Author Archive


February 2, 2016 29 comments

from Peter Radford

So where are we?

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

And I think that matters.

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

I really think this matters.

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

Read more…

Lamppost Afterthoughts

January 14, 2016 4 comments

from Peter Radford

Notes from the cutting room floor:

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

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

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

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

Lamppost Economics?

January 12, 2016 29 comments

from Peter Radford

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

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

Here’s what Krugman said:

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

Well, that’s pretty straightforward. Read more…

Why Teach Economics?

January 9, 2016 9 comments

from Peter Radford

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

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

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

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

Let me take another hack at this:  Read more…

Santa Claus, taxes and deficits

December 23, 2015 1 comment

from Peter Radford

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

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

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

History and Economics

December 13, 2015 7 comments

from Peter Radford

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

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

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


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

Am I contradicting myself?

Read more…

Tower of Babel

December 1, 2015 5 comments

from Peter Radford

I have quoted Gombrowicz before, allow me to repeat myself – or, rather him, – once more. Only this time at more length:

“I stopped by the cafe where a group of young poets, Concreto-Invencion (or maybe it was the group Madi), gather every week. There were always ten poets yelling at each other in a passionate exchange at one of the tables. Yet this cafe has terrible acoustics and at this hour is full of people. You can’t hear a thing. So I said: wouldn’t it be appropriate to move to another cafe? … but these words drowned in the general racket. So I shouted them again, once, twice, and I kept on shouting into the ear of my neighbor until I realized that they were probably all shouting the same thing – but they could not hear each other. Strange people these poets. To gather together every week in one place in order not to be able to make themselves understood in the matter of moving to another cafe …”

I have the same reaction.

Non-mainstream economists seem to gather together for the sole reason of exchanging the same opinion all the time. That opinion bounces back and forth symbolically. It becomes a totem of allegiance. It is invariant. Indeed it is the one thing we can rely upon: mainstream economics – whatever that truly is – sucks. It is absurd. Silly. Unrealistic. It does grave injustice to the world as we know it. Yet it endures.

Read more…

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…


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