Provocation #21. Priductive economy assumed to be latent.

The purpose of economics has always been rationalized, sold to the political process, as doing good for society, meeting human needs in an approximation of high-efficiency.

Then why does economics stress increased profit with decreased wages through increased productivity?

Equating the good of society with the benefits to the wealthy makes it clear that economics still works for the current one percent(We will always have a top 1%, it’s just that they might have 3% of the total economy rather than 80% of it). Economy is a small subset of society and each society a small subset of history, yet economics treats the interests of the economy as being without question the interest of all.

I was reading this morning the chapter on macroeconomics in a new textbook. The variables are per capita investment,per capita savings, per capita income, per capita growth. No mention of the fact that the per capita is an average and ‘average’ can go up while the bulk of the distribution is going down. And of course no discussion of what the investment is for or what people can do with the income, increasing or decreasing.

(Remember that the ‘cap’in ‘capita’ comes from the Roman ‘cap’, head, is in head of cattle.  Herd management.)

The result is a discussion of macro economics which is squeezed between the real macro issues of climate, inequality and species well-being, on the top side of the sandwich, and the lives of real people, lives which are larger than the standard microeconomics of consumerism.

Thus sandwiched makes it impossible to have a discussion. Can economics break out of this confine? Can we get to new economic thinking? Or is any serious problem (defined by content rather than method), is so far outside the scope of the current mainstream that imagination fails us?

Part of the answer I think is that those who are benefiting argue that it would be better to continue for 20 more years and then collapse than to try and fix it now and collapse now.

How else to account for the conservatism of an economics which looks at only small parametric changes but always within the confines of the standard paradigm?

New economic thinking requires that we break out of the narrow confines but economics works to prevent it.

But for an alternative view;

Capitalism, it turns out, will not be abolished by forced-march techniques. It will be abolished by creating something more dynamic that exists, at first, almost unseen within the old system, but which breaks through, reshaping the economy around new values, behaviours and norms. As with feudalism 500 years ago, capitalism’s demise will be accelerated by external shocks and shaped by the emergence of a new kind of human being. And it has started.

From post capitalism
Paul Mason
From Bernanke (in Economistsview)

In this post, I consider the merits of helicopter money as a (presumably last-resort) strategy for policymakers. I make two points. First, in theory at least, helicopter money could prove a valuable tool. In particular, it has the attractive feature that it should work even when more conventional monetary policies are ineffective and the initial level of government debt is high. However, second, as a practical matter, the use of helicopter money would involve some difficult issues of implementation. These include (1) the need to integrate the approach with standard monetary policy frameworks and (2) the challenge of achieving the necessary coordination between fiscal and monetary policymakers, without compromising central bank independence or long-run fiscal discipline. I propose some tentative solutions for these problems.

So Bernanake provides another example of believing that if we get stimuls right, the economy will flow. The variables are lower interest, stimulus, , etc, all assume that there is an economy waiting there to function under right conditions. What is not considred is that there must be buyers wanting to buy and makers intrested in innvation and making. Both these are the nore intersting parts of an economy. Sure, if you have makers and buyers all goes, but if not, deeper analysis required.

Larry Summers (also economists view)

The core of the revolt against global integration, though, is not ignorance. It is a sense — unfortunately not wholly unwarranted — that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. …
Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ..

Straightfoward criticism of the .01%

Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.

Terrific, but short on implementation.

So the challenge is

• from mainstream economics to
• new economic thinking
• to action