Author Archive

Shareholders and Public Trust?

November 22, 2015 2 comments

from Peter Radford

I remember sitting at business school what seems a lifetime ago and absorbing with enthusiasm the latest financial trickery. It seemed so much more rigorous than all the other stuff. I felt as if I was being taught something incisive, something with intellectual heft, something that was not subject to the whim of subjective belief, but was, rather, grounded in solid theory.

Boy, was I wrong.

Somewhere in the middle of all that mumbo jumbo was the notion of shareholder value. Here we were being taught that the only purpose of a corporation was to return the most it could to its shareholders. That most big businesses were called a ‘public’ corporation seems an irrelevancy because the word ‘public’ was simply a device to distinguish it from the alternative: a ‘private’ corporation, which was a different animal altogether.

But that word public actually has a deep meaning. Especially when we consider the near total lack of ownership that the presumed owners actually possess.

I was prompted to think about this by a recent John Kay article in the Financial Times. Set aside the source. Think about the thoughts. Here is a good sample:  Read more…

Disbelief as Belief

November 18, 2015 2 comments

from Peter Radford

Are we at a point of true reflection on the right in politics?

Here in the US we have the extraordinary spectacle of a bevy of outsiders of various political stripes leading in the polls not long before the election process gets into its more concrete moments. Decisions are looming very closely.

A few months back we were all amused at the sight of people like Donald Trump and Ben Carson ahead of the ‘establishment’ candidates. We all reassured each other that the closer we approached decision time the more likely its was that these oddballs would fall away and leave the field to the ‘sensible’ candidates – those with experience  or gravitas in the political arena.

But that isn’t happening.

Not even after four televised debates. And those debates were very well watched. We cannot argue no one knows what’s going on any more – the viewership figures belie that idea. People know very well what’s going on.

Read more…

Republican Debt Builders

November 17, 2015 7 comments

from Peter Radford

Just to make the point, here is a chart I grabbed, back in 2012, from Atlantic magazine:

Total Increase in debt to GDP overall












It shows the increase in the national debt as a percentage of GDP during various presidential regimes.

Guess what?

Read more…

Republican Pseudo-Economics

November 12, 2015 7 comments

from Peter Radford

I was going to write about last night’s Republican presidential debate. After all it was ostensibly about the economy.

But I can’t. I won’t.

There is nothing to say other than these two observations:

First: the questions themselves were designed to allow the candidates to spout standard Republican ideology unfettered by reality. For instance, early on one question began with a meandering statement about how the national debt is unsustainable, and how the social security system is headed for bankruptcy. Neither is true. Neither is true at all. However, in the tightly controlled and hermetically sealed world of the GOP party base, both those statements are regarded as rock solid facts.

Thus the candidates were able to answer with the necessary Republican critique that we must balance the budget, slash social spending, and cut ties on the wealthy.

In other words the answers were given to questions that did not reference the real economy, but only the make-believe economy that Republicans now inhabit.

Read more…

Academic and Political Free Speech?

November 5, 2015 3 comments

from Peter Radford

A few things along the same lines:

Something that really bugs me at the moment here in the US is the absolutely stupid idea that freedom of speech and the possession of lots of money are somehow entangled. Put differently: how come the Supreme Court – Supreme at what I wonder? – allowed the flood gates of money to continue to pour into the American political process and not then wonder how much corruption and distortion that flood would create?

Isn’t it obvious?

I suppose not to someone cloistered for years in the American legal profession and positioning continually for promotion to the top.

It is absurd to think that wealthy people and big businesses spend all that money on elections and then don’t expect something in return. I mean really absurd. You have to go to great and other-worldly lengths to deny basic human instincts in order to convince yourself that a big political donor is giving away gobs of cash because they simply want us all to have great elections. Read more…

Interest rate mania

November 3, 2015 4 comments

from Peter Radford

People keep asking me about interest rates. I wish they would stop. The question always make me feel like mimicking Eugene Fama: rates are rates. They are what they are. Perfect reflections of whatever they meant to be reflections of. And so on.

Such amazing analytical insight is worthy of one of those pseudo Nobel prizes.

Seriously though: people do seem a little more concerned than usual. Why?

Because rates have been low for so long and don’t seem to have accomplished much for all that. I think it’s hard for some people – including quite a few prominent economists – to grasp why interest rates are mired in this near historically low trough. I would have thought the answer is obvious: the economy sucks.

It still sucks after all these years.

Let’s look at it through the eyes of the textbook – this doesn’t imply we all agree with the textbook, so please relax. What are we looking for? Something called the “natural rate”. Let’s set aside that there’s absolutely nothing “natural” about the economy simply because it is an entirely humankind construction reflecting the complex interplay of a zillion intentions and expectations. Economists love to pretend that there are such “natural” things in the economy and this so-called natural interest rate is one of them.

What is it? Read more…

Strategy and Structure

October 30, 2015 2 comments

from Peter Radford

Yes, I know, Chandler already wrote a famous book about it. But he was talking about something else. He was talking about strategy as structure. Hmm. Come to think about it he was right.

We have discussed the problem of expectations here many times, and it was recently argued that modern economics has a problem because it assumes that expectations are formed in the face of reality. That is to say expectations are consequent to a proper understanding of that reality.

This is wrong.

Expectations are formed as a consequence of an understanding of reality, but also with an understanding that reality is inherently uncertain and thus unknowable. Given this level of uncertainty the resultant expectations are simply ‘hopes’ or ‘wishes’. They do not represent reality accurately, but, rather, they represent hoped-for reality.

Read more…

Operating Space – First Cut

October 26, 2015 2 comments

from Peter Radford

It has become impossible, apparently, for anyone to do a sober analysis of the torrent of fads that collectively are known as the start-ups of Silicon Valley. Instead we are given a fast paced – it has to be fast paced nowadays for fear of being disrupted five minutes later – and inevitably glowing surface-skim of the impact all these fads will have on the economy.

All we know is that the change will be total. Absolutely total.


It seems like an age ago, but there was a time when I was deeply interested in the impact that the internet and related technologies would have on business. I thought about the problem for a long time. Indeed it was the reason I re-connected with economics because I, rather foolishly in retrospect, assumed that economics would be a good source of knowledge about the fundamentals of business.

I began with the question: “why do firms exist?”.  Read more…

I don’t care about the You-Know-What Prize

October 14, 2015 6 comments

from Peter Radford

Every year around this time many of you get seriously vexed over the award of something the we know as the sort-of-Nobel prize in economics. And every year I get swept up in the hubbub.

Not this year.

I have decided to ignore the entire thing. Who cares? I don’t. Nor should you.

Nor do I care any more whether economics is a science of not. Who cares? I don’t. Nor should you.

We have wasted a whole lot of time arguing, discussing, and otherwise pondering whether economics deserves its singular status within the social sciences. It doesn’t. So let’s move on.

Now I realize I am not giving you all a lot of evidence to support my case here. I ought, to be truly rigorous about this, to present a series of examples and reality checks upon which to base my case. But am not going to that. No. Not at all. I am simply going to assert that economics is basically libertarian ideology wrapped up in mathematics to disguise its lack of content and its right wing intent. It can’t hold a proverbial candle to sociology or psychology when it comes to explaining real people’s behavior. So there. I said it.

And I can do this proudly.


Because I learned a thing or two from economics!

Who needs evidence? Not when you can just assert stuff.  Read more…

Automation and History

October 1, 2015 2 comments

from Peter Radford

History always has something doesn’t it?

Here is John Aziz writing at Pieria:

“So what does that mean today, as we get caught up in this great new tsunami of technological innovation and Schumpeterian creative destruction?

It means that we shoudn’t really fear the process we are going through. Yes, technology destroys some jobs. But the historical record suggests that automation will free us up to do more interesting ones. For sure, nobody precisely knows the future. And — just as there was during the Great Depression, when the U.S. economy transformed from a predominantly agricultural economy into a predominantly manufacturing economy — there may be great dislocation and major bumps in the road (one possibility is rising inequality if the robots are heavily centralized, although many argue not, and I am on the latter side of the argument).”

There is no doubt that the current wave of automation is changing the economy. That change is both having an accumulating impact. There are about 260,000 ‘robots’ working in America right now. That number will rise to an estimated 700,000 over the next decade. Read more…

Quote: Capitalism

September 28, 2015 8 comments

from Peter Radford

While preparing for a speech here I came across this:

The shrinking of the middle class is not a failure of capitalism. It’s a failure of government. Capitalism is doing exactly what it was designed to do: concentrating wealth in the ownership class … That’s the natural drift of the relationship between capital and labor, and it can only be arrested by an activist government that chooses to step in as a referee.”

That’s Ed McClelland writing in Slate.

It’s also the point I have been making here for ages. The conflict between capitalism and democracy needs to be managed. We cannot leave either unattended. Unfortunately America has, for four decades or so, bent over backwards to privilege capitalism over democracy. The result is the ongoing economic crisis that we continue to live through.

It also accounts for the egregious levels of inequality we are suffering through and which threaten our social cohesion. perhaps it will take the demise of the middle class to focus voters on the need to re-establish a balance between the two. In the meantime it behooves us on the left to remember that we have the antidote to capitalism at hand. It is a force that allows us to constrain capital and make it work for all of us and not just the ownership class. And it is a force that allows us to accomplish the redistribution of the fruits of economic advance without risking the loss of that advance. Nor does it rely on exaggerated or extravagant claims that its utopian rivals are built upon. Nowhere within it are claims of great historic movements towards salvation that inevitably deteriorate into authoritarian dictatorship. Nor are there naive reductive claims of individualism that bear no relation to reality. Read more…

Interest Rates

September 27, 2015 9 comments

from Peter Radford

The Fed’s decision last week not to raise interest rates has produced a predictable burst of apoplexy in the banking industry.

So what?

Banks would be more profitable if rates were higher. These low rates have squeezed their net interest margins and banker are prone to bleat very loudly if their bonus opportunities are damaged slightly.

So what?

I was asked over the weekend whether this prolonged period of low interest rates was politically rather than economically driven. I am not quite sure what my questioner had in mind about the political motivation. It was probably some deep Obama plot to deprive retirees of their interest income. I tried to present the basic argument explaining low rates and their persistence. I don’t think I made much impression.

It seems that the bankers and their friends in the right wing media have managed to bludgeon their message into the public’s minds. Plenty of people who normally ignore economics are suddenly experts on Wicksell. Or so it seems. Read more…

Beating dead horse?

September 24, 2015 3 comments

from Peter Radford

I am not sure I understand the point of Alexander Kaufman’s column in the Huffington Post. In it he takes Paul Krugman to task for being repetitive and talking about just there things: austerity is bad, inflation fears are overblown, and Keynes was right.

Well now.

Whether or not we have disagreements with Krugman – and I know many of you do – those disagreements pale in comparison with those we all have with the arguments of the people Krugman is targeting in his columns. Yes Krugman can be annoying with his emphasis on his version of the Hicks version of Keynes. But if it serves to get a vital message across to a public largely unaware of the internecine struggles within economics, so what? I don’t care. Nor should you.

And if he sounds repetitive, then we should ponder the reason: far too many policy makers are still stubbornly clinging to disproven theories. Yes, disproven. So are far too many academics. Read more…

Let’s all blame capitalism

September 14, 2015 6 comments

from Peter Radford

Well, actually let’s not.

Just as much as I decry single minded adherence to what I have called the binary vision of our world, as in markets are great, the state is bad, I also object to laying all the blame for our multitude of ills at the feet of capitalism. Simple answers to complicated questions always raise my suspicions. I suspect that the truth is somewhat more nuanced.

Take poverty for example. Is it really true that capitalism is the root cause of poverty? No. It is not.

What do we mean by poverty anyway? Relative poverty, as in some distribution of incomes and wealth? Or absolute poverty, as in an inability to provide sufficient sustenance to support life?

Theses are quite different things.

The libertarians are naturally inclined to look at what we can call the long view of poverty. Many more people live above the basic support level than ever before. To argue the contrary is to delve into special pleading and to redefine the issue in a prejudicial way. There is no doubt that we, in our part of the world, live a far more prosperous life than any of our ancestors. The great surge of invention unleashed after the Enlightenment and then applied after the Industrial Revolution has driven the average person’s lifestyle to gaudy levels undreamed about even a mere two hundred or so years ago. That is an extraordinary achievement. Read more…

Libertarian Economics

September 4, 2015 11 comments

from Peter Radford

Economics is contextual. At its inception this context was the struggle for power as entrepreneurial and landowner citizens tried to wriggle free of the impress of ages old monarchical rule. As political freedoms steadily grew and different societies obtained an ability to critique their rulers and as they managed to change the institutional set up in which their economies were embedded the study of economics became a coherent field of enquiry.

This early economics was almost invariably an attempt to demonstrate why it was that monarchs ought to interfere less in the workings of the economy. Such interference was seen as arbitrary and inefficient, whereas the operation of the entrepreneurs and landowners was seen as obeying ‘natural laws’ that would, inevitably, produce better outcomes than those obtaining under state rule.

The market versus state conflict was thus built into classical economic thought from the beginning. Indeed much of the original impetus for economic theorizing was precisely to ‘prove’ the efficacy of markets. Read more…


September 2, 2015 5 comments

from Peter Radford

Seriously though.

The 2012 Page, Bartels, and Seawright paper makes interesting reading. I came across it via the Krugman blog and recommend it to you all.

The key is that this is a first small attempt to quantify the difference in perspective between the ‘wealthy’ and the ‘general public’. The paper is thus an important step along the way towards understanding why it is that so  much of our political discourse seems totally blind to the reality as experienced by the vast majority of our citizens.

If, like me, you have come to believe that our policy makers have a narrow focus and that their focus overlaps more with that of the wealthy and/or big business than it does with ordinary folk, then this paper is a start to getting empirical support for that feeling.

The paper’s concluding paragraph is worth quoting in full: Read more…

Mea Culpa: Storytelling Part Two

August 31, 2015 8 comments

from Peter Radford

I have been accused of a few things. I appear to have upset some people. For this I apologize.

I need to explain in order that we can all move on.

Let me begin my stating my belief that economics, in all its multiple instantiations, is a vital discipline. It seeks to get at the heart of one of our most important activities, and it seeks to discover what can be called truths about those activities. It then propagates what it learns and passes its wisdom along to those outside and who might then act upon that wisdom in order to organize human life more properly. However they define ‘properly’.

So I begin with a profound belief in the importance of economics. Read more…

Market truths or obscured views?

August 28, 2015 4 comments

from Peter Radford

This is meant as a friendly gentle nudge:

As we all know markets are heavenly creations of exquisite perfection. Free and impersonal markets that is. We just know this. It just is. Free impersonal markets are what have delivered us all from the abominations of servitude and the darkest poverty. They have enlightened us. The have illuminated us. They are what have enabled us to discover what we now know. Our literature, our arts, our politics, our cultures, our very beings are due entirely to the ability of free impersonal markets to grab hold of the tyrannical state and demolish its suffocating grip.

Markets said free, and they were free.

That in a democracy we the people are the state and so apparently have our own hands on our own throats is of no consequence. That ‘we the people’ stuff is just a veil behind which lurks the monster of the state waiting to bash us with another calamitous and inevitably doomed policy. Even if that policy was conceived with the best intentions. Read more…

Quick Question

August 26, 2015 5 comments

from Peter Radford

How do you calculate the marginal productivity of an economics professor? Especially a tenured professor. Especially a tenured professor who advocates economics theories based upon ‘marginalist’ thought.

And do they apply those theories to their own lives?

Do they?

Do they believe that the theories they advocate and promulgate are representations of reality?

If so they must surely live by those theories. Their lives must reflect those ideas. Their day to day existence must mimic the ideas they fill student’s heads with.

I am not so much interested in the fun discussions of cutting edge ideas that occupy their time in graduate seminars, professional meetings, conferences and the like, but, rather, in what they teach everyday students. What do they teach students who are taking only one of two economics classes and whose knowledge of the economy will rest entirely on that exposure? Read more…

Economics as storytelling: McCloskey again

August 20, 2015 9 comments

from Peter Radford

This is not new to most of you of course. You are already steeped in McCloskey’s Rhetoric. Or you ought to be. After all economists are simply telling stories about the economy. Sometimes we are taken in. Sometimes we are not.

Unfortunately McCloskey herself gets a little too caught up in her stories. As in her explanation as to how she can be both a feminist and a free market economist: Read more…


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