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March 13, 2010
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addendarb you have outlined the wage scaling of a manager here marx called these “products” of universal labor as to return on capital per se that it's cabled togather with entrepreneurial innovation and get up and go if that weren't enough the threads themselves are braids of threads better to conclude with the interpenetration of opposites doctrine . Posted by pinky at 01:20 PM |
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marx rawls“marx held that labor per say does not have value “it (labor) produces all exchange value “Rawls on Marx; December 1973” Rawls on Marx; December 1973, by Daniel Little: John Rawls taught a course on the history of political philosophy throughout much of his career at Harvard University. The course contained his description and analysis of the most important figures in modern political philosophy, including Mill, Locke, Rousseau, Kant, and Marx. The course evolved over time; the final version from 1994 is edited in Samuel Freeman's Lectures on the History of Political Philosophy. I served as graduate assistant in Rawls's lectures on this subject in fall 1973, and recently reread my notes of the course. Here are my notes of a particularly important lecture towards the end of the course: Rawls's treatment of Marx's ideas about economic justice. This lecture demonstrates Rawls's understanding of the fundamentals of Marx's economic theories and the labor theory of value. (I am inclined to think that Joseph Schumpeter's History of Economic Analysis (1954) was an important source for Rawls on the history of economic thought, including Marx's economics, though I can't at this moment confirm this.) This lecture is particularly significant in that it is roughly simultaneous with the emergence of “analytical Marxism” announced by the publication of an important article by Allen Wood, “The Marxian Critique of Justice” in Philosophy and Public Affairs in 1972 (link). MARX'S ATTITUDE TOWARDS THE THEORY OF JUSTICE John Rawls, History of Political Philosophy, Phil 171, fall 1973 [Quoting Rawls:] Capital seems to be a description of an unjust society. The owners of the means of production live in relative abundance and idleness at the expense of the ever-growing class of wretched laborers. But Marx doesn't make any attempt to present an argument that capitalism is unjust, nor any concept of justice which would back up such an argument. Moreover, we have vitriolic criticisms of utopian socialists who did condemn capitalism on the grounds of justice. Marx asserts on the contrary, that capitalism is perfectly fair, perfectly just. Why so? (a) It is not enough to say Marx is averse to preaching or moralizing. He is so averse; but judgments of justice can be reasoned and hence not properly described as “preaching”. (b) It is not enough to say that he didn't want the critique of capitalism to rest on some social ideal. He does reject the utopian socialists' program; but that would not prevent him from stating his own opinion. And he doesn't do that either. He reproaches the utopians for not realizing that some major social change must precede an adjustment along moral lines. Here is my conjecture as to why Marx didn't judge capitalism unjust. He thinks of justice as a political and juridical conception which is associated with a particular conception of the state and society; so it belongs to the prehistory of mankind. Given his picture of human society, these political and juridical institutions belong to the superstructure, and reflect the workings of the mode of production. For each mode of production there is a conception of justice appropriate to it, at least in prehistory. A further qualification: It is worthwhile to distinguish between the high time of a form and its low period — where the form is a progressive force and where it stands in contradiction to the mode of production. Here is a brief discussion of justice in Capital III: This view seems to suggest a sort of relativism; but this would be a faulty conclusion. We have a theory matching theories of justice with modes of production, and we might at some time find a function systematically linking them. Let's now try out this suggestion on the conception of surplus value. The utopians argued that workers ought to be paid the value of their contribution to the firm. Since they are not, capitalism is unjust. Marx rejects this view. It makes the appropriation of surplus value appear accidental — as if the capitalists could act differently. Marx required a theory of value which made the appropriation of surplus value a necessary part of the capitalist system. On the theory of value every commodity is exchanged for a strict equivalent. Marx distinguishes between the product of labor and labor power. The worker is given the value of his labor power, not his product. It is on this ground that he is fairly treated. Thus he is undercutting the Ricardian socialist position by rejecting and replacing the principle of contribution. It is the system itself which brings about surplus value, not the behavior of individuals who violate moral principles. Surplus value is an intrinsic part of the working of the social institutions of capitalism. Consider the description of the production of surplus value in Capital. Marx thus rejects the Ricardian principle of contribution. He finds it a bourgeois notion, basing property rights on one's labor. Summing up. (1) Marx views the notion of justice as a virtue of legal forms and institutions, and thus perhaps it is a notion which belongs to prehistory. The state depends upon the mode of production. (2) Marx doesn't deny that the various conceptions of justice have formal features in common — exchange of equivalents for equivalents — but the notion of what is equivalent is determined in different ways. Marx would be prepared to admit that capitalism in its high period is just. One reason he rejects the utopian's argument is that it is misleading. It rests on a misapprehension of where the essential problem lies: not in the superstructure, but in the mode of production. He felt that the key enterprise is to give a scientific theory of the mode of production. A second point: justice is a distributive notion. The appeal to justice suggests that we can separate the mode of distribution from the mode of production. This is for Marx incorrect. Appeals to justice are thus supposed to be superficial. Moreover, appeal to justice suggests that important social change can be achieved by legislation. [Other relevant materials from the course:] From the syllabus: (a) Marx's criticism of the liberal state; (b) His attitude towards theories of justice; © The theory of alienation and exploitation; (d) The conception of rational human society Final exam questions on Marx: 4. Present and discuss Marx's theory of alienation (as developed in the Economic and Philosophic Manuscripts) Posted by Mark Thoma on Wednesday, March 10, 2010 at 02:14 AM in Economics, History of Thought Save to del.icio.us Tweet This Permalink Comments (101)
paine said… rawls see only the super structure in stasis the necessary material premise Reply Mar 10, 2010 at 04:49 AM bakho said… Reply Mar 10, 2010 at 04:58 AM paine said in reply to bakho… you are a nature boy eh ??? Reply Mar 10, 2010 at 05:03 AM cm said in reply to bakho…
paine said… the others using the expression pre history i strongly suggest it not be used in common discourse the phrase below here paraphrased all history up until now the portions by marx in german ideology Reply Mar 10, 2010 at 05:02 AM anarcho said… Actually, Proudhon was the first to argue this “Marxist” position in 1840's classic “What is Property?” — as he put it, workers produced more value than they received in wages: “Whoever labours becomes a proprietor . . . And when I say proprietor, I do not mean simply (as do our hypocritical economists) proprietor of his allowance, his salary, his wages, – I mean proprietor of the value his creates, and by which the master alone profits . . . The labourer retains, even after he has received his wages, a natural right in the thing he has produced.” Property meant “another shall perform the labour while [the proprietor] receives the product.” So the “free worker produces ten; for me, thinks the proprietor, he will produce twelve” and so to “satisfy property, the labourer must first produce beyond his needs.” This is why “property is theft!” From: Introduction: General Idea of the Revolution in the 21st Century This is the introduction to a new anthology of Proudhon's writings called “Property is theft!” (due out later this year) — some material is on-line already: http://www.property-is-theft.org Proudhon: “Property is the right to enjoy and dispose of another’s goods, – the fruit of another’s labour” Reply Mar 10, 2010 at 05:06 AM OhNoNotAgain said in reply to anarcho… Yes, but was Marx advocating otherwise ? I read the above to indicate that Marx thought that it was perfectly just for labor to be compensated simply on the basis of their input. I know very little about Marx other than the cursory knowledge that most people possess, so the above is indeed an actual question. :-) Reply Mar 10, 2010 at 05:28 AM paine said in reply to OhNoNotAgain… yes that is precisely his view the peculiar commodity labor power btw way a barber cutting your hair does get the full value of his service capitalists find ways to employ barbering power at this full hourly value and yet say by using a cutting machine owned by the capitalist fair v?? by a cutting machine pal…
OhNoNotAgain said in reply to paine… Indeed, it thickens. What would one say about an employee-owned business ? Are the workers exploiting themselves ? :-) For me, the issue is more one of access to capital. Yes, one can always say that a stylist working for Supercuts, or something similar, can go out and start their own shop at any time. But, does said stylist make enough money to be able to save for such an occasion, and in reality, do our community banks do a good enough job of making micro-loans available to people that need a little extra startup capital ? Reply Mar 10, 2010 at 05:33 PM paine said in reply to OhNoNotAgain… ” the issue is more one of access to capital” access to credit and yes access to credit has crimped many a the co op gets rejected
paine said in reply to anarcho… is not the same as labor time as exchange value the common post ricardian left conflation marx held that labor per say does not have value the point is to distinguish the value of the commodity purchased labor power Reply Mar 10, 2010 at 06:15 AM julio said in reply to paine… the labor “power” which is a misuse of the word when applied to the commodity, the thing that gets me a seat at the exchange table the use value created from that which is the pot we'll split the rules of the negotiation which is where “power” comes in If I'm sitting at the table selling my labor “power” I'm wearing two hats, commodity and salesman. The former does not have any “power” (which is why slavery or $1/day jobs are the same and equally moral or immoral within the capitalist system why is $0 such a different number than $1) Reply Mar 10, 2010 at 11:36 AM paine said in reply to julio… i love you man “the use value … is the pot we'll split” but still i've already bought your laboring services and the use value to me of your laboring services is not the use value of your product which is relevent to my customer not me the rest is merely the julio use of vthe word power limit total working hours boys and girls something my hero sandwitch man never fails to champion as well as knocking the wages fund theory in a cocked hat Reply Mar 10, 2010 at 11:57 AM julio said in reply to paine… Isn't this last number just the difference between what you pay me (exchange value of my labor) and what you charge for the portion of my services built into the thing you sell? You “already bought the exchange value of your product” — no, that is the transaction I'm focusing on, at which price did you purchase it and how was that price determined The exchange value you define here is not some quantity determined mathematically by some “market forces” which determine some “market value” It is just a number bounded from below by starvation and above by the “market value” of the commodities the capitalist sells to the customers (“market value” assuming said customers have some choice) the number changes e.g. when capitalists buy senators. Re “julioism vs marxism”, yes, I know, I need to RTFM. Reply Mar 10, 2010 at 12:58 PM paine said in reply to julio… you operate at the factory door then he enters the factory you aren''t wrong production is jointly of use values and exchange values now read hegel to discover how complexly Reply Mar 10, 2010 at 01:48 PM paine said in reply to paine… Reply Mar 10, 2010 at 05:44 PM julio said in reply to paine… I knew I was going to have to RTFM. Reply Mar 10, 2010 at 06:27 PM paine said in reply to julio… in essence the wage labor form of production collides with the chatel labor form of production i simplify terribly Reply Mar 10, 2010 at 12:01 PM john c. halasz said in reply to julio… The point is that the worker doesn't realize himself through his labor or in its products by reproducing the conditions of his existence. Rather he is already alienated from the get-go and converted/objectified into a commodity, labor-power, as a condition for the reproduction of his existence. But it is not the worker who realizes “value” through his “voluntary” labor. Rather value is measured as abstract, average, socially necessary labor-time, which is abstracted/extracted by the system of social relations of exchange and production, (which constantly transforms value in the course of its unfolding/”development”). Which is why Marx constantly emphasizes that commodities are always exchanged at equivalent value. But capital goods and labor-power are distinct from other commodities in that their only use-value lies in the production of exchange-values, which is a crucial point in understanding the source of surplus-value and its distributions, i.e. in understanding the dynamics that drive the system as a “whole”. (Capital goods, though they progressively enhance the productivity of labor, for instance, nonetheless can't be measured in terms of a sheer physical surplus, and since they are exchange at equivalent value, they are accounted at replacement rather than historical cost, which becomes a crucial component in the dynamic by which capital effectively depreciates itself under competitive conditions and increasing “masses” of physical capital stocks come under concentrated ownership at lessened “value”). Hence Marx is not opposed to the extraction of surpluses per se, since it builds up the future productive potential of the unfolding system, and exploitation is more a functional than a normative concept. Marx' appeal to the revolutionary praxis of a self-emancipating working class is at once situated with in and aimed at the unfolding dynamics of the system, not at ensuring the workers act in their own “interests” and maximize their fair share of their output under current conditions; rather the aim is to transform the systemic relations and conditions by which surpluses are abstracted, distributed and directed. The “ultimate” prospect he espies is that the “forces of production”, i.e. both the work force and the accumulation of its technical means and endowments, will come into increasingly exacerbated “contradition” with the dominant “relations of production”; in other words, the private profit driven development of the potential of the productive system will become an increasingly obstructive constraint on the full development of technical means and laboring capacities. paine might not like it, but Marx' thought is thoroughly indebted to Hegel's, entangled with it, and only half-way and with partial success makes a break with his illustrious predecessor. (And Hegel, though thorny, is by no means nonsensical or incomprehensible, though one has to understand his relation to and criticism of Kant to gain a purchase on where he's coming from). To understand Marx, one must realize, contrary to empiricist traditions, that he views the world as a human objectification, and thus remains bound up in a humanist/”anthropological” perspective, no matter how radically historicized and critically refined. That perspective on the world as a human objectification is by no means nuts, nor is it fully conceptually adequate. But it doesn't make an absolutely crucial difference whether the source and agency of that objectification is taken to he consciousness/mind/spirit or the organization of social labor activity. But once one grasps the “objectification” perspective, then the normative elements in Marx' thinking, which Rawls can't detect with his Analytic qua-Kantian means, begin to come into view. For one thing, Marx follows Hegel in holding that social/ethical norms have no meaning or reality, as mere Kantian ideal “oughts”, except as anchored in the recognitions of actual social relations (“Sittlichkeit”). Where Marx breaks with Hegel is in refusing any merely idealist and political notion of reconcilation of social and political conflicts and “contradictions”, insisting that social relations and their recognitions are rooted in a socio-economic base. And in refusing Hegel's idealist reconciliation of prevailing social relations in thought, in favor of their real and material organization, though the world is still a human objectification for Marx, it is and remains an alienated one. Hence Marx' distinctive conception of ideology and its critique, as part of his overall project. Ideology is not mere illusion, but a distorted, misrepresented account of prevailing social norms, which invertedly mis-recognizes and misunderstands the actual context and dynamic of prevailing social relations. But, though disguising prevailing power relations and misrepresenting the actual basis of social relations, ideology contains, willy-nilly and against itself, genuine, if distorted and incompletely recognized, normative contents, which Marx seeks to uncover and turn against their rationalization of prevailing conditions. It makes no more sense to Marx to moralistically denounce the alienated condition of the social world than to idealistically imagine its reconciliation. Traditional morality was sheerly oppressive, but to moralize current conditions as already “emancipated” amounts to immorally rationalizing alienated conditions as the height and scope of “morality”, over against the overwhelming weight of material reality, “the preponderance of the object”. Hence Marx' amoral stance. The point is to work to transform the objectification process to the point where it becomes no longer alienated, but consciously and collectively assumed. Then the material and social conditions for the application of the occluded and distorted norms of ideology would become actually possible. But then such norms, when really applied, would look utterly unlike what we currently take “morality” to be. Not the sort of “justice” based on mutual antagonism, immiseration and renunciation. (Oscar Wilde remarked in “The Soul of Man under Socialism” that he was in favor of it, because it would do away with “altruism”, i.e. the constrained falseness and hypocrisy, the scarcely disguised egotism, of “concern” for (lesser) others). Lastly, there is an Aristotelian element to Marxian normativity, an emphasis on the development of capacities rather than the elaboration of rights and duties, in Kantian fashion, (with its motivational aporias). Not just for reasons of political economy and technological development and material plenty does Marx emphasize production. Also, because, (along with Aristotle and the “Bildung” beloved by Schiller and the German Idealists), he conceives of productive or fruitful and self-formative activity as the mark of the good life, as the realization of human worldly fulfillment. Reply Mar 10, 2010 at 06:11 PM cm said in reply to john c. halasz…
john c. halasz said in reply to cm… Houyhnhnm power! Reply Mar 10, 2010 at 10:51 PM julio said in reply to john c. halasz… Really appreciated the rest, still scratching my head about it. Maybe I need to look it up in Yahoo. Reply Mar 11, 2010 at 11:38 AM paine said in reply to julio… but the struggle over imagine what that makes alas however its with unions we start Reply Mar 11, 2010 at 01:26 PM paine said in reply to john c. halasz… is it correct i gotta trust you johnny “Marx constantly emphasizes that commodities are always exchanged at equivalent value” “capital goods and labor-power are distinct from other commodities in that their only use-value lies in the production of exchange-values, which is a crucial point in understanding the source of surplus-value and its distributions,” capital goods are definitely all about use value nice marx axiom paraphrased slightly perhaps: “all exchange value comes from human labor and all active use value comes from the same animal power… human labor” use value is crucial here to the dynamics of the price system and the working thru of surplus value to the surface of the system too much marx exposition emphasizes and so is the laborers productive efforts Reply Mar 11, 2010 at 12:53 PM john c. halasz said in reply to paine…
BTW what is your take on the TSS claim that the “transformation problem” doesn't exist, is the result of a neo-classical misreading? Because, (the double counting issue aside), the point is, unsurprisingly, an exact inversion of Marx' actual point: labor-values don't need to be converted into prices/costs-of-production, because costs/prices-of-production can't be determined without first determining the distributions of surplus-value. Reply Mar 11, 2010 at 09:31 PM paine said in reply to john c. halasz… and we see these irrational fetters Reply Mar 11, 2010 at 12:54 PM paine said in reply to john c. halasz… i couldn't agree with you more mighty hegel stands at carl's shoulder i caution however hegel has been used by friends of catl Reply Mar 11, 2010 at 01:00 PM paine said in reply to john c. halasz… alas here we totally disagree: “it doesn't make an absolutely crucial difference whether the source and agency of that objectification is taken to he consciousness/mind/spirit or the organization of social labor activity.” not some spooky higher mind diachronics expressing the self unfolding world historical ..spirit these forms are however twins Reply Mar 11, 2010 at 01:08 PM paine said in reply to john c. halasz… Reply Mar 11, 2010 at 01:09 PM paine said in reply to john c. halasz… this is your home turf Reply Mar 11, 2010 at 01:13 PM paine said in reply to john c. halasz… world historical classes no one head needs to hold it all or even any sine qua non hunk of it all
Reply Mar 11, 2010 at 01:18 PM john c. halasz said in reply to paine… Reply Mar 11, 2010 at 09:57 PM paine said in reply to john c. halasz… lovely
Reply Mar 11, 2010 at 01:21 PM paine said in reply to john c. halasz… Reply Mar 11, 2010 at 01:23 PM Sandwichman said… In his critique of “traditional Marxisms”, Moishe Postone argued that the varieties of Marxism abandoned Marx's example and focused instead (and mistakenly in Postone's view) on issues of distribution and justice.
paine said in reply to Sandwichman… in the end snarled in half steps misteps and backward slips among the posse of left ricardians as you know second only to refuting marx's surplus value theory i submit neither is true but both aide the class enemy though i'll not waste a moment more on it not even marxiod dilke's grasp might generously be compared ricardo despite sraffa has none hell only marxist have one but don't say so to john eatwell —- but isn't dilke better portrayed as a brilliant pre figuation your narrative strikes the naive reader as Reply Mar 10, 2010 at 10:49 AM Sandwichman said in reply to paine… In that case the reader needs to stop being so naive. Marx's use of Dilke was not “plagiarism.” Nor was his analysis of surplus value 100% original. Nor did Marx give as much acknowledgment of Dilke's influence in his published work as might be indicated in his unpublished manuscripts. My position is that the differences between Marx's and Dilke's analysis give a fuller picture than either by itself. Reply Mar 10, 2010 at 01:10 PM paine said in reply to Sandwichman… marx was nat plagiarizing a fine point perhaps but a real one marx often gives us vast displays of erudition but maybe here the anon source given their lower order origins
paine said in reply to paine… “This scarcely known pamphlet (about 40 pages) [which appeared] at a time when McCulloch, “this incredible cobbler”, began to make a stir, contains an important advance on Ricardo. It bluntly describes surplus-value—or “profit”, as Ricardo calls it (often also “surplus produce”), or “interest”, as the author of the pamphlet terms it—as “surplus labour”, the labour which the worker performs gratis, the labour he performs over and above the quantity of labour by which the value of his labour-power is replaced, i.e., by which he produces an equivalent for his wages. Important as it was to reduce value to labour, it was equally important [to present] surplus-value, which manifests itself in surplus product, as surplus labour. This was in fact already stated by Adam Smith and constitutes one of the main elements in Ricardo’s argumentation. But nowhere did he clearly express it and record it in an absolute form.” Reply Mar 10, 2010 at 03:45 PM Sandwichman said in reply to paine… I hold no grudge against Marx, though, for such a trivial breech of scholarly etiquette. He more than made up for it by the monumental contribution he made to the analysis of the concept of surplus vale. Reply Mar 10, 2010 at 07:04 PM beezer said… One isn't “given.” One “gets,” and what one gets is based upon one's “power.” If you're Madonna, the power is in the talent and its scalability. If you are labor, the power is in the labor union—which provides scalability. No union. No power. Race to the bottom for labor. Race to the top for executives and their owners.
paine said in reply to beezer… it has a certain range of variation that becomes inconsequenntial if say one of her's is requested and you play one by cyndy lauper … the commodity type -or form - from it he “derives the commodity form of money sandy above sights a labor theorist who uses that accurate explanation of value in exchange as if capitalist exploitation Reply Mar 10, 2010 at 11:04 AM cm said in reply to beezer…
beezer said… Son of large ranchowner is surveying Dad's land. Two days out from the ranch he runs across a squatter, with wife, two kids, some animals and a modest farm house made of mud. Son tells squatter he must leave his Dad's ranchland. Squatter asks “Where did your father get his ranch?” Son replies “From my Grandfather.” Squatter: “Where did your grandfather get the land?” Son: “He fought the Indians for it.” Squatter. “Get down off your horse. I'll fight you for this land.” Not much has changed. Reply Mar 10, 2010 at 07:37 AM Peter K. said… Notes on Rawls: I like Marx's unsentimental attitude about morality. He judges by the norms of the time and place. Compare views on gender, race (blacks/Jews/etc.) and sexuality from 50 years ago and today. Someone might be fairly moral back then but still reflect the prejudices of the time. Utopian socialists just like the sound of their voices. Reply Mar 10, 2010 at 08:08 AM paine said in reply to Peter K….
and hell take labor time money similar attempts to finesse exploitation Reply Mar 10, 2010 at 11:13 AM anne said… (b) It is not enough to say that he didn't want the critique of capitalism to rest on some social ideal. He does reject the utopian socialists' program; but that would not prevent him from stating his own opinion. And he doesn't do that either. He reproaches the utopians for not realizing that some major social change must precede an adjustment along moral lines. — Daniel Little from John Rawls I do not understand either summary comment, and possibly there might be a further explanation. Reply Mar 10, 2010 at 08:30 AM paine said in reply to anne… because it was idle time fun only “major social change” if it all were a matter of choice alone
class agency isn't like tinker belle time Reply Mar 10, 2010 at 11:31 AM beezer said… Not my point, of course, about the rich kid calling in the law. You assume that, in the real world, the rich kid would have that choice. Most of the time, certainly. But not always. Unions, for example, came about as a result of violent reaction to exploitation. Sometimes calling in the law didn't work. And not that long ago either. That's my point. Reply Mar 10, 2010 at 09:53 AM kthomas said… The more I read about him, the more intrigued and impressed I am with the man. Genious. My favorite Marx quotes: “I am not a Marxist.” “From each according to his abilities, to each according to his needs.” “Sell a man a fish, he eats for a day, teach a man how to fish, you ruin a wonderful business opportunity.” Reply Mar 10, 2010 at 10:14 AM paine said in reply to kthomas… his line is not that common place of communal utopian sects its this intermediate aim: “from each acoording to his abilities to each according to his work” the context of the line i am not a marxist
Reply Mar 10, 2010 at 11:44 AM realpc said… About property owners and means of production: The main reason it irks some people that workers are not the owners is that ownership can be inherited. The owner's son might be a lazy bum, but he still is rich. If there were no inheritance, then I think the fairness of capitalism would be more obvious to everyone. The owner (if he did not inherit anything) came up with a good idea, developed it, marketed his idea, invested time and resources, worked hard for years, and finally became successful. This successful owner hires workers because he can't do all the work himself. The workers are willingly involved, and they would rather work for the owner and get paid than start a business themselves. What is unfair about that? Do you expect this owner to grant equal ownership to all his workers? Even the guy he hired yesterday to sweep the floor? Forcing the owner to do that would be extremely unfair, and would discourage anyone from starting their own business. What's the point, if you are forced to give most of it away? So I think we can agree that capitalism is fair, at least when the business is not inherited. But when it is inherited, things become less clear. Should inheritance be allowed? Well if you try to get rid of it, the opposition would be intense. People naturally want to give their children advantages. It would be impossible to convince wealthy parents that their children should start out life just the same as poor children, with nothing.
An economic system is fair when people take out approximately what they put in. “To each according to his needs and from each according to his ability” is not fair. Not only is it unfair, it's impossible to calculate, so it could not be practiced. Reply Mar 10, 2010 at 10:56 AM Bruce Wilder said in reply to realpc… Yes. Marx worked as an American journalist — writing in English as a correspondent for the largest American newspaper of the day, the New York Tribune. Those articles, with no trace of the constructive obscurity of his German theoretical work, which would become fodder for movement cattle, are accessible, and remarkable for their analytical clarity. http://www.marxsite.com/Marx%20as%20a%20Journalist.html Reply Mar 10, 2010 at 11:15 AM paine said in reply to Bruce Wilder… also hus 18th brumaire Reply Mar 10, 2010 at 12:06 PM Bruce Wilder said in reply to realpc… If you want to see a bad historian abuse Marx shamelessly, you might enjoy Brad DeLong's essays. The exchange with Robert Waldmann was pretty good. http://delong.typepad.com/sdj/2009/07/robert-waldmann-has-an-interpretation-of-karl-marx-that-is-new-to-me.html Reply Mar 10, 2010 at 11:30 AM paine said in reply to realpc… there will be a multitude trying
paine said in reply to realpc… and the andrew carnegie warrem buffet line has great merit marx agrees with you once we are all workers there will still be differences Reply Mar 10, 2010 at 01:38 PM OhNoNotAgain said in reply to realpc… Absolutely, and I agree with your post entirely. However, the founding fathers realized quite astutely that excessive inherited wealth always leads to worse democratic (and economic) outcomes over time. The estate tax is one way of keeping things in check. Another is to simply tax all income at the same rate, regardless of whether it is actively or passively earned. I'd be in favor of getting rid of the estate tax if any wealth that was given to the children was taxed at the same rate as if they had earned it themselves. Reply Mar 10, 2010 at 05:07 PM Bruce Wilder said… Reply Mar 10, 2010 at 11:31 AM paine said… sorry i don't mind losing really but karl as my mentor vof mentors Reply Mar 10, 2010 at 12:03 PM Bruce Wilder said in reply to paine… Do you do requests? “using the expression pre history “i strongly suggest it not be used in common discourse” I can't promise not to use it, but when I do use it, I'd kinda of like to know what it means. Reply Mar 10, 2010 at 12:09 PM paine said in reply to Bruce Wilder… the metaphor of dream awakening where the dream as a product of social reality marx as he ripened grew denser and more realist
i tend to recommend people read marx backwards starting with his last writing and journeying back but use the work of say his last 12 productive years as the basis for brand marx pronouncements 3 up 5 up 2 up are not mass marketable i like hois very prickly notes on wagner which sets the foundation to launch into his discoveries about the origins of surplius value Reply Mar 10, 2010 at 01:13 PM anne said… — Daniel Little from John Rawls
because it was idle time fun only “major social change” if it all were a matter of choice alone if on the other hand class agency isn't like tinker belle time — Paine Reply Mar 10, 2010 at 12:31 PM anne said… — Daniel Little from John Rawls So, Marx did not wish to preach but rather set down a reasoned theory of justice. What the innovative significance of this is I do not know, since modern philosophers routinely were setting down reasoned theories of justice by the time Marx wrote as opposed to the preaching forms of Plato or Aristotle. What else were the utilitarians doing, let alone Kant, than setting down reasoned theories of justice? Marx followed the modern philosophers. Reply Mar 10, 2010 at 12:37 PM paine said in reply to anne… marx like any materialist finds values flowering out of the mundane soil of social metabolism the key is his use of the mode of production itself as the “producer ” of human innovation utilitarians simply say social values are what they are because they're useful marx felt he'd discovered the secret of social motion not in the clas struggle itself Reply Mar 10, 2010 at 12:51 PM Bruce Wilder said in reply to anne… That's not how I read Little's notes on what Rawls says. Rawls is pointing out that Marx rejects “preaching”, but the rejection of “preaching” does not explain why Marx does not present a reasoned theory of justice as a foundation for his critique of capitalism. The claim, by Rawls, is that Marx has not presented a reasoned theory of justice or made such a reasoned theory a foundation of his critique of capitalism, and this omission deserves some explanation. Rawls, himself famously ambitious to present a reasoned theory of justice, then presents a conjecture about Marx. Reply Mar 10, 2010 at 01:45 PM anne said… utilitarians simply say social values are what they are because they're useful [The question is whether Marx had a theory of justice that differed in an significant way from that of the utilitarians, the problem with the utilitarian theory of justice always being the rights of minorities?] Reply Mar 10, 2010 at 12:59 PM paine said in reply to anne… the 20th century ordinal utees pretty much stymied the social welfare function totalitarianism ahh it gets long and winding to be brief hegel i'm sure shadows your mind like Posted by pinky at 03:16 AM |
March 11, 2010
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marx in the mixerDaniel Little shares his notes: Rawls on Marx; December 1973, by Daniel Little: John Rawls taught a course on the history of political philosophy throughout much of his career at Harvard University. The course contained his description and analysis of the most important figures in modern political philosophy, including Mill, Locke, Rousseau, Kant, and Marx. The course evolved over time; the final version from 1994 is edited in Samuel Freeman's Lectures on the History of Political Philosophy. I served as graduate assistant in Rawls's lectures on this subject in fall 1973, and recently reread my notes of the course. Here are my notes of a particularly important lecture towards the end of the course: Rawls's treatment of Marx's ideas about economic justice. This lecture demonstrates Rawls's understanding of the fundamentals of Marx's economic theories and the labor theory of value. (I am inclined to think that Joseph Schumpeter's History of Economic Analysis (1954) was an important source for Rawls on the history of economic thought, including Marx's economics, though I can't at this moment confirm this.) This lecture is particularly significant in that it is roughly simultaneous with the emergence of “analytical Marxism” announced by the publication of an important article by Allen Wood, “The Marxian Critique of Justice” in Philosophy and Public Affairs in 1972 (link). MARX'S ATTITUDE TOWARDS THE THEORY OF JUSTICE John Rawls, History of Political Philosophy, Phil 171, fall 1973 [Quoting Rawls:] Capital seems to be a description of an unjust society. The owners of the means of production live in relative abundance and idleness at the expense of the ever-growing class of wretched laborers. But Marx doesn't make any attempt to present an argument that capitalism is unjust, nor any concept of justice which would back up such an argument. Moreover, we have vitriolic criticisms of utopian socialists who did condemn capitalism on the grounds of justice. Marx asserts on the contrary, that capitalism is perfectly fair, perfectly just. Why so? (a) It is not enough to say Marx is averse to preaching or moralizing. He is so averse; but judgments of justice can be reasoned and hence not properly described as “preaching”. (b) It is not enough to say that he didn't want the critique of capitalism to rest on some social ideal. He does reject the utopian socialists' program; but that would not prevent him from stating his own opinion. And he doesn't do that either. He reproaches the utopians for not realizing that some major social change must precede an adjustment along moral lines. Here is my conjecture as to why Marx didn't judge capitalism unjust. He thinks of justice as a political and juridical conception which is associated with a particular conception of the state and society; so it belongs to the prehistory of mankind. Given his picture of human society, these political and juridical institutions belong to the superstructure, and reflect the workings of the mode of production. For each mode of production there is a conception of justice appropriate to it, at least in prehistory. A further qualification: It is worthwhile to distinguish between the high time of a form and its low period — where the form is a progressive force and where it stands in contradiction to the mode of production. Here is a brief discussion of justice in Capital III: This view seems to suggest a sort of relativism; but this would be a faulty conclusion. We have a theory matching theories of justice with modes of production, and we might at some time find a function systematically linking them. Let's now try out this suggestion on the conception of surplus value. The utopians argued that workers ought to be paid the value of their contribution to the firm. Since they are not, capitalism is unjust. Marx rejects this view. It makes the appropriation of surplus value appear accidental — as if the capitalists could act differently. Marx required a theory of value which made the appropriation of surplus value a necessary part of the capitalist system. On the theory of value every commodity is exchanged for a strict equivalent. Marx distinguishes between the product of labor and labor power. The worker is given the value of his labor power, not his product. It is on this ground that he is fairly treated. Thus he is undercutting the Ricardian socialist position by rejecting and replacing the principle of contribution. It is the system itself which brings about surplus value, not the behavior of individuals who violate moral principles. Surplus value is an intrinsic part of the working of the social institutions of capitalism. Consider the description of the production of surplus value in Capital. Marx thus rejects the Ricardian principle of contribution. He finds it a bourgeois notion, basing property rights on one's labor. Summing up. (1) Marx views the notion of justice as a virtue of legal forms and institutions, and thus perhaps it is a notion which belongs to prehistory. The state depends upon the mode of production. (2) Marx doesn't deny that the various conceptions of justice have formal features in common — exchange of equivalents for equivalents — but the notion of what is equivalent is determined in different ways. Marx would be prepared to admit that capitalism in its high period is just. One reason he rejects the utopian's argument is that it is misleading. It rests on a misapprehension of where the essential problem lies: not in the superstructure, but in the mode of production. He felt that the key enterprise is to give a scientific theory of the mode of production. A second point: justice is a distributive notion. The appeal to justice suggests that we can separate the mode of distribution from the mode of production. This is for Marx incorrect. Appeals to justice are thus supposed to be superficial. Moreover, appeal to justice suggests that important social change can be achieved by legislation. [Other relevant materials from the course:] From the syllabus: (a) Marx's criticism of the liberal state; (b) His attitude towards theories of justice; © The theory of alienation and exploitation; (d) The conception of rational human society Final exam questions on Marx: 4. Present and discuss Marx's theory of alienation (as developed in the Economic and Philosophic Manuscripts) Posted by Mark Thoma on Wednesday, March 10, 2010 at 02:14 AM in Economics, History of Thought Save to del.icio.us Tweet This Permalink Comments (49)
paine said… rawls see only the super structure in stasis the necessary material premise Reply Mar 10, 2010 at 04:49 AM bakho said… Reply Mar 10, 2010 at 04:58 AM paine said in reply to bakho… you are a nature boy eh ??? Reply Mar 10, 2010 at 05:03 AM paine said… the others using the expression pre history i strongly suggest it not be used in common discourse the phrase below here paraphrased all history up until now the portions by marx in german ideology Reply Mar 10, 2010 at 05:02 AM anarcho said… Actually, Proudhon was the first to argue this “Marxist” position in 1840's classic “What is Property?” — as he put it, workers produced more value than they received in wages: “Whoever labours becomes a proprietor . . . And when I say proprietor, I do not mean simply (as do our hypocritical economists) proprietor of his allowance, his salary, his wages, – I mean proprietor of the value his creates, and by which the master alone profits . . . The labourer retains, even after he has received his wages, a natural right in the thing he has produced.” Property meant “another shall perform the labour while [the proprietor] receives the product.” So the “free worker produces ten; for me, thinks the proprietor, he will produce twelve” and so to “satisfy property, the labourer must first produce beyond his needs.” This is why “property is theft!” From: Introduction: General Idea of the Revolution in the 21st Century This is the introduction to a new anthology of Proudhon's writings called “Property is theft!” (due out later this year) — some material is on-line already: http://www.property-is-theft.org Proudhon: “Property is the right to enjoy and dispose of another’s goods, – the fruit of another’s labour” Reply Mar 10, 2010 at 05:06 AM OhNoNotAgain said in reply to anarcho… Yes, but was Marx advocating otherwise ? I read the above to indicate that Marx thought that it was perfectly just for labor to be compensated simply on the basis of their input. I know very little about Marx other than the cursory knowledge that most people possess, so the above is indeed an actual question. :-) Reply Mar 10, 2010 at 05:28 AM paine said in reply to OhNoNotAgain… yes that is precisely his view the peculiar commodity labor power btw way a barber cutting your hair does get the full value of his service capitalists find ways to employ barbering power at this full hourly value and yet say by using a cutting machine owned by the capitalist fair v?? by a cutting machine pal…
paine said in reply to anarcho… is not the same as labor time as exchange value the common post ricardian left conflation marx held that labor per say does not have value the point is to distinguish the value of the commodity purchased labor power Reply Mar 10, 2010 at 06:15 AM julio said in reply to paine… the labor “power” which is a misuse of the word when applied to the commodity, the thing that gets me a seat at the exchange table the use value created from that which is the pot we'll split the rules of the negotiation which is where “power” comes in If I'm sitting at the table selling my labor “power” I'm wearing two hats, commodity and salesman. The former does not have any “power” (which is why slavery or $1/day jobs are the same and equally moral or immoral within the capitalist system why is $0 such a different number than $1) Reply Mar 10, 2010 at 11:36 AM paine said in reply to julio… i love you man “the use value … is the pot we'll split” but still i've already bought your laboring services and the use value to me of your laboring services is not the use value of your product which is relevent to my customer not me the rest is merely the julio use of vthe word power limit total working hours boys and girls something my hero sandwitch man never fails to champion as well as knocking the wages fund theory in a cocked hat Reply Mar 10, 2010 at 11:57 AM julio said in reply to paine… Isn't this last number just the difference between what you pay me (exchange value of my labor) and what you charge for the portion of my services built into the thing you sell? You “already bought the exchange value of your product” — no, that is the transaction I'm focusing on, at which price did you purchase it and how was that price determined The exchange value you define here is not some quantity determined mathematically by some “market forces” which determine some “market value” It is just a number bounded from below by starvation and above by the “market value” of the commodities the capitalist sells to the customers (“market value” assuming said customers have some choice) the number changes e.g. when capitalists buy senators. Re “julioism vs marxism”, yes, I know, I need to RTFM. Reply Mar 10, 2010 at 12:58 PM paine said in reply to julio… you operate at the factory door then he enters the factory you aren''t wrong production is jointly of use values and exchange values now read hegel to discover how complexly Reply Mar 10, 2010 at 01:48 PM paine said in reply to julio… in essence the wage labor form of production collides with the chatel labor form of production i simplify terribly Reply Mar 10, 2010 at 12:01 PM Sandwichman said… In his critique of “traditional Marxisms”, Moishe Postone argued that the varieties of Marxism abandoned Marx's example and focused instead (and mistakenly in Postone's view) on issues of distribution and justice.
paine said in reply to Sandwichman… in the end snarled in half steps misteps and backward slips among the posse of left ricardians as you know second only to refuting marx's surplus value theory i submit neither is true but both aide the class enemy though i'll not waste a moment more on it not even marxiod dilke's grasp might generously be compared ricardo despite sraffa has none hell only marxist have one but don't say so to john eatwell —- but isn't dilke better portrayed as a brilliant pre figuation your narrative strikes the naive reader as Reply Mar 10, 2010 at 10:49 AM Sandwichman said in reply to paine… In that case the reader needs to stop being so naive. Marx's use of Dilke was not “plagiarism.” Nor was his analysis of surplus value 100% original. Nor did Marx give as much acknowledgment of Dilke's influence in his published work as might be indicated in his unpublished manuscripts. My position is that the differences between Marx's and Dilke's analysis give a fuller picture than either by itself. Reply Mar 10, 2010 at 01:10 PM paine said in reply to Sandwichman… marx was nat plagiarizing a fine point perhaps but a real one marx often gives us vast displays of erudition but maybe here the anon source given their lower order origins
paine said in reply to paine… “This scarcely known pamphlet (about 40 pages) [which appeared] at a time when McCulloch, “this incredible cobbler”, began to make a stir, contains an important advance on Ricardo. It bluntly describes surplus-value—or “profit”, as Ricardo calls it (often also “surplus produce”), or “interest”, as the author of the pamphlet terms it—as “surplus labour”, the labour which the worker performs gratis, the labour he performs over and above the quantity of labour by which the value of his labour-power is replaced, i.e., by which he produces an equivalent for his wages. Important as it was to reduce value to labour, it was equally important [to present] surplus-value, which manifests itself in surplus product, as surplus labour. This was in fact already stated by Adam Smith and constitutes one of the main elements in Ricardo’s argumentation. But nowhere did he clearly express it and record it in an absolute form.” Reply Mar 10, 2010 at 03:45 PM beezer said… One isn't “given.” One “gets,” and what one gets is based upon one's “power.” If you're Madonna, the power is in the talent and its scalability. If you are labor, the power is in the labor union—which provides scalability. No union. No power. Race to the bottom for labor. Race to the top for executives and their owners.
paine said in reply to beezer… it has a certain range of variation that becomes inconsequenntial if say one of her's is requested and you play one by cyndy lauper … the commodity type -or form - from it he “derives the commodity form of money sandy above sights a labor theorist who uses that accurate explanation of value in exchange as if capitalist exploitation Reply Mar 10, 2010 at 11:04 AM beezer said… Son of large ranchowner is surveying Dad's land. Two days out from the ranch he runs across a squatter, with wife, two kids, some animals and a modest farm house made of mud. Son tells squatter he must leave his Dad's ranchland. Squatter asks “Where did your father get his ranch?” Son replies “From my Grandfather.” Squatter: “Where did your grandfather get the land?” Son: “He fought the Indians for it.” Squatter. “Get down off your horse. I'll fight you for this land.” Not much has changed. Reply Mar 10, 2010 at 07:37 AM Peter K. said… Notes on Rawls: I like Marx's unsentimental attitude about morality. He judges by the norms of the time and place. Compare views on gender, race (blacks/Jews/etc.) and sexuality from 50 years ago and today. Someone might be fairly moral back then but still reflect the prejudices of the time. Utopian socialists just like the sound of their voices. Reply Mar 10, 2010 at 08:08 AM paine said in reply to Peter K….
and hell take labor time money similar attempts to finesse exploitation Reply Mar 10, 2010 at 11:13 AM anne said… (b) It is not enough to say that he didn't want the critique of capitalism to rest on some social ideal. He does reject the utopian socialists' program; but that would not prevent him from stating his own opinion. And he doesn't do that either. He reproaches the utopians for not realizing that some major social change must precede an adjustment along moral lines. — Daniel Little from John Rawls I do not understand either summary comment, and possibly there might be a further explanation. Reply Mar 10, 2010 at 08:30 AM paine said in reply to anne… because it was idle time fun only “major social change” if it all were a matter of choice alone
class agency isn't like tinker belle time Reply Mar 10, 2010 at 11:31 AM beezer said… Not my point, of course, about the rich kid calling in the law. You assume that, in the real world, the rich kid would have that choice. Most of the time, certainly. But not always. Unions, for example, came about as a result of violent reaction to exploitation. Sometimes calling in the law didn't work. And not that long ago either. That's my point. Reply Mar 10, 2010 at 09:53 AM kthomas said… The more I read about him, the more intrigued and impressed I am with the man. Genious. My favorite Marx quotes: “I am not a Marxist.” “From each according to his abilities, to each according to his needs.” “Sell a man a fish, he eats for a day, teach a man how to fish, you ruin a wonderful business opportunity.” Reply Mar 10, 2010 at 10:14 AM paine said in reply to kthomas… his line is not that common place of communal utopian sects its this intermediate aim: “from each acoording to his abilities to each according to his work” the context of the line i am not a marxist
Reply Mar 10, 2010 at 11:44 AM realpc said… About property owners and means of production: The main reason it irks some people that workers are not the owners is that ownership can be inherited. The owner's son might be a lazy bum, but he still is rich. If there were no inheritance, then I think the fairness of capitalism would be more obvious to everyone. The owner (if he did not inherit anything) came up with a good idea, developed it, marketed his idea, invested time and resources, worked hard for years, and finally became successful. This successful owner hires workers because he can't do all the work himself. The workers are willingly involved, and they would rather work for the owner and get paid than start a business themselves. What is unfair about that? Do you expect this owner to grant equal ownership to all his workers? Even the guy he hired yesterday to sweep the floor? Forcing the owner to do that would be extremely unfair, and would discourage anyone from starting their own business. What's the point, if you are forced to give most of it away? So I think we can agree that capitalism is fair, at least when the business is not inherited. But when it is inherited, things become less clear. Should inheritance be allowed? Well if you try to get rid of it, the opposition would be intense. People naturally want to give their children advantages. It would be impossible to convince wealthy parents that their children should start out life just the same as poor children, with nothing.
An economic system is fair when people take out approximately what they put in. “To each according to his needs and from each according to his ability” is not fair. Not only is it unfair, it's impossible to calculate, so it could not be practiced. Reply Mar 10, 2010 at 10:56 AM Bruce Wilder said in reply to realpc… Yes. Marx worked as an American journalist — writing in English as a correspondent for the largest American newspaper of the day, the New York Tribune. Those articles, with no trace of the constructive obscurity of his German theoretical work, which would become fodder for movement cattle, are accessible, and remarkable for their analytical clarity. http://www.marxsite.com/Marx%20as%20a%20Journalist.html Reply Mar 10, 2010 at 11:15 AM paine said in reply to Bruce Wilder… also hus 18th brumaire Reply Mar 10, 2010 at 12:06 PM Bruce Wilder said in reply to realpc… If you want to see a bad historian abuse Marx shamelessly, you might enjoy Brad DeLong's essays. The exchange with Robert Waldmann was pretty good. http://delong.typepad.com/sdj/2009/07/robert-waldmann-has-an-interpretation-of-karl-marx-that-is-new-to-me.html Reply Mar 10, 2010 at 11:30 AM paine said in reply to realpc… there will be a multitude trying
paine said in reply to realpc… and the andrew carnegie warrem buffet line has great merit marx agrees with you once we are all workers there will still be differences Reply Mar 10, 2010 at 01:38 PM OhNoNotAgain said in reply to realpc… Absolutely, and I agree with your post entirely. However, the founding fathers realized quite astutely that excessive inherited wealth always leads to worse democratic (and economic) outcomes over time. The estate tax is one way of keeping things in check. Another is to simply tax all income at the same rate, regardless of whether it is actively or passively earned. I'd be in favor of getting rid of the estate tax if any wealth that was given to the children was taxed at the same rate as if they had earned it themselves. Reply Mar 10, 2010 at 05:07 PM Bruce Wilder said… Reply Mar 10, 2010 at 11:31 AM paine said… sorry i don't mind losing really but karl as my mentor vof mentors Reply Mar 10, 2010 at 12:03 PM Bruce Wilder said in reply to paine… Do you do requests? “using the expression pre history “i strongly suggest it not be used in common discourse” I can't promise not to use it, but when I do use it, I'd kinda of like to know what it means. Reply Mar 10, 2010 at 12:09 PM paine said in reply to Bruce Wilder… the metaphor of dream awakening where the dream as a product of social reality marx as he ripened grew denser and more realist
i tend to recommend people read marx backwards starting with his last writing and journeying back but use the work of say his last 12 productive years as the basis for brand marx pronouncements 3 up 5 up 2 up are not mass marketable i like hois very prickly notes on wagner which sets the foundation to launch into his discoveries about the origins of surplius value Reply Mar 10, 2010 at 01:13 PM anne said… — Daniel Little from John Rawls
because it was idle time fun only “major social change” if it all were a matter of choice alone if on the other hand class agency isn't like tinker belle time — Paine Reply Mar 10, 2010 at 12:31 PM anne said… — Daniel Little from John Rawls So, Marx did not wish to preach but rather set down a reasoned theory of justice. What the innovative significance of this is I do not know, since modern philosophers routinely were setting down reasoned theories of justice by the time Marx wrote as opposed to the preaching forms of Plato or Aristotle. What else were the utilitarians doing, let alone Kant, than setting down reasoned theories of justice? Marx followed the modern philosophers. Reply Mar 10, 2010 at 12:37 PM paine said in reply to anne… marx like any materialist finds values flowering out of the mundane soil of social metabolism the key is his use of the mode of production itself as the “producer ” of human innovation utilitarians simply say social values are what they are because they're useful marx felt he'd discovered the secret of social motion not in the clas struggle itself Reply Mar 10, 2010 at 12:51 PM Bruce Wilder said in reply to anne… That's not how I read Little's notes on what Rawls says. Rawls is pointing out that Marx rejects “preaching”, but the rejection of “preaching” does not explain why Marx does not present a reasoned theory of justice as a foundation for his critique of capitalism. The claim, by Rawls, is that Marx has not presented a reasoned theory of justice or made such a reasoned theory a foundation of his critique of capitalism, and this omission deserves some explanation. Rawls, himself famously ambitious to present a reasoned theory of justice, then presents a conjecture about Marx. Reply Mar 10, 2010 at 01:45 PM anne said… utilitarians simply say social values are what they are because they're useful [The question is whether Marx had a theory of justice that differed in an significant way from that of the utilitarians, the problem with the utilitarian theory of justice always being the rights of minorities?] Reply Mar 10, 2010 at 12:59 PM paine said in reply to anne… the 20th century ordinal utees pretty much stymied the social welfare function totalitarianism ahh it gets long and winding to be brief hegel i'm sure shadows your mind like its like differential equations hey if u want to be for an electrical engineer similarly dialects baby cakes dialects i fear more folks stumble and fall here you'd find keynes very congenial i think he combined a burkean scepticism Reply Mar 10, 2010 at 01:24 PM paine said in reply to paine… he has not one bright new idea about designing such a system again recipes for the cook shops of the future and all that u want to know how to live your life and marx is no help here at all Reply Mar 10, 2010 at 01:28 PM anne said… i suspect you prefer Kant's notion of humans as ends in themselves not instrumentalities [Clever, but Rawls may have added what passes for class agency to Kant making for an increasingly realistic Kant.] Reply Mar 10, 2010 at 01:41 PM anne said… i suspect you prefer Kant's notion of humans as ends in themselves not instrumentalities [I am thinking this through carefully, but Hegel at best has the teleological or ends frame of justice that Aristotle had and Marx seems to have combined that with a utilitarian frame that is still lacking. Marx needed to have addressed Kant to be complete, from a modern philosophical perspective. As Michael Sandel would teach, a teleological frame of justice means that a fine flute is deserved by a flute player who can play well rather than a person who simply has more money to buy a flute. The flute is justly destined for the fine flutist. There is a crudely appealing aspect to such a justice system and even a sort of utilitarian aspect but no comprehensive frame for justice.] Reply Mar 10, 2010 at 03:18 PM Anonymous said… Reply Mar 10, 2010 at 03:36 PM paine said in reply to Anonymous… proletarian revolution Posted by pinky at 01:45 AM |
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“labour is the sole source of exchange-value and the active source of use-value, “ Posted by pinky at 01:25 AM |
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“There is always the wish that the smallest possible portion of society should be doomed to the slavery of labour, to forced labour. This is the utmost that can be accomplished from the capitalist standpoint…..” “It is self-evident that if labour-time is reduced to a normal length and, furthermore, labour is no longer performed for someone else, but for myself, and, at the same time, the social contradictions between master and men, etc., being abolished, it acquires a quite different, a free character, it becomes real social labour, and finally the basis of disposable time—the labour of a man who has also disposable time, must be of a much higher quality than that of the beast of burden” Posted by pinky at 01:19 AM |
March 08, 2010
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another perry white rejectthere is something all too twisted in me…take my new heart throb the rather aquiline CATHERINE RAMPELL… Posted by pinky at 08:10 PM |
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rajiv soarsDefenders and Demonizers of Credit Default Swaps, by Rajiv Sethi: The recent difficulties faced by Greece (and some other eurozone states) in rolling over their national debt has let some to blame hedge fund involvement in the market for credit default swaps. These contracts can be used to insure bondholders against the risk of default, but when purchased naked (without holding the underlying bonds), they can serve as highly leveraged speculative bets on a rise in the cost of borrowing faced by the sovereign states. Posted by Mark Thoma on Sunday, March 7, 2010 at 02:52 PM in Economics, Financial System Save to del.icio.us Tweet This Permalink Comments (37)
Anonymous said… Reply Mar 07, 2010 at 03:15 PM Bruce Wilder said in reply to Anonymous… There was definitely an element of that, when Goldman Sachs “insured” securities of its own creation with AIG. Reply Mar 07, 2010 at 03:26 PM Goldilocksisableachblond said in reply to Bruce Wilder… I'd love to see that happen , but somehow I think the people of Greece would get screwed anyway. Better might be use even more gov't debt to bet - BIG - on their own default , then default on payment of both the debt AND the bet. ( aka The Goldman Sting ) Reply Mar 07, 2010 at 03:56 PM Leigh Caldwell said… http://www.knowingandmaking.com/2010/03/indecent-exposure-putting-clothes-on.html Reply Mar 07, 2010 at 03:33 PM paine said in reply to Leigh Caldwell… he outlines just why you might not want to allow nakedness “Goldman Sachs synthesizing securities that they knew carried a lot of risk, and then buying CDS from AIG, comes to mind” produce stealth shit to be sober here and don't be so easily trumped by liquidity fears its all largely taboo gaming by insiders bruce is correct to suggest amateur sleuths i don't pretend to get the game here Reply Mar 07, 2010 at 05:12 PM Uncle Billy Cunctator said… Reply Mar 07, 2010 at 03:44 PM save_the_rustbelt said… Reply Mar 07, 2010 at 03:54 PM paine said in reply to save_the_rustbelt… myopic moral hazard strictures Reply Mar 07, 2010 at 05:47 PM RW said… Reply Mar 07, 2010 at 04:05 PM paine said in reply to RW… but we need to have the casino empowered ie uncle sam as ultimo compulsory re insurer the unitary credit dome chapter two
Reply Mar 07, 2010 at 05:52 PM Bruce Wilder said… There are some fundamental issues, here. I can see three peeking through the fog of esoteric financial jargon. Mark Twain explained portfolio theory this way: either you should not put all your eggs in one basket, OR you should put all your eggs in one basket and then watch that basket. Some actors in the economy are controlling processes, reducing error. You really do not want someone charged with actively guarding a basket of financial eggs to be able to insure against their loss — you can call that moral hazard or whatever you like, but the bottom line is that insurance is not always a net gain in efficiency. Spreading the loss widely is not all to the good; sometimes, focusing the loss on folks, who have the power to reduce the loss, is a gain to society. I would think that would be the point behind not allowing “naked” CDS, but it seems to me that the “naked” thing does cover all the cases, where, maybe, CDS is a bad, bad idea. Leverage, in an ordinary business, is a way of achieving a balance between “insurance” to reduce the costs and expense of volatility in business expenses and outcomes, and focusing incentives on management, put in a position to control the production processes in a way to that minimizes the losses due to waste and error and so on. The contractual obligations that establish priority are what focuses the incentives of risk. We don't want to be undoing those contractual obligations, with esoteric financial engineering. Goldman Sachs synthesizing securities that they knew carried a lot of risk, and then buying CDS from AIG, comes to mind. For economists, putting the story this way tempts them to shout “asymmetric information”, and I suppose that is an important part of the story. Adverse selection and moral hazard, at a certain level of abstraction, are exactly the same thing. But, I would not want to let responsibility for control leak out of the story. I know I hammer this point all the time, but it is important: there are important economies from technical control of production processes, even in banking. Economics, focused on incentives and allocative efficiency exclusively, tends to give this aspect of the situation short shrift, but it is often critically important. Underwriting mortgages and underwriting mortgage-backed securities were both processes that deteriorated markedly in the run-up to the recent crisis. Someone is supposed to manage those processes — manage them in a technical sense, to prevent bad debt from being created, by due diligence, winnowing out the fraudsters and so on. The incentive for doing that job can not be “insured” away, without doing damage. And, it seems as if it was “insured” away, and tremendous damage was done. But, if we are going to shout, “asymmetric information”, then let's tie CDS to financial reporting, because that's what CDS is so often about. If you see CDS as extreme leverage, congratulations. Gold star on your forehead. Now, how are the contingent liabilities to be reported, if they are reported at all? What are the words that will be used in the financial statement, next to the nice round numbers, which will allow either managers, or stockholders, or government regulators or bondholders, to know what is going on. How is a Graham & Dodd investor supposed to make heads or tails of what a CDS is doing for a bank or an insurance company or an ordinary industrial company, if there be such, in our brave new world. I don't mean this to be just a luddite rant against financial innovation, but I do question whether some of these esoteric instruments are not just opportunities for perpetuating sophisticated frauds. Finally, I want to mention the Minsky effect. Economists love their stasis, and the idealization of competitive markets, arriving at balanced perfection. But, Minsky saw financial markets, correctly I think, as having a socially predatory tendency toward cycles of boom and bust. Acceleration thru leverage from good hedge finance to bad speculative finance was his central story. CDS looks like financial acceleration on steroids. YMMV, but what social benefit would we lose, if we banned CDS entirely? Really. Reply Mar 07, 2010 at 04:17 PM paine said in reply to Bruce Wilder… to intensify the personal stakes i suspect insurers are the ones in this case to look into this before rating the issue and of course their insiders need to be correctly incentivized also infinite regress here ?? the stock holders of insurers need investigative guys Reply Mar 07, 2010 at 05:19 PM paine said in reply to Bruce Wilder… a scam from alpha to omega Reply Mar 07, 2010 at 05:27 PM paine said in reply to Bruce Wilder… Reply Mar 07, 2010 at 05:30 PM Gump_does_Irony said… What exactly does “… the use of CDS contracts for hedging … has beneficial effects …” mean? The only person that would need to hedge is somebody who has credit exposure to the issuer, i.e., one that owns a bond. If the credit exposure becomes undesirable, the straightforward solution is to sell the bond; what exactly would the point be in buying CDS protection instead? Usually, the answer is that there is less liquidity in the cash bond market to sell the bond whereas it may be easier to find someone (a hedge fund) willing to take the credit exposure by selling a CDS contract on the bond. However, the reason why that hedge fund is not willing to purchase the cash bond outright but is willing to sell the CDS (both are effectively the same credit risk and return) has to do with the need to come up with the cash (and the capital) in the case the cash bond purchase. A CDS contract allows the hedge fund to own the credit without putting up the capital to do so; if said hedge fund were to be forced to own the cash bond, they have to either have the capital (or explicitly borrow against their capital, i.e., leverage) to do it. On the other hand, a CDS contract opens the door to the hedge fund to obtain implicit and opaque leverage that is magnified severalfold because all the hedge fund needs to do to own a CDS contract is the ability to fund margins, i.e., daily changes in the value of the CDS contract, which are typically a small fraction of the price of the cash bond. If opaque and excessive leverage in the hands of hedge funds is how the extra liquidity becomes available to the original cash bond owner, how that benefits said bond owner (and in turn the issuer of the cash bond) is the unanswered question. It is fairly easy to see how this extra liquidity is a contrived situation and is inherently unstable. Now, looking at this from the CDS buyer's side, especially if it is a naked CDS purchase, it changes the incentive structure quite dramatically. A natural owner of credit is typically willing to work through a stress situation and restructure the obligation in such a way as to optimize the payoff to both parties. On the other hand, a holder of a CDS insurance contract is not only uninterested in an orderly restructuring, but actually is incented to see the borrower fail so that the insurance policy (in reality a naked bet) can be collected on in full! The more such insurance policies he owns, the greater the incentive to force a failure. CDS contracts make it easy to purchase multiple insurance policies with relatively little capital (and thus for several players in the market to collude on the bet in huge size); the next step in this easy money strategy is to orchestrate a trash-the-credit campaign through gullible and/or compromised financial journalists and bloggers … I wonder what the reaction of Felix would be were he to discover that someone other than his mortgage lender is loading up on multiple insurance policies on his home! it should not be too difficult to discern that the incentive structure begins to favor the arsonist pretty soon!!
Bruce Wilder said… Reply Mar 07, 2010 at 04:43 PM paine said in reply to Bruce Wilder… if you don't see the limits of arbitrage Reply Mar 07, 2010 at 05:24 PM paine said in reply to Bruce Wilder… Reply Mar 07, 2010 at 05:33 PM paine said in reply to paine… not some brother of the trickster god Reply Mar 07, 2010 at 06:06 PM Goldilocksisableachblond said… Here's another example , on the issue of high frequency trading : Why policymakers need to take note of high-frequency finance http://www.voxeu.org/index.php?q=node/4725 His summary : “High-frequency finance holds out the hope of turning aspects economics and finance into a hard science by the sheer volume of data and its ability to set events into their appropriate context by mapping rare events into a short-term time scale with a near infinity of events, albeit at a shorter-term time scale. Second, the tracking of events on a tick-by-tick basis opens the door to identify underlying flows and develop economic weather maps. Surely that’s not a bad thing?” … His goal ? “In the end, he says, his goal is to make the financial system work better and more safely.” http://alansforexblog.com/2008/02/03/a-day-in-the-life-of-dr-richard-olsen-founder-of-oanda So , he must be an academic or philanthropist , right? , out to make the financial world safer for us mere mortals. No other motives , right ? Well , let's see : “Currently, most of my time is dedicated to Olsen Ltd and Olsen Investment Corporation. Olsen Ltd develops quantitative statistical trading models for trading currencies. Olsen Investment Corporation offers managed currency accounts, markets a hedge fund called High Frequency Data Fund and other currency related investment products.” …. He might be right about HFT , for all I know. But if we're going to cast a wary eye on Al Gore because he stands to gain financially on his green tech investments if climate change policies are enacted , shouldn't we take a close look at those who advance financial reform agendas , and how they would stand to gain from adoption of those agendas ? We need a variety of opinions on these debates , but we also need to know who's really behind those opinions and how they make their money , and then weight those opinions accordingly. Reply Mar 07, 2010 at 05:03 PM paine said in reply to Goldilocksisableachblond… this high frequency shit Reply Mar 07, 2010 at 05:34 PM RueTheDay said… In any fixed income security, the interest rate is supposed to reflect (among other things) credit risk. In theory, the cost of a credit insurance vehicle (e.g., CDS) should be exactly equal to the risk premium attached to the interest rate in its absence. The fact that credit insurance exists means it’s cheaper than the interest rate risk premium. Unless there is some sort of information asymmetry or economy of scale that a monoline or a CDS protection writer has over THE ENTIRE BOND MARKET, there is no reason for this to be the case. The existence of credit insurance is predicated on the underpricing of risk, furthermore it ENCOURAGES the underpricing of risk. Reply Mar 07, 2010 at 05:35 PM paine said in reply to RueTheDay… Reply Mar 07, 2010 at 07:45 PM paine said… this is what my uncle called bronx sophistry Reply Mar 07, 2010 at 05:37 PM paine said… like the old prussian censorship so no nakedness till proven innocent like patent on a device that the patent office Reply Mar 07, 2010 at 06:02 PM paine said in reply to paine… but i want a model to make certain i got the whole wiring diagram here Reply Mar 07, 2010 at 06:04 PM paine said in reply to paine… Reply Mar 07, 2010 at 06:05 PM Gump_does_Irony said in reply to paine… Somewhere along the way, the whole thing transmogrified into an arrangement where the requirement to deliver the reference security was abandoned in favor of a net settlement against a privately auctioned value for the reference security. This meant that a CDS buyer no longer had to own (or buy) the cash bond in order to deliver against the CDS contract settlement, but ISDA (a trade body comprised largely of the big banks) would simply hold a private clearing auction of all outstanding CDS contracts ex post after the default happens, thus opening the flood gates for side betting on the reference security. Reply Mar 07, 2010 at 06:40 PM Gump_does_Irony said in reply to paine…
Gump_does_Irony said in reply to paine… Hope this helps. Reply Mar 07, 2010 at 06:52 PM paine said in reply to Gump_does_Irony… but i need a model that allows me to link to analogues better understood rajiv uses the bank run model i don't know if that is adequate or not Reply Mar 07, 2010 at 07:29 PM Anonymous said… Reply Mar 07, 2010 at 06:24 PM paine said in reply to Anonymous… Reply Mar 07, 2010 at 07:30 PM mrrunangun said… Reply Mar 07, 2010 at 06:52 PM paine said in reply to mrrunangun… Reply Mar 07, 2010 at 07:33 PM paine said… for a second tier barnyard piker i read rajiv's blog like few others Reply Mar 07, 2010 at 07:39 PM Robert Waldmann said… Shift the focus a few miles North from Wall Street. You will find burned out buildings. In the 70s there were a huge number of fires in New York. Then the City made sure that there weren't buildings insured for more than their market price. The rate of arson declined sharply. In general it is not legal for anyone to profit from an event by buying insurance against some event. As far as I know, in all other insurance markets, the equivilant of a naked CDS is forbidden. This general rule was avoided by naming credit default insurance a credit default swap. Naked CDS can make the financial equivalent of arson profitable. Sethi is not the first person to point this out . http://www.angrybearblog.com/2008/09/financial-arsonists.html It is easy to prevent this. There are different kinds of CDS : cash settlement CDS and physical settlement CDS. If you own a physical settlement CDS and the asset in default, then you get the face value of the asset in default. It is legal, but unwise to buy a naked physical settlement CDS. If the nominal value of physical settlement CDSs is greater than the value of the insured instrument outstanding, then, in case of default the physical settlement CDSs are worthless and the underlying asset is worth just as much as it was without default. This has happened. It is not theory it is a known fact. Cash settlement CDS were invented because existing instruments did not make it possible to gain huge profits when an entity defaulted. If this is considered an undesirable situation, it is trivially easy to avoid it by banning cash settlement CDS. This again is trivially easy just by saying that a cash settlement CDS contract won't be enforced so I can buy something which says someone will pay me a huge amount of money in case of some default, but if that default occurs I can't make him pay me anything. The regulatory problem is trivially easy — declare new cash settlement CDS to be non-contracts of no legal significance. Now what is the disadvantage of banning cash settlement CDS ? Reply Mar 08, 2010 at 01:47 AM Comment below or sign in with TypePad Posted by pinky at 08:09 PM |
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shiller non thrillerMom, Apple Pie and Mortgages, by Robert Shiller, Commentary, NY Times: For decades, the federal government has subsidized … owner-occupied housing. This has been especially true during the continuing financial crisis, with Fannie Mae, Freddie Mac and the Federal Housing Administration … issuing guarantees … on most new mortgages. Posted by Mark Thoma on Sunday, March 7, 2010 at 04:17 AM in Economics, Financial System, Housing Save to del.icio.us Tweet This Permalink Comments (54)
bakho said… What Shiller says makes sense but it would also devalue many of the current homes that were purchased under subsidies. Houses purchased with subsidy and sold without subsidy will be worth less. Reply Mar 07, 2010 at 06:01 AM david said… But I'm more concerned about the inane opposition of human psychology to financial wisdom in paragraph 5 - that stuff is the worst of behavioral economics. Which makes me happy to see the last paragraph, which holds out hope that there's something more to measure (“richness of human experience”), and he's not stuck in the oh if only these dummies understood we wouldn't have to nudge them Cass Sunstein style crap. Reply Mar 07, 2010 at 06:02 AM Mark G. said… What drivel this is. Is Shiller talking his own ETF book? Is he channeling George Bush as he speaks to “freedom” and “liberties” and “ownership society”. American culture? What is American culture? Youths wearing pants halfway down their ass, monster truck races, cage fighting or obese people laying on the couch, zipped into a fleece snuggie as they feed their face watching American Idol? Is the American culture/identity zero net jobs created and flat wages over the last decade, the looting of the tax base to make those financial institutions that created this mess whole and then see those same financial institutions pay out record bonuses? Is the American culture defined by the fact there has been zero financial regulation enacted as both political parties seek not to disrupt the flow of campaign donations from the FIRE sector?
What is America's identity, the definition of American culture? The freedom and liberty of home ownership vs. renting from oppresive landlords? 25% of mortgages are underwater, estimates are for that percent to hit fifty. Is that not more oppresive than renting? As Shiller makes his bizzare argument for further subsidizing of home purchases, he touches upon an interesting subject. What is American culture/identity? Reply Mar 07, 2010 at 06:03 AM save_the_rustbelt said in reply to Mark G…. So you prefer to live in a tenement owned by some rich white guy, like my great grandparents? Good luck with that. Reply Mar 07, 2010 at 06:44 AM Mark G. said in reply to save_the_rustbelt… Reply Mar 07, 2010 at 07:16 AM save_the_rustbelt said in reply to Mark G…. They worked hard and kept their families together - fact. Some of them moved to rural areas or out west where they could OWN HOMES - fact. They made better lives for their children, and kept families together during the depression because they owned homes. I hope someday you can see past your bitterness and see the good in our people and our communities - despite our problems.
Mark G. said in reply to save_the_rustbelt… Reply Mar 07, 2010 at 08:25 AM Σπάρτακος said in reply to save_the_rustbelt… “They made better lives for their children, and kept families together during the depression because they owned homes.” this is a lie. owning a loan in the midst of the deflation of the great depression caused many families to fall into abject poverty.
more exceptionalist “american dream” hokum from rusty. the myth of the bright-eyed family buying their cookie-cutter white-picket fence in a community where the children are all above average (and white). unfortunately this rockwellian fantasy is actually orwellian propaganda used to justify oppression and cruelty.
Reply Mar 07, 2010 at 11:13 AM paine said in reply to save_the_rustbelt… intentionalizing and incentivizing the ultimo genteel compulsion is aesthetic of course an end to mortgage payment deductions Reply Mar 07, 2010 at 07:40 AM paine said in reply to Mark G…. i agree in fact i advocate walking away but far be it from me each household must place this matter any agenda about reclustering the hoi hogs
save_the_rustbelt said in reply to paine… Beg to disagree. Technically the current market value of both my places could be zero, homes are not selling. So I guess technically I am underwater. In terms of current utility and future value there will be considerable equity when the market heals. Now, those who are really seriously underwater with no hope of recovery have to consider the utility of the home and the payments versus rental opportunities. For some, especially in areas with concentrated misery, walking away may be the only option. Reply Mar 07, 2010 at 08:03 AM paine said in reply to save_the_rustbelt…
its the local value that implodes the package value the lot has a negative value now get it ??? location is not zero valued but negative test imagine you built ever kooler at some point one of these houses would be so kool some one would pay something to move to its horrible location Reply Mar 07, 2010 at 09:23 AM Σπάρτακος said in reply to save_the_rustbelt… Reply Mar 07, 2010 at 11:20 AM watt d fark said in reply to Σπάρτακος… AND…in Michigan they have until 6 years after the last mortgage payment is due to do so (if you take out a 30 yr mortgage today, they have until sometime in 2046 to sue you if you walk) http://freep.com/article/20100307/BUSINESS06/3070532/Mortgage-tax-bills-ultimately-come-back-to-haunt-walkaways As usual, you can't win. If you're a business, you can walk away from a bad investment, but as an individual you are screwed. Reply Mar 08, 2010 at 09:44 AM Pingry said… If one has the gall to claim that landlords “oppress” renters, the one should also wise up and realize that the taxpayers are “oppressed” by the government into paying taxes to subsidize other people to buy homes. Maybe there's another reason for this obsession with homeownership. Clearly it's a backdoor attempt to curry favor with certain groups. Nothing more than a sly attempt at income redistribution. Whenever government can concentrate benefits while spreading costs as broadly as possible, look out! —Pingry
paine said in reply to Pingry… the goal of each family its own bit of turf the family farm is now just the sterile family house plot misbegotten ?? who are we genteel trust fund rentiers “down with the little pink ranchos !!”
save_the_rustbelt said in reply to Pingry… Very tough sometimes. I've been on both sides of that equation. Reply Mar 07, 2010 at 08:05 AM paine said in reply to save_the_rustbelt… are systems best judged by counting their white hats and black hats ??? slum lording is still the easiest way to make fast money in real estate Reply Mar 07, 2010 at 09:34 AM bakho said… Reply Mar 07, 2010 at 07:05 AM cm said in reply to bakho… From my vantage point, in Germany and probably elsewhere in “first world” “Europe”, there seems to be much stronger legislation and enforcement of renters' rights and rental standards, as well as a sizable portion of rentals owned and managed by public entities and co-ops. There are many private landlords, and of course they complain about the regulations, but I haven't seen them starve. Also at least here in “Silicon Valley”, a good deal of the rental stock looks much shabbier than what I know from “Europe”. Probably due to absence of European over-regulation.
paine said…
give us a for instance mr S !!!! leased apartments vs condos ??? the spec is in the turf purchases living sprawled vs stacked may well be again think of course
jamzo said… Reply Mar 07, 2010 at 07:19 AM paine said in reply to jamzo… Reply Mar 07, 2010 at 07:43 AM roger said in reply to paine… On the other hand, you are certainly right that this is not a white hat/black hat issue. After all, rusty's americans who pioneered in moving out and building houses also pioneered in retiring to florida and buying condos, which are now being covered by a state subvented homeowners insurance, since homeowner insurance companies, for some reason, got tired of insuring Gulf Coast property. To divide this into separate units of preference is, I think, to miss the reality here.
Steve Bannister said… Arrayed against that argument is one I haven't seen argued at all…that housing has been encouraged by the elites as the part of the social safety net that makes retirement feasible for the masses, thus preventing the pressure for better tax funded retirements that should build in the wake of the crisis now that the fantasy bubble has popped, and also allowing finance to profit. This is not the case, e.g., in developed Europe. Here, its Qu'ils mangent de la brioche. Reply Mar 07, 2010 at 07:55 AM paine said in reply to Steve Bannister… its problematic where as recent de3velopments suggest solidly the house itself is an inflation proof as to elite preference then of course little guy fueled
paine said in reply to paine…
Steve Bannister said in reply to paine… And it won't be the last attempt. Reply Mar 07, 2010 at 08:26 AM paine said in reply to Steve Bannister… since the system is largely of “their” making anyway you cut up the “risks “ Reply Mar 07, 2010 at 09:37 AM DR said… Housing is subsidize by the US government so as to provide a safe,ready stream of dollar instruments(MBS). Up until recently there wasn't enough US treasuries to go around. Reply Mar 07, 2010 at 08:25 AM Eleanor said… Reply Mar 07, 2010 at 08:36 AM paine said in reply to Eleanor… okay in fact that's exactly what the prophets but i agree with bill faulkner Reply Mar 07, 2010 at 12:54 PM jrossi said… Reply Mar 07, 2010 at 08:37 AM Σπάρτακος said in reply to jrossi… “Of course a few years ago when any fool could buy a house with no money down, that changed the equation for a time. “ The cognitive dissonance of loan-owners knows no bounds. FHA 0-3.5% dp loans with $8000 cash moneyu bribes from uncle sam is the rock that american real estate is based. “Don't overleverage—20% down minimum.” 5x leverage is a safe bet!?! BRB! I'm going to phone my broker now! “At bottom, buying a home to live in should be a lifestyle choice, not an investment.” This is true. Only those with money to blow should buy a home. Reply Mar 07, 2010 at 11:39 AM jrossi said in reply to Σπάρτακος… Reply Mar 07, 2010 at 07:59 PM CathyG said in reply to Σπάρτακος… So we saved and built our dream home in 1990 and are now just 13 payments away from owning it outright. It's the only home our boys have known and it's the last home we plan to own. Sure, there are risks. It's not easy to avoid death, disease and unemployment for 20 years. It's hard to hold everything together for that long and never miss a payment. Buying a home isn't, and never was, the right solution for everyone. But it gave us a type of security, peace and, ultimately, financial well-being that we would have never enjoyed if we had continued to rent. Reply Mar 08, 2010 at 07:49 AM Noni Mausa said… As you can all see, I have no idea how specifically this would work. Maybe the tranches could apply to registered housing stock or stock built just for the purpose. Industries might want to invest in such a scheme. I would hope it would allow people to build equity while still being free to move around the country. Whether it would actually work that way — who knows? ===== “…Historically, homeownership has been associated with freedom, while renting … has been linked to the oppression of a landlord….” I don't know about “oppression”, but in my city, and many others I imagine, the quality of the neighborhood is inversely related to the proportion of renters. Home purchase is tied to comparative steadiness of income and ability to save — renters may have these qualities, but buyers MUST have them. Landlords and tenants can also share a mutually destructive relationship to the property. At the low end of the cost slope, the renter either can't afford upkeep, or won't do it because the investment of time and money is lost to them when they leave. The landlords have much the same problem — why invest lots of time and money in a home which will just suffer damage from inept or violent tenants? I enjoyed watching the French rental environment in the movie “Amelie”, with longstanding rental arrangements and the neighbors knowing each other well — investing in their neighborhood. You more cosmopolitan Bears can tell me whether this is a true or idealized portrait, but it's not a lot like the apartment environments I have experienced. Reply Mar 07, 2010 at 08:47 AM Bruce Wilder said… What went wrong in American housing wasn't on the tax subsidy side. What went wrong was in the structure of finance and banking: “financial innovation”. You remember “financial innnovation”? A housing bubble driven by deteriorating underwriting standards and adjustable rates and home equity lines of credit? Sound familiar? The American middle class is being squeezed into pulp, like grapes in a wine press. Shiller is just part of the process of propagandizing in favor of one of the next steps in reducing the middle class aspirations of the 90%. Others are getting ready to steal Social Security; Shiller is weaning the former American middle class from the financial security of home ownership. Look, people, there's no fighting the new economy. Work for no benefits as an “independent contractor”. Cash your checks for 3% at Wal-Mart. Rent a place to live. And, when the time comes, die waiting in the emergency room. It's the new American Dream. Reply Mar 07, 2010 at 09:00 AM paine said in reply to Bruce Wilder… bruce btw there one needs to add the analogy between landlord mortgage deductions and householder mortgage deduction is Reply Mar 07, 2010 at 09:45 AM Bruce Wilder said in reply to paine… As other commenters have put it, he's “talkin' his book”. Shiller is a shill. He's a salesman, with a customer base to please and a product to sell. Conservative economists have developed so-called tax “incidence” into a fine art of propaganda, where the goal is always to suggest, never to prove. It is argument as hypnosis, not analysis. Just so, here. The mortgage interest deduction has nothing to do with the housing bubble, or the housing bubble's usefulness in transferring, literally, many trillions of dollars from the middle class to the top 1%. How would a long-standing tax subside provoke a bubble? I brought up the heavy tax subsidy to commercial ownership of property to suggest that there might be an issue of balance, here. It's my way of saying, “wake up!” If Shiller were doing an honest analysis, there would be some acknowledgement of the full range of taxes and tax subsidy, including local and State PROPERTY TAXES (hello!!!), and their effect ON BALANCE AND ON NET on behavior and choice. That's the way real economic analysis works. Shiller's essay is not an economist's honest attempt at an informative and insightful critical analysis. It is a propagandist's venture in hypnotic suggestion and distraction, useful to the extent that it focuses political discussion on further reforms to government policy protective of the middle class, to benefit the kleptocracy, rather than reforms to banking or finance, that might limit the predation. So, yes, I think he's very much a black hat. Reply Mar 07, 2010 at 02:30 PM Bruce Wilder said in reply to paine… Many conservative economists disparage the minimum wage, while touting the EITC. Their concern for the poor is touching. Who gets the subsidy cash is politically important in a society of ignoramuses, but is not an indicator of the economic effect or benefit, in shaping the society. What I liked about the New Deal, as a package, was that it promoted the freedom of a middle class, to build and have something of their own, by subsidizing the accumulation of “insurance”. The key to economic domination in a plutocracy is the “insurance effect” of wealth: the wealthy want to rent out their wealth as insurance to the poor, then use politics to administer shocks to the system, in order to draw off as much income as possible. Laissez-faire doctrine is all about preventing the masses from using government to protect themselves, with police actions, regulation or mutual schemes to provide cheap “insurance”. What Save-the-Rustbelt said above about the role of home ownership in the epic achievements of families seems exactly right to me. I'm not a fan of McMansions or urban sprawl, but I am a fan of enabling people to live satisfactory lives, in families and communities, where the individual has power and choice. Not the fake power touted by libertarians, exemplified by, say, a credit card “contract” that the bank can change without notice, but the actual power of being able to hold a stable job, live in a house, and end up owning the house.
Σπάρτακος said in reply to Bruce Wilder… the fact that the middling class keeps on voting for the squeezers shows that this is a lie. the middling class supports “tax cuts” not social equity. they are “as long as i get mine” and “not in my back yard” enablers to the oligarchs. in my view, the fact that there are fewer, and fewer of the middling class is a good thing. once there numbers dwindle below a certain threshold we might see “real” change. Reply Mar 07, 2010 at 11:50 AM Bruce Wilder said in reply to Σπάρτακος… At this point, Americans vote for the squeezers, because only squeezers can run. Reply Mar 07, 2010 at 02:36 PM CathyG said in reply to Bruce Wilder… Reply Mar 08, 2010 at 08:07 AM Fred C. Dobbs said in reply to Bruce Wilder… It's not as if this is much (any?) benefit to the renters, though it would be to the landlord. Which is obviously why the incentive for ownership is so popular. And perhaps why folks like Barney Frank would set out to 'liberalize' the availability of mortgages. Reply Mar 07, 2010 at 11:55 AM RueTheDay said… If someone bought a house during the boom with no money down and financed it with some goofy interest only, negative amortization, or pick a payment type loan, they are no more a “homeowner” than the renter down the street. Reply Mar 07, 2010 at 09:32 AM paine said in reply to RueTheDay…
RinoRevolt said… Most apartments rent expensive but are built cheaply.
Dirk van Dijk said… Still, on average, people who own have higher incomes than those who rent. Thus the mtg tax deduction is highly regressive. Probably the way to start going from A to B would be to slowly bring down the cap on how much mortgage interest can be deducted, and then correspondingly start raising the standard deduction. However, given that having a $900,000 mortgage means something very different in New York City than in Dayton, there might have to be a more complicated system for bringing down the cap, based on regional average costs. Reply Mar 07, 2010 at 11:03 AM anne said… http://www.nytimes.com/2010/03/07/business/07view.html March 5, 2010 Mom, Apple Pie and Mortgages This time, the best answer isn’t found in traditional economics but rather in American culture: a long-standing feeling that owning homes in healthy communities is connected to individual liberties that embody our national identity. Historically, homeownership has been associated with freedom, while renting — often in tenements or mill villages — has been linked to the oppression of a landlord…. Reply Mar 07, 2010 at 11:14 AM anne said… September 14, 2005 Blacks Hit Hardest by Costlier Mortgages WASHINGTON - Regardless of income levels, blacks were about three times as likely as whites to borrow through more expensive “subprime” mortgages last year, according to a nationwide lending survey released Tuesday by the Federal Reserve. The new report, based on data collected from 8,853 lenders, is the Fed's first attempt to look for evidence of racial and ethnic discrimination in the booming business in exotic mortgages and subprime lending. Among low-income homebuyers, about 39.2 percent of blacks but only 12.9 percent of whites took out high-priced mortgages, which the Fed defined as loans with interest rates about 2 percentage points higher than those for “prime” customers with good credit. For buyers of a $200,000 house last year, that would have meant about $3,000 extra in annual interest payments…. [What is always saddening but increasing startling as the trend continues, is that the legacy of discrimination, especially discrimination against Blacks in housing and mortgages is simply turned away from. Federal Reserve executives would turn away even when the Fed's own researchers pointed to the problem and the New York Times wrote of the problem. Black homeowners and Black communites have been fiercely harmed these last years and special attention is needed but the problem is virtually never addressed by analysts.] Reply Mar 07, 2010 at 11:20 AM anne said… February 19, 2010 A Sight All Too Familiar in Poor Neighborhoods MILWAUKEE — Shantana Smith, a single mother who had not paid rent for three months, watched on a recent morning as men from Eagle Movers carried her tattered furniture to the sidewalk. Bystanders knew too well what was happening. “When you see the Eagle Movers truck, you know it’s time to get going,” a neighbor said. On Milwaukee’s impoverished North Side, the mover’s name is nearly as familiar as McDonald’s, because Eagle often accompanies sheriffs on evictions. They haul tenants’ belongings into storage or, as Ms. Smith preferred, leave them outside for tenants to truck away. Here and in swaths of many cities, evictions from rental properties are so common that they are part of the texture of life. New research is showing that eviction is a particular burden on low-income black women, often single mothers, who have an easier time renting apartments than their male counterparts, but are vulnerable to losing them because their wages or public benefits have not kept up with the cost of housing. And evictions, in turn, can easily throw families into cascades of turmoil and debt…. The study found that one of every 25 renter-occupied households in the city is evicted each year. In black neighborhoods, the rate is one in 14. These figures include only court-ordered evictions; the true toll, experts say, is greater because far more tenants, under threat of eviction, move in with relatives, into more run-down apartments or, sometimes, into homeless shelters. Women from largely black neighborhoods in Milwaukee constitute 13 percent of the city’s population, but 40 percent of those evicted. Housing lawyers in Los Angeles and New York described a similar predominance of minority women, including Hispanic women, in eviction cases. (The figures do not include displaced renters from foreclosed properties.) Even for working mothers, evictions and the ensuing damage to social ties, schooling and credit ratings can be an ever-hovering threat…. Reply Mar 07, 2010 at 11:25 AM OrganicGeorge said… This is the type of shameful propaganda that passes as social/economic comment. Whats' good for Mr. Shiller's fortune's, and his clients on Wall St, must be what's good for the middle class and blue collar workers. If not for the fact that Wall St. has destroyed the middle class and blue collar jobs in their never ending search for market efficiencies. What a shameful period of US history. Reply Mar 07, 2010 at 11:32 AM Winslow R. said… Rents here are 2x what it costs to buy. How's that for timing? Reply Mar 07, 2010 at 01:04 PM Comment below or sign in Posted by pinky at 08:08 PM |
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stig is lard boilingJoseph Stiglitz picks up where Jamie Galbraith left off: The Dangers of Deficit Reduction, by Joseph E. Stiglitz, Commentary, NY Times: A wave of fiscal austerity is rushing over Europe and America. … Posted by Mark Thoma on Saturday, March 6, 2010 at 12:58 AM in Budget Deficit, Economics Save to del.icio.us Tweet This Permalink Comments (33)
ken melvin said… Reply Mar 06, 2010 at 04:38 AM stunney said in reply to ken melvin… Is it any wonder that Tea Bagging patriots by the million are demanding an end to this failed 75 year experiment with Socialism, now led by a foreign-born coloured “President”? Brought to you by the Glenn Beck Foundation for the Economic Education of America Reply Mar 06, 2010 at 08:22 PM OhNoNotAgain said in reply to stunney… Reply Mar 07, 2010 at 01:53 AM paine said… joe has the insight like few others how has he sharpened the debate here this: “most economists agree…” blah blah blah
joe plays consensus builder has he just spent too much time telling us the same stuff without result ??? some folks might tire of the response and up the ante joe i guess tried that in the late 90's we need a chomsky among economists
julio said in reply to paine… I almost invariably agree with Stiglitz, and so too in this case, but found the article flabby. A number of random quotes as I went along: “The financial sector has imposed huge externalities on the rest of society. America’s financial industry polluted the world with toxic mortgages, and, in line with the well established “polluter pays” principle, taxes should be imposed on it. “ [“Well-established”? Where has he been? But the whole riff on “toxic mortgages” is silly — economic policy by metaphor?] “Over the longer term, most economists agree that governments, especially in advanced industrial countries with aging populations, should be concerned about the sustainability of their policies. “ [As opposed to the rest of the economists, that say “what the hell”?] “Faster growth and returns on public investment yield higher tax revenues, and a 5 to 6% return is more than enough to offset temporary increases in the national debt. “ [“Temporary”? Isn't that dodging the issue?] “But high-return public investments that more than pay for themselves can actually improve the well-being of future generations,” [That should quiet the people who are against high-return public investments that more than pay for themselves.] Other than that ;-), glad to see Stiglitz chiming in. Reply Mar 06, 2010 at 09:17 AM ilsm said… Talk of deficit reduction which leaves militarist plundering at present levels is Orwellian, class warfare. In 1987 military waste was reduced in the face of the soviet threat. Today militarism is in charge, protected by propaganda and wildly inflated fear of a bunch of thugs. Reply Mar 06, 2010 at 05:32 AM paine said in reply to ilsm… you need to fight the battle in front of you not switch off to i'm prolly ten times more anti pentagon but this isn't about that Reply Mar 06, 2010 at 05:55 AM btg said in reply to ilsm… Reply Mar 08, 2010 at 07:59 AM paine said… that mark thoma our gracious host won't admit this
ya lame one ya poison core: “and it would be doubly foolish to burden (future generations) with debts from unproductive spending and then cut back on productive investments. “ burden the future ??? these are the macro ignorant enemies faux talking points the present always takes from the present with production slack no incremental expenditure the waste is leaving these factors idle as keynes put it we're not storing up these lost idled manhours the souls of millions
julio said in reply to paine… the waste is leaving these factors idle “ It's not binary, it's ternary: We can do nothing, Reply Mar 06, 2010 at 09:25 AM bakho said… We have frittered away “stimulus” on tax cuts for the wealthy who don't need them and are not using them to increase demand. States are laying off teachers and other workers, canceling projects and cutting services as we speak. We are sitting on our hands arguing over cap and trade while our competitors are investing in alternative energy systems, building smart electric grids and putting the 21st century infrastructure in place. We are subsidizing the status quo BigEnergy dinosaurs that are headed for extinction. We are not taxing their record profits. We have bad labor policy. Our community colleges are overflowing with workers trying to retrain on their own dime. We subsidize loan sharks with our tax dollars to turn workers trying to educate themselves into debt hell. We have politicians who have no vision and do no planning for the future. They turn policy over to the special interests who have a vision of a future where the special interests own everything and the rest of us are their serfs. We have poor leadership coming from the administration that was elected to change. This administration grovels before the status quo, restrained by the special interests. Our politicians are a bunch of wealthy elites who don't understand the middle class, don't understand jobs and are completely out of touch with the American people. The Republicans at least are in touch with the segment of the population that is special interest and wants to punish everyone who isn't like them. The Democrats are trying to split the difference and delivering tepid policy that does nothing to relieve the suffering of their own base, creates an economic environment that is certain to erode support and allows the opposition to gain traction. Obama doesn't get it. The Democrat elites don't get it. The Obama administration is a major disappointment.
anne said… useless mush joe has the insight like few others how has he sharpened the debate here this: “most economists agree…” blah blah blah [Which reminds me of when Stiglitz was complaining that Krugman is fine as an economist but too shrill politically. This is political-economics mush.] Reply Mar 06, 2010 at 07:48 AM Bruce Wilder said… I don't. What you say about the mushy rhetoric, and the needs of the political moment strikes me as perfectly sensible, except for one niggling detail: where would an icon of mainstream economics come up with a coherent “architectural” view? Reading Michael Woodford? I don't think so. The problem is not just rhetoric. Stiglitz really does lack a sense of the economy as something structured, which we collectively do, as opposed to a separate, spontaneous, disjointed animate, which we can only prod, interpret and manage a bit around the edges. Reply Mar 06, 2010 at 09:18 AM Anonymous said… Reply Mar 06, 2010 at 10:13 AM OhNoNotAgain said in reply to Anonymous… Reply Mar 07, 2010 at 02:00 AM anne said… March 6, 2010 Missing the Story on Iceland: Can the Bankers Steal Your Kids' Money The New York Times article * on Iceland's referendum on using public money to pay debts to foreign bank depositors failed to explain the real issues involved. During the boom, several Icelandic banks courted deposits outside the country, mostly in the UK and the Netherlands, by offering higher interest rates. The banks then used these deposits to finance a range of highly speculative investments. As long the bubbles kept expanding, this model was hugely successful. However, when the bubbles burst, the value of the banks' assets collapsed and they had no ability to repay their depositors. This would have all been a private matter, except that the government insures bank deposits up to a certain level (like the FDIC in the United States). Iceland, as a matter of its treaty obligations with the European Union, is obligated to maintain a system of public deposit insurance which applies to both domestic and foreign depositors. The issue here is whether private banks can effectively create enormous obligations (the money at stake would be equivalent to $6 trillion in the United States) for taxpayers. There was obviously an enormous regulatory failure on the part of the Icelandic bank regulators. International agencies like the IMF also played a role in failing to call attention to what were obviously very speculative investments. (Frederick Mishkin, a former Federal Reserve Board governor, did his part to promote the Iceland catastrophe, touting the great strength of its economy in a 2006 report. ** He does not appear to have faced any consequences as a result.) It is also likely that some of the banks' actions involved fraudulent accounting practices if they concealed the extent of their true liabilities. The question then is whether the taxpayers or the depositors should bear the risk from fraudulent actions by banks. Arguments could be made in both directions, but this issue is never mentioned in the article. It should also point out how the Iceland bank actions makes a mockery of anyone who claims to support leaving financial activities to the market. In almost all cases, actors in financial markets assume that governments will stand behind banks at the end of the day. Therefore when they say want the government to leave things to the market they are lying. They just want to be able to take risks with taxpayers money, without being fettered by regulations limiting the extent of these risks. In short, the finance boys want a free lunch, not a free market. * http://www.nytimes.com/2010/03/06/world/europe/06iceland.html ** http://www.vi.is/files/555877819Financial%20Stability%20in%20Iceland%20Screen%20Version.pdf — Dean Baker Reply Mar 06, 2010 at 11:33 AM Goldilocksisableachblond said in reply to anne… http://blogs.reuters.com/felix-salmon/2010/03/06/iceland-says-no/ Iceland says no Does any referendum, ever, get a 98% no vote — especially when it’s a referendum on a bill which was passed by a democratically-elected legislature? The first reaction is that the people have obviously spoken with one voice. But then the question arises: What have they said? It’s worth noting, here, that the bill they were voting on — that Iceland repay its $5.3 billion debt over 15 years, with 5.5% interest — is no longer the deal being offered by the UK and Holland, which have now offered a two-year interest holiday and a lower interest rate. And it’s also worth noting that the “no” vote was certainly split between people saying “no to this deal” and people saying “no to any deal”. So maybe this is simply a sensible national negotiating tactic, giving Iceland some small amount of leverage in the run-up to a new deal being hammered out in coming weeks. Or maybe it’s just in the national character to want to stand up to bullies In a previous column , Salmon implied a certain solidarity with the Icelanders , but I wonder if his heart was really in it : http://blogs.reuters.com/felix-salmon/2010/01/06/iceland-stands-up-to-bullies/ “In principle, I’m with Mish on this one: if you’re the president of a country where 70% of the population opposes the bill and 20% have signed a petition urging you to veto it, the noble course of action is clear.” Reply Mar 06, 2010 at 04:06 PM anne said… May, 2006 Financial Stability in Iceland EXECUTIVE SUMMARY There has been good and bad news for the Icelandic economy. The good news is that it is receiving a lot of attention. The bad news is that it is recieving a lot of attention. Recent volatility in Iceland's asset markets have raised concerns about the fragility of Iceland's economy. In this respect many have looked to the country’s large current account deficit. This study provides a framework for evaluating financial fragility by examining the fundamentals of Iceland's economy to see whether they suggest that the country could go down the traditional routes to financial instability. Iceland is unique in that it is the smallest economy in the world to have its own currency and a flexible exchange rate. It has experienced high current account deficits before, but rapid adjustment has taken place in the past without significantly stressing the Icelandic financial system. Iceland is also an advanced country with excellent institutions (low corruption, rule of law, high education, and freedom of the press). In addition, its financial regulation and supervision is considered to be of high quality. Iceland also has a strong fiscal position that is far superior to what is seen in the United States, Japan and Europe. Iceland's financial sector has undergone a substantial liberalization, which was complete over a decade ago, and its banking sector has been transformed from one focused mainly on domestic markets to one providing financial intermediation services to the rest of the world, particularly Scandinavia and the UK. There are three traditional routes to financial instability that have manifested themselves in recent Reply Mar 06, 2010 at 11:49 AM anne said… * http://www.nytimes.com/2006/04/18/business/worldbusiness/18iceland.html April 18, 2006 Iceland's Fizzy Economy Faces a Test Reply Mar 06, 2010 at 11:56 AM anne said… March 6, 2010 Frederick Mishkin, a former Federal Reserve Board governor, did his part to promote the Iceland catastrophe, touting the great strength of its economy in a 2006 report. He does not appear to have faced any consequences as a result. — Dean Baker Mishkin, who may not have read New York Times accounts of Iceland's difficulties in 2006 and evidently did not read Times accounts of mortgage abuses that Federal Reserve researchers had studied and did not read the Times account of hedge funds openly taking positions against American mortgage holders, would become a Governor of the Federal Reserve in September 2006. Reply Mar 06, 2010 at 12:10 PM julio said in reply to anne… Reply Mar 06, 2010 at 04:13 PM Bruce Wilder said in reply to anne… [I need easy, today.] Reply Mar 07, 2010 at 09:16 AM ken melvin said… Reply Mar 06, 2010 at 02:40 PM Winslow R. said… Too little attention is paid to long-term interest rates and the effect on the economy. We've had falling long-term rates for 3 decades which is now coming to an end as it hits the zero bound. As interest rates stabilize, the economy will shift away from depending on capital gains to justify investment. Income flows are taking over in making investment decisions! There is a fine line in the economy between falling asset prices leading to falling incomes. Given present monetary and fiscal policy it could be crossed in the next year or so. The amorphous elite (monarchy in many countries) seem to be quite confident they can retain control (as they were prior to WWII). We'll see. Each crisis should lead us towards a more democratized financial system. This crisis, so far, has been a total failure. Almost all economists see quite content to retain a banker monopoly. Allow citizens to use government bonds as collateral at the Fed window. Let citizens borrow at the overnight rate.
suburbanite said… save up for rainy day. borrowing dull the edge of husbandry. Reply Mar 06, 2010 at 05:50 PM danny said…
Reply Mar 06, 2010 at 06:25 PM Goldilocksisableachblond said… He keeps saying : ” Right now , we must focus on the steaks. ” and : ” We've got a real problem with the steaks. “ What is the problem ? Mad Cow Disease ? Reply Mar 06, 2010 at 09:00 PM Sean said… I'm all for expanding government-funded health care if you make the humanitarian argument, but I can't think of a better example of reallocation of resources from high-return assets to low-return assets. Reply Mar 06, 2010 at 10:04 PM Goldilocksisableachblond said… You're committing a common fallacy of logic. You're taking a proposition that is probably true for you , as an individual , and assuming that it also true for everyone else. It is not. The highest-returning capital asset , as a class , is human capital. That there may be occasional exceptions amongst individuals doesn't change that fact. Reply Mar 06, 2010 at 10:39 PM Young Economist said… For EU and Japan, they face the long term deflated economy because of mature economy and aging population. They are wrong to use the growth target policy but they should focus the stability policy. Japan fail to target growth but they create the unpaid government debts from growth target policy. Now they should use stabilizing policy and tries to bring down debts. Surely, Japan face declining population and if they face the declining capital or capital flight; for example, all big corporations move out of Japan, they cannot pay back debts. For EU, the monetary union at the end will benefit the most competitive countries like Germany and they can use fix exchange rate policy in the union to reduce unemployment under the cost of unproductive economies such as Spain, Greece, Italy and others. Surely the unproductive economies will face severe unemployment and political instability in the future and the political conflicts will occur at some points. The solution is that they need the flexibility in the region in every aspect including fiscal flexibility to transfer, labor flexibility or even currency flexibility such as the internal exchange rate adjustment but no external rate adjustment. The last is emerging economies. For China, BRIC , they face the bubbles in asset prices nearly all assets in commodities, food, property, equities. They need the create the right monetary policy and fiscal policy. China will face bigger problem if they decide to appreciate renminbi because noone know the government debt level and credit level but all knows debts are quite high at 100% of GDP for government debt and 120% for credit/GDP. They must do 1. control the debts level to grow less than GDP for government and credit. 2. control asset price especially property price by using both fiscal tool like tax and increasing supply. They also need the more stringent lending regulation and the banking capital and risk management. At the end, they cannot allow renminbi to float at this point on fragile economy and maybe all emerging counties with larger trade surplus must use capital control and Tobin tax on short term capital movement to stabilize economy and reduce bubble and crises. The biggest problem for the global economy is the very low interest from Fed and this low funding cause the quick movement in the liquidity to cause bubble and crises. Surely, the Volcker rule is the must but the Tobin tax for speculation may be the best tool because the low rate must be taxed for speculation to tackle the bubble and crash. Reply Mar 07, 2010 at 03:36 AM Fred C. Dobbs said… Reply Mar 07, 2010 at 06:59 AM Anonymous said in reply to Fred C. Dobbs… Reply Mar 07, 2010 at 11:40 AM Rob Parenteau said… Sector financial balances do not exist in a vacuum. They are interconnected. Raise taxes or cut government expenditures and you reduce private sector cash flow. Unless the trade balance increases in an offsetting fashion to fiscal deficit reduction, the result is private sector will face a reduction in its financial balance. Either household and business net saving will fall, or the private sector deficit spending will deepen. This is not high theory - it is double entry bookkeeping, which should be familiar by now. The connectedness of sector financial balances is introduced in the link below and the recent issue of the Richebacher Letter, with application to the eurozone predicament. The sooner more people understand these trade-offs, the less damage will be done. http://www.nakedcapitalism.com/2010/03/parenteau-on-fiscal-correctness-and-animal-sacrifices-leading-the-piigs-to-slaughter-part-1.html Reply Mar 07, 2010 at 04:05 PM Comment below or sign in with TypePad F Posted by pinky at 08:05 PM |
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nassau seniorAs you've probably heard, even though we are just beginning to see a way out of a deep recession that has long-term unemployment rising to historic levels, Republicans are blocking the extension of unemployment benefits. Joe Klein explains why: This Is Getting Good, by Joe Klein: Jim Bunning is doing all of us a favor. As this comment from the Number 2 Senate Republican, Jon Kyl of Arizona, makes clear, the Republicans are turning toward a form of reactionary radicalism that is well to the right not only of traditional conservatism, but also of post-Victorian concepts of government and—not to put too fine a point on it—of common decency as well: In his book Three Lectures on the Rate of Wages, Senior explains why he believes that relief for the poor will lead them to acquire the attitude that they have the right to exist without having to do any work: greater exertion and severer economy are … [the laborer's] resources in distress; and what they cannot supply, he receives with gratitude from the benevolent. The connexion between him and his master has the kindliness of a voluntary association, in which each party is conscious of benefit, and each feels that his own welfare depends … on the welfare of the other. But the instant wages cease to be a bargain-the instant the labourer is paid, not according to his value, but his wants, he ceases to be a free man. He acquires the indolence, the improvidence, the rapacity, and the malignity, but not the subordination of a slave. He is told that he has a right to wages …. But who can doubt that he will measure his rights by his wishes, or that his wishes will extend with the prospect of gratification? The present tide may not complete the inundation, but it will be a dreadful error if we mistake the ebb for a permanent receding of the waters. A breach has been made in the sea-wall, and with every succeeding irruption they will swell higher and spread more widely. What we are suffering is nothing to what we have to expect. Nassau Senior (1790-1864) was a lawyer with an interest in social, economic, and political issues. He was a friend of many of the more prominent members of the Whig party and he was the party’s general adviser on matters involving economic and social issues. In 1825 he was appointed to the first chair of political economy at Oxford University. In his early years, his main concern was the causes and consequences of poverty and the standard of living of the poor. Prior to 1830 Senior had considerable sympathy for the plight of the poor, and his concern appears to have been generally benevolent. He rejected Malthus’ population theory which implied long-run misery for the masses and instead believed that improvements in productivity would coincide with increases in moral character to lift the poor from their misery. He saw moral education as the only answer to poverty and actively promoted efforts to uplift intellectual and moral standards. Conditions for the working class during this time were almost, if not surely sub-human. Exploitation and degradation were commonplace and there came a time in the 1820s and 1830s when labor began to organize and fight back. The result was widespread strikes, industrial sabotage, riots, and fires, all of which had a great influence on Senior. He changed. He particularly cited “the fires and insurrections which terrified the south of England in the frightful autumn of 1830” (Nassau Senior, Industrial Efficiency and Social Economy, 2:156). He came to believe that the poor laws and government’s dole to the poor and the unemployed were the principle causes and consequences of poverty and that this threatened to undermine the very existence of capitalism in England. In 1830 Senior published Three lectures on the Rate of Wages. After the unrests in the autumn of 1830, he added a preface called “The Causes and Remedies of the Present Circumstances” the source of the famous wages fund doctrine. Setting aside all the finer details, the essence is that there is a fixed pool of income to divide among workers and the size of the pool is determined solely by labor productivity. Thus, to improve living conditions, labor productivity has to rise or the number of poor depending upon the fixed fund has to fall. How to increase labor productivity? He advocated two solutions. First, the removal of all restrictions on free commerce and the accumulation of capital. Second, abolition of the poor laws which “made wages not a matter of contract between the master and the workman, but a right for one, and a tax on the other.” Senior was no longer worried about the misery caused by poverty. The events of 1830 led him to worry about the “threat of an arrogant laboring class, resorting to strikes, violence, and [unions], a threat to the foundation not merely of wealth but of existence itself.” Poor laws and dole led to a decreased incentive to work and created the arrogant attitude that workers and their families had a right to exist even if they could not or would not find work. With his connections to the powerful Whig party, Senior was able to put some of his ideas into practice. In 1832 he was appointed to the Poor Law Inquiry Commission which was to study existing poor laws and methods of dealing with poverty and recommend reform. The report issued in 1834 was by all accounts largely Senior’s work. The new law stated: Workers should accept any job the market offered, regardless of working conditions or pay. One historian, E.J. Hobsbawn (Industry and Empire: An Economic History of Britain since 1750) said the poor law Senior was influential in creating was Whenever I go back and read about these times, the people, the policies, there are echoes of present day policy debates everywhere. To repeat a cliche, little is truly new in this world. A close look at the principles underlying contemporary rules for Unemployment Compensation reveals strong echoes of Senior’s policies. Much of the rhetoric surrounding welfare reform, Social Security reform and so on can be found in the literature surrounding the birth of capitalism and its struggle against socialist ideas, ideas abounding during Senior’s time. As we begin another episode where these same ideas clash, are we fully aware of how this resolved itself in the past when societies struggled with the very same issues?
ken melvin said… Reply Mar 01, 2010 at 09:31 PM purple said… Reply Mar 01, 2010 at 09:42 PM Mike said… Reply Mar 01, 2010 at 09:44 PM Dana J. said… Reply Mar 01, 2010 at 10:11 PM reason said in reply to Dana J…. You like Dickensian poverty (and crime)? Reply Mar 03, 2010 at 07:05 AM gordon said… Reply Mar 01, 2010 at 10:12 PM paine said in reply to gordon… and thru that four square prophecy Reply Mar 02, 2010 at 05:13 AM marcello said… whine, bitch, complain. they can take it. Really, whad'ya going to do, revolt or something ?
Reply Mar 01, 2010 at 10:33 PM Craig Bardo said… It's just like Marxist theorists who invariably fail to grasp human nature. Too bad. Reply Mar 01, 2010 at 10:35 PM paine said in reply to Craig Bardo… Reply Mar 02, 2010 at 05:11 AM GipsyKing said in reply to Craig Bardo… working on it, working on it — won't be long now! Reply Mar 02, 2010 at 07:39 AM kthomas said in reply to Craig Bardo… Still, I sense you are trying to get to the essence of something. So please, do come hither. Reply Mar 02, 2010 at 07:58 AM roger said in reply to Craig Bardo… Reply Mar 02, 2010 at 07:58 AM reason said in reply to Craig Bardo… Reply Mar 03, 2010 at 07:12 AM Mindrayge said… Reply Mar 01, 2010 at 10:47 PM paine said in reply to Mindrayge… Reply Mar 02, 2010 at 05:10 AM kthomas said in reply to Mindrayge… Reply Mar 02, 2010 at 07:59 AM Min said… Extending unemployment benefits for longer periods is a palliative. Long term unemployment is not good for the unemployed, nor is it good for society as a whole. Let's create 7-8 million jobs by the end of 2011! Reply Mar 02, 2010 at 01:37 AM paine said in reply to Min… Reply Mar 02, 2010 at 05:09 AM julio said… Looking at Wall St., he may have a point… Reply Mar 02, 2010 at 01:51 AM paine said in reply to julio… nice point but those are management clique Reply Mar 02, 2010 at 05:08 AM paine said… uncle has the means to enforce such job market conditions by effective demand management linked to a reinforcing credit policy senior to me is hardly worse then the humane neo liberal the dole is a squalid compromise with profiteers rentiers and assorted dignified social parasites Reply Mar 02, 2010 at 04:38 AM paine said in reply to paine… that globalist breed of neoliberals Reply Mar 02, 2010 at 05:03 AM Fred C. Dobbs said… Same deal for Social Security, nothing more than Now, get outta my elevator! Reply Mar 02, 2010 at 04:45 AM paine said… “real” shortages ?? yup
wage bargains squeezing out operating margins ?? prolly end to the profits system ??? nope so long as top mangement is rewarded by profit loss performance
Reply Mar 02, 2010 at 04:46 AM ken melvin said… Reply Mar 02, 2010 at 04:47 AM Richard said… Reply Mar 02, 2010 at 05:17 AM roger said in reply to Richard… Reply Mar 02, 2010 at 08:26 AM littleblackduck said… In theory one could argue something similar about people who live off dividends and other income investments… They don't 'work' either and if it was inherited wealth they didn't earn it either. I'm not saying that should end, but the puritanical work ethic of drudgery for the sake of drudgery needs to be put to rest, particularly if it is only applied to one class of people. Reply Mar 02, 2010 at 05:41 AM Noni Mausa said… These vindictive, grasping policies make a far weaker country. “Deserving” and “undeserving” has nothing to do with it. If there is one job for every six job-hunters, the remaining citizens are wasted and weakened and that weakens the whole country. America has enemies, and I am certain that they get a chuckle every day, reading in the papers accounts of the US cutting off huge swathes of human capital in the fear someone might get a dollar they didn't work for. You don't put out a fire by measuring a thimble of water per square inch of flame. You pour the water on and if some of it accidentally waters the flower bed, so what? Noni Reply Mar 02, 2010 at 07:08 AM don said in reply to Noni Mausa… Reply Mar 02, 2010 at 09:31 AM Barkley Rosser said in reply to don… Reply Mar 02, 2010 at 10:43 AM beezer said… Bingo. No taxes paid on the investments. But for those in the labor class (read those who actually make things) who can't find work the standards applied are quite different. No? For them, the idea of unemployment checks is corrupting. So change the name. Will semantics matter here? Call it the unemployment TRUST fund. How's that? Now, there's no curruption, right?
Σπάρτακος said… http://en.wikipedia.org/wiki/File:Chartist_meeting,_Kennington_Common.jpg
Barkley Rosser said in reply to Σπάρτακος… Reply Mar 02, 2010 at 10:46 AM yuan said in reply to Barkley Rosser… 'which were associated with Robert Owen coining the term “socialism” in that year' Reply Mar 02, 2010 at 04:37 PM anne said… March 2, 2010 Obama Voices Approval for Firing of Rhode Island Teachers In education news, President Obama has voiced support for the mass firings of every teacher at a public high school in Rhode Island. Last week, all ninety-three teachers and school personnel at Central Falls High School were told they were being fired at the end of the school year because of the school’s low achievement scores and low graduation rates. Last week, Education Secretary Arne Duncan applauded the move, saying school committee members were “showing courage and doing the right thing for kids.” On Monday, President Obama added his support for the mass firings. “So, if a school is struggling, we have to work with the principal and the teachers to find a solution. We’ve got to give them a chance to make meaningful improvements. But if a school continues to fail its students year after year after year, if it doesn’t show signs of improvement, then there’s got to be a sense of accountability. And that’s what happened in Rhode Island last week at a chronically troubled school, when just seven percent of eleventh graders passed state math tests. Seven percent. When a school board wasn’t able to deliver change by other means, they voted to lay off the faculty and the staff.” President Obama’s comment during a speech promoting School Turnaround Grants for low-performing schools. The President encouraged school districts to fire teachers at poorly performing schools, open more charter schools, and close some schools outright. The president of the American Federation of Teachers, Randi Weingarten, responded to the President’s speech by saying, “We know it is tempting for people in Washington to score political points by scapegoating teachers, but it does nothing to give our students and teachers the tools they need to succeed.” [Combining the President's job and education programs, for the sake of efficiency.] Reply Mar 02, 2010 at 08:21 AM Outsider said… Reply Mar 02, 2010 at 08:50 AM Noni Mausa said in reply to Outsider… Reply Mar 02, 2010 at 12:38 PM djt said… Reply Mar 02, 2010 at 10:27 AM Barkley Rosser said… Reply Mar 02, 2010 at 10:48 AM Dirk van Dijk said… Reply Mar 02, 2010 at 11:10 AM sth said… Reply Mar 02, 2010 at 11:51 AM LJM said… Reply Mar 02, 2010 at 12:12 PM Linda R. said… 1) People I know well share this attitude. One said to me, “Don't you think that every time you take a handout from government, you lose some of your freedom?” This same person will at times say, in response to my lamenting the condition of the unemployed, the poor (employed or not), or some other relatively less fortunate person/group, “There's a program for that problem, isn't there?” This person has, in fact, taken advantage of programs for which she and her husband qualified. No doubt they justified that by the fact that without those programs their ability to hold onto their house, or even put food on the table would be threatened. (Thus exposing their true prejudices). They have even continued to cash those checks when their eligibility no longer existed - until it was time to requalify by filling out another set of forms. 2) The idea of workers being paid “according to [their] value” is a radical concept. Under Senior's rubric, workers were to be paid according to their power, not their value. 3) My more creative side wonders. If freedom equals “nothing left to loose,” then shouldn't we do something to assure that even the well-off know the joys of such freedom? My first reaction to Joe Klein is that he's right. My second is that whether due to lack of knowledge of the history, lack of reading Dickens, or inability to think, there are people who will never connect what the Republicans say, in their reactionary frenzy, to their own lives. The “Republicans” who will listen and connect it with their own life or that of their neighbors are already RINOs, Independents, or Democrats! What will the soundbites on local news show? How about putting some people to work writing and producing a modern day Oliver Twist movie? And show it on TV. (Oh, and since there are no longer any restrictions, it could name names and be shown the week before Election Day!) Reply Mar 02, 2010 at 01:29 PM Barkley Rosser said… Reply Mar 02, 2010 at 02:02 PM Fred C. Dobbs said… Reply Mar 02, 2010 at 03:05 PM Resnyc said… I'm no economist, but the essential issue here, it would seem to me, is defining relative terms. The laborer sees his work and time as having a certain “value” and the capitalist sees a different “value” to the same thing. It's perception. One capitalist might decide that a profit margin of 20 percent is good enough for him and give the rest of the surplus “value” back to the workers; another capitalist might decide that margin should be much higher… On some level, the labor movement knew this and simply demanded to have the “value” of their time and work be perceived differently, using novel means of persuasion such as strikes, demonstrations, riots, and, after the point was made, sitting down and bargaining as a collective. Fast forward to today - unions represent, what, 8 percent of private-sector workers, so they have very little actual leverage - the unions are more like just another lobbying group vying for legislators' attention. And yet no one else speaks for workers as a group, and most workers have little idea what public policy has to do with their lives, having been drinking the koolaid that if they work hard enough they can become management one day, or strike out on their own as a small business. That day of reckoning that someone above said is coming - it would seem a logical outcome to the present acceleration of wage-earners' marginalization, but it is very difficult to imagine a large-scale cultural reaction against low wages or chronic high unemployment, much less what it would look like, because labor couldn't be less aware of itself as a class than it has become in the last 25 years. Instead, we have the populism of Sarah Palin and the Tea Partiers, supposedly readying a revolution against “big government”. Perhaps the reckoning will simply be the complete collapse of late-capitalism because that paradigm was dependent on labor pushing back hard enough to secure wages that kept demand up for all the consumer products the capitalists have been profiting from. Reply Mar 02, 2010 at 04:30 PM kaleberg said… Reply Mar 02, 2010 at 05:16 PM reason said in reply to kaleberg… Reply Mar 03, 2010 at 07:31 AM Lafayette said… {Senior explains why he believes that relief for the poor will lead them to acquire the attitude that they have the right to exist without having to do any work} The explanation is, of course, short-sighted. Any awake economist will easily explain that support payments do not go into savings accounts but back directly into the economy, thus maintaining Demand and thus maintaining employment. Maintaining employment is crucial to creating jobs. When employment is not maintained, neither are jobs created — businesses do not expand the production of goods and services at a time when job losses reduce National Income. (QED) Secondarily, nobody in their right mind wants to sit around watching the four walls on the dole. Well, perhaps a truly ignorant few do, but most people would like a job to occupy their time. And not only for its monetary benefits, but also because it fulfills a social function. People who work are “in the rat-race looking out, rather than outside the rat-race and looking in”. Like it or not, in our day and age, participating in the rat-race is preferable to its alternative. Then there is the matter of the Work Ethic. This ethic was once a cultural hand-me-down from generation to generation. It arrived in America with the Protestants (particularly the Calvinists) and embedded itself within the national psyche. It is entirely possible that this ethic, worn with time, needs some burnishing and promotion within American secondary schooling. POST SCRIPTUM Let us not expect the Replicants to think beyond their noses. They've never done so in the past, why should we expect them to do so in either the present or the future? It is beyond the capability of their mental processes. Except for an enlightened few … who will be making their way back to lead the party. Yep, the delusional era of Reaganonomics is clearly over. It is less clear what will take its place on the Replicant side of the legislative division. Methinks the time opportune for a third way, that of Centrism in the form a Social Democratic Party. Meaning a real Left-of-center party rather than the present Dem variety — a smörgåsbord of differing dishes, some to the Right-of-center.
Lafayette said… We've let the troglodytes take over both parties, that fact is clear. Maybe there should be tenure time-limits? Three successive tenures and then you're out. Make room for new blood, new thinking. Monarchies used to have to wait for a crowned head to die before regimes changed. Democracies have tied themselves into a knot by allowing the “oldies” to stick around for far longer than their “useful end-date” on the packaging. But, of course, tenure is for the citizens to decide. Don't expect either chamber of Congress to happen upon such an epiphany spontaneously. Reply Mar 03, 2010 at 12:38 AM ken melvin said in reply to Lafayette… Reply Mar 03, 2010 at 05:23 AM Lafayette said in reply to ken melvin… Jerry Brown on Viagra. That will be a sight to see … ! Reply Mar 04, 2010 at 12:36 AM Posted by pinky at 07:41 PM |
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debt mind trapsMaybe debt doesn’t matter after all, by Tim Harford: On Saturday I wrote about the paper by Carmen Reinhart and Ken Rogoff about the chilling effect high levels of debt seem to have on economic growth. Now I’m not so sure. David Hendry, the Oxford econometrician who, for his sins, taught me econometrics (actually, he mostly taught me to spot bad econometrics), writes to point out that: No matter how this debate plays out, once employment is back on track — which doesn't look likely to happen anytime soon — it will be time to pay for the money that was borrowed to get us through the downturn, and to begin looking toward longer term budget issues. But if we listen to the overly anxious about the debt and begin to pull back too soon, it will delay the time it takes for labor markets to recover even further and, in the very worst case, send us back into recession. Right now, the economy needs more help, not less. Even relying upon traditional measures of output and unemployment to execute the “correct” budget policy could cause policymakers to contract too soon. The recession “may have been deeper, and longer-lasting than previously thought” based upon standard measures of economic activity: Is Okun’s Law Really Broken?, by Justin Wolfers: “Okun’s law” is a much-loved rule of thumb — it links increases in the unemployment rate with decreases in output. The red dots in the chart below illustrate Brad DeLong’s version of this rule, which relates the change in output over the past eight quarters with the change in the unemployment rate. Most of these dots lie pretty close to the dashed line, which suggests a stable relationship. Based on this rule, and the relatively mild decline in measured output, you might have expected the unemployment rate to have risen by 3.5 percentage points over the past two years, to about 8 percent. But the dots at the top left show what actually happened—unemployment rose by something closer to 5.5 percentage points, and the unemployment rate is closer to 10 percent. That’s a big difference. And it has led many commentators to ask whether Okun’s Law is broken. There’s a simpler way to show all this: Let’s map out Okun’s Law using this alternative income-based measure of output. That’s what is shown in [this] figure… The rise in unemployment seems quite consistent with these alternative output data. If anything, the puzzle now appears to be why unemployment didn’t rise by more in early 2008, given the very weak state of this income-based measure of output. However it's measured, output is far too low, unemployment is far too high, and disinflation is still a worry. Don't let the deficit and inflation hawks convince you otherwise.
M.G. in Progress said… Everybody should agree on that regardless the level of debt, whose reimbursement could be postponed, but not too long. The point is who has to foot the bill of the help now and how to redistribute scarce resources. If we continue to say that we cannot raise taxes on the finance industry, bonuses or on financial transactions just because we are happy of their contribution to the growth of a country and we continue to discuss if financial innovation is socially useful we will never escape the conundrum of the debt. We can have more debt but you have to tell people who is going to reimburse and share that burden. Somebody made some clear mistakes, make them to pay. As far as we can see we continue to have unemployment everywhere but profits and bonuses in the finance industry. Something is wrong. But we have to admit that the work of Joe the plumber is not less socially useful or valuable than the Wall Street trader's one. Reply Mar 02, 2010 at 12:31 AM Min said… If the debt is so bad, why not pay it off? Andrew Jackson did, but that didn't work out too well, as America's first depression soon followed. Was that just bad luck? Or would it be a bad idea to pay off our current debt? If paying off the debt would be a bad idea, why would it be a good idea to reduce it? Interest payments on the debt are a sizable portion of the Federal budget. Of course, it would be disastrous if they were the whole budget. Perhaps that is the key statistic about the debt. Well, interest rates are low now. Maybe we should load up on low cost debt? Reply Mar 02, 2010 at 01:26 AM paine said in reply to Min… i submit however that by itself will reduce the ongoing the notion of a full employment budget deficit if we had a large export surplus we could run a surplus budget and pay down the debt Reply Mar 02, 2010 at 07:35 AM Min said in reply to paine… “i submit however I think that my strengths like in two areas: First, in critique, in uncovering logical flaws, unwarranted assumptions, and ambiguous language; second, in the production of ideas. Neither is sufficient to construct and maintain practical solutions. But, hey! two out of three ain't bad. ;) Reply Mar 02, 2010 at 01:14 PM Anonymous said…
paine said in reply to Anonymous… note the default rate Reply Mar 02, 2010 at 07:40 AM ken melvin said… Reply Mar 02, 2010 at 04:40 AM bakho said… Reply Mar 02, 2010 at 05:02 AM roger said in reply to bakho… Or so it seems. I'd like a measure of goods and services that more accurately reflects wealth. Is there one? Reply Mar 02, 2010 at 08:12 AM NKlein1553 said… Reply Mar 02, 2010 at 06:17 AM Lyle said… Reply Mar 02, 2010 at 06:31 AM Eric said… Reply Mar 02, 2010 at 06:57 AM paine said… feed back requires no exactitude in the model reality “match” its absurd to say “we will use fiscal stimuls to create x jobs…period “ we ought to say we will use fiscal stimulus to return us to full employment which is an unemployment rate of z yes science oughta discover the biggest bang methods but the result is paramount eh ?? is there a price too high for rapid job recovery ?? Reply Mar 02, 2010 at 07:26 AM julio said in reply to paine… Reply Mar 02, 2010 at 04:28 PM Steve Roth said… Post hoc obviously doesn't mean propter hoc, but “ensuingness” is one of the few natural-experiment handles we've got in a science where you can't re-run the experiment. While the paper (oddly, it seems to me) doesn't say so explicitly, it seems to be comparing a country's debt levels in a given year to that country's GDP growth in the same year. While the data set is impressive (are they sharing?), the analysis is based on the most simplistic of correlations. And it's not even adjusted for the most widely-accepted of necessary corrections—“convergence” or the “catch-up effect”—the tendency of less-prosperous economies to catch up with their cohorts due to transfers of technology, expertise, trade, capital, etc. (Which effectively changes the question to something like, “Gee, these countries didn't catch up, when they should have. Why not?”) That correction is actually impossible in absence of a lag period. But putting the convergence issue aside for a moment: Reinhart and Rogoff acknowledge their lag-blindness in a decidedly less-than-reassuring parenthetical: “(Using lagged debt should not dramatically change the picture.)” p. 7 “Should not.” Now that's a convincing piece of robustly supported econometric evidence and argument, don't you think? The paper provides at least one perfect—downright eye-popping—example of this lag-blindness, and the false picture it paints. In Figure 3 (p, 10), they show their debt-to-growth correlations (broken into their “buckets” by debt/GDP ratio) for the U.S., purportedly demonstrating that debt/GDP levels above 90% result in far lower GDP growth levels. But note the footnote to this table: they have only 5 samples (years) out of 216 in which debt/GDP was greater than 90%. It's not hard to figure out what years those were: U.S. Federal Debt as a Percentage of GDP http://www.usgovernmentspending.com/downchart_gs.php?year=1930_2015&view=1&expand=&units=p&fy=fy11&chart=H0-fed&bar=0&stack=1&size=l&title=&state=US&color=c&local=s I find six years to their five, but in any case. The growth figures for these years, obviously, are wildly distorted by the war imperatives: the profound effects of rationing, military spending, post-depression, wartime consumer savings versus consumption (reversed in the late 40s and 50s), etc. etc. While arguments can be made to the contrary, it's not insane to suggest that the debts of the late 40s—finally breaking the back of The Great Depression—were in fact the impetus (or at least enabler) for the Great Prosperity of ensuing decades. But whether or not you buy that argument, this example demonstrates that Reinhart and Rogoff's lag-blindness in this paper quite resoundingly undercuts that value of its conclusions. Their choice of correlations—year-X debt to year-X growth—exemplifies a dismaying tendency among U.S. growth econometricians, particularly those like Rogoff who display a predeliction for making political points: a tendency to concentrate on short-term results rather than long-term benefits. I think almost all will agree that the important question we need to be asking is, “What effect will debt levels have on our (country's) long-term prosperity and well-being?” Will our children and grandchildren decades hence be more or less prosperous as a result of Policy X, or Policy Y? (This also because we can actually have an effect on those long-term outcomes. Short-term fixes are always iffy…) In my amateurish way, I'd like to suggest that answers to those questions can be found more readily by looking at many lag periods for any given correlation. In particular—since many important economic effects (arguably the most important ones) play out over many years or decades, and it takes years or decades to implement significant policies—we should be looking at long lag periods to draw our conclusiosn. This also has the statistical benefit of smoothing out short-term blips and bleeps that serve only to confuse and pollute our judgments. Here is one example—comparing U.S. to EU15 GDP/capita growth rates for all the periods from 1970 to 2006. (I apologize that this is not corrected for convergence/catch-up.) http://www.asymptosis.com/europe-vs-us-who%e2%80%99s-winning.html And another example here, suggesting that wealth equality correlates with somewhat slower growth in the short term, but profoundly faster growth in the long term. (Again, not corrected for catch-up.) http://www.asymptosis.com/wealth-equality-and-prosperity.html Hendry's charts, by the way—essentially efforts to demonstrate correlation or lack of same but without a correlation matrix that lays it out for us—strike me as falling prey to many of the same types of failings, notably the concentration on a single country with nothing to compare it to. Steve Reply Mar 02, 2010 at 08:13 AM Goldilocksisableachblond said in reply to Steve Roth… Good stuff. I remember having some doubts when I first read R&R , particularly about using only 5 datapoints out of a couple hundred to arrive at their conclusion about debt/gdp >90%. Your point about lags and study periods must be considered as well. I see Rogoff as a bit of a deficit hawk , for reasons that probably extend beyond his research results , based on what I've heard from him in interviews , including , among others , at Davos this year. The austerity camp will direct the attention of policymakers towards the 90% ” money shot ” in the R&R work , leaving aside any questionable assumptions like those you've highlighted. Deflation's benefits accrue to the creditor class , aka the “squeaky wheel” , and odds are good they're about to get another nice grease job. I think if it were possible to reconstruct the economic arguments of 1930 , they'd sound much like those of today — polarized on idealogical grounds , with widely different interpretations of the same economic data. Fast-forward to 1950 or 1960 and the self-evident success of certain policy choices must have forced considerable concessions from one side , resulting in a closing of the gap between the two. Ten feet of sea level rise would do the same for the climate debate. Those old arguments and the economy that succeeded them are largely forgotten in the 1930 economy of the present-day , so we debate anew , and maybe don't make such good choices this time. Ten years of post-GFC “dust-settling” will , like the ten feet of sea-level rise , clarify the issues under debate. Among the advanced economies , the contrast in outcomes between “winner-take-all” , laissez-faire , free-market havens on the one-hand , and more egalitarian , social-democratic capitalist systems on the other , will be obvious. I hope we decide to revisit our history in choosing the path forward. If we do , I think we'll be OK. Reply Mar 02, 2010 at 07:58 PM Steve Roth said in reply to Goldilocksisableachblond… I'm simply saying that because of their analysis methods, R&R's paper doesn't give us any real insight into that. Because of their zero-lag analysis, they certainly give no insight into the long-term effects, which strike me as the effects that really matter. Compounding interest and all that… Reply Mar 02, 2010 at 08:15 PM Goldilocksisableachblond said in reply to Steve Roth… A progressively targeted program of debt restructuring/forgiveness would help accelerate the process and partially redress past economic injustices , but politically , it's a no-go. Reply Mar 02, 2010 at 09:07 PM Steve Roth said in reply to Goldilocksisableachblond… Yes. Perfectly encapsulated, and blessed in its conciseness and cogency. It took us thirty-five years to work down the debts from The Great Depression/World War II—largely through economic growth. We don't have the advantage now, of course, of having 15 years of private frugality behind us that was (then) converted to consumption. So it won't be easy. Reply Mar 03, 2010 at 09:15 AM James B said… Reply Mar 02, 2010 at 09:53 AM Bruce Wilder said in reply to James B… Reinhart and Rogoff find that external debt, particularly debt in a foreign currency, can be a drag on growth. Shocking, I know. Hendry is discovering that a marketable national debt in a sovereign's currency and held by nationals is a public good, which can be used by the financial sector in arbitrage operations that facilitate productive investment and, yes, growth(!) in the real economy. In the U.S., household debt is a terrible burden, greatly reduced household wealth, pensions, etc., and the increasingly predatory nature of the financial sector, might all be causes for concern. And, many acute observors have pointed to the expansion of intra-financial-sector debt (debts — credit default swaps might come to mind) as a cause for concern. In the meantime, as you say, the policy — THE ACTUAL POLICY — has been to exchange (often extremely dubious) private for public debt. The policy is scarcely acknowledged, and its implications remain largely unanalyzed, except to be told we cannot afford fiscal stimulus spending of sufficient size to relieve growing, long-term unemployment. (We can afford Jamie Dimon's $17 million in annual “compensation”, though.) Reply Mar 02, 2010 at 10:28 AM Min said in reply to Bruce Wilder… Yes, but whose private debt? The guys with private planes, that's who. :( Reply Mar 02, 2010 at 01:34 PM Bruce Wilder said in reply to James B… If you think that the channel to consequence is an essentially moral one — the sin of debt or a “weak” currency or some similar claim, it leads to a very different set of operational ideas about how policy works, and who is to blame, etc. If you think the financial sector, or markets generally, are institutional mechanisms, it leads to a completely different approach to analysis. These polar opposite viewpoints are not separated in economics — not separated even in individual economists! Business confidence or morale can be invoked as a mechanism — animal spirits! — and then treated, in the next breath a moral quantity, as people speculate on how, say, the stock market might react to some bit of political news, projecting onto the stock market, what the ancients might have attributed to the jealousy of the gods. These correlation studies seek a broad audience, by trying to bridge the chasm between these approaches. Their authors don't see any percentage in excluding one, in favor of investigating the other. So, debt is treated as if it is an ethical question, where principles are adopted in ignorance of proximate consequences, but hope of some more diffuse benefit in the long-run. Is “high” debt a “burden” becomes like the question, is “honesty” a “handicap”? Also, if one were to be diligently mechanistic, correlation would lose its purchase on the data, as there are always too few cases, and Marshall's great insight — that economic variables are overdetermined — must be ignored by the econometrician, if he is to go on. Reply Mar 02, 2010 at 11:19 AM Min said in reply to Bruce Wilder… Oui, mon frere! C'est domage! “Life is the art of drawing sufficient conclusions :) Reply Mar 02, 2010 at 01:48 PM Ryberg said in reply to Bruce Wilder… Reply Mar 04, 2010 at 05:03 AM im1dc said… Hope is renewed. I can't help but think Paul Krugman has known and taught this all along but that few listened to him within or outside the Economics profession. Reply Mar 02, 2010 at 11:00 AM Barkley Rosser said… Reply Mar 02, 2010 at 02:00 PM M.G. in Progress said in reply to Barkley Rosser… Reply Mar 02, 2010 at 09:27 PM anne said… March 3, 2010 U.K. Teeters on the Brink of Its Own Greek Tragedy LONDON — Could Britain be on the verge of a debt panic? The fiscal crisis in Greece and a growing worry that the coming elections here could result in a hung Parliament, with no political party strong enough to push through unpopular deficit-cutting measures, have sparked fears that Britain will experience its own sovereign-debt meltdown. In such an event, foreign investors would sharply cut back on their purchases of British government bonds, leading to an interest-rate spike and a potential double dip-recession, if not worse. “If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.” Since the Labour government’s intense fiscal intervention in 2008 and 2009, yields on British government debt have soared to among the highest in Europe. And on a broader scale, which includes the borrowing of households and companies, the overall level of debt in Britain is the second-largest in the world, after Japan’s, at 380 percent of the country’s gross domestic product, according to a recent report by the consulting company McKinsey. In recent weeks, the focus of attention has been on debt scofflaws in Europe like Greece, Portugal and Spain, countries where borrowing costs have shot up in line with their burgeoning deficits as investors demanded higher rates to compensate them for the added risk of lending the governments money. But the recent plunge in the value of the pound below $1.50 and the gradual move upward of Britain’s benchmark 10 year borrowing rate on government bonds, or gilts, to above 4 percent suggest that investors are now getting ready to reassess the country’s fiscal condition. On Tuesday, the pound was at $1.4977 and the yield on 10-year gilts was down 6 basis points at 4.02 percent. That followed a big fall in the value of the pound Monday, after polls released over the weekend indicated that the opposition Conservatives had lost their clear lead in the election race. Britain is not in the 16-nation euro zone and, unlike Greece and other struggling countries that use the currency, it retains control over its monetary policy. As it result, it has benefited so far from a huge bond-buying program undertaken by the Bank of England — proportionally, the largest in the world — that has kept mortgage rates and gilt yields at unusually low levels. That means the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation…. Reply Mar 02, 2010 at 02:13 PM anne said… Price of an American Dollar in British Pounds, 1992-2009 British Pounds 1992 ( 0.57) 1995 ( 0.63) 2000 ( 0.66) 2005 ( 0.55) December 31 2009 ( 0.62) March 3 2010 ( 0.67) Reply Mar 02, 2010 at 02:14 PM anne said… Price of an American Dollar in Euros, 1999-2010 Euros 1999 ( 0.94) 2000 ( 1.08) 2005 ( 0.80) March 3 2010 ( 0.74) Reply Mar 02, 2010 at 02:15 PM Debtsolver said… Reply Mar 05, 2010 at 06:31 AM enrque said… Posted by pinky at 07:38 PM |
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party on freakDaniel Little is worried about the “nightmare scenario for democracy”: Appearance and reality in public life, by Daniel Little: So what kind of democracy do we have? Do our institutions do a great job of establishing the public interest over the medium term, or have our institutions been captured by private interests, leaving essentially no real power in the hands of citizens?
The not-so-ideal case: The nightmare scenario for democracy: The fact that healthcare reform, regulation of CO2 emissions, and significant reform of the financial system have all been essentially blocked in the current legislative process seems to point to one of these scenarios; and it isn't the first or the second. I'll quote an idea used in the previous posting to suggest one possible way forward for our democracy: a movement towards substantially greater participatory democracy in this country. Archon Fung and Erik Olin Wright address the future of our democracy in Deepening Democracy: Institutional Innovations in Empowered Participatory Governance. Here is how they set the stage for their analysis: Posted by Mark Thoma on Wednesday, March 3, 2010 at 04:38 PM in Economics, Politics Save to del.icio.us Tweet This Permalink Comments (36)
Denis Drew said… A portion of a letter to a San Francisco Chronicle columnist fills out the point: I think that all it would take to be a giant American political hero would be to support balanced middle class (neither financial or academic elite) concerns: being more worried about protecting the country from outside — which the Repubs do a great job of: read “The Terrorist Watch” — than whether the FBI reads a few emails it should not and push for world-wide tested sector-wide labor agreements by law here: would rebuild labor overnight. Of course Mr. Anybody would have to alert people to things like 30% of American families are plausibly living below the poverty line even in good times if you don't count government helps like food stamps — 40 years and double the average income (!) after LBJ declared war on poverty. What happens when the majority economic middle class disappears is most dramatically illustrated in the neighborhood I grew up in the South Bronx: New York's billionaire mayor for whatever unbalanced rationale decided — after crime was reduced more than half — that what the Bronx needed was a new $400 million courthouse to replace the two existing courts: the oldest on the corner of Grand Concourse and 161 St. is a classic building, arguably the most beautiful building in the Bronx (don't laugh — it is that building you see in the background looking towards the outfield from the old stadium) and the other, a block east, was brand spanking new when I spent many hours there with some neighborhood kids in just the late 1970s. The mayor also closed down an entire park block a few blocks west of the courthouses on which a track and field used by 39 Bronx schools resided along with a softball and a baseball field to make room for a new Yankee Stadium equipped with a couple of thousand fewer seats but with 43 more skyboxes for millionaires. And like the slum landlord who replaced our old refrigerator when we moved into our 1966 East Village apartment so he could raise the rent but did not bother to remove the old refrigerator our billionaire mayor left behind (at my last look) the old stadium to rot. The mayor's legacy in the Bronx may be adding 3 (more) giant derelict structures in what you may have gathered is sort of the geographic center of gravity of the Bronx (the missing park was part of a three large block park stretch — sort of our Central Park) — which could never have happened when middle class outrage still controlled. But our (I say because of our race to the bottom labor market) poor folks don't have any idea of their power to control — which I see as the story of America (but I am just an over the hill, former cab driver not a Berkeley supposed progressive). Reply Mar 03, 2010 at 05:07 PM paine said in reply to Denis Drew… really ??? isn't their “runaway” inflation taboo implicit colaboration with the corporate exploitation system ??? isn't the high priets of social liberality what of their odd secret celebration an independent fed
Denis Drew said in reply to paine… The core pathology is not in Wall Street or with the corporations getting away with murder — it is what opened the way for them to do so — the same marketeers exist in Europe without impoverishing everyone. The real problem starts at the bottom of our uniquely broken American labor market where the minimum wage is now 75 cents below what it was in 1956, inflation adjusted — 250% the average income later. The real problem is with only 12% of labor unionized in the private market — compared to L-E-G-S-L-A-T-E-D S-E-C-T-O-R W-I-D-E labor agreements in operation everywhere else in the first world (only other notable exception: labor screwed Japan where half the workers are about as well off as our illegals and the other half work 60 hours and pay 50% too high prices) and in lots of places in the second (Argentina) and the third (Indonesia!) world. Most of Wall Street's gamblers are not even getting the 15% of labor income that has slipped away from the bottom 90% to the top 3% — mostly the top 1/10 of 1% of earners — not most of them anyway since 1973. In 2007, 180,000 Wall Street gamblers averaged “only” $180,000 bonuses on top of their average “only” $120,000 salaries. Top 1 percentile household income, 2006: $1.2 million! That sounds to my untrained economic self (but my family has starred in competitions in eighth grade math) as if top 1/10 of 1 percentile households must be doing something in the range of $10 million a year — one out of every thousand people! What people? People who by and large are not smart enough to exploit the rest of us: linebackers (the stars of my day are tending bar now), new anchors and CEOs earning 25X what they did decades ago for the same work input. The only way this can happen to my actual victim of labor market rape mind — not some too distant to see what should too obvious academic mind: simplest of economic/PHYSICS — squeeze a toothpaste tube on the bottom, the pressure equalizes in the middle, it all comes out the top. Where else? Said process is totally enabled by total lack of awareness in the American labor market — otherwise we would not be having this conversation. :-) Reply Mar 04, 2010 at 09:42 AM TigerPaw said… Sadly I think I know the answer to that question as well. What this all will likely lead to however, at some point is the appearance of a demagogue. Whoever it is, will take advantage of the mess and chaos, will appeal to the worst aspects of human nature, and in the name of fixing things will take power. And if you don't think it can happen … why is it suddenly OK to wiretap, torture, and all those other “unthinkable” things. We're already halfway there. The stage is set, the audience is waiting, all that's left is for a devious ambitious person to pick up the microphone and say “follow me”. Reply Mar 03, 2010 at 05:18 PM Bruce Wilder said… Politics, I am fond of repeating, is a team sport. The U.S. two-party system plays the game with three teams, one of which fails to acknowledge that it is a team, or plays. Little's analysis is typical of the narcissistic idealism of many “independent” non-partisans, who congratulate themselves on having a point of view that denigrates actual participants, while celebrating a pure vision of “participation” and abstract argument. Policy becomes an expression of the public will in pursuit of the common good; actual politics is grubby, actual politicians petty and corrupt. This isn't social science, it is some kind of Manichean Platonism. The strawman of Little's imagined “Civics 101” reminds me of nothing so much as Dory Previn's “Mythical Kings and Iguanas”. (Boy, does that date me!) I don't find this contempt for materialism and the pursuit of self-interest particularly enlightening as social science. It tells me that Little is a somewhat detached academic, with the gift of logorrhoea and somewhat excessive regard for his own point of view and judgments. (Yeah, I know, takes one to recognize one.) But, it does not constitute any sort of political science. Political science would start with social governance as a set of interconnected problems to be solved. It would not presume that solutions are waiting just outside the Platonic Cave, ready to be grasped by those, who walk in the light, nor would it prescribe contempt for the material nature of a process concerned with material things. Reply Mar 03, 2010 at 05:23 PM paine said in reply to Bruce Wilder… there is no general will only necessary class missions Reply Mar 04, 2010 at 05:02 AM Bruce Wilder said… i have flown to star-stained heights on bend and battered wings in search of mythical kings mythical kings sure that everything of worth is in the sky and not the earth and i never learned to make my way down down down where the iguanas play
comet tails in search of magic rings to conjure mythical kings mythical kings singing scraps of angel-song high is right and low is wrong and i never taught myself to give down down down where the iguanas live
i sit and throw i ching aesthetic bards and tarot cards are the cords to which i cling don't break my strings (i wish you would) or i will fall (i wish i could i wish i could i wish i could)
that mounts the clouds in search of mythical kings and only mystical things mystical things cry for the soul that will not face the body as an equal place and i never learned to touch for real or feel the things iguanas feel down down down where they play teach me teach me teach me reach me.
Reply Mar 03, 2010 at 05:32 PM paine said in reply to Bruce Wilder… the iguana tries fleeing her Reply Mar 04, 2010 at 04:55 AM Hal said… Reply Mar 03, 2010 at 05:32 PM Bruce Wilder said… What can be the justification for this judgment? I think Bunning is an idiot, but I don't see the evidence that he fails in some ethical way, to fulfill an ethical duty to adhere to the public good. I don't know what adhering to the public good would look like, in the abstract. Was he bribed? I don't think so. Was he getting back at someone, for insulting his wife? No. This whole line of reasoning is faulty, and it doesn't improve by this connection to current events, in the degeneration of our politics. Bunning, during his last election, was doing pretty much everything he could to demonstrate his personal unfitness for office. One could try to understand how somebody so incompetent — never mind his politics — gets elected. But, he wasn't hiding either his personal eccentricities or his politics under a bushel basket. People in Kentucky voted for him. Is the objection to Bunning's “abuse” of procedure? Maybe, the social scientists would like to step forward and explain why legislative bodies have complex rules of procedure? There's something peculiarly contradictory about complaining of Bunning's actions, and also talking about transparency. Bunning's actions have received more public attention that most acts of policy-making ever do. Is this a good thing?
Richard said… Reply Mar 03, 2010 at 06:18 PM Bruce Wilder said in reply to Richard… What does “decentralized” even mean? Reply Mar 03, 2010 at 07:22 PM Richard said in reply to Bruce Wilder… Reply Mar 04, 2010 at 05:09 AM Bruce Wilder said… Imagine having human beings in public office! Such bad design. Politicians pursuing their own political interests — oh, the unexpected horror! Look, I am, genuinely, distressed (and pessimistic) by the deterioration in American political institutions, and the increasing dominance of plutocratic interests over middle class interests, mentioned by other commenters. But, how can we take Little's diagnosis seriously? The patient is sick — no one doubts that — but can “the disease” be that our politicians are self-interested human beings? This is like telling a person, who is sick, that she is ailing, because she's alive. That might fly as a kind of philosophical insight, but it's not a medical diagnosis, and cannot lead to a practical prescription. I don't see this kind of detached idealism as helpful, but it represents the understanding of politics of a lot of people. And, it is part of the problem, imho. It doesn't help the system to discriminate good policy from bad, good procedure from bad procedure, or even good politicians from bad. Political governance is a tough, tough problem. Many of the problems, requiring some kind of resolution, are beyond the capacity of individual humans to comprehend. There are no calipers we can use to measure the “general good”. Many participants in the political process are only going to understand their own interests — and will understand even their own interests with a highly imperfect mixture of acute familiarity and global stupidity: not the clean asymmetry of economic principals and agents, but the more normal of condition of human beings, up to their ears in half-remembered ideas, half-understood information, passionate conviction in nonsense and common sense, and confusion. Our political institutions may not be serving us all that well. (Morons, who think they served the 19th century well, should probably just shut up.) One might suspect that someone thinks they benefit from the deterioration. Reply Mar 03, 2010 at 07:01 PM wjd123 said in reply to Bruce Wilder… “The patient is sick — no one doubts that — but can “the disease” be that our politicians are self-interested human beings? This is like telling a person, who is sick, that she is ailing, because she's alive. That might fly as a kind of philosophical insight, but it's not a medical diagnosis, and cannot lead to a practical prescription.” Bruce Wilder
Why shouldn't someone who goes into politics to help those who can help him or her be seen as deficient by those who don't see acting on ones self interest as particulary moral. Have you no Kant in you? Aren't values the very motivation that help bring about change. I see self interests first and always as the motivation to action as the wrong attitude for public office. That is how the system ends up leaving 45 million citizens without health insurance. We love a good fight, but being constantly at war with ones fellow citizens is hard on the nerves and society. Reply Mar 04, 2010 at 03:12 PM mrrunangun said… Reply Mar 03, 2010 at 07:08 PM Bruce Wilder said in reply to mrrunangun… You don't have to look any further than the Presidential election of 2000. The Democrats nominated the sitting Vice-President, a man with a solid record of constructive achievement. Many journalists in the mainstream Media joined in campaign to stir up resentment against those very achievements (“Gore claims to have invented the internet!”). His opponent, an alcoholic, was promoted as a good guy with whom to have a beer. The Republican caucus on the Supreme Court appointed Bush to the Presidency. The rest is history, as they say. Those on the Right don't like to see people using government to provide public goods, don't like to see ordinary people represented, say, on the public utilities commission or the Federal Reserve Board. So, Al Gore is labeled a “hypocrite” on global warming, but the Chairman of Exxon-Mobil is just doing his job, as is the journalist, who reports what the Exxon-funded so-called thinktank puts out, as if it constitutes “scientific” debate and dispute. Resentment is as real a phenomenon, and as powerful a force in politics, as admiration — maybe more powerful. Fear is as real and powerful as hope. People, whose politics is founded on their fear and resentment, will vote for the fake over the genuine hero, every damn time. Fear and resentment have been winning a very high percentage of elections. And, lots of ordinary people seem to have lost any sense of politics as a means to solve problems and make a better life in a better world. Whether it is an ideological “faith in free markets” or a pessimism about the possibility of fairness, too many people seem to have very strange ideas about the possibilities of politics. Their schools don't have a prayer of educating Johnnie and Jane, and these folks think the solution is to put prayer in schools, and creationism in biology class. Reply Mar 03, 2010 at 07:57 PM Bruce Wilder said… Obviously, I'm getting exercised about this line of argument, but the more I think about it, the more wrong and unhelpful, I think it is. The opposition of “private interests” to “the common good and the broad interests of society as a whole” may sound idealistic, but the abstractness of it is pernicious. Appearance vs reality is platonic b.s. In actual democracy, we citizens, every one, represent “private interests”. We don't have royalty to embody sovereignty in a public person, and that's actually a good thing. Overarching vision can certainly be useful in marshalling working majorities for broad programs, but it has no legitimate claim of privilege over the guy, who just wants the pothole on his street, filled. Politics is a contest of organization for power, with material outcomes at stake. Conflict, not airy fairy notions of the common good, is at its core. I'm not saying that specific concepts of the common good are not sometimes useful in resolving conflict, but the conflict has to come first. I suspect that Little's affection for abstraction masks a distaste for the reality of conflict. Too many “independents” simply wring their hands, shout a pox on all the partisans, and fail to participate in the political conflict. They know nothing. They vote randomly. And, then, like Little, they wonder why the game is won by those who play. Reply Mar 03, 2010 at 08:36 PM paine said in reply to Bruce Wilder… conflict between wings of the elite Reply Mar 04, 2010 at 05:35 AM gaddeswarup said…
Lafayette said… Both Plato and Socrates, upon occasion, disdained democracies. Perhaps they thought common people were not apt at electing good managers of the public commonwealth? Current evidence makes them seem right. Some Enlightenment Philosophers thought up the notion of the Benevolent Dictator, a person who would rule absolutely but purely in the public interest. That person with such admirable selflessness was never born to a woman, methinks. And given the current array in Congress, far too many deeply indebted to Vested Interests … it does make on wonder. The first two years of FDR's administration were attributed to Roosevelt as the Enlightened Despot. Of course, the economic situation was so bad, even Mickey Mouse would have earned that titled had he been able to rectify it. We have opted for democracy because, as Winston Churchill said, and I paraphrase, “the option to democracy is unthinkable”. So we must make the best of it. Meaning what? Meaning that as much as we might be seduced by whatever Quick Fix that would change the Awful Mess in LaLaLand on the Potomac … uh, there is no Quick Fix. We've taken decades to get where we are with this presently poor caliber of republican representation (small “r”, the difference IS important). No Quick Fix will show us the exit. The solution is longer-term. Ignorant Twerps will elect twerps — we saw that with Lead-head. The “intellectually challenged” will be manipulated by base media — which is why money is sooo very important to American politics. And furthermore, which is why money is donated, most assuredly, with strings attached. The Plutocrats, these anal individuals who MUST control everything, seek to control thought. So our candidates are offered up as handsome blown-dried guy/gal, cute children, with a perfect spouse. Are any of these Real Criteria for a presidency or are they the sauce in the salad? Methinks not — more likely, they suit voting for Hollywood Celeb Of the Day. Which is what we've become — a banal Celebrity Culture. Which sparked John Lennon to say, “We're more popular than Jesus …”. There is no disrespect (for God) in that statement of fact. The Beatles were indeed more famous than God; the media having made them so. What to do? First, shut off the Boob Tube. Then, sit down and think. Really think. Then vote. Reply Mar 04, 2010 at 01:13 AM Reality Bites said… It seems to me that the focus of late and especially with the left is that they want government to do something for them. More importantly, they want government to take away from others and use that to do something for them. Seems very destructive and self-centered, but all this anger seems centered upon the government unable to do something for them. There are many community organizations that could use some help, volunteer some time, it can be fun or at least interesting as most new experiences are. Obama encouraged people to get active in private charities and non-profit organizations, do something yourself to help out instead of calling on the government to take away from another to give to you. Reply Mar 04, 2010 at 02:22 AM reason said in reply to Reality Bites… Reply Mar 04, 2010 at 03:25 AM reason said in reply to reason… Reply Mar 04, 2010 at 03:26 AM reason said in reply to reason… Reply Mar 04, 2010 at 03:48 AM reason said in reply to reason… The problem with private charity is that it is volatile, potentially controlling and demeaning (even when it doesn't plan to be). It is not a dignified solution to the problem, which is why almost every rich, civilised society has developed publicly financed alternatives. Reply Mar 04, 2010 at 03:38 AM reason said in reply to reason… Reply Mar 04, 2010 at 03:44 AM mark said… Reply Mar 04, 2010 at 11:53 AM Goldilocksisableachblond said… http://www.politico.com/news/stories/0310/33866.html Un-freakin'-believable. Reply Mar 04, 2010 at 12:32 PM gordon said in reply to Goldilocksisableachblond… Actually, for some reason the article reminded me of “Charlie Wilson's War” (the movie) where there is some dialogue like this (from memory):- Wilson: “I'm worried about helping these Moslems. I'm supported by Jews, remember?” (somebody else): “How many Jews are there in your Congressional District?” Wilson: “Seven. But your supporters aren't your voters, they're your contributors. I'm Israel's good buddy up there on the Hill”. Reply Mar 07, 2010 at 05:28 PM anne said… “But the liberal wing of the Democratic party only has itself to blame for this. It's due to the expansion of the federal government's role that individual voices are drowned out in federal policy making.” http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=87&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=2007&LastYear=2009&3Place=N&AllYearsChk=YES&Update=Update&JavaBox=no#Mid January 15, 2010 Federal Government Net Saving, 1992-2008 (Billions of dollars) 1992 (- 302.5) 1995 (- 206.2) 2000 ( 185.2) 2005 (- 283.0) Reply Mar 04, 2010 at 12:41 PM anne said… Imagine failing to understand or rather wishing to be false about the astonishing long-lasting successes of the Roosevelt-New Deal and Kennedy-Johnson Presidencies: http://www.measuringworth.com/growth/ February 22, 2010 Annualized Growth Rates Roosevelt 1933 to 1940 Real GDP = 7.22% Kennedy & Johnson 1961 to 1968 Real GDP = 5.21% Reply Mar 04, 2010 at 12:52 PM anne said… http://www.measuringworth.com/growth/ February 22, 2010 Annualized Growth Rates Bush II 2001 to 2008 Real GDP = 2.31% Reply Mar 04, 2010 at 12:54 PM anne said… Reply Mar 04, 2010 at 01:10 PM mark said… That a Republican expanded presidential power vs Congressional or Judicial power in 2001-2008 proves nothing about whether Democratic administrations expanded federal power vs state power in the 1933-1968 period. Individual and civil rights are anti majoritarian rights by definition; they are supposed to endure regardless of democracy. I am not a Republican. Small is beautiful, in government (and in comments). Reply Mar 05, 2010 at 09:48 AM wjd123 said… Mark, And who is supposed to enforce our individual and civil rights? A benevolent despot. And who is suppose to keep other power centers like corporations from encroaching on our rights? They have already manage to weaken democracy. Shrink government and there will be other powerful forces ready to exploit the power vacuum. I'm not happy about government capture by powerful special interests. But I don't see how small government will make the situation any better. Small government in today's world is a bumper sticker on the rear of a carriage in which ride gentlemen with wigs and ladies with corsets. We have to deal with the world we live in. Shrinking government won't help, nor will it strengthen democracy. The idea is both reactionary, romantic, and dangerous. We have to reform government. We have the means, the ballot box. We don't need to destroy the village in order to save it. Posted by pinky at 07:36 PM |