Wednesday, July 31, 2013

Alan Travis — National archives: Margaret Thatcher wanted to crush power of trade unions

"We had to fight the enemy without in the Falklands. We always have to be aware of the enemy within, which is much more difficult to fight and more dangerous to liberty," Margaret Thatcher speech to the backbench 1922 committee, July 1984.
In case anyone had any doubts.

Union busting is a top priority for neoliberals, who see unions as the major obstacles to social, political and economic control in representative democracy — as Karl Marx foresaw. Neoliberals views trade unions as "socialism."

The Guardian (UK)
National archives: Margaret Thatcher wanted to crush power of trade unions
Alan Travis | Home affairs editor

Josh Bivens — GDP Shows The Economy is Growing too Slowly to Improve Employment

GDP Shows The Economy is Growing too Slowly to Improve Employment
Economic Policy Institute — Quick Takes
Don’t let the new numbers distract you
Josh Bivens

Brad DeLong — Malinvestment In The Recession?

I think Daniel Kuehn mistakes Evan Soltas's point. Soltas is arguing not against the fundamentalist Austrians and their claims that the depression is caused by previous malinvestment in the boom. Soltas is arguing against the Martin Feldstein's who claim that interest rates need to be high during the bust in order to guard against additional malinvestments committed then.
Grasping Reality
Malinvestment In The Recession?
J. Bradford DeLong | Professor of Economics, UCAL Berkeley

Only 5 days left to sign up for my Forex course!

I'm bringing back, by popular demand, my online Forex trading course. The course will be held next week, Aug 5 - Aug 9.

I will teach how to use the highly sophisticated, Oanda online trading platform and Ii'' give you all the tricks and techniques that I've accumulated over 34 years of trading so that you can become a successful Forex day trader.

Here are what some people who took the course said:

"I wanted to take the time to thank you and tell you that your techniques freed me from fear. I am no longer afraid to take the trade. I know I can fix whatever comes at me or at least break even. This has been my biggest issue in trading. Since your class I have been trading fear free and enjoying it." -Chuck

"First let me say that you have revolutionized my trading...most importantly me. The lecture for me was like getting a shot of steroids! I have increased in confidence just from your seminar you've taught. I was very timid of losses and making mistakes, but your talks, strategy and kick in the butt has transformed me." Thank you!

"I wanted to personally thank you for the Forex course you gave. I have already made 80 pips today directly as a result of your methods. I have NEVER made 80 pips in one day. I was becoming so frustrated and negative, having been new to trading since this past October. Many many many many thanks!!!" -David

"Mike, I LOVED having you as an instructor and I absolutely love your trading style and have been using it as well. Blessings Mike." -Jay

Get more info on the course here.

Peter Buffet: The Charitable-Industrial Complex

The son of Warren Buffett is out with an OP-ED in the NYT here.
Philanthropy has become the “it” vehicle to level the playing field and has generated a growing number of gatherings, workshops and affinity groups.
As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to “give back.” It’s what I would call “conscience laundering” — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity.
But this just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.

I pretty much agree with Buffett junior here.

"Charity" or philanthropy are no substitutes for just and righteous economic policies imposed via the  authority we humans can grant to our institutions of civil government.

Evan Soltas — How to Think About Malinvestment

Evan schools Larry Summers and Austrian economists about "malinvestment" in a recession owing to low interest rates. NOT.

Evan Soltas
How to Think About Malinvestment
(h/t Brad DeLong)

David Spencer — Underemployment As A Challenge To Orthodox Economics

The constraint on work hours raises important issues for economic theory in the sense that it implies that the labour market is not an idyll of free choice. Orthodox neoclassical economics assumes that workers "choose" the hours they desire based on their preferences. If workers want to work more they can do so. They will also be rewarded for the disutility of longer work hours with higher wages.
This fantasy world of free choice runs contrary to the reality of the labour market that exists in the UK and elsewhere. Workers are not “free to choose" the work they want but instead confront constraints both on their ability to secure paid work and when in work on their ability to work the hours they need and desire. Employers set work hours not workers and often employers will deny workers the work hours they need and desire. Workers can suffer not just involuntary unemployment but also involuntary underemployment.
Neoclassical economics fails to recognise and indeed denies the unequal bargaining power between capital and labour and its influence on labour market outcomes. Contrary to what neoclassical economics assumes, in the real world, workers are not able to realise their preferences at will; rather they face having to take jobs on a take-it-or-leave-it basis. In work, workers must settle for hours decided upon by employers. Employers will not accede to the demands of workers for longer work hours unless they stand to gain higher profits from doing so. They will also be liable to impose longer work hours against the will of workers if they find it profitable to do so. While some workers will be denied longer work hours, others will face being overworked.

Just as involuntary unemployment poses a challenge to neoclassical economics so too does involuntary underemployment. The latter exposes the fiction of neoclassical economics in relation to its depiction of workers as "free agents" who are able to decide their work hours at will. As a tool for understanding how the labour market operates including the creation and reproduction of involuntary underemployment, neoclassical economics is dangerously mistaken.
Mistaken or disingenuous? Is neoclassical economics designed as propaganda for vested interests allied against labor? See Michal Kalecki, Political Aspects of Full Employment.

When it comes to choosing between ignorance and complicity when vested interests and large sums of money are involved and the people involved are very smart, the rational choice is to prefer complicity unless shown otherwise. The conventional economics profession looks to be in bed with the money, and everyone knows what this is called. It's the "oldest profession in the world." Neoliberalism raising its ugly head out of the swamp of cronyism and corruption.

Underemployment As A Challenge To Orthodox Economics
David Spencer | Professor of Economics and Political Economy, Leeds University Business School, University of Leeds

Stuart Varney, Fox Business host: Feeding hungry seniors is ‘called buying votes

Fox Business host: Feeding hungry seniors is ‘called buying votes’ (via Raw Story )
Fox Business host Stuart Varney on Tuesday accused the AARP of signing hungry seniors up for food stamps as part of a “buy-the-vote campaign” to benefit President Barack Obama. On Saturday, the Tribune-Democrat reported that the Pennsylvania chapter…

Ted Cruz: ‘Why is President Obama threatening to shut down the federal government?

Ted Cruz: ‘Why is President Obama threatening to shut down the federal government?’ (via Raw Story )
Sen. Ted Cruz (R-TX) on Tuesday argued that President Barack Obama and Democrats, not Republicans, were the ones trying to shut down the federal government because he insisted on funding a health care reform law that was passed in 2010. Last week, Sen…

Tuesday, July 30, 2013

Lakshman Achuthan: The US Entered Recession Last Year And "Is Worse Than Japan In the 90s"

At 1:05, Achuthan stuns the Bloomberg anchors - "We believe that a recession began last year. Time will tell if that call is correct."
More serious:
Five years ago, the summer before the Lehman collapse, ECRI’s research found that U.S. economic growth had been stair-stepping down in successive economic expansions, going back to the 1970s. So, even before the Global Financial Crisis (GFC) and deleveraging concerns came to the fore, we predicted a feeble economic expansion to follow the then-ongoing recession.
 We extended our research to other major developed economies, most of which exhibited similar patterns of slowing trend growth. Driven by deep structural changes, these patterns were likely to result in low trend growth for many years to come – with or without the deleveraging that followed the GFC.
Zero Hedge
Lakshman Achuthan: The US Entered Recession Last Year And "Is Worse Than Japan In the 90s"
Bloomberg TV's Tom Keene interviews ECRI's Lakshman Achuthan

Mary Bottari And Rebekah Wilce — The Force Behind Bills To Lower Wages and Suppress Workers’ Rights? You Guessed It: ALEC

The right-wing American Legislative Exchange Council has modeled legislation to strip workers of their rights nationwide.
According to a new analysis by the Center for Media and Democracy (CMD), publishers of, at least 117 bills introduced in 2013 fuel a “race to the bottom” in wages, benefits and worker rights—and resemble “model” bills from the American Legislative Exchange Council (ALEC).
As working Americans speak out for higher wages, better benefits and respect in the workplace, a coordinated, nationwide campaign to silence them is mounting—and ALEC is at the heart of it. ALEC corporations, right-wing tink tanks, and monied interests like the Koch brothers are pushing legislation throughout the country designed to drive down wages; limit health care, pensions, and other benefits; and cripple working families' participation in the political and legislative process....
While ALEC and its supporters frame their actions as fiscally responsible and pro-worker, it is clear that this is a deeply political agenda. An analysis by the Economic Policy Institute (EPI) shows that, on the whole, these types of bills don't create new rights for employees but “significantly tilt the political playing field by enabling unlimited corporate political spending while restricting political spending of organized workers.” Fox News reporter Shepard Smith put it even more bluntly. He noted that of the top 10 political donors in the United States, only three donated to Democrats—all unions. “Bust the unions, and it's over” for the Democrats, he said.... 
Harold Schaitberger, General President of the International Association of Fire Fighters, put it best when he told CMD, “The sole purpose of ALEC has been to develop the most anti-middle class, pro-corporation policies, legislation, and agenda in history. They've been waiting for just the right moment to reverse the progress of the American middle class and drive everyone to the bottom, to the lowest wages, the weakest benefits, no job security, and no retirement to speak of. We may not have the billions of dollars of the Koch brothers. But we have each other and we must stick together and fight ALEC's cynical and un-American agenda.” 
In These Times
The Force Behind Bills To Lower Wages and Suppress Workers’ Rights? You Guessed It: ALEC
Mary Bottari And Rebekah Wilce

Noam Chomsky — The State Fears Its Own People

Chomsky on terror, Snowden, and why "security" is usually an excuse for government repression.
Noam Chomsky: The State Fears Its Own People
Noam Chomsky

Interesting summary of Lenin's "Imperialism, the Highest Stage of Capitalism" (1916):
This thesis posited that the merging of banks and industrial cartels gave rise to finance capital—the basis of imperialism, the zenith of capitalism. To wit, in pursuing greater profits than the home market can offer, business exports capital, which, in turn, leads to the division of the world, among international, monopolist firms, and to European states colonising large parts of the world, in support of their businesses. Imperialism, thus, is an advanced stage of capitalism based upon the establishment of monopolies, and upon the exportation of capital (rather than goods), managed with a global financial system, of which colonialism is one feature.

BTW, Lenin's later justification of the necessity for a national security state in Russia is pretty similar to the rationale we are hearing now from recent administrations and leaders of both parties.

Glenn Greenwald — Major opinion shifts, in the US and Congress, on NSA surveillance and privacy

Pew finds that, for the first time since 9/11, Americans are now more worried about civil liberties abuses than terrorism
Tide turning?

The Guardian (UK)
Glenn Greenwald

Dallas Fed — How Bad Was It? The Costs and Consequences of the 2007–09 Financial Crisis

The 2007-09 Financial crisis was associated with a huge loss of economic output and financial wealth, psychological consequences and skill atrophy from extended unemployment, an increase in government intervention, and other significant costs. Assuming the financial crisis is to blame for these associated ills, an estimate of its cost is needed to weigh against the cost of policies intended to prevent similar episodes. We conservatively estimate that 40 to 90 percent of one year's output ($6 trillion to $14 trillion, the equivalent of $50,000 to $120,000 for every U.S. household) was foregone due to the 2007-09 recession. We also provide several alternative measures of lost consumption, national trauma, and other negative consequences of the worst recession since the 1930s. This more comprehensive evaluation of factors suggests that what the U.S. gave up as a result of the crisis is likely greater than the value of one year's output.
Dallas Fed Staff Papers (July 2013)
How Bad Was It? The Costs and Consequences of the 2007–09 Financial Crisis
Tyler Atkinson, David Luttrell and Harvey Rosenblum

Noah Smith — Peter Schiff trolls Sargent and Sims

Finance prof Noah goes after Peter Schiff, but Mike Norman and the Schitt Report do a better job.

Peter Schiff trolls Sargent and Sims
Noah Smith | Assistant Professor of Finance, Stony Brook University

Lars P. Syll — Top 10 – the “ought to have read” in theory of science for economists

I'm a big fan of top ten lists.

Top 10 – the “ought to have read” in theory of science for economists
Lars P. Syll | Professor of Social Studies and Associate Professor of Economics, Malmo University

Yanis Varoufakis — James Galbraith on Europe, Greece (and Syriza), Germany and America

What follows is the extended, English language, version of James Galbraith’s recent interview with Roger Strassburg published in NachDenkSeiten.
James Galbraith on Europe, Greece (and Syriza), Germany and America
Yanis Varoufakis

Lord Keynes — M. E. Brady’s Critique of Post Keynesianism

While charge (1) is probably true, I think it is clear that charge (2) is false: there are Post Keynesians who do recognise degrees of uncertainty, such as, for example, Dow (1994 and 1995), Jespersen (2009: 8), Lars Syll, and (if he self-identifies as a Post Keynesian) Crocco (2002).
But I would like to see someone respond to charge (3).
Wonkish, but I have been wondering about this myself.

Social Democracy For The 21St Century: A Post Keynesian Perspective
M. E. Brady’s Critique of Post Keynesianism
Lord Keynes

Randy Wray — MMT and Main Street vs Wall Street

Here’s a pretty good piece on MMT, by a “retired career PhD scientist” who has recently “become a serious student of macroeconomics and the role of government in our economy.” What I’d like to know is why this is so hard for PhD macroeconomists? Why can’t heterodox macroeconomists–who studied most of the same economics literature that Stephanie Bell, Scott Fullwiler, Eric Tymoigne, Bill Mitchell, Mat Forstater, Ed Nell, and I (and a handful of others)–get this? I realize that it is a bit easier for those who come straight out of financial markets–like Warren Mosler–to understand the details of monetary operations, or those like Charles Goodhart who saw the monetary ops first hand. But after a quarter of century of hundreds of published articles, thousands of blogs, and far too many conference presentations to count, why is this still so difficult for most PhD economists?
Economonitor — Great Leap Forward
MMT and Main Street vs Wall Street
L. Randall Wray | Professor of Economics, UMKC

CNS News: 70 Straight Days: Treasury Says Debt Stuck at Exactly $16,699,396,000,000.00

Out of paradigm Terry Jeffrey with another way to look at the current situation at CNS News here.

He gets the facts correct but I'd assume NOT the interpretation.

The US Treasury continues to use "extraordinary measures" to be able to continue to spend well above previously budgeted levels even though we continue at the "debt ceiling" so-called for the last many weeks.

Accordingly, S&P earnings and the index level are at/near all time highs this quarter as government spending continues unabated even while "stuck" here at the "debt ceiling" so-called and these firms continue to just simply rake it in from these leading government flows.

The fiscal flow for August may even improve from what we have experienced this month (July 2013) if seasonality is at work as last August 2012 posted very strong relative fiscal flows on relatively strong summer end Medicare/Medicaid reimbursements and strong scheduled payments of Interest on US Treasury Securities.

Stay tuned.

Real Housewives' fraud charges a travesty

It's a travesty when two of the stars of Bravo's "Real Housewives of New Jersey" face 50 years in prison for fraud, when HSBC, BofA, Goldman, JP Morgan and other Wall Street banks can commit massive fraud, nearly bankrupt the entire global financial system, and nothing happens.

Teresa and Joe Giudice are facing 50 years in prison for falsifying loan documents dating back to 2001 to 2008, in addition to lying about their financial condition when they filed for bankruptcy several years ago. The two have been indicted on 39 counts of fraud and face major prison time. Read here.

Meanwhile, HSBC is caught laundering billions in illicit money, BofA fraudulently foreclosed on homeowners and took away their homes, Goldman admits to fraud and Jamie Dimon is in flagrant violation of Sarbannes-Oxley with his "tempest in a teapot" whale trade, yet nothing happens.

What a travesty.

Learn to trade Forex at my upcoming online Forex course

Monday, July 29, 2013

Yves Smith — Tom Engelhardt: Edward Snowden vs. Robert Seldon Lady Shows How Our One-Superpower World Works

Yves here. Tom Engelhardt’s latest piece discusses how, as he puts it in his setup:
Retired CIA agent Robert Seldon Lady, convicted in absentia in Italy for a rendition/kidnapping operation, is picked up in Panama on an Interpol warrant, hits the news for a day, and then is allowed to fly back to the U.S. where he disappears — and despite the Edward Snowden case, the Washington media doesn’t even blink.
Astonishingly, not only did this story come and go with remarkable speed, but there has been nada in the way of follow-up. Until now, where Engelhardt’s piece delves into how and why Lady has been disappeared in order to escape from justice in Italy.
Double-standard and Orwellian double-speak. The US government is shown up as an imperial regime bent on maintaining global hegemony through superpower status. Now there is not longer any pretense about it. There goes US soft power. RIP.

Naked Capitalism

Tom Engelhardt: Edward Snowden vs. Robert Seldon Lady Shows How Our One-Superpower World Works
Yves Smith

Bill Mitchell on Marriner Eccles

[Economic liberals] deliberately create unemployment and poverty and try to spin a narrative that this is labour market reform or essential fiscal consolidation. Marriner Eccles clearly saw through all of those arguments when they were used in his time.
This narrative is usually based on the false analogy between a government as the currency issuer and households and firms, which are currency users.
Neoliberals claim that governments, like households, have to live within their means. They say budget deficits have to be repaid and this requires onerous future tax burdens, which force our children and their children to pay for our profligacy.
The false neoliberal analogy between national budgets and household budgets resonates strongly with voters because it attempts to relate the more amorphous finances of a government with our daily household finances.
"Labor market reform" amounts to reducing the economic position of workers enough to induce "wage flexibility," that is, undermining labor bargain power so that employers can offer less, even less than a living wage, driving workers into debt — as is presently the case with major employers in the US such as Walmart, in a return to Dickensian times. For further development see Michal Kalecki in Political Aspects of Full Employment

Bill Mitchell – billy blog

There is nothing new under the sun
Bill Mitchell

We Are Stupidly Rescinding the Fiscal/Monetary Constitution Written Largely by Marriner Eccles

Commentary by Roger Erickson

Between 1776 & 1787 we distilled a brilliantly terse prescriptive, not descriptive, approach to solving any emerging task, and called those "methods" the US Constitution. Our Constitution is a prescription for how to approach problems, not endlessly descriptive rules or recipes for exactly how to do anything in particular ... except preserve our agility in improving the quality of distributed decision-making.

Similary, way back in 1938, Marriner Eccles explained prescriptive, not descriptive methods for solving any emerging fiscal/monetary task - essentially a Fiat Currency Constitution. So what on Earth happened to us since? We actually rescinded our fiscal/monetary Constitution, and are half-way through rescinding key elements of our original Constitution.

Why do grandchildren have to re-learn lessons their grandparents learned the hard way, and their parents either forgot or never learned? What citizenry sends their offspring out the door unprepared for the entire range of things that are coming down the pike?

Our biggest hurdles involve retaining our own, distributed common sense - our ability to maintain and grow our quality of distributed decision-making - NOT the complexity of the tasks we face.

"On September 8, 1938, – Marriner S. Eccles – the former Chairman of the Board of Governors of the US Federal Reserve System (1934-1948) presented a speech – Address Responding to Criticisms Leveled by Orval Adams – ... which was a response to an earlier Speech made in May 1938 by Orval W. Adams, who was then the President of the American Bankers Association.

Marriner Eccles was a central banker who ... understood that fiscal ratios should not be the targets for policy. Rather, policy should concentrate on maximising real output and prosperity. Again, the the polar opposite to the policy positions taken today."

Kudos to Thorvald Moe of Norway for dredging up this particular speech, and to Bill Mitchell for further disseminating the link.

Mike Norman's online Forex trading course, Aug 5 - Aug 9

Back by popular demand!

I will be giving a 5-day intensive online Forex trading course, Aug 5 - Aug 9.

Course will be taught online and you will be instructed on how to use Oanda Forex trading platform. 

You will learn everything you need to know to trade Forex successfully. Past students have been very pleased with this course. 

Please go here for more info.

-Mike Norman

Sunday, July 28, 2013

David Colander — Solving Society’s Problems from the Bottom Up: For-Benefit Enterprises

Few people knew that when Milton Friedman claimed that a corporation's only responsibility is profits, it would become conventional wisdom. David Colander, the always original and often iconoclastic economist, makes the refreshing case in support of for-benefit enterprises.
Solving Society’s Problems from the Bottom Up: For-Benefit Enterprises
David Colander | Christian A. Johnson Distinguished Professor of Economics at Middlebury College
(h/t John Hobgood at FB)

Unlearning Economics — Brief Thoughts on the Real Bills Doctrine

There was a brief but interesting conversation on my post on the neutrality of money, between me and commenters Blue Aurora and Dinero, centering around the Real Bills Doctrine (RBD). I had not really looked into the RBD in too much depth before, but it seems like a natural ally of endogenous money (and MMT) theory, and it adds a lot of insights that, in my opinion, the Quantity Theory of Money (QToM) lacks.
Unlearning Economics
Brief Thoughts on the Real Bills Doctrine

Lord Keynes on Mises and epistemology

Lord Keynes put up two interesting philosophical posts recently. I did want to comment on the first post, which is a good summary of the issues, but haven't had time. However, I did just write up a response to the second about Mises, putting it in historical perspective.

Social Democracy For The 21St Century: A Post Keynesian Perspective
Epistemology and Kinds of Knowledge

What is the Epistemological Status of Praxeology and the Action Axiom?
Lord Keynes

Mises action principle is Aristotle's every agent acts for an end (telos). Aristotle's approach to biology is teleological. This principle of causality was reiterated by Aquinas and was fundamental to Medieval Scholasticism as rational explanation of articles faith, contra the credo quia absurdam est, misattributed to Tertullian. Long and venerable tradition deeply embedded the principle of causality in the Western psyche. 

Hume attacked causality as a principle based on his assumption that knowledge is either from sense data or logic and no sense data correspond to causality other than observation of constant conjunction. Kant attempted to counter this move by moving causality from intellectual intuition to the logical structure of the mind that imposes a necessary connection between cause and effect in structuring knowledge. Aristotle's intellectual intuition of cause (aitia) as a real principle known through intellectual intuition become instead a category inherent to reason that is imposed on knowledge of that which is given in experience.

Not a bad move in retrospect in that it is being borne out somewhat in cognitive research on brain function. But this says nothing about reality outside the mind, which is really Hume's skeptical argument. In Hume's view, humans believe in an external world but know only sense data, which is then structured in terms of logic.

Kant's solution was no escape. It is simply the claim that humans cannot think beyond the bounds of spacial and logical categories — space and time, and existence and causality. The question remains that, although humans are hardwired to think within and in terms of these boundaries, does knowledge correspond actually to reality and do we know this for sure. For Kant it is impossible to know the thing in itself since knowledge as for Hume occurs within the confines of experience, which is structured subjectively. In the attempt to escape Hume, Kant has landed in subjective idealism instead of Aristotle and Aquinas's subjective realism in trying to avoid Hume's skeptical conclusion.

Kant did not realize (and probably could not at the time) that his categories don't always match up with scientific theory and findings. De eloped over a century later, QM and relativity are counter-intuitive, for instance, and suggest that reality is much more complex than the classical world of ordinary thought and observation in which Kant's epistemic categories apply "necessarily". Moreover, there is increasing reason to think that so-called reason cannot be separated from feeling ("passion") categorically, or nature from nurture. There is no "pure reason," anymore than there is an "invisible hand".

In addition, the the Kantian categories function as epistemic substitutes for the metaphysical "essences" that the ancients asserted were intuited intellectually. Hegel realized this in setting forth logic as metaphysics. 

Now anthropologists and sociologists are finding that these categories are culturally determined to a far greater degree than previously realized. Philosophy is turing out to be much more anthropological and sociological that Western thinkers had suspected previously. Wittgenstein made use of these anthropological and sociological discoveries in his later work exploring the logic of ordinary language.

The upshot is that Mises generated yet another metaphysical system. Metaphysical systems assume or posit their own criteria, which leads to circular reasoning, or assume unspecified criteria that lead to an infinite regress. This is no ticket to avoiding skepticism, as the failure of metaphysical systems to be universally compelling goes to show.

Scientific method was devised to counter subjectivity, but even science cannot avoid the issue of skepticism since its appeal is to experience and science has not shown how to bridge the gap between the knowing subject and objects of knowledge in that science presumes that immediate knowledge of objects and events is dependent on the senses.

But science makes skepticism a virtue in that scientific theories are general descriptions and general descriptions can only be falsified but never confirmed indubitably if the description is of an open set not all of whose members is known. Nonetheless, the question about the relation of knowledge and reality remains without an answer that is able to overcome skepticism as the view that human knowledge is relational, hence, relative to the knower rather than immediate knowledge of reality independent of the knower. This knowledge is inferred from the inability of the knower to control the known, and this inference depends on the principle of causality, which itself is in question.

Hume was not the first to put forward an argument for skepticism, and his is not the strongest case owing to his flawed assumptions. But he did put the ball in the court of those who wish to claim that there are universally compelling criteria supporting an intrinsic connection between subjectivity and objectivity that yields true knowledge of reality such that it is not influenced by subjectivity, and it is possible to know this for sure, that is, based on adequate criteria.

Mises is stuck in his own mind, which he has confused with reality, and has ruled out empirical testing on the grounds that he matter is settled — he says. No wonder Hayek ran away from that dogmatic claim.

A Pension Deficit Disorder: The Massive CEO Retirement Funds and Underfunded Worker Pensions at Firms Pushing Social Security Cuts

This report analyzes the retirement policies of the U.S. corporations leading the “Fix the Debt” campaign, which is calling for reduced spending on senior citizens’ benefits as part of a deal on the national debt.
A major player in the national debt debate, the “Fix the Debt” campaign, is arguing that cuts to Social Security and Medicare are necessary to avoid economic disaster. Meanwhile, the corporations leading this campaign are contributing to Americans’ retirement insecurity by funneling enormous sums into their CEO retirement accounts while underfunding their employee pension funds.
Key findings:
• The 71 Fix the Debt CEOs who lead publicly held companies have amassed an average of $9 million in their company retirement funds. A dozen have more than $20 million in their accounts. If each of them converted their assets to an annuity when they turned 65, they would receive a monthly check for at least $110,000 for life.
• The Fix the Debt CEO with the largest pension fund is Honeywell’s David Cote, a long-time advocate of Social Security cuts. His $78 million nest egg is enough to provide a $428,000 check every month after he turns 65.
• Forty-one of the 71 companies offer employee pension funds. Of these, only two have sufficient assets in their funds to meet expected obligations. The rest have combined deficits of $103 billion, or about $2.5 billion on average. General Electric has the largest deficit in its worker pension fund, with $22 billion.
IPS — Institute for Policy Studies
A Pension Deficit Disorder: The Massive CEO Retirement Funds and Underfunded Worker Pensions at Firms Pushing Social Security Cuts
Sarah Anderson and Scott Klinger
Contributors include Brent Soloway
(h/t MoveThroughIt in the comments)


Philip Pullella and Anthony Boadle — Millions at Brazil Mass hear pope ask youth to change world

"Through your joyful witness and service, help to build a civilization of love. Show, by your life, that it is worth giving your time and talents to attain high ideals," Francis said at the Rio airport before he departed for Rome....
"Bringing the Gospel is bringing God's power to pluck up and break down evil and violence, to destroy and overthrow the barriers of selfishness, intolerance and hatred, so as to build a new world," he said.Many young people in Brazil saw this as his support for peaceful demonstrations to bring about social and political reform....
Francis dedicated much attention in his speeches to the problems, the prospects and the power of youth....
The pope addressed Latin American bishops before leaving Brazil, telling them the Church had to shed all elitism and get closer to the people.... 
Many young people in Brazil saw this as his support for peaceful demonstrations to bring about social and political reform... 
On Friday night he called on them to change a world where food is discarded while millions go hungry, where racism and violence still affront human dignity, and where politics is more associated with corruption than service 
The day before, during a visit to a Rio slum, he urged them not to allow their hopes of change to be extinguished. Many young people in Brazil saw this as his support for peaceful demonstrations to bring about social and political reform.
Millions at Brazil Mass hear pope ask youth to change world
Philip Pullella and Anthony Boadle, Rio De Janeiro

Peter Radford — Simple model mania

...The point being that the obsession to reduce everything to simple ideas that can be put into simple models, condemns economics to misunderstand, and therefore not explain, reality. People are far too nuanced and unpredictable to be shoved completely into either PIH or RIH. They bounce about. The truth is that there are likely plenty more explanations as well. Perhaps there are twenty hypotheses each explaining a little bit. But, since that makes modeling complicated, economists stay well away from reality.
BTW, this is an underlying message of Ludwig Wittgenstein's investigation of the logic of ordinary language in his later work. Thinkers typically go awry in over-generalizing. This is the informal fallacy of hasty generalization, and it includes composition fallacies as well.

Economics is particularly susceptible of fallacies of composition in the chief methodological assumption of liberal economics is a representative individual acting in the vacuum of rational free choice, "rational" being defined as pursuit of maximum utility in making choices, presumed to be fully informed, and "free" meaning independent of external influences such as culture, institutions, affiliations, and personal relationships. The problem with this is that homo economicus is not homo sapiens sapientis, but rather an methodological and ideological construct that is non-representational in spite being asserted to be representative. Examining the logic of conventional economics, it cannot be correct.

Real-World Economics Review Blog
Peter Radford

Bill McBride — They're Back! Congress threatens to Default Again

It is a bluff. As Republican Senator Mitch McConnell noted in 2011, if the debt ceiling isn't raised the "Republican brand" would become toxic and synonymous with fiscal irresponsibility.
The bottom line is Congress is being silly (again), and they will raise the debt ceiling.

"Congress"? Or the GOP-controlled House? Speaker Boehner is being jerked around by his unruly caucus.

Calculated Risk
They're Back! Congress threatens to Default Again
Bill McBride

Chris Dillow — Bosses, Power & Ideology

Chris Dillow says, "Now, you might think I'm making leftist points here. I'm not sure." I can assure him that he is when he says, "This too gives bosses power, especially as it is combined with the aforementioned biases. And money flows to power." Speaking of power in the context of economics and finance is leftist by definition. Ruling the speaking of power out marginalizes the powerless, which is presumably the intent of vested interests.

That this blog even needed to written when it is so patently (and painfully) obvious also goes to show that it is "leftist" , not to mention that many vested parties will disagree with it, some vehemently.The fact is that it is just common sense, backed up with evidence. Sociologists have shown that it is hardly controversial empirically that economic behavior is institutional and that hierarchical institutions distribute power and information asymmetrically from the top down.

Stumbling and Mumbling
Bosses, Power & Ideology
Chris Dillow | Investors Chronicle (UK

Lars P. Syll — What’s the use of economics?

Reprogramming economics students to think "rationally" and dupe the rubes with numbers as they are prepared for ordination into the contemporary secular priesthood. Same old sophistry and magical thinking posing as knowledge.

Lars P. Syll

What’s the use of economics?
quoting Alan Kirman | Professor Emeritus of Economics at the University of Aix-Marseille III and at the Ecole des Hautes Etudes en Sciences Sociales

Tschäff Reisberg — Best of Frank Newman's Freedom from National Debt

Some short excepts.

This Episode of Life
Best of Frank Newman's Freedom from National Debt
Tschäff Reisberg

Frank N. Newman, CEO of major banks in the U.S. and China, and former Deputy Secretary of the U.S. Treasury, is the author of Six Myths that Hold Back America: And What America Can Learn from the Growth of China's Economy and Freedom from National Debt.

Saturday, July 27, 2013

David Sloan Wilson — A good social Darwinism [and much more]

Evolution has changed all we know about how humans behave, compete and co-operate. When will economics catch up?
Shreds neoclassical assumptions.

A good social Darwinism
David Sloan Wilson | Distinguished Professor of Biological Sciences and Anthropology, Binghamton University
(h/t Gavin Kennedy at Adam Smith's Lost Legacy)

Links at the bottom of the article leads links to limited time (six months) download of papers from the Journal Of Economic Behavior & Organization and This View of Life. Here is the lead in from This View of Life:
Q: How many economists does it take to screw in a light bulb?

A: Zero. The invisible hand will do it.

Making jokes about economics is fun and easy. The field’s nickname is the ‘dismal science’. Type ‘economic jokes’ into Google and you will see 19.5 million hits, far more than other fields, and almost as many as for political jokes. Economics is the field that people love to hate.

Improving economics is much harder than making jokes. In a special issue of the Journal of Economic Behavior and Organization, more than two dozen scholars from around the world have written 13 articles with the important and difficult goal of making economics better.
The title of the special issue is “Evolution as a General Theoretical Framework for Economics and Public Policy.” This is a relatively novel approach and deserves some discussion.

The standard economic paradigm is the neoclassical model. People know what makes them happy and are good at making decisions to accomplish their goals. Furthermore, neoclassical theory has been used to support free market policies by arguing that self-interested, rational actors lead to ‘optimal’ social outcomes, when optimal is defined in a particular way 

“People are rational and greed is good” would be a lay summary of neoclassical economics.
Just reading that sentence probably makes many people’s blood boil. The list of critics of neoclassical economic is long and distinguished. Within the citadels of economic power, however, only one critique has made significant inroads. This successful critique is the behavioral economic field founded by Daniel Kahneman, Amos Tversky, and most forcefully advanced by Professor Richard Thaler of the University of Chicago.
Professor Thaler sums up behavioral economics by saying that people are ‘nicer and dumber’ than economists assume.
The authors of the special issue of JEBO believe that evolutionary theory is required to improve economics. In 1973, the famous biologist Theodosius Dobzhansky, wrote, “Seen in the light of evolution, biology is, perhaps, intellectually the most satisfying and inspiring science. Without that light it becomes a pile of sundry facts-some of them interesting or curious but making no meaningful picture as a whole.”

Paraphrasing Dobzhanksy, we, the authors of these articles on economics and evolution, argue that economics without evolution is a pile of sundry facts-some of them interesting or curious but making no meaningful picture as a whole.

Furthermore, these articles go beyond criticism to specific areas. In many cases, the authors have devoted decades to these topics, and are recognized global leaders. The techniques range from theoretical to experimental to simulation. The species covered include humans, non-human primates, and many other animals.
In order to make the issue accessible, This View of Life is pleased to provide short summaries of each article that link to the full-length articles, which the Evolution Institute has paid to make free online for a period of six months.


“Evolution as a General Theoretical Framework for Economics and Public Policy,” Special issue editors: David Sloan Wilson, John M. Gowdy, J. Barkley Rosser

This supplementary issue of the Journal of Economic Behavior and Organization is based on a collaborative project between the Evolution Institute and the National Evolutionary Synthesis Center that started in 2009 with a NESCent catalysis meeting titled “The Nature of Regulation: How Evolution Can Inform the Regulation of Large-scale Human Social Interactions”. The meeting led to a 2-year project on integrating economic and evolutionary theory. This project used NESCent’s working group rubric to organize three workshops, whose participants were drawn from a larger advisory group. Other outputs of the project include a white paper submitted to the National Science Foundation and a final workshop titled“The Science-to-Narrative Chain”, which examines how to create a new public narrative based on the evolutionary paradigm.

Supplemental material can also be found at our online magazine: This View of Life

1)Wilson, D. S., Gowdy, J, Rosser, B. Jr. (2013). Rethinking Economics from an Evolutionary Perspective. An Editorial

2) Wilson, D. S., & Gowdy, J. (2013). Evolution as a General Theoretical Framework for Economics and Public Policy.

Role in issue: First lead article. Describes how evolution functions as a general theoretical framework in the biological sciences and considers four reasons why evolution might not add value to the study of human-related subjects.

3) Gowdy, J., Dollimore, D., Witt, U., & Wilson, D. S. (2013). Economic Cosmology and the Evolutionary Challenge.

Role in issue: Second lead article. Describes how modern disciplines such as economics and evolution reflect ancient cosmologies and how advances in evolutionary science can help economics overcome some of its outdated assumptions.

4) Wilson, D. S., Ostrom, E., & Cox, M. (2013). Generalizing the Core Design Principles for the Efficacy of Groups.

Role in issue: Shows how the design principles for the efficacy of common-pool resource groups, for which Ostrom received the Nobel Prize in economics in 2009, can be generalized from an evolutionary perspective and used as a practical framework for improving the efficacy of real-world groups. Also serves as a tutorial for multilevel selection theory, which plays an important role in some of the other articles.

5) Witt, U., & Schwesinger, G. (2013). Phylogenetic footprints in organizational behavior.

Role in issue: Explains modern social organizations, including firms, as a product of biocultural co-evolution. The authors have backgrounds in economics, nicely complementing the article by Stoelhorst and Richerson.

6) Stoelhorst, J. W., & Richerson, P. J. (2013). A Naturalistic Theory of Economic Organizations.

Role in issue: Explains modern social organizations, including firms, as a product of biocultural co-evolution. The first author has a business school background and the second author is one of the major figures in cultural evolutionary theory, nicely complementing the article by Witt and Schwesinger

7) Manapat, M., Nowak, M., & Rand, D. (2003). Information, Irrationality and the Evolution of Trust.

Role in issue: Focuses on the important topic of trust and illustrates the role of analytical models in evolutionary science relevant to economics and public policy.

8) Wilson, J., Yan, L., & Hill, J. (2013). Costly information and the Evolution of Self-organization in a Small, Complex, Economy.

Role in issue: Describes a real-world application of the evolutionary perspective to an economic system and illustrates the role of computer simulation modeling from an evolutionary and complex systems perspective.

9) Gowdy, J., Rosser, B. Jr. & Roy, L. (2013). The Evolution of Hyperbolic Discounting: Implications for Truly Social Valuation of the Future.

Role in issue: Addresses a fundamental topic in economics and public policy from an integrated ultimate and proximate evolutionary perspective.

10) DeAngelo, G., & Brosnan, S. (2013). The Importance of Risk Tolerance and Knowledge when Considering the Evolution of Inequity Responses Across the Primates.

Role in issue: Focuses on the important subject of inequity responses and illustrates the importance of cross-species comparison, which is novel for much of the economic and policy literatures.

11) Burnham, T. (2013). Caveman Economics: Toward a neo-Darwinian Synthesis of Neoclassical and Behavioral Economics.

Role in issue: Focuses on the concept of mismatch, whereby genetic and cultural adaptations to previous environments become dysfunctional in current environments.

12) Johnson, D., Price, M., & Van Vugt, M. (2013). Darwin’s Invisible Hand: The Evolution of the Market Competition, Evolution, and the Firm.

Role in issue: Applies multilevel selection theory to the selection of behavioral and organizational practices within and among firms, reaching a different set of conclusions than standard economic views of the firm.

13) Mullins, D.A., Whitehouse, H. & Atkinson, Q. D., (2013). The Role of Writing and Record Keeping in the Cultural Evolution of Human Cooperation.

Role in issue: Takes a long-term cultural evolutionary view on the structure of human social organizations as corporate units, with implications for current and future organizations.

14) Biglan, A., & Cody, C. (2013). Integrating the Human Sciences to Evolve Effective Policies.

Role in issue: Reviews the fields of public health, prevention science and applied behavioral analysis, which have a proven ability change behavioral and cultural practices in individuals, small groups, and large populations. Also emphasizes the importance of prosociality for promoting human welfare at all scales, which stands in contrast to the individual focus of orthodox economic theory. This article is important to underscore the fact that evolution functions as a general theoretical framework for all forms of policy, not just economics.

And a reminder that David Sloan Wilson wrote a thirteen part series on evolution and economics, "Economics and Evolution as Different Paradigms" Series.

Evolutionary theory and evolutionary economics promise to be a large chunk of the emerging new paradigm of economics, along with monetary economics, energy economics, environmental economics, and ecological economics, along with the life and social sciences. Mechanism will be replaced by organicism, and atomism by general system theory, of which economist Kenneth Boulding was a founding developer and laid the groundwork.

The Animal Enterprise Terrorism Act Rebrands Constitutionally Protected Behavior as Terrorism

On Monday, June 22, the Center for Constitutional Rights appealed the dismissal of a federal lawsuit that bears my name, Blum v.Holder and challenges the constitutionality of the Animal Enterprise Terrorism Act (AETA). Last March, Judge Joseph L. Tauro dismissed the case because, he said, the plaintiffs “have not alleged any specific, actual harm suffered.” But I have been deeply harmed. The AETA explicitly punishes causing an “animal enterprise” to lose profits, and I have spent years living in fear that the more persuasively I tell the truth about the animal suffering that underpins so much of our daily lives, the more likely I am to get thrown in jail.
The ruling by the US District Court for the District of Massachusetts offers one very narrow interpretation of the statute and a hollow promise that the AETA will not be used to prosecute those engaging in first amendment protected speech - but I am not relieved. If the AETA exists only to prosecute activists who engage in criminal activity, as the court claims, then it needn't exist at all. Ample state and federal laws already exist to prosecute those who damage property or engage in harassing or threatening behavior. What did not exist until the AETA was a way to rebrand effective advocacy on behalf of animals as terrorism. The court's ruling allows the AETA's labeling of nonviolent civil disobedience as a terrorist act and punishes those who trespass on factory farms and illegally liberate animals from horrific conditions orders of magnitude more severely than someone who steals or damages property for reasons other than animal rights.
Who are the actual terrorists here?

Truthout | Op-Ed
The Animal Enterprise Terrorism Act Rebrands Constitutionally Protected Behavior as Terrorism
Sarahjane Blum

Torture is "enhanced interrogation." Kidnapping is "rendition." Aggression against a sovereign nation that has not attacked is "pre-emptive defense." Ignoring habeas corpus is "indefinite detention." Whislte blowing is "espionage." Abrogating human and civil rights is "patriotism." Civil disobedience in protest is "terrorism." Dictatorship and empire are "freedom" and "democracy."


Friday, July 26, 2013

Simon Black — Here's What Happens When A Central Bank Goes Bust

Apparently the gold bugs over at ZH haven't heard that the Fed is allowed to operate with negative equity, or Karl Whelan's argument that central bank operations are not contingent upon solvency in a non-convertible floating rate system. 

You don't even need MMT to understand this. Gold standard thinking is a zombie that refuses to die.

Zero Hedge
Here's What Happens When A Central Bank Goes Bust
Submitted by Simon Black of Sovereign Man

Matias Vernengo — The meaning of short and long-term and the natural rate

Good (Post Keynesian, i.e., post capital debates) explanation of "the natural rate of interest," as well as "long run" and "short run."

Naked Keynesianism
The meaning of short and long-term and the natural rate
Matias Vernengo | Associate Professor of Economics, University of Utah

John Carney — Why insider trading should be legal

I tend to agree that this would end the silly myth that markets are perfect, information is symmetrical and institutional power is irrelevant to markets, driving a nail in the heart of neoclassical equilibrium based on perfect markets, symmetrical information, and equal players pursuing maximum utility rationally. Then the truth would be obvious that financial markets are biased.

It's already obvious that final goods markets are not competitive markets due to fixed instead of flexible (negotiated) pricing, along unequal market power that leads to artificially imposed scarcity. That in turn takes down the myth on which the neoliberal narrative of market capitalism is based.

And anyone can easily see that the simplest way to reduce crime is make it legal. Think of all the money that could be saved by eliminating security, oversight, and accountability.


Why insider trading should be legal
John Carney | Senior Editor

Paul Waldman — GOP Circular Firing Squad Locked and Loaded

So threatening to shut down the government has become the all-purpose means by which some Republicans believe they can achieve almost any policy goal. Can't cut food stamps? Shut down the government! Can't repeal Obamacare? Shut down the government! "Mr. Chairman, if our proposal to declare August to be National Ted Nugent Appreciation Month is not passed by this body, we will have no choice but to shut down the government!
Fortunately, many Republican senators are sane enough to realize that shutting down the government in an attempt to stop Obamacare would be a political catastrophe for the GOP, so they're not going to let it happen. But the whole thing is sure to breed plenty of displeasure and resentment. Just what the party needs.
The American Prospect
GOP Circular Firing Squad Locked and Loaded
Paul Waldman

Andrew Lainton — A Simple Post-Keynesian Alternative to IS-LM

I have a pdf of this post here, I will be posting in on SSRN once I have had some feedback.
If you have constructive feedback, please post it at Andrew's place.

Decisions, Decisions, Decisions
A Simple Post-Keynesian Alternative to IS-LM
Andrew Lainton

Chris Dillow — The Transition To Socialism

...the creation of non-capitalist forms of organization in the interstices of capitalism which, if they can expand, could eventually marginalize capitalism itself....
It's already happening in the alternative economy, where it has been possible to live peripheral to the mainstream. Alternatives have been for some time as new frontier, so to speak. Now we are seeing a new push.

Stumbling and Mumbling
The Transition To Socialism
Chris Dillow | Investors Chronicle (UK)

Jen Alic — Why the CIA Is Worried About Geoengineering

The CIA is worried about the national security implications of climate change, and it’s also concerned about the potential implications of geoengineering—large-scale deliberate intervention in the Earth’s climate system.
The US National Academy of Sciences (NAS) has launched a study of geoengineering as a way to fight climate change, bringing together experts and getting the CIA involved as one of the study’s financers.
For the purposes of the NAS study, geoengineering is the process of removing carbon dioxide (CO2) from the atmosphere or reflecting solar radiation away from the Earth to reduce global warming effects.
While this is great fodder for conspiracy theorists who can imagine geoengineering as a weapon of mass destruction, that is exactly one of the CIA’s concerns—so it’s not so far out there.
Interesting article. The GOP is blocking financing, of course, since climate change is only a hoax that NSA and the CIA have apparently fallen for, too.

Oil Price
Why the CIA Is Worried About Geoengineering
Jen Alic
(h/t Yves Smith at Naked Capitalism)

Bill Mitchell – The IS-LM framework – Part 1

I am now using Friday’s blog space to provide draft versions of the Modern Monetary Theory textbook that I am writing with my colleague and friend Randy Wray. We expect to complete the text during 2013 (to be ready in draft form for second semester teaching). Comments are always welcome. Remember this is a textbook aimed at undergraduate students and so the writing will be different from my usual blog free-for-all. Note also that the text I post is just the work I am doing by way of the first draft so the material posted will not represent the complete text. Further it will change once the two of us have edited it.

NOTE: Randy and I discussed at length how much mainstream analysis we would include in the textbook. Clearly, we have a responsibility to provide students with an understanding of the tools that are used in the profession including those that are frequently referred to in the policy debate.
As you will see from the Table of Contents (information below), I think we have been fairly generous in how much of the mainstream material, which we see as having no analytical veracity or policy relevance, we have included.
This Chapter is about IS-LM analysis, a framework we also reject outright. However, during the current crisis, it has been used by notable economists who have held it out as an approach that still has relevance. In that vein we have decided to include it as a separate chapter even though, at first, we had excluded it from the book.
However, we don’t go the next step and derive and utilise the full AD-AS model that flows from the IS-LM approach and is the main organising framework for the orthodox exposition.
The Home Page for the Textbook is now available but the material is still being added and the site won’t be fully functional for some months yet. We have nearly agreed on the Table of Contents, which defines the order of exposition of the pedagogy. You can find the site at and the Table of Contents is available there.
Note I still haven’t finished the British-IMF Case Study but the sequencing needs for a class that is using the book this semester requires I get the IS-LM Chapter completed first – over the next couple of weeks.
Chapter 16 – The IS-LM Framework
16.1 Introduction
Bill Mitchell – billy blog
The IS-LM framework – Part 1
Bill Mitchell

Al Jazeera — Pope sends message of hope to Brazil's poor

Pope Francis has issued the first social manifesto of his young pontificate, telling slum dwellers in Brazil that the world's rich must do much more to wipe out vast inequalities between the haves and the have-nots.

History's first Latin American pope, in a speech on Thursday to residents of Manguinhos, blasted the "culture of selfishness and individualism" that persists in the world and encouraged efforts in Brazil to end hunger and poverty.
"No one can remain insensitive to the inequalities that persist in the world," he said.
Al Jazeera
Pope sends message of hope to Brazil's poor

Al Jazeera — Japan plans marine force and drone fleet

The Japanese government has said it needs to create a US Marines-style force and a fleet of drone aircraft as it faces territorial threats from China and North Korea.
Japan re-militarizes, signaling that the US umbrella is not enough. Pretty clear that eventually Japan will have to nuke up. Things are going in the wrong direction.

Al Jazeera

Japan plans marine force and drone fleet

Max Blumenthal — Shocking 'Extermination' Fantasies By the People Running America's Empire on Full Display at Aspen Summit

A close up look at the scary people in charge. Well-intentioned but severely misguided about civil rights, human rights, the US Constitution and Bill of Rights, law, and democracy.

The military mind at work in the context of empire — the end justifies all means regardless of unintended and unforeseen consequences that the CIA calls "blowback." Frighteningly short-sighted and crass.

This is a big reason that there is civilian control of the military and separation of military and domestic security forces. The lines are now extremely blurred, and the wall of secrecy is so thick that it is difficult for the public to know what is going on or what their fate is.

Shocking 'Extermination' Fantasies By the People Running America's Empire on Full Display at Aspen Summit

Max Blumenthal

Sen. Ron Wyden On NSA Spying: It's As Bad As Snowden Says — Transcript of speech

Transcript from a speech given on Tuesday, July 23, at the Center for American Progress in Washington

Sen. Ron Wyden On NSA Spying: It's As Bad As Snowden Says
Ron Wyden

Thursday, July 25, 2013

Jonathan Larson — Status emulation as a change agent

Status emulation as a driving force in modern capitalism. Looks to be the harnessing of an evolutionary trait, although Veblen saw it as not only powerful but often also nutty.

Real Economics

Status emulation as a change agent

Jonathan Larson

Dirk Ehnts — Survival of the least skilled?

Recently I have been thinking whether intelligence is aimed at finding the truth or aimed at survival. I came to the conclusion that the latter was right, but that we can use reason to build a society where the two coincide. Institutions matter....
...the lesson is to create institutions that bring out the best behavior of human beings. And for those that say that this suppresses freedom: we already have lots of institutions that influence us. Think of school, families and so on. These are not natural, so we might as well think about how to improve those institutions. The result could be a survival of the most social.
econoblog 101
Survival of the least skilled?
Dirk Ehnts | Berlin School for Economics and Law

"Survival of the fittest" is about species survival through natural selection, not individual survival through competition as social Darwinism has it wrongly. The most "fit" supposedly have more chances at leaving offspring, hence their DNA, which on balance favors the survival and spread of a species over time through adaptation to emerging environmental challenges.

Philip Pilkington — Even the Statisticians Are Highly Dubious of Applying Their Methods in Economics!

Lars Syll just ran a rather amusing quote from a handbook on mathematical statistics in which the author — a mathematical statistician — lays out all the cop-out arguments used by those who apply these methods in a dubious manner in the social sciences. I looked up the original book and I think that it might be worthwhile outlining another quote which is, in a sense, even more damning to those who try to use these methods in socials sciences and, most especially, in economics.
Fixing the Economists
Even the Statisticians Are Highly Dubious of Applying Their Methods in Economics!
Philip Pilkington

Matias Vernengo — Krugman is right: "Macroeconomics is all wrong"

Excellent takedown of Paul Krugman along with conventional macro, in just a couple of paragraphs.

Naked Keynesianism
Krugman is right: "Macroeconomics is all wrong"
Matias Vernengo | Associate Professor of Economics, University of Utah

Matias Vernengo — Why the crisis didn't discredit mainstream (neoclassical) economics?

Simple answer — star power sell out. Philip Mirowski's critique is short and to the point.

Naked Keynesianism

Why the crisis didn't discredit mainstream (neoclassical) economics?

Matias Vernengo | Associate Professor of Economics, University of Utah

Yves Smith — Michael Hudson Shreds Obama’s Orwellian Speech on Middle Class Prosperity

Michael Hudson was so incensed by what he called a “Blairesque” speech by Obama on Wednesday that he took it upon himself to comment on its all-too-frequent sleights of hand and outright fabrications. However, you’ll also notice that the speech contained so much bullshit (in the Harry Frankfurter sense of indifference to the truth) that eventually Hudson’s comments thin out a bit.
The original speech is in black. Hudson’s remarks are in red. You’ll see he took mercy on you and edited the speech down a bit and also bolded some of the, erm, remarkable parts. I’ve added a few observations, in blue. I hope readers in comments will join in the fun by extracting sections or phrases from the speech and explaining what they really mean.
The worst is that Obama apparently plans a series of Big Lie speeches on his “vision for rebuilding an economy that puts the middle class — and those fighting to join it – front and center.” That’s at best an afterthought, since he’s given the economy over to an at best indifferent and at worst predatory elite that have no interest in giving it back.
Naked Capitalism
Michael Hudson Shreds Obama’s Orwellian Speech on Middle Class Prosperity
Posted by Yves Smith

Randy Wray — Wall Street’s Rent Seeking Vampires Kill Innovation

I can't tell you how excited I am to see Randy going after rent-seeking. I had though that was missing as an MMT emphasis previously, although Michael Hudson has been on it for a long time. As Randy pointed out in his previous post, "euthanizing the rentiers" in the sense of ending parasitical economic rent and extractive rent-seeking was high on the policy agenda of Keynes at the conclusion of the General Theory.

While there are moral arguments against economic rent, rent-seeking is inefficient and constitutes an unnecessary drag on circular flow that inhibits productive investment and innovation. It also leads to inequality that also becomes an economic drag, as well as increasing the political power of wealth.

Perhaps most significantly in the long run, without addressing rentierism and rent-seeking, capitalism becomes increasing incompatible with democracy and distributive justice, and leads to corporate statism.

Even from the side of capitalism, economic rent and rent-seeking are also disruptive to price discovery in markets by favoring vested interests that able to extract rents and thereby to exact privilege as well. This leads to artificially imposed market power and artificial scarcity, as well as exclusion of disruptive innovation that would shift the status quo.

Economonitor — Great Leap Forward
Wall Street’s Rent Seeking Vampires Kill Innovation
L. Randall Wray | Professor of Economics, UMKC

Steve Roth — Not Spending is Not Investment

I see this logical error so constantly, almost every day, that I feel the need to reiterate. Personal saving, virtuous and useful as it is for individuals, does not increase investment. This is what I call the “lump of money” fallacy (a.k.a. the loanable funds model)....
Not Spending is Not Investment
Steve Roth

Michael Stephens — The “Success” of the Greek Bailouts

Along with ideology and pet economic theories, C. J. Polychroniou suggests another (far more cynical) interpretation [than the failure of austerity as a policy]. The bailout programs, he says, aresucceeding in some respects; the problem is that we may be incorrectly assuming what the main priorities are:
"Amazingly enough, in the face of this ongoing and uncontrolled catastrophe, and despite the IMF’s admission that it misjudged the impact of austerity on Greece’s economy and its people, IMF and EU officials remain as committed as ever to the policies responsible for Greece’s collapse. But while many seem surprised by this apparently contradictory posture, they shouldn’t be. The austerity “shock treatments” administered by the IMF and the EU have two explicit goals: (1) to ensure that the loans are paid back no matter what the cost, and (2) to roll back the average standard of living in order to create highly favorable conditions for international business-investment opportunities and to increase the rate of profit for the corporate and financial elite at home. It is an avowedly class-warfare approach, cloaked in the organization’s holier-than-thou rhetoric about the overall benefits of a neoliberal economic order and the economic drag created by organized labor and workers’ rights, social welfare provisions, and decent wages."
Doh. That was the neoliberal goal from the get-go and it hasn't changed a bit. It's straight up "disaster capitalism" as laid out by Naomi Klein. In fact, although the context is different, the policy is actually quite similar to the assassination of President Allende and installation of General Pinochet in Chile. Neoliberalism is antithetical to democracy and treats workers as a commodity in "the labor market." When C. J. Polychroniou says "roll back the average standard of living," this means reduction in the real wage, and lowering of benefits and protection for workers as well as public services. This is also an opportunity to privatize public resources and enclose more of the commons in order to monetize it "for greater efficiency" through market disciline.

Multiplier Effect
The “Success” of the Greek Bailouts
Michael Stephens

Greg Palast shows how this was the intention of the creators of the EZ, Robert Mundell, evil genius of the euro — For the architect of the euro, taking macroeconomics away from elected politicians and forcing deregulation were part of the plan

Robert E. Prasch — The Next Chair of the Federal Reserve Must be a Regulator

If we go by the rumors circulating in the financial press, the Obama Administration is on the verge of selecting a proven failure – Lawrence Summers – to be the next Chair of the Federal Reserve System. This is the man, let us recall, whose greatest success in office was to work for the repeal of Glass-Steagall in 1999 and the nudge along the passage of the Commodity Futures Modernization Act of 2000 (which forbade any agency from regulating Credit Default Swaps). These profoundly mistaken decisions provided the nation’s largest and most irresponsible financial institutions with the bulk of the permission they needed to leverage up their balance sheets, hide the risks inherent in the mortgage-backed securities they were pushing onto unsuspecting investors, all while enabling them to become Too Big To Fail (and, as no less than the Attorney General of the United States has affirmed, Too Big To Prosecute)....
New Economic Perspectives

The Next Chair of the Federal Reserve Must be a Regulator
Robert E. Prasch | Professor of Economics at Middlebury College

Of course, Wall Street will get the Fed chairperson that it wants, since Wall Street provides a large share of campaign finance for the Democratic Party. The GOP is somewhat less beholden to Wall Street since they are also heavily funded by other wealthy donors. So count on President Obama caving to the financial sector.

From what I have been reading, Larry Summers is well-known to the White House and Democratic insiders, while they hardly know Janet Yellin at all. This gives Summers a big leg up politically.

And if Obama chooses Summers, Wall Street is not going to say no. The only big issue with Summers is his approval by the Senate, where he would likely run into more GOP opposition that Yellin due to his support of the President's "Keynesian" policies while serving in the administration. Of course the progressive base would be livid, but that has never bothered the president before and he seems to see that as positive, proving his bipartisan centrist credentials and showing him to be a Very Serious Person.

Looks like the choice is going to be made chiefly politically by White House political operatives weighing the pros and cons against a political calculus of donations and votes.

Bill Mitchell — Austerity fails – its in the numbers

Not only the numbers, as Bill also reports. Neolilberals are shuttering democracy with militarized police in order to impose their failed policy without having to the people. Neoliberalism again shows that it is antithetical to democracy as workers are no longer permitted freedom of expression.

Bill Mitchell – billy blog
Austerity fails – its in the numbers
Bill Mitchell – billy blog

Wednesday, July 24, 2013

Sam Adler-Bell And David Segal — Why NSA Surveillance Should Alarm Labor

If unions are not speaking out against PRISM, it is because they have short memories.
Good history lesson. You don't have to be libertarian to understand that government often either colludes with the wealthy and powerful, or is captured by vested interests. There is along history of government being used to go against labor.

In these times with liberty and justice for all
Why NSA Surveillance Should Alarm Labor
Sam Adler-Bell And David Segal

Melissa Hogenboom — Psychopathic criminals have empathy switch

Psychopaths do not lack empathy, rather they can switch it on at will, according to new research....
Christian Keysers from the University of Groningen, the Netherlands, and senior author of the study, said it could change the way psychopathic criminals were viewed.
"The predominant notion had been that they are callous individuals, unable to feel emotions themselves and therefore unable to feel emotions in others.
"Our work shows it's not that simple. They don't lack empathy but they have a switch to turn it on and off. By default, it seems to be off."
The fact that they have the capacity to switch empathy on, at least under certain conditions, could have a positive side to it, Prof Keysers said.
"The notion psychopaths have no empathy at all was a bleak prospect. It would make it very hard for them to have normal moral development 
"Now that we've shown they have empathy - even if only in certain conditions - we can give therapists something to work with," Prof Keysers told BBC News.
But he explained that it remained unclear how this wilful capacity for empathy could be transformed into the spontaneous empathy most of us have.

BBC News
Psychopathic criminals have empathy switch
Melissa Hogenboom | Science reporter

Hunter — Crackpot Pennsylvania police chief makes good case for town quarantine

It gets worse, or funnier, depending on how you look at it. 

This is rural Pennsylvania, after all. Your remember the Whiskey Rebellion that George Washington himself put down at Alexander Hamilton's urging in order to enforce the federal whiskey tax? (Got that? "Enforce the tax law.") 

I guess rural Pennsylvanians have either forgotten about it or are game for a re-match in the hope of winning this time. Maybe they think Barack Obama is no George Washington.

Daily Kos
Crackpot Pennsylvania police chief makes good case for town quarantine

AFP — Tech firms say they are losing business over NSA surveillance

Revelations about the US government’s vast data collection programs have already started hurting American technology firms, according to an industry survey released this week.
The Cloud Security Alliance said 10 percent of its non-US members have cancelled a contract with a US-based cloud provider, and 56 percent said they were less likely to use an American company.
Doh. Ya think?

The Raw Story
Tech firms say they are losing business over NSA surveillance
Agence France-Presse

Saving Fiat, That Should Work Wonders For A Fiat Currency Issuer!!!

Commentary by Roger Erickson

Door-to-door mail delivery on chopping block
"The House Wednesday is considering a proposal that would end door-to-door mail delivery and save the cash-strapped U.S. Postal Service billions of dollars per year."

ESPECIALLY if the issuer of cash is "cash-strapped." *

Wow. If you start off propaganda with total bullshit, where else can the conversation go?

Supposedly, if we don't act now, even Congress could run out of fiat!!!

Where does the fiat buck stop? If we got too low on fiat, might citizens lack even the initiative to vote? Might they also curtail how often they simply read, look, interact, learn .... even think? Can't do nuttin' without fiat, you know. Good thing it's free ... at least to those who still bother to think.

What happens when a nation quits bothering to think?

* If a US Public Agency could actually be cash-strapped, then why would pernicious lobbyists work so long and hard on getting it separated from government? So it'll be eligible for unlimited Corporate Welfare programs? :(

Our strategy is now clear, in this topsy-turvy world. If we're going to embrace Orthodox Economics, then just make SocialSecurity a Corporation! Brilliant!!

You can't make this stuff up fast enough. Lily Tomlin remains un-refuted.

Limbaugh: "Economic Recovery Is Not Caused By The Middle Class"

Close but no cigar for Limbaugh here (I'm sure he can afford his own Cubans...).

Summary of a recent Limbaugh rant at Media Matters here.

RUSH LIMBAUGH: Now, here's the next New York Times story. This one -- this one is unbelievable. It's by Annie Lowrey. "President Obama says prosperity does not trickle down and that a rising tide does not lift all boats. The conservative policies predicated on those ideas, Obama maintains, amount to a you're-on-your-own economics, when the country really needs a we're-in-this-together approach."
In short, what Obama is gonna say in these speeches -- I want you to look at me, I want you to hear this so that you know what's coming, because when the press amplifies this and applauds it, you are going to become enraged. The president is going to say that prosperity comes from the middle out.
"Prosperity needs to come from the 'middle out' rather than the top down." Never mind that this has never, not once, worked. It has never succeeded, this formula of the middle class leading the economic rebound. It's not possible. The middle class benefits from it, but an economic recovery is not caused by the middle class. An economic expansion is not caused by the middle class. The middle class, by and large, are consumers.
In order for the middle class to consume to the level that economic growth takes place, they must be paid a lot of money. And in order for that to happen, the businesses where they work must grow. The places where they are employed must do well. They must be making more. They must have more customers they're servicing. Whatever the enterprise is, it has to grow so that people working there earn more, get raises, get more benefits, and so that new people get hired.
This idea that the economy bubbles up from below is absurd.
That's what Obama's gonna sell, though. Obama is gonna sell "we've gotta take more money from the rich and we've gotta raise taxes on businesses and we gotta get that money to the middle class where it will cause the economy to grow." That's not how this happens.
You start taking money away -- just like the government takes from the private sector -- the private sector shrinks. You take money away from the rich and business owners and entrepreneurs, you get less of what they do, including employment.
Limbaugh has some points correct, as far as how he asserts that the middle class is not "the source" of economic growth, as this is not possible.  But he, just like the President who he is trying to criticize here, cannot see that it is not "the rich" or "the middle" who create conditions that result in economic growth, but it is rather the government sector that provides the increase in fiscal flows that provide the leading $NFA flows to the non-government sector that allows for increased consumption, savings and investment within that sector.

Close but no cigar Rush.

Both you and the President have it all wrong, and you both appear blind to our government's real fiscal authority.

Robert Johnson — The Real Story of Detroit's Collapse

State underfunds its pension system and puts the funds into corporate welfare. Then the fiscal scolds blame it all on poor people.

And not just Detroit. This is SOP.

The Real Story of Detroit's Collapse
Robert Johnson

Robert Oak — Over 15% of America was on Food Stamps in April 2013

Lately there have been claims from some in the press and Congress that SNAP, the food stamp program is ripe with fraud and abuse. This is simply false. The economic realities of the new America are the reason food stamp usage has risen so dramatically. Next time you go to the grocery, watch for the food stamp cards. You will be surprised just how many are using them and fraud has nothing to do with it. Most people are broke and the wages statistics back that fact up.
The Economic Populist
Over 15% of America was on Food Stamps in April 2013
Robert Oak

Eric Dolan — Archbishop: Right wing of the church not happy about Pope Francis

Archbishop: Right wing of the church not happy about Pope Francis (via Raw Story )
Conservatives in the Vatican are less than pleased with the election of Pope Francis, according to Archbishop Charles Chaput of Philadelphia. In an interview with the National Catholic Reporter published Tuesday, Chaput said right wing officials in…

Eric Dolan — Pennsylvania police chief: F*ck all you libtards out there, you take it in the a**

Pennsylvania police chief: F*ck all you libtards out there, you take it in the a** (via Raw Story )
The mayor of Gilberton, Pennsylvania is standing by her city’s police chief despite a series of profanity-laced and threatening videos. In a video that has received wide attention, police chief Mark Kessler repeatedly tells those upset by his use…

Tuesday, July 23, 2013

Ali Watkins — Sen. Wyden says he tried to warn of massive surveillance program

“If we do not seize this unique moment in our constitutional history to reform our surveillance laws and practices, we will live to regret it,” [Sen Wyden] said.
“Sen. Mark Udall and I tried again and again to get the executive branch to be straight with the American public, but under the classification rules observed by the Senate, we are not even allowed to tap out the truth in Morse code,” he said. “And we tried just about everything else we could think of to warn the American people.”
Wyden blasted the Foreign Intelligence Surveillance Court, the body that must approve surveillance requests, saying that the veil of secrecy behind which it functions negates the concept of balanced oversight. The court’s secret interpretations of the Patriot Act and the Foreign Intelligence Surveillance Act are too broad, he said, and render the legislation unrecognizable.
“I tell Oregonians that there are effectively two Patriot Acts,” he said. “The first is the one they can read on their laptop in Medford or Portland, analyze and understand,” Wyden said. “Then there’s the real Patriot Act – the secret interpretation of the law that the government is actually relying on.”
McClatchy News
Sen. Wyden says he tried to warn of massive surveillance program
Ali Watkins | McClatchy Washington Bureau