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The concept of homeostasis

12 days ago

From Ken Zimmerman  (originally a comment)
On the one side were those who believed that the existing economic system is in the long run self-adjusting, though with creaks and groans and jerks, and interrupted by time-lags, outside interference and mistakes … These economists did not, of course, believe that the system is automatic or immediately self-adjusting, but they did maintain that it has an inherent tendency towards self-adjustment, if it is not interfered with, and if the action of change and chance is not too rapid.
Those on the other side of the gulf, however, rejected the idea that the existing economic system is, in any significant sense, self-adjusting. They believed that the failure of effective demand to reach the full potentialities of supply, in spite of human

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The failure to start from real, concrete questions and issues in the real world

13 days ago

From Gerald Holtham  (originally a comment)
The biggest problem, it seems to me, is not the tools that economists use but the failure to start from real, concrete questions and issues in the real world. Someone builds a model of a real situation. It may be useful or not but if it is ingenious it gets published. People then play tunes on the model; they seek to “generalise” it in various ways. We embark on a process of theoretical development for its own sake, increasingly divorced from the original problem and all too often from any real application at all. The usual destination is then sterility.
I have seen mathematical queuing theory fruitfully applied in the study of development aid and mathematical game theory successfully applied in auction design. The secret of success was that

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Is emerging Asia in retreat?

14 days ago

From C. P Chandrasekhar and Jayati Ghosh
International observers still view Asia and particularly East Asia as the most dynamic economic region in the world, a perception that has been even more entrenched over the period of the pandemic. Certainly, if aggregate GDP growth rates in real terms (as shown in Figure 1) are anything to go by, there is no doubt that the region of East Asia has been growing faster than the world as a whole, and has even managed to maintain positive growth in the pandemic year 2020, when most other regions have stumbled or even collapsed. By contrast, South Asia, which earlier showed higher growth rates, was decelerating even before the pandemic and has since shown a worse decline than the world as a whole.
Figure 1: East Asia has performed better than the

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The G7’s tax reform could entrench global inequality

23 days ago

From Jayati Ghosh
The tax proposal decided at the G7 Finance Ministers’ meeting last weekend has been hailed as ‘historic’ and ‘transformative’. But in its present form, it is, unfortunately, neither. Major changes can and should be made — at least by the G20 where this will next be considered — if there is to be any serious global tax reform.
The proposal is based on the recognition that the international tax architecture, designed for an earlier and very different era, contains anomalies that enable multinational companies (MNCs) to avoid paying the same rate of taxes that local companies pay. They do this through accounting procedures described as ‘base erosion and profit shifting’ (BEPS), artificially moving profits to low-tax jurisdictions to avoid paying higher taxes in countries

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Weekend read – Essentialism and traditionalism in academic research

25 days ago

From Ryan Kyger1and Blair Fix

Philosophy of science is about as useful to scientists as ornithology is to birds.
— attributed to Richard Feynman2

Most scientists don’t worry much about philosophy; they just get on with doing ‘science’. They run experiments, analyze data, and report results. And by so doing, they fall repeatedly into known philosophical pitfalls.
This essay is about two such pitfalls: essentialism and traditionalism.
‘Essentialism’ is the view that behind real-world objects lie ‘essences’ — a type of eternal category that you cannot observe directly but is nonetheless there. Racial categories are a common type of ‘essence’. To be racist is to attribute to different groups universal qualities that define them as people.3
Given the long history of racism, it’s clear

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Piketty and a minimal inheritance for all

June 26, 2021

From Thomas Piketty in Le Monde
The Covid crisis is forcing us to rethink the tools of redistribution and solidarity. Proposals are springing up everywhere . . . .
The idea that we just have to wait for wealth to spread doesn’t make much sense: if that were the case, we would have seen it long ago.
The simplest solution is a redistribution of inheritance allowing the whole population to receive a minimal inheritance, which, to fix ideas, could be of the order of 120,000 Euros (i.e. 60% of the average wealth per adult). Paid to all at 25 years of age, it would be financed by a mix of progressive wealth and inheritance taxes yielding 5% of national income (a significant amount but one that could be considered in the long term). Those who currently inherit nothing would receive 120,000

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Ideological engineering for the 1%

June 24, 2021

From  Finance as warfare by Michael Hudson

The economy is polarizing because of how the 1% use their wealth. If they invested their fortunes productively as “job creators” – as mainstream textbooks describe them as doing – there would be some logic in today’s tax favoritism and financial bailouts. Rentier elites would be doing what governments are supposed to do. Instead, today’s financial oligarchy lends out its savings to indebt the economy at large, and uses its gains to buy control of government to extract more special privileges, tax favoritism and rent-extraction opportunities by political campaign financing in the United States (unlimited since the Supreme Court’s Citizens United ruling) and by lobbying.
Politics and the legal system have become part of the market in the sense

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Effort to save humankind from impending catastrophe

June 23, 2021

From Asad Zaman and RWER issue 85

The methodology and ideology of modern economics are built into the frameworks of educational methods, and absorbed by students without any explicit discussion. In particular, the logical positivist philosophy is a deadly poison which I ingested during my Ph.D. training at the Economics Department in Stanford in the late 1970s. It took me years and years to undo these effects. Positivism uses clever arguments to make you deny what you feel in your bones to be true, and make you believe what your heart says must be false – for example our supposed knowledge of subjective probabilities of unknown events.
The roots of the problem go back to the famous Cartesian argument that “I think therefore I am”. Although it is clever piece of logic, it has a deadly

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No way out

June 22, 2021

From Shimshon Bichler & Jonathan Nitzan
For much of the 20th and early 21st centuries, U.S. unemployment and incarceration went hand in hand. This is how the rulers disciplined their subjects. But during the Great Depression and Great Recession, the link broke, if only temporarily. The following figure shows these patterns.

Part of the rational for this two-pronged discipline is illustrated in the next figure: since the Second World War, the income share of the top 10% of the U.S. population has been tightly correlated with the country’s correctional population, although this correlation seems to have broken recently.

For more, see our 2004 paper ‘No Way Out’ bnarchives.yorku.ca/391/

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The current state of game theory

June 21, 2021

From Bernard Guerrien and RWER no. 83

One of the most widespread myths in economics, but also in sociology and political science, is that game theory provides “tools” that can help solve concrete problems in these branches – especially in economics. Introductory and advanced textbooks thus often speak of the “applications” of game theory that are being made, giving the impression that they are revolutionizing the social sciences.
But, looking more closely, we see that the few examples given concern mostly the usual “stories” (prisoners’ dilemma, “chiken”, battle of sexes, entry deterrence, store chain paradox, centipede game, etc.) of “old” game theory. Take the four volume set Handbook of Game Theory with Economic Applications – a Handbook that provides an extensive account

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Weekend read – Free speech for me, not you

June 19, 2021

From Blair Fix
They say that Americans love two things: freedom … and guns. The trouble with guns is obvious. The trouble with freedom is more subtle, and boils down to doublespeak.
When a good old boy defends his ‘freedom’, there’s a good chance he has a hidden agenda. He doesn’t want freedom for everyone. He wants ‘freedom for himself, not you’. I call this sentiment freedom tribalism. It’s something that, given humanity’s evolutionary heritage, is predictable. It’s also something that has gotten worse over the last few decades. And that brings me to the topic of this essay: free speech.
When the talking heads on Fox News advocate ‘free speech’, they’re using doublespeak. What they actually want is free speech for their own tribe … and censorship for everyone else. This

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CO2 since the start of the Industrial Revolution

June 18, 2021

The amount of carbon dioxide in the atmosphere (raspberry line) has increased along with human emissions (blue line) since the start of the Industrial Revolution in 1750. Emissions rose slowly to about 5 billion tons a year in the mid-20th century before skyrocketing to more than 35 billion tons per year by the end of the century. NOAA Climate.gov graph, adapted from original by Dr. Howard Diamond (NOAA ARL). Atmospheric CO2 data from NOAA and ETHZ. CO2 emissions data from Our World in Data and the Global Carbon Project.
Source: https://www.climate.gov/news-features/understanding-climate/climate-change-atmospheric-carbon-dioxide

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The impasse in external debt relief

June 17, 2021

C. P. Chandrasekhar and Jayati Ghosh
When the pandemic first swept across the globe and destroyed economies in its wake, there were at least some expressions of international solidarity among leaders of the rich countries. External debt problems were widely recognised to be inevitable in the new crisis context; to address them, G20 governments declared a Debt Service Suspension Initiative (DSSI) from May 2020, designed to reduce some of the immediate debt repayment burden of the poorest and most vulnerable economies. Yet this and the subsequent “Common Framework for Debt Treatments” of November 2020 barely scratched the surface of the problem, and are unlikely to fend off future likely defaults.
There were several fundamental design flaws in the DSSI, and different but not unrelated

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Remote working pay cut?

June 16, 2021

From Peter Radford
When a large corporation goes on the hunt for a lower cost base of operations I doubt whether it thinks it will be penalized for what is a rational and frequently made decision.  After all if you can make the same revenue and reduce your costs your profit goes up. Yeah.  Capitalism 101.  If we all go about life in this way, and if we believe Adam Smith, all this pursuit of self-interest will shower society with the glories of social benefits previously unheard of.
I know, that’s twisting things a bit.  But self-interest in a corporation is most often expressed in the endless search for that extra little bit of profit.  So re-locating to a low cost base is a classic move in the well-read CEO playbook.  And who cares if your employees have to uproot themselves and take

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If history follows the path Thomas Piketty noted, it will . . .

June 11, 2021

From Ikonoclast  (originally a comment)
If history follows the path Thomas PIketty noted, it will take a major war or revolution to change matters. Each time profit rises faster than the overall rate of growth we get a war, like WW1 or WW2 or a great depression like most of the 1930s. Sometimes we get the depression, then the war. Piketty noted that under capitalism’s axioms:
If R (rate of return on capital) is Greater Than G (growth in inflation adjusted dollars) then inequality increases.
There are real limits to the increase in inequality. People reach the point where they will not tolerate greater inequality. They will rebel against the system and elites enforcing the inequality or be diverted by elite misdirection into attacking others.
Piketty’s “Conditional Law of Approach to an

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The quant case for open-access COVID vaccines

June 10, 2021

From Blair Fix
Around the world, rich countries are celebrating as their COVID numbers fall. Their success is no mystery — it’s because of a massive rollout of COVID vaccines. While we should celebrate the development of these vaccines, their deployment highlights the tyrannies of capitalism.
Most of the basic research for COVID vaccines was funded by the public. Yet their manufacture is controlled by Big Pharma. The predictable result is that vaccines flow to the highest bidder and Big Pharma reaps the profit. Thus, the world is now ‘blessed’ with 9 new pharma billionaires.
Since we’re stuck with COVID for the long haul, we need to end the privatized vaccine model. The alternative is surprisingly simple. Let governments continue to fund basic science. And let private companies

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Pharmaceuticals: Beating the hell out of the average

June 9, 2021

From Shimshon Bichler and Jonathan Nitzan
A lot has been written on the imminent decline of pharmaceuticals: their falling production, reduced R&D, declining innovation, the opioid crisis, patent cliffs, biting competition from generic drugs, growing opposition to IPR. The list goes on.
Top Guns
Judging by the yardsticks that matter the most, though – namely, the companies’ relative profit and relative capitalization – pharmaceuticals are doing just fine. In fact, based on these yardsticks, they remain the most powerful corporate sector of all.
In their 2020 study, ‘Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies‘ (JAMA 323, 9, March 3, pp. 834-843), Ledley et al. show that, during the period 2000-2018, the top 35 listed pharmaceutical firms

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And we are still doing nothing substantive to stop this

June 8, 2021

From Ikonoclast  (originally a comment)
. . . what really counts is the amount of coal, oil and gas we are burning and thus how much CO2 we are releasing into the atmosphere. The benign Holocene is ending. Scientists have declared we have already entered a new era, the Anthropocene. The climate, and thus weather patterns, of the benign (for humans at least) Holocene were a resource for human civilization.
It is common mistake, and one I long made, to pay attention only to primary input resources. Thus we were obsessed about peak oil, peak coal and peak gas, imagining that the supply of these primary input resources would be the constraint for our global civilization, civilization being so energy dependent. However, it turns out that the major constraint on civilization involves not our

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Are mindless zombies a projection of what we fear we have really become?

June 6, 2021

From Ikonoclast (originally a comment)
It’s strange in a time of gross over-population that dystopian fiction so often focuses on hypothesized fertility crises. We see this in The Handmaid’s Tale and Children of Men, for example. This is when the real problem is of course the diametric opposite. The earth has a vast over-population crisis of humans and an accelerating decline of all other forms of life (the sixth mass extinction).
It leads me to wonder if genuine fears are deflected by an invocation of the opposite in story-telling. Dystopian and horror fiction give us a delicious thrill of vicarious fear when we actually feel fully secure that “that could never happen”. What people enjoy about disaster storytelling is feeling proof against the specific disaster depicted. It could only

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How U.S. capitalism lifts all boats

June 4, 2021

From Jonathan Nitzan and Shimshon Bichler

Liberals insist that capitalism lifts all boats. It doesn’t, certainly not in the U.S. Since 1880, ‘real’ total returns on the S&P 500 rose, on an annual average, 4.6% faster than U.S. ‘real’ wages. The total returns/wage ratio today is 1,166 greater than in 1880.

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Excessive wealth

May 30, 2021

From Ken Zimmerman (originally a comment)
Following the ‘Great Depression’ excessive wealth required justification. Otherwise those who possessed it were looked on as freeloaders and featherbedders who played no or little useful part in society. FDR came from one of America’s wealthiest family’s but proved himself by his work ethic, care for ordinary Americans, and work to save the USA. Even the wealthy who wanted to be ostentatious feared public rebuke and legal punishments if they focused solely on protecting their wealth. At best excessive wealth was tolerated but seldom glorified, at least publicly. Mostly Americans found their heroes elsewhere.
Second, WWII reinforced the notion that in winning wars, protecting democracy, ensuring an economy that is both successful and good for

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