In Debunking Economics, I argued that economic theory had done such damage to society that humanity would be better off if everything ever written about economics by anyone–including yours truly–were obliterated, and the world had to start again from scratch.
Unfortunately that can’t be done–everything, even economics, develops in an evolutionary way–but the next best thing is to admit how wrong neoclassical thought has been, and to start developing alternatives.
There are many such endeavours around the world, and one of them is taking place in the very apposite location of Reykjavik, Iceland, in September this year.
Though I am on the scientific committee for Managing financial instability in capitalistic economies, I won’t be able to attend for the usual reasons of not having a sufficient travel budget to overcome the distance from Sydney to Iceland. The rest of this post replicates the conference’s description and its call for papers.
Managing financial instability in capitalistic economies
Reykjavik, Iceland
September 3rd- 5th, 2009
Background
The financial and credit sectors have a great importance in our modern service-oriented economies. as the present credit crunch and financial market crash and the subsequent severe economic recession have pointed out. According to present mainstream approaches to economics, the financial and liability structure of the economy may influence aggregate economic activity and amplify business cycles. However, capitalistic economies are viewed as essentially stable and tending towards steady growth; and the investment-finance linkage is considered as an amplifying mechanism of shocks exogenous to the economy. A complementary strand of research emphasizes the role of the investment-finance link not just as a propagator of exogenous shocks but as the main source of financial instability and business cycles, i.e., during good times economic agents take excessive risks and lend and borrow too much, generating endogenous ruinous boom-and-bust cycles. Besides, recent developments in statistical equilibrium approaches to economics, alongside with the emergence of behavioural and agent-based models, have indicated the way to overcome the limitation of traditional equilibrium-based analytical models characterized by fully rational representative agents.
Aims and scope
The purpose of the workshop is twofold: to discuss new modelling paradigms in financial economics and to design new public intervention policies aimed to recover a capitalist economy from a deep recession caused by a credit crunch or a collapse in assets values. The Icelandic economy will be discussed as a case study.
Topics include, but are not limited to, the following:
- Agent-based computational economics
- Behavioural finance and economics
- Economics of heterogeneous and interacting agents
- Financial Keynesianism and financial fragility
- Financial engineering
- Econophysics
- Endogenous and systemic risk management
- Financial econometrics
- Statistical equilibrium in economics
A final round table is foreseen in discuss new possible foundations to the science of economics. A related document, called Reykjavik manifesto, will be released.
Call for Papers:
Researchers are invited to submit a paper to the First International Workshop on Managing Financial Instability in Capitalistic Economies (MAFIN 09), to be held in Reykjavik (Iceland), September 3rd – 5th, 2009.
Aims and scope:
This three-day event will offer presentations of papers selected by the Scientific Committee after a blindly double review, as well as keynote sessions by Invited Speakers. Discussions will have a large space in the final program.
The purpose of the workshop is twofold: to discuss new modelling paradigms in financial economics and to design new public intervention policies aimed to recover a capitalist economy from a deep recession caused by a credit crunch or a collapse in assets values. The Icelandic economy will be discussed as a case study.
Topics include, but are not limited to, the following:
• Agent-based computational economics
• Behavioural finance and economics
• Economics of heterogeneous and interacting agents
• Financial Keynesianism and financial fragility
• Financial engineering
• Econophysics
• Endogenous and systemic risk management
• Financial econometrics
• Statistical equilibrium in economics
A final round table is foreseen in discuss new possible foundations to the science of economics. A related document, called Reykjavik manifesto, will be released.
Venue:
The workshop will be held at Reykjavik University in the Ofanleiti building, 103 Reykjavik, Iceland.
Submissions:
An extended abstract or a short paper should be submitted in PDF format by sending an email to: mafin09@ru.is
The deadline for the submission of extended abstracts or short papers is July 19th, 2009.
The maximum length of contributions should be 6 pages.
Please send an anonymous version without any author information to guarantee a double-blind review. Author(s) information must be included in the body of the email.
Workshop Proceedings:
After the event, we plan to publish in a special issue of a Journal with a JCR impact factor, the extended and revised versions of some selected papers modified after the remarks and discussions that will take place during the Workshop.
Important dates:
July 19th, 2009 Submission of extended abstracts or short papers
August 15th, 2009 Notification of acceptance
August 25th, 2009 Workshop registration deadline
September 3rd – 5th, 2009 Workshop
October 31st, 2009 Submission of final papers
Organizing Committe:
Marco Raberto (Chair), Reykjavik University, Iceland
Hlynur Stefánsson (Co-Chair), Reykjavik University, Iceland
Haraldur Óskar Haraldsson, Reykjavik University, Iceland
Invited speakers:
Silvano Cincotti, University of Genova, Italy
Cees Dicks, University of Amsterdam, Netherlands
Mauro Gallegati, Polytechnic University of Marche, Ancona, Italy
Thomas Lux, University of Kiel, Germany
Enrico Scalas, University of East Piedmont, Alessandria, Italy
Willi Semmler, New School, New York, USA
Leanne Ussher*, City University of New York , USA
(*to be confirmed)
June 7th, 2009 at 12:40 pm
[...] See the original post here: An economic counter-revolution begins… in Reykjavik | Steve Keen's … [...]
June 7th, 2009 at 5:41 pm
Willem Buiter – latest post: “I am particularly intrigued by Lara Resende’s argument that this downturn is different from all past downturns, including the Great Depression of the 1930s, because of the continuing high level of private sector indebtedness, and that under these conditions neither monetary policy nor Keynesian fiscal policies are likely to be effective. But judge for yourself”.
Great read – http://blogs.ft.com/maverecon/2009/06/after-the-crisis-macro-imbalance-credibility-and-reserve-currency/
June 7th, 2009 at 6:02 pm
Someone should delete the above comment…
Mark Blaug sums up conventional economic theory well:
“Modern economics is “sick.” Economics has increasingly become an intellectual game played for its own sake and not for its practical consequences. Economists have gradually converted the subject into a sort of social mathematics in which analytical rigor as understood in math departments is everything and empirical relevance (as understood in physics departments) is nothing. If a topic cannot be tackled by formal modeling, it is simply consigned to the intellectual underworld.” (pp. 12-13)
“Economists are loath to examine their assumptions by the use of survey techniques, by simply asking agents what they believe or what they do, because Friedman’s methodology gave economists the false impression that nothing can ever be learned by such means. Perhaps the real trouble is our age-old belief, going back to Ricardo, that economics is essentially a deductive science, in which we infer economic behavior on the basis of some assumptions about motivations and some stylized facts about prevailing institutions, suppressing even the temptation to ask whether these are descriptively realistic assumptions and accurately chosen facts. It is high time that economists re-examined their long-standing antipathy to induction, fact-grubbing, and fact gathering before, and not after, we sit down to theorize.” (p. 30)
Blaug, Mark. 1998. “Disturbing Currents in Modern Economics”, Challenge, Vol. 41, No. 3, pp. 11-34
Joseph McCauley sums it up:
“To be quite blunt, all existing ‘lessons’ taught in standard economics texts should be either abandoned or tested empirically, but should never be accepted as a basis for modelling. It is important to understand what economists have done previously mainly to avoid making the same mistakes.” (p. 603)
McCauley, Joseph L. 2006. “Response to ‘Worrying Trends in Econophysics’”, Physica A, Vol. 371, No. 2, pp. 601-609
June 7th, 2009 at 10:56 pm
jrbarch,
Reading that blog entry I came across an assertion that I wouldn’t mind fleshed out.
So if anyone can give me an explanation of how this is so, please do. I’m curious to the mechanism for this pronouncement.
“While chronic inflation is essentially a question of excessive debt of the public sector…”
i.e. how is chronic inflation caused by government debt?
Extracted from the end of the 15th paragraph.
June 7th, 2009 at 11:22 pm
Also,
“It is thus understandable that China, the largest withholder of American public debt bonds, does not feel comfortable and proposes the creation of a supra-national reserve-currency.” (End of para’ 26)
Here’s another curiosity; how would the “Cavaliers” expand credit in such an environment?
June 8th, 2009 at 9:15 am
http://www.washingtonsblog.com/2009/06/economists-and-other-experts-are.html
“The economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself.
“There are economic professors in American universities who think they are masters of the universe, but they don’t have any historical knowledge. I have never believed that markets are self correcting. No historian could.”-Niall Ferguson.
““The Government’s business is in sound condition.”
Andrew W. Mellon, Secretary of the Treasury
-December 5, 1929
RESERVE BANK AREAS FORECAST NEW YEAR
Despite the obvious slackening of the pace of business at the close of the year, leaders in banking and industry throughout the country maintain an optimistic attitude toward the prospects for 1930.
-January 1, 1930
“The worst is over without a doubt.”
James J. Davis, Secretary of Labor.
- June 1930
‘BUSINESS CYCLE’ SEEN AT NEW PHASE; Bankers Hold Downward Trend in Markets Indicates Recovery Is Near. DENY ANALOGY TO 1920-21 Economists Point to Superior Credit Conditions Now, Holding Easy Money Points to Revival.
-July 6, 1930
………..etc etc.
June 8th, 2009 at 9:42 am
The first results from the EU elections have arrived. There is a significant swing to the right or far right. If the same happens elsewhere (in the US) it is easy to predict what’s going to happen next.
You guys do not need to buy gold at least during the next phase of the crisis. The risk of inflation is getting lower. Buy a gun instead. I predict even more competition between social groups and countries. There is a brutal Polish proverb saying “before the fat guy slims down the slim guy will die”.
I think that this is also the end of the New Labour ideology in the UK. I hope that this message will be understood by the local followers in Australia however it might be too late already (despite the current popularity of the Prime Minister). Your mandate to stay in power is based on the preservation of the illusion of wealth for everyone.
The mandate to seize power for the right wing parties is that they don’t care – as long as my wealth (or my illusion) is preserved.
My observation is that economics as a science in this context is irrelevant. It can only play a role of the fig leaf. The world will once again be based on a pure free competition and a race to the cliff edge (of exhausting global resources and damaging the environment). To understand this the economics from 18th century is good enough. Whoever runs faster can push the opponent off the edge. So let’s run or get carried on the Chinese back!
June 8th, 2009 at 10:09 am
ak,
Unlike Europe with it’s disparate peoples, languages, cultures, bankster families, various brutal histories with extremeist politics (and wonderful food!), Australia has a home grown cohesion borne of people who escaped the crap of Europe and elsewhere to start anew. That breeds a certain resiliance and tenacity.
Humble and new as it is, there are some very strong centrepoints to our small history that can be invoked in times of extreme adversity to uniting effect, like that which we will be shortly encountering. The benefit being that we are an island nation , all of us raised in the belief that we sink and swim TOGETHER. Yes there will be strata among our mob and strains will emerge- but *together* we will remain- you don’t need to doubt that.
I wouldn’t be so confident to say that of Europe however.
June 8th, 2009 at 10:52 am
Aligned with Australia’s unfolding collapse in trade….;
http://www.globalresearch.ca/index.php?context=va&aid=13874
“Has the Chinese Economy Really Recovered? The Signs are Mixed.”
June 8th, 2009 at 6:12 pm
Hi dobther – I’m just a casual observor (as I guess you are or you wouldn’t have asked the questions?) so please take my understanding as such (pundits feel free):
A govt. runs a country into debt, and exhausts its own and its population’s capacity to service the debt now and in the future. If the debt is deemed irrecoverable the country’s currency collapses.
Before this happens the govt. may issue more (and riskier) debt until buyers lose confidence. The govt. is then forced to either implement savage spending cuts incurring greater wrath from the people, or ultimately default on its debt.
The last option before default is to try and inflate away the debt, inflation reducing its nominal value. This is done through increasing the money supply thus devaluing the currency. Some economists believe this is the strategy Larry Summers will rely upon if he takes over as next Chairman of the Fed from Bernanke; which is an international concern as the dollar is an international store of value.
This is why China in uncomfortable holding US bonds. To the degree the dollar collapses, so too does their investment. They want a supra-national reserve currency in which they can store value.
Am sure there are many other factors. Cheers …
June 8th, 2009 at 6:17 pm
I think that European citizens have moved to the right because of the apparent failure of left and liberal European political parties to deal with inequality, the GFC and related economic issues. Even the ultra-right BNP in the UK has been gaining popularity.
Unfortunately, as John Dewey pointed out long ago, alterations in the shadow will not change the substance. Right, centrist, liberal or left politics isn’t likely to change much until the substance is finally confronted and democratized. Criticizing government, whether it is justified or not, will not achieve much.
Niall Ferguson is an interesting academic, and has been accused of historical revisionism (which isn’t necessarily wrong). I’ve got his Ascent of Money, but haven’t watched it yet. It should be interesting.
June 8th, 2009 at 8:27 pm
New article from Michael Pettis, an expert on China based in Beijing. Steve gets a mention…
http://mpettis.com/2009/06/stimulus-%E2%80%93-at-what-cost/
“As badly as Chinese exports have been hurt, and exports were down 22.6% year on year in April, Chinese exporters have still done much better than other exporting countries in Asia and elsewhere, suggesting that they have managed to avoid much of the brunt in the contraction in global imports, led by the contraction in the US. This, as I argued in last week’s entry, has as much to do with credit and interest rate policies as it does with any inherent competitive advantage.”
June 9th, 2009 at 8:24 am
Have a look at this
http://www.technocracy.ca/simp/man-hours-distribution.html
Like Fisher, seems to me that these guys from the 1930s and 1940s knew more about economics than we do today.
June 9th, 2009 at 8:27 am
I love this quote, I really love it:
” In the distribution to the public of the products of industry, the failure of the present system is the direct result of the faulty premise upon which it is based. This is: that somehow a man is able by his personal services to render to society the equivalent of what he receives, from which it follows that the distribution to each shall be in accordance with the services rendered and that those who do not work must not eat. This is what our propagandists call `the impossibility of getting something for nothing.’
Aside from the fact that only by means of the sophistries of lawyers and economists can it be explained how, on this basis, those who do nothing at all frequently receive the largest shares of the national income, the simple fact is that it is impossible for any man to contribute to the social system the physical equivalent of what it costs that system to maintain him from birth till death-and the higher the physical standard of living the greater is this discrepancy. This is because man is an engine operating under the limitations of the same physical laws as any other engine. The energy that it takes to operate him is several times as much as any amount of work he can possibly perform. If, in addition to his food, he receives also the products of modern industry, this is due to the fact that material and energy resources happen to be available and, as compared with any contribution he can make, constitute a free gift from heaven.
Stated more specifically, it costs the social system on the North American Continent the energy equivalent to nearly 10 tons of coal per year to maintain one man at the average present standard of living, and no contribution he can possibly make in terms of the energy conversion of his individual effort will ever repay the social system the cost of his social maintenance. It is not to be wondered at, therefore, that a distributive mechanism based upon so rank a fallacy should fail to distribute; the marvel is that it has worked as well as it has. “
June 9th, 2009 at 8:50 am
Gloves off. This is the possible cost of reducing carbon dioxide reductions according to Australian economist and Reserve Bank Board member, Warwick McKibbin:
“The US can expect to shave 2.5 per cent off its GDP by 2050 if it introduces the House version of its cap and trade scheme, compared to doing nothing”
“Personal consumption would be reduced by between $US1 to $2 trillion on present values over the period. Employment levels would be cut by 0.5 per cent in the first decade with big impacts in the coal, crude oil and electricity sectors, the study found.”
“Professor McKibbin’s model looked only at the US economy. But in remarks after his presentation he warned that Australia’s abatement costs would be five times those of the US because of its dependence on coal and the lack of substitutes like nuclear power.”
“The big message Professor McKibbin and his fellow researchers want to stress is that different schemes with different mid-term targets can have different and quite significant economic impacts.”
“What we have demonstrated is that flexibility matters. You can end up with the same outcome for the environment with much higher cost if you don’t have flexibility,”
“So if you announce targets and you stick to those targets year by year, without allowing any banking or borrowing or allowing any inflow or outflow [of permits] across borders, you can end up imposing much higher costs for no additional benefit.”
http://business.smh.com.au/business/new-laws-could-shave-25-off-us-gdp-mckibbin-20090609-c136.html
I can only believe that the model he used was based on the neoclassical economics. His message makes sense to me – rules should not be applied blindly but it is the end result what matters.
Steve,
How reliable is his model?
I have 2 comments:
1. If the system is so inflexible what will happen if the oil physically becomes less available?
2. Has anyone spent even a minute trying to address the real issue:
Why the economy has to grow? Why do we depend on the increasing consumption level especially with relation to energy? What if it cannot grow and it shrinks 5-10% for example due to the GFC? Are we condemned to 10-15-20% of unemployment?
I personally don’t care if my real income shrinks by 5%. But in fact I am better off the crisis especially in the deflationary scenario. I anticipated the downturn and locked up my salary in a company which has a stable market position. My wife has a public sector job.
Can you see the problem? For maybe 30-50% of the society the recession/depression will be beneficial. For maybe 30-40% it will be bad (if somebody has to find a new job and it is getting paid less as a result). But for 10-20% it may be a disaster as they will be permanently unemployed. (I made up these numbers this is just an example).
June 9th, 2009 at 7:23 pm
As a revolutionary, I cannot help thinking that the title of this post should be: An economic revolution begins…
Counter-revolution invokes pictures of Tsarist generals destroying soviets and hanging peasants, Lenin crushing Kronstadt, Franco’s troops shooting anarchists in Zaragoza’s bullring, Soviet tanks in Hungary, and so on.
Surely, as the aim is to transform economics for the better, it should be a REVOLUTION? Particularly as many of our problems come from the neo-classical counter-revolution against Keynes which produced the post-war neo-classical “Keynsian” synthesis that Joan Robinson attacked?
June 9th, 2009 at 10:03 pm
Frank,
You remind me, that Ayn Rand said all that and more in her philosopical “Objectivism”
She covered every principle of mans’ rights in production and worth, intellectual ownership within any trade, emotionally as well as commercially.
They are excellent principles and cannot be denied to the high minded moralist.
However we suffer reality. That is the World is controlled by “power lust” and this includes Greed That is why a new economic system is needed and legislatively introduced to effectively give people the right to feel secure with the commitments they wish to undertake. Not too much for a society to expect from their elected representatives, I would think.
Elected Govts have a lot to answers for. The rot is there, not with the people.
Abe Lincoln said “God must have loved the simple people, because he made so many of them”
He was right, He did not mean dumn, or disadvantage, or incapable of thought. he meant productive people that want security in their elected leaders carrying out their role to protect their faith in having elected them. Sorry for the rave ole boy but philosophy unless put to reality is no different to “wishin’ an’ hopin”
June 9th, 2009 at 11:11 pm
all this talk of trading and financial imbalances between the US and china gots me to thinking.
what happened last time china got involved with trade with the west.
it isnt the late 70’s and deng ,but the late 18th and early 19th century.
according to some, during this period china was responsible for anywhere between 20 to 30% of global manufacturing output, care of its daliance with the british and other european empires.
what happened.
the chinese produced all manner of finery for europe, such as tea and silk. in return for their troubles the british gave them opium , and lots of it.
and when the chinese protested to much, the british re negotiated their trading relationship with the chinese through the pointy end of a barrel of a gun, extracting major trading concessions from the manchu’s. and hence we had what are now refered to as the opium wars.
it didnt end there.
we had ,a tottering and corrupt qing dynasty, unrest in the country side and humiliation at the hands of the british,
enter stage left a messianic madman named hong xiuquan circa 1847, and the beginings of what is now refered to as the taiping rebellion, a major civil war that raged up and down the chinese country side for over 15 years, and claimed anywhere between 20 to 40 million lives, which probably makes it the second bloodiest war in history after world war 2.
in one of histories minor ironies, the tai ping were ultimately put down by the qing with the help of the british in the form of commander charles “chinese” gordon.
ultimately the actions of the taiping served as an example to mao himself
the moral of the story is this,
as china negotiates its way through these treacherous waters towards modernity and hegemony , what is its response going to be to percieved injustices and obstructions in the global trading environment towards it, and what will the internal consequences be.
will they be racked by internal revolution again, will they shun outsiders and become insular again, or will they try and gain consessions from the rest of us through the barrel of a gun.
the past is very interesting and not very encouraging , lets hope the future is less interesting and more encouraging, lest we resurect that old confucian curse “may you live in interesting times”.
June 10th, 2009 at 8:15 am
Well, on this point we do differ Anarcho–though on most intellectual issues, I am in considerable agreement with you.
I’m an evolutionist as regards society; in economic theory I am too, and if any decent evolutionary process had been applied to neoclassical economics then it would have become extinct in the 1930s. Instead it was kept on intellectual life support by absurd assumptions and its supplicant role in justifying inequality in a capitalist system.
That life support involved an intellectual counter-revolution directed at Keynes’s ideas, led primarily unknowingly by Hicks but also Samuelson, and later knowingly and deliberately by Friedman and then Lucas and Sargent etc, and described as such. Hence in an academic sense using the term counter-revolution I’m using their term back against them.
Now having thought about it, you’re probably right about the semantics here too!
June 10th, 2009 at 8:32 am
Steve,
Will the talks/proceedings be available online? I’m sure many of us who won’t be able to make it would at least be interested in reading the plenary papers after the fact.
June 10th, 2009 at 2:28 pm
i’m not sure we should couch anything in terms of revolution or counter revolution.
we dont want to scare away the chickens.
it would be nice if the messege itself was enough for most people,
but it isnt, sometimes
and its important , how its delivered,
and in most things of this nature its best to come in under the radar,
the more unconventional and radical the messege, the more re assuring and conventional we should appear,
lest we be accused of being radical priests,
obviously things get bad enough sometimes that there is no covering them in honeyed words.
June 10th, 2009 at 2:29 pm
Steve,
Gerard Jackson contends (strongly) that Australian GDP is calculated incorrectly. Your comments on this?;
http://www.brookesnews.com/090806ausrecession.html
“Their second failure is to grasp the fact that GDP greatly underestimates total economic activity. Once we take into account spending between firms we find that consumer spending as a proportion of total spending drops from about 60-64 per cent of GDP to about one-third. Therefore it is business spending that drives the economy and not consumer spending.”
“It follows from the previous reasoning that if account were taken of inter-firm spending then the national accounts would show that the economy is contracting.”
June 10th, 2009 at 3:00 pm
Steve,
“…if any decent evolutionary process had been applied to neoclassical economics then it would have become extinct in the 1930s.”
That’s not necessarily so, can I draw your attention to Richard Dawkins work on Memes, it’s then easy to see how it has survived and continues to flourish.
A case in point in the animal kingdom is the peacocks tail, not regarded as a utilitarian piece of evolution but without it you’re toast in the peacock world.
His analogy of a constant room temperature being maintained by the input of a heater and that of an air conditioner serves well to illustrate that you can achieve a wide variety of outcomes as long as you have the means to offset the other variable. Turn up the heat, lower the temperature with the conditioner to keep it where you want it. Only when you run out of that ability will things change.
June 10th, 2009 at 4:04 pm
dobther
One tool which became well understood in the 1930’s was mathematics which described the behaviour of dynamics systems with time. For the last 80 years neoclassical econimists have chosen to ignore time as an important parameter. If their discipline had evolved in the right direction (or rather at all) the effects of time and feedback would now be well understood. Now they are clearly lost in the wilderness of mathematical ignorance, they don’t even know what they don’t know.
They like to think of hidden hands, while they have been misquoting Adam Smith with his hidden hand of the market, the hidden hand of Old Man Time has defeated them.
June 10th, 2009 at 4:42 pm
This is what happens when you fail to manage the data correctly. Obama’s spin machine needs an overhaul (perhaps Kev can consult for him?);
http://michaelscomments.files.wordpress.com/2009/06/stimulus-vs-unemployment-may-corrected.gif
Obama’s predictions on unemployment are WAY off the mark, just like their Govt revenue projections. So how far off the mark are their Budget spending and Deficit pprojections? One wonders.
This is why deficit spending is wrong and decietful. It is always based on inherently wrong politically inspired erroneous projections. Ken Henry, Swan and Rudd – are you taking notes?
June 10th, 2009 at 4:43 pm
Going on from what Steve and Anarcho were saying, evolutionary change isn’t always a smooth process. Stephen Jay Gould called this term punctuated equilibria, where evolution would be gradual for a long time and then in a short period, a great amount of upheaval would occur.
I think that economic and social systems may show a tendency like this. Things are going along smoothly until a fit occurs which causes rapid change. Events such as rebellion, strikes, workplace occupation, refusal to work, etc are examples of this. Many of us today greatly benefit from such actions.
Even if neoclassicism were to be thrown into the garbage and something better replaces it to make capitalism less inefficient and less inequitable, there still remains a problem: business as a system of power. Are firms going to stop externalizing costs, rent-seeking and committing crime? It won’t matter if the new economic theory is near-perfect in understanding how real markets work, because capitalism as a system of domination and hierarchy isn’t going to let go of its power over society if we ask it nicely.
If a revolution or rapid evolution needs to take place in economic theory, a greater one needs to take place to democratize capitalism.
June 11th, 2009 at 1:38 am
Philip,
Why does Cladogenesis happen in the first place?
I’d hazard that most of large evolution adaptations occur after exogenous shocks to the system creating and destroying niches in the process.
The phyletic gradualism that Stephen and Eldredge criticise would be the arms race that we see evident in species like the cheetah and its prey the antelope, both have a need for speed. If one becomes too successful then the other would die out.
But that doesn’t seem to happen, it’s not until a large environmental change takes place that things get interesting.
So for as much as its worth, I don’t think the present economic class really need to know how the system works as long as it does. They could all make a pilgrimage to the pythoness and get the good news for us rather then have some abstract economic model predicting the show (strangely they don’t anyway). It just doesn’t matter, as long as the we continue to eat our fill change isn’t nessarsary.
The danger is having the fiduciary system controlled by the banks, with their ability to create credit, forcing excessive inflation on the population and the subsequent need to expand and exploit resources to counter this, an exogenous shock will occur when the carrying capacity is exceeded.
Steve’s right, this present GFC will pass and we’ll get back to the main show of exploiting. Its when those limits that allow this are breached will Cladogenesis occur. Not some abstract theory being disseminated through the population.
The peahen doesn’t care.
June 11th, 2009 at 9:53 am
It is utilitarian. It gives peahens a ready gauge to the health of her prospective partners, and it gives the peacock a better chance of mating. The species as a whole benefits from the healthiest males being chosen for future generations.
It is no different to human males buying a very expensive suit, and a fast car, in order to give the impression of success and wealth (although human females are more easily fooled than peahens, technology moves faster than brain adaptation).
This is explained in a book called “the Red Queen”.
June 11th, 2009 at 11:15 am
Tel,
It’s a flamboyant means to ascertain genetic health, it can’t possibly be described as utilitarian. You’d be turning the whole meaning on its head to make it fit that assertion.
What I’m trying to highlight is the the driving force behind the tail. Its not the peacock, its the peahen.
So if you consider the neo-classical economist as the ‘peacock’ the you can understand that it doesn’t matter what the plumage is as long as its what the ‘peahen’ wants that does.
This tail creates a higher level of predation but on the converse results in selective advantage to the peacock.
With the advent of the central nervous system a new level of evolution commenced: Memes.
This needs to be considered when economic theories are proposed. As much as they can describe a system they are still only an abstraction of reality.
June 11th, 2009 at 12:01 pm
Tel,
You seem to be arguing an evolutionary psychology perspective. There is considerable debate within psychology and evolution of the merits of this research program.
One interesting point I’d like to make is that there appears to be a divergence between biological rationality and instrumental rationality. What that means is that the goal of genes (to reproduce) has diverged, through the course of evolution, and we are a vehicle of our genes have our own goals and desires which are separate from that of our genes.
A good analogy to consider this point is of a human and his dog. The human represents the genes, whilst the dog the vehicle for the genes. When a dog is taken out on a walk they are restricted on how far they may go by a leash. The length of the leash will determine how ‘free’ or how much the two diverge. When the dog is taken off the leash its ‘rationality’ has almost completely diverged from that of its masters. Similar the same could be said in regards to humans. Whilst we are vehicles for our genes we have been let of the leash.
The usual counter to this by this is that we have a brain that has evolved tools from our early evolution. The debate then begins on defining what our brain is, is it a Swiss army knife or is it a General purpose problem solver. The former is obviously supported by evolutionary psychology explains why we behave certain ways, as you suggest. The latter is not compatible with the claims of evolutionary psychology. It suggests that we have not evolved tools from our early evolutionary history. Rather we adapt and modify our surrounding environment to suit our needs.
Just some food for thought. I am in no way an expert on the topic. I’ve only done some cursory reading of the topic.
Some books that I have read that are particularly interesting are:
Buss D.M. 1994. The Evolution of Desire: strategies of Human Mating. New York: Basic Books
Over, D. 2003. Evolution and the psychology of thinking the debate. New York: Psychology Press inc,
Richardson, R., 2007. Evolutionary Pschology as Maladapted Pschology. MIT Press.
You could also watch the movie Gattaca. It makes the argument that we are ‘more than the sum of our genes’.
June 11th, 2009 at 12:26 pm
Anarcho,
What is the address to your website again?
June 11th, 2009 at 12:38 pm
Can someone please BEGIN the “counter revolution…” quickly? ABS announces that “employment decreases by 1700 in Australia….” !! We’re in the money..!! We’re in the Money…!! (goes an old song folks!!)
‘THEY’ have no SHAME!!
June 11th, 2009 at 12:44 pm
Ernest,
Home page: http://anarchism.pageabode.com
Anarchist FAQ: http://anarchism.pageabode.com/afaq/index.html
I’m currently up to Section C of the AFAQ, its tough but very interesting reading.
June 11th, 2009 at 1:14 pm
There is a Polish proverb “it is better to catch big fish in murky water”.
I wouldn’t be surprised if big fat corporations, banks, rich individuals and secret services of big powers invest money and resources in anarchism, technocracy, Austrian school of economics and green socialism.
The more confusion the better.
I know that this will offend many people who sincerely believe in these great things but these universal solutions to all the human problems look all too familiar to me.
Please bear in mind that most of the leading bolsheviks were former agents of Okchrana (sorry for possibly incorrect spelling).
Who suffered were real people.
Maybe we should just start solving our problems? So get rid of negative gearing and software patents rather than start another revolution, please.
June 11th, 2009 at 2:49 pm
“There has been enormous stockpiling of all commodities” by China, and this cannot continue indefinitely, said Tim Huxley, the chief executive of Wah Kwong Maritime Transport Holdings, a big shipping line based here.
Those extra purchases beyond China’s daily needs have helped reverse the price collapse in commodities that followed the economic downturn last fall, but could also limit the scale of the rebound.
Moody’s Investors Service announced on Wednesday that it was putting a negative outlook on the base metals, mining and steel industries in Asia and the Pacific, having previously done so for these sectors elsewhere.”
http://www.nytimes.com/2009/06/11/business/economy/11commodity.html?_r=2&hp
tommyt,
I agree. So, like (no shit) Sherlock Holmes says; when you have eliminated the all the improbabilities, you have left the probabilities.
We are *probably* being mislead. I know, this probably comes as a surprise but it is probable.
June 11th, 2009 at 3:18 pm
http://2.bp.blogspot.com/_9ZzZquaXrR8/SjA6iAOXvuI/AAAAAAAAD7A/shTc0Yzb0ms/s1600-h/TheNextGreatCrisis.gif
This is a very scary graph. Much discussion here is about debt, Govt deficits, QE and taxes. Look at this graph from the US CBO. Look at the debt ratios , to GDP and in $’s.
Note the graph MAGICALLY shows a trimming down in outlays after the mythical US recovery begins. It also shows a MAGICAL recovery in US tax revenues after said mythical recovery begins. And what if it does not happen that way? What if this depression lasts longer and is deeper than forcasted? What if Obama chooses to keep bailing?(a no brainer!)Ho do you think that graph might look then?This could easily become a map showing a nation’s financial implosion.
All sorts of wonderful theories abound but this we do know- the bond markets are watching this graph very very closely and they don’t like what they see if yields are a measure. And, if the bond markets are marking down US debt, they are marking down Australian debt (Govt and private)right along with it.
Excessive indebtedness is madness. Gov’t deficit spending to 20%+ of GDP is lunacy. And anyone espousing it’s benefits is clearly delusional.
June 11th, 2009 at 4:47 pm
Thought the following on “OUR” banks (hypocracy) was a good read.
http://www.moneymorning.com.au/
June 11th, 2009 at 4:49 pm
Thought the following on OUR banks hypocricy was a good read. ( sorry if it comes up twice in the posting !)
http://www.moneymorning.com.au/
June 11th, 2009 at 8:12 pm
for those interested in peacocks tails and cheetahs and other such evolutionary wonders, and how they relate to the human condition,
i highly recommend a book by gerard diamond
“sex is fun”
and no i’m not peddling porn
June 11th, 2009 at 10:31 pm
hi height,
i’m not sure if you’ve owned any dogs,
but i can tell you that my rationality and the rationality of my red healers are intimately connected. you’ll see what i mean if you’ve gone for a walk with a pair of red healers, leash or no leash.
heaven help anyone that enters their masters space.
i’m not sure if the dog leash analogy is a good one.
personally i think ,when you scratch a little bit, there’s not much difference between the behavior of most humans and what you see on david attonborough doco on a pride of baboons in the serengety.
quite a lot of us havnt been able to escape our evolutionary past and we are reaping the consequences now.
we’ve gotton rid of slavery for the time being, but we still have genocide and murder and greed and selfishness to deal with , all in a world full of nuclear weapons.
June 11th, 2009 at 10:49 pm
Mahaish,
I own three.
The analogy I gave was a rough rehash of the one I read in ‘Evolution and the psychology of thinking the debate’. It’s been a few months since I read it but essentially I still think it’s captured in the analogy I gave. I am fairly certain it was given my Dawkins when he was describe the rationality of the vehicle for genes and the rationality of genes.
I believe the divergence between the two rationalities is accepted by evolutionary psychologists. But they state that the brain is a Swiss army knife of various evolved tools, which are ‘activated’ depending on the situation in which the vehicle finds itself e.g. fear of spiders, snakes etc. By invoking this concept of the brain they can overcome the divergence and still hold that to a large extent our behaviour is biologically determined.
I’m actually a fan of David Attenborough, I’ve watched quite a bit of his work. I agree that there does appear to be similarities between our behaviour and animals (this is not to suggest we are not animals ourselves)but I cannot accept that there are genes and other biological factors which predetermine a persons behaviour. My brief reading into the topic revealed that evolutionary psychology and socio-biology lacks empirical evidence to support its claims.
——–
FWIW it most likely wasn’t dogs. Now that I think about it he could have been to do with satelites or something. I’ve read too much this semester to recall it in any further detail. lol. If you want I’ll borrow the book my uni and get the correct analogy.
June 11th, 2009 at 11:29 pm
height,
I don’t think they predetermine someones behaviour but they certainly do influence our behaviour.
Reading Steven Pinker’s, the blank slate, I came across this.
The three laws of behavioural genetics:
1. All human behavioral traits are heritable.
2. The effect of being raised in the same family is smaller than the effect of the genes.
3. A substantial portion of the variation in complex human behavioural traits is not accounted for by the effects of genes or families.
Summarised as Genes: 40-50%, Shared environment 0-10%, 50% Unique environment.
I also recommend googling Dan Ariely and Derek Denton for further information on actually what we are.
June 12th, 2009 at 10:19 am
Hi Steve,
Any response on Henderson’s comments on GDP calculation?
Thanks.
June 12th, 2009 at 10:23 am
Hi all,
please keep in mind that I am fairly new here. I am posting a link to a opinion piece from Terry Ryder. He has had a fair old go at the prof.
Everyone’s thoughts re this piece would be appreciated please
http://www.jenman.com.au/news_subscribers_item.php?id=23&Section=Reports
Scroll down to the section titled
“Feature topic:
We need a new breed of economist – or maybe no economists at all”
Thanks
W800I
June 12th, 2009 at 11:53 am
W800I,
Thank you for the link to the Terry Ryder article. In the past I have purchased one of his reports (late 2007) and for all of his sledging of economists, I recall that his report started off with the economic analysis that everything was on the up and up (i.e. no signh of clouds on the horizon).
I am very interested in the outcomes of this economic crisis as it relates directly to my desires to purchase a home for me and my young family.
As such I am very interested to hear feedback from other blog contributors far more knowledgable than I.
June 12th, 2009 at 1:10 pm
Once in a while I stumble over a post on the web which I find so exceedingly interesting and valuable I want to share it with as many as possible:
From The Oil Drum: “Profiting from Scarcity”
http://www.theoildrum.com/node/5478
June 12th, 2009 at 4:50 pm
ueberbaer,
That was an interesting article. The problem with convention economic theory is that it postulates infinite substitution of commodities and technological advancement so resources will not be depleted and the environment will not be harmed.
This is, of course, utter rubbish. It also assumes that commodities will be priced at its full social cost. Take petrol for instance. In the US, a gallon currently costs ~$2. However, if its negative externalities were factored into the price, a gallon should cost between $7 – $20. The same in Australia as well. As markets misprice commodities to an extraordinary extent, it results in mass over-consumption, thus depleting resources and harming the environment.
We constantly hear the statement that oil (and its derivatives) is expensive. Unfortunately, it is the exact opposite, by a considerable factor.
June 12th, 2009 at 5:13 pm
Any of you perma bears need a pessimism maintenance dose in these times of continued strength in equities and consumer confidence? You could read the baseline scenario and the article in the May Atlantic magazine at http://baselinescenario.com/. It is by the former chief economist of the IMF in 2007 and 2008.
The US unlike all the basket cases the IMF has to bail has not yet made the big decisions that will inevitably confront their powerful (and corrupt/ conflicted – note the Washington-Wall Street jobs for the boys with Rubin, Snow, Paulson, Kashkari etc) elite interests (in this case their financial oligarchy) by properly cleaning up murky finance industry balance sheets. They are still not yet united politically that this level of purging is needed with many still ideologically biased against government intervention given the cult of finance that has imbued the entire culture (surely changing!). Also they have the reserve currency which they can print as needed. So they aren’t at the desperate stage with no other options but hard and decisive ones. Instead of a quick nationalisation, restructure (into smaller not too big to fail units hence breaking the oligopoly) and resale we are seeing a continued non-transparent piecemeal approach ala Japan in the 90s to now. This will result in zombie banks that need continued taxpayer funds while continuing to be unwilling to adequately lend. This extends the recession in a best case scenario and if we see a return to global crisis triggered say via an Eastern European government debt default will set the US up for depression… I know you’ve read it before but it’s nice coming from the IMF guy.
Not miserable enough people could also check Paul Kedrosky’s site for the T2 Partners (US) Mortgage report posted 8 June. See this on p64 – ‘Our data shows that the mid-to-upper end housing market is on the precipice of the exact cliff that the market fell off of in 2007, led by new loan defaults. What happens to the economy when you hit the mid- to-upper end earners the same way the low-to-mid end was hit with the subprime implosion? We will find out soon enough. When we look back on (US) housing at the end of 2009, anyone that made positive housing predictions this year will not believe how far off they were’.
June 12th, 2009 at 6:52 pm
hi height,
as jarod diamond would say , there are 3 types of chimpanse,
bonobos, chimpanse’s and us.
our brains have given us all this technology and engineering including financial engineering, but we are still trying to shake off all this bad behavior and the inner chimpanse within us.
given whats been going on in recent times, i’m actually thinking of getting our benobo cousins to write a book on ethical behavior and better manners to help us humans.
June 12th, 2009 at 7:49 pm
Great articles from “New Scientist”.
http://www.newscientist.com/special/can-science-reinvent-economy