Relevant and even prescient commentary on news, politics and the economy.

The assumption that markets are ‘natural’

by Brenda Rosser
re-posted from Econospeak with permission from the author

The assumption that markets are ‘natural’

I’ve just begun to browse the pages of David Graeber’s  2011 book entitled ‘Debt – The First 5,000 Years’.  Graeber is an anthropologist who makes no bones about the historical errors made by many economists on the evolution of markets and the use and nature of money.
On pages 44-45 Graeber writes:
“People continue to argue about whether an unfettered free market really will produced the results that [Adam] Smith said it would; but no one questions whether “the market” naturally exists….we simply assume that when valuable objects do change hands, it will normally be because two individuals have both decided they would gain a material advantage by swapping them.  One interesting corollary is that, as a result, economists have come to see the very question of the presence or absence of money as not especially important, since money is just a commodity, chosen to facilitate exchange, and which we use to measure the value of other commodities.  Otherwise it has no special qualities.
“….Call this the final apotheosis of economics as common sense.  Money is unimportant.  Economies – “real economies” – are really vast barter systems.  The problem is that history shows that without money, such vast barter systems do not occur….It’s money that had made it possible for us to imagine ourselves in the way economists encourage us to do:  as a collection of individuals and nations whose main business is swapping things.  It’s also clear that the mere existence of money, in itself, is not enough to allow us to see the world this way. …
“The missing element is in fact…the role of government policy…”

Graeber goes on to explain how government foster ‘the market’.  Laws, police, monetary policy, pegging the value of currency to precious metals, altering the amount of coins in circulation, regulating banks etc.
On page 49 Graeber asks a key question: “…what exactly was the point of extracting the gold, stamping one’s picture on it, causing it to circulate among one’s subjects – and then demanding that those same subjects give it back again?”
“This does seem a bit of a puzzle.  But if money and markets do not emerge spontaneously, it actually makes perfect sense.  Because this is the simplest and most efficient way to bring markets into being.”
Money brings markets into being.  Not the other way around, as most economists would have it.  If this is true then Graeber’s concluding thought has some authenticity:  “Perhaps the world really does owe you a living.”

Report From Rio…Barkley Rosser

by Barkley Rosser
re-posted from Econospeak with the authors permission

Will A Thousand CEOs Save The Planet? Report From Rio

Just back from presenting paper at International Society for Ecological Economics (ISEE) conference in Rio that preceded the main UN Sustainable Development conference that has started today there, the Rio + 20 show.  What is going on there is much more than the UN part, which will probably amount to a lot of fine resolutions signifying very little.  Demos are going on; we saw a bunch of landless marching, an “Occupa” group in tents protesting an arrest in Uruguay, and in the local paper feminists marching topless and a fancily made up Indian blocking traffic with his bow and arrow.
But the real show is all the other stuff, not just ISEE, but 500 side conferences.  I saw a claim that 60,000 people are in Rio for all this, with 1000 of those being CEOs, yes, CEOs.  Indeed, in our hotel I saw all kinds of business people, all dressed up and going to conferences.  The weirdest were Russian oil men from Siberia.  Now that has got to lead to green capitalism!   Another guy in a suit was attending a list of alphabet soup I did not recognize, although he did say he works for International Business Phones, whoever they are.  Saw a sign for something called ISGIE (could not track down on google who they are), but they were all in suits, and there was a big sign welcoming the Thai delegation for that one.  Indeed, for the main event, supposedly there are reps from over 130 countries.

I suspect the vast majority of these are wannabe rent seekers, out to get government subsidies for this that or the other thing.  I do not know.  Many I am sure have little real interest in improving the environment (see Russian oil men above).  OTOH, it does occur to me that when the green movement gets real, it is when one really gets business people doing stuff about it and making money from it.  Will any of those there seeking to make money out of all this actually accomplish anything worthwhile?  I really do not know.   I suspect the vast majority will not, but maybe some of them actually will, and I suspect that they will be the participants there not making any headlines.
As for ISEE, it is an uber green outfit also notable for taking heterodox positions regarding economic analysis, at least its founders and leaders.  One of the plenary speakers was the Prime Minister of Bhutan, the place where they first started saying they want to emphasize happiness over GDP.  Some of the papers and sessions were simply awful, the sort of thing that I suspect is going on at many other of the 500 side events (and maybe the main one as well), people going on about meta-analysis of how to implement the format for assessing how to discuss sustainability. I am not kidding.
But then there were papers on very specific things going on in very specific places that gave me some hope, such as the efforts to provide credits for reforestation in developing countries through the Reducing Emissions from Deforestation and Desertification (REDD) UN project.  Unsurprisingly the bottom line often gets down to details.  Seems to be working in Kenya, mixed bag in Senegal (depends on which trees are planted), not doing so well in Nicaragua because central government grabs 3/4 of the credits, and in West Bengal the better off peasants in upper castes are doing much better out of the program than the poorer scheduled castes and scheduled tribal groups.  Messy reality out there, but worthwhile things are actually happening on the ground in some places, even if Nature journal is right that overall humanity deserves Fs on climate change, biodiversity, and income inequality since the last Rio conference 20 years ago.

Which Spending Is Easier To Cut And By What Level Of Government?

by Professor Barkley Rosser

Reposted from Econospeak with permission from the author

Which Spending Is Easier To Cut And By What Level Of Government?

Back from his break, our former co-blogger, Dean Baker at Beat the Press, takes down WaPo ed page editor, Fred Hiatt, for his pushing yet again for cutting Social Security because it is supposedly “easy to do” in contrast to medical spending, with Hiatt pinning the blame on Dems for not supporting cutting either.  Baker notes that putting med costs in line with those in other countries would alone completely eliminate the federal budget deficit, and that Dems are not the ones opposing cuts to drug companies or “overpaid medical specialists.” CEPR   Hiatt barely nods at GOP opposition to tax increases and the possibility of cutting defense spending, even though the US is winding down some of its current active wars.
Dean kindly avoids noting that Hiatt is part of a group of established media mavens in Washington who long ago convinced themselves that somehow not only is Social Security “in crisis,” but that somehow it is the easiest program to cut (future) spending on politically, although that will do nearly nothing to limit near-term deficits and that there is nearly zero support among the public of both parties for such an action, and that efforts by various politicians of both parties in recent years to do this have ended up as embarrassing failures.  But this gang does not give up easily, including Hiatt, back at it yet again.

Unfortunately, the alternative appears to be a trick buried in Paul Ryan’s budget proposal: send certain social safety net programs down to the states, with the leading candidate being Medicaid, which is already partly funded by the states.  As much as any program, this is one that should be solely funded by the feds as that would help even the playing field across states, given that the states that need it the most are the states with the most poor people and thus least able to support their poor people.  But no, Ryan thinks that Medicaid should be sent fully to the states, and some movement in this direction has already happened.
This hypocritical trend of Grover Norquist “no higher taxes” politicians sending important programs to lower levels of government so they can claim “savings” without tax increases is going on more widely, also reflecting Norquist’s influence at even state levels.  So, in Virginia where I live, this most recent legislature, newly run fully by the GOP with our GOP governor, has in an effort to balance the state budget without raising taxes or appearing to cut programs, sent an unfunded mandate to the local governments, removing the funding but requiring that they contribute more to teacher pension funds.
This has led to a fairly astounding result, although the mayor or Harrisonburg, where I live, tells me that a lot of these legislators somehow convinced themselves it would not happen.  Nearly every local government in the state, including the vast majority of ones run by Republicans, has raised local taxes, mostly property taxes, but also others as well.  They have been cutting and cutting their budgets for the last several years, something manifesting itself nationally in the steady stream of layoffs at both state and local government levels.  The expectations by citizens for continuing to have basic local public services of some sort simply overrode this idiocy of no new taxes in the face of this unfunded mandate from the state, which in turn at least partly reflects the ongoing rise of Medicaid costs, exacerbated by the feds pushing even more of those down to the states.
As it is, here in Harrisonburg, property taxes are going up, along with a small increase in the rate on restaurant meals.  The alternative to the meals tax rise (much opposed by local restauranteurs) was to raise personal property taxes.  Around the state, different combinations of such increases have been implemented, and it will be interesting to see whether local voters punish their leaders for doing this or will figure it out that they have been pushed to this by the irresponsibility of state politicians.  This problem may well be worse for local Republican leaders than for Dems, given that in general the latter have not hobbled themselves so tightly with all these inane pledges about taxes, although so far, Grover Norquist has not gotten down to the local level guys with making them sign pledges and holding them publicly to them.  There are just too many of them for him to keep track of all of them.
Posted by Barkley Rosser at 12:40 AM

Technology and unemployment


Sandwichman, the go to guy on labor issues and author of the series Chapman, Labor, and Unemployment at Econospeak suggests an alternative to the myth of supremacy of capital, which is after all an idea that reminds me of King Midas in our little child version, but in the adult world has several versions some of which include the daughter “life”, but in the Illiad is described as a son and a “reaper of men”.

Technology doesn’t destroy jobs. What technology does is make possible and make necessary either increased consumption, increased leisure or both. Unemployment results not from a quantity of jobs deficit but from an adjustment deficit. Unemployment results, that is to say, from a failure to establish a new income, consumption and work time regime commensurate with the new production potential offered by the technological advance.

Furthermore, adjustment is no more “automatic” than is technological change. Hello? Has anyone ever heard of “patents”? Or of government financial subsidies to research and development. On the contrary, adjustment should be considered an inherent part of the reciprocal process of technological innovation. Why it is not treated as such by so-called economists is a question 26,000,000 unemployed and underemployed Americans deserve an answer to.

Update: Yves Smith has a post worth reading at Naked Capitalism regarding Ambrose Evans-Pritchard in The Telegraph.

Peter Dorman of Econospeak Writes, So I Don’t Have To

I’m just going to “Go Thoma” on him, since I can’t find anything to cut:

Barack Obama tells us we should not investigate American intelligence agents or their overlings who are responsible for torturing hundreds of suspects in their custody. We have to forget about the past, he says, to concentrate our attention on the future. That might be a convincing argument if Obama were going all out for an ambitious program to remake our economy and our relationship to the rest of the world. But the future is on hold because the number one job today is bailing out the financial system, so we can preserve the money moguls who juiced our economy in the past.