Home > Uncategorized > We wrecked the planet but if the young just read the Washington Post, they will only blame us for the national debt!

We wrecked the planet but if the young just read the Washington Post, they will only blame us for the national debt!

from Dean Baker

You have to love Robert Samuelson. He writes a column noting that baby boomers are leaving the workforce, and some are dying off, leaving the country to our children and grandchildren. He concludes the piece with a comment on the national debt.

“To boot, there’s also a massive federal debt. Good luck.”

Given the enormous damage that we have done to the environment, our children and grandchildren would be enormously forgiving if all they blamed us for is the national debt. Of course, since we (baby boomers) will all be dead at some point, we will also be passing on the bonds that constitute the national debt to our children and grandchildren.

Most kids will not be inheriting bonds, due to the inequality of wealth, but at some future point the debt will be held by the children and grandchildren of Bill Gates and his ilk, making the debt an issue of intra-generational inequality, not inter-generational inequality. But even beyond this logical point, the burden of the debt is also relatively low these days, around 1.0 percent of GDP, as opposed to 3.0 percent of GDP in the early 1990s. So it’s hard to see what the big deal is.

Also, Samuelson consistently ignores (like all deficit hawks) the implicit debt that the government creates by granting patent and copyright monopolies. These government-granted monopolies raise the price of items like prescription drugs, medical equipment, software, and other products by many hundred billion dollars annually above the free market price. Yet, the deficit hawks want us to pay no attention to this burden. If I were more cynical I would think they were getting money from the interest groups that benefit from these monopolies.

Anyhow, if the only thing our kids think we did was wrong was run up a large government debt, then we failed big-time in giving them a decent education.

  1. May 24, 2019 at 6:50 pm

    There might be some value in resuscitating Max Weber. The point is whether the situation the young will inherit will remain ‘dominated’ by economic understanding or whether some other aspect of the human condition will become prioritized.

    Weber argued it is useless to try and grasp our situation in its entirety. Inter alia, he was interested in how economics (and economic rationality) had become dominant.

    There is a case to be made that this epochal shift has proven catastrophic, leading to monetizing (disenchanting) the planet as well as social life.

    Perhaps future generations will not so much be forced back to forms of life before economics’ rise as forced find news ways to examine the balance/tensions/irritations (in the Luhmann sense between what Weber labeled the six ‘spheres of life’ – of which ‘the economic sphere’ is but one.

    • Rob
      May 25, 2019 at 5:16 am

      What were the six ‘ spheres of life’?

      • May 25, 2019 at 1:57 pm

        Glad you asked – most don’t bother. Weber’s intuition, based, I believe, on his study of Indian and Chinese philosophy, was the philosophical absurdity of trying to ‘understand’ the entirely of the human condition – the intuition many know as ‘bounded rationality’. The intellectual’s first task is to disaggregate human/social questions into brain-bite-sized ‘chunks’. He chose ‘religion, the economy, politics, aesthetics, Die Erotik, and ‘intellectualism’.

        The meaning of these separations has changed somewhat since his time (as Luhmann explores). But the general point is that if you mix everything up together you get nowhere.

        Inter alia here is the key to understanding Frank Knight’s economics, itself the taproot of neoliberal economics of Stigler, Friedman, et al. which studiously dismissed Knight’s approach.

        Weber’s (and Knight’s) point – that the economy must first be understood as a ‘sphere of life’ with its own ‘rules’ before we can explore its interaction and influence over the other spheres, notably politics and religion. But that also meant that any ‘real’ or useful economics had to be ‘attachable’ to the other spheres and thereby to the human condition. Thus Knight (and Coase) pilloried – ineffectually – what became ‘mainstream economics’ for being un-attachable and so irrelevant.

        Which raises questions about ‘how come?’, specially since Stigler, Friedman and Co were Knight’s students.

        Unfortunately very few seems interested in this, preferring to pontificate about how absurd today’s economics is, and how it must be ‘reformed’. Alas, as we know, those who ignore their history are bound to repeat it – as tragedy perhaps.

      • Rob
        May 25, 2019 at 2:29 pm

        As the old saying went at Chicago, “There is no God, but Frank Knight is his prophet.” (http://a.co/afyJEWq)

        Much appriciated. I lack context so I have more questions than understanding. If I understand correctly, one point is historical context counts, but it cannot be gained except by breaking it down into intellectually bite sized chunks. I know that is not all you said, but I don’t want to “pontificate” before I understand.

        As I read your comment ideas that came to mind were recent books on the history of economics that I read, and how while they are useful and part of the puzzle, I still don’t have for lack of a better term a cosmic perspective.

      • Rob
        May 25, 2019 at 2:32 pm

        To understand your meaning I need to understand Frank Knight better. Any good sources? I have a couple but would like your input.

      • Rob
        May 25, 2019 at 3:19 pm

        I thought of you when I read this quote from “Economics as Religion: From Samuelson to Chicago and Beyond” by Robert H. Nelson –

        “Knight did not consider himself a Christian—indeed, he was famous for his antagonism to traditional religion.6 Yet he joined with a theologian to publish a book (each author wrote separate sections), The Economic Order and Religion.7 When the time came to deliver his presidential address to the American Economic Association in 1950, Knight self-consciously labeled it his “sermon” to the profession.8 In teaching his economics courses, as Patinkin observed, Knight was prone to engage in “long digressions on the nature of man and society—and God.”9 The core social and economic problem in Knight’s view was one of “discovery and definition of values—a moral, not to say a religious, problem,” which stood in great contrast to the progressive aspirations for “value-free” scientific management of society.10”

        Start reading this book for free: http://a.co/dImVR2R

      • Rob
        May 25, 2019 at 3:21 pm

        I thought of you when I read this quote from “Economics as Religion: From Samuelson to Chicago and Beyond” by Robert H. Nelson –

        “If the ethics of self-interest is the core moral/religious problem for economics, Knight’s way of thinking about the place of self-interest in society was in great contrast to that of Samuelson. Knight doubted that there could be any possibility of the scientific management of society, through the manipulation of self-interest in the market, or otherwise. Human reason, he believed, was a frail instrument, often corrupted by the baser elements in human nature. He thought, in contrast to the great majority of economists of his time, that the economic problem in society was in the end a religious problem.”

        Start reading this book for free: http://a.co/68kKGnB

      • Rob
        May 25, 2019 at 3:22 pm

        I thought of you when I read this quote from “Economics as Religion: From Samuelson to Chicago and Beyond” by Robert H. Nelson –

        “The defense of freedom—including the opportunity to express self interest in the market—must rest not on a scientific demonstration but upon an adequate moral/philosophical foundation.”

        Start reading this book for free: http://a.co/4ENzPef

  2. Craig
    May 24, 2019 at 8:01 pm

    Between the penny wise and pound foolish “freedom caucus”, deluded and demagogic finks like Donald Trump and Steve Bannon who expound upon the virtues of disintegration instead of the wisdom of integration and the fiddling while Rome burns by liberal/heterodox economists….catastrophe is sure to take its toll.

    Wisdom is deeply informed action, and Man mindlessly trods upon it, looks at it and yet misses it or settles for lesser modes of thinking.

  3. May 25, 2019 at 1:53 am

    This “national debt” business is totally fraudulent, Samuelson ought to know, but seems not to. Congress, in its infinite stupidity, mandates that Treasury must auction bonds to match the deficit. However the deficit spend eliminates the debt, at the same time as it creates the money supply. Two birds with one stone. Consequently the bonds cannot be used to fund the deficit as there is no debt to apply to, so the bonds just sit in savings accounts earning interest for the investors who took up the offer. At maturity the sums are reversed entered into the investors checking accounts.

    • Craig
      May 25, 2019 at 2:22 am

      True. You can account for the money of course whether it’s debt or monetary gifting, and if one eliminates inflation and doubles everyone’s purchasing power with a 50% discount at the point of retail sale you can totally invert the two realities that characterize the two deepest problems of modern economies. That’s a real two birds with one stone policy realization.

      • May 25, 2019 at 10:07 am

        Why would you do that? It’s not up to the government to discount the private sector.

      • Craig
        May 25, 2019 at 6:58 pm

        If technologically advanced capital intensive economies are inherently cost inflationary and private finance and its paradigm of debt only can only result in additional flows of costs to the economy…it IS the business of government to alter those realities. And a discount/rebate policy at retail sale is the immediate and most effective way of reducing costs to the consumer….and benefiting enterprise at the same time.

        In other words it is stupid NOT to do that because it resolves the biggest problems of the economy and is universally beneficial to every legitimate economic agent.

  4. May 25, 2019 at 4:23 pm

    @ Rob – cogitating – but thanks!

  5. May 25, 2019 at 4:37 pm

    @ Rob – Ross Emmett is the leading authority on FHK and has been studying FHK’s work from RE’s PhD on. But there’s plenty of room for alternative thoughts about material this rich.

    In my view it is not possible to understand ‘modern’ economics, post Marshall, without engaging FHK who has, I believe, influenced everything we call modern economics.

    Point two is the FHK was initially a ‘social philosopher’, just as Herbert Spencer was, equally influential. There are many different stories of how FHK became ‘an economist’. But it is not clear that he was ever that, really – though much lauded during his career.

    But midway through he drifted away from the economics he influenced so much and back into social philosophy, re-engaging the religion that he studied during his master’s degree trip to Germany in 1913.

    • Rob
      May 25, 2019 at 10:09 pm

      Thank you JC, that is good information. I am cogitating too! I am going to spend some time going back over your post above, reviewing all the information I have on FHK in my library now, and how to acquire Emmett. Robert H. Nelson has an entire chapter on Wright and I will re-read it.

      I seem to remember a few interesting posts of FHK’s on this forum where he made a rather chilling statement about economics as a religion and it should be taught that way, but my memory is old so I could be wrong. I will see if I can find the quote. In the meantime I will see what I can find with my limited resources on Ross Emmett.

      Have you read ILLIBERAL Reformers? I found it interesting especially in his coverage of how economics evolved as a modern field fo study and the early Social Gospel movement and progressivism.

      (Leonard, Thomas C.. Illiberal Reformers: Race, Eugenics, and American Economics in the Progressive Era. Princeton University Press.)

      • May 25, 2019 at 10:35 pm

        No. Thanks for the tip. Social Gospel – very important!

        My uncle – deeply involved with the Royal Society – was a leading British eugenicist before WW2

      • Rob
        May 26, 2019 at 9:11 am

        I thought of you when I read this quote from “Frank Knight and the Chicago School in American Economics (Routledge Studies in the History of Economics Book 98)” by Ross B. Emmett –

        “Frank Knight occupies a paradoxical place in the history of Chicago economics: vital to the tradition’s teaching of price theory and the twentieth-century re-articulation of the defense of free enterprise and liberal democracy, yet a critic (in advance) of the empirical and methodological orientation that has characterized Chicago economics and the rest of the discipline in the post-war period, and skeptical of liberalism’s prospects. This edited collection focuses on the tension between economic science – with its assumption of stable, known preferences necessary for predictive power (the de gustibus non est disputandum assumption of the Chicago School’s approach) – and economics as one element of a social philosophy befitting a free society. Knight’s emphases – uncertainty, the exploratory nature of human choice, the role of religion, and democracy as “government by discussion” – clearly resonate through the volume.”

        Start reading this book for free: http://a.co/2m8Gq0z

        Just started reading.

      • May 26, 2019 at 2:43 pm

        Absolutely to the point. The challenge is to press on to make sense of what Knight was pointing towards. Alas, the way mainstream economics has been institutionalized both in the university and in how it must be fashioned to interact with power (i.e. with policy-makers) makes it VERY difficult to stick to Knight’s path. Hence Ross, who knows better than all of us, speaks of paradox between Knight’s intuitions and their legacy.

        But there are deeper paradoxes within Knight’s work, indeed they are the gateways into his thinking. They must be engaged rather than paved over in the pursuit of ‘science’. Hence his ‘some limitations of the scientific method in economics’ (1924) – one of that staggering quintet of papers produced while he was at the University of Iowa.

      • Rob
        May 27, 2019 at 12:12 am

        Enjoying your website JC. Some real gems there. I would like to read Knight’s (1924) paper you refer to above, but I no longer have access to Journals vai the University of Washington library, which was slowly been cutting off any public access whatsoever and putting more and more behind pay-walls.

        In Japan, ethics is inextricably bound up with religious dimension (two normative environments) and social dimension (framework of concentric circles) The normative environments, influenced by Confucianism, Buddhism, and other traditional and modern Japanese religions, emphasize that not only individuals but also groups have their own spirit (numen) which is connected to the ultimate reality. (Iwao Taka (1994), Business Ethics: A Japanese View, in Business Ethics Quarterly, Volume 4. Issue 1.)

        Reading Ethical capitalism : Shibusawa Eiichi and business leadership in global perspective (Edited by Patrick Fridenson and Kikkawa Takeo. Japan and global society. University of Toronto Press, Scholarly Publishing Division. Kindle Edition.)

        I was able to find this:

        https://link.springer.com/content/pdf/bbm%3A978-94-009-7421-0%2F1.pdf

      • May 27, 2019 at 9:08 pm

        You have the 1924 paper with the Springer link – though it is an abridged version.

      • Craig
        May 26, 2019 at 5:00 pm

        Interesting discussion on Knight. Philosophy is a level of understanding above science which includes and requires ethics. Paradigms are par excel-lance integrative concepts in that they are purely mental/conceptual and yet understanding them changes an entire pattern in the temporal universe as well. Paradigms and paradigmatic thinking are replete with paradoxes, conceptual oppositions, inversions, transformations, simplicities of operation that due to their philosophical difference and temporal universe point of execution create deep, complex and significant effects.

        If debt, its nature and the monopolistic enforcement of that nature even to the point of economic collapse is the problem how can monetary gifting not be the answer?

        If the zeitgeist of Hunting and Gathering was enchanted and benevolent dependence on the ecology for survival and Agriculture, Homesteading and Civilization was de-natured material accumulation and consolidation of power then why is not grace as in relative abundance and benevolent and ethically redeemed power not the next zeitgeist and progression?

  6. May 26, 2019 at 5:18 pm

    @ craig – right!! Knight’s notions of economics were also ‘above science’. Which was one of many reasons for his deep disappointment at how economics developed at Chicago and elsewhere following WW2. See Ross’s writings on this.

    • Craig
      May 26, 2019 at 9:55 pm

      Yes, apparently he had a sense of philosophy and genuine ethics instead of the mere and paltry “ethic” of profit, power and control.

  7. May 26, 2019 at 10:06 pm

    Yes Craig, he was a philosopher first, before he got into economics.

    On the spheres of life:

    Weber, M. (1970). Religious Rejections of the World and Their Directions. In H. H. Gerth & C. W. Mills (Eds.), From Max Weber: essays in sociology (pp. 323-359). London: Routledge & Kegan Paul.

  8. May 27, 2019 at 9:03 pm

    @craig

    What I meant by ‘the quintet’ – though a couple of other papers qualify for inclusion.

    Knight, F. H. (1922). Ethics and the Economic Interpretation. Quarterly Journal of Economics, 36(3), 454-481.
    Knight, F. H. (1923). The Ethics of Competition. Quarterly Journal of Economics, 37(4, August), 579-624.
    Knight, F. H. (1924). The Limitations of Scientific Method in Economics. In R. G. Tugwell (Ed.), The Trend of Economics (pp. 229-267). New York: F. S. Crofts and Company.
    Knight, F. H. (1925). Economic Psychology and the Value Problem. Quarterly Journal of Economics, 39(3, May), 372-409.
    Knight, F. H. (1929). Freedom as Fact and Criterion. International Journal of Ethics, 39(2, Jan), 129-147.

  9. June 1, 2019 at 9:06 pm

    academia.edu has 3 million papers and moves research into a new world! In 1930, John Maynard Keynes, the famous economist, thought a 15-hour work week would be enough – and he never saw the Internet! Visit Vancouver B.C. with its 26 community centers and a computer-operated Sky Train light rail and you become radicalized in what our slow, backward-oriented, hyper-materialistic society could become! The 4-day week would be a social revolution!  The state is not a business or a Swabian housewife but can become indebted to help present and future generations.  The zero deficit is a myth as “finance drives the real economy” is a myth. 

    Unlike a chair, an idea can be shared by a whole people!  Reducing working hours is a socio-economic investment – giving better long term health and more time sovereignty!

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