1804. New economics needed for a new kind of economy.

In thinking about modifying the economy and the economics which tries to understand it,   we need to start with the clear idea  that the economy  has the productive capacity to meet all current needs for all people. The problem is that

  1. The distribution is terrible

2.  We are producing too much of the wrong things – consumer stuff and war stuff rather than what people need and desire. Desire is broader and more interesting than mere consumerism.

Producing the stuff that meets a better mix of needs and desires may require less production than the current consumption catalogue has to offer. Such a possibility scares many people. those with investments and those with jobs,  but something like it is necessary to prevent  climate catastrophe and dealing seriously with inequality.

We are currently producing in the closed circle of  investing – hiring – makeing – selling plus the importation into the circle  of externals. such as energy, land, free PR (The Trump approach to media). This circle creates money for the one percent more than it meets a serious assessment of human needs and desires. In fact people are being forced out of the circle because they are too expensive – wages – and not buying. Can we help create  a world with a better match between real needs, desires  and production?

Can we imagine an economics that supports the economy needed for a  transition to such a world? Can we do it?

We need an economics that helps create an economy that move toward  “The wealth of Nations” , recognizing  that Adam Smith knew what he was doing when he  though of the wealth of the whole nation, not just a class, and when he  made it plural recognizing the interdependence of opportunity and achievement across borders, and included in his book lots of advice on education as a state  supported activity, and against any form of monopolization.

We need  to admit that new economic thinking cannot occur without adding some serious 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 current  economics supports a dysfunctional government and does not model the dysfunctions. We read very little political history. For example, the rise of Mussolini, the fall of Rome, the wars that led to the Treaty of Westphalia. We know much more about how to make an iPhone than a government.

In political history this is classic. Elites make choices for their benefit and are blind to the impact of their policies on most of the population. Broadly acceptable  views of society serve the narrow interests of the elite. The bad results add up until violent regime change. Some of that violence bottom up and some  top down. The top down usually wins.

We must recognize that the task governance is very difficult in a crowded world with an overworked economy. We need leaders, but how are they chosen and how rewarded? The complexity of the world and its interdependence with technology makes the task for leaders  almost impossible. Part of the problem is that the goal of the system is simple inequality and extending production is used to continually achieve that inequality. If the goal was meeting real needs rather than just consumerism,  elites would have a meaningful alternative and would recognize the value of democracy and serious education for all – not for jobs but for community imagination in the shared task of making sliceable and happier world. Economics could work to achieve such a world.

We need an economics which helps people meet real needs of family, science, communities, interdependence, education, health and quality of life in all its richness. The current model of proves the middle class a standard of living defined by consumerism rather than by livability of community.   We have  a lower class defined by their invisibility and whose work needs, when they have work,  for computer and cell phone are treated as discretionary consumer items rather than as school and work necessities. We have created a society with a great deal of pain and fear.

Economics as a guide to the wealth of nations would be a different economics. It would discuss values, political arrangements, quality of life, and be fundamentally  interested in what is good for humans in their private and community life in a more democracy tending society. Instead of dismissing most of these issues new economics would above all find them interesting – as reality can tend to be.

This will be very hard work, in part because it means redistributing careers,  power and assets, redesigning institutions and communities, and because we have not been educated for it. Elites must understand that they must give up the goal of ending up with more than they started. They imagine that the more that they accumulate comes out of the ether,  or the banks, not out of the living conditions of real people.

We need to get past the idea that a green economy can make this happen. Under current conditions a green economy would still continue the concentration of wealth. We need to get past the idea that as farm to factory so industrial to digital will maintain job parity. The new factor is that increasing demand for labor increases the incentive to automate. We need to understand that third world development is destroying village life and subsistence farming and replacing it with urban high rises  and much higher prices. We need to get past the idea that per capita GDP is a measure of anything other than concentration of wealth masked by averages.

A green and happy economy is possible and will require different goals, high cooperation and compassion, more values, more aesthetics, and lots of caring.

Such an economy breaks down into four major categories of ”employment”.

  • Greening the whole environment for food and quality of life)
  • Taking care of people hurt in the transition (perhaps half the population as it is redeployed)
  • Managing these two (seeing distribution as a core output of society)
  • Art and education. (what is humanity, what is nature, how do we think)

There is lots to do.

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1803. England and early modernity

from Wolin Political Vision

Why it is important to know history, especially now political history.

Fear had been a natural reaction to the conditions of the sixteenth century. Religious ferment had combined with the travail of national centralization to make disorder a constant possibility and stability a tenuous achievement. Society was continually being threatened by a reversion to “political nature.” It was not surprising that men as diverse as Luther and Bodin had voiced the same warning that only a powerful coercive authority spelled the difference between anarchy and order. In the ontology of political thought, order has been the equivalent of being, anarchy the political synonym for non-being. Hobbes’s England had experienced political revolution and religious conflict of such intensity as to draw a whole society to the edge of nothingness. So dramatic had been the suddenness with which En-gland had been plunged into war and revolution, so great had been the devastation, and so bitter had been the enmities that for the next three centuries and more English politics was conducted on the unwritten premise that history ought not be allowed to repeat itself.

1802. Trump and America

Trump’s path to the presidency was more like falling into a vacuum produced by about three decades of a political system that was working for the rich and creating inequality (and environmental damage). It is Trump’s Long Island construction industry character and low exposure to other worlds that makes him such a bad leader.

He does not understand the need for calm. He think we all admire a gamester who likes to win. He does not understand that he has to be the president for the losers as well as the winners. He acts as though is head of a team that is out to win for self and defeat others. But once the election is over the president must be head of the league and protect all the teams in an atmosphere of compassion thoughtfulness – consider all sides to a question – and fairness, whereas in the construction industry bullying bluster braggery and bloat seem to work well.

Trump is obviously a spoiled child who deeply is identified with mother  and thinks being a bully will either force others to back off or to admire him and agree with him. Childhood bad behavior got him sent to military school. Through some college at Wharton we do not have his transcripts but evidence seems to be of basically no show. His paper trail – transcripts, taxes, sealed legal proceedings – seem to hint at a mode of operation that would be a disaster for a country. His pathetic adolescent need to show independent from mom by instilling fear and constant sexual exploitation of 10’s is pathetic. (see photos of his mother’s hair treatment – much like Donald’s).

He seems to have no understanding that his actions create enemies, not only for himself but in the much larger global society where extreme diplomacy and wise historical understanding are essential. The resulting decline in the perception of America is one of the greatest good will collapses in history. (I draw from the shrunken well of Trumps’ own superlatives). While under way for decades, Obama did much to repair the America perceived, and it has been trashed in a few weeks.

Trump has no connection to the idea of democracy. His business has been perks for the one percent: golf, retreats – and casinos for the unfortunate.He seems – and is – unsocialized to the American ambience that most of us carry as a kind of social DNA that combines reasonableness with humility.

But it is important to realize that Trump is more result than cause. The Republican Party is led by a strange bunch of power brokers who play on myth of christian self righteousness and whose personal goals are neither Christian nor democratic. In fact neither party is suffeciently  led by people concerted with the issues we need to be concerned about: climate warming, population, migration, inequality, neo-colonialism, weak governance, deep corruption.

A serious problem is that the pace of events will outpace any proposed plan of recovery. The result is we will live in a world trying to remake itself while it is coming apart. We need to realize this as a human crisis and be prepared, all of us, to respond meaningfully to the pain of those who are hurt by what we are about to go through.

Trump’s mean egoism is truly dangerous in a dangerous situation. The social reaction against Trump is deep and suggests resources among the people that are awesome. A better future is possible if we think toward a world that is less driven by consumerism and more driven by meeting people’s needs and desires. We produce enough. It is poorly distributed, and it is the wrong stuff. There is a lot to do and the crisis of getting rigd of Trump may be driven by an awareness of this overall situation. Gives hope.

1800. US and Russia -trump

 

The problem with the US supporting Montenegro into NATO is that it provokes Russia and makes it look like a a large country.  Do you is pushing for NATO expansion already had that affect over the last couple of decades. Trump’s focus on NATO and Russia has already shifted the world balance, strengthening russia and china, making the US look weak and stupid.

1799. The meaning of “rational”

There is a lot of provocation today. Start with Sheila Dow’s paper  on our website, “The people have had enough of experts”, and the comments on Twitter in response, such as the paper posted by John Boit in Medium,

https://medium.com/@JohnBoik/an-economy-of-meaning-or-bust-2aa46457b649#.hp1u95kh3.

These are worth serious reading for their hints about new economic thinking. Dow writes for example ” but the fact remains that these models are by their nature incapable of predicting a crisis because of the way they are constricted to ensure settlement on equilibrium.” Great language.

As it is, wrongly constructed economics is blamed on excess formalism whereas it might be understood as making systems that support, or do not undermine, the economics of the one percent.

The reason a math approach gets it wrong is because you cannot do math without assuming some things in the system are constants or constantly distributed. The interesting things about life do not fit such assumptions. As  a society we may want steady state security but our social rhetoric is all in the direction of innovation, competitive advantage and change.

But l will add a few thoughts from a slightly different angle.

What is often rational is, in economics, called irrational and what is irrational called rational. The use of “rational” in economics generally refers to calculating probabilities.  What is not calculable  is called irrational.

This conflicts with classical thinking which treats rational as the use of the mind in the service of life and irrational what does not.

we have

https://www.bloomberg.com/view/articles/2017-01-25/behavioral-economics-isn-t-dead-yet

 

This throws cold water on the dream of linking psychology with economics, since it means that seemingly irrational economic behavior results from the sum of a whole plethora of psychological effects.

 

The implication is that all things psychological are not rational,  like mood, shifting preferences, concern for how a purchase looks in our community. From a human point of view such considerations are the height of  rationality. If my mood tells me “no” perhaps the mood reflects some state of my being I should take seriously. To call it irrational is to suggest that major structures that arose through evolution are irrational – do not serve a life purpose. This is a very strange place to end up, calling the results of evolution irrational.

 When interest rates or gross domestic product change, people in Gabaix’s model don’t quite realize that things are different. Even more importantly, they’re short-sighted — they don’t think as much about the probability of a recession happening 10 years from now as they do about one occurring in the next six months.

People have a lot on their minds, and limited bandwidth. To ignore something is not irrational. If we ignore something because our mind is preoccupied and we fail to make all the calculations , this is “irrational” in a way that discounts reality.

One example is a paper by Northwestern University’s Lorenz Kueng. He adds yet another piece of evidence against the so-called permanent income hypothesis — the theory that rational, forward-thinking consumers don’t increase their consumption when they get a temporary boost in income. When the Alaska Permanent Fund — a pot of money funded mostly by oil revenue — gives people their annual handouts, they go out and binge instead of sticking it all in the bank as standard rational theory would predict. Kueng shows that this is consistent with a behavioral theory in which consumers are close to rational, but not quite.

 

Why isn’t a binge  rational? What is life for? The model of rationality here is a caricature of a character type that sacrifices pleasure to savings.  Who is rational,  the saver or the pleasure seeker? This cannot be answered except in the assumption of a framework of values.  I think of William Saroyan’s “Every man knows his true destiny, but he likes his detours because they take time.

To equate rational with the results of calculation is to reduce rational to means-ends consistency, kind of like engineering. A design of a bomb can be rational from an engineering view, but its irrational when considered in the framework of life giving.

Want to see how “irrational” this gets?

Another example is a paper by Rawley Heimer, Kristian Myrseth and Raphael Schoenle. The authors document how young people save too little, and the elderly spend too little, relative to standard fully rational theories. The latter might be explained by old people wanting to pass money to their children, but low savings among the young require an explanation. Heimer and Schoenle’s theory is that young people don’t realize how long they’re going to live. Far from believing in their own immortality, Heimer et al. posit that young people spend like there’s no tomorrow. Presumably, once they reach middle age, people regret their youthful binges.

So I will live a long time. I will save everything I can  year after year – and then I die. Rational?

Rational comes from ratio, balance, proportion. Machine logic is not life  Logic and economics should be aware of the difference and not subordinate our description of people to an economy where at its most “rational” neither workers (low wages) nor owners (savers) get to benefit from the regime.

Economics avoids the flowing world and tries to replace it with a solid abstract model. Such solidity is not given to humans, though they yearn for it.

“Men find it difficult, Machiavelli noted, to accept a world of becoming; they hunger for constants. This leads them to create an illusory world which is then treated as though it were a real basis for action. In terms of human behavior this often took the form of clinging to certain habits despite their having been long outdistanced by the pace of events.”

 

from  Wolin Politics and Vision.

 

 

 

 

1798. Trump and fortress america.

Because we are isolated perhaps he feels far less vulnerable than other world leaders to surrounding circumstances.

from Wolin Politics and Vision, discussing machiavelli

The symbol of man’s illusions was the armed fortress. The fortress, in all of its seeming solidity, dramatized the false hope that there could be points of fixity, anunchanging basis of political and military security, in a restless world. But thereis a further lesson to the symbol. Deceived by the impressive exterior of his fortress, the ruler comes to believe himself invincible and is tempted into cruel and extreme acts. The illusion of security thus releases the psychological springs of ambition and domination. This example gives point to one of the principles of the new science: vice, in a political sense, is often the function of illusion,virtue the product of clear-sightedness