Confusopoly

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from Ikonoclast  (originally a comment)

I think I can give an example of why economic reductionism or economic simplism or economism do not work. It revolves around the fact that the world, even the socioeconomic world, is extremely (if not infinitely) complex and endlessly changing and mutating. There are numerous gradations and changes to every phenomenon possible.

About 25 years ago, I commissioned a house to be built. About 25 weeks ago I commissioned a landscape (hardscape and softscape) to be built. Leaving aside the facts that these are different projects of different sizes, complexities and technical issues, much has changed in the Australian political economy in the last twenty-five years. The differing difficulties I had with each of these projects suggest to me that subtle but profound changes have occurred in that time.

There are now many more products and deals available and the amount of technical information a consumer must have to be an informed consumer has expanded enormously. There is the issue that there is too much choice now. Too much choice actually becomes a problem for the consumer. Along with the excess of choice comes the excess of complexity in deals and projects. Krugman has written about this recently.

Australian economist John Quiggin posted on this issue recently in his blog. Some of his commenters made some good points.

“Scott Addams called this a confusopoly a long time ago, and the term has stuck in my mind. A market with a deliberately confusing array of choices where providers don’t compete to have the best deal, they instead cloak more profitable deals in confusing language. He was talking about cellphone plans, but then Australia started privatizing retail electricity and I noticed that that was exactly what happened there….

Which reminds me of my personal objection to the theory of perfect information: it assumes that people’s time has no value, and learning has no cost. “Anyone” can get a PhD in economics to understand how markets work, then another degree that gains them entry to the industry in question, then work their way up to the point where they understand the products on offer and how best to use them. Multiply that by the number of products that a person needs to live a modern life… and you have an “informed consumer”, one of the prerequisites for an “efficient market”. ” – Moz.

I wrote (in a combative frame of mind):

“It’s capitalism, stupid! (Directed at P.K. and other liberals who are still essentially pro-capitalist rather than say democratic socialists.)

It’s all very well for Paul Krugman to bemoan the current state of things. But he basically still supports capitalism does he not? I am open to correction on that issue, if I am wrong. This is what capitalism, especially deregulated, unfettered capitalism, leads to. It’s an axiomatic outcome of the rules of the system. Indeed, under standard capitalism, even well regulated capitalism, the concentration of money, and thus the concentration of money power increases over time, and this leads to an ever greater influence of money on politics. It’s a feedback system. Too much money in too few hands leads to too much political influence which leads to even more money in even fewer hands… and so on in the vicious spiral to extreme oligarchic capitalism.

This has been the experience of the entire capitalist era. The punctuations to this capitalist concentration spiral have been the major crises be they depressions or widespread wars. Only under these conditions was the capitalist wealth concentration spiral re-set. The work of Thomas Piketty has amply demonstrated this with empirical data (which data is “as empirical” as one can get in such a difficult field for both historical data gathering and data interpretation).

The tendency to oligarchy and oligopoly is intrinsic to the prescribed rules and prescribed calculations of capitalism. Only by changing the design of the current system profoundly and radically will we escape the wealth-concentration / crisis-collapse oscillation. We have to progress beyond capitalism or we will completely collapse. The next full crisis collapse will not be escapable by capitalist political economy methods. Socialism or barbarism will be the choice then… or rather soon. The final disaster of Western capitalism is very close now in historical terms (meaning a few decades at most and maybe as little as 5 years).”

But back to my specific example. I noticed that businesses are now harder to deal with than they were 25 years ago. I mean this is the case for both consumers and workers. Consumers and workers find themselves in a changed institutional environment (relative to 25 years ago) such that businesses and employers are much more empowered now to play hardball with consumers and workers. And to bamboozle consumers much more with either more complex contracts or else deliberately vague and scanty contracts (both tricks are used). The laws and regulations have been changed to favor business owners and bosses much more. The change is palpable. Consumer protection and recourse is weakened and/or more difficult to access behind new walls of bureaucracy which seem much more designed to protect businesses rather than consumers.

I discovered that at least some workers on my project, even laborers (landscape laborers,) were on contracts, not on wages. They were and are regularly required to work extra hours for no extra pay at all, let alone overtime pay rates (which would have applied 25 years ago). The business also clearly felt able (empowered) to add extra charges against me, the consumer, not clearly covered in the contract and to do so confident that I would not fight the extra charges. Fighting the extra charges would have cost me more than the charges. Twenty-five years ago, my general experience in my house project and other projects at that time (the latter not governed by large contract documents) was that there was more honesty, fair dealing and good faith in business transactions than there is today.

A subtle yet powerful change has occurred The pure money nexus, and particularly the business push for profits to the ever greater exclusion of consumer rights and worker rights, has definitely become considerably more powerful. The institutional framework (law and regulation) has been changed to enable this to happen and it has been changed over time by regulatory capture and political capture by the business class. Where are the neat equations for these changing trends and phenomena and their real effects on consumers and workers? Nowhere, because these factors have been deliberately theorized out of existence by reductionist neoliberal models. This is not a bug of neoclassical economics. It is an intentional feature. Theorize out of existence realities you do not wish to acknowledge, measure or value; like consumer and worker rights.

The above is all reltavely easy for business interests to do now. They will keep doing it until consumers and workers fight back with mass action via mass disobedience. To behave atomistically and litigiously is to fail by playing their game. Only mass social action, national strikes, consumer strikes, rent strikes et cetera will have a change effect. The time for theory and theory contra theory is over. We have enough theory. It’s time for action.