Thursday, February 20, 2014

Dean Baker — How the Super Rich Get Wealthy By Rigging the System to Their Benefit


Contra Mankiw.

AlterNet
How the Super Rich Get Wealthy By Rigging the System to Their Benefit
Dean Baker

See also Enrique Diaz-Alvarez, The Rent Is Too Damn High, at Jacobin.
For every dollar that our capital stock increases, FIRE collects somewhere between two and four dollars! Old Soviet bureaucrats with their chauffeured Ladas and modest three-bedroom apartments never dreamed of achieving this level of parasitism....
Mankiw’s bucolic view of our financial elite as misunderstood, hard working and talented supermen collecting their justly enormous rewards is completely wrongheaded. Closer to the mark is the image of a gang of grasping toll collectors collecting more and more for doing less and less for the rest of society — and doing it badly.



Max Blumenthal — Meet Venezuela's Opposition Leader: Front Man for the Oligarchs Sidelined by Hugo Chavez


Not all is as it seems, or is made to seem.

AlterNet
Meet Venezuela's Opposition Leader: Front Man for the Oligarchs Sidelined by Hugo Chavez
Max Blumenthal

Zachary A. Goldfarb — With 2015 budget request, Obama will call for an end to era of austerity


Better late than never.

Mr. President, what took you so long?

The Washington Post
With 2015 budget request, Obama will call for an end to era of austerity
Zachary A. Goldfarb
(h/t Charles Hayden)

Brad DeLong — Macroeconomics’s “Faustian Bargain”?: Wednesday Focus


Brad DeLong sums up some of the proceedings and adds a bit of his own.
...models with micro foundations are not of use in understanding the real economy unless you have the micro foundations right. And if you have the micro foundations wrong, all you have done is impose restrictions on yourself that prevent you from accurately fitting reality.
Washington Center For Equitable Growth — The Equitablog
Macroeconomics’s “Faustian Bargain”?: Wednesday Focus
Brad DeLong | Professor of Economics, UC Berkeley


Kashmira Gander — Online trolls are psychopaths and sadists, psychologists claim


Well, we knew that already.

The Independent (UK)
Online trolls are psychopaths and sadists, psychologists claim
Kashmira Gander
(h/t Yves Smith at Naked Capitalism)

Lars P. Syll — Macroeconomic challenges


It would be better to just face the truth — it is impossible to describe interaction and cooperation when there is essentially only one actor.
Macroeconomic challenges
Lars P. Syll | Professor, Malmo University

The assumption of representative agents is atomistic in the sense that atoms are indistinguishable elements of a homogenous system that is characterized by timeless invariant relationships that can be captured as mathematical functions — as it physics. However, social systems are not at all like physical systems, are they? 

So why assume atomism in the first place, when it is bound to fail. The only realistic answer I have seen is methodological convenience. Such models are tractable. Modeling complexity is hard.

Randy Wray — Seeing “It” Coming: An Interview on the Global Financial Crisis and Euroland’s Fatal Flaw

I recently did an interview for the magazine “Synchrona Themata” (“Contemporary Issues”). The interview, which will appear in Greek, was conducted by Christos Pierros, doctoral student at the University of Athens Doctoral Program in Economics (UADPhilEcon). What follows is the English transcript

Multiplier Effect 

L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Bill Mitchell — Somewhat of a Marxist


Bill gets a bad rap hung on him by a politician with parliamentary immunity. It's pretty much what we can expect as MMT gains ground and is attacked by the mainstream.

Bill Mitchell — billy blog

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the Charles Darwin University, Northern Territory, Australia

Peter Radford — Adam Smith – Socialist?

It is, apparently, not odd to attend classes in a business school and learn all about modern microeconomic theory. The lessons hammer away at efficiency and marginal pricing. They drill home the arguments about efficient markets, especially those that relate to capital. And they go on about the great laws of supply and demand that operate in the timeless vacuum of a market uncluttered by human frailties.

Then off go the students to be drilled into how to make those very frailties into weapons for profit. These other lessons are about how to impede the free market by rigging the game, and by building ‘barriers to entry’, by enforcing patents and copyrights, by eliminating competition, and by interfering in the labor markets to reduce wage bills.

What is learned in a business school education is almost exactly a negation of what is taught to economics students. Both sets of students are taught the wonders of market magic, but then the business school students are taught a myriad tricks to defeat that magic in order to produce long term profits and rents unsustainable under a true market magic regime. Only the economics students, cut off from reality as they are, continue on blissfully unaware that their magical world is being riddled with holes dug by their business school peers.
Peter Radford asks,
Should society be indifferent to profit levels but scandalized by higher wages? Does a rise in the minimum wage undermine employment the way the economists preach? If so, does not high profit?
Smith certainly seemed to know the answer. I will leave it to you to think about. I know what I think.
Real-World Economics Review Blog
Adam Smith – Socialist?
Peter Radford

Senator Bob Corker's anti union voter manipulation scheme may have just f**d the South for good

So it looks like the joke's on Senator Bob Corker (R-TN) and the workers at the Volkswagon plant that voted down a measure to join the UAW last week.

Germany has a co-determination model that mandates workers councils, which are similar to unions in that they represent worker interests.

The head of Volkswagon's "Works Council" told a German newspaper that Volkswagon would now be hesitant to expand in the South as a result of the union vote.

"I can imagine fairly well that another VW factory in the United States, provided that one more should still be set up there, does not necessarily have to be assigned to the South again," said works council leader Bernd Osterloh.
"If co-determination isn't guaranteed in the first place, we as workers will hardly be able to vote in favor" of building another plant in the right-to-work South, Osterloh added.
The vote was influenced by Corker and others who misled workers by telling them that if they voted down the union, Volkswagon would add new production at the plant, a claim that Volkswagon vehemently has denied.

Corker's interference is against the law and gives the National Labor Relations Board every reason to void the vote. However, it's not likely that the NLRB will do that because it's afraid of incurring the wrath of Congressional Republicans as they have gone after the NLRB in the past and have attempted to defund it and shut it down.

But the vote was definitely influenced illegally despite the fact that Volkswagon, the company, was IN FAVOR of unionization.

Hopefully with Corker's help the South has just fucked itself and we start to see a backlash and a  migration of manufacturing jobs back up to the unionized North.

Eric W. Dolan — Alabama House panel approves school prayer bill even though majority votes no (via Raw Story )

Alabama House panel approves school prayer bill even though majority votes no (via Raw Story )
The Alabama House Education Policy Committee approved legislation by a voice vote that would allow public school teachers to lead students in a daily prayer, even though the majority of the committee members voted against it, according to The Montgomery…

Scott Kaufman — Candidates for TX Board of Education do not believe state should be involved in education (via Raw Story )

Candidates for TX Board of Education do not believe state should be involved in education (via Raw Story )
At least two of the Republican candidates running for the Texas State Board of Education indicated in a conservative voter’s guide that they don’t believe the Texas State Board of Education should have any authority over how children are educated…

John Byrne — Matt Taibbi quits Rolling Stone, joins Glenn Greenwald

First Look, the news company created by former PayPal employee Pierre Omidyar, announced Wednesday that they had added irreverent journalist Matt Taibbi to their stable of prominent reporters.
Taibbi will lead a second newsmagazine for First Look. The First, Glenn Greenwald’s The Intercept, launched earlier this month....
First Look’s release adds:

"While at Rolling Stone, Taibbi won a National Magazine Award for his reporting on the 2008 presidential election, and was a finalist for his coverage of Occupy Wall Street. The author of two New York Times bestsellers, he earlier worked as reporter for the Moscow Times, an English-language expatriate newspaper, and co-founded The eXile, a bi-weekly newspaper based in Moscow. The paper became infamous for its satirical wit, as well as for hard-nosed reporting of corruption in both the Russian government and the American aid community. The paper was the only publication to correctly predict the 1998 Russian financial crisis…

"Taibbi will be based in New York City. The name and launch date of his digital magazine will be announced in the coming months. First Look Media’s first online publication, The Intercept, led by Glenn Greenwald, Laura Poitras, and Jeremy Scahill, launched on February 10."
The Raw Story
Matt Taibbi quits Rolling Stone, joins Glenn Greenwald
John Byrne

It's on. Hunter Thompson must be pleased, wherever he is. Paul Krassner too.

Is Greg Palast next?


Falguni A. Sheth on neoliberalism and the biopolitics of charity

In my research, I’ve been exploring neoliberalism and the biopolitics of charity. How do we understand consumption and activism in a society whose social/public safety nets are increasingly eroded?
I’m going to try to post a series of pieces on neoliberal practices. This is the first. And there’s a fun snarky video at the end.
Translation Exercises — Philosophers Club
Consumer Activism and the Biopolitics of Consumption

Correcting the Poor: The Civilizing Impulses of Homo Corporatus and Private Charities
Falguni A. Sheth
(h/t John Zelnicker)

Wednesday, February 19, 2014

Chris Bowers — Actual photo of the moment Democrats lost the white working class vote



Daily Kos
Actual photo of the moment Democrats lost the white working class vote
Chris Bowers

The irony is that they joined the party of Lincoln.

Lynn Parramore — Predator Banks Enter Brave New World of Epic Scams and Public Hasn't Got a Clue


If you didn't read the latest Taibbi on the squids, here's a summary.

Truthout
Predator Banks Enter Brave New World of Epic Scams and Public Hasn't Got a Clue
Lynn Parramore, AlterNet | Op-Ed

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Nicholas Watt — Bishops blame David Cameron for food bank crisis


David Cameron has been blamed by 27 Anglican bishops for creating a "national crisis" which has seen 500,000 people visit food banks since Easter last year. 
In one of the most significant political interventions by leading members of the Church of England since the Faith in the City report in 1985, 25 of its bishops have blamed "cutbacks to and failures in the benefit system" for forcing people to use food banks. They are joined by two bishops from the Church in Wales, 14 Methodist districts chairs and two Quakers.

In an open letter published in the Daily Mirror on Thursday, the faith leaders write: "We must, as a society, face up to the fact that over half of people using food banks have been put in that situation by cutbacks to and failures in the benefit system, whether it be payment delays or punitive sanctions."
The Guardian World News
Bishops blame David Cameron for food bank crisis
Nicholas Watt

Adair Turner — "In Praise of Capital Market Fragmentation"

Financial liberalization was lauded because it enabled capital to flow to where it would be used most productively, increasing national and global growth.

But empirical support for the benefits of capital-account liberalization is weak. The most successful development stories in economic history – Japan and South Korea – featured significant domestic financial repression and capital controls, which accompanied several decades of rapid growth.

Likewise, most cross-country studies have found no evidence that capital-account liberalization is good for growth. As the economist Jagdish Bhagwati pointed out 16 years ago in his article “The Capital Myth,” there are fundamental differences between trade in widgets and trade in dollars. The case for liberalizing trade in goods and services is strong; the case for complete capital-account liberalization is not.

One reason is that many modern financial flows do not play the useful role in capital allocation that economic theory assumes....
And yet, despite the growing evidence to the contrary, the assumption that all capital flows are beneficial has proved remarkably resilient. That reflects the power not only of vested interests but also of established ideas. Empirical falsification of a prevailing orthodoxy is disturbing. Even economists who find no evidence that capital-account liberalization boosts growth often feel obliged to stress that “further analysis” might at last reveal the benefits that free-market theory suggests must exist.

It is time to stop looking for these non-existent benefits, and to distinguish among different categories of capital flows. Some are valuable, but some are potentially harmful....
In the past, policymakers have been at pains to stress that no such fragmentation will be allowed. But we need to be blunt: Free flows of short-term debt can result in capital misallocation and harmful instability. When it comes to global capital markets, fragmentation can be a good thing.
Social Europe Journal
"In Praise of Capital Market Fragmentation"
Adair Turner



Adair Turner

Chris Mooney — Surprise: Liberals Are Just as Morally Righteous as Conservatives


Like George Lakoff has been saying. Liberals need to lead with moral arguments as conservative do, instead of leading with reasoned argument. The heart trumps the head in persuasion. Save reasoning for justification of moral argument.
...much research has suggested that the basic moral systems of the left and the right are very different. If you follow George Lakoff, liberals have a "nurturant parent" morality, centered on caring and empathy, as opposed to conservatives' "strict father" morality, centered on rules and obedience. If you follow Jonathan Haidt, meanwhile, then liberals feel strong moral convictions about issues involving harm and fairness, whereas conservatives root their morality in authority, tribalism, and even emotions of disgust.

There's no reason to doubt that these differences are real. But the new study suggests that in spite of them, both the left and the right can get very fired up about politics. And when they let their deep-seated moral emotions drive their political views, they may do so with equal zeal.
Mother Jones
Surprise: Liberals Are Just as Morally Righteous as Conservatives
Chris Mooney

Jonathan Larson — More evidence that TPP is utterly corrupt

The biggest problem with these neoliberal trade deals like the Trans-Pacific Partnership (TPP) is they homogenize evil. Having local options is not just some quaint hippie idea, it is the very basis of advanced economic development. So in their naked greed, these trade grabbers outlaw a whole bunch of very useful ideas. The best example I can think of concerns an Asian nation that was trying to keep it's young from starting to smoke. Their non-smoking campaign was successfully sued by big tobacco for creating a trade barrier. In the acutely brain-damaged minds of the neoliberal, this actually makes sense (or so they argue.) That such folks have been dominating the economic argument since the 1970s demonstrates a theological fanaticism that is so extreme it makes the craziest religious nuts of history look like harmless cranks by comparison (and yes, I know about the children's crusades.)
Unfortunately, these trade agreements make it possible to seize the incomes of whole nations so there are serious incentives to get them passed. This time around, it seems like the big-money folks have bought some extra influence in the corridors of the permanent government. It might not be enough. It looks like the pushback from the 97% that are actually harmed by these deals may sink TPP. Even in a barely-functioning "democracy" such as we have in USA, these kind of numbers can sway even a corporate toady like Nancy Pelosi into announcing her opposition to "fast-tracking" TPP. (We'll see!) Of course, until the discussion changes its focus to what is necessary for a survival economics, the neoliberals will just bring back TPP under a new name. It's what they do. They have erected a complex institutional apparatus used to corrupt governments into agreeing to their insane greed.
real economics
More evidence that TPP is utterly corrupt
Jonathan Larson

Winterspeak — Palley on MMT


Now Winterspeak speaks.

One matter that needs clarification is this.

Like Palley, I am stunned by the claim that MMT rejects counter-cyclical fiscal policy. Certainly contrary to what I've heard, and if Wray really does take this position then we'd have to disagree.
The notion that MMT rejects counter-cyclical policy misses the point of MMT, where the fiscal balance expands and contracts with the cycle through automatic stabilization, changes in tax receipts, and the ELR as an employment buffer and price stabilizer. MMT also distinguishes between "good" and "bad" deficits based on whether they are incurred as a result of government adjusting the fiscal balance through proactive fiscal policy to accommodate increasing saving desire or address inflation rather than pursuing a policy like austerity in a contraction, which will only result in growing the deficit through automatic stabilization and reduced tax receipts.

Palley may be thinking of traditional counter-cyclical policy. That's true. They think there is a better way. MMT economists are skeptical of "Keynesian pump-priming," which they view as usually too late to the table and too fraught with political wrangling to be an effective policy tool. However, when the financial crisis hit and caught policymakers unawares, Warren Mosler was in the forefront, recommending providing unlimited liquidity to solvent banks, a suspension of FICA, and per-capita block grants to states. This could have been accomplished overnight whereas the stimulus package that was finally passed took months, was watered down below what models indicated was needed, and then took time to deploy, prolonging the response and watering it down.

Palley on MMT
Winterspeak

Chris Dillow — The macroeconomic challenge

These facts are a challenge to both RBC and New Keynesian models. But they have something in common. They stress the heterogeneity of agents: some unemployed respond to benefit changes but most don't; some prices are sticky but others aren't; some firms are big enough to have macro effects, others aren't. This, I fear, means that the problem with conventional macro isn't so much its microfoundations per se as the assumption that these microfoundations must consist in representative agents.

Now, you'll object that any model that tries to embed these five facts will very quickly become very complex. But that's my point - the economy is a very complex system and any theory that doesn't see this is very dubious. It could be that the best way to understand it - if at all - lies in agent-based models rather than conventional DSGE ones.
Stumbling and Mumbling
The macroeconomic challenge
Chris Dillow | Investors Chronicle

Dirk Ehnts — A not-so-friendly critical look at MMT?


Dirk Ehnts jumps into the Palley-MMT fray.

econoblog 101
A not-so-friendly critical look at MMT?
Dirk Ehnts | Berlin School for Economics and Law

Randy Wray — Minsky on Banking: Early Work and Critiques by Krugman and Horizontalists Revisited

In this piece I will revisit only the main underlying issue: what was Minsky’s early approach to banking? Did Minsky adopt an endogenous money approach–at the time that he was first developing his financial instability approach? If he did, that, by itself, does not prove that his FIH is consistent with an endogenous money approach. Nor does it disprove the claim that there is a Says Law of finance. Both of those criticisms could still be made whether or not Minsky held and explicated an endogenous money approach. I have argued elsewhere, however, that these positions do not hold up to scrutiny. In fact, Minsky’s FIH relies critically on an endogenous approach to money, and the Say’s Law approach of some Post Keynesians is fundamentally flawed. In any case, we will not detail those critiques here. (4)
Further, it is useful to return to Krugman’s critique of Minsky to compare Minsky’s early view of banking with the current view held by many macroeconomists. I’ll argue that Minsky’s views over half a century ago are far more advanced than those held today by Krugman.
Economonitor — Great Leap Forward
Minsky on Banking: Early Work and Critiques by Krugman and Horizontalists Revisited
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City

Tuesday, February 18, 2014

Daniel Little — Lincoln and Marx


"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." — Lincoln's First Annual Message to Congress, December 3, 1861.

Understanding Society
Lincoln and Marx
Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor

Brian Romanchuk — MMT And Constraints


Brian Romanchuk comments on Tom Palley's recent criticism of MMT and discusses the budget and external constraints.

Bond Economics
MMT And Constraints
Brian Romanchuk

 

John Bingham, and Peter Dominiczak — Cutting benefits part of a 'moral mission', Cameron tells new Cardinal














David Cameron says he is giving unemployed Britons “new hope and responsibility” by cutting their benefit payments and claims his welfare reforms are part of a “moral mission” for the country.

In an article for the Telegraph, the Prime Minister issues a sharp rebuke to Britain’s most senior Roman Catholic, the Most Rev Vincent Nichols, who said recent changes had left many in “hunger and destitution”.

Mr Cameron argues that the Archbishop of Westminster’s criticism is “simply not true” and says the overhaul of the benefits system, led by Iain Duncan Smith, himself a practising Catholic, was about “doing what is right” and not simply “making the numbers add up”.

His comments came as Archbishop Nichols, who will be made a Cardinal later this week, stepped up his warnings over implementation of welfare reforms.
The Telegraph (UK)
Cutting benefits part of a 'moral mission', Cameron tells new Cardinal
John Bingham, and Peter Dominiczak
(h/t Andy Blatchford)

The prime minister schools the new cardinal on the real meaning of Christian morality. Get out the popcorn. This should be good.

Notice also that Archbishop Nichols's elevation is an early appointment of Pope Francis, signaling the direction the Church is taking internationally.

If you had any doubt that the upper echelons of finance were sociopaths, read this














Great piece in New York Magazine by a reporter who crashed the annual gala of the Kappa Beta Phi "secret society" of financial titans. If you had any doubt that these people are a bunch of depraved, egomaniacal sociopaths, read this.

Here is an excerpt:

As I walked through the streets of midtown in my ill-fitting tuxedo, I thought about the implications of what I’d just seen.
The first and most obvious conclusion was that the upper ranks of finance are composed of people who have completely divorced themselves from reality. No self-aware and socially conscious Wall Street executive would have agreed to be part of a group whose tacit mission is to make light of the financial sector’s foibles. Not when those foibles had resulted in real harm to millions of people in the form of foreclosures, wrecked 401(k)s, and a devastating unemployment crisis.
This should be a siren call telling us that if our nation is to survive--no, if THE WORLD AS WE KNOW IT is to survive--where societies are established for the benefit and "general welfare" of the people who live in them, then the Finance, Insurance, Real Estate (F.I.RE) sector has to be dismantled or shrunk down to a level where it's parasitic tentacles are no longer a threat.

Wer're a long way from that.

Here is a list of the Kappa Beta Phi members.





Joel Bleifuss — The Reform That Dare Not Speak Its Name


Why the US will be fighting a cold civil war for the forseeable future unless the GOP takes Congress and the presidency. However, the way electoral vote stack up it will be very difficult for the GOP to win the presidency. So it looks like divisive divided government unless the political winds change significantly. or the rules are changed.

In These Times
The Reform That Dare Not Speak Its Name
Joel Bleifuss