Category: Economics and Finance
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My belief, or observation really, is that economics as a discipline is a tautological exercise in self-referential abstractions: it explains nothing but itself, and has lost connection to the world. It fails as a science because in science, ideas are tested against reality, and adjusted. In economics, reality is adjusted to suit the doctrine. (Kind of like climate change ideology).
But I am a mere political scientist and sort of lawyer, so what do I know?
Along comes Robert Sidelsky, who has written Money and Government: The Past and Future of Economics. He is an economist and author of a definitive biography of John Maynard Keynes. The New York Review of Books carries an excellent review of Money and Government by David Graeber, from which the quotes are taken.
“Surely there’s nothing wrong with creating simplified models. Arguably, this is how any science of human affairs has to proceed. But an empirical science then goes on to test those models against what people actually do, and adjust them accordingly. This is precisely what economists did not do. Instead, they discovered that, if one encased those models in mathematical formulae completely impenetrable to the noninitiate, it would be possible to create a universe in which those premises could never be refuted….
“The problem, as Skidelsky emphasizes, is that if your initial assumptions are absurd, multiplying them a thousandfold will hardly make them less so. Or, as he puts it, rather less gently, “lunatic premises lead to mad conclusions”:
The efficient market hypothesis (EMH), made popular by Eugene Fama…is the application of rational expectations to financial markets. The rational expectations hypothesis (REH) says that agents optimally utilize all available information about the economy and policy instantly to adjust their expectations….
Thus, in the words of Fama,…“In an efficient market, competition among the many intelligent participants leads to a situation where…the actual price of a security will be a good estimate of its intrinsic value.” [Skidelsky’s italics]
“In other words, we were obliged to pretend that markets could not, by definition, be wrong—if in the 1980s the land on which the Imperial compound in Tokyo was built, for example, was valued higher than that of all the land in New York City, then that would have to be because that was what it was actually worth.”
Readers may recall the consternation of Alan Greenspan, former head of the Federal Reserve Bank, who confessed that his great error was to believe that rational information theory prevented such things as the 2007 bank blow-out. He was in a state of “shocked disbelief”. But at least he had the honesty to admit his model was at fault.
When you reach the state where, by definition, you cannot be wrong, you are doomed. How many currently unassailable ideologies will come crashing down in the passage of time? My answer, of course, is ‘all of them’.
The recent media kerfuffle about some boys from Covington high school and their supposedly awful attacks on some poor old Indian have turned around into a media catastrophe. The leftist press got everything wrong – no surprise – but was apprehended in the act, and had to back off. The entire incident will be forgotten in a week. I present this as an important reason why I try not to participate in the blogging of outrage.
In the time the entire event arose, spread, was refuted, and collapsed, I had to go to hospital for a cardiac procedure. (I am well thank you). The slight risk of actual death has a wonderfully concentrating effect on the mind. I turned to youtube videos about saw mills and cabin building. They are my way of engaging in escapist literature.
More than this, they concentrate me into practical efforts that bring exercise, accomplishment, and deep satisfaction in their wake.
The net tendency of Internet participation is to be constantly aggravated. If you are like me, it will be offended by the leftist assault on reason, history, religion, males, the white race, Christianity and morality. If you are anti-Trump, then everything happening these days will be offensive to you sensibilities. The best way to regain your poise and equanimity is to stop paying attention to the shadow play of politics.
I realize this is not what a political blog ought to say. Yet I am more concerned with my own health and sanity than I am with Trump, Trudeau or any of the dozens of points of concern, such as Brexit, Venezuala, or building pipelines in Canada. We have to remember that the reasons why we are conservatives is that most of life lies beyond and outside of politics, and it is to those wells that we go to draw our spiritual water.
One of the mysteries to me since Trump’s election has been the steadfast refusal of many intelligent people to contemplate the reasons why he won, why the gilets jaunes are rebelling in France, why the Brexit vote, why anything in the post world War 2 consensus might no longer be applicable, or might have to change. I see a failure of imagination comparable to that of the 1930s, when all well-educated Establishment opinion held that alarms about this Hitler fellow were just Winston Churchill’s bad judgment and war mongering.
The people pointing to the oncoming disaster are mistaken for the disaster itself. The perceptual failure is like the dog who thinks the finger you are using to point with is the thing referred to. You would think people with two university degrees would be smarter, but they are not. In fact the more educated they are, the more resistant to the idea that they might need to adapt their ideas.
I noticed on Facebook pages the first break in the ice-wall. This morning I saw the first reference in my circle of Facebook friends and correspondents to the work of Christophe Guilluy (pronounced Geewee with a hard ‘g’). The article occurred in Spiked, and is called “the gilets jaunes are unstoppable”.
Guilluy produced a study in 2014 called “La France Péripherique” (Peripheral France) that argued that the native French working class no longer lived in the large metropolitan centres of Paris, Toulouse and Lyon, as they had been driven out by real estate prices. They had been replaced by immigrant populations who would build and serve the metropolitan elites, who remain unaware of what is going on in the parts of France (or England) where they no one of their circles lives.
“Technically, our globalised economic model performs well. It produces a lot of wealth. But it doesn’t need the majority of the population to function. It has no real need for the manual workers, labourers and even small-business owners outside of the big cities. Paris creates enough wealth for the whole of France, and London does the same in Britain. But you cannot build a society around this. The gilets jaunes is a revolt of the working classes who live in these places.
They tend to be people in work, but who don’t earn very much, between 1000€ and 2000€ per month. Some of them are very poor if they are unemployed. Others were once middle-class. What they all have in common is that they live in areas where there is hardly any work left. They know that even if they have a job today, they could lose it tomorrow and they won’t find anything else.
spiked: What is the role of culture in the yellow-vest movement?
Guilluy: Not only does peripheral France fare badly in the modern economy, it is also culturally misunderstood by the elite. The yellow-vest movement is a truly 21st-century movement in that it is cultural as well as political. Cultural validation is extremely important in our era.
One illustration of this cultural divide is that most modern, progressive social movements and protests are quickly endorsed by celebrities, actors, the media and the intellectuals. But none of them approve of the gilets jaunes. Their emergence has caused a kind of psychological shock to the cultural establishment. It is exactly the same shock that the British elites experienced with the Brexit vote and that they are still experiencing now, three years later.
The Brexit vote had a lot to do with culture, too, I think. It was more than just the question of leaving the EU. Many voters wanted to remind the political class that they exist. That’s what French people are using the gilets jaunes for – to say we exist. We are seeing the same phenomenon in populist revolts across the world.
spiked: How have the working-classes come to be excluded?
Guilluy: All the growth and dynamism is in the major cities, but people cannot just move there. The cities are inaccessible, particularly thanks to mounting housing costs. The big cities today are like medieval citadels. It is like we are going back to the city-states of the Middle Ages. Funnily enough, Paris is going to start charging people for entry, just like the excise duties you used to have to pay to enter a town in the Middle Ages.
The cities themselves have become very unequal, too. The Parisian economy needs executives and qualified professionals. It also needs workers, predominantly immigrants, for the construction industry and catering et cetera. Business relies on this very specific demographic mix. The problem is that ‘the people’ outside of this still exist. In fact, ‘Peripheral France’ actually encompasses the majority of French people.
spiked: What role has the liberal metropolitan elite played in this?
Guilluy: We have a new bourgeoisie, but because they are very cool and progressive, it creates the impression that there is no class conflict anymore. It is really difficult to oppose the hipsters when they say they care about the poor and about minorities.
But actually, they are very much complicit in relegating the working classes to the sidelines. Not only do they benefit enormously from the globalised economy, but they have also produced a dominant cultural discourse which ostracises working-class people. Think of the ‘deplorables’ evoked by Hillary Clinton. There is a similar view of the working class in France and Britain. They are looked upon as if they are some kind of Amazonian tribe. The problem for the elites is that it is a very big tribe.
The middle-class reaction to the yellow vests has been telling. Immediately, the protesters were denounced as xenophobes, anti-Semites and homophobes. The elites present themselves as anti-fascist and anti-racist but this is merely a way of defending their class interests. It is the only argument they can muster to defend their status, but it is not working anymore.
Now the elites are afraid. For the first time, there is a movement which cannot be controlled through the normal political mechanisms. The gilets jaunes didn’t emerge from the trade unions or the political parties. It cannot be stopped. There is no ‘off’ button. Either the intelligentsia will be forced to properly acknowledge the existence of these people, or they will have to opt for a kind of soft totalitarianism.
A lot has been made of the fact that the yellow vests’ demands vary a great deal. But above all, it’s a demand for democracy. Fundamentally, they are democrats – they want to be taken seriously and they want to be integrated into the economic order.
spiked: How can we begin to address these demands?
Guilluy: First of all, the bourgeoisie needs a cultural revolution, particularly in universities and in the media. They need to stop insulting the working class, to stop thinking of all the gilets jaunes as imbeciles.
Cultural respect is fundamental: there will be no economic or political integration until there is cultural integration. Then, of course, we need to think differently about the economy. That means dispensing with neoliberal dogma. We need to think beyond Paris, London and New York.
Christophe Guilluy was talking to Fraser Myers.
The more I ponder the current Liberal government in Canada, the more I realize they really are fatuous. Vapid. Hollow. And they may be really dangerous to the nation’s unity and health.
Our Glorious Leader was in Calgary the other day and was asked about getting oil out of the province. The Prime Minister was addressing the Calgary Chamber of Commerce.
“…chamber CEO Sandip Lalli grilled Trudeau on what Ottawa intends to do, including possibly investing in moving crude on trains as a stop-gap measure as new market-opening pipelines remain in limbo.
“You think there’s a super-simple easy answer and there’s not. There’s a multifaceted complex issue and as much as there is a tendency out there in the world to give really simple answers to really complex questions, unfortunately the world doesn’t work like that,” Trudeau replied.
“We need to make sure that we’re moving forward in the right way and that is where actually listening to the experts is sort of the best way to make policy.”
Trudeau said the federal government is doing what it can to get the Trans Mountain pipeline expansion built, which would triple its capacity to carry oil to tankers on the west coast.”
There are two known ways of getting oil to market: pipelines and trains. Pipelines are less hazardous and cheaper (witness the disaster in Megantic). Either you build pipelines or you buy tank cars for the railroads. This is not complicated. What makes it complicated is that Trudeau and his cabinet of Greens think that, in principle, the fossil fuel industry should not exist. This is the second time that Alberta has faced federal moves to cripple its (and Canada’s) oil industry. This time the blows are being administered by economically illiterate judges rather than Liberal cabinets, as under Trudeau the Elder, but the solutions to this economic illiteracy of the courts are in the hands of the federal government.
In my early days in government (in the regime of Trudeau the Elder), I too received the same speech from my boss at the time. Steepling his fingers, he told me that public policy was multifaceted and complex, and gave me to understand that bulge-o-brains such as himself grappled and wrestled with its complexities. Implied always was that I was welcome to join the Church of Complexity and grapple with Deep Issues, or that I could exile myself in the wilderness of Simplification, or the Simplistic.
Whenever you hear the word “simplistic” you may be sure that you are in the presence of someone who is trying to con you into believing that you are wrong because you, but not they, want a solution and think one is possible.
The solution may be complex, but the will to find one is simple. Therein lies the confusion. Getting half a million troops ashore on D-Day in June 1944 was as complex as any operation ever launched, but the will to send them there was simple.
What Trudeau and his minions lack is the will to solve the Alberta oil shipment problem. It suits their green agenda to destroy the industry as fast as they can, while pretending to be concerned.
It was Prime Minister Justin Trudeau himself who said in January 2017: “We can’t shut down the oilsands tomorrow. We need to phase them out. We need to manage the transition off of our dependence on fossil fuels.
“That is going to take time. And, in the meantime, we have to manage that transition.”
Peter Zeihan, the geo-strategist, has said for a long time that Canada is in long-term trouble. His reasons are as follows. Canada is increasingly dependent upon Alberta’s oil, whether through taxes or actual supply. Alberta has the youngest and fastest-growing population. It has to sell its oil in Canadian dollars and buy its equipment in US dollars.The rest of Canada is failing to reproduce, is ageing rapidly, and is becoming more like Japan, which has an even larger problem of ageing and lack of reproduction than we do. Albertans pay $6,000 more per head than they take in revenues, and that figure is rising. They are the only net contributors to equalization. Alberta has the only rate of reproduction above replacement. What solves Alberta’s problem at a stroke, and exacerbates Ottawa’s revenue problem? Alberta joining the US. So argues Zeihan.
See the video. The arguments are persuasive. Another Zeihan video on the same topic is here, even better. Zeihan is too gloomy towards Canada, but his analysis is hard to fault on rational grounds.
Accordingly, I do not believe that Trudeau Junior’s government is up to the task of dealing with the real problems this country faces. I observe them destroying the tax base that supports the ageing Canadian population. Do they care? In order to care, they would have to have a clue. They are clueless. Hence Canada staggers towards long-term disaster, confident in all the wrong things.
Thomas Sowell has spent a life time fighting the unconstrained vision which, crudely, comes down to “I know best and there is no institution that should stand in my way of doing good as I conceive it”. The sincerity and passion with which they hold their view is the guarantor of its truth. “Man is born free, and yet everywhere he is in chains” said Jean-Jacques Rousseau. Only bad institutions make us behave badly. Since man is the creature of social arrangements, if we change the institutions we will change man, for the better. Nothing prevents us from the attainment of this goal except reactionaries, people of ill-will, ignorance, and the forces of evil.
Sowell, on the subject of sincerity in politics:
“People who have the constrained vision will understand that people make mistakes. and so therefore when someone says something the disagree with,…they see no need to question his sincerity, his honesty or whatever. But for those with the unconstrained vision, what they believe seems so obviously true, that of you are standing in the way of it, either you must be incredibly stupid, utterly uninformed, or simply dishonest.” (at minute 24 of the interview)
Hence, in the days when I still watched broadcast television, I saw the three political party reps talking about gay marriage (as I recall). The little faggot from the NDP [there is no more swiftly accurate designator] was insisting “we shouldn’t even be debating this”. His views exactly typified why normal people find leftists so intolerant.
And that is how it is with everything on the Left. We should not even be debating this, when what they think should not be debated is precisely what should be debated.
In the following video, George Friedman tells why the expert class has been disgraced since the 2008 financial meltdown. In the end there will be nations, he says. The reign of the unelected and international experts is over. The order that existed in the 70 years since the Second World War is coming to an end.
Friedman is at pains to insist that the pain of the 2007 financial crash was distributed unevenly; the expert class made out like bandits, the working classes are unemployed and in an oxycodone death crisis. This is not sustainable. Hence Trump, Orban, the Italian political crisis, nationalist movements everywhere.
“The nation is back”, says Friedman.
I listened to some smooth-talking London-based millionaire bond trader yesterday tell me that Brexit will never happen, that the vote for it will mean nothing in the end. I refrained from saying he was the same sort of intelligent insider who thought a Trump victory would never happen. My impression is that the expert class has not learned a thing, but will have to be taught through some hard blows to their pocket books and to their self-esteem.
“Look at how your income is distributed (within a nation). That is you future”.-George Friedman
In the crash of 2008, and the subsequent measures to stave off a very real global crash of liquidity, certain measures were taken. These had the effect of saving the large banks and financial institutions, and the owning classes, worldwide. In the ensuing ten years, the elites took care of themselves very well. Anyone who had assets, gained; those who offered labour have had to live on no wage increases. So says Steve Bannon. Those with capital gained, while over half the US population cannot put $US400 to cover emergencies.
Socialism – the government covers your downside risk – for the rich, capitalism for the poor.
Start watching around 14:00 minutes. Prior to that is interesting but they are making irrelevant points. This is the best, most cogent, analysis of why Trump came to power. My left wing friends (I have a couple) would probably agree. The essential argument ends by 20:55 into the interview.
Bannon explicitly excludes Obama from any blame for this situation.
In my opinion, while the populist/nationalist movement appears radical, it is actually conservative in intention, trying to save the capitalist system from its current situation where, to repeat, there is socialism for the rich, capitalism for the poor.
Start at 38:17.
“If people think the Washington elite is arrogant towards the rest of the country, it is as nothing compared to Brussels and the City of London financial elites towards their own countries”.
I like people who are able to explain at a high level of abstraction what is happening: fact driven, insightful, and as much as possible, above the fray.
Jordan Peterson does this in academic subjects, Peter Zeihan in energy, demographics and large scale political outcomes, and Steve Bannon in why Trump made it to President, and why he must prevail.
“With China and NAFTA and everything else, we are at the beginning stages of a major renegotiation of the economics of the United States and how we are treated in the world and what our place is in the world. It’s at the heart of the Republican Party and the re-formation of the Republican Party. His biggest enemies in this are the Republican Party….”
Zakaria has some good points in rebuttal, too.
And Bannon comes right back.
A superior interchange among very intelligent people.
“The United States is more than an expeditionary humanitarian military force that is there to be the world’s police force and they [the deplorables] are paying for it. They are asking for a re-calibration.”