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Contemporary inequality is a challenge to economics

October 24, 2020 Leave a comment

from Peter Radford and The Inequality Crisis

The challenge of contemporary inequality is not just to the cohesion of modern society it is also a challenge to economics, because it is economics and its values that sit squarely within the social framework that has allowed inequality to become so pervasive and debilitating. We have built a society resting on only one view of liberty and equality, that of the economic sphere, rather than on a more holistic view that allows the inclusion of other spheres. We persist in believing ourselves as free, but it is a harsh and hollow freedom built upon individuality and isolated action, rather than on solidarity and communal action.

There are economists of a certain type who question whether there is any distortion produced by inequality. They often repeat the claim that inequality is a benign consequence, a side effect of little interest, to the march of economic progress and the accumulation of modern prosperity. It is a profound error to think this. Then again these same people are often oblivious to the existence and importance of society, so they regard themselves as bereft of such an error.

This is a denial of the history of the very ideas that they have used as the foundation of their perspective. Read more…

The time trend in global inequality

October 23, 2020 Leave a comment

from James Galbraith and Jaehee Choi and The Inequality Crisis

Inspection of trends and changes in inequality gives a strong clue to the sweep of events. There are four trends and three distinct turning points. From 1963-1971, no trend appears, and changes in individual countries are for the most part small. After 1971, while inequality increases in some of the wealthy countries, in much of the world it is declining. After 1980, there is a radical change, and the world enters on a period of large inequality increases, sweeping across regions beginning in Latin America and Africa, hitting Eastern Europe and the (former) USSR after 1989, and moving on to Asia in the 1990s. In 2000 there is a further turning point, after which stabilization and even modest declines in inequality are found in Russia, China, Latin America, parts of Africa and elsewhere. Figure 1 provides this time trend as estimated above, over the entire global data set. The key turning points in the early 1970s, in 1981, and 2000 emerge very clearly.

Figure 1 The Time Trend of Global Inequality

US   UK   JP   AU

The wayward rise of machina-economicus

October 20, 2020 3 comments

from Gregory Danake and RWER issue 93

The nexus of mainstream (or neoclassical) economic theory is “homo-economicus” (or economic person). It is a super being who dwells in a fairy tale land with complete information and is obligated to act hedonistically (maximizing their individual utility at the margin). Neoclassic economists merely stamp out this little cookie person, and then chuck out all the inconvenient dough, including: altruism, reciprocation, and “moral sentiments” (as Adam Smith suggested in his virtually unknown first volume), not to mention behavioral proclivities and a modicum of concern for the natural environment. Their poor little cookie person has been bludgeoned to crumbs on empirical as well as philosophical grounds for decades (see, Fleming, 2017), and yet its specter lives on. Many ideas and actions of the mainstream have been widely condemned and disconfirmed, yet they persist, suggesting an inordinate level of scientific lassitude.

Some of the more potentially troubling aspects mainstream economics could receive a renewed lease on life, via selective applications of Artificial Intelligence. This is particularly relevant if it is merely used to shore up faulty theories regarding the dog-eat-dog nature of our society. MACHINA-EONOMICUS could be even more impenetrable and strengthen the illusion that the prevailing ideology is unassailable logic. Just when it began to look like the beleaguered cookie person was finally going to yield to the often befuddled (yet authentic) sense of our common humanity, s/he is being refurbished with even more mechanical workings. As AI further penetrates the raison d’état of the clandestine political economy, neoliberalism might be a reinvigorated. Read more…

TRADE WARS AFTER CORONAVIRUS – online WEA Discussion Forum opened today

October 19, 2020 1 comment

TRADE WARS AFTER CORONAVIRUS

Economic, political and theoretical implications

An online conference from the WEA, 19th October to 5th December, 2020

Read more…

Humanism or racism

October 18, 2020 2 comments

from Hardy Hanappi and issue 93 of RWER

The state of the global political economy is producing an extremely dangerous dynamic. The human species has conquered the planet, its productive forces are reaching ever more sophisticated levels and are arranged in a global network that would be able to transform growth of profits into growth of general welfare. But such a transformation needs a political agent, which is powerful enough to defeat the forces, which currently exploit large parts of the human population just to accumulate profits in the hands of some small, globally ruling classes.

The essential characteristic of the human species is that its members are using internal mental models to choose their actions. These models mostly are learned and shared by groups, constituting what in political economy has been called class consciousness. The formation of this consciousness partly takes place in local family and work contexts, partly it is shaped by the global information sphere. The structure of classes thus today can only be understood by taking the processing contradiction between local and global experiences serious. The successes of Fascism leading to WWII show that there are ways to interpret exploitation, which can mobilize the population of nation states against an imagined group of enemies. This strategy of a self-proclaimed new national ruling class to strengthen their new rule and the accompanying exploitation regime is called Racism. Read more…

Artificial intelligence and the future of economics?

October 8, 2020 Leave a comment

from Gregory Daneke and RWER issue 93

The global financial crisis that began in earnest in 2008 (and is yet to be resolved) prompted significant challenges to the theory and methods of mainstream or orthodox (also known as Neoclassical and/or Neoliberal) economics. Even distinguished orthodox economists, Paul Krugman (2009) Joseph Stiglitz (2017), and Paul Romer (2020) have joined with the crescendo of obscure, yet profound, voices, such as: “institutionalist” (e.g. Hodgson, 2004), “heterodox” (e.g. Keen, 2001; and E. Smith, 2010), and “ecological” (e.g. Constanza, et al., 1997; and Fullbrook and Morgan, 2019), as well as Marxist economists.

One especially promising alternative to mainstream economics grew out of work in nonlinear dynamics and systems theory (see, Daneke, 1999), and has been enhanced by huge advances in computational capabilities. This approach, under the catch-all rubric of Complexity Studies, has many variegated and partial offshoots both mathematical and metaphorical. Plus, use of its computational tools is no guarantee of theoretical coherence. Some qualitative applications are especially robust and some quantitative pieces linger too close the event horizons of neoclassical black holes. Nonetheless, at its core, complexity is a completely unique worldview (see, Arthur 2013) with far reaching implications for how economies are studied and policies derived. As one might expect, mainstream economics, has been extremely reluctant to accept these implications and has only tangentially toyed with the isolated elements of the complexity approach. As in the past (e.g. game theory, behavioral economics, etc.), mainstreamers merely graft-on certain tools and concepts without altering their archaic foundations or their ideological commitments. This highly selective retention is made more problematic by recent developments in Artificial Intelligence (AI) and BIG DATA. Read more…

Wealth that results only from a change in the exchange-value of some goods relative to others

October 4, 2020 Leave a comment

from Andri Stahel and RWER issue 93

As will be argued, a great part – and increasingly so – of the capital gains result from an inflationary increase in the monetary value of given financial assets and not from productive employment of capital, generating both capital-income and new wealth on its wake. Thus, we overlook the effect of the different kinds of capital both in fostering or not overall economic activity and the effect of that which has been termed “financialisation” on the wealth-inequalities in our contemporary world. “A pattern of accumulation in which profits accrue primarily through financial channels rather than through trade and commodity production”, as defined by Greta Krippner following Arrighi (Arrighi 1994; Krippner 2005, p. 174).

While in the case of capital invested in productive and commercial activities we may observe a larger appropriation of newly created wealth by some in proportion to that gained by others, but still growing wealth for all in global terms; a completely different picture emerges when we look at the speculative financial gains obtained from buying and selling financial assets at a profit. Here, no new wealth is created and thus, at the aggregate level, we have a net transfer of the existing wealth to those who managed to effectively obtain speculative gains from their capital at the expenses of those who don’t and who do not possess speculatively invested savings.

A second aspect which is not considered by Piketty and by economists at large even when talking about “wealth distribution” issues has to do with the very definition of wealth and what we are talking about in the first place. read more

issue no. 93 of RWER

October 1, 2020 Leave a comment

The problems of economics as an academic pursuit have a sociological origin

September 26, 2020 89 comments

from Gerald Holtham (originally a comment)

The problems of economics as an academic pursuit have a sociological origin. The subject matter of economics is of interest to nearly everyone who lives in a commercial society and has to make a living. Intelligent people develop opinions about it and advance opinions in a way they would not do about astronomy or quantum physics. Similarly every politician has a story about the economic policy to be followed. This situation has created a strong form of credentialism among academic economists, evidenced by the use in the USA of the term “PHD economist” i.e. distinguishing a “real” economist from an economic journalist or mere informed commentator. This desire to define and secure a profession of economists has led not only to credentialism but to formalism. There must be hoops to jump through, filters to pass, if “real” economists are to be distinguished. An emphasis on mathematical technique is just such a filter. From credentialism and formalism comes a self-referential approach that holds “economic problems must have economic explanations and economic solutions”. That makes it illegitimate to introduce “non-economic” elements into economic theory. Demarcation and the exclusivity of “economics” is thereby reinforced. Non-economic elements are often considered to include any form of “irrational” behaviour. Unfortunately some schools of economics at that point finalise their separation from the real world by failing to distinguish “procedural rationality”, which is a useful simplifying assumption, from “substantive rationality”, which assumes a never-never land of near-perfect knowledge and ubiquitous equilibrium. The distinction, due to Herb Simon, was apparently too subtle for the neo-classical school. Ideology also plays a part in promoting some schools of economics. Theories that depict a self-stabilising system in which everyone is doing as well as possible are remote from reality but convenient for the conservative interests in society that wish to resist change. Once this structure is in place it is difficult to pursue a career as an academic economist without going along with a substantial part of it. Read more…

Human rights and fiscal policy: a necessary link

September 15, 2020 3 comments

from Grazielle David, Pedro Rossi,and Sergio Chaparro and WEA Commentaries

Human rights and the economy are intrinsically linked issues. There is an important economic dimension to human rights in terms of the resources needed to guarantee rights and how they can be socially allocated for this purpose. On the other hand, human rights are, or should be, an important normative parameter for the organization of activities and the economic system itself. However, the fiscal implications of human rights obligations are not fully systematized and are not regularly considered. This “disconnection” has many negative consequences, which are aggravated in contexts of instability or economic crisis and in the face of fiscal austerity measures.

The evident analytical, academic and political detachment of the two fields may explain the incomprehension and indifference of many professionals in both areas and also in a scarce bibliography that articulates these themes.  read more

New book from WEA Books

September 13, 2020 Leave a comment

Public law and economics after the financial crisis

Mstis Fernanda Madi, Renny Reyes, and Vicente Bagnoli (editors)

Kindle Edition $5.89 –  US  UK  DE  FR  ES  IT  NL  JP  BR  CA  MX  AU  IN

Paperback $12.99 –  US  UK  DE  FR  ES  IT  JP  CA

Is this the end of globalisation (as we know it)?

September 11, 2020 1 comment

from  Karim Errouaki and WEA Commentaries

The health, economic, social and political crisis created by the COVID-19 pandemic will reconfigure the geopolitics of international relations and globalization. We are only at the beginning of this crisis, particularly on the economic and social fronts. Many sectors, such as tourism, transportation and entertainment, will only recover over a very long time; many jobs will be destroyed. In contrast, other sectors are insufficiently developed and cruelly lacking in production. Therefore, we must act now to give the economy a new direction and to harness new engines of development.

French Economist Patrick Artus (2020) argued that the current pandemic and its consequences could precipitate a slowdown in ‘’Globalization’’ or even result in a process of ‘’Deglobalization’’. We can expect to see an acceleration in the structural changes that we have already been seeing in the process of globalization. Indeed, COVID-19 and the way of addressing it is slowing physical globalization down. At the same time, it is also promoting an important digital, online form of globalization.  read more

TRADE WARS AFTER CORONAVIRUS – WEA online conference

September 10, 2020 2 comments

This conference is open for submissions  SUBMIT YOUR PAPER

Call for Papers

The United States declared an economic war on China in early 2018. Economic warfare is a unilateral action that questions the existence of multilateralism and places the question of what regime we are about to enter after the weakening of the existing multilateral trade agencies. US trade policy opens the door for new relationships between emerging market economies and international financial institutions on issues of liberalisation but mostly it ends a period started in the 1980’s of unregulated international trade and opens a new one. The solution to the structural economic problems of the US, similar to those of Britain in the 1960’s is not tariffs and trade restrictions. The trade war is above all a war that will be won by one side at some point.

The recent outbreak of coronavirus has just added more uncertainties to the global trade war scenario

This conference calls for a deep reflection to matters related that includes, among other questions:

Read more…

“David Graeber, Caustic Critic of Inequality, Is Dead at 59”

September 7, 2020 3 comments

from The New York Times

  • by Sam Roberts

David Graeber, the radical anthropologist, provocative critic of economic and social inequality and self-proclaimed anarchist who was a coiner of “We Are the 99 Percent,” the slogan of the Occupy Wall Street movement, died on Wednesday at a hospital in Venice. He was 59.

His death was announced on social media by his wife, Nika Dubrovsky, an artist. She did not specify the cause, but Dr. Graeber reported on YouTube last week that he had been feeling ill.

A public intellectual, professor, political activist and author, Dr. Graeber captivated a cult following that grew globally over the past decade with each book he published.

In “Debt: The First 5000 Years” (2011), he explored the changing definitions of borrowing and who owed what to whom. He advocated a “jubilee” of loan forgiveness. Writing in The New York Times Book Review, Thomas Meaney called the book “more than a screed” and praised its “brash, engaging style.” In “The Utopia of Rules” (2015), Dr. Graeber ridiculed the bureaucracy that is typically associated with government, but that also permeates the corporate world and everyday business transactions.

In “Bullshit Jobs: A Theory” (2018), he wondered what happened to the 15-hour week that the economist John Maynard Keynes, in 1930, had predicted would be possible by the end of the 20th century. (“This book asks readers whether there might be a better way to organize the world of work,” Alana Semuels wrote in her Times review. “That’s a question worth asking.”)

“In technological terms, we are quite capable of this,” Mr. Graeber wrote. “And yet it didn’t happen. Instead, technology has been marshaled, if anything, to figure out ways to make us all work more. Huge swaths of people, in Europe and North America in particular, spend their entire working lives performing tasks they believe to be unnecessary.

Read more…

Branding debt as a Chinese weapon

September 6, 2020 2 comments

from C. P. Chandrasekhar

Declared the leading threat to global stability by the United States and a group of its allies, China has been accused of transgressions varying from stealing hi-tech secrets, spying, and interfering in domestic politics abroad to spreading viruses. Sometimes, even normal measures adopted by countries as part of their international economic relations are presented as crimes when practised by China. A case in point is lending abroad, especially to developing countries, including the poorest among them. China, of course, deploys its hard currency surpluses in multiple forms in a wide range of countries, including the US, with a small share flowing to developing country partners. Rather than being seen as an inevitable fall-out of China’s successful accumulation of those surpluses, such capital transfers to developing countries are read as evidence of China’s effort at trapping countries in debt and exploiting their vulnerability to control their natural and physical resources and bring them into its sphere of influence. The Belt and Road Initiative (BRI), which promises large investments in infrastructure in countries in need of foreign finance is seen as a convenient tool in this effort.

It is indeed true that in recent years China has become a major creditor in the world economy. Read more…

new issue of WEA Commentaries

September 2, 2020 Leave a comment
WEA Commentaries
Volume 10, Issue 3  –    August 2020
download the whole issue

Human rights and fiscal policy: a necessary link
           – Grazielle David, Pedro Rossi, Sergio Chaparro

Mitja Stefancic interviews Guy Standing

Pandemic Musings
           – Peter Radford

Is this the end of globalisation (as we know it)?
           – Karim Errouaki

WEA Conference: Trade Wars After Coronavirus

The two-party, one-ideology, neoliberal state

September 2, 2020 3 comments

from Ikonoclast – Origianlly a comment on Are corporate CEOs worth $20 million?

The time for nice debates alone is over. The time for voting and direct action to radically change our entire political economy has arrived. Debates, voting and direct action all have to operate in concert. Any one or two are powerless on their own. In a two-party, one-ideology state, where the wealth and power elites have captured the parties, voting on its own is useless. No matter who you vote for you still get a neoliberal capitalist apologist or right wing reactionary. The two-party, one-ideology, neoliberal state, is a ratchet and hold system. The right (or ultra-right as it is now) ratchets up the neoliberal measures and tightens the law and order screws on the people. The faux-center (really a mid-right) candidate set, if they win, then essentially hold the system at the current point. Real reform does not occur. Read more…

Supply and demand deconstructed

August 26, 2020 25 comments

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?

Read more…

A new real-world economics text book

August 25, 2020 5 comments

The 2008 financial crisis, the rise of Trumpism and the other populist movements which have followed in their wake have grown out of the frustrations of those hurt by the economic policies advocated by conventional economists for generations. Despite this, textbooks continue to praise conventional policies such as deregulation and hyperglobalization.

This textbook demonstrates how misleading it can be to apply oversimplified models of perfect competition to the real world. The math works well on college blackboards but not so well on the Main Streets of America. This volume explores the realities of oligopolies, the real impact of the minimum wage, the double-edged sword of free trade, and other ways in which powerful institutions cause distortions in the mainstream models. Bringing together the work of key scholars, such as Kahneman, Minsky, and Schumpeter, this book demonstrates how we should take into account the inefficiencies that arise due to asymmetric information, mental biases, unequal distribution of wealth and power, and the manipulation of demand. This textbook offers students a valuable introductory text with insights into the workings of real markets not just imaginary ones formulated by blackboard economists. Read more…

Why do we need to Transform Economics, and how do we do it?

August 23, 2020 12 comments

from Jayati Ghosh

It’s truly a delight for me to be able to address the UNCTAD-YSI Summer School. This is not only because these are two groups that I have huge respect for and sympathy with. It’s also because the theme of this Summer School is something very close to my heart, something I and some of my colleagues have been grappling with for decades. It’s really quite energising to realise that there are so many young people willing to engage in this project. So I am going to treat this as an opportunity for me to think through some of the concerns I have, in the hope that all of you are going to be the ones taking forward this transformation.

Mainstream economics, why do I not love thee? Let me count the ways. Read more…