Karl Rove Engineers Attacks on Democrat Supporters of Simpson-Bowles

Story via the Rachel Maddow operation at MSNBC:

Now Rove’s Crossroads is back with another ad that does pretty much the same thing, this one hitting Senator Kay Hagan in North Carolina over Social Security’s retirement age. 

The spot, which is backed by more than $1 million, says Hagan is a “big believer” in a “controversial plan” that “raises the retirement age,” while the words “raises Social Security retirement age” flash on the screen. It also claims the plan Hagan supports “increases out-of-pocket Medicare costs.” 

Yes, it appears Rove’s Crossroads is attacking Hagan for saying nice things about the Simpson Bowles debt reduction plan, which squeezes seniors by cutting Social Security and Medicare benefits.

Probably not yet time to take Rove off the moron list, but it is fair to say that he is the highest profile political operative yet to take a hack at the Simpleton-Bowels er... I mean the Simpson-Bowles people.

Matt Bruenig — Desert-Sacrifice-Utility Whack-a-Mole

Earlier, I explained the common argumentative strategy I call Capitalism Whack-a-Mole. People who utilize this strategy claim that they support capitalism for a specific normative reason (e.g. that it gives to each what they produce), but then, when you show that normative reason is actually inconsistent with capitalism, they shift to a totally new normative framework. For those who use the whack-a-mole, their preference for laissez-faire capitalism never changes, but their justification for it shifts rapidly from moment to moment.

Previously, I wrote about a whack-a-mole experience I had on Twitter with some fellow named Adam Blackstone. Here, I write about another whack-a-mole experience I had with on Twitter with a fellow named William Freeland. This twitter back-and-forth was very long, so I will just summarize it (you can try to work through it here though if you want).

Desert-Sacrifice-Utility Whack-a-Mole
Matt Bruenig

Ismael Hossein-Zadeh — The Death Grip of Neoliberalism — Keynes is Dead; Long Live Marx!

Many liberal economists envisioned a new dawn of Keynesianism in the 2008 financial meltdown. Nearly six years later, it is clear that the much-hoped-for Keynesian prescriptions are completely ignored. Why? Keynesian economists’ answer: “neoliberal ideology,” which they trace back to President Reagan.

This study argues, by contrast, that the transition from Keynesian to neoliberal economics has much deeper roots than pure ideology; that the transition started long before Reagan was elected President; that the Keynesian reliance on the ability of the government to re-regulate and revive the economy through policies of demand management rests on a hopeful perception that the state can control capitalism; and that, contrary to such wishful perceptions, public policies are more than simply administrative or technical matters of choice—more importantly, they are class policies.

The study further argues that the Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view, which attributes the plague of unemployment to the “misguided policies of neoliberalism.” Likewise, the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle.…

The claim that the abandonment of Keynesian policies in favor of neoliberal ones began with the 1980 arrival of Ronald Reagan in the White House is factually false. Indisputable evidence shows that the date on the Keynesian prescriptions expired at least a dozen years earlier. Keynesian policies of economic expansion through demand management had run out of steam (i.e., reached their systemic limits) by the late 1960s and early 1970s; they did not come to a sudden, screeching halt the moment Reagan sat at the helm. 

As Professor Alan Nasser of Evergreen State College points out, arguments that “policies of economic equity represented costly trade-offs in terms of efficiency” were made by economic advisors of the Democratic administrations long before Reaganomics solemnized such arguments. Arthur Okun and Charles Schultze had each served as chair of the Council of Economic Advisors to Democratic presidents. In his Equality and Efficiency: The Big Tradeoff, Okun (1975) argued that “the interventionist goal of greater equality had inefficiency costs that injured the private economy.” Schultze (1977) likewise claimed that “government policies which impact markets in the name of fairness and equality are necessarily inefficient,” and that such policies were “bound to disadvantage the very people policymakers intended to protect, and to destabilize the private economy in the process."

Jerome Kalur also points out, “Chamber of Commerce and Business Roundtable efforts to gain control of government regulatory decision-making were initiated at least nine years before” the election of Ronald Reagan to presidency, “when corporate attorney Lewis Powell submitted to the Chamber his now well-known memorandum ‘Attack of American Free Enterprise System’” [7]. In concert with Powel’s legal offensive against labor and regulatory standards, big business moved swiftly to “impede union organizing” and “to eliminate regulatory controls via streams of think-tank propaganda from the likes of The American Enterprise Institute (1972), The Heritage Foundation (1973), and the Cato Institute (1977).…”

While theoretical turnaround from New Deal–Keynesian economics by the luminaries of the Democratic Party pre-dated President Carter, policy implementation of such theories began under the Carter administration. Reagan picked up the Democrat’s copy of gradual agenda of neoliberalism and ran with it, replacing the rhetoric of capitalism-with-a-human-face with the imperious, self-righteous rhetoric of rugged individualism that greed and self-interest are virtues to be nurtured. Neither President Clinton eased the supply-side economic policies of the Reagan years, nor is President Obama hesitating to carry out such policies.

The Keynesian view that the government can fine-tune the economy through fiscal and monetary policies to maintain continuous growth is based on the idea that capitalism can be controlled or manipulated by the state and managed by professional economists from government departments in the interest of all. The effectiveness of the Keynesian model is, therefore, based largely on a hope, or illusion; since in reality the power relation between the state and the market/capitalism is usually the other way around. Contrary to the Keynesian perception, economic policy making is more than simply an administrative or technical matter of choice; more importantly, it is a deeply socio-political matter that is organically intertwined with the class nature of the state and the policy making apparatus.…

At the heart of Keynesian economists’ frustration or disappointment is the unrealistic perception that economic policies are intellectual products, and that policy making is primarily a matter of technical expertise and personal preferences. What these economists overlook is the fact that economic policy making is not simply a matter of choice, that is, of “good” vs. “bad” policy. More importantly, it is a matter of class policy.…

Enter Karl Marx.

Not only is the liberal economists’ account of the actual developments that led to the demise of Keynesianism and the rise of neoliberalism inaccurate, so is their explanation of the ongoing problems of unemployment and economic stagnation. By blaming the persistently high rates of unemployment on “neoliberal capitalism,” instead of capitalism per se, proponents of Keynesian economics tend to lose sight of the structural or systemic causes of unemployment: the secular and/or systemic tendency of capitalist production to constantly replace labor with machine, and to thereby create a sizeable pool of the unemployed, or a “reserve army of labor,” as Karl Marx put it. 

The fundamental laws of demand and supply of labor under capitalism are heavily influenced, Marx argued, by the market’s ability to regularly produce a reserve army of labor, or a “surplus population.” The reserve army of labor is therefore as important to capitalist production as is the active (or actually employed) army of labor. Just as a regular and timely adjustment of the level of a body of water behind an irrigation dam is crucial to a smooth or stable use of water, so is an “appropriate” size of a pool of the unemployed critical to the profitability of capitalist production…

Recall Michal Kalecki, Political Aspects of Full Employment

…the Marxian view that meaningful, lasting economic safety-net programs can be carried out only through overwhelming pressure from the masses—and only on a coordinated global scale—provides a more logical and promising solution to the problem of economic hardship for the overwhelming majority of the world population than the neat, purely academic and essentially apolitical Keynesian stimulus packages on a national level. No matter how long or loud or passionately the good-hearted Keynesians beg for jobs and other New Deal-type reform programs, their pleas for the implementation of such programs are bound to be ignored by governments that are elected and controlled by powerful moneyed interests. The fundamental flaw of the Keynesian demand-management prescription is that it consists of a set of populist proposals that are devoid of class politics, that is, of political mechanisms that would be necessary to carry them out. Only by mobilizing the masses of workers (and other grassroots) and fighting, instead of begging, for an equitable share of what is truly the product of their labor can the working majority achieve economic security and human dignity.

Counterpunch
The Death Grip of Neoliberalism — Keynes is Dead; Long Live Marx!

Ismael Hossein-Zadeh | Professor Emeritus of Economics, Drake University

masaccio — Studies Confirm Huge Wealth Loss of Middle Class

Firedoglake
Studies Confirm Huge Wealth Loss of Middle Class

masaccio

The trend lines are clear. The Oligopoly will get richer. The middle class will disappear in a few years. 

Politicians don’t care. The Republicans are ecstatic: it shows that markets are working and heavily rewarding the most moral and superior among us. The Democrats don’t care. They’re happy to talk about income inequality, but they can’t bring themselves to mention the growing Oligarchy, the vanishing middle class, or the sickening poverty of the bottom 24 million households.

Christian Parenti — Reading Hamilton From the Left

About "Hamilton’s 'American School of economics and its successor in the 'American System' of Henry Clay of Kentucky, with its package of policy ideas drawn from The Report: a high tariff, a national bank, public funding of infrastructure or 'internal improvements.'”

Jacobin
Reading Hamilton From the Left
Christian Parenti

Jocelyn Kiley — In search of libertarians

The question of whether libertarianism is gaining public support has received increased attention, with talk of aRand Paul run for president and a recent New York Times magazine story asking if the “Libertarian Moment” has finally arrived. But if it has, there are still many Americans who do not have a clear sense of what “libertarian” means, and our surveys find that, on many issues, the views among people who call themselves libertarian do not differ much from those of the overall public.

Pew Research Center
In search of libertarians
Jocelyn Kiley | Associate Director of Research at the Pew Research Center

Diane Goldstein — Take It From a Cop: The Drug War Poisons Community Policing

The Ferguson riots are the latest high-profile example of the deep schism between American law enforcement and the communities it serves. This schism has been made demonstrably worse by the way the drug war has blurred the police mission. The community policing mission should always be fundamentally different to that of the military—yet that often hasn’t been the case, thanks in large part to wrongheaded policies put in place decades ago. 

The long history of racial disparity in the enforcement of our drug policies was greatly exacerbated by the architect of the modern war on drugs, Richard Nixon. His vision was to create a crime- and violence-free society—but his false belief was that black heroin addicts were the primary cause of crime in our communities. 

Nixon once stated to his aide H.R. Haldeman, “you have to face the fact that the whole problem is really the blacks. The key is to devise a system that recognizes this while not appearing to.” 

Nixon’s dream of devising a criminal justice system that targets communities of color through the mechanism of our drug policies was achieved. According to the ACLU report “ War Comes Home: The Excessive Militarization of American Policing,” among myriad other sources, law enforcement’s attempt to eradicate drug use in America has hit communities of color the hardest.…

Law Enforcement Against Prohibition (LEAP) speaker and retired police chief Dr. Joseph McNamara once noted the effect of war language on law enforcement professionals: 

“When you’re telling cops that they’re soldiers in a Drug War, you’re destroying the whole concept of the citizen peace officer, a peace officer whose fundamental duty is to protect life and be a community servant. General Colin Powell told us during the Persian Gulf War what a soldier’s duty is. It’s to kill the enemy. And when we allowed our politicians to push cops into a war that they’ll never win, they can’t win, and let them begin to think of themselves as soldiers, the mentality comes that anything goes.”

AlterNet
Take It From a Cop: The Drug War Poisons Community Policing
Diane Goldstein | Substance.com
Then it was a short step to criminalizing dissent, which Nixon also attempted to do at the time of the Vietnam anti-war movement, especially after the bombing of Cambodia and the mass protests that followed. Of course, 9/ll and the Global War on Terror greatly amplified that.

See also Mike Konczal, Rioting Mainly for Fun and Profit: The Neoconservative Origins of Our Police Problem, at Rortybomb.

Before it was anything else, the neoconservative movement was a theory of the urban crisis. As a reaction to the urban riots of the 1960s, it put an ideological and social-scientific veneer on a doctrine that called for overwhelming force against minor infractions -- a doctrine that is still with us today, as people are killed for walking down the street in Ferguson and allegedly selling single cigarettes in New York. But neoconservatives also sought, rather successfully, to position liberalism itself as the cause of the urban crisis, solvable only through the reassertion of order through the market and the police.… 

As James Q. Wilson explained in the 1982 Atlantic Monthly article that popularized the topic, “the police in this earlier period assisted in that reassertion of authority by acting, sometimes violently, on behalf of the community.” 

Before the modern liberal state of accountability and due process, the police force wasn't judged by “its compliance with appropriate procedures” but instead by its success in maintaining order. Since the 1960s, “the shift of police from order maintenance to law enforcement has brought them increasingly under the influence of legal restrictions… The order maintenance functions of the police are now governed by rules developed to control police relations with suspected criminals,” writes Wilson. According to this theory, order is preserved by the police out there, acting in the moment against minor infractions with a strong display of force, not by liberal notions of accountability and fairness.  

This neoconservative vision that started in the 1960s and continues into today doesn’t just inform local arguments about policing, but rather the entire policy debate. So much of the debate over the (neo)conservative movement emphasizes suburban warriors, or evangelicals, or the Sun Belt, or the South. But as Alice O’Connor demonstrates in her paper "The Privatized City: The Manhattan Institute, the Urban Crisis, and the Conservative Counterrevolution in New York," there was a distinct urban character to this thinking as well. Rather than a crisis of race relations, police violence, poverty, or anything else, rioting and the broader urban crisis were framed by the neoconservative movement as a crisis of values and culture precipitated by liberalism.

The broader urban crisis, in this story, hinges not on structural issues but on personal morality and behavior that can be restored by the extension of the market. Crime and urban “disorder” fit right next to social engineering and failing state institutions as a corrupt legacy of the liberal project and its bureaucratic, administrative governing state. Only the conservative agenda, as O'Connor puts it, of “zero-tolerance law enforcement, school ‘choice,’ hard-nosed implementation of welfare reform, and the large-scale privatization of municipal and social services” is capable of dismantling it. Only through the market, individual responsibility, and freedom from government “interference” can order result from the restoration of “political and cultural authority to a resolutely anti-liberal elite.” This legacy harnesses police excess to the triumph of the market. And as we see, it will be hard to dislodge one while the other reigns supreme.

Unlearning Economics — Pieria: The Rise and Fall of Piketty Critiques

I’ve been dragged back into the Piketty melee by a review of Piketty from ‘New Institutional’ superstars Daren Acemoglu & James Robinson. Unsurprisingly, they focus on the institutional aspects of Piketty’s work, charging that his framework doesn’t pay much attention to institutions. I disagree…

Pieria: The Rise and Fall of Piketty Critiques
Unlearning Economics

John Mills — Is Piketty right, is growing inequality inevitable?

Reducing inequality is a complex task and will required a broad mix of reducing unemployment, increasing manufacturing jobs, lowering debt and cracking down on tax avoidance.

Open Democracy

Is Piketty right, is growing inequality inevitable?
John Mills | economist, entrepreneur and the Chairman and majority shareholder of JML (John Mills Ltd), an import-export and distribution company

Ed Dolan — A Universal Basic Income and Work Incentives. Part 2: Evidence

In Part 1 of this series, I outlined some basic economic theory regarding a universal basic income (UBI) and work incentives. By a UBI, I mean an income support policy that provides a set monthly benefit to every citizen. A UBI, as I define it, would to everyone, regardless of income, wealth, or employment status. In that respect it differs from means-tested income support policies (MTIS), such as current US welfare system programs or a negative income tax (NIT), which reduce benefits as the recipient’s income increases. 

The fear that a UBI would undermine work incentives is among the most important sources of resistance to the idea. In Part 1, I argued, on theoretical grounds, that replacing the existing welfare system with a UBI would tend to increase average work effort. This part will look at several sources of evidence that support the theory, beginning with the famous income maintenance experiments (IMEs) of the 1970s and 1980s.

EconoMonitor

A Universal Basic Income and Work Incentives. Part 2: Evidence
Ed Dolan

Bill Mitchell — Eurozone has failed – a major shift in direction is needed

Summary analysis from Bill: It's the (neoliberal) design, stupid.

Conclusion
As it stands, the Eurozone is a failed system. It has been for 14 years.
Unless there is a major shift in thinking it will continue to be.

The fix —

What is required immediately is: 

1. Overlook the SGP rules – allow nations to exceed the deficit and debt thresholds (encourage them to do so) – they can invoke the emergency let outs in the Treaty. 

2. Announce that the ECB will buy any government debt. This can be done within the Treaty via the secondary markets. That will eliminate any problems with bond markets and higher yields. The ECB can guarantee solvency implicitly in this way and still stick within the legal constraints. 

3. Announce a massive public employment and public infrastructure program throughout Europe. That would eliminate unemployment and spur growth in private spending. 

4. Do not waste time introducing a quantitative easing program. All bond purchases should be tied to increasing fiscal deficits. 

5. Provide a demogrant of some euro amount to all people in the bottom 3 quintiles of the income distribution funded by the ECB. That would flow straight into the expenditure stream. There is nothing in the Treaty rules that say the ECB cannot do this. They just cannot bail out governments or allow overdrafts to them.

Bill Mitchell – billy blog
Eurozone has failed – a major shift in direction is neededBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Bill Black — The Wall Street Journal’s Choleric Rant about Cholera and Bank Fraud Epidemics

Brilliantly stated takedown of Murdoch's WSJ. Who needs mathematically modeling with prose like this. Outstanding. Bill outdoes himself with this one.

New Economic Perspectives
The Wall Street Journal’s Choleric Rant about Cholera and Bank Fraud Epidemics
William K. Black | Associate Professor of Economics and Law, UMKC

Peter Martin — How to Balance the Government Budget

Government Deficit = Savings of the Private Domestic Sector + External Deficit
.... 

So, if government, in its wisdom (or folly?), does decide the deficit does need to be cut in a recessionary period, it should forget about spending cuts and tax rises. What needs to happen is for saving to be discouraged and, of course, having interest rates very low helps do that. Then imports have to be cut and/or exports increased as well. Of course that’s very difficult to do in a free society where individuals wish to purchase goods and services from anywhere in the world. However, if neo-liberals argue that it this is impossible they must also necessarily concede that running a government surplus is sometimes impossible too.

Of course, cutting savings is anathema to neoliberals because savings = financial wealth and they believe that saving causes investment.

Cutting the trade deficit could be done by making imports more expensive either through currency devaluation, but that results in inflation, which they hate, or by imposing tariffs, which violates free trade, a cardinal principle of neoliberalism.

As far as low rates discouraging saving in recession, the evidence doesn't bear that out since liquidity preference increases with economic uncertainty and liquidity preference determines the ratio of saving and investment.

So to be true to principle, neoliberals have to advocate fiscal austerity, which results in larger deficits due to automatic stabilization. The neoliberal answers, again true to principle — reduce or eliminate the automatic stabilizers that increase non-discretionary spending and add to the deficit.

And they don't understand stock-flow consistency anyway and not only think it's possible to have all three sectors in surplus simultaneously but also set this as the goal.

So the neoliberal formula is to increase domestic private savings to drive investment, run a balanced budget or even a fiscal surplus for fiscal responsibility, and run an export economy in emulation of "strong" economies like Germany and America as it used to be.

It's no wonder that the neoliberal countries are economically stagnant.

Modern Monetary Theory: Real Economics

How to Balance the Government Budget

Peter Martin

sfc-models.net — New papers using the SFC approach

Like it says, a list of papers and links.

sfc-models.net
New papers using the SFC approach

Posted by Gennaro Zezza

Dr. Housing Bubble — Building for a future of American renting serfs

There was much celebration regarding the jump in private housing starts. However, once you begin to look beyond the headlines you realize that the big jump came largely because of multi-family starts. In other words, building more rentals in the form of apartments for a growing population that rents. Private starts for places with 5 units or more has now hit a post recession high. This makes sense given the fall in rental vacancy rates and the rise in rental prices. Yet what we find is that more income is being siphoned off into a less productive sector of our economy. Real estate tends to be a big plus for an economy when it happens organically with rising incomes, good overall employment prospects, and first time buyers leading the charge. Today it is more of a shifting of assets into fewer hands while extracting more income from the productive sectors of the economy. Not everyone can have their flipping show on cable television. For example, over 11 million Americans now pay 50 percent or more of their income to rent. Many of those people are here in California. The trend to building rentals aligns with the underlying reality that many future Americans will be less affluent compared to their parents. 

Dr. Housing Bubble
Building for a future of American renting serfs: Private housing starts for structures with at least 5 units hits a post recession high. More than 11 million Americans spend more than 50 percent of income on rent

Phil Thornton — Daniel McFadden: Understanding better how people really make choices

The classical economic of choice is therefore far too simple as it does not capture what goes on in people’s brain when they make choices. “It is also much too static to capture the sensitivity and dynamics of the process,” he said.

Lindau

Daniel McFadden: Understanding better how people really make choices
Phil Thornton

Daniel Little McFadden (born July 29, 1937) is an American econometrician who shared the 2000 Nobel Memorial Prize in Economic Sciences with James Heckman. McFadden's share of the prize was "for his development of theory and methods for analyzing discrete choice". He is the Presidential Professor of Health Economics at the University of Southern California and Professor of the Graduate School at University of California, Berkeley. —Wikipedia

Doug Short — Measuring Real Wages: "Lies, Damn Lies, and Statistics"

Earlier this week I updated my commentary on Five Decades of Middle Class Wages, an analysis of Real Average Hourly Earnings of Production and Nonsupervisory Employees. During the 21st century and especially since the end of the Great Recession, wages have clearly been stagnant. 

But, as Mark Twain famously remarked, "there are three kinds of lies: lies, damned lies, and statistics." 

I was, therefore, not surprised when a reader sent me a link to a blog article entitled "Real Wage Stagnation Is a Bit of a Myth." Seriously! The article featured a chart that included the very same earnings data series that I had used, but it came to quite the opposite conclusion:

"Contrary to popular belief, wages have been rising a bit faster than prices. In other words, real wages haven’t stagnated as widely believed, but have been moving higher, albeit at a slow pace."

All it takes is a simple statistical manipulation to paint a smiley face on the real wage data. And what is that? Choose a tame deflator for your inflation adjustment.…

dsshort.com
Measuring Real Wages: "Lies, Damn Lies, and Statistics"
Doug Short

Branko Milanovic — My take on the Acemoglu-Robinson critique of Piketty

A couple of days ago Daron Acemoglu and James Robinson published a critique of Piketty’s Capital in the 21st century. It is published here. Because of the renown of the authors, perhaps more than because of its intrinsic quality, it is a review worth reading. I read it today and my brief reaction to the three main critiques by Acemoglu and Robinson is as follows.…

globalinequality
My take on the Acemoglu-Robinson critique of Piketty
Branko Milanovic

The Roots Of Political Gridlock? A Foolish Population & Their Options Are Soon Parted

   (Commentary posted by Roger Erickson.)



Definition of a foolish population? One that doesn't listen well enough - or often enough - to enough of it's own, growing spectrum of feedback ..... to know what it knows!

You want yet another perspective?

Control Fraud:

"voters will not get angry ..if they don’t know that money is being stolen in the first place."

(?? And if they don't realize that national outcomes are being diverted, regardless of how much "money" does or doesn't seem to change hands?)

This is an incredibly long and detailed essay, above, by Francis Fukuyama ..... and yet he goes to all that trouble without making any suggestions for what to do about the challenges he lists!

I find the straightforward approach of OBT&E - or OSCE - to be much more productive.

Quit separating the endlessly emerging challenges from the early and continuous adjustments?

Forget Combinatorial Chemistry. We're undergoing Combinatorial Culture - and have to parse the simultaneous changes the best we can. That ALWAYS means forcing early decisions with insufficient data, but not TOO MANY! We've been doing this for 4.5 billion years, so don't panic. In fact, we've gotten really good at it, and now practice the refined approach called "social species."  No matter the context, social species solve emerging challenges by ... "being social" - i.e., by exchanging, analyzing and quickly (& continuously) acting upon ENOUGH of their own, available feedback to surf unpredictable reality.

Do we have to do that on a larger scale every year, by inventing & testing entirely new and more scalable methods?

Sure. That doesn't mean it's not doable.

What happened to American ingenuity?

We seem to be trying our best to tax it out of existence, with FICA, Medicare and other income taxes on what's left of Jane and Joe Sixpack of the former Middle Class.

We now use the hyper-efficient NSA to detect any sign of public feedback.



Yet if they detect any ... do they just call in the newly weaponized SWAT teams? What's next? Diverting the imaginary Social Security Trust In Fiat Fund to support drones for neighborhood police?

There is a better way, obviously - but we have to select it from current options. We can invest in developing reasonable, reasoning, free citizens ... or we can invest in imprisoning them in their own faux security.





Yes, there's an app for that. We're still working on bullet proof apps for the unborn, all the way to their source ... ovaries and testes. Support the RIGHT TO STRIFE fund! Since that obviously won't be enough, will we encase our brains in impenetrable shielding too? Or just our institutions and their momentum, since that's always tangential to our culture's unpredictable Adaptive Path.

If a shrinking Policy Space and declining Policy Agility is what we think we want, then we're doing a good job. Unfortunately, those goals are incompatible with what we all say we want for ourselves, our kids, our grandchildren, and our 7th generation yet unborn.

"Progress is impossible without change, and those who cannot change their [methods] cannot change anything." - George Bernard Shaw

John Ross — Deng Xiaoping - the world's greatest economist

China’s economic performance after the beginning of its 1978 reforms simply exceeded the experience of any other country in human history. To give only a partial list…

But while in one sense Deng Xiaoping "returned to Marx," he necessarily had to resolve many problems of a modern economy Marx never envisaged. Purely theoretically, a number of these had been analyzed by Keynes in the 1930s. Keynes’ fundamental conclusion was that investment played the determining role in the economy, "the fluctuations of output… depend almost entirely on the amount of current investment" (Keynes conclusion has since been comprehensively confirmed by statistics). As, in a modern economy, investment is financed by borrowing, Keynes advocated very low interest rates to incentivize investment. But Keynes judged these alone would be insufficient to stably maintain an adequate investment level. 

It was therefore necessary for the state to play a direct role in setting the level of investment: "I am… skeptical of the success of a merely monetary policy directed towards influencing the rate of interest… I expect to see the state… taking an ever greater responsibility for directly organizing investment." Keynes noted: "I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands."

But if the "the current volume of investment" were to be set, Keynes realized this meant a large state investment role: "I conceive… that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment."
Keynes noted such a "somewhat comprehensive socialization of investment" did not mean eliminating the private sector, but socialized state investment operating together with a private sector: "This need not exclude all manner of compromises and devices by which public authority will co-operate with private initiative… The central controls necessary to ensure full employment will, of course, involve a large extension of the traditional functions of government." Keynes, consequently, envisaged an economy in which a private sector existed but in which the state sector was sufficiently dominant to set overall investment levels.

But Keynes’ analysis remained purely theoretical. It could not be implemented in the West for an insurmountable reason – which is why the West’s "Keynesianism" bears little relation to Keynes’ own writings! Capital investment is "the means of production." If the most basic investment decisions were not taken by private capital, it would no longer be a capitalist society. Keynes had developed an incisive theoretical analysis, but which could not be implemented in the society in which he lived.

Problems which were insurmountable for Keynes were, however, no problem for Deng Xiaoping – as he did not intend to create a capitalist society! To be clear, there is no evidence Deng Xiaoping’s economic concepts were directly influenced by Keynes. But ideas Deng Xiaoping was entirely familiar with from Marx led to the same economic structure as Keynes. The state would retain ownership of large scale (i.e. socialized) economic sectors, thereby giving it the ability to regulate the investment level, while smaller scale economic sectors (non-socialized production) could be released to the private or non-state sector. The state therefore did not need to own the overall economy, just to own enough to set the overall investment level.

Online University of the Left
Deng Xiaoping - the world's greatest economistJohn Ross

Medea Benjamin — Police Departments Shouldn't Become Dumping Grounds for Weapons Makers

Public good, or pork barrel for the defense industry? File under WTF?!

Your head will spin if you take a look at this map the New York Times published on August 21. It lists the counties that have received military surplus and the supplies they’ve received. The acquisitions under the Department of Defense (DOD) program since its inception in 1991 are valued at $5.1 billion, with $449.3 million given out in fiscal year 2013 alone. In just the past 5 years, as part of Section 1033 of the National Defense Authorization Act of 1997, the Pentagon has given away “tens of thousands of machine guns; nearly 200,000 ammunition magazines; thousands of pieces of camouflage and night-vision equipment; and hundreds of silencers, armored cars and aircraft” to counties in every state throughout the country.

While attention is now focused on the DOD’s program, the Department of Homeland Security (DHS) has a program that is three times the size. This year alone, DHS plans to give away $1.6 billion worth of military equipment for counterterrorism, border security and disaster preparedness. Thanks to DHS, every squad car in Fargo, North Dakota, has assault rifles and kevlar helmets and 1,500 beat cops in Philadelphia are trained to use AR-15s.

DHS is also giving out money for a few dozen police departments to experiment with drones. When the Federal Aviation Administration opens US airspace to drones in the coming years, civil liberty advocates fear that the nation’s 18,000 police departments will be lining up for DHS grants to get their latest toy--a toy that has the capacity to spy, stun, maim and kill.

This is already starting. In May 2012, DHS began distributing $4 million in experimental grants to help local law enforcement agencies buy their own small drones, opening a new market for politically connected drone makers as the wars overseas shrink. The sheriff’s department in Montgomery County, Texas received a $250,000 grant to buy a drone, which in April 2014 crashed into Lake Conroe and was destroyed. In 2013, citizens of Seattle pressured police into returning two drones they had received from DHS grants for $82,000. The drones were then pawned off on the LA Police Department, which is now facing a citizen backlash to get rid of them.

In the past, Congress has done nothing to rollback the handouts. When Congressman Alan Grayson introduced legislation in June to limit funding to the 1033 program, it was quashed by an overwhelming vote of 355-62, including 35 members of the Congressional Progressive Caucus who voted against it.….

Worse than traffic cameras for revenue generation as a replacement for taxation.

AlterNet

Police Departments Shouldn't Become Dumping Grounds for Weapons Makers
Medea Benjamin

See also, Steve Holland and Andrea Shalal, Obama orders review of U.S. police use of military hardware, Reuters

Key concerns include a clause in the program that requires police to use the equipment within a year, something the American Civil Liberties Union argues may give police forces an incentive to use the equipment in inappropriate situations. The program also does not mandate training for crowd control or other uses.…

U.S. weapons makers have been eyeing what they call "adjacent" markets for years, keen to drum up fresh demand for products initially developed for the military, and recently, to offset declines in U.S. and European military spending. 

Faced with a dwindling number of big-ticket military contracts, even the Pentagon's largest suppliers such as Lockheed Martin Corp (LMT.N) and Northrop Grumman Corp (NOC.N) are competing for increasingly smaller contracts in commercial or non-military markets, analysts and industry executives said. 

Among the products marketed to state and local officials are military-grade communications equipment, radios, night-vision goggles, drones and other surveillance equipment.…

Biology-101 ..... Does Institutional Persistence Without Change Slow Adaptive Rate? (Does a Duck Swim?)

   (Commentary posted by Roger Erickson)





So was Minsky the only economist who ever took biology 101?

Why don't all economics students learn this BEFORE starting college?

"The very stability of institutions .. is .. the source of political decay [as] circumstances change and institutions fail to adapt."

Ya think? (Really, I had no idea that people in other professions had NOT learned that at the onset of their education!)

That observation was the STARTING point of the theory of evolution - articulated and discussed as early as 1840 - and the onset of modern biology.

170 years ago, and that's not an axiom of economics? What the hell happened to the fundamental concept of a well-rounded education? Today's specialists wander only among their own choir?

If at least 10% of an electorate doesn't understand some prerequisite for democratic organization ... then that electorate won't require their politicians to understand. Consequently, Policy Space will shrink, and Policy Agility will dwindle. Without an informed electorate, an informed policy staff is highly improbable.

It's that simple?

"We" as a people are what we (in aggregate) train and practice becoming? Failing to quickly incorporate adaptive perspectives into preparatory education amounts to yet another shabby trick - played on ourselves!

This naturally leads to a simple conclusion, borrowed from the field of statistical process control. "Cease, forever, checking for [Adaptive Value] after the fact. Instead, [continuously manage Adaptive Value from the onset of the development process]."

In short, if we don't revitalize K-12 education, we can't succeed in our own Adaptive Race. Nor will our erstwhile democracy.

Karoli — Media Punked By Fake 'Josie' Account Of Michael Brown Shooting

Another faux rush to judgment.

Crooks and Liars
Media Punked By Fake 'Josie' Account Of Michael Brown Shooting
Karoli

Philip Pilkington — Economists: An Anthropological View

One of the best short take-downs of conventional economics I have read in terms of apt comparison.

Fixing the Economists
Economists: An Anthropological ViewPhilip Pilkington

Branko Milanovic — Mr. Piketty and the classics

For a seminar in Oslo on September 4, I was asked (although I did not expect it) to speak of the significance for economics, and especially economics of inequality, of Piketty’s recent work. So I decided in this brief note to put some thoughts together.

globalinequality
Mr. Piketty and the classics
Branko Milanovic

Summary: Capitalism is designed to favor capital formation and in most nations running capitalist economies, capital is predominantly owned by the ownership class rather than being distributed. So wealth begets wealth and without redistribution, the rich get richer. It's institutional, rather than a function of merit and deserts.

However, a recent and important (yet unpublished) work by Christoph Lakner shows that in the US, the probability of a person having a high labor income also having a high capital income is greater than the reverse probability, of a person with high capital income having also a high labor income. So we may be moving toward the emergence of a peculiar capitalism with high concentrations of both labor and capital incomes.

Lots of other stuff worth reading too.

Jeffrey A. Winters — Oligarchy and Democracy

Weekend must-read. Detailed analysis. Here are a few of the high points. I highly recommend reading the whole article through, even though it is detailed and longish. It's the basis for understanding what's happening, and it dovetails with the post on economics and law posted previously. This issue extends far beyond economics and shows how and why the conventional approach to economics not only cannot deal with it but is designed not to deal with it.

Democratic institutions aren't sufficient in themselves to keep the wealthy few from concentrating political power….
The complex truth, however, is that the American political economy is both an oligarchy and a democracy; the challenge is to understand how these two political forms can coexist in a single system. Sorting out this duality begins with a recognition of the different kinds of power involved in each realm. Oligarchy rests on the concentration of material power, democracy on the dispersion of non-material power. The American system, like many others, pits a few with money power against the many with participation power. The chronic problem is not just that electoral democracy provides few constraints on the power of oligarchs in general, but that American democracy is by design particularly responsive to the power of money…. 

The founding fathers made sure of that in the structure of representative government, and the rise of the two-party system cemented it. The triumph of Hamiltonian centralization over Jeffersonian decentralization also contributed to the concentration of the power of wealth in US politics.

Oligarchy should be understood as the politics of wealth defense, which has evolved in important ways throughout human civilization. For most of history, this has meant oligarchs were focused on defending their claims to property. They did so by arming themselves or by ruling directly and jointly over armed forces they assembled and funded. Every great increase in wealth required oligarchs to spend additional resources on armaments, castles, militias and other means of defense. The greatest transformation in the politics of wealth defense and thus of oligarchy came with the rise of the modern state. 

Through its impersonal system of laws, the armed modern state converted individual oligarchic property claims into secure societal property rights. In exchange, oligarchs disarmed and submitted to the same protective legal infrastructure that applied to all citizens (in theory if not always in practice). Property rights offered reliable safeguards not only against potential antagonists without property, but also, no less important, against other oligarchs and the armed state itself that administered the entire arrangement. 

This new formula for political economy had several major consequences. One was that it created the mistaken impression that there were no longer any oligarchs, only wealthy people with no shared political motivation; yet this illusion is proved false every time states in the modern era fail to protect property and wealthy people re-arm or hire private militias once again to do the oligarchic job themselves. Another consequence is that the transformation shifted rather than fully solved the broader problem of wealth defense for contemporary oligarchs. The legal state made property inviolable, but in many cases it also aggressively targeted income and, occasionally, wealth via taxation. This was “taking” of a different kind. 

Indeed, progressive taxation is the unique challenge to oligarchs in democratic states. Heavier tax burdens on those most able to pay can theoretically retard the pace at which the rich enlarge their estates, and in extreme cases could even redistribute wealth downward. The story of oligarchy in America has unfolded as a titanic battle over wealth defense as oligarchs have sought to deflect tax burdens onto others in society. With tens of billions of dollars at stake annually, the struggle is politically charged for a small number of ultra-wealthy Americans. While its intensity has ebbed and flowed throughout American history, it is a battle oligarchs have been winning handily for the past several decades. Again, the question is why. 

Excellent analysis follows about the intersection of economics and politics, that is, wealth and power, in a liberal society.

Interestingly, the analysis supports Thomas Piketty's claims that the Kuznets curve is a historical anomaly rather than the new normal as supposed.

Over the course of the 20th century, two wrenching things happened within American democracy and oligarchy that together constitute the Great American Inversion. First, early in the century, steep new income taxes were imposed exclusively on the rich. By the end of the century, these same tax burdens had been shifted from the richest Americans to the various strata below them. 

Second and related, there was a sharp reversal of economic momentum for average Americans and the rich. The average income of working-class Americans around 1920 doubled in real terms by 1955 and tripled by 1970. A growing American middle class was taking an ever-larger share of an expanding economic pie. Although the chasm separating the rich from the rest remained huge, ordinary citizens were closing the gap at a remarkable pace. But then this process stopped. In the four decades since 1970, there has been almost no improvement on average for the lower 90 percent of American households. Although the U.S. economy continued to grow, income stopped growing for average citizens. Adjusted for inflation, average household incomes in 2010 were almost exactly what they had been forty years earlier. They peaked and stopped in 1970 at “triple 1920.” Growth America became stagnation America. 

The story was much different for America’s oligarchs. At first their wealth shot up significantly during the 1920s. They were also busy in that decade trying to roll back or deflect the new taxes aimed at them. But then the Crash of 1929 hit them in the solar plexus. It is not that oligarchs went to the poorhouse like almost everyone else. The rich still enjoyed very luxurious lives, but their real gains across the next several decades were very modest. One instructive thing about this period of history is that oligarchic influence was weaker during deep political-economic crises and wars than it was during the “politics of the ordinary” between crises. It took decades after 1945 to reverse the relative leveling effects of the Crash, the New Deal and the embryonic welfare state of the Great Society. 

During the long arc from 1920 to 1970, the top 1 percent of American families moved up at barely half the pace of the average household. The very richest families (the top 0.1 percent and 0.01 percent) were having a hard time grabbing a larger share of the growing income pie for themselves. By 1955, the real incomes of these two top strata were actually 20 percent lower than their 1915-–20 level. It was not until 1970 that the ultra-rich were earning roughly the same real incomes they had enjoyed half a century earlier. 

And then, as suddenly as the improvements had come for mainstream society, the new bonanza for the ultra-rich commenced. The decade from 1970–80 was the turning point in the Great American Inversion. This is when the boom for the average household turned to bust and the rich soared after decades of treading water. It is as if a big pause button had been hit in 1970 for the bottom 90 percent at the same moment the fast-forward button clicked on for oligarchs. The cumulative effect was breathtaking. By 1990, real incomes for the top 1 percent exceeded the 1920 level threefold and continued to rise thereafter, while those of the majority did not budge. Reversing the pattern of previous decades, the richer you were, the faster gains accrued. It did not matter if Democrats or Republicans were in charge of the White House or Congress. By 2007, the top 1 percent of households had almost five times the real income they had in 1920; the top 0.1 percent had around six times, and the top 0.01 percent were awash in nearly ten times the real income they had enjoyed nine decades earlier. The tables had turned.

Why? In large part owing to class structure and power.

Many analysts have pointed out the role of globalization, higher international capital mobility and the related decline of unions in causing this reversal of fortunes. What has gone largely unnoticed is the compounding effect on these trends due to the increasingly aggressive strategies of wealth defense on the part of oligarchs. As the United States was becoming a tiger economy exclusively for the rich, tax burdens on American oligarchs grew lighter by the decade. Meanwhile, tax burdens on the strata below grew more regressive as average Americans went from seeing rapid gains to being mired in economic molasses and rising debt.…

It is impossible to make sense of these transformations without understanding how oligarchic power operates within American democracy.

It is not just political power that has been operative but "going Galt" and refusing to participate, daring government to prosecute "wealth defense" through tax evasion avoidance, and now we see also through massive fraud. It also explains the depredation of the middle class the tax burden was shifted down to those affluent enough to pay, but unable to compete with the power of wealth at the to and sophisticated approaches to wealth defense.

The income defense industry is comprised of lawyers, accountants, wealth management consultants, revolving-door lobbyists, think-tank debate framers and even key segments of the insurance industry whose sole purpose is income defense for America’s oligarchs. The industry is wholly funded by oligarchs, and it would simply not exist if oligarchs did not have massive fortunes to defend. There is no parallel (much less countervailing) industry serving the material interests of the mass affluent, the middle class or the poor. The activities of the income defense industry extend far beyond mere “interest group” lobbying over policies. Its salaried specialists assist oligarchs in exerting a form of power that is unique to the ultra-rich: the defensive redeployment of their money and income across a global geography of jurisdictions, banks and offshore havens through the use of tailor-made tax instruments, evasive trusts and shell corporations…

The most strategic theater is taxes, with combat conducted on two fronts. The first is the effort to lower the published top tax rate as much as possible and also to set the income threshold for the top bracket low enough that large numbers of relatively modest income earners feel the oligarchs’ pain. The second front is making the spread between the published tax rate and actual (or “effective”) taxes paid as wide as possible. This is one of the most important and costly fights the income defense industry wages on behalf of its oligarchic patrons. In the 1970s, oligarchs paid an average effective tax rate of about 55 percent, which was almost 80 percent of the top published rate. By 2007, the top 400 income earners in America paid an effective tax rate of 16.5 percent, which was barely 50 percent of the top published rate. Thus, the [income defense] industry delivered lower tax rates on which oligarchs paid a lower proportion. The richer the client, the wider the income defense spread achieved.…

The upshot.

The income defense industry, attached symbiotically to the nation’s richest citizens, has fortified the material power and influence of oligarchs. It has enabled them to fight much more tenaciously even in the face of deep crises that, in earlier decades, delivered serious setbacks to their broader wealth defense agenda. Although oligarchs still operate mostly atomistically, their common deployment of a highly networked and organized industry lends their actions an unprecedented degree of unity. Combined with weakened unions and considerably less political unity among average citizens, America’s oligarchs are arguably more powerful today than during the robber baron era at the turn of the 19th century.

Where conventional economics fails.

"America does not have oligarchs, it has rich people", declared one of my seminar students at Northwestern University. This could only be true if wealth were somehow stripped of its inherent political potency. Whatever else American democracy has achieved, it has not managed this. Rather, oligarchy and democracy operate within a single system, and American politics is a daily display of their interplay.

So is economics.

The conclusion.

Universal suffrage and liberal freedoms empower all citizens in a radically equal manner. But the one-person/one-vote principle does little to prevent oligarchs from exercising the power of money in a manner that is profoundly unequal. Formal juridical equality is essential to human freedom. But full political equality, even in the most liberal democracy, is impossible as long as concentrated wealth places grossly unequal political influence in the hands of a few citizens. Democracy fused with oligarchy is certainly better than no democracy at all. But there should be no illusions that it is anything other than a partial step toward full political equality and representation.

The American Interest
Oligarchy and Democracy

Jeffrey A. Winters | Professor of Political Science at Northwestern University

Andrea Terzi — Fiscal responsibility means quality spending and a large enough deficit

Austerity is a respectable policy approach when it is concerned with the quality of public spending. Austerity is harmful and unscrupulous when it is concerned with making all levels of government balance their books.

Using the wrong tool for the job botches the job.

Money and the Real Economy
Fiscal responsibility means quality spending and a large enough deficit —A response to Steve Hanke’s defense of austerity
Andrea Terzi | Professor of Economics at Franklin University Switzerland, and a Research Associate at the Levy Economics Institute of Bard College, NY

Sara Mayeux — Three Ways of Explaining the Rise of “Law and Economics,” and Also, One Way

Weekend reading. Short summary of the shift in thinking about the relationship of economics and law that led to the conservative legal revolution that has shaped American law and its friendliness to economics interests. No it wasn't only the appointment of conservative judges, but a shift in legal theory based on activism on the part of the Chicago School of neoliberalism. This legal theory is now a cornerstone of US insitutional neoliberalism.

Today it can be hard to understand why applying economics to law could be controversial, both because of the cultural prominence of economics generally and because it has become so commonplace to talk about law in economic terms: to question how regulations affect the efficiency of a particular market, for instance, or to accuse some statutory regime of enacting perverse incentives, or to suggest that some policy has been pushed past the point of diminishing returns.… 

And yet, this particular economic mode of thinking and talking about the law only dates to about 1960, and only became widely influential in the 1970s and ’80s.… 

Between the 1960s and 2014, then, what changed? At the basic level of events and chronology, it is not hard to trace the rise of law and economics. Scholars typically identify the University of Chicago as the relevant holy land, Ronald Coase’s 1960 article, “The Problem of Social Cost,” as the gospel of modern law and economics, and Richard Posner’s 1973 book Economic Analysis of Law, which synthesized and riffed on the burgeoning literature for a wide audience, as its letters from Paul. But to name the key texts and figures in a school of thought is one thing; it’s another to explain how and why those texts and figures gained influence—why anyone read them, much less took them seriously. 

Summary of how we got here.

The cleanest way I can see to synthesize these three accounts would go something like this: [Brad] Snyder’s tale of generational rebellion explains the motivation that drove leading figures like Posner to want to chart a new path in legal thought away from legal process theory. [Daniel] Rodgers’s big-picture intellectual context explains why this particular new path was among the routes visible to them at the moment they began looking (and perhaps why it was among the more attractive such paths). And finally, [Steven] Teles’s nuts-and-bolts account explains why so many others followed down the path, once it had been marked—it reconstructs the vectors of institutional support and funding that brought these ideas into contact with judges, lawyers, legal scholars, and other interested observers of law who might not have had any particular generational motivation to worry about process theory, and who might not have had any particularly systematic exposure to the welter of market concepts that Rodgers discusses, but who, once they encountered law and economics in its various vernacular iterations, decided it sounded plausible enough to them (and/or that it served other interests they had) that they became converts. 

Now maybe that’s not right because there’s some deep flaw with one or more of these accounts that I’m overlooking, or because it’s not the best calibration among the three accounts; and of course it’s too schematic, insofar as it implies that phenomena such as motivation, mindsets, and institutional support operate independently and on entirely different levels from one another. But it strikes me as one plausible enough way to explain the rise of law and economics.

Neoliberalism is basically the application of classical economic liberalism to law and politics. It was spawned by the Chicago School and its spread was funded by wealthy donors.

The trend has been away from traditional thinking toward rational choice theory and the assumptions of neoclassical economics, that is economic liberalism at the expense of social liberalism and its focus on human rights and civil liberties.

U. S. Intellectual History Blog

Three Ways of Explaining the Rise of “Law and Economics,” and Also, One Way
Guest Post by Sara Mayeux, a Sharswood Fellow at the University of Pennsylvania Law School and a PhD candidate in history at Stanford

Unlearning Economics — Economists Dissing Economics

Quotable quotes, and some economic humor.

Unlearning Economics
Economists Dissing Economics

Lyle Jeremy Rubin — A Former Marine Explains All the Weapons of War Being Used by Police in Ferguson

There’s at least one line every Marine knows: “Never point a weapon at anything you do not intend to shoot.” The St. Louis County Police Department apparently never received that memo.…

One small way to measure the police violence against black people in Ferguson is to attend to its details. It is in that spirit that I present this simple catalog.…

Everything but the price list. Is this another aspect of military Keynesianism to feed the defense industry?

This is not only police militarization but also domestic militarization under the coordination of the Department of Homeland Security, the first "ministry of the interior" aka institutionalized secret police that has been permitted in the US.

The Nation

A Former Marine Explains All the Weapons of War Being Used by Police in Ferguson

Lyle Jeremy Rubin