Wed Sep 15th, 2010 at 08:39:50 PM EST
In Sven's Paris diary Fran asked, regarding ET goals:
What would a good alternative, to the current system, look like? and, later:So what and where should our society move towards? Once this is defined, we can start brainstorming how this can be done.
I responded, in part with the following assertion:
The core of our current problems lies in the capture of governmental power by economic elites. The style and method might vary from country to country, but that is the essence of the problem.
It follows that the solution is to break the money link between economic power and political governance any way we can!
I identified spreading awareness of this problem and goal as The first step and then noted:
The second step is to publicly critique what currently passes for the official economic theory. None of the theories commonly taught in universities acceptably explain the functioning of the existing system. There are better approaches available. They are not being pursued because the existing theory has been found to be useful as propaganda for the existing economic elites. This has to be drilled into the popular mind.
To which Fran responded:
What are these better approaches? I think that would be also important to spread - if they know and understand more about these other/better approaches the more they will demand them and also vote for those people who will most likely implement them.
I responded and Fran suggested that response be turned into a diary so others could more easily find it. See below:
Update [2010-9-17 1:39:24 by ARGeezer]: To include diaries by Migeru on Keynes.
Update [2010-9-18 11:58:50 by ARGeezer]: To include a diary by Migeru about and on-line text of works by Thorstein Veblen.
Update [2010-9-18 23:7:49 by ARGeezer]:: To include posts by Bill Mitchell per the recommendation of Bruce McF.
Update [2010-9-19 15:16:58 by ARGeezer]:: To add Propaganda by Bernays.
Update [2010-9-22 0:27:18 by ARGeezer]::: To add THE LOST TRADITION OF BIBLICAL DEBT CANCELLATIONS by Michael Hudson and Our Best Economic Minds are Failing Us by Michael Hirsh.
Update [2010-12-30 10:16:20 by ARGeezer]: To include links to Rob Parenteau and 3 Sector Financial Balance analysis.
The problem for the general reader is providing them with an understanding of Mainstream Economics in all of its current bizarreness so that they can see the problems and appreciate the alternatives. Robert Heilbroner's The Worldy Philosophers is a readable and informative, if inadequate, introduction, but it does introduce the reader to the major economists and give some idea of their contributions. Perhaps someone can suggest a better but comparably readable introduction.
Much of the nature of contemporary economics derives from the circumstances of its creation. The best single work I know on this subject is Karl Polanyi's The Great Transformation which I am currently re-reading. It was written in 1944 and is simultaneously an economic history and a history of the economic thought of Europe from the Renaissance to 1944 focusing strongly on England, site of the first industrial revolution and the first social transformation from a traditional society to a market driven industrial society. Polanyi emphasizes the inherent nature of economies being embedded in the social structure of the society in which they operate and he illuminates the history of economic thought by illustrating the social and economic history that was the context for the development of that thought. (I find on Amazon that The Worldy Philosophers and The Great Transformation are frequently sold together. I cannot think of a better pair of books as an introduction to this subject.)
Polanyi has been studiously ignored by those in the academic mainstream of economics and political science, though he is well respected by sociologists and anthropologists, though many would quibble about the dated nature of the work he cites. I found him to be eminently readable, though my re-reading is going slowly. This is because I have learned so much more about economics and economic history since my first reading that I am pausing after each page or paragraph to let another of his continuing profound insights sink in and find its place amongst all I have subsequently learned. (I am considering a diary on Polanyi, the classical economists and the historical and social context of their work.)
Steve Keen is the most interesting contemporary economist of whom I know. His site, Steve Keen's Debtwatch, has a enormous amounts of information, including Power Point presentations of his Introduction to Economic Thought course and other courses. He is producing work that is a distinct improvement over the existing version of Mainstream Economics. Amazingly, (to a non-economist), mainstream economics does not include time in their calculations, which are based on equilibrium analysis. So, if it is necessary to consider developments over a period of time, the approach is to do an equilibrium analysis of conditions at two different times. The only economic model for which research monies are provided in the USA is the Dynamic Stochastic General Equilibrium Model, or DSGE, which, despite the term "Dynamic" in the title, is an equilibrium model which analyzes all economic decisions as though they are made by a single rational actor. (Four trenchant critiques of the DSGE approach found here.) Keen, on the other hand, has developed models that are based on ordinary differential equations which include time as a variable. Further, his models include multiple sectors, such as a labor sector, a banking sector and a business sector. Keen also published a book, Debunking Economics, which is available for $10.00 in electronic form at his site, though it might be preferable not to start with the debunking before having a rudimentary idea of what is being debunked.
Some of my diaries on Henry George and Neo-Classical Economics, on Steve Keen and his work, and on other critiques of Mainstream Economics might be of some use to one who has not previously delved into what is, in its current form, truly "The Dismal Science."
Another single work which puts the development of economic thought into perspective, but which goes into much more detail is Nitzan and Bichler's Capital as Power. They come out of a Neo-Marxist background but base this work on the insights of Thorsten Veblen and Lewis Mumford. Mumford describes the "social machine" that has existed since the first river based civilizations and that has enabled rulers to organize the population for production. Veblin was a sociologist who had basic insights into social and economic organization in the USA, including The Theory of the Leisure Class, The Theory of Business Enterprise and Absentee Ownership and Business Enterprise in Recent Times. Veblen stresses the role of "strategic sabotage" both of your own company's production and that of competitors so as to maximize profits and the agency problem that arises when businesses are not run by their owners, among other factors. Capital as Power is a recent work and brings the reader up to the present while also surveying the history of economic thought as it pertains to the reorganization of society in terms of the requirements of capital.
Links to some of my diaries, (with highly informative comment threads):
Mainstream Economics vs. the rest of the world
Henry George and Neo-Classical Economics
Steve Keen's Dynamic Model of the Economy
The Con of the Decade, (conservatively)
Systemic Fear, Modern Finance and the Future of Capitalism
A link to recent critiques of Mainstream Economics by four eminent economists.
An Aug 16, '10 Salon Comment: Bank Profits a sign of economic sickness, not health
A list of archived comments on ET containing references to Rob Parteneau and 3 Sector Financial Balance analysis is here , but the link on his name above provides both parts of his long article in New Economic Perspectives.
Links to short articles that illuminate important aspects of economics:
THE GREAT SLUMP OF 1930 John Maynard Keynes. 1931 The basics of macro economics, debt-deflation and the roles of consumer and capital investment and spending explained almost totally non mathematically in three pages! The clearest simple explanation I have found.
Keynes, Recovered Jonathan Kirshner reviews three works about Keynes in Boston Review.
John M. Keynes: Proposal for an International Currency Union The description of Keynes' proposal is 5 pages long. Also attached are several papers discussing alternative approaches to international currency clearing arrangements.
The J.M. Keynes Homepage at The New School A concise survey of Keynes' life and work with a major bibliography and link fest at the end.
An Interview With Paul Samuelson The Atlantic Wednesday, September 15, 2010 The creator of modern US economics explains why economists do that vodoo that they do so well.
Commercial Banks as Creators of "Money" James Tobin. Legendary US Economist from Yale. Very readable treatment of money, though written before the rise of the Shadow Banking System. (Systematically miss-writes "Widow's Curse" as "Widow's Cruse" :-) ) pdf
The Debt-Deflation Theory of Great Depressions Irving Fisher. (14 pages + charts and graphs) From the St. Louis Fed site. A very readable classic that is particularly relevant today. (pdf)
The Financial Instability Hypothesis Hyman Minsky Seven pages. (pdf)
Finance and Economic Breakdown: modeling Minsky's financial instability hypothesis Steve Keen Thirty pages. Read the Minsky paper first. Keen's discussion of the background is more demanding on those unfamiliar with 20th century economic thought than is his presentation of his modeling.
ECONOMICS IS NOT NATURAL SCIENCE by Douglass Rushkoff. About 12 screens. A reprise of World Economic History over the last 1000 years. The problem: Plus ça change, plus c'est la même chose. George Dyson's review at the top is also worthwhile.
Our Best Economic Minds are Failing Us by Michael Hirsh. A summary of many of the critiques of the current state of economics that is especially notable in that it appeared in Newsweek. The article is dated 9-16-'10. It is also a summary of a new book by the author.
Related online books
Propaganda 1928 Edward Bernays. From the book cover: "The nephew of Sigmund Freud, Edward Bernays (1891-1995) pioneered the scientific technique of shaping and manipulating public opinion, which he called "engineering of consent." During WW I he was an integral part -- along with Walter Lippman -- of the US Committee on Public Information (CPI), a powerful propaganda machine that advertised and sold the war to the American People as one that would "Make the World Safe for Democracy." A foundational work.
Neo-classical Economics as a Stratagem against Henry George by Mason Gaffney 137 pages of text plus 20 pages of references and bibliography. (pdf) Very readable history of economic thought from Henry George to the mid '80s. NCE deconstructed.
THE LOST TRADITION OF BIBLICAL DEBT CANCELLATIONS 1993. 86pp, text - 45pp, Appendices, Glossary and Bibliography - 41pp Michael Hudson. This paper is based on research done as a Research Fellow at Harvard University's Peabody Museum in Babylonian economic history, and was originally published by the Henry George School of Social Science. Most bible scholars do not know that the passages in the Pentatuch and elsewhere in the scriptures were a vital, living part of these religions and cultures, in some cases up to less than a few hundred years ago. Classical and neo-classical economics, if not science, triumphs over scripture!
The Economic Consequences of the Peace, 1919. John Maynard Keynes brilliant analysis that reads like the history of the 15 years that followed.
THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY J.M. Keynes' classic in online full text.
The Theory of Business Enterprise 1904 by Thorstein Veblen. Full on-line text of Veblin's little known classic.
The Engineers and the Price System, 1921 Thorstein Veblen. A collection of articles published in Dial magazine in 1919 discussing the role of sabotage, inefficiency, salesman ship public tolerance and the current and possible future role of engineers vis a vis the Captains of Industry in an absentee owner economy, all in the light of the ongoing Soviet Revolution in Russia.
Links to diaries and comments on economics by Migeru
Keynes and the monetarization of economics***
Any brave soul daunted by digging in to Keynes' General Theory will be comforted by the first few words of this diary by Migeru: "I am trying to read Keynes' General Theory and I find it rather hard because it is a technical book written for professional economists..." :-) Yes indeed! But Mig points out some of the stumbling blocks along the way and lights our paths.
Keen on Keynes Amusing and insightful
Pulling Keynes' teeth "The State of Long-Term Expectation" Long quote and interesting discussion.
The Credit Bubble theory of the Business Cycle (I: Veblen) Why Veblen comes up in so many diaries and comments. Once again check the comment thread.
Links to diaries on economics by Bill Mitchel, courtesy of Bruce McF:
Billy Blog -- alternative economic thinking. Home Page Content changes frequently.
Archive for the ‘Debriefing 101’ Category The antidote for Mainstream Economic Nonsense from a Modern Monetary Theory, MMT, Perspective. Updated regularly.
Fiscal sustainability 101 – Part 1 Not what the deficit hawks say. Having full employment by doing socially useful things?
Fiscal sustainability 101 – Part 2 Forget Arbitrary Debt/GDP ratios. Many economists' minds may be on a Gold Standard, but countries aren't. Foreign creditors are not going to provoke a calamity.
What Causes Mass Unemployment Insufficient government spending when the private sector stops spending?
Will we really pay higher interest rates? In which it is revealed that all of the arguments for "fiscal constraint" are neo-liberal rhetoric designed to prevent the government from engaging in social spending because the neo-liberals don't like it.