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  • feedwordpress 08:01:19 on 2019/05/12 Permalink
    Tags: Agricultural Adjustment Act, Andrew Kortina, attention economy, , , economics, , New Deal, social philosophy, systems theory,   

    “Thus did a handful of rapacious citizens come to control all that was worth controlling in America”*… 


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    history-of-capital-ai

    The evolution of capitalism (“the capital AI machine”) as a series of levels that were unlocked by new “learning” APIs to humans

     

    Consider capitalism as a highly efficient objective function (or “AI”) with its parameters optimized for the satisfaction of our short term desires rather than our long term interests.

    Paranoia about runaway feedback loops – in consumer capitalism, artificial intelligence, mass media, ‘Wrestlemania politics,’ etc – ultimately stems from the inscrutability of the emergent behavior of these complex systems to the individual actors and observers operating within them.

    Rather than responding with Luddite / anarchist nihilism, we should remember that technological and social systems like these have dramatically reduced our exposure to the unpredictability of the natural world and greatly improved living conditions on a number of dimensions over the past few centuries.

    At the same time, we should not ignore warning signs of a dystopian future, nor should we hope that a ‘personnel change’ of institutional leaders will solve our problems.

    Because the problems at hand are complex systems problems – where the root causes are not the actors themselves, but the ill-designed structures and incentives that dictate their actions – we should think about redesigning the rules and incentives of social, political, and economic systems as the path forward…

    Andrew Kortina explains modern capitalism as a system– one that, for all of its all-too-manifest faults, should be saved; then he starts the conversation about how to do that salvaging: “History of the Capital AI & Market Failures in the Attention Economy.”  Mildly geeky, but richly provocative– which is to say, useful, whether one buys his suggested solutions or not– it’s eminently worthy of a read.

    * “Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.  – Kurt Vonnegut, God Bless You, Mr. Rosewater

    ###

    As we wonder about the water in which we swim, we might recall that it  was on this date in 1933 that the Agricultural Adjustment Act came into force.  A central piece of New Deal legislation, the AAA aimed to aid farmers devastated by reduced demand for their crops by creating price supports via a series of government purchases (of crops and livestock) and subsidies (essentially payments not to plant/grow).

    The program was controversial in its time– it made previously independent farmers dependent on the government– but it worked; average farm income rose 50% from 1932 to 1935.  It’s elements– government purchase and subsidy– survive to this day, evolved into (many of) the provisions of the Farm Bill, passed by Congress every five years or so… even though the constituency of small farmers the Act was intended to serve has largely given way to an agricultural landscape dominated by a handful of gigantic corporate players.

    farmer

    A Roosevelt County New Mexico farmer and a County Agricultural Conservation Committee representative review the provisions of the Agricultural Adjustment Act (AAA) farm program to determine how it can best be applied on that particular acreage

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  • feedwordpress 08:01:02 on 2019/05/06 Permalink
    Tags: , economics, , Flash Crash, , , , , ,   

    “There are three types of lies — lies, damn lies, and statistics”*… 


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    Charts

    “Hiding in Plain Sight”

     

    A chart’s purpose is usually to help you properly interpret data. But sometimes, it does just the opposite. In the right (or wrong) hands, bar graphs and pie charts can become powerful agents of deception, tricking you into inferring trends that don’t exist, mistaking less for more, and missing alarming facts. The best measure of a chart’s honesty is the amount of time it takes to interpret it, says Massachusetts Institute of Technology perceptual scientist Ruth Rosenholtz: “A bad chart requires more cognitive processes and more reasoning about what you’ve seen.”…

    Five examples (like the one above) of the kinds of tricks that charts can try to pull, explained: “Five Ways to Lie with Charts.”

    * Benjamin Disraeli

    ###

    As we stack the deck, we might recall that it was on this date in 2010, at 2:32p EDT, that the U.S. stock markets suffered a “Flash Crash”– in a period of just 36 minutes, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite collapsed and rebounded (the Dow, e.g., lost 9% of its value, then recovered most of it).

    Nearly five years later, the SEC charged a 36-year-old small-time trader who worked from his parents’ modest stucco house in suburban west London with having caused the collapse (using spoofing and layering, along with a form of front-running– all now explicitly outlawed).  But many experts are not convinced; to this day, there are numerous theories– but no consensus– as to the cause(s) of the crash.

    Flashcrash-2010

    The DJIA on May 6, 2010 (11:00 AM – 4:00 PM EDT)

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  • feedwordpress 18:30:54 on 2019/02/17 Permalink
    Tags: , economics, Engles, GDP, , , , , ,   

    “The welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP”*… 


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    GDP

     

    Is the world becoming increasingly prosperous? It would be hard to answer “yes” right now, at least so far as the leading high-income economies are concerned. Yet the longstanding bellwether of economic progress – inflation-adjusted GDP – has been growing across most of the OECD since 2010, suggesting that everything is fine.

    Some 80 years after GDP was introduced, nearly everyone (apart from the indicator’s stewards) has concluded that it is  of economic progress. But there is no consensus yet on a possible replacement. Reaching agreement on an alternative will require a new concept of prosperity and a new way to measure whether living standards are improving…

    Over eight decades after its introduction, there is a widespread consensus that GDP is no longer a useful measure of economic progress.  Its successor will need to be compelling and tell a persuasive story, consistent with experience, of what is happening in our economies.  Diane Coyle offers some leads on possible successors: “What Will Succeed GDP?

    * Simon Kuznets

    ###

    As we grope for good gauges, we might recall that it was on this date in 1848 that a political pamphlet by the German philosophers Karl Marx and Friedrich Engels, The Communist Manifesto, was published.  Commissioned by the Communist League and written in German, it appeared as the Revolutions of 1848 began to erupt.  Subsequently, of course, Marx elaborated on his argument (with Engel’s help, after Marx’s death) in Das Kapital.

    150px-Communist-manifesto

    Cover of the first edition

    source

     

     
  • feedwordpress 09:01:51 on 2019/01/29 Permalink
    Tags: Albert O Hirschman, , , economics, , , Jeremy Adelman, John Gay, The Beggars Opera, ,   

    “Emergencies have always been necessary to progress”*… 


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    economy

    The 2008 financial crisis continues to plague the world economy and our politics. It’s also messing with how we understand our narratives of global integration. Until recently, going global implied exuberant stories about one-world connectivity and technocratic togetherness. Now, it’s the other way around: the stories of our times are consumed with collapses, extinctions and doom. It’s a playbook for nativists, who see interdependence as a recipe for catastrophe.

    Our big narratives were once capable of more nuance than the pendular swing from euphoria to dysphoria. For every 18th-century Enlightenment story of hope, there was a shadow of decline; in the 19th century, liberals had to joust with conservative and radical prophets of demise. Some even saw crisis as an opportunity. Influenced by Karl Marx, the Austrian economist Joseph Schumpeter in 1942 made a virtue out of ruin. There could be something creative about bringing down tired old institutions. The late German-born economist Albert O Hirschman thought of disequilibria as a potential source of new thinking. In 1981, he distinguished between two types of crisis: the kind that disintegrates societies and sends members scrambling for the exits, and what he called an ‘integrative crisis’, one in which people together imagine new ways forward…

    Jeremy Adelman, the Henry Charles Lea professor of history and director of the Global History Lab at Princeton, argues that we should look for opportunities in our travails: “Why we need to be wary of narratives of economic catastrophe.”

    See also: “The Three Revolutions Economics Needs.

    * “Emergencies have always been necessary to progress. It was darkness which produced the lamp. It was fog that produced the compass. It was hunger that drove us to exploration. And it took a depression to teach us the real value of a job.”                               – Victor Hugo

    ###

    As we search for silver linings, we might recall that it was on this date in 1728 that John Gay’s The Beggar’s Opera premiered at the Lincoln’s Inn Fields Theatre in London.  It ran for 62 consecutive performances, the longest run in English theater history and second longest run in the Western world up to that time (after 146 performances of Robert Cambert’s Pomone in Paris in 1671).

    260px-william_hogarth_016

    Painting based on scene 11 Act III of The Beggar’s Opera; by William Hogarth, c. 1728 [source]

     
  • feedwordpress 09:01:08 on 2019/01/11 Permalink
    Tags: , economic theory, economics, Federalist, , Founding Father, , , , national bank,   

    “Economic theory is the art of pulling a rabbit out of a hat right after you’ve stuffed it into the hat in full view of the audience”*… 


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    economic-crisis

    Many critics were disappointed the 2008 crisis did not lead to an intellectual revolution on the scale of the 1930s. But the image of stasis you’d get from looking at the top journals and textbooks isn’t the whole picture — the most interesting conversations are happening somewhere else. For a generation, leftists in economics have struggled to change the profession, some by launching attacks (often well aimed, but ignored) from the outside, others by trying to make radical ideas parseable in the orthodox language. One lesson of the past decade is that both groups got it backward. Keynes famously wrote that “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” But in recent years the relationship seems to have been more the other way round. If we want to change the economics profession, we need to start changing the world. Economics will follow.

    From J.W. Mason‘s helpful survey of economic thought since the Crash of 2008: “How a Decade of Crisis Changed Economics.”

    * Joan Robinson

    ###

    As we contemplate counting, we might send revolutionary birthday greetings to Alexander Hamilton; he was born on this date in 1755 (or 1757, there is some scholarly debate about the year, but not the date).  A Founding Father of the United States, Hamilton created the Federalist Party (proponent of stronger national government than provided by the Articles of Confederation), the United States Coast Guard, and the New York Post newspaper.  But he was probably most notably the creator of the new nation’s financial system.  The main author of the economic policies of George Washington’s administration, he took the lead in the Federal government’s funding of states’ debts, and established a national bank, a system of tariffs, and friendly trade relations with Britain.  His vision included a strong central government led by a vigorous executive branch, a strong commercial economy, a national bank supporting manufacturing, and a strong military…. in all of which he stood most frequently opposed to Thomas Jefferson, who favored agrarian and small government policies.

    220px-alexander_hamilton_portrait_by_john_trumbull_1806 source

     

     
  • feedwordpress 09:01:06 on 2019/01/04 Permalink
    Tags: Alan Greenspan, , , economics, , Federal Reserve, , ,   

    “Efficiency is doing things right; effectiveness is doing the right things.”*… 


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    Feed-Efficiency-4a

    Eliminating waste sounds like a reasonable goal. Why would we not want managers to strive for an ever-more-efficient use of resources? Yet as I will argue, an excessive focus on efficiency can produce startlingly negative effects, to the extent that superefficient businesses create the potential for social disorder. This happens because the rewards arising from efficiency get more and more unequal as that efficiency improves, creating a high degree of specialization and conferring an ever-growing market power on the most-efficient competitors. The resulting business environment is extremely risky, with high returns going to an increasingly limited number of companies and people—an outcome that is clearly unsustainable. The remedy, I believe, is for business, government, and education to focus more strongly on a less immediate source of competitive advantage: resilience. This may reduce the short-term gains from efficiency but will produce a more stable and equitable business environment in the long run…

    Roger Martin‘s eloquent argument for a longer-term perspective and for robustness as a primary goal: “The High Price of Efficiency.”

    [image above: source]

    * Peter Drucker

    ###

    As we take the long view, we might recall that it was on this date in 2000 that Alan Greenspan was nominated for his fourth term as Chairman of the Federal Reserve.  An accolyte of Ayn Rand, he oversaw an “easy money” Fed that, many suggest, was a leading cause of the dotcom bubble (which began later that year) and the subprime mortgage crisis, (which led to the Great Recession, and which occurred within a year of his departure from the Fed).

    220px-Alan_Greenspan_color_photo_portrait source

     

     
  • feedwordpress 09:01:36 on 2018/12/07 Permalink
    Tags: Bonus Army, economics, GINI index, , , Hunger March, , ,   

    “The good we secure for ourselves is precarious and uncertain until it is secured for all of us and incorporated into our common life”*… 


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    inequality Scales

    … It might be that people have been studying inequality in all the wrong places. A few years ago, two scholars of comparative politics, Alfred Stepan, at Columbia, and the late Juan J. Linz—numbers men—tried to figure out why the United States has for so long had much greater income inequality than any other developed democracy. Because this disparity has been more or less constant, the question doesn’t lend itself very well to historical analysis. Nor is it easily subject to the distortions of nostalgia. But it does lend itself very well to comparative analysis.

    Stepan and Linz identified twenty-three long-standing democracies with advanced economies. Then they counted the number of veto players in each of those twenty-three governments. (A veto player is a person or body that can block a policy decision. Stepan and Linz explain, “For example, in the United States, the Senate and the House of Representatives are veto players because without their consent, no bill can become a law.”) More than half of the twenty-three countries Stepan and Linz studied have only one veto player; most of these countries have unicameral parliaments. A few countries have two veto players; Switzerland and Australia have three. Only the United States has four. Then they made a chart, comparing Gini indices with veto-player numbers: the more veto players in a government, the greater the nation’s economic inequality. This is only a correlation, of course, and cross-country economic comparisons are fraught, but it’s interesting.

    Then they observed something more. Their twenty-three democracies included eight federal governments with both upper and lower legislative bodies. Using the number of seats and the size of the population to calculate malapportionment, they assigned a “Gini Index of Inequality of Representation” to those eight upper houses, and found that the United States had the highest score: it has the most malapportioned and the least representative upper house. These scores, too, correlated with the countries’ Gini scores for income inequality: the less representative the upper body of a national legislature, the greater the gap between the rich and the poor.

    The growth of inequality isn’t inevitable. But, insofar as Americans have been unable to adopt measures to reduce it, the numbers might seem to suggest that the problem doesn’t lie with how Americans treat one another’s kids, as lousy as that is. It lies with Congress…

    The estimable Jill Lepore on accounting for inequality: “Richer and Poorer.

    [image above: source]

    * Jane Addams

    ###

    As we search for the balance, we might recall that it was on this date in 1931 that the National Hunger March gathered in Washington DC to demand jobs and relief.  Massing in front of Congress, the 1,670 marchers were met by an estimated 1500 police, and 1000 Marines, all armed.  They left without a hearing from President Hoover or any other official, but did have an impact: they set the stage for the 1932 march of the Bonus Army where 43,000 marchers – many veterans – descended on Washington DC to demand payment for the “service certificates” which had given to them in 1924 in lieu of cash.

    hunger-march-in-pictures source

     

     
  • feedwordpress 10:01:20 on 2018/11/08 Permalink
    Tags: Civil Works Administration, economics, , Financial crash, , , , , Works Progress Administration   

    “A turning point at which modern history failed to turn”*… 


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    William Powhida: Griftopia, 2011; a ten-foot-wide ‘visual translation’ of the 2008 financial crisis based on Matt Taibbi’s 2010 book of the same title

    William Powhida: Griftopia, 2011; a ten-foot-wide ‘visual translation’ of the 2008 financial crisis based on Matt Taibbi’s 2010 book of the same title

     

    The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations…

    Read Robert Kuttner‘s review of Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze: “The Crash That Failed.”

    * G.M. Trevelyan

    ###

    As we struggle to avoid repeating past mistakes, we might recall that it was on this date in 1933 that President Franklin D. Roosevelt announced the Civil Works Administration.  Intended as a short-term agency charged quickly to create jobs for millions of unemployed Americans through the hard winter of 1933–34, it was closed in March of 1934– having provided work for 4 million workers who laid 12 million feet of sewer pipe and built or improved 255,000 miles of roads, 40,000 schools, 3,700 playgrounds, and nearly 1,000 airports.

    CWA was effectively replaced by the Works Progress Administration (WPA), which operated on a much larger scale.  Almost every community in the United States had a new park, bridge or school constructed by the agency.

    220px-Civil_Works_Administration_(CWA)_workmen_cleaning_and_painting_the_gold_dome_of_the_Denver_Capitol,_1934_-_NARA_-_541904

    Civil Works Administration workers cleaning and painting the gold dome of the Colorado State Capitol (1934)

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  • feedwordpress 08:01:53 on 2018/10/30 Permalink
    Tags: , , , economics, Elinor Ostrom, , Hermes, , , ,   

    “What is common to many is least taken care of”*… 


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    comic2-1755

    As an evolutionary biologist who received my PhD in 1975, I grew up with Garrett Hardin’s essay “The Tragedy of the Commons,” published in Science magazine in 1968. His parable of villagers adding too many cows to their common pasture captured the essence of the problem that my thesis research was designed to solve. The farmer who added an extra cow gained an advantage over other farmers in his village but it also led to an overgrazed pasture. The biological world is full of similar examples in which individuals who behave for the good of their groups lose out in the struggle for existence with more self-serving individuals, resulting in overexploited resources and other tragedies of non-cooperation…

    Unbeknownst to me, another heretic named Elinor Ostrom was also challenging the received wisdom in her field of political science. Starting with her thesis research on how a group of stakeholders in southern California cobbled together a system for managing their water table, and culminating in her worldwide study of common-pool resource (CPR) groups, the message of her work was that groups are capable of avoiding the tragedy of the commons without requiring top-down regulation, at least if certain conditions are met (Ostrom 1990, 2010). She summarized the conditions in the form of eight core design principles: 1) Clearly defined boundaries; 2) Proportional equivalence between benefits and costs; 3) Collective choice arrangements; 4) Monitoring; 5) Graduated sanctions; 6) Fast and fair conflict resolution; 7) Local autonomy; 8) Appropriate relations with other tiers of rule-making authority (polycentric governance). This work was so groundbreaking that Ostrom was awarded the Nobel Prize in economics in 2009…

    David Sloan Wilson on the design principles that can solve the tragedy of the commons: “The Tragedy of the Commons: How Elinor Ostrom Solved One of Life’s Greatest Dilemmas.”

    For more on the tragedy of the commons, see here— also the source of the cartoon above.

    * Aristotle

    ###

    As we share and share alike, we might recall that it was on this date in 1937 that we– the entire population of the earth– narrowly avoided total obliteration, as the 500,000 ton asteroid/planetoid 69230 Hermes failed to collide with our planet.  It missed by twice the distance of the Moon… but that’s only three seconds.  (In 1989, the earth had an even closer approach, but by the smaller 4581 Asclepius.)

    69230 Hermes

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  • feedwordpress 08:01:41 on 2018/09/25 Permalink
    Tags: 100 dollar bill, AM/FM Debate, cash, , economics, , Franco Modigliani, , life-cycle hypothesis, ,   

    “It’s All About The Benjamins”*… 


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    Hundred-Dollar-Bill

    A funny thing happened on the way to a world of cryptocurrencies and mobile payments. Cash became more popular than ever. The main reason? The one hundred dollar bill.

    In 2017, for the first time ever, the one hundred dollar bill became the most popular US bill in circulation, beating out the one dollar bill. It is quite the turn of events for Benjamin Franklin-faced banknote. Just 10 years ago, it was less common than both the $20 and the $1.

    The share of US dollars in circulation as a share of GDP rose from about 6% in 2010 to 9% in 2018, according to the Federal Reserve. Increased use of $100 bills has been the primary driver…

    Why cash is king: “There are now more $100 bills than $1 bills in the world.”

    * Puff Daddy

    ###

    As we contemplate currency, we might spare a thought for Franco Modigliani; he died on this date in 2003.  An economist, he originated the life-cycle hypothesis, which attempts to explain the level of saving in the economy, suggesting that consumers aim for a stable level of consumption throughout their  lifetime (for example by saving during their working years and then spending during their retirement)– for which he was awarded the Nobel Prize in Economics in 1985.

    Among his other accomplishments, he initiated the Monetary/Fiscal Debate when he (and co-author Albert Ando) wrote a scathing critique of an early 1960s paper by Milton Friedman and David Meiselman.  Freidman and Meiselman had argued (in effect) that monetary policy was the only effective tool in managing an economy; Modigliani and Ando pointed out flaws in their analysis and made the case for fiscal measures (effectively, government spending) as equally-effective tools.  The debate– known by the antagonists’ initials as the AM/FM Debate– rages to this day.

     source

     

     
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