Kevin came across an interesting site that uses a unique animated format to help explain complex issues. This is a segment that reviews the GFC and what the author perceives to be major issues within "Capitalism". Very unique, somewhat like the UPS commercials with the whiteboard.
12 comments:
Prof. David Harvey (CUNY) is a scholar of Das Kapital. He holds a BA, MA, and PhD in geography from Cambridge.
http://davidharvey.org/
RSA animations are fantastic.
Anybody who wants to understand the collaborative and co-operative forces and how they show the way forward for the world should watch the one on motivations.
It has a very good description of the free software movement and how that creates a better economics.
Tom,
I received Harvey's 'Enigma of Capital' for Christmas. Ive read some but Tom, I am having a hard time getting into it. But I do think it is an enigma.
I'm picking up another quantitative problem with the whole concept of 'Kapital'. The word is singular. Implies a 'finite' supply of some stock measure of something called 'Kapital'. Not to discount the distributional problems/concerns that Marx/Harvey bring up, but it seems like a band-aid on a symptom, and not a real cure for what ails us.
Once we place this sort of "self-imposed" constraint on ourselves, in this case Harvey/Marx and their concept of 'Kapital' (I interpret as an economic Stock measure, ie they imply there is 'limited' capital), it all necessarily devolves into a fight for the distribution of the finite.
I know this does not need to be the case. Tom, time after time, we seem to be imposing constraints on ourselves like this. Whether it was our Roman ancestors carrying a limited number of jars of denarius into Brittania, Marx here writing about 'Kapital' (singular, implies there is a limited amount), limited CB gold reserves, or in the 20th century the Monetarists and all of their concern for the levels of the so-called "money supply" BS. Probably others. We are obsessed with stocks, and seem to ignore the concept of flows. (Is this a problem with mathematical maturity as systems of flows are dynamic and harder to visualize? Stocks are simple instant measures?)
This seems to be a major problem in the west if not across the entire humanity throughout history.
Tom do you think it has something to do with how we often perceive our own mortality? Our own apparent finite nature? We carry this over into our economic beliefs which then become finite/limited?
Hard to figure out where we get this...
Resp,
Neil,
It is interesting to note that the results of the study became counter intuitive when the task became more abstract.
I think we are up against people who are generally lacking in certain types of quantitative cognitive skills. Lacking abstract cognitive abilities to a certain extent.
For instance it is easier to think of the govt as a household rather than have to reverse that thought and recognize that the govt is a currency issuer, and then all that implies...
Or monetarists who use a simple analogy to "dilution" to predict price instabilty or so-called "inflation"... all they have to do is divide by the new stock measure of so-called 'money supply' (simple division) rather than have to view it as a constantly changing, dynamic inter-dependent process of flows...
This may be a larger general problem with cognitive development rather than just a misunderstanding of MMT.
Cheers,
Tom do you think it has something to do with how we often perceive our own mortality? Our own apparent finite nature? We carry this over into our economic beliefs which then become finite/limited?
I suspect that there is a lot to this. Freud investigated this in Civilization and Its Discontents, where he sees humanity "condemned" to pit the pleasure principle against the death principle, knowing that the death principle is going to win. While don't agree with the whole of Freud's approach to this, I think he has hit on at important insight.
Psychologically, this dynamic is complex and largely unconscious. Most people are driven by subliminal "complexes" of which they are unaware. As Robert Nelson observed, economics is a lot closer to religion that many realize. Freud examined the depth psychology of religion in The Future of an Illusion. While I don't completely agree with him here either, he hits on an important dynamic of which most people are unaware, hence, their approach to religion (and economics) is an outgrowth of their psychology.
Capitalism is based on scarcity thinking — "economics is the study of the allocation of scarce resources." The primary resource wrt capitalism is, well, capital. Capital is considered to be a scarce resource. People tend to hoard resources that they consider scarce, and capital is considered to be a scarce resource. That pretty much sums up capitalism.
R. Buckminster Fuller observed that humanity's most valuable resource is the ability to use knowledge. This resource is both infinite and metaphysical, therefore, it is not scarce unless we make it so through ignorance. We also know from MMT that the ability to fund projects is limited only by the availability of physical resources. Neither knowledge as human capital, nor money as financial capital is the problem other than in thinking it so.
The only real problem is real resources, which must be husbanded sustainably. But even here, technological innovation is always expanding the availability of real resources iaw the law of accelerating returns, which is exponential.
Humanity needs to get beyond its poor psychology.
BTW, "Blessed are the poor, in sprit" means that only those who have internally transcended self-interest can be truly happy because their happiness is sui generis and independent of what is transient. This is the inner meaning of fakir or faqir in Sufism, the term meaning "poor" in Arabic. There is a saying that anyone who owns anything cannot own everything, for thinking of oneself as owning anything is self-limiting. We are not owners of things, but stewards of creation.
Tom,
Thanks for your insight.
From my spiritual perspective, I sometimes think I am the only one in entire Christendom that believes that what you've found is also the correct interpretation of Mat 5:3, "Happy, in spirit, are the poor."
I've recently had to sit thru a sermon where the leader taught it as basically "blessed are the depressed (poor in spirit)", and we "need" hardship, etc... Not realizing that the word 'poor' (Greek ptochos) was strictly an economic term. Not pointing out how far we have strayed from the economic outcomes He desires for all of us and therefore put the economic aspects into the Mosiac Law.
We indeed have a long way to go to get past our current psychology.
Resp,
We don't have a free market capitalist system guys. It's a mixed economy. Our money and interest rates are centrally planned. There are countless other examples of socialism and corporatism in the economy.
You guys simply want to pin the blame on something that you don't like. This system that we have is a mixed economy. The left created it during the Progressive, New Deal, and Great Society programs. It is a gross misidentification to name the current system free market capitalism.
Also, why is it that the Austrian free market school called the Nasdaq and housing bubbles to a man with remarkable accuracy while almost none of the neo-liberal economists did? Maybe something is wrong with your models and starting assumptions guys. These people who didn't see this coming are now to lecture those of us who did? It ain't a lack of regulation fellas. That new "financial reform" legislation isn't going to stop the next tidal wave from breaking in the next two years. I imagine that when the real crisis hits some of you will keep banging your head against the regulatory tree. It's the regulation of interest rates and money by central planners that is the problem.
WWS,
That is why I put the word "Capitalism" in quotes.
Resp,
Let me preface my comment first with that I come in peace and comradery. I consider my views as being a hybrid of both the MMT and Austrian Schools. Now on to my comment:
It really irks me the way the term "capital" is so loosely used today. What is "capital?" Capital is the REAL resources (means) AVAILABLE for productive or consumptive purposes (ends).
Alot of Keynesians and Marxists alike, wrongly equate "capital" to "money" and vice versa. That is, they assume "money" accurately represents the underlying "stock" of "capital" or "value" within an economy. Capital is only created when human ability (i.e. human capital) is applied to physical matter or existing capital to yield value. Creating new claims on the economy (i.e. more money) does not in and of itself create capital.
So yes, economies are constrained, at least until we discover the formula to make gold (can you sense the sarcasm?) ; ) We are constrained by the real and available quantity of productive applications of "human ability" at any point in time and we are constrained by the real and available quantity of physical matter and existing capital at any point in time.
Now you'll probably say that the application of human ability is virtually infinite, and I'd agree with you... But (and that's a big BUT), the thoughts of applications of human ability -IN YOUR MIND- does not make it REAL or AVAILABLE (why don't you become an entrepreneur?).
You see, what economies really suffer from is a "coordination problem." That is, the ability to sustainably distribute "coordinative economic activity" over time (intertemporal allocation of capital). This necessarily involves actual theories of capital, capital structures and the business cycle, which of course modern economic thinking lacks, including both Keynesian and Monetarist doctrines.
Consider this- MMT'ers say what we need is more "money." I agree with the general assertion that people need more "money," but (and that is a big BUT), more "money" should not necessarily mean only monopolized fiat "money." It has been said that we are suffering a balance-sheet recession- i.e. too much debt. People hold other "things" that "should be" allowed to "discharge debts" other than what legal tender laws allow. For the record, NO, I am NOT a gold bug or advocate of a commodity standard, or any government-set standard for that matter. "The standard(s)" need to be set by the creditors and debtors within the economy - not some third party imposing their arbitrary standard(s) of value/payment on them. If debtors are constrained to basically only paying in "federal reserve notes" and the people who hold income producing assets don't want to sell them and want to hold onto the "federal reserve notes" they get from the assets rather than exchange them in the economy, the situation will continue to deteriorate for debtors/liability holders until the future is more certain to yield positive real returns in which case the asset and "federal reserve note" holders will feel compelled to exchange "federal reserve notes" to invest to receive the said real returns. With the investment spending "federal reserve notes" become more plentiful throughout the economy and debtors are better able to "capture" federal reserve notes to discharge their debts.
In my view, legal-tender laws are an unnecessary constraint on an economy, especially for debtors. If people could shift what they use as tender and it meets the satisfaction of the creditor, what is the big deal?
In addition, what is the point of government issuing interest-bearing bonds to The Fed as collateral when it wants to increase the supply of money when government has the power to issue money interest-free? What value does the country get from paying a private cartel of banks (known as the Federal Reserve) to issue and use their money?
I know, I'll likely get the response from somebody saying, "we issue bonds as a part of monetary operation" - but that doesn't answer the question of why a central bank is necessary - the government can issue money interest free, and control the supply of money through taxes, fees and what have you (which it does to a degree now anyways). Why not give the treasury 100% power of monetary operations, why add an extra layer of bureaucracy with "The Fed?" Essentially, what this amounts to is that private banks run the monetary system, and I am not so sure somebody can honestly say with a "straight-face" that monetary operations are conducted in an "independent" way. Perhaps what is meant by "independent" is that decisions are made in favor for the private banking industry cartel "independent" of any other "interests" or constitutional law.
In summary, laws surrounding our system of money and credit have been corrupted by private special interests, much like the laws of everything else in the U.S. To uphold legal tender laws is to advocate more pain and suffering for debtors in particular, and the economy in general. Private banking special interests have lobbied for and setup a system that amounts to legal-theft. Banks trade liabilities for real value/assets where as we trade real value/assets for liabilities. It is a complete fraud.
WWS:Our money and interest rates are centrally planned. Like all forms of money and all interest rates everywhere throughout history. Austrians advocate a particularly extreme centrally planned intervention by the state into the economy, a gold standard.
ACC:I consider my views as being a hybrid of both the MMT and Austrian Schools. Arch-MMTer Abba Lerner was a student of Hayek, and considered himself a "Neo-Austrian with a social conscience" to the end of his days.
Consider this- MMT'ers say what we need is more "money." I agree with the general assertion that people need more "money," but (and that is a big BUT), more "money" should not necessarily mean only monopolized fiat "money.
There is monopolized fiat money = debt owed by government to holder & private debt money, like bank money. There is no other kind of money. (Commodity money is a contradiction in terms, and never existed.) Money IS Debt/Credit.
the point of government issuing interest-bearing bonds to The Fed No point. No point to issuing bonds at all, except when there is full employment, and for technical reasons to raise interest rates.
To uphold legal tender laws is to advocate more pain and suffering for debtors in particular, and the economy in general Legal tender laws have no economic meaning and could repealed tomorrow without effect, good or bad.
that doesn't answer the question of why a central bank is necessary It isn't. Most/many MMTers would agree entirely with you. Central Banks are less important than usually made out, and their functions could easily be folded into the treasury. Independence is a bad thing, and just a cloak for special interests. The Fed at best can only fix problems it has created; at worst it just destabilizes the economy.
Repost -seems to have been eaten. Apologies if double posts:
welfarewarfare state: Our money and interest rates are centrally planned. Like all money and interest rates throughout history. Austrians support a drastic centrally planned intervention of the government into the economy, the gold standard.
Austro-Contrarian Capitalist: I consider my views as being a hybrid of both the MMT and Austrian Schools. Arch-MMTer Abba Lerner was a student of Hayek, and called himself a "Neo-Austrian with a social conscience" to the end of his days. So welcome!
Consider this- MMT'ers say what we need is more "money." I agree with the general assertion that people need more "money," but (and that is a big BUT), more "money" should not necessarily mean only monopolized fiat "money." There is monopolized fiat "money" = government debt & private money = private debt = bank money basically. There is no other kind of money. Money IS debt/credit. Commodity money is a contradiction in terms and never existed.
In my view, legal-tender laws are an unnecessary constraint on an economy, especially for debtors. Legal tender laws are economically meaningless and could be repealed tomorrow, with no effect, good or bad. They have nothing to do with fiat currencies and its value.
In addition, what is the point of government issuing interest-bearing bonds to The Fed No point. There is no point to issuing bonds at all, except at full employment, for technical reasons, and to raise interest rates.
that doesn't answer the question of why a central bank is necessary .. Why not give the treasury 100% power of monetary operations, why add an extra layer of bureaucracy with "The Fed?" It isn't necessary. Many or most MMTers would agree entirely. "Independence" is a very bad idea. But Central Banks are not as powerful as they are made out to be. They can mess things up by monkeying with interest rates and at best then fix their mistakes. That's all. In a sensible world, interest rates would be fixed for eternity. The Central Bank would just be the lender of last resort, and regulate finance to ensure the first function is very rarely used.
The primary function of all of these things that people unfortunately get exercised about: the Fed, legal tender laws, the national debt, even bond issuance - is just to confuse people and obscure what is really happening by getting people exercised about them.
Post a Comment