A Letter to Paul Krugman

Dear Dr. Krugman,

For many years now I have been reading your op-eds in the New York Times. In my mind you are one Nobel Prize economist who speaks the truth to the weaknesses and strengths of past and present economic theory. With all due respect though; let me suggest that the time has come for you and the many economists in your field to step out of your shoes and take a long hard look at a fatal flaw in the economic theory that the world has accepted for so long as having intrinsic value.

You and your colleagues need to begin an articulation within your profession of new economic theory that will meet the pressing planetary challenges confronting our species. I do not see this happening.

The architecture that grew out of the industrial revolution, on which capital markets today justify their operation, now finds its “raison d’etre” shaking under its own weight. The cold hard fact is that this architecture has not only seen its day; it is like an insidious disease working against human survival.

All around us there are indications of the failure of past economic theory; from the recent debacle on Wall Street to unemployment on Main Street, from the toxic tar sands in Canada to the overfishing of tuna in the oceans, from the increasing CO2 in the biosphere to the acidification of the oceans. And this failure extends well beyond these few observations. Planet Earth is telling us something. It is pointing to its rejection of our open and free capital market economic system.

The key fault is the unfettered operation of our capital markets. These markets have grown to a size where they are energizing ecologically and socially destructive forces of a magnitude that has never before been seen in the history of the planet. Resource allocation is being misguided and misappropriated on a massive scale. Irreparable planetary damage is being done. Fingers can be pointed in many directions for this such as human greed, political dysfunction, just plain stupidity; however, the rules under which capital markets have been operating since they took form from the beginning of the industrial revolution onward must take primary blame.

Your profession has come forward with no new ideas to stem the tide. You and those like you need to be thinking and writing and speaking about new economic theory. It is not happening. Physical scientists throughout the world have been describing the ecological problems with great clarity; it is time for economists to offer economic solutions. So far, there is only silence.

Boiled down into a few words; our resource exploitive capital market system needs to be transformed into a constrained yet incentive directed market system emphasizing the equitable and humanistic provision of both the material and psychological needs of all humanity. The long lasting functionality of all the earth’s resources to meet these needs must take on the highest priority. Every element of today’s energy intensive market driven consumerism must be made to meet this planetary survival/functionality test.

How can we mechanistically achieve this? Negative external costs and positive incentives must be built into every investment decision. And these costs and incentives must be applied to every human economic activity from the mine to the chemistry lab to the assembly line to the opera house to the athletic field to the hospital. Economic outcomes with negative social and/or ecological value must be recognized. Negative externalities need to be measured and priced in up front so as to discourage, temper, or at the extreme eliminate investment.

Every investment decision must be internally priced to reflect its socially constructive or destructive outcome. Croplands, grasslands, forests, fisheries, inorganic resources; all of the earth’s natural resources, must be internally priced so as to prevent their exploitation and damage to the planet.

In our present world, none this is happening on a broad enough scale to make a difference. We see punitive cigarette and liquor taxes and some others like them, but across the board, any form of built-in “negative external” cost reflecting ecological considerations is almost nil. Disincentives/Incentives in vital areas like energy are being very poorly handled. The most simple questions such as; is this or that delivering real worth to society and to the health of the planet are avoided. As I am certain you are aware; some progress is being made in northern Europe, but I am sure you will agree with me that on a world scale that is insignificant.

Humanity is crying out for an entirely new form of economic/monetary theory. Social/political theory must necessarily be a part. A response is coming from some enlightened intellectuals in the world community; however, there is at present no universal consensus, nor are there long term solutions at hand. Our species remains in gridlock. Your economics profession remains notably silent, content on using its advanced theories of algorithms for trading purposes, but not for the above.

How much time do we have to come up with a revised capital market system? Some highly accredited scientists say our present trajectory will present very serious planetary problems within the next fifty years and they even point to the end of our species.

Will our great and great-great grandchildren find themselves at the bottom of Dante’s inferno with no escape? There is this possibility. The time has come for humanity to recognize that unless it can change the way it prices what it desires to consume, the biblical prophecy of the end of times may very well prove to be self-fulfilling.

Respectfully yours,

David Anderson

I think that above is a great summation of the reason(s) we need economists to, well, come back (for the first time?) to reality to help us formulate a response to the neoliberal policies that are destroying our world — both environmentally and socially. When profit — the continuing enhancement and consolidation of wealth and power among a very few — is the goal, everything else is grist for the mill. That includes our planet, and, thus, ultimately, our existence.

One of the solutions David offers is strict taxation and regulation of harmful business practices while incentivizing those that produce positive results through positive means (for the means are the ends, as people must to perform and receive both, in social policy). His position is, as I read it, essentially, that we need to increase and improve government oversight of business. Getting the charlatans out of the halls of government, and replacing them with those with both hearts and minds (rather than merely pseudo-scientific inclinations/aspirations) would be a great start.

I’ve started to think that if you have a really hard time understanding an economic proposal, suggestion or analysis, it’s probably the economics that are wrong. On the other hand, myths like Adam Smith and the invisible hand are also quite easy to understand (and be led astray by). I suppose the solution is to assume the economics are wrong until you understand them and have better proof (whatever that may be — clear causal relation between policy and outcome?). [This paragraph is really just me going stream-of-consciousness there for a minute.]

My thanks to David for allowing me to republish his letter.

If you think he (or I) sounds alarmist, it’s because this is an issue — a way of life — that should alarm you.

Go Away, Economists; Take Your Nobel With You

The latest ersatz Nobel prize went to a couple of guys who theorize a lot about contracts. This is the kind of work that now dominates much of economics. Tinkering with mathematics, incentives, and other aspects of minutiae whilst steadfastly turning away from the rapidly approaching storms that threaten the lives of real people outside the tenured redoubts professors hide within.
— Peter Radford, “The Market and Nobels.” Real-World Economics Review Blog, 12 OCT 2016.

I don’t know how many times I’ve written here that economists shouldn’t be listened to and certainly shouldn’t be trusted. Their “forecasts” and “predictions” and even after-the-fact “explanations” are — far more often than not — complete bullshit.

I once said this on Facebook and someone got angry because they have a friend who’s an economist. He commented and said something about having done it for twenty years or some such . . . blah, blah, blah. Just because you do something for twenty years doesn’t make it legitimate.

When I checked out his blog, I noticed that he pointedly doesn’t write about economics. He’s written about education, however.[1] That’s also a rather political subject, as are the others he discusses. Once again, ideology triumphs.

What I’d planned to write about yesterday (but didn’t) is the economic sciences Nobel awarded earlier in the week. It’s important to know this isn’t a real Nobel. Nor is economics a science.

As Avner Offer and Gabriel Soderberg write in their new book, The Nobel Factor: The Prize in Economics, Social Democracy and the Market Turn:

The Nobel prize came out of a longstanding social conflict. On one side, central banks and the better-off striving to keep property intact and prices stable; on the other, everyone else’s quest for economic security. The Swedish social democratic government clipped the wings of the central bank – Sveriges Riksbank – in pursuit of more housing and jobs. In compensation, the government allowed the central bank to keep some funds, which the bank used in 1968 to endow the Nobel prize in economics as a vanity project to mark its tercentenary.

In The Guardian:

Would it not be extremely useful to take economics down one peg by overhauling the prize to include all social sciences? The Nobel prize for economics is not even a “real” Nobel prize anyway, having only been set up by the Swedish central bank in 1969. In recent years, it may have been awarded to more non-conventional practitioners such as the psychologist Daniel Kahneman. However, Kahneman was still rewarded for his contribution to the science of economics, still putting that field centre stage.

Think of how frequently the Nobel prize for literature elevates little-known writers or poets to the global stage, or how the peace prize stirs up a vital global conversation: Naguib Mahfouz’s Nobel introduced Arab literature to a mass audience, while last year’s prize for Kailash Satyarthi and Malala Yousafzai put the right of all children to an education on the agenda. Nobel prizes in economics, meanwhile, go to “contributions to methods of analysing economic time series with time-varying volatility” (2003) or the “analysis of trade patterns and location of economic activity” (2008).

But the writer goes on:

A Nobel prize in economics implies that the human world operates much like the physical world: that it can be described and understood in neutral terms, and that it lends itself to modelling, like chemical reactions or the movement of the stars. It creates the impression that economists are not in the business of constructing inherently imperfect theories, but of discovering timeless truths.

To illustrate just how dangerous that kind of belief can be, one only need to consider the fate of Long-Term Capital Management, a hedge fund set up by, among others, the economists Myron Scholes and Robert Merton in 1994. With their work on derivatives, Scholes and Merton seemed to have hit on a formula that yielded a safe but lucrative trading strategy. In 1997 they were awarded the Nobel prize. A year later, Long-Term Capital Management lost $4.6bn (£3bn)in less than four months; a bailout was required to avert the threat to the global financial system. Markets, it seemed, didn’t always behave like scientific models.

Criticism of the Nobel — and, more important, economics as a profession — continues. You can likely see the dissatisfaction with the status quo among some economists roiling beneath the surface of the economics field just by what’s written been about the Nobel. There’s plenty more criticism of economists and the field of study (work?) out there. I’m not alone.

[1] I should note that college professors who write about Pre-K-12 education often place themselves in dangerous rhetorical waters because they assume teaching is teaching (or some similar concept). They think, “Well, I could do that. It’s simple. Just . . .” But applying tertiary education methods to elementary and secondary education settings haven’t exactly worked. Also highly dissimilar: the teaching experiences at various levels. College students may be assholes but they rarely shit their pants.

MR.S. in Economics

“These same decades (the last five) also witnessed an upsurge in the number of students majoring in economics, which is now the most popular concentration at two-thirds of the 40 top-ranked universities and liberal arts colleges.”

—George Scialabba, “Class and the Classroom: How Elite Universities Are Hurting America,” Foreign Affairs, Mar.–Apr. 2015.

This proves that economics is, clearly, the psychology for 21st century college students. That is, the default for those who don’t know what to study; almost as valuable as that venerable MR.S. degree.

And people wonder why I don’t believe in economists.

Like Hannibal Lecter, Economists Eat Brains

Shitloads of Money by Liz Phair on Grooveshark
I stopped by the Leander Public Library after dropping Misty off at work this morning. I actually went inside, got a library card (you only need photo ID now! not photo ID and mail), browsed, looked up some books and ended up checking out three.

I’ve had a library card for every city I’ve ever lived in — unless it was a base library card instead of the local town’s. Air Force bases tend to have really good libraries.

It was disappointing at how small this new, white stone building was. There are actually two wings, but one is dedicated to conference rooms, according to the librarian with whom I spoke. The kids’ area was huge. It could have passed for a daycare, without the unattended kids running everywhere (only a couple). The Austin Public Library often seemed to be a daytime homeless shelter. That wouldn’t fly long in Leander.

With most of my books in storage, and my new medications waking me up as early as 3:30 in the morning now, I’ve been desiring a non-e-book to satisfy my brain tickling. (Seriously, it sort of feels that way — as if my brain were tingling with desire to start reading or writing and a then a wash of pleasure — tickling — comes over it during the act.) I’d read all the printed literature (newspapers, books, magazines, journals, etc.) in the house. I needed something I could run my finger down the margin, follow the words with my finger, generally ensure I mess up all the doors in the house. I just love the feeling of books. And the smell. Misty makes fun of me for smelling books. I make fun of her for not. Continue reading

More Poisonous: E-cigs or Economists?

I know certain people (C.Z.) will say that I should have already canceled my subscription to and stopped reading The New York Times. But I just can’t. I need that weekly fix of newsprint on my fingers, forehead and doors. Regularly, though, I find myself frustrated by what I’m reading. And so I retire to this blog to piss and moan about it.

Look, e-cigarettes are dangerous. But “Selling a Poison by the Barrel: Liquid Nicotine for E-Cigarettes” is a bit hyperbolic. Especially when you go on to say, “The problems with adults, like those with children, owe to carelessness and lack of understanding of the risks.”

I mean, poison? As someone who just started smoking an e-cig in place of regular cigarettes (haven’t had one since I walked into the vaporizer shop a month or so ago), I was a bit worried. But if you’re only telling me I shouldn’t drink it, inject it or allow much on my skin because it’s transdermal, let’s not call it a poison. Legit e-cigarette sellers tell you this when you buy your first e-cig. Good places walk you through everything as if you were buying a new car. It can take up to 45 minutes.

Everyone likes to say, “But it hasn’t been proven . . .” Exactly. Nothing has been proven about e-cigs. You can’t say they hurt you anymore than you can say they can. So let’s just back off a little and not get our whities in a wad just because those who vape happen to exhale a visible water vapor.

On the other hand, there was finally some honesty from an economist in yesterday’s Times:

Do you want to know a dirty little secret of economists who give policy advice? When we do so, we are often speaking not just as economic scientists, but also as political philosophers. Our recommendations are based not only on our understanding of how the world works, but also on our judgments about what makes a good society.

Now, of course, that isn’t the entire truth. The entire truth is that “scientists” shouldn’t be put after the word “economic” in anything but satire. The dismal science isn’t dismal. It isn’t a science. At best, it belongs in the social science department. It may well belong in the humanities alongside literary criticism, philosophy and rhetoric. But it sure as hell isn’t a science.

Economists are just lacking politicians. They cloak their personal beliefs and ideologies in the shroud of some numbers and present their biased policy proposals. Half of them operate from a purely fictional Adam Smith/Milton Friedman premise. We’d do better to listen to anthropologists. Seriously.

So I’m glad the Times published this piece. At least one of them has come clean, even if he did far overuse the word “scientist” in his piece. He should never consider himself a real scientist. His are beliefs. Often wrong beliefs — like his argument on the minimum wage. But that’s just him being intellectually dishonest and, at the same time, encouraging readers not to believe other economists who agree with a minimum wage hike. Quite clever, actually.

But let’s be done with this, too: Economists are not scientists. They have no special view into the economy or its future or what this or that policy action may do to it. They’re just wannabe politicians. Take their opinions thusly.

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