Mainstream amnesia
Econ4 team member Gerald Epstein writes for TripleCrisis on the “Memento syndrome” in orthodox macroeconomics:
Like the protagonist in the movie Memento, who has no memory but is trying to solve the mystery of his wife’s murder, and has to remind himself every minute about what happened the minute before by writing notes and even tattooing himself , mainstream macroeconomists’ write themselves articles and books after every crisis and they then promptly forget what they wrote (no tattoos as far as I know).
I believe there is a reason for this: the mainstream never changes its underlying theory which is based on the erroneous ideas that financial markets are, by and large, perfectly self-governing and efficient and that the market economy has strong self-equilibrating forces that always bring the economy back to full employment… Since they won’t change their basic framework, they have nowhere to put the new information they get after each crisis. So, they forget it just as soon as they can… The tragedy is that it is these same economists who still control the elite economics departments, the main economics journals and hold the key policy making and research positions in our public institutions such as the Federal Reserve. Their stranglehold must be broken if we are going to break the Memento syndrome that is hindering sensible economics and economic policy.
Read his piece here.
Dividends for the people
Peter Barnes, author of Capitalism 3.0, writes for onthecommons.org:
Why don’t we pay everyone some non-labor income — you know, the kind of money that flows disproportionally to the rich? I’m not talking about redistribution here, I’m talking about paying dividends to equity owners in good old capitalist fashion. Except that the equity owners in question aren’t owners of private wealth, they’re owners of common wealth. Which is to say, all of us.
One state—Alaska—already does this. The Alaska Permanent Fund uses revenue from state oil leases to invest in stocks, bonds and similar assets, and from those investments pays equal dividends to every resident. Since 1980, these dividends have ranged from $1,000 to $2,000 per year per person, including children (meaning that they’ve reached up to $8,000 per year for households of four). It’s therefore no accident that, compared to other states, Alaska has the third highest median income and the second highest income equality.
Alaska’s model can be extended to any state or nation, whether or not they have oil. Imagine an American Permanent Fund that pays dividends to all Americans, one person, one share. A major source of revenue could be clean air, nature’s gift to us all. Polluters have been freely dumping ever-increasing amounts of gunk into our air, contributing to ill-health, acid rain and climate change. But what if we required polluters to bid for and pay for permits to pollute our air, and decreased the number of permits every year? Pollution would decrease, and as it did, pollution prices would rise. Less pollution would yield more revenue. Over time, trillions of dollars would be available for dividends.
Read his piece here.
U.S. Defense Department budget since WW2
Food for thought from the National Priorities Project:
As the chart below shows, current defense spending levels – even without funding for the wars in Iraq and Afghanistan – are higher than at any time since World War II when adjusted for inflation.
Robert F. Kennedy versus GDP
Hear Robert F. Kennedy’s words, just as compelling today as when they were spoken shortly before his assassination in 1968:
Source: http://www.youtube.com/watch?v=77IdKFqXbUY
Econ4: Changing the Way We Look at Economics
Fast Company (fastcoexist.com) reports on Econ4:
“We’re economists: we want to promote not only the supply of new economics teaching but also student demand for it.”
Read the story and accompanying interview here.
Unequal and unstable
The correlation between income inequality and financial crises raises an important question: could it be that extended periods of increased income inequality help to cause financial crises? Evidence suggests this may well be the case, through three primary mechanisms that reinforce each other:
- Sharp increases in debt-to-income ratios among lower- and middle-income households looking to maintain consumption levels as they fall behind in terms of income;
- The creation of large pools of idle wealth, which increase the demand for investment assets, fuel financial innovation, and increase the size of the financial sector;
- And disproportionate political power for elite financial interests which often yields policies that negatively affect the stability of the financial system.
Read their analysis here.
RFK on the poverty of satisfaction
Ronald writes on January 6, 2012, quoting from an address by Robert F. Kennedy at the University of Kansas:
“Even if we act to erase material poverty, there is another great task. It is to confront the poverty of satisfaction a lack of purpose and dignity that inflicts us all.
“Too much and for too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things.
“The gross national product does not allow for the health of our children, the quality of their education, or the joy of their play.
“It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials.
“It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country;
“It measures everything, in short, except that which makes life worthwhile.”
I have always found this text very inspirational.
I wish you the best of luck !
Econ4 replies:
Thanks, Ronald. There’s still a tremendous gap between how orthodox economists measure well-being and what’s really of value. In these eloquent remarks, delivered just 11 weeks before he was assassinated, RFK pinpointed one of the reasons why we want to upload ethics into economics.
Measure what matters
From Matthew, December 10, 2011:
As a macroeconomic indicator of well-being, GDP is lousy. We need to measure what matters.
Econ4 replies:
You’re absolutely right. We’re currently drafting the script for an Econ4 video on “Measuring the Economy” – and looking for funding to produce it.
Economic fallacies: time to work more, or less?
In the models of neo-classical economics times like the present are assumed away. But when we’re actually living through them, we need to recognise that measures that result in higher hours can be counter-productive by creating more unemployment and investor pessimism. Similarly, responding to shortfalls in pension programs by asking people to stay in the labour force more years further dis-equilibrates the market by creating more demand for a limited number of jobs.
Ethics in economics: a step forward
The Wall Street Journal, reporting on the American Economics Association’s recent decision to require economists to disclose potential conflicts of interest, quotes Econ4’s George DeMartino and Gerald Epstein, leading advocates of uploading ethics into the profession.
George DeMartino, a University of Denver professor who headed the panel, has argued for the adoption of an even broader “economists’ oath” that would address questions like the ethics of advising dictators and the responsibility of economists to stand up for the poor.
Gerald Epstein, a professor at the University of Massachusetts at Amherst who has previously criticized economists’ lack of disclosure, in an email called the policy “a very big step forward.” He said the call for disclosure in nonacademic work, though nonbinding was particularly important because it will help “set norms of behavior that colleagues, the press, students and citizens can help hold economists accountable to.”
Read the story here.
