Author Archive

Geography as an Example

October 7, 2017 3 comments

from Peter Radford

Let me be very quick:

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

So why does economics not start this way?

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

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

Las Vegas

October 5, 2017 7 comments

from Peter Radford

So we go through it all again.

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

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

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

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

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

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

The Workplace — a few charts

October 4, 2017 6 comments

from Peter Radford

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

Read more…

Tax Fog

October 2, 2017 2 comments

from Peter Radford

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

This week’s ballyhooed tax plan is no exception.

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

So what is it?

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

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

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

Ugly and Uglier

September 27, 2017 9 comments

from Peter Radford

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

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

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

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

Same Old

September 26, 2017 4 comments

from Peter Radford

Allow me to break my silence for a moment and comment on David Brook’s latest apology for the status quo. I realize others have already done so, but I feel compelled to add to the discussion.

First: by way of explanation for my absence. I have been busy elsewhere, and especially busy looking at the future of the workplace.

Second: it is because of this detour that I want to take a shot at Brooks.

Let’s recapitulate Brook’s argument. He takes a look at the last couple of years and extrapolates. He want to debunk that argument that the American economy faces a crisis of distribution, and replace that problem with another: America has a productivity problem.

Why is this important?

Because has become a totem of both right and left sided populists that the economy is failing to generate opportunity, income, and security for the vast middle class. It has become commonplace for us to read about the decline and/or disappearance of that famous center of economic and social gravity. This is especially true in the aftermath of the Great Recession of 2008, and the subsequent glacial pace of recovery.

If it is true that the economy has been rigged in favor of a few — the much criticized 1% and big business — then populists of all stripes have a good case and the debate becomes one of how to divide the spoils of growth more equitably.

If, on the other hand, distribution is not the issue, but the problem is the deeper one of growth itself then the debate can be shifted by the likes of Brooks back onto their preferred territory.  Read more…

Apologies not accepted

July 20, 2017 4 comments

from Peter Radford

OK, let me get back to it:

I have just read a set of short papers over at a journal aptly named Democracy. The papers are held together under the banner:Symposium: has Economics Failed Us?

Naturally that question was sufficient to get my attention, but reading through the material was so depressing.


Because there was Jason Furman offering a defense that has all the hallmarks of an economics profession steadfastly denying its own reality.

Dean Baker was brilliant in laying down the gauntlet: his analogy was perfect. He suggested that economics has become akin to an incompetent firefighting team. They sort of have useful ideas about how to put out fires, but fail spectacularly when called upon to do so because they are burdened by too much irrelevant or wrongheaded other ideas.

Worse Baker cites an example of how convoluted and inward looking economics has become: he tells us about a paper that ended up being published by Brookings only after his collaborators [Brad DeLong and Paul Krugman] added sufficient, and irrelevant, complexity to it that editors could take it seriously.

Form, it seems, wins over function every time. Someone is not a serious economist without the right accoutrements no matter whether all that dazzling complexity is relevant. Professional advancement, prestige, and success have to be bought by ensuring that even the simplest insight is made inscrutable to outsiders. Ultimately this leads, and has led, to self-delusion. Economics deserves to be laughed at precisely because it has become laughable. The sad part is that its practitioners, most of whom are honestly toiling away at something they love, do not understand what there profession looks or sounds like from the outside. They are reduced, by their well-meant self-belief, to defend what is an increasingly indefensible exercise.   Read more…

Economics 10Whatever

June 28, 2017 80 comments

from Peter Radford

I have been less vexed about economics recently precisely because I have been focused on other, and more urgent, topics. The politics of our age are wondrously absorbing, if not a little disturbing. In any case I do try to keep an eye on what economists are up to. In that endeavor I came across a short article by Diane Coyle on the website “Project Syndicate”. If you want to know what is occupying the establishment it’s a good place to visit periodically.

And Professor Coyle is decidedly establishment.

Her article is couched as a book review/discussion of what ails economics. In it she attempts to refute the notion that economics is lost in a desert of its own making, as I and many others would suggest, but rather, she argues, it is vibrant and rapidly modernizing. She tries to persuade us that critics, like me, just don’t get what’s going own at the frontier of the discipline. There are, apparently, a load of breakthrough ideas some of which might make it into the textbooks sometime in the future.


But not great enough.

Two paragraphs towards the end of her article illustrate the issues:  Read more…

Equilibrium: a weed to pull

May 19, 2017 20 comments

from Peter Radford

Just how pejorative must we be in order to get attention? There are silly things in economics that need to be weeded out, so that something better can emerge. Sometimes I just say the whole thing is a waste of time, after all economics is not simply a body of thought, but it is also a social phenomenon, it has its own language, its own self-referential estimate of quality, its own hierarchy, and its own history that locks it tightly along a specific path.

And, frankly, that path has led it astray.

Take this piece of silliness from one of its greats:

” Just as we measure gravity by its effects in the motion of a pendulum, so we may estimate the equality or inequality of feelings by the decisions of the human mind. The will is our pendulum, and its oscillations are minutely registered in the price lists of the markets. I know not when we shall have a perfect system of statistics, but the want of it is the only insuperable obstacle in the way of making Economics an exact science.” ~ William Stanley Jevons

Well, we do know about Jevon’s ‘perfect system of statistics’. We will never have it. An economy is too complex to fit neatly into any statistics Jevons could imagine. Maybe he was hinting at that when he called the lack of it an ‘insuperable obstacle’.

In any case, the entire search for equilibrium has bedeviled economics long enough. Those mechanical references to nicely oscillating systems slowly swinging away under the influence of gravity are totally inappropriate for something like an economy. Equilibrium is  a nasty weed. It clutters up our garden. It distracts us from reality. Rip it out!   Read more…


May 11, 2017 19 comments

from Peter Radford

I don’t understand why people get upset when I say that economics is a waste of time. I suppose it’s because I don’t make a clear enough difference between economics as a general topic and economics as a formal, mainstream, body of knowledge. It’s the latter that is a waste of time. The former is wonderfully interesting.

At its heart economics is a study of human behavior, where that behavior is specific to certain activities. It is thus deeply rooted in psychology, so it is more closely associated with biology than physics. This is not a new idea: some of the greatest economists of the past have argued as much. Trying to transfer in ideas from physics, even metaphorically, therefore tends to lead to dead ends.

Like the notion of efficiency. That’s something of great interest to engineers, but has little to do with economics. You can have an efficient physical system. You cannot have an efficient social system. There’s just too much we don’t know and can never know. Still economists all over the world are obsessed with efficiency. So what do they do? They start to abstract and simplify. They model and fine tune. They test and re-test. And still their ideas run afoul of reality: human beings are not efficiency seeking machines, and so any system filled with humans is likely to be darned near impossible to steer towards efficient outcomes. Nothing daunted economists press on. If humans are unlikely to be efficient the logical next step is to construct a theory to exclude actual humans. That’s what’s happened in economics: the faulty decision to root economics in a physics-like setting rather than in a biology like-setting forced subsequent generations of economists to “refine” their thinking and, eventually, to force real people out of their theoretical world. Voila! Modern economics ends up as a wonderful edifice with extravagant claims as to its ability to understand human behavior precisely by eliminating all contact with humanity. Weird.   Read more…

Channelling Galbraith

May 4, 2017 1 comment

from Peter Radford

Jamie Galbraith’s conclusion in his essay at Dissent magazine:

“The progressive alternative to an economic program of reckless stimulus and real-estate capital gains is a program of full employment, fair wages, and broad investment in social, cultural, and environmental needs, backed by taxes that fall directly on rents, monopoly profits, and on inheritances, thus directly dismantling the dynastic oligarchy that has been running the United States, through both parties, since 1981. How precisely progressive action along these lines can be made to work is a matter for study and argument. But this needs to begin now. Intellectually and politically, the Democratic Party is in ruins. It cannot be rebuilt solely from a defense of past achievements, nor by reacting to disasters that lie just ahead, nor from simple economic models or fragments of a half-baked agenda. It is time, in short, for a left program at least as radical as that about to be enacted by the right.”


It is time for the entire neoliberal era to be drawn to a close. Or torn down, whichever is easier. Average people everywhere are being oppressed by the combination of plutocratic corporatism and liberal intellectual indifference. Four decades of this is enough. Surely Trump’s election ought to be sufficient warning that something has to give.  Read more…

Complex Simplicity

April 30, 2017 10 comments

from Peter Radford

Simplification, in the context of an economy, is the eradication of all things of interest. This does not mean that studying an economy is thus doomed to be a pointless recitation of history as it unfolds. It is, rather, the recognition that as an economy moves through time it is never, to paraphrase Heraclitus, possible to see the same thing twice. Each economy is different. Each instance of the same economy is different. Any attempt to generalize eradicates those differences and thus eliminates the very substance we wish to explain. It is the existence of differences that are of interest in economics. Indeed, it is the existence of difference that allows an economy to exist in the first place.

Difference as in the spatial scarcity of resources.

Difference as in the complexity of human agency, motivation, and desire.

Difference as in the application of and resistance to power.

Difference as in variations in access to opportunity.

Difference in the chance bestowed by birth.

Difference as in variable interpretations of information.

And so on …

It is impossible to collapse all these differences into a model and then hope that such a model can capture even a modicum of reality. It couldn’t hope to. No amount of mathematical elegance and rigor can contain all the information needed to describe let alone predict an economy. Such a task is a computational impossibility. Uncertainty condemns a model’s relevance to degrade rapidly through time, if not from the very beginning.  Read more…

Nailed to its perch

April 23, 2017 5 comments

from Peter Radford

I always use some famous Chicago School economist as my representative fool when I am describing mainstream economics to my uninitiated friends. How does one, after all, defend such a ludicrous body of thought? By reference to Monty Python?

Here is Gary Becker explaining why mainstream theory is so ridiculous:

“The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and consistently, form the heart of the economic approach.”

And thus Becker’s economic approach remains firmly nailed to its perch looking for all the world like a dead bird. A very dead bird. It would be funny, indeed hilarious, were it not for the rather dismal fact that people like Becker win prizes and accolades for believing such tripe. There is, apparently, no satire sufficiently cutting, no mirth sufficiently loud, and no critique sufficiently detailed to stop the farce from continuing.

Economics, especially the Becker sort, is dead. It died at its inception. It is a joke that needs sensitive burial so we can move on and look for a real economics that engages real problems and real economies and not the fetid fantasies of the type inhabiting too many professor’s minds.

I often wonder whether economists realize how funny they sound. Or whether they even care about economies. The evidence isn’t reassuring. They press on teaching rubbish as if it were golden. They press on writing ever longer papers riddled with details and mathematics that describe absolutely nothing. They continue to paint pictures that amount to fog. They are, in short, wasting everyone’s time.  Read more…

Notes on the firm

April 20, 2017 2 comments

from Peter Radford

When, for reasons too byzantine to recount here, I decided to re-engage with economics a couple of decades ago I did so through the prism of business. After all I had just finished a stint in banking and was thinking about the way in which the rise of digital technology would change the way in which business is conducted.

The reason for this point of re-entry was that I believed then, and still do, that economies are movements of information as much as, if not more than, anything else. So if digital technologies make information more tractable, abundant, and accessible then they must affect business. My earliest basic assumption was that a business firm is simply a system of thought whose objective is to protect and exploit its information advantage. This brings it into conflict with both its suppliers and its customers who are seeking to overcome the asymmetries of information that occur “naturally” in the landscape. I described the space that firms occupy as “operating space” that is a wedge preventing direct contact between customers [end users] and suppliers [or resources].

That was back in the mid 1990’s and, by and large, since then the disintermediation of operating space that we observe as a consequence of the “digitalization” of the economy has gathered pace.

The most obvious manifestation of this is the steady redesign of business itself. More and more business firms are reducing their operating space by jettisoning  what they consider to be “non-core” activities. The idea being to reduce their logical space only to that in which their information advantage resides, and to allow those aspects of their older form that represent no advantage to go elsewhere to be repurchased at lower cost if, and when, needed.  Read more…

Reflections: Perhaps we need to re-invent economics.

April 14, 2017 4 comments

from Peter Radford

It is easy to be partisan. It is easy to believe in sweeping utopian solutions. It is easy to delude yourself that what you think is what everyone thinks, or, perhaps, what they ought to think. This is why I recoil from anyone offering definitive answers to complex questions. The truth is never so easily teased from reality. A healthy does of skepticism helps to keep us grounded. It seems we need that protection especially right now.

Why now?

Because I feel we are going through a great transition during which much of what we know is quickly being made irrelevant by our changing environment.

The progressive wing in American politics suffered what appears to be an irreversible defeat back with the rise of Reagan. Of course it was not Reagan himself, after all he was a very narrow person and depended on image to project his message. It was the revolution in ideas that permeated society, his rise simply marked the triumph of those ideas. It was the same with Thatcher in the UK.

Looking back the so-called Reagan revolution was an attempt to contain the after effects of the progressive era immediately preceding his election. That progressive era itself was an attempt to bring alignment to a society that was trying to match its prosperity born of industrial prowess with its remaining and widespread inequities which were legacies of the pre-industrial era.

The early industrial inequity of class seemed to be fading away as the post-war boom saturated society with material wellbeing. Yes, in retrospect that conclusion was an error, I suppose it was inevitable that capital would find ways to fight back, but in the moment class issues had become decidedly old fashioned. Besides the existential threat posed by communism as represented by the Soviet Union provided a convenient backdrop against which class style confrontation could be characterized as unpatriotic. America had solved its class issues, not through politics, but through economics.  Read more…

Firms: Who Knew?

April 12, 2017 5 comments

from Peter Radford

One of the controversies buried by contemporary economists in their great cause of advocating market freedoms, is that of the role of central panning. There was a time when economics accomodated controversy. Nowadays it’s arguments are securely contained within the narrow bounds of saltwater versus freshwater type spats that are little more than professional name calling inspired over minor differences of detail.

Recall the capital controversy? No?

How about the socialist calculating controversy? No?

They were real differences. Time has allowed modern economics to ignore its larger conflicts in the name of ideological purity.

Yet central planning lives on.

Bigly, as our new president might say.

One of the greatest deficiencies of modern economics is its total blindspot to the middle layer of economic activity. Few, if any mainstream economists, refer to a “meso-economics”on a par with their hallowed micro and macro versions. Indeed the most ideologically pure insist that macroeconomics is simply a summation of their micro version. So they try to pummel everything into one flat layer.

And yet that meso level exists. We call it business, and if you want to understand what’s going on in most modern economies you have top grasp what’s going on in business.   Read more…

Impossibilities and The Market Turn

April 10, 2017 3 comments

from Peter Radford

One of the least credible aspects of economics, an enterprise that suffers from a credibility problem at the best of times, is that of general equilibrium. Chasing after this mirage comes at a great cost. For one thing it makes economists look more like priests than scientists or even artists. It is an article of faith, not anything remotely plausible in a real economy. Any reference to general equilibrium in an article, book, or paper, automatically disqualifies its author as being about to pronounce on the economy as we experience it. It is, rather, a necessary badge to be sworn within the temples so as to allow the author to assert membership of the highest faith.

Economists have been fixated on the apparent order exhibited in the economy ever since the discipline began to form in its modern guise. Adam Smith’s unfortunate and passing reference to an invisible hand with its supernatural ability to turn individual greed into aggregate happy circumstance was the beginning of a chase down one of economic’s deepest rabbit holes. Turning lead into gold is a time honored endeavor and has always made its aspirants look foolish.

There is no global order. There is no general equilibrium. All that apparent calm on the surface is simply a gloss over the constant seething and deep undercurrents beneath. You cannot suddenly jump from individual activity with all its idiosyncrasy to smooth seas above with no intermediate explanation at all. Unless, as economists do, you suppress the individual and impose absurd constraints.   Read more…

Budget Topline

March 17, 2017 1 comment

from Peter Radford

We all ought calm down about the Trump budget. Presidential budgets never, ever, get put into practice. They are simply exercises in politics. They simply give us insight into presidential goals.

In Trump’s case there is nothing that we didn’t already know. He wants to slash domestic programs, especially those niggling ones that offend his far right fans, and pile on the offensive weaponry for the Pentagon.

As I said: no big surprise.

Here’s a very short synopsis of the bigger items:

  1. The Environmental Protection Agency takes a really big hit — a 31% cut in spending. Many of its key programs would simply be axed. They range from any and all research into climate change to the very popular Energy Star program that rates energy using products and so gives consumers insight into their probable energy bills. Ironically one program that might survive is the greenhouse emissions monitoring program which is a mandate by Congress so getting rid of it would imply legislation unlikely to pass. So the EPA might still monitor greenhouse gases. It just would n’t be able to do anything about them.
  2. The Energy Department gets hammered too with an almost 18% cut. The biggest target at DOE is its research programs designed to help accelerate the country’s move from a carbon based energy supply to alternative sources. Right wingers have constantly complained about the DOE dabbling in applied rather than pure early stage research. Evidently Trump agrees.
  3. The State Department also gets a beating, especially anything to do with climate change. The cuts don’t indicate that the US is quitting the Paris climate agreement of 2015, but it sure looks as if that is in the cards. The cuts also include anything to do with UN based climate initiatives. Indeed the UN is a heavy target with the US contribution to peace keeping in the cross hairs. State is having its “soft power” capacity severely trimmed. These are the kinds of programs both the hard right and Russia particularly dislike. They are programs that allow the US to project a softer, gentler image to the world and are meant to take the edge off the militaristic image all those wars project. Apparently Trump doesn’t care about the US image. His generals do: they love soft power because it makes their lives easier out in the war zones.
  4. NASA gets its climate watching programs axed or drastically cut.
  5. The National Oceanic and Atmospheric Administration is likewise gutted.

Read more…

The scorekeeper speaks

March 14, 2017 6 comments

from Peter Radford

The Congressional Budget Office is the latest victim of the intensity of Washington politics. The CBO is the organization we rely on to “score” legislation so that Congress and the White House know roughly what impact their policies will have on the country. As you can imagine being the CBO during times such as these when alternative facts have become the primary way of explaining things is perilous. Worse: being the CBO when one party wants to cram through some legislation  that is already known to be a doozy is more than perilous.

So it is with Trumpcare.

Up until today we were just guessing at how awful the Republican healthcare reform plan is. Now we know. The CBO issued its report today. There isn’t much to say other than this:  Read more…

RyanCare! Or is it TrumpCare?

March 7, 2017 1 comment

from Peter Radford

Well, the wait is over. We now know what the Republican health care plan looks like. It’s early days and the inevitable compromises will have to be made, but the Republican seven year crusade is reaching its climax.

Or not.

The problem is this: as we have discussed many times, any credible health care plan needs a number of key features. Three stand out:

  1. You need to ensure the biggest insurance pool you can. In an ideal world this pool would be the entire population of the country. In the US it will be smaller because local ideologies militate against “social” solutions and thus we are prevented from seeking maximum efficiency. Obamacare sought to do this through the so-called “mandate” which penalized people who failed to get insurance coverage.
  2. You need to regulate the private insurers to prevent them from discriminating against high risk customers. Obamacare did this by forcing insurance companies to cover people with “pre-existing” conditions, and by limiting the premiums charged to such people.
  3. Then you need some form of subsidy so that low wage people can afford to buy insurance. Obamacare did this by providing subsidies and by imposing taxes to cover the cost. The subsidies were linked to income and to the cost of insurance to make them strongly effective.

The success of Obamacare was that it achieved its biggest goal: it vastly expanded coverage, with around 20 million people newly insured at a rough cost of 0.6% of GDP. That cost, in the context of the goal, is low.

So now we have RyanCare.

How does it differ?   Read more…