We have plenty of diagnoses of what is wrong with the economy and politics. We even have a fair number of “should” or ought” statements. But none hardly on how to do it, Statements like “Congress should..” are totally empty of plausible actions.
We need to admit that new economic thinking cannot occur without adding some political modeling and ideas. This is because the economics we have is part of a political regime that favors the one percent, creates inequality, ruins the environment and furthered the division of the country in ways that create voting out of anger and despair and potential violence. The result is a dysfunctional government that ignores the serious issues and governs through the theater of hyping the wrong issues. Our economics supports a dysfunctional government.
What are the self-imposed constraints on new economic thinking?
The purpose of science is to give as best we can a picture of relevant reality. It is not the results of applying a method to a problem only because the problem is tractable with the method. Aa Aristotle made clear, each un known has is appropriate method.The first criteria is to pick a good enough example of the problem that, if understood, would actually throw light on the problem, not just on the method.
Economics seems to operate under extreme constraints on what it can or should study. Big data can find the tiny fraction of you that correlates with the tiny fraction in many others, but it cannot find the Plato or Bob Dylan in you. So big data misses lots that is relevant to actual humans. The admonition to grad students and tenure seekers to find a good data set might be good careerism but bad science.
If we accept the constraints, like keeping economics separate from politics or the other social sciences, how can we live up to the challenge for new economic thinking? New economic thinking probably requires introducing new aspects of reality, new “variables”, into the discussion. To introduce new methods without considering new aspects of reality probably can’t bring us very far and reflect a conservative – “things have to change in order to remain the same” approach, which might provide an important clue as to the motive for the slow movement of new economic thinking.
Constraints emerge because we stay within assumptions that we do not violate:
The assumption of capitalism.
The assumption that ownership is not a legitimate category of economics
The lack of discussion of the caste system that divided us into owners and workers, labor and capital.The legitimacy of corporations
Economics bypasses all the interesting categories of how the day is spent by an unemployed spouse, by the retired, trust fund babies, artists choosing poverty, those filling out time to retirement by playing videos at their desks, adventurers. We don’t look at the content – much of which is not “economic”- of the lifestyles of the one percent.
Why do we stay within these constraints?
Not wanting to shake up colleagues?
Fear of consequences to career?
Fear of destabilizing society?
Put another way: the world needs managing of the relationship between humanity and the globe, which needs to be a mix if economics, ecology, politics, philosophy, historical understanding, dealing with human nature and civil society. Is economics up for it, or is it holding on to old assumptions that help prevent any integrated approach?
Is there a better way to frame the question?
Provocation #162 Numbers in physics and economics.
The fact of money as numbers is like catnip for the mathematically inclined. But for something to become a number subject to economic analysis it has to go through a very complex social process of culture building, trust, faith, shared intuition about the worth of something in dollar terms, and the growth of supporting institutions..
Physics is just the opposite.The numbers are given by nature. True, a social process of inventing physics is necessary to be able to see the numbers, but the numbers are not generated by a social process.
The result is that the potentially most interesting parts of economics are ignored: how trust develops, the interaction between the social and the physical worlds, how desires and needs are amplified by media, how style emerges, how preferences form (the Trojan Horse of a more human centered economics), for example the US style stand-alone house vs. the close structure of the European hill-towns. Reflexivity means dynamics of a social field, but people are treated as isolated with internal preferences a bit like Plato’s innate ideas.
Economics could be about how society works and how to manage the interactions between humans and environment more skillfully – but not if sych workings with all their complexity are not seen as a question.
Economics students are told “search for data bases” and apply math and create your career.
A a 50 to 150 million dollar severance package after sexual misconduct? This is a symptom, not the sex but the money, of a broken society. Does it get questioned? Or is it just the productive function working its logic and acquiesced to by economists?
I keep coming back to Tim Cook: where is the analysis that says his compensation is based on an adequate economic model of real contributions to Apple’s success? Its customers, for example, are able to use an iPhone because of an expensive education (yes, even a four year old has benefited from much of society allowing them to become customers), but that is treated by Apple as an external it can monetize without having to pay for it. Cook’s wealth is socially generated, privately consumed. This is crazy making – to wit, the current deteriorating state of society which is unnerving us all, and, as Stieglitz says, inequality will continue to get worse. As is often argued, being at the top of a large pyramid should pay more than being at the top of a small pyramid. but this ignores that the existence of both pyramids is the work of a whole society over a number of years. Even the increasing size of a hierarchy under the guidance of a leader pulls together people, ideas, and properties created by others. Each building block of an organization has a history before its incorporation.
“The economy is doing well but society is doing badly.” Employment and the stock market are up, but impact of new jobs on the environment is continuing to increase the stress.
It is all very interesting and very important. But the siloed contributions found in most economic journal articles do not touch on these issues. If you Google “guaranteed annual income and inflation” simple issues like increases in rents and befits to owners and banks are not discussed or brushed over quickly. “The amount of cash put into society by a GAI is small in comparison to the overall GNP.” The reality of a homeless person with their GAI check trying to rent when all the spaces are rented is not explored. It is all gobbledygook with grammatical but not empirical integrity. Lets strive to be more relevant and interesting.
Meanwhile global temperatures and effects ratchet upwards where physics numbers and economic numbers occupy the same space.
If economics moved in the direction responding to much of the current critique in so many books and articles it would be much less mathematical-and more narrative. Could such a transition be made? Who would teach what? And when done, what jobs would there be? I think this refocus is needed if we are to help prepare society for tough times coming (The simultaneity of climate, inequality, authoritarian governments, automation, pollution impacts)
We have made an economics that helps the flow of financialization but is self contained. The result is that much of the critique, and lots of the posting on INET reflect this, uses the current vocabulary to critique the current practices. Is it possible with the economic vocabulary to construct alternative approaches that go beyond critique? The vocabulary we use is adequate to the financialization of the economy but that vocabulary, for example economic man and rational expectations mandate stripping out human concerns. A common example is talking about income in developing countries in terms like “Income has gone from $1.25 to 1.65 in the last decade, ” with no concern for the surrounding prices, availabilities, or general living conditions, as though 1.65 tells us that. Imagine a good reporter from Buzzfeed or an anthropologist telling us what they see. Even the idea of inequality is inequality in money terms, which might be different from inequality focused on an economy of quality of life, or family quality (employment is up, hooray. Both parents of little children can now go to work. Uh oh.) rather than consumer centered.
I think it is important to reflect on how all societies were until quite recently able to function without economics. What would happen if we just removed economics but not the economy (leaving in place accounting and all the material conditions which form the ensemble economists reify as “the economy”) from this society?
Provocation # 150 management schools.
In the spirit of provocations
Perhaps the split off of management schools from economics put the operational stuff away from the guidance of theory, just as the management schools became control centers for profit making and the success of corporations. At the same time economics was kept pure, not sullied by pragmatic concerns. The result is management is not a thoughtful enterprise with real scope and reach but narrowed to the interests, not of society but of corporations. Economics becomes a somewhat grotesque ensemble of formalisms not giving guidance on how to govern the humanity in the context of our given planet.
Accounting also was given a lower place, full of skills but not guided by either theory (economics) or pragmatics of the business schools, but just a narrow set of skills.
I like the idea of bringing them all back together in an effort to manage the future for the broader good. This could mean a serious blending of science and the humanities. The best of the enlightenment.
As a footnote about the placement of disciplines, remember what used to be called “home economics.” Here are the first sentences of the wiki article on “Home economics.”
Home economics, domestic science or home science is a field of study that deals with home and economics. It deals with the relationship between individuals, families, communities, and the environment in which they live.
Not bad. What happened?
Family and consumer science was previously known in the United States as home economics, often abbreviated “home ec” or “HE”. In 1994, various organizations, including the American Association of Family and Consumer Sciences, adopted the new term “family and consumer science” to reflect the fact that the field covers aspects outside of home life and wellness. (Also wiki)
The field is also known by other names, including human sciences, home science, and domestic economy. In addition, home economics has a strong historic relationship to the field of human ecology, and since the 1960s a number of university-level home economics programs have been renamed “human ecology” programs, including Cornell University’s program. (More wiki).
Home economics emerged at the turn of the twentieth century as a movement to train women to be more efficient household managers. At the same moment, American families began to consume many more goods and services than they produced. To guide women in this transition, professional home economics had two major goals: to teach women to assume their new roles as modern consumers and to communicate homemakers’ needs to manufacturers and political leaders. The development of the profession progressed from its origins as an educational movement to its identity as a source of consumer expertise in the interwar period to its virtual disappearance by the 1970s. An additional goal of the field was to “rationalize housework”, or lend the social status of a profession to it, based on a theory that housework could be intellectually fulfilling to women engaged in it, along with any emotional or relational benefits. (Wiki)
“Home economics” has for decades been a deeply dismissive name. Peculiar, since that is the meaning of economics in the original Greek as used by Aristotle and others. That dismissiveness gets in the way of looking at economics more holistically, a reorientation of economics away from a stress on narrow flows to a fuller exploration of how to manage the planet.
Imagine politics, economics and history along with management and accounting brought together as the integrative discipline of giving guidance on managing the planet as serious estate management , rather than the narrow discipline of exploiting the planet for the benefit of a few that economics has largely become.
Financialisation as the Core Problem for a “Social Europe”
For more than three decades, increasing financialisation has been a core feature of the European economy. This process does not only lead to economic instability, but also to social inequality. A driving force of financialisation in Europe are the internal market institutions of the European Union, aggravated through the introduction of the Euro and the programmes for rescuing the common currency. The European Union, principally, should be the most suitable institution to limit financialisation in favour of a more social Europe, given that it is often considered to be a shield against the harsh winds of globalisation. However, both the legal foundations as well as the political power relations within the Union are more likely to rather pave the way towards a deepening of financialisation and social inequality.
More diagnosis, but the language more pointed.
But strong on what’s wrong, absent on what to do about it.
Provocation #149 Why can they get so rich?
In the spirit of provocations..
Cook, Bezos and Musk all want to use money pulled from society and blow it off into outer space, abandoning earth and humanity. As Bezos has said, basically there is nothing on earth worth investing in. Some jobs are created by their space orgasm. But no Parthenon, no Museum of Modern Art, no university, no rising wages are carried into the future.
What rationale for marginal value can locate such wealth in such people? Why does such concentration not lead to a serious examination of the regulations and tax policies of ownership logistics, such value concentrating justifications, not get more serious examination? There is no way that their billions represent a well thought out return on effort. A german real-estate developer, asked if the income gap between him and one of his employees, was reasonable, answered
“I work 20 hours, the employee only 8, so of course its fair. ( a factor 2.5 in time resulting in a factor of 10,000 (10 to the 9th / 10 to the 5th ) in income? “ (Paraphrase from
Do economists admire this so much they can’t make the critique?
Hard to image that it is a an income difference based on skills. Their management expertise doesn’t seem that unusual., but it might have been a kind of tenacity, bull headedness, even meanness, that got them to their position.
Tim Cook couldn’t make a dime at Apple if there were not customers. And customers are an essential part of the cycle and the customer is expensive paid for by society that does not get a return because it all goes to the top: lots of education, social position, all from of a larger society that has paid for those customers to be able to buy, but who do not share in the profit. I don’t see any literature about why Cook is such a great manager.
Increase in stock price? f the increase were distributed proportioned to the actual contributions of society and workers the result would be very different. Obviously a high evaluation of stock depends on lots of customers, and they are created by many other factors that are not being compensated but taxed.
It might be that the top positions in largest corporations have to be filled by somebody and the logic of size yields such high benefits to those who, like a winning run in a pinball machine, got there. If this is so, where is economics exploring the cause and the awkward consequences of such concentration?
The following is sketchy.
I like Musk’s use of numbers.
“Two billion wall batteries would be needed to meet all the world’s energy needs. Difficult? Most people think impossible. We have 2 billion cars, replaced every twenty years. We can do this. “
If we took the social side in the same straight-forward way, what draconian but adequate measures would be necessary. A few off the top ideas floating around:
•Unemployment is first step toward redeployment,
You get the idea. Necessary but impossible? But something will happen.
Two major narratives to start:
◦Collapse; climate, food, grid, finance
Smart money right now seems to be on cohere (though private conversations suggest widespread skepticism), because if you win, great, and if you lose no worse than if you had bet on collapse. But since this takes many smart people who, in choosing the likelihood of society cohering, out of the effort to work on draconian measures, which consequently hurries us toward failure.