Author Archive

Share buybacks — again?

September 7, 2022 2 comments

from Peter Radford

What isn’t said is often more telling than what is.  The silence denotes either a disrespect for thorough analysis or an ignorance of issues beyond the ken of the speaker.  Then, of course, a third option arises: that those issues are an embarrassment to the point being made and are thus best left unmentioned.

For some reason stock buybacks appear to fall into such a zone of silence.  There is some controversy currently about the topic because of the recent proposal to impose a very modest tax on stock buybacks here in the U.S.

The usual arguments have been put forward to defend buybacks.

Michael Mauboussin, who is head of something called consilient research in an arm of Morgan Stanley, recently wrote this in an op-ed for the Financial Times:

“An essential role of an efficient economic system is the reallocation of capital away from businesses with limited prospects to those with more potential. Buybacks facilitate this process, and nearly all of the proceeds are reinvested in the shares of other companies.”

All you need to know about the oddity of the topic is contained within these two sentences. Read more…

Tax stock buybacks?

August 25, 2022 2 comments

from Peter Radford

Taking a short break from my crusade to get information taken more seriously in economics …

Yesterday’s Financial Times includes, on page 9 of the print edition, one of its regular “Market Insights” columns.  This is the space the FT allocates to sundry financial market types to opine on subjects of general interest to other financial market types.  It’s always a good read if you want to gain insight into how our magnificent financiers talk to themselves whilst allocating capital appropriately around the economy.  Well that’s what they see themselves doing, so let’s not nitpick.

The column yesterday was written by a luminary of the investment community, someone who sat on the board of a popular retirement fund, and who has written extensively on subjects related to finance, investing and so on through the years.  The subject was the possibility of eliminating the new tax that Congress just established on stock buybacks.  The new tax, all of 1% and thus hardly onerous, has stirred up a ton of ire in the corporate world where stock buybacks are viewed as a centerpiece of good “stewardship”.  That is if you consider stewardship to be centered purely on making shareholders happy. Read more…

Say it ain’t so

August 19, 2022 4 comments

from Peter Radford

re-visiting economics’ basic concepts

I am nothing if not annoying.  Allow me to elaborate.

Let’s be basic.

I mean really really basic.

Our model world initially consists of two people, Adam and Eve.  I know, it’s been done before.  But we are economists.  What are we interested in?  What problems that Adam and Eve face do we want to study?

Well, they need energy.  Human bodies, like all ordered structures, need flows of energy to maintain that structure.  The Second Law of Thermodynamics is the damndest thing.  It gets in the way.  But that’s life.  So what do Adam and Eve do?  They go look for energy, which in our speak we call food.  They avert death by searching for, finding, and consuming food.  Problem solved.

What do we make of this?

Demand — the need for a supply of energy — precedes its supply.  And that the search for, location of and ultimately the consumption of that energy requires more energy.  We are stuck in a loop.  We can summarize the search and location parts of the process as work.  And work requires its own source of energy.  

One thing leads to another as they say.  But cut to its absolute minimalist core, work is about sources of energy.  It is the application of energy to a task, which in a primitive sense is simply survival.  And the sum of all the work being done is the sum of all the energy gathered and processed to satisfy the demand for — energy.

I know.  This is absurd reduction.  But that’s where we need to go in order to clarify what an economy actually is.  It is the sum of work being done.  It is an energy flow. Read more…

Machine age musings on algorithmic growth theory

August 7, 2022 1 comment

from Peter Radford

Don’t mind me.  I am just thinking out aloud…

That we live in a Machine Age is indisputable.  Our lifestyles depend entirely upon the mediation of machines.  Without them modernity collapses back to whatever existed in the prior ages and we surrender most of what we currently cherish.

And it is important to use the phrase “machine age” because other phrases such as Industrial Age and so on limit us.  Some say we are now entering a Digital Age, but this too is a mistake.  All that is changing is the nature of our machines.  The Machine Age lives on.

So what is a machine?

It is a piece of information that allows us to channel energy and concentrate it such that we amplify the output we expect from that application of energy.  In this case the information is embodied in a plan, design, or layout of a particular physical structure through which we harness the energy.  The nature of that information has changed mightily throughout the Machine Age, ranging from the design of steam engines at one end to the design of supercomputers at the other.  At its core, though, the notion remains the same.  The application of information to the harnessing of energy is the basis of economic activity.  We might even say that we don’t simply harness energy through the use of machines: we also harvest it.  Or, at least, we use that aspect of energy available to do work.  And an economy is simply the totality of work we need to do to provide whatever it is we feel we want — whether those “wants” are essential or luxurious is irrelevant to this discussion.  That’s a moral not a machinery question. Read more…

Thinking like an Economist?

May 19, 2022 5 comments

from Peter Radford

Thinking like an economist.

What a horrible thought.  Can you imagine anything more restrictive and less imaginative?  It requires you to disengage from reality and enter a world constrained by absurd assumptions, odd definitions, and a lack of foundation.  The entire edifice of economics sits, in all its glory, suspended in mid-air and relying on what the philosopher Daniel Dennett describes as “sky hooks” to hold it up.  Beneath it is only vapor and foggy notions of the phenomena it purports to describe and explain.  Just ask an economist to describe a market in detail and you will understand how vague the enterprise is.  

Perhaps I am wrong.  It takes a lot of imagination to conceive of what passes as economics as being a study of actual economies.  You need a really vivid imagination, for instance, to think that businesses actually calculate or apply marginal productivity on payday.  Or that the dense ignorance of total factor productivity is an actual thing and not simply a definition of how little economists know about how economies grow.  Or that there is something called an equilibrium calling out and pulling us all into a perfect quiet calm stasis devoid of the roughness or hurry-burly that makes theorizing reality so stressful.  Or … well you get the picture.

How about this: did you hear the joke about the economist? Read more…

Free to trade efficiency?

March 23, 2022 10 comments

from Peter Radford


The war in Europe is messing with some major preconceptions and exposing some as illusions that, perhaps, we would be better off without.

Take, for instance, The Economist magazine’s leader article entitled “Trading with the enemy.”  Here’s the key question the article poses:

“Is it prudent for open societies to conduct normal economic relations with autocratic ones, such as Russia and China, that abuse human rights, endanger security and grow more threatening the richer they get?”

You and I might answer in the negative with a certain ease, but for the Economist and its ilk the question is more nuanced.  After all aren’t freedom and free trade one and the same?  If you stop trading freely aren’t you surrendering your freedom?

The Economist goes on to present its case, which inevitably decries any diminution of free trade, and ends thus:

“Liberal governments need to find a new path that combines openness and security, and prevents the dream of globalization turning sour.”

All well and good.  And predictable.  We must not get in the way of free trade.  Must we? Read more…

A note on Furet

March 7, 2022 1 comment

from Peter Radford

Intellectual vanities abound in a technocratic society.  It seems inevitable that as we push the boundaries of knowledge further and further into the space of potential beyond our current state that the division of labor presses down on us.  We become, each of us, more distant from any sense of self-sufficiency.  Such a state is an absurdity in our technologically infused and dependent world.  We have become enmeshed in the very supplementary support system we developed to drive ourselves out of the Malthusian trap we lived in for millennia.  As the complexity of our society rose, as the interdependence implied by the ever increasing network of specialities grew, and as we left behind the visceral ways of life we were prepared for by our evolutionary trajectory, we became attached to, and eventually, inseparable from, our technology.

The implications abound.

Our social organization has had to adapt to the complex realities.  We have had to create softer social technologies to foster and manage the harder technologies of production.  We had to organize.  We had to specialize.  We had to delegate.  We had to invent various forms of political arrangement to rein in the very freedoms that we unleashed in order to set ourselves beyond the deprivations of yore.  

This contradiction between the freedom necessary to defeat perpetual poverty and that needed to restrain the concentration of wealth that threatens to disintegrate the cohesion needed to maintain prosperity once achieved, is an ongoing and insoluble aspect of modernity.   Read more…

All wet like a river

March 3, 2022 3 comments

from Peter Radford

I am still stuck wondering about Diane Coyle’s defense of economics.

Heraclitus exists only in fragments.  That’s unfortunate because aphorisms are not the best way to tackle the hubris of the technocrat.  He was on to something though.  We all know his well-worn saying about stepping into rivers.  He tells us that they’re never the same twice.  And yet they stay the same.  Beware, then, the analyst that thinks she sees a regularity in our economy.  It may look the same as before, but it isn’t.  Not in detail.

Yes, I am still stuck wondering about Diane Coyle’s defense of economics.  It has, she says, changed a great deal since it was exposed as somewhat vapid back during the Great Financial Crisis.  I am trying to be gentle.  In truth it was exposed as being a lot worse than vapid. 

The problem I have is that the resurrection of economics, in the eyes of Coyle, is in its contribution as a technocratic bulwark against the visceral or uneducated emotions of democracy.  As a center of empirical wisdom economics can, apparently, regain its luster and provide a counterweight to the fogginess of ideas that emerge, not from dogged adherence to statistical analysis, but from the vague good intentions of the people’s representatives.  The economist-as-technocrat thus replaces the economist-as-theorist at the epicenter of modern policy and decision making.  Technocrats can do what mere politicians might not.  They can stand aloof and make the hard choices.  They can point out the opportunity cost of a choice.  They can hammer out the alternative values within an array of choices.  They can sort the costs from the benefits and weigh them objectively so as to ensure that society reaches the peak of its potential.  They can, in short, make us all efficient.

Whatever that means.  Read more…

Democracy? Surely not!

January 4, 2022 5 comments

from Peter Radford

Let’s stir things up for the New Year by continuing with one of my recent themes.

A quote from an opinion piece in the NYT this morning [January 3rd]:

“James Madison boasted that the Constitution achieved “the total exclusion of the people, in their collective capacity.” Its elaborate political mechanics reflect the elite dislike and mistrust of majority rule that Madison voiced when he wrote, “Had every Athenian citizen been a Socrates, every Athenian assembly would still have been a mob.” Madison’s condescension has never gone away. Walter Lippmann, perhaps the most prominent intellectual of the short American Century, reckoned that citizens were ignorant, confused and emotional. Democracy brought “an intensification of feeling and a degradation of significance” to whatever it touched.” 

I love that phrase: “the total exclusion of the people, in their collective capacity”.  What other capacity can the people have, other than collective?  Madison was hedging.  He wanted to be aristocratic with a popular twist.  And there was that awful reference to “we the people” in the background that needed proper definition.  So the people were invited in.  Just not collectively.  They were let in selectively instead.

To this day the threat of democracy is a real and present danger in America.  The bedrock of the constitution remains firmly anti-democratic.  Various bolt-ons have attempted to bring it into the democratic era, but they have failed.  America is not a democracy.  So there is no existential threat to it.  You can’t lose something you don’t have.  Our project for the New Year ought not to be dedicated to fixing the governance system.  It ought to be dedicated to reforming it.  Making it democratic would be a good start.  Just think: had America been a democracy Trump would not have been elected.  He lost the 2016 election by three million votes.  He lost in 2020 by seven million.  Due to the undemocratic nature of the constitution, switching a mere 46,000 of those seven million — in the right states — would have secured a win for Trump and his attempted coup would have been unnecessary.  No wonder he’s upset.

Read more…

Confusion reigns

December 29, 2021 8 comments

from Peter Radford

What on earth were they doing?

Rocked but undaunted by the great financial crisis the orthodoxy of our central banks survived to fight another day.  The system had been saved.  That no one saw the onrushing crisis is still being debated.  Of course some people saw it coming.  Anyone with a scintilla of understanding of Minsky for instance.  But those folk are hard to find in the top seats of central banks.

The objective of the so-called independent central bank is to preserve the system.  To make it safe for markets to continue undisturbed by the intrusions of political whims.  To save, that is, capitalism from the depraved intrusions of democracy.  The idea is to separate as firmly as possible the political and the economic realms.  After all as economists seem to believe: people are astonishingly rational when they participate as market members, but are hopelessly self-indulgent and irrational when they participate as voters.  We all suffer from split personalities in economic orthodoxy.  Rational one minute, mindlessly mixed up the next.  It’s an interesting view of human behavior.  It undergirds, in rather more formal guise, orthodoxy and its resolute defense of central bank independence.

This independence is supposed to maintain a wall between these two halves of our personalities.  Making the system safe for markets means guarding vigilantly against the inevitable weaknesses of politicians who might fall victim to the democratic urge to look after the majority of voters. Read more…

Domain shift

December 7, 2021 3 comments

from Peter Radford

Brian Arthur tells us that technology most often advances in the form of domain shifts.  In his narrative technologies cluster in related groups he calls domains.  So individual technologies might advance through a tweak here or there, but the economy advances through a shift from one cluster of technologies to another.

I like this idea.  Especially when we then broaden the topic to use technology as a background against which we view a particular slice of history.  Thus we can think, legitimately about the “steam era” and such.  Adding insight to this, Arthur situates all technologies as extensions of natural phenomena.  So he characterizes a technology as a phenomenon being “captured and put to use”.

All good.  This gives us a practical definition of technology and helps map its evolution onto the changes of society itself as it became more and more infused by technology.

Arthur also tries to make us embrace a very broad notion of technology.  He insists that a great number of social structures can also be defined as technologies.  So a modern business organization is a technology, as is any other institution.  I agree.  When we go further and identify that most, if not all, technologies can be segmented into sub-technologies we start to see commonalities that might elude us in a more holistic analysis.  This does not imply we can predict the higher level organization from the sum of the component parts, but it does allow us to see common ancestors to many of our contemporary technologies: they are rooted in lineages in the same way that the natural world is.

Let’s stay with this. Read more…

More is different: a redux

December 1, 2021 15 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 1 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…

%d bloggers like this: