Dirk Ehnts — The Atlantic on Adam Smith and inequality miss major quote

The Atlantic has an article named The Problem With Inequality, According to Adam Smith. One paragraph reads:

Yet there remains a broad consensus, even among scholars of the period, that Smith was concerned by poverty but not by economic inequality itself. According to this view, Smith hoped to ensure that all members of society could satisfy their basic needs, but he was untroubled by relative differences in income and wealth. As long as everyone has food on their tables, clothes on their backs, and a roof over their heads, the thinking goes, it does not matter if some have far more than others. Indeed, it is often claimed that Smith saw economic inequality as a manifestly good thing. 

I have pointed out in 2012 that the Prometheus edition of “The Wealth of Nations” is abridged and that a major quote from book 5, chapter 1 is missing:

Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.

This is only one sentence from some longer paragraphs that Smith has on the the sovereign….

People who quote others should actually read them.

econoblog 101
The Atlantic on Adam Smith and inequality miss major quote
Dirk Ehnts | Lecturer at Bard College Berlin

Sheldon Richman — Madison on Government and Force

Thus Madison would have understood that libertarian minarchism without taxation is incoherent.

While it is unclear what Washington may have thought or said, he did lead the army to put down the Whiskey Rebellion to put down an insurrection over refusal to accept a tax.

Free Association

Madison on Government and Force
Sheldon Richman

Mariana Mazzucato — STATE VS. MARKETS: A MISLEADING DICHOTOMY

The debate about the relative roles of the state and the market in capitalist economies tends to swing from side to side in the hearts and minds of public opinion: periods when the state is defended for its role in economic development are always superseded by an attack on its intervention into ‘well functioning’ markets. It has been like this throughout the twentieth century. And it is what has happened since the most recent global financial crisis and economic recession: a brief period right after its outbreak, when there was consensus that the state had a key role to play in both saving the banks and using fiscal policy to promote growth, was quickly apprehended by those who feared rising levels of public debt. Indeed, this debt was mistakenly seen as the cause rather than the result of the crisis—due to lower tax receipts, rising bailouts, etc. So austerity became again the flavour of the day, while any sort of serious economic and industrial policy became anathema.

What is missing from the public perception is how through the history of modern capitalism, the state has done, and continues to do, what markets simply won’t. This is not about its role in simply fixing ‘market failures’, but its role in directly shaping and creating markets.…

MARIANA MAZZUCATO — Economics - Innovation - Inclusive Growth
STATE VS. MARKETS: A MISLEADING DICHOTOMY

Mariana Mazzucato | RM Phillips chair in the Economics of Innovation at SPRU in the University of Sussex

See also Interview on CNN GPS with Fareed Zakaria

Mark Thoma — The Problem with Completely Free Markets

Some weekend reading.

Econ 101 — because some people need constant reminding of the difference between so-called free markets and genuinely competitive markets. 

Mark Thoma reminds that government institutions and supervision are required for competitive markets. Markets "free" of government "intrusion" are not likely to be competitive, and imperfect competition constitutes market failure, e.g., rent extraction based artificial market power.

The Fiscal Times | Opinion
The Problem with Completely Free Markets
Mark Thoma | Professor of Economics, University of Oregon

How Do You Get People To Explore Their Options? Give 'em Enough Income To Keep Doing So.

   (Commentary posted by Roger Erickson)

Speaking of trust, an erstwhile cartoonist examines the ...

Trans-Pacific Partnership

and, quite accidentally, ends up considering trust in government, and how to get people to explore their options. Could be worse. He muddles some of the issues regarding Free Trade, but at least he's against blind acceptance of the TPP ... for the simple reason that it ASSUMES that we can trust our lobbying process that produces the government we have. Amazing. We need a cartoonist to explain that? Maybe so.



What's also amazing? I keep reading (including in the TPP comic) of people getting Nobel Prizes for rediscovering common sense that peasants carved into stone inscriptions WAY before the Egyptians built the pyramids.

Don't rely on existing assumptions? (Daniel Kahneman) No kidding? That predates humans! Ever see a penguin afraid to go in the water even though it can't see any leopard seal?

Multiple people may both cooperate & compete simultaneously? (John Nash) Wotta concept! :( You mean like symbiosis, autocatalysis, or teamwork?

Weepin' Buddha on a decline! Are these people joking?

I'm sticking to my thesis. ANY aggregate* or network going through a growth spurt HAS to get clumsier (& dumber), before it can regain & extend agility.

Can I get a Nobel Prize for reminding the new, clueless hoards of THAT age-old observation? :( Or does anyone even care about getting Nobel Prizes any more, since our aggregate went through it's latest growth spurt, and triggered another round of deflation in aggregate intelligence?

Why? Good heavens. Do you have to ask? A network dependent upon interconnections & feedback ... that suddenly doubles it's number of nodes without increasing it's feedback interconnects by N! (AND TUNING them all) .... is a clumsy, ignorant network. [N! = N-factorial]

How fast does it take a disorganized, growing network to re-organize on a larger scale?

It takes time.

What's the half-life of feedback-based agility recovery in a network expanding faster than its inter-connects? 

There are endless options, but in our current challenge, we (or another country) will eventually evolve a culture that pushes to re-organize on a bigger scale, faster. Or maybe human nation states will do that through symbiosis - which sounds less statistically likely. Witness the EEU struggles, and the history of "Monetary" unions. How system evolution eventually occurs can't be predicted by prior systems, only discovered by trial and error.

We named our goal as "Adaptive Rate" over 150 years ago, yet we're still spewing students faster than we're reminding them what their core challenge is.

Until then, it seems that our culture won't have hit rock bottom until someone gets a Nobel Prize for rediscovering that 2+2 = 4. Once we stop sinking lower, we can turn the corner & start regaining cultural agility, and AdaptiveRight will reapproach survivable balance with CopyRight. It's a simple balance for any adaptive system: keep components alive a & adequately provisioned ... WHILE growing the system. Components eating their system is dumber than sawing off the limb they sit on.

* (not just adolescents, i.e., an aggregate of cells who go through an aggregate growth spurt, and yes, get clumsier before they can regain agility;  do I have to repeat this 12 times?)

The Arthurian — "No government in history has been known to evade this pattern."

"Governments, if they endure, always tend increasingly toward aristocratic forms. No government in history has been known to evade this pattern. And as the aristocracy develops, government tends more and more to act exclusively in the interests of the ruling class -- whether that class be hereditary royalty, oligarchs of financial empires, or entrenched bureaucracy." — Frank Herbert, Children of Dune

The New Arthurian Economics
"No government in history has been known to evade this pattern."
The Arthurian

The Century of the Self (and it's unending attack on the aggregate)

   (Commentary posted by Roger Erickson)

The Century of the Self

Nice to find this again. It disappeared from YouTube, when the BBC sued for copyright protection.

Of course, Bernays claimed to have recanted later on, or so his publicist says.

John Aziz — Why are Democrats souring on big government?

According to a new Gallup poll, 72 percent of Americans say that big government is a greater threat to the U.S. in the future than big business or big labor, a record high in the half century that Gallup has been asking the question. The previous high for big government was 65 percent in 1999 and 2000.

What isn't mention among the factors is the growth and dominance of the national security state. Could be a big one?

The Week
Why are Democrats souring on big government?
John Aziz

Who needs the banks? It's Gov't that does most of the lending now.

A few days ago JP Morgan announced that it was going to stop making student loans. Great, who needs them?

Since the crisis the banks have been largely irrelevant when it comes to lending. Bank credit has only really grown with respect to auto financing, however, real estate, student loans, it's been all government.

Take a look at this chart. It's a chart of the dollar volume of student loans being made by the Federal Government. We don't need the banks with the government lending like this.

The crisis has exposed one glaring fact...that the banks are good at one thing and one thing only and that is gambling in the markets and losing money. (Then extorting us to pay them back for their losses.)

Oh yeah, if they make money (and it happens from time to time) it's only because their bets are rigged, like with Libor, which is nothing more than outright thievery. (And the Fed does nothing.) Oh yeah...and fees.

I don't know how many of you have had this experience recently: go into your local bank...they are so courteous and nice and friendly, right? But you just know they're screwing you in some other way.

Anyway, check out JP Morgan's financial statements. The nation's largest bank makes a paltry 1.0% return on assets. Great job, Jamie Dimon! You're a true, Master of the Universe!

And by the way, the only reason it even makes that ridiculous 1.0% is because the U.S. government--WE THE PEOPLE!--pay it welfare in that amount. That's right...interest on our own, freakin' money that we create without limit.

The poor get nothing, but we give $30 billion to JP Morgan. America...what a country!

Ross Eisenbrey — Government–Not Business–Has Been the Source of Breakthrough Innovation

Mariana Mazzucato, a professor of economics at the University of Sussex, has been making the point very effectively in lectures and a new book, The Entrepreneurial State, that the real innovation engine in the global economy is not business, nor the market, but the government. A recent story about Mazzucato in Forbes cites her view that long-term, patient capital–provided by government–is the absolute prerequisite for breakthrough innovation.

Who knew? What do firms that utilize this public contribution pay for it? Nothing other than taxes on the profits from breakthrough innovation. And they are continually objecting to high taxation inhibiting innovation. Another neoliberal myth goes down in flames.

EPI
Government–Not Business–Has Been the Source of Breakthrough Innovation
Ross Eisenbrey
(h/t Mark Thoma at Economist's View)

Brad DeLong — Economic Policy: Saturday Twentieth Century Economic History Weblogging

Interesting assessment of economic history leading to present-day challenges, which Brad argues, require government involvement in society and the economy in order to bring balance among disparate forces and prevent conflict from developing. Apt quote from Keynes as a bonus.

I have a somewhat darker view than Brad projects, however, based on institutional bias toward capital owing to the construction of neoclassical "orthodox" economics and neoliberal politics. I don't think it is through ignorance or increasing complexity that we are were we are, but rather through conscious and intention pursuit of self interest by the elite members of society acting through institutional rules they put in place.

Grasping Reality with Both Invisible Hands
Economic Policy: Saturday Twentieth Century Economic History Weblogging

J. Bradford DeLong | Professor of Economics, UCAL Berkeley

Our entire government, and press, is acting as though 1933 never happened.

commentary by Roger Erickson

Van Hollen Calls Simpson-Bowles a Framework for Debt Deal
Representative Chris Van Hollen, the House Budget Committee’s top Democrat, predicted the proposal by President Barack Obama’s 2010 deficit panel will be the “framework” for averting the so-called fiscal cliff of spending cuts in January.

Has no one in policy or journalism ever heard of William Vickrey, or Marriner Eccles, or FDR, or even fiat currency itself - let alone modern currency operations? Do they really think we're still on a gold standard currency system, or that they can simply continue to lie outright to a public whose intelligence they treat with complete disdain?

Talk about a COMPLETE abdication by the press of its responsibility to challenge political statements and financial lobbies! I'm beginning to wonder if any journalist now working reads anything except lobbyist press releases. No one seems prepared to just do their job - to just think, and simply ask useful questions.

I sent this to the Bloomberg journalist who wrote this story, James Rowley, and cc'd Warren Mosler. Let's see if Rowley responds, and rises to the occasion.

Mary Hobart, 1891, Presages Parts of Modern Monetary Operations

commentary by Roger Erickson

A Scientific Exposure of the Errors in Our Monetary System - 1891.

"Our government exacts taxation, but devoid of justice, fails to provide the means in sufficient quantity to meet these exactions. A government “by the people, of the people, and for the people,” demanding from the people that which it is impossible for them to obtain ! 

Can human tyranny sink to lower depths of infamy ? And has it come to this in our free Republic, that the people, armed with the ballot, have not the power to provide themselves with a currency sufficiently large to pay their taxes ? Have we no right as a people to establish a currency which will be sufficient in quantity to adjust our social debts and credits ? "

Sounds like a very smart lady. What happened, the banking lobby?

ps:  She was very much against a gold-standard.

Kemal Dervis — Caijing: What Role for the State?

In today's interdependent world, the debate about the role of public policy, the size and functions of government, and the legitimacy of public decision-making should be conducted with the four levels of governance [local, national, regional, and global] much more clearly in focus. The levels often will overlap (infrastructure and clean energy issues, for example), but democracy could be greatly strengthened if the issues were linked to the levels at which decisions can best be taken.

Caijing (English)
What Role for the State?
Kemal Dervis, a former minister of economics in Turkey, administrator of the United Nations Development Program (UNDP), and vice president of the World Bank, is currently Vice President and Director of the Global Economy and Development Program at the Brookings Institution.

Kemal Derviş — What Role for the State?

In today’s interdependent world, the debate about the role of public policy, the size and functions of government, and the legitimacy of public decision-making should be conducted with the four levels of governance [international, national, regional/provincial, and local] much more clearly in focus. The levels often will overlap (infrastructure and clean energy issues, for example), but democracy could be greatly strengthened if the issues were linked to the levels at which decisions can best be taken. [emphasis added]

This is called subsidiarity

Read it at Project Syndicate
What Role for the State?
Kemal Derviş, a former minister of economics in Turkey, administrator of the United Nations Development Program (UNDP), and vice president of the World Bank, is currently Vice President of the Brookings Institution

Why Climate Change Will Make You Love Big Government

Such calamities, devastating for those affected, have important implications for how we think about the role of government in our future. During natural disasters, society regularly turns to the state for help, which means such immediate crises are a much-needed reminder of just how important a functional big government turns out to be to our survival.

Read it at TruthDig
Why Climate Change Will Make You Love Big Government
By Christian Parenti, TomDispatch

Time to re-read the Declaration of Independence and recall its noble ideals

Time to revisit the Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

These ideals have been forgotten.