Recent efforts by conservatives in the US have reopened (again!) the issue of the purpose of education. In keeping with the tilt toward authoritarianism and conservatism over the past 40 years the push has been towards more structured education. This is a sharp change from the development of "liberal" education started by John Dewey at the beginning of the 20th Century. I examine both schools of thought below.

There are two views as to the function of education. Let's call them "knowledge" vs "process".

I wrote awhile back about how this crisis was going to make big firms even bigger and reduce competition even more. This is the first time that I can remember where the government actively promoted business consolidation.

Others have started to notice as well, but not enough to change the course of action being undertaken in the "bailout". Just to show that others have understood what is happening (even if the pols don't or pretend they don't) here's a snippet from an overheard internal phone conference at Chase by a NY Times reporter.

This is the term on Wall Street when the market goes up after a sharp drop only to continue downward again.  It is assumed that only suckers will buy into a falling market while it is still on its way down. Unfortunately knowing when a market has hit bottom is impossible to tell, although there are any number of "experts" willing to take your money and tell you when.

I wrote a few weeks ago about why capitalism is becoming "obsolete": Capitalism must die!

I see that my projections were a bit premature. What is happening right now is the development of a post capitalist system. We are still groping for a name for this new arrangement: socialist capitalism, corporatism, etc.

The essence is that governments now actively promote the creations of monopolies or oligopolies, rather than opposing them. In addition the government has made explicit its promise that these monopolies will be protected from failure. Even when firms are "nationalized" this is just a step on the way to their being relaunched as for-profit firms once again. These are pseudo-private firms. The profits go to the select few while the losses are absorbed by the public.

There are many who are saying that this collapse "proves" that the US capitalist model is obsolete, or based upon false ideas.

I claim that it is just the reverse. What the US has had since the 1870's is syndicalism - a partnership between big business and government. In an earlier time people weren't afraid to call it what it is.

"The business of America is business."   --  Calvin Coolidge  

"...because for years I thought what was good for the country was good for General Motors and vice versa". -- Charles Erwin Wilson, GM president (1953)

Analogies are never perfect, but here's one using horse racing. Don't expect a perfect correspondence to the banking situation, but I think it is close enough for government work.

Joe goes to the track and bets $2 on a horse.

As part of the ongoing debate about global warming there have been various studies which have tried to cast this as a problem in economics. The most comprehensive of these was created by the British Economist Nicholas Stern. The full report is available here along with various summaries.

For our purposes this is all that is required:

Using the results from formal economic models, the Review estimates that if we don't act, the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more.

Promoted by afew

While people claim that they abhor prejudice they seem to find nothing wrong with imposing cultural behaviors and norms on their children. Implicit in this is the belief that there is something special about their culture which is to be preferred in the education of their children. Then they complain when others stereotype them.

Why should a child have to adopt the rituals and conventions of their parents? Instead of being required to practice these rites why shouldn't they be free to chose their own? Why should I learn the music of my country if I prefer that of another time and place?

The purpose of this essay is to explore how the techniques used in economic analysis compare to those used in other disciplines. As in other social sciences, data in economics  is observational, rather than being obtained from controlled experiments. Analyzing such data can be cast as an information processing problem.

In this essay, I will draw a parallel between the two disciplines. The fundamental assumption is that any finite data set can be considered a "message" or "signal", embedded in noise. The noise in this case is additional information which is not relevant to the hypothesis under consideration. Extracting information from this "noise" then becomes analogous to techniques used in signal processing.

People like me often rail against the inefficient and corrupt US health care system. I'll remind you of some of the worst problems.

1. About 47 million or 16% of the population has no health insurance.
   
2. Drug companies promote me-too and lifestyle drugs rather than doing basic research on life saving treatments.
   
3. Drug companies use the patent system to charge monopolist prices for life and death drugs.
   
4. Private insurance companies siphon off 30% of the money they get in premiums.
   
5. Specialist doctors charge what they wish, drawing doctors away from family medicine where payments are limited by insurance contracts.
   
6. Too many hi-tech medical procedures are pushed when cheaper alternatives are available.
   
7. Too much money is spent on useless end-of-life care and too little on preventive care.
   

The core principle of economics is the law of supply and demand. Raise the price and demand will go down and vice versa. Common experience tends to confirm this, although with a fudge factor called "elasticity". If the demand doesn't go down as much as one would expect then it is said that demand is inelastic.

As the world enters into a period of fossil fuel limits, and as demand increases due to developing countries and overall population growth, discussions of using pricing to control demand have become popular.

This is all part of the "magic of the market" and "invisible hand" that has been standard fare since the rise of mercantilism in the 16th and 17th Centuries. The sensible economists are pushing for an increase in the cost of fuel through distinctly non-free market mechanisms. The most common idea being some sort of new tax plan.

This story gets to the heart of the economic basis of our society - that we are all "rational" consumers:

An Update on Gardasil: Marketing Trumps Science - Billions Spent; Risks Remain Unknown

Now that the world is going through one of its periodic economic convulsions there is increased activity among the chattering classes as to what went wrong (this time). First I'll lay out the types of criticism of the situation. Second I'll explain what "capitalism" is. Last I'll go into why capitalism needs to be replaced and how to design the new economic system. If you aren't interested in the definitions, skip to the last part.

There is a nice Wikipedia article about "comparative advantage". It even cites one of the newest works by Economist Ha-Joon Chang where he argues that this idea worked adversely for developing countries.

I've decided, after seeing a lot of shoddy and self-serving economic research being passed off as science that we need to take a new approach. The era of the MBA and the bottom line has to come to an end.

The golden rule does not state "do unto others...as long as it is cost effective".

Promoted by afew

I'm confused about the present meltdown, the blame is focused on risky loans and those who facilitated them, but I think the problem lies elsewhere.

In the old days, if you wanted to borrow money you went to the bank, and if your prospects were good enough, and you had adequate collateral, they lent you the money. The money they lent you was obtained from depositors. The bank made money by paying interest to the depositors which was less than they charged to borrowers. When everything worked right, everyone came out ahead, and the banker was ensured a steady income. Banks were low growth businesses. Many were even mutual savings associations which meant they were owned by their depositors.

The myth of Ricardo is that each country does what it is best at and then trades with its neighbors. Each produces at the lowest cost, since it is an expert, and everyone benefits. This may have been true in some limited areas when countries were at similar levels of development so that labor cost difference were due to specialization and not to the general standard of living.

Factor in natural resource and climate benefits and it makes for a good theory. Recent developments have led to questioning the model. So the question is not should a society be self-sufficient, but can it?

Diary rescue from July 18 by afew

John Edwards has spoken frequently of the "Two Americas" so what I'm about to say isn't totally original. His focus has been on how much the "haves" have and how little the rest of us don't.

I want to focus on what the haves have that the rest of us don't.

There was a comment on my Grump diary about the EU Constitution, given my poor opinion of European leaders, so I thought I write one (as requested).

OK, I'm not actually going to write one, just highlight the problems (as if you all didn't know already).

Perhaps it's the hot weather, but I think the meltdown in the financial markets has something to do with it. I've been involved long enough that I've lived through several of these ups and downs before, but this time seems different.

In no particular order, my complaints:

One of the stories of our age has been that there was a cultural revolution which started during the Nixon era and reached its culmination with Reagan. There are three parts to this view of history.

1. Conservative "values" became the majority viewpoint in the nation
   
2. Evangelical Christian views on social issues were made into policy
   
3. Libertarian style economic policies became the norm

The press and many politicians have certainly acted as if these were widely accepted ideas. Recently, as the age of Rove winds down, people have been discussing the fall in the power of the GOP and implicitly equating its political power with the conservative themes listed above.