Author Archive

Corporations continued

October 19, 2018 5 comments

from Peter Radford

The key to understanding corporations is to separate the economics from everything else.  We need to do this because the economics, as expressed in various theories of the firm, are usually entirely idealized and bear no resemblance to reality.  Economists, as usual, love to theorize about things that don’t exist but which they wished did exist.

But that may just be me being dismissively judgmental.

Corporations, far from being products of the free market, are actually franchises of the state.  They are sub-contracted jurisdictions.

To be a corporation is to possess a charter from the state.  That charter brings privileges not available to non-corporations. The most notable privilege is that the corporation is recognized as a distinct legal entity separate from any “natural” person who may be associated with it.  And because the corporation is brought into existence prior to it being populated or animated by any natural person, it is not owned by any of them.  It is unowned.  In this sense it is akin to a nation state, the church, most universities, and, at least here in the US, most towns,  It would be odd to describe any of those bodies as being owned by the people who animate them.  Yet we routinely talk of firms being owned by stockholders. It is this misattribution of ownership that leads most economists astray in their theorizing.

The advantages that the privileges of being a corporation bring have long been recognized.  The ancient Romans set up corporations for business purposes for exactly the same reasons we do nowadays:  it makes the joint ownership and management of property for short term business purposes much more efficient than alternatives such as the traditional partnership.   Read more…

Who “owns” a corporation?

October 11, 2018 10 comments

from Peter Radford

I have become quite a fan of David Ciepley this summer.  He, amongst many I am sure, is blazing a trail through the morass of corporate law and providing new insights into the role and status of the animal we know as the “corporation”.

Anyone with an interest in the role business plays in the economy needs to understand what Ciepley is saying.

In one talk he gave, at MacGill University, the introductory remarks by his host were illumination in themselves.  The occasion was a presentation and interdisciplinary discussion about the corporation and its role in shaping the social landscape.  The host rattled off the university departments and working groups involved in the discussion in his welcoming remarks.  There was no mention of economics.  The omission tells us all we need to know.  Economics cannot engage, easily with other disciplines in discussions about the organization of business because it cannot recognize the reality associated with said organization.  This is not to say that somewhere in the great archipelago known as economics there isn’t some little island of thought about institutions — at one time that island was much more significant — but nowadays the need to crush everything into an anti-social market driven explanation makes the odds of communication with such distant shores very difficult if not impossible.

Which is a shame because I think the key to understanding the contemporary economy requires a solid knowledge of modern business theory, that theory is, after all, simply an expression of neoclassical thought. Read more…

Clueless or Just Plain Stupid?

June 19, 2018 30 comments

from Peter Radford

Here we are deep into the dark forest known as the Trump administration and half my friends are still grappling with the 2016 election result. How come America elected an erstwhile tyrant? How come a boatload of voters look quite happy tossing so-called democracy overboard?

Well, as you know, I have a simple answer. Money. Or, more precisely, the lack of it. If there is one characteristic of contemporary America that stands in stark contrast to those happier times a few decades back it is the corrosion of self-confidence and belief that  is a direct consequence of the obliteration of wage growth.

For some reason that eludes me our policy elite — both parties, the big media, academics, and business leaders — all fail to understand that for them to be allowed to govern peacefully on behalf of the masses they need to deliver the goods to those masses. Else they get a rude awakening.

This particular rude awakening was the arrival of the nincompoop called Trump.

Elites gain and keep power through two methods: one is the ballot box, which has the advantage of being relatively peaceful, and the other is force. Our elite tried to invent a third way, which is corruption of democracy and its perversion into plutocracy. The ballot box stayed in place, but was rendered increasingly meaningless by a relentless campaign to subvert electoral decisions by drowning the legislative process in oceans of lobbyist distributed loot.

This effort was a huge success.  Read more…

Why Innovate?

May 31, 2018 39 comments

from Peter Radford

Every so often one of the numerous news feeds that fill my inbox contains a story that stops me short. In this era of Trump dominated news I have become numb to the corruption that he has brought in his wake and to the absurdity of his autocratic style with its contempt for the rule of law. Instead I focus on why it was that so many Americans were willing to elect someone so ill fitted to the job. The insecurities of the contemporary workplace offer a partial answer. So when I read Steve LeVine’s “The Future of Work” feed from Axios recently, not only did it stop me short, it gave additional insight into that electoral conundrum.

Not that I was reading anything particularly new. Sadly the there was no news. What struck me, however, was the brazen attitude and expression of the CEO’s quoted. LeVine didn’t give us his source, I assume it was some conference or other, so I am simply quoting his article verbatim before I comment:  Read more…

The future of work is now

from Peter Radford

The future of work has become one of the most hotly debated and analyzed topics of the past couple of years. No one with a pretension of a serious nature or a desire to be seen opining on the “big” issues can afford not to have a point of view on it. Thus we are bombarded by an endless torrent of articles, books, academic papers, and speeches on the way in which the workplace will be changed by the emergence of  various technologies. The usual umbrella under which these technologies lurk is the one we call artificial intelligence.

There is no doubt that AI will have an enormous impact. There are countless breathless accounts of the number of jobs that will simply disappear as AI sweeps through the economy. These accounts usually appear from those involved in the invention and application of AI. They all end up expressing some form of fatalistic vision where the workplace will inevitably collapse under the impress of technology, wages will similarly collapse for those poor souls unable to keep up with the onslaught of robotics, with the resultant picture being grim for just about everyone except for the few who remain in the so-called “knowledge economy”.

The almost total agreement between all these accounts with respect to the dystopia they articulate is matched only by the paucity of mitigating prescriptions. Just about all of them agree that education is the only escape hatch available to the ordinary worker. Consequently there are as many equally breathless accounts about the need for everyone to engage in constant learning of one form or another as there are accounts of the impending wage disaster if we don’t all suddenly become perpetual students.  Read more…

Ryan, deficits and hypocrisy

April 13, 2018 4 comments

from Peter Radford

Paul Ryan is leaving Congress. Before he had finished announcing his upcoming retirement the airwaves were awash with commentary about his legacy.

Count me as one of those who have a particularly strong perspective on this. Paul Ryan was, and presumably still is, a supremely hypocritical human being.

Recall how he sprang into public consciousness. He quickly established himself as a severe right winger, but one with the smarts to back it all up. He promoted himself as a thoughtful conservative. He quoted all the thinkers one has to refer to if one is to be such a person. Ayn Rand was his go-to intellectual foundational source.

He spoke eloquently about the damage that Federal deficits would do. He berated Democrats, and Obama especially, for their wanton reliance on debt to pay for rescuing the economy in the aftermath of the Great Recession. His mantra was that if we would only set taxpayers free, if we would only slash social spending, and if we would only see the sense in balancing our budget then America would enter a new golden age.

Well, a golden age for the wealthy at any rate.

He was, and presumably still is, one of those far right conservatives who honestly believe that cutting away the social safety net from underneath our fellow citizens will somehow lead to their discovery of endless vitality, determination, and virtue sufficient to lift them free of poverty, sickness, or age whichever of which is the cause of their reliance on that safety net.  Read more…

Watch the boulder

April 6, 2018 19 comments

from Peter Radford

There’s a bold rolling down the hill.

We are watching it carefully. It is accelerating. It is enormous. It will mow us down. Lives will be lost. Or at least livelihoods will be lost. People will suffer. The boulder is terrifying.

But, hey, let’s keep watching.

That’s about the attitude of the people who keep on talking about the imminent tsunami of automation, AI, and other so-called disruptive technologies. Let’s keep watching because it’s bad — really, really, bad.

The good folks at Axios distribute a regular synopsis of all the hyperbole surrounding the future of work and today’s edition caught my eye. Buried deep in the summary is a short item headed: “A long disruption is ahead, with low-paying jobs“.

The contents are grim reading.

Here’s a taste:

“Their big picture: There may be a long, deep economic disruption lasting decades and taking millions of jobs. The economy will eventually come out of it. But wages for most jobs may be too low to sustain a middle-class lifestyle.

Important background: In the 19th century, it took about six decades for U.S. wages to recover after the first industrial age automation of the 1810s. And the agriculture-to-industrial shift of the 20th century lasted four decades.”

This is hardly something to ignore.  Read more…

What happens next?

March 17, 2018 3 comments

from Peter Radford

As we tumble from one degrading political spectacle to another it is worth remembering that things that mattered were actually addressed periodically, even if the result was tumult. For reasons not worth mentioning here I am taking good look at English history between 1909 and 1911. In this case the tumult was triggered by a budget which was resisted by landowners and the House of Lords, and ended with a radical reorientation of power that left the House of Lords relatively toothless — although not, unfortunately, eliminated.

That radical budget was introduced by its major proponent, Lloyd George, as follows:

“This is a war Budget. It is for raising money to wage implacable warfare against poverty and squalidness. I cannot help hoping and believing that before this generation has passed away, we shall have advanced a great step towards that good time, when poverty, and the wretchedness and human degradation which always follows in its camp, will be as remote to the people of this country as the wolves which once infested its forests.”

Even from our jaundiced position this is an audacious introduction. Only a few years later Europe was engulfed in catastrophe that led, in large part, to the introduction of meany of the measures within the budget. But Lloyd George and his Liberal colleagues could not have anticipated that.

The constitutional crisis that erupted as a consequence of the budget’s introduction lasted the following two years and involved threats of packing the House of Lords with compliant new members to ensure passage of the law. It involved two different kings — King Edward died in 1910 — plunging the new King George into politics from his first day on the throne. It involved a couple of snap elections, in each case called to bolster the democratic position of the House of Commons and the ruling Liberal party. And it was finally resolved after the House of Lords was cowed into submission and agreed to the passage of the so-called Parliament Act of 1911. This latter act heavily cut back on the House of Lord’s power to interfere in budgetary matters and introduced what we would now recognize as the supremacy of the Commons in fiscal affairs.

There are two points to reflect on in this episode of crisis:  Read more…

Beware what you ask for

March 3, 2018 9 comments

from Peter Radford

This has been a long and miserable time. Deluged daily by strange and almost surrealistic gyrations in Washington I decided to sit to one side and simply watch. The spectacle of America rapidly decaying and apparently unable to prevent itself from gnawing away at its institutions is compelling. The regular attempts to undermine the credibility of everything meant to act as a bastion against tyranny is riveting. The subsequent indulgence in endless introspection about how dire our political collapse is equally absorbing.

Why add to the malaise by commenting?

It’s all out there.

A great nation turned against itself, locked in polarized paralysis it drifts buffeted by the incessant whimsy of its current leadership. That denigrates the word leadership, so I refer only to the titular head of state. He is a misogynist, a racist, a child, and an imbecile.

But he is president.

And the right wing side of our political class has gathered itself around him, disregarding his manifest faults and incompetence, in order to eke out a few long-held ideologically driven policy wins. I hope they reflect on the stain they will for ever carry, and that they are able to regard that stain as being worthwhile when set against those policy wins.  Read more…


December 30, 2017 2 comments

from Peter Radford

Hayek says this:

“The problem which we pretend [to] solve is how the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affairs in which prices correspond to costs, etc., and which could be brought about by deliberate direction only by somebody who possesses the combined knowledge of all those individuals … “

This is from his essay ‘Economics and Knowledge’ which was published in 1937.

Hayek’s thrust is, of course, to demolish the notion that an economy can be centrally planned to any degree of efficiency. His argument is simplicity itself: the body of knowledge that exists within an economy is so asymmetrically distributed, so extensive, and so diverse, that it is not possible for anyone sitting at the center to know whether their proposals and policies are the “best” solution to whatever problem is being solved.

The “we” in that first sentence is the economics profession — his essay is based on his 1936 presidential address to the London Economic Club, so he addressing an audience of economists and attacking their assumption that everyone knows everything, which is really an assumption to make modeling more tractable rather than an effort to understand the world.

And I think he’s correct.

Knowledge is scattered about the economic landscape. It is clumpy rather than smoothly available to everyone. People hoard and protect knowledge in order to extract value from it. A pictorial representation of the spread of knowledge would look decidedly granular.

But having made this point, Hayek then goes on to commit an error:  Read more…

Consistency is the …

December 12, 2017 14 comments

from Peter Radford

Well, at least I am being consistent. Whether that’s being a good thing or not I will leave to you to figure out.

David Brooks set me off on a rant a few days ago, and he’s doing it again. I have to stop reading his columns. Last time it was about the rotting Republican Party: Brooks is one of those people who realized way too late that the GOP of yore disappeared long ago and has been replaced by a mash-up of far right cause driven groups smeared together with a good dose of corporatism. A good example being Trump who managed to win the last election by appealing to enough disgruntled and disaffected voters with exhilarating visions of smashing up the ossified Washington consensus and replacing it with something more responsive to everyday voter needs. Except, as we now know, Trump is every inch a corporatist and has absolutely no intention of following through on his promises. I must admit I admire the loyalty of his supporters who have yet to realize the extent of his betrayal of their support. It must be that they mistake the cloud of dust raise by his myopic corporate driven incompetence for the tearing down of what was there before. Even the giveaway of the tax plan hasn’t shaken made the message sink in: Trump is out for himself, not them.

In any case, back to Brooks.  Read more…

Real tax reform?

December 7, 2017 3 comments

from Peter Radford

OK, let’s all calm down. The Republican tax plan is now in its last stages of design. The two versions that exist need to be stitched together and then the compromise version passed in both houses of Congress.

The law as we currently know it is a classic piece of plutocratic largesse. It will fail in its supposed intentions: it will not do much at all for the economy. It gives rich people and large corporations big dollops of cash and a slew of new loopholes to feather their respective nests. It does nothing for the middle class, except for its upper reaches in the rise enclaves around our biggest cities where it will raise rather than lower taxes. And it raises the possibility, but not the certainty, of cost to social programs down the road when the deficit grows and the far right can start shouting about the lack of affordability of those programs.

Beyond that? Poof!


The law will not destroy the economy. It will not destroy anything at all.

I know I am one who has complained about it loudly, but that’s because of its class basis. The reality is that the law is ineffective as tool of permanent class war simply because it leaves untouched a great deal of what we need to protect the poor, workers, the elderly, and the sick. Even in this more extreme hour the Republicans haven’t summoned up the courage to tilt full force at things like Social Security and Medicare.   Read more…

Doomed to repeat?

November 19, 2017 8 comments

from Peter Radford

One of the great pleasures of living here in southern Vermont is that we have a terrific local bookshop. I go there simply to absorb that book shop vibe unattainable in the bits and bytes of Amazon. And like all good bookshops this one throws up surprises. About three weeks ago I was browsing the small business and economics section and found a book by Heinz Kurz. It’s his “Economic Thought, A Brief History” I recommend it for all of you who want to understand the predicament of modern economics.

Now I admit I am a sucker for reading about the history of economics. It’s a great parallel story to the broader social history of the past few centuries. Economics as it weaves back and forth from one emphasis to another is a much more humble adventure than the arrogance of the overly formal neo-mathematics that is has become nowadays. There was a time when it attempted to explore reality, when it included lumpy and vague concepts, when it allowed for collective action, and when it related to experience: how different from today’s pseudoscientific axiomatically self-determining oddity.

Many of you, of course, will be completely familiar with such a history. Most of you will have your own heroes and villains as the story unfolds. Reading the Kurz book reminds me of mine.  Read more…

Taxes: 1970’s Redux?

November 16, 2017 2 comments

from Peter Radford

Taxes. What a problem.

I was going to start by saying something about our current national debate about taxes, but that would have been an untruth. We are not having a debate. Instead we are all sitting on the sidelines whilst the Republican Party desperately tries to cobble together a tax plan in order to fulfill one of the promises it made during last year’s election. That this would be the only major promise thus fulfilled we can ignore for now.

Instead, I think I will start with an observation I have made many times before: the American tax code is ridiculously complex and inefficient. It is also rigged, although the real extent of the rigging only comes into focus when we take a look at the budget that the tax code nestles within.

One of the sneaky ways that politicians of both parties communicate about government spending is to talk only in terms of programs funded out of revenues. That’s obviously a sensible thing to do. So we hear all about such-and-such a program costing $xx billion or trillion dollars which is invariably then presented as YY% of the total budget.

This is sneaky because it immediately creates a framework for conversation about programs and policies. In particular it opens up programs to easy public scrutiny and criticism of their expense. The most oft attacked programs — things like welfare and poverty amelioration activities — are easy targets when their cost is presented in clear dollar amounts or as shares of total revenues.

Indeed anything that is a line item in the budget becomes an easily understood and vulnerable target.

But here’s the really sneaky part:  Read more…


October 27, 2017 8 comments

from Peter Radford

Robert Locke’s excellent discussion of the different perspective presented by a tacit-knowledge rather than explicit-driven driven enquiry into economic matters prompts me to reprise my understanding of the purpose of a business firm.

Put briefly: a business firm exists to translate what is often called tacit knowledge in to what is called explicit knowledge. An alternative wording would be that firms take the ad hoc and various and make them into the codified and uniform. In my own thought I use the words “secondary knowledge” to refer to the kind of knowledge that tackles ad hoc or unexpected circumstances. I use the words “primary knowledge” to refer to the codified knowledge that allows us to tackle the usual and/or repetitive circumstances. It is phraseology I borrowed from evolutionary psychology.

Why do firms do this?

Because that’s how they extract value.

Firms succeed when they control a process in order to produce something. Such processes are constructed from a variety of roles and routines whereby knowledge is combined with energy and physical resources, with the outcome being something for sale. Since establishing a process is a risky proposition — it takes up both space and time and so is susceptible to uncertainty on two fronts — control becomes the key component. And, in order to make the process most profitable, firms want to establish maximum control over the outcome: products must be both qualitatively and quantitatively predictable. How best to do that? By eliminating the ad hoc and various and limiting production to the codified and uniform.   Read more…

Geography as an Example

October 7, 2017 3 comments

from Peter Radford

Let me be very quick:

Geography is not taught [if it is taught at all] as if there are no rivers, mountains, plains, valleys, coasts, seas, or oceans. Cities, towns, villages and the networks that connect them exist in even the most elementary geography lesson. Geographers don’t begin their lessons by ignoring reality. They dive right in and use the real world as the backdrop for teaching the processes and forces that result in what we actually see.

So why does economics not start this way?

Why does economics begin with the unreal and then make a sequence of adjustments to get closer to reality? Perhaps it’s because geographers cannot hide reality from their students: its all around us everyday. But economists are dealing with something more abstract, so they can get away with beginning with fantasy.

We can argue back and forth over how close economics ever gets to reality, but few would argue that economics 101 is far too simple a view and is far too riddled with unworldly assumptions to be of much value as a description of real economies.  Read more…

Las Vegas

October 5, 2017 35 comments

from Peter Radford

So we go through it all again.

We go through the constant call for payers. The incessant search for reasons; the outpouring of emotion; the interviews; the graphics; the enumeration of mayhem; the grief of families; the interviews with experts; and the silence of the voices lost.

There are never, however, efforts to deal with the problem.

America is obsessed with guns. It adores them It worships them. It is sick with guns.

Blame it on the foolishness of the second amendment. Or, more pointedly, blame it on the truly stupid interpretation of that foolish amendment.

And blame it on a nation that clings stubbornly to the illusion that a few men a couple of hundred years ago would endorse the twisted version of their vision that the second amendment has become. They surely would not. They would move on, just as America today refuses to move on. The need for a well-armed militia is hardly relevant in today’s world. It is an artifact of history. Our contemporary problem is not the need for a militia, it is our need to rein in the gun lobbyists and the gun makers who peddle death.

Economics has a concept called “revealed preference”. Like it or not we can apply it to yesterday’s sickening violence. Because preferences are inscrutable to analysts — they are hidden within the minds of consumers — economists are forced to rely on what people actually purchase in order to define them. The assumption being that consumers reveal their preferences in their purchasing behavior. That there may be a million other causes for why people act as they do, but economists zero in own what they can measure. The immeasurable is ignored.  Read more…

The Workplace — a few charts

October 4, 2017 19 comments

from Peter Radford

I have tried to use diagrams to explain the vast impact that the never ending search for higher shareholder value has had on the American workplace. Here is my attempt to show what the old workplace looked like in terms of the benefits to a worker …

Read more…

Tax Fog

October 2, 2017 2 comments

from Peter Radford

Whenever we are told about a Trump plan we have to use the word “plan” very carefully. Thus far Trump’s various plans have been more vague suggestions, hints, clues to what’s inside his head, or varieties of “what a plan were to look like were Trump to have an actual plan, but he doesn’t”.

This week’s ballyhooed tax plan is no exception.

It has been introduced as a framework. A skeleton. A coat hanger upon which Congress will need to hang actual policy in order to legislate. It isn’t a plan, that’s for sure.

So what is it?

Much like Trump’s other initiatives — I use the word lightly — the tax plan is a series of items that now need to be stitched together. In other words the really hard part lies ahead. More importantly it lies ahead in waters teeming with lobbyist sharks waiting to pounce and defend privileges that sundry clients want preserved.

The American tax code needs thorough overhaul. It is riddled with special interest privileges, it is incomprehensible, bloated, and really bad at the one thing it needs to do which is to raise taxes to fund government activity. Let’s not forget why the tax code exists: the government needs cash. And that cash comes from you and me.

Now I don’t want to get into discussions about the interesting idea that the government can fund itself simply by printing money. That’s for another day. Let’s stay focused on the here and now by looking at the latest Trump tax “plan”.  Read more…

Ugly and Uglier

September 27, 2017 13 comments

from Peter Radford

One reason I have not been very communicative in the past two months is my disgust at the state of the nation. America is simply not the place I came to live in back in the late 1970’s. It is a tired, aging, and deeply unsettled country grappling with an identity crisis and its steady loss of economic energy.

America as a myth was always built around the notion that it was a “land of opportunity”. That opportunity was open to as many interpretations as there were people thinking about it, but that was, I think part of the point. Most often opportunity meant, or at least implied, that citizens of the US has a better chance of personal success, of achieving financial security, and of being able to pass that along to future generations than people elsewhere. This was, post-war, largely myth: other countries were rapidly catching up and were building their own versions of the myth, such that the American exceptionalism people here are so proud of was deeply diminished if not eradicated by the latter end of the last century.

Freedom and opportunity abounded in the industrial west, it wasn’t just concentrated here.

Not only this but because of the politics of America since 1980 American reality and American myth parted company. The ability of the elite to speak of a “rising tide lifting all boats” began to sound very hollow, if not being an outright lie, as it became more and more obvious that certain parts of our citizenry were being tossed overboard to fend for themselves. Eventually, as we all now know, that part being tossed overboard constituted the majority and America became tightly controlled by and governed on behalf of a privileged few.  Read more…