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Feedback on 'Future Imperfect - Part 1 - Gathering the Threads'
John Newman (April 1998)
I'm not sure you can say that the US crash of '29 says something definitive about the 'Hand of the Market'. After all governments and banks are forever fiddling with the situation (as they should, of course).
One of the reasons reasons economics is not a science is that you cannot do experiments, it's all real world and there are no controls.
You seem to take a very 'Good guys, bad guys' approach. After all the problem is not just corporate self interest and government stupidity and cupidity. We all contribute to it.
As I read your piece on economics I had visions of the pages and pages I would devote to my response. How it is not the dark art you so carefully describe and how it can in fact be seen as scientific i.e. it uses the scientific method and "experiments" using models. I could even point out that all economic decisions - be they by government or by you and I - are experiments in their own way.
Then I realised three things.
1) The reprinting of an entire economics textbook would only go part of the way towards rebutting some of your argument.
2) This is an argument that I was deeply involved in here in ANZAPA not that long ago and which got me nowhere for my pains
3) I actually agree with the main thrust of your argument anyway.
Just when economics became ghod only he knows. Somewhere along the way sight seems to have been lost of what is truly important. Economics is not an end in itself - it is one means amongst many of achieving ends.
One thing though. You blame governments for "...ignoring their social responsibilities." Where this has happened it is because we, the people who vote governments in and out, have let them. Nay, we have encouraged them. Governments which have been brave enough to acknowledge their responsibilities and to tell the voters what is required have been voted out to make way for one riding on populism. Can you blame them for being wary of ever doing the same again?
A brilliant expose of Economics, to which I add my modicum of original thought.
Economy is related to Scarcity; and so we may (with a degree of accuracy) define Economics as 'the management of scarcity'. You are right to say that governments are largely ignoring their social responsibilities - see my comments to Eric Lindsay and my comments to David Grigg in this IRS
The solution is for people to have the correct attitude to taxation before, rather than after, facilities and services that should have been provided are no longer available. You see, people complain if they think that a government is taxing them too much. But they will never forgive a government that has been shown to have taxed them too little. I am talking from a perspective of decades here. The artificial short term political cycle imposed by what I call 'electionism' is not a natural phenomena and will not last two centuries into the new millenium. For the shape of things to come, please refer to my comments to Terry Frost [Feb. 1998].
The Science of Economics is, as you point out in graphic style and in less vulgar terms than the following is, in fact, a gigantic confidence trick designed to hoodwink the people while they are being screwed. In the nineteenth and early twentieth centuries, the discipline was called 'Political Economy' which is a bit more honest. Nevertheless, management of scarcity is what it is and always has been about.
I challenge your contention that national governments, acting together, can necessarily cause multinational corporations to pay their fair whack of tax. Theoretically they can because, collectively, governments have a monopoly of the means of violence on the grand scale that is needed to define the lines of international and intranational trade. But that may not continue to be the case if push came to shove. There are structures in place for private armies now. They can achieve dominance very quickly, given the appropriate stimulus. For example, elite SAS troops from the Australian army were recently 'lent' to a private firm in current attempts to break Australia's water front union in a manoevre which will take its place in text books for fascism in due course. Classic fascism is alive and well in ruling structures everywhere.
I am looking forward to Part 2 of your essay titled 'Weaving the Tapestry' where you intend to probe deeper into the fabric of society. Hmmmmm. only one subject is taboo. Reaction is swift and deadly if you probe too deeply into focused hatreds. Power elites are very sensitive to public awareness of the process.
JOHN NEWMAN writes:
GERALD SMITH writes:
BILL WRIGHT writes:
Bill Wright is correct in a sense in describing Economics as the "management of scarcity." I've seen it defined like that in dictionaries of economics.
In "Future Imperfect. Part 1" I might have given the impression that the market-place is more influenced by unpredictable factors than it really is. If I was rewriting the essay now I'd state my case much more briefly. Most of the time the economy rattles along and you can pretty much understand what's going on and make valid predictions. It's just that now-and-again the unexpected happens, and you have a change in conditions. The Economists have to rerun their simulations with some altered variables.
Now - I have been giving a lot of thought recently to what Economics actually is.
My first clue to what Economics actually is was from my observation that there is nothing like it in the natural world. (The closest equivalent is creatures competing for limited food resources, or animals storing up food to use during the winter. Animals share, but they do not barter, nor do they use money.)
Economics is not an Art, nor is it a Science. Neither is Economics a Discipline - although it can be studied like one. Economics is a technology!
I owe this insight to Neil Postman and the chapter in "Technopoly" entitled 'Invisible Technologies.' In this chapter I learnt how technologies don't need metal or rotating gears or stuff like that. A technology can be as simple (and as profound) as a standardised system of procedures: a way of making a series of actions reproducible, mechanising them - think of an assembly line, or a multiple-choice test!
Economics is a systemised, mechanical way of controlling the distribution of resources - managing scarcity if you will.
You can think of an economy as some sort of vast machine, with parts interacting, feedback loops, etc. You'll find it surprisingly easy to do.
Economics is a technology, it is a human invention - and like every invention throughout history it can be tinkered with, improved, redesigned, simplified, or superseded by a better alternative.
I reply to John Newman individually (June 1998):
I'd been concentrating on the 'bad guys' because that's where the problems lie, but acknowledged that many (most) corporations and individuals are unselfish.
I would like some more insight from you into how we all contribute to the problem.
Good to see the radical tradition continuing in the apa. Be interesting to see if you scare up some lengthy comments about it. I agree totally that one big problem facing society at the moment is breaking the power of the corporations.
I reply (June 1998):
I don't think I'm being that radical, I'm just making a few observations. Now if I was pushing for a theological dictatorship with me as the prophet; or declaring that we should abandon our technology, and become nudists living in harmony with the forests - now that would be radical!
As for the corporations - I'm unsure what to do here. Provided international corporate laws are in place and are enforced, we can watch as the corporations are gradually made irrelevant by history.
All I can say about Part 1 of 'Future Imperfect' is that I agree with you completely, and that's what I would say if I could be bothered writing a full- length essay about my view of society, government, economics and the whole damn thing. Probably a majority of people believe much the same, but we don't seem to be able to do anything about the lunatic path being taken by current governments, because each of the major parties believes in the same idiotic notions. No choice, no democracy. Dystopia has arrived, if for no other reason than Australian voters, who believe they have democracy, will not consider voting for a third force that renounces the assumptions of the other two parties.
So what we need is an essay on how we can change the current direction of society, since we already know what's wrong. If you can provide the how-to kit, you'll get my vote, Michael.
I reply (August 1998):
"Dystopia has arrived, if for no other reason than Australian voters, who believe they have democracy, will not consider voting for a third force that renounces the assumptions of the other two parties."
I am tempted to ask you what you think about the Pauline Hanson phenomena. My friend J.D. says that the best thing the "One Nation Party" has done is to 'give a kick up the backside to the two major parties and force them into justifing their views.'
Unfortunately Pauline is not an acceptable "third force" for me, but at least no one is apathetic about her and her politics. (The success of 'One Nation' also shows the gulf that exists between the concerns of our political parties, and our concerns as citizens. I find the notion of "a mandate from the people" deeply offensive.)
I agree that we only have nominal democracy. We can vote for the party we prefer, but after that we have damn little influence over what our politicians say and do.
What happened to Utopia, indeed? Your hypothesis that greed, gutless government, and the quest for perfection [caused it] seem as valid as any other explanation.
Like Gerald, I threw my hands up in despair. My initial thoughts went something like this. If I wrote a long article claiming that the whole of physics was nonsense because quantum mechanics was "obviously" rubbish and because knowledge of physics allows people to make nuclear bombs, you'd all think I was a complete idiot, wouldn't you.
After some reflection, a few more constructive comments occured to me.
Economics does not make people greedy, they are greedy naturally. If they are not able to exploit each other through free markets, they will do so through empire building in offices, social climbing, religious disputes, anything to get one over the other guy. Capitalism (which is not synonymous with economics) focuses people's greed on financial matters, which can make that greed more obvious, but don't let it fool you that there was no inequality in communist Russia.
There were no good old days. Sure people in Australia were more prosperous a generation ago. But that prosperity was based on a combination of ruthless exploitation of the Third World and natural resources, plus an unfortunate habits of governments to spend more money than they had. Besides, there were a lot less people about. Sure folk had a job for life, but go back a bit further and that job was because you were a servant or slave and could not leave. The mobility we see now in the job market is a result of people gaining much more freedom of employment. One of the biggest problems facing business is the lack of skilled staff, but no one will pay for training because the trainee could up and leave at any time. Hence companies are now offering contracts which contain financial penalties if an employee leaves within a certain period. It sounds harsh, but the employer needs security too.
Economic laws are not necessarily linear. Humans like to think that everything progresses in a smooth, linear fashion. But, like biology and chemistry, economic laws are often highly non-linear. Supply and demand do not move smoothly together. One or the other will race off into the distance and the other will suddenly correct like crazy to catch up. Just because it isn't linear doesn't make it wrong.
I reply (August 1998):
Hello once more. You are my toughest critic, but that's okay.
"Like Gerald, I threw up my hands in despair. My initial thoughts went something like this. If I wrote a long article claiming that the whole of physics was nonsense because quantum mechanics was 'obviously' rubbish and because knowledge of physics allows people to make nuclear bombs, you'd all think I was a complete idiot, wouldn't you."
I'll slip on my patent-pending Cheryl Morgan coloured filters and look at my essay:
"Economics is complete rubbish because it's all influenced by random stuff, and it's bad because it lets some people become greedy bastards."
Yes - the threads are all there but there's a lot of other stuff around them which modifies their meaning considerably. I clarified my argument on 'random factors' in my reply above.
But you are right. Economics isn't the problem - greed is.
"Economics doesn't make people greedy, they are greedy naturally."
I don't entirely agree with this. A baby will grab stuff like food, but that's not because its greedy - its because of an innate drive for self- preservation ("Me hungry. Me need food. Me see food. Me grab food."), linked with the fact that the baby has not yet come to realise that other people have needs too.
Learning to value the rights of other people and learning to share what you have is part of growing up and gaining maturity. Unfortunately not everyone learns how to be unselfish. (And in times of stress we hold onto our possessions more tightly. We do not want to lose them. We need our security blankets).
If people are naturally greedy - how do we explain all the good, selfless things that people do? Why would we bother helping another when there is nothing in it for us?
Greedy people exist. Selfless, generous people exist. I can agree to differ from you in what I think the more common human condition is.
"There were no good old days."
I agree with you here. The past is always subjected to selective forgetting, and I wonder if we were magically returned to our lives in a former year with our current mindstate, would we find it intolerable?
Your analysis of history is good, but it is not the whole story. History is shaped by forces pulling in different and sometimes opposite directions, and the magnitude of these forces changes (as they are all made of smaller forces - and ultimately individual human lives) and new forces come into being. The world shifts. We can describe in some detail what happens, but the reasons are multitudinous and can never be completely defined. (You can choose the big obvious ones, but even these cannot always be agreed upon.)
My point. The past is more complex than it seems. The present is not properly understood. The future is impossible to predict.
"Economic laws are not necessarily linear...Just because it isn't linear doesn't make it wrong."
I'll be forced to agree with you on this. The trouble is that economic decisions are influenced by human psychological factors - fear, excitement, etc.
I'd like more insight into these non-linear laws.
Do you or GERALD SMITH have any economics texts to recommend to me so that I may read and become less ignorant?
Re Days of Future Past. A very long time ago I had an economics course at the Jr. College level. The year was 1951. The book that we used predicted that by 1980 the standard work week would be 32 hours! Further, by the middle nineties it would be reduced to 24 hours! Well, this has not happened! I wonder why?
Using your multiples for the average worker in 1960 and present time with similar wages in USofA I find that the average CEO's salary went from around 100,000 dollars to 5.7 million. I truly have great difficulty with these figures.
In the "old" days after you shot the bear and determined which parts you wanted, you took the left-overs to your neighbors to see what they had that you wanted for what they would be willing to trade what you wanted.
Also when there was a barn to raise or a house to build or what ever the project, it became a community wide one. As time moved on it became increasingly difficult for all to maintain a full barter economy. However, there are a number of individuals in this country who us this system to acquire most of the goods and services that they need to exist. The problem that the system comes to is how to determine the worth of the item offer and the worth of the item required.
There was quite a black market in a number of countries after World War II. Did Australia have one?
RYCT Cheryl: Once again I find myself agreeing with Cheryl, this time on the innate greed of people. Call me cynical, but I don't think many people particularly care about the rights of others or sharing with them. If they did, we wouldn't have children starving in third world countries, inter- and intra-country wars, and most of the general nastiness of the world. Certainly greedy people exist, and certainly selfless, generous people exist. But most of us are a combination. Touch the right buttons, and we'll be generous, but only if we're comfortable. I doubt you're contemplating selling your computer and sending the proceeds to Bangladesh or North Korea. Does that make you greedy? Yes. But then so am I, and so are the rest of us. The skill is in learning how to live with your failings without sickening yourself...
Partly Re: Cheryl Morgan
I agree that greed is one of the basic instincts of babies. In a civilised community, the basic instincts do not disappear, but are modified and integrated into a socially responsive civilisation. America foists onto Australians a baby culture: I want! I grab! Australia has had its periods of civilisation, when there has been a sense of a total Australian adventure, but in the last twenty years it has been captured, reduced, babyised, disintegrated. Still, we can keep in our minds a sense of what a civilised country would be like, in the hope that it returns one day.
Relates to my earlier reply to John Newman, Gerald Smith and Bill Wright
Ryct me rytc you (A.181), Economics is all the things John Newman, Gerald Smith and I said it is; but it is not what you said it is. Economics is not technology. Technology is the fusion of science and engineering; whereas Economics is merely a model, or set of models, which helps to operate the mechanism of production, distribution and exchange. It is a tool of governance without the remotest pretension to scientific rigour. Granted, it is inventive; but all the tinkering and modifications are never new. Old concepts are recycled according to needs conceived by those in power from time to time. Sadly, this time around, those needs are not ours.
Ryct Cheryl -: Whether people are naturally greedy depends in part on your definition of greed. If you narrow it down to mean an obsessive desire for more for oneself, possibly at the expense of others, then yes I agree with you that people are not naturally greedy. If you use a broader definition, that people seek to maximise their own wellbeing then Cheryl's statement holds.
Right or wrong economics has always assumed that it is the natural state of things for people (individually or as a group) to want to maximise their own wellbeing. Unfortunately it has tended to concentrate on measuring that wellbing in material terms - simply because that is measurable. Recently economists have started to question that methodology but they still hold to the assumption. People still want to maximise their wellbeing - but they have different ways of defining what that means.
As to recommending texts you could read to "..become less ignorant", there are heaps.. It depends on how much reading you want to do and how much depth you want to go into.
However here are a few I could recommend.
An Inquiry Into The Nature And Causes of the Wealth of Nations by Adam Smith
The General Theory of Employment Interest and Money by John Maynard Keynes
Economics by Paul A Samuelson et al.
Applied Economics: an introductory course by Alan Griffiths
Dollars and Sense: an introduction to economics by Marilu Hurt McCarty
The Economic Way of Thinking by Paul Heyne
Almost Everyone's Guide to Economics by John K Galbraith et al
Abridged Economics: the sense of commonsense by Elbert V Bowden
The Accumulation of Capital by Joan Robinson
That should be enough to get you started.
I reply (February 1999):
Thank you for the list of economics books! (I'll see which ones I can pick up economically.) Your reply to Bill Wright seems to indicate a wide-ranging and detailed study of the subject.
Your analysis of "greed" on page 10 is excellent, and will serve as valuable clarification if I revisit the subject.
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Last Updated: 16 October 2002