To help poor people, give them money (Draft excerpt from Economics in Two Lessons)

by John Quiggin on June 16, 2015

Here’s another draft excerpt from my book in progress, Economics in Two Lessons. To recap, the idea of the book is to begin with the idea that market prices represent opportunity costs for the households and business who face them (Lesson 1), and then go on to explain why market prices won’t in general equal opportunity costs for society as whole (Lesson 2). A lot of the book will be applications of the two lessons, and this section is an application of Lesson 1.

As before, all kinds of comment and criticism, from editorial points to critiques of the entire strategy are welcome.

To help poor people, give them money

The problem of poverty is huge, in rich and poor countries alike. Around the world, nearly a billion people live in extreme poverty, living on less than $US1.50 a day. Even in the United States, on many measures the wealthiest country in the world, the Dept of Agriculture estimates that 14.5 per cent of the population experience food insecurity, defined as being ‘uncertain of having, or unable to acquire, enough food to meet the needs of all their members because they had insufficient money or other resources for food.’

Faced with images of the hunger and suffering caused by famines and extreme poverty, a natural and intuitive reaction is to send food. This reaction is often politically appealing in countries that happen to have large stockpiles of food, either because of unforeseen declines in market demand, or because of government policies such as price supports for farmers.

On the other hand, many advocates of development aid dismiss food aid as a short-term ‘band-aid’, and argue that the aim of aid should be to provide the ‘right’ kind of assistance, as measured by subsequent economic growth. Advocates of aid initially focused on economic infrastructure and industrial development, and have more recently turned their attention to health and education.

Similar debates have played out in the United States. The Supplemental Nutrition Assistance Program (SNAP), better known as food stamps, has played a central role in US programs to assist low-income households since it was introduced in 1964. With cuts in other welfare programs, its importance has increased over time.

On the other hand, as with international food aid, the SNAP program is regularly derided as a bandaid approach. Liberals frequently point to education as the way to provide real opportunities for the poor.

Which of these approaches is right? Much of the time, neither. While support for health and education has a better track record than food aid, there is a growing body of evidence to say that, in both poor countries and rich ones, the best way to help people is to give them money.

To see why this should be so, ask: What would a desperately poor family do with some extra money? They might use to stave off immediate disaster, buying urgently needed food or medical attention for sick children. On they other hand, they could put the towards school fees for the children, or save up a piece of capital like a sewing machine or mobile phone that would increase the family’s earning power.

So, the poor family is faced with the reality of opportunity cost. Improved living standards in the future come at the cost of present suffering, perhaps even starvation and death. Whether or not their judgements are the same as we would make, they are in the best possible position to make them.

This is a straightforward application of Lesson 1. Market prices reflect (and determine) the opportunity costs faced by consumers and producers.

Exactly the same points apply in rich countries. Giving poor people assistance in kind, such as food stamps and subsidized housing, has a lot of political appeal. Not only does it meet an apparent need, but it appears to reduce the chance that the recipients will waste their extra income on luxuries, or on alcohol and tobacco. In addition, as in the case of the US food stamps program, it may also be possible to form a political coalition with producer interests, represented by the farm lobby.

Thinking in terms of opportunity cost, however, we can see that aid in kind almost inevitably results in waste. The opportunity cost of subsidized housing is the low rent paid for the house, while the opportunity cost of moving usually includes going to the back of the line. So having secured subsidized housing, people will stay there even if the house no longer suits their needs, because it is too big, too small, or too far away from a new job.

The same kinds of problems come up with food stamps. Families poor enough to get food stamps face all kinds of problems. They might, for example, need urgent medical or dental care, or be faced with eviction if they don’t make a rent payment.

Most of the time food stamps cover only part of a family’s food budget, so they are really just like cash. Families can meet some of their food bills with stamps, then use the money they save to meet other needs The opportunity cost of spending more on food is the alternative that can’t be afforded.

But it’s precisely when people need money most, to the point where they are prepared to live on a restricted diet, that the limits of food stamps start to bite. If poor families were given money, they could choose to pay the rent bill even if it meant living on rice and beans. That’s a hard choice, but it might be the best one available.

Unsurprisingly, then, poor people often try to change some of their food stamps for money. This is denounced as ‘fraud’ and used as a reason for cutting food stamps even further.

It is market prices that determine the opportunity costs of goods and services for individuals and families. So, when people choose how to spend additional money, the opportunity cost of one choice is the alternative that could be bought for the same amount.

The idea that poor people don’t understand this is patronizing and wrong. The tighter are the constraints on your budget, the more important it is to pay attention to them. Poor people often have less access to markets of all kinds, including supermarkets basic financial markets such as bank accounts and face complex and variable prices as a result. Nevertheless, many of them manage to find highly creative ways of stretching a limited budget to meet their needs. Additional constraints, in the form of payments that can only be spent in particular places and on particular goods, are the last thing they need.

These arguments have been going on for many years, but resolving them has proved difficult, since there are usually many different factors that determine good or bad outcomes for poor families. In recent years, however, a combination of improved statistical techniques and careful studies of experimental program pilots have allowed an assessment of the evidence to emerge. Overwhelmingly, it supports the view that giving people money is more effective than most, if not all, forms of tied assistance in improving wellbeing and life outcomes.

http://www.thebaffler.com/blog/blaming-parents/

http://www.nytimes.com/2013/08/18/magazine/is-it-nuts-to-give-to-the-poor-without-strings-attached.html?_r=0

If the best way to help the poor is to give them money, what is the best way of doing that?  In a market economy there are two possible answers. The one that has been discussed most is redistribution; that is, using the taxation and welfare systems to transfer some market income from the rich to the poor. More difficult, but arguably more effective is to change the structure of markets and property rights to produce a less unequal distribution of market income — this is sometimes called ‘predistribution’. We will come back to this issue later.

{ 208 comments }

1

reason 06.16.15 at 7:43 am

“More difficult, but arguably more effective is to change the structure of markets and property rights to produce a less unequal distribution of market income — this is sometimes called ‘pre-distribution’. We will come back to this issue later.”

Pre-distribution is just the same as redistribution, but a different wrapper. Effective redistribution means that there is more money in poor communities and more local employment (and so they have better bargaining power in the labour market). An unconditional income support (i.e. a basic income) is the best way to stop employment exploitation – because it gives poor people the ability to say no to exploitative offers. It also means less intrusive bureaucracy (we are trusting people to make their own decisions). Some of the redundant bureaucrats could maybe do real social work instead of making poor people jump through hoops.

Housing is a completely different issue, and needs real supply side measures (demand side subsidies just push up the price of land). But basic income would help here too, by allowing people to move to where they could afford to live (rather than where they could find work) and to some extent, jobs would then follow them.

2

reason 06.16.15 at 7:49 am

P.S.
I don’t think there is one simple solution to all problems, but I don’t think you can rely on capitalism producing a society that works for everyone as a matter of principle. Redistribution may not always be needed, but it will be needed sometimes (think of the potential implications of robots and artificial intelligence here). There is no guarantee that the market income of every individual will always be adequate for a basic dignified life, and if as liberals (including classical liberals) we value autonomy, then some redistribution is imperative.

3

Tim Worstall 06.16.15 at 8:21 am

Interesting recent book on basic income in India. I discuss it briefly here:

http://www.forbes.com/sites/timworstall/2015/01/28/indias-basic-income-or-lets-abolish-food-stamps-and-make-everyone-richer/

Makes much the same points (the book that is). Giving cash is hugely better than the current Indian system of giving goods (grain, cooking oil etc).

Three bits I’d add.

In the US system at least, there’s not all that much support for general redistribution. There’s more support for redistribution so that people can eat, get medical care, get housing. That what redistribution there is is largely limited to these things (at least in my view) increases the amount of redistribution that does happen. Simply because the general populace thinks that way.

On the food aid internationally: worth noting that both the Bush and Obama admins have tried to change the system. Instead of 50% (or whatever it is) of food aid having to be American food, transported on US ships, instead send money to buy food locally to distribute. That they couldn’t get it through allows a Mancur Olson like point to be made about special interests blocking good policy.

Predistribution I worry about, possibly excessively. Depends upon exactly what one does as that redistribution. The recent UK election saw the freezing of energy prices being described as this, and also a good idea (from some quarters). Rent control also often offered as a similar idea, possibly higher min wages and so on. But price fixing has a horrible record. Too much of it (for some meaning of “too much”) leads to the Venezuela situation. There’s been an excellent analysis showing that the country could have achieved its poverty reduction goals by selling petrol domestically at a reasonable price (currently, they don’t actually charge for it. The wholesale trucks don’t invoice the gas stations as the margins needed to run the station are higher than the total price of gasoline to the consumer) and then using that cash to distribute as something like a citizen’s income.

Predistribution could also be better than redistribution, I suppose, but it would depend upon exactly what was being done.

4

christian 06.16.15 at 8:56 am

“Improved living standards in the future come at the cost of present suffering, perhaps even starvation and death.”

I would put it differently – there is not much future left once you have paid the cost of death.

5

Lee A. Arnold 06.16.15 at 10:14 am

John, who is your target audience for this book?

6

Anarcissie 06.16.15 at 1:18 pm

I take it capitalism, and the capitalist state, are to be preserved at all costs. One of the givens which should be made explicit, maybe.

7

SamChevre 06.16.15 at 1:40 pm

Giving poor people assistance in kind, such as food stamps and subsidized housing, has a lot of political appeal. Not only does it meet an apparent need, but it appears to reduce the chance that the recipients will waste their extra income..

What’s the limiting principle here? There seems to be general consensus (at least from the center-left left) that medical care and schooling should be provided, as opposed to “give people money and let them choose”. An argument as to why medical care is different from housing would be helpful.

8

harry b 06.16.15 at 1:43 pm

Addition to TW’s points: in the US WIC is affected by lobbying from big agriculture. He’s right that there’s not much support in the US for general redistribution, but even if there were big agriculture wants guaranteed sales and would frustrate it in the way it has frustrated the Obama/Bush efforts.

John — some examples, illustrations, would help. You report the empirical findings, but the reports would be more compelling with stories (for what I assume is your intended audience — people who are relevantly like smart, moderately attentive, but only moderately well-informed, undergrads).

9

Anarcissie 06.16.15 at 1:57 pm

SamChevre 06.16.15 at 1:40 pm @ 7 —
Medical care is a kind of authoritarian caste monopoly, so it does not respond readily to market pressures. The average person knows whether she or he wants to buy a kind of food or live in a kind of house, but decisions of medical care — prescriptions — are masked in layers of miracle and mystery. Given that this situation will not, perhaps cannot change, the solution often proposed is further authority, for example Single Payer or socialized medicine.

Similar observations might be made of the (formal) education industry, although its work is somewhat less arcane.

10

engels 06.16.15 at 2:17 pm

I could be wrong but my impression is this is the ‘ecomically literate’ left-wing view (entitlements to public provision of services bad, progressive income transfers good) which has been conventional wisdom among left-liberal policy types in UK at least since 90s, a period during which the left has lost much ground politically and inequality has ballooned (whether these facts are connected I would not like to say).

11

MPAVictoria 06.16.15 at 2:29 pm

“I could be wrong but my impression is this is the ‘ecomically literate’ left-wing view (entitlements to public provision of services bad, progressive income transfers good) which has been conventional wisdom among left-liberal policy types in UK at least since 90s, a period during which the left has lost much ground politically and inequality has ballooned (whether these facts are connected I would not like to say).”

People understand helping the poor with medical care, food and shelter. For some reason giving the poor cash money FEELS different. Not sure why really.

/I actually think a combination of strong public services and a guaranteed national income would be the best system for everyone.

12

reason 06.16.15 at 2:35 pm

engels
“(entitlements to public provision of services bad, progressive income transfers good) “
It seems to me the entitlements AND the progressive income transfers have both been on a downward path, so I don’t quite understand how the facts on the ground are relevant to judging the policy prescriptions.

13

Anarcissie 06.16.15 at 2:42 pm

MPAVictoria 06.16.15 at 2:29 pm @ 11:
‘People understand helping the poor with medical care, food and shelter. For some reason giving the poor cash money FEELS different. Not sure why really.’

It gives them autonomy.

14

MPAVictoria 06.16.15 at 3:03 pm

“It gives them autonomy.”

Probably correct.

15

engels 06.16.15 at 3:34 pm

‘It gives them autonomy’

Choosing whether to fix your heating or take your kid to the doctor: freedom…

16

Anarcissie 06.16.15 at 3:44 pm

The question was why giving the poor cash feels different from authoritarian social welfare programs. Whether it is more efficient or effective (and in what framework of values) is a different question.

17

engels 06.16.15 at 4:03 pm

That was the question but answered it with a the normative claim: giving poor money to spend on (privatised? essential?) services ‘gives them autonomy’ compared to public provision) – I disagree. (Labelling the latter ‘authoritarian’ is also rather tendentious…)

18

CJColucci 06.16.15 at 4:20 pm

So if affordable housing is scarce, I take it the preferred method of dealing with it is (in rank order):

1. Money to people who can’t afford market rents
2. “Rent stamps” to people who can’t afford market rents
3. Privately-provided housing, publicly subsidized, for those who can’t afford market rents
4. Publicly-provided housing for those who can’t afford market rents
5. Rent control
Not sure about 3 v. 4

19

Brian 06.16.15 at 4:25 pm

This comes off as naive about the facts on the ground, which vary from place to place.
For instance, I know a grandfather in Sacramento, a worker for the state, whose daughter got involved in an outlaw motorcycle gang when she was 15. I’ll call him Abe and her Sara. Sara spent 20 years in the gang, getting free cocaine, meth and whatever else, and providing sex for the gang and childcare for the gang leader. Sara had two children. Both were raised by their grandfather. They have serious neurological problems. One boy has managed to stay in a section-8 housing apartment. The other cannot do that. He lives on the streets, sleeping under cars, under the freeway, etc. The boys have children by girls who are from similar circumstances that are equally incapable of functioning in society. The grandfather has arranged for adoption.

Sara, a grandmother now, has 3 teeth left. She is in the process of being institutionalized by Abe. He took her in after the biker gang kicked her out for being old. She was left alone while they went on vacation and they returned to a mess, despite watchful friends.

There are many stories like this. There are poor people who are struggling and making responsible decisions. And there are a persistent class who create their own misery and can’t be stopped. That is why the EBT and SNAP programs exist. There are far too many mothers and fathers out in society who see nothing for themselves. To them, the opportunity cost of anything that isn’t drugs that make them feel better is too high. There is a recent case here of a man who killed a 6 year old while mom was in rehab and burned her body. Those people would spend all their money on liquor, pot, meth, cocaine, etc. There are good reasons why EBT food cards don’t pay for anything but food and you can’t buy alcohol with them.

Another story is the son of a UC Davis professor. He got involved in drugs when he was young and never stopped. As often happens, he got arrested for assault and did time in prison. I met him when he worked at UCD and was on parole. He did ok then. Off parole he began stealing again and moved into a storage locker. He was seen around town for a while then disappeared. Last time I talked to him he mumbled, “I don’t even remember,” when I mentioned something about the years he worked at UCD. He was on assistance and disability. His focus was drugs, and when he was sober he saw that his life was totally screwed up. He didn’t want to be a janitor or a nobody. So he went back to drugs.

I know this is anecdote, not statistics. But I also know that data collection on this segment is fairly poor. My experience with it directly contradicts certain papers I have read. So I am wary. There are many such stories. I could go on.

20

Anarcissie 06.16.15 at 4:36 pm

I lived for several years among poor, largely Hispanic people, whom I would occasionally try to help in their confrontations with the Welfare system, and I can assure you it is highly authoritarian. One application for some sort of assistance I looked over had more pages to fill out than my single-proprietor tax return. (It is necessary to have a specialist provided by the system to fill it out correctly, which means waiting on line for hours, and other gestures of supplication.) Food stamps may be used for this and not that. A program may help you with your rent — maybe bypassing the tenant and giving money directly to the landlord, so that the tenant has no way of pressuring the landlord to make repairs or keep the furnace going. Another program helps with the heat bill, if you have one, maybe. These accord with the still-dominant Calvinist worldview, in which the poor are evil and must be disciplined and kept under control, so the authoritarianism is morally necessary. I probably don’t need to describe how the provision of such possibly public services as medical care, education, law and police protection, among others, are (as ‘we’ organize them) authoritarian and are especially so for the poor, but war stories on request, I guess. The autonomy provided by cash would be very modest, but even that little bit twinges.

21

Unlearning 06.16.15 at 5:09 pm

Surely this just falls head first into the objection that any redistribution distorts markets and messes up relative opportunity costs?

Overall, from what I’ve seen it just feels like you’re using too much of the right’s framing. As soon as you start talking about things in terms of markets, taking them as natural and given, and arguing that social justice is just about getting the price right, you’re going to be met with all the standard rejoinders: externalities will correct themselves via Coaseian bargaining, charity will fill the gap, income distribution reflects productivity, etc. I’m not saying these are right or even that you’ve not considered them, but I would try to maintain an awareness of and engagement with them throughout the book.

In any case, I hope you will include this quote from Paul Samuelson at some point:

“This is why books entitled Economics in One Lesson must evoke from us the advice: ‘Go back for the second lesson’.”

Interestingly, he was actually referring to the Cambridge Capital Controversies.

http://robertvienneau.blogspot.co.uk/2006/08/some-of-samuelson-on-subject-of-sraffa.html
In any case,

22

Brett 06.16.15 at 5:27 pm

@MPAVictoria

It reflects distrust that the poor will actually use money given to them to improve themselves and their situation, rather than simply consuming it and working less to stay at the same level of poverty. Giving in-kind support is less helpful to them, but theoretically more likely to be used for what people consider “real needs” (Not saying that’s a good thing – the public’s definition of what the “real needs” of the poor are tends to be hypocritical and often bad).

23

Brett 06.16.15 at 5:40 pm

@CJColucchi

3. Privately-provided housing, publicly subsidized, for those who can’t afford market rents
4. Publicly-provided housing for those who can’t afford market rents
5. Rent control
Not sure about 3 v. 4

#4 is usually cheaper, but won’t reflect the desires of the tenants as much as #3 in terms of housing. I tend to prefer #4 simply because it solves the issue of the poor being priced out of an area because demand is rising faster than housing stock, and because you don’t need to create a big monitoring system to ensure that private developers getting public subsidization are in compliance.

24

Robespierre 06.16.15 at 5:47 pm

Anarcissie, it seems to me that this is more a problem with a means-tested benefits program as opposed to a universal service (as, say, public health or public school), and not a problem of in-kind vs cash.

25

engels 06.16.15 at 5:49 pm

Anarcissie- I’m aware US welfare state can be highly authoritarian and bureaucratic. I said that in an argument over state versus private provision of welfare services referring to the former model ‘authoritarian’ is tendentious (and makes you sound like a right-libertarian imo).

(I’m aware it rains a lot in London but someone who insisted on referring to London as ‘the rainy city’ in argument about the competing merits of London versus Manchester wound not be encouraging enlightening discussion imho).

Anyway, to answer MPA’s question another reason is that it tends to be hugely wasteful as much of said money ends up in pockets of rich people who own the capital and land which is used to provide the services cf. Britain’s C21st housing benefit bill aka slumlords benevolent fund

26

Bruce Wilder 06.16.15 at 6:09 pm

I don’t know about the “capitalist state”, but I suppose that we want to preserve a high degree of decentralized, distributed decision-making. Loose talk about “autonomy” as if “autonomy” could be neatly divorced from the system of decentralized choice by an isolated policy decision to grant cash benefit seems strangely obdurate somehow.

I get why middle-class people resent welfare — as least welfare as they imagine it and why these programs are administratively designed to be stingy, authoritarian and cruel. To be middle-class, even with the generous support of previous generations, requires a large investment in self-discipline and self-denial. Even the children of high privilege often experience their childhood and youth as a series of struggles to jump over hurdles, to get into the best schools or the best internships, to win competitions by dedication and sacrifice. The rewards farther down the ladder are not nearly as shiny, but you still have to get thru school, pass the test, get the certificate, earn the degree, burnish the resume, keep your permanent record clean, not to mention the equally trying social tasks of getting along with your boss and co-workers and keeping your marriage together.

Self-discipline and persistence appear to the merely middle-class to be the price of the autonomy that they have — in their self-regarding view — earned.

27

MPAVictoria 06.16.15 at 6:12 pm

“I get why middle-class people resent welfare — as least welfare as they imagine it”

Atrios has a great line about how many poor white people believe that minorities have access to the “good” welfare system.

28

Anarcissie 06.16.15 at 6:20 pm

Robespierre 06.16.15 at 5:47 pm @ 23 —
What I was describing is not a problem, it is an accomplished design. Means-tested in-kind is more in accord with the authoritarian principles responsible for the design, because the recipients are more rigorously directed towards certain goods and services which are deemed preferable by their betters. I was not advertising cash payments as a solution, simply noting that even a connotation of autonomy is repugnant to presently prevailing concepts of social welfare and how society should be organized in general.

Supposedly universal public services can be preferentially directed and filtered, too. This is especially obvious in the schools, but it even affects the bus line that runs past my house.

29

Tim Worstall 06.16.15 at 6:30 pm

“‘It gives them autonomy’

Choosing whether to fix your heating or take your kid to the doctor: freedom…”

Yes, very much what that book about India describes. “Agency”. Or, as we might describe it, the maximum increase in human utility for a given level of redistribution.

But then that’s me getting all free market again: because I’d ascribe the same to schools, give them the money and let them decide, etc, etc, etc.

30

Plume 06.16.15 at 6:54 pm

If the capitalist system is preserved — and it shouldn’t be. We can’t sustain it, morally, ethically, economically or ecologically. If it is to be preserved, then the most logical way to solve inequality, poverty, hunger is this:

Guarantee living wages and jobs with living wages. By rule, a private business should have to pay workers at least X amount, and at least X amount as a ratio of top to bottom pay within that company. Orwell said 10 to 1. I think 4 to 1 better, which is very close to the public sector. But it should be somewhere in that range. At worst, 20 to 1. At worst.

Government must guarantee anyone who wants a job a job, and that it pays enough to live on. There really should be no unemployment, at all. At least not for anyone who wants to work. Ever.

Also, help keep the job markets humming by lowering retirement age. Make it 60. Every American gets an actual pension, not just a supplement.

Free state tuition for all and cradle to grave schools. Single Payer health care as a right. A radical upgrading of all public transportation. Clean, green, super-fast. We can get the folks who don’t have jobs to rebuild, build and upgrade this, etc. For starters.

Bernie Sanders has a bill calling for tuition to be covered via a Robin Hood tax on financial transactions. Some say it won’t be enough to cover the full extent of the change. But he has a ton of wiggle room on the tax. The derivatives portion, for instance, is something like 0.005%. Change that to 0.1% and you’ve got more than enough money to cover what some are claiming as missing costs. Raise taxes on everyone making more than a million to, say, 50%, 10 million to 70%, 25 million to 80%, 50 million to 90%, 100 million to 95%, and 1 billion and above to 98% . . . and we’ve got the other changes suggested above covered.

With the richest 1% holding 99% of all wealth beginning next year, it’s more than fair, right, morally and economically sound to radically raise their taxes . . . and those of the 0.1 and 0.01, etc. etc.

31

Plume 06.16.15 at 7:06 pm

Ideally, though, we organize society from the get go, from Day One, to benefit everyone. That means we don’t have to react to poverty. It’s not there. If we organize society around the needs of the 100%, as opposed to our current way of doing so for the greed of the 1%, then we don’t have to worry about issues after the fact. We prevent them from happening in the first place.

And why we keep insisting on a system that we know will always, forever — it’s guaranteed — forever produce ungodly amounts of inequality, waste, destruction, ecological devastation, poverty, etc. etc. . . . is truly beyond baffling. The acceptance of official, legal, structural insanity, while expending energy on trying to mitigate for that insanity, is itself insane.

32

Bruce Wilder 06.16.15 at 7:40 pm

If I understand Quiggin’s intention correctly, it goes something like this:

Hazlitt’s “one lesson” is that the economy is a system, and as in any system, what one does, has consequences that cannot be isolated from the system: push against the system and the system pushes back.

The economic system — the money economy — produces a virtual reality denominated in money and prices, where money and prices are the levers and signals by which we can individually and independently (autonomously) make our way, make choices virtually independent of others and realize the (marginal) consequences for ourselves, while still benefiting from complex social cooperation in a system of deep specialization, investment and trade. If the economic system worked perfectly, price would be exactly equivalent to opportunity cost, as Hazlitt proposes is the case in a homey little story of broken window glass: you could map the complex web of social cooperation mediated by the maya of money and prices onto a “real” economy, and find Robinson Crusoe choosing alone on his island, in defiance of John Donne.

Lesson Two, if I’m understanding Quiggin’s emerging intent, is: the System does Not work perfectly. Like any machine, it fails to achieve anything like a perfect efficiency. There are costs to its operation, and predictable failings (market failures?) and losses to friction. The actual system has to be administered, and can be poorly managed or subverted and manipulated.

In light of Lesson Two — the System fails — Lesson One — there is a System and the System Works (perfectly) — is problematic as a result of having to delete the implied and parenthetical “perfectly”. [In fairness to the conservative argument, the “perfectly” could be replaced by a Friedman-esque argument that the System works well enough that it cannot be improved upon easily by the costly administrative interventions of a clumsy, highly imperfect State. Friedman’s argument is fundamentally deceptive, but harder to refute because the deception is clever.]

In the Lesson One column — the System Works — production and productivity are driven by the distribution of income. Money income provides the incentives for a system of decentralized decision-making coordinating investment and specialized production thru exchange mediated by price and finance.

The neoliberal reasoning, that focuses on so-called “redistribution” seems to be predicated on Lesson One. The implied idea is that the money economy produces a correct in the sense of an efficient result — that is, an (idealized competitive-market) efficient allocation of resources to tasks: the right things are produced in the right quantities and qualities and the right investments are made and the right factor incomes are paid: rents are right, wages are right and prices are right.

If people who want to work for a living, for example, are unemployed in the System Working Perfectly, it is because they are in a transitional state, being re-allocated. They may be engaged in costly Search for the new, efficient employment, but the deprivation of income in the meantime is a necessary incentive — perhaps they need reality to beat on them for a while, to convince them they need to accept a lower wage. Everyone can find some useful employment at a lower wage in the System Working Perfectly. It is only logical. And, There is No Alternative.

If you give Them (the poors) money income for not-working, that’s an incentive to not-work, and will only prolong the costly Search, assuming that they search at all (better have administrative regulations attached to the social welfare program called unemployment compensation, to make sure they don’t just take a vacation.) [And, yes, some conservatives will argue that the unemployed, no matter how many or how miserable and frustrated, even without income, are taking a vacation.]

Neoliberals would concede Lesson Two, but in a somewhat peculiar way. According to the allegedly realistic neoliberal view, the System Works Perfectly (or practically close enough — see Friedman) in the sense of producing an “efficient” result, but fails to produce an “equitable” result. The spectacle of the poor is ugly and offends our moral sensibility, exciting our compassion, as it should, and so the government can be an instrument of “redistribution”, carefully calibrated to satisfy our desire to collectively correct offensively inequitable results, while mindfully refraining from cooking the Gold-Egg-Laying Goose of Market Capitalism by too much “pre-distribution” reform of the kind that “burdens” private enterprise and the all-important Gold Egg production (aka “economic growth”).

This is how our politics got trapped after 1975 or so: Libertarian Conservatives on one side arguing for Lesson One, and left Neoliberals on the “other side” arguing their peculiar version of Lesson Two, where there’s a trade-off between efficiency and equity. All political argument is fitted into this Procrustean dialectic, where market liberalization is always and everywhere the right policy because it improves gold-egg producing efficiency and “growth”, and we are going to fix the inequities of increasing “inequality” on the backend, with tax and transfer redistribution of that growth and efficiency real soon now.

In this Procrustean bed of economic policy “debate” between libertarian conservatives and neoliberals, it is not surprising that social welfare should become authoritarian and ineffective. Everything one does to make the operation of The System more equitable is making it less efficient. The logic of neoliberalism, with its neat little lies about redistribution “compensating” for the inequities of market liberalization, has driven us to a political extreme, where people are ready to question this enervating dogma.

I take some hope from Quiggin’s valedictory (for this post), “More difficult, but arguably more effective is to change the structure of markets and property rights to produce a less unequal distribution of market income — this is sometimes called ‘predistribution’. “

Obviously, some comments will have to await that promised post.

What I would plead here is that just as the success of Hazlitt’s original work owed something to its historical timing, so the success of Quiggin’s will as well. If Lesson Two is an effective rebuke to neoliberalism, and the uses neoliberalism has made of Lesson One, it would be a very great thing. Very great.

33

Bruce Wilder 06.16.15 at 7:56 pm

Anarcissie @ 27: . . . noting that even a connotation of autonomy is repugnant to presently prevailing concepts of social welfare and how society should be organized in general.

Autonomy, of at least a limited kind, is the reward for successfully navigating and being socially useful in the System; the wages of failure, so to speak, must feature depriving people of autonomy — going to prison being the extreme. Social welfare is just a rung slightly higher on the ladder than prison.

Not arguing for the system, of course, just adding to your insightful remarks.

34

Plume 06.16.15 at 8:07 pm

Bruce,

interesting capsule.

I’m guessing you’re not saying the argument should only be between those factions. Just that it is, right? I think it’s pretty obvious that one huge problem, right off the bat, is the lack of diverse POV in the debate from the get go. It’s basically been a center-right, full-on right debate for some time. At least from Reagan on. There in lies a great deal of the problem.

And “predistribution.” I like that. If the initial distribution is done fairly, there is no real need for a redistribution later — at least not for 97% or so of the population. And since capitalism is itself classic redistribution of wealth, based on extraction from workers, consumers and the earth, the re-redistribution is completely warranted, despite the screams from conservatives. They don’t want to admit to the original redistribution. Ever. But it’s there.

Logically, rather than going for extensive triage after the injuries — the liberal remedy — we should set things up not to be injurious at all, at least to the extent possible. And this is not nearly as difficult as has been portrayed. Nor is it utopian or pie in the sky. It’s actually quite doable, if there is a will for it.

Basic pay ratio laws, living wage floors, universal education, health care and upgraded transportation, plus guaranteed work would do it. Government guarantees all these things, as it should.

If we can have a set aside right enshrined in the BOR for deadly pieces of metal, surely we can do so for basic human need, dignity, sustenance, etc.

35

MPAVictoria 06.16.15 at 9:02 pm

“Basic pay ratio laws, living wage floors, universal education, health care and upgraded transportation, plus guaranteed work would do it. Government guarantees all these things, as it should.”

Sign me up for almost all of this.

36

engels 06.16.15 at 9:02 pm

Never argue with a man whose idea of “agency” is seeing two brands of washing powder on a supermarket shelf and putting the cheaper one in your trolley.

37

kidneystones 06.16.15 at 9:06 pm

@19. Kudos. Your post confirms, to me, that a definition of poverty rooted simply in cash on hand and potential earning power is entirely inadequate for any sensible discussion of the problems of the poor.

@30. Your authoritarian demands are certain to find stiff resistance even from the poor. Legislating wage scales within corporations is an attractive option, however, and an option worth pursuing.

38

Stephen Clark 06.16.15 at 9:32 pm

Give a hungry man a fish and you feed him for a day. Teach a hungry man to fish and you destroy his culture and ruin his environment.

39

Bruce Wilder 06.16.15 at 9:59 pm

Plume @ 33: I’m guessing you’re not saying the argument should only be between those factions. Just that it is, right?

That’s right, sort of. I wouldn’t say, “factions” because there are no corresponding political factions. These are not interest group positions, or even partisan policy stances. They swallow up partisan competition for office and power, removing both the ideas and levers of institutional power by their framing of a common economic world view that leaves no alternative. Any deviation from this framework can be marginalized by a ready torrent of rhetoric, as you can readily confirm by consulting the massive output of a Brad Delong, Matthew Yglesias or Tyler Cowen. Mark Thoma provides dozens of links every damn day, to example high and low. I would not even say, “two” because the rhetorical symbiosis is so close, though the ability for these professionals (and they are professionals, whether economists or pundits — that’s important to note; no real person would have these opinions, left to their own devices; they are too disconnected from reality) to manufacture a massive stream of blahblahblah between their two poles of a common axis is critical to their effectiveness as propagandists in excluding any point of view grounded in reality.

I am saying that political arguments about economic policy are presented in salient media as only between those two points-of-view, with their common presumptions and construction of how the political economy “works”. It is taught that way in schools and colleges and presented that way by prominent pundits, as the proper terms of discussion for “serious” mainstream policy by “serious” people. Everytime, some pundit repeats, for example, a cliche about “the” debate being fundamentally about “the size of government”, they are repeating a frame introduced by Milton Friedman more than fifty years ago, when he was laying the foundations for this dialectic. So, yes, as you say, this has been the way it has been since before Reagan, when the Liberalism of the New Deal faded away in its last hurrah in the 1960s (and I suppose also, as militant left-authoritarian socialism lost its sense of idealism and power, after the death of Stalin).

Since we are talking about Hazlitt, I think it would be fair to say, that the seeds were planted in the 1930s and 1940s, as reactionary conservatives tried to recover from the debacles of the Great Depression and the World Wars (which dogmatic reactionary conservatives and weak-minded liberals caused, not incidentally). Hazlitt’s little pamphlet was, arguably, one of those seeds, and fitted into a propaganda dogma about what made private-enterprise capitalism superior to actually-existing communism.

On Quiggin’s previous thread on the Last Gasp of U.S. Neoliberalism (his title, not mine), I provoked a little exchange with Brad DeLong, where Professor Delong (advice: always use the proper honorific when calling someone stupid), explained his own neoliberalism, as based on the claim

. . . market mechanisms–properly-regulated market mechanisms–are more likely than not a better road to social democratic ends than command-and-control mechanisms.

paired with another claim that a measure of social democracy is necessary to preserve capitalism against the threat of socialist revolution (my heavily paraphrased interpretation of his thesis). DeLong took the view that as the threat of imminent socialist revolution faded, so did the strength of the left (neo)liberal argument in favor of what we used to call a mixed economy balanced between “market mechanisms” and social democratic, social welfare policies. A bit self-serving in the sense that proto-neoliberals ancestor to the DeLongs of our tired, sad world, made a deal where they did everything they could to knife the threat of imminent socialist revolution in the back, marginalizing every one to their left and destroying whatever institutional support the socialist viewpoints might have had. And, of course, DeLong remains absolutely committed to praising his conservative libertarian interlocutors while savagely attacking anyone to his left. (In that thread, he called JW Mason “stupid”, which surely misses the mark.)

This is getting long-winded, because I’m trying to be very precise as well as accurate. I want to draw attention to the other leg of Brad DeLong’s neoliberalism, the one expressed in the blockquote above: “market mechanisms . . .are . . . better . . . than command-and-control mechanisms”. This is the one that is acutely relevant to Quiggin’s challenge to Hazlitt’s One Lesson. Hazlitt’s One Lesson includes the supposition that the Economy is a “market” system. His analysis of “the System” is based on a theory that analyzes the general equilibrium tendencies of a theoretic market economy that coordinates by market price and opposes coordination by market price to coordination by the administrative fiat of the state, aka command-and-control. Brad DeLong accepts this dichotomy, which was a central dictum of the conservative propaganda that came to prominence in the 1940s. Hazlitt is drawing on Mises and Chicago School ideas, as well, of course on the venerable Bastiat, and his effort is closely related to that other great pamphlet of the time, Hayek’s Road to Serfdom, which made use of Hayek’s own elaborate theory of competitive market price as an informational system allegedly superior to command-and-control. Brad buys into this. And, like all the foundational dictums of propaganda, it is a Big Lie.

We used to know this about propaganda, that propaganda is founded always on the synergy of the Big Lie and the Half-Truth. Well, this is the Big Lie. As I am always having to repeat, there are, in fact, very few actual markets in our money economy, and most of the prices you encounter are formed in administrative processes: the prices you encounter are administered, which is to say, that prices are mostly tools of command-and-control. Not alternatives to, but artifacts of. Our economy, our economic system is dominated by hierarchy. More than half the U.S. labor force works for organizations with more than 100 people and the vast majority of people participate in the economy in employment or in analogous contractual relations and in a commerce of administered exchange.

So, I guess I could say, Brad DeLong is a big, fat liar, but that would be impolite and would unfairly discount his sincerity. Not to realize this, to base his most serious political commitment — indeed, his most serious professional commitment as an economist — on a sixty-plus year old propaganda dictum that he could disprove to himself in a moment if he just opened his eyes next time he was in the supermarket, well, that’s a special kind of stupidity.

Anyway, the point is not to create an opportunity to call an arrogant, but basically good-natured and honest, tenured professor either stupid or a liar. It is to point out how deeply handicapped is our collective ability to think about the economy and discuss it. At the most basic level, we are regularly committing ourselves to a shared unreality. We are trapped inside this neoliberal fog of propaganda, this endless torrent of schizophrenic blahblahblah in the Media, facing an army of Zombie ideas that never knows a permanent casualty. The people, who should be trained to understand how the System works, are, many of them trained in irrelevant esoterica, which is just a mathematically difficult version of Lesson One, used to legitimize nonsensical pontifications. To their credit, some economists and pundits try to free themselves and us, to discredit Austerity, for example, as bad economics and foolish politics, but for too many their first commitment is to losing the argument in this now-antique neoliberal dialectic.

End of Rant.

40

engels 06.16.15 at 10:17 pm

To put my point one other way, another big lie (a la Bruce): agency = spending your own money (if this were so, Bill Gates would be buying his own groceries).

41

Bruce Wilder 06.16.15 at 10:43 pm

Plume @ 34: Basic pay ratio laws, living wage floors, universal education, health care and upgraded transportation, plus guaranteed work would do it. Government guarantees all these things, as it should.

Yes, these are at least among the kind of things we ought to be talking about, given that we live in an economy already so seriously hierarchical.

In the spirit of decentralization, we should also be thinking about ways to make it much less centralized.

When I look at the U.S. economy, after the neoliberal “market liberalizations” that began with deregulation in the Carter Administration, and accelerated under Reagan and Clinton, going into overdrive with Bush’s financial deregulation prior to the GFC, the creation of giant sectoral conglomerates stands out as a serious problem.

Now, the old vocabulary is all about “markets” where they don’t exist, and the model is particularly idiotic: the model of monopoly still taught in Econ 101 is one where the firm has “no competition” and therefore faces a “market” “demand curve” that is sloped “downward”, meaning that the archetypal monopoly elevates price by restricting output, because more output drives down price. The alternative is a firm in “perfect competition” (often explained as a firm facing so many competitors, that the firm is not even aware that’s output decision affects price).

So, the critique is of “monopoly” in this highly restrictive sense of “market power” (a particularly diffuse concept) as the capacity to restrict output to raise prices, and the canonical remedy is “more competition”.

I am an actual expert on the economics of industrial organization, and I can tell you that this substitute for “thinking” is so insanely stupid, that it leaves me wanting to scream and run from the room. It is not like it is not possible to be far, far more sophisticated and still “mainstream”. It is that there’s no pressure to eliminate this fairy tale.

In the landmark antitrust case against Microsoft almost twenty years ago, a Dean of MIT’s business school testified for Microsoft using exactly such a primitive intellectual foundation, and though the Judge called him on the quality of his testimony, the profession did not.

Ever since the GFC of 2008, critics of the enacted financial reforms have attacked the TBTF problem. But, I do not see any one making much headway. It’s really hard to make the case against an economics profession that is locked into some heavy-duty stupid, talking learnedly about systemic risk and prudential supervision with no understanding, and a popular vocabulary of monopoly and market competition that doesn’t have words or proper concepts.

The reality of the Financial Sector is that uniting strategic control in a few, absurdly large units, is a recipe for inefficiency, control fraud and racketeering on a global scale. The Universal Bank is a very, very bad idea when there’s nothing else. Command-and-control does go wrong when centralized at scale. Duh. But, it is a discussion we cannot have in the neoliberal fog.

Intellectual Property is probably an area where the old vocabulary of concepts from economics is at its strongest. The absolutely ridiculous amounts charged for medicines of dubious medicinal value is truly scandalous. But, even there the redoubtable Dean Bakers of the world make little headway. I live in Hollywood, and I like to tweak locals, by challenging the prices charged for “renting” movies for streaming or “buying” licensed music from, say, Apple’s iMusic Store. That we’ve reduced the resources that go into an hour’s recorded entertainment by two orders of magnitude without reducing the nominal “price” isn’t as scandalous as killing a terminal patient, but it still reflects bad economic policy that impoverishes millions (a little bit) to make very few (and not creatives for the most part) absurdly rich.

42

Bruce Wilder 06.16.15 at 11:06 pm

engels @ 39

And, nothing says autonomy like the consumer buying the prettier box, because the spokesmodel was sexy last nite on teevee.

43

Plume 06.16.15 at 11:46 pm

Bruce @38,

That was an excellent “rant.” One of the best things you’ve written here, IMO.

One especially good part from that excellent post:

We used to know this about propaganda, that propaganda is founded always on the synergy of the Big Lie and the Half-Truth. Well, this is the Big Lie. As I am always having to repeat, there are, in fact, very few actual markets in our money economy, and most of the prices you encounter are formed in administrative processes: the prices you encounter are administered, which is to say, that prices are mostly tools of command-and-control. Not alternatives to, but artifacts of. Our economy, our economic system is dominated by hierarchy. More than half the U.S. labor force works for organizations with more than 100 people and the vast majority of people participate in the economy in employment or in analogous contractual relations and in a commerce of administered exchange.

Yes and yes and yes. Capitalism is centralized by nature. Especially in its “mature” form of corporatism. As you say, it’s hierarchical, top down control, concentrated among very few people, relatively speaking, who also use the power of the state to further their own wealth, power and consolidation. Centralized power using centralized power to centralize power.

The Big Lie, as you mention, is to make of it some kind of wonderfully liberating dispersal of autonomy, wealth, opportunity, etc. etc. to all and sundry — away from Big Gubmint. It’s quite the opposite.

And the other part of the Big Lie . . . as you mention, that we can either have this or Stalin has been incredibly effective. That we have no other options. One obvious alternative is to set things up in an actually existing dispersal and decentralization of power, wealth and opportunity . . . . along the lines Chomsky, Wolff, Alperovitz and others have discussed. True decentralization of public and private power. Both. The neoliberal lie is to both claim there are no other options, and to say they’ve already solved the problem of centralization.

44

Plume 06.17.15 at 12:01 am

@40 is excellent as well.

The obvious answer there is break up all companies larger than X. Not just banks. And make this real, with teeth, not cosmetic. As in, when a company is broken up, it can’t (re)own its old parts in any manner. Can’t hide parts. Can’t have relationships with them beyond the completely separate and fully autonomous.

And “size” would be based on several factors. If a company has a relatively small number of employees but controls its market, it’s too big.

One of the driving contradictions inherent in the system goes back to the relatively low profit margin for most industries. This encourages endless growth, without necessarily improving anything at all along the way. Leading toward monopoly. If someone or a group of someone’s wants to become crazy rich, and their industry makes 3% profit, or 10%, or even 20%, it’s in their best interest to get bigger, and bigger and bigger. Obviously. Spend a million bucks and you might have a net profit of 50K. Get that up to a billion, and you’re talking serious money for the owners.

And this Grow or Die incentive, of course, is killing the planet. There is no incentive to stay small, sustainable, live within the limits of nature, etc. etc. Unless one doesn’t care about getting rich, and most people who start up a business in the first place do care about that.

Of course, all of this flies in the face of political will and existing power arrangements. The deck is stacked against true reform, not to mention actual revolution. But that said . . . . we DO have the numbers on our side, if we wake up. And if more economists see the big picture, and admit they see it . . . . who knows? That’s a very good place to start.

45

T 06.17.15 at 12:18 am

Hi John —
Based on the comments on this thread, it doesn’t seem like Lesson 1 sunk in.

Bruce @38 —
“as militant left-authoritarian socialism lost its sense of idealism and power, after the death of Stalin”
I kinda need a short refresher on Stalin’s sense of idealism. Care to have a go?

46

Harold 06.17.15 at 1:16 am

T, if all people on the left are followers of Stalin, then all those on the right must be fans of A. Hitler, QED

47

Bruce Wilder 06.17.15 at 1:29 am

It was not Stalin’s personal sense of idealism that I was referring to (though I have no doubt that he was, in addition to being murderously ruthless, a true believer, but, rather, the sense of many that socialism was a potent set of ideas and an organized political movement that might make the world a better place in political struggle against the power of an unjustly privileged and oppressive establishment and against many reprehensible prejudices.

Left authoritarianism is not something anyone today is likely to have much personal acquaintance with, so even if I could mimic it for you, I doubt that even on CT, anyone would recognize the accent. Orwell’s Homage to Catalonia is excellent, if you want a kind of well-observed flavor for how it played out in real time, without rote Manicheism of any kind and from a determinedly personal and liberal philosophical perspective. Reading about a figure like Harry Bridges, the Australian-born American union leader, might be educational, as well.

In any case, political anacyclosis has its inflection points, and in the case of the Soviet Union and Communism, the death of Stalin at the halfway point between the fall of the Romanovs and the fall of the Berlin Wall certainly marked one.

48

John Quiggin 06.17.15 at 1:48 am

BW @32 – that’s very much the idea. @46 I remember reading a bio of Bridges years ago, though the only thing I can remember is his take on automation which was, roughly, “maybe some day, there’ll only be one longshoreman left on the West Coast, but he’ll be the best paid SOB in the country”

Unlearning @21 The Samuelson quote is already in place, right before the Preface.

49

Peter T 06.17.15 at 1:48 am

I’m a bit confused as to John’s audience and aim here. I think he wants to broaden the the thinking of the moderately educated orthodox. This is a worthy aim, given the harms that arise from simple belief in Economics 101. Yet, in laying out the basic tenets of economics, he is exposing their weakness and narrowness to anyone of moderate intelligence who has not already been indoctrinated. We learn, for instance, that opportunity cost just means that choices must be evaluated in the context of the perceived alternatives. Or that poor people are best placed to know whether their more immediate need is food or car repairs.

So the book won’t sell in the US (where Eco 101 pervades the air), may comfort some social democrats in the UK and Australia, and it is just possible that some libertarian-inclined students may revisit their beliefs. Is this last effect worth it?

50

Rob 06.17.15 at 1:51 am

John – along with @1, @18, @23 & @25 my view is that you need to think more about the issue of housing.

You say: “Thinking in terms of opportunity cost, however, we can see that aid in kind almost inevitably results in waste. The opportunity cost of subsidized housing is the low rent paid for the house, while the opportunity cost of moving usually includes going to the back of the line. So having secured subsidized housing, people will stay there even if the house no longer suits their needs, because it is too big, too small, or too far away from a new job.”

a) your “the opportunity cost of moving usually includes going to the back of the line” refers to a cost imposed by inappropriate administration – well administered public housing does not have to do this – and in many cases it does not.

b) Depending upon the regulatory environment (compare for example Australia and France) public housing can offer some additional services – such as security of tenure which can be very costly to obtain in the private rental market (and leads into a whole set of opportunity costs for government – do you provide public housing to deal with this – and some protection from discrimination – or do you impose this through regulation – recognizing that this will constrain supply increase prices and hence increase the need for higher levels of transfers).

c) The opportunity costs can vary substantially by population subgroup – and this is often reflected in the targeting of public housing – it can be argued that it is frequently targeted at those with low probabilities of facing some of the costs you identify in relation to moving and employment – that is the aged and the disabled. (Both groups who tend to value security of tenure as well.)

d) There are also really big assumptions around the equivalence of different housing options – for many the choice is much more complex – to go into the private rental market even with additional cash may not be of great benefit – in Australia many landlords are much more reluctant to let to people on social security – even when they come with cash in hand (given rent assistance is paid to them as a cash benefit), and of course racial and other discrimination.

Taking all of this together I am not convinced that the housing example really provides justification for ” aid in kind almost inevitably results in waste”, especially when you weigh it up against the alternative waste which might be associated with regulation etc to achieve the same set of social outcomes.

One other issue of relevance in this context is that of insurance – and it comes up in your comments re health – should you provide health care in kind – free hospitals etc, or cash which might enable people to purchase health insurance – but do people then properly understand the opportunity costs in the decisions around purchasing insurance.

51

LFC 06.17.15 at 2:09 am

Haven’t read all the comments, so apologies if someone has mentioned this already, but w/r/t int’l ‘food aid’: most donor countries currently give it in cash earmarked for the purchase of local food. The U.S. is an exception here, continuing to “tie” food aid, i.e. to ship actual grains (and other commodities). Untied aid (i.e. cash) is, as the OP suggests, preferable.

On this pt, see e.g.: William A. Munro, Review of Jennifer Clapp, Hunger in the Balance: The New Politics of International Food Aid (2012), in Perspectives on Politics v.12 n.1 (March 2014), p.281.

52

LFC 06.17.15 at 2:19 am

P.s. Price supports for farmers and other subsidies to US agribusiness, as the OP excerpt indicates, contribute to the continuation of ‘tied’ food aid (plus the strength of the relevant lobbies). At the same time, an enormous amount of produce, which could be consumed domestically if not necessarily exported, is thrown out. A Natural Resources Defense Council study, mentioned on the PBSNewsHr tonight, shows that almost 40 percent of produce grown in the US is thrown into landfills. (I think close to 40 percent was the figure — even though it sounds unbelievable.)

53

Sebastian H 06.17.15 at 2:46 am

Bruce, I wonder if you are doing a bit too much with the “central planning” shorthand. As I understand it, especially as talked about by say Brad DeLong, it suggests that governmental central planning tends to have serious problems because it is largely divorced from price signals and market discipline (meaning that it doesn’t allocate well on price and is insulated from getting punished for poor allocation by competitors). While some pseudo-monopolies are divorced from price and market discipline (see cable companies for example) most large businesses are not.

54

Bruce Wilder 06.17.15 at 3:04 am

LFC @ 51

http://www.nrdc.org/food/files/wasted-food-ip.pdf

Yes, the linked study says forty percent is wasted. And, they make that sound pretty plausible, I think.

They are using a standard of technical efficiency, rather than the purely allocative efficiency on which economists touting the efficiency of a “market economy” (coordinated by market prices) usually focus, often without being very clear about the distinction. Common-sense does not usually make the distinction, and propagandists will just wave their hands.

These systems — and there are hundreds of major ones subsetting just within a supermajor supersystem, like “industrial agriculture” — are primarily what national government economic regulation is focused on. That their architecture has to be reformed by political policy from time-to-time is something we ignore at our peril. That neoliberalism celebrates ignorance of this aspect of how the economy is organized is frightening.

55

LFC 06.17.15 at 3:15 am

BW,
thanks for the link.
I had just written a comment about my perception of the differences betw your view and JQ’s but the computer ate it, prob. just as well. I do wonder why you don’t use the word ‘oligopoly’ (which I always thought was a useful one). Also, though a non-economist, I wd say (or my impression is) that there are market prices in certain sectors, ‘administered’ prices in others. You seem to think there are virtually nothing except administered prices. I don’t pretend to know, just throwing the issue out there.

56

Plume 06.17.15 at 3:24 am

Sebastian H @52,

As I understand it, especially as talked about by say Brad DeLong, it suggests that governmental central planning tends to have serious problems because it is largely divorced from price signals and market discipline (meaning that it doesn’t allocate well on price and is insulated from getting punished for poor allocation by competitors). While some pseudo-monopolies are divorced from price and market discipline (see cable companies for example) most large businesses are not.

That’s yet another part of the Big Lie. On several levels. That a large business somehow isn’t just as bureaucratic, or bureaucratically divorced, from “signals.” From my experience, a business doesn’t even have to be all that large for the folks at the top to be completely out of touch with both front line workers and front line customers. I’ve worked in small, medium and large companies, and not one of them had a hierarchy that really understood what was going on. They mostly had meetings on how to have meetings, and then follow up meetings about that. And they lived in their own bubble, generally dismissing, politely and not so politely, anything told to them about actual front line stuff that we, ON the front line, dealt with daily. They really didn’t want to hear about it, even though we were routinely proven right in the end.

In reality, the government is no more removed from “signals” than any business, and there’s nothing inherent about it to make it more removed. Any large, hierarchical structure will be, and since businesses tend to have much steeper hierarchies than governments — much, much steeper — logically they’re further removed.

57

Plume 06.17.15 at 3:29 am

Also, a government, especially a local community government, is going to be far closer to the actual ground of any business than Corporate HQ, which may well be thousands of miles away. And a local government, which employs local folks, is going to have a much greater stake in making things work than that far away corporate HQ which already has shipped thousands of jobs even further away.

A government of the people, by the people, has a far greater incentive to make things work for the people than any business. A business has every incentive in the world to make things work for the very top of the heap, and that necessarily means screwing over the vast majority of workers, oftentimes customers, and the earth, always.

Give me a locally planned, community based, publicly held business any day over one with the driving goal of making a tiny few rich — often from great distances.

58

ZM 06.17.15 at 4:20 am

LFC,

“At the same time, an enormous amount of produce, which could be consumed domestically if not necessarily exported, is thrown out. A Natural Resources Defense Council study, mentioned on the PBSNewsHr tonight, shows that almost 40 percent of produce grown in the US is thrown into landfills. “

I don’t have time for a proper comment, but in the region where I live the small regional city has a Foodshare program (there are a network of these) which collects and distributes food that would otherwise go to waste. On their website it says that so far this year they have rescued 1 million kg of food that would have been wasted otherwise. They distribute this through charities, schools, and other organisations. There are also other programs that do similar work, like collecting used food from restaurants and distributing it, or individuals who go dumpster diving.

In Agnes Varda’s film The Gleaners and I there were people who would also go to markets at the close and get food tat would be thrown away, so people might do that at the Melbourne markets.

In general in Australia I do not think people are so adverse to redistribution and cash benefits as it seems is the case in the USA. Food is not provided by the government, but the money provided by benefits for unemployment, full time study, disability, and old age are meant to provide enough of an income to purchase food with.

I think there are more people on benefits struggling to buy food now for a few reasons — housing has become much more unaffordable and takes up a bigger proportion of income; unemployment and full time study benefits are low as they are intended to be either temporary or for people who are young and their families can help support them — but for people who are long term unemployed or whose families can’t help support them these incomes can be inadequate and entrench poverty. The foodshare and similar programs are beneficial as they assist by both providing food and also diverting food from waste.

The State provides some public housing — but there is an under supply: from memory the waiting list for public housing is more than 20 years unless it is am emergency, which means people only access public housing in emergencies. The State sold off quite a bit of public housing over the last few decades, and I don’t know that it subsequently built enough to replace all the sold off units.

There is also an under supply of affordable housing. Our property market was only slightly affected by the GFC and soon property prices returned to growing. The lack of affordable housing is recognised more and more as a problem. There was an article in the Sydney Morning Herald a few days ago about the NSW government considering mandating the provision of affordable housing for rental by key workers (eg. nurses, teachers etc) in new developments — however this policy would not provide for people who were not key workers but need affordable housing, and is focused on rental housing rather than house ownership which is preferred by most Australians.

http://www.smh.com.au/nsw/future-sydney-property-development-to-include-affordable-housing-20150613-ghn68t.html

59

ZM 06.17.15 at 4:21 am

” collecting used food from restaurants “

by which I mean “collecting unused food from restaurants”

60

Tim Worstall 06.17.15 at 4:38 am

On the food waste issue: the largest portion, as that paper makes clear, is at the domestic end. Stuff that’s bought in the supermarket and never eaten thus ends up in the trash. In contrast to waste in poorer countries, where it’s in the distribution system itself. And in those poorer countries it’s said that 50% of food is wasted in that distribution system.

Lots of waste in both, but different forms of waste in the different systems.

61

reason 06.17.15 at 7:28 am

Tim Worstall @59
I’m sure the rats and cockroaches don’t think of it as waste. =)

62

Sebastian H 06.17.15 at 7:45 am

“And they lived in their own bubble, generally dismissing, politely and not so politely, anything told to them about actual front line stuff that we, ON the front line, dealt with daily. They really didn’t want to hear about it, even though we were routinely proven right in the end.”

What does proven right in the end mean? I suspect it means that they lost money (price signal) or lost business (competition pressure).

“In reality, the government is no more removed from “signals” than any business, and there’s nothing inherent about it to make it more removed.”

No, there is quite a bit inherent about it that makes it more removed. Governments very often try to wave away price signals and they face very little competition pressure. This is often even more true at the local level where you think it should be least true. See for example school boards. Many of the worst government decisions are made at the city or county level. It isn’t ONLY hierarchy levels that make bad decisions, it is insulating from consequences. The major way that companies insulate themselves from consequences is by co-opting the government. Governments are insulated from the consequences of their decisions at almost every step.

That isn’t to say that company decision-makers aren’t often insulated. CEOs famously are more and more insulated from their bad decisions (again often by co-opting government protection–see too big to fail). But bad government decisions can last even longer. Voters are notoriously bad at punishing bad policy-makers and rewarding good ones. And they get to vote on it only once every couple of years.

There certainly are systemic problems with the way markets are run in the capitalist-ascendent world. But being blind about why governments fail isn’t going to help. Price allocation and competitive pressure really do solve lots of problems. They don’t solve ALL problems the way some conservative economists seem to think. But they do solve a lot.

(I would tend to suggest that conservatives go astray in focusing too much on price without enough attention to the need to actively foster competitive pressure.)

63

david 06.17.15 at 7:46 am

I did warn that Quiggin would have trouble convincing people of neoliberal Lesson One just so he can talk them back to social-democratic Lesson Two, back in the comments on one of the earlier draft posts.

It’s on especially clear display in the comments to this post. It’s also a problem that must necessarily be confronted and fixed if the book is to successfully upsell third-way-neoliberal policy planks, in the 2010s rather than glorious 1990s. I don’t know how that would be done, however.

64

dbk 06.17.15 at 8:11 am

I second (or third, or fourth) BW’s excellent observations … one of your best series of comments ever (and I always read them).

As others have noted, it is unclear who the intended audience of this projected volume is: professional economists? social policy/political economy grad students? educated lay readers? all of the above?

Speaking from a personal standpoint, I learn theory much better with the help of (manifold) concrete examples of how any given theory plays out in practice.

Here are three links:
http://sociology.ucsd.edu/faculty/LaneKenworthy.shtml
Lane Kenworthy doesn’t get any play on CT, but I’ve read him for years. He really is an expert on poverty and poverty alleviation.

On designing a system for “equal opportunity” to a good education by the poor:
http://www.bostonreview.net/forum/richard-d-kahlenberg-bernard-wasow-what-makes-schools-work-0
There’s a reference to the Boston School System’s new lottery, and plenty of discussion on other sites about its initial results

On affordable housing for the poor through public-private (charitable) partnerships:
https://www.facebook.com/cnhed
Coalition for non-profit housing and economic development/ lead partner = All Souls Church Unitarian in Northwest (DC)

Friends in the field of health policy refer to these sorts of things as “wicked problems”.

65

reason 06.17.15 at 8:12 am

P.S. Just as an aside. An awful lot of CONSUMED food is also waste. I don’t think anyone with open eyes could really think the world as it is, is EFFICIENT. Desert eco-systems are efficient, modern capitalism isn’t.

66

reason 06.17.15 at 8:40 am

Re the discussion about autonomy, I find the snide comments by Engels rather depressing. Autonomy has a value not necessarily because it makes people better off, but because it gives them dignity and a sense of importance. One of the worst aspects of practical authoritarian socialism was that it didn’t give people choices (however meaningless those choices may seem to you). Asking people what sort of ice cream they would like is quite different than just giving them one of a dictated flavour and colour.

67

engels 06.17.15 at 9:29 am

Reason, I tend to think that things like being able to attend university, not having to worry about medical bills or having a genuine say in whether someone is firing remote controlled missiles at third world farmers in my name are more important to my autonomy, agency, dignity etc than being offered the choice of half a dozen brands of sugared water.

I would not surprise me to learn that Worstall disagrees but I note that according his definition, a price comparison website has ‘agency’.

68

reason 06.17.15 at 10:03 am

engels,
people may not be able to attend university because they are not suited to study at university, people have to worry about medical conditions whether they have to worry about bills or not and one vote in millions (or should every individual have a veto right) is also not necessarily empowering. Things at the margin make a difference – relative importance is not everything.

69

Peter T 06.17.15 at 10:11 am

Oddly enough, it does not take a lot of research to find that many ordinary people under authoritarian socialism thought it gave them much more autonomy than the systems they replaced. The autonomy of being mechanics, doctors, engineers, teachers rather than the passivity of being peasants. That’s what they fought so hard for.

I find John’s posts slightly depressing. They are cheerful, intelligent, well-argued, and almost entirely mislead on the issues facing us collectively. This is because economics profoundly misreads history – it is not by trade between self-interested individuals that we have come to our present dangerous level of wealth and power, but by painfully leaning how to build organisations of ever greater scope, reach, coherence and internal coordination. Orthodox economics largely ignores this process (when not insisting that it is impossible or unnecessary); marxists and many others try to convince themselves that the wealth and power will remain when the organisation disappears.

Both the social democratic and neoliberal solution to the threats we face involve creating even higher levels of organisation – ones encompassing the entire globe – to manage the world’s ecology, climate and human societies. They differ on what needs managing. Since both lack any real grasp of what is involved, neither asks the sensible question of whether this is possible. One the evidence of the ongoing train-wreck of US politics (360 million people), the state of permanent crisis that is China (1.3 billion) and the squalor of India (1 billion), the likely answer is no. Discussion of alternatives might start from there, but won’t.

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engels 06.17.15 at 11:38 am

“should every individual have a veto right”

Why not? Give everyone defence vouchers or just cash and let them choose whether to spend them on army, navy, drones, nuclear weapons, militarised police, IDF, ISIS, whatever gives them the best customer experience. Stop this top-down authoritarianism once and for all.

71

Rich Puchalsky 06.17.15 at 12:52 pm

Bruce Wilder: “Now, the old vocabulary is all about “markets” where they don’t exist, and the model is particularly idiotic:”

My example is always the energy sector, because it’s so clearly a non-market process and people persist in talking about it as if it’s a market one. (And because it’s a fundamental world problem right now.) When economists talk about energy, they like to talk about people driving cars and buying light bulbs and turning their thermostats up or down as if there were billions of little decisions that affected energy use. But there aren’t. There are only hundreds of large energy producing facilities in even a large country.

And when people plan whether to build one or not, it’s never a matter of waiting for the market, as long as the government is fairly functional. You don’t let people run out of electricity and then wait for market forces to cause someone to build a large generation plant. Nor do you speculatively overbuild. Planners sit down with current and projected population figures, estimates of industrial use etc. The same pretty much goes for refining and distributing oil and gas.

Between overt decisions to build or not build and subsidies — the energy sector is hugely subsidized in various ways — there’s no market determining production, only various governments’ decisions. The economic concept of an energy price as it affects consumers is like the price of a basic food staple: it may or may not have anything to do with actual costs of producing that staple, and in a stable society there never will be such a necessary relationship.

So getting actual costs of energy, which include externalities, to influence how energy gets produced is a political process and not an economic one. The government starts putting out subsidies for one kind of power, stops writing permits to build plants for another kind of power. Consumers as always are forced to take whatever “choices” their highly expensive infrastructure provides.

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Plume 06.17.15 at 1:28 pm

Sebastian H @62,

Proven right on scores of issues. Not just in any immediate sense, as in, choosing the wrong product to back, the wrong service, the wrong price-point. But in constantly scrimping on support, while we get screamed at by angry customers. When our “superiors” deigned to listen to us for a second or two, they typically scoffed at those angry customers — from afar, of course. They never dealt with them. We were their shield. But the company ended up losing customers in droves at one point.

Acquisitions was another thing we were proven right about. We said wrong company, wrong time, wrong market. But our “superiors” knew better. We were proven right not that long afterward. Truly scores of things they got wrong.

And I know this is just anecdotal, so I’ll go back to what we know in the aggregate. Business failures are the norm. Most businesses fail, and often within the first few years. Economics generally teaches the subject as if this doesn’t happen. Not only does it teach things as if the “markets” are efficient, they teach things as if the overall failure rate for business isn’t huge . . .

So even if we leave aside the massive inequalities, waste and ecological damage produced, it doesn’t even work for many of its own players, most of the time. It’s a given that it doesn’t work for 90-95% of the country. It doesn’t even work very well for the folks who opt in to start a business.

Also, while there is massive government protection for the big boys (and girls), they take care of their own as well. Carly Fiorini, for instance, decimated HP, lost billions for the company, fired thousands, and she walked away with the proverbial golden parachute in the realm of 15 million, if memory serves. You could have pulled a homeless guy off the street and gotten better results. But she made millions after failing.

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T 06.17.15 at 1:28 pm

Boy oh boy, you try to have an opportunity cost/efficient transfer party and the next thing you know the Stalinists show up and start breaking everything.

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Plume 06.17.15 at 1:49 pm

The above example is one of the obvious reasons why, contrary to received neoliberal wisdom, where government is the only entity capable of inefficiency, and business is gloriously tied directly to all kinds of amazing incentives to do the right thing . . . . . the massive amount of money to be made, regardless of doing the right thing or not, makes business owners far more insulated. They can crash and burn a company and still come out richer than a pasha. A government suit? He or she likely caps out at 200K to begin with, if they get to the very top of the food chain. They don’t make more for screwing things up, though they do often have incentive to make life wonderful for corporations, so they have a nice fall back position through the revolving door. But if they’re a screwup, they’re probably not going to be in big demand in the private sector. Being good at their government job — good for business — is a better road to a higher plain for them.

IOW, that kind of corruption is generally based on results. Not simple membership in the boys and girls club or the deep state.

75

jake the antisoshul soshulist 06.17.15 at 2:07 pm

Capitalism does align well with the (rather perverse) brand of Puritanism than infects American culture. To an unfortunately large segment of the population, rewarding the “good” (ie the rich) and punishing the “bad” (the poor) is as important result as creating growth/wealth.

And when one makes a specific criticism, the answer is always that the problem is caused by regulation. “Capitalism can’t fail, it can only be failed.”

76

Plume 06.17.15 at 2:15 pm

Jake,

Yes. It’s Calvinist, in its own way. The elect. Self-serving and circular, of course. The elect are the elect because they’re virtuous. Riches accrue to them because of their amazing hard work and virtue. Not because of a concatenation of events which favored them, arbitrarily, and which they capitalized upon with their severe advantages, often resorting to atrocities along the way.

Like, the destruction of Native Americans, Pacific Islanders, Africans, etc. etc. . . . mass slavery, mass wage-slavery, indentured servitude, Dickensian hells, wars to keep the shipping lanes open, etc. etc. It was all because they were just really virtuous and true blue and they worked so very, very hard and they earned it by their lonesome. No one helped them, blah blah blah.

77

T 06.17.15 at 3:39 pm

@69 “Oddly enough, it does not take a lot of research to find that many ordinary people under authoritarian socialism thought it gave them much more autonomy than the systems they replaced.”

Likewise for National Socialism — it was a pretty good job creator from what I understand. Ignoring the gulags and the camps of course. Heard the leading proponents of the two systems even had a treaty for a while.

78

engels 06.17.15 at 4:02 pm

Was that the Munich Agreement or am I getting confused?

79

Plume 06.17.15 at 4:14 pm

T,

We’ve already been through this here at CT. The Nazis were and still are clearly right wing and nothing about their system was ever remotely “socialist.” It was always SINO. Socialism in name only, chosen for propaganda purposes to gain support of German workers. Once in power, they immediately and violently threw those workers under the bus, into jail, shot them, exiled them, criminalized their unions, their activism, etc. etc.

The American right are kissing cousins to the Nazis and Fascists, with an all too similar ideology and hate-list, and a part of it are card carrying members of neo-Nazi and neo-Fascist groups outright. This is the case for part of the European right as well. Actual socialists, OTOH, are in diametrical opposition to any incarnation of Nazism or Fascism.

80

geo 06.17.15 at 4:17 pm

reason@66: Autonomy has a value not necessarily because it makes people better off, but because it gives them dignity and a sense of importance

But doesn’t giving people dignity and a sense of importance make them better off? It certainly doesn’t make them worse off, or leave them exactly the same.

81

T 06.17.15 at 4:18 pm

@78
I even provided a nice picture for you. Now give me a couple of paragraphs on the wonders of Stalinism. I know you got it in you.

https://en.wikipedia.org/wiki/File:Bundesarchiv_Bild_183-H27337,_Moskau,_Stalin_und_Ribbentrop_im_Kreml.jpg

82

F. Foundling 06.17.15 at 4:27 pm

@T 06.17.15 at 3:39 pm
>Heard the leading proponents of the two systems even had a treaty for a while.

Yes, after the Soviet Union (Litvinov) had been trying to collaborate with Britain and France against Germany for years and they had shown both by the Munich betrayal and in subsequent Soviet-initiated negotiations that they weren’t really interested and were hoping for Hitler to attack the USSR instead. Stalinism does suck, but in this case Western anti-Communism like yours is what led to the Molotov-Ribbentrop pact, as well as to Hitler’s unchecked rise and thus to WW2: check out e.g. for something more eloquent and authoritative.

83

T 06.17.15 at 4:30 pm

@79
I’m not saying they were remotely socialist. You stated that @69 “Oddly enough, it does not take a lot of research to find that many ordinary people under authoritarian socialism thought it gave them much more autonomy than the systems they replaced.” I’m saying likewise for National Socialism. Many ordinary people liked that, too.

84

F. Foundling 06.17.15 at 4:34 pm

@reason 06.17.15 at 8:40 am

@Autonomy has a value not necessarily because it makes people better off, but because it gives them dignity and a sense of importance. One of the worst aspects of practical authoritarian socialism was that it didn’t give people choices (however meaningless those choices may seem to you). Asking people what sort of ice cream they would like is quite different than just giving them one of a dictated flavour and colour.

In view of what has happened with employment, pensions, wages, the safety net, crime, minority integration, healthcare, education, even food and construction regulations in post-Communist countries, with destructive and often literally lethal effects on citizens, the retrospective whining about things like the number of ice-cream flavours is not just pathetic, but psychopathic. Still, sure, many people do it – but this isn’t a measure of relative subjective happiness under socialism and capitalism, but a reflection of a desire to be on the winning side and to conform.

85

F. Foundling 06.17.15 at 4:36 pm

@Sebastian H 06.17.15 at 7:45 am

@No, there is quite a bit inherent about it that makes it more removed. Governments very often try to wave away price signals and they face very little competition pressure.

In democratic states, there’s supposed to be competition from other political parties who offer something better. In business, there’s supposed to be competition from other companies who offer something better. In both cases (and not just in states), it somehow often happens that this competition offering something better never appears and everyone offers the same rubbish, so there is room for avoiding consequences by means of collusion and by manipulation from outside. In both cases (and not just in states), your success depends not directly on whether you’ve been beneficial, but on whether you manage to convince people that you’ve been so, so there is room for avoiding consequences by means of deception.

Still, there are quite a few differences of principle. For example, the state at least belongs to the public, theoretically; its only official purpose is to serve the public and it is subject to debate and reform by the public. A business theoretically belongs to its owners and shareholders; its official purpose is to serve them by obtaining money from other people by any means that don’t get the state’s police on its heels, it is not subject to debate and reform by the public and the only thing the public can do about it is to choose individually whether to buy or not (apart from affecting it through the state, that is). Furthermore, business is secondary, since maintaining competition and preventing monopoly in business can only be ensured by means of state regulations. States can sometimes be more insulated from the consequences of some harmful decisions simply because they are entrusted (for a good reason) with decisions that have more long-term effects. It’s like assuming that state actions are inherently more bloody based on the fact that the national armies haven’t been privatised yet. Business taking over state functions usually keeps the monopoly but increases its abuse.

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F. Foundling 06.17.15 at 4:43 pm

@T 06.17.15 at 4:30 pm

@I’m not saying they were remotely socialist. You stated that @69 “Oddly enough, it does not take a lot of research to find that many ordinary people under authoritarian socialism thought it gave them much more autonomy than the systems they replaced.” I’m saying likewise for National Socialism. Many ordinary people liked that, too.

What they liked wasn’t the autonomy. As far as I know, National Socialism didn’t elevate many peasants to the status of being “mechanics, doctors, engineers, teachers”, which is what Peter T was talking about.

87

Plume 06.17.15 at 4:53 pm

T @83,

You’re confusing me with Peter T.

F Foundling@85,

Good points. The right-libertarian dream of (very close to) an all private society rests on that bogus idea. That just the transfer of power from the public to the private realm immediately ends corruption, inefficiency, the abuse of power, etc. etc and sets us all wildly free. It’s actually quite laughable, given the massive examples from history and the present of private sector atrocities.

If, as you mention, the state hands over its military to private forces, abuse and misuse of lethal power isn’t going away. It may even — and I think definitely will — increase beyond the already obscene levels of misuse and abuse. It will not lessen. And in cases where new monopolies are formed, as with a switch to private incarceration, there is a virtual guarantee that abuses will increase. Throw in the profit motive — which governments, at least theoretically, don’t have — and you have major incentive to screw over the population in question. What incentive does a private jail system, for instance, have to spend time, energy and money on health concerns for inmates, or safety, or nutritional, etc. etc.? The less they spend, the more they make for themselves. A government system has no real incentive to continuously cut costs to pad their own wallets. Yes, they’re constrained by budgets, too. But they don’t have to present profit reports quarterly, etc. and their pay doesn’t come from the surplus value created by workers in that particular enterprise.

88

engels 06.17.15 at 4:53 pm

Geo, I think reason’s point was that the benefits of autonomy aren’t just material but psychological and moral. Fwiw I agree, but just disagree that ‘autonomy’ and ‘spending your own money’ in general have much in common.

T why don’t you do it? I’m sure you know what your straw man debating opponent is supposed to say far better than I do.

89

T 06.17.15 at 4:58 pm

@82
“but in this case Western anti-Communism “like yours” is what led to the Molotov-Ribbentrop pact, as well as to Hitler’s unchecked rise and thus to WW2″

First off, I admire your mind reading skills. And second, thanks for telling me that what you infer is my kinda thinking “led to the Molotov-Ribbentrop pact, as well as to Hitler’s unchecked rise and thus to WW2” That’s the consensus view. Settled issue.

Glad we agree that “Stalin does suck.”

90

Plume 06.17.15 at 5:10 pm

T,

I’m guessing your a big fan of capitalism. Me? I detest it. Lenin established state capitalism in Russia, and Stalin made sure it continued, by any means necessary. Those of us in the anticapitalist camp are far more opposed to Stalin than any conservative, especially American conservatives. Not only do we vehemently oppose totalitarian and authoritarian regimes — capitalist business is authoritarian to the core — we support real democracy, including the economy, unlike anyone on the right.

Radical democrats, egalitarians, libertarian socialists, ecosocialists, etc. . . . however one might label us . . . . are diametrically opposed to all forms of totalitarianism and authoritarianism. Conservatives can’t accurately make the same claim, especially if they support capitalist systems.

91

Bruce Wilder 06.17.15 at 5:12 pm

Sebastian H @ 53: Bruce, I wonder if you are doing a bit too much with the “central planning” shorthand. As I understand it, especially as talked about by say Brad DeLong, it suggests that governmental central planning tends to have serious problems because it is largely divorced from price signals and market discipline (meaning that it doesn’t allocate well on price and is insulated from getting punished for poor allocation by competitors).

I wasn’t advocating for, or criticizing, governmental central planning, in whatever form. I was criticizing the rhetorical convention by which we talk politics and policy as if markets and market prices organized the economy as opposed to the administrative fiat of bureaucracies. That convention has its origins, as I understand it, in political propaganda and struggles of the 1930s and 1940s, in which an urgent need was felt among reactionaries in the West to both draw sharp contrasts with actually existing Communism and to push back against the politics of strong trade unions and the social welfare state. Hazlitt’s One Lesson belongs to the era of that propaganda effort. I imagine Brad DeLong’s thumbnail caricature of the dynamic between the right-wing advocates of business interests and more moderate defenders of the emergent social welfare state was roughly accurate.

I wasn’t proposing to re-open those now antique controversies about whether socialist planning was superior to market capitalism and why, or vice-versa. I was objecting to a rhetorical vestige of those controversies as obsolete and misleading, to wit, the cliché, “market economy”.

When Hazlitt talks confidently about the economy as a System, he is basing his analysis largely on a model of the economy as a system of markets, in which markets arrive at an equilibrium price and those prices allocate resources. To say that that analysis is not engaged in close observation of the actual economy is a gross understatement.

Now that we are not engaged in a death struggle with totalitarianism in whatever form, it seems to me that we could revise our understanding of how the economy actually works, to refer to processes and institutions that we can observe. Being able to have political discussions and disagreements that are reality-based seems to me to require terms of reference that refer to things we can observe in common, a consensual reality that does not involve fantasy pretence.

I’ve made the point that the vast majority of people who work for wages or salaries in the actual economy, do so as part of hierarchies. The archetypal employment contract is adapted to the needs of hierarchy: the employee agrees to do as he’s told, in exchange for a fixed wage, with a contingency — if employee doesn’t follow rules and do as he’s told, he’ll be fired. Being fired is costly to the employee, because it is hard to find another job at the same wage. The employer offers employment on a take-or-leave-it basis.

It seems surreal to turn around and talk the politics of economic policy, while pretending there’s a “labor market” and a “market wage”.

Discipline is clearly in play, here. I just wouldn’t call it, “market” discipline, since it observably isn’t.

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geo 06.17.15 at 5:22 pm

engels @88: I agree, but just disagree that ‘autonomy’ and ‘spending your own money’ in general have much in common

I agree. That is, I disagree. I mean, I agree with you in disagreeing. But I also agree with you in agreeing with reason that “the benefits of autonomy aren’t just material but psychological and moral.” Except I don’t agree that there’s a fundamental difference between “material” and “psychological,” at least when it comes to being better off. Because after all, we’re material all the way down. Don’t you agree?

93

Plume 06.17.15 at 5:39 pm

Bruce,

What do you make of the constant refrain from the right that “workers are worth what someone is willing to pay them, and not a penny more”?

That points to your comment regarding the actual absence of a labor market.

It also points to a rather despicable use of the word “worth” in the first place, but that’s another story.

94

engels 06.17.15 at 5:55 pm

Geo, I agree (although I think it’s still possible and useful though to distinguish material advantages – food, housing, capital – from mental ones – wellbeing, knowledge, skills – even though the latter are also material in the final analysis).

95

LFC 06.17.15 at 6:16 pm

ZM @58

in the region where I live the small regional city has a Foodshare program (there are a network of these) which collects and distributes food that would otherwise go to waste.

There are similar programs in the U.S., but according to the earlier-referenced NewsHour segment it often costs farmers something to save (and transport) food even for this purpose — hence, absent the right incentives, they still end up chucking a lot. Haven’t looked at the NRDC paper itself, but the NewsHr segment in summarizing definitely made it sound as if some of the waste comes at the pt-of-production, i.e. farmers throwing produce out, as well as at the pt-of-consumption, as T. Worstall mentioned above.

96

William Timberman 06.17.15 at 6:17 pm

Stealing the common from the goose in the name of economic development, efficiency, and therefore greater prosperity for all goes back a long way, and so do good faith as well as bad faith defenses of it. If , as Bruce insists, these arguments, both pro and con, are now well past their sell-by date, we should look more carefully than we have at the conflict between what we believe to be necessarily hierarchical management structures and the rest of what defines us as human beings. It clearly won’t do in the long run to treat everything which can’t be measured in money as a troublesome externality, and its devotees as (mildly) regrettable collateral damage.

The idea of stewardship is attractive for its religious resonance on the one hand, and its echoes in the political idea of public service on the other, but I wonder if it could be broadened into something as fully fleshed out and politically relevant as the isms of the 20th century once seemed to be. Could Rosa Luxemburg and Stewart Brand actually have any viable offspring, I wonder? If I wait long enough, surely somebody here can — and will — tell me.

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T 06.17.15 at 7:53 pm

@90Plume @88engels John

“Lenin established state capitalism in Russia, and Stalin made sure it continued, by any means necessary.”
Thanks for clarifying your position. It’s not always obvious where someone stands. And parsing the difference between a self-described libertarian socialist and other socialists is not necessarily obvious w/o explanation, at least to me.

Engels — Plume was kind enough to give a paragraph on the wonders of Stalinism from his perspective — there weren’t any. (Plume – that’s my reading of what you said.) And from his earlier posts that wasn’t clear to me. I don’t know your views and I’m not going to put words in your mouth. Feel free not to respond. I asked a legitimate question as shown by Plume’s answer. My take is that you’d have a different view than his.

John — I’m a little flummoxed on how to integrate the two lessons. The two lessons are pretty straightforward and show that restricting choices for the poor is not the best way to improve their lives. The comments section shows that this is not obvious as demonstrated by the folks that were uncomfortable with cash transfers rather than transfers in kind of food or housing. That’s exactly the response you want from non-economists who now have to start working through the issues. Maybe further examples in the opportunity cost section would be helpful. Maybe put in more examples with restrictions on choice unrelated to transfers and inequality. If folks buy onto that argument, the same point made in the context to transfers to the poor would better highlight the contradiction. This is pretty pertinent given what’s happening in Kansas, Wisconsin, and other states that keep adding restrictions to transfers. The comments surprised me a bit.

98

William Berry 06.17.15 at 7:53 pm

@engels: “Was that the Munich Agreement or am I getting confused?”

I see what you did there.

You are on fire.

Also, too, geo @92

99

geo 06.17.15 at 8:07 pm

WB@98: How agreeable of you!

100

T 06.17.15 at 8:07 pm

@86
When you’re living in a depression and state policies create jobs, that might be an increase in autonomy over the alternative.

101

LFC 06.17.15 at 8:42 pm

From the OP
The problem of poverty is huge, in rich and poor countries alike. Around the world, nearly a billion people live in extreme poverty, living on less than $US1.50 a day.

Is that the current World Bank figure? For a while the needle had seemed to be stuck, acc to WB (or UNDP) figures last I checked, at 1.2 billion living on less than the equivalent of US $1.25/day. JQ’s figure suggests a slight improvement, though these varying estimates are just as likely to be a result of different methods of calculation, I suppose.

From the OP
many advocates of development aid dismiss food aid as a short-term ‘band-aid’, and argue that the aim of aid should be to provide the ‘right’ kind of assistance, as measured by subsequent economic growth. Advocates of aid initially focused on economic infrastructure and industrial development, and have more recently turned their attention to health and education.

I think this may be too simplistic, even for a bk aimed at a wide audience. There’s prob still a constituency for big infrastructure projects in some poorer countries, albeit prob more attention on how the different elements (infrastructure, health, education, agricultural reform, water, sanitation, etc) can be made, if possible, to fit together. Also more attention to environmental effects (e.g. large dam projects). As for food aid, as pointed out above most of it (though not from the U.S.) is now given “untied,” i.e., as cash. It’s still short-term, but often necessary given persistent food shortfalls from various causes. Recent figures (circa 2012) for chronic malnourishment were approx. 870 million (approx. 850 million of whom were in developing countries).

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LFC 06.17.15 at 8:47 pm

P.s. “given persistent food shortfalls”
and, of course and often more important, persistent income shortfalls so that people can’t afford to buy food even when harvests have been good and the distribution chain is running more or less as usual.

103

Lee A. Arnold 06.17.15 at 10:56 pm

Well that’s the thing. We don’t worry so much about when harvests are good. (Though if we don’t address climate change, we are going to be worrying a lot more than in olden times.) As it stands at this moment, when harvests are bad, we can substitute something else, or order from somewhere else. There really aren’t many significant scarcities, anymore. The former scarcity of (most) goods has been solved by a couple of centuries of technological advancement. The only remaining scarcities compose a fairly short list: 1. your own individual time, 2. desirable real estate near the beach, 3. wildlife ecosystems, 4. seats at a popular music concert, 5,6,… etc. etc.

But the concept of opportunity cost DEPENDS upon scarcity. That’s why you had to choose: because time and resources to make things were scarce. The new (18th century) price system was posited as the best way to do this, after the ancien regime collapsed. It’s why money is still under control. But we don’t really need the new 18th-century system anymore, either. It had upset the prior millennia of the traditional social hierarchy, and now after only 300 years it is already changing into something else, again.

This undermines the strategy of countering Hazlitt by explaining why “market prices won’t in general equal opportunity costs for society as a whole (Lesson 2).” Because opportunity cost DEPENDS upon having to choose, and having to choose depends upon the scarcity of goods, but there is no relevant scarcity anymore. The short list of remaining scarcities can be taken care of by things like individual preference for enjoyment, by bringing the most desirable real estate into public park systems, by instituting lotteries, and by other site-specific choice mechanisms.

There is however one OTHER function of the price system. This is to reward individual merit to spur individual effort, and to prevent free riders and lazy bums from getting too far.

Thus there have been two, very different, functions of the price system: allocation by scarcity and opportunity cost (now becoming defunct), and the social psychology of encouraging people to justly make their own new place in the worldly material hierarchy of scarce wealth.

Well the scarcity is disappearing. But the social psychology of defining the “kind” of people that we want to live among, is still strong as ever. Almost every other way of adjudicating that — by neighborhood councils, by local votes, by setting good examples, etc. — pales in comparison to the simplicity and expeditiousness of the price system.

From the tenor of comments above, it would appear that the proponents of changing or eradicating the price system seriously underestimate the present strength of the social expectation of gradation by merit. The idea that an individual will step-up to become a responsible citizen simply if given more “autonomy”, and the idea that an individual should be the only judge of his or her own merit, is not yet credible to most people. (In fact most of the left-wing steps gingerly around the discussion, and usually falls back upon protestations about individual freedom.)

Significantly however, the technological economic system itself, having forced the end of scarcity upon us, is ALSO undermining any credible promise that it once had, to reliably reward merit. it is clear to everyone that most people are not getting “ahead” no matter how hard they work, and on the other hand, people at the top end of the scale are rewarded in excess of their merit.

Thus the market system is naturally killing both scarcity and the need for merit: the market system is inexorably killing itself.

This has led to a sense of crisis. And to very revealing responses from left, right and center.

On the right, the idea is to simplify, simplify: to cleanse the new 18th-century system so that it works on “first principles”. They say, “There is true scarcity; and we need a meritocracy.”

In the technocratic center, the idea was to mitigate the worst excesses, (because obviously the bare system can never work as advertised: there are scientifically-defined “market failures” and the like), and then to see what happens next. But the most honest and scientific of them however are now stumped by the return of “secular stagnation” and by the acceleration of disemployment in high-productivity sectors by automation, which appears to be permanently consigning most people, both labor and entrepreneurs, to low income growth, no matter what happens. Because these things MAY mean that the system is indeed transitioning into something else, for which neoliberalism is obsolete. That’s why people like Brad DeLong, Joseph Stiglitz, Adair Turner (whom I believe is coming out with a new book this year) are among the most interesting people to read right now.

Then we have the left, which is a hodgepodge. Most of the left appears to believe that the secondary manifestations of this crisis (i.e., politics, economics, wealth concentration, racism, gender, etc.) are the primary causes of the crisis. Most of the left misconstrues both merit and scarcity: As to the question of merit, the statement goes something like, “Let’s give everybody a guaranteed income, and after that, the rest of us are not to judge what each individual does with it.” Yet the left says this, while often ACCEPTING the principle of scarcity: that government spending should be kept under control, that goods must be allocated, and so on. Most of the current left does not appear to understand that scarcity is at an end. Perhaps this is because the left is heavily environmentalist (which is a good thing), and so the left has swallowed the erroneous notion that everything else is scarce too.

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T 06.17.15 at 11:09 pm

@103 Scarcity is a real issue for the poor, esp. food, education, healthcare and housing of which the later 3 have risen in price way faster than inflation. And it would significantly increase the welfare of the poor if they could decide how to balance their consumption of all four given their limited resources even after transfers. Hence the two lessons. Anyway, that’s how I read the two lessons.

105

Lee A. Arnold 06.17.15 at 11:29 pm

T #104: “Scarcity is a real issue for the poor…”

Scarcity of MONEY is the issue for the poor! There need be no scarcity of food, education, healthcare and housing. There are plenty of resources on earth to give 10 billion people or more a middle-class standard of living. That fact undermines the value of the concept of “opportunity cost” for the analysis of the future. The reason money is scarce is because it is kept scarce, due to the false but widespread belief that resources are scarce and to protect the widespread belief in the hierarchy of merit for those who aspire to ascend in it as well as those who have already benefitted by it (i.e. the rich).

106

Anarcissie 06.18.15 at 12:16 am

Scarcity is having less of something than people want. It can exist naturally, or it can be created by various means, either by destroying existing goods, or by increasing wants. Since, in what I call a capitalist state but other may describe otherwise, the ruling class derives its power, wealth and status from its ability to manage production, trade, and distribution of ‘scarce’ goods and services, it will labor mightily to produce scarcity (real or apparent) by whatever means are available — war, imperialism, waste, consumerism, capital investment, shooting for the moon, etc. In this sense scarcity is not yet at an end, although it has been potentially at an end for some time.

107

T 06.18.15 at 12:17 am

World per capita gdp is about $13K. I suggest asking your neighbors how they’d feel at $13K per year. People making middle class incomes do feel constrained although you think they shouldn’t. Whose choice is it how they feel?

108

Plume 06.18.15 at 12:19 am

There is a scarcity of food and money for no other reason than the concentration of those things at the top of the pyramid. There is no scarcity at all if there is even a modicum of fair distribution. It doesn’t even have to be “egalitarian” per se, though it’s the moral, ethical and right thing to make it egalitarian. It just has to be less despicably hierarchical than it is now.

For instance, by 2016 America’s 1% will hold, literally, 99% of all its wealth. That’s all we need to know when it comes to distribution of resources, including money. Though it helps reinforce that to know a few other stats:

The richest 400 Americans now hold more than 60% of its wealth. The richest 80 people on the planet hold more wealth right now than the bottom 3.5 billion human beings. Just 80 humans have as much wealth as 3.5 billion. Think about it.

And the richest 20% of the world consumes 85% of its resources. Obviously, that leaves 15% for 80% of the globe. No one can make a moral or rational case for this obscenity.

It was recently reported by the World Wildlife Fund that if everyone on earth lived like an average American (today), we would need four entire earths to meet demand for resources. Four. As things stand, with no changes, we’ll need two earths by 2030.

We obviously have finite and dwindling resources of all kinds, but even with their finiteness, if we distributed goods, services, money, etc. etc. etc. in an even remotely fair manner, there is no poverty, hunger, homelessness. The misery quotient is radically reduced, simply by shifting the distribution of resources. And, again, this doesn’t even require “egalitarian” distribution. Just less obscenely vertical, exclusive, concentration at the top.

Ironically, it’s actually far better for any economy to have that fairer distribution. One of the things which guarantees perpetual economic crises is the wild imbalance, the grotesque inequality, created by capitalism. Even things up a bit and those crises are fewer in number, frequency and severity.

109

Lee A. Arnold 06.18.15 at 12:31 am

Anarcissie #106, exactly. Almost all scarcity has been made illusory, by the very productive success of the system. But those in power depend upon the illusion. Note however that they are not the primary cause of the problem. If almost everybody else didn’t believe that things are scarce, and if almost everybody didn’t bow to the social psychology of a material meritocracy of personal effort, then the whole system would already be transformed into something else, and the ruling class could do nothing about it.

110

Plume 06.18.15 at 12:33 am

One big problem we face in America regarding the above: Most Americans think we’re a far more equal society than we actually are . . . . though a recent concentration on the topic of inequality may be making a dent.

Several recent studies have shown that most Americans have a wildly inflated belief in the levels of overall equality of means, income and wealth, etc. It’s not at all close to reality. When given a blind test — along the same idea as blind taste tests, I suppose — 95% of Americans choose the wrong pie charts for this country’s actual inequality levels. Ironically, when asked to pick the one they prefer the most, roughly that same percentage picks Sweden’s chart, without knowing it’s Sweden.

The American powers that be have been very effective, in this supposedly “free and open” society, of tamping down actual information about its reality. From existing inequality, to ecological damage, consumer dangers, financial and corporate malfeasance, gun violence, foreign ventures, wars, conditions in our jails, police killings, surveillance, etc. etc. . . . Americans are kept in the dark about all too much.

First step in any viable movement for reform, much less revolution, is getting rid of the veil.

111

Plume 06.18.15 at 12:39 am

Another thing that pisses me off to no end. Conservatives often go on and on about how the poor should make do with less, and if they don’t, that’s the crux of their problem. They need to just shut up and accept their poverty, and “economize” with that fact in mind.

But ask a stinking rich person to do with less, and their high dudgeon kicks into overdrive. “Why that’s un-American to ask us rich folks to take a little less and pay our workers a little more!!”

Logically, the folks who should make do with less are the people who already have so much more than everyone else. Asking the poor to make do with less is adding the proverbial salt to a gaping wound.

112

Lee A. Arnold 06.18.15 at 12:53 am

T #107: “…asking your neighbors how they’d feel at $13K per year.”

Well then let me amend my statement to, “There are plenty of resources on earth to give 10 billion people, or more, a US upper-middle-class standard of living.” (And I write that, as an ardent ecologist and environmentalist.) However, I never wrote anything remotely like, “People making middle class incomes [shouldn’t] feel constrained.” It’s very clear that even the US upper-middle-class does feel constrained! The question is, what are the basic reasons that is happening? 1. Is it because they are falling behind? 2. Or do they feel compelled to get ahead of others in the social psychology of accumulation? 3. Or are their wants truly unlimited? I yend to think it’s mostly #1, but if you believe that it is either 2. the status competition or 3. that their wants are unlimited, (or both), then perhaps you will support some version of the pseudo-scarcity.

113

T 06.18.15 at 12:56 am

@105 btw — the concept of opportunity cost doesn’t just apply to necessities. It’s just the notion that tradeoffs exist including what to consume, work vs leisure, and now vs the future. You may argue that the choices become trivial at some point. But anyone faced with those tradeoffs is better off if they can choose than if they are imposed upon them, especially the poor. And since the poor are forced with these choices today, it’s better that they can handle the tradeoffs themselves with cash than someone giving them a slab of surplus cheese or a housing voucher when they’d rather spend the money on education or healthcare. The point of the Two Lessons.

114

Cranky Observer 06.18.15 at 1:04 am

= = = You may argue that the choices become trivial at some point. But anyone faced with those tradeoffs is better off if they can choose than if they are imposed upon them, especially the poor. = = =

Time and mental effort expenditure are also limited resources, and access to information is generally not free either (nor is Internet access). If people with few resources are forced to expend time and effort to make choices then they are not necessarily better off for having more options. This is particularly true if they are forced to make choices in an enormously complex system they are not educated [acquiring specialized education is a cost] or equipped to navigate. E.g. selecting a minimum-cost healthcare provider under the US healthcare system.

115

Lee A. Arnold 06.18.15 at 1:13 am

T #113″ “the concept of opportunity cost doesn’t just apply to necessities. …including what to consume, work vs leisure, and now vs the future.”

Sure, because some things remain truly scarce, such as personal time, as I wrote in #103: “The only remaining scarcities compose a fairly short list: 1. your own individual time…” But that is rather outside of the Two Lessons, if technological advance increasingly obviates the need for labor to cure scarcity, as appears to be the case.

But getting back to necessities there’s no doubt that giving cash to the poor is a good way to go. The question is, how much would you give them? I would give each of them US$100,00o a year. What is your number?

116

Plume 06.18.15 at 1:16 am

T,

But the choice shouldn’t be between, say, a government check or government food supply. We need to have an economy that makes it unnecessary for the government to step in and help in the first place.

If the choice is between the right-libertarian Social Darwinism hell and the social democratic welfare state, I take the latter. But we really need a completely different system and setup with neither dominant. We need an economy that works well enough for everyone to render “assistance” unnecessary for all but those who simply can’t work. As in, that social safety net should only be needed for those who absolutely can’t work. A sane, rational economy would pay everyone at least a living wage, by law, guaranteed, and if we keep the capitalist system, every single American who wants a job would have one. No exceptions. If the private sector can’t hire, the public sector fills in the gap.

It’s always struck me as nutz to play triage after the fact instead of preventing the injuries (and deaths) in the first place. Force businesses to pay fair wages up front, provide safe, healthy working conditions, put workers first, and you don’t need much of a social safety net. The government then need only step in when it comes to picking up the slack for jobs.

As mentioned up thread, make it the law that there is a living-wage floor, a max ratio of ownership to rank and file pay, free, cradle to grave, universal education, universal, single payer health care, radically upgraded public transport, safe water, food supplies, environment, etc. etc. . . . and we just don’t need to play triage later.

The government should guarantee distributional fairness and at least modest fulfillment of needs upfront, and not wait until it’s too late to act. No one need be poor, ever, if this happens, if the economy actually works as it should and distributes goods, services, access and opportunity to everyone, instead of a very small minority.

It’s not rocket science. The issue is the obscene inequality of pay, wealth, access, power and overall distribution. This is easily correctable, if we have the will.

117

T 06.18.15 at 1:20 am

@112 Lee
I sent 113 before I saw 112. Those are very good points (although I’m unclear exactly about the differences between 1 and 2.) The behavioral economists and psychologists seem to be spending a lot of time on the relationship between happiness and relative wealth and income. There seem to be happiness effects on absolute income as well — people in wealthier countries are happier on average than in poor countries. And the decline in leisure time and increase in two income families even among the upper middle classes suggests that many folks are going for income rather than leisure or home work/child care/family care. These tradeoffs still seem to exist even in wealthy societies. Not many folks seem satiated — they want more of some things whether they cost money or time.

118

Plume 06.18.15 at 1:22 am

Shorter version: If we keep the current capitalist system, the money should come from employers, not the government. The money should be more than enough to render government assistance unnecessary. This is where the “autonomy and dignity” parts kick in. I think most people would rather “earn” their pay than have it handed to them by a third party. The key is making sure all work is valued, instead of our current system which devalues most of it, except, of course, the work of the folks who write the rules.

119

T 06.18.15 at 1:40 am

@114 Cranky
I completely agree. The stress of being poor and constantly under severe financial constraints is a huge mental burden on the ability to make decisions. The gov’t can help by making default choices that will work for “average” people. But the ability to chose and make tradeoffs if your situation is not average is very valuable. (Lesson Two) I’ve been trying to stick with the OP.

120

Lee A. Arnold 06.18.15 at 1:43 am

@117 T: The difference is that 1. they may feel they are falling behind in the stuff they had already planned and budgeted to do, such as being able to afford to send the kids to college or to have an early retirement, vs. 2. wanting to have a nicer car than their neighbors, no matter what.

121

Chris Warren 06.18.15 at 1:54 am

Plume

I wonder whether “detesting capitalism” is really the right approach simply because a lot of the detestable features we associate with capitalism have reoccurred under socialism. Corruption, bureaucracy, sectarianism, racism, chauvinism, environmental degradation and growth mania have all emerged within socialism.

Focusing on detestable symptoms diverts the Left. One detestable symptom is the fact that in the US one child is shot every hour (one third killed).

Marx gave capitalism some measure of acknowledgement but then highlighted the damage and crisis it was structurally doomed to inflict once various countervailing tendencies were exhausted.

Unfortunately, it is possible to conceive of a nice capitalism (for a few generations) where a welfare state deliberately taxes profits and returns the purchasing power back to those who produced the output. Our bookshelves are full of naive paperbacks proposing this sort of “Civilising Capitalism” outcome. Most of the posters above, including John Quiggin, exhibit this mindset.

The basis of nice capitalism is Keynesianism where workers get a heavily restricted share of money of one type (cash earnings) but capital gets money of a different type (weakly restricted finance). Finance plus politics is then used to accumulate capital. This is the cloak our economists hide under. It all looks so nice and pleasant. They honestly think that

To help poor people, give them money … Overwhelmingly … giving people money is more effective than most, if not all, forms of tied assistance in improving well being and life outcomes.

However once a period of war and empire is over, debt, unemployment, and falling wages necessarily emerge and inexorably increase over time. In fact Marx’s predictions become clearly apparent since the 1960’s – Capitalist structural crisis tendencies

So the issues that should occupy progressive people are the structural issues of long-run increasing debt, increasing unemployment, and falling wages. Here there is only one cause – the private accumulation of capital through exploitation of the public.

It is just too easy to wail against the fact that:

The problem of poverty is huge, in rich and poor countries alike. Around the world, nearly a billion people live in extreme poverty, living on less than $US1.50 a day.

You cannot deal with poverty, inequality, homelessness, racism and climate change without addressing the ultimate structural root cause.

122

LFC 06.18.15 at 1:55 am

My remarks above @101 and 102 were written somewhat too hastily. I’ll try to clarify what I meant.

The reason there is chronic, year-after-after undernourishment (and other indices of severe poverty) has to do largely with maldistribution of income and wealth, as Plume has said. As a separate phenomenon, occasionally there are external, exogenous if you prefer, factors (e.g. drought, earthquake, other weather factors, or sometimes armed conflict, notably civil wars) that produce food emergencies, i.e. threats of mass starvation or famine, and those are the events that tend to reach TV screens in the ‘developed’ world and prompt emergency relief efforts. But, by contrast, the chronic levels of undernourishment are a concomitant, an aspect, of chronic severe poverty.

Thus, JQ’s sentence in the OP — “Faced with images of the hunger and suffering caused by famines and extreme poverty, a natural and intuitive reaction is to send food” — refers to two different kinds of occurrences/phenomena. (1) Famines, which tend to be caused either by armed conflict, weather or some combination (though occasionally political incompetence may enter the picture, or in certain 20th-cent instances, state policy, deliberate or otherwise); and (2) chronic levels of hunger and mal- or undernutrition, which are results of chronic extreme poverty. The two phenomena have different causes and therefore call for different responses. For famines, emergency shipments of food and other relief; for chronic undernutrition, cash transfers in some form or other (and, more fundamentally, redistribution of income). Hence, the U.S.’s “tied” (in-kind) food aid, as directed toward chronic undernutrition, is retrograde: it undercuts local producers and restricts the choices of recipients.

On other matters, I’m not sure I fully understand certain of Lee Arnold’s points above, and to the extent I understand some of them I don’t agree (e.g., the notion that the planet has the capacity to support 10 billion people with the consumption patterns of an upper-middle-class or middle-class U.S. existence seems quite wrong, but that’s only a problem if you think everyone has to be, e.g., using energy at those rates and transporting themselves everywhere by car to have a decent life, which also seems wrong).

123

Peter T 06.18.15 at 1:56 am

The discussion between T, Lee Arnold and Plume illustrates one of my points: they all assume choice is related to wealth, and wealth results from “the system”, so if we re-arrange or refine the system, then wealth can be spread around more, and more people will have more choice.

In fact, as BW points out, the wealth results from a system that coordinates and controls people – a massive set of interlocking hierarchies. Take away the hierarchies, and the wealth evaporates. In simple terms, if it takes 10,000 people closely coordinated to build a bulk carrier that then enables ore to be moved around the world in 100,000 tonne lots (and another 500,000 to work the ports, mines, railways, shipping agencies….), that coordination does not happen by accident, nor is it maintained except by shaping all those people so that they fit together without too much friction. Almost all of that shaping is ideological – force is a very clumsy instrument.

If you want autonomy, be a hunter-gatherer. You can do whatever you want pretty much whenever you want. No chiefs, and if your companions vex you, change bands. If you want, collectively, the power to have 100 ice-cream flavours on offer, then you have to be the sort of person who will follow the myriad rules of city and employment and political life. Autonomy and material wealth are pretty much opposites. If money is choice, then it’s choice earned by doing what you are told most of the day and, for many people, not even being able to conceive of doing whatever they want at any time.

124

John Quiggin 06.18.15 at 1:58 am

Thanks for all these comments. One thing I need to clarify is that there’s a strong case for public provision and funding of health and education services in general, and I’ll talk a lot about this in the book. What’s more questionable is the provision of these services specifically for the poor, and considered as an anti-poverty strategy, based on the reasoning that the poor are poor because of specific deficits. I’d argue that the important deficit is not having enough money and that, in a system with lots of inequality designed in, there must be a large group of people who are poor.

125

John Quiggin 06.18.15 at 2:01 am

LFC @101 The latest WB estimates are for 2011, and say “just over a billion”. I’ll amend accordingly and also think about your other very useful comments

http://www.worldbank.org/en/topic/poverty/overview

126

LFC 06.18.15 at 2:05 am

Of course, if one agrees with Chris Warren — which I don’t — that “the private accumulation of capital” in itself is the sufficient and underlying cause of all problems, then one will think my analysis in 122 irrelevant. On the other hand, there *are* serious questions about whether a system that makes endless accumulation of capital the highest priority is sustainable over the medium or long run.

127

LFC 06.18.15 at 2:15 am

@JQ 125,
thanks

128

Lee A. Arnold 06.18.15 at 2:27 am

LFC #122: “…but that’s only a problem if you think everyone has to be, e.g. using energy at those rates…”

I used to believe this but my error was to suppose that the rate of energy production and consumption must always result in waste of equal destructiveness to the biosphere. It does not. We can have energy use at the same rates and higher–generated by renewables and causing little more waste that infrared radiation. It’s all in the materials design, and the rate of innovation in this field is accelerating very rapidly.

The same thing goes for the rest of the resources, with few exceptions.

If we focus on cleaning up toxics, CO2 and nitrogen excess, plus protecting wildlife ecosystems, we will be fine.

129

floopmeister 06.18.15 at 2:45 am

Boy oh boy, you try to have an opportunity cost/efficient transfer party and the next thing you know the Stalinists show up and start breaking everything.

Boy oh boy, you try to have an opportunity cost/efficient transfer party and the next thing you know the Jonah Goldberg Liberal Fascism (‘mustachioed smiley face’ TM) fanboys show up and start breaking everything.

130

Lee A. Arnold 06.18.15 at 2:53 am

Peter T #123: “…they all assume choice is related to wealth…
“In fact, as BW points out, the wealth results from…a massive set of interlocking hierarchies.”

I’m don’t understand the first assertion. I do not assume that choice is related to wealth. In fact I think that the system has been so successful in eliminating scarcity in reality, that there does not have to be any forced choices, only the choices of leisure.

But the second comment makes me think that you are conflating very different definitions of the word “wealth”. “Wealth” is used to mean 1. goods produced, 2. long-term assets, and 3. concentrated ownership. We can surely produce enough goods for everybody. Concentrated or hierarchical ownership structures are not required for that, provided that we can realize and internalize two changes which are true, fundamental, yet widely misunderstood, as I tried to argue in #103: the system has almost completely solved the problem of scarcity, and, the system is no longer able to reward most individual merit. These profound changes have been caused by technological developments (as have many other fundamental changes in history). But most everybody is still trapped in the early-modern psychological bubble.

The question of what comes next remains to be answered, but I expect more of what we already see: a long transition period of lurching crises, government stopgap measures to compensate for pseudo-scarcity and ownership concentration, and perhaps local-level innovations in organization to find new ways to encourage meritorious behavior that can replace the impersonal money-income system.

131

Plume 06.18.15 at 3:19 am

Chris @121,

I want an end to all systems of control by the few over the many. Capitalism is perhaps the first such system in history that actually needs to spread to stay alive, so it’s worse than pretty much all the rest. Other forms of hierarchy could sustain themselves in fixed places, at fixed rates, without the need for endless growth and further consolidation. Capitalism is different. It has to grow or die, and it can’t grow without exploitation — of workers, consumers, the earth, other systems. It, unlike previous systems of control, can’t allow competition or stasis. It has to control markets and expand them. It has to extend its network everywhere. It has to use government and governments to centralize its power and spread that power. As mentioned above, it has to use centralized power to centralize power.

The socialism you mention, IMO, was never socialism, at least as I understand and use the term. I don’t advocate for any system that has ever been tried on any national scale to date. At least not in the so-called modern era. Real democracy, by whatever name, is the answer and it’s never been tried. Dispersal of power to everyone is the answer. Flattening out hierarchies to the greatest degree possible is the answer. Egalitarian structures for equal access, equal chances, equal shots at fulfilling our individual potentials . . . . that’s the answer. Capitalism prevents this. What might be called caesarian socialism — Camus used the term — isn’t the answer.

In short, valuing all human beings equally, valuing all work, never, ever allowing any cadre to set rules to advantage that cadre, etc. etc.

There is no poverty if all of us have an equal say, an equal voice, an equal place in the system we build and design for us, for all of us. Heretofor, all systems have been designed for the few, built by the many, supported by the many, so the few reap the vast majority of benefits. To me, it’s just common sense that the collective we shouldn’t accept this. The collective we should work for the collective we, never for a few.

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Rich Puchalsky 06.18.15 at 3:20 am

Peter T: “If you want autonomy, be a hunter-gatherer. You can do whatever you want pretty much whenever you want.”

Bob Black wrote a lot about this. Of course you may have already gotten it from him.

Of course the world can’t support very many people as hunter-gatherers. That was pretty much removed as a “choice” during the transition to agriculture: the agriculturalists have individually less autonomous lives, but they have higher population density and push the hunter-gatherers out.

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david 06.18.15 at 3:22 am

Is it actually true that we can produce enough goods for everybody? Put aside the prodigious size of labour-intensive education and healthcare sectors and it’s still obvious that liberal democracies have steadily sucked at producing certain physical assets, like houses that people want to live in located in neighbourhoods that people want to live in. Insofar as local-level government or community processes have been involved, they have mostly attempted to foist housing problems on other localities.

Even in commodities that we’ve become pretty damned efficient at producing, people keep coming up with new requirements. Even if we can’t eat more chicken, we can demand that technological progress go toward better living standards for the chicken before it’s eaten. Even if we can’t purchase more refrigerators and washing machines, we can demand more options and more features and more just-in-time manufacturing (just so that we don’t pay for the bit where the fridge sits in a warehouse).

That aside, even in the 1980s the state capitalism of the late Soviet Union still sucked at producing shoes that people wanted to wear, despite producing prodigious amounts of shoes.

134

Plume 06.18.15 at 3:26 am

Peter T @123,

It’s simply not true that if we remove the hierarchies, wealth vanishes. At least not the wealth that matters. Without those hierarchies, without capitalism, without profits, we don’t require but a fraction as much to live well, and without capitalism and the concept of profits, we gain massive amounts of free time — and few things are more important than time.

The thing you’re missing is the relative and totally contingent nature of systems. Living within them. Radically alter the system and you also radically alter need and what constitutes “wealth.” You radically alter the meaning of a host of things. Get rid of the monstrosity of capitalism and you no longer define “wealth” in the same way. It doesn’t carry over into any true alternative. “Wealth” becomes something completely different, and it definitely doesn’t vanish when the hierarchies go away. A different kind of “wealth” is created, and without those hierarchies, it’s available to everyone, instead of a tiny few, as is the case in capitalist societies.

In short, too many people want to force capitalist rules and (il)logic on alternatives. It’s like saying you’re playing chess wrong because you’re not going by Risk rules. They don’t apply anymore. It’s a totally new game.

135

ZM 06.18.15 at 3:39 am

William Timberman,

“The idea of stewardship is attractive for its religious resonance on the one hand, and its echoes in the political idea of public service on the other, but I wonder if it could be broadened into something as fully fleshed out and politically relevant as the isms of the 20th century once seemed to be.”

On a small scale there was a legal case about a river in New Zealand brought by the Indigenous traditional owners, the Iwi. It took a long time for them to get standing (ie. a judge agreed to hear the case), but the judgement was to legally recognise the river as a person in its own right, and to look after its wellbeing and interests the court appointed the river two guardians – one chosen by the Iwi, and one chooses by the Crown.

That was in 2012, and I am not sure what the tangible outcomes have been over the last few years. A newspaper article indicated the Iwi were hoping to engage the wider river community in the stewardship of the river.

We have a slightly similar program about to start locally which is called Keepers of the Creek, this is where people take on duties to observe sections of the creeks and look after them, but this is not a legal outcome like the case of the river in New Zealand, and I am not sure if the Indigenous traditional owners will be asked to be involved or not.

136

Anarcissie 06.18.15 at 3:39 am

Lee A. Arnold 06.18.15 at 12:31 am @ 109:
‘….If almost everybody else didn’t believe that things are scarce, and if almost everybody didn’t bow to the social psychology of a material meritocracy of personal effort, then the whole system would already be transformed into something else, and the ruling class could do nothing about it.’

I wonder how to bring that about. I’ve been involved with giving stuff away (free stores, Food Not Bombs, etc.) but at this stage the projects are very marginal, and, like a lot of people, perennial refugees from the real estate war zones.

137

Plume 06.18.15 at 3:40 am

Quick elaboration on above comments: I’m not sure how it is for others, but conversations like these force the donning of several different hats. There’s one for the way things are, and how to deal with that; there’s another for the way things really should be, at least in my view; there’s still another acknowledging the likely impossibility of radical changes; another that seeks to push things as far as possible within current boundaries, and so on. A realist’s hat, a cynic’s hat, a pragmatist’s hat, a dreamer’s hat, etc. etc. I sometimes mix them up without realizing it. It’s difficult sometimes, in this crazy world, to keep them straight.

But when all is said and done, I’m a diehard radical democrat and egalitarian and seriously think our current system is insane. I think we should strive as much as possible to make our current system fairer, on the way to replacing it altogether. Chris’s concept of “nice capitalism” isn’t what I want. It’s just slightly less destructive than neoliberalism, but not sustainable either. Kind of like the difference between a broken arm and an amputation. The former is preferable. But both are far from good, much less ideal.

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david 06.18.15 at 3:41 am

I don’t know how the brave new world after the revolution will radically alter the meaning of things, but I would like that world to have piped running water and electricity to almost all households and functional almost all the time, and that alone means a substantial bureaucracy to monitor physical infrastructure, dispatch teams of men with heavy equipment to do physical labour at inopportune times of the day if things break, and dispatch teams of men with weaponry if someone happens to notice that there’s all this valuable copper just lying around.

So: hierarchy and organization. Or is the contention that one should ‘radically alter’ one’s attitude toward the usefulness of piped water and electricity?

139

Chris Warren 06.18.15 at 3:44 am

Plume

Yes, I understand where you are coming from.

You want to end all political and economic exploitation and oppression and as you are aware you still have “wealth”.

That is fine and there is nothing you have said that I disagree with. However the GFC and fossil fuels means we have to tackle the accumulation of private capital even if this does not eliminate corruption, chauvinism and destruction of the environment, homelessness and mistreatment of refugees etc etc.

You are seeking a socially classless society, but you have to tackle the mechanism that creates economic classes first.

140

Chris Warren 06.18.15 at 3:49 am

LFC

I am not clear what you are saying.

If:

…there *are* serious questions about whether a system that makes endless accumulation of capital the highest priority is sustainable over the medium or long run.

then what is the issue?

I just say that the very existence of the endless accumulation of capital is not sustainable in the long-run. Are you merely raising an issue of “priority”?

141

Plume 06.18.15 at 3:53 am

david @138,

No reason why you need major hierarchies to do any of the things you’re talking about. We’ve just been brainwashed into thinking we need massively steep hierarchies in place — by the people at the top of them, soaking up the wealth, telling us they’re essential, telling us we need them to be at the top.

In fact, even in our current capitalist system, ironically, local governments give us examples of how things can work with mild hierarchies in place. A typical local government has roughly a 4 to 1 pay ratio. Federal government is generally in the 5 to 1 range. And, yes, I know, pay isn’t even close to being everything. But this tells us that it is indeed possible, even in capitalist societies, to have relatively few tiers and still get things done.

A Fortune 100 company pays its CEO (on average) a thousand times the rank and file, or more. Compare that with the local government. Now extend this to titles, duties, flow charts, and throw in rotational leadership, and you can radically flatten those hierarchies that are such a huge part of our current capitalist structure. Push that down into the earliest stages of life, make education free and universal from cradle to grave, do the same for health care, public transportation, guarantee safe food supplies, water, etc. etc. . . . and you build up a society with hundreds of millions of people capable of manning the gears efficiently on their own. Self-management. Self-government. Self-provisioning as much as possible.

Democratically supported. Supported democratically.

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Plume 06.18.15 at 4:02 am

Chris,

Makes sense. The goal is the classless society, as far as I’m concerned. And, personally, I really don’t get that anyone outside the upper class actually is okay with their existence. That someone in the upper class would be opposed to an end to their privileges is easy to understand. But the vast majority of humanity? Why on earth are they even okay with such a set up?

Would appreciate reading your thoughts about the mechanisms that create classes. It’s too easy for me to just say it’s capitalism. I know class formation also occurred long before its rise. But if we’re dealing with today, just today, what are your ideas on the subject?

143

david 06.18.15 at 4:10 am

We’ve moved from abolishing hierarchies and radical alteration of meanings in ways of living, to proposing existing local and federal US government as an exemplar in terms of “non-major” hierarchy, payscales, and ways of living.

This feels like Holbo’s two-step of terrific triviality, really.

I do not like your “etc. etc.”. I must ask you to elaborate. You want guaranteed water. I like guaranteed water, too, but that implies a hierarchical bureaucracy that manages water infrastructure and presumably pays the labour that actualizes this maintenance. Is local government hierarchy okay if it obtains repeated democratic mandates? The locally-elected legislature exercises supremacy over, e.g., the plumbers union local, right?

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Lee A. Arnold 06.18.15 at 4:14 am

Anarcissie #136: “I wonder how to bring that about.”

The trend is in progress and it’s the logical conclusion. The system of merit is already under question, because more and more people work hard and don’t get ahead, while the people at the top of the pile are doing the inverse: reaping unmerited rewards. (The bank bailouts were only the most recent egregious case.) Right now we’re in a period of warring phony theories about why this is happening: government interference, lack of education, you name it. But as time goes on, if more and more people have less and less, no matter how hard they work, while at the same time the richest continue to pull further ahead, while at the same time there is no cessation in technological advance and the wonders of science, then the natural conclusion will be that the scarcity is being artificially imposed by the system of money.

145

david 06.18.15 at 4:18 am

A quick perusal of the 20th century suggests that people often blame foreigners instead. Rich foreigners, perhaps, but the really important thing is that they’re foreign.

146

js. 06.18.15 at 4:32 am

For famines, emergency shipments of food and other relief

Minor point, but I think Sen is utterly compelling that famines at least in the 20th century aren’t caused by food shortages in the traditional sense. So that raising “entitlements”, e.g. through cash transfers, would be very much to the point even there. (And fwiw, Mike Davis extended this argument to the 19th century, also pretty compellingly I think.)

147

david 06.18.15 at 4:48 am

Proposing cash transfers in the context of a Sennian famine is a confusion of the causes of such a famine – the problem is not incentivizing last-mile infrastructure, the problem is a combination of state incapability (e.g., Japanese conquest of British Burma) and state legitimacy (e.g., Indian demands for local provincial sovereignty leading to rice-hoarding and therefore collapse of any willingness to sustain compensatory inter-regional transfers).

That is to say, cash transfers would be equally impossible if a hostile country annexed a good chunk of the tax base on one hand, and then amongst your remaining subordinate governments, the richer ones voted to give nothing to the poorer ones.

On the other hand, if you could the state capability to implement cash transfers and the state legitimacy to seize the cash from the localities being net transferred from, then you shouldn’t really have problems distributing rice either. The actual gain is a public choice one: preventing ancillary motives (e.g., price support for rice farmers) from capturing and then distorting policy or implementation. US international in-kind support is not chiefly dangerous because it undermines food producers in recipient nations – many areas of the world, including rich areas, are permanent food importers – it is chiefly dangerous because it is abruptly withdrawn when the US has a bad season. In-cash support would be less vulnerable to this volatility.

148

Tim Worstall 06.18.15 at 6:52 am

@84

“In view of what has happened with employment, pensions, wages, the safety net, crime, minority integration, healthcare, education, even food and construction regulations in post-Communist countries, with destructive and often literally lethal effects on citizens,”

Currently sitting here in the Czech Rep and all of those things have, according to the people who live here (and the statistics themselves) improved enormously. That this hasn’t been true of all the ex-communist countries is true, I know, but it seems to depend upon what people did after communism, not the vanishing of it itself.

For JQ and LFC on the absolute poverty numbers. What line you draw makes a huge difference. The $1.25 a day was the Millennium Development Goal one, to be halved, and that was met. And largely by pushing people from $1 a day (roughly, say) to $1.40. So using $1.50 a day, or $4, whatever, will change the numbers significantly.

Whatever definition we do use the incomes of substantial numbers of people rose above it. $4 a day, $10 a day, all show the same effect. But which actual number will depend upon which limit of “poverty” is used.

149

Chris Warren 06.18.15 at 8:53 am

Plume

In history there are may types of classes. In ‘just today” there are just two types of classes.

1) Sociological – based on level of income irrespective of the source.

2) Economic – based on the source of income irrespective of the level.

Only 2 creates economic crisis, unemployment, austerity, catastrophe.

However history is still a factor. Today’s differences in source of income only exists because of historical violence when massive portions of the populations were dispossessed of their means of subsistence and original landowners were forced off their land by European musquets, cannons, sabres and and microbes.

Once expelled from their livelihoods they had no option but to sell their working capacity to whoever they could find and under whatever conditions they had to take. Many went into service, many went into the military, many went begging and thieving, many died and many ended up working for masters, initially in small machinery shops but subsequently in larger and larger shops as industry grew.

Developments were slightly different in transplanted settlements such as Australia and North America, but the result was the same.

This system was protected by a undemocratic State all through the 18th and 19th centuries against many attacks from Levellers, Diggers, Populists, Chartists, Utopians, Socialists and Trade unionists and Communists.

So, from this background, as new generations were born, new adults had no option but to also seek employment at whatever meagre amount they could get and again, the State ensured that this amount was low and political organisations of workers were kept in check.

This flow of humanity into low paid jobs producing goods and services they cannot afford to buy, allows others to receive income even as they sleep in their feather-beds.

So a small investor earning $30,000 from investments is in a different class to a factory worker who earns $40,000 making widgets for Walmart. The investor earning $30,000 will have completely different expectations for what the State does than the factory worker on $40,000.

There is more complexity particularly in OECD economies, but nonetheless this is the fundamental structure that must be changed. This class structure is the basis of modern capitalism and all the crisis tendencies that then arise. They are not resolved by “giving money to the poor”.

150

reason 06.18.15 at 8:54 am

It seems to me interesting in this thread that the Marxist have decided that the feeling of autonomy (there is a dispute about represents autonomy itself) is unimportant and have put themselves on the other side of a divide compared with the social democrats and the classical liberals. It seems autonomy is an interesting issue. I thought one of the main arguments that social democrats would have against classical liberals is that giving people the right to choose is not the same as giving people choices, but it seems both still value choice. Marxists apparently think not being exposed to negative forces is sufficient (so are Marxists just more pessimistic – maybe). Anyway interesting.

151

reason 06.18.15 at 9:19 am

Chris Warren @149
“So a small investor earning $30,000 from investments is in a different class to a factory worker who earns $40,000 making widgets for Walmart. The investor earning $30,000 will have completely different expectations for what the State does than the factory worker on $40,000.

There is more complexity particularly in OECD economies, but nonetheless this is the fundamental structure that must be changed. This class structure is the basis of modern capitalism and all the crisis tendencies that then arise. They are not resolved by “giving money to the poor”.

I think this is poppycock in the modern world.
1. Being a peasant may be more autonomous than being a wage slave but it doesn’t represent relative empowerment.
2. Most people in richer countries earn some income from accumulated assets (even if it is income in the negative sense of not paying rent)
3. Very few earn income only from assets thoughout their life.
4. The modern middle class life is an asset intensive lifestyle – it is impossible for this lifestyle to exist without some accumulation.
5. Pensioners can either live off capital income and savings or provided for from general taxation – ultimately the effect is the same – a transfer from the working to non-workers. This may be a generations struggle but it is not in general a class struggle.

People worried about excessive inequality may be concerned that your view of the world may be becoming a more realistic one, but that doesn’t mean it is in general a useful way of looking at things.

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engels 06.18.15 at 9:53 am

Reason, I don’t know what you mean by ‘negative forces’ but I think that’s a misunderstanding. Marxists haven’t said afaict that autonomy isn’t valuable, just that identifying it with consumer choice (flavours of ice cream) is silly.

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Chris Warren 06.18.15 at 9:59 am

poppycock

your 1) is irrelevant
your 2) is true but is consistent
your 3) does not change anything
your 4) is part of the complexity I mentioned
your 5) is a red herring. Retired workers are still workers and only receive the benefit they provided for their parents.

154

engels 06.18.15 at 10:07 am

T, short answer: it wasn’t socialism, it sucked, it wasn’t comparable to Nazism, it had some good points (winning WW2 for starters), it’s gone, it’s not coming back. (Pre-Stalin Russia is a different question.)

155

ZM 06.18.15 at 10:43 am

Plume: “And the richest 20% of the world consumes 85% of its resources. Obviously, that leaves 15% for 80% of the globe. No one can make a moral or rational case for this obscenity.”

I have mentioned this before, but low income earners in advanced economies are in the top 10-20% of income earners globally, because global income disparity is much greater than income disparity within advanced economies.

david: “Is it actually true we can produce enough goods for everybody?”

It depends what you mean by enough. There are too many goods being produced and used now which is responsible for our many environmental and sustainability problems. However people do not need so many goods as historical accounts of the past show us, they can just live simply. If everyone lives simply then that would help solve the environmental problems and the inequality problems too as since everyone can just live simply there wouldn’t be inequality.

A lecturer at uni just published a new book of collected essays on simple living:

“I am pleased to announce the publication of Samuel Alexander’s new book, Prosperous Descent: Crisis as Opportunity in an Age of Limits, which is the first book of his collected essays to be published this year.

The paperback of this book is available here:
http://clicks.aweber.com/y/ct/?l=FvRxk&m=3iCwPAMoVwid6Dr&b=hU24k2_m4a384Rwzx_Fg6w

For those who would prefer an electronic version, thefollowing link provides access to a pdf of the book on a ‘pay what you want’ basis. While the suggested price is $10, if you are unable to pay, then the book can be accessed for free.

http://clicks.aweber.com/y/ct/?l=FvRxk&m=3iCwPAMoVwid6Dr&b=UFkqFXNBo4xyjpKWRTpowg

Samuel Alexander declined several separate approaches by the premiere academic publisher, Routledge, because he wanted to reserve the right to give away his new book for free in a way that no conventional publish would allow. While we may not want to go into business with Sam, we can all be grateful for his generous activism.

Please share these links with your social networks. It is a small act that could send ripples through culture further than we might first think. Thanks for your support.”

156

Peter T 06.18.15 at 11:26 am

Branko Milanovic provides a succinct overview of economic life after communism:

http://glineq.blogspot.com.au/2014/11/for-whom-wall-fell-balance-sheet-of.html

The results illustrate my point – the large production systems that generate lasting wealth are built slowly and, when they are disrupted, they are not easily rebuilt. Money is the by-product, not the mechanism. The issue is how to reconfigure the systems so that they consume less without major disruption – if this truncates the hierarchies so that the bottom gets more, that would be good. But a flat structure lacks the power and reach build anything much.

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Peter T 06.18.15 at 11:39 am

Branko also nicely illustrates how very hard it is to build large social systems: money alone has not helped many of the countries on this list:

http://glineq.blogspot.com.au/2015/03/v-behaviorurldefaultvmlo.html

158

MPAVictoria 06.18.15 at 12:30 pm

Great links Peter.

159

Anarcissie 06.18.15 at 12:38 pm

david 06.18.15 at 4:10 am @ 143:
‘… I do not like your “etc. etc.”. I must ask you to elaborate. …’

I have heard that Marx complained that people wanted him to write the menus of the restaurants of the post-revolutionary world.

160

Plume 06.18.15 at 1:03 pm

david @143,

That’s a silly misreading of what I said. No, we’re not going from abolishing hierarchies to existing local government ratios. I just pointed out existing local government ratios within our current system to prove that even now, today, here, we don’t need neck-breaking hierarchies to make things work.

Get rid of capitalism absolutely, as we should, and it will be all the easier to do without them. They only exist in their current form to make a tiny few rich and the rest of us subservient — and separate from each other. There is no rational, logical or moral basis for the massive range of pay, duties, access, benefits, etc. etc we have now. There is no actual gap in the value between human beings to support the one in effect. There is no actual gap in the value of human time to support the one in effect — where a hedge fund manager can make more in seconds than most people will make in a lifetime. It’s done to keep us dependent, isolated and poor.

An average bloke may make in the area of 2-3 million for an entire lifetime of work. It would take them a thousand lifetimes to make as much as our billionaires.

Division of labor, specialization, going back to different workers making different parts of that famous umbrella . . . . none of that warrants the grand canyon gaps in pay, benefits, status, access, etc. etc.

We have been brainwashed into believing we must have steep hierarchies to get things done. Bullshit. And there is, of course, a second and third part to this:

What we get done will change, and how we get it done. Replace capitalism and we’re not making the same old useless shit that fills out garbage bins and landfills. We go from exchange value to use value. Replace capitalism and we’re not producing things in order to make a tiny few rich, which liberates us and frees us ginormously, so we can produce things to benefit the earth as well as the collective we.

161

LFC 06.18.15 at 1:08 pm

js. 146
…I think Sen is utterly compelling that famines at least in the 20th century aren’t caused by food shortages in the traditional sense. So that raising “entitlements”, e.g. through cash transfers, would be very much to the point even there.

ok. That’s why I put in the qualification about political factors.

T. Worstall 148
on the absolute poverty numbers. What line you draw makes a huge difference.
yes.

@Lee Arnold: My impression is that innovation in that area (energy) is not being translated into reality as quickly as you suggest, but it’s not something I know that much about, so I’ll bow out of the argument on that.

162

Plume 06.18.15 at 1:10 pm

Chris @149,

Very good precis. Michael Perelman does the history of that in The Invention of Capitalism. It sounds like you’ve read it. If you haven’t, it’s essential reading in my view.

Yes, it can be boiled down, in part, to options and actual freedom. Yet another of the lies told by the leaders of right-libertarian movements is that capitalism is synonymous with freedom. Maybe for a certain level of capitalists, but not for the vast majority, and not for workers. The right’s conception of “freedom” is that a worker can leave one job and go to the next. Actual freedom would mean, as you mention, not having to sell one’s labor power to a financial elite in the first place. It would mean being born into a system where everyone had the means and the options to choose different paths — like self-provisioning.

Until we break the cycle, until every human being gets to choose, you’re right. Giving money to the poor won’t be enough. This needs to start before one is even born.

163

Plume 06.18.15 at 1:20 pm

Peter T @156,

Is it your belief that the purpose of an economic system is “to produce wealth”? If so, there’s the problem in a nutshell. The purpose of an economic system should be to fulfill the basic needs of 100% of society, first and foremost. From that point, if it moves in a kind of Maslow’s hierarchy path, so be it. But it’s Prime Directive should be to take care of all fundamental human needs. Until it does that, it has no business even discussing “wealth creation” for anyone.

Our system has it ass backward. It was created to make a few people very rich, and if the rest of the population manages to survive along the way, well, that’s just a nice side-benefit. The idea of “trickle down” is actually nothing new. It’s fundamental to the capitalist system from Day One. Our economic system doesn’t exist to make sure workers have what they need, and can provide for their families. It exists so that workers make their bosses rich. Everything else is less than an afterthought.

That, to me, is criminal.

164

Plume 06.18.15 at 1:21 pm

its prime directive.

165

LFC 06.18.15 at 1:27 pm

From the Millennium Development Goals Report 2014 (UN Development Program) as summarized here:
http://www.undp.org/content/undp/en/home/mdgoverview/mdg_goals/mdg1/

“1.2 billion still live in extreme poverty [less than $1.25/day, (apparently) 2010 figures] even though poverty rates have been halved between 1990 and 2010 and the MDG target has been met.” The chart at the link breaks down, by region, the percentage living on less than $1.25/day in 1990 and 2010. There were fairly marked improvements in Southern Asia, S.E. Asia, and Latin America/Caribbean. In sub-Saharan Africa, however, the reduction was less impressive: from 56 percent to 48 percent.

166

parse 06.18.15 at 1:34 pm

So, the poor family is faced with the reality of opportunity cost. Improved living standards in the future come at the cost of present suffering, perhaps even starvation and death. Whether or not their judgements are the same as we would make, they are in the best possible position to make them.

Is this meant to be self-evident? As suggested above, in some cases, like medical care, there’s a strong case that poor families are not always in the best possible position to make judgements because experts have access to information that they don’t have.

Even as a general rule, this strikes me as something you would need to argue rather than to take as a given.

167

LFC 06.18.15 at 1:42 pm

p.s. to 165: As T.Worstall said, if one moved the extreme poverty ‘line’ to, say, $1.50/day or $2.00/day, the numbers deemed to be living in extreme poverty (i.e. below those figures) would go up somewhat.

168

Plume 06.18.15 at 1:46 pm

LFC,

To me, a major problem with those stats is they leave out why those people are making just 1.25 a day in the first place. The major reason is so that a Multi-National corporation can make obscene profits for its ownership, by paying a worker over there pennies on the dollar.

The usual comeback from supporters of this is to say that the worker over there is thrilled to make that 1.25. Nonsense. The folks exploiting them should be locked up for piracy . . . . Getting someone to produce something for a tiny fraction of what it would cost here is very close to actual slavery (Apple!!), and is at least on par with the concept of child labor. Pay a kid a few nickels to do something an adult would do for a few dollars is obscene. Doesn’t matter if the kid thinks it’s really cool to have those shiny nickels. What matters is the massive theft being committed at the top of the pyramid, as they laugh all the way to the bank.

Btw, roughly 3 billion humans work for 2.50 a day or less. More obscenity. All of that should be against the law, at the very least.

169

T 06.18.15 at 1:49 pm

engels @154
Thanks for the reply. That dissolves any ambiguity.

Peter T., Lee Arnold

As stated by Lee earlier, ever since agriculture humans had severe inequality. And we lived in a Malthusian world with growth in the hundredths of one percent for 100s of year until the industrial revolution. Life was short and brutal for most. An extraordinary share of the world’s population were slaves, serfs, and low castes. So how do you make the transition from Malthusian growth and almost no growth-enhancing technological change to a industrial society that produces 3% growth and allows the world’s population to increase from the hundreds of millions to 10 billion? Not a trivial problem. It was the possibility and actualization of this growth that lifted 1 billion Chinese and Indians out of severe and unrelenting poverty in our lifetimes (and it was export led growth to capitalist countries that turned the trick.)

Today in he U.S. we’re living through a concentration of income and wealth that mirrored the Guided Age and beyond with peak with inequality in 1929, at about the same level of inequality we have today. It took the depression and a world war to stop the trend last time after about 50 years of continuous concentration. The recent consensus among economists is that that level of concentration actually slows growth. The crisis of increasing inequality can last for a long time. We’re 30 years into this one, 20 years shorter than last time….

I don’t see society devolving into smaller governmental units as Peter T would like. We’re faced with the issue of dealing with nation states of of tens if not hundreds of millions of people. The right structure isn’t obvious although a bunch of the current problems are. There isn’t a successful model to turn towards. The most avid socialists on the thread seem to disavow the Soviet model as a bastardization of socialism or no socialism at all. I don’t see anyone putting China forward as a model and rightfully so. And were certainly in an age where autonomy is highly valued which limits our alternatives. So I’m all ears.

In terms of the OP, John is right on. We should get what we can right under the current political constraints especially if it can improve the lives of the poorest at no cost. People have to get over the fact that cash is the best way to help and that poor people should be trusted like everyone else to make decisions in their own best interests and that of their families. If that notion can’t get support on this thread after John explained it so well, it’s probably doomed for a while. (And I’m with him that education and healthcare/insurance do deserve special treatment.)

floopmeister @129 fuck off

170

reason 06.18.15 at 2:04 pm

T
(And I’m with him that education and healthcare/insurance do deserve special treatment.)
Add housing to that list of exceptions and I’m with you.

171

T 06.18.15 at 2:26 pm

Education is public good despite what our new overlords keep telling us. The markets for healthcare/insurance are particularly tricky in that participation needs to be mandated for the private markets to work (versus single payer) Hence the special treatment. I’m not so sure with housing. There have been a bunch of studies looking at public housing v. vouchers v cash as alternatives to help the poor. If anyone on the thread is familiar with those studies I’d be interested. A lot of the problem in housing seems to be zoning from what I recall. And there’s a long ugly history of racial discrimination in the private and public mortgage markets as well.

172

Plume 06.18.15 at 2:32 pm

Inequality levels are actually higher today than they were in the Guilded Age, and the separation between classes is greater on big ticket items like health care, education, housing. The leaps in pay one has to make in order to actually afford college today are greater than in the past. With the ginormous increase in health care costs, the same thing applies.

One year of chemo, for instance, can wipe out a family. Depending upon if hospital time is required, it can wipe out families with insurance too. Even in an outpatient situation, one day with a drip bag can cost 30K or more. That’s just one session. Most insurance doesn’t cover all of that and leaves a pretty fat amount for out of pocket.

We’ve gone from a gap of a few thousand for the rank and file income, a few million for the top, to a median wage for a single person of 28K, and a top range in the billions. The rank and file has barely moved, while the very top has gone up a thousand fold. Obviously, in order to make those billionaires, prices had to go up and wages had to go down, overseas or stagnate. Making billionaires requires far more drastic suppression of wages than making millionaires, etc.

Better yet, no millionaires or billionaires at all, and we solve most of the problem. Prices, wages and access. We can then move to ending money as the main barrier for entry to essentials, and radically reduce poverty, hunger, lack of education, etc. etc.

173

reason 06.18.15 at 2:51 pm

T @171
Re housing, I agree zoning (or put more generally planning issues) are a large part of the problem. The problem is that housing cost is dominated by land cost, and that in turn is dominated by externalities, infrastructure provision and NIMBY local government intervention.
My concern is that given supply blockages, just using cash subsidies on the demand ends up doing no good – land prices eat up any benefit. You need real supply side intervention (in whatever form it takes – maybe determined by local considerations).

* By real supply side I mean policies that actually increase the supply, not policies that make the rich richer.

174

T 06.18.15 at 2:54 pm

Plume —

I think the Pinketty numbers show US income inequality about the same today as in 1929. Inter-country inequality has fallen off considerably due esp to China although intra-country inequality is rising. I’m with you on education and healthcare. Housing affordability seems to be a more local problem suggesting it isn’t driven by the same forces. The share of national income going to labor has declined by 6 percent. So not only is income inequality getting worse, an increasing share is going to profits, rents, and interest. And a lot of the profits are from non-productive activities — oligopoly rents from industry concentration, extravagant IP protection, financial services — nothing that benefits the society as a whole. And those folks are buying the government. Like the Gilded Age…

175

Anarcissie 06.18.15 at 2:56 pm

@144 & @ 145 — There is the well-known syndrome wherein people with strong beliefs cling more strongly to those beliefs the more they are challenged, regardless of the validity of the evidence. Maybe it is universal; it is certainly widely observed (global warming, global not-warming, guns, gun control, creationism, Evolution, race, identity, etc.)

So it may be that belief in hierarchies of merit (whose dark underside is scarcity and penury), real or potential, is one of these quasi-religious beliefs. In that case, as david suggests, the reduction of scarcity will result in not only a political crisis (as those who rule through scarcity scurry about trying to preserve it) but a religious crisis as well, and foreigners, external or internal, may be used as scapegoats while new scarcities are created to alleviate the political and religious crises.

An alternative development would be to figure out what appetite is sated, or pain alleviated, by the belief and practice of meritorious hierarchy, and see if it might be replaced by something less injurious.

176

Plume 06.18.15 at 3:08 pm

Anarcissie @175,

Recent studies have shown that conservatives are especially prone to that digging in in the face of new evidence. Will try to find the links. They broke things down between “liberals and conservatives” — which is too narrow a political spectrum to begin with, but that’s another story. While liberals were also prone to clinging to previous beliefs, the studies found that conservatives did this more often and to a greater degree . . . and that, unlike liberals, the more they were confronted with new evidence contradicting their beliefs, the more they dug in.

Obviously, these studies aren’t claiming some universal. Just aggregate tendencies. But they do seem to suggest that people on either side of the political aisle have different reactions to new evidence. From one degree to another, with exceptions, etc. etc.

177

Plume 06.18.15 at 3:13 pm

T,

I’m willing to concede the point about relative inequality overall. Though this can sometimes miss further breakdowns of key costs, as mentioned. We do know, however, the gap is widening. I think it was Oxfam that had to redo their own numbers in just a matter of a few months. I need to recheck this, but I think they went from the richest 85 people holding half the world’s wealth . . . to the richest 80 . . . in just months, while seeing the trend as getting worse.

In our recent “recovery,” pretty much 100% of the gains have gone to the richest 10%, with roughly 95% going to the richest 1%. This, as far as I know, is unprecedented. While the rich have always seen the lion’s share of gains, I can’t recall such an overwhelming concentration in any previous recovery before. Maybe JQ, Bruce or some other poster has contrary data.

Suffice it to say, the problem is getting worse, not better.

178

T 06.18.15 at 4:42 pm

reason @173

I think we agree. My point was that housing supply issues vary from locality to locality — CA is a zoning disaster and parts of Manhattan have turned into a location where housing is an asset and not a place to live. But in a lot of the country where there is room to spread horizontally, land values haven’t gone berserk. The education and healthcare issues are a different beast altogether.

Plume —
It is getting worse and I hope that a great depression and world war aren’t needed to turn the tide.

And going back to opportunity cost on a macro level. Adding a billion Chinese to the world labor force dramatically improved their welfare and income and lowered prices for lots of manufactured goods. But if you are working class American in the Midwest, that brings little solace. The benefits of that deal went to labor in China and capital in the US. And unfortunately some of that pain has been directed at unionized workers in WI, immigrants, and the poor in the blue states. So yeah, opportunity cost.

179

LFC 06.18.15 at 9:42 pm

Plume @168

LFC, To me, a major problem with those stats is they leave out why those people are making just 1.25 a day in the first place.

These figures do not say that approx. 1 billion people are making less than $1.25/day. The figure says approx. 1 billion people are living on, or surviving on, less than $1.25/day. The figure, standing alone, does not say what the source of their income is — in some cases it might be wage labor, in other cases it might be begging on the streets, in other cases it might be transfer payments, in other cases it might be catching fish, eating some, and selling some occasionally in a market, in other cases it might be growing something and selling it occasionally, etc. etc.

To say that a statistic does not reveal what the causes of the statistic are is not a “problem” with the number. Numbers of this sort in general tend not to contain an explanation of themselves on their face (though there may be some exceptions). If I said “person XYZ earns 30,000 dollars a year,” and you came along and said “the problem with that number is that it doesn’t explain why or how XYZ earns 30K a year,” would that make sense as a critique of the number? Not really. That a number doesn’t contain an explanation is not a problem with the number, it just means the number may not tell one all of what one wants to know.

Which is a long-winded way of saying that while I generally share your dislike of exploitative multinationals, I’m not too happy about the way you have put the opening of your comment @168.

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Plume 06.18.15 at 10:14 pm

LFC @179,

Oh, come on. Your complaint is a classic example of splitting hairs. That’s enough to make you “unhappy”? That actually matters to you, the difference in language between “living on” and “making”? Seriously?

I should think you’d be far more worried about the folks living on or making that 1.25 or less, rather than taking issue with incredibly minor differences in wording.

As the young kids used to say, whatever.

181

LFC 06.19.15 at 2:31 am

@Plume
Here’s a more substantive point: The fact is that extreme poverty (however defined in terms of a precise income cutoff) has various causes, and multinationals paying low wages are probably *not* the prime cause of poverty of this ‘extreme’ sort. Indeed, factory workers being paid low wages in poor countries often make more (or have more income) than than their counterparts who stay in villages and don’t move to cities. That’s one reason why people take these factory jobs, even though the pay is low and the conditions bad and sometimes unsafe. So I don’t think that among the main causes of extreme poverty is (to quote you) “a Multi-National corporation … paying a worker over there pennies on the dollar.” (Which is not to defend multinationals’ pay scales or other practices.)

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Anarcissie 06.19.15 at 2:32 am

Plume 06.18.15 at 3:08 pm @ 176:
‘Recent studies have shown that conservatives are especially prone to that digging in in the face of new evidence. Will try to find the links. ….’

I’m aware of the studies. I would not be surprised to find conservatives acting in a conservative manner, if they were actually conservative, etc. (I am resisting a strong temptation to pepper these terms with quotation marks.) However, many other explanations of the phenomena are possible. Conservatives might care more deeply than liberals about political, moral, and cultural facts, for instance, or they might care about a greater variety of facts. Those things which the liberals did care deeply about my well elicit the same intransigence.

For example, scientists and science fans will say that any belief may be challenged, but actually, almost all that I have encountered believe strongly that (1) there is objective truth; (2) that human beings can apprehend at least some of this objective truth; and (3) that the scientific method is the way to apprehend it. When it became briefly popular in certain academic environments to challenge these beliefs, many science adherents became hysterical about the challenges (at least on Usenet and in certain print publications). Yet most of these people were probably quite liberal and, indeed, philosophically committed to the validity of such challenges.

People are curiously attached to their ideas. All of us. Maybe evolving new ideas is a very laborious or anxious task.

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LFC 06.19.15 at 2:35 am

p.s. Cities in poorer countries would not be bursting at the seams in terms of population (as many of them are) if people didn’t think that their economic opportunities, however constrained, were in many cases greater in the cities than in the countryside. This ‘deruralization’ in terms of population movements has been going on for quite a long time and is continuing. And corps. continue to site their garment factories, e.g., mainly in or around urban areas, at least afaik.

184

Plume 06.19.15 at 2:45 am

LFC,

I didn’t say those multinationals caused their poverty. But they have it in their power to pay fair wages and end it and they don’t. They could easily afford to pay — let’s take Apple and Foxconn, for instance — every worker twenty times their current wage with a ton of room to spare. Those workers make 70 cents an hour to build Ipads and Iphones for Apple, and because of this, Apple recently made well over 40 billion in profits for one year . . . . and now has a cash nest egg of well over 170 billion free and clear. It would cost Apple just one billion out of that 40 billion to give all of their overseas workers a 10K bonus. That’s still a drop in the bucket for them.

If you have the means — many times over — to alleviate poverty and you don’t? That’s pretty despicable. And these are Apple workers who make the owners of Apple filthy, obscenely rich. It wouldn’t be charity. It wouldn’t be a handout. Those workers actually deserve the money far, far more than the Apple suits sitting on their keisters a few thousand miles away.

Of course, Apple is just one of thousands of MNCs exploiting the shit out of people overseas. But they’re perhaps the biggest.

185

LFC 06.19.15 at 3:20 am

I agree the corps. should raise wages.

186

Peter T 06.19.15 at 4:51 am

Plume

No – my point isn’t that the purpose of an economic system is to produce wealth. It’s that people, as an ultra-social species, have learned how to build larger and larger social units, on a feedback combination of ideology enabling cooperation, cooperation enabling greater command of resources, this leading to greater production, production enabling expansion and so on. How we share the resulting resources is a political issue. Any economic theories about this are just window-dressing for some political preference (mine are with yours, for greater equality – but too much equality implies less production). Whether we can continue to expand – to build a political system that can encompass cooperation on the ecological issues facing us – is an open question. I don’t think we can before the resources fuelling the system start to run down.

Money is not wealth – it’s a claim on the pool produced by all of us in many and varied ways. If the global wealthy tried to translate their money claims into actual goods and services they would find the limit very quickly. Again, Branko Milanovic is illuminating on the difference:

http://glineq.blogspot.com.au/2015/05/was-everybody-under-socialism.html

187

Peter T 06.19.15 at 7:57 am

Or, to connect this directly to the post: if you wish to make the poor richer, bend the system such that there is more command of resources at the lower level: make union membership compulsory, use tariffs to keep high-wage production onshore, centralise industrial bargaining, direct government money to promote the industries judged most likely to provide good jobs…All cheerfully anti-market.

188

engels 06.19.15 at 8:57 am

An interesting companion piece to this post from 2010: John’s blue skies thinking on HE, inspired by the London student protests. Bottom line: abolish entitlement to free public university and replace it with Ackerman-style capital grants to be spent on tuition fees, starting a business, getting on the property ladder or other worthy goals.

http://crookedtimber.org/2010/12/15/realistic-utopianism-for-20-year-olds/

189

ZM 06.19.15 at 12:12 pm

There was an article in Asia and the Pacific Policy Society: Policy Forum by Adrian Pisarski arguing affordable and social housing should be categorised as infrastructure rather than welfare:

“Affordable and social housing in Australia needs to be considered as infrastructure rather than welfare, and in many ways it doesn’t matter which level of government has responsibility.

What matters is that resources are maintained to grow and reform how we provide social housing within a broader portfolio of affordable housing. After all, social housing is an asset that belongs to taxpayers, which ideally would be put to work for the benefit of all citizens, especially our most vulnerable.

If housing is viewed as infrastructure then affordable housing is essential to a productive economy, just like the provision of roads, rail, airports, water and electricity. For too long Australia has dealt with housing as a private commodity or as a welfare provision, and it is high time we think about the housing system as a whole.

We must rethink the purpose of housing, and see it as an essential component of a healthy, productive and engaged population.”

http://www.policyforum.net/house-of-cards/

190

engels 06.19.15 at 1:59 pm

‘abolish entitlement to free public university and replace it with Ackerman-style capital grants’

In real world of course we’re making great headway on the first part of this proposal (abolishing free access to HE), haven’t heard too much about the second lately…

191

Plume 06.19.15 at 2:17 pm

Peter T,

Thanks for the clarification.

We are in an impossible dilemma, due to the rapid, cancerous expansion of global capitalism. That dilemma takes many forms. But perhaps the worse form is this:

We have catastrophic, deadly levels of inequality, and we are running up against the absolute limits of the planet to sustain human life and much of nature — primarily because of destructive human activity connected with the endless growth of that global capitalism.

But in order to raise living standards for the poor and the lower middle (in our current system), we have to increase the very thing that is driving us up against those limits. In order to do the moral, ethical and right thing — radically reduce inequality — production and consumption levels will increase. Right now, the richest 20% consume 85% of all our resources. What happens when the “bottom” 80% starts to consume like the top?

The World Wildlife Fund, in their annual report, doesn’t tackle that issue (consuming like the rich) specifically. But it does talk about the impact of everyone on earth just living like the average American. If that were to happen, we’d need four entire earths to meet resources demands. Four. Even if we do nothing, we’ll need two entire planets by 2030.

To me, logically, the only answer is to radically downsize production and consumption, especially at the top, and lift up standards of living from the bottom up in such a way that it doesn’t add to the overall levels of new consumption and production.

In short, we’ve painted ourselves into a corner, and sticking with capitalism means we die there.

192

reason 06.19.15 at 2:34 pm

Plume,
I think you are making exactly the same mistake as free marketers do when they claim that “capitalism” has increased living standards. Capitalism is neither the panacea it’s supporters claim or the monster its opponents claim. It is just a method of organisation. The organisation doesn’t set the goals or the constraints (nor does it discover science and technology). Yes we need to redistribute (not least because redistribution will reduce the birth rate). But we also need sensible targets and constraints and history to me has shown that a division of responsibilities works better at that than a single concentrated source of power. People are forgetting that communism for a long while worried the west because it was catching up in production – not because of its inefficiency. But it did so at the expense of horrendous ecological damage, precisely because the fox was in charge of the henhouse. Countervailing power is the way to go, not concentrated power. The problem with the right is not that they are in favour of capitalism, it is that they are in favour of capitalists. It is a subtle but important distinction.

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engels 06.19.15 at 3:25 pm

No, it’s not a very subtle point. The problem with the Right is it’s for capitalists; the problem with liberals is they’re for capitalism.

194

reason 06.19.15 at 3:56 pm

Everything is obvious when you see it. Many supporters of the right really don’t understand the distinction.

195

Anarcissie 06.19.15 at 4:12 pm

Capitalism is not a thing? I would think a collective practice of domination and exploitation might be an actual thing which would in turn affect other things. Or to be ontologically precise, could be construed as such a thing. No?

196

Plume 06.19.15 at 4:15 pm

Reason,

I never said capitalism increases living standards. I don’t believe it has, except for a very small portion of humanity. I think the evidence shows it’s radically lowered living standards for the many, in order to raise them for the few.

197

Plume 06.19.15 at 4:19 pm

Engels,

That’s true.

I think a good analogy for that is:

Capitalism is like cigarettes. Conservatives want to smoke the unfiltered kind. Puts hair on your chest! Liberals want to put filters on them, thinking they can mitigate some of the damage.

We anticapitalists believe it makes a hell of a lot more sense to just get rid of the damn cigarettes altogether.

198

engels 06.19.15 at 7:32 pm

Another theory: conservatives represent the dominant faction of the dominant class, liberals subordinate faction of same class (from following last decade or so of US politics it appears both are quite capable of destroying capitalism, America’s empire and themselves.)

199

UserGoogol 06.20.15 at 9:05 pm

Capitalism versus socialism is a question of who runs the economy, which is an important question. But what really matters is what the people who run the economy do with that power: what policies are implemented. It’s entirely possible that if the economy was collectivized people would just implement the policies of capitalism in another name if they thought that was the right thing to do, and it’s entirely possible that in a private economy business owners could implement socialist-style policies if they thought that was the right thing to do, although market forces would certainly make that difficult to organize without some government regulation.

200

engels 06.20.15 at 9:30 pm

It is entirely possible that a monkey seated a computer keyboard will tap out the source code to Windows 8.

201

UserGoogol 06.20.15 at 11:17 pm

Perhaps not, but if you can’t expect people to implement reforms, why would you expect them to make communism happen? We are all part of the system, and the system can only make change happen when historical forces are aligned for them to happen. If people have the power to instate communism, then they also have the power to create radical social democratic reforms within capitalism.

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Bruce Wilder 06.21.15 at 5:28 pm

engels: It is entirely possible that a monkey seated a computer keyboard will tap out the source code to Windows 8.

If that is indeed what happened, it would explain a great deal.

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Bruce Wilder 06.21.15 at 9:03 pm

UserGoogol: Capitalism versus socialism is a question of who runs the economy, which is an important question. But what really matters is what the people who run the economy do with that power. . . if you can’t expect people to implement reforms, why would you expect them to make communism happen? We are all part of the system, and the system can only make change happen when historical forces are aligned for them to happen.

Anarcissie: Capitalism is not a thing? I would think a collective practice of domination and exploitation might be an actual thing which would in turn affect other things. Or to be ontologically precise, could be construed as such a thing. No?

reason: Capitalism is neither the panacea it’s supporters claim or the monster its opponents claim. It is just a method of organisation. The organisation doesn’t set the goals or the constraints (nor does it discover science and technology).

I do think the multifarious institutions and conventions that form the political economy, qua social and political and economic system, are frequently experienced by participants as alien and puzzling.

What we do individually does seem to have knowable and certain consequences; our intentions ordinarily align with our self-conceptions, our habits follow a predictable channel; the existential improbabilities seldom merit consideration, that we may be risking life and all to cross a street for the trivial satisfaction of greeting a friend or consuming an overpriced, over-hyped cup of coffee isn’t something we consider, except as spectators on tragedy, in news or fiction.

Yet, we remain embedded within this complex social construction that does constrain us, does define our choices and options, defines what a street is, that we should have to cross it, and how we should cross it safely — that is, the conventions we should observe and teach to children — “look both ways, use the crosswalk” or, should we assume the role of driver upon the street, “pedestrians have the right-of-way” and “stop on red” — and provides the crosswalk and the street that we should travel it, and defines many of the objects we should pursue in travelling the street or crossing it, as occasions arise.

We are all of us relying on the kindness of strangers in the fog of complexity that is the modern world: hoping that the driver of the car upon the street will respect convention and leave us to cross the street in peace and in whole possession of life, limb and property. The figures in Hazlitt’s tale of a broken window, all hope the baker is baking healthful bread, the tailor sewing a durable suit, the glazier skillfully fitting quality glass. Whether they do, is, if we are not impossibly naïve, something we presume, with reservations, just as we know that mostly we can safely cross the street, but that someone, somewhere, every hour of every day, has not made it safely across.

That we have this now very, very complex “system” of social, political, economic cooperation, chock full of artifacts and conventions, is familiar to us in frustration, even if we are ignorant of the history of its construction. We are all of us following rules, and often in the breach, all our moral sense transferred to conforming to the instrument of the rule (which, as I say, we probably don’t really follow, so much as we temper our violation according to our individual lights) with only a vague and imperfect sense of consequences, consequences masked by chance and ignorance of the interpretation of experience and calculations that have gone into the contingent “design” of the rules. Crossing the street in a purely libertarian society, stripped of conventions backed by authority, would presumably be a game of dodge-em or chicken, followed in cases of lethal error by one or another player, by vendetta. But, crossing the street in our society, when marred by fatal error, may be dismissed in authority’s judgement as an unintended accident, and carry no moral opprobrium or little penalty, though the consequences are real and tragic; while a violation of a rule with no immediate consequence — driving under the influence or violating a speed limit where the risk taken has involved no consequential “accident” — can involve a fairly serious penalty. Institutional authority makes costs and their distribution synthetic and systemically counterfactual to “real” consequences; the nominal is not a simple mask for the real and “opportunity cost” becomes surreal.

A highly developed, complex political economy carries with its complexity this distinct dilemma: how to control and judge the performance of public authority, especially in attenuating risk and waste.

“The System”, it seems to me, is a kind of a synecdoche representing this problem of public authority and how the problems of exercising public authority should be thought thru. “Capitalism” can be a useful label for the historical emergence of a set of modern institutions and political expectations contradistinctive to the foregoing “feudalism”, but I think in this discussion, the problems of public authority made manifest in that historic emergence are our focus.

“Capitalism” becomes shorthand not for a “system” so much as for a kind of mythology rationalizing, and apologizing for, a particular style or scheme for governing the further evolution of the exercise of public authority — an ideology, if you like.

Adam Smith’s great Inquiry into the Wealth of Nations, founding the discipline of Political Economy, was explicitly a guide for thinking thru how public authority ought to be exercised amid the emergent modernity driven by the disparate striving of a commercial economy loosely coupled by money and developing a deepening division of labor. Marx’s great work was subtitled, A Critique of Political Economy, and he attacked the rationalization cum apologia further developed from Smith by Ricardo and others. Hazlitt is offering a fundamentalist variation on the rationalization cum apologia, known as neoclassical economics, itself a further (bastard?) descendant of Adam Smith’s thinking.

I was trained in neoclassical economics and I rail against it, rather self-consciously, “from the inside”, cheerleading for its aspiration to epistemic integrity and scorning its ambitions to be a civic religion for an oppressive oligarchy.

My complaint against neoclassical economics is that it blocks and retards productive political debate on how public authority ought to be exercised and governed, by propagating lies about a “market economy” that does not exist. The differences between the loosely-coupled money economy that we actually have and the mythical “market economy” conjured in the imaginations of the faithful center on problems of knowledge and risk, rules and insurance, and involve the institution and exercise of hierarchical authority, something that pervades our actual political economy and is largely ignored (or pigeon-holed where it can do no harm to predatory or parasitic interests) in the theory of our political economy, most especially as that theory is propagated as neoliberal ideology.

I think getting smarter as a society, as a polity, about how to exercise and govern public authority has the potential to meliorate the consequences of its collective stupidity regarding the exercise and governance of public authority. I cannot say I am optimistic; betting on stupid is usually safer, where human politics is concerned, but humans are a species of idiot savants, capable of amazing leaps in understanding. Even if the actual system is about to break, as it surely appears to be, due to its inadequate governance, and a great crash of population and civilization follows, maybe the breakdown will trigger a disenchantment of the polity and a consequent exchange of priests for competent technicians and mechanics.

I cannot say I find Plume’s case for a different religion and different priests “system” convincing. Facing uncertainty squarely in the absence of a well-thought-out and shared theory is more likely to be paralyzing than it is likely to be galvanizing. People never know enough, to not-make mistakes; the best you can hope for is that they understand well-enough the system they have inherited and are free enough from cant to learn from their mistakes, and to continue the endless work of social construction and repair. We can work a revolution in our thinking, but the best we are capable of, in relation to the actual system, is reform followed by reform, and the worst . . . well, stupid is not as limited in its potential as genius.

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engels 06.21.15 at 9:15 pm

“If people have the power to instate communism, then they also have the power to create radical social democratic reforms within capitalism.”

You’re talking about different “people” in your two clauses. The kind of mass mobilisation needed to bring about socialism involves a larger (possibly largely disjoint) set of people than a left-wing party in government. (And I was responding not to either of these propositions but to your initial claim, that “business owners could implement socialist-style policies”.)

205

UserGoogol 06.22.15 at 3:27 am

engels: That’s fair enough. Although I’m fairly optimistic about the possibility of change “within the system,” I was probably picking an unrealistic extreme examples for dramatic effect. I mean, I do think that in principle business owners could implement socialist-style policies if they really really wanted to, (and I purposefully added that bit about regulation to acknowledge how difficult it would be to actually accomplish that even if they did), but that’s rather unlikely, because well, they have a certain role in society and that role discourages them from toying with such ideas. Ideally you might be able to persuade business owners that such policies are just the right thing to do, but some level of government intervention is necessary, whether that be pure socialism or just social democracy.

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UserGoogol 06.22.15 at 3:36 am

(Well, government intervention or something equally forceful, I get that there are anarchists in the room.)

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reason 06.22.15 at 8:54 am

Plume @196
????
“I never said capitalism increases living standards. I don’t believe it has, except for a very small portion of humanity. I think the evidence shows it’s radically lowered living standards for the many, in order to raise them for the few.”

I never said you did – I meant that SUPPORTERS of capitalism claim that it has.

But regards your second sentence – really? – compared to what exactly?

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Anarcissie 06.22.15 at 2:21 pm

UserGoogol 06.22.15 at 3:27 am @ 205 —
Historically, capitalist ruling classes have felt motivated to institute social-democratic (Welfare state) programs only when threatened by alternative ideologies of social organization which would threaten their position (for example socialism, communism, anarchism, fascism). Now that these threats appear to have receded, the programs are being rescinded.

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