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Damn facts

from Peter Radford

It seems appropriate to mention increasing returns today.  After all, this is the day on which several of our modern titans of industry are appearing before Congress to respond to the concerns raised by the gargantuan size that their respective businesses have grown to become.  The CEOs of Apple, Amazon, Google, and Facebook are all under the gun to defend the enormous clout that each wields in the modern marketplace.  Today is the culmination of a long investigation by Congress into the problems, or perceived problems, that these four companies represent.  Whatever the outcome the simple fact that the four are being clustered into one band of rogues taints them with an aura of indecency we normally associate with the pharmaceutical, banking, or tobacco industries.  That’s bad company to keep.

But back to increasing returns.

It’s one of those topics that economists like to tuck away and discuss out of the glare of public gaze. It represents a considerable challenge to the foundation of contemporary economics.  Economists love letting us know that they know about the potential various errors that might devastate the core of what they believe, but they equally love sweeping such anomalies under the rug so as not to have to re-invent their discipline.

And the big four tech companies being hauled before Congress today are each a pretty good example of the problem.  More exactly, they are all good examples of the existence of increasing returns as a fact in the real world.  Facts can be so annoying when you want to preserve your theory.  Economists have made a habit of collecting awkward facts and discussing them offline so that the central theory they love so dearly can be preserved from embarrassment.  Those brave souls who set off to examine the awkward facts get great praise and often serious support from their less brave colleagues.  They are, after all, inoculating the entire discipline against the charge that it ignores facts.  You can almost hear them say: No it doesn’t, just look at Professor so-and-so over there, they’re checking it out.  See?  Economics is really diverse and inclusive.  Under their breath, of course, you can hear them muttering that they hope Professor so-and-so doesn’t get so far that the Big Theory has to be torn down and replaced.

You can get a hint of this in some odd places.  For instance, Ken Arrow wrote about it in his Foreword to Brian Arthur’s 1994 collection of papers published under the title “Increasing Returns and Path Dependence in the Economy”.  Commenting on how the English School, particularly Ricardo and John Stuart Mill, dropped the concern Adam Smith had for increasing returns he says:

“Other analysts in different traditions, especially the French metahemtician and economist, A.A. Cournot (1838), saw clearly enough the incompatibility of increasing returns and perfect competition and developed theories of monopoly and oligopoly to explain the economics system implied by increasing returns.  But this tradition acts like an underground river, springing to the surface only every few decades.”

Arrow goes on to mention luminaries such as Chamberlin, Robinson, Young, and Kaldor all of whom have dared to bring increasing returns back to the main table only to be rebuffed as malcontents or misfits.

Indeed you get the feeling from Arrow that his own attitude is ambivalent.  He tells us that those aforementioned luminaries developed the ideas “though far from completely”.  Damning praise.  Perhaps Arrow, one of the modern greats and with a reputation that would have made him impervious to criticism might have helped complete the journey?  But no.  He spent his capital on the silly nonsense called general equilibrium, hoping, no doubt, that no anomalies popped up to reduce his effort to dust.

I must give Arrow his due, he confesses that the onerous requirements needed to make neoclassical general equilibrium work — let’s all admit that those requirements are other-worldly — look as if they undermine the entire project’s credibility.  So the wonderful edifice he helped articulate and bring into being achieves not much at all.  The excact same criticisms can be leveled against it that its defenders leveled against central planning in the infamous “socialist planning debates ” of the 1920s and 1930s.  Arrow is being honest when he observes that if even a single person anywhere in the economy can set a price (as opposed to being a passive price taker):

“the superiority of the market over centralized planning disappears.  Each individual agent is in effect using as much information as would be required by a central planner”

So general equilibrium is not a statement about the real economy, it is a statement about what economists would like to talk about — notably artificial markets.  I have often remarked, and not always in jest, that economists do not study economies, they study economics.  The two are very different.  Not least because economies often contain damn facts that poke holes into preferred theories.

A slightly different manifestation of this problem is the infamous Friedman position on the reality of assumptions in modeling.  There’s nothing wrong with making what appear to be extreme assumptions if the subsequent analysis produces some insight of value.  Friedman himself says that the goal of science is to make “valid and meaningful predictions about phenomenon not yet observed.”   This, naturally, begs the question concerning which phenomena he speaks of.  Most people, I would wager, look at economics as the discipline focused on making statements about markets, industries, firms, and whole economies.  It is not, according to people like Friedman, at all about the economic behavior of individuals.  This is odd because the entire effort following in the Friedman tradition has been to theorize about the collective phenomena only as aggregates of individuals.  This leads to the absurdity of Thatcher’s claim that there is no such thing as society.  She was making an ideological statement.  But it was based upon firm Friedmanite foundations.  The problem with this is that the corpus of statements about the collective phenomena are built on knowledge and assumptions that are, according to Friedman, not within the purview of economics.  If we are to believe this, then so-called “micro-foundations” are merely speculation exogenous to the core of economics and cherry picked in order to facilitate desired statements about aggregate behavior.  This conundrum exists only because those following in Friedman’s footsteps want to avoid being accountable for any prediction of individual human behavior based on that speculative basis.  Individual behavior is, remember, not the subject of economics, it is just an assumption that economists make in order to examine the bigger picture.  So what if the facts belie the validity of that speculation?  We can leave that to the behavioralists — another worthy subgroup working on the fringes and inoculating the mainstream against the charge of ignorance.

I have, as I usually do, digressed somewhat.  But the existence of things like increasing returns and realistic individual behavior lurk constantly outside the fences of economics and spring up, to use Arrow’s analogy, periodically to embarrass the mainstream.  They never appear to barge all the way in.  Somehow economics manages to push them away and consign them to specialist study as interesting sidelines.  They are treated as oddities and not the norm, so the conversation can continue much as before.

Which means, ultimately, that economics stagnates unwilling to expand its core range to encompass facts that are difficult to scrunch into its perfectly competitive general equilibrating world.  What then is positioned as advance is simply an ever more detailed discussion of the same stuff.  Decade after decade.  This is not a novel observation.  Leontief, hardly an non-person in the galaxy of economic stars, agrees:

“If the great 19th-century physicist James Clerk-Maxwell were to attend a current meeting of the American Physical Society, he might have serious difficulty in keeping track of what was going on.  In the filed of economics, on the other hand, his contemporary John Stuart Mill would easily take up the thread of the most advanced arguments among his 20th-century successors.  Physics, applying the method  of inductive reasoning from quantitatively observed events, has moved on to entirely new premises.  The science of economics, in contrast, remains largely a deductive system resting upon a static set of premises, most of which were familiar to Mill and some of which date back to Adam Smith’s Wealth of Nations.”

One last thing, speaking of stagnation: the current burgeoning “trade war” between the U.S. and China is often viewed through the lens of Ricardian analysis.  Comparative advantage encourages trade between nations.  So standard economics tells us that trade is a “good thing”.  But the current trade between the two is not actually trade between nations.  It is a complex of privately determined, shareholder driven, supply chain relationships.  Where is the comparative advantage?  Where is the nation?  Who benefits?  Simple little models built in the Ricardian tradition fail completely to get at the current facts.


Damn facts.

  1. Ikonoclast
    August 1, 2020 at 12:37 am

    Damn right! Well written, Peter Radford, digressions and all. We can and should note that the Marxists of the Monthly Review (John Bellamy Foster, Robert W. McChesney et. al.) do NOT ignore monopoly capital. Indeed, they write whole books about it. See “The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China”. In this work, among other analyses about labor arbitrage etc, they quantitatively examine the increase in monopoly capital in late stage capitalism up to time of writing.

    The modern Monthly Review Marxists are theoretically the most accomplished, most objective and least ideological (believe it or not!) of all the Marxist schools. They are also far less ideological than capitalist or bourgeois economists. By “less ideological” I mean they pay far more attention to the “damn facts” than do bourgeois economists (with the meritorious exception of Thomas Piketty). The Monthly Review Marxists have also jettisoned certain ideological claims of orthodox, doctrinaire “Marxism”. Key among the ideological claims the MR group have jettisoned (precisely because damn facts refute such claims) is the absurd claim that the “tendency of the rate of profit to fall” is a Law: an absurd claim still held by some hard-line, doctrinaire and dogmatic Marxists (who don’t even understand Marx). The hard-liners apparently didn’t notice that Marx termed it a “tendency”, not a Law, and clearly indicated other tendencies, like the tendency to monopoly which presents an antithetical tendency leading to a new system “synthesis”, a new “emergent state” of the system as we would say today.

    I have noticed that in mentioning truly radical theory – theory which actually pays attention to damn facts – meaning the theory and empirical investigations of the MR Marxists and the works of Veblen plus Bichler and Nitzan (Capital as Power), I sometimes get attacked on heterodox economic sites, including this one. These are sites which one might think would be radical and progressive sites paying attention to the empirical facts. These attacks proceed from those who clearly want to preserve large chunks of existing capitalist economics theory and praxis, including capitalist ownership rules and relationships, and to do this by reforming some minor sub-field of the discipline. This is like claiming that astrology, homeopathy or the humors theory of disease can be reformed by reforming some minutiae of calculation in the discipline without reforming, or rather without throwing out lock, stock and barrel, their fundamentally fallacious base ontology. A fallacious ontology gets the basic damn facts wrong. Any such fake ontology is wrong about fundamental existents and their complex systems relations.

    Capitalism is pure ideology and prescription. There is nothing objective about any part of the political economy “discipline” of conventional, capitalist or bourgeois economics. It is a degenerate research program, to use the terminology of Imre Lakatos. Only a radical and complete rejection of capitalism and all of its “economics” can possibly reform political economy from the human equality and ecological perspectives. This is me nailing my colors to the mast, of course. In my opinion, all RWER intellectuals and bloggers have to decide whether this site is just another capitalist apologist site operating in that paradigm (thus being ideologically and intellectually captured and derivative) or whether RWER is truly dedicated to a radical re-examination of political economy. At the moment it is neither fish nor fowl.

    And finally, so long as I continue to blog on this site and get directly attacked and abused by (some few) capitalist apologists, my push-back will be vigorous but I will attempt to avoid direct ad hominem attacks in return like some of those made on me by said capitalist apologists.

    In general, I am surprised, on this site and even on other sites which actually bill themselves as being from a socialist perspective, to get attacked at all for advocating aspect(s) of socialism and critiquing capitalism. It is astonishing how far to the right the Overton Window has moved. Even many “democratic socialist” sites remain fundamentally in favor of capitalism even as it destroys the livable biosphere: and even as the neoliberal capitalist system clearly crumbles, unable to withstand the first significant exogenous shock (the zoonotic disease outbreak from COVID-19) which nature throws at us. This is a mere shot across the bows from nature compared to the broadsides to come… and yet our timbers are “shivered” and we are sinking already. What an astonishingly fragile and non-robust system is this risible and despicable capitalism, that it should take on water so at such a small challenge compared to the real challenges that nature will soon throw at it. It is a system wholly deserving of complete and utter contempt and rejection for its idiocies, inequalities, destructiveness, intellectual ossification and all round systemic fragility. It will collapse. It is un-savable. People wouldbe well advised yo move on to developing something that might actually work.

  2. Geoff Davies
    August 1, 2020 at 3:54 am

    Increasing returns are not just a problem to be dealt with, they are the death knell of neoclassical equilibrium:

    Sir John Hicks concluded in 1946 that if increasing returns to scale were common then “the threatened wreckage is that of the greater part of general equilibrium theory”

    as I noted in my Economia twenty years ago. It was increasing returns that got me into this sorry business. Quoting again:

    “… Tumbling Dice by Brian Toohey (1994), who is an Australian jounalist and economic commentator. It was Toohey who first gave me a coherent account of the central theory underlying free-market rhetoric. In it Toohey confirmed a growing suspicion of mine: that if economies of scale are widespread then there can be no general equilibrium (p. 70).”

    It took me quite a while to realise the absurd assumptions of the neoclassical nonsense are the desperate attempt to keep instability away. But there are many sources of instability, and economies are far from equilibrium and in a radically different realm of behaviour. See Economy, Society, Nature, in the right-hand column.

    As for Friedman’s ramblings about assumptions, totally confused. He may have been trying to comment on the art of the good first approximation, but he was so confused you can draw the opposite conclusion to the correct one, which is that the possible conclusions of a theory are completely defined by its assumptions. Absurd assumptions will get you absurd conclusions.

  3. Craig
    August 1, 2020 at 7:46 am

    Capitalism versus socialism is a false, obsessive and unwinnable “debate”. The profit making economic system of Direct Monetary Distributism, what I call Wisdomics-Gracenomics, is the thorough integration of the particles of truth in that dualism plus some new policy insights that accomplish inversions of temporal universe economic realities.

    • Ikonoclast
      August 1, 2020 at 8:23 am

      I disagree. To take my three examples, the Monthly Review Marxists, Veblen and the theorists of Capital as Power (CasP) have extensive and valid insights into the Capitalism – Socialism spectrum of political economy debate, theory and praxis. We might as well wait for the angels to come down and set us right if we start depending on theories about Wisdomics-Gracenomics. If the angles did exist and did come down, as messengers and harbingers, it would not be to cheer us up but to terrify us for our own good: not to amend economics but end it.

      • August 1, 2020 at 12:38 pm

        I agree with Craig’s first statement, but I’m still wishing I understood what the rest of it meant well enough to be able to agree or disagree with it.

        Ikonoclast incidentally has got the wrong end of the stick thinking religion is about terrifying people. Despite the Reformers reverting to the judaic view of an Almighty God criticising us with good reason, even Marx saw the challenging love of the Catholic “God the Father” as “the opiate of the people”.

      • Craig
        August 1, 2020 at 6:43 pm

        What I post here has nothing whatsoever to do with any religious dogma. It is instead natural philosophy/metaphysics and ethics which is the rational consideration of morals/rightness and wrongness. We should never let our religious beliefs or lack thereof arbitrarily impinge on our policy recommendations. On the other hand any economist or pundit who fails to consider ethics, especially in their economic policies, is far off the rails from the start.

        Systems were made for Man, not Man for systems. Full stop. Wisdom is the resolving integration of philosophy/thought and policy/action and grace/graciousness is its supreme value and insight. Full stop. If you integrate love with personal action/systemic policy the result is grace/graciousness. Full stop.

        A major aspect of the natural philosophical concept of grace is unity and the resolution of opposites. Full stop. Endless argumentation about opposites that do not resolve are unfruitful. Full stop. Palliatives/reforms never last. Full stop. Paradigms/entire pattern changes are permanent progressive resolutions. Full stop. Paradigms are single concepts that change entire patterns.

        Dave, Please ask me specific questions if you don’t understand my philosophy and policies?

      • August 1, 2020 at 10:30 pm

        So taking up your reaction to Ikonoclast’s thinking you were talking religion, I’ve just been reading Simon Singh quoting Pope Pius XII in “Big Bang” saying much the same as you about it being unhelpful to mix religion and science. But don’t throw the bathwater out with the baby: there is a lot of very interesting economic advice in bible stories that deal with the human problem as ours, not God’s.

        So I’ve been seeing your language, not its meaning, and it is that which I’m not really understanding. I’ve asked you specifically enough (and often) what you mean, and perhaps your “systems were made for man” answer here is about as clear as any I’ve seen.

        I’m taking it you are using the word “integration” in its Hegelian rather than Newtonian sense, which I do understand though I can show there are four Newtonian levels as well as three Hegelian phases in it. But it doesn’t seem wise to me to discount half the evidence and the philosophical analysis in use, nor to sell policies one hopes to achieve unsupported by blueprints showing exactly what and how, so that prima facie your 50% discount at point of sale can be refuted because its sums don’t add up. We agree love needs to end up as graciousness, but it too often doesn’t: arguably because “we” haven’t accounted for C S Lewis’s four types of love and our needs changing as we grow up.

        Please don’t misunderstand me. I want to agree with you, but I I don’t think in questions, I look for and try to learn from answers, and here I’m wondering if I’ve found yours. The questions I’m left with are: “Am I right?” and “Why do you not ask specific questions of ME and learn from MY answers?”

      • Craig
        August 2, 2020 at 2:57 am

        Retail sale is the terminal summing point of all costs plus profit for every consumer product or service even though specific prices for specific products/services between competing retailers may vary slightly. The exception is finance whose costs string out post retail sale which is the dead give away that private for profit finance is totally parasitic and thus not a legitimate economic business model at all because retail sale is where production becomes consumption.

        It amazes me actually that economists have not cognited on the significance of the point of retail sale (the singular aggregative point of the micro-economy) and the potential for equally significant price, monetary and ecological policy at that (pivotal) point. But being in present time observing comes hard for those habitually trained to look only via abstractions. It’s the same malady intellectuals stumbled over when Christ told them that you could “only enter the kingdom of heaven if you became as little children”.

        Graciousness like every other human emotion and action is self actualized. “As a man thinketh, so is he” comes to mind. Self actualization takes a little time and just a little self awareness. With economic purchasing decisions being numerous daily a system manifesting graciousness shouldn’t take that long to “click” with most.

      • Craig
        August 3, 2020 at 4:08 am

        I’m not saying that there aren’t insights in capitalist, socialist and other theories. There are. Particles of truth. None of them however deal with the number one problem in economics and that is the current monetary and financial paradigm. Handle that and most of the problems heterodox economists complain about and that are held in suspension by it are resolved.

        Austerity? Poof! Costliness to the point of non-competitiveness? Poof! Individual monetary scarcity and decline of purchasing power? Poof! Inflation? Poof! Poverty? Poof! Inability to re-industrialize in the most efficient and ecologically sane way possible because of costliness? Poof! Divide and conquer political gridlock which benefits no one…except finance of course? Poof! High taxes in the vain attempt to implement economic democracy? Poof! The absolute insanity of doing virtually nothing for decades to make the changes necessary to survive climate change? Poof!

      • August 3, 2020 at 9:50 am

        Agreed, Craig; but “the number one problem in economics … is the current monetary and financial paradigm” only because the idea it represents is catalytic of the number one REAL problem, which is buying more than the earth is capable of letting us reproduce. Surely discounting prices will just encourage us to buy more?

      • Craig
        August 3, 2020 at 5:22 pm

        1) Resource depletion, except petroleum, is not a current general problem.

        2) Doubling purchasing power doesn’t perfectly equate with a doubling of economic throughput.

        3) A directly distributed monetary system with 50% discounts at retail sale and at note signing resolves the major economic problems we face and enables both every sane green policy ever conceived and the fiscal programs necessary to handle climate change including retro-fitting the world and the off planeting of the most carbon emitting industries.

        4) Can we afford to wait another 50 years of tweaking Keynesianism, managerialism, advocating our personal hobby horse theories etc. etc., or is it time to handle the REAL PRESENT TIME problem that keeps all of the other economic problems in suspension. namely, the monetary and financial paradigm.

  4. August 1, 2020 at 9:15 am

    The answers to all the questions asked in the last paragraph are to be found in David Ricardo’s writings. I would recommend Peter Radford to start reading his writings. What he won’t find there is a reference to a law or theory of comparative advantage.
    Here is the explanation to this general misconception, in case anyone is interested: https://dx.doi.org/10.2139/ssrn.3095473

    • Ikonoclast
      August 1, 2020 at 10:42 am

      That seems a nice refutation of Mill’s misinterpretation. I mean “nice” in the old-fashioned sense which means “possessing or marked by correctness and precision”.

      I have long thought that comparative advantage was susceptible to another refutation. Namely that the production by a nation of its comparatively best product A would not usually exhaust all of A’s labor. Hence, production of its comparatively second best product B would be economically viable too and so on down to Z (or until full employment). For a productive, developed and efficient nation, many of these products could still find a market in the global system. Even where they did not, production of product Z at a higher cost than a possible import might still be viable and rational nationally, as the total personal and social costs of unemployment of Z-item production workers in the home nation might well exceed the savings made to the nation by the importation of item Z.

      • August 1, 2020 at 11:31 am

        Thanks. To get a sense of the implications of this finding, it is perhaps necessary to add that John Stuart Mill’s misinterpretation was the starting point of all “further developments” in international trade theory” (= neoclassical trade theory).

        The refutation of comparative advantage that you have long thought is equivalent to stating that what costs the labour of, say, 50 workers should be produced with the labour of 100 workers.

      • August 1, 2020 at 12:17 pm

        Not really, Jorge. You are assuming workers needing employers to pay them wages rather than crediting them (in a credit card economy) for having worked. If the work which needs doing only requires 50 full-time workers then it can be shared between 100, either by three day working weeks or by early retirements from active work.

  5. Manuel Angeles
    August 1, 2020 at 9:26 am

    Iconoclast is Damn Right. Thanks!

  6. Ikonoclast
    August 1, 2020 at 11:20 am

    Speaking of damn facts there are the damn facts of limits to growth to contend with too.

    ”The highest priority is to effectively deal with the escalating challenges of human-induced climate change and energy security…” – Geoff Miell.

    This is correct. However, even an absolutely essential course of action, in any complex system situation, is path dependent. Many people think that we can deal with human-induced climate change first and then worry about capitalism later. This is incorrect because capitalism as a path or trajectory does not lead to dealing with human-induced climate change in time. This is empirically demonstrated by capitalism’s failure to meet all targets to date from the Kyoto Protocol, 1992, onward.

    “To cut this right to the quick here, 1.5 degrees Celsius is now impossible. We’re not… we don’t have a chance of making that, and that’s because since 2015, the five years since then, we would have had to get emissions capped and heading downward. They have actually risen since 2015.” – climatologist Professor Will Steffen, presenting expert advice to the Independent Planning Commission NSW (IPCN), Australia, re more coal mines!

    Let me propose an analogy. Imagine I am on a remote beach, wandering along the littoral at low tide. Furthermore, I am at the base of a large, vertical cliff, un-climable by a slightly overweight but otherwise moderately fit 66 year man (that’s me) with no climbing equipment. Ahead of me is a rocky, near-impassable promontory jutting out into the sea. Behind me is a mile of open sands leading back to a path I can climb and then follow to the highest local prominence inland from the cliff. At this moment, I become aware that the sea is rapidly running out to a level much lower than even the lowest possible tidal ebb. I deduce a tsunami is headed my way. Clearly, my only option is to run back a mile, seek the path and attempt to ascend it as rapidly as possible to the peak. I cannot scale the cliff and I cannot negotiate the rocky promontory ahead anywhere nearly quick enough to reach safety.

    Humanity is trapped in precisely this kind of predicament. Our escape IS path dependent. One path which clearly will not work is capitalism; a system predicated on anything BUT measuring real system trajectories. Capitalism simply does not measure real system trajectories at all and indeed is predicated on paying lip-service to or serving up outright denial about real system trajectories and their asymptotes as limits. Capitalism measures only nominal values and nominally predicted economic trajectories within its formal, axiomatic system. It derives its calculations and prescriptions for action and response only from those fallacious axioms, its mathematico-deductive formal systems and its final money calculations. It measures all things in the social-fictive dimension of the numéraire (dollars) and not in the real scientific dimensions (in SI base units) employed for scientific explanations, predictions and prescriptions for real actions in the real world.

    Increased application of neoliberal capitalism is the impossible climb up the cliff, ignoring all physical realities. Tentative reform of capitalism is a leisurely walk towards the impassable promontory self-comforting with the deluded thinking that we still have plenty of time to pick our way over all the rocks. Radical reform is the sprint back for the physically feasible path and hoping that the current resources of our system, and our emergency improvisations to same, can get us back there and up the path to safety.

    Sadly and ironically, our best hope is that as we stand dithering, a terrifying but survivable lead wave of ecological disaster (which is in reality the COVID-19 zoonotic disease pandemic wave) will convince us to turn and run via radical socialist and statist measures along the only potentially survivable path. Sans this we are all dead.

    • August 1, 2020 at 12:04 pm

      Brilliantly put! My one objection is that the most able among us are too busy feeding and teaching our kids to have read their emails in time, but think of the Covid risk if they all rushed up the escape path together!

      Perhaps the thought of A N Whitehead that we need to grasp at the right end and hang on to like grim death is THE URGE TO ACTIVITY OF THE YOUNG. We have sent young people to wage war on our behalf, and right now we need them to wage war on the damage caused by short sighted politics causing climate change. During the war the old men in the Cabinet Office also had to insist on rationing, which because they have not kept up with the information feedback theory of self-control, now needs extending from provisioning to our reproduction.

  7. Yoshinori Shiozawa
    August 1, 2020 at 12:52 pm

    So general equilibrium is not a statement about the real economy, it is a statement about what economists would like to talk about — notably artificial markets. I have often remarked, and not always in jest, that economists do not study economies, they study economics. The two are very different.  Peter Radford

    I totally agree with Peter Radford on what he emphasized in this paragraph. However, in addition to what Geoff Davies said on increasing returns in the post above, I want to note two points which seem to be misunderstanding in Peter’s part, or at least remarks that may engender misunderstanding among readers.

    One of the two is simple: relationship between trade war and economics. It is natural that Peter does not know the current state of heterodox economics. There are often substantial progresses even in this non-mainstream economics. He is completely out of current in what he wrote in the last part of his post:

    One last thing, speaking of stagnation: the current burgeoning “trade war” between the U.S. and China is often viewed through the lens of Ricardian analysis. Comparative advantage encourages trade between nations. So standard economics tells us that trade is a “good thing”. But the current trade between the two is not actually trade between nations. It is a complex of privately determined, shareholder driven, supply chain relationships.

    What he tells us by Ricardian analysis or comparative advantage is the contents that are taught in the economics course either for undergraduate or high-school economics. It is true that there were no essential progress in mainstream international trade theory. There are four generations of trade theories now taught in international trade theory (or international microeconomics) in graduate course: Ricardian, Heckscher-Ohlin, New, and New new theories. As Peter points it correctly, none of them has succeeded to incorporate input trade (or trade of intermediate products). New trade theory that Krugman inaugurated claim to be a theory of increasing returns but his theory (models) are formulated on an astonishing hypothesis that all firms who produces products in a group have the same production techniques (symmetricity hypothesis). But he never presented an analysis of the non-symmetric situation. New new trade theory which started from Melitz’s paper in 2003 treats individual firms but it is a theory of small open economy (!) which trade with the rest of the world on the assumption that the rest of the world is given exogenously.

    So, as far as one follows developments of mainstream trade theory, what Peter complaints is correct. However, in this field, there was a big progress in heterodox economics. See my introductory article The New Theory of International Values: An overview (2017). The theory is still developing. A new definition of “regular value” (vector composed of wage rates for all countries and prices of all products) is proposed for example in Chapter 2, Section 2.6 in our book Microfoundations of Evolutionary Economics. See at first Marc Lavoie’s book review. By the new definition, it became possible to analyze international trade situation without full employment assumption. All mainstream trade theories assume full employment by assumption and this is the reason why all trade theory concludes there is always gains from trade. However, the deep reasons of trade war stems from increased unemployment and industrial decline. All heterodox economists should know that there is an international trade theory by which we can analyze losses from trade. Now international trade is organized as Global Value Chains (GVCs) which is a network of productions linked by input trade. For the moment, there is no theory in the mainstream economics that incorporates input trade. This is the reason why GVCs are mainly studied by sociologists like Gary Gereffi and organization researchers. Someone may think that General Equilibrium Theory can treat input trade but it is defective as international trade theory, because it cannot analyze specialization of production between countries. (I have posted almost the same remark in another page of this blog.)

    The second point is more difficult to explain. I will post it in the next Reply.

    • Yoshinori Shiozawa
      August 2, 2020 at 4:38 am

      My second point is difficult to explain. It is not only for me to make me understand but probably for readers to grasp and understand, because it concerns the framework with which we think.

      Economics and economies are different things as Peter Radford points it. But the distinction between what you observe in economic affairs and the framework you have vaguely in mind are not so clear. Those who believe that economics has nothing to do with their ideas and thoughts are victims of economics that leads them how to think of economic matters. Most dangerous thing is that you are bound by economics you want to refuse. Custom to think in the framework of neoclassical economics is so deeply entrenched that you are not aware of it and cannot escape form it. In this sense, economics matters as well as economies do. There are so many contributors who believe that they are free from neoclassical economics framework without seriously reflecting on it. They are not very different from those practical men in the following famous citation:

      [T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

      To escape from magnetic field of neoclassical economics, there is no other way than to construct an alternative economics. Constructing an alternative economics needs to study essential framework of neoclassical economics, history of economic thought, and many accumulated facts that are hidden for many years under the realm of neoclassical economics. There are many contributors who believe they have correct ready-made solutions or policies must remind that they may be madmen who hear voices in the air. Without serious study of economics, even if they are so defective and wrong, and without efforts to find new true economics, policy recommendation may be not only ineffective but positively harmful. (Simply remind what those Marxist-Leninists did in the 20th century. I do believe their good will and intentions. But, as a result, they have brought disasters and tragedies in many countries. Why? They had bad economics. Do not repeat such silly thing even in a much smaller scale.)

      If you are rightly discontent of the current state of economics, study heterodox economics and criticize it with a purpose to obtain a truer economics. There are so many people who criticize mainstream economics but few who study heterodox economics and criticize it. As a result, the current state of heterodox economics is not so good. There are so many fanatic believers (I hope they are minorities) but few constructive works. Without sound self-criticism and in-depth consideration, there is no sane science.

      • Robert Locke
        August 2, 2020 at 9:38 am

        Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back

        as an historian who has studied innovative practical men this is not true;

      • Yoshinori Shiozawa
        August 2, 2020 at 10:51 am

        Actually, aren’t you fighting with those madmen and those who believe to be practical men? Such persons may not be real practical men, but simply narrow-minded persons. In this precise latter sense, you are right, Robert. But this citation is an aphorism for those who believe to be practical men or women, who simply believe that they know economy and economics. It is not directed for innovative practical men or women.

      • August 2, 2020 at 3:54 pm

        Yoshinori, I found the differentiation of four trade theories in the first part of your comment here, most instructive. I say only that economics is not about trade, it is about provisioning people, in which trade is secondary to production, and in general “second-hand”. In your second part, the whole argument is that studying the framework of neoclassical economics will lead only to economies based on that framework. New ideas need a different framework along, with more realism about what it is possible to know precisely enough for theorising to be reasonable. That is what I tried to work out in that draft paper I sent you: a new framework evolving the aim of economics as provisioning (or more precisely equilibrium in provisioning), and what in economic terms (but not in navigation or engineering) is a new theory of how to achieve it: in the terminology of the Newtonian mathematical calculus relating his equations of motion, a PID servo. That is a topological framework, not a quantifiable geometric one, so if you want to know what is happening inside the framework you have to look. (It varies with the inputs and outputs available to societies, leaving micro economic theories mere short term localised approximations, based on insufficient time for feedback leaving the topological form geometric). The wikipedia entry on topology is most interesting, see https://en.wikipedia.org/wiki/Topology. Nb. Euler and Poincare.

        Robert, as an innovative practical man myself I think Yoshinori’s response to you here is right. I’m just reading Simon Singh’s “Big Bang” (checking the facts underpinning my accepting this as axiomatic), and it is full of innovators being short-changed by self-conservers. In case you think my defence of co-operativism over capitalism is self-serving, let me point out its agreement with your position on German business policy: co-operation within firms!

  8. Robert Locke
    August 1, 2020 at 3:12 pm

    Ikonoclast. I don’t understand how you make capitalism the culprit. Anyone familiar with the environment of communist countries knows they were the worse polluters I know because my wife comes from upper Silesia, a very heavily polluted region,.and I live on the Polish- German border,, area between Goerlitz and Zittau, the German side of which has elminated lignite mines, and the Polish side of which has not. What damn facts are you talking about.?

  9. Ikonoclast
    August 1, 2020 at 11:24 pm

    Robert Locke,

    Your question requires a long answer to go into it thoroughly.

    First, we have to deal with nomenclature and definitions. The three systems which need definition are;

    (1) Capitalism;
    (2) State Capitalism; and
    (3) Socialism.

    You will note there is no system called Communism in this list. This is because what the West, and even some Soviets termed Communism or Socialism was in fact State Capitalism. This should become clear as we explore definitions. The Wikipedia definitions are good enough and indeed rather revealing in one key point.

    “Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include private property and the recognition of property rights, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets.” – Wikipedia.

    “State capitalism is an economic system in which the state undertakes business and commercial economic activity and where the means of production are organized and managed as state-owned enterprises…” – Wikipedia.

    “Socialism is a political, social, and economic philosophy encompassing a range of economic and social systems characterized by social ownership of the means of production and workers’ self-management of enterprises.” – Wikipedia.

    We note that the first two definitions define systems which have really existed and still exist. The third definition (correctly in my view) defines socialism as a “philosophy” (or ideology or theory) which clearly has never been implemented in total, in practice, in a real nation state. The phrase “no true socialism”, issued as a leftist defense or as a rightist jibe, is in fact true. There has never been a true socialist system to date. This will please the rightists who will say socialism is “pie in the sky” and “unrealistic”. The conclusion is that Socialism is either unrealistic or it has not yet developed, emerged or evolved. But let us leave socialism aside for the moment.

    All that has really existed to date, since the decline of Feudalism, has been Capitalism and State Capitalism; the latter often mis-termed communism. All modern nation states have governments, government sectors and private sectors. These are hybrid economic systems. Governments run non-profit departments (e.g. defense) and for-profit entities as state capitalist (nationalized) enterprises such as Amtrak or the Post Office in the USA. Some of these state for-profit enterprises run at a loss. The Government also regulates the private sector and maintains at the least a minarchist state and usually much more.

    My plain answer concerning pollution is that all pollution since the rise of capitalism has occurred under capitalism. For there have been no other nation-dominant systems except capitalism and state capitalism. This answer looks too “pat” I am sure. But we can certainly say no pollution has occurred under fully socialist systems because none have existed to date. In fact, we can term all capitalist-era economies “mixed economies” where either private capitalism or state capitalism dominate the system. They contain various proportions of capitalist, state capitalist, welfarist and some minor true socialism elements; the latter as workers’ self-managed enterprises.

    The perception that less pollution and fewer environmental disasters have occurred under private capitalism dominated systems is probably incorrect in any case. Have a look at this list;


    Of the ones that are man-made, a great number can be attributed to Capitalist countries.

    There is another effect, namely that many of the dirtiest aspects of industrial private capitalism occurred in earlier eras, Much pollution generation has been tranfserred to State Capitalist countires. like modern China, which in fact is transitioning considerably from State Capitalism to Private Crony Capitalism, in any case. There’s no denying the State Capitalist Soviet Union had tremendous pollution problems. There’s also no denying Private Capitalist USA has had tremendous problems from the “sacrifice zones” of the West Virginia coalfields, to the Oklahoma Dust Bowls, to the Three Mile Island nuclear leak to the Deepwater Horizon Spill. Many more incidents could be named. These problems are systemic to Capitalist and State Capitalist industrialisation.

    The “system reasons” why these problems occur relate to the ownership and power system and the formal financial system of capitalism with its inability to correctly model and plan within the constraints of real systems of the biosphere. As I wrote above:

    Capitalism is a system predicated on anything BUT measuring real system trajectories. Capitalism simply does not measure real system trajectories at all and indeed is predicated on paying lip-service to or serving up outright denial about real system trajectories and their asymptotes as limits. Capitalism measures only nominal values and nominally predicted economic trajectories within its formal, axiomatic system. It derives its calculations and prescriptions for action and response only from those fallacious axioms, its mathematico-deductive formal systems and its money calculations. It measures all things in the social-fictive dimension of the numéraire (dollars) and not in the real scientific dimensions (in SI base units) employed for scientific explanations, predictions and prescriptions for real actions in the real world. This sums up the disconnect between capitalism and biosphere reality.

    Capitalism has proven to be the only politically-economically evolvable system to date, as proven empirically by its extant near-total dominance. However, science now shows capitalism is unsustainable in its current form which ignores natural limits. Thus the need arises for the kind of analysis I give above to suggest some way out of our dilemma. We need to emerge or evolve a system which empowers people democratically and in a true socialist manner as that could be a system which might be able to respond correctly to the current crisis. We have tried ownership and management of the political economy by the rich and corporate elites and this method is failing and leading us to irrevocable disaster. We must now choose between certain disaster via capitalism or possible survival by true democratic socialism.

    I further theorize that argument will not carry the day. For example, I very much doubt I will convince you. What will carry the day is the extensive and ongoing collapse of the current system. That will provoke radical change at some point. Also political economy progress proceeds one death at a time. I do not mean or advocate violence. I mean that those who are mature or old – and of course conservative – simply cannot change their mind or accept new facts as the world system changes beyond what they understand. They (we) will simply die off naturally and young people living in a very different and very damaged world will see things very differently and construct a new system.. Providing anyone survives at all the real choices are probably “socialism or barbarism”. The latter would look like “catabolic warlordism”. (See “warlordism” and “catabolic collapse”.)

    • Robert Locke
      August 2, 2020 at 9:27 am

      how do you talk about damn facts, when one thing you are comparing never existed, this is nonsense, especially to a professor of European history who taught the subject 50 years

      • Ikonoclast
        August 3, 2020 at 7:58 am

        Robert Locke,

        Your mind is closed apparently and you are too sclerotic intellectually to re-open it. I put it that way and less than tactfully because you have been tactless and insulting to me, on at least two occasions. Do you imagine that if something has never happened in history that it therefore can never happen in the future? How do you deal with the phenomena of emergence and evolution? Do you imagine that when humans propose new ideas that none of these new ideas are ever feasible or capable of actualization because nothing precisely like them has ever happened before?

        Knowledge has clearly advanced since you closed your mind to new discoveries and new ideas. When you use insults instead of arguments, don’t be surprised if you receive the same in kind. I have actually been restrained in this reply and self-edited. I will no longer respond to you in any way.

    • August 2, 2020 at 12:53 pm

      Sorry, Robert, it is you that are talking nonsense. The fact that non-state socialism has never existed in state form doesn’t mean it has never existed.

      I’ve been saying what Ikonoclast has been saying for years, and not joining the Labour Party because it is Fabian, i.e. State Socialist, and the Marxists for similar reasons, given Marx’s distaste for the Owenites. If the Distributists and the Mondragon cooperatives are socialist I’m a socialist, but I’ve never been a state socialist so any Conservative accusation of my being Left Wing is totally misguided: I’m not the left wing of that of which they are the right wing, nor am I a neutral in between, content to have no policy. Though I have little enthusiasm for retail marketing cooperatives, I still remember and urge on others the sanity of New Zealand’s cooperative wholesale marketing and our Trade Unions before the lying Hayekans wormed their way into successful Keynesian crisis management time-sharing Government. Ruskin already saw that our world was being wrecked, and like him, I’m doing what little I can – sowing seeds in the form of ideas – to do something about it.

      Your talking nonsense is just as much a damned fact as Ike and I ineffectively trying to talk good sense.

      • Robert Locke
        August 2, 2020 at 2:25 pm

        IN 1998, i GAVE THE KEYNOTE ADDRESS AT THE 3RD LUSTRUM OF THE FOUNDING OF THE BUSINESS SCHOOL AT Groningen university, NL. The theme was “social justice in a free market economy” In that address I learned heavily on German SOCIAL ECONOMISTS and on their view that we make a mistake to organize our thoughts socialism=capitalism, because we eliminate the importance of the organization of civil society to our logic. I think the Germans ( leaned a lot from Wilhelm Röpke} had it right in their social market reconomy because the way they organize society creates a civil society that acts more harmoniously with the state. I have such a good relationship with the local people here. They do not oppress me or my wife; they help me, as long as I contribute to the community’s well being.(THEY DON’T LIKE HIT AND RUN SPECULATORS) The Lausitz region is a wonderful place, with well kept and restored cities and villages, which had deteriorated under the state socialism of the German democratic republic. I left beautiful Hawaii to live here in my retirement after 1999.

        . I find this discussion has no relationship to the reality of my existence in Germany and Poland, where my son runs a rural based business. It does to Hawaii, but I have consistently criticized us capitalism, since my discussions began in print in 1977. .

      • Robert Locke
        August 2, 2020 at 3:11 pm


        “Every nation likes to believe myths about itself. Americans’
        belief in the superiority of their managerial know-how seemed to be among those most solidly based in reality. Yet, Locke argues, despite its universal claims, American managerialism has never been more than a cultural peculiarity,one moreover whose claims to superiority had not been proved but assumed, on the premise that the best economy must have the best management. That premise, moreover, has not served American managerialism particularly well, for in the 1970s a gap opened up between the mystique of American managementand the reality of a mediocre American managerial performance. The ‘mystique’ collapsed and those looking for best practice began to look elsewhere.Locke traces the evolution of American management in the postwar era – the phenomenon once described by Churchill as that ` clear cut, logical, mass production style of thought’. He goes on to discuss in detail the views of such business writers as Chandler, Reich, Senge, and Deming. But the forceof his critique rests on a thorough examination of alternative forms of management that grew up in West Germany and Japan during the past decades. He argues that these alternative management forms have done a better job managing capitalist economies since the 1970s than has American managerialism.In fact, Locke asserts that American managerialism has become so dysfunctional that it threatens to undermine the prosperity of the American people, and America’s role in the future world order.But the book is not an essay in negativism. In the final chapter the author suggests ways that American management can follow in order to fulfil its original promise. Looking forward, Locke urges American management to unlearn much of the received wisdom and learn from the successes of others inorder for the nation to enter the 21st Century with a management equal to the social and economic challenges.With an unusually wide-ranging knowledge of management and business thinking in the US, Germany, and Japan, and the historian’s ability to stand back and take the longer view, Locke has written a powerfully argued, eminently readable, and challenging book.”

      • August 2, 2020 at 4:48 pm

        Robert, sorry if I offended, but it seems we are at cross purposes. I was reacting to your reaction to Ike:

        “Ikonoclast. I don’t understand how you make capitalism the culprit.”

        Ike was arguing about misleading labels. I was agreeing with him and disagreeing with you calling his argument nonsense, knowing better than to accuse you of being a defender of US capitalism.

        In fact I’ve since situated your German style of management as the “internal to the firm” style of local co-operativism that I endorse and Ike was calling [real as against State] socialism. I would add that Marx learned to believe in mass production from the early capitalists, and the economies of the early communists (like Cuba since) have been forced by “cold war” to become capitalist enough to participate in capitalised world trade. That’s another reason for my agreeing with Ike.

      • Meta Capitalism
        August 3, 2020 at 3:46 am

        I want to recommend this product at Amazon.com
        Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Out of Balance (Economic Controversies)
        by Amazon.com Services LLC
        Learn more: https://www.amazon.com/dp/B00A76WZ96/ref=cm_sw_em_r_mt_dp_eN3jFb5MQ8EFP

  10. August 2, 2020 at 10:13 pm

    “[T]he existence of things like increasing returns and realistic individual behavior lurk constantly outside the fences of economics and spring up, to use Arrow’s analogy, periodically to embarrass the mainstream. They never appear to barge all the way in. Somehow economics manages to push them away and consign them to specialist study as interesting sidelines. They are treated as oddities and not the norm, so the conversation can continue much as before”. [Peter Radford].

    Precisely. Hence the explanation of increasing returns in PID control system behaviour, and the realistic behaviour of children, parents and pensioners of different personality types and perhaps four types of lover, have been briefly mentioned (by me) but pushed away as – no matter what their relevance – too “specialised studies”. I wonder why?

  11. Ikonoclast
    August 3, 2020 at 8:18 am

    Some would have us believe that the faults of capitalism are not intrinsic but simply due to bad management! ROFL! I guess it is because German/EU management and ordoliberalism are so near-perfect that we saw that disgraceful and deceptive corporate behavior from Volkswagen to do with emissions devices, ordered by their executives, missed by their union board representatives and government, and which emanated from a whole complex of poor corporate-favoring legislation and administration in the EU (illustrating legislative capture by capitalist corporations).

    I do agree that American managerialism and generic managerialism have been serious problems for the US and countries like Australia which foolishly started to copy that theory and the neoliberal capitalism it came with. But the EU and Germany have simply become neoliberal with European characteristics. They have not escaped the capture of government and governance by corporate capitalist power and are doing little better on the ground than American capitalism at this stage.

    • Ikonoclast
      August 3, 2020 at 8:24 am

      I should append the statement that Angela Merkel is competent and sane whereas Donald Trump is completely incompetent and psychologically unbalanced. Leaders who are competent and sane help a lot even if one does not agree with them on everything.

      • August 3, 2020 at 9:34 am

        I endorse that judgement, but even Merkel doesn’t seem to see the significance of a single currency controlled via a central bank, as since 1694 in the UK, since 1913 in the US and since 1999 in the Eurozone.

      • Ikonoclast
        August 3, 2020 at 9:57 am


        Or since 1910 for the Australian Pound and then the Australian Dollar from the 1966. “The Australian pound was the currency of Australia from 1910 until 14 February 1966, when it was replaced by the Australian dollar.” – Wikipedia

        The key point(s) about a modern sovereign currency are not just that they be fiat and “governed” by a Reserve Bank. The polity must also be an OCA (optimal currency area) OR a true Federation in monetary and fiscal terms with central taxation and representation and both horizontal and vertical fiscal transfers. The last permits the whole Federation to be an OCA if it would not be otherwise.

        The EU is an imperfect Federation (indeed not a Federation at all) which is over-dominated by Germany and the Deutsch Bundesbank and treats the periphery incorrectly in OCA and ethical terms.

        But never mind, read management books! They’ll tell you how to fix everything. ;)

        How Australia educated the public for the change. I remember the ads. I was in grade 7 primary school.

        Quotable quote: “Bosses will get angry!” LOL. When don’t they?

      • Meta Capitalism
        August 3, 2020 at 12:25 pm

        A map of the world that does not include Utopia is not worth even glancing at, for it leaves out the one country at which Humanity is always landing. And when Humanity lands there, it looks out, and, seeing a better country, sets sail. Progress is the realization of Utopias. Oscar Wilde (1854–1900)

        Utopia for Realists by Rutger Bregman.

        It must be nice to have arrived at the Utopian Land Iconoclastic Utopianism–a world of absolute certainty. Perhaps you might try understanding that in the real world opposed to the Panglossian vision for the world you pontificate on Germany (have you ever lived there? Or is this just absolute confidence from a distance?), like other Nordic countries, is evolving a capitalism that doesn’t dominate social democratic ideals. Never perfect, but always evolving. As The Nobel Factor makes clear, this is an evolutionary process in which there is an ebb-and-flow, and democratic socialism doesn’t always come out on top for some periods of time, but in the long run I have confidence they will get it right (at least better, relatively speaking) than the market-fundamentalism worshiped in the U.S. by many.

      • August 3, 2020 at 2:46 pm

        Perhaps I should have said Mrs Merkel didn’t seem to see the “malign significance” of central banks (controlled ultimately by their ultra-rich shareholders). But I take it Ike as well as Meta was trying to be funny. Utopia was not Panglossian. Its Book 2 was a humorous rebuke to a Book 1 in which so-called Christian England had become a land where “sheep eat men”.

        I liked the look of Germany, and my grandson who lives there loves it, but the Germans seem to be just like any other people: “When they are good they can be very very good, but when they are bad they are horrid”.

    • Robert Locke
      August 3, 2020 at 1:12 pm

      Remember the distinction Charles Peguy, who was killed in 1914 on the Marne, made between “politique” and “mystique.” “Mystique” is how you describe your side., “politique” is how you describe your enemies. That is what is going on here.

      • August 3, 2020 at 2:59 pm

        Had you come across Ike’s “ROFL” before, Robert? I hadn’t. I’ve just looked it up and found it means “rolls on floor laughing”. The post-Euro Volkswagon affair hardly covered the reputation of pre-Euro management with glory, though paradoxically it ought to have done.

  12. Ikonoclast
    August 3, 2020 at 9:18 pm

    To reply to a couple of posts above. I don’t feel I have arrived at any Utopian land even in theory. But I am confident that “really existing” capitalism is unfortunately tending to dystopia (social collapse and ecological collapse), hence the need to explore ideas for something more radical which could be an improvement and permit continued human survival.

    I happen to agree that the EU is “at least better, (relatively speaking) than the market-fundamentalism worshiped in the U.S. by many.” However, I still have serious reservations about Europe’s version of an OCA (optimal currency area) and the way the EU “north” treats the EU periphery. My critical ideas about existing structures are usually not addressed by my critics here. My more thorough-going critique of capitalism in total provokes seeming incredulity, with accompanying insults, that anything but capitalism could ever exist.

    Robert Locke’s, or rather Peguy’s distinction, between “politique” and “mystique” seems interesting and useful for self-criticism. I am sure I am guilty of that bifurcation to some extent. I am sure capitalist apologists are at least as guilty of the same.

    I have been to Germany albeit only for a few weeks in 1991 as part of a European tour. Aspects of Germany impressed me for sure (such as I could see in a short visit). The idea of sanitariums (correct term?) and rest-cures for citizens and workers is an excellent one.

    If one knows a bit of history, one knows Germany received (at least partial) debt and reparation forgiveness for WW2 and was then greatly assisted by the Marshall Plan. Germany paid zero or inadequate reparations to Greece for war damages and war crimes. Yet Germany led the charge to stick it to Greece and deny it adequate debt forgiveness during and after the Great Recession crisis. In many ways, Germany uses the EU more for its own purposes and interests than for pan-European interests.

    As Charles de Gaulle perceptively said, “Nations have interests, not friends.” This is certainly true under capitalism. Whether it would remain as true under genuine democratic socialism perhaps remains to be seen.

  13. Ken Zimmerman
    August 11, 2020 at 5:56 pm

    Published on November 22, 1787 under the name ‘Publius’ (Alexander Hamilton, James Madison, and John Jay), Federalist No. 10 is among the most highly regarded of American political writings. No. 10 addresses the question of how to reconcile citizens with interests contrary to the rights of others or inimical to the interests of the community as a whole.

    Madison saw factions as inevitable due to the ‘nature of man.’ That is, as long as people hold differing opinions, have differing amounts of wealth, and own differing amount of property, they will continue to form alliances with people who are most similar to themselves and they will sometimes work against the public interest and infringe upon the rights of others. He thus questions how to guard against those dangers. It is interesting that neither Madison nor any of the other ‘Fathers’ suggested setting up a government that stopped such differences in wealth and property from occurring. Or, at least limited or controlled the size of the differences. Something to consider today, I think.

    Federalist No. 10 continues a theme begun in Federalist No. 9 and is titled ‘The Utility of the Union as a Safeguard Against Domestic Faction and Insurrection.’ The entire series is cited by scholars and jurists as an authoritative interpretation and explication of the meaning of the Constitution. Historians such as Charles A. Beard argue that No. 10 shows an explicit rejection by the ‘Founding Fathers’ of the principles of direct democracy (I agree) and factionalism (again I agree), and argue that Madison suggests that a representative republic is more effective against partisanship and factionalism. (I agree so long as the ‘representative republic’ is strong and functional.)

    Madison saw the Constitution as forming a ‘happy combination’ of a republic and a democracy, with “the great and aggregate interests being referred to the national, the local and particular to the State legislatures” resulting in a decentralized governmental structure. In his view, this would make it “more difficult for unworthy candidates to practice the vicious arts by which elections are too often carried.”

    Today we face a political party (another thing the Founding Fathers did not expect and certainly believed would hurt the nation and its peoples) that has focused on learning and applying these vicious arts. With a malignant narcissist madman at their head they have set about doing what all the ‘Founding Fathers’ feared most. Replacing the American democratic republic they created with an autocracy or oligarchy.

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