Author Archive

More is different: a redux

December 1, 2021 13 comments

from Peter Radford

“Formation is the vanishing of being into nothing, and the vanishing of nothing into being”

Hegel loved his dialectics.  But it isn’t just contrasts that illuminate reality.  It is connections also. Connections matter.  Single things are interesting.  Perhaps even intriguing.  But it is the way in which things connect that leads us to the better understanding of our surroundings and of ourselves.

Our modern world rests largely on a web of technology that mediates our existence and removes us from our primitive origins.  We pride ourselves on this web.  Our ability to render nature compliant and exploit both our context and our intellect to produce comfortable lifestyles is the essence of modernity.  Any brief study of the past two hundred years will astonish us at the gulf in everyday existence between now and then.  We really do seem to have broken the Malthusian grip that nature held us within for so long.

A great part of that ability to break free consists in our imposition of reasoning on the problems previously preventing us from escape.  We learned to abstract.  We learned practical problem solving.  We learned both to reduce problems to solvable sizes and then to reconstitute solutions from those now-known component parts.  We created, to borrow from Brian Arthur, a reliance on modularity: we learned to build technologies from various parts.  And each part itself was itself modular.  The implied reductionism in this prompted the illusion that the method for superior knowledge was always through breaking things apart and re-assembling them once we knew what each part did.  

Economics took heed of this method and ran with it as if the economy was a technology comprised of parts easily assembled back into a whole.  Economics is justifiably proud of its internal logic.  But is it something that matches reality well? Read more…

Is there a “policy”?

November 25, 2021 Leave a comment

from Peter Radford

I read this morning that the Federal Reserve had bought, at the peak of the recent crisis, about 40% of all US government bonds being issued.

This may, to some of you, be something of no concern.

Think again

The illusion that there are separate spaces for monetary and fiscal policy is belied by this fact.  Which one was it?  Was it the Fed flooding the economy with money?  Or was it the government issuing debt to finance economic support? I suppose it was both.  But it wasn’t fiscal policy.  The effect of all that money was simply to support asset prices.  Whether that was the intention is irrelevant.  The flood found its way into the financial system and relatively little found its way into the economy in the form of an expansion of productive activity.  We could go further: a great deal of what expansion of capacity actually occurred went abroad to build fragile supply chains and take advantage of low wages in distant parts.

What also happened was that households sat on the portion of the flood that they received as a hedge against further economic mayhem.  And when, as now, they began to feel more confident they started to spend the money on goods rather than services.  Remember that the economy is heavily skewed towards consumption, and within that, towards services.  The problem with services is that they tend to be in-person.  And being in-person is something a lot of people are avoiding right now.  So they decided to switch and buy goods instead. Read more…

The sabotage of efficiency

November 23, 2021 3 comments

from Peter Radford


Not the sort of sabotage we associate with plucky heroes undertaking dramatic action like blowing up railway lines and so on.

No, the sort of sabotage that is a great deal more subtle.  The kind that is summed up by the metaphorical boiled frog.  The slow devious and underhanded chipping away at something termite-like until the edifice is more fiction than fact.

That sort of sabotage.

The sort of sabotage that Thorstein Veblen wrote about a hundred years ago in his curious collection of papers later accumulated into the volume entitled “The Engineers and The Price System”.  I must admit that every time I read those papers I come away with a furrowed brow.  What on earth was Veblen getting at? Read more…

And now for something completely different …

October 4, 2021 2 comments

from Peter Radford

My summer of research is almost over.  The season here in Vermont is changing and the view from our window will soon be dominated by the brilliant autumnal colors our region is famous for.  All is both regular and well.

Sort of.

Perhaps there’s something in the water down there in New York.  There are rumblings of life in economics.  The long sclerosis inhibiting the emergence of theories that explain rather than re-invent reality might just be close to loosening its grip.

I hope so.

In case you are unaware, there has been a paper published that has emerged as something of a viral hit.  We all need to add to its fame.  It begins thus: Read more…

Weekend read – Who’s in charge: us or our technology?

August 28, 2021 2 comments

from Peter Radford

So who is in charge?  Who controls the flow of technology?  Is it us?  Or does the technology now control us?

We live in a technology infused world.  Our current civilization sits on a foundation accumulated through the past few centuries and built of machine power.  We cannot separate ourselves from this cumulative support system without regressing to a pre-industrial way of life.  Which is something few of us either want or are equipped to deal with.  We have forgotten how to live that life, and despite the sentimentalism of our artists and poets, it is not returning without a crash forced upon us.  We will not return willingly.

The rise of this technologically mediated existence crept up on us.  At first the technology was resisted: it displaced human beings from their workplace.  It took over doing the work.  It does the work better, more efficiently, more reliably, and in greater volume.  What’s not to like about that?

The disruption is not to like, but that is more inconvenience in the fullness of history rather than a reason for stopping.  People suffer, but society benefits.  Productivity rises.  Wealth increases and we all, eventually, enjoy the fruits of the rise of technology.

Or so the story goes.  And, largely, the story is correct.  History says so.

With the continual accumulation of technology comes a continuing increase in complexity.  Society is constantly sliced and diced into specialties, localities, and the networks between them.  The whole edifice develops along a trajectory that no one controls.  It controls itself.  We get swept up in the continual movement towards greater reliance on technology.  We need the extra productivity, it is, after all, what allows us to live this life.  So we are dependent.  We are subsumed into the flow of innovation. Read more…

Diversity in economics

August 19, 2021 1 comment

from Peter Radford

In this case geographical diversity.

Dani Rodrik has brought to our attention a rather serious problem within the economics profession: it is still dominated by people living and working in the West.  As a consequence it has a decided bias towards issues that are of significant interest to the West.

This is, of course, not news to any of you not living in the West.  Nor is it news to anyone outside the profession paying attention to the product of the journals and various other outlets.  The ideas that get the most attention and the work that gets most lauded is still channeled through a very narrow lens.  The result is a considerable — massive? — underrepresentation of viewpoints and experiences that inhibit the ability of the discipline to engage broadly with the world.

I cannot dispute Rodrik’s conclusion:

“Economics is currently going through a period of soul searching with respect to its gender and racial imbalances. Many new initiatives are underway in North America and Western Europe to address these problems. But geographic diversity remains largely absent from the discussion. Economics will not be a truly global discipline until we have addressed this deficit as well.”

He is absolutely correct.  More power to him for bringing this to the fore.

The problem is that Rodrik lives and works within that very narrow space he suggests cramps the discipline.  Well done him.  But there is a sense of something missing from his short article. Read more…

Technology: being and belief

July 25, 2021 13 comments

from Peter Radford

E. O. Wilson was here before us when he said:

“We exist in a bizarre combination of Stone Age emotions, medieval beliefs, and god-like technology,”

The development and application of technology has, over the past three hundred years or so, lifted us out of the primordial economic problem.  I define this problem not just in terms of our ability to locate the energy needed to sustain ourselves, but also in terms of providing for ourselves in a relatively secure way.  Safety from predators was as much a problem for our ancestors as was the source of food.  The consistency of safety, food sources, and shelter was never assured.  We live in the shadow of this lack of consistency even today.  It’s almost as if we cannot quite believe our achievement.  We conquered the impress of nature and freed ourselves from the ancient fears that shaped our senses, beliefs, and instincts but have not yet shaped new ones more fitting to our prosperous circumstances.  We are lugging around a set of beliefs that are inappropriate and not at all helpful.  How can we decide what to do next if we are bedeviled by shadows of the past?  

That’s what Wilson is getting at.  And it’s what we often forget when we theorize about human behavior.  We are animals conditioned and evolved in a harsh context.

Read more…

Techno babble

July 2, 2021 2 comments

from Peter Radford

What is about technology?  It’s either a panacea for all our ills, or it’s the cause of all the aforesaid ills.  Why can’t we make up our minds?

This morning’s Financial Times is, sort of, a good demonstration of the confusion we are in.

On the one hand there’s any article about cryptocurrencies.  On the other there’s a rather less techno-centric article about bank culture.  In both cases technology looms large.  In neither is technology really mentioned in detail.  It just forms a context and provides the framing for the problem being discussed.  After all cryptocurrencies are the archetypical modern techno fad and banks were early adopters of hi-tech bookkeeping and analytical tools.  It’s all about ledgers.  Which means, in my mind at least, that it’s all about information.

The entire crypto-craze is a fascinating example of how technology is seen as a solution to a problem.  No matter that the problem doesn’t really exist.  It is also roiling the financial world which is how the two articles intertwine.

First:  Brook Masters gets into the weeds of cryptocurrency regulation. Read more…

Structural defects

June 30, 2021 3 comments

from Peter Radford

The Bank for International Settlements issued its annual report yesterday.  Perhaps the central banks are feeling a little insecure, or perhaps they are a little more sensitive to economic reality, but the BIS felt compelled to use one third of its report to tackle inequality.  Here’s the summary as given in the report:

“Key takeaways

  • The long-term rise in economic inequality since the 1980s is largely due to structural factors, well outside the reach of monetary policy, and is best addressed by fiscal and structural policies.
  • Monetary policy can most effectively contribute to a more equitable society by fulfilling its mandate, which addresses two key factors causing inequality at shorter horizons. This requires keeping inflation low and limiting the incidence and duration of macroeconomic and financial instability, which disproportionately hurt the poor.
  • Central banks can also help mitigate economic inequality wearing their “non-monetary hats”, notably as prudential authorities, promoters of financial development and inclusion, and guardians of payment systems.”

Fairly bland stuff. Read more…

Back to the bank?

June 20, 2021 3 comments

from Peter Radford

Following on from the revelation that our impoverished banks are thinking off penalizing their staff for the rather obvious and rational decision to re-locate, along with their big city wages, to a low cost place to live, we discover that most are now trying to force those recalcitrant workers back to the big city offices.

My head is still spinning from the absurdity of the threat to cut the wages of enterprising workers.  Just how stupid, mean-spirited, and unnecessary is this?  Those workers are being exactly the kind of person the banks want to employ.  Self-interested, rational, aggressive in pursuing their goals, and intense.  The problem, I suppose, is that all those qualities make them difficult to control.  Whatever next?

Banks love, of course, to crow about the so-called “teamwork” and “spirit” that allows them to help their clients “realize their goals”.  Renting this teamwork is expensive.  Woe betide the unsuspecting client who falls into the grip of a hungry investment banker.  That spirited teamwork can appear gold plated at times.  Those partners have expensive lifestyles to uphold. Read more…

Power shifts, or not?

June 9, 2021 4 comments

from Peter Radford

“Even someone as smart as Larry Summers.”  

Power can flummox even the best economist.  A typical explanation of events in an economy makes scant reference to the way in which power distorts the wondrous smooth motions that so obsess the discipline.  It’s almost as if human relationships don’t exist in those wonderful models they are all so proud of.  For the rest of us, power is central.  It takes little time to realize that establishing an imbalance can have all sorts of advantages.  They most notable being that it defeats or undermines the consequences of the classic impersonal marketplace.  Fair is out.  Asymmetry is in.

Not that the existence of asymmetry ought surprise anyone.  The real world is an awfully lumpy place.  Resources, information, people, and everything else exist in clumps.  Without those clumps there would be no exchange.  There would be no trade.  There would be no markets.  But the world is lumpy, hence all of the above.  This paradox, that economists study idealized worlds whose features eliminate the very phenomena that are the supposed object of study, is one of the more endearing aspects of economics.  Building theories about made up worlds is a whole lot more fun and easier than inventing them to explain the real world.  But, hey, let’s be fair: as long as we all know that we are theorizing about our fantasies in order to extract useful nuggets about the real world, we should go for it.  Unfortunately, and I think this is fair criticism, the way in which economics is taught often elides this. Read more…

Where are we going?

May 26, 2021 4 comments

from Peter Radford

Paul Krugman has been rightly skeptical about cryptocurrencies lately.  The extraordinary volatility in the price of Bitcoin, for example, has brought a bout of crypto mania to the fore in both the media and the marketplace.  And, as seems usual, various regulators around the world are arriving at the party about a decade after the launch of what their advocates call an alternative to the evils of fiat currencies.

I suppose it would be churlish of me to remind us all that the launch of each and every form of crypto assets is itself an act of fiat.  Instead of a government waving its wand, a small group of self-selected techie libertarians waves its collective wand, that is if a group of libertarians can be called a collective.  The former is, apparently evil, the latter a wonderful expression of freedom and democracy.


But Krugman’s larger criticism is more interesting: Read more…

Weekend Read – Regime change — Technology style

May 7, 2021 5 comments

from Peter Radford

I have mentioned many times here that one of the ways in which economics has ventured astray is in its selection of capital and labor as the core constituents of production.  These are, to me, political and not economic quantities.  They are, at best, an approximation of reality and the farther we venture from the origins of modern technologically driven economic development the less useful the approximation becomes.  This is because they draw a veil over the essence of what went on: the first great wave of industrialization — the first great technological regime to borrow a phrase from Nelson and Winter — was centered on the substitution of different sources of power to drive production.  It was the harnessing and application of new sources of energy that defined this first regime.  

For most of history the energy needed to do the work necessary for human subsistence came in an animate form.  Either human or animal muscle power provided the energy to convert the natural world into something useable by our ancestors in their quest for survival.  Through the course of millennia wind and water were also tamed to assist, but even so most work was done by muscle.   Read more…

The technological bright blue yonder?

April 22, 2021 14 comments

from Peter Radford

One of the greatest shifts subsequent to the rise of machinery and industrialization is the social acceptance of apparently  never-ending technological change.  A change, moreover, that we are told will inevitably lead us all towards an improved, more prosperous, healthier, and happier existence.  That this future cannot be precisely determined or known to us is set aside, we simply accept the drumbeat of change and presume the rest.

Or at least that’s one view.  How else to explain the great contrast between the social reaction to new technologies back at the onset of industrialization and our contemporary reaction?  The one was tempestuous and riddled through with hostility, questions, and counter-attack by the workers affected by the introduction of the first machines.  The second simply elicits a resigned acceptance, confusion, and highly muted criticism by the workers affected by the latest wave of automation.  No one nowadays wants to be labeled a “luddite”.  No one wants to appear opposed to advance.  No one wants to question the efficacy of the decisions made by our latter day innovators and self-styled “disruptors”.

We have become inured to technological change.  Far from being an exciting frontier-extending aspect of life, full of promise and allure, technological change is now a routine, almost humdrum, background noise. Read more…

Chapter thirty-one

April 20, 2021 5 comments

from Peter Radford

There’s a story about Richard Feynman who is reputed to have said that anyone who claims to understand quantum physics almost certainly does not.  This coming from someone who almost certainly did.  I have much the same reaction to anyone who claims to have understood Ricardo on their first read through his work.  Then again, perhaps it’s just my own struggle: every time I grapple with Ricardo it takes me a while to understand where he’s going.  It’s a case of knowing the plot, but failing to follow the details.

In any case, here we are towards the end of the pandemic-induced economic downturn and minds are turning back to the many longer term issues we were all discussing before the shutdown curtailed conversation and re-focused our minds on shorter term issues.  The march of technology and inequality have always loomed large in my mind so it to those that I am now returning.

One conundrum that interests me is that we are constantly being told to regret the loss of “good paying” factory jobs and their replacement by lesser paying service sector jobs.  Looking back to the beginnings of industrialization those same factory jobs were hardly welcomed.  The threat to traditional ways of life, however much a struggle that life might have been, loomed large in contemporary discussions about the march of technology, the arrival of machinery, and the shift from domestic to factory production.

There are echoes of that early controversy in our current efforts to come to terms with the arrival of things like artificial intelligence and other digital technologies that appear, at least anecdotally, to be altering not just the workplace but deeper aspects of society such as the balance of power between the key factions in the economy.

Technological unemployment is back on the agenda.

Which is why Ricardo is worth recalling.  That enigmatic chapter thirty-one, tucked away as it was at the end of the third edition of his “Principles” seems to betray his entire prior thought process. Read more…

Weekend Read – Odd contradictions

April 16, 2021 1 comment

from Peter Radford

Jamie Dimon, CEO of JP Morgan Chase writes his annual letter to shareholders, Wall Street quivers in anticipation at his wisdom.  This year’s is a doozy.  Dimon, it seems, wants to explain to us all that corporations play many roles in society and are not simply focused on “short term rapacious profit taking” (his words, not mine).

Let me begin with an aside: why it is that an annual communication from a CEO to the shareholders of a corporation that he/she leads is thought newsworthy in some general sense?  Why is it not treated as a minor activity all CEOs are expected to indulge in?  Why is society at large meant to listen in and, perhaps, learn a thing or two?  Personally, I blame the cult of CEO personality, which is an absurdity that, by itself, demonstrates the depths to which recent capitalist fads have sunk.  Be that as it may, the Dimon missive is highly anticipated, perhaps because of the enormous oligopolistic presence that J.P. Morgan Chase commands in the economic landscape.

Dimon doesn’t let us down and I am going to limit myself to just one of the many messages of his letter.  I am assuming he considers it the most important because he addresses it first.  This is his view on what he calls the “Corporate Citizen”.

Where to begin? Read more…

The crooked timber of history

April 2, 2021 11 comments

from Peter Radford

I was lucky enough last week to meet a few friends for the first time in person since the pandemic swept all before it.  We are an eclectic group with more than a fair influence of Wall Street.  Given all that is going on, and has gone on since we last met face-to-face, I expected to be drawn into endless political discussions.  But no, we spent a majority of our time talking about how the pandemic has accelerated the current wave of technological change.  At one point someone asked whether there were lessons from the Industrial Revolution that we could apply to where we are now.  Our conversation evolved from there.

Near the end of the introduction to his history of the British experience between 1700 and 1850 Joel Mokyr gives us his abbreviated perspective on the key ingredients of what he calls the “economic game”:

“The economic game is played at two levels: the level of a game against Nature (technology), and a game of interacting with other people (institutions).  Stripped to its barest essentials, the game against nature is not a social game — though in any practical historical situation it was of course mixed up with social elements. Technology is always and everywhere about utilizing natural phenomena and regularities to extract from Nature something she does not willingly give up.  Production involves harnessing these regularities to further human material needs.”

This is on page twelve of a book that then goes on to span nearly another five hundred pages, but the meat of the discussion is all there.  Somehow a combination of technology and institutional evolution created the conditions for the extraordinary acceleration in human well-being we associate with the industrial era now ending. Read more…

Inflation: who matters?

March 30, 2021 3 comments

from Peter Radford

There are times when you really don’t need to say much.  The facts make the argument for you.  At such times all that matters is that the largest number of people are aware of those facts and that at least some of them speak to the issues raised.

So too is with a small snippet of news I saw this morning.

I came to it via the New York Times.  The original report being in Business Insider.

Apparently Wall Street bonuses have risen 1,217% since 1985.  Quite what the significance of 1985 is I cannot tell, but the number itself seems to have the right feel.  Having seen a few of those years first hand I can attest to the pace of increase from an anecdotal perspective.

More importantly, if we applied the same rate of increase to the minimum wage over a similar period it would stand at $44 per hour and not the current rather pathetic $7.25.

Imagine the hullabaloo were we to advocate bringing the minimum wage into line with the extraordinary levels of largesse Wall Street lavishes upon itself. Read more…

Reform of what?

March 25, 2021 1 comment

from Peter Radford

We have heard a great deal in the American media about the so-called Biden reform agenda.  The huge injection of government spending into our hibernating economy is meant not just to sustain it until we arrive at a post-pandemic moment when it will spring back to life by itself, but also to reform it.  That is to say the $1.9 trillion package is not just disaster relief, but is also politically motivated to change the economic landscape beyond the pandemic.

I think the politics of muddling the two goals, relief and reform, into one big package are clear: the Republican party would fight tooth and nail against reform and with the wafer thin majorities that the Democrats enjoy delaying it would court permanent postponement of even the most modest reform.

But the economics are less clear.  Anything that adds a cost to business at a moment when additional costs are more burdensome than usual, is problematic.  Surely we ought to wait until business conditions are on the up before we layer in more expense.

So the politics and the economics seem to be going in two different directions.  Clearly the Biden administration is mindful of the endless election cycles that cripple long term political thinking here in the U.S. and has decided to go for broke.

Good for them.

The problem then becomes: what are we reforming? Read more…

The social question

March 9, 2021 13 comments

from Peter Radford

If you were to ask me what the greatest intellectual error of the past fifty years has been I wouldn’t hesitate.  Shareholder value.  It’s an easy response.  Yes, it reflects my own curious interest in the fundamentals of business and its intersection with economics, but it is also emblematic of so much more.

Derived as it is from the wrong turn in economics and politics in the middle of the last century it carries with it so many of the ill founded ideas that have brought us all to where we are now: bedeviled once more by the social question.

How is it that the wealthiest nation the earth has ever witnessed is so ill equipped to ensure a secure life for its citizens?  All its citizens.

The history of the concept we know as shareholder value is well rehearsed.  There is no need to delve into its precise origins.  Like many pieces of technology it is an amalgam of ideas brought together eventually in one broad and encompassing whole.  Most of us have read the infamous newspaper article in which Milton Friedman gave his intellectual backing to the notion that the only goal of business management was to tend to the welfare of shareholders.   I think, from our vantage point many decades later, this appears to be uncontroversial.  We have been bent to accept something as a social goal which, in reality, only serves a few.  Generations of business school students have been taught the mantra.  They have taken on board the simplicity of the aim: shareholders are what matters, they need to be pandered to and nurtured.  Everything else is secondary. Read more…

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