Veblen’s insights come back to haunt us.

from Ken Zimmerman

Veblen’s “The Theory of the Leisure Class” is even more relevant for events over the last 100 years. But this and most other Veblen research and writing have been systematically buried. Thorstein Veblen’s working life — from 1890 to 1923 — overlapped with America’s first Gilded Age, so named by Mark Twain, whose novel of that title lampooned the greedy corruption of the country’s most leisurely gentlemen (all men). Now, well into America’s second (bigger and better) Gilded Age, in a world of overwhelming inequality, Veblen’s insights come back to haunt us.

A brilliant student and scholar, Veblen studied anthropology, sociology, philosophy, and political economy (out-of-date for what’s now called economics). When Veblen studied economics, he, like most economists was concerned with the actual conditions of ordinary human beings. None would have settled for data from a sham “free market.” Veblen’s first job was at the University of Chicago, the university bought and paid for by John D. Rockefeller the classic robber baron, and leader of the leisure class. Rockefeller called the university “the best investment” he ever made, since he intended to use it to advance the interests of his class and suppress opposition.

The Great Transformation: poverty on a large scale

from Maria Alejandra Madi

In the analysis of the economic and social transformations of the nineteenth century, Polanyi noted that the emergence of a market economy pushed to the side the old economic and social systems based on reciprocity and redistribution.  Since then, the market economy has been characterized as an economic system controlled by prices that determine what, how and how much is produced and how is distributed.

As Polanyi explained, the decisions about production and distribution are guided by the economic motive and they do not aim at achieving common welfare. Indeed, in the market economy there are not social considerations in the decisions about production and distribution.

In his well-known book, The Great Transformation, one key-question is: Where do the poor come from? To answer this question, Polanyi described the birth of the market economy and the emergence of the labor market in nineteenth century Western civilization (Polanyi, 1944:87). After land and money had already emerged as commodities, the commodification of labor – that is to say the commodification of human lives – resulted from land appropriations through enclosures. In this historical setting, the process of social change created by the market economy led to the emergence of poverty on a large scale.

Karl Polanyi described the desolation, dehumanization and degradation of human lives as necessary steps for the emergence and expansion of the labor market in a market economy:

Share of wealth held by the bottom 90% by country

Sources: Credit Suisse (aggregating data from national records)
Last updated: May 12, 2016

“This was it seems Nordhaus’ plan all along.”

from Ken Zimmerman

Bichler and Nitzan get into the details of how “capitalization” is used to deny climate change in their article, ”How to use capitalization to minimize the cost of climate change and win a Nobel for ‘sustainable growth.’” The title says it all. William D. Nordhaus won the Nobel prize in economics for a climate model that minimized the cost of rising global temperatures and undermined the need for urgent action. Nordhaus’ “racket” created low-ball estimates of the costs of future climate change and high-ball estimates of the costs of containing the threat contributed to a lost decade in the fight against climate change, lending intellectual legitimacy to denial and delay. At any time t, the present value (PVt) of future climate change — or, in plain words, the cost to society if it were to bear the brunt of climate change at time t rather than in the future — involves two separate considerations: (1) the estimated cost to be incurred n periods into the future (Ct+n), and (2) the discount rate at which these costs are to be brought back to present value (r). Nordhaus “monkeyed” with both. Vastly overestimating the costs to manage climate change today and underestimating the future cost of climate change effects with a phony-up discount rate. Nordhaus does not have the credentials to achieve the first and can achieve the second only indirectly through an absurd discount rate of 6%. At this rate the present value of $100 of climate change cost incurred 100 years from the present is less than $0.25. So, why act today? It cost us (the planet of us) little to nothing to wait another 20 or 30 years, or even longer. “The nice thing about these discount-rate ‘adjustments’ is that, unlike the commotion stirred by debates over the actual cost of climate change, here there are no messy quarrels with scientists, no raised eyebrows from journalists and no outcries from the cheated public. Only contented politicians and delighted capitalists. This was it seems Nordhaus’ plan all along.  read more

Power: take two

from Peter Radford

I have been reading Walter Scheidel’s wonderful book “The Great Leveler”, which gives us a very long period perspective on inequality.  Were I to be limited to only two books on inequality, this would be one.  It covers the ebb and flow of inequality over an extremely long time, with extensive discussions on civilizations as diverse as ancient China and ancient Rome.  Anyone who wants to make a serious contribution to the understanding of inequality has to be familiar with Scheidel and his mountain of data.

At the risk of being too brutal to Scheidel’s argument, here is my very brief version of it:

• Inequality is the norm, not the exception, throughout history
• Its ebb and flow is dictated more by the impact of warfare and mayhem on society than by social reform or redistributive governance
• Our current high level of inequality is simply a return to the norm because the devastation of capital during the first half of the twentieth century has now worn off, and the urgency for social reform caused by the two world wars has dissipated

And that’s about it!

What I like about the simplicity of this general idea is that it undermines the logic — at least in my mind — of economic forces being the key determinant of resource allocation.

WEA Commentaries

Volume 9, Issue No. 1 Download the issue as a PDF       

• Karl Polanyi and social justice     Maria Alejandra Madi
• What can economics learn from medicine     Peter Swan
• How monetary union is sacrificed on the alter of competitiveness    Norbert Häring
• The Demise of Neoliberalism in Mexico today: if so, so what?      Juan Carlos Moreno-Brid              

Please support the WEA by paying a membership fee   or making a small donation

 

Global inequality from 1960 to 2017

conceived by Jason Hickel   visualization by Huzaifa Zoomkawala

Economics vs. the Natural Sciences: The methodology of “as if”

from Michael Hudson

What is even more remarkable is the idea that economic assumptions need not have any relationship to reality at all. This attitude is largely responsible for having turned economics into a mock-science, and explains its rather odd use of mathematics. Typical of the modern attitude is the textbook Microeconomics (1964:5) by William Vickery, long-time chairman of Columbia University’s economics department, 1992-93 president of the American Economic Association and winner of the 1997 Nobel Economics Prize. Prof. Vickery informs his students that “pure theory” need be nothing more than a string of tautologies:

Economic theory proper, indeed, is nothing more than a system of logical relations between certain sets of assumptions and the conclusions derived from them. The propositions of economic theory are derived by logical reasoning from these assumptions in exactly the same way as the theorems of geometry are derived from the axioms upon which the system is built. 

Median wealth by country

Sources: Credit Suisse (aggregating data from national records)
Last updated: May 12, 2016

Eight billionaires ‘as rich as world’s poorest half’

Vanishing green shoots

from C.P. Chandrasekhar and Jayati Ghosh

When the third estimate of US growth in the last quarter of 2018 was released the euphoria exuded by forecasters of global growth even a few months earlier waned. The annualised quarter on quarter growth rate that had risen to a more than comfortable 4.2 per cent in the second quarter of 2018, had fallen to 3.4 and 2.2 per cent in the subsequent two quarters (Chart 1). The quarterly rates measuring growth relative to the corresponding quarter in the previous year after having risen consistently have stagnated (Chart 2). Once again it appears that growth in the US is losing momentum, contrary to the optimistic projections of recovery that figures relating to the periods prior to the last quarter had generated.

This is having repercussions at a policy level too. The Federal Reserve, which after having tapered out its bond purchasing programme had begun raising interest rates, announced that it would not be implementing the further interest rate hikes in 2019 it had declared it was committed to.

There are a number of messages that can be read into these developments, of which four are particularly significant.

Ecological limits and hierarchical power

from Blair Fix, Shimshon Bichler and Jonathan Nitzan

Nowadays, it is commonplace to claim that the economy overuses our limited material and energy resources (Figure 1) and that this overuse threatens both human society and the biosphere. Other than ant-science cranks, the only ones who seem to deny this claim are mainstream economists (Fullbrook 2019).

In our view, though, this conventional condemnation of the economy is somewhat misleading.

Economics 101: Dog barking, overgrazing and ecological collapse

from Edward Fullbrook and RWER Special Issue: Economics and the Ecosystem

“the collapse of our civilisations and the extinction of much of the natural world is on the horizon”
(David Attenborough)

Today’s economics, especially Economics 101, is a major source of humankind’s denial of the possibility of the calamity of all calamities which our economy is engineering. Annually millions of students around the world are forced to study textbooks that indoctrinate them in to thinking that there is no significant causal connection running from our economy to the ecosphere. Once upon a time there wasn’t. Although from the first forest-clearing onwards, the economy has caused environmental damage and at an increasing rate, it was only when in the 19^th century the economy began the big switch away from muscle energy that it began to acquire the means to cause lethal damage to the ecosphere.

It has now been over half a century since the natural sciences began to discover that the economy was causing fundamental and irreversible changes to the ecosphere by which we and the economy exist. Given that economics is the study of the economy, a more radical change in a science’s empirical realm is unimaginable.

In 50 years, what has economics done about it?

Traits of modern beliefs that are at the core of today’s crisis.

from Richard Norgaard

Changes in European perceptions of themselves, both with respect to nature and social organization, also coevolved around very important new ideas about individualism that coevolved with the rise in atomism in natural philosophy. Martin Luther’s call for reform of the Catholic Church stressed that individuals were responsible for their own salvation through their own reading of the Bible, the only true source for coming to know Christ and God. Luther’s call awakened individualism, expanded education to the masses so people could read, unintentionally further separated church and state, and ignited multiple intellectual Enlightenments: English, Scottish, French and eventually in the Catholic Church and feeding back on Protestantism too (Ryrie, 2017). The natural theology that evolved into natural history and then into natural science was increasingly built on atomism and the assumption that the parts of nature could be understood apart from each other. As a result, modern science split into disciplines with each discipline learning about particular parts of nature. No one needed to understand the whole because it was thought that the parts would naturally unify into the whole. Millgram (2015) characterizes the coevolution of knowledge with technology and social organization since the Enlightenment as the Great Endarkenment. People today, scientists included, are far less conscious of the environmental system in which they live than were hunter-gatherers. The Enlightenments’ strong move toward individualism in social thinking and atomism in natural thinking became traits of modern beliefs that are at the core of today’s crisis.      Economism and the Econocene 

A push to make ecocide an international crime

Why do we wait until someone has passed away before we honour them? I believe we should overcome our embarrassment, and say it while they are with us. In this spirit, I want to tell you about the world-changing work of Polly Higgins.

She is a barrister who has devoted her life to creating an international crime of ecocide. This means serious damage to, or destruction of, the natural world and the Earth’s systems. It would make the people who commission it – such as chief executives and government ministers – criminally liable for the harm they do to others, while creating a legal duty of care for life on Earth.

It would force anyone contemplating large-scale vandalism to ask themselves, ‘Will I end up in the Hague for this?’

I believe it would change everything. It would radically shift the balance of power, forcing anyone contemplating large-scale vandalism to ask themselves: “Will I end up in the international criminal court for this?” It could make the difference between a habitable and an uninhabitable planet.

There are no effective safeguards preventing a few powerful people, companies or states from wreaking havoc for the sake of profit or power. Though their actions may lead to the death of millions, they know they can’t be touched. Their impunity, as they engage in potential mass murder, reveals a gaping hole in international law.

Last week, for instance, the research group InfluenceMap reported that the world’s five biggest publicly listed oil and gas companies, led by BP and Shell, are spending nearly $200m a year on lobbying to delay efforts to prevent climate breakdown.

George Monbiot

It is time to open up university departments of economics for alternative schools of thought.

from Peter Söderbaum

Research and education in universities is subdivided into disciplines. There are departments of economics and departments of political science for example. Specialization and division of labour is thought of as being fruitful; Economics is about resource allocation at the micro and macro levels while political science is about democracy and governance. Something is sometimes gained through specialization but there are losses as well. This opens the door for counter-movements in terms of transdisciplinary research. Should “efficiency”, for example, be exclusively a matter for economics and economists and democracy exclusively something for political scientists?

Sustainable development is a challenge in contemporary society. It is a complex, multidimensional issue where contributions from all university disciplines can make a difference. Social sciences such as economics, business management, political science, economic history, sociology, psychology, all have something to offer. And barriers between disciplines become less relevant.

Present development is unsustainable in essential ways. Climate change and biodiversity loss are examples. This process of unsustainable development has been going on for some time and we have every reason to try to identify factors explaining the failures. This is not easy but the difficulties are no reason to refrain from attempts.

Economic beliefs

from Richard Norgaard

Economistic beliefs are not detrimental because they are mere beliefs. People need a belief system to live together. Yuval Harari develops this argument around the following statement.

“Any large-scale human cooperation – whether a modern state, a medieval church, an ancient city, or an archaic tribe – is rooted in common myths that exist only in people’s collective imagination” (Yuval Harari, 2014, p. 30)

Many critiques of the recent neoliberal economy make the same point that neoliberalism survives on a set of necessary public beliefs, but most critics imply that those who profit from the system orchestrate the beliefs. While not denying that those who most benefit from particular beliefs have helped push them on the masses, the process by which beliefs come to be held and sustained is more complex than this. People need beliefs to explain the system in which they live, and they need beliefs to rationalize their decisions and those of others. Furthermore, people are able to choose between alternative beliefs and rationalizations being pushed by religious organizations, interest groups, and social commentators. The dominant choice of Europeans and North Americans switched during the 20^th century from Judeo-Christian explanations to neoliberal economism. And the rest of the world also made this shift on their own time scales starting from their own religious bases.  Economism and the Econocene

Capitalist priority to growth and profits over people and planet

from Richard Smith

Given this unprecedented existential crisis one might expect governments would responsibly meet this climate emergency with emergency plans to prevent ecological collapse bold proposals for “deep emissions reductions in all sectors,” for “far-reaching transitions in energy, land, infrastructure, and manufacturing” and so on. After all, the 2018 IPCC 1.5°C report makes clear that on present trends we could be facing the collapse of agriculture in California, the Great Plains, India, China much of Africa, mass famine, submerging cities, destruction of the world’s last forests and worse, possibly as soon as 2040, well within the lifetimes of many leaders today and certainly their children’s and ours.  . . . . . . . . . . . . . . . .

Yet we hear no bold proposals to meet the challenge from any governments – not from European socialist parties, not from Canadians or Australians (the leading exporters of the world’s dirtiest fuels), certainly not from the Chinese (the world’s largest polluters who, moreover, are now abandoning the limits on coal-burning they just imposed last year in order to restore growth in the face of the trade war),[1] let alone from the Trump administration. Trump’s response to his own government’s prediction of a 4°C warming by 2100 is “the planet’s fate is sealed” so we may as well abandon Obama’s federal fuel-economy standards for cars and light trucks and “burn baby burn”. To the extent we hear any proposals at all, it’s just renewed calls for more of the same carbon taxes, the same fantasy tech fixes like carbon capture and storage that have manifestly failed to staunch emissions to date.  Why is that?

Global average temperature 1850 – 2018

Economism

from Richard Norgaard

We live in the era of Economism. Human consciousness is deeply etched by economistic beliefs in individualism, materialism, property, markets, economic growth, and freedom as consumer choice. These beliefs are necessary to sustain the system that supports us. But the economy we have is unlikely to support our grandchildren. Natural scientists argue that we are in a new geologic era, the Anthropocene, where people have become the major force in changing the geosphere: the atmosphere, oceans, and land. But it is the economistic beliefs that describe the cosmos of most people, bind people together, support their particular behavior, and sustain the economic system. Economism is altering the physical processes of the geosphere and collapsing the diversity of the biosphere. Econocene is a more appropriate term for the new geologic era. Fossil fuels and their technologies have transformed agricultural and industrial processes, the mobility of goods and people, and the geographies of cities and rural areas. People’s values, ways of understanding, and social organization have coevolved with fossil fuels and their technologies, but it is economism that binds people together and girds the economic system we have. We need a new “ism”, a new human consciousness, to support a new relationship with Earth and its other inhabitants.     Economism and the Econocene