ECONOMICS: -AN INCOMPLETE STORY: NOT A SCIENCE BUT DISMAL
by Jonathan A. Weiss Esq.
Economics is neither an art nor science. Rather, the area features attempts systematic presentations but confronts the challenging contingency of a world where events have many causes, natural and human. Economic events demonstrate the high unpredictability inherent in the world of human interaction, evaluation and facilitation of human transactions involving assessment of material value. This limitation restricts explanations of current content, constituents, and transactions – effected by changes in nature, needs, and preferences. Precise prediction is as difficult as weather and stock markets – general prediction relies on unproven and unjustified historical extrapolations although sometimes also relying on psychology, even sociology, and anthropology. This major problem is compounded by the challenge to quantify human activities in many overlapping contexts. An invocation of mathematical formulas, often employed in homage to science, obscures rather than clarifies. In addition, various human activities involving or connected to commerce and contracts take on a life, momentum and special patterns of their own – money particularly. Unfortunately, the theories are often used to camouflage greed for the powerful and deprivation for the deprived.
Economics is a collection of sub plots.
These fall into two types:
(1) What really occurs in the economies of the country and the interrelated world. Greed and its attempted controls vary over time in cultures and States; survival alone makes particular demands while politics, religions, ideologies, cultures. both affect and are effected by economic realities and expectations. Unlikely or unforeseen events occur as randomness occurs in this contingent world
(2) The various theories which attempt to be systematic, descriptive, and predictive. The nature of some characters, in the narrative change over time, particularly money. The attempt to reduce the subject to markets, then finances, then money management is doomed to failure. Plausible precise prediction is prevented by reality; explanation post hoc both simplistic and biased. A range of explanations of what happened is possible; we will rely on the United States, primarily for examples, but the analysis is universal.
Macro economic attempts has also to take into amount natural phenomena such as droughts, storms, floods, earthquakes, and pestilence, without predictability, in general, mainly at random with underlying patterns not yet explicable. Wars, beginning, duration, destruction, end with lasting effects on cultures, society, States, ethnic and racial grudges, and nature. Dominated by mistaken academic “orthodoxies” and models based on incomplete data, and unwarranted assumptions. Economic theories developed, that are therefore, generally, at best, descriptive of some past patterns over a limited run, and neither prescriptive nor prescriptive. Not only do economic dynamic changes offer, at best, limited probability at some time in the future but also there is feedback from what occurs to what will occur in this area, increasing rather than decreasing complications and changes in possible future situations in addition to other factors. International commerce, politics, and conflicts (violent, cultural, and ideological) further complicate considerations.
The more comprehensive, and inclusive of randomness and contingency by specifying crucial functioning factors, an economic theory is, the more likely it will contribute to knowledge of the current complexity of economic activity in cultural and political contexts. Current conditions do reveal patterns of economic behavior but not exhaustive exposition and reliable predictions about economic entities and what occurs to them; but does indicate local and time confined relevant public polices.
Economic choices made by governing directly (which should be based primarily on needs and attractive social prospects) consumers, producers, suppliers, employers indirectly involve the allocation of resources with both long term and short term prospects. All will generate transactions with economic activity based on them. Proper remedies for present problems may, therefore, be offered persuasively when they deal with established patterns, assumptions, and plausible explanations. Long term projections of consequences of these allocations, on the other hand, are based the persistence of clear patterns (effects and trends), assumptions involving human nature, particularly motivation, and claimed history producing future economic realities, all of which add confusion in contingent ambiguous social and ideological contexts which limit both descriptions and predictions proffered. Basic essential components for proper allocation and a flourishing economic environment can be induced for inclusion in proper public policy but not rigid requirements.
Given the right stable conditions, however, economic policy may create real living and, even basic, changes in actual economies. Persuasive current arguments do not confirm connected theories. The principles instanced may appear to be derived from economic theory or suggest it but a plurality of theoretical preferences will be available while the conditions have to be conducive. It is clear that unfettered greed, justified improperly by “Capitalist theory” causes inequality of wealth, monopoly, and unfettered disaster. Policies based on allocation for need and social progress, from productive resources, control of unfettered greed, public projects from education to infrastructure, will in a democratic country (and perhaps in a dictatorship of some sort) suggest good means of transactions, affirmation of individual worth with possibilities available, to lead to more equality in a functioning environment with the great majority, if not everybody, benefiting. Closing the right principles on a number of grounds, rather than operating dogmatically from an ideology advances actual economies. These can be therefore justified along with an understanding of the crucial factors and stable conditions.
We suggest that economic formulations historically offered are systems of answers without confronting or considering the important questions raised by actual economic transactions, development and evolving conditions. In most intellectual areas, particularly science, there is a current common consensus about basic elements and principles with disputes, some important, still continuing. Chaos abounds in economic history and theoretical ascription and prescriptions. We must distinguish between macroeconomics which attempts take into account many forces and micro economics, such as monetarism, which focuses on specific markets to assume that the prime economic mover is money, its mobility, liquidity, and possession. #Macroeconomics which includes versions of history, theories of material value, and exploration and exposition of human behaviors, resources available and allocated with related tendencies in commercial and financial settings.
We are open to persuasion about theories when there is some method of verifying of justifying their assumptions, principles, predictions over a long run. Science employs controls and repetition to increase the certainty of its exposition. In economics, however, there appears to be too many complicating factors, many with unclear patterns for the future subject to sudden impact from nature, society, and States which must be considered in macro economics. This condition prevents verification in current experience, since economic principles play out in complex settings, with no possible controls, so that specific predictions, even when they come to pass, may not occur at the time specified or for the reasons specified. History revealed is the only test of theories, so many economic “systems” write histories to justify their claims (most notably Marx.) But even accepting these histories arguendo, there is no guarantee that the predictions will follow in the same patterns as the past(in spite of claims of “iron laws.”) which are used to explain what has occurred revealing patterns of principles and factors. Economics seems particularly Western culturally bound with economic theorists not able to verify their hypotheses they would impose upon other societies because as a subset of human transactions and communications, economic realities are dependent on context and cultures.
Abstract ideas and principles can form the core of an economic theory advanced but their persuasiveness must rest primarily on the plausibility of the abstraction as related to the real economic world offering explanatory insights and explanations of what is occurring and/or has occurred at various times. They are also subject to changing interpretations depending on the “data”, politics, and perspective of those who study or urge particular applications, as are other histories. We must look particularly for the evidence of any claim, the means of extrapolating from the data, the comprehensiveness of the account, the nature of patterns in context, and analysis of ascription’s and their presented principles recognizing the selection, assembly, presentation of date, perspective, and narrative voice. This is not to say that the theory is not also testable by predictions as well as the plausibility and completeness of explanations, but that it is different from any real science which can replicate controlled experiments. We emphasize that possible crucial events always lurk (e.g. war, social and political, movements or natural disasters) which change the current social, natural, and political situation increased by feedback and thereby affecting any economic narrative – randomness and contingency – as well politics, power, and institutions always driving decisions about the allocation and possession of resources. These conceptual limitation apply a fortiori to macroeconomic theories based one limited principles, perspectives, and contexts
Survey of Elements
Economists’ starting subject matter, broadly defined, concerns the controlled transfers of goods and services. This consideration leads to describing means of production including devices), concepts of markets, values utilitarian and ascribed, institutions, physical capability and psychology of those involved, units and aggregates for activity and interconnection with social environments, politics, society, nature (resources, obstacles, and events) in particular cultures, In each of these constituents, developments may occur so that matters take on a life of their own in action and study, all forming subplots, but not a specific inclusive story. Perhaps the best way to approach our account of economic theories is from the top down, starting with the most abstract generalizations to explore first, the varied concrete examples and then how these concrete examples, in the Western world, have been studied and presented.
(1) Goods. There are tangible items desired, intangibles sought, and indications of both valued.
(A) All individuals need (also conditions for fostering the provision of) food, shelter, protection, sustenance, means of getting around, clothing, communication, leisure (enjoyment), reflection, values (even if egocentric) and provision for self-affirmation. Shelter and clothing also both provide some form of protection. Groups can also provide protection; co-operation may produce or ensure these desired items. These goods are normally considered necessities. In any grouping of individuals, different people can contribute and provide different items. Interchanges of desired goods may be habitual, customary, formal or informal or varying combinations of them.
(B)(1) Evidence, even in the most “primitive” societies is of activities not directed towards the provision of pure physical necessities. There are paintings, sculptures, and reasons to infer to language, dance, thought, etc. These are desired societal intangibles.
(B) (2) Individuals are all egocentric, some idealistic. There are those who seek status, approval, and even power over others. Some are greedy and identify with possessions of desired objects/ There are those who seek to know, to have faith, to create – invoking philosophy, religion, myths, history, and basic principles/patterns,. Desired items or systems affect the evaluation of tangible and intangible entities and ascription of value to them, in general or in transactions, sometimes reflecting utility for necessities or public purposes. There are many forms of communicating knowledge of these attributes utilizing associated tools Description for specified items asserts value to be acknowledged and or accepted – although subject to dispute (e.g..bargaining). Greed may determine both economic actors’ behavior and the “market value” of items.
©) People adorn themselves with status symbols of power, prestige, beauty, accomplishments and connection with others. Art forms, such as music, painting, sculpture, and architecture are sometimes employed to create status and hierarchy as well as beauty, emotional and intellectual involvement, personal fulfillment, and public enjoyment. Even speech and beliefs may be considered indications of wealth, power, and special properties, exercisable in public and political arenas. Some of these also require tools for presentation and production.
(D) There are the products of useful (and sometimes destructive) crafts and their products including buildings, furniture, plumbing, electricity, heating, air-conditioning, ventilation, means of communication, rails, highways, bridges, tunnels, dams, irrigation, waste disposal, ports, access to nature (sometimes modified by sport), airports and airplanes and the like. Increasingly obvious are the resulting destruction and environmental degradation which also creates poisons and direct harm to human beings. (E.g. nuclear waste; fracking; pollution…the list goes on.) The agrarian economy sustained many individuals. The industrial revolution created many goods and services causing a great increase in population, consumption, and environmental impact. The technological extension (argued by many to be revolution) has had radical impacts on communication, production, transaction facilitation, comforts and luxuries, attitudes towards thought, humanity, production, daily lives, and working and living situations while creating associated problems for human development and the survival of the planet.
(E) There are weapons, tools (now technical too), harvesting, production and instruments of war, oppression, invasion of privacy, affecting society, institutions and transaction effectuation in human lives.
(F) There are many tools for scientific (and space exploration )- featuring engineering and applied chemistry and physics – sometimes particular mathematics directly. Judgement on them is made by society, institutions, and individuals based evaluation of instrumental and intrinsic value for humans at specific times and places Economists tend to use mathematics for short hand in conclusions and assumption. (The degree of mathematical sophistication is often unclear. Samuelson’s Economic Text appears to have trouble with its Cauchy sequence in its early page.?
(2) Services involve human activities. Their results may be immediate or spread over time. They may involve tangible or intangible matters. They can be productive either directly for human physical necessities (sometimes care taking; sometimes extensive) or desired commodities (sometimes causing direct or associated undesirable destruction) or indirectly for human aspirations, fulfillment, and enjoyment in the arts, sciences, mathematics, philosophy, religion, and advancement of self or group or institution (often in contrast with others). They can also be destructive as in wars, environmental degradation, crimes, and containment of the sanctioned or oppressed (sometimes life destructive directly or indirectly. They may use simple or complicated equipment (e.g. computers, internet, etc.)
(3) Transfers are most easily discerned when tangible. Someone gives something to someone else or commits some action (including giving of objects or representations of value) for the person. But they also can be intangible – both communicable and inferrable. Positions, phrases, postures, movements, incantations, etc. can all communicate to those who understand what intangible values are also being transferred. (There is a combined area of the purchase of physical pleasure as with massages and prostitutes.) When viewing a collection of people from the perspective of what the collectivity manifests (while recognizing that it may be a subpart of another collectivity with which it interacts) certain elements may suggest what values, material, aesthetic, and/or ideological are present in that collectivity (generally cultural). The tombs of the Pharaohs, for example, allow some obvious inferences as well as archaeological speculation. Most transfers are reciprocal – founding the doctrine of contract. Some are purely generous as with gifts. Some are generational as with wills and gifts in contemplation of death. (Some are also involuntary as in theft and fraud. Corruption can be a major factor in financial transactions and government.)
Transfers may be habituated, informal, or formal. (The famous legal phrase from Sir Henry Maine is “from status” to “contract” which is both illuminating and limited since there are implicit contracts as to status and status determining contracts). In some societies or included communities, arrangements, such as marriage, are based on economic considerations. In all cases, something is given and characteristically exchanged. Transfers can be direct with tangible, immediately useful objects or can be indirect, as we shall see, involving money, which an important area of transfer itself (with money malleable for creating associated money), with items ascribed value to facilitate transactions in the modern era (often considered complex systems of multi-person barter.) with their availability for use as items valuable for transfer themselves and derivative values then for further transfers – all implicating expectations in a system of transfer – usually a “market”. Gamblers make transactions (or promises of them) in anticipation of tangible gain.
Economics normally emphasizes the tangible, the limited in time, and the observable. Since, as this abstract analysis indicates, human nature manifested under such scrutiny is more complex and rich, its accounts as so limited will always be at best incomplete and at worse misleading. People give up their wealth or part of it to places of religious devotion (including insane cults), to attain political influence or power (often to increase wealth directly or indirectly; sometimes to push policies), to become patron of the arts, to buy time to do their own work, to be with families and loved ones, or people potentially useful (or attractive), to purchase items and public and private displays that flatter or reassure or facilitate or create sensual or mental pleasure even in self destructive ways for them and society..
We may commence with a primary focus on tangible exchanges of goods and activities to create working tools of analysis, utilizing the insights achieved by viewing this field as comprised of subplots (from simple transactions to complex transactions to markets to public policy for taxation, governmental function, and allocation of resources). We can the, attend to what we observe in contemporary society and history, as long as we note the complicated and often conflicting nature, motivations and enterprises of the individuals and institutions acting in the economic sphere. What particularly pertains to economic understanding are those activities, objects symbolic or actual, and use which involves the fulfillment of apparent human needs and desires, individual and collective. Necessities form the most obvious sphere for observation and interpretations; modern society the most complicated. These are, however, not to be placed on a smooth continuum for, as we have noted, the evidence is that prehistoric mankind had values beyond survival and procreation and that those in the most advanced societies have actual necessities, some biological, including eating and waste distribution, shelter, clothing, and comfort, communication, and means of getting about – be they cloaked by euphemism or willful avoidance or ceremony (and space and time for leisure with enjoyment). Man can not leave his physical and biological needs behind but is never exhaustively defined by them.
(2) Labor and ownership. Without applied effort, there could be no transactions. Even the assertion of ownership as a precondition for transfer, unilaterally or reciprocally, requires an effort. The claim of ownership, however, is usually based on some effort, past or present, to obtain or produce the object. The clearest example of such activity is that produced by what is justly called “labor.” Without the physical effort employed, there would be nothing to offer. Hunters, farmers, and industrial workers all produce something tangible with their activities. In the contemporary electronic age, companies generate computers, some of which are intended to duplicate human activity or enhance it (e.g. drones) and connections; gadgets and entertainment. It should also be noted that intellectuals and artists must work to produce anything in the realm of ideas, particularly when embodied in a concrete form – as in what is considered to be proper for patenting or copyrighting in States with such provisions. These achievements are often valued in economic terms either in the sale of items or the salaries (or grants or subsidies) provided to those who produce or are supposed to produce those items from intangible to partially tangible – reflecting abstract or creative activity. (Some of course, with different means of support, work without remuneration or reward; the flip side is the appalling sight of oligarchies and monopolies reaping enormous profits from the research of salaried researchers who may only get a bonus – often with research paid for by the State or done by it). The simplest way to look at labor is in the actual production of concrete goods (including necessary preconditions) to be transferred with ownership, a matter of custom and law, dependent on status and relationships (contractual or customary). In any event, the labor employed to produce that which was not before, is relevant to the value placed on it by the producers and receivers of that product. The utility for various purposes is also relevant by creating needs for resource, sometime rare, and sometime even plundering the planet and causing danger with substances produced in obtaining them.
(3) Market. Goods are exchanged in specific times and places. There are specific places and institutions where exchanges take place. Involved in these transfers can be not only be goods, but also items that represent goods, and items that represent items which represent goods (and so on, although not infinitely). There market places for ranges of items, for labor, for capital, and particular ones, e.g. stocks and commodities. These markets have rules, informal as well as formal, presenting their own subplot’s story (hence available for ascription in theory, some claiming to reveal a compelling history or persuasive predictions). Some are now directly dependent on or heavily influenced by computers, the internet, and cyber space activities.
In a market, bargaining is normally expected to be possible (some, as in Labor markets often feature competition to participate in production or markets themselves.) One need not sell nor buy; offer to someone or receive from someone to have participated in a market or be affected it. (See charities, government benefits, families). There may be one party or many parties simultaneously or sequentially involved. In the process. value may be recognized or ascribed. Expectations and psychology are involved. There may be fools, winners or losers.
Markets can be established for anything that anyone desires. Hence there are markets for arts and stocks and bonds. There are individual sellers all alone or in large “markets” where individuals and groups (including “funds” and “investment firms” etc.) operate. All that is necessary for a market to be is that something assigned value is transferred by a clear mechanism involving goods, services, or connected symbols almost always with something tangible connected to the entity making the transfer (e.g. commodity futures)
Profits occur when an individual or organization receives, as a result of a transaction, a good or service of more value, as measured by a common community calculus, than that what he has given (e.g. industrially suppliers, workers, facilities, energy and consumers – discounting for commercial propaganda in advertisements, sponsorship, etc.) Profits produce wealth (whose nature is subject to accounting – often suspect). In very simple markets, profits become one means of buying necessities and more. In large markets, profits may well distort any economic model (based on simple profits) which is proffered as a defining model. A Platonic critique of size (or critical mass) is most relevant here. There are natural monopolies (like energy) and created monopolies by horizontal or vertical acquisitions, and “intellectual property” laws, lucky ones (e.g. being first to market or most successful at the beginning of a field of production – frequent in new technologies from phones to the internet and computers). These monopolies mean that no claims of supply and demand; no claims of inspiring creativity; no claims of competition as determining values and transactions may be made honestly. With monopolies and profits controlling, the market becomes primarily an agency of exploitation coupled with a genuine threat of corruption. The profit motive, either unthinkingly or cynically praised, is claimed by some to have both an economic and psychological virtue but much more often leads to inequality, destruction of other values, and eventual loss of real productivity. (Marx goes farther, reifying this aspect and its consequences. I believe natural monopolies should be owned and managed by affected communities, co-ops or the government; lucky ones broken up). There are possible “countervailing forces” (John Galbraith’s term) in unions and aroused consumers (currently concerned with environmental effects) which can put pressure and publicity against large, even monopolist companies. The solidarity with focus on specific demands may diminish worker degradation and underpayment but will normally not limit market power. Establishing co-ops (with ancient antecedents in towns, continuing in Italy with harmony in production and selling) where consumers run the retail businesses have had positive effects in many communities and encourage democratic participation in the market as well as in political policy. They emphasize the importance of communities in economics. Similarly, Daniel DeLeon argued, as a Marxist, for worker control of industrial production companies. (In a distant echo, there are movement among stockholders today for companies to act for social good as well as profit maximization, particularly in the short run. In fact, currently there are “vultures” which buy companies and dismantle them into parts to see to make quick profits. Greed is exalted by some and the exclusive rights of the shareholders proposed with no reason or basis by the Chicago school featuring Milton Freedman who helped wreck the Chilean economy). Motives and actions in the corporate contexts offer little stories.
(4) Money. Tangible items and intangible symbols to which expectation of conversion for items of value is assigned. Some represent goods and services which may be treated as “money” generally based on a community consensus in non-industrial societies. In complex societies much can function as money (stocks and bonds, their derivatives and derivatives on them; credit, assets as defined by accountants, invented measures for value, etc.) It is also used for salaries, pensions, governmental and business benefits, including insurance which implicates predictions of future events involving monetary estimation. Both Keynes and Marx wrote brilliantly about the nature and history of money but it remains a vexatious subject for most academics as all have extrapolated from a myth of a basis in barter, generally bilateral, as a governing story rather than the reality confronted as money takes on a life of its own. Money, in a society, has its own story and probably history. The myth of the barter basis starts the story off wrong.
Money seen in that elementary way as a means of easing barter does generate a story often historical. If a person wants something from others he can obtain money which allows him to obtain those goods, obtained often by previously offering something of his own to obtain the money. As quantified “value” ascribed to an item which facilitates a transaction, money is subject to further manipulation into transactions itself where it becomes an item for what else acts as money. (Hence checks, credit cards, stock, bonds, derivatives, mortgages, debts, etc.) But by this time, any aspect of barter, even if historically urged will have disappeared, leaving only expectation of receiving something of value for what is held in some tangible, or symbolic form. Hence, the volatility of all markets, including money, is based on the collective effect of individuals’ economic calculation, predictions, psychology to create distinctive patterns for events and individuals which can be related as stories/subplots..
Many things can stand for money itself while money itself can be used to generate more money (by investment, interest, etc.). Although money can be embodied in minerals, such as gold, silver, and platinum it can also be embodied in writing about them. (Those who urge a return to the “gold standard” are arguing for a different symbol.) In the current society, we have checks, credit cards, stocks and bonds, and derivatives of stocks, bonds, debt trades, computer generated items in cyberspace and commodities, all with consequences for consumer prices with little or no connection to the original justification of recognition or ascription of values than that what is sold, if not a basic good or service. – a “derivative” which may be used in various markets – even electronic ones in cyberspace. (Pricing requires money reflecting not only utility but consumer mentality anticipated.)
There is more than one “money”. Different monies produced (generally by different States or by Corporations acting like States in issuing symbols (stocks and bonds) that represent “money” (also authorizing and effectuating allocation of money and resources – and/ or derivatives) are measured by other monies for which they can be exchanged with fluctuating exchange rates. Money, backed by some (even attenuated) reference to value, is convertible to other “instruments” (i.e. paper, coins, written descriptions, e.g letters of credit) for use in exchanges. Exchanges take place in money markets where arbitrage is possible (the buying and selling of “money” at various convertible rates in order to make a profit – ending up with more of some money before and after buying and selling.) There it is dealt with by theories and predictions a special area of enterprise.
With the invention of bitcoin and crypto currencies, money is invented out of the whole cloth, the object of technical skills, to be used as money even convertible to conventional State backed money (necessary for stability in International trading of goods and services). Their danger, and approach to Ponzi schemes, particularly with chain transactions is not yet fully known. Money usage ranges, therefore, from a convenience in trade to a whole world of its own in origin, nature, and usage.
Money in a stable environment is often used as a measure of value. Although it may be conceived as representing value as its basis it also has value in what it apparently can obtain and sometimes is considered an intrinsic worth or utility. It therefore can be taken as a value in itself as we see with greedy billionaires who always want more money although they can never spend or even devise sensibly all they possess. Money, in this sense, has its own “value” whose form can be found in all types of “wealth” from holdings of financial instruments to possessions of art and buildings. It then becomes an end in itself. Forbes publishes lists of wealthy individuals which apparently is important to many readers.
Money, in all forms, ultimately depends on faith that it can be used for exchanges and/or is founded on some justifiable basis (which is what encourages conceptual claims for “barter” basis.). Stable governments issue money, normally covered under the term, “cash”. At one point the United States promised redemption in gold. Derivatives of all sorts depend upon a belief that “cash” is behind them at some ratio. (Banks are allowed often to carry “risk” at a high ratio to “cash reserves” based upon expectation of collection of debts and derivative sales. Financial instruments are sold on the expectation of return – as in real estate (e.g. REITs)). A country’s stability and productivity have an effect upon the faith assigned to its money (and ability to pay that money in the future – e.g. bonds). When a country loses a war (civil or not) the value of the loser’s instruments is put in serious jeopardy if not annihilated. (In an interesting obverse of this situation, there was a shortage of change in Italy once so stores started issuing paper representing 10s of lira with the expectation that others would honor them and eventually change would appear -as it did.) “Bitcoins”, and then other cyber money (even crypto) were basically created out of the whole cloth in cyberspace as “money” to be used in transactions for those able to access them and then spread their use with early success. Psychology and politics clearly play a part in forming the expectations of usefulness for getting other money or making purchases.
While money may be the measure, some have maintained that labor creates value; others that markets create value by “supply and demand”; others that things have intrinsic values (religious icons). It may be, and I would suggest it is the case, that all these types of value, usually represented by money in all its forms, generally come into play as factors, invoking commitment and expectation. Elementary transactions often reflect supply and demand. Labor required (and paid for no matter how badly) establishes a reference for evaluation in what is produced and who benefits from the production. Things are sought for their value itself (which may be only in the eyes of the beholders.) Money considered as designed to facilitate transactions (and socially allocation of resources) develop into multiple manifestations and derived embodiments.
(5) Society and environment. What is valued is often set by cultural norms. What there exists in tangible form can be affected (even to the point of ruination).Veblen, in The Theory of the Leisure Class described brilliantly the form of cultural norms setting value in cherished items and displays. Anyone mobile in our modern society has seen that different value recognized by different people for the same items or objects. Convenience, advertising, appearance all play a part in encouraging people to spend money for items at a particular amount (and often higher price than can be located elsewhere). Large companies, particularly retailers, have leverage (often helped by preferential tax treatment) to eradicate small companies, particularly in the internet age offering ease and immediate gratification in purchase. (A large retailer can sell as loss in a locality until its local competitors lose enough to go out of business, and then raise prices with the resulting monopoly). There are many societies, communities, and many environments. Political events and climatic changes, small and large, in brief or extended times can affect markets, labor, productivity, value, even survival. The unpredictability of natural and human occurrences (with feedback, mass and individual psychology, and implement policies)) in these domains ensures that no one can forecast accurately the economic future, local or global. The political and natural environment can have major impact. Tastes as well as needs change (partially based on what service or luxury can be provided). There is, of course, randomness built in production, evaluation, and exchange. (Dramatic failures in production, often because of lack of visibility and accountability, can affect sales – e.g. Boeing and the defective 737 Max planes that twice killed hundreds). Laws, regulations, tariffs, corruption, and availability affect trade. Individuals alone and aggregated change in desires, inclinations and aversions, evaluations and actions. But, even if one could reduce the effect of these factors, there is no way to eliminate them from having a direct effect probably in the short run and certainly in the long run – unless one has a highly deterministic view of history which, for the moment, is outside this survey and not historically borne out. Readers of The Economist, and particularly Buttonwood, raise many factors affecting businesses but rarely offer predictions or means to weigh their interaction. The stock market (whose units represent money and money anticipated is often described as one operation rather than an aggregate with some psychological contagions) thrives on predictions general and specific which have little basis and often less known real factors Commodity markets are based on speculations about the future of demand, production, weather, etc. Unpredictability results. (This is not to gainsay the reality that insiders rig particular markets (e.g. stocks, commodities, financial) and in the short term produce advantageous conditions for insiders to skim off the cream, while the outsider, confined to watching trends and hearing advice, loses.) In related areas, vulture investors buy up companies to break up and sell fragments which affect markets and companies.
Politics (and public policy) affect the economic realities. War, which some consider the extension of politics by other means, has obvious effects on all aspects from environment, to productivity, to personnel, to sales, to what money is available and employed. Decisions are made as to what individuals, individual companies, and industries get government contracts or subsidies. The military industrial and prison industrial fields in the USA today illustrate the corruption, direct (to agencies and politicians) and indirect (to the public) with importance of governmental allocation of resources rather than abandoned sometimes wholesale as in “privatization” of public basic needs with profit, rather than efficiency, safety and social justice, determining allocations and charges. “Privatized” rests on the rather remarkable claim that costs plus profits when private business operates its bureaucracies and gives its bonuses to the “captains of industry” (Veblen) will be more efficient and cheaper than non-profit government operation. (The abstract unsupported claim is that government run entities are “inherently inefficient” – as if any organization doesn’t have defects, incompetence (purposeful or not) and slackers). The privatization of prisons, as noted, in the United States increased the already grotesque nature of incarceration with additional motives for incarceration. Similarly a health system with private insurance companies driven by profits (returning about 60% of premiums to “ beneficiaries” while frustrating them with mountains of unnecessary paper work and improper refusals), fewer, but expensive, hospitals, costly Doctors (some of which will not take insurance) presents an American medical disaster causing wide spread suffering, deprivation of timely treatment, adequate local care, shortened life expectancy.
Decisions about allocations for infrastructure, environmental protection, and military production, just to mention a few. have direct economic as well as daily living consequences. The existence. power, and influence that unions may exercise, depends on the effectuation of policy by laws and regulations. (The Taft Hartley Law produced ghost towns in New England as companies busted unions for cheaper labor by moving down South. As mentioned, Galbraith hailed the unions as a “countervailing force”, rather abstract. Marx dismissed them as an obstacle on the way to the :dictatorship of the proletariat.”) Politics is admittedly unpredictable although a post hoc narrative (in traditional history sometimes) is available supports the continuation or institution of controlling transactions and allocating resources – compatible with some theories advanced but not persuasive for their systems or preposition; another reason economic conditions in the future are unpredictable in precise or large part. In the modern world, corruption has many inviting venues to obscure and to change economic conditions, particularly large purchases and markets, legal and illegal. Greed, discussed in connection with money, drives many decisions further adding instability and unpredictability often shrouded from view.
Among crucial policy areas lies one subset of cultural norms. Mankind has a particular monopoly of nature and its resources beyond what nature provides. Environments have capacities for exploitation in various ways to produce harvesting, industry in bulk (oil) or in part (lithium), and objects considered valuable with what ranges from necessity to what is valued for vanity or current utility or use in transactions. (E.g. gold) Decisions made to plunder or save the environment, organic and inorganic, decisions to change the environment (as in dams and water diversions which destroy wetlands, (water intensive crops and golf courses) clearly produce results which effect various components of society and nature itself either beneficial or harmful to living beings, including the human race. The far reaching consequences of planetary plunder (fossil fuel production, deforestation and water diversion offer powerful example ) and overpopulation can not be overstated. The treatment of the downtrodden, the different, the poor, the deviant, the oppressed are all, of course, profoundly affected by the allocation of resources by governments in taxation and dispensation of assets in good, services and money. Further, they create economic dislocation, refugee and immigration crises which cause humanitarian disasters with economic consequence (and political, too – often used to rabble rouse.) How extensive the disaster(s) will be, the areas seriously effected, and when – dependent on what human action besides nature itself – can not be predicted with any precision or deduced or derived from any theory even as the activities have serious crucial effects. Climate change (global warming), ice melting, seas rising, animals forced to move or dying are therefore at least equally difficult to forecast. This “doomsday” scenario has characters, a plot, a tone but no resolution or ending yet.
Taxation is public policy. It reallocates resources by subsidies, exemption, deductions. (If inadequate for public spending, it creates national debt with future consequences with date uncertain.) especially for poor “third world” countries. Laughing at Laffler aside, the decisions made as to what to collect from whom directly impacts the taxed (and tax) in the ability to sell and buy. (Sales taxes, user taxes such as tolls, and Value Added Taxes furnish among the clearest examples of unequal effects on the rich and poor.) The preservation of a wealthy elite is accomplished both by inheritance laws and by lax taxation. (An interesting subplot of charitable donations by the wealthy. who receive both taxes and special privileges, produces noticeable and notable effects in the creative world.) The wealthy elite are often not those who should be in power but are unfortunately able, even when not in direct power, to change what those in political power do above and below board. As I write the Koch brothers and others along with ALEC (which writes and pushes laws benefiting the rich and mighty, oppressing the poor, effecting democracy itself) exercise a considerable pernicious effect on democracy and its institutions.
Governing bodies produce regulations as well as laws for safety, movement of goods and services, markets of all sorts, etc. These regulations, often implementing laws provide part of the economic context, reflecting practical policy decisions with economic consequences. How laws and regulations are publicly applied in a geographical area (locales may differ) affects how transactions occur with social norms relevant and enforcement possibly required with personal elements, attitudes, and possible corruption created.
What is valued (jewelry) or promoted (the arts) or denigrated (the homeless; ugly views) produces economic decisions by those who command vast sums of money which are occasionally spent on charities (which themselves are manipulable, wasteful with bureaucracy and solicitations, and even corrupt.) This suggests a supplementary idea of “value” as intrinsic, rather than labor or market based. In the United States, organizations are established (e.g. PACS and Super PACs) specifically designed for political purposes including the allocation of resources (including by taxation) benefiting a few at the expense of the many. Vast sums are also spent by the wealthy on luxuries resulting in pollution, of all sorts and all places, from yachts, limousines, jets, helicopters, and demands for and on servants. Money and resources also support a range of activities from daily needs, education, transportation, shelter, amusements, addictions, and possessions from the necessary through conspicuous consumption to obsession. The arts are dependent in the United States on their “charity” allowing them to put their names on artistic (and medical) venues, engage in expensive self-congratulatory parties, etc. then to take tax deductions. Accumulated wealth thereby not only reflects cultural conditions but also effects the culture itself with resulting social and allocation problems – an example of feedback. Quite a story – we could consider it subplot (even in an incomplete account) which causes uncertainty.
Allocation of resources and receipt of power, prestige, and possessions usually reflects the pervasive corruption. to which we referred, in all modern industrial societies (often pervading international interchange) and almost all their involved institutions. Its effect on every aspect of society and governance can not be overstated, involving public and private industrial production, real estate, media, education, social mobility and law enforcement, transactions themselves etc. Any realistic economic survey has to include “black markets “ with all the elements involved in doing business (from the trivial of standard bribes for moving to the major government purchases and buying political influence to preferential educational admission.) In particular, there are “illegal drug” cartels which operate like many “legitimate businesses” to service demand and need (without necessarily creating it with advertisements) further corrupting law enforcement and involved with considerable associated crimes, criminal (violent) personnel, money laundered, etc. In some countries, the “black market” in currency, goods, and services forms a major proportion of economic transactions, and, in all, major money moves in secretive ways, avoiding taxes and other problems (creating special “havens” in small island companies, for example, on which their economy is based.) A drive across the border from Italy to Switzerland reveals many expensive cars going to and from banks to make their transactions free from scrutiny and taxes. Fiction has featured exploration of the characters, actions, and ambiance of these crucial, mainly hidden, economic activities.
Monopolies (both State, i.e. current China and private) further can distort the economy. (State monopolies may result from autocracy.) They can and should often be run by a non-corrupted government satisfying universal needs, education, utilities, transportation, extraction of resources, health care. We will focus on private examples with an implicit resistance to “privatization”. It should be obvious that a bureaucratic institution is not improved by grafting on the profit motive. We illustrated this proposition with the “privatization” of prisons whose current embodiment is much to be condemned anyhow; in education it has failed to a lesser degree) (In contrast, the military offer socialism with free room, board., availability of education, health care, continuing for veterans)/ Monopoly of a resource (land in the pre Industrial times) affects markets and allocation of resources. As Fritz Kessler demonstrated (69 Yale Law Journal) it can be achieved by control of a source of a vital component in production or of the field of distribution. Any reference to a barter basis of market and derivative “money” is thereby destroyed. Monopolies extending or being created have social, political, and environmental consequences with pervasive daily effects on individuals lives and fulfillment of needs and desires.. (See, General Motors destruction of efficient street car transport (a subtext of the movie Roger Rabbit) to sell buses and cars, later multiplied by Eisenhower’s administration erroneously investing money into highways not railroads as European countries did in WWII reconstruction.). Living conditions, politics, societies (separate or together in some type of harmony or conflict, like war), arts and sciences are distorted by the resulting waste and misallocation of resources diverted to the profit of the privileged few.
The attachment to jobs, income, and profits affects mobility, life style, and political attitudes. Conversely, of course, those in turn affect decisions, political and social, in enterprises and allocations. See, in general, Veblen’s Theory of Business Enterprise. Some fiction explores the interiority of professions psychologically (see, e.g. Von Doderer’s The Demons, Part One on journalism), others production (miners in Zola’s Germinal) and all other aspects which affect decisions which in turn create economic realities directly or indirectly.
Caveat. A great deal of description is based on “data”. Not only are sources often incomplete subject to bias (intentional or not) but the methodology for assembly and presentation is often flawed and corrupted by those who want to use it for political or economic advantage – and not justified except by purposeful inclusion in a narrative or thesis..
(6) Psychology. Both Veblen and Keynes indicated the role that psychology plays in any market, exchange and assessment of value. Keynes focused on the psychology of the investor for financial markets indicating that it made investment markets inherently unpredictable (which doesn’t mean it can’t be rigged in a short time for specific trades or in a technological age money made by computer algorithms in high speed buying and selling. In general, as noted, the insiders skim off the cream, and the outsiders, small investors particularly, lose out.). Veblen described how the rich seek status (non tangible if often displayed concretely). Mass and individual psychologies function throughout these other factors in our survey from how people work, to the importance of ownership, in value recognized or ascribed, in the markets manifested in the transfers of goods, moneys, or tokens of them, and in how the nature and changes in society and environment are handled. (Psychology, of course, can be misused. E.g. the claim that higher taxes will lead businesses and individuals to move when not only is the usually proportionally a small amount less than moving costs while the rich pick their commercial locations based on other concerns particularly preference for location’s ease of access to companies and luxuries; employees can not or have too many attachments).
Effecting the psychology of the public has economic consequences (utilized by advertisements). The tax savings (just critiqued) for companies and the rich would better be directed to job training, facilitating mobility and settlement, even augmented by direct payments to the jobless, in particular; in addition to allocations ensuring basic needs from housing to safety (personal and generally from industry and agriculture’s process and product) to medical, – included for individual appropriate demands on a government, to be provided to the deprived members of that political unit. The money dispensed to the jobless and dispensed to support the poor is immediately spent to circulate – with Keynes multiplier – rather than hoarded or spent abroad by corporations and the wealthy. Empirical studies bear this proposition out.
Driven by propaganda (psychological and emotional appeal) on patriotism (emotional), military build up at expense of population needs results from greed, power lust, and paranoia (self protection.) It is raised by leaders and accepted by followers (with general safety concerns implicating police, sometimes militarized, and sanctions). The result is that other States build up their military for “self defense” (justified by real threats or unjustified), image, helping commerce. and sometimes expansion, which further justifies other States’ increased allocation for troops and weapons, including for mass destruction. (The military is used not only in wars but in commercial enterprises and conquests (both combined, for example in the British Empire’s and the East India Tea company’s symbiotic colonization of China – both present in the “Opium Wars.” Here the psychological feedback from other States increased military power, with economic effects, is in full force with many unpredictable effects (including expenditures, often corrupted in politics for location.).
How Profits From Opium Shaped 19th-Century Boston
Definition of Boodle, Boodle Boys and the Good Ole’ Boy Network
Colonel Thomas Handasyd Perkins, or T. H. Perkins (December 15, 1764 – January 11, 1854), was a wealthy Boston merchant and an archetypical Boston Brahmin
John Perkins Cushing (April 22, 1787 – April 12, 1862), called “Ku-Shing” by the Chinese, was a wealthy American sea merchant, opium smuggler,
Psychology also plays a large part when there are big environmental (or political) changes. Often the reaction is as if the anticipated effects have already occurred. (See. e.g. changes in stocks and commodity market prices when a commodity may become short, such as well oil; or will become short as with wheat.). Psychology often accelerates a financial depression, when fears inhibit spending. How people react in the markets; what companies do with labor; what is considered valuable is altered.. (Some “narrative” economists such as Robert Shiller, mistake this important phenomenon as the main or sole driving force ignoring more inclusive accounts such as Galbraith’s. Shiller argues that the “Great Depression” resulted from unfounded fear of robots taking jobs away – cf .current considerations of “artificial intelligence”, robots, and computers). These occasions, with big swings, also provide another occasion for the insiders dealing with some type of “money” to profit while the small players (e.g. small investors) lose. Inflations are often partially driven by shortages and fears of their increase, as interest and dividends rest, in part, on uncertain future calculations for the assets holders future prosperity and income. Bankers usually focus too much on their own salaries, benefits and bonuses with the banks simultaneously operating for immediate gain, with a parochial fixation on one domain of “assets” rather than function, future, or fellow man. (Often, business decisions are made for short terms gains instead of long term ones since “money” is so mobile and variable.) People also invest their savings knowing little if nothing about how or where it is invested (granted it may be very hard to find out) and trusting “financial advisors” who make money primarily by selling “products” (bonds, stocks, shares, puts, calls, credit swaps, etc.) rather than knowing what are good investments in the long run – an inherent conflict of interest – a dialogue of unequals, in which the trust of the ignorant is crucial. The reducio ad absurdum of investment can be found in most forms of gambling of which lotteries are the worst example with astronomical odds against winning coupled with infinitesimal returns compared to cash collected. The amount of greed and duplicity is reduced by co-operatives (e.g. credit unions) and State owned banks(ironically in North Dakota – the Supreme Court enabled definer of credit cards interest usurious limits ). With knowledge not widely available the innocent investor may be fooled. For example, municipal bonds were rated very highly secure (AAA) because they were insured…by shell companies with no resources. Trust, psychologically based, even when justified by reason, may badly mislead.
What makes a product succeed is often primarily psychological.. The fashion industry, cosmetics, hair styling, pharmaceuticals, foods desired, architecture, furnishing, decorating, automobiles, etc. depend on trends – current “taste”. Even toys have their season – almost every Christmas there is a craze for a particular one. Fortunes are made and sums of varying amounts are lost on predictions of what will strike the public’s fancy or be aroused by advertisements. Advertising itself is based on amateur and even professional psychological theories about what will induce purchase with the content often unrelated to the product’s usage. (Addiction, no matter how it occurs, can create drives to purchase too.)
We should also recognize that Psychology may incorporate idealism. A guiding vision of a just society, of one without poverty, one with equality, on the one hand, and theocracies, on the other, can contribute to or determine public policy and attitudes towards goods, transfers, allocations, markets, profits, taxes, entitlements, investments public and private. Aggregated individual psychology may constitute major forces in the “market place” but ideology may create the tone and the plans containing these forces. (In this context, the difference between short term and long term interests grows in economic significance.) “Planning for future generations” with long term projects with costs rather than short term gains have lead to construction of high speed rails and the setting aside of lands for conservation. Some countries have sporadically attempted to equalize opportunity and provision for basic needs. Some have tried “Communism” (intended by Marx for an advanced Industrial Society such as contemporaneous Germany) but distorted, often to an extreme degree, by dictatorships and lack of resources and developments in large areas such as China and Russia, or rigidified in a Cuba. We must also accept that “left” leaders like Lumumba and Allende were assassinated by capitalistic and company driven governments with secret agencies when there was reason to believe they would succeed and improve the country and particularly the lot of the poor needy.
The first five constituents may be viewed somewhat unformed characters in subplots, without a complete story, that have occurred over time in society and societies (comprised of many overlapping communities with where people dwell, function, and identify) with international repercussions in that interrelated economic sphere. The 6th may be considered to help constitute the nature of these characters. The tone or style for presentation of a particular theory are clearly affected most the 5th and 6th factors or forces but also by the way each of these develops a coherent life of its own. In particular, the psychology can affect the means of transactions and allocation as a style for a society as well as serving as a component of its actors. The first five factors are not abstracted directly from discrete objects or forces but rather partially generated and justified by “professional” economists with theories to offer elements of explanations and histories, still resting on unjustified assumptions (as Veblen so well points out in his demolition of Classical and mathematical economists.). Descriptions of subplots, although dealing with actual changing situations, conditions, and factors. found in known economic theories, are not abducted empirically if sometimes supported by selected data (often “historical”).
We should distinguish, at this point, between micro economist and macro economists. The micro economists believe in closed systems with one or at most two driving mechanisms. Monetarists, prominent today, believe that currency manipulation is the way to manage an economy, so they look to statistics, not necessarily reliable, about gross domestic products, debt ratios, interest rates, money liquidity, savings, new investments, either to impose “austerity” stupidly depriving the deserving and needy or intelligently to follow Keynes, in the short run, and therefore governmentally employ “ money” in a counter cyclical way, with government spending is a depressed economy. In the United States, the monetarists reduce economics from finance into money movement into determination of money movement by interest manipulation by the Federal Reserve – with minor real effect.
Macroeconomics should include all the six factors we have outlined – accepting not only their interrelationship but their inherent contingent natures. No one theory with its patterned plots or accounts projected, given the number and complexity of variables and intrinsic unpredictability, will fit all possible situations although all will display the factors and forces we have identified. Chaos theory where one action can create unforeseen consequences in meteorology furnishes a good analogy. The plausibility and utility for the accounts given rests upon how well these categories for consideration are given concrete content from analysis and abstraction, freedom from propaganda and current cliches, the use of data and evidence, a sense of particularity of history and society with a recognition of tentativeness and probabilities, denying certainties to certain future economic activities. This permits many macroeconomic theories to be maintained. each one with a different implicit presentation of human nature, association, and transaction, perhaps exhibited in analysis of past developments. Any understanding must also focus on the interplay between politics, political decisions and economic conditions; both with social and ideological changes affecting the public and expressed by it. As we have presented, allocation of resources defines economies but is often decided politically; likewise economic considerations motivate those in power and what and who may affect them (poverty, frustration, anger, etc. focused on income, services, and financial conditions lead to regime changes and revolutions, with or without ideological theories associated) including the use of money to produce propaganda and control the media. A well structured and justified macroeconomic theory, always frustrated in the future by unpredictability in a contingent world, should foster insights into past and present economic conditions to suggest particular policies at a particular time and place.
A Summary Sampling of Theories
The stories related and expressed in economics often to approach caricatures of histories with “explanations” peddled as myths for the public and occasional policy markets. On the other hand, they are often formulated as if they were problems in mathematics which remove them further from reality with the pretense of appearing “scientific”. Micro economists fasten on one device (e.g. taxes, interest rates) or one abstraction (e.g. money, stock market, consumers or supply, deficits and debts) as the determinate factor. Economic history provides prime examples of mistaken abstraction as well importation of conclusions and methodologies from other disciplines. The most obvious example is the misuse of mathematics.
Malthus produced its first dramatic misuse, mathematics. Population, he stated in 1798, goes up geometrically while food production rises only arithmetically. Then he predicted doom.
Why? What evidence for this proposition was or is there? What data illustrates this fact?
Some studies indicate that when middle class goals are possible for a population, it ceases to grow (as is the current case for native populations in most of Europe) whereas poverty breeds large families for many reasons including other sources of income or labor, the lack of knowledge of birth control, or slavish religious behavior (also applicable to the wealthy who can afford it, although the devout often divide from the authorities on these issues). Yet Malthus is still used for analysis. The baseless claim has mathematical simplicity – that is all but it has echoed through theories.
This is not to say that population growth may not be or even currently is not the major problem environmentally. China illustrates rapid multiplication over the last half of the last century even when it tried a one child per family policy. Ironically, there seems to be about a ten fold population increase since 1750 with enough food to feed almost all if properly distributed – if properly grown and harvested for masses without creating dangerous pollution problems and devastating irreversible loss of natural resources. What can not be done is to make the problem geographically universal and then subject to an elementary mathematical formula, particularly when there is no empirical data base, means of generalizing, or recognition that population is itself affected by economic reality as well as all the factors evoked above present in economic activity, nature, politics, and technology. Population explosions, it seems, is best controlled by economic policies alleviating poverty and equalizing wealth and resource distribution. Overpopulation of the world may have enormous potential for disaster, but not demonstrated by Malthusian simplification.
Quesnay, at the end of the next century, revived the idea of mathematical formula as ones which expressed real economic activity. The failure of his principles either to predict or describe led to his oblivion. Neither he nor Malthus did more then treat men as economic units incapable of multi-faceted motivation in a contingent word – how much richer and accurate was Veblen’s refutation in his Theory of the Leisure Class and Theory of Business Enterprise.
Bad ideas die hard (even they are refuted in fact and theory). Arthur Laffler drew that curve on a napkin at a supper, received gratis, claiming that it revealed, with precision, that total revenues went up when taxes went down. Needless to say there was no data, means of generation, or analysis involved. It was honored by the title of “Supply Side Economics.” to become influential in academia and right wing American governments (hand in hand with Vulture capitalists preying on vulnerable companies without restrictions). When put in practice, of course, the results were entirely different – people hoarded their tax reductions or spent them abroad rather than domestically so coupled, with lower tax rates, the total revenue were less. (Keynes, a brilliant mind, who knew both mathematics and logic, posed an opposite theory: the multiplier effect discussed below.)
Meanwhile in the financial world, business schools and other gurus were tempted, as so many soft minded people are, to think that physical formula are applicable outside of physics. Coincidentally, computers entered the financial investment scene making it quite possible to have mathematical formulas and mathematical models put to work on numbers fed into the machines in order to produce results the way physical formula produce results in physics. (Others have urged the application of game theory to economics on the unproven assumption that aggregates of economic actors behave as if in games. For work in this field, people have received the fake “Nobel prize” created by Swedish banks discussed below.) In the stock market, some “investors” rely on speed in calculating changes to buy and sell before the market reflects those changes, thereby using technology to game the system and get rich.
Garbage in means garbage out. True enough when numbers employed were taken from movements of money derivatives for speculation in investment markets (stocks, commodities – so subject to climate). There is no evidence that these mathematical models were based upon the actual economic principles but rather featured algorithms for movements in money markets. Moreover, a herd instinct took over with feedback automatically resulting as all the financial would be geniuses (in rising markets) employed the same models. The crash to which we refer in this Chapter’s first Appendix occurred in part because investors in these markets followed mathematical formula. Reading the Economist over the years reveals a parade of mathematical theories entertained which have not worked well – once described by the columnist Buttonwood (most of them dealing with financial instruments and markets as if they were discrete entities following specific patterns rather than reflecting a plurality of causative factors.).
Adam Smith is generally considered the first and one of the Great Classical Economists (although many of his observations were based on his experiences in a small port town.) More often misquoted and misused than read, he is rightly credited as the person who introduced the factor of the market (although he also suggested the labor theory of value) featuring supply and demand and the values of competition. (How his theory would have evolved if he had lived in Italian towns where many made the same product in a cooperative atmosphere is not clear.) By a market, he meant a general area of exchange at a time when debentures and the like, stock undertakings, were done in coffee shops because that is the only place the British were sober in the morning as a result of drinking coffee in addition to or as a replacement of beer or ale for breakfast. Transactions were on an almost always small scale. His extrapolations were never justified as he ignored problems of scale while assuming contextual stability.
The problems with the market theory (with the “invisible hand”) are many. Around the turn of the 20th century, our eccentric genius Thorsten Veblen destroyed both Quesnay and associated mathematicians along with those followers of Adam Smith who thought that everything was controlled by market forces on discrete individuals in the Theory of the Leisure Class and the Theory of the Business Class. For either type of theory to work, Veblen pointed out one would have to assume that people were all individuals aggregated with each one following. instantly and completely, “rational” decisions about all activities based only on economic “facts” (and further assuming they were accurate and available.) – clearly wrong. In a witty trenchant style, he demolished this assumption describing the leisure class as engaged in “conspicuous consumption” showing off their wealth, while the business class acted only in its own interest often sabotaging production to get greater return on the products. One could also add, Classical Economics was built on assumptions as to lack of monopoly or oligarchical power, mobility, full knowledge, and duration of conditions. (Esther Duplo, the 2nd woman to win the Swedish banks’ Nobel Prize, shared in that honor for “empirical research” (“random controlled tests”) which indicated the falsity of Classic Economic assumptions, such as change of location based on work availability; welfare as a disincentive to work – a quite limited base for extrapolation.)
Veblen thus introduced both psychology and implicitly the issue of corruption. It is important to note that his psychology was not meant to be sophisticated or empirical but only to demonstrate that classical economics was based on a simplistic and simply erroneous basis. (Fraud is, of course, a form of corruption – as when gas prices are raised immediately and sometimes drastically when there is unrest in an oil producer, regardless of the probable duration of supplies and even diminished demand). There have been sociological studies of how people behave in various economic contexts, psychological tests of how people choose, even theories generated from them to predict market behavior and thence economics (which do not confirm game theory application). But these too, by dealing only with some psychology, whose limitations we have outlined, and no complete account of reality, are also inadequate, if professionally respectable. Further, the joining of corruption and psychology lead to “public relations” where more is spent by companies claiming good acts than doing them (also by giving to charity for personal or brand expected acclaim by individuals and corporations); good benefits promised or enjoyment either not possible or overridden by harm and unjustified price. Advertising is the main factor in sales with “brand loyalty.”. Lobbying those who make political decisions is another form of “public relations” where corruption (usually incorporating fraud and lies) can become an even great component. (More money is spent on advertising how good a company is, say for the environment, than doing less harm to it – hence, these days, many ads promoting fracking and claiming the oil spills were cleaned up while money – none or much less than spent on fraudulent propaganda – was lacking for degraded land and lost livelihoods – as big corporations were not held responsible as they should have been.)
“The Market” became an incantation, almost a mantra for many who stood, at least on a temporary basis, to profit from its invocation. (And they of course had their acolytes, jackals, and journalists repeating the governing cliche). “The market” assumed equal bargaining power; it dealt with elementary transactions; it did not account for money in derivative forms for bills of tender (although the “market” became sometimes synonymous with the Stock Market and to a lesser degree to Commodity markets.) Ideas of “market forces” (generally undescribed except by another mantra of “supply and demand” assumed intimately and immediately linked) was imported whole and totally undigested into descriptions and predictions in these markets for money as money and material derivatives. In the Stock Market, “experts” even talked about “fundamentals”, e.g. earning to price ratios, while suggesting that the prices would be properly set, as supposed in street markets, by supply and demand after bargaining and free exchange. Stock markets have proliferated; other markets trading on expected exchange returns (including money now including bitcoins, etc, investments too, ) have been created. Since there transactional aspects of time in any “market” movement but also all the factors. we have mentioned, crucial, and often effected by corruption, in a contingent context, there is never a pure market except as an willed abstraction. Yet, since all markets move with and in numbers, the temptation to use mathematics always beckons – while real economic conditions and patterns, actual and unexpected events eventuating, both threaten and come to be. We can see in some histories even claim some patterns were predicatively determinative, erroneously since no one predict where the economic story will go with any precision or certainty – and, if based on limited theories, doomed to error.
Taking off from Veblen as well as the history of stocks (See, e.g. Galbraith, The Great Crash of 1929) we must again emphasize corruption itself. Deals are rigged, numbers are faked, goods are stolen (even pirated), as those in power seek to enrich themselves (and Dictators even when driven out, usually escape along with billions of dollars).
Corruption can be generalized. There are short term gains and long term gains. The two may not be compatible. Alfred Nobel had such contempt for “economics” that he refused to create a prize for it. The Swedish banks stepped into the breach and designated a separate prize to be given at a separate time and place from the Nobel prizes as “in honor of Nobel” fooling many into thinking there is a Nobel prize in Economics. They were therefore able to pick “economists” that served their short term goals if not the long term needs of communities of the world. Hence, they gave the imprimatur of “Nobel laureate” to Milton Freedman giving intellectual cover for the plunder of South America and other “developing societies.” He also peddled with some success that “corporations” facilitated by governments for the public good only existed to serve the shareholders, not the workers, suppliers, environment, or public, placing profit (minus bloated executive salaries, burdensome bureaucracies, advertisements) at the center of consideration.
Once again the environment becomes most relevant. What produces profit in the short run may be totally antithetical to what is beneficial ecologically (for example) and therefore economically in the long run, even for what is produced. Short term profits have no necessary connection with long term profits for their bases are different with conditions and resources changed and depleted as are their uses. Decisions made in this area between the competing interests of quick profit and long term preservation implicate the planet and quality of life invoking politics and public policy. Examples of these clashes abound – logging an area so that it is degraded for future production may make millions for those who log but for all those who live there or come later: – only poverty is plentiful (sometimes genocide for the indigenous). The constructions from dams to highways to munitions may make some a great deal of money but cause misery for much many more – forever more. There is also market saturation, depletion of supply, and dependence on trends and fads which lead to disasters after quick successes (with executives bailing out with “golden parachutes” etc.)
Marx came along, and while standing Hegel on his head (not his feet as he claimed), became the last of the Classical Economists. Steeped in facts (and perceptive as a Journalist – see his dispatches from England to the Herald Tribune) he took Ricardo’s Iron Laws (more mathematics) of Rent and Labor to combine them with the labor theory of value to produce the scenario of “surplus value”, the profit taken from labor residing in an increasingly wealthy and small group of people with the producers of that value growing larger in number and poorer in living. The result was revolution. His theory takes into account, in fact, depends upon a doctrine of history (e.g. from feudal to industrial) and hence politics; does rely on data as he developed it in his many works, and used accepted principles of economic analysis. Sometimes it seems, as a result, that his predictions may come, at least, partially true, particularly when corruption allows for profiteering and where the rich can corrupt the political process (as presently the US Supreme Court has made easy in the United States) with radically unequal wealth distribution. Ironically, it has not been tried in advanced industrial countries but misapplied (particularly the utopian goal of “dictatorship of the proletariat) in underdeveloped societies/States.
In human terms, dislocation and destruction of communities are also important. When an industry dies or cuts down work force because of failure of demand or “technological” advances from machinery to robots, or (often associated with city planning -“urban renewal is Negro removal” was a common phrase in the 1960s, or even highway intrusion often cause no jobs to be available for people there.) This disaster can be alleviated, but rarely is, by increasing the ease in mobility and relocation, job training, and government (and perhaps) private commitment of funds to both income levels and new productive facilities. Marx did not envisage this aspect but it joins his general principles of exploitation. (Some capitalists claim it does not matter what happens to those who produce – or suppliers or consumers – but only what shareholders receive.)
The importance of the Industrial revolution was enormous resulting both in provision of necessities, luxuries, etc. but also bringing deep dangers to the earth, ocean, and sky now augmented by concurrent overpopulation. Technology has played an important role. There are many who argue for a subsequent “technological” revolution with cyber space now available. It is not clear now, however, that it is different in nature than other inventions, means of communication, and production. Its effects are pervasive in daily life but it has yet to be proven that it offers fundamental changes. Drudgery is drudgery whether in an assembly line or serving or servicing computers and the internet. Its wealth creation with inequality associated suggests that Marx’s analysis would not be altered.
Ricardo, whom we have mentioned, who came between Adam Smith and Karl Marx (and Engels, DeLeon, and Lenin) created another attractive illusion based on simplicity: Free trade. He called this doctrine “comparative advantage” arguing that whichever country produced an item more cheaply than another in that country that is what they should produce to buy what is most cheaply produced in another country. Therefore, Banana Republics. The defects in his system was, once again, having only a simplistic formula without a vision of the whole picture which would include consideration of time for transfer, costs for transfer, losses of other productivity and materials by specialization, depletion of nonrenewable resources, and the effects of politics, money movement, and corruption, etc. The potentiality of others than the locals controlling the production was not considered. Self sufficiency and change in desirability of a commodity offer further crucial factors. One other related real danger became evident with globalization where only one country or locale produced some important ingredient in products (e.g. Japanese chips for electronic devices) which became unavailable or rare due to either catastrophe or planning, so that production of many goods was seriously affected..(One aspect of anti-monopoly laws against vertical integration was to prohibit monopoly of one essential component from selling it at a preferential price to an allied company allowing them cheaper costs than competitors. The other end is monopolizing sellers who exclude rival products.) Ricardo’s simplistic formula has seduced some policy makers causing harm, justifying self-serving others in their actions. True bad, serious consequences lurk in tariffs, even when justified as protecting nascent production; there are virtues in increasing trade and sharing; Tariffs are taxes upon the consumer unequally hurting the poor consumer. There does not exist a simple principle but a requirement for policy reflecting actual and economic possibilities at a specific time for a particular State(s), Economic theory must recognize the variable local domestic and international production along with all the other considerations – extreme example: sanctions for disapproval of a State’s governance…or conquest.
John Maynard Keynes created what was called the “New Economics” and invented at least one useful mathematical tool: the multiplier effect. If a dollar (money unit) was spent by several people, he argued, then it was as if there were several dollars spent so the speed of transactions had a multiplier effect. A poor person, therefore, is the best recipient of money since he must spend it and spend it locally where it will be respent, whereas a rich person may store the money where it multiplies nothing but ego or spend it out of the economic area where it was produced. How precise a tool this principle is has not yet been demonstrated empirically or theoretically but seems to offer a good general proposition and has justified some successful policies put in practice, most famously the New Deal.
His brilliant insight, correlated with data produced policy, was employed effectively to combat the capitalistic crisis of the 1930s depression. By putting money in the hands of the poor and by the government extensively employing people in productive enterprises including the arts (later also in War), and by distributing money directly, the Keynesians helped end the depression as well as alleviate misery.
One problem is that Keynesianism helped give birth to monetarism ( with number obsessions to appear “scientific” if not indicative of real conditions and patterns): the doctrine that the economy can be controlled by manipulating the money supply and the amount of money in circulation (when money is represented without derivatives). This leads inevitably to mistaken mathematical modeling. Also, as we have so often indicated, it neglects many factors – more than we have discussed since it does not even take into consideration productivity and the real production of value. Once again a school of “economists” have seized upon an economic factor with the claim that it tells the whole story. The monetarist believes that money manipulation can determine what an economy will do (One of its manifestations is an obsession with a country’s debt as related to in Gross Domestic Product and as a quantity, rather than assessing its role in the current and projected economic productions and exchanges. Thus the imposition of the ruinous austerity on Greece by the European Union, International Monetary Fund, and World Bank in the beginning of the 21st Century which made conditions continually much worse.)
It should be noted, int his connection, that we also have the obverse of corruption possibly playing in politics. Ideals serve policy. The idea that a country as wealthy as the United States should have a “War on Poverty” is noble. The use of wealth, directed by a properly run government, so all people have the basic necessities we have suggested, and more, including education, support of the arts and science, extensive cheap or free transportation, affordable shelter, clothing, health care, to create an opportunity for personal advancement, with enjoyment, may help determine economic choices creating freedoms. It is a fortunate coincidence that a monetarist acceptance of the Keynesian multiplier leads to the idea of investing in the poor and what they spend and can do. Here, the policy advocated also reflects political and philosophical doctrines of society, human rights, and human worth. It will not do the whole trick but remains valuable, particularly at times of crisis and particularly as a affirmation of humanity and individual worth.
Obviously this brief excursion through some of the famous movements in economic theory is superficial and incomplete (wasting time refuting Hayeck or the Chicago school). What it should do, however, is suggest, by examples, that all these theories founder on incompleteness and necessarily can not predict precisely and effectively (e.g. stock and commodity markets, all forms of pyramided derivatives, international exchanges, future jobs in this world of human behavior and uncertain changes in nature with randomness introduced by nature and man.) or commensurately be but one of alternate historical explanations for conditions past and present. The lure of mathematics, in spite of its occasional productive use, has given these subplots a claimed shine of science but over the long run, they, if not necessarily immediately, will fail. (Often political policy for economic’s results take time to take hold), Rather, what this exegesis demonstrates is that economic stories, no matter how well told, can not account for physical realities, politics, and chance in the real world of economics. No subplot will tell the full story. Economics is not and never will be a complete discipline, even one where we can move from data to abstraction to theory to an application for persuasive explanation or persuasive predictability. Policies, whether justified by theory or not, which reflect actual conditions are, however, necessary. Good ones reflect need not greed; accept society and culture, how transactions occur and how allocation of resources should help all individuals and the worlds, with institutions, in which they live.
It appears clear that there can never be a complete account of an economic future, or probably of the present – the first because of the multiplicity and randomness in factors; the second because of incomplete or fraudulent information and “data” as well as understanding an aggregate of motivations, justifications, and emotions, functioning in transaction and the movement of assets and objects of “value” etc. We affirm that this is a contingent world, that factors, human behavior and natural impacts, interact and interrelate producing feedback, that there are important yet not predictable, crucial events with far-reaching consequences, that descriptions of the past may be quite helpful but does not generate a basis for all particular policy prescriptions for the future. We always are presented with an incomplete account, still dynamically interrelated with communities, cultures, customs, diverse (internal and external) societies, and States. The theories presently available, correspondingly based on ascriptions of “ “value” as assumptions, describe neither present dynamics not offer definitive guidance for the future. Marx imagined revolutions where they did not happen, Keynes, in 1921 predicted a 15 hour week based on production improvements for 40 years later.
The best historians attempt to tell stories based on solid evidentiary grounds. Economists can only see this as an aspiration. Their accounts, historical and projective, even when presented as an apparently compelling story but including prescriptions, proscriptions, and projections, have always produced incomplete stories, some with historical subplots and constructed futures with dynamic changes -seeking a non-existent Holy Grail of a complete story with past, present, and future. Nonetheless, we can analyze with some insights, engagement, and focused use of theoretical principles which have plausibility almost persuasiveness, to analyze what a situation presents and what solutions should be tried – which was mainly successful in FDR’s economic New Deal and Johnson’s Great Society in the United States.. We may not have a complete story but we can act with practical wisdom achieved by economic analysis of its components and apparent principles.
I attach as an Appendix I –what I wrote in 2008 and 2010 about the economic crisis to illustrate both how the factors discussed may apply with “technicalities” central in detailed analysis of the American financial system in crisis, while accepting that this analysis is a story that can only be told once for the people alive and struggling at that time, albeit with some historical parallels. It should also reveal how time and context bound my analysis when viewed historically as I try to give a coherent account of what the economic story was then. I attach as Appendix II an expanded account of Marx from the viewpoint of a story analysis for those who think I gave him short shrift..
Appendix I – Principles Applied
The Mess In 2008 – Or Some Relevant History – Plurality of Factors
The original idea behind the Stock Market was that it would raise capital by investment so people could purchase items and ideas to create products that were worthwhile by giving them capital in return for a profit for and from that investment. It then grew like Topsy. Stocks took on a life of their own, as did commodity futures – paying in advance for goods at a lower price to get money to farmers and then selling them at the higher price when delivered -“in theory”. People started to buy and sell in order to make money without concern for their basis in productivity or eventual market. “Fundamentals” used to mean the price of the stock based on how much it earned – or expectations thereof. People were allowed to go out on “margin” and purchase stocks by only putting up a percentage of what the stocks cost which could work for speculation if the stock went up but work disaster when the stock was “called” and the rest of the money demanded for stocks worth less than the original price. Banks were enabled to loan and invest a large multiple of the money they actually had – and expected to receive. (Bank regulations have only required, past and present, a small percentage of assets held to justify loans and activities undertaken.) Technical tricks for this “market place” include “puts and calls”, selling short or long – promising to buy without putting up the full amount until a later date based upon the individual’s estimate of what they were worth in the future, and gaming the system by advance knowledge, electronically by receiving stock market changes earlier that other received it (a technological feat). Into this area with deregulation, derivatives arrived while Vulture Capitalists (buying and selling off pieces of companies) thrived..
Derivatives are treated as if they were money which is based upon some basic value but they are not. They are based upon “leverage”, a constructed price from manipulation. So mortgages are sold in groups (be they ARMS, Ninjas, or subprime) and those groups into other groups (divided and recombined) so the value of the final product can be many times (e.g. 25) the value of related claimed “basis”. These derivatives are further complicated when swapped as if they were real “money” transactions of, assets between banks, auctioned, used as a basis for loans between banks and others, etc. There are also derivatives based on capitalistic predation. Private equity firms (also “vultures”) purchase “distressed assets” to assume the debts for various accounting and tax purposes, then segment, package, and sell those debts, which become worthless if the purchasers plans fail.
At the same time, we have a credit loan transactions occurring. Although they should be treated as contracts and subject to fraud claims and usury they are not. In this country the usury problem results, in part, because the Supreme Court allowed credit cards to charge interest based on the State laws they picked to claim as home base. Oversight of pay lender loans to the poor living from the then partial payment of paycheck to the next round is feeble at best. These transactions demand with more money in the future (usually extended over time) than they are worth in the present. Student loans in which installments are paid over long times and payments applied against the principle can amount to substantially more owed in interest, after years, than ever borrowed. Credit cards with additional devices make purchases also cost more over the long run by quite a not only with their interest charges but also fines when bills are paid (received) almost immediately in full. Installment purchases always cost more than cash. Predatory lending pay day to pay day can create actual annual interest around 500%. The result is a creditor expectation of increased money over time which has to come, in some way, from the consumers and borrowers. Bankruptcy once allowed for some individual adjustments but recent changes in that law have made it impossible to get rid of credit card and student loans. It is possible that the next real “liquidity” crunch, e.g. future expectations of credit payments frustrated, will come from the accumulated credit card and student debt, particularly when people are collectively earning less. Similarly pension plans, almost universally, do not have enough current or projected capital to meet the commitments for future retirees (The Pension Guarantee federal fund is not able to supply the difference projected.)
The problem of people unable to budget, for example not paying rent, is a widespread problem among some poor and handicapped. The solution, with due process protections including free advocates, would lie in adjudications that such costs could be paid directly then deducted from general payment by dispensing authority – analogous to current “incompetency” hearings.
Creative accounting beckons. Not only are corporate structures, payments, and benefits unscrutinized, hedge funds, derivatives, and commodities kept out of view, but accountants can make money status look differently than it is. (Sometimes it is not even necessary as when banks swap loans to list the loans due as if they were assets at the amount expected.) The calculation of assets, the estimation of receipts, the probability of payment, the exposure to law suits, the liabilities to other organizations, the costs projected can all be manipulated so that no one has a clear idea of what the actual monetary inflow and outflow really is. (Some dishonest individuals submit a high property estimated value for insurance and a low one for tax purposes). “Ratings” are not honest. Triple A for municipal bonds meant only they were insured – by empty corporate shells! In this way, people, who are not insiders (and even they, sometimes) can be mislead about the value of a company, project, stock, bond, or promissory papers.
With the repeal of the Glass Steagall bill, banks were allowed to do more than lend on value (the loans of course effecting the value set in money) and allowed to engage in investments such as in derivatives, debt swaps, etc. (This is also how they were – and financial institutions – allowed to grow so large that it was claimed they were too “big to fail”. It should be noted in this connection that the Madoff Ponzi scheme, identified wrongly as the face of the general financial failure, was enabled because he kept all three functions: – custody, investment “management”, and brokerage together under secrecy. Insurance companies were allowed to create “serves”from which to pay claims (and also administration and profit – which often meant enormous CEO salaries and departure packages) while stripping regulation and oversight from other transactions (e.g. commodities) in the same repeal pushed by Phil Gram and backed by Bill Clinton, Alan Greenspan (an Ayn Rand disciple considered a genius because he obsessively studied numbers from the Stock Market and some transactions… until whole markets crashed) and Bobby Rubin – over the objection of Brooksley Born, head of the Commodities market. Meanwhile insurance companies tied to banks were used to assure people of the value of what they purchased (See again municipal bonds ratings-like AAA rated solely on the fact they were insured with no guarantee of the insurance company’s ability to cover liability – in fact, not able to do so as they were “shells”) rather than the probability of payment according to promise. Others were allowed to engage in predatory loans in a system that those who obtained the loans were paid commissions and bonuses before the loans were paid off resulting in subprimes (some even with no payment down “ninjas”) and payment systems in which the interest went suddenly up (ballooned). These were the loans that are now considered “toxic” and were bundled with other loans and rebundled to create “leverage” – instruments achieved which were multiples of the original loan’s theoretical value (as evaluated at a present moment before the loans were even partially paid significantly). On the other hand, banks and financial institutions made loans based on various transactions and swaps to municipalities that resulted in those municipalities paying usurious interest on that money advanced leading to inevitable city budget problems along with reduced tax incomes and bond payment problems (also with other institutions created by government – usually with “approval” from voters).
At the same time, two terrible problems arose.
(1) Risk was encouraged
(2) Activities were done in secret.
Hedge funds exemplify both. Large sums of money are handed to their handlers (note there is no specific training or licensing to be a “financial manager”) with nothing but a “trust me, I have done well” and restrictions about taking it out. As they got 2% for each transaction and 20% for increase in money valuation, if they have a successful big risk they do well; if it fails they can walk away with the money they had obtained by risking others money. CEOs are paid in stock options as well as outrageous salaries. If they gamble and the stock goes up, they cash in; if it fails they can walk away with their salary swag and exit bonus.
A Ponzi scheme occurs when investors are paid not out of actual returns on investments but from new people’s investments. Some flourished in an unregulated market. (Never forget all these people are geniuses in the rising “market” while by the law of distribution some will always do well, so that it is difficult to establish who has good investment theories which work). Ponzi like schemes also abounded in real estate (e.g. Florida) as mortgages become due to those who could not pay but were persuaded by predators earlier they could do so and resell – sometimes immediately – the property at a profit. Then people stopped buying. The result was a collapse of real estate and bad mortgages.
Picture a pyramid on its tip. The tip is rotten so it starts to fall. Putting bricks in above that tip (the outrageous “bail out” – a gift of power to the monetarists from Goldman Sachs to buy anything after their monetarist theories were proven failures – these monetarists propound that manipulating money “flow” by interest rates, etc. is a major or the major determinative factor in stock and other markets) – is sure to fail as the pressure from above grows. The question is when. The rich may be saved but the rest of us will not resulting in great wealth inequality.
Another way to understand this situation is to return to the concept of leverage in which instruments are created with higher prices than the components are worth, as we described (sometimes by a multiple of 25 or even more.) When the system collapses, the leverage operates in reverse. Worse, the effect upon the psychology of those who buy what comprised the material basis of the original value is not to buy, so that the reversal can go below even the previous basis. Stock markets get spooked by many things from generalized anxiety to fears that inflation will lead to higher interest in bonds, unpredictable natural disasters, defects in technology, dramatic political events, all causing stocks to fall with feedback for lessening investment of all sorts.
Both of these models are more favorable than the reality. The new concept is “toxic assets.” Ninja loans (no income no job no assets), “Subprime” mortgages (i.e. bad credit risk), “under water” mortgages (i.e. house will sell for less than the mortgage) means that there is less of a point for the pyramid than even 1/25th of the leveraged accounts. Ironically capitalist greed exacerbated this condition. By excluding from bankruptcy both credit card and student loans, an individual can not go bankrupt and then therefore will often be unable to continue to pay and own a house since those debts must be “serviced.” The loss of home leads often to loss of income from dislocation so all the debts interact to build on each other. Not paying loans in full and on schedule also cost the victimized consumer.
Three other factors have been ignored. The first is the role of Private Equity firms’ unsupervised and hidden maneuvers in purchasing weakened companies (often public in the sense of having stocks) for tax advantages, for leverage using the companies obtained as collateral, and exercising monopolistic control of some markets sometimes, etc. Not only might these leveraged buyouts collapse. but also at best they destroy local facilities, communities and jobs with no remedies for the workers. The second lurks behind the cliche “too big to allow to fail” for investment companies and banks since the remaining companies are now much larger, having swallowed the smaller ones. The implication is clear – they can act with impunity and immunity, of course, including executive compensation. The third is the repeal of the Capital Gains tax (1997) for house sales which led to over investment in the housing market.
Behind all of this lies years of social policy (ultimately as destructive as the radical roll back of the progressive income tax and level of taxes on “excess” profits and estates) designed to make people buy houses with the often explicit assumption that real estate investments always appreciated in value (compounded in tax as policy giving deductions for mortgage payments.) It should also be noted that this part of the “American Dream” was associated with cars and resulting highways, suburbs, shopping malls, etc. Peoples’s assets were tied up in houses so to spend they sought credit not only based on their ownership but by installment purchases (particularly cars, computer connected devices and appliances). In the recent past, the price of houses ascended rapidly (as they are now descending). To keep up, the American worker now works much more (and has family members who do so too with increases in productivity going into profits pocketed by the rich – furnishing a Marxist scenario. In Europe, in contrast, workers’ hours are down – nowhere to the extent Keynes had predicted.) The worker has been sold the bill of goods that he is not a member of the proletariat but rather a member of the “middle class” if he owns (albeit with a mortgage) a house and (albeit with a loan) a car. The bourgeoisie have different types of work – blue collar and white collar work is not an obsolete distinction; nor is the one between those who shower in the morning and those in the evening.
All of this disaster was not only predictable but with clear historical precedent, even if the economy and “investment” are now much more complicated, and if anything, more secret from the public and their “expert advisers.” J. K. Galbraith’s , The Great Crash: 1929 detailed what happened then (substitute the improperly called “hedge funds” for “investment trusts” which bought collections of investments in the market and margin as generic for “puts and calls” etc.). Leveraged investments went into reverse also reflecting the “fundamental” problems in the economy such as under capitalization, foolish speculations, expansions, production diminution, and interaction with foreign markets. (Galbraith pointed out that among Churchill’s many sins, including racism, was tying the Pound to gold, resulting in an honored request for loosening of American market credit.) This book is well known, the parallels obvious, but the monetarists (and authors of the “bailout” better termed the “failout” a/k/a Goldman Sachs, a fool in 1929 too but bailed out) and their expert partners in complicity, claim surprise but belief that the “market” will eventually resolve itself by some unproven but magically inherent stability. (“invisible hand”).
Currently, too little too late, the monetarists now are giving guarantees to banks (in 1929 the failed guarantors of “organized support” to the market) so they can lend money without risk therefore theoretically freeing up credit (i.e. the general ability to borrow and lend). Even if there is more credit, it will not create enough of a multiplier effect. The banks, again can save neither market or buyer aversion (although belated attempts to be strict with credit – unaffected by giving them easy money – does constrict the market.) Of course, financial institutions, including banks continue to operate in secrecy with widespread executive outrageous pay packages and cumbersome administration in expensive real estate so money given to them is not accounted for and likely not countable or traceable, so they can hold on to it. What is needed. instead, is money in the hands of those who will spend it in their communities – the poor and working class. Bring back the New Deal, the Great Society, mass transportation and create high speed trains, ecological advances, forestry, desperately needed infrastructure repair and artistic projects which were associated with them. Remember the Keynesian multiplier, so money should not be transferred into capital hoards but where it will not be spent (except perhaps for luxuries, many foreign) but where other people will spend in turn, multiplying its effect – the wages of people involved in these projects.
Even if various markets recover, many will still have been victimized to a point that only direct money payments will restore their lives. For years employees were required to buy stocks in their company as “savings”, pressured to put their investments into the company’s stock, and often their pension was based on that company’s stock. As companies collapse (e.g Enron) these people have nothing on which to live except some Social Security, in some cases. Those who have lost their homes, even if some mortgages are now kept going are, by definition, homeless.
as individual catastrophes multiply to have a negative economic effect even on some of those whose greed, augmented by corruption, distorted even a “free market” fantasy model. Meanwhile the focus, again ironically, is on mismanaged investment companies who are “too big to fail.” The cart which broke down should not be put before the living horse but the political power of these financial manipulators has led to this inhumane and unwise priority.
There is a depression well underway. Expectations of credit valuations holding up have collapsed along with real (e.g Maddoff) and pseudo Ponzi schemes. Whether one is a Marxist or a Keynesian the only way to solve the matter is to have many people at work producing value and able to increase the amount of payment to institutions that provided and will provide credit. The government can inject money, directly or with banks, into the system which may provide temporary liquidity but that will not address the long term problems and contractions.
Worse than 1929 and not widely noted is the fact that manufacturing which used to about a quarter of the (GNP now GDP) is now near 10%, while “finance” or finance services has reversed those percentages to be factored in at 25%. The tip and middle of the pyramid is more full of destabilizing holes than ever before. Also, of course, money now has to be printed to pay off the enormous money “lent” and “bailing out” large entities, let alone to invest in the infrastructure and help the victims. Inflation creeps now (particularly for consumer daily needs) not mentioned (waiting for the other oily shoe to drop too) which the monetarists would want to control by raising interest rates but are now committed to keep low (e.g. for treasury bonds). A double bind as it were.
Oversight and reregulation are necessary but not sufficient even with real implementation. In my opinion, prosecutions with the aim not only of deterrence but restitution against those who have accumulated wealth by knowingly “gaming the system” is one first step. Vigorous enforcement of regulations is another. Of course, a new Glass Steagall bill is necessary, accompanied by a consumer protection agency (perhaps with an ombudsman); dealing with student and credit cards debt and mortgagees in Bankruptcy proceedings; prevention of usury (thanks to Supreme Court now present in credit cards), enactment and rigorous extensive enforcement of anti-monopoly (horizontal and vertical) elimination of leveraging and combining etc. is also desirable. My current suggested policies follow.
Current Solutions – Or How To Avoid A Marxist Outcome
There is no reason to examine the value of claims about the “free market” and profit seeking (greed) as a benign force. Veblen devastated this position in the beginning of the last century. Profits based on wage suppression, made by financial manipulation of derivatives and stocks, and the destruction of competition are justified only by those who profit by them as if they were rewards for real investments and achievements. We should make room for competition between individuals and small groups, reward those who invent good results, and make capital and resources available to start some businesses (but not those which are natural monopolies, living necessities – including mass entertainment, or environmental destruction.) Clearly this competitive situation and context can neither be generalized into a theory or utilized to correct economic disaster and help the needy.
The short term solution can come from Keynes. There should be money directed to those who will spend it immediately particularly those who will also spend it quickly such as local stores, etc. Obviously funneling a great deal of money into entitlement programs food stamps, unemployment, medicate, medicaid, medigap, even increasing Social Security, public and subsidized housing ,welfare in part as we knew it (mothers paid properly to rear their children and provide for them, etc), will serve economic as well as moral ends. Particular immediate attention must be given to those who lost their homes, jobs, and savings due the predation and financial failures. Foreclosures by big companies and banks must be halted with money (as during the New Deal with eventual profit to Federal governments) loaned directly to home owners rather than corporations and banks to lend to individuals vulnerable to their predation. The Pension Guarantee fund should be filled with money so it can cover pension commitments, a stop and reversal of pension destruction implemented so retired people are not destitute but have money to spend. Funds indexed to inflation should reflect a properly calculated figures (rather than the current CPI with happiness and substitution components) such as one based on empirical data of what normal purchases and necessities cost for the majority of consumers who buy them. Cities with big debts to financial institutions should have the interest rates lowered by Federal laws and assisted in repayment by the Federal government if necessary. Statutes and regulations restoring the Glass Steagall act and preventing derivative creation etc. must be instituted to expand through the next stages, diminish the role of stocks and bonds. The devilish details of what industries should be how much and how constitute a major factor in economic policy.
The middle term solution is three fold, connecting social policy and the Keynesian solution. Bring back the programs of both the New Deal and Great Society to do environmental work (AAA), lodgings, repair the infrastructure, replacing, then tearing down high-rise public housing, building new public and “affordable” housing with maintenance, enforcement of rent regulations, job training, building many rural hospital (even more in urban areas) Head Start, Peace Corps, Vista, artistic projects (WPA), day care, neighborhood (senior) centers with social work (and outreach), home economics, living placements, community activities, real Legal Services for the poor properly funded (which would lead to the increased need for lawyers and Judges when the poor can get their “day in Court”) and more payment to be spent. Job training, public (and private) investment in communities destroyed by job loss, provision of resources to the dislocated are also very valuable. So too education (including augmentative practical for the poor for nutrition, etc.) including the medical field, Then we should implement a massive investment in inter-city high speed rail and local mass transit, repairs of all its modes and cleaning of streets. Accessibility (a particular but important and frequent challenge) to transit must be increased to total; the same for home care, associated services, sufficient community services, for health care. See Free Public Transit in Kansas
Big financial institutions should be dissembled (capitalism works best at a local competitive level in any event.) Private equity taking over companies should be outlawed or radically reformed with strict regulations protecting workers, communities, and competition. Government should return to regulation pre Carter days even more strict, comprehensive, and universal for corporations, their salaries, bureaucracy, and benefits as well as activities and financial soundness, lenders and financial services. Big financial institutions should be broken up into little community responsive agencies – not “too big to fail” opaque institutions with large capital sources apart from the government – coffined to specific fields where the capital provided is based on clear projections and limited to them rather than acquisitions which lead to excess power and monopolies. Co-op and State Banks (e.g. North Dakota) should be supported substantially. Co-ops, particularly in agriculture can be encouraged and even subsidized, in many fields of production, agricultural (and even industrial – cf. Daniel Deleon for worker run factories.) The excessive influence of advertising must be curbed by regulation particularly when based on fraud – such a move is both difficult and complicated as it is necessary.
The long term solution invokes social policy, applying the insights from Marx and Veblen in a cultural context, and the ideology that we must provide support for the poor and those without resources, even individual. First, abolish all derivatives and securities (treated like money) so that stocks are investments almost exclusively in future productivity, establish a real progressive income tax, a highly progressive estate tax. (Robert Reich reports that 60% of “wealth” is inherited.” Agribusiness should be broken up – loans given to farmers only to grow Federally controlled healthy crops (poisonous pesticides and fertilizers forbidden) on reasonable expectations of a harvest and interest to be paid at harvest. (The monopolistic horror of Monsanto’s current seed monopoly must obviously be busted; as well as poisons which help kill undesired vegetation). Natural monopolies like utilities (gas, electricity, internet access, including media, if not dispenses on a rotating basis for applicants limited in years) should be nationalized (See the success of TVA measured against PSGE a. Owning a house should not be considered part of the “American dream” or the major lifetime investment but rather low cost housing should be provided for those on fixed incomes mainly from pensions and the government, rent control extended universally (including small commercial enterprises) with renting encouraged. (In the United States public policy, particularly since Eisenhower, has heavily favored home ownership indirectly with highways and commuter routes leading to malls and deteriorating “inner cities” directly. (Washington budgetary resources were $230 billion for home ownership against $60 billion for renting, contributing to the potential for depressing dispossession) . Expensive luxuries for the rich (e.g. golf courses) which destroy the environment should be closed as dog racing parks for the poor gamblers were.
Commensurate with the great expansion of rail transportation between places and in localities, although there should be no tolls on motor ways (let alone run by and for private industry) car ownership should also not be considered part of the “American Dream” (with time for transition and recognition of the needs of those now car dependent). Of course, for those who are destitute (and who will spend money immediately) all assistance should be given. Housing, transportation, food, clothing, education, health, and income, should be considered finally as rights. To pay for all of these changes, in addition to increased tax revenues, the shrinkage or abolition of spy and war agencies should occur, including the FBI, CIA, Pentagon, Homeland Security, FISA, Bureau of Alcohol, Tobacco, and Gun control, (all money spend on the “war on drugs” should be spent on public rehabilitation and treatment centers with outreach) etc.. Imprisonment should be protection from proven wrong doers rather than a growth industry (particularly with privatization!) predicated on police misconduct and drug laws. The past capitalist predators should be jailed, however, for the deterrent effect while forcing them to make restitutions. Monopolies must be completely broken up, including the media (licenses granted for short duration on first come first served basis with a waiting list) with a movement to have co-operatives and labor run (and sometimes owned – syndicalism, Daniel DeLeon again) factories, etc. – particularly obvious in natural monopolies such as utilities. Obviously the Taft Hartley law should be repealed and extensive protections for unions, and their growth, installed. The tax code makes economic and social policy. The progressive tax system (even as it was under Eisenhower), heavy estate and luxury taxing (private yachts, jets, etc.) is only just and effective (with perhaps an absolute limit on wealth held in and form, here and abroad.) And “excess” profit taxing will also both restore some good social policies and raise revenues. A return of Capital Gains tax on house sales will redirect investment and garner money for the Federal government.
The prevailing capitalist myth must be rejected (while accepting in some contexts, local competition is good. It need not be incompatible with co-operation between competitors but a competition for improvement and market – free from advertising distortions.) A complete overhaul of the financial system must be made. Proven programs to improve nature, community living, and quality of life must be implemented. These are all somewhat abstract subplots subject to many contingencies but should produce a better allocation and system of resources, for a blurry projected future whose details and characters remain, as yet, unknown.
Marx can be viewed from the perspective as an historian as well as an economic analyst (the last of the “Classical economists.” -h is history of money is as engrossing Keynes even though its nature has changed with modern finance. His dialectical materialism makes the future into an era as certain as the past which transforms his system into a (science-fiction?) description of the future. Some of his predictions seem to be refuted, some seem prescient (some of his followers like Gramsci too) but for a future and time he did not envisage, and others such as Mao and Stalin have twisted them into disasters. (He expected the revolution to come in Industrial rather than agricultural societies and states). The question is whether approaching his work from the perspective of a story analysis will offer any insights into his theory that are not obvious or not yet embedded or seemingly refuted in history. We suggest that his insistence on clear developments and inevitability as the complete story is in error for economic reality is highly contingent and effected by many factors, environmental, cultural, and political. He does not take into account the existence of ambiguity and randomness. ((Mathematicians are interested in “random paths”, an almost oxymoronic phrase – which appear relevant to various configurations in chemistry and physics. Brownonian movement seems to describe types of crowd movement.)
The easiest way to understand Marx as an economist is to consider him the and greatest of the Classical Economists (Smith, Ricardo, etc. All share in common the presumption that individuals are exclusively motivated by economic considerations and that value is created solely by labor. Experience demonstrates invalidity.) In societies where greed is allowed (or even encouraged) to flourish, where the ideology favors the accumulation of wealth, and wealth is predicated upon production (and derivatives function as money in many forms) the analysis may be useful for understanding what is occurring and what will occur if there are no controls placed on greed and its manifestations in accumulation and political use. Ricardo’s “comparative advantage” may create “banana republics” (ignoring nation’s needs for some self-sufficiency, development of a plurality of products and modes of transports, the effect of time on supply and demand, etc.) while Marx uses his Iron Laws of wages and rents to show how lead will need to an unsustainable accumulation in the hands of a few non-producers then leading to a revolt of those who produced but do not receive what they need (and deserve.) Marx himself had individuals as richer characters in other writings such as his journalistic reporting of the Irish potato famine and the British treatment of the Irish.. But when he and the other Classical economists viewed labor as the measure of value while greed situated that value with a privileged few the plot indeed turned sinister. Marx was willing to take the next step in the story by recognizing that individuals were measured by more than economic accumulation or productivity. He saw that they could organize and fight for their rights, “throw off their chains”. By affirming more humanity to the economic productive units, than the others, he was able to produce a story which became a predictive possibility rather than just an abstract analysis.
Adam Smith is read too simplistically. He espoused some controls and moral values. But his story essentially was driven by only one human characteristic: greed. (Others try to justify it as “Darwinian” – the struggle to survive and survival of the fittest but we need not concern ourselves with this unsupported reductive error). Ricardo’s additions were based on the abstract system that he derived in this tradition where wealth is created by labor and accumulated by market mechanisms he describes but does not justify. Marx accepts them but adds yet another human element – that of need. At some point, he argues those who have been cheated by the greedy who have accumulated the wealth those needy have produced, the increasingly deprived. will reach a critical mass to revolt then seize the political and economic power. As I write, the income inequality in this world is staggering and increasing. Whether, when, and how it will result in more than turmoil in markets and political institutions is far from clear although its inherent instability lends more credence to Marx’s view than it might have had in the mid 20th Century. On the other hand, the increase in wealth inequality, monopolies, diverse forms of money, technology, particularly digital, and artificial “intelligence” (see Capek’s anticipation of these two in RUR – inventing the concept and term Robot) might lead to dictatorships. Politics is one of the unpredictable interactors with economic reality.) For our purposes, the addition of more human characteristics into models for human behavior make the models more reasonable and the plots about them both clearer and more plausible.
Like Dante, his account of hell after the industrial revolution was more detailed, richer and more interesting than the heaven he predicted at the end of a passage through the purgatory of revolution. Combining his doctrine of money, surplus value, the labor value theory, the feudal agrarian economy developing into an industrial economy with the various classes and means of production, he related a complete story of materialism that has not yet materialized, at least as he presented the saga. The modifications in political structure and introduction of modern technology to the industrial revolution could be argued to retard rather than prevent the predicted events, however, and the case can certainly can be made that the Communism he described has never been tried where he expected it to take root (a fully industrialized community).
He, invoking Hegel, relies heavily on story principles with the presuppositions and principles we noted. What are the characters, the plot, the tone, and the truth that he reveals in his unfolding narrative?
The characters are not individuals but groups or “classes.” These classes are not defined primarily by desires, ideologies, achievements, and ideas (although as Trotsky made clear those are affected by classes) but rather by their hierarchical relations to means of production and the ability to manipulate them and the values they produced. His plots present the evolution of money, the means of production, the accumulation of wealth, leading inexorably to the evolution of power between the classes (three: the capitalists, the bourgeoisie, and the proletariat) to end in a situation where there are no classes at all. The tone vacillates between that of a dispassionate observer and an Old Testament prophet.
One can not engage a powerful system and a great man such as Marx without a systematic detailed analysis. But what we can do is attempt to criticize him from the vantage point of story choices.
One fundamental failure is to focus in history and prediction only on groups. (There is a probable associated weakness in assuming an essential similarity in societies arriving at the same historical situations – which is one of the reasons it is interesting that his ideas have been attempted to be implemented in societies not at the stages he anticipated, and thus far resisted in advanced industrial states. Communities, not considered, manifest great diversity in values, institutions, creative and productive engagement, enjoyments. and fundamental beliefs). Individuals are not exclusively determined by class struggles. Cubans, for example, revolted against oppression and followed a charismatic leader and skillful tactician to try to find a better state while excited by some of the appealing propositions of Communism in the fields of health and education (among others). The persistence of the Communist regime with its accommodation of some capitalistic ideas owes much if not more to patriotism and pride in cultural identity than it does in the Marxist dogma. In Vietnam and China great generals won wars but then took entirely different paths while claiming to be communists. In none of these states were classes eliminated but bureaucracies proliferated. (North Korea seems just to be a dictatorship with wealth and power concentrated in the ruling elite with a slight pink tinge to slogans and propaganda). Venezuela, attempting the “Cuban path” (albeit against some American subversion) has been incompetently and corruptly administered in a society with few if any members of the proletariat. For a non-communist, an explanation based on the type of analysis of other revolutions with oppression, leaders, tactics, and popular support for change works as well as a theory of inevitable change in an industrial society – which these countries did not present. Revolutions termed “Communist” or not rises from aggrieved individuals joining together when conditions are intolerable, led by individuals who may be remarkable and/or corrupt. The real historical stories seem to evolve slowly with these leaders not only the classes they may claim to represent (if their policies serve them at all) and even sometimes inspire.
Perhaps one could argue that even a Communist revolution needs a leader. (Cf. Rousseau). Someone has to handle the logistics and then organization. But a leader is an individual and even Marx does not claim that all individuals are the same, it is rather that the moving character for his plot is a group not an individual. If such an individual is necessary, the inevitability of his dialectic is now at least modified and contingent on personnel available. Alas, what would have come of the Russian revolution, had Trotsky replaced Lenin, rather Stalin murder him and with increasing paranoia starved and killed those he was supposed to lead? (The sudden concentration of greatness if hard to analyze and impossible to predict (even in hindsight) as with the classical Greeks and Renaissance. So , which person at the spearhead of major politic change becomes the one who could heed Machiavelli’s advice and moral and ethical principles too?.
It is anomalous that the “communist” revolutions took place in non-industrialized societies. which in China’s case has then tried to industrialize – creating social and ecological ills associated with colonialism and its capitalism. A Marxist can claim therefore that these weren’t real “communist” revolutions. Yet, either there have been none in a world where there is a large split between a privileged few and a suffering many or we must recognize that the Marxist analysis and ideology drove these revolutions enough to have them so characterized and feature powerful spokesmen for the ideals, including the ideal of a classless society – only approached by common deprivation in Cuba (which does have a limited elite). In either case, inevitability is a phantom.
Zola, in Germinal describes an angry mob as a character raging through the countryside and towns. His novel explains why this happens. When a person’s life has been reduced to such a level that he feels his death would not be worse, then he is ready to risk his life to change it. (Consider the plight of refugees from the war torn Middle East and starving dangerous Central America now .)The coal mines created a mob of such people who went on a completely destructive rampage. Could this have been what Marx had in mind or Marxist can choose as an ideal? The negative answer lies in the fact that it is all negative, not aimed at taking over the means of production and distributing value equitably but rather demonstrating how an aggregate of abused people can coalesce into a temporary destructive force which does not need a leader to locate the objects of vengeance. Zola illustrates powerfully why individuals might join to so act in a way Marx would appreciate, but their unfocused rage does not follow the paths his theory would construct for this rage to follow. Marx’s story is different for it is not a mob which is one character but a class which is the moving character.
A broader criticism must be made of his characters constituted of individuals. They are not just members of a “class.” They are constituted by, participate in, and are loyal to many institutions, communities, and individuals. He could have noted that many wars have been fought over religion and persecution official or social (although it may be argued that there were economic aspects or repercussions). Many a poor man prays with more fervor than the rich which is why Marx called it the “opiate of the people – “pie in the sky, bye and bye.” People self-identify and are identified with many forces and entities, their families, their culture (with customs), sometimes, their religion, their ideals, their profession, their aspirations and driven by passions and reactions that they often do not understand (while identified by some others by irrelevant outward appearances,). The world they confront is therefore ambiguous in its possibilities and demands and they are ambivalent about the various claims made of them and prospects proffered for them. It is therefore, impossible, to use them only as constituents of character necessary for the material dialectical plot.
To the degree that classical economics offers valid insights into economics and the market place, and we assume that predictions can be made safely, Marx’s analysis is persuasive. To the degree that his analysis predicts the untrammeled market place as the locus of manipulation so that there will result, in an industrial society, a privileged few, a bourgeoisie for transactions, and the poor laborer and dispossessed, he teaches a valuable economic, political, and social caution. To the degree that he explains how producers of value by their work can be reduced (and alienated) so that their lives are stripped of meaning so that they seek meaning elsewhere, he explains the seeds of class consciousness and the potential passion for revolution. Were he to confine himself to this analysis, the short story of relations and feeling of injustice would be most compelling – offering a sub plot in economic activity.
One might quarrel with his acceptance of the assumptions of “classical economics” but maybe it could be subsumed under a broader theory, factoring in the contingencies we have evoked, which would not deny its relevance or utility. Moreover, in many a Capitalist society the rich and power preach and worship the “market place and “market forces” (“invisible hand” ) which – particularly when augmented by political favoritism for the rich – work to concentrate the wealth as the Marxist analysis would have it.. Where one must depart from his doctrine is in his making the future as rigid as the past, generated by his making a character out of a class rather than recognizing that all members of a class are also members of many other groups and subject to emotions, ideas and ideals which complicate their motivations and actions into ambivalent unpredictability.
The tonal consequence of inevitability robs the narrative of the human richness that Marx himself recognizes elsewhere (Louis Brumaire). His narrative is reduced to a mechanical procedure with a specific end (the dictatorship of the proletariat and the withering away of the State – although the mechanism is much less clearly described than the proletariat anger which leads to uprising). Many a history (retrospective and prospective) attempts to approach the richness of a novel, but in Marx it is reduced, in principle, to abstract movements even though the groups are humans who labor, who oppress, who are greedy, who are angry, and who are led to act. (It is also Western in its focus on the Industrial revolution as the culmination of economic history, not sufficiently acknowledging the developments of Eastern civilizations which differed from the medieval feudal systems which preceded them). The current crucial concern of ecological catastrophe caused by fossil fueled industry and mineral served electronics adds a major new dimension to the economic story that is now unfolding. Focusing only on the Capitalist factors that he did, in order to tell a mechanical story with the preclusion of other subplots and contingencies, robs any general narrative of richness and comprehensive vision. Choosing such a limited nature of character, a mechanical tone of narrative, dooms his plot to inadequacy in explanation of what did occur and failure in predicting what might come to be. We owe him a great debt for his analysis of capitalism based on of “free market” but humanities’ richness prevents his future visions from being even possible, with classes distinguished by more than labor accumulated value concentrated in a few with production by the many. His story is necessarily incomplete, like all Economic theory, because of contingency and complexity, with developments unforeseen.
Persuasive proponents advance the idea of a basic universal income.
(Dick Nixon used the idea for a “bait and switch” discarding the New Deal’s “categorical assistance” for Supplemental Security Income who often was not a supplement, offered no security, and little income. Bill Clinton finished the destruction with abolishing direct assistance to mothers to rear children for social and humanitarian benefit.) As with all economic proposals, the social, political, and assets context is crucial. The payment joins other benefits to the public from free public libraries to roads, transportation, safety, and health care provision, etc. necessary for the citizens of a resourced State to have the proper resource base and possibilities. In particular, it recognizes the need for individual income for the arts, crafts, time to think, possibility to be informed and engage in politics, and have enjoyment in life. The objections come from two different directions. Why should the prosperous have extra income? The rich often think that they can barely make ends meet -Tom Wolfe described such calculation in Bonfire of the Vanities.
Obscene amounts of wealth may be curbed in many better ways, taxes (progressive; on wealth), total income (and wealth) restrictions, limiting or eliminating inheritance, etc. On the other hand, there is the problem of another bureaucracy. If not properly designed some will “game” it. The reduction of this occurring requires effective personnel and records coupled with possible, clearly justified, sanctions which do not harm the innocent and vulnerable. Its administration will suffer from all bureaucratic defects. This problem can be combated, in the main, by ombudsmen. free appeal to Courts, and the provision of free properly compensated effective advocates. Given all these considerations and factors, tailored to the appropriate society’s allocation of resources, a basic universal income would offer a good element for a State’s furnishing of resources for the good of its members and society.
A Monkey Economy As Irrational As Ours
Laurie Santos Ted Talk 2010
Our monkey ancestor and the way humans now choose to spend money are deeply embeded in us.
Laurie Santos looks for the roots of human irrationality by watching the way our primate relatives make decisions. A clever series of experiments in “monkeynomics” shows that some of the silly choices we make, monkeys make too.
GAMING THE SYSTEM
Three of Trump’s top advisors all have extensive financial and business ties to Russian financiers.
Trump’s de facto campaign manager, Paul Manafort, was a longtime consultant to Viktor Yanukovich, the Russian-backed president of Ukraine who was overthrown in 2014. Manafort also has done multimillion-dollar business deals with Russian oligarchs. Trump’s foreign policy advisor Carter Page has his own business ties to the state-controlled Russian oil giant Gazprom. … Another Trump foreign policy advisor, retired Army Lt. Gen. Michael Flynn, flew to Moscow last year to attend a gala banquet celebrating Russia Today, the Kremlin’s propaganda channel, and was seated at the head table near Putin.
Crime Pays Big Time: “UK Government Releases Photos of Russian Hackers, Whose Lives Look Awesome Lambos, Audis, bundles of cash. Really these photos from the NCA of alleged members of high profile cybercrime group Evil Group are incredible. Authorities indicted alleged members of Evil Corp, a high profile cybercrime group.
NYAG brief on Tether. Start reading on p.13
Blockchain Capital 2019 Year in Review.
Bitfinex is Mixed Up with Colombian Cocaine, Polish Media Reports
Cryptocurrency rocked by massive Bitcoin fraud
The Justice Department has branded the activities of the ‘BitClub Network’ as a “high-tech Ponzi scheme” that lured victims with fake Bitcoin mining profits while taking money from investors who were rewarded for recruiting new members.
The problem of fake gold bars
Social Media Penetrates Every Aspect of Our Online Lives for Profit
#What is Economics? Find ground-breaking scholarly research.
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Social science that analyzes the production, distribution, and consumption of goods and services
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