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The disaster of axiomatic macroeconomic thinking

by Cyrille Tue Feb 26th, 2013 at 06:17:41 AM EST

On Friday (22nd February), Moody's downgraded the UK's credit rating by a notch. That is actually a non-event. Rating agencies clearly play to an ideological agenda (for instance, they consistently give a higher rating to a private company than to a state for a similar level of risk), and it's hard to see in what circumstances the UK, a country with its own central bank emitting fiat money, could default.

What makes it somewhat more interesting is that UK's chancellor, George Osborne, reacted that way :

"Tonight we have a stark reminder of the debt problems facing our country - and the clearest possible warning to anyone who thinks we can run away from dealing with those problems," he said.

"Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it.
"We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs."
[...]
"As the rating agency says, Britain faces huge challenges at home from the debts built up over many, many years, and it is made no easier by the very weak economic situation in Europe.
"Crucially for families and businesses, they say that 'the UK's creditworthiness remains extremely high' thanks in part to a 'strong track record of fiscal consolidation' and our 'political will'.
[...]
"They also make it absolutely clear that they could downgrade the UK's credit rating further in the event of 'reduced political commitment to fiscal consolidation'.
"We are not going to run away from our problems, we are going to overcome them."

front-paged by afew


Now, this got some reactions. Paul Krugman, Mark Thoma, Simon Wren-Lewis(and many others I'm sure) quickly wrote about this, and made very good, and damning, points. What I would like to focus on is the fact that this could even be said, the assumptions (spoken or unspoken) that Osborne's statement carried with it. Incredibly, they are by many not seen as assumptions, or points of contention, or even hard-acquired knowledge. Rather, they are there as undisputable facts of life that everyone knows. I will list the ones that come to me, but will surely miss some that you may want to add.

To make the point clearer, I should probably add something that not Osborne but Moody's said -the main (official at least. The main reasons may be ideology and wanting to trot out the brand name) reasons behind the downgrade.

"The main driver underpinning Moody's decision to downgrade the UK's government bond rating to AA1 is the increasing clarity that, despite considerable structural economic strengths, the UK's economic growth will remain sluggish over the next few years due to the anticipated slow growth of the global economy and the drag on the UK economy from the ongoing domestic public and private sector deleveraging process," the agency said.
"The country's current economic recovery has already proven to be significantly slower - and believes that it will likely remain so - compared with the recovery observed after previous recessions, such as those of the 1970s, early 1980s and early 1990s."

To that, Osborne claims that this is just the signal that more austerity is needed in order to meet a harder than expected fiscal target. Implied here are :

Assumption 1 The state of the economy is entirely exogenous to the Government

OK, actually I believe that Osborne would be prepared to say that the Government can make it worse by pursuing left-wing targets, but that's one way traffic, nothing can be done to make it better, and no right-wing target could make it worse.

This is an extraordinary claim, and I would really want a stronger adjective.
The Government is the biggest employer in the country by some ridiculous distance. Surely Osborne would reckon that a private company could do some good -else why even try to attract such companies, as many policies directly propose to do. Why then would an entity well over ten times bigger than the biggest local private entity not be able to? Unless, of course, it choses to.

However, even if the Government was not a huge employer (and who knows, at the rate that teachers and NHS doctors, it may end up being the case), it would still be a mind-boggling claim. The Government, unlike any private agent (again,officially at least) has executive power, and is backed by a parliement that has legislative power. It is in a unique position to have an impact on the economy.
And after almost three years in power, that saw the move from an appreciable recovery, possibly the most impressive one in the OECD, transformed into an intermittence of recession and marasm, it is now hard to attribute the recent worsening to Labour policies. Yet, in the face of a worse than forecast economy, Osborne sees that as the call for more austerity :


Assumption 2 The main target of the Government should always be to balance the books

Here I don't intend to debate Modern Monetary Theory -not that it is an uninteresting topic, merely that it would be an unnecessary distraction. You don't even need the MMT framework to see how odd that assumption is.
Actually, I believe that even in Schwabian housewife economics, it should be seen as absurd. Forget the macro effects for a moment (not for too long, though) -would you say that the main target of parents should always be to balance the books ? That when one of them becomes unemployed, they should strive not to add a penny in debt, should that mean having one of their kids starve and the others drop out of school to save some cash?
And as we know, the Government is not a household. Much of its spending comes back as revenue from increased economic activity -indeed, in times like these of persistent depression, probably MORE comes back than was spent, in particular thanks to the avoidance of long-term loss of potential.

We expect -we need many things from a Government. This, in turn, will require some spending. It will also require some taxation. Those two should, in the very long run, probably not average a neat balance, but not something hugely different either. Still, spending and taxation are at most a means to goals, and even then, the primary drivers for fixing them certainly are not a year over year balancing act.

Yet here we are, served with notice that despite considerable structural economic strengths (yes, I wondered, too. Maybe the reference point is not too challenging. Anyway, it's their statement) the country is going nowhere fast, Osborne's reaction is instantly "we'll need more efforts to balance the books".

I'm sure you noticed my dropping the « year on year » well...


Assumption 3 : The only term is the short term

OK, I'm not naïve. Correction, I am easily naïve, but I also pay sufficient attention to often be cynical.

I realise that our society will be short-term biased. In the private sector, many managers change roles every very few years, but even that is geological term compared to how their bonuses are calculated. In politics, it seems that it's now pure PR in a horse-racing reporting of a non-stop electoral campaign.

I realise that Osborne is a professional politician (if the editing policy allows me to use such rude words), hoping to trip Cameron and become alpha Gorilla sometime in the future. However, he is also the Chancellor of a country going through the biggest economic crisis in seventy years (eighty if you don't count the war). Roosevelt was also a politician, after all.

Even if you want to aim at balancing the books, it is blatantly insane to add "within the legislature ". There is no reason why the legislature calendar should be synchronised to the economic one. On the other hand, since some infrastructure works will have to be done over the next 20 years, a good book-balancer would make use of the lowest rates -and costs- ever to get better quality for less money. However ...

Assumption 4 : there is no such thing as a business cycle

Yes, I know, that's odd for people who often sprout out conclusions straight from Real Business Cycle theory. Yet, when you keep bragging about having reduced the deficit by a quarter (and got a record number of jobs -I'd like to see the source for that one, but of course if you start counting the minute after everyone got laid off in a panic, for half of them to ber e-hired as the panic subsides, it's not exactly a stellar achievement), while taking as your starting point 2009/10, with a hugely inflated deficit due to the program of bank bailouts, you are either immensely disingenuous, or you have to believe that any movement in the balance is permanent.

Apart from that one point, over the legislature, the debt had been brought to a point where servicing the interest was at the lowest point in 110 years. Not that it should matter all that much when the UK has its own central bank, but in any case it's hard from that fact to derive the conclusion that, in Osborne's words, "As the rating agency says, Britain faces huge challenges at home from the debts built up over many, many years"

He also adds that: "they say that 'the UK's creditworthiness remains extremely high' thanks in part to a 'strong track record of fiscal consolidation' and our 'political will'. [...] They also make it absolutely clear that they could downgrade the UK's credit rating further in the event of 'reduced political commitment to fiscal consolidation'."

Absent from Moody's statement (yet implied by Osborne's reaction) was the word "immediate". The UK debt went from over 260% of GDP in 1820 to under 30% in 1913, then from 180% in 1946 to around 25% in the early 1990s. That's the aforementioned track record -note how it did not happen in a single legislature. As for the political will, well, that's just that, unlike in the States, none of the main parties has shown to be intent on threatening to default to score petty political points. All it needed for the UK was to say that they would pay and, with their own central bank, nobody could prevent them from doing so. And nobody was asking for immediate payment either.

Assumption 5: Interest rates are low only because of AusterityTM

At this stage, I wish I had saved the link to Krugman's post with the evolution of the borrowing rates of the UK, USA and Japan in parallel.
The clear message was that what mattered was having your own central bank. Actually, the UK's rates were (and are) the highest of the three, which goes against Osborne's implied claim -although one should be careful of the reason for that. Long term rates are simply projections of short-term ones and it may be that investors felt that the Band of England would be more likely to be pressurised into raising rates than the others.

Still, claiming that the rates are a gift from AusterityTM is a laughable proposition -but a very, very frequently heard one among, for instance, readers of the Telegraph or the Economist.

All those assumptions, that are trotted out as undisputable -pretty much axiomatic- are blatantly wrong. Yet Osborne can say that and not be instantly laughed off the stage.


I understand, as Krugman bluntly explains, that Osborne cannot say otherwise without losing his claim to be qualified to do anything. Actually, even if Austerity was the right course of action, I am not entirely clear as to why Osborne, who does not seem to understand anything about economics and finance, would be qualified either, but I digress.

However, it is an abominable course of action. This person, who lectures his entire country and beyond about responsibility and taking personal hits for a greater cause, is sending millions into destitution, poverty and even death for the sake of a gamble to maybe boost his personal neurotic ambitions.

Might may be de facto right. But over and above, used that way, might is wrong.

Display:
OK, I'm really struggling with the formatting. I'll do my best to improve this.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Feb 25th, 2013 at 10:53:54 AM EST
You're aware that you can use maths notation here, right?
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 10:58:59 AM EST
[ Parent ]
I'm not even sure what you mean. Sorry...

If you refer to my not just putting 1, 2, 3, I initially did and was afraid that someone reading too quickly might think that those statements were intended to be true. So I added assumption.
If it's something else, please explain.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Feb 25th, 2013 at 11:08:43 AM EST
[ Parent ]
I mean this. \[\sum_{i=0}^{\infty} x_i\]
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 11:19:50 AM EST
[ Parent ]
That way lies madness...

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Feb 25th, 2013 at 11:22:23 AM EST
[ Parent ]
Yes. Yes it does.
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 11:23:09 AM EST
[ Parent ]
Bwa-ha-ha?


-----
sapere aude
by Number 6 on Wed Feb 27th, 2013 at 07:55:20 AM EST
[ Parent ]
OK -though I would need to learn how to do it. But was there anywhere that it would have made sense to do so?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Mon Feb 25th, 2013 at 11:30:00 AM EST
[ Parent ]
I don't know, but it occurs to me that you're one of the people who might benefit.
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 11:32:01 AM EST
[ Parent ]
If it doesn't have formulas in it, it's not serious economics.....
by gk (g k quattro due due sette "at" gmail.com) on Mon Feb 25th, 2013 at 02:22:57 PM EST
[ Parent ]
Assumption #6: The purpose of Economics is to analyze and explain the economy.

Clearly the true purpose of the current 'Mainstream' version of Economics is to disguise the abuse of power by the wealthy few to facilitate their ongoing looting of the society by anesthetizing and narcotizing the general population to the ongoing parasitism that is gnawing now on vital organs of the body politic and social. Any dissenting opinions are characterized as 'crazy' and 'heretical' and it is not even possible to frame a coherent analysis of the problems in the terms of the existing formulation of 'Economics'.  

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 25th, 2013 at 11:20:33 AM EST
Disguise and/or justify the abuse of power.
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 11:29:25 AM EST
[ Parent ]
Yup, the discourse is so disconnected from reality that I don't see any way to get it to reconnect.
by Colman (colman at eurotrib.com) on Mon Feb 25th, 2013 at 11:30:57 AM EST
Brad deLong: Economics in Crisis (Apr. 29, 2011)

The most interesting moment at a recent conference held in Bretton Woods, New Hampshire - site of the 1945 conference that created today's global economic architecture - came when Financial Times columnist Martin Wolf quizzed former United States Treasury Secretary Larry Summers, President Barack Obama's ex-assistant for economic policy. "[Doesn't] what has happened in the past few years," Wolf asked, "simply suggest that [academic] economists did not understand what was going on?"

Here is the most interesting part of Summers' long answer: "There is a lot in [Walter] Bagehot that is about the crisis we just went through. There is more in [Hyman] Minsky, and perhaps more still in [Charles] Kindleberger." That may sound obscure to a non-economist, but it was a devastating indictment.

...

For Summers, the problem is that there is so much that is "distracting, confusing, and problem-denying in...the first year course in most PhD programs." As a result, even though "economics knows a fair amount," it "has forgotten a fair amount that is relevant, and it has been distracted by an enormous amount."



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Mon Feb 25th, 2013 at 11:52:32 AM EST
[ Parent ]
"economics knows a fair amount," it "has forgotten a fair amount that is relevant, and it has been distracted by an enormous amount."

How is this not an acknowledgement of intellectual bankruptcy?


Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Mon Feb 25th, 2013 at 12:34:39 PM EST
[ Parent ]
It is often noted that "Money is Power". In our society the relationship between money and power has, effectively, been sacralized. As anthropologist Mary Douglass noted in How Institutions Think the closer an investigator got to the most holy beliefs in any culture the more evasive and defensive their informants became. It is not that they are taught how to be evasive and defensive. They do so 'naturally'.

Preferment, honors and advancement in one's profession are awarded by those with instinctive ties to the existing order, which is based on great individual wealth. If a US economist questions the tenants of NCE or, worse, undermine them they had best forget tenure at major universities or employment by the Federal Reserve. This is a very powerful disincentive. It is very much like the effects of acknowledging being an atheist has on someone with a Doctorate in Divinity becoming a minister of a denominational congregation. It is not a jest when economists speak of to which church any given economist belongs.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 25th, 2013 at 01:15:08 PM EST
[ Parent ]
OK, then we're talking intellectual and moral bankruptcy.

(Works for me.)

;-)

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Mon Feb 25th, 2013 at 01:30:37 PM EST
[ Parent ]
If there was ever a 'banca' to 'rupta'. Moralies are just the 'mores' of the various people. In our case they have a strong, unacknowledged differentiation along the lines of total wealth.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 25th, 2013 at 02:31:09 PM EST
[ Parent ]
Well, this is acknowledged sometimes, as with Junker: "When it is serious you have to lie." That this did not result in serious consequences for him just shows how widely, if tacitly, accepted such behavior is for the wealthy and those who represent them.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Feb 25th, 2013 at 02:33:38 PM EST
[ Parent ]
Who Could Have Predicted?

FT.com: Voters expect Osborne to stay his course (Janan Ganesh, February 25, 2013)

The reality is that at some indistinct stage in this parliament voters, in a very British way, resigned themselves to economic torpor for the foreseeable future. The regular focus groups that are conducted by Downing Street paint a picture of an electorate that is bleak about the economy, yes, but so bleak that they don't believe things would much improve under an alternative policy.
Mission accomplished, then?
The clamour for Mr Osborne to adopt greater or lesser degrees of austerity is essentially an elite conversation; the public are busy hunkering down for years of slow growth and squeezed living standards that they regard as more or less inevitable. They don't like it, much less do they approve of the government, but they feel none of the "do-somethingism" that exercises the political classes. The economy strikes voters as lousy but not especially fixable - and there is a world of political difference between the two.


I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Tue Feb 26th, 2013 at 01:36:06 AM EST
That is terrifying. What could then be the impetus to break the bind?
What could then stop the powerful from milking the 99% into their graves?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Tue Feb 26th, 2013 at 05:55:38 AM EST
[ Parent ]
You say that like it's a bad thing?
by Colman (colman at eurotrib.com) on Tue Feb 26th, 2013 at 06:36:12 AM EST
[ Parent ]


Austerity can only be implemented in the shadow of a concentration camp.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 26th, 2013 at 07:09:32 AM EST
[ Parent ]
That's nothing Barry's drones can't fix.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Tue Feb 26th, 2013 at 07:11:33 AM EST
[ Parent ]
Mission accomplished.
by Colman (colman at eurotrib.com) on Tue Feb 26th, 2013 at 06:35:46 AM EST
[ Parent ]
This person, who lectures his entire country and beyond about responsibility and taking personal hits for a greater cause, is sending millions into destitution, poverty and even death for the sake of a gamble to maybe boost his personal neurotic ambitions.

Well - it's more about the destitution, poverty and death of millions being irrelevant to the profit of the small minority of rich lunatics who put Osborne into the job.

The critical mistake is to assume that Osborne has any interest in the welfare of most of the population.

Like most of the Tories, he doesn't. He sees the poor - which includes most of us - as powerless failures who can be lied to with impunity, abused for cynical enjoyment, and exploited for profit and self-aggrandisement.

The democratic problem is making Western populations understand that this is how their governments work.

It's difficult, because it's hard for most people to imagine that anyone can be this cynical, and even harder to imagine that our former flawed but functional social democracies have become Hobbesian nightmares.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Feb 26th, 2013 at 07:41:21 AM EST
"The critical mistake is to assume that Osborne has any interest in the welfare of most of the population. "

Oh, I realise that. Which is the sense of my conclusion. Might may be de facto right, but it is just wrong.
I know, that's just a moral statement and therefore carries little weight. But the start of any fightback to the current popular apathy should probably be to make it clear that Osborne (and Merkel) are destroying an entire generation for petty personal gains.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Tue Feb 26th, 2013 at 07:48:18 AM EST
[ Parent ]
Well - as I said the issue is more that voters still have an expectation that right-wing governments are still fundamentally on their side, but misguided.

Most of the economic posts on ET for the last few years have assumed this.

I think it's more realistic to assume that this isn't true, and hasn't been true since at least the middle of the 90s - much earlier in some countries.

In fact social democracy was a short Wiemar-esque interlude between the usual periods of insane imperialism and capitalist exploitation that dominated the last few centuries of the old millennium.

It's not a given, it's not How Things Are, and it doesn't stay social democracy for long - unless there are political, social, and financial checks and balances in place to keep it that way.

So the way to start a push back isn't to tell people that the government are mishandling the economy, but to explain to them that right and centre-right governments are invariably corrupt, dishonest, and fundamentally abusive, with an adversarial relationship with most of the population.

It's the adversarial relationship that gives it away. Currently in the UK people are still in denial about it, and about how nasty that relationship has the potential to become.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Feb 26th, 2013 at 09:50:06 AM EST
[ Parent ]
Social democracy was based partially on high-paying low-skill jobs that existed in the West for about 30 year after WWII.

Spot on about adversarial.

(Side note: Should we stop buying anything from anything with shareholders?)


-----
sapere aude

by Number 6 on Wed Feb 27th, 2013 at 07:59:37 AM EST
[ Parent ]
The Corruption of Economics

    In time that happy glow of mutuality turned to ashes. After JFK, with his influential economist Walter Heller, the flame burned low; later leaders stumbled in the dark. They relied too simple-mindedly on demand management through fiscal and monetary policy, carrying them well beyond their power to stimulate supply. Thus they lurched into Stagflation: double-digit inflation and recession conjoined. They blamed the war, then the Arabs. They scolded the public, and they called for sacrifices, as leaders always do when they lack ideas. "You must mature and face the facts of life," they lectured. "There is no way to stop inflation except unemployment. Whichever evil you choose, don't blame us, we told you so."[8] Faced with that, the voters exercised a third choice: they retired the patrons of those new dismal scientists.

    Before Keynes there was another great reconciler, Henry George. In 1879, George electrified the world by identifying a cause of the boom/slump cycle, identifying a cause of inadequate demand for labour, and, best of all, following through with a plausible, practicable remedy. Like Keynes and Laffer after him, he turned people on by saying "Forget the bitter trade-offs; we can have it all."

    Henry George came out of a raw, naive new colony, California, as a scrappy marginal journalist. Yet his ideas exploded through the sophisticated metropolitan world as though into a vacuum. His book sales were in the millions. Seven short years after publishing Progress and Poverty in remote California he nearly took over as Mayor of New York City, the financial and intellectual capital of the nation. He thumped also-ran Theodore Roosevelt, and lost to the Tammany candidate (Abram S. Hewitt) only by being counted out (Barker, pp.480-81; Myers, pp.356-58; Miller, p.11). Three more years and he was a major influence in sophisticated Britain. In 1889, incredibly, he became "adviser and field-general in land reform strategy" to the Radical wing of the Liberal Party in Britain, where he was not even a citizen. "It was inevitable that, when (Joseph) Chamberlain bowed out, George should become the Radical philosopher" (Lawrence, pp.105-06). It also happened that when Chamberlain bowed out, the Radical wing became the Liberal Party. It adopted a land-tax plank after 1891 (The "famous Newcastle Programme"), and came to carry George's (muted) policies forward under successive Liberal Governments of Campbell-Bannerman, Asquith, and Lloyd George.

    How could a marginal man come out of nowhere and make such an impact? The economic gurus of the day, even as today, were in a scolding mode, blaming unemployment on faulty character traits and genes, and demanding austerity. They were not intellectually armed to refute him or befuddle his listeners. He had studied the classical economists, and used their tools to dissect the system. Neo-classical economics arose in part to fill the void, to squeeze out such radical notions, and be sure nothing like the Georgist phenomenon could recur.




"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Thu Feb 28th, 2013 at 06:30:26 AM EST
[ Parent ]
Re-reading section I - C at your link reaffirms just why it was so essential for the Tycoons of the late 19th century to spare no expense in creating an alternate economic theory in the terms of which what George was saying would be incomprehensible. J.D. Rockefeller was right in saying that his contributions to what became The University of Chicago were the best investment he ever made. It was the investment, along with that made by Morgan in Columbia, etc. that propagated a form of economics that was completely non-threatening to the wealthy, no matter how feeble its analytic and predictive power. And Gaffney's work is a quarter of a century old.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Feb 28th, 2013 at 04:57:12 PM EST
[ Parent ]
we bin 'ad, mate... that's the long and the short of it.


"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Thu Feb 28th, 2013 at 07:01:00 PM EST
[ Parent ]
Got an political-economy focused on taking wealth from the producers of wealth to give to parasites and an academic discipline built to obscure the nub of the issue, as the Schalkenbach Foundation puts it:

In today's troubled economy, too many people are unemployed, most have to work hard just to make ends meet, and a few monopolize the lion's share of the benefits.


Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Sat Mar 2nd, 2013 at 06:41:02 PM EST
[ Parent ]
Did I say this is some excellent analysis?
I certainly meant to.
So: thank you.

-----
sapere aude
by Number 6 on Thu Feb 28th, 2013 at 05:55:56 AM EST
Well, thanks for saying it! Much appreciated!

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Thu Feb 28th, 2013 at 06:40:37 AM EST
[ Parent ]
The Corruption of Economics

    Later writers have added fretworks, curlicues and arabesques beyond counting, and achieved more isolation from history, and from the ground under their feet, than in Patten's dreams, but all without disturbing the basic strategy arrived at by 1899, tailored to lead to arguments against Henry George.

    To most modern readers, probably George seems too minor a figure to have warranted such an extreme reaction. This impression is a measure of the neo-classicals' success: it is what they sought to make of him. It took a generation, but by 1930 they had succeeded in reducing him in the public mind. In the process of succeeding, however, they emasculated the discipline, impoverished economic thought, muddled the minds of countless students, rationalized free-riding by landowners, took dignity from labor, rationalized chronic unemployment, hobbled us with today's counterproductive tax tangle, marginalized the obvious alternative system of public finance, shattered our sense of community, subverted a rising economic democracy for the benefit of rent-takers, and led us into becoming an increasingly nasty and dangerously divided plutocracy.

    The present paper purports to identify the elements of Neo-Classical Economics (NCE) that were planted there to sap and confound George, and show how they continue to warp, debase and vitiate much of the discipline called economics. Once a paradigm is well-ensconced it becomes a power in itself, a set of reflexes to sort the true and false. Any exception spoils the web of interpretation through which art seeks to make human experience intelligible. Only the young, the brave, the energetic, the sincere and the skeptical can break off such fetters. This work is addressed and dedicated to them.




"We can all be prosperous but we can't all be rich." Ian Welsh
by melo (melometa4(at)gmail.com) on Thu Feb 28th, 2013 at 06:26:02 AM EST


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