Pitchforks and Torches

Cancel American Idol. Blame it on Goldman Sachs. Then you'll see some pitchforks and torches, by golly.

Of course the finance industry will blame the consumer, after all no one put a gun to their heads when they took out loans they couldn't afford.

But just as the modern food industry is probably responsible for the obesity epidemic, the finance industry is responsible for the over-borrowing. Both industries have legions of specialists who are tasked with pushing people's behavorial buttons to have them engage in actions that hurts the consumer but profits industry.

I would guess that most people reading this blog are relatively immune to the crap that industry throws at us, but most Americans aren't, and we all sufffer the consequences.

Max is completely correct. What happened when Keynes published the first comprehensive theory of Macro economics was that it became possible to model the overall economy mathematically - if you had the data. Since then government at every level, especially the federal government, has spent large sums of money collecting economic data for use in macro economic models. It's important that they do so. But the data is predominantly demographic data (relatively static over any short period of time) and accounting data which is the aggregation of the pricing results of large numbers of exchange transactions using money.

Remember that about the accounting data. There is no effective data collected on the power relations between the buyers and sellers, and nothing in that data addresses the equity of any of the transactions involved, either before or after that accounting transaction data is accumulated and aggregated.

Unfortunately it had a really bad side effect. Historically the discipline was called political-economics because in Marx' formulation the intent was to understand the materialism at the root of society, recognize the essential inequity of what he identified as the class distinction between property owners and the workers who had little control over their own lives, and change society so that there was more equity between people. The discipline has changed since 1936 into the statistical manipulation of the data the government collects.

It is now left to politicians to deal with the power relations involved in economic transactions, and since all the money belongs to wealthy capitalists, only the financial manipulations that can use accounting data are rewarded. The various economic models have become politically a great source of political propaganda, and the most widely respected economists in the academic world are actively discouraged from studying or speaking out on economic power relations unless it is to support capitalism as the perfect system and demonize socialism (which was designed to get government to deal with the power relations such as monopolies and such.)

This also permits the very wealthy in America to manipulate the government to both give them contracts in preference to competitors since they send many of the politicians into office, and also to get the laws changed so that procedures and taxes that give preference to the wealthy get passed. The most extreme example is the effort to eliminate the inheritance tax which is of no economic value to society, but works to maintain the wealthy families at their high (and mostly inherited) social positions. As Madoff and Stanford have recently demonstrated, control of large sums of money makes you immune to most oversight and regulation, even when the law is expected to take those actions. Both of those ponzi schemes were maintained way too long in spite of good reasons to be suspicious.

The result of the fact that the economics profession has become totally dependent on things that can be quantified is that today economists are very adept statisticians - and the study of power relations between people is actively discouraged in the profession. If you want to discuss the social value of economic society, the "economic" profession has nothing to offer except the assumptions they make when they create their statistical models. You see, there are no numbers that can be reliably and validly assigned to "equity" and "justice" or even to "humanity" that allows those thiings to be entered in the aggregations that make up the statistical models.

That's what Max is talking about. So was J. K Galbraith, which is why as famous as he got, he was never a very respected academic economist.

I've been reading a lot of Gaibraith lately, and I recommend it. Many of his observations were spot on, and many of his predictions have come to pass. Granted much of what he said was more sociology instead of economics, but in that way he pointed out the huge blind spots that economic teaching has.

Sometimes, to this humble observer, our chief economists remind me of the CIA analysts who were instructed by Bush to repeat their analysis until they gave him the answers he wanted to hear. In this case it is the ultra-rich who are asking the economists to produce a result which always favors their interests. Whether this pressure is overt or covert, direct or indirect, obvious or devious seems to matter little. The end result is always the same.

The moneyed interests are satisfied first. Look at Goldman Sachs projecting, what, tens of billions of dollars in payoffs this year? You can buy a lot of politicians with that kind of payola. The rest of us don't stand a chance.
Tripp