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Market Reflex

April 28, 2016 12 comments

from Peter Radford

There are a few thoughts or words in a normal economics discourse that trigger what I call my ‘market reflex’.  Asad Zaman just triggered it. Of course he didn’t mean to, and the sentence in question is in an article I agree with. Further, the sentence, on the surface, looks and sounds so innocuous. Here it is:

“Free market economists believe that markets work best when left alone, and any type of government intervention to help the economy can only have harmful effects”

See what I mean? Innocuous. Asad is totally correct, they do think that. Worse: they mean it. And even more worse: they teach it.

Which gets me truly bothered.

The entire enterprise of contemporary economics, aside from its fringes, is built on this shady and unsubstantiated premiss.  It’s shady because it is laden with ideological bias, and it’s unsubstantiated because, well, its unsubstantiated.

Which gets me even more annoyed.  Read more…

Too expensive?

April 25, 2016 9 comments

from Peter Radford

Some things get too expensive. When they do, people tend to buy less. Duh. This quite simple and intuitive observation sits at the heart of all that fancy math we call economics. We don’t need the math to understand the relationship between the cost of, and the demand for, something, but having lots of complicated looking equations gives us comfort: there is a universal law lurking in the intuition. With exceptions of course. This is, after all, economics. There are always exceptions.

One of the things that is getting too expensive, if it hasn’t already arrived there, is higher education. The cost of going to college is becoming prohibitive. Sooner or later the cost of college will cut into the demand for education.

Just as it ought.

In our contemporary economy we are accustomed to being told that ever higher levels of education are not just desirable, but they are essential. One idea endlessly tossed about, especially on the right in politics, is that our workers are insufficiently skilled to compete with their foreign peers, and so the nation is at risk of losing its competitive edge. This is then twisted into the follow-up idea that we need a higher percentage of our population at college.

But what happens when we arrive at saturation? What is saturation? What is the value of a college degree when everyone, or nearly everyone, has one? Do we all then need to go on and get a post-graduate education? And once we all have PhD’s, then what?

Clearly there is something amiss in the thinking.  Read more…

Hope 101?

April 23, 2016 1 comment

from Peter Radford

A nice way to end the week:

I overheard a conversation between two high school students this morning.

The first person was asking about which classes the second was going to take next. One of those mentioned was microeconomics.

“Oh, that’s easy” said the first, “You just have to remember that its all rubbish – they want you to believe that people are rational, and that there’s all this perfection in the world.”

“Really?” responded the second, “That’s really dumb. I wonder why they do that?”

“It doesn’t matter, it’s economics”

“Well maybe I’ll take history instead, at least I might learn something useful.”

And, yes, this was the conversation.

A small ray of hope?

 

101 or Not 101- Uber Knows?

April 22, 2016 4 comments

from Peter Radford

Paul Krugman has this in his blog today:

The name is a takeoff on Noah Smith’s clever writing about “101ism”, in which economics writers present Econ 101 stuff about supply, demand, and how great markets are as gospel, ignoring the many ways in which economists have learned to qualify those conclusions in the face of market imperfections. His point is that while Econ 101 can be a very useful guide, it is sometimes (often) misleading when applied to the real world.

My point is somewhat different: even when Econ 101 is right, that doesn’t always mean that it’s important – certainly not that it’s the most important thing about a situation. In particular, economists may delight in talking about issues where 101 refutes naïve intuition, but that doesn’t at all mean that these are the crucial policy issues we face.

So why is 101 what it is?

Read more…

New York stops the revolution in economics too?

April 21, 2016 5 comments

from Peter Radford

Yesterday’s election result in New York State effectively ended Bernie Sander’s tilt at the Democratic windmill. Here’s what I wrote to a friend who was intent on parsing the numbers:

And, the point is?

We can analyze all we want. It doesn’t alter the result. It provides nice fodder for coffee shop talk, but doesn’t help anyone.

It’s time to move on. Bernie will keep going. Clinton will become even more annoyingly patronizing. Her surrogates [like Krugman] will gloat. She will likely win in November. And America will struggle on regardless.

Clearly 2016 is not the year of change. It is a year of upheaval on the right, complacency in the center, and only the beginnings of rebirth on the left.

I never imagined that the Democrats would be the party of centrist corporate establishment thought. Or that it would be the Democrats enforcing the wishes of big business over and above those of the working people. But that’s where we are.

I suppose none of this is a surprise. The total dominance of social/cultural issues as a defining line in politics has obscured the equally powerful dominance of right wing economics across the board. Neoliberalism is the monotone ideology of both parties.

The revolution will have to wait.

Buried in there is my attitude towards economics. By enabling neoliberal ideology, and following the lead of Hayek and Friedman, economics debases the role of liberal democracy and representative government. This casts a long dark shadow across the subject.

Read more…

Pre-existence

April 19, 2016 2 comments

from Peter Radford

One of the mysteries of economics is its contemporary willingness to ignore everything around it. Economists act as if the economy they study is easily isolated from its surroundings and thus immune to the trends, problems, and changes that go on in those surroundings. Indeed this isolationism is a key component of economics because it allows the profession to preserve and bolster its pretense to being scientific.  It allows economists to chat away blithely without concern for the web of entanglement within which actual economies reside. Instead they can pretend to have discovered timeless regularities that allow the ‘system’ to glide smoothly and effortlessly towards a singularity, unsullied by the nastiness of the self-same system’s attachment to other social realities.

It is thus that economists indulge in their fantasies of social physics, and consign anything that interrupts the aforementioned smooth glide to the horrible non-economic netherworld known as ‘exogenous’ forces.

A netherworld which you and I refer to as ‘life’.

It is as if the economy was plopped pristine into a pre-existing reality, with the shape of that pre-existence fitted perfectly to conform with the analytical demands of economics.   Read more…

Flat Earth Rules (chart)

April 2, 2016 5 comments

from Peter Radford

Economists, especially mainstream economists, often like to ignore the real world consequences of their theories. Instead they prefer to hide away pretending that their conversations and ideas leave no imprint on society, and that their simple little models are just representations designed to cut through the tangle of reality to get at some core truth. Only in the grand world of macroeconomics is this not true. There, economists love to strut about as if they hold the keys to universal insights untroubled by the somewhat ambiguous results their ideas appear to inflict on the rest of us.

The fact that there are economists on all three sides of any two sided argument ought be sufficient to let us know that their insights are a little vague, and highly dependent on each individual economists worldview. Economics, it seems sometimes, is little more that highly formalized opinion. Read more…

Am I an economist?

March 14, 2016 9 comments

from Peter Radford

Who knows?

If measured by the standards of the current elite of the subject, then clearly not. I am apostate. I am an outsider.

Let me explain: I had the good fortune to attend The London School of Economics – I only mention this because it is important later in the story. It was too long ago for me to recall all that I studied there, but my concentration was what was then called Diplomatic History. What they call it now I have no idea. The only course in economics that I took was the common first year class for those who were not going on to become economists. I can, at this distance, only assume that the class was designed to be less specialized. Somehow I dimly recall the name Alchian. I do remember, however, getting stuck in the elevator with Lord Robbins as we both were on our way to his history of economics class. The book based on that class – although produced much later – still has pride of place on my book shelf.

Now this does not mean that I wasn’t interested in economics. My decisions back then were much more driven by my greater affinity for history rather than a distaste for what economics was, or was about to become.

Read more…

Why Trump?

March 13, 2016 13 comments

from Peter Radford

I have become so enmeshed in political activity here that I rarely have time to reflect on the strangeness of it all. Why Trump? Why now? But I was prompted to think a little harder about it when I re-read the following in Karl Polanyi’s “The Great Transformation”:

“Market society was born in England – yet it was on the Continent that its weaknesses engendered the most tragic complications. In order to comprehend German fascism, we must revert to Ricardian England.”

Now I don’t want to re-litigate the entire argument about neoclassical economics. Frankly I am tired of wasting my time. If the preponderance of economists want to disconnect from reality, then who am I to argue? Let them. And ignore them. Their ignorance of the real world is both willful and necessary for the alternative world in which they think to cohere. So be it.

But.

For those of us who value economics as an understanding of a critical part of social reality we must insist that those inhabiting that alternative world take full responsibility for the outcome of their ideas if, and when, those ideas are allowed to seep into actual policy making. They must be blamed. And we ought to demand an explanation as to why the imposition of fanciful ideas onto an unsuspecting world, with the core consequences now becoming apparent, is at all ethical.

Read more…

Trumped?

March 2, 2016 5 comments

from Peter Radford

My head hurts this morning. I don’t know why I would be so disoriented by Trump’s continued rise to power, it was, after all very predictable once he entered the race, but it still hurts.

And, yes, it was predictable.

The Republican party has steadily vanished into a haze of obstreperous religious business driven drivel from which only a far right populist could ever emerge with any coherence. One of the great laughs anyone can have in this current peculiar electoral season is to listen to a Republican claim that Trump doesn’t belong in the party of Lincoln.

That’s true. He doesn’t. But the Republicans are not the party of Lincoln. They co-opted the name and perverted it. In most ways they are now the exact opposite. Especially when you take the scarcely veiled racism of their state level activists into account. We only have to look at the many local efforts to limit access to the polls – all in the pure name of being opposed to voter fraud – that disproportionately affect African-American voters. Guess which states those efforts are most advanced. I’ll give you a one word clue: Confederacy.

Read more…

What would Smith say?

February 25, 2016 16 comments

from Peter Radford

Sometimes I pity poor Adam Smith. I really do. He’s an accidental icon of all that’s wrong in economics. And let’s face it that’s a lot of wrong to be an icon of. How many times have we all been reminded that his metaphorical reference to an invisible hand performing some wild and strange magic is the root of most modern economics? And how often are we reminded that he used those words just once in a book of over eight hundred pages?

The invisible hand was just not that important to Smith. He didn’t mean to launch economics into a century or more of quixotic and ever more bizarre search for something that he meant as a passing reference to the superficial order he saw around him.

Smith spent no more time on the invisible hand metaphor than he did on other phrases that are much more concrete. How about this one: Read more…

Krugman versus Sanders

February 21, 2016 20 comments

from Peter Radford

Paul Krugman seems to be spending an awful lot of his time nowadays trying to  discredit Bernie Sanders. The last two of his blog entries at the New York Times are devoted to explaining why Sander’s extravagant claims are wrong and potentially damaging to the Democratic cause.

I can understand why Krugman is so vexed. What I don’t understand is why he seems so unable to understand why so many people are embracing Sander’s message.

To me it is obvious: the so-called “wonkery” that Krugman loves both to indulge in and to explain to us lesser souls is precisely what has created the world in which we live. So if we are dissatisfied with that world we, to put it mildly, are being consistent if we want to toss overboard that jargon laden, leaden souled, wonkish stuff.

Now, I am equally sure that Krugman will retort that his version of the wonkery is not the cause of our woes. He would, I am sure, point to the right wing economics of that part of the mainstream currently exerting influence, and explain that it’s all the fault of those who advocate the mysticism of markets to be found in that part of the mainstream.

Read more…

Decline and Fall

February 17, 2016 3 comments

from Peter Radford

One of the features of American politics during the past few decades has been the emphasis on togetherness. Yes I know that sounds absurd, but hear me out. Our political landscape has been carefully segregated into two separate and distinct zones: that of social conflict and that of economic harmony.

The zone of social conflict is where the great cultural war has been fought. It began as a counter-revolution to the advances of the 1960’s and especially to the establishment of civil and women’s rights as central political themes. The conservative elements of society who found both those rights movements repugnant and/or destabilizing gradually regrouped and then emerged with sufficient force to condemn an entire generation to fruitless combat. The entire political landscape became littered with “them or us” issues cast in stark contrast and drained entirely of any semblance of nuance. Either you were “for” something or you were “against” it. There was no room for anything that could resemble compromise.

Read more…

Secular stagnation – a highly local view

February 12, 2016 7 comments

from Peter Radford

I lead a local discussion group here in Vermont. The group is small, about 16 members, most retired, 30% women, a good mix of ex-business managers and owners, and all highly interested in politics. Yesterday’s discussion managed to blur two topics. One was secular stagnation. The other was Bernie Sanders win in the New Hampshire primary and what that may mean for the political future.

I have seen other commentators and writers reacting to Robert Gordon’s book about the relative lack of economic growth going forward. I am not sure I agree with Gordon, but his argument is, to say the least, interesting. The general idea being that all the truly “big” innovations are in the past and because of that the great waves of increased prosperity that came from the middle years of the Industrial era will not be matched going forward. We are, according to Gordon, in for much more normal and much slower growth rates in future.

So what did my group make of this? None are economists. None are political scientists.

Read more…

Post-Iowa

February 2, 2016 29 comments

from Peter Radford

So where are we?

Nowhere further forward. Except, perhaps, that we now know about half of the Democrats in Iowa think Clinton is an extension rather than a repudiation of the past.

And I think that matters.

The time has come for us all to assess just where we are. There is way too much confusion and anger in that air for this bizarre election simply to be an oddity. I think it has meaning. Deep meaning that we need to understand if we are to venture into the future with anything other than bemused silence.

I really think this matters.

Let me venture to say that Clinton’s lost gloss – a truly accepted ‘presumptive’ nominee would not have lapsed into a tied race in Iowa – is cause for reflection amongst all those who profess to be well versed in American politics and government. She simply cannot resonate with a message for the future. She has no message of the future. In one of her last rallies before last night’s caucus she waxed lyrical about pressing on with the current agenda. Yet, surely, the electorate is no mood for continuation. The post recession muddle and thirty years of neoliberal economics have eroded voter’s confidence in our economic institutions, in our leadership, and even in our capability to get anything done. The electorate is losing both its nerve and its patience. Bad things happen when that occurs. Bad things like Donald Trump.

Read more…

Lamppost Afterthoughts

January 14, 2016 4 comments

from Peter Radford

Notes from the cutting room floor:

Lest anyone be mistaken I am aware that we live in a world of models. Everything we do can be described at some level of abstraction as a model. Our entire ability to live is based upon modeling. Our various systems and bodily functions are models. That is these things are solutions to problems, and those solutions are encoded some way so as to allow that code to cause behavior that, within our environment, is efficacious,

Models are simply a way of testing and examining a specific solution to a problem. Sometimes they begin life in a rather ad hoc fashion, as guesswork, or heuristic. Other times they are the result of prior thought, in which case they represent a point along a line of modeling stretching back a long time. Perhaps so far back that their origins are forgotten. Or perhaps only so far back as the last test of an older model.

In any case models are small packages of our ideas spliced together towards some end. That end being a solution. A problem solved.

Evolution, of course, is the greatest problem solver of all, so the processes of evolution give us insight into modeling. We create models. We test them. We select, as successful, those that survive when let loose into our environment. Read more…

Lamppost Economics?

January 12, 2016 29 comments

from Peter Radford

Paul Krugman came remarkably close to giving economics a big negative review in his New York Times blog last week. To sum up his argument: economics is very good at talking about, although not resolving, issues that are tractable to formal modeling — anything else not so much. You see there’s this gigantic blind spot in modern economics. If a topic cannot be modeled then it doesn’t attract too much attention. At least in the bright lights of the mainstream version of the subject. Which, of course, begs the question: what is economics missing?

Krugman’ attention was brought to this blight by an article by Justin Fox who bemoans the early lack of interest in inequality displayed by a profession whose core focus seems to encompass such a vital topic.

Here’s what Krugman said:

“I’m a few days late on this characteristically lucid Justin Fox column on why it took so long for economists to focus on income inequality. But as one of the economists who did write about inequality — especially the rise of the one percent — pretty early, I think Fox has missed one important aspect: it’s a hard issue to model.”

Well, that’s pretty straightforward. Read more…

Why Teach Economics?

January 9, 2016 9 comments

from Peter Radford

No I am not going to get upset about mainstream economics. Today I have a different issue to be vexed about: why do degrees in economics exist?

It makes no sense to me to teach economics in a vacuum. None at all. The economy is simply one part of a very complicated and intertwined thing called society, so why isn’t that the centerpiece, possibly with specialization at a later stage?

This isn’t new of course. People have been arguing about this for ages, but if we want to rid the world of the hyper-specialized-to-the-point-of-irrelevance oddity that economics has become we have to try to drag it back towards reality.

A reality that is not simply endless reflection on the machinery of markets either. Successive waves of formalization have reduced the study of markets to meaningless applied mathematics. I suppose it’s nice to understand all that stuff, but it doesn’t provide an understanding of actual markets.

Let me take another hack at this:  Read more…

Santa Claus, taxes and deficits

December 23, 2015 1 comment

from Peter Radford

“Deficits don’t matter”, to borrow a phrase made famous by Dick Cheney. Hardly a left of center guy, Cheney was defending the sea of red ink Ronald Reagan created in the early 1980’s. Reagan, please recall, was the first president to plunge the US into deficits that were not related to war, economic downturn, or macro-economic management. They were simply an outcome of an ideologically driven set of policies. So Cheney was right: they didn’t matter.

According to the modern Republican party they especially don’t matter when the slashing of Federal revenues is done at the behest of business. That’s because the tax cuts involved are “pro-growth”, and, so we are assured, the increased growth presumed to be stimulated by the cuts will more than offset the red ink.

That’s never happened, but such is the allure of the magic of markets that otherwise sensible people can fall for fairy tales. The University of Chicago is thick with such folk.  Read more…

History and Economics

December 13, 2015 7 comments

from Peter Radford

In the ongoing debate about the relevance or otherwise of history as it pertains to economics allow me to add:

Within the enormous pile of instances of history, most of which we have collectively forgotten, there are multitudes of experiences that illuminate any particular view we have of an economy, but none by themselves ‘explain’ economics. This is because they are reflections of relationships between people and the economy extant at the instance of experience. They are more context than subject. But that line blurs to make economics difficult.

Are these instances irrelevant? No. Are they economics? No. They shed light on a phenomenon. They are not the phenomenon itself.

Perhaps.

But this is not being inclusive. I have spoken only of human history. What about a more general history? How about that of the earth? There the instances of history are more relevant because the experience of the earth conforms more closely with the predictions of generalizations. It excludes the overlay of human activity and speak to things like geology and physics which are both less complex because they exclude the exigencies of life.

Am I contradicting myself?

Read more…

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