The Making of Homo Financius and Neoliberal Morality Oleg Komlik

In their paper Maman and Rosenhek made an insightful contribution in shedding light on how the state agencies, institutional actors and mechanisms concoct the neoliberal morality and conduct the moralization of the economic field within particular macro-institutional context. This important research direction should be amplified more in our field. One thing is certain: in (neoliberal) capitalism moral sentiments play a key role in the extraction of economic value.

Maman, Daniel and Zeev Rosenhek. 2019. “Responsibility, Planning and Risk Management: Moralizing Everyday Finance through Financial Education.” The British Journal of Sociology https://doi.org/10.1111/1468-4446.12698

Economic Sociology and Political Economy
The Making of Homo Financius and Neoliberal Morality
Oleg Komlik | founder and editor-in-chief of the ES/PE, Chairman of the Junior Sociologists Network at the International Sociological Association, a PhD Candidate in Economic Sociology in the Department of Sociology and Anthropology at Ben-Gurion University, and a Lecturer in the School of Behavioral Sciences at the College of Management Academic Studies

Chris Dillow — Adam Smith's two economies

Adam Smith thought there were two economies – meritocratic for the poor and powerless and anti-meritocratic for the powerful.

There is also a legal double-standard of justice reflecting this. Steal a hundred go to jail; steal a million, get promoted.

Accountability is inversely proportional to status?

Stumbling and Mumbling
Adam Smith's two economies
Chris Dillow | Investors Chronicle

Branko Milanovic — 1½ Adam Smiths

The recent book by Jesse Norman simply entitled “Adam Smith” is a pleasure to read. There are of course innumerable books on the founder of the political economy, so why another one? Norman’s book is directed toward that, at times elusive, general educated reader, and has, in my opinion, three objectives: (i) to situate Adam Smith in his time, both intellectually and politically, (ii) to argue that there is a remarkable consistency between the Adam Smith of the Theory of Moral Sentiments, Lectures on Jurisprudence and the Wealth of Nations, and (iii) to show that most of neoclassical and laissez-faire appropriations of Adam Smith are at best one-sided, and in many cases downright wrong....

Global Inequality
1½ Adam Smiths
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Frank Li — Adam Smith vs. Karl Marx

Frank Li is a Chinese ex-pat that settled in America after receiving a PhD in the US. He is an electrical engineer and entrepreneur.

His take is informed from both the Chinese and American (Western) points of view and he offers a reasonably objective analysis in comparison to the largely one-sided and ill-informed one that one generally encounters in the West. His work covers the social, political and economic spectrum but this one focuses on economics.

The dramatic rise of China over the past four decades not only has rocketed China's economy to the top of the world (in terms of PPP - purchasing power parity), with no end in sight, but also is ending western dominance over the past 200 years, at least.

What does that mean to the world? Everything, from politics (End of Democracy?) to economics!

This post is about economics. It highlights two giant economists: Adam Smith behind the West’s economy and Karl Marx behind Chinese economy....

econintersect
Adam Smith vs. Karl Marx

Frank Li | Chinese ex-pat living in the US

See also

Enter the dragon.

Sputnik International
China Wages Cold War Seeking to Replace US as Main Power - CIA Official

Michael Emmett Brady — J M Keynes on the Enemies of Capitalism: The Internal, Endogenous Threat to the Macro Economy from Wall Street Stock Market Speculators and Rentiers

Abstract

J M Keynes carefully read Adam Smith’s The Wealth of Nations (1776) before he was 28. Of extreme importance to Keynes was Smith’s categorization of a group of upper income class citizens, whose speculative and financial interactions with the private banking industry created a very severe danger to the society as a whole, as being projectors, imprudent risk takers, and prodigals. Keynes’s description of Smith’s projectors, imprudent risk takers, and prodigals in the General Theory, as well as Keynes’s extremely important, early 1937 papers in the Eugenics Review and Quarterly Journal of Economics, is that Smith’s projectors, imprudent risk takers, and prodigals are Keynes’s Wall Street speculators and rentiers. It is the speculators and rentiers who are mainly responsible for the problems of inflation and deflation in the macro economy. Keynes realized that this destructive, casino-gambling type behavior that is so damaging to the macro economy is facilitated and financed by the “…forces of banking and finance”.

Keynes’s Chapter Twelve analysis on pages 147-162 in the General Theory of the speculative dangers resulting from the financial behavior of Wall Street speculators and rentiers is identical to Smith’s pages 114-115, 279-341 discussions in the Wealth of Nations of the dangers from projectors, imprudent risk takers, and prodigals.

Both Smith’s and Keynes’s analysis complements each other. Both Smith and Keynes could have given the exact, same, vastly superior analysis and policy advice to government officials facing the 2007-2009 Great Recession that would have been greatly superior to the type of very poor policy analysis provided by DSGE macroeconomists in the period 2006-2010.

Both Smith and Keynes explicitly point out and analyze the malign impacts(see Kennedy, 2008) on the macro economy perpetrated by either Smithian projectors, imprudent risk takers, or prodigals or Keynesian speculators and rentiers. The role of government is to impose constraints on these categories of upper income class members so as to prevent them from harming the sober people by proactive laws, rules, and regulations.

The obvious reason that DSGE macro models failed so egregiously is that there are no variables in their models representing the impacts of these types of decision makers on the macro economy over time. The reason for this misspecification modeling error by DSGE proponents is that they accept Bentham’s critique of Smith that there are no such individuals in the economy as Smith’s projectors, imprudent risk takers, or prodigals.

SSRN
J M Keynes on the Enemies of Capitalism: The Internal, Endogenous Threat to the Macro Economy from Wall Street Stock Market Speculators and Rentiers
Michael Emmett Brady, California State University, Dominguez Hills
Written: May 18, 2018

Ramanan — Joan Robinson And Nicholas Kaldor On Antagonism To Keynesian Ideas

Some good quotations.

The Case for Concerted Action
Joan Robinson And Nicholas Kaldor On Antagonism To Keynesian Ideas
V. Ramanan

Nature — How to retool our concept of value – Mariana Mazzucato

Must-read in full. It's short and to the point.

The meaning of "value" is one of the most pertinent questions in economics and political economy. Michael Hudson has been emphasizing this for some time, as have Marxists and Marxian. Consideration of value of other than as price revealed in competitive markets is ruled out in conventional economics by methodological assumptions.

What we value and how we value it is one of the most contested, misunderstood and important ideas in economics. Economist Mariana Mazzucato’s comprehensive The Value of Everything explores how ideas about what value is, where it comes from and how it should be distributed have changed in the past 400 years, and why value matters now more than ever. Mazzucato emphasizes the need to reopen debate to make economies more productive, equitable and sustainable. The 2008 financial crisis was just a taste of looming problems — climate disruption, massive biodiversity and ecosystem-services decline, even the possible collapse of Western civilization — unless we learn to value what really matters.

Early economists focused on the production of value from land (François Quesnay and the ‘physiocrats’), labour (Adam Smith to Karl Marx) and capital. In this view, value determines price (Four decades ago, I described this in terms of embodied energy: see R. Costanza Science 210, 1219–1224; 1980). By contrast, the current mainstream ‘marginalist’ concept bases value on market exchanges: price, as revealed by the interaction of supply and demand in markets, determines value, and the only things that have value are those that fetch a price.

This has major implications for ideas about the distinction between value creation and value extraction, the nature of unearned income (‘rent’) and how value should be distributed....

Nature
How to retool our concept of value — Mariana Mazzucato
Robert Costanza

David Henderson — Adam Smith on the Bipartisan Support for Attacking Syria

Apt quotes.

Militarism is about "glory."

EconLog
Adam Smith on the Bipartisan Support for Attacking Syria

David Henderson | research fellow with the Hoover Institution and professor of economics at the Naval Postgraduate School in Monterey, California

See also

"Glory."

Defend Democracy Press
A Dangerous and Ridiculous Europe: Macron and May are dreaming to repeat the Libya crime against Russia, a nuclear superpower!

also

"Pundits and the media are making John Bolton’s wildest dreams come true: in his first week on the job, everyone is calling for a new war."

Common Dreams

Showing They 'Learned Nothing' From Iraq, Corporate Media Help Beat War Drums for Trump Attack on Syria

Jake Johnson, staff writer

Sandwichman — Is the "Invisible Hand" a lump of labor?

Debunking the persistent wages-fund and lump of labor fallacies.

Thirty years after Hoyt, Leopold Amery delivered a series of lectures in which he evaluated The Fallacies of Free Trade, paying particular attention to Smith's "terminological inexactitude." Smith's concept of capital viewed the capital of a nation as merely an aggregate of individual capitals. The difference, Amery explained, was that an individual's capital "is the result of saving, and grows by saving from profits or by credit based on profits" while the capital of a nation, "grows by the exercise of the qualities and energies of which it consists." In the jargon of systems dynamics, Smith mistook a stock for a flow.

EconoSpeak
Is the "Invisible Hand" a lump of labor?
Sandwichman

Branko Milanovic — The bitterness of Adam Smith

Some keeper quotes, and some parallels with today.

Global Inequality
The bitterness of Adam Smith
Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

Paul Sagar — The real Adam Smith

Setting the record straight.

Aeon
The real Adam Smith

Paul Sagar | lecturer in political theory in the Department of Political Economy, King’s College London

Gavin Kennedy — An Authentic Adam Smith

Gavin Kennedy's new book on Adam Smith setting the record straight is now available.

Adam Smith's Lost Legacy

An Authentic Adam Smith

Gavin Kennedy | Professor Emeritus, Heriot Watt University

Gavin Kennedy — Lost Legacies Stance of the Invisible Hand Is Endorsed

Weekend reading.

Michael Emmett Brady, California State University, published in the Social Science Research Network (SSRN) he takes giant steps to demolishing Samuelson’s myth. Michael Emmett Brady writes the most significant contribution to the invsisible-hand debate since 1948:

“Who Taught Paul Samuelson the Myth of the “Invisible Hand” at the University of Chicago? The most likely answer is Jacob Viner or fellow student George Stigler” .

 Its author takes the invisible-hand debate onto another level. Brady’s paper is available free via: https://ssrn.com/abstract=3078415

I highly recommend that readers visit the SSRN web site and read Michael Brady’s paper.There is no substitute for reading Michael Emmett Brady’s relatively short paper. It would be invidious for me to attempt to summarise that which is down-loadable in full from SSRN. I shall quote from Brady’s thoughtful contribution below, but I urge readers to follow his whole argument from its SSRN original….

The paper is 24 pages and an easy read.

Adam Smith's Lost Legacy
Lost Legacies Stance of the Invisible Hand Is Endorsed
Gavin Kennedy | Professor Emeritus, Heriot Watt University

Brad DeLong — John Maynard Keynes: Essays In Biography

Brad rates this as a should-read. For anyone interested in Keynesianism, Post Keynesianism and MMT, the history of economics, or economic theory, it is a must-read.

Conventional economists have apparently concluded that they don't need to read it if they even thought about, which most probably haven't, being under the spell of the "normal paradigm" in spite of its poor results empirically.

Washington Center for Equitable Growth
John Maynard Keynes: Essays In Biography

Brad DeLong

Here is a link to download Keynes's Essays in Biography (1933) as a PDF.

Another must-read from Brad.

 I think the very smart Jeffrey Friedman gets this… not quite right. The case for the empirical benefits of capitalism is very strong—but only if one is willing to remove libertarian blinders and focus on eliminating the market failures (in distributions, in aggregate demand, in externalities, in information, etc.) that keep the function the market maximizes from being a good proxy for societal well-being. And once one has the market properly supported and disciplined, the philosophical discussion can commence: Jeffrey Friedman: What’s Wrong with Libertarianism: “Libertarian arguments about the empirical benefits of capitalism are, as yet, inadequate…

From the Marxian and Institutionalist points of view,  economic liberalism, of which contemporary Libertarianism is a variant, provides the philosophical framework for bourgeois capitalism. Its fundamental weakness is prioritizing economic liberalism over social and political liberalism, which gives rise to many paradoxes of liberalism that result in illiberality such as have been pointed out many time here at MNE.

Brad also provides another keeper Keynes quote.

Here is an excerpt:

But, above all, individualism, if it can be purged of its defects and its abuses, is the best safeguard of personal liberty in the sense that, compared with any other system, it greatly widens the field for the exercise of personal choice.

Individualism as the pursuit of self-interest does not lead to the greatest good for the greatest number the spontaneous emergence of natural order, unless "natural order" is conceived as the outcome of social Darwinism. This result is so grossly unfair that overtime it becomes unstable politically.

Keynes is saying here that individualism only works as a guiding principle of liberalism if collective consciousness is sufficiently high, which is manifested in a society's culture and institutions. The fact that civil and criminal law are needed goes to show that collective consciousness alone is not that high presently. In addition, the level of social and political dysfunctionality in liberal countries shows that the culture and institutions of the society are insufficient to bridle narrow self-interest to the degree necessary to generate a harmonious society and balanced social, political and economic conditions.

This is a design problem.

Jeffrey Friedman: What’s Wrong with Libertarianism

More from BDL:

Three Books for 2017: Economics for the Common Good, Janesville, Economism

Weekend Reading: Richard Thaler: Behavioral Economics

Branko Milanovic — Adam Smith: is democracy always better for the poor?

Interesting article and a relatively short read. Here is the conclusion.

Smith’s lesson here has broader applicability. An oligarchic democracy may be worse for the poor than an arbitrary government. A state, relatively autonomous from the elite, may care more about the “general interest” than an ostensibly democratic government that is in reality the government of the rich. Smith highlights, I think, in both his discussion of social cleavage in interests when it comes to colonies and in his discussion of slavery, the ambivalence of the connection between the state and class. In more democratic (but exclusivist) settings the state may be less autonomous and more directly “hitched” to the interests of the ruling class. In an autocracy, the state may be less subject to the power of moneyed interests, and more concerned with the position of the poor. Our facile and somewhat lazy approach that more democracy implies a greater concern or improvement for the poor is shown here, by the founder of political economy, to be possibly—at times—wrong.

Global Inequality
Adam Smith: is democracy always better for the poor?Branko Milanovic | Visiting Presidential Professor at City University of New York Graduate Center and senior scholar at the Luxembourg Income Study (LIS), and formerly lead economist in the World Bank's research department and senior associate at Carnegie Endowment for International Peace

David F. Ruccio — From highway to master

More on Adam Smith that contradicts the mainstream view of him, from his own pen.

Occasional Links & Commentary
From highway to master
David F. Ruccio | Professor of Economics, University of Notre Dame

Tyler Cowen — *Adam Smith: Systematic Philosopher and Public Thinker *

That is the new, excellent, and detailed book by Eric Schliesser, a political scientist at Amsterdam. I would say that Schliesser is a very learned “left Smithian,” and that you should take the subtitle very very seriously.

Should be aware of. Schliesser contradicts the neoclassical and Samuelson views of Smith.

Marginal Revolution

*Adam Smith: Systematic Philosopher and Public Thinker *

Tyler Cowen | Holbert C. Harris Chair of Economics at George Mason University and serves as chairman and general director of the Mercatus Center

Timothy Taylor — Adam Smith: The Plight of the Impartial Spectator in Times of Faction

Quote from The Theory of Moral Sentiments (1759).

Conversable Economist
Adam Smith: The Plight of the Impartial Spectator in Times of Faction
Timothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota

Gavin Kennedy — Paul Samuelson's Awesome Error

Certainly, none of Smith’s contemporaries mentioned Smith’s use of the invisible hand. Only in the mid-20th century was that assertion made and believed, thanks to Paul Samuelson’s awesome reputation legitimising his wholly invented error.

Adam Smith's Lost Legacy

Paul Samuelson's Awesome Error

Gavin Kennedy | Professor Emeritus, Heriot Watt University

Gavin Kennedy — More Evidence Of The Tide Turning?

Oscar Valdes Viera posts (1 July) a most interesting Working Paper ( NO. 893) HERE
[Levy Institute] Working Paper No. 893

 The Neoclassicals’ Conundrum: If Adam Smith is the Father of Economics, It Is a Bastard Child

ABSTRACT 

Neoclassical economists of the current era frequently pay lip service to Adam Smith’s theories to certify the validity of natural-laws-based, laissez-faire policies. However, neoclassical theories are fundamentally disconnected from Adam Smith’s notion of value, his understanding of the economic individual and their interactions in society, his methodology, and the field of study he afforded to political economy. Instead, early neoclassical economists parted ways with the theories of Adam Smith in an effort to construct economic laws that would validate the existing capitalist order as universal, natural, and harmonious.

 Adam Smith specialist Gavin Kennedy comments:

This by far is the most focussed contribution to the missing debate over where and why did economic theory and science go astray from the 19th century though to the 21st century.

I recommend readers to take the trouble to follow the links and read the whole paper and make their own minds up about the degree of the validity of the Author's arguments.

Adam Smith's Lost Legacy

More Evidence Of The Tide Turning?

Gavin Kennedy | Professor Emeritus, Heriot Watt University

The tide is turning indeed, and Levy Institute is leading the way!