Scott Santens, cryptocurrency lover

While I am interested in the general idea of basic income, I have long and strenuously disagreed with basic income guru-evangelist Scott Santens' specifics.

That starts with Santens' bad math. If you can't get the math right (and Scott didn't even come close), you've lost credibility. Especially when you also add some loss-leader angles into your pitch.

Above all, I ABSOLUTELY reject his idea of replacing part of Social Security with basic income.  Beyond that, I reject replacing unemployment benefits, disability income, or other safety net items with basic income. Behind that, I reject his "solutionism" idea of simply throwing out the door any social program that doesn't work as well as he claims (puffery and all) BI would.

Second, I reject his ancillary claims, like the one that BI will magically reduce stress.

Third, I called on Santens, and call on others, to consider guaranteed employment as an alternative to BI.

Fourth, especially given One and Two, and per a long review of a long Boston Review seminar written roundtable, I encourage people to know what is realistic and what is not.

In general, I've already thought his BI ideas too libertarian, and too susceptible to being further manipulated by harder-core libertarians.

And now, and also based in part on an old Tweet of his claiming BI is "neither liberal nor conservative," I'm wondering just how libertarian Scott is himself.

That wonderment is increased by seeing he is a cryptocurrency enthusiast. No, he's more than that.

As with BI, he's a cryptocurrency guru-evangelist. I'd forgotten that I'd seen hints of this before, but this is full blown.

NO. Cryptocurrencies, IMO, are part of libertarian wet dreams for undermining nation-states. Santens idea of a Fed-based crypto would be soundly rejected by real crypto backers, as would his other ideas that seem to try to weld a national cryptocurrency with something like Modern Monetary Theory. I think I just threw up in Scott's mouth. (I've written before about the Maoist cult of MMT.)

Beyond that?

He repeats his BI stress reduction claims about crypto.

Beyond THAT?

What should be the bottom line for any Green.

AND, if we're going to be serious about climate change, we MUST address how much electricity cryptocurrency bitmining expends. (I wouldn't even ask Santens to comment on that; I'm sure he'd give a puff answer that's not true.)

So, Greens like Laura Palmer? Feel free to out BI, but as I told her on Twitter, do NOT tout Santens' version of it when I'm around. It's climate-change unfriendly, at least as it stands now.

==

Side note: If I am understanding him correctly, Douglas Rushkoff thinks cryptocurrency is, well, is, a semi-Ponzi scheme. And I wouldn't argue.

MMT is Maoism, or New Ageism

Given the ferocious feedback last week to Doug Henwood on his Jacobin piece, that header is the bottom line.

And, Michael Hudson, Yves Smith and others? File 13 your love for Modern Monetary Theory.

First, the Maoism part.

Doug's piece is actually very interesting. I didn't know that Hudson is NOT the No. 1 touter of MMT at Missouri-Kansas City, which Henwood calls the Vatican of MMT. I also didn't know that Yves Smith of Naked Capitalism is a fangirl.

In usual Henwood style, Doug can be scathing. (He can be when he's wrong, as well.):

MMTers extend this hubris about the precision and power of policymaking to the realm of interest rates, which they think the central bank is completely in control of and should be kept as close to zero as possible.

That right there is silly. I don't need Doug to tell me that:

Without higher interest rates to compensate for greater default risk or longer maturities, there will simply be no one willing to buy the bonds or issue the loans.

And, one Twitterer, after first mentioning bonds, then switched to securities. That's a bait-and-switch, as securities can include stocks and other private-sector offerings.

The MMTers answer is for the Fed to be the purchaser of last resort.

Gee, isn't that something quite similar to Quantitative Easing? And we've seen the bitching that's caused with even a partial and time-limited enactment of it.

Otherwise, Doug's even better further in, when he criticizes the MMTers for being lackadaisical about inflation.

Then, tying this back to Hudson's thoughts on reserve currencies, Henwood notes other nations don't have the same degree of currency-printing freedom as does the US. There, he's spot on. If, say, South Korea or Thailand tried to actually enact MMT, George Soros would squish them like a bug, just like in 1998.

Henwood then notes that a jobs guarantee program is in no way dependent on MMT. Nor is the somewhat related basic income. In fact, I have yet to see a top basic income touter link it to MMT, though I could be wrong. Indeed, Scott Santens says that a universal jobs guarantee as framed by most MMTers is antithetical to BI.

One last thought, per Henwood: If Stephanie Kelton truly believes that just following MMT will solve climate change, she's either a tremendous idiot or an incredible liar.

See more MMT refudiation here.

And, stuff like this on Twitter is laughable.

MMT is first and foremost just a description of how our monetary system works. So, in order to rein in FIRE it’s good to know how our monetary system works

— Kathryn Cannon (@katiecannon2) February 27, 2019

Geez. Back at you.

No #MMT is not "first and foremost just a description of how our monetary system works." It is not even second or third "just a description of how our monetary system works." We are getting into #Maoist Little Red Book territory, I do think. Bye!

— ATrealDonaldTrump 🚩🌻 (@AFCC_Esq) February 27, 2019

And, that's that.

And now, the New Ageism part.

MMT is basically like the New Age idea of "manifesting," as best as I can tell it. Maybe, it's actually negative manifestation in this case. MMTers seem to believe you can make inflation disappear simply by strong enough mental focus.

This is a hugely dangerous idea, of course. Beyond the dangers within MMT, such ideation is part and parcel of American history.

American exceptionalism? We believe it and proclaim it enough. We're manifesting it and therefore it must be so.

We're not an empire? We believe it, proclaim it and redefine "empire." We're manifesting it and therefore it must be so.

Etc., etc.

Because of that, that's probably EXACTLY why MMT has such an appeal at times.

And, appeal it does. Hudson was recently preaching the New Age Success Gospel of MMT to Jimmy Dore and listeners. Or read Howie at Down with Tyranny drink Kelton's Kool-Aid.

Harry Frankfurt: From "On Bullshit" to just bullshit

Harry Frankfurt's "On Bullshit" and the thinking behind it wasn't bad.

His new book? "On Inequality" sounds like ... bullshit, even if insightful philosopher Massimo Pigliucci seems to think it's as good as the original.

For me? First, recognizing that he rejects traditional liberal concerns about income equality is bad enough. Indeed, the LA Review of Books calls "bullshit" on the title, noting that Frankfurt doesn't really care about what he claims to care about. And, that comes from the world of academia, namely, economic sociology.

Another reviewer, this one also academic, and from the world of public policy, accuses Frankfurt (rightly) of strawmanning.

Second, seeing that he's not replaced that with better thinking, above all, apparently not being concerned about the expansion of structural, systemic job loss, and ideas to address that like basic or guaranteed income, make it even more iffy.

And, third, seeing it positively blurbed by George Will, and even more, by Tyler Cowen? Multiple straws breaking that camel's back.

After noting that his missing the boat on this was a problem, and throwing a responsive elbow to Dan Kaufman, I said this:

You made a statement, and in partial response to saying what I thought was wrong in general with the Frankfurt book, I responded. And, am responding again. As far as Frankfurt missing the boat on systemic, structural, job loss, not only is capitalism not the answer to that, but, it’s actually predicated on that happening.

The fact that this is not part of Frankfurt’s book is NOT irrelevant, contra your last comment. Structural job loss is part of increasing economic inequality. It forces more and more Americans into contract labor, with fewer benefits, lesser job security, etc. Those are all directly part of income inequality, ultimately. And, in for a penny, in for a pound — Frankfurt either knows that, and thus is being intellectually dishonest, in my opinion, or else he doesn’t know that, which further goes to alleged value of the book in other ways, in my opinion.

(Oh, and this issue is affecting more and more white-collar careers, not just blue- and gray-collar ones.)

In turn, that gets me back to some of the people blurbing the book, per the Amazon link. I’m sure all American commenters here know who George Will is. Tyler Cowen? Only one of the most ardently libertarian academic economists in America, at the home base of academic libertarian economists, George Mason University. I suspect his only concern with the book is that Frankfurt isn’t libertarian enough. (And, re structural job losses, Cowen has said, more than once, in various ways, “Deal with it,” in essence.)

Massimo then responded to part of that:

Is it really necessary or helpful to accuse someone you don’t know of intellectual dishonesty, just because you would have written then book differently? Or another book altogether?

Well ….

I then came back with this analogy:

Let's say Paul of Tarsus were writing the book of Romans 2,000 years later, and per his comments on homosexuality, I said he either should know better, per the science, and his ignorance undercuts him, or he does know better, and that silence undercuts him — or even shows he's intellectually dishonest.

Is it philosophically necessary to say that? No. Is it, to the degree book critiques are sociologically "necessary"? Probably. Is it sociologically helpful? I think so indeed.

Best analogy to other book critiquing I could think of on short notice. But, the analogy applies to critiques of books in general. No, I can’t PROVE Frankfurt is being intellectually dishonest. But, like the nonexistence of Russell’s Teapot, it’s a reasonable inference to me.

Or, a non-books analogy from the 2008 Democratic primaries.

Either Barack Obama knew, before Hillary Clinton called him out, that Obamacare needed an individual mandate to work and he was intellectually dishonest, or he really didn't, and thus was arguably too ignorant to be proposing Obamacare.

Beyond that, on his Friday links list last week, among his links to read, Massimo had posted an incredibly funny, yet still savaging, critique of a stupid book, getting back to the books angle.

Beyond THAT, the book is, in some way, about ethics, but that’s only partially so, and that’s the only philosophical portion of that.

Beyond that, it’s about economics, and even more, economics sub specie public policy — and per those blurbers, politics as well as public policy.

I have standing there. I have experience there as a newspaper editor.

And, if I think Harry Frankfurt is being intellectually dishonest, I’m going to call him that. And, it’s damned well helpful, Massimo, if it keeps other people from uncritically reading his book. 

I've said the same, or worse, or differently-veined just as bad in reviewing other books. I accused Civil War historian James McPherson of a rush job to capitalize on the Civil War sesquicentennial with a book on Jeff Davis as military strategist that wasn't worthy of much more than an extended blog post, for example. I've called Garry Wills "mendacious." I just recently crushed Robert Wright's new book on Buddhism, in part accusing him of choosing a clickbait title.

So, if I have empirical evidence, and reasoned induction, or even the social sciences level of scientific abduction, that I have conducted, and I determine an author is intellectually dishonest?

Ultimately, it's necessary to people who want some intellectual honesty from me in blog posts and book reviews. And, to myself.

Things were little better on the second installment of Massimo's review of this mini-book. At least Massimo didn't semi-yell at some of us commenters. But, I also guess that some of my snark was too much.

Dan Kaufman said:

-->

Massimo, don’t feel like you are a lone voice in the wilderness here. I largely agree with you — indeed, I may agree with Frankfurt even more than you do — but I’ve stayed out of the conversation largely because my interest in fantasy fiction has waned significantly, since the genre died in the 1970s.

To which I responded:

I'm cut to the quick!

However, under Massimo's moderation, that wasn't posted, as of several hours later, and I'm assuming it's dead.

Over there. 

But not here.

Business Orwellianism: Human resources

Let's face it, for about 99 percent of businesses in America big enough to have a human resources department, these companies do not care about finding and developing the talent within their employees as a resource of the humans they employ, let alone extending the idea of "talent" beyond skills to emotional and psychological expertise the development of which will be more beneficial to the employee, and thus make her or him more beneficial to the company, but also more "beneficial" to herself or himself as a human being.

Oh, sure, some higher-end corporations look more and more to assess these psychological and emotional talents, but in almost all cases, it's still for a business-exploitative utilitarian angle. And don't get me started on the even more neoliberal phrase of "human capital."

And, frankly, I'm sure this is why most big business CEOs oppose basic income or universal income or guaranteed income ideas. ‡

That said, back to the non-parenthesezed start to that last paragraph.

Small businesses at times have more incentive to develop the employee as a whole person because if you don't, it affects a large chunk of small-office interpersonal dynamics, and if those dynamics were at least OK before, then you're on the spot. That's of course praising with faint damns, which is another issue itself.

But big business doesn't even have this incentive. And resume-scanning programs that are far from AI, which itself can't search for emotional intelligence, can't cut the mustard.

==

‡ I may delve deeper into the woods on any nuanced differences between those three phrases, plus issues about libertarian-driven versions of such ideas, in future blog posts, especially that latter. There's a lot of techies that support some version of this, and many are, IMO, likely somewhere between tech-neoliberals and libertarians.

Thomas Piketty: Allergic to the word "union"

I had read others' reviews of Piketty's "Capital in the Twenty-First Century," and so I knew in advance that he had ignored the possible work of unions in trying to reverse the increase in income inequality in the last 40 years. Indeed, based on those other reviews, especially one by Thomas Frank, I had previously blogged about this issue.

And, now, having gotten a copy of the book from the nearest larger-sized library, I can see that in person.

Basically, it's because he ignores the past role of unions in reducing income inequality.

Piketty could have mentioned the word "union" as early in the book as page 9.

At the bottom of that page, he says:

In the last third of the nineteenth century, wages finally began to increase: the improvement in the purchasing power of workers spread everywhere.

And continuing in that same paragraph, on page 10:

Like his predecessors, Marx totally neglected the possibility of durable technological processes and steadily increasing productivity, which is a force that can to some extent serve as a counterweight to the process of accumulation and concentration of private capital.

Gee, wouldn't that be a good place to discuss the role of unions?

Nooooooo.

Instead, we're told that technocracy plus good old macroeconomics of productivity explains all.

But, we're not told WHY the owners of the means of production, to go back to the original "Capital," would share that increasing productivity's monetary benefits.

Gee, wouldn't that be a good place to discuss the role of unions?

Nooooooo.

It gets worse. I jumped ahead, after the Introduction in which that all appeared, and the word "union" did not, to Chapter 9, in Part Two, which is about "The Structure of Inequality."

Its title? "Inequality of Labor Income."

Gee, wouldn't that be a good place to discuss the role of unions?

Nooooooo.

I saw the word "union" mentioned once in the entire chapter.

So, I skipped ahead to Part Four: "Regulating Capital in the Twenty-First Century."

Chapter 13 is "A Social State for the 21st Century."

Gee, wouldn't that be a good place to discuss the role of unions? Wouldn't it be a good place to discuss the possibility of established unions trying to revitalize themselves by looking to do more organizing work in white- and gray-collar occupations?

Nooooooo.

In fact, the U-word is again not mentioned in this chapter.

It's worse at the very end, in the index.

The word "union" has no entry.

Wow.

Beyond that, Piketty also ignores the third leg of the traditional "land, labor, capital" stool.

In the introduction, he briefly talks about how David Ricardo looked at the price of land, as a parallel to Thomas Malthus' overpopulation, as something that might produce a scarcity with economic effects. He notes that Ricardo was talking about farmland, and Piketty says the idea could apply to urban real estate today.

And then stops there.

When there's so much relevance of that to today.

Can the Green Revolution of the 1970s be sustained, or brought to a new level? Even for those of us who don't fear GMOs, but at the same time, like Norman Borlaug said the Green Revolution was just a one-generation fix, and reject the ideas that GMOs are the "cavalry riding over the hilll," or as I call it, an example of "salvific technologism," there's worries here.

And, things like Peak Oil or other diminishing mineral reserves could also be discussed in depth under the "land" leg of the stool.

But Piketty doesn't.

So, this is essentially a left-neoliberal technocrat writing a very incomplete book about how to fix the economy of the 21st century. And, one who's doing a cheap ripoff of Marx, and in his own way, arguably no more scientific than Marx.

So, true liberal friends, beyond my original blog post, I've now read enough of this book that you don't have to.

Plus, he's not that good of an economist in some of his theorizing. Indeed, that link explains exactly why he doesn't mention unions hardly at all:

Let me return to Piketty’s theoretical paradigm (the “neo-classical” paradigm). According to this theoretical paradigm all persistent unemployment must be explained as the result of wages being “too high”, i.e. as the product of trade union action. It is not accidental that Robert Solow whose “neo-classical” growth model Piketty invokes is a votary of “labour market flexibility”, which means in effect smashing trade unions through “free hire and fire”. Smashing trade unions on the plea that this would raise employment is currently on the agenda of corporate capital everywhere in the world including India. It is a pity that Piketty, despite his concern with wealth inequality, adopts a theory that provides sustenance to this corporate agenda.

Bingo.

#Piketty: A liberal Frenchman ignorant of unions? Or not quite so liberal?

Thomas Piketty, Paul Krugman via Salon
(Credit: Reuters/Charles Platiau/Anton Golubev)

Or a left-neoliberal trying to pose as an actual liberal?

Thomas Piketty's "Capital in the 21st Century" has gotten a lot of touts. That goes even as far as Counterpunch. So, it has to be true liberal, right?

Well, Thomas Frank notes one big absence. I'd not read the book yet, but in hindsight, his review points out what all the other reviews missed.

Frank, like others, praises the analysis, while astutely noting, although without quite as much depth as Counterpunch, that Piketty's not new, nor alone.

I was puzzled at first by the extraordinary success of Piketty’s book; despite his commitment to cant-free prose, it is not an easy read. Besides, most of what Piketty tells us has been told to us before, many times over, in a three-decade long parade of forgotten treatises and sad New York Times stories on downsizing and deindustrialization.

Going beyond that, he also touts Piketty for slapping around most of his fellow economists.

One of the best things about Piketty’s masterwork is his systematic demolition of his own discipline. Academic economics, especially in the United States, has for decades been gripped by a kind of professional pretentiousness that is close to pathological. From time to time its great minds have grown so impressed by their own didactic awesomeness that they celebrate economics as “the imperial science”— “imperial” not merely because economics is the logic of globalization but because its math-driven might is supposedly capable of defeating and colonizing every other branch of the social sciences. ...

Piketty blasts it all to hell. His fellow economists may have mastered the art of spinning abstract mathematical fantasies, he acknowledges, but they have forgotten that measuring the real world comes first.

However, on the prescriptions side? Frank points out that Piketty's French souffle just fell in the oven.

Yes, he talks about a wealth tax, which all other reviews have noted.

But, in an "emperor has no clothes" moment, Frank also points out that Piketty, a native of a country where even the farmers are unionized, doesn't have bupkis to say about boosting worker organization rights. 

Frank kind of buries the nutgrafs of a critical review three-quarters of the way down. But, I'm moving it up:

Turning to the problem of income inequality here in the United States, there is an even simpler solution (than a wealth tax), by which I mean a more realistic solution, a solution that builds on familiar American traditions,that works by empowering average people, that requires few economists or experts, that would involve a minimum of government interference, and that proceeds by expanding democracy and participation rather than by building some kind of distant and unapproachable global tax authority: Allow workers to organize. Let people have a say on the basic issues affecting their lives.

Piketty’s biggest blind spot is that he has virtually nothing to say about labor unions. He starts Chapter 1 of “Capital” with an anecdote about a bloody strike in South Africa and he returns to that same tragic episode at the very end of the book, but in between he addresses the matter almost not at all. Piketty talks a good game about democracy, but like other economists who have made inequality their subject, he prefers solutions that are handed down from the lofty heights of expertise. (My emphasis.)

As I said, the man's a native of a country where the farmers unionize. It's a blind spot, or worse.

That's why I use the phrase "left-neoliberalism," which I've talked about occasionally before. Click on that tag, at bottom, for more related posts.

Hey, France is full of technocrats. Christine Lagarde runs the International Monetary Fund, one of the holy of holies places of neoliberal technocrats. And, arguably, François Mitterand found the "Third Way" long before Bill Clinton or Tony Blair.

Calling this a blind spot might be charitable — and not just a little. I mean, per the sentence of Frank's that I bolded, isn't this the stereotypical neoliberal approach? Let us technocrats work out the solutions?

Frank then goes on:

It is not a coincidence that labor’s rise in the 1930s happened at the same time as the One Percent’s fall from grace, nor is it a coincidence that labor’s long decline has been almost a mirror image of the One Percent’s recovery of its nineteenth-century heaven. ...

The disappearing middle class? This is labor’s grievance par excellence. The minimum wage? Labor is always the loudest voice calling for an increase.

Frank admits that re-empowering organized labor is not the totality of the solution, either. He does note that it needs to be more of the solution in union-gutted America than in Europe.

Speaking of, Piketty apparently doesn't know a lot about America in general.

Frank also notes that this lack of knowledge is part of a bigger pattern of potholes in the book:

Unfortunately, Piketty’s enthusiasm for disciplines other than economics is more theoretical than anything else.

And, for someone claiming his book is as much history as economics, his American chocolate cake fell in the oven even more than his French souffle.

Whenever Piketty moves away from numbers and tries to describe life in the United States, things go wrong in a hurry. The worst example first: Piketty tells us that, unlike the French, Americans feel “no nostalgia for the postwar period” because our economy didn’t grow rapidly in those years. ...

Piketty’s command of American political history is, quite simply, abysmal. He announces that the U.S. “never became a colonial power,” which would be news to the people of the Philippines, not to mention the Sioux. ...

There are numerous other examples in Piketty’s enormous book of this weird blind spot concerning all things American; indeed, you could write an entire review just cataloguing them.

Bad, indeed.

At Counterpunch, Jack Rasmus gets at some of those same  union-related issues via a back door of sorts. Here's his key point on this issue:

Explaining inequality—not just reporting it—requires an analysis of how these various ‘forms of wages’ have been reduced in recent decades and especially since 2009. That deeper analysis leads to explanations of trends of destruction of unions and thus the higher union wage, the growing trend of outright ‘wage theft’ by businesses, the avoidance of paying overtime pay by reclassifying millions of workers as ‘exempt’ instead of hourly paid, the atrophying of the real minimum wage, the wage reduction effects of free trade, the shift to contingent labor, and all the reasons why the total unemployed (in and out of the labor force) are rising steadily and are chronically longer term jobless. Add to this the analyses of the many government policies introduced in recent years and decades that reduce the deferred, social, and future wage and underestimate the real wage.

Exactly. And, the noted destruction of unions has been part of the cause of the rest of this. But not all of it.

Compared to much of Europe, and especially Piketty's France, the word "union" has become a four-letter word to more and more vanishing middle-class Americans.

Well, folks that didn't happen out of nowhere. Since there is class war in America, the "unions are ebil" meme came out of the mouths of people who had reason to fear unions. And, it was easily sold. You're not middle class if you're in a union, you're working class. Plus, in traditional industrial unions, people who were promoted from line jobs to management were encouraged to leave unions for that reason. Probably, though I don't know for sure, back in the 1960s and ’70s, white folks promoted from line jobs to management were encouraged to leave their unions for other reasons, but that's another story.

In short, by missing the union part of the equation, Piketty is missing half the class warfare part of the issue.

And the need to re-empower labor, and workers' desire for that, was shown on May 15 by an international fast-food employees' strike. (That said, in details of the strike, I think $15/hr, without a phase-in of seven or so years, is too high. Even then, it might be a bit much. The $10.10 of Beltway rounds, with a four-year phase-in, AND a COLA clause as part of that, sounds about right to me.)

And, given that unionized French farmers have driven their tractors into the streets of Paris before, I can't believe this is totally accidental. So, thanks to Thomas Frank triggering some thought, I doubt I'll read Piketty's book.

Learning economics, being rich, makes you greedy

It should be no surprise that, on average, the richer you are, the more likely you are to lie and cheat. Here's an interesting sidebar to that:

In the research reported yesterday, the experiments suggest at least some wealthier people “perceive greed as positive and beneficial,” probably as a result of education, personal independence and the resources they have to deal with potentially negative consequences, the authors wrote....

Previous research has shown that students who take economics classes are more likely to describe greed as good.  

Were Shakespeare alive today, he'd say: "The first thing we do is kill all the economists." You know, those folks who justified everything leading up to 2008.

Back to the main thread. The story notes that the rich were ready to cheat for relatively minor sums, too. Sums that would, in real life, benefit them almost nothing.

Were Lord Acton around today, he'd say, "Too much money corrupts, and the more you're over the 'too much line,' the more likely you are to be more corrupt."

Arthur Caplan notes how this is the baseline problem with capitalism:

“Support for free-market capitalism will collapse if those who do well don’t do good. Rapacious, intolerant, nonempathetic capitalism that says lie, cheat, steal, it’s only the bottom line that matters -- aside from being morally repugnant, it’s got a dim future.” 

Well, actually, with social Darwinism and the "success gospel" propping it up, it may not have a dim future at all, unless "What's the Matter with Kansas" sheeple get a clue.

4 strands of biology, sociology, economics, philosophy connect

The four strands? Competitiveness in general, capitalism, Pop Evolutionary Psychology and social Darwinism.

Regular readers know that I’ve recently written about No. 4, including listing one candidate most wouldn’t put there. I’ve regularly written about Pop Ev Psych and its largely unscientific, occasionally pseudoscientific claims; I’ve been wary of it even when less liberal than I am now, so this is not driven by political issues.

I am that liberal, though … left-liberal of a sort for America, at least. So, in various ways, I’ve definitely written about No. 2, capitalism?

No. 1, competitiveness, somewhat ties all the others together.

Evolution by natural selection does involve a degree of competitiveness, to be sure. However, that competitiveness is usually against members of other species, more than members of one’s own species. To the degree there is intraspecific competition, it’s often sexual selection that’s the driver. That said, at the same time, group selection can be a driver for collaboration with other members of the same species.

So, that’s biology. Pop Ev Psych is sociology, primarily in what it says about its adherents. Ditto for social Darwinism (the fourth modern variety of social Darwinism, New Atheism, has many libertarian adherents, and yes, adherents is the right word). Capitalism is obviously a matter of economics.

Philosophy? Trying to extrapolate from the biological basis of and need for competitiveness to the other three gets us to Davie Hume’s famous is-ought distinction. (It’s worth noting that, in my opinion, many people who claim that Hume’s comments on this are misconstrued, misinterpreted, wrongly implied, etc., have personal reasons for stating this; see ox, whose and goring.)

Just because we have to fight to escape a lion (or per the old joke, run faster than a companion also seeking to escape it) doesn’t mean that Wall Street plutocracy, Pop Ev Psych “just so” stories and the beliefs behind them, or the social Darwinism of either New Atheism or old-time religion has to be that way.

Because it doesn’t.

And, this is part of why the American education system is problematic, and not just K-12 education.

I don’t think I am overstating matters when I say 90 percent of Americans are unfamiliar with Hume’s is-ought distinction. And that’s sad. Hume is one of the most “approachable,” largely non-technical, philosophers in modern, or even modern plus ancient, philosophical history.

Why economics isn't even social-science scientific

It doesn't matter the school of thought, whether Keynesian, New Keynesian, neo-Keynesian Vienna School, Chicago School's tweaking of Vienna, or something brand new.

Most economics isn't even at the psychology or sociology level of social-science level of science. And, outside of the research-based behavioral economics, this is true for economics in general.

Take this Australian economist who claims that Keynesians of various stripes are wrong about how debt works in a fiat money society.

He's got interesting ideas. But, especially his three anti-Keynesian talking points at the end? They're not falsifiable. First, you can't falsify a whole society. Second, I don't think they're falsifiable even by computer simulation. Even using "falsify" more loosely than an ardent Popperian, they're really just not falsifiable.

Therefore, they're really not "theory," even in a loosely used sense of falsification. They're policy prescriptions. They're really statements of, "People should believe this about how debt works in a fiat money society."

And, thus, per Hume, with that "should," he's totally jumping the is/ought shark. But, it's not just him; as noted, my take is that most economics is not social-scientific science, but policy prescriptions.

In this particular case, I think they're some interesting policy prescriptions. But, they're not scientific.

Some are good. Others are somewhat straw men, like some claims about New Keynesianism, and, per Wikipedia, ignoring the links between modern monetary theory's roots and original Keynesianism.

Beyond that, here's some specific criticism of MMT.

The only way any macroeconomic theory can be close to scientific is to start by incorporating researched findings from behavioral economics.

At the same time, per Mitchell's blog, and per the main Wikipedia entry about MMT, it does appear at times to be generally "progressive" in its political stance, as noted here:

One commentator today noted that monetarism was neither right- or left-wing. I disagree. The whole edifice of mainstream economics – indeed its roots – are ideologically disposed towards what we call right-wing thinking. Modern mainstream economics is an extension of the marginalist school which emerged in the second half of the C19th to combat the fears the industrialists had about the growing popularity of Marxism.

However, in that same post, Mitchell lauds the Chinese for, in part, being free of democratic constraints. But, both it and New Keynesianism seem to assume too much about people's, or institutions', behavior as rational economic actors. And Mitchell assumes too much about the wisdom of China's leaders, to boot.

So, I think Krugman is right when he says MMT just isn't right. And, while it may not be right-wing, beyond being overly rationalistic, it is a monetarist policy.

Adam Smith, mercantilism, 'invisible hand' and Deism

I've written an occasional post touching on the edges of what's at the heart of this one.

And, that is that Smith wasn't such a pure-blooded Platonic idealist capitalist, first.

Even more important, secondly, is how his economic theory, especially as connected to his moral-sense ideas, and economically culminating in his "invisible hand," were based on Enlightenment Deism, an optimistic version of that religion that is scientifically, philosophically and psychologically untenable today.

For defenders of Smith the simon-pure free trader? You're wrong on the mercantilism, Smith and the colonies (Google Docs link). I quote, from a book: "Smith likewise approved of the laws which authorized the payment of a bounty for the production of naval stores in the American colonies and prohibited their export from America to any country other than Great Britain. This typical mercantilist regulation was justified, in Smith’s view, because it would make England independent of Sweden and the other northern countries for the supply of military necessities and this contribute to the self-sufficiency of the empire"

Source? "Wealth of Nations," Book IV, pp. 545-546, 609-610, 484, note 39.

Now, naval stores isn't all colonial goods, but given that they related to national defense, albeit loosely, Smith had no problem bringing them under a mercantilist umbrella.

Elsewhere, Smith accepted government support for start-up industry, retaliatory tarrifs (albeit on a limited basis) and other things.

On whence Smith derived ideas of "an invisible hand" or "the invisible hand," no, I can't prove it's from the wind-up-the-universe God of Enlightenment Deism. Nonetheless, it sounds reasonable, and I know it can't be disproven either, that as a source. Per Wikipedia, referencing his obit as a source, he rejected Orthodox Christianity at Oxford and was generally understood to have become a Deist.

Beyond that, von Mises says in Wikipedia again that he thought Smith thought the invisible hand was God.

Beyond that, we know that Deism was a strong influence on Smith's theory of moral sentiments. (Google Docs link.)

It's arguable, and has been argued by some, that the "invisible hand" doesn't apply to the workings of the market. But, even if it's considered an "inner witness," and not directly linked to Deism, nonetheless, via Smith's theory of moral sentiments being Deist influenced, a denial of any connection at all is hard to maintain. Certainly, the ideas that an invisible hand will rationally maximize production to the ultimate benefit of all is pure Deism at its most optimistic and moonshiney.

And, of course, Deism was scientifically undercut in 1900 by Max Planck. Before that, indirectly, as Voltaire knew, such an optimistic Deism was shaken by the 1755 Lisbon tremblor. Since then, nuclear weapons, world wars and the Holocast have further shattered Smith's blithely optimistic Deism.

Speaking of science, James K. Galbraith argues Smith is non-scientific in another way - he's pre-Darwinian! Very interesting. And, Galbraith applies this thought to all Smithian descendants, namely those nutbar Strausians and related Chicago School economists.

Both liberals and conservatives need behavioral economics lessons

David Brooks doesn’t actually use the phrase “behavioral economics,” but it’s clear that’s what he’s talking about when he says both conservatives and liberals currently hold fast to rationalistic, mechanistic versions of macroeconomics.

And, you know something? He’s right.

Blind faith in the “invisible hand” of Adam Smith and conservatives has been shattered – and not for the first time. But, as Brooks notes, Keynesian economics is pretty mechanistic itself, with faith in government stimuluses and debt-based pump priming believed to be tools to also get “rational actors” acting rationally again.

Well, behavioral economics points out that we aren’t normally rational actors. Or even close to it.

Of course, truly progressive thinkers have long known that.

And, as for yours truly, I’ve pointed out in the past that Smith’s “invisible hand” is grounded in his Enlightenment Deism, refuted by world wars, the Holocaust, nuclear weaponry, etc.

From the Department of Economic Self-Delusion

Blue Chip Economic Indicators thinks the recession will be over by mid-year.

Hah!

Frum to conservatives — own up to income inequality

Of course, Frum himself won’t own up to the solution

On page 3 of his in-depth take on “The Vanishing Republican Voter,” Bruce Frum says today’s GOP needs to face facts:

The trend to inequality is real, it is large and it is transforming American society and the American electoral map. Yet the conservative response to this trend verges somewhere between the obsolete and the irrelevant.

Conservatives need to stop denying reality. The stagnation of the incomes of middle-class Americans is a fact. And only by acknowledging facts can we respond effectively to the genuine difficulties of voters in the middle. We keep offering them cuts in their federal personal income taxes — even though two-thirds of Americans pay more in payroll taxes than in income taxes, and even though a majority of Americans now describe their federal income tax burden as reasonable.

Frum points out it IS about healthcare costs, above all.

Of course, he stops there without offering a solution.

Psst, Bruce? It’s called national healthcare.

At the same time, he disagrees with liberal elites (they do exist) and their neolib economic analysis flunkies (Brad DeLong, that’s you; somebody tell this to Orange County semi-elite Kevin Drum) that illegal immigration does drive down wages.

And, snark aside, he notes that smart states (seven out of top 10) swing blue, while dumb states swing red (nine out of bottom 10).

Kevin Phillips denotes 40 years of government economic lies

The real unemployment rate in America today? Oh, about 9 percent?

Gross domestic product didn’t grow 0.6 percent this quarter; it slipped.

Inflation? About 6-7 percent, in reality.

A newspaper excerpt of Phillips’ new book, “Bad Money: Reckless Finance, Failed
Politics and the Global Crisis of American Capitalism,” details how, since JFK, every American president except Carter has jacked with how we calculate unemployment, the Gross National/Domestic Product (remember, one of those changes was to move from GNP to GDP), the inflation rate, or two or more of the above.

Phillips points out it was Jack Kennedy who had his administration invent the idea of “discouraged” workers to lower unemployment numbers.

Under John Kennedy, out-of-work Americans who had stopped looking for jobs — even if this was because none could be found — were labeled “discouraged workers” and then excluded from the ranks of the unemployed.

Lyndon Johnson orchestrated a “unified budget” that combined Social Security with the rest of the federal outlays. This innovation allowed the surplus receipts in Social Security to mask the emerging federal deficit.

Richard Nixon created a division between “core” inflation and headline inflation. If the Consumer Price Index was calculated by tracking a bundle of prices, so-called core inflation would simply exclude, because of “volatility,” categories that happened to be troublesome (and thus in the “headlines”). At that time, it was food and energy (as it is now).

Under Ronald Reagan, the Bureau of Labor Statistics decided that housing was overstating the Consumer Price Index and substituted an entirely different “Owner Equivalent Rent” measurement, based on what a homeowner might get for renting his house. This methodology, controversial at the time but still used, sidestepped what was happening in the real world of homeowner costs. Some say that led to the mortgage crisis today.

Under the first President Bush, officials moved to reorient U.S. economic statistical measure away from old industrial-era methodologies toward the emerging services economy and the expanding retail and financial sectors. Skeptics said the underlying goal was to reduce the inflation rate in order to reduce federal payments — from interest on the national debt to cost-of-living outlays for government employees, retirees and Social Security recipients.

Under President Clinton, the convoluted CPI changes proposed under Bush were implemented. And the Clintonites tinkered with the unemployment number, in part, by changing its housing economic sampling, disproportionately eliminating inner city households. That is believed to have reduced black unemployment estimates and eased worsening poverty figures.

Don’t expect any of this to change. Hillary Clinton’s husband was one of the bigger numbers-fudgers, in a way that “the first black president” didn’t help blacks.

McCain? It doesn’t involve a tax cut, so he doesn’t give a damn, and he’s already admitted his economic cluelessness.

Obama? Maybe, but I won’t hold out too much hope.

But, the bottom line is this has been bipartisan. Republican and Democratic Congresses have acquiesced in Republican and Democratic Presidents doing this.

And, no, in our current two-party system, I really don't expect this to change.

Greenspan says credit crunch worst since WWII

Former Federal Reserve Chairman Alan Greenspan said the credit crunch is the worst problem facing the country since World War II.

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

Unfortunately, he neither offered much in the way of solutions nor took responsibility for his own quite large part in the debacle.

All he would do was blather that regulatory changes should not affect the mythical, hagiographic “free market system.” And, in fact, he defended large parts of the current system of securitization of various types of debt and credit:

I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline.

He did admit that there is room for behavioral economics in the modern modeling world:

Forecasters’ concerns should be not whether human response is rational or irrational, only that it is observable and systematic.

And, where were you on that 5 or 10 years ago?

Bear Stearns sticks toe in Chinese investment waters: what’s it mean?

U.S. investment bank Bear Stearns has joined forces with China’s Citic Securities in an investment alliance that involves each bank investing $1 billion in the other.

Here’s the details, courtesy of MSN and the New York Times.

Citic will acquire about $1 billion of 40-year convertible trust preferred securities that will convert, on a fully diluted basis, to approximately 6% of Bear Stearns' shares; Bear will seek regulatory approval with China to acquire a similar stake in Citic for about $1 billion through a six-year convertible debt security and five-year options to acquire additional shares.

"This groundbreaking alliance will give Bear Stearns a unique footprint in one of the world's fastest-growing economies through a strategic partnership with a premier market leader," Bear Chief Jimmy Cayne said in a press release this morning. "We are confident that combining our operations in Asia with Citic Securities will greatly benefit Bear Stearns' global client base and generate substantial new revenues and growth opportunities for the firm over the long term."

Rumors had been swirling that Bear Stearns was looking to sell a stake in itself after the demise of two of its subprime-based hedge funds hammered the Wall Street bank this past summer. Bear reported a 61% drop in profit in the third quarter because of the mortgage-market meltdown.

So, in other words, Bear is probably still worried about not having enough liquidity, and that’s half of why it’s been pressing for this deal. If that’s the case, expect clamor for further Fed rate cuts, as well as a backstop “pool” of money from the Fed, Bank of England and the European Central Bank. Also consider the possibility that the likelihood of other, taxpayer-funded, liquidity steps has increased.

In exchange, Bear gets increased access to the theoretically valuable Chinese investment world.

But, just as much of the “tranches” from collateralized debt obligations here were never “marked to market,” that is, never had an open-market price calculated before being sold, it’s my considered non-professional opinion that much of the entire Shanghai stock market, and collateral investment centers, isn’t adequately marked to market.

In other words, China could have a bubble, too, perhaps in part caused by a U.S. backfire, since China has so many eggs in just a few American baskets.

My off-the-top-of-my-head guess is that the Shanghai stock exchange is overvalued by 20 percent. Maybe more.

What if other American investment banks make deals similar to Bear, and then this Chinese bubble bursts?

Definite recession. Perhaps a biggie.

Part of the problem here is the world hasn’t had a serious recession since China became a global economic player. So, I think professional economists far smarter in the “dismal science” than I probably have little more than guesstimates to offer on how well China could weather a 20 percent burp in its stock market.

Amen to this: The Nobel-lite economics prize should be canned

Even former prize winners critique the economics prize as as too abstract and mathematical, too ideological, or too business-leaning:

The notion that economics is scientific, said Jeff Madrick, the director of policy research at the Schwartz Center for Economic Policy Analysis at the New School in New York, is “highly exaggerated.”

Madrick not only doubts that significant contributions in the field can be limited to those based on econometrics but also questions whether that type of work is as unbiased as is often claimed. “The Nobel prize has become quite a political animal,” he said, “in the disguise of being scientifically pure.”

This was the heart of the complaint from the Nobel winner Gunnar Myrdal. In a 1977 letter to a Swedish newspaper, he rejected the idea that the field of economics could claim a Nobel on the basis of its scientific rigor. Economics should concern itself with political and social needs, he argued, and he called for an end to the prize in economics.

Add to that the fact that the work cited is often too theoretical and too-Wall Street oriented, it’s time to abolish the damn thing.

As for economics not being a science, a discipline that can make psychology look scientific sure ain’t scientific itself.

John Markman: Another stock market moron

The only way the Dow hits 21,000 in four years is if stock buyers become even much more irrational than they already are. I suppose that’s theoretically possible. It’s also theoretically possible that either George W. Bush or Vladimir Putin will win a Nobel Peace Prize.

At some point before 21,000, enough people will either start flinging out honest questions, or simply saying “Whoa,” to keep a mega-bubble from getting to ridiculousness.

Or the Chinese will move enough money to euros. Or OPEC will.

Markman says the Dow will hit 21K if it just performs as well as the Dow utilities or transportation indexes.

Well, I suspect the utilities index has been inflated by privatization. A slowdown, if not a stop, to that, plus more global warming worries, will spike utilities in the future, I wouldn’t doubt.

Transport stocks will be jumbled by oil price confusion in coming years.

“Bubbles” are good? Sorry, Gross is moronic

Slate’s Daniel Gross claims bubbles, like the housing bubble, are invariably good for the economy.

Now, without dismantling him point-by-point, let me comment on one or two things.

First, he says:

Bubbles get started when entrepreneurs latch onto new technologies, or new economic assumptions (or both).

Nonsense. The real-estate bubble was started by, in essence, speculative lending. Nothing new there. It was enhanced by finding a way to package junk-bond money making into a new package through collateralization of subprime loans. Not much new there.

Second, he claims:

And because Americans process failure quickly, the infrastructure swiftly morphs into a cheap, pervasive, and powerful platform for other entrepreneurs—who then launch businesses and innovations that benefit the economy at large.

Well, he is assuming that they also always process failure correctly. And that’s not a given.

Third, he overlooks that we may be in a worldwide bubble right now.

Jeremy Grantham notes:

everyone, everywhere is reinforcing one another. Wherever you travel you will hear it confirmed that “they don’t make any more land,” and that “with these growth rates and low interest rates, equity markets must keep rising,” and “private equity will continue to drive the markets.” To say the least, there has never ever been anything like the uniformity of this reinforcement.

With this as the set of talking points of focus:

1. Global fundamental economic conditions are nearly perfect and have been for some time.

2. Availability of global credit is generous and cheap and has been for some time.

3. Animal spirits and optimism are therefore high and feed on themselves through reinforcing results and through being universally shared.

4. All global assets reflect this and are overpriced and show, probably for the fi rst time, a negative return to risk taking.

5. The correlation in global economic fundamentals is at a new high, refl ected in the steadily increasing correlation in asset price movements.

6. Global credit is more extended and more complicated than ever before so that no one is sure where all the increased risk has ended up.

7. Every bubble has always burst.

8. The bursting of the bubble will be across all countries and all assets, with the probable exception of high grade bonds. Risk premiums in particular will widen. Since no similar global event has occurred before, the stresses to the system are likely to be unexpected. All of this is likely to depress confidence and lower economic activity.

9. Naturally the Fed and Fed equivalents overseas will move to contain the economic damage as the Fed did last time after the 2000 break. But the heart of the last bubble, the NASDAQ and internet stocks, still declined by almost 80 percent and 90 percent, respectively. (The heart of the bubble this time is probably private equity. In 10 years, it may well be described as the private equity bubble just as 2000 is thought of as the internet bubble. You heard it here first!)

10. What is wrong with this logic? Something I hope.

11. Of course the tricky bit, as always, is timing. Most bubbles, like internet stocks and Japanese land, go through an exponential phase before breaking, usually short in time but dramatic in extent. My colleagues suggest that this global bubble has not yet had this phase and perhaps they are right. (A surge in money flowing into private equity might cause just such a hyperbolic phase.) In which case, pessimists or conservatives will take considerably more pain. Again?!

Now, he does console us with the idea that some catalysts for change may more gently deflate bubbles than savagely bursting them. Let us hope.

U.S. income gap worst since 1928

And we all know what happened right after that — something called the Great Depression.

Chinese companies are able to take these manufacturing jobs from the U.S. and elsewhere for more reasons than simply having the lower wage costs of a developing country. Here’s how else China does it.

While total reported income in the US increased almost 9 per cent in 2005, the most recent year for which such data is available, average incomes for those in the bottom 90 per cent dipped slightly compared with the year before, dropping 172 dollars, or 0.6 per cent.

According to the report, the gains went largely to the top 1 percent, whose incomes rose to an average of more than 1.1 million dollars each, an increase of more than 139,000 dollars, or about 14 percent.

The top 10 percent, roughly those earning more than 100,000 dollars, also reached a level of income share not seen since 1928, according to the report.

The reasons are largely the same as 1928, also — increasing manipulation of various “financial instruments,” which are even more complicated today, thwarting the efforts of both federal regulators and surely, in some cases, the Internal Revenue Service, in keeping tabs on this.

Problem is, many people in that lower 90 percent are being fobbed off with modern America’s equivalent of “bread and circuses” — cheap made-in-China electronics.