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11.1. The Neoliberal Turn, & Hyperglobalization: Readings: Econ 115 F 2020

Required Readings Note:

The required readings for Module 11 are rather long—but not nearly as long as for Modules 9 & 5, where I wound up taking two weeks per module.

There is Skidelsky chapter 6 https://github.com/braddelong/public-files/blob/master/readings/chapter-skidelsky-keynes-6.pdf. The chapters of Skidelsky before this one I've been all about how Keynes was smart and right. This chapter is, from Skidelsky’s view as of 1995, as an enthusiastic advocate of the neoliberal turn, how Keynes’s disciples were dumb and wrong. It is a very good analysis, on the level of events and ideas, of why people decided to take the neoliberal turn.

11.1. The Neoliberal Turn, & Hyperglobalization: Readings
https://www.icloud.com/keynote/0wiN44cBruFAXnvv0weXzgCNw
https://github.com/braddelong/public-files/blob/master/econ-115-module-11.1-neoliberal-turn-readings.pptx
https://www.bradford-delong.com/2020/11/111-the-neoliberal-turn-hyperglobalization-readings.html
https://www.typepad.com/site/blogs/6a00e551f08003883400e551f080068834/post/6a00e551f080038834026bdea77620200c/edit Frame your reading of it around these three quotes:

Continue reading "11.1. The Neoliberal Turn, & Hyperglobalization: Readings: Econ 115 F 2020" »


11.2.0. The Neoliberal Turn: Intro Video: Econ 115 F 2020

mmhmm Interactive Video: https://share.mmhmm.app/22a2ade496c94828a170a2910550751f

https://www.icloud.com/keynote/0Iew_EELHLYo1GVrvdtJmpqew
https://github.com/braddelong/public-files/blob/master/econ-115-module-11.2.0-neoliberal-turn-intro-video-16.75.pptx

Continue reading "11.2.0. The Neoliberal Turn: Intro Video: Econ 115 F 2020" »


DeLONGTODAY 2020-10-30: American Republicans Are Bad Economic Managers

Video at: http://delongtoday.com

https://github.com/braddelong/public-files/blob/master/delongtoday-2020-10-30.pptx
https://www.icloud.com/keynote/0N6bJBYfxAcdZMKxUYEc8q2gQ
https://www.bradford-delong.com/2020/10/2020-10-30-american-republicans-are-bad-economic-managersdelongtoday.html 2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Today is an economic-analysis day:

  • I will start with the large gap between economic performance under Democratic and under Republican presidents, and with Alan Blinder’s and Mark Watson’s puzzlement as to where it comes from

  • I will then run through the history of what went wrong with Republican economic policy

  • I will then point out the technocratic idiocies of economic policy under the Trump administration

  • And I will then set forth my theory of where the performance gap—that American incomes grow 1.8%-points per year faster when Democrats are president than when Republicans are—comes from. Democratic politicians and legislators are willing, at least sometimes, to listen to their economists. Republican politicians and legislators will not even let their economists into the room where it happens until they have agreed that the politicians and legislators are already pursuing great policies.


.#forecasting #economicgrowth #highlighted #politicaleconomy #politics #2020-10-30

Continue reading "DeLONGTODAY 2020-10-30: American Republicans Are Bad Economic Managers" »


The Economic Incompetence of Republican Presidents: Project Syndicate

J. Bradford DeLong: The Economic Incompetence of Republican Presidents https://www.project-syndicate.org/commentary/democratic-administrations-historically-outperform-on-economy-by-j-bradford-delong-2020-10: In a United States rife with disinformation, one of the most persistent myths is that Republicans are better than Democrats for business and economic growth. In fact, Republicans have consistently under-performed on the economy for almost a century. One hears many strange things nowadays, not least because “they” (a complicated term) are flooding the zone with misinformation. Without a shared set of facts upon which to base ethical and policy debates, democracy inevitably breaks down. The system’s virtue lies in its unique ability to elevate and consider a broad range of ideas emanating from society. Ideally, through a good-faith exchange of arguments and a weighing of the alternatives, a majority of voters converges on the best course of action...

https://github.com/braddelong/public-files/blob/master/delong-project-syndicate-2020-11-01.pdf https://www.project-syndicate.org/commentary/democratic-administrations-historically-outperform-on-economy-by-j-bradford-delong-2020-10 https://www.icloud.com/pages/0X3WOZxicKKMrstEB66_3N7eA https://www.icloud.com/keynote/0-wFK4esatnHmRMnSxPg-B8Lg https://www.bradford-delong.com/2020/10/the-economic-incompetence-of-republican-presidents-project-syndicate.html
2020-10-30


We hear many strange things today. They—and it is a complicated “they”—are flooding the zone with misinformation. Why? For lots of reasons. But democracy breaks down under a flood of misinformation. Democracies’ excellences spring from its ability to consider ideas from different places in society, and converge on the good ones. But that requires that the flow of information into the public-sphere be reality-based—or at least that there be confrontations in which the people can watch Lincoln debate Douglas and decide who is trustworthy and correct and who is not. And we have lost that.

But we keep on trying. Here Sisyphus. Here rock. Here hill. And, as Camus wrote now long ago, we must imagine Sisyphus happy, with what he meant depending on which of the many possible ways we choose to read the word “must”.

One piece of misinformation I see more and more these days is that on election day America faces a tradeoff. On the one hand, electing a Democrat means that America will no longer have a government that permanently kidnaps children just because it can. On the other hand, electing a Democrat “who will be radical and hurt the economy…”, as the Wall Street Journal columnist Peggy “No Republicans Should Ever Stab Trump in the Back” Noonan puts it, before writing that “[Biden] should not be going out for ice cream in a mask like John Dillinger on the lam…” and that “[Kamala Harris] is embarrassing. Apparently you’re not allowed to say these things because she’s a woman…. I will not sweat it, I will be myself…. If you can’t imitate gravity, could you at least try for seriousness?…”

So let me give the microphone to economists Alan Blinder and Mark Watson, who write that: “The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define success…. The performance gap… strains credulity…. 1.8 percentage points [per year]… from Truman through Obama…” And note that if they went back two more presidents—to Hoover-Roosevelt—the gap would be even bigger: about 3%/year.

Note that in this context Trump was an unusually good president as far as economic performance in his first three years was concerned. In teh first three years of his presidency the economy matched the 2.4%/year growth it achieved in Obama’s second term. Even matching the previous Democrat is something that Trump’s and only Trump’s, of all post-WWII Republican presidencies, has seen.

Blinder and Watson are flummoxed on where this performance gap comes from: greater fixed investment, more consumer optimism and thus spending on durables, fewer unfavorable oil shocks, and perhaps stronger growth abroad. But these can explain less than half of the gap. It is not that Democrats pursue overinflationary policies that borrow growth from the future and move it into the present.

When I first read Blinder and Watson, the oil factor jumped out at me. Both President George Bushes—and also Nixon and Ford’s Secretary of State Henry Kissinger—were deeply confused about whether the U.S. wanted a high or a low price of oil as far as boosting real income growth was concerned. Other presidents grabbed for chances to make or keep oil prices lower.

When we look back at history, it seems that Republican presidents and their administrations have little sense of what economic policies are likely to work. It simply never entered George W. Bush’s mind, or the mind of anyone in his administration, that a financial crisis could be produced by underregulation and would be a bad thing. It simply never entered Ronald Reagan’s mind, or the mind of anyone in his administration, that the big budget deficits they created gave America a choice between seeing investment collapse—slowing growth—or borrowing from abroad and in the process importing lots more manufactures—thus turning the Midwest into a rust belt. And Nixon’s belief that low interest rates plus wage-and-price controls could keep both inflation and unemployment low was hard to fathom either at the time.

Here we can say of Trump that he has played true to type. NAFTA: worst trade deal in American history. TPP: second worst. Add some TPP provisions to NAFTA and call it USMCA, and all of a sudden it makes America great again. A trade war with China: “good, and easy to win”. But the result has been no change in manufacturing employment, a widened manufacturing trade deficit, U.S. consumers suffering reduced real incomes because they, not China, have paid the tariffs. Why? Because Robert Lighthizer and company had no clue how to plan or fight a trade war.

Republican presidents with their repeated failures to understand how the economy works have been hurting it since at least 1928. There is no tradeoff here.

829 words


.#economicgrowth #highlighted #macro #politicaleconomy #projectsyndicate #2020-10-30<!--more-->

We hear many strange things today. They—and it is a complicated “they”—are flooding the zone with misinformation. Why? For lots of reasons. But democracy breaks down under a flood of misinformation. Democracies’ excellences spring from its ability to consider ideas from different places in society, and converge on the good ones. But that requires that the flow of information into the public-sphere be reality-based—or at least that there be confrontations in which the people can watch Lincoln debate Douglas and decide who is trustworthy and correct and who is not. And we have lost that.

But we keep on trying. Here Sisyphus. Here rock. Here hill. And, as Camus wrote now long ago, we must imagine Sisyphus happy, with what he meant depending on which of the many possible ways we choose to read the word “must”.

One piece of misinformation I see more and more these days is that on election day America faces a tradeoff. On the one hand, electing a Democrat means that America will no longer have a government that permanently kidnaps children just because it can. On the other hand, electing a Democrat “who will be radical and hurt the economy…”, as the Wall Street Journal columnist Peggy “No Republicans Should Ever Stab Trump in the Back” Noonan puts it, before writing that “[Biden] should not be going out for ice cream in a mask like John Dillinger on the lam…” and that “[Kamala Harris] is embarrassing. Apparently you’re not allowed to say these things because she’s a woman…. I will not sweat it, I will be myself…. If you can’t imitate gravity, could you at least try for seriousness?…”

So let me give the microphone to economists Alan Blinder and Mark Watson, who write that: “The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define success…. The performance gap… strains credulity…. 1.8 percentage points [per year]… from Truman through Obama…” And note that if they went back two more presidents—to Hoover-Roosevelt—the gap would be even bigger: about 3%/year.

Note that in this context Trump was an unusually good president as far as economic performance in his first three years was concerned. In teh first three years of his presidency the economy matched the 2.4%/year growth it achieved in Obama’s second term. Even matching the previous Democrat is something that Trump’s and only Trump’s, of all post-WWII Republican presidencies, has seen.

Blinder and Watson are flummoxed on where this performance gap comes from: greater fixed investment, more consumer optimism and thus spending on durables, fewer unfavorable oil shocks, and perhaps stronger growth abroad. But these can explain less than half of the gap. It is not that Democrats pursue overinflationary policies that borrow growth from the future and move it into the present.

When I first read Blinder and Watson, the oil factor jumped out at me. Both President George Bushes—and also Nixon and Ford’s Secretary of State Henry Kissinger—were deeply confused about whether the U.S. wanted a high or a low price of oil as far as boosting real income growth was concerned. Other presidents grabbed for chances to make or keep oil prices lower.

When we look back at history, it seems that Republican presidents and their administrations have little sense of what economic policies are likely to work. It simply never entered George W. Bush’s mind, or the mind of anyone in his administration, that a financial crisis could be produced by underregulation and would be a bad thing. It simply never entered Ronald Reagan’s mind, or the mind of anyone in his administration, that the big budget deficits they created gave America a choice between seeing investment collapse—slowing growth—or borrowing from abroad and in the process importing lots more manufactures—thus turning the Midwest into a rust belt. And Nixon’s belief that low interest rates plus wage-and-price controls could keep both inflation and unemployment low was hard to fathom either at the time.

Here we can say of Trump that he has played true to type. NAFTA: worst trade deal in American history. TPP: second worst. Add some TPP provisions to NAFTA and call it USMCA, and all of a sudden it makes America great again. A trade war with China: “good, and easy to win”. But the result has been no change in manufacturing employment, a widened manufacturing trade deficit, U.S. consumers suffering reduced real incomes because they, not China, have paid the tariffs. Why? Because Robert Lighthizer and company had no clue how to plan or fight a trade war.

Republican presidents with their repeated failures to understand how the economy works have been hurting it since at least 1928. There is no tradeoff here.

829 words


.#economicgrowth #highlighted #macro #politicaleconomy #projectsyndicate #2020-10-30

Continue reading "The Economic Incompetence of Republican Presidents: Project Syndicate" »


Disaster Capitalism: DevEng 215 2020-10-22

https://www.icloud.com/keynote/05yW08oQvx5uDpAZcxmObZsZA
https://github.com/braddelong/public-files/blob/master/deveng-215-2020-10-22.pptx
https://www.bradford-delong.com/2020/10/disaster-capitalism-deveng-215-2020-10-22.html

This incorporates-by-reference the readings & lectures from week 9 of Joeva Rock's Fall 2020 instantiation of GPP 115...

Continue reading "Disaster Capitalism: DevEng 215 2020-10-22" »


Is America in Decline? || Pairagraph

Pairograph: Is America in Decline? https://www.pairagraph.com/dialogue/fc2f8d46f10040d080d551c945e7a363: Life expectancy at birth in the United States today is 78.6 years. Life expectancy at birth in Japan today is 84.5; in Singapore, 85.1; in Switzerland, 84.3; France, 83.1; in Germany, 80.9. U.S. life expectancy is on a par with Poland, Tunisia, Cuba, Nicaragua, and Albania; below Peru, Columbia, Chile, Jordan, and Sri Lanka; and only a year greater than China.

The United States currently has ~300 deaths per hundred million people per day from the coronavirus plague. The United Kingdom, Japan, Italy, Germany, and Canada each have less than 10...

Continue reading "Is America in Decline? || Pairagraph" »


Hacker & Pierson: Let Them Eat Tweets—Noted

Perhaps the most interesting book to be published by someone in the Equitable Growth posse this summer: Equitable Growth: '[Thursday August 6, 2020,] Research Advisory Board member Jacob S. Hacker https://twitter.com/equitablegrowth/status/1291004223791026177 and co-author Paul Pierson talk about their new book Let Them Eat Tweets. Register/watch and more details here: https://epi.org/event/let-them-eat-tweets-how-the-right-rules-in-an-age-of-extreme-inequality/ Economic Policy Institute: "Thursday at 3:30pm ET... followed by a panel with Thea Lee, Larry Mishel, and Jaimie Worker on what can be done to derail rising inequality… #books #noted #politicaleconomy #2020-08-05


De Tocqueville: "Property... a... badge of fraternity. The wealthy... elder... but all... members of one family..."—Noted

Alexis de Tocqueville: Recollections. http://www.gutenberg.org/files/37892/37892-h/37892-h.htm: ‘The steward of my estate, himself half a peasant, describing what was taking place in the country immediately after the 24th of February [1848], wrote: "People here say that if Louis-Philippe has been sent away, it is a good thing, and that he deserved it...." This was to them the whole moral of the play. But when they heard tell of the disorder reigning in Paris, of the new taxes to be imposed, and of the general state of war that was to be feared... and when, in particular, they learnt that the principle of property was being attacked, they did not fail to perceive that there was something more.... I was at once struck by a spectacle that both astonished and charmed me.... In the country all the landed proprietors, whatever their origin, antecedents, education or means, had come together, and seemed to form but one class: all former political hatred and rivalry of caste or fortune had disappeared from view. There was no more jealousy or pride displayed between the peasant and the squire, the nobleman and the commoner; instead, I found mutual confidence, reciprocal friendliness, and regard. Property had become, with all those who owned it, a sort of badge of fraternity. The wealthy were the elder, the less endowed the younger brothers; but all considered themselves members of one family, having the same interest in defending the common inheritance. As the French Revolution had infinitely increased the number of land-owners, the whole population seemed to belong to that vast[116] family. I had never seen anything like it, nor had anyone in France within the memory of man... .#equitablegrowth #history #noted #politicaleconomy #politics #2020-07-07


Newitz: A Better Internet Is Waiting for Us—Noted

Let me not think about our current problems and dysfunctions for a moment and instead cast our eyes forward to the task of how to build something closer to Utopia over the next decade, after this mess wins its way to its likely very sorry end. The thoughtful Annalee Newitz is worth listening to as we face the task of constructing a better functioning public sphere. We can certainly do it. But it almost surely cannot be built on the backs of advertising supported social media. Facebook, Twitter, Instagram, and Company will probably have to die and be replaced by subscription and by public services:

Annalee Newitz: A Better Internet Is Waiting for Us https://www.nytimes.com/interactive/2019/11/30/opinion/social-media-future.html: 'My quest to imagine a different reality: Social media is broken. It has poisoned the way we communicate with each other and undermined the democratic process. Many of us just want to get away from it, but we can’t imagine a world without it. Though we talk about reforming and regulating it, “fixing” it, those of us who grew up on the internet know there’s no such thing as a social network that lasts forever. Facebook and Twitter are slowly imploding. And before they’re finally dead, we need to think about what the future will be like after social media so we can prepare for what comes next.... What will replace social media the way the internet replaced television, transforming our entire culture?... Erika Hall’s design firm Mule.... “I absolutely believe that you can design interfaces that create more safe spaces to interact, in the same way we know how to design streets that are safer,” she said. But today, she told me, the issue isn’t technical. It has to do with the way business is being done in Silicon Valley.... [John] Scalzi... imagines a new wave of digital media companies that will serve the generations of people who have grown up online (soon, that will be most people) and already know that digital information can’t be trusted. They will care about who is giving them the news, where it comes from, and why it’s believable. “They will not be internet optimists in the way that the current generation of tech billionaires wants,” he said with a laugh.... There isn’t a decent real-world analogue for social media, and that makes it difficult for users to understand where public information is coming from, and where their personal information is going. It doesn’t have to be that way.... Public life has been irrevocably changed by social media; now it’s time for something else. We need to stop handing off responsibility for maintaining public space to corporations and algorithms—and give it back to human beings. We may need to slow down, but we’ve created democracies out of chaos before. We can do it again... #cognition #democracy #noted #politicaleconomy #publicsphere #2020-06-25


Note to Self #tickler: The works & relevance of A.C. Pigou

Note to Self #tickler: The works & relevance of A.C. Pigou:

Ian Kumekawa (2017): The First Serious Optimist: A. C. Pigou and the Birth of Welfare Economics https://www.amazon.com/Ian-Kumekawa-ebook/dp/B071R54415/...
Ian Kumekawa (2020): We Need to Revisit the Idea of Pigou Wealth Tax https://github.com/braddelong/public-files/blob/master/readings/article-kumekuwa-pigou-wealth-tax.pdf...

Arthur Cecil Pigou (1916): The Economy & Finance of the War: Being a Discussion of the Real Costs 0f the War & the Way in Which They Should Be Met https://github.com/braddelong/public-files/blob/master/readings/book-pigou-war-finance.pdf...
Arthur Cecil Pigou (1919): The Burden of War & Future Generations https://github.com/braddelong/public-files/blob/master/readings/article-pigou-burden-of-war.pdf...
Arthur Cecil Pigou (1920): A Capital Levy & a Levy on War Wealth https://github.com/braddelong/public-files/blob/master/readings/book-pigou-wealth-tax.pdf...
Arthur Cecil Pigou (1920): The Economics of Welfare https://github.com/braddelong/public-files/blob/master/readings/book-pigou-economics-of-welfare.pdf... Arthur Cecil Pigou (1940): The Political Economy of War https://github.com/braddelong/public-files/blob/master/readings/book-pigou-war.pdf...
Arthur Cecil Pigou (1946): Income: An Introduction to Economics https://github.com/braddelong/public-files/blob/master/readings/book-pigou-income.pdf...
Arthur Cecil Pigou (1947): A Study In Public Finance https://github.com/braddelong/public-files/blob/master/readings/book-pigou-public-finance.pdf...

  #economics #equitablegrowth #inequality #politicaleconomy #notetoself #moralphilosophy #tickler #2020-06-07

Pigou


Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill: Hoisted from the Archives from 2018

Insane Clown Posse

Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill https://www.bradford-delong.com/2018/08/herbert-hoover-as-bad-to-ally-with-stalin-and-churchill-against-hitler-as-to-ally-with-hitler-against-stalin-and-churchill.html: I was reading Herbert Hoover (1964): Freedom Betrayed https://books.google.com/books?isbn=0817912363 on the plane, and it is really clear to me why nobody wanted Hoover to publish it during his lifetime and why his heirs buried it for half a century. I will tell you what I think. I think Hoover does not quite dare say:

When Hitler attacked Stalin in June 1941, the U.S. should have told Britain to cool it—embargoed Britain until, and then offered it security guarantees when, it made peace with Germany. And then the U.S. should have supported Hitler in his war on Communism, by far the worst of the three totalitarianism of Communism, Naziism, and New Dealism. Afterwards, Hitler and his successors would have had their hands full ruling their Eurasian empire, and Naziism would have normalized itself, and Communism would be gone. Too bad about Nazi rule over the French, Belgians, Dutch, Danes, and Norwegians, but that would have been a price well worth paying...

He does not quite dare say it, but he is thinking it. It is Jeanne Kirkpatrick's: "we should always and everywhere support authoritarian regimes and movements against communist regimes and movements" turned up to 11.

And he tiptoes way way way up to it and almost gets there...

Continue reading "Herbert Hoover: As Bad to Ally with Stalin and Churchill Against Hitler as to Ally with Hitler Against Stalin and Churchill: Hoisted from the Archives from 2018" »


Josiah Ober: The Greeks, the Rational, & Other Topics...

Josiah Ober: The Greeks & the Rational: The Discovery of Practical Reason http://www.classics.berkeley.edu/people/sather/josiah-ober https://www.dropbox.com/sh/jiqa9d9x3brvogu/AACQs2icHAN5_qMbS7cCvw8xa?dl=0:

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Noted: Henry Farrell: "Public" Choice

Henry Farrell: “Public” Choice https://crookedtimber.org/2020/05/12/public-choice/: ‘The public choice approach tends to prefer models that I suspect are particularly unlikely to be helpful in understanding key aspects of the public’s reactions to coronavirus.... Public choice [is] specifically unhelpful... [because] as described by the late Charles Rowley, longtime editor of the journal Public Choice, the public choice approach is a "program of scientific endeavor that exposed government failure coupled to a programme of moral philosophy that supported constitutional reform designed to limit government". In other words, it is not a neutral research program, but one that has a clear political philosophy and set of aims. Bluntly put, it starts from governments bad, markets good, and further assumes that the intersection between governments and markets (where private interests are able to "capture”" government) is very bad indeed. This is useful for understanding some aspects of politics.... There is an interesting affinity between public choice and Marxism, another analytic approach with an associated political program. Both agree on the awful things that can happen when government and business interests are in cahoots, even if each sees a different party as the serpent in its paradise.... [But] it’s a terrible starting point for understanding the public response to coronavirus.... The evidence from public opinion polling is emphatic. People... are in favor of stay at home orders, and closed schools and non-essential businesses.... If there is an instance of democratically legitimate coercion, then stay at home orders are it.... So why then, may the equilibrium break down? It’s clearly not because of express demand from the public. Nor because of cheating (some people may want to free ride, even when the potential rewards include getting sick and dying, but it’s hard to see how they are a majority, or can create one). The plausible answer is that private power asymmetries are playing a crucial role in undermining the equilibrium. Some people—employees with poor bargaining power and no savings—may find themselves effectively coerced into a return to work as normal.... If you’re not lucky, your employer’s power over you may very literally be the power of life and death.... Why don’t you just demand safe working conditions? Perhaps you’re an undocumented immigrant who fears retaliation...

#coronavirus #inequality #noted #politicaleconomy #publichealth #2020-05-18

Lecture Notes: East Asian Miracles

4149 words: https://github.com/braddelong/public-files/blob/master/lecture-east-asia-text.pdf

East Asia was on the downside of the Malthusian cycle when western Europe erupted into the eastern Pacific in the 1800s: populous, with many ingenious and efficient non-machine technologies for squeezing output out of very limited resources, but desperately poor. “The West” brought machine technologies and the global market. It also brought a measure of contempt for east Asia. Nearly all western observers thought the idea that the Mysterious East might catch up to the north Atlantic in any reasonable historical timeframe was absolutely ludicrous.

Malthusian poverty meant no domestic middle-class to demand domestic manufactures, and productivity levels in Asia were hopeless as far as manufactured exports were concerned. The military and political power gradient vis-à-vis the north Atlantic meant no ability to impose tariffs, even had a domestic middle class on whose demand one might be able to build a community of engineering practice and progress existed. The lack of a powerful domestic bourgeoisie meant rule by princes for whom broad-based economic growth was simply not a priority. And in general a “Confucian” religious orientation meant that right moral attitude was more important than the rationalization of techniques and methods.

As Melissa Dale says: If we were sitting here in the 1950s, we would not have predicted anything like east Asia’s miracles.

Yet we have had four: first the early industrialization of Japan, then the extraordinary drive of Japan to global north status from 1950 to 1975, then the four east Asian tigers, and now coastal China.

All that surprises...

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The Pattern of Normal Politics, 1870-1914: An Outtake from "Slouching Towards Utopia?: An Economic History of the Long 20th Century, 1870-2016"

Il Quarto Stato

Left-wing avowedly socialist—parties in pre-World War I Europe wanted, for the present, only weak tea. The Socialist Party of Germany’s Erfurt and Gotha programs seek things like: universal male and female suffrage; the secret ballot, proportional representation and an end to gerrymandering; annual government budgets; elected local administrators and judges; the right to bear arms; free public schools and colleges; free legal assistance; abolition of the death penalty; free medical care including midwifery; public burial insurance; progressive income and property taxes; a progressive inheritance tax; a 36-hour minimum weekend; an occupational safety and health administration; equal status for domestic and agricultural workers; and a national takeover of unemployment and disability insurance “with decisive participation by the workers in its administration”. Rather white bread, no? Even their declared intention that:

the German Social Democratic Party… fights… every manner of exploitation and oppression, whether directed against a class, party, sex, or race...

would raise few eyebrows today, in western Europe at least.

But there was also:

  • “By every lawful means to bring about a free state and a socialistic society, to effect the destruction of the iron law of wages by doing away with the system of wage labor…”
  • “The transformation of the capitalist private ownership of the means of production—land and soil, pits and mines, raw materials, tools, machines, means of transportation—into social property and the transformation of the production of goods into socialist production carried on by and for society…”
  • “This… emancipation… [is] of the entire human race…. But it can only be the work of the working class, because all other classes… have as their common goal the preservation of the foundations of contemporary society…”

There was a tension here.

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Lecture Notes: The Rise of Socialism, -350 to 1917

Let us talk about the rise of socialism, as background to the rise of really existing socialism—the system that lived behind what Winston Churchill called the Iron Curtain from 1917-1991, that shook the world, and that in the end turned out to be far, far, far from the brightest light on the tree of humanity’s good ideas.

Let us very briefly race through history—moral, intellectual, political, and social—from the year -350 to the year 1917, when Lenin and his Bolshevik Communist Party staged their coup in Russia.

There was a profound shift from the belief in “divine right” and “natural order” as the fundamental grounding for an unequal society to enlightenment values—that human institutions should be rationally designed on the basis of a rational understanding of human psychology in order to attain the greatest good of the greatest number, and thus that inequality is not given by the gods or by the requirements of nature, but rather is a thing to be allowed to the extent that it incentivizes cooperation and industry and thus enriches us all.

Back in the century of the -300s, Aristotle had taken it for granted that a good society was only possible if the society allowed for philosophy. And philosophy was only possible if you had a leisured upper class. And a leisured upper class was possible only with large scale-unfree labor—serfdom, or its harsher cousin slavery. Thus it was and thus it would always, be unless and until humans obtained the fantasy technologies of the mythical Golden Age...

https://www.icloud.com/keynote/0l4Z5qINR94b5ZcNGuXSt_fvg

https://github.com/braddelong/public-files/blob/master/lecture-rise-of-socialism--350-1917-text.pdf

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Lecture Notes: The Development of Underdevelopment and W. Arthur Lewis

3086 words https://github.com/braddelong/public-files/blob/master/lecture-inequality-text.pdf

The large populations and low levels of material wealth and agricultural productivity in China and India checked the growth of wages. Workers could be cheaply imported and employed at wages not that far above the physical subsistence level. Low wage costs meant that commodities produced in countries open to Asian immigration were relatively cheap. And competition from the Malaysian rubber plantations checked growth and even pushed down wages of the Brazilian rubber tappers as well. The late nineteenth century saw living standards and wage rates become and remain relatively low (although higher than in China and India) throughout the regions that were to come to be called the third world. And as wages in economies that were to become the global periphery were checked, the prospects for having a rich-enough middle class to provide demand for a strong domestic industrial sector ebbed rapidly.

As a result, the chain of causation went thus:

  • The openness of some places where tropical goods could be produced to migration from China and India pushed down their prices in world markets.
  • Low prices in the world markets meant low wages everywhere tropical goods were produced.
  • Low wages meant no prosperous middle-class anywhere tropical goods were produced.
  • No prosperous middle-class meant no mass domestic demand for manufactures.
  • No domestic demand for manufactures meant no chance of starting industrialization.
  • No chance of starting industrialization meant no building a community of engineering practice.
  • No community of engineering practice meant no taking the next step and advancing in industrialization.
  • No advancing in industrialization meant no walking onto the escalator to modernity and prosperity.

That, in a nutshell, is the story of the relative underdevelopment of the global south. It was not that globalization left the global south alone in the years before World War I. It was that globalization put it on a road that made its industrialization more difficult, even though the openness of world markets made it more prosperous in that pre-World war I half century seen rightly as a global El Dorado.


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Dealing with Coronavirus: The Hunker Down and the Jubilee

Coronavirus

The problem of dealing with the economic policy consequences of the current coronavirus public health emergency is best analyzed in two pieces: the Jubilee, and the Hunker Down.

 

Bringing the Jubilee

What is the Jubilee? It happens after we have managed to get the virus under control, so that normal public health measures of (1) testing a random panel sample periodically to understand where we are, (2) testing the symptomatic, (3) tracing and testing their contacts, and (4) hospitalizing patients with serious illnesses can manage the situation as best as it can be managed.

Note: I say “managed” rather than eliminated. The extent of asymptomatic transmission means that this disease will not be eliminated. It will become endemic. The task is to delay until our virologists can work their miracles. The task is to delay so that the medical care system is not overwhelmed so that we can keep mortality from the disease at 1% rather than 5% or more.

Once the virus is under control—by June 1, say—we will want every job that existed on February 1 and every business that was running on February 1 to resume. We will want no business to have received a “bankruptcy shut down“ from the market system. We will want no worker to have a received a “you are not wanted“ signal from the market economy.

There is a side constraint on the Jubilee: whatever policies we adopt need to be crafted to minimize unjust enrichment. Perhaps the second biggest economic policy mistake committed by the Obama administration was that its policies to deal with the great recession were both inadequate out of the fear of being perceived to contribute to unjust enrichment, and yet somehow also managed to generate a huge amount of unjust enrichment for the financial sector.

 

Hunkering Down

Then there is the question of how to manage the Hunker Down. In the Hunker Down, social distancing needs to reach a level that reduces the caseload to what the medical system can currently handle, but should not be pushed far beyond that point. Beyond that point, the benefits of generating a situation in which our ICUs and emergency rooms have excess capacity are low and the costs are high. In the Hunker Down, as many people as possible need to be given financial incentives to move into new productive occupations that provide useful goods and services without disrupting social distance. And in the hunker down, everyone needs to receive the income flow they need to pay their bills.

Managing the Hunker Down and bringing the Jubilee are two separate problems that need to be designed and implemented separately. We need to think about both. We need to keep worries about bringing the Jubilee from damaging our ability to undertake the Hunker Down. We need to keep inplementing the Hunker Down from impairing our power to bring the Jubilee.

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Lecture Notes: Inequality

14487 words https://github.com/braddelong/public-files/blob/master/lecture-inequality-text.pdf

Philosophers, of course, if there are any in the audience here, will have winced by now. Perhaps they will have done more than winced—although I did not see any philosophers rise and run, screaming, from the room.

I have drawn strong conclusions about how high and important a priority reducing inequality should be for making a good society by being a bad philosopher. Philosophers would presumably say that I should first be a good philosopher. They would say that only after having reached good philosophical conclusions should I then use those conclusions as a springboard to derive “oughts” for political economy.

The problem, of course, is that there is no agreement on what the good philosophical conclusions are.

I maintain that my bad philosophy is a very useful middle ground. I draw conclusions for society from it. As you decide on what your view of good philosophy is, you move from my bad philosophy to yours, and that movement will carry with it a move of your political economy conclusions from the baseline I have established to those that you will think best. You will start with my conclusions, and adjust them in light of the difference between my bad and your good moral philosophy. My bad philosophy thus provides you with a convenient basecamp from which you—with your good philosophy—can begin your climb of the mountain of truth...

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1919: Inevitability and Chance: A Teaser for "Slouching Towards Utopia?: An Economic History of the Long Twentieth Century"

stacks and stacks of books

From 1870-1914 we can see global economic history as by-and-large following a logic that was if not inevitable at least probable, or explicable after the fact. Luck and probability gave humanity an opening around 1870 in the form of a quintuple breakthrough: the ideology and policy of an open world, the transportation breakthrough, the communications breakthrough, and—most important the coming of the research laboratory plus the large corporation to to more than double the pace of invention and greatly speed the deployment of new technologies. Thereafter to 1914 the economic logic rolled forward: the idea of invention, the specialization of inventors, the deployment of technology in corporations trade, the international division of labor, and global growth (but also the creation of a low-wage periphery, and the concentration of industrialization of wealth in what is still the global north); the beginnings of the demographic transition that curbed the tendency for technological progress to be nearly entirely eaten up by greater numbers; the shift of work from farm to factory; and the coming of sufficient (if ill-distributed) prosperity. These all raised the possibility that someday, not that far away, humanity, in the rich economies of the global north at least, might attain something that previous eras would have judged to be a genuine utopia.

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Shelton the Charlatan: Project Syndicate

In 1994 Milton Friedman wrote about Judy Shelton: "In a recent Wall Street Journal op-ed piece (July 15)... Judy Shelton started her concluding paragraph: “Until the U.S. begins standing up once more for stable exchange rates as the starting point for free trade...” It would be hard to pack more error into so few words.... A system of pegged exchange rates, such as the original IMF system or the European Monetary System, is an enemy to free trade. It is no accident that the 1992 collapse of the EMS coincided with the agreement to remove controls on the movement of capital..." https://miltonfriedman.hoover.org/friedman_images/Collections/2016c21/NR_09_12_1994.pdf. To turn monetary policy away from internal balance toward preventing exchange rate movements that market fundamentals wanted to see occur was, in Friedman's view, the road toward disaster. It was simply wrong. And it could be held together only if economies moved from free trade back toward managed trade—and so beggared not just their neighbors but themselves.

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Wealth Tax: Project Syndicate

Larry Summers hates this, and, given that I lose three of four arguments I have with him, that is a sign that I may well be wrong here. Maybe it is that I spend too much time back in the eighteenth century, and do not understand modern public finance. Maybe it is just that we upper middle class urban Californians pay huge wealth taxes, and so don't see why others think it is a big deal. But it seemed and seems to me that whether one taxes wealth, income, or consumption in order to try to minimize the utility cost of taxation by placing burdens on those with a very low marginal utility of wealth is overwhelmingly a question of administrative practicality: how to identify those with a low marginal utility of wealth:

Isn't a Wealth Tax Common Sense? https://www.project-syndicate.org/commentary/wealth-tax-common-sense-by-j-bradford-delong-2020-01: I was not surprised when Gabriel Zucman and Emmanuel Saez https://www.brookings.edu/wp-content/uploads/2019/09/Saez-Zucman_conference-draft.pdf in offices down the hall and Thomas Piketty over in Paris began proposing, and Democratic presidential candidates began endorsing https://www.vox.com/policy-and-politics/2019/1/24/18196275/elizabeth-warren-wealth-tax https://www.vox.com/policy-and-politics/2019/9/24/20880941/bernie-sanders-wealth-tax-warren-2020, the idea of a “wealth tax“. What did surprise me was what seemed and still seems to be a surprising amount of unexpected pushback—pushback from people I had always thought to be on the side of a more-progressive rationalization of the tax system.

Back up: When I learned public finance, I was taught that there were three principles of taxation, all spring from Jean-Baptiste Colbert‘s observation that the point was to extract the feathers from the goose with the least amount of hissing. That meant, first, always broadening the tax base so that you could hit your revenue target with the lowest possible and hence the least annoying tax rates. That meant, second, imposing taxes on items for which demand was inelastic, so that the tech system did as little as possible destructive distortion to the pattern of economic activity. That meant, third, taxing those for whom the utility cost of their tax payments was least—that is, taxing the rich. And what is the broadest possible tax base on which to tax the wealthy? It is their wealth, of course. And for what is the demand of the wealthy least elastic—what are they least willing to sacrifice to try to reduce their tax burden? Their wealth, of course.

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Friedrich Engels (1884): The Relative Autonomy of the State: Weekend Reading

Weekend Reading: Friedrich Engels (1884): The Relative Autonomy of the State https://www.marxists.org/archive/marx/works/download/pdf/origin_family.pdf: 'The state... is normally the state of the most powerful, economically ruling class, which by its means becomes also the politically ruling class, and so acquires new means of holding down and exploiting the oppressed.... The ancient state was, above all, the state of the slave-owners for holding down the slaves, just as the feudal state was the organ of the nobility for holding down the peasant serfs and bondsmen, and the modern representative state is the instrument for exploiting wage-labor by capital. Exceptional periods, however, occur when the warring classes are so nearly equal in forces that the state power, as apparent mediator, acquires for the moment a certain independence in relation to both. This applies to the absolute monarchy of the seventeenth and eighteenth centuries, which balances the nobility and the bourgeoisie against one another...

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Note to Self: MOAR political economy readings, 1920-1950


#history #notetoself #politicaleconomy #2020-02-22

Scheduled for Squawk Box: January 2, 2020 6:50 AM EST: Talking Points

Squawk-box

From: xxxx@nbcuni.com
Subject: Your Squawk Box segment this Thursday, January 2: Please get to the studio at UC Berkley by 6:40am est
Body: The anchors will be Joe and Becky. You’ll share the segment with Shermichael Singleton, political consultant, contributor at The Hill. The discussion will be about "running against the Trump economy". Trump has had the best 3 year performance out of every president since Reagan, since being elected. How does one run against this? Who has the potential to compete? Can Trump keep it up, how? Please send thoughts and talking points.

  • Jump in the S&P over the past eight years from 1300 to 2600 3200 [1]

    • A 1.5x 1.8x in the valuation ratio
    • A 1.16x due to inflation
    • A 1.15x due to an increase in the fundamental earning power underpinning each share of stock
      • All of that is due to buybacks. None of that is due to greater business earning power
      • Thus the optimism with respect to the valuation ratio—even given limited opportunities to earn money elsewhere—somewhat puzzles me
      • Plus there is the joker in the deck: will the wage share remain depressed indefinitely?
      • Usually I'm a "150% of your net worth in stocks" guy
      • Now we are moving money out, and I'm a "50% of your net worth in stocks" guy
  • The talk I hear about the "strong Trump economy" makes no allowance for the difficulty of the dive he has faced relative to that that other presidents face...

    • Trump was handed very good cards
    • Taking account of the difficulty of the dive, I think you have to say that:
      • The Clinton economy turned out much better than expected (due to good policy)
      • The Obama economy turned out better than expected (due to good but inadequate policy)
      • The Trump economy has turned out as expected—but with extra damage done by the trade war, which has on net hurt manufacturing and agriculture, and with no investment boom
      • The Reagan economy turned out somewhat worse than expected—policy incoherence between the tax cutter, the defense spenders, and Paul Volcker really stomped the entire economy over 1981-3 and the Midwest over 1981-1987.
      • The George H.W. Bush economy turned out worse than expected—they took their eye off the ball on the S&L crisis
      • The George W. Bush administration really _ _ the pooch...
  • It looks like we have dodged a recession...

    • We have had a manufacturing recession, but domestic manufacturing is no longer an important enough sector for a manufacturing recession to bring down the economy as a whole...
    • The Trump economy is very weak in productivity growth and the wage share, and those are very worrisome for long-term trends.
  • The most striking aspect of the political situation is the strong divergence between Trump's good unemployment and inflation numbers and his lousy approval numbers

    • Yet perhaps what should surprise me the most is that his approval numbers are so high
    • Policy incoherence while you insult people on Twitter would not have seemed to me to be a governing strategy that many Americans would approve of...
    • It's not just not doing your job...
    • It's undignified
    • Yet he has his fans—and very few of them are beneficiaries of his tax cut, and there are no beneficiaries of his trade war or his foreign-born sliming...
      • Perhaps all his fans think they will benefit from his tax cut?
      • Recall John Steinbeck: "We didn’t have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist..."
      • A new paper out by Alberto Alesina and Stephanie Stantcheva on how Americans think there is much more and Europeans think there is substantially less upward mobility than in fact there is—and how in real life there is more in Europe than in America

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Neoliberalism: Are We Sure That's the Right Word?: Talking to Noah Smith

Noah Smith and Bradford DeLong: Neoliberalism: Are We Sure That's the Right Word? http://www.pairagraph.com/dialogue/6420f501123b4520892978e93565cff9/1: Noah Smith: 'So we're supposed to be discussing neoliberalism, are we? Well, I was elected "Chief Neoliberal Shill of 2018" in a rigged joke online poll, so I spent a year looking around for reasons to think that "neoliberalism" might describe a good and useful policy outlook instead of Reagan/Thatcher/Milton Friedman libertarian dogma. I remembered that you had penned a defense of something called "neoliberalism" a while back: You framed "neoliberalism" as basically a program that protected markets as the basic engine of production and then tried to add a welfare state on top of those markets. And you depicted the main benefits of this system as being poor-country growth and global convergence. That strikes me as a useful definition and a solid assessment of its benefits...

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"There Speaks the Nineteenth Century!": For the Weekend

stacks and stacks of books

For the weekend: One powerful and very common presumption among the thinkers of the nineteenth century was that if the problems of overpopulation could be solved, and if that coupled with better technology solved the problem of inadequate resources to provide necessities, then the distribution of conveniences and luxuries would take care of itself, and the distribution of necessities would be unproblematic as an immediate consequence of common humanity in an age of abundance. They were wrong:

Edward Bellamy: Looking Backward 2000-1887 https://delong.typepad.com/files/bellamy-backward.pdf: '“Who is capable of self-support?” he demanded. “There is no such thing in a civilized society as self-support. In a state of society so barbarous as not even to know family coöperation, each individual may possibly support himself, though even then for a part of his life only; but from the moment that men begin to live together, and constitute even the rudest sort of society, self-support becomes impossible. As men grow more civilized, and the subdivision of occupations and services is carried out, a complex mutual dependence becomes the universal rule. Every man, however solitary may seem his occupation, is a member of a vast industrial partnership, as large as the nation, as large as humanity. The necessity of mutual dependence should imply the duty and guarantee of mutual support; and that it did not in your day constituted the essential cruelty and unreason of your system”...

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What Is the Political-Economic Agenda After Piketty?

Introduction: Let me write, overwhelmingly, about inequality understood as inequality between people who regard themselves as members of a common culture, economy, nation. There is the separate issue of inequality between the different cultures, economies, nations that make up the world, but let me leave that for the very end, and then deal with it only briefly.

History of Inequality: For most of human history since the invention of agriculture, typical settled human societies have been about 80% as unequal as they could possibly be: were anything to stretch out the distribution of income and wealth by more than an additional 20%, and working-class women would have become too skinny to ovulate regularity and working-class children would have had compromised immune systems, and so the population would have failed to reproduce itself. The typical economy's Gini index was about 45 or so (the same Gini value as if 72% of wealth and income were evenly divided among the top 28%, and the rest evenly among the rest)—with New Spain in the eighteenth century estimated up at above 60 (the same Gini value as if 4/5 were evenly divided among the top 1/5, and the rest evenly among the rest) and the Kingdom of Naples and China estimated down below 30 (the same Gini value as if 65% were evenly divided among the top 35%, and the rest of income evenly among the rest).

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Marx's Capital: “Freedom” Inverted: It’s Really Powerlessness

4.4.2) “Freedom” Inverted: It’s Really Powerlessness: Capitalists and their ideologists write about how everybody is “free” in a capitalist economy: slavery and serfdom have both been abolished, so that workers can go where they want, take the jobs they want, and so raise society’s productivity. Marx reacts with very heavy-handed snark.

The serf was not free: he was tied to the land, and had to stay there and present his lord with the customary feudal rents specified under that form of land tenure. The coming of capitalism frees the serf: he is no longer required to stay on his inherited piece of land, and farm it.

But the coming of capitalism “frees” the serf in another sense as well: he is “freed” from his connection with the land, which now belongs to the landlord. And he can do what he used to do—farm the land—only if he can strike a bargain and rent it from the landlord. He is, in the words of Milton and Rose Director Friedman, “free to choose”. But he is also free to lose. And—if he cannot strike a bargain to rent the land and then cannot strike a bargain to work as an employee—free to starve.

Yes, he is no longer constrained by the web of obligations that constrained him under the feudal or the petty-bourgeois mode of production. But by the same token that freedom from social position and social ties may well reduce his bargaining power when he goes to the labor market. Constraints can keep you from doing better, but they can also keep you fro being forced to do worse.

Moreover, that bargaining-power reduction is essential for the system’s operation, at least in Marx’s view. Capitalism can only form if there are a lot of workers who have lost their feudal status as serfs who are both owned by and own the land, and lost their petty-bourgeois status as artisans or merchants who own their tools and their businesses. Only if there is a proletariat—a large group of workers who must find a capitalist employer, and must do so under conditions in which workers have very little bargaining power:

The starting point of the development that gave rise to the wage labourer as well as to the capitalist, was the servitude of the labourer. The advance consisted in a change of form of this servitude, in the transformation of feudal exploitation into capitalist exploitation.… Revolutions are epoch-making that act as levers for the capital class in course of formation; but, above all, those moments when great masses of men are suddenly and forcibly torn from their means of subsistence, and hurled as free and “unattached” proletarians on the labour-market…

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Marx's Capital: Part VIII: Primitive Accumulation Proper

4.4) Part VIII: Primitive Accumulation: At the end of Part VII, Marx had completed his analysis of how the purpose of capitalism-as-a-system was simply capital accumulation, which produced ever more productivity, wealth, and misery, all three growing together, and all three growing together at an ever-increasing pace. The natural next step in Marx’s argument would be for him to lay out what he forecasts will bring this mad sorcerers-apprentice process to an end.

That, however is not what we get. We turn to the next page, and its title of “Part VIII: Primitive Accumulation” tells us that Marx is now jumping back to the historical beginnings of the process of capitalist capital accumulation.

He needed an editor.

Fortunately, this part is misnamed. “Primitive” accumulation is supposed to be about how the juggernaut of capitalism initially gets rolling. This part starts out being about that. But it then moves on, and is in its later stages also about much, much more.

4.4.1) “Primitive Accumulation” Proper: Part VIII does start out with its expressed topic. It hammers home the difference between the myth that the capitalist tell themselves and others, and the reality with which the system came into being. The myth is as follows, as Marx brings the snark:

Its origin is supposed to be.… In times long gone by there were two sorts of people; one, the diligent, intelligent, and, above all, frugal elite; the other, lazy rascals…. Thus it came to pass that the former sort accumulated wealth, and the latter sort had at last nothing to sell except their own skins. And from this original sin dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work. Such insipid childishness is every day preached to us in the defence of property…

The reality is very very different:

The process which creates the capital-relation can be nothing other than the process which divorces the worker from the ownership of the conditions of his own labour; it is a process which operates two transformations, whereby the social means of subsistence and production are turned into capital, and the immediate producers are turned into wage-labourers. So-called primitive accumulation, therefore, is nothing else than the historical process of divorcing the producer from the means of production. It appears as ‘primitive’ because it forms the pre-history of capital, and of the mode of production corresponding to capital…

And it is not just that history happened this way in some ethically neutral way. Great crimes were committed. And great was the role played by political corruption. Marx reviews British history starting in 1500, running from Henry VIII Tudor to William III Orange, and beyond:

The spoliation of the Church’s property, the fraudulent alienation of the state domains, the theft of the common lands, the usurpation of feudal and clan property and its transformation into modern private property under circumstances of ruthless terrorism, all these things were just so many idyllic methods of primitive accumulation. They conquered the field for capitalist agriculture, incorporated the soil into capital [a very interesting phrase], and created for the urban industries the necessary supplies of free and rightless proletarians…

The Glorious Revolution... brought into power, along with William of Orange, the landed and capitalist profit-grubbers. They inaugurated the new era by practising on a colossal scale the thefts of state lands which had hitherto been managed more modestly. These estates were given away, sold at ridiculous prices, or even annexed to private estates by direct seizure … The Crown lands thus fraudulently appropriated, together with the stolen Church estates, … form the basis of the present princely domains of the English oligarchy…

Employ the power of the state, the concentrated and organized force of society, to hasten, as in a hothouse, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society which is pregnant with a new one. It is itself an economic power…

Not just market buying-and-selling bring capitalism into being. Brutality and force are the “midwife” of every transformation from one kind of society to another—here the origins of society based on the capitalist mode of production born from the womb of the previous pattern of society based on the feudal mode of production:

Unleash[ing] the ‘eternal natural laws’ of the capitalist mode of production, to complete the process of separation between the workers and the conditions of their labour, to transform, at one pole, the social means of production and subsistence into capital, and at the opposite pole, the mass of the population into wage-labourers, into the free ‘labouring poor’, that artificial product of modern history.... [Feudalism] has to be annihilated; it is annihilated. Its annihilation, the transformation of the individualized and scattered means of production into socially concentrated means of production, the transformation, therefore, of the dwarf-like property of the many into the giant property of the few, and the expropriation of the great mass of the people from the soil, from the means of subsistence and from the instruments of labour, this terrible and arduously accomplished expropriation of the mass of the people forms the pre-history of capital…

Continue reading "Marx's Capital: Part VIII: Primitive Accumulation Proper" »


Marx's Capital: The Capitalist System Worsens Over Time

4.3.3) The Capitalist System Worsens Over Time: Remember, always, to Marx, capitalism is a system. It works, in the sense that it carries itself forward into the future:

Therefore, the worker himself constantly produces objective wealth, in the form of capital, an alien power that dominates and exploits him; and the capitalist just as constantly produces labour-power, in the form of a subjective source of wealth which is abstract, exists merely in the physical body of the worker, and is separated from its own means of objectification and realization; in short, the capitalist produces the worker as a wage-labourer. This incessant reproduction, this perpetuation of the worker, is the absolutely necessary condition for capitalist production…. The capitalist process of production, therefore, seen as a total, connected process, i.e. a process of reproduction, produces not only commodities, not only surplus-value, but it also produces and reproduces the capital-relation itself; on the one hand the capitalist, on the other the wage-labourer...

As the system carries itself forward into the future, it changes. It, Marx argues, becomes even worse and more destructive. The gap between what society could be given the magical productivity of human labor augmented by science and technology and what society is grows beyond measure.

Accumulation of capital leads to innovation and the invention of new kinds of more productive machines. The capital intensity of production rises. And as the capital intensity of production rises, downward pressure on workers’ wages rises as well.

Marx thinks he has an airtight argument that this will be so:

Since the demand for labour is determined not by the extent of the total capital but by its variable constituent alone, that demand falls progressively with the growth of the total capital, instead of rising in proportion to it, as was previously assumed. It falls relatively to the magnitude of the total capital, and at an accelerated rate, as this magnitude increases. With the growth of the total capital, its variable constituent, the labour incorporated in it, does admittedly increase, but in a constantly diminishing proportion... constantly produces, and produces indeed in direct relation with its own energy and extent, a relatively redundant working population, i.e. a population which is superfluous to capital’s average requirements for its own valorization, and is therefore a surplus population…

Marx believes that machinery is not a complement to but a substitute for labor. Here, once again, Marx has been betrayed by the labor theory of value. The century and a half after his writing of Capital has seen wages rise fifteen fold. It has seen inequality rise, fall, and more recently rise again. But even now, at our current inequality peak, it is only back to the level it was in mid-nineteenth century Britain here in the United States, and is lower elsewhere in the global north.

Not a Human Logic, But Its Own Mad Logic: Why does the system work as it carries itself into the future—as it “reproduces itself”, as Marx likes to say? The rapid advances of science and technology on the one hand in the scope of the collective social division of labor mediated by the market on the other greatly increase the productive power of humanity. Why are these increased productive powers turned not to the greater good but to making greater evils? Marx has an answer: His answer is that the wishes and wills of humans have no purchase once the capitalist machine has started rolling. People must fit into their slots, and do what their slot in the system requires that they do. Workers who do not sacrifice their essential humanity to a hard, dehumanizing, and low-paying job find themselves and their families at deaths door. Capitalists who do not devote every moment to raising productivity, pushing down wages, and reinvesting their larger profits to increase their scale of operations faster find themselves outcompeted. They wind up going bankrupt–and then their children join the working class proletariat. Thus, according to the principle that the purpose of a system is what it does, the purpose of the capitalist system is maximum investment and capital accumulation:

Accumulation for the sake of accumulation, production for the sake of production: this was the formula in which classical economics expressed the historical mission of the bourgeoisie in the period of its domination. Not for one instant did it deceive itself over the nature of wealth’s birth-pangs. But what use is it to lament a historical necessity? If, in the eyes of classical economics, the proletarian is merely a machine for the production of surplus-value, the capitalist too is merely a machine for the transformation of this surplus-value into surplus capital…

Mark thinks he has an iron and water-tight argument that this process of investment in capital accumulation greatly raises the stock of instruments of production that workers use—no, in capitalist factories as Marx sees them workers do not utilize machines, instead, machines use up workers—while reducing the funds available to be spent paying the wages of the workers:

The law of the progressive growth of the constant part of capital in comparison with the variable part is confirmed at every step … by the comparative analysis of the prices of commodities, whether we compare different economic epochs or different nations in the same epoch. The relative magnitude of the part of the price which represents the value of the means of production, or the constant part of the capital, is in direct proportion to the progress of accumulation, whereas the relative magnitude of the other part of the price, which represents the variable part of the capital, or the payment made for labour, is in inverse proportion to the progress of accumulation…

Thus, for Marx, it is inconceivable that there might be a permanent, durable increase in the average wage level as the process of capital accumulation proceeds and as capitalism-the-sytem carries itself forward into the future. Supply-and-demand could not, and marks his analysis, lead to such an outcome, for supply-and-demand work in the context of a ever-growing surplus population that makes up an industrial reserve army of unemployed and hungry-for-jobs workers:

The industrial reserve army, during the periods of stagnation and average prosperity, weighs down the active army of workers; during the periods of over-production and feverish activity, it puts a curb on their pretensions. The relative surplus population is therefore the background against which the law of the demand and supply of labour does its work. It confines the field of action of this law to the limits absolutely convenient to capital’s drive to exploit and dominate the workers…

In fact, for Marx, it is inconceivable the average wage level will manage to stay above bare subsistence:

The most diverse machines are now applied to the manufacture of the machines themselves…. The labourers employed in machine factories can but play the role of very stupid machines alongside of the highly ingenious machines…. To sum up: the more productive capital grows, the more it extends the division of labour and the application of machinery; the more the division of labour and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together…. A mass of small business men and of people living upon the interest of their capitals is precipitated into the ranks of the working class…. Thus the forest of outstretched arms, begging for work, grows ever thicker, while the arms themselves grow every leaner…

Thus, as Mark sees it, the more powerful and productive new workers become, the more dominated and exploited workers become. :Workers become not men but fragments of men: hands, no more than appendages to the machine. And working to make things becomes not a source of joy at accomplishment but into an alienated torment:

We saw in Part IV, when analysing the production of relative surplus-value, that within the capitalist system all methods for raising the social productivity of labour are put into effect at the cost of the individual worker; that all means for the development of production undergo a dialectical inversion so that they become means of domination and exploitation of the producers; they distort the worker into a fragment of a man, they degrade him to the level of an appendage of a machine, they destroy the actual content of his labour by turning it into a torment; they alienate…

In Marx’s analytical framework, wealth, productivity, and misery all grow together. Greater productivity produces greater wealth. And then greater wealth produces greater misery, because under capitalism wealth is used to dominate and, if the capitalist is going to survive, he must use his power to dominate to push down wages and worsen working conditions so that he can not consume but invest his profits to produce an even greater scale of production and even greater productivity:

In proportion as capital accumulates, the situation of the worker, be his payment high or low, must grow worse. Finally, the law which always holds the relative surplus population or industrial reserve army in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock. It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i.e. on the side of the class that produces its own product as capital...

What is going to bring an end to this mad process?

Continue reading "Marx's Capital: The Capitalist System Worsens Over Time" »


Which Political Party's Policies Boost Investment in America, Again?

Investment-presidents

  • Suppose you were a stranger to humanity, and looked at this graph of trends in the investment share of output under various administrations.
  • Would you then credit the claim that the red-presidents political party was dedicated to boosting investment in America, and that the blue-presidents political party was dedicated to sacrificing investment and growth to achieve egalitarian redistributional social goals?
  • No.
    • One might claim that presidents don't control the economy or economic policy.
    • But presidents get most of what they ask for in terms of economic policy, and economic policy has a substantial impact on the actual economy.
    • One might claim that the big collapses of investment from the S&L and the subprime housing crises were bad luck for both Bush presidents.
    • But didn't mis- and under-regulation have something to do with it?

FRED: Gross Private Domestic Investment/Nominal Potential Gross Domestic Product https://fred.stlouisfed.org/graph/?graph_id=516170&rn=79#0...

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Marx's Capital: Part VII: The Accumulation of Capital

4.3) Part VII: The Accumulation of Capital: 4.3.1. The Bourgeoisie Is the Ruling Class: This is where the book starts to sing (to me, at least).

The first important thing I get out of Part VII is that, to quote from the Communist Manifesto, “the executive of the modern state is a committee for managing the affairs of the _business class”. Wealth speaks loudly, and influences the government to arrange things for the convenience of wealth—to keep wages low, and workers available.

Continue reading "Marx's Capital: Part VII: The Accumulation of Capital" »


Marx's Capital: Parts V-VI

*4.2.5) Part V: Absolute & Relative Surplus-Value *: Here Marx is indeed repeating himself. You are trapped in some Groundhog Day-like scenario. This time through reading these chapters, my major thought was: Wouldn’t Engels pay for an editor? It goes over ground Marx has already gone over. And it loses itself in byways that seem pointless to me.

For example, what is the usefulness of this?:

From one standpoint, any distinction between absolute and relative surplus-value appears illusory. Relative surplus-value is absolute, since it compels the absolute prolongation of the working-day beyond the labour-time necessary to the existence of the labourer himself. Absolute surplus-value is relative, since it makes necessary such a development of the productiveness of labour, as will allow of the necessary labour-time being confined to a portion of the working-day. But if we keep in mind the behaviour of surplus-value, this appearance of identity vanishes. Once the capitalist mode of production is established and become general, the difference between absolute and relative surplus-value makes itself felt, whenever there is a question of raising the rate of surplus-value. Assuming that labour-power is paid for at its value, we are confronted by this alternative: given the productiveness of labour and its normal intensity, the rate of surplus-value can be raised only by the actual prolongation of the working-day; on the other hand, given the length of the working-day, that rise can be effected only by a change in the relative magnitudes of the components of the working-day, viz., necessary labour and surplus-labour; a change which, if the wages are not to fall below the value of labour-power, presupposes a change either in the productiveness or in the intensity of the labour…

Why is it not better to say that the rate of profit (or of surplus-value extraction) depends on five things; the length of the working day, the productiveness of labor, the intensity of labor, the cost of worker subsistence, and the deviation of the wage level from the cost of subsistence? What is gained by calling some of these ‘relative’ and the others ‘absolute’ as it is indeed true that, as Marx says: ‘relative surplus-value is absolute… [and] absolute surplus-value is relative’?

Perhaps there is a new nugget in Chapter 16 of this Part V. Marx wishes to establish that David Ricardo and John Stuart Mill have blinded themselves by confusing things that are present only under the capitalist mode of production with things that are always true of the human division of labor, and so confuse themselves. But Ricardo and Mill—and I—would respond: Yes, these things are only apparent and obvious under the capitalist mode of production, but they are always true in the sense that they are constraints on and opportunities arising from the construction of a societal division of labor under conditions of scarcity; it is just that under other systems of arranging the societal division of labor these constraints and opportunities are masked by how they are embedded in the networks of obligation and control that make up non-market societies.

This is an argument Marx ought to have wrestled with. But he did not.

And much of Part V is simply confused: Marx disappears into the swamp that is the labor theory of value, and criticizes other economists for not getting lost in the swamp in the same place he does.

4.2.6) Part VI: Wages: Once again, I find Marx in need of an editor: little said in a substantial space. However, chapter 22, on differences across nations in the level of wages, seemed to me to be of interest. Marx says that looking across countries there are those with:

more intense national labour… more productive nation[s]…. In proportion as capitalist production is developed in a country, in the same proportion do the national intensity and productivity of labour there rise above the international level…. It will be found, frequently, that the daily or weekly, &tc., wage in the first nation is higher than in the second, whilst the relative price of labour, i.e., the price of labour as compared both with surplus-value and with the value of the product, stands higher in the second than in the first…

So that a higher rate of exploitation, a higher rate of productivity, and a higher value of real wages in terms of the commodities they can buy go together. Comparing Russia to England, Marx finds:

Despite all over-work, continued day and night, despite the most shameful under-payment of the workpeople, Russian manufacture manages to vegetate only by prohibition of foreign competition…

English cotton mills pay their workers more and extract more profits and surplus value out of them. Russian cotton mills pay their workers less, over-work them more, and yet would fail to extract any profits or surplus value if not for government subsidies via tariffs. The more exploited are workers in Marx’s extraction-of-surplus-value sense, the better off there workers are.

This should have given Marx pause: if it is true looking from less-capitalistic to more-capitalistic nations that higher rates of exploitation and better-fed and better-housed workers go together, might it not also be true looking over time from less-capitalistic to more-capitalistic eras that we see the same? This should have led Marx to rethink. It did not.

4.2.7) Summing Up Parts I-VI: In summary, with the exception of Chapter 10, The Working Day, Parts I-VI of Capital do not sing for me. Confused, and where not confused usually wrong, is my judgment.

Part I makes Hegelian philosophical intellectual moves to construct an argument for the labor theory of value, an argument which I do not see as valid and which leads to a false conclusion. Part II makes the important point that capital is not a thing but rather a set of relationships or processes that generate a certain kind of economy with its patterns of production, distribution, and dynamic evolution. But this seems obvious to me: it is something I know in my bones. Marx presents it with what seems to me to be a lot of fluff and mystification.

Parts III-VI develop and use his analytical framework and, with the exception of chapter 10 on the working day, I find the framework creaky, inadequate, and often misleading: labor theory of value, rates of surplus value, organic composition of capital, and hidden behind the curtain the unsolved and unsolvable analytical problems of reduction and transformation.

It is only in Part VII that the book begins to sing to me.

Continue reading "Marx's Capital: Parts V-VI" »


I do confess that I am sad that §7.6 of my "Smith, Marx, Keynes" lecture notes https://www.icloud.com/keynote/0osOOsPvSrTaiK4__D5MghPVA is still just huge honking quotes from Paul Krugman's Mr. Keynes and the Moderns https://delong.typepad.com/files/keynes-moderns.pdf. I kinda want to say "just read the whole thing". But here are the passages I chose:

Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology, its analogies to beauty contests, and more. Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability. What Chapter 12ers insist is that this is the real message of Keynes, that all those who have invoked the great man’s name on behalf of quasi-equilibrium models that push this insight into the background, from John Hicks to Paul Samuelson to Mike Woodford, have violated his true legacy...

Continue reading "" »


Lecture Notes: Smith, Marx, Keynes: Thanksgiving 2019 DRAFT

I have finished (a draft of) my "Smith, Marx, Keynes" lecture notes—well, I have not written 7.6 and 8.2. For 7.6, I have simply dumped in (much of) Paul Krugman's Mr. Keynes and the Moderns. 8.2 I have not written anything on. But what it is, it is...

https://www.icloud.com/pages/0howtV7CndvjkSCCLmtjmq_SA

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Marx's Capital: Parts III-IV

4.2.3) Part III: Production of Absolute Surplus-Value: Formal Equality Masking Substantive Inequality and Oppression: Here Marx tries to peel back the mask that conventional liberal ideology places over the face of the capitalist market economy. The market economy pretends that it is a realm of freedom: everyone is independent, everyone is unbound by ties of slavery and serfdom, everyone owns what he or she owns, everyone produces, buys, and sells, everyone does so an an equal legal footing…

And yet..., and yet..., and yet...

Marx tries to lay out how such a formally-equal form of social organization like the market economy nevertheless produces massive and mammoth inequality. He does so by diving into the working day and the labor process: How is it that the value of labor-power is less than the value of the commodities that that labor-power the capitalist purchases then creates? Why doesn't the worker just work for themself and so reap the full value of the commodities they produce as the wage for their labor power?

However, Marx gets lost here in the swamp of the labor theory of value. And so the analytical apparatus he builds creaks. It is, I think, simply not up to the task.

Sources of Capitalist Social Power: I think, however, that it is easy to rescue Marx's argument by throwing his labor theory of value overboard and simply looking at average or market equilibrium prices. It is a fact that those without money have little social power. It is a fact that those without money have little ability to delay their purchases or sales in the hope that a better bargain will be. It is a fact that those who are desperate to buy or sell get a bad bargain. And it is a fact that workers are desperate to sell their labor, and then desperate to buy commodities now: they and their families have to eat.

But why can't workers just work for themselves? Why can't they be independent contractors, and so capture for themselves the surplus the capitalist exacts from the fact that workers are desperate to work and so will work for less than the value of what they will produce because they need money now? They can—if they have enough of a stake to tied themselves over. But as time passes and as production becomes more and more capital-intensive and value chains become longer and longer, the size of the stake needed to remain independent grows. Some succeed in maintaining the needed stake, and even enlarging it: they maintain a precarious independence or become capitalists themselves, respectively. Most, from bad luck, imprudence, or a failure to keep pace with increasing scale, fall into the proletariat, and so have to strike bad bargains with employers in which they capture little of the surplus created in the process of production.

That, at least, would be a coherent theoretical argument.

Marx Wrote at the End of an Era of Wage Stagnation: It would run into the empirical problem that the wages of labor today in the Global North are 15 times higher than they were two centuries ago, and that in the world as a whole only 9% of people earn too little in the global market to escape from extreme poverty while 80% were in extreme poverty 200 years ago. But it would be a coherent argument. And it would accurately describe the world of an Industrial Revolution with little or no increase in real wages that Marx had seen in his life up to 1867. (Albeit that phase of the world economy was about to end: wages, worldwide, were then about to start rocketing upward.)

Nassau Senior’s “Last Hour”: Please, I ask you, do not miss the last part of chapter 9: Section 3: Senior's "Last Hour". Marx’s evisceration of the argument in support of the cotton manufacturers of Britain by British classical economist Nassau Senior is a thing of beauty. And it was the source for the first economics article I ever wrote that would up published.

The Length of the Working Day: And read carefully and reread chapter 10. In chapter 10 the book descends from German Hegelian-philosophical and British classical-economic abstractions and theory into the condition fo the working class in England in the middle of the nineteenth century, and the book becomes great.

Creaky Abstractions Return: But in chapter 11 the abstractions and the creaky analytical apparatus are back.

Marx then finds himself on the defensive. The profits that different manufacturers realize have nothing to do with the amounts of surplus value that Marx calculates different manufacturers extract from their workers. Why are the profits of one manufacturer who has few workers and so can extract no surplus value from them just as high as the profits of another manufacturer sweating surplus value out of tens of thousands? How I this consistent with Marx’s claim that profits in some sense are, or are the surface manifestation of the deep reality that is surplus value?

This is a natural question to ask. Asking it very much puts Marx very much on the defensive. So we find passages like:

The law... of surplus-value produced... clearly contradicts all experience based on appearance.... A cotton spinner, who... employs... little variable capital, does not, on account of this, pocket less profit or surplus-value than a baker... [with] much variable... capital. For the solution of this apparent contradiction, many intermediate terms are as yet wanted, as from the standpoint of elementary algebra many intermediate terms are wanted to understand that 0/0 may represent an actual magnitude.... It will be seen later how the school of Ricardo has come to grief over this stumbling block. Vulgar economy which, indeed, “has really learnt nothing,” here as everywhere sticks to appearances in opposition to the law which regulates and explains them. In opposition to Spinoza, it believes that “ignorance is a sufficient reason”...

To paraphrase, Marx is here saying: My theory says the sun rises in the west, but you say it rises in the east. You are confused by the surface appearance of things. I have a deeper understanding, and I will present my answer later.

He never did present an explanation.

As I said, the analytical apparatus creaks, and is not up to the task.

4.2.4) Part IV: The Production of Relative Surplus-Value: No, you are not caught in some Groundhog Day-like time loop. If this sounds to you like he is starting to repeat himself, you are right. And if you ask what makes some surplus value “relative” and other surplus value “absolute”, you will not get a clear answer.

I think that when the working day is expanded or the standard of living is lowered, that is an increase in absolute surplus value. I think that when productivity rises, that is an increase in relative surplus value. I would have called Part III “The Working Day and Surplus Value” and Part IV “Worker Productivity and Surplus Value”.

Deskilling: But do not skip or skim—too much. The analytical core of this part is an important insight: The market economy produces enormous incentives to innovate in technology and to then invest in labor-saving machinery in order to raise productivity:

A most furious combat rages between the capitalists for their individual share in the market... proportional to the cheapness of the product.... This struggle gives rise to in the use of improved machinery for replacing labour-power... the introduction of new methods of production... [and] a forcible reduction of wages beneath the value of labour-power is attempted...

And this pressure has a powerful impact in potentially "deskilling" workers. Marx quotes Adam Smith here:

The understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations … has no occasion to exert his understanding … He generally becomes as stupid and ignorant as it is possible for a human creature to become.... The uniformity of his stationary life naturally corrupts the courage of his mind … It corrupts even the activity of his body and renders him incapable of exerting his strength with vigour and perseverance in any other employments than that to which he has been bred. His dexterity at his own particular trade seems in this manner to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall...

Hence Adam Smith calls for a major deviation from laissez faire in favor of publicly-funded and mandatory public education:

The common people... have little time to spare for education. Their parents can scarce afford to maintain them.... As soon as they are able to work they must apply to some trade by which they can earn their subsistence.... But though the common people cannot, in any civilised society, be so well instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education... by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public.... It was in this manner, by facilitating the acquisition of their military and gymnastic exercises, by encouraging it, and even by imposing upon the whole body of the people the necessity of learning those exercises, that the Greek and Roman republics maintained the martial spirit of their respective citizens....

The gross ignorance and stupidity which, in a civilised society, seem so frequently to benumb the understandings of all the inferior ranks of people... [leaves them] mutilated and deformed in... [an] essential part of the character of human nature. Though the state was to derive no advantage from the instruction of the inferior ranks of people, it would still deserve its attention that they should not be altogether uninstructed. The state, however, derives no inconsiderable advantage from their instruction. The more they are instructed the less liable they are to the delusions of enthusiasm and superstition.... An instructed and intelligent people, besides, are always more decent and orderly.... They feel themselves, each individually, more respectable and more likely to obtain the respect of their lawful superiors.... They are more disposed to examine, and more capable of seeing through, the interested complaints of faction and sedition.... In free countries, where the safety of government depends very much upon the favourable judgment which the people may form of its conduct, it must surely be of the highest importance that they should not be disposed to judge rashly or capriciously...

I dare say you might well be able to convince Adam Smith, were he here with us today, to ban cable news, and Facebook.

But to return to Marx and to the cause of “deskilling”, rather than attempts to counteract its effects, we have Marx:

Along with the tool, the skill of the worker in handling it passes over to the machine. The capabilities of the tool are emancipated from the restraints inseparable from human labour-power. This destroys the technical foundation on which the division of labour in manufacture was based.… In so far as the division of labour reappears in the factory, it takes the form primarily of a distribution of workers among the specialized machines.... In handicrafts and manufacture, the worker makes use of a tool; in the factory, the machine makes use of him. There the movements of the instrument of labour proceed from him, here it is the movements of the machine that he must follow.... In the factory we have a lifeless mechanism... independent of the workers... incorporated into it as its living appendages.… The machine... deprives the work itself of all content … [The] conditions of work employ the worker...

Capitalism as a Vampire: And so innovation further diminishes workers' power to strike a good wage bargain, in chief a reasonable working day. Dead Labor—capital—or rather Undead Labor—fastens upon Living Labor like a vampire sucking his or her blood:

Partly by placing at the capitalists’ disposal new strata of the working class previously inaccessible to him, partly by setting free the workers it supplants, machinery produces a surplus working population... compelled to submit to the dictates of capital.... Machinery sweeps away every moral and natural restriction on the length of the working day.... The most powerful instrument for reducing labour-time suffers a dialectical inversion and becomes the most unfailing means for turning the whole lifetime of the worker and his family into labour-time at capital’s disposal for its own valorization.... Dead labour... dominates and soaks up living labour-power...

There is even, Marx claims, a large downside to laws to protect workers, to raise minimum wages, and to shorten the maximum working day. Such laws relatively disadvantage small-scale producers, and drive them into bankruptcy:

If the general extension of factory legislation to all trades for the purpose of protecting the working class both in mind and body has become inevitable, on the other hand, as we have already pointed out, that extension hastens on the general conversion of numerous isolated small industries into a few combined industries carried on upon a large scale; it therefore accelerates the concentration of capital and the exclusive predominance of the factory system. It destroys both the ancient and the transitional forms behind which the dominion of capital is still partially hidden, and replaces them with a dominion which is direct and unconcealed...

What is worse:

The immense impetus given to technical improvement by the limitation and regulation of the working day is to increase the anarchy and the proneness to catastrophe of capitalist production as a whole, the intensity of labour, and the competition of machinery with the worker. By the destruction of small-scale and domestic industries it destroys the last resorts of the ‘redundant population’, thereby removing what was previously a safety-valve for the whole social mechanism...

“The Worse, the Better”: But there is a "the worse, the better" apocalyptic silver lining here:

By maturing the material conditions and the social combination of the process of production, it matures the contradictions and antagonisms of the capitalist form of that process, and thereby ripens both the elements for forming a new society and the forces tending towards the overthrow of the old one...

I tend to be very very suspicious of “the worse, the better” arguments.

Karl Marx’s Theory of History: Note also that it is in this Part IV of Capital that we get Karl Marx's big-picture theory of history and political economy:

My view is that each particular mode of production, and the relations of production corresponding to it at each given moment, in short ‘the economic structure of society’, is ‘the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness’ [mental conceptions, if you like], and that ‘the mode of production of material life conditions the general process of social, political, and intellectual life...

And it is in this part of Capital that we have get a very brief glimpse into Marx's speculations about the business cycle:

The factory system’s tremendous capacity for expanding with sudden immense leaps, and its dependence on the world market, necessarily give rise to the following cycle: feverish production, a consequent glut on the market, then a contraction of the market, which causes production to be crippled. The life of industry becomes a series of periods of moderate activity, prosperity, over-production, crisis and stagnation. The uncertainty and instability to which machinery subjects the employment, and consequently the living conditions, of the workers becomes a normal state of affairs...

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Karl Marx: The Philosophical, Activist, Economist Layers Overlap. They Always Overlap

3.4.4) The Layers Overlap: Marx’s First Published Essay: You can see all three of these layers in Marx’s first published essay, On the Jewish Question. There is the German-philosophical layer: interrogating the concept of what it means to be free. There is the French-activist layer: how to organize and legislate to attain freedom. And there is the British-economist layer: the real problems lie in the economy, and how the workings of the economy drive people to be cruel to each other in spite of society’s overall prosperity. In On the Jewish Question Marx is pro-freedom. Jews are seeking equal rights. Many (including Marx’s about to be ex-friend Bruno Bauer) claimed that Germany was a Christian country in which Jews had no standing to ask for equal rights until they joined it—that is, became Christian—and then work for separation of state from church. Marx disagreed, stating that Jews’ status as Jews ought not to in any way be a bar to political emancipation.

But, Marx went on to write, political emancipation is not full human emancipation. In order to accomplish that, we need to transform the economy so that it no longer oppresses people.

Marx’s Antisemitism: And then Marx’s argument becomes unfortunate, because the way that the economy oppresses people, Marx says, is that it leads them to behave like he says Jews behave:

Let us consider the actual, worldly Jew–not the [observant] Sabbath Jew, as Bauer does, but the everyday Jew.

Let us not look for the secret of the Jew in his religion, but let us look for the secret of his religion in the real Jew.

What is the secular basis of Judaism? Practical need, self-interest. What is the worldly religion of the Jew? Huckstering. What is his worldly God? Money.

Very well then! Emancipation from huckstering and money, consequently from practical, real Judaism, would be the self-emancipation of our time.

An organization of society which would abolish the preconditions for huckstering, and therefore the possibility of huckstering, would make the Jew impossible. His religious consciousness would be dissipated like a thin haze in the real, vital air of society. On the other hand, if the Jew recognizes that this practical nature of his is futile and works to abolish it, he extricates himself from his previous development and works for human emancipation as such and turns against the supreme practical expression of human self-estrangement…

This was not a phrase Marx outgrew. A decade and a half later, in the mid 1850s, we find him writing things like:

Thus we find every tyrant backed by a Jew, as is every pope by a Jesuit. In truth, the cravings of oppressors would be hopeless, and the practicability of war out of the question, if there were not an army of Jesuits to smother thought and a handful of Jews to ransack pockets…

Yet by far the majority of the big bankers of mid-nineteenth century Europe were Christians. If he were around today, Marx would be one of those people who, when he wants to say something negative about bankers, will always say “Goldman Sachs” and never say “Bank of America” or “J.P. Morgan” or “Credit Suisse”. And the correspondence between Marx and Engels in which they express their envy of fellow German socialist Ferdinand Lassalle is just… weird. Simon Sebag Montefiore summarizes:

Both… were wildly jealous of Lasslle, who was in many ways what they wished to be: a political star, bon vivant… showman… lover… supported financially by his mistress, Countess von Hatzfeld…. Lassalle recognized Marx’s talent… helping him… get his work published…. Marx and Engles… repaid the favor with an endless stream of racist epithets… “stupid Yid”… “Jewboy”… “n——r”…. Lassalle… affair with a young woman engaged to a Wallachian prince whom he foolishly challenged to a duel. Lassalle was killed. Marx and Engels were astonished by the rise and fall of this flamboyant meteor…. Engels’s reflections on Lassalle’s intellectual and sexual power are particularly striking: “she didn’t want his beautiful mind but his Jewish cock”.

Marx was soon going to change his language away from On the Jewish Question’s claim that the big problem was that in market society all human beings acted like Jews: true human freedom would be thought of as the freedom of humanity from domination by the bourgeoisie, domination by the business class, rather than freedom from what Marx called “Jewishness”, and from an economic system that pushed people to act in what Marx called a “Jewish” way.

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Marx's Capital : Parts I-II

4.2) Capital, Parts I-II: Let me provide you with a brief guide in the form of my reactions on my last reading through Capital. And, truth by told, if I had made up the syllabus I would have assigned Parts VII and all but the last chapter of Part VIII, and dipped into Parts I-VI only for chapter 10, The Working Day, and a few selected passages. In place of the bulk of Parts I-VI, I would have substituted Marx’s 1847 essay Wage Labor and Capital; Marx and Engels’s 1848 The Communist Manifesto; Marx’s early 1850s study of French politics and political economy, The Eighteenth Brumaire of Louis Bonaparte; and his late-in-life Critique of the Gotha Program.

So here I am going to rush through Parts I through VI of Capital. I do not have time now to do more. Plus, with the exception of Chapter 10, The Working Day, which is great and which is by itself worth the price of the book, these pieces of the book do not sing to me.

4.2.1) Part I: Commodities and Money: The start of the book is, at bottom, a Hegelian German-philosophical argument for the truth of something called the labor theory of value: that the value of a commodity is the human labor that it took, directly and indirectly, to produce it. If you were a Hegelian German philosopher you might well find that argument somewhat convincing. But you are not. And in fact there are no Hegelian German philosophers at all: the consensus of philosophers is that Hegel is an important figure in the history of philosophy, but that his concepts and frameworks have little worthwhile bite.

Moreover, the labor theory of value is wrong, or at least profoundly unhelpful for Marx.

It involved him in spending years of his life trying to resolve all kinds of problems—the reduction problem, the transformation problem, how to characterize the capital-intensity of the economy—that were at best time-wasting sinks of energy and at worst led to what were in retrospect obvious analytical errors.

I get little out of Part I. But maybe I have not remade myself into the right kind of reader?

4.2.2) Part II: Transformation of Money into Capital “Capital” as Not Things But a Process: As the book moves out of Marx’s Hegelian German-philosopher mode it becomes, I think, much more promising. People typically think of “capital” as stuff: machines, buildings, inventories, and so on. But, Marx argues—I think correctly—that capital is better thought of as a particular form of social power: wealth directing human activity by being itself directed toward acquiring more wealth. Capital is money that is in the business of making more money by being used to buy and thus be transformed into commodities, and then back into more money. And, Marx argues, the most important commodity that capital is transformed into in its every-amplifying circular flow is labor-power, because the only reason that the system can produce profits on average—that the amount of capital can grow in general—is that the value of labor-power is less than the value of the commodities that that labor-power the capitalist purchases then creates.

But it takes Marx three chapters to say that.

Antisemitism Again: There is one piece of Part II that I should not pass over. It is:

The capitalist knows that all commodities, however tattered they may look, or however badly they may smell, are in faith and in truth money, are by nature circumcised Jews, and, what is more, a wonderful means for making still more money out of money…

What are “the Jews" doing here? Yep. This is a leftover from 1842, from the days when Marx and his soon to be ex-friends Moses Hess and Heinrich Heine were attacking “Jewishness” as the source of evil—cf. Heinrich Heine’s denunciation of his own city of Hamburg a:

a city of hagglers populated entirely by Jews, some baptized (I call all Hamburg’s inhabitants Jews)…

It’s people who behave like how Heine has been taught to think Jews behave who are the subject of his ire. Still, not at all a good look.

Continue reading "Marx's Capital : Parts I-II" »