Recessions & a Taoist principle of healing
I have written recently about how a recession could open the door to progressive policies to reduce inequality. Of course it is crazy to call for a recession. Yet the message is one of healing. So to understand this message… let’s explore a healing principle of Taoism.
“In order to heal, you must first learn to kill.”
When I was taught this principle at a Taoist school of traditional Chinese medicine, I thought it was crazy. Yet, the wisdom here is beyond the western mind. We in the west wouldn’t make killing a prerequisite for healing. Our stomachs turn and our eyes roll. We are taught to cherish life. We would rather say, “In order to heal, you must first learn to love.” Logically we cannot make sense of the principle. We end up saying that the Chinese are crazy.
In the same way, we find a recession disgusting. It is not that we are afraid of recessions, but rather trained to see them as unnatural and socially unacceptable. So when Reagan and Volcker created a recession to combat inflation, they were taking a big social risk.
Yet, let’s see if we can understand the wisdom with our western minds…
A simple yet incomplete way is this… The prime mission is to kill the disease. It is only through killing the disease, that lives are saved.
An emotional understanding is like this… A person who is afraid to kill will not have the courage to heal the tough diseases. Some diseases are so virulent that you have to allow a few to die in order to save the many.
The true understanding comes like this… The healer has a ruthless logic to understand the relationship between life and death. Death is inevitable, and life seeks to survive. Death is a part of bringing new life. The healer must understand the purpose of death as much as the purpose of life. The healer seeks a healthy balance between death and life. Thus, the healer must be willing to work on behalf of death as much as life, since it is a vital part in the grand cycle of healthy living.
In economics we see recessions as death… Not something to be incorporated in our economic life, but something to be avoided at all costs. Even though we would love to never see another recession, they are an essential part of the grand business cycle. Does anyone remember how economists some years ago were rejoicing that recessions had finally been overcome? They showed a great lack of wisdom in saying that. And what happened? A big recession came to show them just how foolish they were.
The cycle of life and death is a simple lesson of nature, but the western culture has lost touch with nature. So when I say that a recession could be a time of healing, now that there are economists ready to make the proper changes to reduce inequality, people say I have gone too far. They say “Oh my God, the right can now criticize the left as crazy.”
There is a deeper lesson here…
Economists must learn to understand the role of recessions in a natural business cycle. They must learn to incorporate recessions in their healing to make the economy better. When economic visions work with the natural role of recessions, they will learn to cultivate a sustainable economy based on natural cycles. Within that vision, inequality becomes a disease which causes more troublesome recessions.
So let’s put the principle like this…
“In order to heal the economy, you must first learn to kill the economy.”
Now do you understand?
I see your point, but i am troubled by it.
It reminds me of what Andrew Mellon said about the Great Depression: “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people,”
After having invented supply-side economics six decades before its time and deciding that economics was, indeed, a morality play, Mellon either didn’t realize or didn’t care that it was possible to slump into a new equilibrium with permanent low growth and high unemployment.
I suppose it is the ensuing desperation which becomes a catalyst for change. But there is no straight line from working on behalf of death, as Mellon proposed, to promoting life. Other routs are possible, depending on concurrent social and political headwinds.
Look at the fork in the road that occurred during the 30’s. The U.S. chose progressive policies. Germany did not. Down one road lies the New Deal and 5+ decades of prosperity. Down the other lies fascism, nationalism, oppression and war.
Which reminds me of a Woody Allen quote: “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.”
In my limited understanding of Taoistic Chinese traditional medicine, illness is seen as part of an imbalance of the whole person, not just an isolated event. Illness is also seen in the context of the person´s relationships with the wider world: other people, food, the home, the workplace, the environment, etc.
So, to cure an illness, one must treat the entire person as well as the person’s relationships with the wider world. Taoistic Chinese traditional medicine also strikes me as minimalistic, rather than interventionistic, as one must be careful not to disrupt the person’s existing internal and external harmonies.
Nowhere do I recall reading that Taoistic Chinese traditional medicine stated that “in order to heal, you must first learn to kill.”
Maybe someone who knows more about Taoistic Chinese traditional medicine than myself has something to say about this.
Given Edward Lambert:
1) Routinely cites people as evidence for his views, when on closer inspection their views are almost always the opposite of his own.
2) Has misappropriated terminology implying his views are the same as the people from whom he took the terms.
3) Cited empirical research and yet constructed a model with assumptions that totally contradict that research.
I strongly suspect he is now blatantly misrepresenting the teachings of Taoistic Chinese traditional medicine.
This is the crucial problem:
“now that there are economists ready to make the proper changes to reduce inequality”
This belief is arguably altogether too sanguine.
Yes, there are more than there used to be.
But they are still very much on the outside, looking in.
There is a difference between critical disagreement and character assassination.
You have accused Edward of either reading incomprehension or fundamental dishonesty.
These are heavy charges, and cannot be allowed to stand as naked assertions.
Either cite some evidence, or issue an apology.
I think you’re right that recessions are inevitable. We’re due for another one in a year or so.
But when the next recession comes, it will have the same consequences as all the prior ones – inequality will worsen. This is not a cleansing process. It’s a shakeout where the most vulnerable pay the biggest price. Nothing to cheer about.
“Either cite some evidence, or issue an apology.”
See for example this conversation with Lambert on the definition of “effective demand”:
Or see this conversation with him on Boddy’s model of labor share of income:
In the first case Lambert seemed genuinely surprised that he had misinterpreted Keynes. And it does seem to me that since than conversation (mid-December 2013) that he has ceased claiming his ideas on “effective demand” come from Keynes.
In the second conversation he asks me to show him where it says that labor share of income is a function of employment. I point to the very research that he cited in our earlier conversations. He responds by eliding into the claim that his research is about constraints and not causality. But causality matters a great deal when talking about constraints. because if, as the empirical research shows, labor share is caused by employment and capacity utilization, then demand is a constraint on labor share, not labor share a constraint on demand.This calls for a very different policy response than the one Lambert has been hammering on for the last couple of years, which is essentially to decrease the amount of aggregate demand stimulus.
But there is more to this than simply not understanding what he is reading. There seems to be a willful blindness when it comes to the facts. Each and every one of these conversations where I draw his attention to something I know he will find unpleasant, the conversation ends at that point.
So yes, I charge him with either reading incomprehension or fundamental dishonesty.
Bkrasting: More than one, IMHO.
JazzBumpa and Steve and BKrasting,
I see your points… It is not certain that the next recession will do enough to rectify inequality. And maybe there aren’t enough economists at top levels ready to focus on it.
Yet, hearing Larry Summers and Christina Romer makes me hopeful that the focus on inequality is reaching the top levels of economics. Mr. Krugman is thinking seriously about it with Piketty’s book. Brad DeLong is building his strength on the subject. Mark Thoma gets it now. Give them another year of data, and I think you will be surprised by their words. They are growing in their dislike of inequality.
The basic theory in Chinese medicine is one of excess and deficiency. Treatments focus on draining excess, while building what is deficient. When one looks at inequality, the comparison is too simple. There is an excess of liquidity in the financial sector, and deficient liquidity among middle and low incomes. The instability created is an absolute no-brainer. The key is to drain the excess from capital income and build up the wealth of lower incomes. Until that is done, the organism we call the economy will be sick and below potential.
No treatment will work until the imbalance of excess and deficiency of inequality is dealt with on a global scale. Recessions will feel more frequent and more troublesome.
Eventually, the truth cannot be hidden. Even as I find wisdom from Taoist masters on cycles of nature, i see Jesus at a completely different level. He did not talk about natural cycles like the Taoists. He talked about overcoming death and having an eternal life. His way is how we eventually overcome recessions. We give up our possessions to the poor and give up our desires for earthly wealth. it is an economy of a spiritual path of loving our enemy. he said these extreme words, “… love your enemies, do good to them, and lend to them without expecting to get anything back.” These words are beyond all economic theories of value, rate of return on capital, savings and investment, competition, the invisible hand of self-interest, and so on.
Even look at the Navajo… They have a saying, “a rich man is someone who does not give money to his family.” It is similar to what Jesus said about everyone being your family, but he went farther to include your enemies as well. The pope is saying these things now. But will capitalists take to heart these messages? Only a few.
So when people call me crazy for seeing the wisdom within the natural dynamics of a recession, it is a reflection of how spiritually out-of-touch the economics dialogue is. The things that matter to them are growth, supporting the job-creators, and the wealth effect of monetary policy. To paraphrase Keynes, in the long-run, there is a multitude of poor families who struggle.
I am at peace. I see people attacking me. but that does not perturb me.
thank you. very well said.
i agree with you. (!)
please write a just the facts explanation of your thesis. no metaphors, no appeals to great religions, no appeals even to famous economists: just the mechanism, and why it’s the “only” mechanism.
be careful of falling in love with your model.
yes, i am already thinking again on the mechanisms. It is also good to remember that economics is a social psychological science. Like Krugman is noting the change in cultural norms around CEO pay. So at times we need to address the cultures and philosophies that guide economics.
And as for my model, What if i tell it that I just want be friends? Will it understand? : )
actually I am not sure that even people ever understand. to my ear you are in serious danger of falling in love with your model. it is an occupational hazard..
the occupation of being human. your enemies… and friends… also have their models, which they fall in love with without knowing.
Irrespective of love and hostile attacks, I think Dale has an excellent idea.
I’m reading the General theory and having a bit of trouble wrapping my head around the concept of effective demand. So your posts tend to sail over my head.
A plain explanation in simple prose would be extremely helpful.
Something along these lines –
Edward says: “…economics is a social psychological science.”
That’s a very limited view.
American mainstream economics has made substantial progress over the past hundred years in understanding how economic variables interrelate and interact using mathematical and empirical models.
There are real, although invisible, forces.
And, American mainstream economics has contributed enormous real value at every level, not only on a social level, over the past hundred years.
Edward, I share your concern about income inequality, but only over the past few years and with low-wage workers longer-term.
I think, many people underestimate how well the U.S. economy performed, until after 2007 (including huge gains in real median household income, large sustainable trade deficits, and enormous capital creation through efficiencies, in both old and new industries).
Of course, we need to grow the size of the pie faster.
And, if labor receives a disproportionate low share of income from employment, the larger pie allows more redistribution.
However, it should be noted, labor share is relative. There can be a faster improvement in living standards with a falling labor share, or a slower improvement in living standards with a rising labor share.
Peak Trader: Depends on whether one is a laborer or not to get that faster improvement in living standards with a falling labor share.
So Edward Lambart is a closet “Austrian”?
I would think he was better than that. It is pretty hard to see how any possible benefits of a recession (well the current one is really a depression) could outway the enormous cost.