’s or of the real world. Then again, realistic study and assessment would require a logical foundation of metatheory encompassing the essential metalogical principles of the qualitative & quantitative factors involved.

  8. MichaelLucasMonterey
    March 14, 2019 at 6:57 pm

    Hmmm… I guess that RWER is not the forum for PAE or discussion of remedial meta-economics. Could it be the Milgram syndrome in pro/academic stealth mode?

  9. Ken Zimmerman
    March 18, 2019 at 11:32 am

    Michel, all you say is correct. But there is an effective way to deal with externalities, both those emerging from economic relationships and those that extend beyond economics. I focus my remarks here on only economic interactions. The approach is called “re-framing.” It’s suggested by sociologists. First, I adopt Michel Callon’s definition of externality. “Let A, B, C etc. be agents involved in a commercial transaction, or more generally in the negotiation of a contract. In the course of the transaction or contract negotiation, these agents express their preferences or interests and then evaluate the various possible decisions arising from them. The decision they finally take has positive or negative effects, here referred to as externalities, on another set of agents X, Y and Z (as distinct from A, B, and C); the latter are not involved in this transaction or negotiation, either because they have no way of intervening or because they have no wish to do so.”

    Creating a contract or a corporation involves the same process. It’s called framing. The participants in a contract, for example, create the contract to meet identified purposes, via rules included in the contract, between the identified parties, over a certain time period, etc. This “frame” supposedly insulates the contract from events, actions, and persons outside the contract. But the contract fails, as do all contracts (and corporations, groups, parties, etc.). They fail because for the framing to work in terms of fulfilling a contract or a corporation making a profit, connections with events, actions, and persons outside the contract are necessary. The outside connections can both help and hurt in fulfilling the contract. I repeat, the situation in unavoidable. Sociologists suggest the following. First, identify and describe as specifically as possible the overflows for the contract frame along with all source agents and target agents. Next develop measuring instruments for quantifying and comparing all of these. Then it becomes possible to reframe the interactions. For example, parties X, Y, and Z, formerly excluded from contract negotiations between parties A, B, and C, but effected by those negotiations are now allowed to participate in those negotiations. Such solutions were used successfully in the 1990s and early 2000s but have been stymied by the current polarized relationships in the USA. According to Michel Callon, “This is the tangible result of the investments we have just described in all their scope and diversity: to give the option of internalizing the externalities, or to put it another way, of reframing hitherto uncontained overflows. These investments apply and produce both knowledge, in that they cause hitherto invisible links to appear, and also a reconfigured collective in which these now visible and calculable links have been renegotiated. The social sciences contribute to this dynamic.”

    The situations Michel describes can be overcome. That’s been demonstrated.

  10. MichaelLucasMonterey
    April 13, 2019 at 3:12 am

    Ken, I’m astonished that you believe in Callon’s definitions, notions and scientistic hogwash. Reframing bogus baseless yet deceptive jargon of specious academic rhetoric will never give an amoral pseudo-science of human cultural interaction the ethical dimension that was intentionally deleted from its domain of discourse.

    Without a logical foundation of unitive metatheory, based on generally acceptable, enabling principles & bio-ethics, how can a sustainably biophilic-ecocentric, nontoxic version of economics ever be? Evidently, the vast majority of economists, contributors, readers and commentators here & elsewhere are unable to accept any reframing of economics theory that permits development of a logical foundation of unitive metatheory capable of invalidating the anti-ethical yet profitable predominance of mainstream pseudo-science.

    Hence, the “situations Michel describes” have not been overcome sustainably, globally. What is continually demonstrated is the self-perpetuating, self-reinforcing dynamic of normative psychosis disguised with scholarly language for the sake of self-interest or possibly self-deception at the horrific brink of mass-self-extinction due to mass-insanity.

    Ken, previously, I thought you shared that view of the problem: commercially sponsored mass-corruption or, as Dr. D. Suzuki saw it, toxic “ethicide.” After all, it was openly identified by Thomas Moore, Shakespeare, Lenin and Hitler, among many other realists, before and since them. Soddy must have seen it. Chomsky and others call it impending omnicide or ecocide.

    Not to leave it at that, I think that we can do something about it, but not without an accurate, whole-system diagnosis and a whole-system cure, starting at the level of cause. Yet, Ken, if you doubt that the causal basis and whole of humanity’s socio-cultural illness involves ethics, biology and all the related psychosocial factors, then I would wonder what you see as the root cause and basics.

    I would be very happy to learn that there is some other way to start the cure. So far, I am making very little progress here & elsewhere. Honestly, it still seems surprising. After all, the Works of Keen, Hudson, Piketty, among other WEA contributors are not only technically excellent, they all implicitly and/or tacitly identify the amoral, anti-ethical & dysethical nature of the world’s economic dystopia-in-progress.

    • Ken Zimmerman
      April 13, 2019 at 1:39 pm

      MichaelLuca, I’ll “re-frame” your comment, if you’ll excuse my boldness. It’s obvious you do not accept or agree with the frame that dominates economics and much of western business and culture generally. Your words, “…the self-perpetuating, self-reinforcing dynamic of normative psychosis disguised with scholarly language for the sake of self-interest or possibly self-deception at the horrific brink of mass-self-extinction due to mass-insanity” are an apt description of that frame. But I don’t want to just criticize the frame. I want to understand as any historian or anthropologist would the process by which people create that frame, defend that frame, and expand that frame. Understanding is the first, and very necessary step in changing a frame, if that is as I believe your intention. You contend that nothing can be done about this situation “without an accurate, whole-system diagnosis and a whole-system cure, starting at the level of cause.” I begin with the actual work of people building this frame, the process. I don’t spend much time conjecturing about causes. My focus is process and the people involved in process. People built the frame. They can change it. It’s complex but not overwhelming. Understanding the frame and its creation gives access to spokespersons, agents involved, and what can be called the “logic” of the frame. And this in turn gives access to insights on changing the frame. “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” ― Sun Tzu, The Art of War

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