Provocation # 51.
(remember these are called “provocations” because I am trying to be provocative to stimulate debate from which a better understanding can emerge).
Who cares about economics (as distinct from the economy)?
Most obviously, the profession with graduate training and research and faculty on the treadmill to first jobs and then tenure. For these economics is like a jungle gym and the journals and conferences are mostly good for scanning for those slippery hand holds and foot placements to go up.
Could this process turn more positive?
There definitely are economists who care about society and actually thought entering economics would be to gain leverage to make a better society.
Some of these economists are quite vocal -and ignored within the profession. Perhaps even a large percentage of those going with the mainstream would prefer not to go with the mainstream but can’t imagine how to do it and survive.
If graduate students learned what we think would be better economics: more history, humanity, sociology, anthropology – could they get jobs, or is the jungle gym the main source of employment?
The choice of supporting the mainstream or being scientific is painful, and made worse because “being scientific” is often used as the argument to support the abstract quantification (method centric) at the expense of avoiding phenomena, like banking, wealth, class, and the emerging unknowns that effect change in the structure of the economy.
Does current economics interest people outside the jungle gym?
What of bureaucrats with economic portfolios? They also do not read the journals but justify their own positions based on the impression given by the existence of the journals, departments, and conferences that economics is serious and hence seriously informed people are running the economy. Serious people are in charge.
There are signs that the jungle gym is coming apart. You all know of the problem with the Nobel for economics. Mirowski among others had been eloquent showing that the prize is more political than scientific. But the critique is spreading
The Political Slant of the Nobel Prize in Economics
Avner Offer, the co-author of a book on the award, explains how it has legitimized free-market thinking over time.
The core problem is that, since the prize is given for orthodoxy, it cannot be given for anything else. That market orthodoxy (that free markets are good and possible is used to justify the monopoly and regulation based market we have) keeps us from thinking.
Larry Summers probably in quest for a Noble and or a good job in the next Clinton administration, is struggling to be relevant (secular stagnation) but is trapped, and trapping us, in orthodoxy. His almost good arguments too quickly carry the baggage of existing assumptions. He published yesterday [my comments in [….]’s
It is hard to escape the conclusion that the world is seeing a renaissance of populist authoritarianism.” [But you will notice that populist anxt is seen asdriven by lack of growth, and no other possibility is to be considered.]
As the world’s finance ministers and central bank governors came together in Washington last week for their annual global financial convocation, the mood was sombre. The spectre of secular stagnation and inadequate economic growth on the one hand and ascendant populism and global disintegration on the other led to widespread apprehension.
[“Secular stagnation” is interesting because it mixes religious associations (secular, not religious, with decay and death – a potent piece of rhetoric. “Secular” means not universal but of an age, hence not transcendent nor religious, and “stagnation” means sitting water with hints of decay, as pond or swamp. The impression given by the phrase, “secular stagnation,”. is we should have something that is neither secular(what is the unspoken alternative) nor stagnation. The implication is that we should return to the natural state of growth ( a natural state which is not secular and not stagnant.)]
Unlike in 2008 when the post-Lehman crisis was a preoccupation or 2011 and 2012 when the possibility of the collapse of the euro system concentrated minds, there was no imminent crisis.
Instead, the pervasive concern was that traditional ideas and leaders were losing their grip and the global economy was entering into unexplored and dangerous territory.
[so far correct. Which continues..]
International Monetary Fund growth forecasts released before the meeting were again revised downwards. While recession does not impend in any large region, growth is expected at rates dangerously close to stall speed. Worse is the realisation that the central banks have little fuel left in their tanks.
[ so the possibilities are reduced to lack of growth and no fuel(!).]
Recessions come intermittently and unpredictably. Containing them generally requires 5 percentage points of rate cutting. Nowhere in the industrial world do central banks have anything like this kind of room even making allowance for the effects of unconventional policies like quantitative easing. Market expectations suggest that it is unlikely they will gain room for years to come.
After seven years of economic over-optimism there is a growing awareness that challenges are not so much a legacy of the financial crisis as of deep structural changes in the global economy. There is increasing reason to doubt that the industrial world is capable of simultaneously enjoying reasonable interest rates that support savers, financial stability and the current financial system and adequate economic growth at the same time.
[note: does not touch on climate nor automation, nor distribution. People” are upset, it is not just because of lack of growth but of the narrowness of focus on growth and ignoring other serious issues. The leadership is judged as ill-informed, self serving and suffering from occupational deformities of thought. One percentism.]
Saving has become overabundant, new investment insufficient and stagnation secular rather than transient. [Mixed language here sows confusion, Secular the opposite of transient? No. Secular means transient. ]
It can hardly come as a great surprise that when economic growth falls short year after year and when its beneficiaries are a small subset of the population, electorates turn surly. They lose confidence in traditional policy approaches and their advocates.
[as if the only policy approaches the general population is interested in are growth inducing.]
Looking back at the political traumas of 1968 when there were people in the streets in many countries, it is clear that there was something going on beyond specific issues like Vietnam in the US.
In the same way as with Brexit, the rise of Donald Trump and Bernie Sanders, the strength of rightwing nationalists in many European countries, Vladimir Putin’s strength in Russia and the return of Mao worship in China, it is hard to escape the conclusion that the world is seeing a renaissance of populist authoritarianism.
[The suggestion here is that the populist reaction is authoritarian. No. This is scare tactics. Most people wold prefer common sense democratic, but if that doesn’t work and the problems get worse, then the authoritarian possibility becomes more desirable. Larry;s logic is that if the elite can’t deliver growth the people will side up as an authoritarian mob, and then need to be controlled by an authoritarian reaction. The possibility of common sense thought through social logic that works for all, not with growth but with development, not just the one percent but for all, is not considred.]
These developments are mutually reinforcing. Weak economics promotes angry politics which raises uncertainty leading to even weaker economics. And so the cycle starts again. People have lost confidence both in the competence of economic leaders and in their commitment to serving the wider public rather than the global elite.
[so people are pissed because of lack of growth. I think it is moret hat leaders are not dealing with climate automation, war, migration and quality of life. The idea that the only solution is growth leaves out the possibility of the reconfiguration of the economy with lots of development but no growth (Aristotle raised their possibility in his book Coming to be And Passing Away “we can have growth without development, and development without growth.” ]
A number of traditional economic leaders in the public and private sector seemed to be making their way through the traditional grief cycle — starting with denial, moving to rage, then to bargaining and ultimately to acceptance of new realities.
It is untenable to ignore public sentiment. Nor, as 60 years of experience with populist policy cycles in Latin America demonstrates, is economic nationalism a viable strategy. Rather the challenge is to find a path forward in which international co-operation is supported and enhanced. This should focus on the concerns of a broad middle class rather than of global elites. [what of he much larger global disposed and marginalized?]
[note where he goes.}
Concretely, this means rejecting austerity economics in favour of investment economics. At a time when markets are pointing to the problem over the next generation as being inadequate rather than excessive inflation, central bankers need to spur demand and co-operate with governments.
Enhancing infrastructure investment in the public and private sector should be a fiscal policy priority.
[this could be good, but in the current system infrastructure investment would continue an economy that supports the 1% and includes some of the rest as supporting cast, but continues to neglect the rest. Increasing investment, it is assumed, will lead to jobs. But the fact is that infrastructure jobs are being automated (laser driven trucks and earth movers, gps controlled equipment..) and increased investment will speed up the incentives to automate.]
And the focus of international economic co-operation more generally needs to shift from opportunities for capital to better outcomes for labour. The achievement of this objective will require substantially enhanced cooperation with respect to what might be thought of the as the dark side of capital mobility — money laundering, regulatory arbitrage, and tax avoidance and evasion.
These are a few ideas. The general point should be clear. Few things will be as important for the success of the next president as the restoration of confidence in the global economy.
[So I have gone from “who is interested in economics?” to the traps set by the use of tradition economics when used to forward the interests of power. .]