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Liberty to do what?

May 18, 2015 2 comments

from Peter Radford

Continuing my peon to Judt: he reminds us of Condorcet’s fear:

“Liberty will be no more, in the eyes of an avid nation, than the necessary condition for the security of financial operations.”

No kidding.

How many times do we come across, in this avid nation of ours, some foolish comment that our social policies must not restrict commerce? How many times do we hear some politician arguing that we must become more business friendly? We scarcely can move an inch without tripping over someone cajoling us with fears that limitations on liberty are actually limitations on prosperity. As if prosperous was purely an arithmetic reference and had no qualitative content.

This is Condorcet’s fear alive and well. We seem to have reduced liberty to some small prop for the making of profit. Liberty is simply, in this ghostly shadow of what it once was, a veil behind which profits can be amassed without reference to the fabric of society as whole. And certainly without reference to any larger interest than that of the individual, or individuals, engaged in making that profit. Read more…

We rely on economics too much

May 14, 2015 7 comments

from Peter Radford

I think I am with Tony Judt on this one. I am reading the new collection of his essays written between 1995 and his death in 2010, and have had my memory jolted: he gave us many very considered critiques of modern economics, although they were usually dressed within the context of a book review. The point I am agreeing with is this statement he gives us in his 2009 speech called “What Is Living and What Is Dead in Social Democracy?”:

“But how did we, in our own time, come to think in exclusively economic terms? The fascination with an etiolated economic vocabulary did not come out of nowhere.”

Etiolated? Lovely, but I disagree. Our economic vocabulary is both robust and way too vigorous to be etiolated. On the contrary, economics has become a weed infesting society in every corner, and our use of it is far too frequent to consider it etiolated at all. Indeed our reliance on economic vocabulary belies the gaping holes in the theories that those words depend upon for their relevance.

But the larger point: that we overuse economics, that we see our world in economic terms rather than in other, perhaps more relevant, terms, and that we have come to depend too much on economic analysis to justify our actions is one I wholeheartedly endorse.  Read more…

Categories: Uncategorized

Transaction Cost Confusion

May 5, 2015 3 comments

from Peter Radford

OK. Let’s have some fun.

Transaction costs were invented by Ronald Coase to help explain why we see business firms littering the economic landscape when orthodox economic theory argues that the marketplace is the superior and unequalled coordinator of economic activity. The Coasian idea, later extended and expanded upon by the likes of Oliver Williamson, is that there are costs of accessing the market which, under some circumstances, render market coordination more expensive than having production contained within the boundaries of what we call a business firm. These costs are what are now called transaction costs.

The problem is that they are also fairly vague. Indeed on of the main counter attacks by leading orthodox economists has always been that transaction costs are hard to pin down and thus ‘formalize’. And, as we all know, things that are not formal are considered to be dicey and not rigorous by orthodox ideologues.

Anyway, that’s for them to argue over, let’s get back to our fun.  Read more…

Coase and Reality

from Peter Radford

In his introduction to a collection of his own work, Ronald Coase tells us:

‘Becker points out that: “what most distinguishes economics as a discipline from other disciplines in the social sciences is not its subject matter but its approach”’.

He then goes on:

‘One result of this divorce of the theory from its subject matter has been that the entities whose decisions economists are engaged in analyzing lack any substance. The consumer is not a human being but a consistent set of preferences. The firm, to an economist, as Slater has said, “is effectively defined as a cost curve and a demand curve, and the theory is simply the logic of optimal pricing and input combination”. Exchange takes place without any specification of its institutional setting. We have consumers without humanity, firms without organization, and even exchange without markets.’

All true, too true.  Read more…

Unification

April 8, 2015 3 comments

from Peter Radford

There are many billions of people in the world. There are tens, if not hundreds, of business firms. There are hundreds, if not thousands, of government and quasi government agencies. And there are a multitude of other organizations scattered about the global economy. All these are actors on the economic stage. They generate an incalculable number of relationships built around their multiplicity of desires, needs, and resource endowments. They barter. They exchange. They self-employ. They employ others. They sell. They buy. They consume. Some produce for their own consumption. Some produce for others. Some make their income as rentiers. Others work. They all change through time as they adapt to and interact with each other. They all learn.  Read more…

Efficient Allocations?

March 25, 2015 9 comments

from Peter Radford

Willford King has written:

“It is easy to find a man in almost any line of employment who is twice as efficient as another employee, but it is very rare to find one who is ten times as efficient. It is common, however, to see one man possessing not ten times but a thousand times the wealth of his neighbor … Is the middle class doomed to extinction and shall we soon find the handful of plutocrats, the modern barons of wealth, lined up squarely in opposition to the propertyless masses with no buffer between to lessen the chances of open battle? With the middle class gone and the laborer condemned to remain a lifelong wage-earner with no hope of attaining wealth of even a competence in his old age, all the conditions are ripe for a crowning class-conflict equaling in intensity and bitterness anything pictured by the most radical follower of Karl Marx. Is this condition soon coming to pass?” [Emphasis in original]

That was in 1915. My how times change.

Well maybe not. That comment about the middle class has a very contemporary ring to it.

A couple of things pop out at me when I read that quote – no doubt you will find your own emphasis.  Read more…

Ideas that must be forgotten

March 17, 2015 5 comments

from Peter Radford

Much of what we are told as being advances in economics are diversions or delusions that serve only to trap us in a cul-de-sac. Sometimes that becomes a very long road to nowhere. Sometimes, it seems, economics will never return to being about actual economies, but will always be doomed to stay the plaything of a select group of very clever savants separated from the world by their contempt for its complex messiness.

I am not one of those to indulge in endless territorial fights over purity of thought. What matters to me is practical application. I measure the usefulness of an economic idea by the illumination it throws on a real world problem and on its ability to assist us better our collective lots in life. I frankly don’t care if it is the precise meaning that some long ago dead theorist gave to an idea. Our current divination of that meaning may have strayed from purity, but it might also work. Battles over intellectual turf are meaningless except for a very few whose reputations are involved. Other than that, who cares? Read more…

Categories: rethinking economics

Where’s the Structure?

March 5, 2015 4 comments

from Peter Radford

In its long search for the illusion of equilibrium economics has had to barter away one aspect of reality after another. Driven by its desire to unearth laws that explain the presence of that illusion economists have long ago lost contact with the grittiness of actual economies. They prefer the pristine and simplified sanctuary of their models no matter how reduced the image of an economy those models portray.

Oddly I do not criticize them for this. No, I think I understand the logic of the process that produced the result. I applaud the effort. I salute the intellectual energy that has been absorbed into the project.

It’s the outcome I abhor. Economists are simply caught in a valley which, unfortunately for them, sits in the shadows of reality rather than sitting on a peak casting light on it.

I was thinking thus because I was trying to relate how economics, most of it anyway, ignores uncertainty. As you know this ignorance vexes me more than somewhat, because I see uncertainty as central to human existence. Without some element of uncertainty there would be no need to learn — we would know everything already. It is the absence of knowledge that incites us to search, to innovate, and to arm ourselves against the unknown. It is the very essence of life: problem solving is the distinguishing characteristic of life. It is how we tell that something is alive. The intentional imposition of order on disorder is the central property of all things we consider to be living. Read more…

Categories: rethinking economics

Economic Ignorance?

March 2, 2015 24 comments

from Peter Radford

Ha-Joon Chang nails it.

But I wish he hadn’t.

You see, I agree with his analysis of the inverse nature of status within the economics profession. As a useful general rule the more notable you are within the profession the less you know about the economy. This is a result of the perverse nature of what economists actually do: they are amongst the very few disciplines — perhaps they are unique — who invent the artifacts that they then seek to explain and study. This relieves them, as you can imagine, from having to engage with the mucky real world.

You might wonder how this came about. It is quite a puzzle isn’t it? All those extremely clever people resolutely avoiding contact with the very substance that their chosen topic of study presents them from outside; averting their eyes from the glare of reality; turning inward as they search for clarity and that song sought after simplicity that so beguiles them.

It’s actually quite dispiriting for anyone who dares imagine that economics has relevance to humanity and its ability to chart a course towards a generally more prosperous world.

So how did this disconnect happen? How is it that the very best are the most ignorant? Read more…

I am a know-nothing

February 27, 2015 6 comments

from Peter Radford

Beware of the possible snark in the following:

One of the possibilities you face when you commit to writing about something is that you get called names. Sometimes you are called wrong. And sometimes when you are called wrong, you are indeed wrong. Such is life. We learn.

This is not one of those times.

Because I am right.

Anyway, this time I have been called wrong because I asked that we raise a collective voice to ask questions about economics. I made no substantive claim in my call for questions. I just asked for questions and then did claim that the resultant conversation would/could be interesting. I thought this was uncontroversial.  Read more…

To see is to believe?

February 26, 2015 3 comments

from Peter Radford

The French Republican thinker Charles Péguy once said:

“One must always say what one sees. But especially — and this is the hard part — one must always see what one sees.”

Very true.

The ability to see something and not see it simultaneously seems to be a major characteristic of orthodox economists.

Thus involuntary unemployment melts into thin air as its offensive existence is not only offensive to civility, but is, more importantly, offensive to the ideological basis of orthodoxy. For if markets always exert their magical powers, and if the people caught up within them act [hyper] rationally, and if, and so on and so on, then anyone without a job is someone who doesn’t want a job. That person prefers a life of leisure to one of work, no matter how impecunious they are.

That orthodox economists must see involuntary unemployment is surely undeniable. That they don’t see it because of the jaundice of orthodoxy that afflicts them is, I think Péguy would agree, an affront to reality.

Likewise with uncertainty: Read more…

Categories: New vs. Old Paradigm

Questions – Add Your Voice

February 24, 2015 15 comments

from Peter Radford

There’s been a lot of excitement about changing the substance of economics and the way it is taught. Rightly so. But that, it seems to me, just begs the question: “What is economics?” Or, rather, it begs a series of questions. None of us can pretend to have the answer since the answer is surely to be found in the collective voice of those who are interested enough to respond. Social intelligence is a more robust repository of ‘truth’ than any single intelligence can ever be.

So.

What are the questions? Tell me.

Once we have a good set of questions, let’s then survey our friends and colleagues to get answers. Oh. And let’s restrict ourselves to limited space. Those answers must be short. Let’s say a few paragraphs at the very most.

Once we have the questions and all the answers we can assemble them as a collective voice.

A hundred or so answers to, say, fifteen good questions would give us a very quick but deep insight into the state of economics.

Let’s not place any limits on ourselves just yet – other than the need for brevity.

So go ahead. Add your voice to the collective.

Now.

Categories: rethinking economics

Rats! History does repeat itself

February 10, 2015 3 comments

from Peter Radford

And clearly economists don’t learn from it.

Ponder this:

“It was all very well for the rich, who could raise all the credit they needed, to clamp rigid deflation and monetary orthodoxy on the economy … it was the little man who suffered, and demanded easy credit and financial unorthodoxy.”

That’s the voice of E. J. Hobsbawm in his book, “The Age of Revolution 1789 – 1848″, and he is talking about post Napoleonic Europe.

But how contemporary is that sentiment?

We are stuck in a similar situation. Our elite, both here and in Europe, is managing the economy  for its own ends. The disconnect with everyday folk is astonishing. The hubris and plain meanness of it all is equally astonishing.

Look at Greece: the attempt to impose a teutonic fiscal ‘discipline’ via stringent austerity has simply led to the debt that was the target of the policy becoming an even larger problem. It is an example of epic policy failure. The Greeks, for all their previous laxity and fiscal ineptitude, are to be applauded for calling for an end to the stupidity. Read more…

The Greek Experiment

January 31, 2015 8 comments

from Peter Radford

Let me congratulate the Greeks for taking the first, but only the first, step towards a more civilized economic policy. I am intrigued by the prospect of Yanis Varoufakis as economic minister deep in argument with any of the large number of radicals that infest European economic posts. And, yes, they are the radicals. The notion that aggressive austerity measures can engender growth and can be mostly benign with respect to employment, wages, and other immediate aspects of economic life is a radical, almost extreme, idea honed most recently to protect wealthy elites from having to engage with the rest of the societies inside which they exist. Against this form of radicalism people like Varoufakis, despite being smeared as radicals themselves, are more orthodox than not. At least they realize that economies are not mere models to manipulate, but are collections of people whose futures and dignity are surely worthy of consideration alongside such abstractions as markets or efficiency.  Read more…

Categories: Uncategorized

Zero Shocker

January 20, 2015 2 comments

from Peter Radford

What with the World Economic Forum folks wading in on inequality ahead of the annual Davos shindig for the great and beautiful, here’s what Oxfam has to say:

“Global wealth is increasingly being concentrated in the hands of a small wealthy elite … These wealthy individuals have generated and sustained their vast riches through their interests and activities in a few important economic sectors, including finance and pharmaceuticals/healthcare. Companies from these sectors spend millions of dollars every year on lobbying to create a policy environment that protects and enhances their interests further.”

Moreover Oxfam predicts that the top 1% will have more wealth than the bottom 99% by about 2016. Here’s their chart: Read more…

Economics is what?

January 12, 2015 6 comments

from Peter Radford

This week’s Economist magazine includes an article designed to uplift the hearts of depressed economists everywhere. It devotes a whole page under the headline “Meet the market shapers”, to a catalog of what it regards as cutting edge examples of economists doing useful stuff at the ‘micro’ level. By micro in these cases the Economist means working inside or alongside a business firm.

All the cases in the article are about some clever folk doing some clever analysis that, so we are told, really and truly helps the firms in question do better. In particular a theme emerges that the work seems to help the firms match what they have to sell with people who are likely, though not certain, to buy.

Naturally, although the magazine doesn’t admit to any added value in this, all the firms cited are Silicon Valley start ups and the like. As we know all Silicon Valley firms are very, very smart – they disrupt the dullards who have only managed to survive a few decades by shooting into orbit and surviving [gasp] for months and even years. So to help firms that are already clever is a real feather in anyone’s cap.

All this cutting edge stuff has the Economist really excited. Not only does it give the story a full page, but it even devotes one of its editorial columns to explaining what micro-economists do:  Read more…

Uncertain Causes

January 6, 2015 3 comments

from Peter Radford

When you throw a feather out of a tenth story window it eventually hits the ground, but only after fluttering about for a while and following an often circuitous route downwards. Throw a ten ton lump of lead out and the route tends to be a lot more direct. Gravity wins the day in both cases. It’s just that in one other forces and environmental effects play a much larger role.

In economics the role of gravity is played by uncertainty. It is the dominant force underlying all action. Most often its presence is best detected by the reaction of people to it: they make plans and seek other ways to offset it. Our institutions, for example, are a way to channel activity along more predictable lines and thus keep uncertainty at bay as long as possible.

Eventually uncertainty wins. It undoes our plans by throwing up an event entirely unexpected. We then have a choice: do we repeat one of our tried and true actions on the basis that it has worked – at least sort of – in the past? Or do we invent a brand new action and see if it works in these new circumstances. Whichever we choose we learn something: either we learn that our old trick has new application, or we learn a new trick.

So uncertainty is a driver of learning. Pushing back the boundaries of the unknown, wherein uncertainty lurks the most, is how we make progress. Read more…

Categories: New vs. Old Paradigm

Economic Realism

December 27, 2014 8 comments

from Peter Radford

Lars Syll seems to have started a perpetual conversation when he posted a comment about Tony Lawson’s longstanding complaints about realism in economics. I don’t want to get dragged into what appears to be an endless, and pointless, debate … but.

The debate is endless because some economists seem to thrive on endlessness. That is to say they react with horror at closure on any topic. Thus arguments begun in the early 1800’s still roil along happily employing at least a few economists who have specialized in whatever it is that stirred the arguments back then. No one seems inclined to end the discussion, instead it is added to the ever increasing inventory of points-of-view-come- theoretical-stances that clutter economics and make it opaque to all but the most intrepid cognoscenti.

Ah, but there are others who have, in their own minds at least, arrived at closure. And that’s where the pointless part comes in. Read more…

Categories: methodology

Superior Economists

December 3, 2014 3 comments

from Peter Radford

Actually the paper I just read is called “The Superiority of Economists”. It’s another analysis of thee economics profession by Marion Fourcade, this time in association with Etienne Ollion and Yann Algan. It is well worth reading and fits neatly in the same analytical tradition as Fourcade’s 2009 book “Economists and Societies”.

The problem is that none of it is particularly surprising. The point being that economists, by asserting their superiority vis other social sciences have exposed themselves to greater scrutiny and criticism than their peers. This has, apparently, induced more soul-searching within economics than in those other social sciences. Along with the air of superiority that economists exude due to their self-proclaimed intellectualism, comes a big dollop of insecurity.

Which is a point worth making: economists, for all their arrogant assertion of the truths of their ‘science’, are a little insecure about something. Hence, perhaps, their brashness and lack of interaction with their peers. One of Fourcade’s findings is that economists are more isolated as a profession than those around them. They quote fewer non-economics papers and books in their own work, and are almost haughty in the disregard of insights that other social sciences take very seriously. Read more…

Economics and civil society

December 2, 2014 3 comments

from Peter Radford

I have been subject to quite a bit of push back on my repeated critique of the anti-democratic nature of orthodox/classical/neoclassical economics.

So I am going to double down on the basis that when you’ve hit a nerve and produce a knee-jerk reaction it is wise to hammer away.

Allow me to restate my opinion in brief: economics in the general tradition of Smith’s invisible hand up to and including the notions of Hayek, Friedman, and their disciples is, at its core, an attempt to conceive of a society stripped of politics. By this I mean it is an attempt to argue that passivity in the face of overwhelming “forces” that are “objective”, “decentralized”, and “systemic” will allow for an optimal distribution of wealth, and the attainment of the maximum possible total wealth compatible with that optimum. All that is needed is a goodly dose of rational decision making, a hopelessly large level of cognitive ability, enormous foresight, and an unobstructed view of absolutely everything. Oh, and under no circumstances ought there be any active interference in the economy to adjust the perfect outcomes. It is a perfect-in-perfect-out wonderland in which no one need concern themselves as to the ethics of the outcome. It is, after all, perfect. It cannot be improved upon. Free markets rule!

This wonderland system, so constructed, will, we are assured, give back to everyone a return justified by their so-called marginal productivity. Read more…

Categories: Political Economy
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