The sociopathic crisis

March 30, 2021 5 comments

from Ken Zimmerman (formerly a comment)

Clearly sociopathic actions, right? “In a sociopathic society, sociopathic individual behavior is so pervasive and socially accepted that perpetrators don’t think of themselves as doing anything wrong. When cyclist champion Lance Armstrong first acknowledged in a 2013 interview with Oprah Winfrey that he had been doping—using performance-enhancing drugs—and lying about it for years, she asked him if he believed he was cheating.
Oprah: Did you feel you were cheating?
Armstrong: No. At the time, no. I viewed it as a level playing field. I looked up the definition of “cheat.” The definition of cheat is to gain an advantage over a rival or foe. I didn’t do that. I viewed it as a level playing field.”

Armstrong believed the rules of the game were such that all his rivals were doing the same as him or attempting to do so. Thus, he was not cheating. He was just following the same rules as his rivals. That world Armstrong is describing is a sociopathic one. ‘Win at all costs. No concern for who is hurt, the integrity of the contest, or the future of the society.’

The signs of a sociopathic society are all round us. The US, with a long history of sociopathic institutions and practices, is now evolving toward a full-blown sociopathic society. Read more…

How economic orthodoxy protects its dominant position

March 29, 2021 44 comments

from Lars Syll

John Bryan Davis (2016) has offered a persuasive account of the way an economic orthodoxy protects its dominant position. Traditional ‘reflexive domains’ for judging research quality — the theory-evidence nexus, the history and philosophy of economics — are pushed aside. Instead, research quality is assessed through journal ranking systems. This is highly biased towards the status quo and reinforces stratification: top journals feature articles by top academics at top institutions, top academics and institutions are those who feature heavily in top journals.

mainstreampluralismBecause departmental funding is so dependent on journal scores, career advancement is often made on the basis of these rankings — they are not to be taken lightly. It is not that competition is lacking, but it is confined to those who slavishly accept the paradigm, as defined by the gatekeepers — the journal editors. In this self-referential system it is faithful adherence to a preconceived notion of ‘good economics’ that pushes one ahead.

Robert Skidelsky 

Read more…

More on open-source versus patent monopoly financing of drug development

March 29, 2021 1 comment

from Dean Baker

It is often said that intellectuals have a hard time dealing with new ideas. Unfortunately, for purposes of public debate, open-source government funding of drug development is a new idea, and people in policy positions seem to be having a very hard time understanding it. So, I will try to write this post in a way that even a policy wonk can figure it out.

The basic idea of government-funded research should not be hard to grasp since the government already funds a large share of biomedical research. The National Institutes of Health gets over $40 billion a year in federal funding, with the Biomedical Advanced Research and Development Agency (BARDA) and other government agencies getting several billion more. This puts the government’s total spending in the $45 to $50 billion range, compared to a bit over $90 billion from the industry.[1] So the idea that the government would fund research really should not be that strange.

Most of the public funding does go to more basic research, but there are plenty of instances where the government has actually funded the development of new drugs and also done clinical testing. But under the current system, most of the later stage funding does come from the industry and is funded through patent monopoly pricing. Relying on open-source government-funded research for later-stage development and testing would be a major change.

The Outlines of a System of Government-Funded Research  Read more…

Vaccinations: a new world order (3 graphs)

March 28, 2021 2 comments

India and China are taking over. Cuban vaccines have entered phase three. It’s not the case that western countries are tacking the backseat. Yet. However… There are of course issues with the global vaccination effort. According to rumors, there are 29 million AstraZeneca doses produced in the Netherlands and stored in Italy which are not entering the vaccination chain because of… nobody knows (personal opinion: it sometimes feels as if the ‘intern from hell’ chairs the AstraZeneca board). Also, vaccines work excellent at the micro level, at this moment, when it comes to protecting the vulnerable. Vaccinating old men and women leads within weeks to a staggering decline in the death rate. The macro level is another issue. Only Israel, the fastest vaxer of them all, however seems to have reached something like herd immunity since around ten days ago. The UK and the USA will have to double vaccination rates to reach this stage – will pressure to finally start to export vaccines mounts. The EU, china, India have a long road ahead. Interesting question: logic dictates that Israel will have to vaccinate inhabitants of the Palestine state, too. Will this happen? Is it already happening? Anyway, looking at daily data (the graph shows a seven day rolling average) China vaccinated 6 million people in one day, yesterday. For the time being, there are no limits to vaccination growth. Good.

vaccinations 28 3 2021

 

Read more…

The biophysical resource limits of the planet

March 28, 2021 7 comments

from Ted Trainer and current RWER issue

It is remarkable that the development literature has given so little attention to the “limits to growth” analysis of the global predicament. No other set of considerations has such profound implications for development in rich and poor worlds. Over the last fifty years there has accumulated an extensive and overwhelmingly convincing case that global resource consumption and ecological impacts are far beyond sustainable levels. This rules out any possibility of all the world’s people rising to the present material “living standards” presently enjoyed by the one-fifth who live in rich countries, let alone to the levels of consumption growth would lead them to (TSW, 2019).

The magnitude of the overshoot needs to be stressed.  The World Wildlife Fund’s Footprint index (WWF, 2019) shows that to provide one Australian with the amount of food, water, energy and settlement area now used, about 7 ha of productive land are required. Therefore if the possibly 10 billion people expected to be on earth by 2050 were to live as Australians live now around 70 billion ha would be required. However there are only about 8 billion ha of productive land available on the planet.  This indicates that Australians are consuming natural resources at close to 10 times the rate all people in the world could rise to.

Other measures indicate worse multiples. Read more…

What’s wrong with economics?

March 27, 2021 2 comments

from Lars Syll

81wDHnOlHnLThis is an important and fundamentally correct critique of the core methodology of economics: individualistic; analytical; ahistorical; asocial; and apolitical. What economics understands is important. What it ignores is, alas, equally important. As Skidelsky, famous as the biographer of Keynes, notes, “to maintain that market competition is a self-sufficient ordering principle is wrong. Markets are embedded in political institutions and moral beliefs.” Economists need to be humbler about what they know and do not know.

Martin Wolf / FT

Mainstream economic theory today is still in the story-telling business whereby economic theorists create mathematical make-believe analogue models of the target system – usually conceived as the real economic system. This mathematical modelling activity is considered useful and essential. To understand and explain relations between different entities in the real economy the predominant strategy is to build mathematical models and make things happen in these ‘analogue-economy models’ rather than engineering things happening in real economies. Read more…

New York Times debates when it will tell readers that China has the world’s largest economy

March 26, 2021 2 comments

from Dean Baker

That seems to be the implication of a David Sanger piece commenting on the state of U.S. relations with Russia and China. At one point Sanger notes that China is a rising economic power:

“Economists debate when the Chinese will have the world’s largest gross domestic product — perhaps toward the end of this decade”

Actually, China already has the world’s largest economy using purchasing power parity measures of GDP, which is what most economists view as the best basis of comparison.

Here is what that well-known source of Chinese propaganda, the CIA World Factbook, has to say on the topic.

“From 2013 to 2017, China had one of the fastest growing economies in the world, averaging slightly more than 7% real growth per year. Measured on a purchasing power parity (PPP) basis that adjusts for price differences, China in 2017 stood as the largest economy in the world, surpassing the US in 2014 for the first time in modern history. China became the world’s largest exporter in 2010, and the largest trading nation in 2013. Still, China’s per capita income is below the world average.”

Since China has four times as many people as the United States, it is still much poorer on a per person basis, but its economy is already considerably larger than the U.S. economy and is likely to be close to twice as large as the U.S. economy by the end of the decade.

The sentiment behind eugenics thrives in human capital theory

March 26, 2021 27 comments

from Blair Fix and current RWER issue

A key problem with eugenics is that it neglects the social nature of human traits. It assumes that productivity is an innate trait of the individual, and that breeding for this trait would lead to a better society. It is a seductive idea that is deeply flawed. In all likelihood, selectively breeding people for productivity would, like chickens, lead to a psychopathic strain of human.

The rise of human capital theory

After the horrors of the Holocaust, eugenics fell into disrepute. As a result, few people today dare argue that we should selectively breed humans for productivity. Still, the sentiment behind eugenics (that some people are far more productive than others) lingers on in mainstream academia. It survives – even thrives – in human capital theory.

The ground work for human capital theory was laid just as eugenics fell out of favor. In the 1950s, economists at the University of Chicago tackled the question of individual income.[1] Why do some people earn more than others? The explanation that these economists settled on was that income resulted from productivity. So a CEO who earns hundreds of times more than a janitor does so for a simple reason: the CEO contributes far more to society. Read more…

On the poverty of deductivism

March 25, 2021 2 comments

from Lars Syll

In mainstream macroeconomics, there has for long been an insistence on formalistic (mathematical) modelling, and to some economic methodologists (e.g. Lawson 2015, Syll 2016) this has forced economists to give up on realism and substitute axiomatics for real world relevance. According to the critique, the deductivist orientation has been the main reason behind the difficulty that mainstream economics has had in terms of understanding, explaining and predicting what takes place in modern economies. But it has also given mainstream economics much of its discursive power – at least as long as no one starts asking tough questions on the veracity of — and justification for — the assumptions on which the deductivist foundation is erected.

The kind of formal-analytical and axiomatic-deductive mathematical modelling that makes up the core of mainstream economics is hard to make compatible with a real-world ontology. It is also the reason why so many critics find mainstream economic analysis patently and utterly unrealistic and irrelevant. Read more…

A modest proposal for generating useful analyses of economies

March 25, 2021 3 comments

from Geoff Davies and current issue of RWER

I propose that economists leave philosophy alone for a while and instead try analysing some actual economic observations.

I have observed much discussion among heterodox economists about what science comprises, whether one could do “scientific” economics, and what ontology, epistemology, etc., etc., might be involved. If, for example, economies are historically contingent, how could one hope to do a rigorous analysis. I have also observed much concern about the complications of people and societies and the resulting alleged need for elaborate statistical analyses to extract an object of interest, followed by the construction of an elaborate mathematical model that includes many nuances of human behaviour.

I think the challenge is not nearly so daunting. An economic analysis does not have to emulate the precision of (some) laboratory physics to be useful. It does not have to yield a literal prediction. If one steps out of the equilibrium mindset of the neoclassical mainstream one can find obvious phenomena crying out for explanation, a financial market crash for example.

It is not a great mystery how one might try to do some scientific economic analysis. Many kinds of scientist do science all the time, mostly without worrying about the philosophical nuances of precisely what kind of process they are engaged in. 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…

“Externalities”

March 25, 2021 6 comments

from Duncan Austin and current issue of RWER

The key issue is not that economics is not a valuable way of thinking – it clearly is – but rather that the discipline lost sight of its boundaries and unwittingly propagated an exaggerated sense of its scope. Ironically, it achieved this by fatefully downplaying the significance of one of its own discoveries made a century ago. Given the profound influence of economics within modern culture, this oversight cannot be dismissed as mere academic error, for it has potentially existential real-world consequences.

In 1920, Arthur Pigou, a Cambridge economist, conceived the idea of externalities to describe how market transactions may create unintended harms or benefits for which no monetary compensation or reward occurs. Market exchanges effectively generate ripple effects for human value that go beyond what is captured by the originating transaction. These ripple effects may be positive – I benefit, too, from you being vaccinated – or negative – think of pollution or congestion. However, there is an important asymmetry. Positive externalities take the form of “free goodies”, whereas certain negative externalities constitute systemic risks that may be catastrophic to “trip” or breach. While you generally cannot have too much of a positive externality – a “free good thing” – too much of certain unwanted harms may induce systemic failure.

Externalities exist because markets have an incomplete grasp of what humans value. Markets work off prices and not everything has – or can have – a price. As such, marketed values – or prices – exist amidst a broader “value field” of things that humans care about and which have an influence on our wellbeing.

Pigou’s proposition was an inconvenient truth for economics. It suggested that there are real limits to what conventional economics might say about matters of human value and, hence, to how far markets might serve human wellbeing. The inconvenience of his idea may be why Pigou is not better known – seemingly more tolerated, than celebrated.

http://www.paecon.net/PAEReview/issue95/Austin95.pdf

Realism and antirealism in social science

March 24, 2021 10 comments

from Lars Syll

Scientific Realism: Selected Essays of Mario Bunge: Mario Bunge, Martin  Mahner: 9781573928922: Amazon.com: BooksThe situation started to change in the 1960s, when antirealism went
on the rampage in the social studies community as well as in Anglo-American philosophy. This movement seems to have had two sources, one philosophical, the other political. The former was a reaction against positivism, which was (mistakenly but conveniently) presented as objectivist simply because it shunned mental states.

I submit that the political source of contemporary antirealism was the rebellion of the Vietnam war generation against the ‘establishment’. The latter was (wrongly) identified with the power behind science and proscientific philosophy. So, fighting science and proscientific philosophy was taken to be part of the fight against the ‘establishment’. But, of course, the people who took this stand were shooting themselves in the foot, or rather in the head, for any successful political action, whether from below or from above, must assume that the adversary is real and can be known. Indeed, if the world were a figment of our imagination, we would people it only with friends …

Breit (1984, p. 20) asks why John K. Galbraith and Milton Friedman, two of the most distinguished social scientists of our time, could have arrived at conflicting views of economic reality. He answers: “there is no world out there which we can unambiguously compare with Friedman’s and Galbraith’s versions. Galbraith and Friedman did not discover the worlds they analyze; they decreed them”. He then compares economists to painters: “each offers a new way of seeing, of organizing experience”, of “imposing order on sensory data”. In this perspective the problems of objective truth and of the difference between science and nonscience do not arise. On the other hand we are left wondering
why on earth anyone should hire economists rather than painters to cope with economic issues.

What makes knowledge in social sciences possible is Read more…

issue no. 95 – Real World Economics Review

March 23, 2021 Leave a comment

US stimulus: Setting a new agenda?

March 22, 2021 Leave a comment

from C. P. Chandrasekhar

With President Joe Biden having put through Congress and signed a $1.9 trillion American Rescue Plan, the world is set to experience one of the biggest fiscal boosts of recent times, larger than that resorted to in response to the 2008 Global Financial Crisis. Together with the $900 billion short term stimulus announced by the earlier administration end-December 2020, the level of pandemic induced Federal spending in the US is estimated at 13 per cent of GDP this year. Coming after the $2 trillion of fiscal spending last year, under the CARES Act, this is indeed a gigantic vote for big government in response to the pandemic.

The money would immediately unleash spending, with the key components of the package being a sum of $1,400 being paid to each individual earning up to $75,000 per year, continued payment of federal jobless benefits of $300 a week till early September, increased tax credits for children, and money to accelerate vaccination, reopen schools (with ventilation and sanitation) and provide financial assistance to state and local governments. Besides supporting the unemployed and the middle class, the bill is likely to prove a boon for businesses, especially in the service sector, that expects to see activity resume as the vaccination drive covers a rising proportion of the adult population.

The decision to persist with the stimulus, which is likely to take the fiscal deficit close to the record levels touched during World War II, marks a move away from the fiscal conservatism and dependence on monetary policy instruments characteristic of the neoliberal era that began with Reagan. Read more…

DSGE models — worse than useless

March 21, 2021 15 comments

from Lars Syll

The DSGE Model Quarrel (Again) | BruegelMainstream macroeconomics can only progress if it gets rid of the DSGE albatross around its neck. It is better to do it now than to wait for another 20 years because the question is not whether but when DSGE modeling will be discarded. DSGE modeling is a story of a death foretold …

Getting rid of DSGE models is critical because the hegemonic DSGE program is crowding out alternative macro methodologies that do work … DSGE practitioners, who with a mixture of bluff and bluster act as gatekeeper, judge, jury, and executioner in all macroeconomic matters, are a block on the road to progress. The roadblock has to be removed. The failed and failing DSGE models have to go if mainstream macroeconomics wants to become a force for the common good again.

Servaas Storm

DSGE models are worse than useless — and still, mainstream economists seem to be überimpressed by the ‘rigour’ brought to macroeconomics by New-Classical-New-Keynesian DSGE models and its rational expectations and microfoundations!

It is difficult to see why.

‘Rigorous’ and ‘precise’ DSGE models cannot be considered anything else than unsubstantiated conjectures as long as they aren’t supported by evidence from outside the theory or model. To my knowledge, no decisive empirical evidence has been presented. Read more…

Weekend Read – Flawed foundations of social sciences

March 19, 2021 12 comments

from Asad Zaman

While the car is functioning well, one does not usually open up the engine. But when the car breaks down, it becomes necessary to open it up to see what is wrong. This is the situation today, as the failure of econometric models manifested itself in the global financial crisis, as well as many other occasions. The tragedy is that these same failed models continue to be used today; no serious alternatives have been developed. The reason for this is that the methodology used to develop these models is inherently flawed, and incapable of producing knowledge. It is necessary to understand the engine – the philosophy of science underlying statistics and econometrics – to see why this is so. A capsule summary outline of why it is necessary to discuss philosophy of science is given below: Read more…

Bayesianism — a patently absurd approach to science

March 18, 2021 2 comments

from Lars Syll

Saturday Morning Breakfast Cereal - BayesianMainstream economics nowadays usually assumes that agents that have to make choices under conditions of uncertainty behave according to Bayesian rules (preferably the ones axiomatised by Ramsey (1931), de Finetti (1937) or Savage (1954)) — that is, they maximise expected utility with respect to some subjective probability measure that is continually updated according to Bayes theorem. If not, they are supposed to be irrational, and ultimately — via some “Dutch book” or “money pump” argument — susceptible to being ruined by some clever “bookie”.

Bayesianism reduces questions of rationality to questions of internal consistency (coherence) of beliefs, but — even granted this questionable reductionism — do rational agents really have to be Bayesian? However, there are no strong warrants for believing so.

In many of the situations that are relevant to economics, one could argue that there is simply not enough of adequate and relevant information to ground beliefs of a probabilistic kind, and that in those situations it is not really possible, in any relevant way, to represent an individual’s beliefs in a single probability measure. Read more…

Why are most textbooks still proprietary?

March 17, 2021 Leave a comment

from Blair Fix

Today a rant about textbooks. Every year governments spend billions of dollars on public education, teaching students knowledge that was itself created by publicly funded research. Yet each year, university students must pay anew for this information by purchasing high-priced textbooks.

It needn’t be this way.

Most university textbooks are written by tenured (or tenure-track) professors. These are people who are paid by the public to generate and disseminate knowledge. Professors are expected to write academic articles for free. Why not add textbooks to the list?

With a stroke of the pen, universities could make writing open-access textbooks a part of tenure-track expectations. And if there are costs associated with creating textbooks, fine. We can have grants that cover these costs. It will cost money, yes. But the benefit of liberating information will be enormous. Read more…

Neo-Ricardian economics — rigorous and totally irrelevant

March 16, 2021 14 comments

from Lars Syll

Keynes on the use of mathematics in economics | LARS P. SYLLI claim that Sraffian economics, however rigorous in its use of the simultaneous equations method … is irrelevant to our understanding of the real world and, judging by its failure to draw any policy implications, is largely irrelevant to the major concerns of modern economists … This is not a judgment based simply on my opinion, which is ultimately no better than yours. Relevance is not a matter for individual opinion but a social judgment of the community of professional economists. We assess that judgment by inspecting the professional literature, by citation counts, or by any of the other methods of bibliometrics … Show me a piece of research grounded in Sraffian economics and its principal method of long-period analysis that deals with poverty, inequality, deflation, etcetera, and I have lost the argument. I have been unable to locate any such papers …

At one end of the spectrum, we have highly rigorous but totally irrelevant theories, such as general equilibrium theory and, I contend, Sraffian economics. At the other end, we have not very rigorous but highly relevant theories, such as public choice theory and evolutionary and/or institutional economics, and in between we have the hard-to-classify theories, such as game theory …

Sraffians … spend their time finding logical flaws in the models of their enemies rather than building platforms for illuminating the workings of an economy. They are formalists pure and simple, making a fetish of the form of theories at the neglect of strengthening their content. They simply cannot resist what Nancy Cartwright (1999) calls “the vanity of rigour in economics.”

Mark Blaug