economics Archive

0

Dean Baker shits on David Brooks so you don’t have to

By
Ben Nolan
– May 8, 2012

Link. Teaser:

I don’t know anyone who looks like cyclicalists that Brooks writes about. It would be good if he could toss out a few names for readers so that we know such people actually exist in the world and are not just Brooks’ hallucinations.Since the views Brooks attributes to the cyclicalists are sufficiently bizarre, it is hard to believe that such people exist.

For example, he tells us that the cyclicalists believe:

“the level of government spending is the main factor in determining how fast an economy grows.”

I have never come across anyone who had a view anything like this. I do know many economists, who argue that in a downturn more stimulus will lead to more economic growth, but this is nothing like the view that Brooks attributes to the cyclicalists. Does Brooks really think it is the same thing to say that more stimulus leads to more growth in a downturn and saying that government spending is the main factor determining growth in general? This is scary.

Krugman does too, without naming names.

3. Anyone who says something like “If deficit spending were the route to prosperity, Greece would be in great shape” should be immediately considered not worth listening to. People in my camp have repeated until we’re blue in the face that the case for fiscal expansion is very specific to circumstance — it’s desirable when you’re in a liquidity trap, and only when you’re in a liquidity trap. I know that some people like to project their own crudity onto others, but what they’re actually demonstrating is their own ignorance.

I don’t actually think Brooks is ignorant. I think he’s cynical and dishonest, which is worse.

0

Zizek’s latest is a must-read…

By
Ben Nolan
– January 12, 2012

LRB. Teaser:

If the old capitalism ideally involved an entrepreneur who invested (his own or borrowed) money into production that he organised and ran and then reaped the profit, a new ideal type is emerging today: no longer the entrepreneur who owns his company, but the expert manager (or a managerial board presided over by a CEO) who runs a company owned by banks (also run by managers who don’t own the bank) or dispersed investors. In this new ideal type of capitalism, the old bourgeoisie, rendered non-functional, is refunctionalised as salaried management: the new bourgeoisie gets wages, and even if they own part of their company, they earn stocks as part of their remuneration for their work (‘bonuses’ for their ‘success’).

This new bourgeoisie still appropriates surplus value, but in the (mystified) form of what has been called ‘surplus wage’: they are paid rather more than the proletarian ‘minimum wage’ (an often mythic point of reference whose only real example in today’s global economy is the wage of a sweatshop worker in China or Indonesia), and it is this distinction from common proletarians which determines their status….

In other words, they no longer have the security of a strong positively defined and immediately felt identity of their own (as the entrepreneur did, directly owning and controlling his business.)

The bourgeoisie in the classic sense thus tends to disappear: capitalists reappear as a subset of salaried workers, as managers who are qualified to earn more by virtue of their competence (which is why pseudo-scientific ‘evaluation’ is crucial: it legitimises disparities in earnings). Far from being limited to managers, the category of workers earning a surplus wage extends to all sorts of experts, administrators, public servants, doctors, lawyers, journalists, intellectuals and artists. The surplus they get takes two forms: more money (for managers etc), but also less work and more free time (for – some – intellectuals, but also for state administrators etc).

The evaluative procedure that qualifies some workers to receive a surplus wage is an arbitrary mechanism of power and ideology, with no serious link to actual competence…

E X A M P L E S (not that you need ‘em)

…the surplus wage exists not for economic but for political reasons: to maintain a ‘middle class’ for the purpose of social stability. The arbitrariness of social hierarchy is not a mistake, but the whole point, with the arbitrariness of evaluation playing an analogous role to the arbitrariness of market success.

This is where it gets fascinating….

Violence threatens to explode not when there is too much contingency in the social space, but when one tries to eliminate contingency. In La Marque du sacré, Jean-Pierre Dupuy conceives hierarchy as one of the four procedures (‘dispositifs symboliques’) whose function is to make the relationship of superiority non-humiliating: hierarchy itself (an externally imposed order that allows me to experience my lower social status as independent of my inherent value); demystification (the ideological procedure that demonstrates that society is not a meritocracy but the product of objective social struggles, enabling me to avoid the painful conclusion that someone else’s superiority is the result of his merits and achievements); contingency (a similar mechanism, by which we come to understand that our position on the social scale depends on a natural and social lottery; the lucky ones are those born with the right genes in rich families); and complexity(uncontrollable forces have unpredictable consequences; for instance, the invisible hand of the market may lead to my failure and my neighbour’s success, even if I work much harder and am much more intelligent). Contrary to appearances, these mechanisms don’t contest or threaten hierarchy, but make it palatable, since ‘what triggers the turmoil of envy is the idea that the other deserves his good luck and not the opposite idea – which is the only one that can be openly expressed.’ Dupuy draws from this premise the conclusion that it is a great mistake to think that a reasonably just society which also perceives itself as just will thereby be free of all resentment: on the contrary, it is precisely in such a society that those who occupy inferior positions will find an outlet for their hurt pride in violent outbursts of resentment.

Devastating, no?

Read on @ the LRB…

0

Congress doesn’t care about you because they are not you

By
Trevor Macomber
– January 6, 2012

With 535 people in congress (plus six non-voting members of the House of Representatives, but who gives a shit about them?), you’d hope that the law of large numbers would ensure that the American people are being represented by a relatively diverse cross-section of society in the national political process.

Then again, such hopes would also make you a naïve ass.

According to recent articles by ABC News (12/27/11) and MSN Money (1/15/12),

The average American’s net worth has dropped 8 percent during the past six years, while members of Congress got, on average, 15 percent richer, according to a New York Times analysis of financial disclosure.  The median net worth of members of Congress  is about $913,000, compared with about $100,000 for the country at large, the Times’ analysis found. [ABC]

Broken down:

  • Nearly half of the members of Congress are millionaires, according to the Center for Responsive Politics (CRP), a Washington watchdog.
  • The median net worth of a U.S. senator was $2.63 million in 2010, the most recent year for which financial data are available. That was up 11% from the year before, says CRP.
  • The median estimated net worth for House members was $756,765.
  • The median net worth of House members almost tripled from 1984 and 2009, while the net worth of Americans declined slightly during the same time, according to the Washington Post and the University of Michigan. [MSN]
Having trouble visualizing the disparity? Then please enjoy this pretty picture from Mother Jones (using 2009 data, hence the discrepancy):

At least Americans are realistic about how much they’re being screwed over, right? Yes, and we also love exercise and hate high fructose corn syrup!

More MJ:

See, Republicans? Nobody hates rich people because they’re rich. Hell, we wanna be rich, too! And we know we’ll never get there if some income disparity doesn’t exist in the first place. All we ask is that everyone play by the same rules (HA! “Studies by Alan Ziobrowski at Georgia State University conclude that our reps regularly outperform the markets by large amounts due to the ‘significant information advantage’ they derive from their jobs.” [MSN]) and that we are at least given the chance to pursue geniune upward mobility –  you know, without having to move to Canada or Europe.

Now where the hell did I put my cravat…?

1

For reading…

By
Ben Nolan
– January 4, 2012

No more blood diamonds?

Aron Weingarten brings the yellow diamond up to the stainless steel jeweler’s loupe he holds against his eye. We are in Antwerp, Belgium, in Weingarten’s marbled and gilded living room on the edge of the city’s gem district, the center of the diamond universe. Nearly 80 percent of the world’s rough and polished diamonds move through the hands of Belgian gem traders like Weingarten, a dealer who wears the thick beard and black suit of the Hasidim.

“This is very rare stone,” he says, almost to himself, in thickly accented English. “Yellow diamonds of this color are very hard to find. It is probably worth 10, maybe 15 thousand dollars.”

“I have two more exactly like it in my pocket,” I tell him.

He puts the diamond down and looks at me seriously for the first time. I place the other two stones on the table. They are all the same color and size. To find three nearly identical yellow diamonds is like flipping a coin 10,000 times and never seeing tails.

“These are cubic zirconium?” Weingarten says without much hope.

“No, they’re real,” I tell him. “But they were made by a machine in Florida for less than a hundred dollars.”

Weingarten shifts uncomfortably in his chair and stares at the glittering gems on his dining room table. “Unless they can be detected,” he says, “these stones will bankrupt the industry.”

0

Yglesias Lampoons European Vacation

By
Trevor Macomber
– December 22, 2011

So you know how the PIIG countries are all effed ’cause their citizens are way lazier and/or drunker than the rest of their European brethren? And you know how Germany is doing baller because The Grand Teutons are simply harder working than the rest of their European brethren?

Turns out: no. Because, you know, facts and shit. Take it away Yglesias! (Matthew, I’m afraid — not Enrique):

It’s true that Germans and Greeks work very different amounts, but not in the way you expect. According to the Organization for Economic Co-operation and Development, the average German worker put in 1,429 hours on the job in 2008. The average Greek worker put in 2,120 hours. In Spain, the average worker puts in 1,647 hours. In Italy, 1,802. The Dutch, by contrast, outdo even their Teutonic brethren in laziness, working a staggeringly low 1,389 hours per year.

[...]

The truth is that countries aren’t rich because their people work hard. When people are poor, that’s when they work hard. Platitudes aside, it takes considerably more “effort” to be a rice farmer or to move sofas for a living than to be a New York Times columnist. It’s true that all else being equal a person can often raise his income by raising his work rate, but it’s completely backward to suggest that extraordinary feats of effort are the way individuals or countries get to the top of the ladder. On the national level the reverse happens—the richer Germans get, the less they work.

Well, it’s tough to dispute the work-hour data, but it’s tough to dispute Germany’s economic dominance, too. So if they’re not on top by dint of that famed German work ethic and infamed devotion to the fatherland above all else, what’s their secret?

Closer to the mark is the observation that Germans (like the Dutch and the Austrians) arethrifty, net savers who consume less than they produce and therefore export more than they import.

Oh, well, bingo! If we can just get the little piggies to zip their ham holes a little more diligently, crisis resolved, right? Or am I missing something?

Oh…

Even if there is some sense in which Germany’s trade surplus and attendant thrift is admirable, it simply isn’t possible for all countries to emulate Germany and export more than they import. Your exports are my imports. Your saving is my borrowing. Your assets are my debts. Living within one’s means certainly sounds like a good idea, but it’s not really advice that everyone can take. If every European country strives to reduce government and private borrowing simultaneously, a severe recession and steep decline in output is the only possible outcome. Which is just a reminder that what makes sense as edifying advice to a new college graduate doesn’t necessarily work as a large-scale policy prescription. It would be convenient from the standpoint of moral instruction if laziness were at the root of the European crisis, but the real world is more complicated than that. And faced with those complexities, just about the worst thing we can do is to fall prey to the distinctive torpor of the pundit class and rely on stereotype and hazy generalization instead of cold, hard facts. [emphasis my own]

I like this guy, Yglesias. He uses words I understand to explain concepts I don’t!

2

David Brooks is still stupid

By
Tom OHare
– December 2, 2011

God. I guess Ben and I decided when we were in Montreal that we would try to make fun of David Brooks more (I can’t remember, I was drunk the whole time). And so Ben’s going to see Ghostface tonight and today’s column has fallen to me. Yippee!

Paragraph one:

Why are nations like Germany and the U.S. rich? It’s not primarily because they possess natural resources — many nations have those. It’s primarily because of habits, values and social capital.

Okay, not really? But since I don’t want to shoot my load all at once, let’s continue.

It’s because many people in these countries, as Arthur Brooks of the American Enterprise Institute has noted, believe in a simple moral formula: effort should lead to reward as often as possible.

I can’t speak for the Germans (Ich kann nicht fur die Deutschen Leute sprechen), aber but in America, we primarily pretend to believe in this formula. In reality, the formula reads: “Effort on behalf of the interests of rich people should lead to reward as often as possible; no one cares about your shitty novel, hippy.”

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not. Community institutions should nurture responsibility and fairness.

Okay, see? Without the context of a “David Brooks Column,” I agree with all of this. The trouble is that David Brooks has spent his entire life defending the exact opposite. People who don’t play by the rules (rich fraudsters, e.g.) get Brooks’s seal of approval, because they’re “job-creators.” Money should go to people on the basis of “merit and enterprise,” which is why Brooks cups the ballsacks of the people who tanked the economy. “Responsibility and fairness” should be “nurtured” as long as these virtues don’t interfere with the interests of the very wealthy. And on, and on.

This ethos is not an immutable genetic property, which can blithely be taken for granted. It’s a precious social construct, which can be undermined and degraded.

Right now, this ethos is being undermined from all directions. People see lobbyists diverting money on the basis of connections; they see traders making millions off of short-term manipulations; they see governments stealing money from future generations to reward current voters.

All of which I will happily defend in other columns, just not today, because today I am being David Brooks, and being David Brooks means being PRETTY OKAY WITH LOTS OF FUCKING COGNITIVE DISSONANCE. Ahem.

The result is a crisis of legitimacy. The game is rigged. Social trust shrivels. Effort is no longer worth it. The prosperity machine winds down.

Yet the assault on these values continues, especially in Europe.

Fucking Yurp.

Over the past few decades, several European nations, like Germany and the Netherlands, have played by the rules and practiced good governance. They have lived within their means, undertaken painful reforms, enhanced their competitiveness and reinforced good values. Now they are being brutally browbeaten for not wanting to bail out nations like Greece, Italy and Spain, which did not do these things, which instead borrowed huge amounts of money that they are choosing not to repay.

“Complex international economic crises are reducible to a fifth-grade notion of schoolyard fairness.”

 [Germans] are being asked to bail out nations with vast public sectors and horrible demographics. They are being asked to paper over fundamental economic problems with a mountain of currency.

[snip]

But our sympathy should be with the German people. They are not behaving selfishly by insisting on structural reforms in exchange for bailouts. They are not imprisoned by some rigid ideology. They are not besotted with some semi-senile Weimar superstition about rampant inflation. They are defending the values, habits and social contract upon which the entire prosperity of the West is based.

No, they really aren’t. They’re defending what they think to be their own economic interest, because even though the Eurozone is an integrated economic entity, it’s still comprised of a bunch of different countries that haven’t always gotten along with one another. But, whatevs. What David Brooks would have you believe is that Germany is playing the role of the disappointed moral authority, reluctantly saying to Southern Europe, “Guys, you didn’t follow the rules. You’re grounded.” International relations: they’re just like you and me!

The scariest thing is that many of the people browbeating the Germans seem to have very little commitment to the effort-reward formula that undergirds capitalism. On the one hand, there are the technicians who are oblivious to values. For them anything that can’t be counted and modeled is a primitive irrelevancy. On the other hand, there are people who see the European crisis through the prism of some cosmic class war. What matters is not how people conduct themselves, but whether they are a have or a have-not. The burden of proof is against the haves. The benefit of the doubt is with the have-nots. Any resistance to redistribution is greeted with outrage.

“Which, of course, is why I’ve always stuck up for the haves. Who will defend the weakest in society if the weakest are the wealthiest? Huh? HUH?!”

The real lesson from financial crises is that, at the pit of the crisis, you do what you have to do…. And, as soon as the crisis passes, you move to repair the legitimacy of the system.

That didn’t happen after the American financial crisis of 2008. The people who caused the crisis were never held responsible.

IF THEY WERE, THOUGH, YOU CAN REST ASSURED THAT I PROBABLY WOULD HAVE BEEN ON THEIR SIDE!

The structural problems plaguing the economy remain unaddressed. As a result, the United States suffers from a horrible crisis of trust that is slowing growth, restricting government action and sending our politics off in strange directions.

You know what’s slowing growth? It isn’t a horrible crisis of trust. It’s a lack of fucking money! Nobody has any fucking money to spend! And the ones that do have money aren’t spending it, aren’t lending it, and aren’t giving it the fuck away, like they should be doing. Nah, they’re weathering the storm until the good times roll again (mix’d metaphor, I know). They’re horrible, miserly twits, and David Brooks will be back to defending their interests right after the previous paragraph.

Europe’s challenge is not only to avert a financial meltdown but to do it in a way that doesn’t poison the seedbed of prosperity. Which values will be rewarded and reinforced? Will it be effort, productivity and self-discipline? Or will it be bad governance, now and forever?

Economics is a morality play, you see. The poor ones, whether countries or people, just aren’t productive or self-disciplined enough, gosh darn it, and they need to be put in their place. The rich ones, on the other hand…

Well, I mean, hell. Who signs your motherfucking paycheck? The hobo down the block? RICH PEOPLE RULE 5EVER & ALWAYS, KTHXBAI, <3 DAVID BROOKS.

0

The Economics Profession Has No Clothes

By
Ben Nolan
– December 2, 2011

H-t Yasha

5

Some states are better than others?

By
Trevor Macomber
– December 1, 2011

So the long-awaited “Best and Worst Run States in America” report is finally available from 24/7 Wall St (and by “long awaited,” I mean, “never even knew existed till MSN clued me in a few minutes ago”), and boy is it…umm…a list?

You can read every excruciating methodological detail and the subsequent state-by-state ranking justifications via the previous link, but if, like me, you only care about the end results, here they are in table form for your viewing convenience:

1. Wyoming
2. Nebraska
3. North Dakota
4. Minnesota
5. Iowa
6. Utah
7. Vermont
8. Virginia
9. Kansas
10. South Dakota		 11. Maryland
12. Hawaii
13. New Hampshire
14. Maine
15. Pennsylvania
16. Wisconsin
17. Washington
18. Alaska
19. North Carolina
20. Missouri		 21. Delaware
22. Connecticut
23. Indiana
24. Ohio
25. Texas
26. Idaho
27. Montana
28. Oklahoma
29. Tennessee
30. Massachusetts		 31. Oregon
32. Georgia
33. Colorado
34. New York
35. Arkansas
36. Alabama
37. New Jersey
38. Mississippi
39. West Virginia
40. Florida		 41. New Mexico
42. Louisiana
43. Rhode Island
44. Kentucky
45. South Carolina
46. Nevada
47. Arizona
48. Michigan
49. Illinois
50. California

 
After scanning the list, I consulted my tentative knowledge of U.S. geography and began to wonder if there might be any sort of cartographical correlation between the best- and worst-run states — to the country as a whole and to each other in particular. So with the motivating combination of a bug up my butt and too much time on my hands, I crafted the following color-coded map using the pain-in-the-ass “Do-It-Yourself” mapmaker utility available at monarch.tamu.edu/~maps2.

The results were…interesting? Irrelevant? Somewhere in between? You tell me:

[Editor's note: The color choices were limited, so for ease of viewing, I tried to make the groupings run lighter --> darker and greener --> bluer as the states moved from best to worst in arbitrary subsets of 10.]

I don’t have time for a deeper analysis now, but if anyone wants to steal my thunder and engage in some armchair analyzing themselves, by all means. I don’t have much of a head for this shit anyway.

0

Life is only on Earth, and not for long

By
Ben Nolan
– November 28, 2011

News:

‎The new figures for 2010 mean that levels of greenhouse gases are higher than the worst case scenario outlined by climate experts just four years ago.

[snip]

The world pumped about 564 million more tons (512 million metric tons) of carbon into the air in 2010 than it did in 2009. That’s an increase of 6 percent. That amount of extra pollution eclipses the individual emissions of all but three countries — China, the United States and India, the world’s top producers of greenhouse gases.

Worse than the worst case scenario about which this was written…

In 2007, when the Intergovernmental Panel on Climate Change issued its last large report on global warming, it used different scenarios for carbon dioxide pollution and said the rate of warming would be based on the rate of pollution. Boden said the latest figures put global emissions higher than the worst case projections from the climate panel. Those forecast global temperatures rising between 4 and 11 degrees Fahrenheit by the end of the century with the best estimate at 7.5 degrees.

7.5 degree delta F is about a 4 degree delta C. From the food issue of FP that ran a couple months back…

The rule of thumb among crop ecologists is that for every 1 degree Celsius rise in temperature above the growing season optimum, farmers can expect a 10 percent decline in grain yields.“

So, assuming every degree added to global temperatures will be a net degree added over and above the growing season optimum, taking 90% (current yield minus 10%) to the power of 4 (90% of 90% 4 times), you get end-of-century grain yields approximately 34% smaller than current yields.

This is without taking into account the inevitable-seeming depletion of a terrifying portion of the world’s aquifers (described in detail in the same article).

Nor, giving the optimists their due, is it taking into account technological advancements in grain production — though marginal improvements attributable to technology, the same article reports, have been shrinking as mass capitalized agriculture has almost run out of traditionally-tended quality land to “modernize.”

Other news….

The UN Food and Agriculture Organisation (FAO) estimates that farmers will have to produce 70% more food by 2050 to meet the needs of the world’s expected 9-billion-strong population. That amounts to 1bn tonnes more wheat, rice and other cereals and 200m more tonnes of beef and other livestock.

Other news…

Canada will announce next month that it will formally withdraw from the Kyoto Protocol, CTV News has learned…

Why? Because CHINA.

Shoot me through the part of my brain that conservatives are apparently missing. Please?

Here’s the prologue to the new Trier film, Melancholia — fitting, no? I’m pecking away at a review, the tl;dr version of which is that it’s basically the best movie I’ve ever seen.

0

Preoccupied about #OWS

By
Trevor Macomber
– November 17, 2011

As the autumn leaves abandon their trees, never to return, so too are Occupy Wall Streeters being evicted from their parks and plazas by forces beyond their control — though in their case, “never to return” is less an inviolable law of nature than a squishy civil suggestion. (Which is to say, it ain’t working.)  However, at the two-month anniversary mark, I think it’s worth reiterating — if you missed it the first time around — this comprehensive article from Business Insider detailing What The Wall Street Protesters Are So Angry About…

I think it’s also worth quoting in full five sterling, straightforward suggestions from Matt Taibbi last month about how to address many of the protesters’ painfully valid concerns:

1. Break up the monopolies. The so-called “Too Big to Fail” financial companies – now sometimes called by the more accurate term “Systemically Dangerous Institutions” – are a direct threat to national security. They are above the law and above market consequence, making them more dangerous and unaccountable than a thousand mafias combined. There are about 20 such firms in America, and they need to be dismantled; a good start would be to repeal the Gramm-Leach-Bliley Act and mandate the separation of insurance companies, investment banks and commercial banks.

2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it’s supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.

3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer’s own money to lobby against him. You can either suck on the public teat or influence the next presidential race, but you can’t do both. Butt out for once and let the people choose the next president and Congress.

4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break, which allows hedge-fund titans like Stevie Cohen and John Paulson to pay taxes of only 15 percent on their billions in gambling income, while ordinary Americans pay twice that for teaching kids and putting out fires. I defy any politician to stand up and defend that loophole during an election year.

5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later. It should be: You make a deal today, you get company stock you can redeem two or three years from now. That forces everyone to be invested in his own company’s long-term health – no more Joe Cassanos pocketing multimillion-dollar bonuses for destroying the AIGs of the world.

(off camera hat tip to Kirk for recommending the Taibbi article)

Page 1 of 712345...Last »