Killer economics

“Econ 101 is killing America,” write Robert Atkinson and Michael Lind:

Even though most economists know better, they present to the public, the media and politicians a simplified, vulgar version of neoclassical economics — what can be called Econ 101 — that leads policymakers astray. Economists fear that if they really expose policymakers to all the contradictions, uncertainties and complications of “Advanced Econ,” the latter will go off track — embracing protectionism, heavy-handed “industrial policy” or even socialism.

Read their take on the myths of Econ 101 here.

Redefining the problem: the corporate predator state

Katrina van den Heuvel writes in The Washington Post:

True conservatives are — or should be — offended by corporate welfare as well. Conservative economists Raghuram Rajan and Luigi Zingales argue that it is time to “save capitalism from the capitalists,” urging conservatives to support strong measures to break up monopolies, cartels and the predatory use of political power to distort competition.

Here is where left and right meet, not in a bipartisan big-money fix, but in an odd bedfellows campaign to clean out Washington.

Read her piece here.

Capitalism Unmasked

Capitalism Unmasked, a new eBook edited by Lynn Parramore, was produced in a partnership between AlterNet and Econ4 to expose the myths of unbridled capitalism and show the way to a better future. You can download the PDF here.

Take a joke

The Times reports free-market funnies from documents unearthed in a case now before the New York State Supreme Court:

On March 16, 2007, Morgan Stanley employees working on one of the toxic assets that helped blow up the world economy discussed what to name it. Among the team members’ suggestions: “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout,” as well a simple yet direct reference to a bag of excrement.

Ha ha. Those hilarious investment bankers.

Then they gave it its real name and sold it to a Chinese bank.

Read here what they don’t teach about banking in B-school.

Health care: where profits warp incentives

Echoing our recent Econ4 statement, Eduardo Porter explains in the New York Times why our healthcare-for-profit system means that Americans pay too much and get too little:

From the high administrative costs incurred by health insurers to screen out sick patients to the array of expensive treatments prescribed by doctors who earn more money for every treatment they provide, our private health care industry provides perhaps the clearest illustration of how the profit motive can send incentives astray.

By many objective measures, the mostly private American system delivers worse value for money than every other in the developed world. We spend nearly 18 percent of the nation’s economic output on health care and still manage to leave tens of millions of Americans without adequate access to care.

Read his piece here.

TBTF = TBTR?

Does “Too Big To Fail” also mean Too Big To Regulate?

Gretchen Morgenson talks with Neil Barofsky, former special inspector general for TARP (the Troubled Asset Relief Program) about his new book, Bailout:

“So much of what’s wrong with Dodd-Frank is it trusts the regulators to be completely immune to the corrupting influences of the banks,” he said in the interview. “That’s so unrealistic. Congress has to take a meat cleaver to these banks and not trust regulators to do the job with a scalpel.”

Finally, Mr. Barofsky joins the ranks of those who believe that another crisis is likely because of the failed response to this one. “Incentives are baked into the system to take advantage of it for short-term profit,” he said. “The incentives are to cheat, and cheating is profitable because there are no consequences.”

Read her piece here.

Meanwhile Gar Alperovitz finds a surprising source of support for nationalization of banks that are TBTF and TBTR:

Most liberals in Washington — President Obama included — keep hoping the banks can be more tightly controlled but otherwise left as is. That’s the theory behind the two-year-old Dodd-Frank law, which Republicans and Wall Street are still working to eviscerate.

Some economists in and around the University of Chicago, who founded the modern conservative tradition, had a surprisingly different take: When it comes to the really big fish in the economic pond, some felt, the only way to preserve competition was to nationalize the largest ones, which defied regulation.

Read his column here.

Confidence Men & Fairytales

In “Capitalism Unmasked,” Econ4′s joint project with AlterNet, Paul Davidson tours a fairytale world:

Conservative economists and their friends like to trot out a mythical being whenever they want to make arguments that favor an economy built for the wealthy at the expense of ordinary people. This imaginary being, known as the Confidence Fairy, is only happy when capitalists are given free rein to do whatever they want – even if it brings us to the brink of a global economic meltdown.

Read his essay here.

Musical Scalpel

In his ode to the “Free Market,” Dr. Doug Hendron sings:

Well, there’s something that makes me wanna jump and shout
It seems everybody’s always talking about
The free market, as if it’s just a fact
But you know it ain’t free if it destroys your habitat

Dr. Doug wields his musical scalpel here.

Command and Control Meets the Market

In an essay for “Capitalism Unmasked,” Econ4′s joint project with AlterNet, Lynn Parramore writes on the new economic bondage:

This has been coming for some time. Ever since the Reagan era, from the factory to the office tower, the American workplace has been morphing for many into a tightly-managed torture chamber of exploitation and domination. Bosses strut about making stupid commands. Employees trapped by ridiculous bureaucratic procedures censor themselves for fear of getting a pink slip. Inefficiencies are everywhere. Bad management and draconian policies prop up the system of command and control where the boss is God and the workers are so many expendable units in the great capitalist machine. The iron handmaidens of high unemployment and economic inequality keep the show going.

Read her piece here.

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.