Weekend read – Free speech for me, not you

from Blair Fix

They say that Americans love two things: freedom … and guns. The trouble with guns is obvious. The trouble with freedom is more subtle, and boils down to doublespeak.

When a good old boy defends his ‘freedom’, there’s a good chance he has a hidden agenda. He doesn’t want freedom for everyone. He wants ‘freedom for himself, not you’. I call this sentiment freedom tribalism. It’s something that, given humanity’s evolutionary heritage, is predictable. It’s also something that has gotten worse over the last few decades. And that brings me to the topic of this essay: free speech.

When the talking heads on Fox News advocate ‘free speech’, they’re using doublespeak. What they actually want is free speech for their own tribe … and censorship for everyone else. This free-speech tribalism extends far beyond the swill of cable news. It’s clearly visible (and growing worse) in the pantheon of high thought — the US Supreme Court.

To make sense of this free-speech tribalism, we need to reframe how we understand ‘free speech’. And that means reconsidering the idea of ‘freedom’ itself. Behind freedom’s virtuous ring lies a dark underbelly: power. Free-speech tribalism, I’ll argue, amounts to a power-struggle between groups — a struggle to broadcast your tribe’s ideas and censor those of the others. When you look closely at this struggle, it becomes clear that ‘free speech’ is not universally virtuous. In modern America, free speech has become a kind of slavery.

And with those incendiary words, let’s jump into the free-speech fire.

The quant case for open-access COVID vaccines

from Blair Fix

Around the world, rich countries are celebrating as their COVID numbers fall. Their success is no mystery — it’s because of a massive rollout of COVID vaccines. While we should celebrate the development of these vaccines, their deployment highlights the tyrannies of capitalism.

Most of the basic research for COVID vaccines was funded by the public. Yet their manufacture is controlled by Big Pharma. The predictable result is that vaccines flow to the highest bidder and Big Pharma reaps the profit. Thus, the world is now ‘blessed’ with 9 new pharma billionaires.

Since we’re stuck with COVID for the long haul, we need to end the privatized vaccine model. The alternative is surprisingly simple. Let governments continue to fund basic science. And let private companies continue to manufacture vaccines. Just don’t let these companies have a monopoly on property rights. Instead, put vaccines in the Creative Commons. The result will be cheap vaccines, available to all.

To make the case for open-access vaccines, it helps to run the numbers. To date, the vast majority of COVID vaccines have gone to rich nations. It’s plutocratic healthcare in action: more money = more vaccines.

Let the data speak.

The global distribution of COVID cases

We’ll start by looking at how the global distribution of COVID cases has played out since the beginning of the pandemic. Figure 1 shows the global share of cases by continent since February 2020.

The ritual of capitalization

from Blair Fix

. . . the clergy aren’t priests … they’re economists.

There’s something mysterious about finance. The symbols are arcane. The math is complex. The practitioners are impressively educated. And the stakes are high. All of this gives finance the veneer of higher truth — as if quants are uncovering a reality not accessible to the rest of us. In a sense they are. But the ‘reality’ is not what you think.

When you look at stock-market numbers, they do point to a truth about the world. But it is a truth not about natural law or of human nature. It is a truth about human ideology. The reality is that finance is a quantitative belief system. At its center is a universal ritual — the ritual of capitalization. It is this ritual that underlies all stock-market numbers.

In this post, we’ll look at the regularities that stem from the ritual of capitalization. They are astonishing in scope — a breathtaking consistency to human behavior. They beg the mind to look for some material basis for their existence. But that is a mistake. The reality is that the regularities of capitalization are an artifact of ideas — a manifestation of capitalist ideology itself. A regularity from ritual.

Giving property a number

The ritual of capitalization starts with the institutional act of exclusion — namely property.¹ Property, of course, has a deep history that long predates capitalism. I won’t wade into this history here. Instead, I’ll defer to Jean-Jacques Rousseau’s succinct (but apocryphal) telling of property’s emergence. Property arose when

[t]he first person who, having enclosed a plot of land, took it into his head to say ‘this is mine’ and found people simple enough to believe him …

(Jean-Jacques Rousseau, 1755)

Putting a fence around something and calling it ‘property’ is step 1 of capitalization. But property alone is not enough. Romans had property. So did most feudal kingdoms. But these societies did not have capitalization. To capitalize property, there is a second step. You must mix property with finance.

Weekend Read – Radically progressive degrowth: Reducing resource use by eliminating inequality

from Blair Fix

Pity the billionaires. High in the towers on Billionaires’ Row, life is hard. The pencil-thin buildings groan as they sway in the wind, keeping penthouse dwellers up at night. Water pipes break, ruining posh décor. And elevators are unreliable, interrupting billionaires’ highly productive lives. So reads Stefanos Chen’s recent piece about the pitfalls of sky-high living.

Chen admits (thankfully) that “the plight of billionaires won’t garner much sympathy.” He is correct. As I read Chen’s piece, I shed no tears. Instead, I was fantasizing about an alternative world, one in which the super-rich would be problem free … because they wouldn’t exist.

Imagining this world without billionaires got me thinking about degrowth. In a world without billionaires, the ridiculous towers on Billionaire’s Row (below) wouldn’t exist. And that means the stupendous amounts of energy required to build these towers could have been spent on something else … or not spent at all. In short, ridding the world of billionaires sounds like a great policy for reducing resource consumption (a.k.a. ‘degrowth’).

Weekend Read – Power … and the dialect of economics

from Blair Fix

If you’ve ever taken Economics 101, then you’re familiar with its jargon. In the course, you probably heard the words ‘supply and demand’ and ‘marginal utility’ uttered hundreds of times. As you figured out what these words meant, you gradually learned to speak a dialect that I call econospeak.

Like all dialects, econospeak affects how you express ideas. The vocabulary of econospeak makes it easier to express certain ideas (such as ‘market equilibrium’), but harder to express others (like ‘imperialism’, as we will see). This trade-off is a feature of all specialized dialects. Physics-speak, for instance, makes it easy to talk about the dynamics of motion, but difficult to talk about emotion.

While all scientific languages share this kind of trade-off, econospeak is different from natural-science dialects in one key way. The natural sciences have a solid empirical footing. Mainstream economics does not. As Steve Keen showed in his book Debunking Economics, when the ideas in Econ 101 are subjected to scientific scrutiny, they manifestly fail.

Despite this scientific failure, Econ 101 charges on like a juggernaut, largely unchanged for a half century. Why? The simplest (and most incendiary) explanation is that the course is not teaching you science. Rather, it is indoctrinating you in an ideology.

Weekend Read – Stocks are up. Wages are down. What does it mean?

from Blair Fix

If you listen carefully, you can hear Jeff Bezos getting richer. There’s the sound again. Another billion in Bezos’ coffers.

Let’s put some numbers to this sound of money. Since 2017, Bezos’ net worth has grown by about $4 million per hour — roughly 500,000 times the US minimum wage.¹ This accumulation of wealth would be absurd during normal times. Today, as many workers lose their jobs to a brutal pandemic, it’s obscene.

While Bezos is the pinnacle of capitalist excess, his wealth is part of a larger story. Over the last 40 years, stock prices have surged while wages have stagnated. What does this trend mean?

In this post, I take a deep dive into the stock market. I’ll first tell you what the stock market is not. It’s not an indicator of ‘productive capacity’. Nor is it ‘fictitious capital’. So what is it?

The stock market, argue Jonathan Nitzan and Shimshon Bichler, is how capitalists quantify their power. To understand what Nitzan and Bichler are talking about, we’ll unmask the ritual that defines our social order — the ritual of capitalization. Read on to take the red pill and lift the veil of capitalist ideology.

What do stock prices mean?

When it comes to the stock market, many people believe they have original insight. Often, however, they’re parroting old ideas. Noting this tendency, economist John Maynard Keynes wrote:

Why do economists never mention power?

from Lars Syll

The intransigence of Econ 101 points to a dark side of economics — namely that the absence of power-speak is by design. Could it be that economics describes the world in a way that purposely keeps the workings of power opaque? History suggests that this idea is not so far-fetched …

The key to wielding power successfully is to make control appear legitimate. That requires ideology. Before capitalism, rulers legitimised their power by tying it to divine right. In modern secular societies, however, that’s no longer an option. So rather than brag of their God-like power, modern corporate rulers use a different tactic; they turn to economics — an ideology that simply ignores the realities of power. Safe in this ideological obscurity, corporate rulers wield power that rivals, or even surpasses, the kings of old.

Are economists cognisant of this game? Some may be. Most economists, however, are likely just clever people who are willing to delve into the intricacies of neoclassical theory without ever questioning its core tenets. Meanwhile, with every student who gets hoodwinked by Econ 101, the Rockefellers of the world happily reap the benefits.

Blair Fix

The sentiment behind eugenics thrives in human capital theory

from Blair Fix and current RWER issue

A key problem with eugenics is that it neglects the social nature of human traits. It assumes that productivity is an innate trait of the individual, and that breeding for this trait would lead to a better society. It is a seductive idea that is deeply flawed. In all likelihood, selectively breeding people for productivity would, like chickens, lead to a psychopathic strain of human.

The rise of human capital theory

After the horrors of the Holocaust, eugenics fell into disrepute. As a result, few people today dare argue that we should selectively breed humans for productivity. Still, the sentiment behind eugenics (that some people are far more productive than others) lingers on in mainstream academia. It survives – even thrives – in human capital theory.

The ground work for human capital theory was laid just as eugenics fell out of favor. In the 1950s, economists at the University of Chicago tackled the question of individual income.[1] Why do some people earn more than others? The explanation that these economists settled on was that income resulted from productivity. So a CEO who earns hundreds of times more than a janitor does so for a simple reason: the CEO contributes far more to society.

issue no. 95 – Real World Economics Review

download whole issue Is a capitalist steady-state economy possible? Is it better in socialism? Theodore P. Lianos The “ideal market” as a normative figure of thought Tanja von Egan-Krieger The rise of human capital theory Blair Fix How downward redistribution makes America richer Steve Roth The moral dilemma and asymmetric economic impact of COVID-19 Constantine E. Passaris Pigou and the dropped stitch of economics Duncan Austin Third world development: Simpler way critique of conventional theory and practice Ted Trainer The American Gordian Knot and Alexander the Great is not in sight John Komlos Unbridgeable: why political economists cannot accept capital as power Shimshon Bichler and Jonathan Nitzan A modest proposal for generating useful analyses of economies: a brief note Geoff Davies On the relevance of the Church-Turing Thesis for theoretical economics Ron Wallace From finance to climate crisis: An interview with Steve Keen Steve Keen and Jamie Morgan please support this open access journal

Why are most textbooks still proprietary?

from Blair Fix

Today a rant about textbooks. Every year governments spend billions of dollars on public education, teaching students knowledge that was itself created by publicly funded research. Yet each year, university students must pay anew for this information by purchasing high-priced textbooks.

It needn’t be this way.

Most university textbooks are written by tenured (or tenure-track) professors. These are people who are paid by the public to generate and disseminate knowledge. Professors are expected to write academic articles for free. Why not add textbooks to the list?

With a stroke of the pen, universities could make writing open-access textbooks a part of tenure-track expectations. And if there are costs associated with creating textbooks, fine. We can have grants that cover these costs. It will cost money, yes. But the benefit of liberating information will be enormous.

Weekend Read – Energizing exchange: Learning from econophysics’ mistakes

from Blair Fix

Let’s talk econophysics. If you’re not familiar, ‘econophysics’ is an attempt to understand economic phenomena (like the distribution of income) using the tools of statistical mechanics. The field has been around for a few decades, but has received little attention from mainstream economists. I think this neglect is a shame.

As someone trained in both the natural and social sciences, I welcome physicists foray into economics. That’s not because I think their approach is correct. In fact, I think it is fundamentally flawed. But it is only by engaging with flawed theories that we can learn to do better.

What is important about econophysics, is that it demonstrates a flaw that runs throughout economics: the idea that we can explain macro-level phenomona from micro-level principles. The problem is that in all but the simplest cases, this principle does not work. Yes, complex systems may be reduced to simpler pieces. But rarely can we start with these simple pieces and rebuild the system. That’s because, as physicist Philip Anderson puts it, ‘more is different‘.

What follows is a wide-ranging discussion of the triumphs and pitfalls of reduction and resynthesis. The topic is econophysics. But the lesson is far broader: breaking a system into atoms is far easier than taking atoms and rebuilding the system.

Let there be atoms!

To most people, the idea that ‘matter is made of atoms’ is rather banal. It ranks with statements like ‘the Earth is round’ in terms of near total acceptance.¹ Still, we should remember that atomic theory is an astonishing piece of knowledge. Here is physicist Richard Feynman reflecting on this fact:

A review of Carey King’s ‘The Economic Superorganism’

from Blair Fix

If you are interested in the megatrends of the 21st century, then Carey King’s new book The Economic Superorganism should be on your reading list. It is a well-written, meticulously researched opus on how to understand the sustainability problems that face humanity.

In many ways, the book covers well-trodden ground. King is an engineer who is trained in the systems thinking pioneered by MIT engineers Donella and Dennis Meadows. (The Meadows’ book The Limits to Growth was the original gauntlet drop in the debate about the future of economic growth). Like the Meadows, King is concerned with the biophysical limits of the economy, and how that relates to the exploitation of energy.

Several other recent books have delved into the role of energy in driving economic growth. (For instance, Energy and the Wealth of Nations and The Economic Growth Engine). Yet King’s book is unique, because he has framed his arguments in a surprising way.¹ He has focused on narratives.

Energy narratives 

As 2020 ends, let’s celebrate science

from Blair Fix

We’ve finally reached the end of 2020, a year that many people are happy to forget. In the history books, 2020 will be known for little besides the Covid pandemic. Fortunately, the end of this disaster is in sight. With multiple vaccines starting to roll out, it looks like 2021 will be a better year.

Speaking of vaccines, I’ve been racking my brain to find things to be thankful for this holiday season. It’s not easy. My wife, daughter and I are in lockdown in Toronto. The rest of our extended families are in lockdown in Alberta and BC. So no family Christmas this year. I suspect it’s the same for many people. Fortunately, the Covid vaccine provides some light at the end of the tunnel. This is something to celebrate. But more than that, we should celebrate the whole enterprise that made the vaccine possible — science.

In the grand scheme of our species, it was not long ago that we believed infectious diseases were caused by ‘bad air’. The idea that germs cause disease became widely accepted only in the late 19th century, thanks largely to the work of Louis Pasteur. Vaccines are a similarly recent invention.

Our knowledge of infectious diseases is certainly something to celebrate. But as a political economist, I can’t help note how vaccination is stubbornly related to social inequalities. Vaccines are the ultimate public good — a life-saving device that is the product of our collective scientific effort. Predictably, though, this public good is not shared equally. In the last mile, vaccines are paywalled by private companies. So while in principle vaccines could be free for every human, in practice they are not. The result is that vaccination rates grow with income. The richer the country, the higher the vaccination rate. Here’s the relation in 1988.

As we exhaust our oil, it will get cheaper but less affordable

from Blair Fix

It was a bet heard around the world. Okay, that’s an exaggeration. It was a bet heard mostly by academics and sustainability buffs. But still, it was a bet … and it was important.

The year was 1980. The players were biologist Paul Ehrlich and business professor Julian Simon. The two had conflicting ideas about where humanity was headed. Ehrlich, the author of the 1968 book The Population Bomb, thought humanity was headed for a Malthusian catastrophe. Simon thought the opposite. Humanity, he argued, was itself The Ultimate Resource. Because humanity’s genius knew no bounds, Simon proclaimed that we could think our way out any problem.

The debate between Ehrlich and Simon was fundamentally about resource scarcity. What’s interesting, though, is that their actual wager wasn’t about any physical measure of resource reserves. Their wager was about prices.

Simon challenged Ehrlich to bet on the price of raw materials. Pick any ‘non-government controlled’ resource, Simon said, and he’d bet that the price would decrease over time. Ehrlich chose five metals — copper, chromium, nickel, tin, and tungsten. If their inflation-adjusted prices went down by 1990, Ehrlich would lose. If metal prices went up, Ehrlich would win.

Ehrlich lost.

Actually, Ehrlich lost the bet the moment he entered it. Ehrlich’s was concerned with the physical exhaustion of resources. Had he bet Simon on any physical measure of resource reserves, Ehrlich would have won. (The Earth isn’t making more metal, so we’ve been exhausting our supply since day one.) Instead, Ehrlich fell for a bait and switch. He allowed Simon to frame scarcity in terms of prices. It was a fateful mistake.

The switch from physical scarcity to prices is one of economists’ favorite tricks for dispelling concerns about sustainability. In this post, I’ll show you how to avoid getting hoodwinked. The key is to realize that resources can get cheaper at the same time that they get less affordable. And when it comes to the price of oil, I think this is exactly what’s in store.

Hotelling’s ‘rule’

Supply and demand deconstructed

from Blair Fix

Prices are caused by supply and demand, right? So say neoclassical economists. If you’ve bought their fairy tale, I recommend you watch this video. In it, Jonathan Nitzan demolishes the neoclassical theory of prices. It’s a master lesson in how to deconstruct a theory.

Here’s the 100-word summary. Nitzan shows that the neoclassical theory of prices fails in six ways:

1. Neoclassical theory hinges on utility that cannot be measured
2. It relies on demand and supply curves that cannot be observed
3. It depends on equilibrium whose existence it cannot confirm
4. It requires but cannot show that demand and supply are mutually independent
5. It requires but cannot demonstrate that the market demand curve slopes downward
6. And it must but cannot measure capital and therefore cannot draw the supply curve, even on paper

So what explains prices?

Why isn’t Modern Monetary Theory common knowledge?

from Blair Fix

I’ve always been baffled why ‘modern monetary theory’ is called a theory. I don’t mean this in a disparaging way. As far as theories of money go, I think modern monetary theory (MMT for short) is the correct one. But having a correct theory of money is a bit like having a correct theory of traffic lights.

Traffic lights (like money) are a social convention. We agree that red means stop and green means go. Why we’ve chosen these particular colors is an interesting question, as is why we choose to put traffic lights where we do. But the fact that red means stop and green means go just is. It’s something we’ve defined to be true. The workings of money are similar. True, money is more complex than a traffic light — but only in application. In conceptual terms, money is equally simple. It’s a social convention that we’ve defined into existence.

To frame our discussion of money, let’s begin with what it isn’t. Money isn’t a thing. True, money can have concrete forms like dollar bills and metal coins. But it needn’t. It can be as abstract as digits in a bank account, or tallies on a stick. Money is an idea. It’s an agreement to tie our social relations to a unit of account. To understand money creation, we need only look at the principles of double-entry bookkeeping. Debt goes on one side, credit goes on the other. The two sides carry opposite signs and so cancel out. This allows us to create money while simultaneously balancing our accounts.

Here’s a simple example. Suppose that a friend does a favor for me. I want to return the favor, but don’t have the time to do so immediately. So I give my friend a note that says “Blair owes you one favor”. This note is money. It is created from nothing using the principles of bookkeeping. On one side is a debt: I owe my friend a favor. On the other side is a credit: my friend is due a favor. And that’s all there is to it. My friend can now exchange my IOU with other people. It becomes money in circulation.

Wealth has always been about power

What has confused economists for centuries is that they’ve focused on what’s inside the fence of property rights, not the fence itself. And who can blame them? Historically, the things that were owned were easy to see. In contrast, the act of ownership — the institutional fence of private property — was abstract. And so economists tied wealth to property, not the property-rights fence.

The confusion dates back to the physiocrats. They saw agricultural land and proposed that it was the source of all value. The physiocrats couldn’t see that it was the landowner’s (institutional) fence that made him wealthy, not the land itself.

Then came the neoclassical economists. They saw capital (machines and factories) and proposed that it was a source of value. The neoclassical economists couldn’t see that it was the capitalist’s (institutional) fence that made him wealthy, not capital itself.

Then came the digital revolution. New companies emerged (like Facebook and Google) that owned nothing but algorithms. Wealth had suddenly become non-material. Or so it seemed to economists.

In reality, wealth had always been non-material — a social relation of exclusion. The digital revolution just laid this fact bare because it emptied out property, leaving only the fence of property rights. The digital revolution got rid of land. It got rid of physical capital. It got rid of all the physical things on which to pin wealth. All that was left (in digital tech firms) was the fence of property rights. And this fence was put up around the most non-material of things — ideas themselves.

Blair Fix

But more of what?

      Source: Nitzan and Bichler, Capital as Power

In 2005, Microsoft’s market value was 2,583% greater than that of General Motors. Mainstream economists would say that Microsoft therefore had more property than GM. But more of what? Nitzan and Bichler point out that when we look under the hood of market value, there’s nothing ‘real’ to back it up. Microsoft, for instance, has only 18% as many employees as GM. And it owns only 3% as much equipment (in dollar terms).

Understanding income: You can’t get there from here

from Blair Fix

You can’t get the right answer when you ask the wrong question.

This truism, I’ve come to believe, explains much of what is wrong with economics. When it comes to studying income, economists ask the wrong question. Economists, I argue, have mostly asked: is income fair? The problem is that this is a moral question, not a scientific one. It has no scientific answer.

When the wrong questions get entrenched

You can’t get the right answer when you ask the wrong question. This principle seems trivial. Of course you need to ask the right question! The problem, though, is that when you do science it’s rarely obvious which question is right. Compounding this problem is the fact that scientists are, well, human.

Once we (scientists) pose a question, we get engrossed with answering it. The problem is that it’s not easy to answer a question while simultaneously being skeptical of it. It’s like adding two numbers while you think about multiplying them instead. It’s an exercise in cognitive dissonance.

Here’s how you can make this exercise even more difficult. Join a group in which everyone else asks the same question. This, in a nutshell, is what it means to belong to a scientific discipline. A discipline is a group of people who agree on the questions they’re asking. Particle physicists, for example, agree to ask “what are the fundamental constituents of matter?” Evolutionary biologists agree to ask “what are the determinants of evolution?” Economists, I’ll argue, agree to ask “is income fair?”

How do you spot a crank?

from Blair Fix

I confess that I have a recurring nightmare. In it, I realize that everything I’ve ever written about economics is wrong. Neoclassical economics is not, as I’ve repeatedly claimed, a pile of bullshit. In this nightmare, neoclassical economics is correct. And as a strident critic of neoclassical theory, I realize the horrible truth. I’m a crank!

I wake up in a cold sweat, wondering if I’m wasting my life. Then, as rational thought returns, my fears ebb away. I think about everything I know about neoclassical economics — its flaws, its absurdities. I reassure myself that I’ve made the right choice. I’m not a crank. I’m a rational critic of an absurd theory.

The crank identification problem

Now that I’ve told you about my nightmare, I’ll assure you that this post is not about my late-night fears. Instead, my nightmare got me thinking about an age-old problem in science. How do you tell if someone is a crank?