This is What Box Car Republicanism Would Look Like

Those planning to Abstain for Trump in the November 2016 US Presidential Election would do well to consider this powerful photo of what Box Car transportation looks like. It was taken in April, 1945 by Major Clarence Benjamin and shows a train of Jewish prisoners that had been intercepted by Allied Forces. This is the moment they learned that the train would not be heading to a Concentration Camp and they had been liberated. Not suggesting Trump has gas chambers on his mind, but deporting millions of families would certainly not be bloodless.

Jews saved 1945


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Growing Conflict as We Age Between the World and Our Neural Plasticity

I was doing some work on life stages, using the insights of Brian Wexler’s fine book Brain and Culture, and dreamed up this diagram that captures seven life stages in the context of a rapidly changing world what I represent as producing continual new releases of reality and our inner neural plasticity that declines with age. I guess the message of this growing conflict and dissonance between the changing world and our ability to mentally adapt to it is not to rage against the dying of the light but to keep in touch with the changing world, seek to understand it mindfully without too much judgment and thus feed our neural plasticity. Not easy but may reduce the pain of ageing somewhat.

Life Stages After Brian Wexler April 2016

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Economics 101: Our Top Conflict Tips

I thought it would be fun to post my own Top conflict tips on economics:

  1. All Economics is Political Economics: there is no value-free unpolitical economics, so best to surface all political assumptions right at the start and ask who benefits from this economic theory or policy? And call the subject as it used to be called in the 18th century: Political Economy
  2. Inequality is a central factor in economics, driving deflationary pressures, distorting politics and policy. To ignore it or pretend it is not significant is a political act.
  3. Never study economics without studying economic history; to do so would be like studying astronomy without looking at the night sky
  4. In the long run we are all dead as Keynes said; so “equilibrium” achieved in some theoretical “long run” ain’t much use to most of us
  5. There is little sign of equilibrium in most economies I have studied
  6. The Efficient Market Hypothesis of stock markets is rubbish, as the economic history of the last 300 years or so, is one long round of irrational booms and busts, which are really what need understanding
  7. The Rational Expectations Theory of Macroeconomics is also nonsense: not rational, not explaining how expectations are arrived at and not a testable theory.
  8. 80% of economic activity in a modern economy takes places without market price mechanisms, either within families (where’s the pay for washing the dishes?), where the gift relationship is key, or within corporations where admin rules. Prior to modern economies the % was even higher.
  9. Most of the rest of economic activity is conducted in monopolistic/oligopolistically distorted rigged markets so models of perfect competition aren’t much use except as a starting point
  10. Human beings are not rational, bias free economic beings as per micro-economics theory 101
  11. There is any event no such thing as a free market: all markets have governance structures invariably set from without by governments, drug cartels (cartel: get it?) or whoever.
  12. History has seen many different economic theories and studying just current orthodox free market fundamentalist economics of the Chicago School is not a good strategy. Economic theory pluralism is healthy.
  13. The impact of trade agreements is situational; some are good, so not. Free Trade fundamentalism is a pretty flawed theory.
  14. Creating an opaque mathy economic theory that is not rigorously tested against the real world is more like astrology than a real science.
  15. Economics needs to continually conduct After Action Reviews, admit its mistakes and course correct continuously in the light empirical testing of its predictions and policy recommendations.
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Hope 101 by Peter Radford

Good post in Real World Economics this morning from Peter Radford (an economist): fundamental rule in studying economics: never do it without studying economic history.

from Real World Economics: Hope 101?
April 23, 2016
from Peter Radford
“A nice way to end the week:
I overheard a conversation between two high school students this morning.
The first person was asking about which classes the second was going to take next. One of those mentioned was microeconomics.
“Oh, that’s easy” said the first, “You just have to remember that its all rubbish – they want you to believe that people are rational, and that there’s all this perfection in the world.”
“Really?” responded the second, “That’s really dumb. I wonder why they do that?”
“It doesn’t matter, it’s economics”
“Well maybe I’ll take history instead, at least I might learn something useful.”
And, yes, this was the conversation.
A small ray of hope?”
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Isaiah Berlin’s (1909-1997) Top Ten Conflict Tips

I thought it time to add one of our Top Ten Conflict Tips from the British Philosopher Isaiah Berlin

  1. Both liberty and equality are among the primary goals pursued by human beings throughout many centuries; but total liberty for wolves is death to the lambs, total liberty of the powerful, the gifted, is not compatible with the rights to a decent existence of the weak and the less gifted.”
  2. Philosophers are adults who persist in asking childish questions. 
  3. The first people totalitarians destroy or silence are men of ideas and free minds.
  4. To understand is to perceive patterns.
  5. Injustice, poverty, slavery, ignorance – these may be cured by reform or revolution. But men do not live only by fighting evils. They live by positive goals, individual and collective, a vast variety of them, seldom predictable, at times incompatible.
  6. Only barbarians are not curious about where they come from, how they came to be where they are, where they appear to be going, whether they wish to go there, and if so, why, and if not, why not.
  7. All forms of tampering with human beings, getting at them, shaping them against their will to your own pattern, all thought control and conditioning is, therefore, a denial of that in men which makes them men and their values ultimate.
  8. The fundamental sense of freedom is freedom from chains, from imprisonment, from enslavement by others. The rest is extension of this sense, or else metaphor.
  9. We are doomed to choose and every choice may entail irreparable loss.”
  10. The fox knows many things, but the hedgehog knows one big thing.
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Being Right: Isaiah Berlin (1909-1997)

“Few things have done more harm than the belief on the part of individuals or groups (or tribes, or states or nations or churches) that he or she are in sole possession of the truth, especially about how to live, what to be and do – that those who differ from them are not merely mistaken, but wicked or mad: and need restraining or suppressing. It is a terrible and dangerous arrogance to believe that you alone are right, have a magical eye which sees the truth, and that others cannot be right if they disagree.”

Isaiah Berlin

Isaiah Berlin

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Why Did No One See It Coming?

Great article in Real World Economics by Asad Zaman:

In the wake of the Global Financial Crisis (GFC 2007), the Queen of England asked academics at the London School of Economics why no one saw it coming. The US Congress constituted a committee to investigate the failure of economic theory to predict the crisis.  Unfortunately, economists remain unable to answer this critical question. Some say that crises are like earthquakes, impossible to forecast. Others take refuge behind technical aspects of complex mathematical models. With monotonous regularity, more than 200 monetary crises have occurred globally, ever since financial liberalization started in the 1980’s. the methodology currently in use in economics systematically blinds economists to the root causes of these crises. Many leading economists have called for radical changes to bring economic theory into closer contact with reality.

Many who had hoped that the  GFC would serve as a wake-up call for the profession have been extremely disappointed by subsequent developments. Although there has been a flurry of papers on various aspects of the crisis, there has been no fundamental re-thinking. Theories which assume free markets will create full employment and maximal growth, continue to be taught at  universities. The rational expectations theory of Eugene Fama says that the stock market prices always correctly reflect the information available to the market, and there is no possibility of a bubble – a systematic over-valuation of all stock market prices. Under the influence of this theory, Robert Shiller’s demonstration that the stock market prices were over-inflated went unheeded. Similarly, warnings by many Cassandras like Steve Keen, Raghuram Rajan, Dean Baker, Nouriel Roubini, were ridiculed and ignored by senior level policy makers infatuated with free market dogma.

The last nail in the coffin of the US Economy was driven in when the Glass-Steagall act was repealed in 1999. The Great Depression in 1929 had been caused by irresponsible speculation by banks. In 1933, the Glass-Steagall act prohibited banks from investing in stocks, in order to prevent recurrences of this disaster. This prevented system-wide banking crises for 50 years, until the era of financial de-regulation ushered in by Reagan & Thatcher. Repeal of the act, combined with a lax monetary policy, led to precisely what it was meant to prevent. Banks went on a wild orgy of credit creation, enabling stock purchases of trillions of dollars backed by defective mortgage based securities. Banking crises like this routinely happen when banks are not strictly regulated, since they gamble with the depositors’ money. Financial moguls have created and popularized the misconception that banks are the backbone of the financial system, and must be supported regardless of misdeeds. Thus big banks are routinely bailed out when they indulge in wild gambles. This incentivizes banks to speculate: if they win, it is their personal gain. If they lose, someone else pays.

Even though economists blinded by free market ideologies could not predict it, the global financial crisis was very predictable. Giving permission to banks to gamble with other people’s money led to a financial crisis within the short span of eight years. However, what was surprising and perhaps unpredictable was the aftermath. Instead of being tarred and feathered, Eugene Fama went on to win a Nobel Prize in Economics. Nobel Laureate Robert Lucas, who confidently asserted that economists have learned how to prevent recessions, continues to enjoy the respect of the profession. Ben Bernanke, who presided over the Federal Reserve during the Global Financial Crisis, is being lauded as a hero. He has written a self-congratulatory book entitled “The Courage to Act” in which he praises himself for taking the heroic actions necessary to save the world from the complete collapse of the financial system. As Princeton economists Atif Mian and Amir Sufi have shown in their celebrated book “The House of Debt”, these actions were wrong, and harmful to the economy. The trillion dollar bailout given to banks by Bernanke should have been given to the distressed homeowners with the defaulting mortgages. That would have been just, and would also have saved the economy from the Great Recession, by preventing the large scale transfer of wealth from the impoverished mortgagers to the rich and criminal bankers.

Not only do the faulty theories which led to the crisis continue to be taught to unsuspecting students all over the world, but all efforts to reform the defective system have been blocked. In the US Congress, proposals to bring back the highly successful regulatory system which was created after the Great Depression failed. A few bills which were passed were quietly repealed later. There have been large numbers of seminars and conferences on the need for a new regulatory framework to protect the global financial system, but no action has been taken to create effective new regulations. Thus the system is ripe for another crisis, and there are many signs that another one is on the way.

The reader might wonder, like the author, why there has been no learning from experience? The answer lies in the statistics recently published by Oxfam. The number of people who own half of the wealth of the planet shrank rapidly from 388 in 2010 to only 62 in 2015. The richest people benefit vastly from the financial crises which destroy the wealth of the middle class. This is because the middle class is forced to borrow at interest from those who have the money. This enables the already wealthy to get rich much faster than in normal times where people have enough money for their own needs. To top it all, current economic theories make no mention of debt as an important economic factor. These seriously defective theories are of vital importance in concealing the workings of the mechanism which creates this massive concentration of wealth in the hands of a tiny minority. In subsequent articles we will explore the large number of ways in which current economic theory is defective, and the radical reforms needed to create a better economic theory for the twenty first century.

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